Vislink Technologies Inc

NOTE 1 —NATURE OF OPERATIONS

Vislink Technologies, Inc., is a global technology business that collects, delivers, and manages high-quality, live video and associated data from the action scene to the viewing screen. We provide RF and 5G solutions for collecting live news, sports, entertainment, and news events for the broadcast, surveillance, and defense markets with real-time video intelligence using a range of transmission products. Our team also provides professional and technical services utilizing a staff of technology experts with decades of applied knowledge and real-world experience in terrestrial microwave, fiber optic, surveillance, and wireless communications systems, delivering a broad spectrum of customer solutions.

On February 10, 2025, we filed a Form 25 with the SEC to voluntarily delist our common stock from The Nasdaq Capital Market. Our common stock became quoted for trading with the OTCQB of OTC Markets on February 12, 2025. The decision to move trading of the common stock from Nasdaq to OTC Markets was made to reduce costs and improve operational efficiencies

We deliver an extensive portfolio of solutions for live news, sports, and entertainment industries. These solutions include video collection, transmission, management, and distribution via RF, cellular, IP (Internet Protocol), MESH, and bonded cellular/5G networks. We also provide solutions utilizing AI (Artificial Intelligence) technologies to provide automated news and sporting events coverage. With over 50 years in operation, we have the expertise and technology portfolio to deliver fully integrated, seamless, end-to-end solutions encompassing hardware components, hosted systems management platforms, related software licenses, and ancillary support services.

Industry-wide contributors acknowledge our live broadcast solutions. Our equipment transmits most outside wireless broadcast video content, with over 200,000 systems installed worldwide. We work closely with the majority of the world’s broadcasters. Our wireless cameras and ultra-compact encoders help bring many of the world’s most prestigious sporting and entertainment events to life. Examples include globally watched international sporting contests, award shows, racing events, and annual music and cultural events.

We have developed high-quality RF and 5G solutions to meet surveillance and defense markets’ operational and industry challenges based on our knowledge of live video delivery. Our solutions are designed explicitly with interagency cooperation, utilizing the internationally recognized IP platform and a web interface for video delivery. We provide comprehensive video, audio, and data communications solutions to law enforcement and the public safety community, including Airborne, Uncrewed Systems, Maritime, and Tactical Mobile Command Posts. These solutions may include:

Our public safety and surveillance solutions are deployed worldwide, including throughout the U.S., Europe, and the Middle East, at the local, regional, and federal levels of operation for criminal investigation, crisis management, mobile command posts, and field operations. These solutions are designed to meet the demands of ground operations, command centers, and central receiving sites. Short-range and long-range solutions are available in areas including established infrastructure and exceptionally remote regions, making valuable video intelligence available regardless of location.

NOTE 1 — NATURE OF OPERATIONS (continued)

Vislink offers hardware and software solutions to acquire, produce, contribute to, and deliver video across all private and public networks. Connected edge solutions aid the video transport concept of ubiquitous IP networks and cloud-scale computing across 5G, WiFi6, Mesh, and COFDM-enabled networks. These solutions include:

NOTE 2 —LIQUIDITY AND FINANCIAL CONDITION

For the fiscal year ending December 31, 2024, we incurred a net loss of approximately $20.5 million and utilized $6.8 million in cash for operating activities. As of December 31, 2024, the company maintained a working capital of $13.3 million and $5.5 million in cash.

On November 12, 2024, the Board approved a plan to restructure certain business operations. In connection with this plan, the Company has begun implementing actions such as workforce reductions and facility closures. These initiatives are intended to strengthen the Company’s financial position by eliminating underperforming product lines, consolidating redundant manufacturing operations, and reducing associated headcount and cash outflows. The Company anticipates that, as a result of these operational changes, it will generate positive cash flow in the near future.

Our ability to fund operations will depend on various factors, including economic conditions, inflation, foreign exchange fluctuations, market competition, strategic initiatives, research and development activities, regulatory developments, and technology advancements. While these factors may cause us to consume available capital at a faster rate than expected, based on our current operating plan, we believe we have sufficient liquidity to fund operations for at least 12 months from the date of filing these financial statements.

Restructuring Initiatives

On November 12, 2024, the Board approved a plan to restructure certain business operations. The Company has initiated actions, including reducing its workforce and dissolving its U.K. and Poway, California manufacturing operations, transferring these activities to Mount Olive, New Jersey. These initiatives will enhance the Company’s financial position by eliminating underperforming product lines, redundant manufacturing facilities, and associated headcount. The inventory impairment reflects the write-down of inventory in connection with the Company’s strategic realignment of its product portfolio and resulting discontinuation of certain legacy product lines.

The Company incurred approximately $6.5 million in one-time costs during 2024 related to severance, lease termination, and other restructuring initiatives.

Delisting from The Nasdaq Capital Market

On February 10, 2025, we filed a Form 25 with the SEC to voluntarily delist our common stock from The Nasdaq Capital Market. Our common stock became quoted for trading with the OTCQB of OTC Markets on February 12, 2025. The decision to move trading of the common stock from Nasdaq to OTC Markets was made to reduce costs and improve operational efficiencies.

NOTE 3 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements have been prepared in conformity with U.S. GAAP, as codified in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”), and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). These financial statements include Vislink Technologies Inc.’s accounts and wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.

Segment Reporting

The Company operates as a single reporting segment under the guidance of ASC 280, Segment Reporting. Effective January 1, 2024, the Company adopted ASU 2023-07, which enhances the transparency and utility of segment reporting. The adoption did not result in material changes to the Company’s segment disclosures, as prior reporting periods already reflected the single-segment structure.

The Chief Operating Decision Maker (CODM), comprising of the Chief Executive Officer and Chief Financial Officer, evaluates the Company’s performance and allocates resources based on consolidated financial results consistent with the single operating segment structure. Significant operating expenses, such as selling, general, and administrative expenses, are not allocated to any distinct business units but are reviewed on a consolidated basis by the CODM.

Use of Estimates

Preparing the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities in the consolidated financial statements. Significant accounting estimates reflected in the Company’s consolidated financial statements include the useful lives of property, plant, and equipment; the useful lives of right-of-use assets; the useful lives of intangible assets; impairment of long-lived assets; allowance for accounts receivable doubtful accounts; allowance for inventory obsolescence reserve; allowance for deferred tax assets; valuation of warranty reserves; contingent consideration liabilities; and the accrual of potential liabilities.

Certain estimates, including asset impairments, termination benefits, and facility closure costs, have been revised due to adopting a restructuring initiative in the fourth quarter of 2024. These restructuring-related estimates are preliminary and may change as more information becomes available. Such changes could materially impact financial results in subsequent periods. Actual results could differ from estimates, and any such differences may be material to our consolidated financial statements.

Risks and Uncertainties

The future impacts of global conflicts, such as the Russia-Ukraine war and the Israel-Hamas conflict, and economic conditions, including inflation, currency fluctuations, and global supply chain disruptions, remain uncertain. Additionally, in the fourth quarter of 2024, the Company adopted a restructuring initiative to optimize its operations. This initiative introduces risks related to implementation, workforce reductions, facility closures, and potential operational disruptions.

While the restructuring initiative is expected to improve long-term cost efficiency, it may affect short-term cash flow, financial performance, and the Company’s ability to meet customer demand. Management continues to assess these risks and uncertainties and monitors their potential material adverse effects on our business, financial condition, or results of operations. As a result, estimates and assumptions may be revised over time in response to these developments. Interim period results are not necessarily indicative of the expected results for the full fiscal year.

On February 10, 2025, the Company filed a Form 25 with the SEC to voluntarily delist our common stock from The Nasdaq Capital Market. Our common stock became quoted for trading with the OTCQB of OTC Markets on February 12, 2025. The decision to move trading of the common stock from Nasdaq to OTC Markets was made to reduce costs and improve operational efficiencies. While the Company anticipates cost savings and operational efficiencies from delisting, the transition introduces risks, including reduced liquidity, lower trading volume, decreased investor accessibility, and potential challenges in raising capital. Management continues to assess the impact of these factors on the Company’s business, financial condition, and results of operations.

Restructuring Costs

ASC 420, Exit or Disposal Cost Obligations, recognizes restructuring costs. These costs may include employee termination benefits, facility closure expenses, contract termination fees, and other direct costs associated with restructuring activities.

Restructuring costs are measured at their fair value upon recognition. Adjustments to previously recorded restructuring liabilities are made in the period when changes in estimates occur.

Business Combinations and Asset Acquisitions

The Company accounts for acquisitions that qualify as business combinations by applying the acquisition method according to Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). Transaction costs related to the acquisition of a business are expensed as incurred and excluded from the fair value of consideration transferred. The identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquired entity are recognized and measured at their estimated fair values. The excess of the fair value of consideration transferred over the fair values of identifiable assets acquired, liabilities assumed, and noncontrolling interests in an acquired entity, net of the fair value of any previously held interest in the acquired entity, is recorded as goodwill. Such valuations require management to make significant estimates and assumptions.

The Company evaluates acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether the Company has acquired inputs and processes that can create outputs that would meet the definition of a business. When applying the screen test, significant judgment is required to determine whether an acquisition is a business combination or an acquisition of assets. Accounting for asset acquisitions falls under the guidance of Topic 805, Business Combinations, specifically Subtopic 805-50. A cost accumulation model is used to determine an asset acquisition’s cost. Assets acquired are based on their cost, generally allocated to them on a relatively fair value basis. Direct acquisition-related costs are included in the cost of the acquired assets.

As part of the Company’s restructuring initiative adopted in the fourth quarter of 2024, the intangible assets acquired in the Poway transaction, consisting of customer relationships with a net book value of approximately $330,000, were impaired as the Company exited operations in Poway, California. Additionally, the restructuring effort will guide the evaluation of future acquisitions, requiring alignment with the restructured business model. These actions may impact the recognition and measurement of acquired intangible assets and liabilities and, consequently, the Company’s financial position and results of operations.

Revenue Recognition

The Company accounts for its revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which it adopted on January 1, 2019. The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to the customer in an amount that reflects the consideration it expects to receive in exchange for those goods or services. The Company generates all its revenue from contracts with customers.

Revenue primarily comes from selling broadcast equipment, software licenses, and related services, including installation, support, and extended warranties. Revenue from product and software sales is generally recognized at a point in time when control transfers to the customer, which typically occurs upon shipment or delivery.

Revenue from services, such as installation, integration, support, and warranty obligations, is recognized as those services are rendered or upon completion, depending on the nature of the engagement.

Revenue Recognition (continued)

The Company determines revenue recognition through the following steps:

1. identification of the contract, or contracts, with a customer.

2. identification of the performance obligations in the contract.

3. determination of the transaction price.

4. allocation of the transaction price to the performance obligations in the contract; and

5. recognition of revenue when, or as, the Company satisfies a performance obligation.

At contract inception, the Company assesses the goods and services promised in the Company’s customer contracts and identifies a performance obligation for each. To determine the performance obligations, the Company considers all the products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. The Company measures revenue as the consideration we expect to receive in exchange for transferring goods and services. The value-added sales taxes and other charges the Company collects concurrently with revenue-producing activities are excluded from income.

Remaining Performance Obligations:

The remaining performance obligations, or backlog, represent the aggregate amount of the transaction price allocated to the remaining obligations that the Company has not performed under its customer contracts. The Company has elected to use the optional exemption in ASC 606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original expected duration of one year or less.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2024, and 2023, cash equivalents are unrestricted funds invested in a money market mutual fund.

Concentrations

The Company does not possess any off-balance-sheet concentrations of credit risk. Credit risk, defined as the likelihood of a counterparty defaulting on contractual obligations, poses a potential financial loss for the Company. The primary sources of the Company’s credit risk are its cash, investments, and accounts receivable. To mitigate the risk of loss exposure, the Company follows a policy of holding its cash in high-credit quality financial institutions. Cash deposits, representing a concentration of credit risk, are the main economic instruments exposing the Company to such risks. The Company has allocated approximately $1.0 million towards investments in government bonds held to maturity to diversify our credit risk exposure further and enhance our risk mitigation strategies. These bonds, issued by the United States Federal Government, are evaluated for credit risk based on the issuing entity’s creditworthiness. This investment strategy is aligned with our overarching objective to minimize potential financial losses by spreading risk across various high-credit quality assets and instruments. The Federal Deposit Insurance Corporation (“FDIC”) insures up to $250,000 for accounts held within the United States. In the United Kingdom, the Company maintains cash balance accounts at financial institutions insured by the Financial Services Compensation Scheme, covering up to £85,000 (subject to currency translation rates to the United States dollar). Additionally, in the Netherlands, the Company’s cash balance accounts at financial institutions are insured by the “Dutch deposit guarantee scheme,” providing coverage up to €100,000 per person per bank.

As of December 31, 2024, and 2023, the Company held approximately $4.7 million and $7.7 million above insured limits, respectively, remaining unaffected by any losses in its bank accounts during this period.

During the year ending December 31, 2024, no customer sales represented more than 10% of the Company’s consolidated sales. During the year ending December 31, 2023, the Company did not report any sales to an individual customer that constituted more than 10% of its total sales.

As of December 31, 2024, one customer owed the Company approximately $1,180,000, representing more than 10% of its consolidated net receivables. As of December 31, 2023, one customer owed the Company approximately $1,111,000, representing 13% of its consolidated net receivables.

Accounts Receivable and Allowance for Doubtful Accounts

On January 1, 2023, the Company adopted ASC 326, Financial Instruments—Credit Losses, which introduced the Current Expected Credit Losses (CECL) model. Under this standard, the Company measures credit losses based on expected losses rather than incurred losses, resulting in earlier recognition of allowances for doubtful accounts.

In applying ASC 326, the Company evaluates specific factors, including receivable aging, historical write-offs, current economic conditions, and forward-looking information, such as economic forecasts or indices. These criteria are used to determine the appropriate allowance for credit losses. Receivables are written off when deemed uncollectible in accordance with applicable laws.

Inventories

Inventories consist of raw materials, work-in-process, and finished goods and are recorded at the lower of cost, on a first-in, first-out basis, or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable completion, disposal, and transportation costs. The Company evaluates inventory balances and either writes down obsolete inventory or records a reserve for slow-moving or excess inventory based on net realizable value analysis.

Property and Equipment

Property and equipment are presented at cost at the date of acquisition, less depreciation. Depreciation is computed using the straight-line method over estimated useful asset lives, ranging from 3 to 14 years. The costs of the day-to-day servicing of property and equipment and repairs and maintenance are recognized in the expenses as incurred.

Intangible Assets

Patents and licenses: Patents and licenses, measured initially at purchase cost, are included in intangible assets on the Company’s consolidated balance sheet and amortized on a straight-line basis over their estimated useful lives of 18.5 to 20 years. Amortization totaled $-0- each for the years ended December 31, 2024, and 2023, respectively.

*Other intangible assets:*the Company’s remaining intangible assets include the trade names, technology, and customer lists acquired in its acquisition of IMT, Vislink Technologies, Inc., Mobile Viewpoint Corporate B.V. (“MVP”), and the assets of BMS. An independent third-party appraiser evaluated the acquired assets for these business transactions. We concluded that the methodologies applied provided a reasonable estimate for the values assigned without fair market values from potential buyers or comparable transactions. The Company amortizes intangible asset costs over their useful lives of 3 to 15 years, with its net book value reported on the balance sheet. Amortization totaled approximately $1.0 million each for the years ended December 31, 2024, and 2023, respectively.

Leases

The Company determines if an arrangement is a lease at inception. The Company recognizes lease expense for lease payments on a straight-line basis over the lease term. The Company includes operating leases as ROU assets, such as “Right of use assets, operating leases,” in the consolidated balance sheets. For lease liabilities, operating lease liabilities are included in “Operating lease obligations, current” and “Operating lease liabilities, net of current portion” in the consolidated balance sheets. The Company recognizes operating lease ROU assets and liabilities on the commencement date based on the present value of lease payments for all leases with a term longer than 12 months. The Company’s real estate contracts separate no-lease and non-lease components.

There were no capital leases, now titled “finance leases” under ASC 842, in the Company’s lease portfolio as of December 31, 2024. The ROU assets and related lease liabilities recorded under ASC 842 are calculated based on the present value of the lease payments using (1) the rate implicit in the lease or (2) the lessee’s incremental borrowing rate (“IBR”), defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a comparable economic environment. As most of the Company’s leases do not provide an implicit rate, the Company determines our incremental borrowing rates based on an analysis of prior collateralized borrowings over similar terms of the lease payments at the commencement date to estimate the IBR under ASC 842.

Warranty Reserve

Although the Company tests its products under its quality programs and processes, its warranty obligation is affected by product failure rates and service delivery costs incurred in correcting a product failure. Should actual product failure rates or service costs differ from the Company’s estimates, required revisions to the estimated warranty liability will occur where applicable, based on limited historical data. The claims made during the year ended December 31, 2024, and 2023 were ordinary and customary. The warranty reserve is included in accrued expenses on the accompanying consolidated balance sheets and the cost of components in the accompanying consolidated statement of operations.

Research and Development Expenses

As the Company performs research, design, and development activities, we charge these costs to research and development expenses in the consolidated statements of operations and comprehensive loss. These expenses consist primarily of salary and benefit expenses, including stock-based compensation and payroll taxes for employees’ and contractors’ costs engaged in research, design, development activities, prototypes, facilities, and travel costs.

Advertising Costs

Advertising costs are charged to operations as incurred. For the years ended December 31, 2024, and 2023, respectively, advertising costs amounted to approximately $0.8 million and $0.7 million. The Company includes advertising costs in general and administrative expenses in the accompanying consolidated statement of operations.

Shipping and Handling Costs

The Company invoices its shipping and handling charges to the customer, and we net these charges against the respective costs within the general and administrative expenses. For the years ended December 31, 2024, and 2023, the shipping and handling costs incurred were $0.7 million and $0.4 million, respectively.

Sales Tax and Value-Added Taxes

The Company accounts for sales taxes and value-added taxes imposed on its goods and services on a net basis.

Stock-Based Compensation

The Company accounts for stock compensation with persons classified as employees for accounting purposes under ASC 718 “Compensation-Stock Compensation,” which recognizes awards at fair value on the date of grant and recognition of compensation over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes Option Pricing Model, and the fair value of common stock issued for services is determined based on the Company’s stock price on the issuance date.

The expansion of Topic 718 fell under ASU 2018-07 to include share-based payment transactions for acquiring goods and services from non-employees. The measurement date for equity-classified non-employee share-based payment awards is no longer at the earlier date at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. Instead, the grant date is now considered the measurement date. Under today’s guidance, the measurement of non-employee share-based payment awards with performance conditions is at the lowest aggregate fair value, often resulting in a zero value. The new ASU aligns the non-employee share-based payment awards with performance conditions and accounting for employee share-based payment awards under Topic 718 by requiring entities to consider the probability of satisfying performance conditions. Current guidance requires entities to use the contractual term to measure the non-employee share-based payment awards. The new ASU allows entities to make an award-by-award election to use the expected duration (consistent with employee share-based payment awards) or the contractual term for non-employee awards.

Stock-Option Awards — Time-Based and Performance-Based

Under ASC Topic 718, the compensation cost is measured based on an award’s fair value at the grant’s date for the time vested option award using the Black Scholes-Merton formula as a valuation technique. The Company used the U.S. Treasury note’s rate over the expected option term for the risk-free rate. Employees’ expected term represents the period that options granted are expected to be outstanding using the simplified method. The Company’s historical share option exercise experience does not provide a reasonable basis for estimating the expected term. For non-employee options, the expected term is the entire option term. Expected volatility is based on the average weekly share price changes over the shorter expected term or the period from the Nasdaq Capital Markets Exchange placement to the grant’s date. The Company estimates forfeiture and volatility using historical information. The risk-free interest rate is based on the implied yield on U.S. Treasury zero-coupon issues over the options’ equivalent lives.

The Company has not paid dividends on its common stock, and no assumption of dividend payment(s) is made in the model. For employee equity-classified awards, compensation cost is recognized over the employee’s requisite service period with a corresponding credit to additional paid-in capital. The employee’s requisite service period begins at the service inception date and ends when the requisite service has been provided.

Restricted Stock Unit Awards (“RSUs”) — Time-Based

Under ASC 718, the exercise price for RSUs is determined using the fair market value of the Company’s common stock on the grant date. For an award with graded vesting subject only to a service condition (e.g., time-based vesting), ASC 718-10-35-8 provides an accounting policy choice between graded vesting attribution or straight-line attribution. The Company elects the graded vesting method, recognizing compensation expense for only the portion of awards expected to vest. Forfeitures of time-based units and awards are recognized as they occur. Stock-based compensation costs are calculated using the closing stock price on the grant date to estimate the fair value of time-based restricted stock units.

Restricted Stock Unit Awards (“RSUs”) — Performance-Based

The accruals of compensation cost for an award with a performance condition are related to that performance condition’s probable outcome. Under ASC 718, a “performance condition” is the achievement of a specified target that is defined by referring to the employer’s operations or activities, such as an option that vests if the employer’s growth rate increases by a certain amount or there are the attainments of regulatory approval for a product. There is an accrual of compensation cost upon the likely achievement of the performance condition, and there is no accrual if the accomplishment of the performance condition is not probable. The exercise price for RSUs is determined using the fair market value of the Company’s common stock on the grant date. Stock-based compensation costs are calculated using the closing stock price on the grant date to estimate performance-based restricted stock units’ fair value.

Impairment, Abandonment and Asset Sales

The Company evaluates its long-lived assets, including property, plant, equipment, and right-of-use (“ROU”) assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, in accordance with ASC 360, Property, Plant, and Equipment. Impairment is recognized if the asset’s carrying amount exceeds its estimated fair value, which is determined as the greater of its value-in-use or net realizable value.

Abandoned assets are considered impaired and written down to their estimated fair value, which may be zero if no future economic benefit is expected. Gains or losses on asset sales are recognized upon derecognition of the asset, calculated as the difference between net book value and proceeds received, and recorded as other income (loss) in the consolidated statements of operations.

Certain assets, including those associated with the Poway operation, have been impaired or abandoned as part of the restructuring initiative. These impairments will continue to be evaluated as the restructuring progresses.

Income Taxes

Under ASC 740, as part of our consolidated financial statements, we must estimate our income tax provision (benefit) in each jurisdiction we operate. The Company uses the asset and liability method of accounting for income taxes. The recognition of deferred income tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases fall under this method. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years these temporary differences are expected to be recovered or settled. The recognition of the effect on deferred tax assets and liabilities of a change in tax rates in income is in the period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which management cannot conclude that it is more likely than not that such deferred tax assets will be realized. The Company will file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company recognizes the impact of an uncertain tax position in its financial statements if, in management’s judgment, it is more likely than not sustainable upon audit based upon the position’s technical merits. It involves identifying potential uncertain tax positions, evaluating applicable tax laws, and assessing whether the liability for uncertain tax positions is necessary. The Company’s policy is to classify assessments, if any, for tax-related interest expenses and penalties as general and administrative expenses.

Fair Value of Financial Instruments and Fair Value Measurements

The authoritative guidance for fair value measurements under topic ASC 820, “Fair Value Measurements and Disclosures,” defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not assumptions specific to the entity. ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques reflect assumptions other market participants would use based on the market data obtained from independent sources (observable inputs). In accordance with ASC 820, the following summarizes the fair value hierarchy:

Our financial instruments include cash equivalents, investments, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses, and short-term debt. Fair value estimates of these instruments are made at a specific point in time based on relevant market information. These estimates may be subjective and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The carrying amount of cash equivalents, accounts receivable, prepaid expenses and other assets, accounts payable, and accrued expenses are generally considered representative of their respective fair values because of the short-term nature of those instruments.

Foreign Currency and Other Comprehensive (Gains) Losses

The Company records gains or losses resulting from foreign currency transactions in foreign currency income or loss except for the effect of exchange rates on long-term inter-company transactions that are considered long-term investments that are accumulated and credited or charged to other comprehensive income. The Company has two foreign subsidiaries, one in the United Kingdom and the other in the Netherlands, and their functional currencies are British Pounds and Euros, respectively. The translation from the respective foreign currency to United States Dollars (“US Dollars”) is performed for balance sheet accounts using current exchange rates at the balance sheet date and for income statement accounts using an average exchange rate for the years ending December 31, 2024, and 2023, respectively. The Company has included gains or losses from such translation as a separate component of accumulated other comprehensive (loss) income.

Transaction gains and losses are recognized in the Company’s operations’ results based on the difference between the foreign exchange rates on the transaction date and the reporting date. The foreign currency exchange gains and losses are a component of general and administrative expenses in the accompanying consolidated statements of operations.

Loss Per Share

The Company reports loss per share under ASC Topic 260, “Earnings Per Share,” which establishes standards for computing and presenting earnings per share. The basic loss per share calculation divides the net loss allocable to common stockholders by the weighted average shares of common stock outstanding during the period without considering common stock equivalents. The diluted loss per share calculation is calculated by adjusting the weighted-average shares of common stock outstanding for the dilutive effect of common stock equivalents, including stock options and warrants, excellent for the period determined using the treasury stock method. Common stock equivalents are excluded from the diluted net loss per share calculation because their effect would be anti-dilutive. Therefore, basic and diluted net loss per share applicable to common stockholders is the same for periods with a net loss.

Treasury Stock

Treasury stock is recorded at cost upon the repurchasing of common stock, and the cost method is used upon the re-issuance of shares. Under U.S. GAAP, the excess of the acquisition cost over the re-issuance price of the treasury stock, if any, is recorded to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any. The Company charges the accumulated deficit for any excess.

Investment in Debt Securities

Vislink Technologies, Inc. invests in government bonds with the intent and ability to hold these investments until maturity. In alignment with ASC Topic 320, Investments—Debt and Equity Securities, such investments are classified as “Held-to-Maturity” (HTM) securities and are measured at amortized cost.

Recently Issued Accounting Pronouncements

Adopted:

In accordance with the Financial Accounting Standards Board’s (FASB) mandate, Vislink Technologies, Inc. adopted Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280), effective January 1, 2024. Initially issued by FASB in February 2023, this update revises the reporting requirements for operating segments of public entities to enhance the transparency and utility of segment reporting. We have concluded that we operate as a single reporting segment, and due to this structure, we believe we are only required to report in a single segment by ASU 2023-07. Accordingly, we believe the adoption of ASU 2023-07 has not significantly impacted our financial statements.

Not yet adopted:

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation and income taxes paid. The standard is intended to provide more transparency into the income tax information reported in financial statements. The ASU is effective for annual periods beginning after December 15, 2024, and may be adopted on a prospective or retrospective basis. The Company is currently evaluating the impact of this ASU on its income tax disclosures.

On November 4, 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This amendment requires enhanced disclosures on expense disaggregation within the income statement. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company has not yet assessed the impact of this ASU on its financial statements.

Recent Accounting Pronouncements

Management has evaluated the recent accounting standards issued by the FASB, including Accounting Standards Update (ASU) 2024-01, Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, and has determined that these standards do not have a material impact on the Company’s present or future consolidated financial statements.

NOTE 4 —LOSS PER SHARE

The following table illustrates the anti-dilutive potential common stock equivalents excluded from the calculation of loss per share (in thousands):

NOTE 5 —FOREIGN CURRENCY AND OTHER COMPREHENSIVE (GAINS) LOSSES

The Company has recognized foreign exchange gains and losses and changes in accumulated comprehensive income approximately as follows:

Amounts were converted from British Pounds to U.S. Dollars and Euros to British Pounds using the following exchange rates:

NOTE 6 —CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Cash equivalents consist of unrestricted funds invested in a money market mutual fund. The following table illustrates the Company’s cash and cash equivalents:

NOTE 7 —INVESTMENTS

The Company’s investments in debt securities are classified as held-to-maturity under the Company’s intent and ability to hold these investments to maturity, as defined under ASC Topic 320, “Investments – Debt Securities.” Comparative information for the years ended December 31, 2024, and December 31, 2023, is provided below.

2024 Activity:

2023 Activity:

Held-to-Maturity Investments—Federal Bonds:

NOTE 8 —FAIR VALUE OF ASSETS AND LIABILITIES

As defined under ASC 820, “Fair Value Measurement and Disclosures,” the following table presents the Company’s assets and liabilities that are measured at fair value as of December 31, 2024, and 2023. The table includes recurring and non-recurring fair value measurements, consistent with the fair value hierarchy provisions.

NOTE 9 —ASSET ACQUISITION

On September 14, 2023, Vislink Poway, LLC (“Poway”), a wholly-owned subsidiary of the Company formed on September 13, 2023, entered into an asset purchase agreement with BMS, acquiring working in process inventory consisting of microwave technology systems involving long-range data transmission and assuming certain liabilities in exchange for $200,000 in cash consideration paid at together with a commitment to acquire additional inventory for $230,000 on October 2, 2023, with title to the inventory passing to Poway on October 2, 2023.The transaction was accounted for as an acquisition of assets under U.S. GAAP. Accordingly, the acquisition cost was allocated on a relative fair value basis, and transaction costs were capitalized as a component of the cost of the assets acquired.

The Company recorded the purchase of this agreement under purchase price accounting, recording the fair value of the assets acquired and the liabilities assumed based upon the purchase price, as summarized in the table below:

NOTE 9 — ASSET ACQUISITION (continued)

Restructuring and Impairment

In connection with the Company’s restructuring initiative announced in November 2024, operations at the Poway, California facility are being discontinued. The remaining activities will be transitioned to the Company’s Mount Olive, New Jersey facility. As part of this initiative, the Company conducted an impairment assessment of the intangible assets acquired as part of the Poway transaction. Based on this assessment, an impairment charge of $330,000 was recorded in the fourth quarter of 2024.

NOTE 10 —ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

During the years ended December 31, 2024, and 2023, the Company incurred bad debt expenses of $610,000 and $25,000, respectively. Additionally, for the years ended December 31, 2024, and 2023, we experienced bad debt recoveries of $-0- and $10,000, respectively.

NOTE 11 —INVENTORIES

Inventories included in the accompanying consolidated balance sheet are stated at the lower of cost or market as summarized below:

Inventory valuation adjustments consist primarily of write-offs due to obsolescence or reserves for slow-moving or excess inventory. The Company recorded inventory valuation adjustments of $819,000 and $487,000 as of December 31, 2024, and 2023. As part of its ongoing restructuring initiative, including the closure of its Poway, CA manufacturing operations and the transfer of UK production to Mount Olive, NJ—management conducted a comprehensive product rationalization review. This eliminated specific product lines, leading to an inventory impairment of $6,009,000 in 2024 with $-0- in 2023.

NOTE 12 —PROPERTY AND EQUIPMENT

Depreciation of property and equipment amounted to $352,000 and $232,000 for the years ended December 31, 2024, and 2023, respectively. Additionally, the Company removed approximately $128,000 and $-0- of property and equipment for the years ended December 31, 2024, and 2023, respectively.

NOTE 13 —INTANGIBLE ASSETS

The Company continuously evaluates operating results, events, and circumstances to determine whether indicators of impairment for intangible assets are present under ASC 360-10-35,Impairment or Disposal of Long-Lived Assets. As part of the restructuring initiative to phase out operations in Poway, California, the Company identified impairment indicators related to certain intangible assets associated with these operations. Consequently, an impairment charge of $330,000 was recognized for the year ended December 31, 2024.

The following table illustrates finite intangible assets as of December 31, 2024, and 2023:

The Company’s groups of intangible assets consist primarily of:

Proprietary Technology:

Generally, the Company amortizes proprietary technology over 3 to 5 years. Mobile Viewpoint (“MVP”) uses wireless multiplex transmitters and artificial intelligence internally to produce and sell products and services to customers.

Patents and Licenses:

Patents and licenses filed by the Company are amortized for 18.5 to 20 years. The amortization of the costs associated with provisional patents and pending applications begins after successful review and filing.

Trade Name, Technology, and Customer Relationships:

Other intangible assets are amortized for 3 to 15 years. Integrated Microwave Technology (“IMT”), Vislink, MVP, and BMS assets acquisitions contributed to developing these intangible assets, including trade names, technology, and customer lists.

NOTE 13 — INTANGIBLE ASSETS (continued)

The weighted average remaining life of the amortization of the Company’s intangible assets is approximately 5.1 years as of December 31, 2024. The following table represents the estimated amortization expense for total intangible assets for the succeeding five years:

NOTE 14 —ACCRUED EXPENSES

Accrued expenses consist of the following:

NOTE 15 —NOTES PAYABLE

The table below represents the Company’s notes payable as of December 31, 2024, and 2023:

NOTE 16 —LEASES

In addition to leasing office spaces, operational sites, and storage facilities, our company also rents warehouse facilities internationally and within the country. As of December 31, 2024, these operating leases feature a variety of terms and conditions, with lease lengths ranging from one tothree years. Certain leases contain clauses for rent increases and concessions, which result in higher rental payments during the final years of the lease term. These agreements are recognized using the straight-line method over the lease’s minimum duration.

During those periods, there were no significant adjustments to the straight-line rental expenses. Most costs accounted for in each period were reflected in the cash spent on operating activities, mainly covering payments for the basic rent of offices and warehouses. Additionally, we can renew certain leases at various intervals, though we are not obligated to do so. Expenses associated with short-term leases, taxes, and variable service fees were minimal.

As of December 31, 2024, the Company reported Right-of-Use (ROU) assets totaling approximately $0.3 million on the balance sheet net of $2.1 million in accumulated amortization. In addition, the Company recognized operating lease liabilities of approximately $0.8 million, allocating $0.5 million as current and $0.3 million as non-current, as noted on the balance sheet. The weighted average lease term remaining as of December 31, 2024, was 1.8 years, with leases expiring between January 2025 and May 2027, and the weighted average discount rate was 9.4% as of December 31, 2024.

Lease activity occurring after December 31, 2024, is as follows:

*Poway, CA Lease Agreement

On January 24, 2025, the Company entered a sublease agreement for 7,155 square feet within the Poway, California facility. This space will primarily be used for equipment testing. The lease has a term beginning January 24, 2025, and ending January 31, 2026, with a monthly rental payment of $1,000. This short-term lease qualifies under ASC 842 as it is less than 12 months, and therefore, no Right-of-Use (ROU) asset or lease liability is recorded. The rent expense will be recognized on a straight-line basis over the lease term.

The following represents lease activity for the year ending December 31, 2024:

Colchester, U.K. Facility Abandonment

As part of the Company’s ongoing restructuring initiative, the decision has been made to abandon the manufacturing facility at Colchester, U.K. This decision aligns with the strategic relocation of the Company’s U.K. manufacturing operations to the United States. The facility will be vacated in 2025, and an impairment charge of approximately $168,000 has been recognized per ASC 360-10-35-17, which requires testing for impairment upon triggering events. Additionally, the Company has estimated dilapidation costs of approximately £199,000 British Pounds (equivalent to approximately $250,000) in accordance with ASC 420-10 and ASC 842-20-30, reflecting the contractual obligation to restore the facility to its pre-lease condition upon vacating the property.

Poway, CA Lease Renewal and Classification Correction

On February 12, 2024, Vislink Poway, LLC signed a renewal agreement with CPI Apartment Fund 10 LLC for the premises at 13475 Danielson Street, Suite 100, 130, and 160, Poway, California. The renewal agreement was initially accounted for based on preliminary terms indicating a lease commencement on March 14, 2024, with an end date of January 31, 2026. Consequently, a Right-of-Use (ROU) asset of approximately $484,000 and a lease liability of approximately $473,000 were recognized in the first quarter of 2024.

The final signed lease agreement was obtained during the third quarter of 2024. It confirms a one-year lease term beginning on April 1, 2024, and ending on March 31, 2025. Since the finalized lease term is 12 months, it qualifies as a short-term lease under ASC 842, and no ROU asset or lease liability is required to be recorded.

The Company corrected this by removing the previously recognized ROU asset and lease liability. The Poway, California lease is now accurately accounted for as a short-term lease, with monthly payments of $22,926 expensed on a straight-line basis over the lease term.

Dubai Studio City, UAE Renewal

The Company renewed itslease for 646 square feet of administrative office space in Dubai Studio City, UAE, commencing on July 3, 2024, and terminating on July 2, 2025, for approximately $1,333 monthly.

NOTE 16 — LEASES (continued)

The following represents lease activity for the year ending December 31, 2023:

Lutton, UK

A one-year lease for 600 square feet of administrative office space in Lutton, UK, was signed on September 1, 2023, and will run through May 31, 2024, at approximately $2,100 per month. A two-year lease for 600 square feet was executed at another location and will run from February 1, 2023, through January 31, 2025, at approximately $2,500 per month.

Dubai, UAE

The Company renewed itslease for 976 square feet of administrative office space in Dubai Studio City, UAE, commencing on July 3, 2023, and terminating on July 2, 2024, for approximately $1,632 monthly.

Poway, CA

Included in the September 14, 2023, acquisition of assets from Broadcast Microwave Services, LLC (BMS) was a sublease of approximately 11,715 square feet of general office use facilities previously held under a six-month agreement with BMS, with lease responsibilities conveyed to Vislink Poway, LLC. The initial lease term commenced with a monthly rent of approximately $22,300 and concluded on March 13, 2024. On February 12, 2024, Vislink Poway, LLC signed a renewal agreement for the same space. The renewal term is set for one year and ten and a half months, commencing on March 14, 2024, and ending on January 31, 2026. The base rent for the renewal period is established at $22,926 per month.

Colchester, U.K.

Approximately 2,700 square feet of manufacturing space at the Colchester, U.K. facility were abandoned as part of the Company’s strategic decision to relocate its U.K. manufacturing division to the United States commencing in September 2023, with approximately 13,200 square feet of remaining space. Impracticable conditions made subletting the unused space unachievable, and the Company considered it abandoned. According to ASC 360, leased space abandonment is an impairment indicator, and we assessed whether the lease “Right of use assets, operating leases” (ROU) assets were impaired. It was determined that approximately $83,000 of the Company’s right-of-use operating assets were impaired.

Hemel, United Kingdom

Under the original lease agreement dated April 28, 2017, a “break clause” signifying a “break date” of October 28, 2020, sighted the following: the Company may terminate this lease on the “break date” by giving the landlord such notice within six months of the “break date.” At the lease’s commencement, it was not reasonably sure if the Company would exercise its right by the break clause’s date. These measures upheld the determination of the lease’s noncancellable period for adopting ASC 842 on January 1, 2019. The lease term of 22 months as of January 1, 2019, helped calculate the remaining lease payments’ net present value assigned to the right-of-use asset and operating lease liability upon the adoption date. The total annual rent under this lease is approximately $175,000, covering 12,870 square feet of manufacturing and administrative office space. Neither party exercised their unilateral termination rights by the “break date,” triggering a lease extension. Both parties’ inaction creates new enforceable rights and obligations in the extended period, such that the lease agreement terminates on October 27, 2023.

Trivex, Singapore

The Company renewed itslease for 950 square feet of administrative office space commencing on August 1, 2023, and terminating on July 31, 2025, for approximately $3,100 monthly.

NOTE 16 — LEASES (continued)

The following tables illustrate the Right-Of-Use operating lease data recorded for the years ended December 31, 2024, and 2023:

The following table illustrates the maturities of our operating lease liabilities as of December 31, 2024:

The following table outlines the locations and lease termination dates for the Company’s Right-of-Use Assets under operating leases for the years 2025 to 2027:

NOTE 17 —PREFERRED SHARES

Preferred Stock

In March 2013, the issuance of up to 10.0 million shares of “Blank Check” preferred stock with a par value of $0.00001 per share received approval from the stockholders of the Company.

The following shares were designated as authorized:

On February 5, 2016, the Company terminated the Series A Preferred Stock and Series C Preferred Stock and increased the number of designated shares of Series B Preferred Stock to 5,000,000. The following shares were designated as authorized: Five million shares of Series D Convertible Preferred Stock (“Series D Preferred Stock”) on April 25, 2016. On December 6, 2016, the Company terminated the Series B Preferred Stock. The following shares were designated as authorized: Five thousand shares of Series E Convertible Preferred Stock (“Series E Preferred Stock”) on December 21, 2016. On November 9, 2022, the Company’s Board of Directors (i) terminated the Series D Preferred Stock and Series E Preferred Stock and (ii) designated the following shares as authorized:47,500 shares of new Series A Preferred Stock.

Series A Preferred Stock

On November 9, 2022, the Company’s Board of Directors (the “Board”) declared a dividend of one one-thousandth of a share of Series A Preferred Stock, par value $0.00001 per share (“Series A Preferred Stock”), for each outstanding share of the Company’s common stock, to stockholders of record on November 21, 2022.

Each share of Series A Preferred Stock entitled the holder to 1,000,000 votes per share, and each fraction of a share had a ratable number of votes. Thus, each one-thousandth share of Series A Preferred Stock was entitled to 1,000 votes. The outstanding shares of Series A Preferred Stock voted together with the outstanding shares of the Company’s common stock as a single class exclusively concerning the proposal to adopt an amendment to the Company’s Certificate of Incorporation, as amended, to reclassify the outstanding shares of the Company’s Common Stock into a smaller number of shares of common stock at a ratio specified in or determined under the terms of such amendment (the “Reverse Stock Split”). The Series A Preferred Stock was not entitled to vote on any other matter except to the extent required under the Delaware General Corporation Law.

The Series A Preferred Stock was not convertible into, or exchangeable for, shares of any other class, series of stock, or other securities of the Company. The Series A Preferred Stock had no stated maturity and is not subject to any sinking fund. The Series A Preferred Stock was not restricted to the Company’s redemption or repurchase of shares when there was any arrearage in the payment of dividends or sinking fund installments. The Certificate of Designation was filed with the Delaware Secretary of State and became effective on November 9, 2022. The holders of Series A Preferred Stock were not entitled to receive dividends.

On January 11, 2023, the Company held a special meeting of stockholders (the “Special Meeting”) whereby stockholders voted on a proposal to authorize the Board, at its discretion, to affect the Reverse Stock Split. All shares of Series A Preferred Stock that were not present in person or by proxy at the Special Meeting held to vote on the Reverse Stock Split immediately before the opening of the polls at such meeting (the “Initial Redemption Time”) were automatically redeemed in whole, but not in part, by the Company at the Initial Redemption Time without further action on the part of the Company or the holder of shares of Series A Preferred Stock (the “Initial Redemption”). Any outstanding shares of Series A Preferred Stock that were not redeemed according to an Initial Redemption were redeemed in whole but not in part on March 24, 2023 (i) if the Board ordered such redemption in its sole discretion, automatically and effective on such time and date specified by the Board in its sole discretion or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split at the Special Meeting held for voting on such proposal (“the Subsequent Redemption”).

Each share of Series A Preferred Stock redeemed in any redemption described above was redeemed in consideration for the right to receive an amount equal to $0.00001 in cash for each ten (10) whole shares of Series A Preferred Stock that were “beneficially owned” by the “beneficial owner” (as such terms are defined in the certificate of designation concerning the Series A Preferred Stock) thereof as of the applicable redemption time and redeemed under such redemption, payable upon receipt by the Company of a written request submitted by the relevant holder to the corporate secretary of the Company following the applicable redemption time.

NOTE 17 — PREFERRED SHARES (continued)

Series A Preferred Stock (continued)

The Company was not solely in control of the redemption of the shares of Series A Preferred Stock since the holders had the option of deciding whether to vote in respect of the above-described Reverse Stock Split, which determined whether a given holder’s shares of Series A Preferred Stock were redeemed in the Initial Redemption or the Subsequent Redemption. Since the redemption of the Series A Preferred Stock was not solely in the control of the Company, the shares of Series A Preferred Stock were classified within mezzanine equity in the Company’s audited consolidated balance sheet. The shares of Series A Preferred Stock were measured at redemption value. The value of Series A Preferred Stock shares as of December 31, 2023 and 2022, was de minimis. As of December 31, 2024 and December 31, 2023, no shares of Series A Preferred Stock were authorized and no shares of Series A Preferred Stock were issued and outstanding. See Certificate of Elimination — Series A Preferred Stock.

Certificate of Elimination - Series A Preferred Stock

On April 25, 2016, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware, designating 5,000,000 shares out of the Company’s authorized but unissued shares of its preferred stock as Series D Convertible Preferred Stock, par value $0.00001 per share.

On December 21, 2016, the Company filed a Certificate of Designation with the Secretary of State of the State of Delaware, designating 5,000 shares out of the Company’s authorized but unissued shares of its preferred stock as Series E Convertible Preferred Stock, par value $0.00001 per share.

On November 9, 2022, the Company filed Certificates of Elimination for each of the Series D Preferred Stock and Series E Preferred Stock with the Secretary of State of the State of Delaware, which, effective upon filing, eliminated all matters outlined in the Certificates of Designation of Series D Preferred Stock and Series E Preferred Stock previously filed by the Company. According to the Certificates of Elimination, the shares that were previously designated as Series D Preferred Stock and Series E Preferred Stock resume the status of authorized but unissued shares of preferred stock, par value $0.00001 per share, of the Company, issuable from time to time, in one or more series, under the Certificate of Incorporation.

On March 22, 2023, the Board of Directors of the Company (the “Board”) approved a resolution to eliminate the Company’s Certificate of Designation, Preferences, and Rights (the “Certificate of Elimination”) of the Series A Preferred Stock, par value $0.00001 per share (the “Series A Preferred Stock”), that was filed with the Secretary of State of the State of Delaware on November 9, 2022. Upon the effective filing of this Certificate of Elimination, the shares previously designated under the certificate of designation as Series A Preferred Stock shall resume the status of authorized but unissued shares of the Company’s preferred stock.

On March 24, 2023, the Company filed a certificate of elimination (the “Certificate of Elimination”) with the Secretary of State of the State of Delaware for the Series A Preferred Stock. The Certificate of Elimination (i) eliminated the previous designation of 47,500 shares of Series A Preferred Stock from the Company’s Certificate of Incorporation, as amended, none of which were outstanding at the time of the filing of such Certificate of Elimination, and (ii) caused such shares of Series A Preferred Stock to resume their status as authorized but unissued and non-designated shares of preferred stock of the Company.

As of December 31, 2024 and 2023, no Preferred Stock shares were authorized, issued, or outstanding. The Company previously had five series of Preferred Stock designated: Series A, Series B, Series C, Series D, and Series E. Each series has been fully redeemed, terminated, or otherwise eliminated. The Company filed Certificates of Elimination with the Secretary of State of Delaware for each series.

No new series of Preferred Stock has been authorized or designated by the Board of Directors between January 1, 2025, and the date of the audit report.

NOTE 18 —STOCKHOLDERS’ EQUITY

Common Stock

The Company is authorized to issue up to 100,000,000 shares of Common Stock, $0.00001 par value per share. As of December 31, 2024, and 2023, the Company had 2,467,618 and 2,439,923 shares of common stock issued and 2,467,485 and 2,439,790 shares of common stock outstanding, respectively.

NOTE 18 — STOCKHOLDERS’ EQUITY (continued)

Common Stock Activity

Common Stock Warrants

During the year ended December 31, 2024,1,534 warrants expired and 75,757 warrants forfeited. As of December 31, 2024, these outstanding warrants contained no intrinsic value. The weighted average exercise price of warrants outstanding on December 31, 2024, is $65.00, with a weighted average remaining contractual life of 1.1 years.

The following tables set forth common stock purchase warrants outstanding as of December 31, 2024, and 2023:

NOTE 19 —STOCK-BASED COMPENSATION

Vislink Technologies, Inc. and its subsidiaries (“the Company”) leverage stock-based compensation as a strategic tool to attract, motivate, and retain key personnel. This aligns their interests with those of our shareholders by offering them a stake in the Company’s success. We administer various plans that grant stock options and Restricted Stock Units (RSUs) to our officers, directors, key employees, and consultants.

Long-Term Stock Incentive Plan Awards

The Company operates multiple equity incentive plans, including the 2013 Stock Option Plan, 2015 Incentive Compensation Plan, 2016 Incentive Compensation Plan, and 2017 Incentive Compensation Plan. These plans facilitate the granting of stock options, which may be settled in shares or net-settled, emphasizing our flexible approach to compensation. The options vest over three years and are exercisable up to ten years from the grant date.

Significant modifications and enhancements have been made to our plans over time to ensure they continue to serve the intended purpose effectively. This includes the immediate vesting provisions for terminated employees and removing a cap on the annual share awards per participant, reflecting our adaptability to changing business and operational needs.

Inducement Awards

The Company grants time-vested and performance-based stock options under inducement awards, consistent with NASDAQ Listing Rule 5653(c)(4). These inducement awards, granted outside of our existing equity compensation plans, are designed to reward employees for their commitment and performance toward achieving our strategic goals.

Time-Based and Performance-Based Stock Option Awards

The Company’s stock option awards are granted under terms that ensure they vest based on time or performance-based criteria. Performance-based awards are tied to achieving specific financial metrics, aligning employee rewards with the Company’s success. The Company granted time-vested stock options and performance-based stock options to various employees in connection with their employment agreements. The ten-year, non-statutory time-vested, and performance-based option inducement awards were granted under the NASDAQ Listing Rule 5653(c)(4) outside of the Company’s existing equity compensation plans (all subject to continued employment).

Time-based and Performance-Based Restricted Stock Unit Awards (“RSUs”)

The Company’s RSUs are granted under terms that ensure they vest based on time or performance-based criteria. Performance-based awards are tied to achieving specific financial metrics, aligning employee rewards with the Company’s success.

The Company granted awards under the amended plan for time-based restricted stock units (“RSUs”) to various employees subject to continued employment. The RSUs initially vest between 25% and 33% on their one-year anniversary dates and will vest between 24 and 36 equal monthly periods thereafter. Additionally, the Company granted awards under the amended plan for performance-based restricted stock units subject to performance vesting conditions and continued employment. The RSUs will vest in three equal tranches upon reaching performance conditions for each tranche.

2023 Omnibus Equity Incentive Plan

The Company received stockholder approval on August 23, 2023, to adopt the 2023 Omnibus Equity Incentive Plan (the “2023 Plan”), which will enable it to continue to grant equity-based compensation awards to employees (including officers), non-employee consultants, non-employee directors, and affiliates. The 2023 Plan replaces the 2015 Incentive Compensation Plan, 2016 Incentive Compensation Plan, and 2017 Incentive Compensation Plan. The Company has ceased granting awards under the 2015 Incentive Compensation Plan, 2016 Incentive Compensation Plan, and 2017 Incentive Compensation Plan. The Company has been authorized to reserve 166,415 shares of its common stock for delivery under the 2023 Plan. The 2023 Plan rewards eligible participants for contributing to the Company’s success and encourages retaining and recruiting qualified personnel. The Company’s Board of Directors and Compensation Committee will administer the 2023 Plan.

The 2023 Plan generally grants awards without consideration other than prior and future service. The Company’s compensation committee may grant awards under the 2023 Plan either alone or in addition to, in tandem with, or as a substitute for any other award granted under the 2023 Plan or other company plans. It is important to note, however, that if a SAR is granted in conjunction with an ISO, the grant date and term of the SAR and ISO must be the same, and the exercise price of the SAR cannot be lower than the exercise price of the ISO. A written award agreement between us and the grantee will outline the material terms of the award.

The table below shows stock-based compensation expenses, included in general and administrative expenses, under the following plans.

The following tables provide supplementary data under various equity compensation plans. The first summarizes activity during the year, including Quantity (‘Qty’) and Weighted Average (‘Wtd Avg’). The second presents key year-end metrics.

For the year ending December 31, 2024

Stock-Based Compensation Activity

Stock-Based Compensation Metrics

The following tables provide supplementary data under various equity compensation plans. The first summarizes activity during the year, including Quantity (‘Qty’) and Weighted Average (‘Wtd Avg’). The second presents key year-end metrics.

For the year ending December 31, 2023

Stock-Based Compensation Activity

Stock-Based Compensation Metrics

NOTE 20 —COMMITMENTS AND CONTINGENCIES

Pension:

The Company may make a matching contribution to its employees’ 401(k) plan. Furthermore, Vislink operates a Group Personal Plan through its UK subsidiary, investing funds with Royal London. Employees of the Company in the United Kingdom are entitled to participate in the Company’s employee benefit plan, to which varying amounts are contributed according to their status. Additionally, the Company operates a stakeholder pension plan in the United Kingdom.

The table below represents the Company’s matching contributions as follows:

NOTE 21 —CONCENTRATIONS

Customer Concentration Risk

During the year ending December 31, 2024, no customer sales represented more than 10% of the Company’s consolidated sales. During the year ending December 31, 2023, the Company did not report any sales to an individual customer that constituted more than 10% of its total sales.

As of December 31, 2024, one customer owed the Company approximately $1,180,000, representing more than 10% of its consolidated net receivables. As of December 31, 2023, one customer owed the Company approximately $1,111,000, representing 13% of its consolidated net receivables.

Vendor concentration risk

During the year ending December 31, 2024, two vendors exceeded 10% of the Company’s consolidated inventory purchases, with approximately $2,974,000 (23%) and $1,504,000 (12%), respectively. During the year ending December 31, 2023, the Company recorded $2,132,000 to a single vendor, exceeding 10% of the Company’s total consolidated vendor purchases.

As of December 31, 2024, three vendors accounted for over 10% of the Company’s consolidated accounts payable, with balances of approximately $366,000 (15%), $285,000 (12%), and $249,000 (10%), respectively. As of December 31, 2023, one vendor exceeded 10% of the Company’s consolidated accounts payable of approximately $652,000 (20%).

NOTE 22 –SEGMENT AND GEOGRAPHICAL INFORMATION

The Company has one operating segment. The chief executive officer and chief financial officer act as the chief operating decision makers (“CODM”). The CODM reviews the financial statements on a consolidated basis and other financial analysis, with respect to the statement of operations, focuses primarily on the following expense categories in evaluating performance and allocating resources: cost of components and personnel ($14.0 million and $13.4 million for the years ended December 31, 2024 and 2023, respectively), general and administrative expenses ($21.6 million and $19.4 million), research and development ($4.6 million and $3.5 million), and inventory impairments and valuation write-downs ($6.8 million in 2024; no comparable amount in 2023). These expense categories represent the key cost drivers of Vislink’s operations and reflect how management monitors performance.

In the following table, the Company has disaggregated revenue by the Company’s primary geographical markets and revenue sources:

NOTE 23 —REBATES

The following table represents tax rebates related to the research costs incurred by our U.K. subsidiary, which are included in other income.

While the Company plans to continue filing rebate forms for the 2024 fiscal year, it cannot guarantee that rebates will be available at a similar level or at all in future years.

NOTE 24 —RESTRUCTURING COSTS

On November 12, 2024, the Company initiated restructuring actions to streamline operations, reduce costs, and consolidate global functions. These actions primarily involved the closure of the Poway, California facility, transfer of certain U.K. operations to the U.S., and reductions in workforce.

As a result, the Company incurred the following restructuring-related charges during the year ended December 31, 2024:

The reconciliation of accrued restructuring liabilities is as follows (does not include non-cash charges):

NOTE 25 —INCOME TAXES

The provision (benefit) for income taxes consists of the following:

A reconciliation of the statutory tax rate to the effective tax rate is as follows:

Under the provisions of ASC 740, the Company may recognize the benefits of uncertain tax positions when it is more likely than not that the merits of the position(s) will be sustained upon audit by the relevant tax authorities. No uncertain tax positions were taken or expected on a tax return that would be determined to be an unrecognized tax benefit recorded on the Company’s financial statements for the years ended December 31, 2024, or 2023. The Company does not expect its unrecognized tax benefit position to change during the next twelve months.

NOTE 25 — INCOME TAXES (continued)

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial accounting purposes and the amounts used for income tax reporting. Significant components of the Company’s deferred tax assets are as follows:

As of December 31, 2024, the Company has federal net operating losses (“NOL”) of approximately $194.2 million that will expire beginning in 2027. The Company has federal NOLs of approximately $37.5 million that may be carried forward indefinitely. The Company also has state NOL carryforwards of $161.3 million, which will expire beginning in 2027. Besides, the Company has foreign NOL carryforwards of approximately $35.5 million that generally do not expire except under certain circumstances. The Company also has research and development credits of approximately $3.0 million, which will begin to expire in 2027. The years that remain open for review by taxing authorities are 2021 to 2024 for Federal, Foreign, and State Income Tax returns. Finally, the federal and state NOLs and various income tax credits are subject to annual limitations under Sections 382 and 383 of the Internal Revenue Code, in addition to state provisions, and may not be able to be fully realized.

Realizing the NOL carryforwards and other temporary deferred tax differences is contingent on future taxable earnings. The Company’s deferred tax assets were reviewed for expected utilization using a “more likely than not” approach by assessing the available positive and negative evidence surrounding its recoverability. Accordingly, a valuation allowance has been recorded against the Company’s deferred tax assets, as it was determined, based on past and present losses, that it was “more likely than not” that the Company’s deferred tax assets would not be realized. The valuation allowance was increased to the full carrying amount of the Company’s deferred tax assets. In future years, if management determines that the deferred tax assets are “more likely than not” to be realized, the recognized tax benefits relating to reversing the valuation allowance will be recorded. The Company will continue to assess and evaluate strategies that enable the deferred tax asset, or portion thereof, to be utilized. It will reduce the valuation allowance appropriately when it is determined that the “more likely than not” criteria are satisfied.

The net operating loss carryovers may be subject to annual limitations under Internal Revenue Code Section 382 and similar state provisions should there be a greater than 50% ownership change as determined under the applicable income tax regulations. The limitation amount would be determined based on the company’s value immediately before the ownership change, and subsequent ownership changes could further impact the annual limitation amount. An ownership change under Section 382 may have occurred in the past or could happen in the future, such that the NOLs available for utilization could be significantly limited. The Company plans to perform a Section 382 analysis in the future.

NOTE 25 — INCOME TAXES (continued)

Effective for tax years beginning after December 31, 2017, the Tax Act includes a participation exemption system of taxation, which generally provides for 100% dividends received deduction on certain qualifying dividend distributions received by U.S. C-corporation shareholders from their 10% or more owned foreign subsidiaries. As a result of this new participation exemption system, it is generally anticipated that the Company should not be subject to additional U.S. federal income taxation on its future receipt of actual dividend income (instead of deemed inclusion amounts under specific anti-deferral rules) from its foreign subsidiary.

For tax years beginning after December 31, 2017, the Tax Act introduced a new limitation on deducting interest expense. Current-year interest deductions are limited (among other restrictions) to 30% of adjusted taxable income, with various modifications and exceptions. The Company does incur interest expenses and evaluates each year the impact, if any, of the new limitation.

The Company has not provided for deferred taxes and foreign withholding taxes on the excess of the financial reporting basis over the tax basis in our investments in foreign subsidiaries that are nearly permanent in duration. In general, it is the Company’s practice and intention to reinvest our foreign subsidiary’s earnings in those operations. Generally, our foreign subsidiary’s earnings have become subject to U.S. taxation based on specific U.S. tax law provisions, such as the recently enacted territorial transition tax under section 965 and under certain other circumstances. Due to the complexities of the provisions introduced with the Tax Act, and the underlying assumptions that would have to be made, it is not practicable to estimate the amount of tax provision required to account for these foreign undistributed earnings. The Company will account for any additional expense or deduction in the year it is claimed. The Company will continue to review each year whether this treatment is appropriate.

The Company did not identify any material uncertain tax positions and is not under any income tax examinations.

NOTE 26 —RECLASSIFICATION OF PRIOR PERIOD AMOUNTS

Specific amounts in the prior period’s presentation within the Consolidated Statements of Operations and Comprehensive Loss have been reclassified to conform to the current period presentation. Specifically, inventory valuation adjustments, which were previously presented as a separate line item within operating expenses, are now included within the subtotal “Cost of Revenue.” These reclassifications did not impact previously reported total operating expenses, loss from operations, net loss, or loss per share.

NOTE 27 —SUBSEQUENT EVENTS

Nasdaq Delisting

On February 10, 2025, the Company filed a Form 25 with the SEC to voluntarily delist our common stock from The Nasdaq Capital Market. Our common stock became quoted for trading with the OTCQB of OTC Markets on February 12, 2025. The decision to move common stock trading from Nasdaq to OTC Markets was made to reduce costs and improve operational efficiencies.

Significant Shareholder Update

On February 12, 2025, Hale Capital Partners, LP filed a Schedule 13D with the SEC, reporting its acquisition of approximately 12% of the Company’s outstanding common stock. Between that date, and the date of this filing, Hale Capital filed amendments to the Schedule 13D and various reports on Form 4 under Section 16 of the Exchange Act, disclosing increases in Hale Capital’s holdings of our stock. As of the date of this filing, Hale Capital has publicly disclosed beneficial ownership of 376,594 shares, representing approximately 15.26% of our outstanding common stock. As of the date of this filing, the Company has not received any communication from Hale Capital regarding potential changes to its governance, management, or strategic direction.