Vislink Technologies(VISL) - 2020 Q3 - Quarterly Report

PART I: FINANCIAL INFORMATION Financial Statements 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 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 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 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 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][25][26] - 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][66] - 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] - 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][138][139] Management's Discussion and Analysis of Financial Condition and Results of Operations 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][146] 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][164] - 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][169] - 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] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - To mitigate the control weaknesses, the company relies on direct management oversight and the use of experienced external legal and accounting professionals[194] - The company plans to improve controls by moving towards a more unified accounting and enterprise resource planning system in 2020 and 2021[195] PART II. OTHER INFORMATION Legal Proceedings 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] - 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][139] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported[203] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None reported[204] Mine Safety Disclosures This item is not applicable to the company - Not applicable[205] Other Information 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] Exhibits 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] Signatures