Vislink Technologies, Inc. (NASDAQ:VISL) Q2 2021 Earnings Conference Call August 17, 2021 10:00 AM ET Company Participants Mickey Miller – Chief Executive Officer Belinda Marino – Corporate Secretary of the Board of Directors Mike Bond – Chief Financial Officer Conference Call Participants Operator Welcome to the Vislink Technologies 2021 Second Quarter Earnings Update meeting. During today's presentation, there will be an opportunity to submit online questions. You may submit online questions using the win ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR (State or other jurisdiction of incorporation or organization) Delaware 20-5856795 (IRS Employer Identification No.) 101 Bilby Road, Suite 15, Bldg. 2 Hackettstown, NJ 07840 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period fro ...

Financial Performance - Total revenue for the three months ended March 31, 2021, was $4,090,000, a decrease of 23.6% compared to $5,352,000 for the same period in 2020[19]. - Net loss for the three months ended March 31, 2021, was $2,667,000, compared to a net loss of $4,430,000 for the same period in 2020, representing a 39.8% improvement[19]. - Basic and diluted loss per share for the three months ended March 31, 2021, was $0.07, compared to $0.54 for the same period in 2020[19]. - Comprehensive loss for the three months ended March 31, 2021, was $2,710,000, compared to $4,153,000 for the same period in 2020[19]. - For the three months ended March 31, 2021, Vislink reported a net loss of $2.67 million, compared to a net loss of $4.43 million for the same period in 2020, representing a 40% improvement in net loss year-over-year[23]. Assets and Liabilities - Total current assets increased to $72,785,000 as of March 31, 2021, from $16,515,000 as of December 31, 2020[17]. - Cash balance significantly increased to $59,877,000 as of March 31, 2021, compared to $5,190,000 as of December 31, 2020[17]. - Total liabilities decreased to $10,159,000 as of March 31, 2021, from $10,654,000 as of December 31, 2020[17]. - Total stockholders' equity increased to $66,494,000 as of March 31, 2021, from $9,997,000 as of December 31, 2020[17]. - As of March 31, 2021, the Company had $64.1 million in working capital, $272.8 million in accumulated deficits, and $59.9 million of cash on hand[59]. Cash Flow and Financing - The company raised $62.66 million in equity financing during the first quarter of 2021, significantly up from $5.99 million in the same period of 2020[23]. - Cash and cash equivalents at the end of the period increased to $59.88 million, compared to $2.46 million at the end of March 31, 2020, marking a substantial increase of 2320%[23]. - The company closed on equity financing on February 8, 2021, receiving net proceeds of approximately $46,820,000 from the issuance of 18,181,820 shares of common stock[86]. - During the three months ended March 31, 2021, the company issued 6,079,598 shares of common stock, generating net proceeds of $12,271,000[87]. Expenses - Research and development expenses for the three months ended March 31, 2021, were $602,000, a slight decrease from $656,000 for the same period in 2020[19]. - The company recognized stock-based compensation of $40,000 for the three months ended March 31, 2021, down from $405,000 in the same period of 2020[23]. - The stock-based compensation expense for the three months ended March 31, 2021, was $12,000, a significant decrease from $386,000 in the same period of 2020[91]. - The Company recognized amortization expenses for intangible assets totaling $210,000 for the three months ended March 31, 2021, compared to $301,000 for the same period in 2020[68]. Market Presence and Operations - Vislink has over 200,000 systems installed worldwide, indicating a strong market presence in live broadcast solutions[27]. - The company continues to focus on expanding its satellite communication solutions, with over 2,000 systems deployed globally, catering to governments, militaries, and broadcasters[29]. - Approximately 11% of the company's revenue for the three months ended March 31, 2021, came from a single customer, totaling approximately $466,000[127]. - The company reported that 13% of its consolidated inventory purchases during the same period came from one vendor, amounting to approximately $473,000[129]. Risks and Uncertainties - The Company’s operations are subject to significant risks and uncertainties, including those related to the COVID-19 pandemic[33]. - The Company is currently unable to predict the full impact of the COVID-19 pandemic on its financial condition and results of operations due to numerous uncertainties[62]. - The Company has taken liquidity preservation actions due to the COVID-19 pandemic and believes it has sufficient funds to continue operations for at least twelve months from the date of the financial statements[63]. Stock Options and Warrants - The company has performance-based stock options with vesting conditions tied to achieving cumulative EBITDA targets of $6,000,000, $15,000,000, and $23,000,000 over four consecutive fiscal quarters[105]. - As of March 31, 2021, Mr. Miller held 250,000 performance-based stock options, with a weighted average exercise price of $1.65[104]. - As of March 31, 2021, the company had 9,305,978 outstanding warrants with a weighted average exercise price of $5.30[89]. - The intrinsic value per share for time-vested options as of March 31, 2021, was $1.81, with a remaining expense of stock-based compensation of $479,000[96]. Debt Management - The company reported a gain on settlement of debt amounting to $194,000 during the three months ended March 31, 2021[19]. - The Company incurred a loss from operations of approximately $2.8 million and cash used in operating activities of $4.3 million for the three months ended March 31, 2021[59]. - The Company has a total Payroll Protection Program (PPP) loan obligation of $1,168,000, which is fully compliant with all covenants as of March 31, 2021[74]. - A down payment of $225,000 was made, with a promissory note of $873,000 incurred[133].

Part I [Business](index=5&type=section&id=Item%201.%20Business) Vislink Technologies provides live video and data solutions for broadcast, military, and satellite markets, implementing cost reductions and product integration - The company operates in three main sectors: **Live Broadcast**, **Military and Government (Mil/Gov)**, and **Satellite Communications**, providing end-to-end video transmission solutions[18](index=18&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - In 2020, the company implemented significant cost reduction initiatives, including workforce reductions and reduced discretionary spending, projecting annual savings of approximately **$5.0 million**[24](index=24&type=chunk) - A key strategy involves leveraging the integrated **IMT and Vislink product lines** to offer an expanded suite of products across international and domestic markets, covering both licensed and non-licensed spectrum solutions[27](index=27&type=chunk) - As of December 31, 2020, the company held **36 granted patents** in the U.S. and **12 internationally**[52](index=52&type=chunk) - As of December 31, 2020, the company employed **109 full-time employees**, contractors, or consultants[59](index=59&type=chunk) [Risk Factors](index=15&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from the COVID-19 pandemic, recurring operating losses, potential Nasdaq delisting, internal control weaknesses, and supply chain dependencies - The company's financial statements include disclosures regarding liquidity and financial condition due to recurring operating losses and cash used from operations; for the year ended Dec 31, 2020, the operating loss was approximately **$17.9 million**[66](index=66&type=chunk)[71](index=71&type=chunk) - The company acknowledges **material weaknesses** in its financial reporting controls, including ineffective risk assessment, challenges in integrating accounting systems from acquisitions, and limitations in accounting personnel due to workforce reductions and the COVID-19 pandemic[88](index=88&type=chunk)[92](index=92&type=chunk)[96](index=96&type=chunk) - The **COVID-19 pandemic** has negatively impacted business, financial condition, and operating results, and the company cannot predict the full extent of future impacts[67](index=67&type=chunk)[68](index=68&type=chunk) - The company faces risks of **delisting from Nasdaq** if it fails to comply with continued listing requirements; it previously received a letter of reprimand in April 2020 for non-compliance with Listing Rule 5635(d)[73](index=73&type=chunk)[74](index=74&type=chunk) - The company relies on a **limited number of suppliers** for several components and does not have long-term contracts, which could disrupt manufacturing if a supplier is lost[102](index=102&type=chunk) [Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - Not applicable[147](index=147&type=chunk) [Properties](index=35&type=section&id=Item%202.%20Properties) The company leases all properties, renegotiating several in 2020 to reduce costs, including headquarters and facilities in the UK and Singapore Key Leased Properties and Annual Rent | Location | Details | Annual Rent (Approx.) | | :--- | :--- | :--- | | **Hackettstown, NJ** | Headquarters, new one-year lease effective May 1, 2020 | $239,000 | | **Billerica, MA** | New lease effective March 24, 2020, reducing space by ~79% | $95,000 | | **Singapore** | New lease effective August 10, 2020 | $30,500 | | **Hemel, UK** | Lease extended to October 27, 2023 | $175,000 | | **Colchester, UK** | Lease expires March 24, 2025 | $275,000 | [Legal Proceedings](index=35&type=section&id=Item%203.%20Legal%20Proceedings) The company is not a party to any material litigation, nor is it aware of any pending or threatened litigation that would materially affect its business - As of the report date, the company is **not a party to any material litigation**[153](index=153&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[154](index=154&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Vislink's common stock trades on Nasdaq under 'VISL', with 45.65 million shares outstanding as of March 2021, and the company has never paid cash dividends - The company's common stock trades on the **Nasdaq Capital Market** under the ticker 'VISL'[156](index=156&type=chunk) - As of March 29, 2021, there were **45,652,249 shares** of common stock outstanding[156](index=156&type=chunk) - The company has **never declared or paid a cash dividend** and does not expect to in the foreseeable future[158](index=158&type=chunk) [Selected Financial Data](index=37&type=section&id=Item%206.%20Selected%20Financial%20Data) As a smaller reporting company, Vislink is not required to provide disclosures for this item - Disclosure under this item is **not required** as the company is a smaller reporting company[161](index=161&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Conditions%20and%20Results%20of%20Operations) In 2020, revenue decreased 21% to $22.9 million due to COVID-19, while net loss slightly improved to $17.6 million, driven by cost savings and significant post-year-end equity financing Consolidated Results of Operations (in thousands) | | 2020 | 2019 | | :--- | :--- | :--- | | **Revenue** | **$22,882** | **$28,942** | | Cost of components and personnel | $13,867 | $15,741 | | General and administrative expenses | $17,024 | $20,099 | | Impairment of inventory | $3,801 | $0 | | Impairment of right-of-use assets | $895 | $0 | | **Loss from operations** | **($17,888)** | **($17,200)** | | Interest expense, net | ($121) | ($1,878) | | **Net loss** | **($17,575)** | **($18,047)** | - Revenue decreased by **$6.0 million (21%)** in 2020 compared to 2019, attributed to the negative impacts of the COVID-19 pandemic on the international marketplace[177](index=177&type=chunk)[178](index=178&type=chunk) - The company's cash position improved significantly after year-end, from **$5.2 million** on December 31, 2020, to approximately **$59.3 million** on April 14, 2021, due to subsequent equity financing[199](index=199&type=chunk)[304](index=304&type=chunk) Cash Flow Summary (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($14,354) | ($8,355) | | Net cash used in investing activities | ($258) | ($425) | | Net cash provided by financing activities | $17,998 | $8,519 | | **Net increase (decrease) in cash** | **$3,453** | **($268)** | [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Vislink is not required to provide disclosures for this item - Disclosure under this item is **not required** as the company is a smaller reporting company[237](index=237&type=chunk) [Financial Statements and Supplementary Data](index=49&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The company's audited financial statements and notes are filed starting on page F-1 of the report - The company's audited financial statements and notes are filed starting on page **F-1**[238](index=238&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=49&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[239](index=239&type=chunk) [Controls and Procedures](index=50&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of December 31, 2020, due to material weaknesses in internal control over financial reporting, including ineffective risk assessment and integration challenges - Management concluded that the company's internal control over financial reporting was **not effective** as of December 31, 2020[241](index=241&type=chunk)[91](index=91&type=chunk) - Identified material weaknesses include: (1) **Ineffective risk assessment** and monitoring of internal controls (2) Risks related to **integrating information from various accounting systems** post-acquisitions (3) **Delays and limitations in accounting personnel** due to the COVID-19 pandemic and workforce reductions[248](index=248&type=chunk)[253](index=253&type=chunk) - The company plans to **remediate these weaknesses** by appointing additional qualified personnel and adopting more robust written policies as resources become available and it moves towards a more unified accounting system[245](index=245&type=chunk)[249](index=249&type=chunk) [Other Information](index=51&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[253](index=253&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Other Matters](index=52&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10 through 14 is incorporated by reference from the company's forthcoming 2021 proxy statement - Information for Items 10, 11, 12, 13, and 14 is **incorporated by reference** from the forthcoming 2021 proxy statement[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=53&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including financial statements and various agreements, with financial schedules omitted as not applicable - The section provides a **detailed index of all exhibits** filed with the report, including charter documents, material contracts, and certifications[262](index=262&type=chunk)[264](index=264&type=chunk) - Financial statement schedules were **omitted** because they were not applicable or the information was already included in the financial statements or notes[262](index=262&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=61&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an unqualified opinion on the financial statements, highlighting a critical audit matter regarding inventory valuation adjustments - The auditor's opinion is that the financial statements are **fairly presented** in conformity with U.S. GAAP[276](index=276&type=chunk) - A **Critical Audit Matter** was identified related to the 'Evaluation of Net Realizable Value Adjustments to Inventories for Excess or Obsolescence' due to the high degree of judgment involved in management's estimates[281](index=281&type=chunk)[283](index=283&type=chunk) [Consolidated Financial Statements](index=63&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show a decrease in total assets and liabilities, a slight improvement in net loss to $17.6 million, and a net cash increase driven by financing activities Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Total current assets** | **$16,515** | **$16,785** | | **Total assets** | **$20,651** | **$23,604** | | Total current liabilities | $8,846 | $13,212 | | **Total liabilities** | **$10,654** | **$14,375** | | **Total stockholders' equity** | **$9,997** | **$9,229** | Consolidated Statement of Operations Data (in thousands) | | For the Year Ended Dec 31, 2020 | For the Year Ended Dec 31, 2019 | | :--- | :--- | :--- | | Revenue, net | $22,882 | $28,942 | | Loss from operations | ($17,888) | ($17,200) | | **Net loss** | **($17,575)** | **($18,047)** | | Basic and diluted loss per share | ($1.19) | ($12.08) | [Notes to Consolidated Financial Statements](index=68&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail liquidity, significant equity events including a reverse stock split and financings, lease impairments, legal settlements, and a crucial post-year-end $50 million capital raise - Despite a **$17.9 million operating loss** in 2020, management believes it has **sufficient funds** to continue operations for at least 12 months, primarily due to significant capital raised after the fiscal year-end[304](index=304&type=chunk)[309](index=309&type=chunk) - The company executed a **1-for-6 reverse stock split** effective July 31, 2020; all share and per-share amounts have been retroactively adjusted[439](index=439&type=chunk) - In 2020, the company recorded a **$3.8 million impairment charge** on inventory due to the elimination of specific product lines and an **$895,000 impairment** on right-of-use lease assets due to facility consolidations[377](index=377&type=chunk)[406](index=406&type=chunk) - The company has significant federal net operating loss (NOL) carryforwards of approximately **$177.5 million**, but a **full valuation allowance** has been recorded against the related deferred tax assets due to uncertainty of realization[508](index=508&type=chunk)[509](index=509&type=chunk) - Subsequent to year-end, on February 8, 2021, the company closed an equity financing for gross proceeds of approximately **$50 million**, significantly strengthening its balance sheet[518](index=518&type=chunk)

Vislink Technologies, Inc. (NASDAQ:VISL) Q3 2020 Earnings Conference Call November 13, 2020 10:00 AM ET Company Participants Belinda Marino - Corporate Secretary Mickey Miller - Chief Executive Officer Mike Bond - Chief Financial Officer Conference Call Participants Operator Welcome to the Vislink Technologies Third Quarter Earnings Update Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference ...

[PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the nine months ended September 30, 2020, show decreased revenue but a narrowed net loss due to reduced operating expenses, with significant cash inflow from financing activities [Condensed Consolidated Balance Sheets](index=5&type=page&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2020, total assets slightly decreased to $23.3 million, while total liabilities significantly reduced to $9.7 million, leading to increased stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2020 (unaudited, in thousands) | Dec 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash | $3,123 | $1,737 | | Total current assets | $17,682 | $16,785 | | Total assets | $23,302 | $23,604 | | **Liabilities & Equity** | | | | Total current liabilities | $7,678 | $13,212 | | Total liabilities | $9,701 | $14,375 | | Total stockholders' equity | $13,601 | $9,229 | | Total liabilities and stockholders' equity | $23,302 | $23,604 | [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For the nine months ended September 30, 2020, revenue decreased by 22% to $16.1 million, but the net loss narrowed to $8.0 million due to reduced operating expenses, improving loss per share Statement of Operations Highlights (in thousands, except per share data) | Metric | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :--- | :--- | :--- | | Revenue | $16,138 | $20,565 | | Loss from operations | $(8,236) | $(10,774) | | Net loss | $(8,001) | $(11,660) | | Basic and diluted loss per share | $(0.61) | $(12.77) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=11&type=page&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2020, cash used in operations increased to $10.7 million, offset by $12.3 million from financing activities, resulting in a $1.4 million net cash increase Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2020 (in thousands) | Nine Months Ended Sep 30, 2019 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,698) | $(6,144) | | Net cash used in investing activities | $(227) | $(381) | | Net cash provided in financing activities | $12,294 | $5,026 | | Net increase (decrease) in cash | $1,386 | $(1,500) | | Cash, end of period | $3,123 | $505 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=13&type=page&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail business operations, accounting policies, liquidity, and financial condition, highlighting COVID-19 impact, capital raises, a PPP loan, cost savings, and subsequent legal proceedings - The company specializes in live video collection and delivery for broadcast, military, and government markets, with extensive global installations[23](index=23&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - The company incurred an operating loss of **$8.2 million** and used **$10.7 million** in cash from operations for the nine months ended Sep 30, 2020. Management believes it has sufficient funds for the next 12 months due to cost reductions, a PPP loan, and capital raises[62](index=62&type=chunk)[66](index=66&type=chunk) - The company received a **$1.168 million** loan under the Paycheck Protection Program (PPP) on April 10, 2020, with a **1%** interest rate and a two-year maturity[73](index=73&type=chunk) - Subsequent to the quarter end, the company raised an additional **$5.1 million** in net proceeds from stock issuance, settled a lawsuit for **$50,000**, and faced two new lawsuits regarding patent infringement and non-payment for products[135](index=135&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 22% revenue decline to non-recurring 2019 orders and COVID-19, while net loss decreased by 32% due to cost savings, with liquidity bolstered by equity financings and a PPP loan - The COVID-19 pandemic has not significantly affected worldwide sales or supply chains, but did decrease order intake in the live production market during Q3 2020[144](index=144&type=chunk)[146](index=146&type=chunk) Revenue Comparison (in millions) | Period | 2020 (in millions) | 2019 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Three months ended Sep 30 | $4.8 | $5.0 | $(0.2) | -4% | | Nine months ended Sep 30 | $16.1 | $20.6 | $(4.5) | -22% | - General and administrative expenses for the nine months ended Sep 30, 2020 decreased by **$3.4 million (21%)** YoY, driven by reductions in salaries, stock-based compensation, and freight costs[162](index=162&type=chunk)[164](index=164&type=chunk) - Research and development expenses for the nine months ended Sep 30, 2020 decreased by **$0.8 million (31%)** YoY, mainly due to a **$0.7 million** reduction in salaries and benefits[167](index=167&type=chunk)[169](index=169&type=chunk) - The company implemented liquidity preservation actions including proactive spending reductions projected to save approximately **$5.0 million** in fiscal 2020 and renegotiated leases to lower rental fees by about **81%** at its Hackettstown, NJ locations[179](index=179&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Vislink is exempt from providing quantitative and qualitative disclosures about market risk[191](index=191&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management identified material weaknesses in disclosure controls and internal control over financial reporting due to a lack of segregation of duties, relying on oversight and external professionals for mitigation - Management identified control deficiencies and material weaknesses related to a lack of segregation of duties due to the small size of the accounting staff[193](index=193&type=chunk) - To mitigate the control weaknesses, the company relies on direct management oversight and the use of experienced external legal and accounting professionals[194](index=194&type=chunk) - The company plans to improve controls by moving towards a more unified accounting and enterprise resource planning system in 2020 and 2021[195](index=195&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) As of September 30, 2020, no material litigation was pending, though two new lawsuits were filed against the company in October 2020 - As of the quarter-end date, September 30, 2020, the company had no pending litigation matters it viewed as material[201](index=201&type=chunk) - Subsequent to the quarter, in October 2020, the company was sued by Harmony Licensing LLC for patent infringement and by Macnica GmbH for alleged non-payment of approximately **$1.043 million**[138](index=138&type=chunk)[139](index=139&type=chunk) [Risk Factors](index=46&type=page&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Vislink Technologies, Inc. is not required to provide the information requested by this item - The company is not required to provide risk factors as it qualifies as a smaller reporting company[202](index=202&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None reported[203](index=203&type=chunk) [Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - None reported[204](index=204&type=chunk) [Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[205](index=205&type=chunk) [Other Information](index=46&type=section&id=Item%205.%20Other%20Information) No material changes were reported regarding the procedures for security holders to recommend nominees to the Board of Directors - No material changes were reported regarding the procedures for security holders to recommend nominees to the Board of Directors[206](index=206&type=chunk) [Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and XBRL interactive data files[208](index=208&type=chunk) [Signatures](index=48&type=section&id=SIGNATURES)

Financial Data and Key Metrics Changes - Revenues for Q2 2020 were $6 million, an increase of 11% from Q1 2020's $5.4 million, but a decrease from $7.4 million in Q2 2019 [10] - Gross margins improved to 59.6% in Q2 2020 from 47% in Q1 2020 and 52.1% in Q2 2019 [10] - Net loss narrowed to $778,000 or $0.05 per share in Q2 2020, compared to a net loss of $4.4 million or $0.09 per share in Q1 2020 and $3.6 million or $10.07 per share in Q2 2019 [11] - EBITDA improved to a negative $421,000 in Q2 2020 from negative $3.9 million in Q1 2020 and negative $1.9 million in Q2 2019 [13] - Cash balance increased to $5.1 million at the end of Q2 2020 from $2.5 million at the end of Q1 2020 [13] Business Line Data and Key Metrics Changes - The company focused on four key areas: live production, military government, satellite, and managed services, which represent significant growth opportunities [6] - The Satcom business was revitalized with new leadership and a product roadmap, resulting in eight product modifications [6] - The service business is expected to grow significantly, particularly in extended warranty and preventive maintenance [24] Market Data and Key Metrics Changes - The broadcast live production market faced challenges due to reduced live sporting events, impacting spending by broadcasters [22] - Increased quoting activity was noted in motorsport product offerings as racing series resumed [22] - The MilGov market saw increased sales focus on OEMs, with several large orders shifting from Q2 to Q3 due to COVID-19 uncertainty [23] - The current sales funnel for the Satcom business exceeds $70 million with several multiyear deals [23] Company Strategy and Development Direction - The company is in Phase II of its turnaround strategy, focusing on fiscal discipline, cost management, and cash conservation [15] - Plans include streamlining operations, improving supply chain responsiveness, and enhancing customer engagement [16][19] - The company aims to explore inorganic growth opportunities while complementing organic growth in traditional sectors [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19 but expressed optimism about the company's improved position for growth and profitability [14] - The company is focused on maintaining operations and ensuring employee safety during the pandemic [34] - Management sees opportunities in the broadcast market and expects growth in the service business, particularly with existing customers [32][45] Other Important Information - The company reported no long-term debt, indicating improved financial stability [8] - A new trade-in and trade-up sales campaign generated over $5 million in opportunities within two and a half weeks [17] Q&A Session Summary Question: How has the pandemic affected the recent quarter? - Management noted that many customers were shut down or in quarantine, leading to halted or shifted activities, but activity began to pick up in June [27][28] Question: What is the focus for the second phase of the turnaround? - The focus is on maintaining financial discipline, managing costs, and increasing R&D to meet customer needs [38] Question: Is Vislink positioned to benefit from increased defense spending in Europe? - Management confirmed that there are growth opportunities in NATO countries and emphasized the potential in RF communication for military applications [40] Question: How has over-the-top affected the business? - Over-the-top is seen as a long-term tailwind, but COVID-19 has limited live events, impacting expected growth [42] Question: What marketing strategies are in place to increase revenue? - The company is focusing on re-engaging its existing customer base of over 9,000 and has seen positive responses from outreach programs [45]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number: 001-35988 Vislink Technologies, Inc. (Exact name of registrant as specified in its charter) Washington, DC 20549 (State ...

PART I: FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the three months ended March 31, 2020 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows decreased total assets and liabilities, while total stockholders' equity increased as of March 31, 2020 | Metric | Dec 31, 2019 (in thousands) | Mar 31, 2020 (in thousands) | Change (in thousands) | |:---|:---|:---|:---| | Total Assets | $23,604 | $21,774 | $(1,830) | | Total Liabilities | $14,375 | $10,997 | $(3,378) | | Total Stockholders' Equity | $9,229 | $10,777 | $1,548 | [Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Loss) The company reported a wider net loss in Q1 2020 compared to the prior year, driven by a significant decrease in revenue | Metric | Q1 2019 (in thousands) | Q1 2020 (in thousands) | Change (in thousands) | % Change | |:---|:---|:---|:---|:---| | Revenue, net | $8,206 | $5,352 | $(2,854) | -34.8% | | Total cost of revenue and operating expenses | $10,872 | $10,104 | $(768) | -7.1% | | Loss from operations | $(2,666) | $(4,752) | $(2,086) | 78.2% | | Net (loss) income | $(3,090) | $(4,430) | $(1,340) | 43.4% | | Basic and diluted loss per share | $(1.62) | $(0.09) | $1.53 | -94.4% | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased in Q1 2020, primarily due to equity raises that offset the net loss for the period | Metric | Jan 1, 2020 (in thousands) | Mar 31, 2020 (in thousands) | Change (in thousands) | |:---|:---|:---|:---| | Total Stockholders' Equity | $9,229 | $10,777 | $1,548 | | Additional Paid In Capital | $261,871 | $267,572 | $5,701 | | Accumulated Deficit | $(252,572) | $(257,002) | $(4,430) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net increase in cash, as cash from financing activities more than offset cash used in operations | Cash Flow Activity | Q1 2019 (in thousands) | Q1 2020 (in thousands) | Change (in thousands) | |:---|:---|:---|:---| | Net cash used in operating activities | $(1,564) | $(4,435) | $(2,871) | | Net cash used in investing activities | $(39) | $(97) | $(58) | | Net cash provided (used) in financing activities | $(85) | $5,250 | $5,335 | | Net increase (decrease) in cash | $(1,681) | $722 | $2,403 | | Cash, end of period | $324 | $2,459 | $2,135 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's accounting policies, liquidity, assets, liabilities, equity, and revenue breakdown [NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%201%20%E2%80%94%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Description of Business - Vislink Technologies focuses on advanced wireless communication solutions for broadcasting, sports, law enforcement, and surveillance markets[20](index=20&type=chunk) - The IMT subsidiary specializes in COFDM microwave communications equipment for real-time live video broadcasting[21](index=21&type=chunk)[22](index=22&type=chunk) - The Vislink subsidiary specializes in the wireless capture, delivery, and management of secure, high-quality live video[23](index=23&type=chunk)[24](index=24&type=chunk) Basis of Presentation and Principles of Consolidation - Financial statements are prepared under **US GAAP** for interim information, following Form 10-Q and Regulation S-X[25](index=25&type=chunk) - Consolidated financial statements include Vislink Technologies and its wholly-owned subsidiaries, with intercompany transactions eliminated[26](index=26&type=chunk) Use of Estimates and Risks and Uncertainties - Significant accounting estimates include asset useful lives, impairment, allowances for receivables, and various reserves[27](index=27&type=chunk) - The **COVID-19 pandemic** poses highly uncertain and difficult-to-predict risks with potential adverse material effects on the business[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) Inventories and Revenue Recognition - Inventory is valued at the lower of cost (FIFO) or net realizable value[31](index=31&type=chunk) - Revenue is recognized under **ASC Topic 606** when control of goods or services is transferred to customers[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) Leases - Operating leases are recognized as **ROU assets and liabilities** on the balance sheet for terms over 12 months[36](index=36&type=chunk) - The incremental borrowing rate (IBR) is generally used to calculate ROU assets and lease liabilities[37](index=37&type=chunk) Stock-Based Compensation and Loss Per Share - Stock compensation is recognized at fair value over the service period, following **ASC 718** for employees and **ASU 2018-07** for non-employees[39](index=39&type=chunk)[40](index=40&type=chunk) - Basic and diluted loss per share are calculated by dividing net loss by weighted-average shares outstanding, excluding anti-dilutive equivalents[41](index=41&type=chunk) | Anti-dilutive Potential Common Stock Equivalents (in thousands) | Mar 31, 2020 | Mar 31, 2019 | |:---|:---|:---| | Stock options | 391 | 610 | | Convertible debt | — | 1,352 | | Warrants | 8,604 | 1,187 | | Total | 8,995 | 3,149 | Fair Value of Financial Instruments and Foreign Currency - Fair value is determined using a three-level hierarchy, prioritizing observable inputs[45](index=45&type=chunk)[48](index=48&type=chunk) - Foreign currency translation gains/losses are recognized in accumulated other comprehensive income or the income statement[46](index=46&type=chunk)[47](index=47&type=chunk) | Foreign Exchange (in thousands) | Mar 31, 2020 | Mar 31, 2019 | |:---|:---|:---| | Net foreign exchange transactions: Losses (gains) | $584 | $(89) | | Accumulated comprehensive income: Unrealized (gains) losses on currency translation adjustment | $(277) | $33 | Subsequent Events and Recently Issued Accounting Principles - No material subsequent events were identified for disclosure, except as explicitly mentioned[50](index=50&type=chunk) - The company is evaluating **ASU No. 2016-13 (Credit Losses)**, with an effective date postponed to fiscal years after December 15, 2022[51](index=51&type=chunk) [NOTE 2 — LIQUIDITY AND FINANCIAL CONDITION](index=17&type=section&id=NOTE%202%20%E2%80%94%20LIQUIDITY%20AND%20FINANCIAL%20CONDITION) Capital-raising events and Strategic Initiatives | Capital-Raising Event | Date | Gross Proceeds (approx.) | Net Proceeds (approx.) | Purpose | |:---|:---|:---|:---|:---| | Equity Financing (Common Stock, Pre-funded Warrants, Warrants) | Nov 27, 2019 | $3,988,096 | N/A | Alleviate backorders, working capital | | Equity Financing (Common Stock, Warrants, Pre-funded Warrants) | Feb 14, 2020 | $5,998,000 | $5,438,000 | Working capital, general corporate purposes | | Shelf Registration Statement on Form S-3 | May 5, 2020 | Up to $100,000,000 | N/A | Future offerings of common/preferred stock, warrants, units | - Strategic initiatives include remote work, renegotiating leases (**81% reduction in rental fees**), and proactive spending reductions for approximately **$5.0 million in annual savings**[55](index=55&type=chunk)[56](index=56&type=chunk) Paycheck Protection Program ("PPP") and Liquidity - Received a **$1.2 million PPP loan** on April 10, 2020, with a 1.00% interest rate[57](index=57&type=chunk)[112](index=112&type=chunk)[145](index=145&type=chunk) - PPP loan forgiveness is available for documented payroll costs, rent, and utilities, subject to certain conditions[58](index=58&type=chunk)[146](index=146&type=chunk) - The company believes it has **sufficient funds for at least 12 months**, but future performance is subject to uncertainty from COVID-19[59](index=59&type=chunk)[147](index=147&type=chunk) [NOTE 3 — INTANGIBLE ASSETS](index=19&type=section&id=NOTE%203%20%E2%80%94%20INTANGIBLE%20ASSETS) | Intangible Asset Category | Dec 31, 2019 (in thousands) | Mar 31, 2020 (in thousands) | Amortization Q1 2020 (in thousands) | |:---|:---|:---|:---| | Patents and Licenses Technology (Net) | $1,900 | $1,700 | $200 | | Other Intangible Assets (Net) | $1,022 | $921 | $101 | | Total Intangible Assets (Net) | $2,922 | $2,621 | $301 | - The weighted average remaining life of the company's intangible assets is approximately **3.6 years**[65](index=65&type=chunk) [NOTE 4 — NOTES PAYABLE](index=19&type=section&id=NOTE%204%20%E2%80%94%20NOTES%20PAYABLE) | Note Payable | Dec 31, 2019 (in thousands) | Mar 31, 2020 (in thousands) | Maturity | Interest Rate | |:---|:---|:---|:---|:---| | MB Technology Holdings, LLC | $231 | $231 | Sep 18, 2020 | 8.022% | | IMT Working Capital Loan | $108 | $62 | Apr 24, 2020 | 1.9% | | Total Notes Payable | $339 | $293 | | | [NOTE 5 — LEASES](index=21&type=section&id=NOTE%205%20%E2%80%94%20LEASES) - Operating lease liabilities were approximately **$1.72 million** as of March 31, 2020, with a weighted-average remaining term of **5.0 years**[70](index=70&type=chunk) - A new lease agreement at the Billerica location reduced square footage by **79%** and resulted in a **$21,000 lease termination gain**[69](index=69&type=chunk) | Lease Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | |:---|:---|:---| | Operating lease cost | $202 | $301 | | Short-term lease cost | $102 | $31 | | Sublease income | $(46) | $(35) | | Total lease cost | $258 | $297 | | Operating cash flows from operating leases | $253 | $310 | | Right-of-use assets obtained in exchange for new operating lease liabilities | $546 | $2,899 | [NOTE 6 — RELATED PARTY TRANSACTIONS](index=22&type=section&id=NOTE%206%20%E2%80%94%20RELATED%20PARTY%20TRANSACTIONS) - Amended agreement with MB Merchant Group, LLC (MBMG) to narrow services, focusing on M&A and financing[75](index=75&type=chunk) - Negotiated a final settlement of $561,000 due to MBMG for approximately $230,000, recognizing a **$331,000 gain**[75](index=75&type=chunk)[140](index=140&type=chunk) | Related Party Transaction | Q1 2020 (in thousands) | Q1 2019 (in thousands) | |:---|:---|:---| | Consulting fees incurred, recurring | $200 | $150 | | Consulting fees incurred, non-recurring | $120 | $25 | | Amounts repaid to MBMG in cash | $825 | $230 | [NOTE 7 — DERIVATIVE LIABILITIES](index=23&type=section&id=NOTE%207%20%E2%80%94%20DERIVATIVE%20LIABILITIES) - Warrants with net cash settlement provisions are classified as **Level 3 derivative liabilities**, valued using a binomial model[77](index=77&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) | Derivative Liabilities (in thousands) | Mar 31, 2020 | Mar 31, 2019 | |:---|:---|:---| | Beginning balance | $30 | $1,118 | | Change in fair value of derivative liabilities | $(17) | $74 | | Ending balance | $13 | $1,192 | [NOTE 8 — STOCKHOLDERS' EQUITY](index=24&type=section&id=NOTE%208%20%E2%80%94%20STOCKHOLDERS'%20EQUITY) Common Stock Issuances and Warrants - In February 2020, the company closed an equity financing, resulting in **$5.3 million net proceeds** for working capital[82](index=82&type=chunk) - Issued **47.1 million common shares** from the exercise of warrants, generating approximately $9,600 in net proceeds[82](index=82&type=chunk) | Common Stock Warrants | Dec 31, 2019 (shares) | Mar 31, 2020 (shares) | Weighted Average Exercise Price (Mar 31, 2020) | |:---|:---|:---|:---| | Outstanding | 25,125,447 | 11,094,709 | $2.00 | | Granted | N/A | 42,099,400 | $0.20 | | Exercised | N/A | (56,127,764) | $(0.20) | | Cancelled/Expired | N/A | (5,374) | $(411.80) | Common Stock Options | Stock Option Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | |:---|:---|:---| | Stock compensation expense | $386 | $609 | | Stock Options | Dec 31, 2019 (shares) | Mar 31, 2020 (shares) | Weighted Average Exercise Price (Mar 31, 2020) | |:---|:---|:---|:---| | Outstanding | 505,050 | 486,050 | $14.83 | | Exercisable | N/A | 391,424 | $15.42 | CEO Inducement Award — Time Vested Option - CEO granted a time-vested option for **2,155,481 shares** at a $0.285 exercise price[87](index=87&type=chunk) | Time Vested Option Metric | Q1 2020 (in thousands) | |:---|:---| | Stock compensation expense | $18 | | Remaining stock compensation expense | $574 | | Remaining amortization period | 3.81 years | CEO Inducement Award — Performance-Based Option - CEO granted a performance-based option for **1,500,000 shares** vesting upon achieving cumulative EBITDA targets[91](index=91&type=chunk)[93](index=93&type=chunk) - As of March 31, 2020, **$414,000 of stock-based compensation expense** for this award remains unrecognized[93](index=93&type=chunk) [NOTE 9 — COMMITMENTS AND CONTINGENCIES](index=28&type=section&id=NOTE%209%20%E2%80%94%20COMMITMENTS%20AND%20CONTINGENCIES) Legal and Pension - Accrued **$140,000** for potential liability in a lawsuit filed by Hale Capital Partners, LP[95](index=95&type=chunk) | Pension Contributions | Q1 2020 (in thousands) | Q1 2019 (in thousands) | |:---|:---|:---| | UK Group Personal Pension Plan matching contributions | $43 | $33 | Nasdaq Compliance - Received Nasdaq notices for non-compliance with the **$1.00 minimum bid price rule**, with the compliance period extended to December 7, 2020[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - Received a **public reprimand from Nasdaq** for violating shareholder approval rules in a February 2020 equity offering[102](index=102&type=chunk)[103](index=103&type=chunk) - **Delisting from Nasdaq** could make it difficult to trade common stock and raise additional capital[104](index=104&type=chunk) [NOTE 10 — CONCENTRATIONS](index=30&type=section&id=NOTE%2010%20%E2%80%94%20CONCENTRATIONS) | Concentration Type | Q1 2020 | Q1 2019 | |:---|:---|:---| | Revenue from single customer | 16% ($854,000) | <10% | | Accounts receivable from one customer | 15% ($605,000) | 12% ($649,000) | | Inventory purchases from one vendor | 36% ($1,084,000) | 43% ($2,467,000) | | Accounts payable from top three vendors | 41% ($634k, $494k, $459k) | <10% for any single vendor | [NOTE 11 – REVENUE](index=30&type=section&id=NOTE%2011%20%E2%80%93%20REVENUE) | Revenue Category | Q1 2020 (in thousands) | Q1 2019 (in thousands) | % Change | |:---|:---|:---|:---| | **Total Revenue** | $5,352 | $8,206 | -34.8% | | **Primary Geographical Markets:** | | | | | North America | $2,076 | $3,919 | -47.0% | | Europe | $1,963 | $2,350 | -16.4% | | Asia | $105 | $1,390 | -92.4% | | Rest of World | $1,187 | $528 | 124.8% | | **Primary Revenue Source:** | | | | | Equipment sales | $4,980 | $7,561 | -34.2% | | Installation, integration and repairs | $329 | $601 | -45.2% | | Warranties | $43 | $44 | -2.3% | [NOTE 12 — SUBSEQUENT EVENTS](index=30&type=section&id=NOTE%2012%20%E2%80%94%20SUBSEQUENT%20EVENTS) - Received a **$1.2 million Paycheck Protection Program (PPP) loan** on April 10, 2020[112](index=112&type=chunk) | Warrant Exercises (Post Mar 31, 2020) | Quantity of Warrants Exercised | Quantity of Common Stock Issued | |:---|:---|:---| | Nov 2019 Equity Raise (Cashless) | 20,000 | 15,000 | | Feb 2020 Equity Raise (Cashless) | 9,547,836 | 7,160,877 | | Total | 9,567,836 | 7,175,877 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the adverse impact of COVID-19 on financial performance and outlines mitigation strategies for Q1 2020 [Potential Impacts of the COVID-19 Pandemic](index=32&type=section&id=Potential%20Impacts%20of%20the%20COVID-19%20Pandemic) - **COVID-19 has adversely affected operations**, leading to potential supplier limitations and delivery difficulties[117](index=117&type=chunk)[118](index=118&type=chunk) - Mitigation measures include reducing discretionary spending, streamlining staffing, and securing government assistance[119](index=119&type=chunk)[120](index=120&type=chunk) - The **cumulative effects of COVID-19** on operating results, cash flows, and financial condition are currently unassessable[119](index=119&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) [Overview of Business](index=33&type=section&id=Overview%20of%20Business) - Vislink Technologies' strategy is to deliver advanced wireless communications solutions for reliability, mobility, and performance[123](index=123&type=chunk) - The IMT subsidiary specializes in COFDM microwave communications for live broadcasting and surveillance markets[124](index=124&type=chunk)[125](index=125&type=chunk) - The Vislink subsidiary focuses on wireless capture and management of secure, high-quality live video for broadcast and law enforcement[126](index=126&type=chunk)[127](index=127&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Revenues | Metric | Q1 2020 (in millions) | Q1 2019 (in millions) | Change (in millions) | % Change | |:---|:---|:---|:---|:---| | Revenue, net | $5.4 | $8.2 | $(2.8) | -34% | - Revenue reduction is attributable to **supply chain issues** due to the COVID-19 pandemic and a decline in new orders[129](index=129&type=chunk) Cost of Revenue and Operating Expenses | Metric | Q1 2020 (in millions) | Q1 2019 (in millions) | Change (in millions) | % Change | |:---|:---|:---|:---|:---| | Cost of components and personnel | $2.8 | $4.1 | $(1.3) | -32% | - The decrease in cost of components and personnel is proportional to the revenue decline[130](index=130&type=chunk) General and Administrative Expenses | Metric | Q1 2020 (in millions) | Q1 2019 (in millions) | Change (in millions) | % Change | |:---|:---|:---|:---|:---| | General and administrative expenses | $6.2 | $5.2 | $1.0 | 19% | - The increase was driven by **$0.7 million in foreign exchange losses** and $0.5 million in public entity expenditures[133](index=133&type=chunk) Research and Development Expenses | Metric | Q1 2020 (in millions) | Q1 2019 (in millions) | Change (in millions) | % Change | |:---|:---|:---|:---|:---| | Research and development expenses | $0.7 | $0.9 | $(0.2) | -22% | - The decrease was primarily due to reductions in consulting fees and miscellaneous research expenditures[137](index=137&type=chunk) Amortization and Depreciation | Metric | Q1 2020 (in millions) | Q1 2019 (in millions) | Change (in millions) | % Change | |:---|:---|:---|:---|:---| | Amortization and depreciation | $0.4 | $0.6 | $(0.2) | -33% | - The decline is attributed to an increase in fully depreciated long-lived assets[139](index=139&type=chunk) Other (Expense) Income | Metric | Q1 2020 (in millions) | Q1 2019 (in millions) | Change (in millions) | % Change | |:---|:---|:---|:---|:---| | Gain on settlement of related party obligations | $0.3 | $0.0 | $0.3 | 100% | | Interest expense | $0.0 | $0.4 | $(0.4) | -100% | - A **gain on settlement** resulted from negotiating a related party obligation for less than face value[140](index=140&type=chunk) - Interest expense decreased due to the **payoff of significant long-term debt** in fiscal year 2019[141](index=141&type=chunk) Net (Loss) Income | Metric | Q1 2020 (in millions) | Q1 2019 (in millions) | Change (in millions) | % Change | |:---|:---|:---|:---|:---| | Net (loss) income | $(4.4) | $(3.1) | $(1.3) | 42% | - The increase in net loss is mainly associated with the **decline in revenue** experienced in Q1 2020[142](index=142&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Capital-raising events | Capital-Raising Event | Date | Gross Proceeds (approx.) | Purpose | |:---|:---|:---|:---| | Equity Financing (Nov 2019) | Nov 27, 2019 | $3,988,000 | Alleviate backorders, working capital | | Equity Financing (Feb 2020) | Feb 14, 2020 | $5,998,000 | Working capital, general corporate purposes | | Shelf Registration (Form S-3) | May 5, 2020 | Up to $100,000,000 | Future offerings | Paycheck Protection Program ("PPP") and Liquidity - Received a **$1.2 million PPP loan** on April 10, 2020, with a 1.00% interest rate[145](index=145&type=chunk) - Loan forgiveness is available for payroll, rent, and utilities, subject to conditions on headcount and salary reductions[146](index=146&type=chunk) - Combined capital raises and the PPP loan provide **sufficient funds for at least 12 months**, though future performance remains uncertain[147](index=147&type=chunk) Cash Flows | Cash Flow Activity | Q1 2020 (in thousands) | Q1 2019 (in thousands) | Change (in thousands) | |:---|:---|:---|:---| | Net cash used in operating activities | $(4,435) | $(1,564) | $(2,871) | | Net cash used in investing activities | $(97) | $(39) | $(58) | | Net cash provided by (used) in financing activities | $5,250 | $(85) | $5,335 | | Net increase (decrease) in cash | $722 | $(1,681) | $2,403 | - Operating cash flow was negatively impacted by increased inventory and decreased deferred revenue[151](index=151&type=chunk) - Financing cash flow was significantly boosted by **net proceeds from equity raises** and warrant exercises[154](index=154&type=chunk) [Nasdaq Compliance](index=38&type=section&id=Nasdaq%20Compliance) - Received Nasdaq notices for non-compliance with the **$1.00 minimum bid price rule**, with the compliance period extended to December 7, 2020[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - Received a **public reprimand from Nasdaq** for violating shareholder approval rules in a February 2020 equity offering[160](index=160&type=chunk) - **Delisting from Nasdaq** could make it difficult to trade common stock and raise additional capital[161](index=161&type=chunk) [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company does not have any material off-balance sheet arrangements[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Vislink Technologies is not required to provide these disclosures - As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk[163](index=163&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were not effective due to a lack of segregation of duties and material weaknesses [Evaluation of Disclosure Controls and Procedures](index=39&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Disclosure controls and procedures were **not effective** as of March 31, 2020, due to a lack of segregation of duties[165](index=165&type=chunk) - **Material weaknesses** in internal control over financial reporting, identified in the 2019 Form 10-K, continue to exist[167](index=167&type=chunk) - The company is materially dependent on limited accounting personnel and expects to make improvements as resources permit[166](index=166&type=chunk)[168](index=168&type=chunk) [Changes in Internal Controls](index=39&type=section&id=Changes%20in%20Internal%20Controls) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2020[169](index=169&type=chunk) PART II: OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company had no material litigation matters pending as of March 31, 2020 - The company is subject to ordinary course litigation but had **no material litigation matters pending** as of March 31, 2020[172](index=172&type=chunk)[173](index=173&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Vislink Technologies is not required to provide detailed risk factors - As a smaller reporting company, the registrant is not required to provide risk factors[174](index=174&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[175](index=175&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report - No defaults upon senior securities to report[176](index=176&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable[177](index=177&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) No material changes were made to the procedures for recommending Board of Director nominees - No material changes to procedures for security holders to recommend Board nominees[178](index=178&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (Sarbanes-Oxley Act Sections 302 and 906) and XBRL taxonomy documents[180](index=180&type=chunk)[186](index=186&type=chunk) [SIGNATURES](index=42&type=section&id=SIGNATURES) The report was duly signed by the CEO and CFO on behalf of the company on May 27, 2020 - The report is signed by Carleton Miller (CEO) and Michael Bond (CFO) on **May 27, 2020**[184](index=184&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from__________ to__________ Commission File Number: 001-35988 Vislink Technologies, Inc. (Exact name of registrant as specified in its charter) (State or other juri ...