Vislink Technologies(VISL) - 2021 Q4 - Annual Report

Part I Item 1. Business Vislink Technologies provides live video and data solutions for broadcast, military, and government, bolstered by the 2021 Mobile Viewpoint acquisition - Vislink specializes in live video collection and delivery for broadcast, surveillance, and defense markets, utilizing technologies like microwave, satellite, and IP networks[18] - The company's solutions are used in major live events, including international sporting contests, award shows, and racing events, with over 200,000 systems installed worldwide[20] - The August 2021 acquisition of Mobile Viewpoint (MVP) is a core part of the strategy to expand into bonded cellular, 5G, and AI-automated production, addressing the growth in live internet video traffic and cloud-based workflows[25][26] - As of December 31, 2021, Vislink had 131 full-time employees, contractors, or consultants across various functions[61] Item 1A. Risk Factors The company faces multiple risks in operations, financial stability, internal controls, supply chain, and potential Nasdaq delisting - The company has a history of recurring operating losses and cash used from operations, leading to disclosures about its liquidity and financial condition[67][72] - Management has identified material weaknesses in internal controls over financial reporting, including inadequate risk assessment and issues with integrating accounting systems from acquisitions[78][82][87] - The company faces risks from the COVID-19 pandemic, which could disrupt operations, supply chains, and customer demand[68][69] - Vislink relies on a limited number of suppliers for certain components and does not have long-term contracts, creating a risk of disruption to its manufacturing and sales fulfillment[99][101] - The company's common stock is at risk of being delisted from the Nasdaq Capital Market if it fails to maintain the minimum closing bid price of $1.00 per share[133] - The acquisition strategy involves risks such as the failure of acquired businesses to achieve expected results, difficulties in integration, and the potential for impairment of acquired assets[149][152] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments - Not applicable[155] Item 2. Properties The company leases various global properties, including its new Mount Olive, NJ headquarters, and facilities in the UK, UAE, and Singapore Leased Properties Summary | Location | Size (sq. ft.) | Lease Expiration | Annual Rent (Approx.) | | :--- | :--- | :--- | :--- | | Mount Olive, NJ | 7,979 | Jan 31, 2027 | $130,428 (initial) | | Billerica, MA | 8,204 | Dec 31, 2026 | $95,000 | | Colchester, UK | 16,000 | Mar 24, 2025 | $275,000 | | Hemel, UK | N/A | Oct 27, 2023 | $175,000 | | Singapore | 950 | Aug 9, 2023 | $30,500 | Item 3. Legal Proceedings The company is not currently involved in any material litigation, though its industry is prone to intellectual property claims - The company is not currently involved in any material litigation that it believes would significantly affect its business or financial condition[164] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[165] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Vislink's common stock trades on Nasdaq under 'VISL', with 45.8 million shares outstanding, and no cash dividends have been paid - The company's common stock trades on the Nasdaq Capital Market under the symbol "VISL"[167] - As of March 22, 2022, there were 45,825,089 shares of common stock outstanding[167] - The company has never declared or paid a cash dividend and intends to retain future earnings[169] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue increased 48% to $33.9 million in 2021, driven by live events and acquisitions, despite continued operating losses, while liquidity significantly improved Financial Performance Summary (in millions) | Metric | 2021 (in millions) | 2020 (in millions) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $33.9 | $22.9 | 48% | | Loss from Operations | $(17.7) | $(17.9) | (1%) | | Goodwill Impairment | $9.2 | $0.0 | N/A | | Net Loss | $(16.4) | $(17.6) | (7%) | - The 48% increase in revenue was primarily due to a resurgence in live event sales post-pandemic, growth in military/government contracts, and revenue contribution from the newly acquired MVP[194][195] - General and administrative expenses rose by 29% to $22.0 million, mainly due to $3.2 million in stock-based compensation, $2.0 million in salaries, and $1.9 million in acquisition costs related to MVP[200][201] - The company's cash position increased significantly to $36.2 million at year-end 2021 from $5.2 million in 2020, primarily due to net proceeds of $46.8 million from a public offering and $12.6 million from an at-the-market facility[210][211][212] Cash Flow Summary (in millions) | Cash Flow Activity | 2021 (in millions) | 2020 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | $(9.6) | $(14.4) | | Net cash used in investing activities | $(17.5) | $(0.3) | | Net cash provided by financing activities | $58.3 | $18.0 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk Disclosure is not required as the company qualifies as a smaller reporting company - Disclosure is not required as the company qualifies as a smaller reporting company[251] Item 8. Financial Statements and Supplementary Data This section refers to the company's audited financial statements and notes, beginning on page F-1 - The company's audited financial statements and notes are included in the report starting on page F-1[252] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants on accounting and financial disclosure - None reported[253] Item 9A. Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2021, due to material weaknesses in internal financial reporting controls - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021[257] - Material weaknesses were identified due to limited resources, preventing proper segregation of duties and adequate risk assessment, and a lack of documented internal control assessment[260] - The company is integrating the newly acquired MVP into its operations and internal control processes, with MVP's controls potentially excluded from the 2021 evaluation[259] Item 9B. Other Information The company reports no other information under this item - None[262] Part III Items 10-14 Information for Items 10-14 is incorporated by reference from the forthcoming 2022 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the forthcoming 2022 proxy statement[266][267][268][269][270] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K - The audited consolidated financial statements for the years ended December 31, 2021, and 2020 are filed with this report[273] - A list of exhibits filed with the report is provided, including various corporate documents, material agreements, and certifications by the CEO and CFO[274][277][278] Financial Statements Consolidated Financial Statements Consolidated financial statements show significant asset and equity growth in 2021 due to capital raises, despite continued net losses Consolidated Balance Sheet (in thousands) | Balance Sheet (in thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash | $36,231 | $5,190 | | Total Current Assets | $59,664 | $16,515 | | Total Assets | $68,120 | $20,651 | | Liabilities & Equity | | | | Total Current Liabilities | $9,002 | $8,846 | | Total Liabilities | $11,487 | $10,654 | | Total Stockholders' Equity | $56,633 | $9,997 | Consolidated Statement of Operations (in thousands) | Statement of Operations (in thousands) | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Revenue, net | $33,882 | $22,882 | | Loss from operations | $(17,747) | $(17,888) | | Net loss | $(16,392) | $(17,575) | | Basic and diluted loss per share | $(0.38) | $(1.19) | Notes to Consolidated Financial Statements The notes provide detailed financial information, including liquidity, the Mobile Viewpoint acquisition, goodwill impairment, and other key disclosures Note 2 - Liquidity and Financial Condition - The company incurred a $17.7 million loss from operations and used $9.6 million in cash from operations in 2021, ending with $36.2 million in cash and an accumulated deficit of $286.5 million[324] - In 2021, the company raised significant capital, including net proceeds of $46.8 million from a public offering and $12.6 million from its at-the-market (ATM) facility[325][326] - Management believes the company has sufficient funds to continue operations for at least twelve months from the financial statement date, despite risks and uncertainties[328] Note 4 - Acquisition of Mobile Viewpoint Corporate B.V. - On August 16, 2021, Vislink acquired 100% of Mobile Viewpoint (MVP) for approximately €14.8 million (approx. $17.5 million) plus €0.7 million in assumed debt[407] Mobile Viewpoint Purchase Price Allocation (in thousands) | Purchase Price Allocation (in thousands) | As Adjusted | | :--- | :--- | | Cash (Consideration Transferred) | $18,311 | | Total identifiable net assets | $5,930 | | Excess (Intangibles & Goodwill) | $12,381 | | Allocation: | | | Trade name | $801 | | Proprietary technology | $2,133 | | Customer relationship | $2,215 | | Goodwill | $9,189 | - Since the acquisition date, MVP contributed approximately $2.3 million in revenue[419] Note 8 - Goodwill - The company performed its annual goodwill impairment test as of December 31, 2021, recognizing a decline in market capitalization as a triggering event[427] - A quantitative assessment concluded the reporting unit's carrying amount exceeded its fair value, resulting in a goodwill impairment charge of $9,189,000 for the year[428] Note 12 - Payroll Protection Program Loan - On July 26, 2021, the company received full forgiveness for its $1,168,000 Paycheck Protection Program (PPP) loan, originally received in April 2020[440] - The loan forgiveness was recognized as a gain on settlement of debt in the statement of operations[441] Note 16 - Stockholders' Equity - In February 2021, the company raised net proceeds of $46.8 million by issuing 18,181,820 shares of common stock and 9,090,910 five-year warrants[497] - During 2021, the company also raised net proceeds of $12.6 million by issuing 6,163,198 shares of common stock through its at-the-market (ATM) shelf registration[498] Note 20 - Revenue Revenue by Geography (in millions) | Revenue by Geography (in millions) | 2021 | 2020 | | :--- | :--- | :--- | | North America | $18.1 | $9.1 | | Europe | $11.4 | $9.4 | | Asia | $2.0 | $2.4 | | Rest of World | $2.1 | $1.8 | | South America | $0.4 | $0.1 | | Total | $33.9 | $22.9 | Revenue by Source (in millions) | Revenue by Source (in millions) | 2021 | 2020 | | :--- | :--- | :--- | | Equipment sales | $31.7 | $20.1 | | Installation, integration, and repairs | $1.1 | $2.2 | | Warranties | $0.7 | $0.3 | | Other | $0.3 | $0.3 | | Total | $33.9 | $22.9 | Note 22 - Income Taxes - As of December 31, 2021, the company has federal net operating loss (NOL) carryforwards of approximately $177.8 million, which will begin to expire in 2027[544] - A full valuation allowance has been recorded against the company's deferred tax assets, as management concluded they are "more likely than not" to not be realized due to past and present losses[545]