Filed
Pursuant to Rule 424(b)(4
)
Registration
No. 333-232451
PROSPECTUS
1,550,000
Shares of Common Stock
Pre-funded
Warrants to Purchase 4,450,000 Shares of Common Stock
Warrants
to Purchase up to 6,000,000 Shares of Common Stock
4,450,000
Shares of Common Stock Underlying the Pre-funded Warrants
6,000,000
Shares of Common Stock Underlying
the Warrants
Vislink
Technologies, Inc. (the “Company”, “Vislink Technologies”, “we”, “us” or “our”)
is offering 1,550,000 shares of common stock, par value $0.00001 per share, of the Company (“Common Stock”)
and warrants to purchase up to an aggregate of 6,000,000 shares of Common Stock (the “Warrants”) (and the shares
of Common Stock that are issuable from time to time upon exercise of the Warrants). We are also offering to each purchaser whose
purchase of shares of Common Stock in this offering would otherwise result in the purchaser, together with its affiliates and
certain related parties, beneficially owning more than 4.99% (or, at the election of the holder, 9.99%) of our outstanding Common
Stock immediately following the consummation of this offering, the opportunity to purchase, if the purchaser so chooses, pre-funded
warrants to purchase Common Stock (the “Pre-Funded Warrants”), in lieu of shares of Common Stock. Each Pre-Funded
Warrant will be exercisable for one share of our Common Stock.
The
purchase price of each Pre-Funded Warrant will equal the price per share at which the shares of Common Stock are being sold to
the public in this offering, minus $0.001, and the exercise price of each Pre-Funded Warrant will be $0.001 per
share. This prospectus also relates to the shares of Common Stock issuable upon exercise of any Pre-Funded Warrants sold in this
offering. For each Pre-Funded Warrant that we sell, the number of shares of Common Stock that we are offering will be decreased
on a one-for-one basis. Each share of Common Stock and Pre-Funded Warrant is being sold together with a Warrant to purchase one
(1) share of our Common Stock, at an exercise price of $5.00 per share. Because we will issue a Warrant for each share of our
Common Stock and for each Pre-Funded Warrant sold in this offering, the number of Warrants sold in this offering will not change
as a result of a change in the mix of the shares of our Common Stock and Pre-Funded Warrants sold. The Warrants will be exercisable
immediately and will expire five (5) years from the date of issuance. The shares of Common Stock or Pre-Funded Warrants, and the
accompanying Warrants, can only be purchased together in this offering but will be issued separately and will be immediately separable
upon issuance.
Our
Common Stock is listed on The Nasdaq Capital Market (“Nasdaq”) under the symbol “VISL.” The last reported
sale price for our common stock on Nasdaq on July 11, 2019 was $1.80 per share, which gives effect to our one-for-ten
reverse stock split of our outstanding shares of Common Stock effective May 13, 2019. There is no established public trading market
for the Pre-Funded Warrants or the Warrants, and we do not expect a market to develop. In addition, we do not intend to apply
for a listing of the Pre-Funded Warrants or the Warrants on any national securities exchange.
On
April 30, 2019, our stockholders approved a reverse stock split of our outstanding Common Stock at a specific ratio within a range
from one-for-three to one-for-twenty, and also granted authorization to our Board to determine, in its sole discretion, the specific
ratio and timing of the reverse stock split any time before December 31, 2019. In accordance therewith, on May 13, 2019, a 1-for-10
reverse stock split of our outstanding Common Stock became effective for the trading of our Common Stock. All share and price
information in this prospectus has been adjusted to reflect such 1-for-10 reverse stock split. Without an active trading market,
the liquidity of the Pre-Funded Warrants and Warrants will be limited.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 6 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
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Per
Share and
Accompanying
Warrant
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Per Pre-
Funded
Warrant and
Accompanying
Warrant
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Total
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Public offering price
(1)
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$
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2.00
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$
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1.999
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$
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11,995,550
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Underwriting discounts and commissions
(2)
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$
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0.14
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$
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0.13993
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$
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839,689
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Proceeds, before expenses, to us
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$
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1.86
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|
$
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1.85907
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|
|
$
|
11,155,861
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(1)
|
The public offering price is $1.999 per share of Common Stock and $0.001 per accompanying Warrant and $1.998
per Pre-Funded Warrant and $0.001 per accompanying Warrant.
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(2)
|
We have agreed to reimburse the underwriters for certain expenses. See the section entitled “
Underwriting
”
beginning on page 39 of this prospectus for a description of the compensation payable to the underwriters.
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We
have also granted an option to the underwriters to purchase up to 900,000 additional shares of Common Stock and/or additional
Warrants to purchase up to 900,000 additional shares of Common Stock on the same terms and conditions set forth above from
us within 45 days after the date of this prospectus to cover over-allotments, if any.
The
underwriters expect to deliver the Company’s securities to the purchasers on or about July 15, 2019.
Sole
Book-Running Manager
A.G.P.
The
date of this prospectus is July 11, 2019.
TABLE
OF CONTENTS
The
registration statement of which this prospectus forms a part that we have filed with the U.S. Securities and Exchange Commission
(the “SEC”) includes exhibits that provide more detail of the matters discussed in this prospectus. You should read
this prospectus and the related exhibits filed with the SEC, together with the additional information described under the headings
“Where You Can Find More Information” and “Incorporation of Documents by Reference” before making your
investment decision.
You
should rely only on the information provided in this prospectus or in any prospectus supplement or any free writing prospectuses
or amendments thereto. Neither we nor the underwriters have authorized anyone else to provide you with different information.
If anyone provides you with different or inconsistent information, you should not rely on it. You should assume that the information
in this prospectus is accurate only as of the date hereof. Our business, financial condition, results of operations and prospects
may have changed since that date.
Neither
we nor the underwriters are offering to sell or seeking offers to purchase these securities in any jurisdiction where the offer
or sale is not permitted. Neither we nor the underwriters have done anything that would permit this offering or possession or
distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States.
Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions
relating to, the offering of the securities as to distribution of the prospectus outside of the United States.
Information
contained in, and that can be accessed through, our web site,
www.vislink.com
, does not constitute part of this prospectus.
This
prospectus includes market and industry data that has been obtained from third party sources, including industry publications,
as well as industry data prepared by our management on the basis of its knowledge of and experience in the industries in which
we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management’s
knowledge of such industries has been developed through its experience and participation in these industries. While our management
believes the third-party sources referred to in this prospectus are reliable, neither we nor our management have independently
verified any of the data from such sources referred to in this prospectus or ascertained the underlying economic assumptions relied
upon by such sources. Internally prepared and third party market forecasts, in particular, are estimates only and may be inaccurate,
especially over long periods of time. In addition, the underwriters have not independently verified any of the industry data prepared
by management or ascertained the underlying estimates and assumptions relied upon by management. Furthermore, references in this
prospectus to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the
complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey
or article is not incorporated by reference in this prospectus.
PROSPECTUS
SUMMARY
This
summary highlights certain information about us, this offering and selected information contained elsewhere in or incorporated
by reference into this prospectus. This summary does not contain all the information you should consider before investing in our
securities. You should read the entire prospectus carefully before making an investment decision, especially “Risk Factors”
and the financial statements and the related notes. Unless the context provides otherwise, all references herein to “Vislink
Technologies”, the “Company”, “we”, “our” and “us” refer to Vislink Technologies,
Inc. For definitions of certain industry terms used throughout this prospectus, please see “Glossary”.
Our
Company
The
overarching strategy of Vislink Technologies, Inc. (“Vislink Technologies,” the “Company,” “we,”
“our” or “us”) is to design, develop and deliver advanced wireless communications solutions that provide
customers in our target markets with enhanced levels of reliability, mobility, performance and efficiency in their business operations
and missions. Vislink Technologies’ business lines include the main brands Integrated Microwave Technologies LLC (“IMT”)
and Vislink Communications Systems (“Vislink” or “VCS”). The Vislink Technologies name serves as the corporate
umbrella for its current brands, as well as any new ones that might be added to its portfolio in the future. There is considerable
brand interaction, due to complementary market focus, compatible product and technology development roadmaps, and solution integration
opportunities.
IMT:
IMT
develops, manufactures and sells microwave communications equipment utilizing COFDM (Coded Orthogonal Frequency Division Multiplexing)
technology. COFDM is a transmission technique that combines encoding technology with OFDM (Orthogonal Frequency Division Multiplexing)
modulation to provide the low latency and high image clarity required for real-time live broadcasting video transmissions. IMT
has extensive experience in ultra-compact COFDM wireless technology, which has allowed IMT to develop integrated solutions that
deliver reliable video footage captured from both aerial and ground-based sources to fixed and mobile receiver locations.
Vislink:
VCS
specializes in the wireless capture, delivery and management of secure, high-quality, live video from the field to the point of
usage. VCS designs and manufactures products encompassing microwave radio components, satellite communication, cellular and wireless
camera systems, and associated amplifier items. VCS serves two core markets: broadcast and media and law enforcement, public safety
and surveillance. In the broadcast and media market, VCS provides broadcast communication links for the collection of live news
and sports and entertainment events. VCS’ customers in the broadcast and media market include national broadcasters, multi-channel
broadcasters, network owners and station groups, sports and live broadcasters and hosted service providers. In the law enforcement,
public safety and surveillance market, VCS provides secure video communications and mission-critical solutions for law enforcement,
defense and homeland security applications. VCS’ customers in the law enforcement, public safety and surveillance market
include metropolitan, regional and national law enforcement agencies as well as domestic and international defense agencies and
organizations.
Cost
Reduction Initiatives
The
Company completed a cost reduction plan announced in April 2018 that resulted in approximately $9.8 million in annual savings.
Savings were realized through immediate cost reductions by eliminating certain personnel costs, associated benefits and reduction
in other expenses. Specifically, the Company eliminated 83 full-time and contracted positions from the business, with salary and
benefits savings totaling $8.9 million. The Company also removed $900,000 in annual non-labor costs from the business.
The
Company also completed an additional $1.3 million in savings related to facilities consolidation. This includes consolidating
the two sites in Colchester, U.K. into one, which was completed in April 2019 and the expected savings are approximately $0.5
million through June 2020. The Company also successfully completed a sublease related to its Billerica facility with expected
savings of $0.6 million through May 31, 2021. As part of its cost cutting measures, the Company also vacated an office and warehouse
in Sunrise, Florida when the lease expired on May 13, 2019 for total annual savings of approximately $0.2 million.
Our
Strategy
After
the completion of our cost reduction initiatives in April 2019, the plan going forward is to diversify and grow the business in
the following industries: broadcast and media, sports and entertainment and public safety, surveillance and defense. These industries
allow us to offer a broad array of end-to-end, high-reliability, high-data rate, long-range wireless video transmission solutions.
Our solutions are being used for applications in growing market segments, including in-game sports video mobile feeds, real-time
capture and display of footage from drones and other aerial platforms, and rapid-response electronic news gathering operations.
The
key sector strategies for IMT and Vislink are to expand the various markets for existing miniature wireless video products, which
include the educational sector, videographers, and video service providers, provide complete end-to-end solutions for the video
surveillance market, and introduce complete end-to-end IP technology into the broadcast and media market.
The
acquisition of Vislink offered the Company the opportunity to realize synergies with its IMT business unit, while allowing both
entities to offer an expanded suite of services and product offerings in the markets they are already active in. A key advantage
is that there was limited overlap in product offerings, sales channels and market coverage between the two companies. For example,
Vislink had a substantial client base in international markets where IMT has had a limited presence. In addition, IMT had a very
strong product portfolio targeted to U.S. federal law enforcement and high-end sports broadcasting customers who now have access
to additional solutions based on Vislink’s product configurations. Finally, Vislink has traditionally focused on licensed
spectrum solutions where IMT has pioneered the use of non-licensed spectrum for many applications. Combining Vislink Technologies
shared spectrum and interference mitigation intellectual property with an expanded IMT/Vislink product lineup may provide an opening
into additional customer bases that currently do not have access to licensed spectrum.
Risks
That We Face
An
investment in our securities involves a high degree of risk. You should carefully consider the risks summarized below. The risks
are discussed more fully in the “Risk Factors” section of this prospectus immediately following this prospectus summary.
These
risks include, but are not limited to:
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we
have a history of operating losses and we may continue to realize net losses for at least the next 12 months;
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we
may not be able to continue as a going concern and may not be able to operate in the future;
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our
business depends upon our ability to generate sustained sales of our products and technology;
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our
business depends on our ability to continually develop and commercialize new products and technologies and penetrate new markets;
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we
need to obtain or maintain patents or other appropriate protection for the intellectual property utilized in our technologies;
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our
industry is highly competitive and we may not be able to compete with companies with larger resources than we have;
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we
may require additional capital to develop new products;
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new
regulations or standards or changes in existing regulations or standards related to our products may result in unanticipated
costs or liabilities; and
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we
may fail to meet publicly announced financial guidance or other expectations about our business.
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Company
Information
The
Company was originally organized as a limited liability company under the laws of the State of Delaware on August 26, 2002 under
the name JTS Acquisitions, LLC. On March 21, 2003, we changed our name to xG Technology, LLC. Pursuant to a certificate of conversion
and a certificate of incorporation filed with the State of Delaware on November 8, 2006, xG Technology, LLC converted to a Delaware
corporation under the name xG Technology, Inc. Effective February 11, 2019, xG Technology, Inc. changed its name to Vislink Technologies,
Inc. Our executive offices are located at 240 S. Pineapple Avenue, Suite 701, Sarasota, FL 34236, and our telephone number is
(941) 953-9035. Our website address is
www.vislinktechnologies.com
. Information contained in our website does not form
part of the report and is intended for informational purposes only.
As
of January 1, 2019, we are no longer an “emerging growth company” as the term is used in the Jumpstart Our Business
Startups Act of 2012.
Recent
Developments
On
April 30, 2019, we held our Annual Meeting of Stockholders. At that meeting, among other things, our stockholders approved an
amendment to our certificate of incorporation to effect a reverse stock split of all of the outstanding shares of the Company’s
Common Stock at a specific ratio within a range from one-for-three to one-for-twenty, and to grant authorization to the Board
to determine, in its sole discretion, the specific ratio and timing of the reverse stock split any time before December 31, 2019).
In order to maintain compliance with Nasdaq listing requirements our Board, utilized this authority and authorized a reverse split
ratio of 1-for-10, effective for trading on May 13, 2019. On May 14, 2019, we received a determination letter from NASDAQ stating
that we had not regained compliance with Nasdaq’s minimum bid price of $1.00 requirement for continued listing set forth
in Nasdaq Listing Rule 5550(a)(2). We were initially notified on May 17, 2018, that the bid price for our Common Stock had failed
to satisfy the minimum bid price requirement and in accordance with the Nasdaq Listing Rules, the Company was provided 180 calendar
days, or until November 13, 2018, to regain compliance with the minimum bid price requirement. Subsequently, on November 16, 2018,
the Company was provided an additional 180 calendar day compliance period, or until May 13, 2019, to demonstrate compliance. On
May 29, 2019, we were notified by NASDAQ staff that we had regained full compliance with the minimum bid listing requirement.
As
disclosed in our Form 8-K filing on May 3, 2019, at our 2019 Annual Meeting of Stockholders, after re-submitting certain proposals
to our stockholders for ratification, pursuant to Section 204 of the General Corporation Law of the State of Delaware (“DGCL”),
in order to resolve any defects in the corporate acts relating to the approval of such proposals by our stockholders at prior
annual meetings of our stockholders, we were unable to obtain ratification for any such proposals. Although we intend to resubmit
these proposals again to our stockholders for ratification, there can be no assurance that any of these proposals will be ratified.
In the event that we are unable to secure such ratifications, among other consequences, this could result in a determination that
none of the shares issued by us under these plans were duly authorized and validly issued.
On
May 29, 2018, we issued certain debentures in the principal amount of $4 million that bore interest at a rate of 6% per annum,
with interest being paid quarterly in cash and which were scheduled to mature on May 31, 2019 (the “May Debentures”).
As reported in our Form 8-K filing on June 7, 2019, we received notice from a holder of a May Debenture that we were in default
due to a missed interest payment, which has since been made, and that the May Debenture became due under its terms. As a result
of such default, the May Debentures held by other noteholders in the May 29, 2018 tranche as well as debentures issued by the
Company on December 3, 2018 in the principal amount of $3.5 million (the “December Debentures”), are also in default
as a result of the cross-default provisions in the December Debentures (and together with the May Debentures, the “Debentures”).
The holder who notified us of the default has been made whole and that Debenture is no longer in default. The Company is working
with the other two holders of Debentures to return those obligations to non-default status.
THE
OFFERING
Common
Stock offered by us
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1,550,000 shares (2,450,000 shares if the underwriters exercise their over-allotment option in full to purchase
shares of Common Stock at the public offering price).
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Pre-Funded
Warrants offered by us
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We are also offering Pre-Funded Warrants to purchase 4,450,000 shares of common stock to purchasers whose
purchase of shares of Common Stock in this offering would otherwise result in any such purchaser, together with its affiliates
and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding
Common Stock immediately following the consummation of this offering, in lieu of shares of Common Stock. Each Pre-Funded Warrant
will be exercisable for one share of Common Stock. The purchase price of each Pre-Funded Warrant will be equal to the price per
share at which shares of Common Stock are sold to the public in this offering, minus $0.001, and the exercise price of each Pre-Funded
Warrant will be $0.001 per share. This offering also relates to the shares of Common Stock issuable upon exercise of any Pre-Funded
Warrant sold in this offering. The Pre-Funded Warrants will be exercisable immediately and may be exercised at any time until all
of the Pre-Funded Warrants are exercised in full.
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Warrants
offered by us
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We are also offering Warrants to purchase up to an aggregate of 6,000,000 shares of Common Stock. Each share
of Common Stock and each Pre-Funded Warrant is being sold together with a Warrant to purchase one share of Common Stock. Each Warrant
will have an exercise price of $5.00 per share, will be immediately exercisable and will expire on the fifth anniversary of the
original issuance date. This offering also relates to the shares of Common Stock issuable upon exercise of the Warrants.
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Option
to purchase additional securities
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The underwriters have a 45-day option to purchase up to an additional 900,000 shares of Common Stock and/or
additional Warrants to purchase up to 900,000 additional
shares of Common Stock, in any combination thereof, from us at the public offering price, less underwriting discounts and commissions.
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Common
Stock outstanding prior to this offering
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2,250,380
shares.
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Common
Stock to be outstanding after this offering
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3,800,380 shares, assuming no exercise of any of the Pre-Funded Warrants or Warrants issued in this offering,
and no exercise of the underwriters’ over-allotment option).
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Use
of Proceeds
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We estimate that the net proceeds from this offering will be approximately $11 million, or $12.6 million if
the underwriters’ option to purchase additional shares of Common Stock and/or Warrants is exercised in full, after deducting
the underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from
this offering for the repayment of a certain amount of our senior secured debt, certain payables, as well as for working capital
and general corporate purposes. See “Use of Proceeds” on page 23 of this prospectus.
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Risk
Factors
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See
“Risk Factors” beginning on page 6 and the other information included in this prospectus for a discussion of factors
you should carefully consider before deciding to invest in our securities.
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Market
Symbol and Trading
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Our
Common Stock is listed on Nasdaq under the symbol “VISL”. There is no established trading market for the Warrants
or the Pre-Funded Warrants, and we do not expect a trading market for such securities to develop. We do not intend to list
the Warrants or the Pre-Funded Warrants on any securities exchange or other trading market. Without a trading market, the
liquidity of the Warrants or the Pre-Funded Warrants will be extremely limited.
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Outstanding
Shares
Except
as otherwise indicated herein, the number of shares of Common Stock to be outstanding immediately after this offering is based
on 2,250,380 shares of our Common Stock outstanding as of July 10, 2019, and excludes, as of such date, (i) outstanding warrants
to purchase up to 1,189,000 shares of our Common Stock at a weighted average price of $19.80 per share, and (ii) outstanding stock
options to purchase 610,000 shares of our Common Stock at a weighted average price of $15.00 per share.
Unless
otherwise indicated, all information in this prospectus refers to or assumes:
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the
one-for-ten reverse stock split effective May 13, 2019;
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no
exercise of the Warrants and Pre-Funded Warrants issued in connection with this offering;
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no
exercise by the underwriters of their over-allotment option to purchase additional shares of Common Stock and/or Warrants;
and
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no
conversion of any of the Company’s convertible debt.
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RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should consider and read carefully all the risks and uncertainties
described below, together with all the other information contained or incorporated by reference into this prospectus and in any
free writing prospectus before deciding to invest in such securities. If any of the following risks, or any risk described elsewhere
in this prospectus or in the documents incorporated by reference herein, occurs, our business, business prospects, financial condition,
results of operations or cash flows could be materially adversely affected. In any such case, the trading price of our Common
Stock could decline, and you could lose all or part of your investment. The risks described below and in the documents incorporated
by reference herein are not the only ones facing us. Additional risks not currently known to us or that we currently deem immaterial
may also adversely affect us. This prospectus also contains forward-looking statements, estimates and projections that involve
risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements because
of specific factors, including the risks described below and in the documents incorporated by reference herein.
You
should carefully consider the following risk factors in evaluating our business and us. The factors listed below and in the prospectus,
represent certain important factors that we believe could cause our business results to differ. These factors are not intended
to represent a complete list of the general or specific risks that may affect us. It should be recognized that other risks may
be significant, presently or in the future, and the risks set forth below may affect us to a greater extent than indicated. If
any of the following risks occur, our business, financial condition or results of operations could be materially and adversely
affected. You should also consider the other information included in our Annual Report on Form 10-K for the year ended December
31, 2018 (the “Form 10-K”) and subsequent quarterly reports filed with the SEC.
Risks
Related to the Company and Our Business
We
have included in our financial statements disclosure regarding our liquidity and financial condition as a result of our recurring
operating losses and cash used from operations.
As
reflected in the condensed consolidated financial statements, we had working capital and an accumulated deficit of $6.7 million
and $237.6 million, respectively, at March 31, 2019. In addition, we had a loss from operations of approximately $2.7 million
and cash used in operating activities of $1.6 million for the three months ended March 31, 2019.
Our
condensed consolidated financial statements are prepared assuming we can continue as a going concern, which contemplates continuity
of operations through realization of assets, and the settling of liabilities in the normal course of business. The Company completed
a cost reduction plan announced in April 2018 that resulted in approximately $9.8 million in annual savings. Savings were realized
through immediate cost reductions by eliminating certain personnel costs, associated benefits and reduction in other expenses.
Specifically, the Company eliminated 83 full-time and contracted positions from the business, with salary and benefits savings
totaling $8.9 million. The Company also removed $900,000 in annual non-labor costs from the business. The Company also completed
an additional $1.3 million in savings related to facilities consolidation. This includes consolidating the two sites in Colchester,
U.K. into one, which was completed in April 2019, and the expected savings are approximately $0.5 million through June 2020. The
Company also successfully completed a sublease related to its Billerica facility with expected savings of $0.6 million through
May 31, 2021. As part of its cost cutting measures, the Company also vacated office and warehouse in Sunrise, Florida when the
lease expired on May 13, 2019 for total annual savings of approximately $0.2 million.
Because
of such cost reduction efforts and our existing working capital, management believes we have sufficient working capital to continue
as a going concern for a period of at least the next twelve months.
As
of July 10, 2019, we are currently in default under certain of our convertible promissory debentures due May 31, 2019 and September
30, 2019, which defaults we are working to cure. Were the holders of these debentures to assert an event of default demand repayment
pursuant to the terms of such debentures, our business, operating results and financial condition would be adversely affected.
On
May 29, 2018, we completed a private placement (the “Private Placement”) of $4 million in principal amount of 6% Senior
Secured Convertible Debentures (the “Debentures”) and warrants to purchase 3,000,000 shares of Common Stock (300,000
shares of Common Stock after giving effect to the 1-for-10 reverse stock split) to institutional investors. Although two of the
Debentures were amended to extend their maturity date until September 30, 2019, one of the original holders did not extend the
maturity date. On June 3, 2019, the Company received notice from that holder that it was in default owing to a missed interest
payment, which has since been made, and notice of the Debentures having become due under its terms. As a consequence of the default,
all of the outstanding principal amount of the outstanding Debentures, “plus accrued but unpaid interest, liquidated damages
and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately
due and payable in cash at the Mandatory Default Amount” as defined in the Debentures. Commencing five (5) days after the
occurrence of any Event of Default that results in the eventual acceleration of this Debentures, the interest rate on the Debentures
shall begin to accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable
law. The current balance due under the Debentures is approximately $7.2 million. The investor that declared the event of default
has been made whole and we are continuing to negotiate with the remaining holders to forbear from declaring the cross-default
provisions of their notes while we effect this offering. Were the holders of these Debentures to assert an event of default demand
repayment of such Debentures, our business, operating results and financial condition would be adversely affected.
At
our 2019 Annual Meeting of Stockholders, we failed to obtain ratification by our stockholders of certain proposals submitted for
approval of our stockholders at prior annual meetings, which could be deemed to be defective corporate acts.
At
our 2015 Annual Meeting of Stockholders, our Board submitted to our stockholders, for their approval, (i) a proposal to approve
our 2015 Employee Stock Purchase Plan and (ii) a proposal to approve our 2015 Incentive Compensation Plan. At our 2016 Annual
Meeting of Stockholders our Board submitted to our stockholders, for their approval, (i) a proposal to approve our 2016 Employee
Stock Purchase Plan and (ii) a proposal to approve our 2016 Incentive Compensation Plan. At our 2017 Annual Meeting of Stockholders
our Board submitted to our stockholders, for their approval, (i) a proposal to approve an amendment to our 2016 Employee Stock
Purchase Plan to increase the number of shares of Common Stock available for sale under such plan; (ii) a proposal to approve
an amendment to our 2016 Incentive Compensation Plan to increase the number of shares of Common Stock available for sale under
such plan; and (iii) a proposal to approve our 2017 Incentive Compensation Plan.
At
each of these annual meetings, our inspector of elections determined that the applicable proposal received the requisite stockholder
approval pursuant to our amended and restated bylaws (“Bylaws”) and certified that the proposal passed, which was
subsequently disclosed in an applicable Form 8-K. Questions have been raised as to whether the votes on such proposals were tabulated
in accordance with the provisions of our Bylaws and whether the requisite number of votes were obtained to approve each of these
proposals.
Pursuant
to the provisions of Section 204 of the DGCL and in order to continue to remain in compliance with Nasdaq’s Listing Rules,
we submitted all of these proposals, again, to our stockholders at our 2019 Annual Meeting of Stockholders for ratification in
order to resolve any defects in the corporate acts relating to the approval of these proposals by our stockholders at the prior
meetings. We were unable to obtain ratification by our stockholders for any of these proposals submitted to them at the 2019 Annual
Meeting of Stockholders. Although we intend to resubmit these proposals again to our stockholders for ratification, there can
be no assurance that any of these proposals will be ratified. In the event that we are unable to secure such ratifications, among
other consequences, this could result in a determination that none of the shares issued by us under these plans were duly authorized
and validly issued.
We
may require additional capital in the future to develop new products. If we do not obtain any such additional financing, if required,
our business prospects, financial condition and results of operations will be adversely affected.
We
may require additional capital in the future to develop new products. We may not be able to secure adequate additional financing
when needed on acceptable terms, or at all. To execute our business strategy, we may issue additional equity securities in public
or private offerings, potentially at a price lower than the public offering price in this offering or the market price of our
Common Stock at the time of such issuance. If we cannot secure sufficient additional funding we may be forced to forego strategic
opportunities or delay, scale back and eliminate future product development.
Defects
or errors in our products and services or in products made by our suppliers could harm our brand and relations with our customers
and expose us to liability. If we experience product recalls, we may incur significant expenses and experience decreased demand
for our products.
Our
products are inherently complex and may contain defects and errors that are only detectable when the products are in use. Because
our products are used for both personal and business purposes, such defects or errors could have a serious impact on our end customers,
which could damage our reputation, harm our customer relationships and expose us to liability. Defects or impurities in our components,
materials or software, equipment failures or other difficulties could adversely affect our ability, and that of our customers,
to ship products on a timely basis as well as customer or licensee demand for our products. Any such shipment delays or declines
in demand could reduce our revenues and harm our ability to achieve or sustain desired levels of profitability. We and our customers
may also experience component or software failures or defects that could require significant product recalls, rework and/or repairs
that are not covered by warranty reserves.
We
may fail to meet publicly announced financial guidance or other expectations about our business, which would cause our Common
Stock to decline in value.
From
time to time, we provide preliminary financial results or forward-looking financial guidance, to our investors. Such statements
are based on our current views, expectations and assumptions and involve known and unknown risks and uncertainties that may cause
actual results, performance, achievements or share prices to be materially different from any future results, performance, achievements
or share prices expressed or implied by such statements. Such risks and uncertainties include, among others, changes to the assumptions
used to forecast or calculate such guidance
We
may not fully realize anticipated benefits from our acquisitions.
Although
we expect to realize strategic, operational and financial benefits as a result of our IMT and VCS acquisitions, we cannot predict
whether and to what extent such benefits will be achieved, or that any operational or financial benefits will be achieved. The
success of the acquisitions will depend upon, among other things, our ability to integrate acquired personnel, operations, products
and technologies into our organization effectively, to retain and motivate key personnel of IMT and VCS and to retain their customers.
Any further acquisitions may result in diversion of management’s attention from other business concerns, and may result
in unanticipated costs and operational challenges.
Although
certain technical problems experienced by users may not be caused by our products, our business and reputation may be harmed if
users perceive our solutions as the cause of a slow or unreliable network connection, or a high-profile network failure.
We
expect that our products will be in many different locations and user environments and will be capable of providing transmission
of video, mobile broadband connectivity and interference mitigation, among other applications. The ability of our products to
operate effectively can be negatively impacted by many different elements unrelated to our products. Although certain technical
problems experienced by users may not be caused by our products, users often may perceive the underlying cause to be a result
of poor performance of our technology. This perception, even if incorrect, could harm our business and reputation. Similarly,
a high-profile network failure may be caused by improper operation of the network or failure of a network component that we did
not supply, but other service providers may perceive that our products were implicated, which, even if incorrect, could harm our
business, operating results and financial condition.
Our
ability to sell our products will be highly dependent on the quality of our support and services offerings, and our failure to
offer high-quality support and services would have a material adverse effect on our sales and results of operations.
Once
our products are deployed, our channel partners and end-customers will depend on our support organization to resolve any issues
relating to our products. A high level of support will be important for the successful marketing and sale of our products. In
many cases, our channel partners will likely provide support directly to our end-customers. We will not have complete control
over the level or quality of support provided by our channel partners. These channel partners may also provide support for other
third-party products, which may potentially distract resources from support for our products. If we and our channel partners do
not effectively assist our end-customers in deploying our products, succeed in helping our end-customers quickly resolve post-deployment
issues or provide effective ongoing support, our ability to sell our products to existing end-customers could be adversely affected
and our reputation with potential end-customers could be harmed. In some cases, we guarantee a certain level of performance to
our channel partners and end-customers, which could prove to be resource-intensive and expensive for us to fulfill if unforeseen
technical problems were to arise.
We
may fail to recruit and retain qualified personnel.
We
expect to rapidly expand our operations and grow our sales, development and administrative operations. This expansion is expected
to place a significant strain on our management and will require hiring a significant number of qualified personnel. Accordingly,
recruiting and retaining such personnel in the future will be critical to our success. There is intense competition from other
companies for qualified personnel in the areas of our activities. If we fail to identify, attract, retain and motivate these highly
skilled personnel, we may be unable to continue our marketing and development activities, and this could have a material adverse
effect on our business, financial condition, results of operations and future prospects.
We
rely on key executive officers, and their knowledge of our business and technical expertise would be difficult to replace.
We
are highly dependent on our executive officers because of their expertise and experience in the telecommunications industry. We
have agreements with our executive officers containing customary non-disclosure, non-compete, confidentiality and assignment of
inventions provisions. We do not have “key person” life insurance policies for any of our officers. The loss of the
technical knowledge and management and industry expertise of any of our key personnel could result in delays in product development,
loss of customers and sales and diversion of management resources, which could adversely affect our operating results.
We
purchase some components, subassemblies and products from a limited number of suppliers. The loss of any of these suppliers may
substantially disrupt our ability to obtain orders and fulfill sales as we design and qualify new components.
We
sometimes rely on third party components and technology to build and operate our products, and, until full integration with IMT
and VCS, we may rely on our contract manufacturers to obtain the components, subassemblies and products necessary for the manufacture
of our products. Shortages in components that we use in our products are possible, and our ability to predict the availability
of such components is limited. While components and supplies are generally available from a variety of sources, we and our contract
manufacturers currently depend on a single or limited number of suppliers for several components for our products. If our suppliers
of these components or technology were to enter into exclusive relationships with other providers of wireless networking equipment
or were to discontinue providing such components and technology to us and we were unable to replace them cost effectively, or
at all, our ability to provide our products would be impaired. We and our contract manufacturers generally rely on purchase orders
rather than long-term contracts with these suppliers. As a result, even if available, we and our contract manufacturers may not
be able to secure sufficient components at reasonable prices or of acceptable quality to build our products in a timely manner.
Therefore, we may be unable to meet customer demand for our products, which would have a material adverse effect on our business,
operating results and financial condition.
We
do not have long-term contracts with our existing contract manufacturers. The loss of any of our existing contract manufacturers
could have a material adverse effect on our business, operating results and financial condition.
We
do not have long-term contracts with our existing contract manufacturers. If any of our existing contract manufacturers are unable
or unwilling to manufacture our products in the future, the loss of such contract manufacturers could have a material adverse
effect on our business, operating results and financial condition.
Our
intellectual property protections may be insufficient to properly safeguard our technology.
Our
success and ability to compete effectively are, in large part, dependent upon proprietary technology that we have developed internally.
Given the rapid pace of innovation and technological change within the wireless and broadband industries, the technological and
creative skill of our personnel, consultants and contractors and their ability to develop, enhance and market new products and
upgrades to existing products are critical to our continued success. We rely primarily on patent laws to protect our proprietary
rights. As of July 10, 2019, in the United States, we have 49 patents granted, no patent applications pending and no provisional
applications pending. Internationally, we have 19 patents granted and no patent applications pending. There can be no assurance
that patents pending or future patent applications will be issued, or that if issued, we would have the resources to protect any
such issued patent from infringement. Further, we cannot patent much of the technology that is important to our business. To date,
we have relied on copyright, trademark and trade secret laws, as well as confidentiality procedures, non-compete and/or work for
hire invention assignment agreements and licensing arrangements with our employees, consultants, contractors, customers and vendors,
to establish and protect our rights to this technology and, to the best extent possible, control the access to and distribution
of our technology, software, documentation and other proprietary information. Despite these precautions, it may be possible for
a third party to copy or otherwise obtain and use this technology without authorization. Policing unauthorized use of this technology
is difficult. There can be no assurance that the steps we take or will take will prevent misappropriation of, or prevent an unauthorized
third party from obtaining or using, the technology we rely on. In addition, effective protection may be unavailable or limited
in some jurisdictions. Litigation may be necessary in the future to enforce or protect our rights.
We
may be subject to claims of intellectual property infringement or invalidity. Expenses incurred with respect to monitoring, protecting,
and defending our intellectual property rights could adversely affect our business.
Competitors
and others may infringe on our intellectual property rights, or may allege that we have infringed on theirs. Monitoring infringement
and misappropriation of intellectual property can be difficult and expensive, and we may not be able to detect infringement or
misappropriation of our proprietary rights. We may also incur significant litigation expenses in protecting our intellectual property
or defending our use of intellectual property, reducing our ability to fund product initiatives. These expenses could have an
adverse effect on our future cash flows and results of operations. If we are found to infringe on the rights of others we could
be required to discontinue offering certain products or systems, to pay damages, or purchase a license to use the intellectual
property in question from its owner. Litigation can also distract management from the day-to-day operations of the business.
Enforcement
of our intellectual property rights abroad, particularly in China, is limited and it is often difficult to protect and enforce
such rights.
Patent
protection outside the United States is generally not as comprehensive as in the United States and may not protect our intellectual
property in some countries where our products are sold or may be sold in the future. Even if patents are granted outside the United
States, effective enforcement in those countries may not be available. Many companies have encountered substantial intellectual
property infringement in countries where we sell, or intend to sell, products or have our products manufactured.
In
particular, the legal regime relating to intellectual property rights in China is limited and it is often difficult to protect
and enforce such rights. The regulatory scheme for enforcing China’s intellectual property laws may not be as developed
as regulatory schemes in other countries. Any advancement of an intellectual property enforcement claim through China’s
regulatory scheme may require an extensive amount of time, allowing intellectual property infringers to continue largely unimpeded,
to our commercial detriment in the Chinese and other export markets. In addition, rules of evidence may be unclear, inconsistent
or difficult to comply with, making it difficult to prove infringement of our intellectual property rights. As a result, enforcement
cases involving technology, such as copyright infringement of software code, or unauthorized manufacture or sale of products containing
patented inventions, may be difficult or not possible to sustain.
These
factors may make it increasingly complicated for us to enforce our intellectual property rights against parties misappropriating
or copying our technology or products without our authorization, allowing competing enterprises to harm our business in the Chinese
or other export markets by affecting the pricing for our products, reducing our own sales and diluting our brand or product quality
reputation.
The
intellectual property rights of others may prevent us from developing new products or entering new markets.
The
telecommunications industry is characterized by the rapid development of new technologies, which requires us to continuously introduce
new products and expand into new markets that may be created. Therefore, our success depends in part on our ability to continually
adapt our products and systems to incorporate new technologies and to expand into markets that may be created by new technologies.
If technologies are protected by the intellectual property rights of others, including our competitors, we may be prevented from
introducing new products or expanding into new markets created by these technologies. If the intellectual property rights of others
prevent us from taking advantage of innovative technologies, our financial condition, operating results or prospects may be harmed.
Further
impairment charges could have a material adverse effect on our financial condition and results of operations.
We
are required to test our finite-lived intangible assets for impairment if events occur or circumstances change that would indicate
the remaining net book value of the finite-lived intangible assets might not be recoverable. These events or circumstances could
include a significant change in the business climate, including a significant sustained decline in an entity’s market value,
legal factors, operating performance indicators, competition, sale or disposition of a significant portion of our business, potential
government actions and other factors. If the fair value of our finite-lived intangible assets is less than their book value in
the future, we could be required to record impairment charges. Although we did not recognize any impairment in 2017, during 2018,
we recognized an asset impairment charge of $473,000 of which included $168,000 related to software development costs due
to our analysis of the net realizable value of our capitalized software costs. The amount of any further impairment could be significant
and could have a material adverse effect on our reported financial results for the period in which the charge is taken.
We
rely on the availability of third-party licenses. If these licenses are available to us only on less favorable terms or not at
all in the future, our business and operating results would be harmed.
We
have incorporated third-party licensed technology into our products. It may be necessary in the future to renew licenses relating
to various aspects of these products or to seek additional licenses for existing or new products. There can be no assurance that
the necessary licenses will be available on acceptable terms or at all. The inability to obtain certain licenses or other rights,
or to obtain those licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could result
in delays in product releases until such time, if ever, as equivalent technology could be identified, licensed or developed and
integrated into our products and might have a material adverse effect on our business, operating results and financial condition.
Moreover, the inclusion in our products of intellectual property licensed from third parties on a nonexclusive basis could limit
our ability to protect our proprietary rights in our products.
Our
customers could also become the target of litigation relating to the patent and other intellectual property rights of others.
Any
litigation relating to the intellectual property rights of others could trigger technical support and indemnification obligations
in licenses or customer agreements that we may enter into. These obligations could result in substantial expenses, including the
payment by us of costs and damages relating to claims of intellectual property infringement. In addition to the time and expense
required for us to provide support or indemnification to our customers, any such litigation could disrupt the businesses of our
customers, which in turn could hurt our relationships with such customers and cause the sale of our products to decrease. No assurance
can be given that claims for indemnification will not be made, or that if made, such claims would not have a material adverse
effect on our business, operating results or financial conditions.
We
expect to base our inventory purchasing decisions on our forecasts of customers’ demand, and if our forecasts are inaccurate,
our operating results could be materially harmed.
As
our customer base increases, we expect to place orders with our contract manufacturers based on our forecasts of our customers’
demand. Our forecasts will be based on multiple assumptions, each of which may cause our estimates to be inaccurate, affecting
our ability to provide products to our customers. When demand for our products increases significantly, we may not be able to
meet demand on a timely basis, and we may need to expend a significant amount of time working with our customers to allocate limited
supply and maintain positive customer relations, or we may incur additional costs in order to rush the manufacture and delivery
of additional products. If we underestimate customers’ demand, we may forego revenue opportunities, lose market share and
damage our customer relationships. Conversely, if we overestimate customer demand, we may purchase more inventory than we are
able to sell at any given time or at all. In addition, we grant our distributors stock rotation rights, which require us to accept
stock back from a distributor’s inventory, including obsolete inventory. As a result of our failure to properly estimate
demand for our products, we could have excess or obsolete inventory, resulting in a decline in the value of our inventory, which
would increase our costs of revenues and reduce our liquidity. Our failure to accurately manage inventory relative to demand would
adversely affect our operating results.
If
our technology does not work as well as planned or if we are unsuccessful in developing and selling new products or in penetrating
new markets, our business and operating results would suffer.
Our
success and ability to compete are dependent on technology which we have developed or may develop in the future. There is a risk
that the technology that we have developed or may develop may not work as intended, or that the marketing of the technology may
not be as successful as anticipated. Further, the markets in which we and our customers compete or plan to compete are characterized
by constantly and rapidly changing technologies and technological obsolescence. Our ability to compete successfully depends on
our ability to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and
cost-effective basis to keep pace with market needs and satisfy the demands of customers. A fundamental shift in technologies
in any of our target markets could harm our competitive position within these markets. Our failure to anticipate these shifts,
to develop new technologies or to react to changes in existing technologies could materially delay our development of new products,
which could result in product obsolescence, decreased revenue and a loss of customer wins to our competitors. The development
of new technologies and products generally require substantial investment and can require long development and testing periods
before they are commercially viable. We intend to continue to make substantial investments in developing new technologies and
products and it is possible that that we may not successfully be able to develop or acquire new products or product enhancements
that compete effectively within our target markets or differentiate our products based on functionality, performance or cost and
that our new technologies and products will not result in meaningful revenue. Any delays in developing and releasing new or enhanced
products could cause us to lose revenue opportunities and customers. Any technical flaws in product releases could diminish the
innovative impact of our products and have a negative effect on customer adoption and our reputation. If we fail to introduce
new products that meet the demands of our customers or target markets or do not achieve market acceptance, or if we fail to penetrate
new markets, our revenue will not increase over time and our operating results and competitive position would suffer.
Computer
malware, viruses, hacking and phishing attacks could harm our business and results of operations.
Computer
malware, viruses, and computer hacking and phishing attacks have become more prevalent in our industry and may occur on our systems
in the future. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack,
any failure to maintain performance, reliability, security, and availability of our products and technical infrastructure to the
satisfaction of our users may harm our reputation and our ability to attract and retain customers.
If
we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations.
Our
ability to grow successfully requires an effective planning and management process. The expansion and growth of our business could
place a significant strain on our management systems, infrastructure and other resources. To manage our growth successfully, we
must continue to improve and expand our systems and infrastructure in a timely and efficient manner. Our controls, systems, procedures
and resources may not be adequate to support a changing and growing company. If our management fails to respond effectively to
changes and growth in our business, including acquisitions, this could have a material adverse effect on our business, financial
condition, results of operations and future prospects.
If
our estimates relating to our critical accounting policies are based on assumptions or judgments that change or prove to be incorrect,
our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock
price.
The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires our management to
make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and
expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions
change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below
the expectations of financial analysts and investors, resulting in a decline in our stock price. Management makes estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates and assumptions include reserves and write-downs related to receivables and inventories,
the recoverability of long-lived assets, the valuation allowance relating to the Company’s deferred tax assets, valuation
of equity and derivative instruments, and debt discounts and the valuation of the assets and liabilities acquired by us.
Our
exposure to the credit risks of our customers may make it difficult to collect accounts receivable and could adversely affect
our operating results and financial condition.
In
the course of our sales to customers, we may encounter difficulty collecting accounts receivable and could be exposed to risks
associated with uncollectible accounts receivable. Economic conditions may impact some of our customers’ ability to pay
their accounts payable. While we will attempt to monitor these situations carefully and attempt to take appropriate measures to
collect accounts receivable balances, we have written down accounts receivable and written off doubtful accounts in prior periods
and may be unable to avoid accounts receivable write-downs or write-offs of doubtful accounts in the future. Such write-downs
or write-offs could negatively affect our operating results for the period in which they occur.
Demand
for our defense-related products and products for emergency response services depends on government spending.
The
U.S. military market is largely dependent upon government budgets, particularly the defense budget. The funding of government
programs is subject to Congressional appropriation. Although multi-year contracts may be authorized in connection with major procurements,
Congress generally appropriates funds on a fiscal year basis even though a program may be expected to continue for several years.
Consequently, programs are often only partially funded and additional funds are committed only as Congress makes further appropriations.
No assurance can be given that an increase in defense spending will be allocated to programs that would benefit our business.
A decrease in levels of defense spending or the government’s termination of, or failure to fully fund, one or more of the
contracts for which our products may be utilized could have a material adverse effect on our financial position and results of
operations.
In
addition, the sale of our products to local municipalities for emergency response services depends on government spending allocated
to such areas. There can be no assurance that government spending will be allocated to emergency response services at a level
that would benefit our business. A decrease in levels of government spending for emergency response services, or the government’s
termination of, or failure to fully fund, one or more of the contracts for which our products may be utilized with respect to
emergency response services, could have a material adverse effect on our financial position and results of operations.
Our
failure to obtain and maintain required certifications could impair our ability to bid on defense contracts.
In
order for us to participate in certain government programs we could be required to obtain and maintain quality certification and
certain standards for Department of Defense wireless security such as certification by the Joint Interoperability and Test Command
and to meet production standards in order to be eligible to bid on government contracts. If we fail to maintain these certifications
or any additional certification which may be required, we will be ineligible to bid for contracts which may impair our financial
operations and consequently, our ability to continue in business.
Regulation
of the telecommunications industry could harm our operating results and future prospects.
The
traditional telecommunications industry is highly regulated, and our business and financial condition could be adversely affected
by changes in regulations relating to the Internet telecommunications industry. Currently, there are few laws or regulations that
apply directly to access to or commerce on IP networks, but future regulations could include sales taxes and tariffs in previously
unregulated areas and provider access charges. We could be adversely affected by regulation of IP networks and commerce in any
country where we market equipment and services to service or content providers. Regulations governing the range of services and
business models that can be offered by service providers or content providers could adversely affect those customers’ needs
for products designed to enable a wide range of such services or business models. For instance, the U.S. Federal Communications
Commission (“FCC”) has issued regulations governing aspects of fixed broadband networks and wireless networks. These
regulations might impact service provider and content provider business models and as such, providers’ needs for Internet
telecommunications equipment and services. In addition, many jurisdictions are evaluating or implementing regulations relating
to cyber security, privacy and data protection, which could affect the market and requirements for networking and security equipment.
In
addition, environmental regulations relevant to electronic equipment manufacturing or operations may impact our business and financial
condition adversely. For instance, the European Union has adopted regulations on Electronic waste, e-waste, e-scrap, or waste
electrical and electronic equipment, Restriction of the Use of Certain Hazardous Substances and Registration, Evaluation, Authorization
and Restriction of Chemicals. Furthermore, some governments have regulations prohibiting government entities from purchasing security
products that do not meet specified indigenous certification criteria even though those criteria may be in conflict with accepted
international standards. Similar regulations are in effect or under consideration in several jurisdictions where we do business.
The
adoption and implementation of such regulations could decrease demand for our products, increase the cost of building and selling
our products and impact our ability to ship products into affected areas and recognize revenue in a timely manner. Any of these
impacts could have a material adverse effect on our business, financial condition, and results of operations.
Risks
Relating to Our Industry
Our
industry is subject to rapid technological change, and we must make substantial investments in new products, services and technologies
to compete successfully.
New
technological innovations generally require a substantial investment before they are commercially viable. We intend to continue
to make substantial investments in developing new products and technologies, and it is possible that our development efforts will
not be successful and that our new technologies will not result in meaningful revenues. Our future success will depend on our
ability to continue to develop and introduce new products, technologies and enhancements on a timely basis. Our future success
will also depend on our ability to keep pace with technological developments, protect our intellectual property, satisfy customer
requirements, meet customer expectations, price our products and services competitively and achieve market acceptance. The introduction
of products embodying new technologies and the emergence of new industry standards could render our existing products and technologies,
and products and technologies currently under development, obsolete and unmarketable. If we fail to anticipate or respond adequately
to technological developments or customer requirements, or experience any significant delays in development, introduction or shipment
of our products and technologies in commercial quantities, demand for our products and our customers’ and licensees’
products that use our technologies could decrease, and our competitive position could be damaged.
We
may be subject to infringement claims in the future.
We
may be unaware of filed patent applications and issued patents that could include claims covering our products. Parties making
claims of infringement may be able to obtain injunctive or other equitable relief that could effectively block our ability to
sell or supply our products or license our technology and could cause us to pay substantial royalties, licensing fees or damages.
The defense of any lawsuit could divert management’s efforts and attention from ordinary business operations and result
in time-consuming and expensive litigation, regardless of the merits of such claims. These outcomes may (i) require us to stop
selling products or using technology that contains the allegedly infringing intellectual property; (ii) require us to redesign
those products that contain the allegedly infringing intellectual property; (iii) require us to pay substantial damages to the
party whose intellectual property rights we may be found to be infringing; (iv) result in the loss of existing customers or prohibit
the acquisition of new customers; (v) cause us to attempt to obtain a license to the relevant intellectual property from third
parties, which may not be available on reasonable terms or at all; (vi) materially and adversely affect our brand in the market
place and cause a substantial loss of goodwill; (vii) cause our stock price to decline significantly; (viii) materially and adversely
affect our liquidity, including our ability to pay debts and other obligations as they become due; or (ix) lead to our bankruptcy
or liquidation.
Our
industry is highly competitive and we may not be able to compete effectively.
The
communications industry is highly competitive, rapidly evolving, and subject to constant technological change. We expect that
new competitors are likely to join existing competitors. Many of our competitors may be larger and have greater financial, technical,
operational, marketing and other resources and experience than we do. In the event that a competitor expends significant resources
we may not be able to successfully compete. In addition, the pace of technological change makes it impossible for us to predict
whether we will face new competitors using different technologies to provide products. If our competitors were to provide better
and more cost effective products than our products we may not be able to capture any significant market share.
Regulation
of Voice over Internet Protocol (“VoIP”) services is developing and therefore uncertain and future legislative, regulatory
or judicial actions could adversely affect our business.
VoIP
services have developed in an environment largely free from government regulation. However, the United States and other countries
have begun to assert regulatory authority over VoIP and are continuing to evaluate how VoIP will be regulated in the future. Both
the application of existing rules to us and our prospective customers and the effects of future regulatory developments are uncertain.
Future legislative, judicial or other regulatory actions could have a negative effect on our business. In addition, future regulatory
developments could increase our cost of doing business and limit its growth.
New
regulations or standards or changes in existing regulations or standards in the United States or internationally related to our
products may result in unanticipated costs or liabilities, which could have a material adverse effect on our business, results
of operations and future sales, and could place additional burdens on the operations of our business.
Our
products may be subject to governmental regulations in a variety of jurisdictions. In order to achieve and maintain market acceptance,
our technology and products will have to comply with these regulations as well as a significant number of industry standards.
In the United States, our technology and products will have to comply with various regulations defined by the FCC and others.
We may also have to comply with similar international regulations. For example, our wireless communication products operate through
the transmission of radio signals, and radio emissions are subject to regulation in the United States and in other countries in
which we intend to do business. In the United States, various federal agencies including the Center for Devices and Radiological
Health of the Food and Drug Administration, the FCC, the Occupational Safety and Health Administration and various state agencies
have promulgated regulations that concern the use of radio/electromagnetic emissions standards. Member countries of the European
Union have enacted similar standards concerning electrical safety and electromagnetic compatibility and emissions, and chemical
substances and use standards.
As
these regulations and standards evolve, and if new regulations or standards are implemented, we may be required to modify our
technology or products or develop and support new versions of our technology or products, and our compliance with these regulations
and standards may become more burdensome. The failure of technology or our products to comply, or delays in compliance, with the
various existing and evolving industry regulations and standards could prevent or delay introduction of our technology or products,
which could harm our business. End-customer uncertainty regarding future policies may also affect demand for communications products,
including our products. Moreover, channel partners or end-customers may require us, or we may otherwise deem it necessary or advisable,
to alter our technology or products to address actual or anticipated changes in the regulatory environment. Our inability to alter
our technology or products to address these requirements and any regulatory changes may have a material adverse effect on our
business, operating results and financial condition.
Compliance
with environmental, health and safety laws and regulations, including new regulations requiring higher standards, may increase
our costs, limit our ability to utilize supply chains, and force design changes to our products.
Our
operations are subject to a variety of environmental, health and safety laws and regulations and equivalent local, state, and
regulatory agencies in each of the jurisdictions in which we currently operate or may operate in the future. The manufacturing
of our products uses substances regulated under various federal, state, local laws and regulations governing the environment and
worker health and safety. If we, including any contract manufacturers that we may employ, do not comply with these laws including
any new regulations, such non-compliance could reduce the net realizable value of our products, which would result in an immediate
charge to our income statements. Our non-compliance with such laws could also negatively impact our operations and financial position
as a result of fines, penalties that may be imposed on us, and increase the cost of mandated remediation or delays to any contract
manufacturers we may utilize, thus we may suffer a loss of revenues, be unable to sell our products in certain markets and/or
countries, be subject to penalties and enforced fees and/or suffer a competitive disadvantage. Costs to comply with current laws
and regulations and/or similar future laws and regulations, if applicable, could include costs associated with modifying our products,
recycling and other waste processing costs, legal and regulatory costs and insurance costs. We cannot assure you that the costs
to comply with these new laws or with current and future environmental and worker health and safety laws will not have a material
adverse effect on our business, operating results and financial condition.
Governmental
regulations affecting the import or export of products or affecting products containing encryption capabilities could negatively
affect our revenues.
The
United States and various foreign governments have imposed controls, export license requirements, and restrictions on the import
or export of some technologies, especially encryption technology. In addition, from time to time, governmental agencies have proposed
additional regulation of encryption technology, such as requiring certification, notifications, review of source code, or the
escrow and governmental recovery of private encryption keys. For example, Russia and China recently have implemented new requirements
relating to products containing encryption and India has imposed special warranty and other obligations associated with technology
deemed critical. Governmental regulation of encryption or IP networking technology and regulation of imports or exports, or our
failure to obtain required import or export approval for our products, could harm our international and domestic sales prospects
and adversely affect our revenue expectation. In addition, failure to comply with such regulations could result in penalties,
costs, and restrictions on import or export privileges or adversely affect sales to government agencies or government funded projects.
If
wireless devices pose safety risks, we may be subject to new regulations, and demand for our products and those of our licensees
and customers may decrease.
Concerns
over the effects of radio frequency emissions, even if unfounded, may have the effect of discouraging the use of wireless devices,
which may decrease demand for our products and those of our licensees and customers. In recent years, the FCC and foreign regulatory
agencies have updated the guidelines and methods they use for evaluating radio frequency emissions from radio equipment, including
wireless phones and other wireless devices. In addition, interest groups have requested that the FCC investigate claims that wireless
communication technologies pose health concerns and cause interference with airbags, hearing aids and medical devices. Concerns
have also been expressed over the possibility of safety risks due to a lack of attention associated with the use of wireless devices
while driving. Any legislation that may be adopted in response to these expressions of concern could reduce demand for our products
and those of our licensees and customers in the United States as well as foreign countries.
Risks
Relating to our Securities and this Offering
Exercise
of options or warrants or conversion of convertible securities may have a dilutive effect on your percentage ownership and may
result in a dilution of your voting power and an increase in the number of shares of Common Stock eligible for future resale in
the public market, which may negatively impact the trading price of our shares of Common Stock.
The
exercise or conversion of some or all of our outstanding options, warrants, or convertible securities could result in significant
dilution in the percentage ownership interest of investors in this offering and in the percentage ownership interest of our existing
common stockholders and in a significant dilution of voting rights and earnings per share.
As
of July 10, 2019, we have outstanding warrants to purchase up to 1,189,000 shares of our Common Stock at a weighted exercise price
of $19.80 per share.
Additionally,
we have outstanding options for the issuance of up to 610,000 shares of Common Stock at a weighted exercise price of $15.00 per
share. The exercise of such existing outstanding stock options under our stock incentive plans will further dilute our stockholders’
voting interests. To the extent options and/or warrants and/or conversion rights are exercised, additional shares of Common Stock
will be issued, and such issuance will dilute stockholders.
In
addition to the dilutive effects described above, the exercise of those securities would lead to an increase in the number of
shares of Common Stock eligible for resale in the public market. Sales of substantial numbers of such shares of Common Stock in
the public market could adversely affect the market price of our shares of Common Stock. Substantial dilution and/or a substantial
increase in the number of shares of Common Stock available for future resale may negatively impact the trading price of our shares
of Common Stock.
We
may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing securities that would dilute
your ownership. Depending on the terms available to us, if these activities result in significant dilution, it may negatively
impact the trading price of our shares of Common Stock.
We
have financed our operations, and we expect to continue to finance our operations, acquisitions, if any, and the development of
strategic relationships by issuing equity and/or convertible securities, which could significantly reduce the percentage ownership
of our existing stockholders. Further, any additional financing that we secure, may require the granting of rights, preferences
or privileges senior to, or
pari passu
with, those of our Common Stock. Any issuances by us of equity securities may be
at or below the prevailing market price of our Common Stock and in any event may have a dilutive impact on your ownership interest,
which could cause the market price of our Common Stock to decline. We may also raise additional funds through the incurrence of
debt or the issuance or sale of other securities or instruments senior to our shares of Common Stock. We cannot be certain how
the repayment of those promissory notes will be funded and we may issue further equity or debt in order to raise funds to repay
the promissory notes, including funding that may be highly dilutive. The holders of any securities or instruments we may issue
may have rights superior to the rights of our common stockholders. If we experience dilution from the issuance of additional securities
and we grant superior rights to new securities over common stockholders, it may negatively impact the trading price of our shares
of Common Stock and you may lose all or part of your investment.
The
market price of our shares of Common Stock is particularly volatile given our status as a relatively unknown company with a generally
small and thinly traded public float and lack of profits, which could lead to wide fluctuations in our share price. You may be
unable to sell your shares of Common Stock at or above your purchase price, which may result in substantial losses to you.
The
market for our shares of Common Stock is characterized by significant price volatility when compared to the shares of larger,
more established companies that trade on a national securities exchange and have large public floats, and we expect that our share
price will continue to be more volatile than the shares of such larger, more established companies for the indefinite future.
The volatility in our share price is attributable to a number of factors, including the fact that our shares are thinly traded
relative to larger, more established companies. The price for our shares of Common Stock could, for example, decline precipitously
in the event that a large number of our shares of Common Stock are sold on the market without commensurate demand. In addition,
because we may be considered a speculative or “risky” investment due to our lack of profits to date, certain investors
may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined
to sell their shares of Common Stock on the market more quickly and at greater discounts, thus resulting in a rapid downward decline
in the price of our Common Stock. Many of these factors are beyond our control and may decrease the market price of our shares
of Common Stock, regardless of our operating performance.
The
market price of our Common Stock is still likely to be highly volatile and subject to wide fluctuations, and you may be unable
to resell your shares of Common Stock at or above the price at which you acquired them.
The
market price of our Common Stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number
of factors that are beyond our control, including, but not limited to:
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variations
in our revenues and operating expenses;
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actual
or anticipated changes in the estimates of our operating results or changes in stock market analyst recommendations regarding
our Common Stock, other comparable companies or our industry generally;
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market
conditions in our industry, the industries of our customers and the economy as a whole;
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actual
or expected changes in our growth rates or our competitors’ growth rates;
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developments
in the financial markets and worldwide or regional economies;
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announcements
of innovations or new products or services by us or our competitors;
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announcements
by the government relating to regulations that govern our industry;
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sales
of our Common Stock or other securities by us or in the open market;
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changes
in the market valuations of other comparable companies; and
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we
may fail to meet publicly announced financial guidance or other expectations about our business.
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In
addition, if the market for technology stocks or the stock market in general experiences loss of investor confidence, the trading
price of our Common Stock could decline for reasons unrelated to our business, financial condition or operating results. The trading
price of our shares of Common Stock might also decline in reaction to events that affect other companies in our industry, even
if these events do not directly affect us. In the past, following periods of volatility in the market, securities class-action
litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial
costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating
results and financial condition.
There
is no public market for the Pre-Funded Warrants or the Warrants being offered in this offering.
There
is no established public trading market for the Pre-Funded Warrants or the Warrants being offered in this offering, and we do
not expect a market to develop. In addition, we do not intend to apply to list the Pre-Funded Warrants or the Warrants on any
securities exchange or nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the
Pre-Funded Warrants and the Warrants will be limited.
Holders
of Pre-Funded Warrants or Warrants purchased in this offering will have no rights as common stockholders until such holders exercise
such warrants and acquire our Common Stock.
Until
holders of Pre-Funded Warrants or Warrants acquire shares of our Common Stock upon exercise thereof, holders of such warrants
will have no rights with respect to the shares of our Common Stock underlying such warrants. Upon exercise of the Pre-Funded Warrants
or Warrants, such holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record
date occurs after the exercise date.
Our
charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market
price of our Common Stock.
Our
amended and restated certificate of incorporation, as amended (“Certificate of Incorporation”), and our Bylaws contain
provisions that could delay or prevent a change in control of our Company. These provisions could also make it more difficult
for stockholders to elect directors and take other corporate actions. These provisions include:
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authorizing
the Board of Directors to issue, without stockholder approval, preferred stock with rights senior to those of our Common Stock;
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limiting
the persons who may call special meetings of stockholders; and
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requiring
advance notification of stockholder nominations and proposals.
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In
addition, the provisions of Section 203 of the DGCL govern us. These provisions may prohibit large stockholders, in particular
those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time without
the consent of our Board of Directors.
These
and other provisions in our Certificate of Incorporation and our Bylaws and under Delaware law could discourage potential takeover
attempts, reduce the price that investors might be willing to pay in the future for shares of our Common Stock and result in the
market price of our Common Stock being lower than it would be without these provisions.
If
we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our common
stock.
Our
Common Stock is currently listed on Nasdaq. In order to maintain such listing, we must satisfy minimum financial and other continued
listing requirements and standards, including those regarding director independence and independent committee requirements, minimum
stockholders’ equity, minimum share price, and certain corporate governance requirements.
In
May 2018, we were initially notified by Nasdaq that the bid price of our Common Stock had failed to satisfy the minimum bid price
requirement and in accordance with Nasdaq’s Listing Rules, and after being provided with an extension of time, was given
until May 13, 2019 to regain compliance with the minimum bid price requirement. Subsequently, on May 14, 2019, we received a determination
letter from Nasdaq stating that the we had not regained compliance with the minimum bid price of $1.00 for continued listing on
Nasdaq. On May 29, 2019, we received notice from Nasdaq that our Common Stock had regained full compliance with all applicable
Nasdaq listing requirements.
There
can be no assurances that we will be able to continue to comply with the applicable listing standards. Although we are currently
in compliance with such listing standards, we may, again, in the future, fall out of compliance with such standards. If we are
unable to maintain compliance with these Nasdaq requirements, our Common Stock will be delisted from Nasdaq.
In
the event that our Common Stock is delisted from Nasdaq, U.S. broker-dealers may be discouraged from effecting transactions in
shares of our Common Stock because they may be considered penny stocks and thus be subject to the penny stock rules.
The
SEC has adopted a number of rules to regulate “penny stock” that restrict transactions involving stock which is deemed
to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
and Exchange Act of 1934, as amended (the “Exchange Act”). These rules may have the effect of reducing the liquidity
of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than
securities registered on certain national securities exchanges or quoted on Nasdaq if current price and volume information with
respect to transactions in such securities is provided by the exchange or system). Our shares of Common Stock have in the past
constituted, and may again in the future constitute, “penny stock” within the meaning of the rules. The additional
sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting
transactions in shares of our Common Stock, which could severely limit the market liquidity of such shares of Common Stock and
impede their sale in the secondary market.
A
U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally,
an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or
her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent
to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny
stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”,
a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer
or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer
and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit
monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s
account and information with respect to the limited market in “penny stocks”.
Stockholders
should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns
of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and
misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers;
and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired
level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock
market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate
in the market, management will strive within the confines of practical limitations to prevent the described patterns from being
established with respect to our securities.
We
have not paid dividends in the past and do not expect to pay dividends for the foreseeable future, and any return on investment
may be limited to potential future appreciation in the value of our Common Stock.
We
currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate
paying cash dividends on our shares of Common Stock in the foreseeable future. Our payment of any future dividends will be at
the discretion of our Board of Directors after taking into account various factors, including without limitation, our financial
condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at the
time. To the extent we do not pay dividends, our shares of Common Stock may be less valuable because a return on investment will
only occur if and to the extent our stock price appreciates, which may never occur. In addition, investors must rely on sales
of their Common Stock after price appreciation as the only way to realize their investment, and if the price of our Common Stock
does not appreciate, then there will be no return on investment. Investors seeking cash dividends should not purchase our Common
Stock.
If
securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or
if they change their recommendations regarding our Common Stock adversely, our share price and trading volume could decline.
The
trading market for our shares of Common Stock will be influenced by the research and reports that industry or securities analysts
may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation
regarding our Common Stock adversely, or provide more favorable relative recommendations about our competitors, our share price
would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports
on us, we could lose visibility in the financial markets, which in turn could cause our Common Stock price or trading volume to
decline.
The
requirements of being a U.S. public company may strain our resources and divert management’s attention.
As
a U.S. public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank
Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations. Compliance with these rules and
regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly,
and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual and current
reports with respect to our business and operating results.
As
a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial
condition is more visible, which we believe may result in threatened or actual litigation, including by competitors and other
third parties. If such claims are successful, our business and operating results could be harmed, and even if the claims do not
result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert
resources of our management and harm our business and operating results.
We
acknowledge material weaknesses in the controls and procedures of our financial reporting and may identify additional material
weaknesses in the future that may cause us to fail to meet our reporting obligations, including timeliness, or result in material
misstatements of our financial statements. If we continue to fail to remediate our material weaknesses or if we fail to implement
effective controls and procedures for our financial reporting, our ability to accurately and timely report our financial results
could be adversely affected, which likely would adversely affect the value of our Common Stock.
Our
management has previously identified material weaknesses in our internal control over financial reporting as a result of not properly
performing an effective risk assessment or monitoring of our internal controls over financial reporting. With the acquisitions
of IMT and Vislink, there are risks related to the timing and accuracy of the integration of information from various accounting
and Material Requirement Planning (“MRP”) systems whereby the Company has experienced delays in receiving information
in a timely manner from its subsidiaries. As of March 31, 2019, we concluded that certain of these material weaknesses continued
to exist.
The
Company expects improvements to be made on the integration of information issues in 2019 as we plan to move towards one accounting
and MRP system. The Company is continuing to further remediate the material weakness identified above as its resources permit.
A
control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control
system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints
and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems,
no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Failure of our internal control systems to prevent error or fraud could materially adversely impact us, could lead to restatements
of our financial statements and investors not being able to rely on the completeness and accuracy of the financial information
contained in our filings with the SEC, and could potentially subject us to sanctions or investigations by the SEC or other regulatory
authorities or stockholder litigation. Any such failure could also cause investors to lose confidence in our reported financial
information or our ongoing ability to meet SEC filing deadlines, which likely would adversely affect the value of our Common Stock
and severely limit or even eliminate the prospects for our success in obtaining new capital.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents incorporated by reference into this prospectus include forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that relate to future events or our future financial
performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements
expressed or implied by these forward-looking statements. Words such as, but not limited to, “anticipate,” “aim,”
“believe,” “contemplate,” “continue,” “could,” “design,” “estimate,”
“expect,” “intend,” “may,” “might,” “plan,” “predict,”
“poise,” “project,” “potential,” “suggest,” “should,” “strategy,”
“target,” “will,” “would,” and similar expressions or phrases, or the negative of those expressions
or phrases, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying
words. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus and
incorporated by reference into this prospectus, we caution you that these statements are based on our projections of the future
that are subject to known and unknown risks and uncertainties and other factors that may cause our actual results, level of activity,
performance or achievements expressed or implied by these forward-looking statements, to differ. The section in this prospectus
entitled “
Risk Factors
” and the sections in our periodic reports, including the sections entitled “Business”
in the Form 10-K and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
in the Form 10-K and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2019 (the “March
2019 Form 10-Q”), as well as other sections in this prospectus and the documents or reports incorporated by reference into
this prospectus, discuss some of the factors that could contribute to these differences. These forward-looking statements include,
among other things, statements about:
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our
projected financial position;
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our
estimates regarding expenses, future revenues and capital requirements;
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our
ability to continue as a going concern;
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our
need to raise substantial additional capital to fund our operations;
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our
ability to obtain the necessary regulatory approvals to market and commercialize our products;
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the
results of market research conducted by us or others;
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our
ability to obtain and maintain intellectual property protection for our current products;
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our
ability to protect our intellectual property rights and the potential for us to incur substantial costs from lawsuits to enforce
or protect our intellectual property rights;
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the
possibility that a third party may claim we have infringed, misappropriated or otherwise violated their intellectual property
rights and that we may incur substantial costs and be required to devote substantial time defending against these claims;
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our
reliance on third-party suppliers and manufacturers;
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the
success of competitors and products that are or become available;
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our
ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel;
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the
potential for us to incur substantial costs resulting from product liability lawsuits against us and the potential for these
product liability lawsuits to cause us to limit our commercialization of our products;
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market
acceptance of our products, the size and growth of the potential markets for our current products and any future products
that we may seek to develop, and our ability to serve those markets; and
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the
successful development of our commercialization capabilities, including sales and marketing capabilities.
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We
may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not
place undue reliance on our forward-looking statements. Forward-looking statements should be regarded solely as our current plans,
estimates and beliefs. We have included important factors in the cautionary statements included in this document, particularly
in the section entitled “Risk Factors” beginning on page 6 of this prospectus that we believe could cause actual results
or events to differ materially from the forward-looking statements that we make. Moreover, we operate in a very competitive and
rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks,
nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these risks
and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements
are qualified in their entirety by this cautionary statement. Our forward-looking statements do not reflect the potential impact
of any future acquisitions, mergers, dispositions, joint ventures or investments we may make. You should read this prospectus
and the documents that we have filed as exhibits to this prospectus and incorporated by reference herein completely and with the
understanding that our actual future results may be materially different from the plans, intentions and expectations disclosed
in the forward-looking statements we make. The forward-looking statements contained in this prospectus are made as of the date
of this prospectus and we do not assume any obligation to update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by applicable law.
USE
OF PROCEEDS
We
estimate that the net proceeds from our issuance and sale of our Common Stock, Warrants and Pre-Funded Warrants in this offering
will be approximately $11 million, after deducting the underwriting discounts and commissions and estimated offering expenses
payable by us and excluding the proceeds, if any, from the exercise of any Warrants issued in this offering. We will only receive
additional proceeds from the exercise of the Pre-Funded Warrants and the Warrants issuable in this offering if such Pre-Funded
Warrants and Warrants are exercised at their respective exercise prices of $0.001 and $5.00 per share
of Common Stock and the holders of such Warrants pay the exercise price of such Warrants in cash.
As
of March 31, 2019, we had cash and cash equivalents of approximately $324,000. We intend to use the net proceeds from this offering
for the repayment of debt and for general corporate purposes. With respect to the repayment of debt, we plan to use a portion
of the proceeds to pay all of the principal balance of the Debentures due to the two remaining holders of such Debentures,
which amount is approximately $7,300,000 in the aggregate, inclusive of approximately $1,000,000 in fees and penalties associated
therewith. See “Recent Developments” on page 4 of this prospectus regarding repayment of the Debentures. The interest
rate on such indebtedness that we intend to repay is 10%, and the maturity date is September 30, 2019.
This
expected use of net proceeds from this offering and our existing cash and cash equivalents represents our intentions based upon
our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts
and timing of our actual expenditures may vary significantly depending on numerous factors, including timing of receipts from
customers. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering.
We have no current agreements, commitments or understandings for any material acquisitions or licenses of any products, businesses
or technologies.
We
anticipate existing cash and cash equivalents and the net proceeds from this offering will be sufficient to fund our planned operations
through July 10, 2020. We plan to raise additional capital in the future to fund our ongoing working capital requirements.
As
of the date of this prospectus, we cannot predict with certainty all the uses for the net proceeds to be received upon the completion
of this offering or the amounts we will spend on the uses set forth above. Pending our use of the net proceeds from this offering,
we intend to invest a portion of the net proceeds in a variety of capital preservation investments, including short-term, interest-bearing
instruments and U.S. government securities.
DIVIDEND
INFORMATION
Dividend
Policy
We
have never declared or paid any cash dividends on our common stock and do not anticipate declaring or paying any cash dividends
on our Common Stock in the foreseeable future. We expect to retain all available funds and any future earnings to support operations
and fund the development and growth of our business. Our board of directors has the right to authorize the issuance of preferred
stock in the future, without further stockholder approval, the holders of which may have preferences over the holders of our Common
Stock as to payment of dividends.
CAPITALIZATION
The
following table sets forth our cash and cash equivalents and capitalization as of March 31, 2019:
|
●
|
on
an actual basis as of March 31, 2019;
|
|
|
|
|
●
|
on an as adjusted basis to (i) give further effect to the issuance and sale of 1,550,000 shares of our Common
Stock, Pre-Funded Warrants to purchase 4,450,000 shares of Common Stock and Warrants to purchase 6,000,000 shares of Common Stock,
after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and (ii) after giving
effect to the repayment of the principal amount of the Debentures in addition to all outstanding penalties and fees associated
therewith.
|
All
share and price information immediately above has been adjusted to reflect the 1-for-10 reverse stock split, effective May 13,
2019.
Our
capitalization following the closing of this offering will be adjusted based on the actual public offering price and other terms
of this offering determined at pricing. You should read this table together with our consolidated financial statements and the
related notes and the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in our Form 10-K and our March 2019 Form 10-Q, which are incorporated by reference herein.
|
|
Actual
|
|
|
As
Adjusted
|
|
|
|
(in Thousands)
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
324
|
|
|
$
|
3,984
|
|
|
|
|
|
|
|
|
|
|
Convertible Promissory Notes
|
|
|
6,223
|
|
|
|
—
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.00001 par value per share:
10,000,000 shares authorized; 0 and 0 shares issued and outstanding - actual and as adjusted
|
|
|
—
|
|
|
|
—
|
|
Common stock, $0.00001 par value per share:
100,000,000 shares authorized, 1,923,471 and 7,923,471 shares issued and outstanding - actual and as adjusted (assuming none of the Warrants issued in this offering are exercised)
|
|
|
—
|
|
|
|
—
|
|
Additional paid-in capital
|
|
|
245,338
|
|
|
|
256,298
|
|
Accumulated other comprehensive income
|
|
|
242
|
|
|
|
242
|
|
Treasury stock, at cost
|
|
|
(22
|
)
|
|
|
(22
|
)
|
Accumulated deficit
|
|
|
(237,615
|
)
|
|
|
(238,692
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
7,943
|
|
|
|
17,826
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
14,490
|
|
|
|
21,810
|
|
Except
as otherwise indicted herein, the number of shares of our Common Stock to be outstanding after this offering is based on 1,923,471
shares of Common Stock outstanding as of March 31, 2019, plus the shares of Common Stock offered hereby, and excludes:
|
●
|
the
exercise of outstanding warrants and options exercisable to purchase 1,189,000 and 610,000 shares of Common Stock, respectively,
as of March 31, 2019;
|
|
|
|
|
●
|
the
exercise by the underwriters of their over-allotment option to purchase additional shares of Common Stock and/or Warrants;
and
|
|
|
|
|
●
|
the exercise of any Pre-Funded Warrants or Warrants issued in connection with this offering;
|
|
|
|
|
●
|
no
conversion of any of the Company’s convertible debt.
|
DILUTION
If
you invest in our Common Stock in this offering, your ownership interest will be diluted immediately to the extent of the difference
between the public offering price per share of our Common Stock and the as adjusted net tangible book value per share of our Common
Stock after this offering.
Our
historical net tangible book value as of March 31, 2019 was $3,700,000, or $1.92 per share of our Common Stock. Historical net
tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number
of shares of our Common Stock outstanding as of March 31, 2019.
After
giving effect to the issuance and sale of 1,550,000 shares of our Common Stock in this offering, Pre-Funded Warrants
to purchase 4,450,000 shares of our Common Stock, and accompanying Warrants in this offering, assuming the exercise
of the Pre-Funded Warrants, and after deducting the underwriting discounts and commissions and estimated offering expenses
payable by us, assuming no exercise of the over-allotment option and of the Warrants, and the repayment of the principal
amount of the Debentures in addition to all outstanding penalties and fees associated therewith, our as adjusted net tangible
book value as of March 31, 2019 would have been $1.71 per share. This represents an immediate decrease in net tangible
book value per share of $(0.20) to existing stockholders and immediate dilution of $0.29 per share to new investors
purchasing Common Stock in this offering. Dilution per share to new investors is determined by subtracting as adjusted net tangible
book value per share after this offering from the public offering price per share paid by new investors. The following table illustrates
this dilution on a per share basis:
Public offering price per share
|
|
|
|
|
$
|
2.00
|
|
Historical
net tangible book value per share as of March 31, 2019
|
|
$
|
1.92
|
|
|
|
|
Decrease
in net tangible book value per share attributable to new investors
|
|
|
(0.20
|
)
|
|
|
|
As
adjusted net tangible book value per share after this offering
|
|
|
|
|
$
|
1.71
|
|
Dilution
per share to new investors
|
|
|
|
|
$
|
0.29
|
|
Except
as otherwise indicated herein, the number of shares of our Common Stock to be outstanding after this offering is based on 1,923,471
shares of Common Stock outstanding as of March 31, 2019 and excludes:
|
●
|
the
conversion of any outstanding convertible debt;
|
|
|
|
|
●
|
the
exercise of outstanding warrants and options exercisable to purchase 1,189,000 and 610,000 shares of Common Stock, respectively,
as of March 31, 2019; and
|
|
|
|
|
●
|
the
exercise by the underwriters of their over-allotment option to purchase additional shares of Common Stock and/or Warrants.
|
DESCRIPTION
OF SECURITIES
General
The
following description of our capital stock and certain provisions of our Certificate of Incorporation and Bylaws are summaries
and are qualified by reference to our Certificate of Incorporation and Bylaws. Copies of these documents are filed with
the SEC as exhibits to the registration statement of which this prospectus forms a part.
Our
authorized capital stock consists of 100,000,000 shares of common stock, par value $0.00001 per share, and 10,000,000 shares of
“blank check” preferred stock, of which 5,000,000 shares were designated as our Series D Convertible Preferred Stock,
par value $0.00001 per share (the “Series D Preferred Stock”) and 5,000 shares were designated as our Series E Convertible
Preferred Stock, par value $0.00001 per share (the “Series E Preferred Stock”). On February 5, 2016, we terminated
our Series A Convertible Preferred Stock, par value $0.00001 per share, and our Series C Convertible Preferred Stock, par value
$0.00001 per share. On December 6, 2016, we terminated our Series B Convertible Preferred Stock, par value $0.00001 per share.
As of the date of this prospectus, we had 2,250,380 shares of common stock outstanding, no shares of Series D Preferred
Stock outstanding and no shares of Series E Preferred Stock outstanding.
On
April 30, 2019, our stockholders approved a reverse stock split of our outstanding Common Stock at a specific ratio within a range
from one-for-three to one-for-twenty, and also granted authorization to our Board to determine, in its sole discretion, the specific
ratio and timing of the reverse stock split any time before December 31, 2019. In accordance therewith, on May 13, 2019, a 1-for-10
reverse stock split of our outstanding Common Stock became effective for the trading of our Common Stock. All share and price
information in this prospectus has been adjusted to reflect such 1-for-10 reverse stock split.
Common
Stock
Voting
Rights
Each
stockholder has one vote for each share of Common Stock held on all matters submitted to a vote of stockholders. A stockholder
may vote in person or by proxy. Elections of directors are determined by a plurality of the votes cast and all other matters are
decided by a majority of the votes cast by those stockholders entitled to vote and present in person or by proxy.
Because
our stockholders do not have cumulative voting rights, stockholders holding a majority of the voting power of our shares of Common
Stock will be able to elect all of our directors. Our Certificate of Incorporation and Bylaws provides that stockholder actions
may be effected at a duly called meeting of stockholders or pursuant to written consent of the majority of stockholders. A special
meeting of stockholders may be called by the majority of our Board of Directors or by a committee determined by the Board of Directors
with power to call such meetings.
Dividend
Rights
The
holders of outstanding shares of Common Stock are entitled to receive dividends out of funds legally available at the times and
in the amounts that our Board of Directors may determine, provided that required dividends, if any, on preferred stock have been
paid or provided for. However, to date we have not paid or declared cash distributions or dividends on our common stock and do
not currently intend to pay cash dividends on our common stock in the foreseeable future. We intend to retain all earnings, if
and when generated, to finance our operations. The declaration of cash dividends in the future will be determined by the Board
of Directors based upon our earnings, financial condition, capital requirements and other relevant factors.
No
Preemptive or Similar Rights
Holders
of our Common Stock do not have preemptive rights, and our Common Stock is not convertible or redeemable.
Right
to Receive Liquidation Distributions
Upon
our dissolution, liquidation or winding-up, the assets legally available for distribution to our stockholders and remaining after
payment to holders of preferred stock of the amounts, if any, to which they are entitled, are distributable ratably among the
holders of our common stock subject to any senior class of securities.
Anti-Takeover
Provisions
Since
our Board of Directors has the power to retain and discharge our officers, these provisions could make it more difficult for existing
stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock
makes it possible for our Board of Directors to issue preferred stock with voting or other rights or preferences that could impede
the success of any attempt to change our control.
These
provisions are intended to enhance the likelihood of continued stability in the composition of our Board of Directors and its
policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of us.
These
provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics
that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers
for our shares and may have the effect of deterring hostile takeovers or delaying changes in our control or management. As a consequence,
these provisions also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover
attempts.
Convertible
Debentures
The
Convertible Debentures contain a five percent (5%) original issue discount to the principal amounts contained therein. Prior to
the Convertible Debentures Maturity Date (as defined below), the Convertible Debentures bear interest at 10% per annum, with 12
months interest guaranteed. Interest shall be paid quarterly in cash on January 1, April 1, July 1, and October 1 beginning on
the first such date after the issuance of the Convertible Debentures, on each Conversion Date (as defined in the Convertible Debentures),
on each redemption date (as set forth in the Convertible Debentures), and on the Convertible Debentures Maturity Date (as defined
below). The Convertible Debentures rank senior to the Company’s existing and future indebtedness (except with respect to
the Second Amended May Debentures) and are secured to the extent and as provided in that certain Security Agreement, dated December
3, 2018 (the “December Security Agreement”), by and among the Company, its subsidiaries, and the Majority Investors,
and that certain Subsidiary Guarantee, dated December 3, 2018 (the “December Subsidiary Guarantee”), executed by each
of the Company’s subsidiaries.
The
Convertible Debentures are convertible at any time after their date of issuance at the option of the Majority Investors into shares
of Common Stock at $0.45 per share (the “December Conversion Price”). The Convertible Debentures mature on September
30, 2019 (the “Convertible Debentures Maturity Date”). Commencing on February 1, 2019 and continuing for each fiscal
month thereafter through the Convertible Debentures Maturity Date, the Company will make payments of principal and interest as
Monthly Redemptions (as defined in the Convertible Debentures) to the Majority Investors in order to fully amortize the Convertible
Debentures. The December Conversion Price is subject to adjustment for Events of Default (as defined in the Convertible Debentures)
and upon stock splits, reverse stock splits, and similar capital changes.
At
any time after issuance of the Convertible Debentures, and subject to the certain Equity Conditions (as defined in the Convertible
Debentures) the Company may redeem any portion of the principal amount of the Convertible Debentures, any accrued and unpaid,
and any other amounts due under the Convertible Debentures. If the Company exercises its right to prepay the Convertible Debentures,
the Company will pay to the Majority Investors an amount in cash equal to the sum of the then outstanding principal amount of
the Convertible Debentures and guaranteed interest as follows: (i) from the initial issuance date of the Debentures to the day
prior to the 181-day anniversary of the issuance of the Convertible Debentures, a 110% premium; and (ii) from the 181-day anniversary
of the issuance of the Convertible Debentures to the Convertible Debentures Maturity Date, a 115% premium. The Majority Investors
may continue to convert the Convertible Debentures until the Optional Redemption Payment (as defined in the Convertible Debentures)
is paid.
Section
203 of the DGCL
We
are subject to Section 203 of the DGCL, which prohibits a Delaware corporation from engaging in any “business combination”
with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder,
with the following exceptions:
|
●
|
before
such date, the Board of Directors of the corporation approved either the business combination or the transaction that resulted
in the stockholder becoming an interested stockholder;
|
|
|
|
|
●
|
upon
closing of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes
of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those
shares owned (i) by persons who are directors and also officers and (ii) employee stock plans in which employee participants
do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
|
|
|
|
|
●
|
on
or after such date, the business combination is approved by the Board of Directors and authorized at an annual or special
meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock that is not owned by the interested stockholder.
|
In
general, Section 203 defines business combination to include the following:
|
●
|
any
merger or consolidation involving the corporation and the interested stockholder;
|
|
|
|
|
●
|
any
sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
|
|
|
|
|
●
|
subject
to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
|
|
|
|
|
●
|
any
transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class
or series of the corporation beneficially owned by the interested stockholder; or
|
|
|
|
|
●
|
guarantees,
pledges or other financial benefits provided by or through the corporation.
|
In
general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s
affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder
status did own, 15% or more of the outstanding voting stock of the corporation.
Transfer
Agent, Warrant Agent and Registrars
Our
transfer agent and registrar for our Common Stock in the United States is Continental Stock Transfer & Trust Company (“Continental”).
Our Common Stock is listed on Nasdaq under the symbol “VISL”. Our warrant agent and registrar for the Warrants
offered hereby will be Continental.
DESCRIPTION
OF SECURITIES WE ARE OFFERING
We
are offering (i) 1,550,000 shares of our Common Stock and Pre-Funded Warrants to purchase 4,450,000 shares of
our Common Stock and (ii) Warrants to purchase up to 6,000,000 shares of our Common Stock. Each share of Common Stock
and Pre-Funded Warrant is being sold together with a Warrant to purchase one (1) share of Common Stock. The shares of Common Stock,
Pre-Funded Warrants and accompanying Warrants will be issued separately. We are also registering the shares of Common Stock issuable
from time to time upon exercise of the Pre-Funded Warrants and Warrants offered hereby.
Common
Stock
The
material terms and provisions of our Common Stock and each other class of our securities that qualifies or limits our Common Stock
are described in the section entitled “
Description of Securities
” beginning on page 27 of this prospectus.
Pre-Funded
Warrants
The
following summary of certain terms and provisions of Pre-Funded Warrants that are being offered hereby is not complete and is
subject to, and qualified in its entirety by, the provisions of the Pre-Funded Warrant, the form of which is filed as an exhibit
to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and
provisions of the form of Pre-Funded Warrant for a complete description of the terms and conditions of the Pre-Funded Warrants.
Book
Entry Form
The
Pre-Funded Warrants will be issued in book-entry form and shall be represented only by one or more global Pre-Funded Warrants
deposited with Continental, as custodian on behalf of The Depository Trust Company (“DTC”) and registered in the name
of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Duration
and Exercise Price
Each
Pre-Funded Warrant offered hereby will have an initial exercise price per share equal to $0.001. The Pre-Funded Warrants
will be immediately exercisable and may be exercised at any time until the Pre-Funded Warrants are exercised in full. The exercise
price and number of shares of Common Stock issuable upon exercise of such Pre-Funded Warrants is subject to appropriate
adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our Common Stock and the
exercise price of such Pre-Funded Warrants.
Exercisability
The
Pre-Funded Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed
exercise notice accompanied by payment in full for the number of shares of our Common Stock purchased upon such exercise (except
in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of
the Pre-Funded Warrant to the extent that the holder would own more than 4.99% (or at the election of the holder, 9.99%) of the
outstanding Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to
us, the holder may increase the amount of ownership of outstanding shares of Common Stock after exercising the holder’s
Pre-Funded Warrants. No fractional shares of Common Stock will be issued in connection with the exercise of a Pre-Funded Warrant.
In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise
price of such Pre-Funded Warrants.
Cashless
Exercise
If
a registration statement covering the issuance or resale of the shares of Common Stock underlying the Pre-Funded Warrants is not
available for the issuance or resale of such shares the holder may, in
lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise
price of such Pre-Funded Warrants, elect instead to receive upon such exercise (either in whole or in part) the net number
of shares of Common Stock determined according to a formula set forth in the Pre-Funded Warrants.
Fundamental
Transaction
In
the event of a fundamental transaction, as described in the Pre-Funded Warrants and generally including any reorganization, recapitalization
or reclassification of our Common Stock, the sale, transfer or other disposition of all or substantially all of our properties
or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding Common
Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding Common Stock,
the holders of the Pre-Funded Warrants will be entitled to receive upon exercise of the Pre-Funded Warrants the kind and amount
of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately
prior to such fundamental transaction.
Transferability
Subject
to applicable laws, a Pre-Funded Warrant may be transferred at the option of the holder upon surrender of the Pre-Funded Warrant
to us together with the appropriate instruments of transfer.
Exchange
Listing
We
do not intend to list the Pre-Funded Warrants on any securities exchange or nationally recognized trading system.
Rights
as a Stockholder
Except
as otherwise provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of shares of our Common Stock,
the holders of the Pre-Funded Warrants do not have the rights or privileges of holders of our Common Stock, including any voting
rights, until they exercise their Pre-Funded Warrants.
Warrants
The
following summary of certain terms and provisions of the Warrants that are being offered hereby is not complete and is subject
to, and qualified in its entirety by, the provisions of the Warrants, the form of which is filed as an exhibit to the registration
statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the
form of Warrant for a complete description of the terms and conditions of the Warrants.
Book
Entry Form
Pursuant
to a warrant agreement between us and Continental, as warrant agent, the Warrants will be issued in book-entry form and
shall initially be represented only by one or more global warrants deposited with Continental, as custodian on behalf of
DTC and registered in the name of Cede & Co., a nominee of DTC, or as otherwise directed by DTC.
Duration
and Exercise Price
Each
Warrant offered hereby will have an initial exercise price per share equal to $5.00 per share. The Warrants will be immediately
exercisable and will expire on the fifth anniversary of the original issuance date. The exercise price and number of shares of
Common Stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations
or similar events affecting our Common Stock and the exercise price. The Warrants will be issued separately from the common Stock
and Pre-Funded Warrants, and may be transferred separately immediately thereafter. A Warrant to purchase one share of our Common
Stock will be issued for every one share of Common Stock (or Pre-Funded Warrant, as applicable) purchased in this offering.
Exercisability
The
Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering a duly executed exercise notice
accompanied by payment in full for the number of shares of our Common Stock purchased upon such exercise (except in the case of
a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of the Warrant to
the extent that the holder would own more than 4.99/9.99% of the outstanding Common Stock immediately after exercise, except that
upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding
stock after exercising the holder’s Warrants. No fractional shares of Common Stock will be issued in connection with the
exercise of a Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied
by the exercise price of the Warrant.
Cashless
Exercise
If,
at the time a holder exercises its Warrants, a registration statement registering the issuance of the shares of Common Stock underlying
the Warrants under the Securities Act is not then effective or available, then in lieu of making the cash payment otherwise contemplated
to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such
exercise (either in whole or in part) the net number of shares of Common Stock determined according to a formula set forth in
the Warrants. In addition, the Warrants also provide that, beginning on the earlier of (i) 20 days after issuance and (ii)
if the Common Stock trades an aggregate of more than 20,000,000 shares after the pricing of this offering as reported by Bloomberg,
and ending on the fifteenth (15) month anniversary thereof, each Warrant may be exercised at the option of the holder on a cashless
basis, in whole or in part for a whole number of shares if the weighted average price of the Common Stock on the trading day immediately
prior to the exercise date fails to exceed the initial exercise price of the Warrant.
Fundamental
Transaction
In
the event of a fundamental transaction, as described in the Warrants and generally including any reorganization, recapitalization
or reclassification of our Common Stock, the sale, transfer or other disposition of all or substantially all of our properties
or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding Common
Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding Common Stock,
the holders of the Pre-Funded Warrants will be entitled to receive upon exercise of the Warrants the kind and amount of securities,
cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such
fundamental transaction. In addition, in the event of a fundamental transaction which is approved by our Board (but not in a fundamental
transaction which is not approved by our Board), the holders of the Warrants have the right to require us or a successor entity
to redeem the Warrant for the consideration paid in the fundamental transaction in the amount of the Black Scholes value of the
unexercised portion of the Warrant on the date of the consummation of the fundamental transaction.
Transferability
Subject
to applicable laws, a Warrant may be transferred at the option of the holder upon surrender of the Warrant together with the appropriate
instruments of transfer.
Exchange
Listing
We
do not intend to list the Warrants on any securities exchange or nationally recognized trading system.
Right
as a Stockholder
Except
as otherwise provided in the Warrants or by virtue of such holder’s ownership of shares of our Common Stock, the holders
of the Warrants do not have the rights or privileges of holders of our Common Stock, including any voting rights, until they exercise
their Warrants.
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF COMMON STOCK AND WARRANTS
The
following is a summary of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our
Common Stock and the Pre-Funded Warrants, and the acquisition, ownership, exercise, expiration or disposition of the Warrants,
but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based
upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder,
administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed or subject to differing
interpretations, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those
set forth below. We have not sought and will not seek any ruling from the Internal Revenue Service, or the IRS, with respect to
the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court
will agree with such statements and conclusions.
This
summary also does not address the tax considerations arising under the laws of any U.S. state or local or any non-U.S. jurisdiction,
estate or gift tax, the 3.8% Medicare tax on net investment income or any alternative minimum tax consequences. In addition, this
discussion does not address tax considerations applicable to a holder’s particular circumstances or to a holder that may
be subject to special tax rules, including, without limitation:
|
●
|
banks,
insurance companies or other financial institutions;
|
|
|
|
|
●
|
tax-exempt
or government organizations;
|
|
|
|
|
●
|
brokers
or dealers in securities or currencies;
|
|
|
|
|
●
|
traders
in securities that elect to use a mark-to-market method of accounting for their securities holdings;
|
|
|
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persons
that own, or are deemed to own, more than five percent of our capital stock;
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certain
U.S. expatriates, citizens or former long-term residents of the United States;
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persons who hold our Common Stock,
Pre-Funded
Warrants or Warrants as a position in a hedging transaction, “straddle,” “conversion transaction,” synthetic
security, other integrated investment, or other risk reduction transaction;
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persons who do not hold our Common Stock,
Pre-Funded
Warrants or Warrants as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes);
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persons deemed to sell our Common Stock,
Pre-Funded
Warrants or Warrants under the constructive sale provisions of the Code;
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pension
plans;
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partnerships,
or other entities or arrangements treated as partnerships for U.S. federal income tax purposes, or investors in any such entities;
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persons for whom our Common Stock constitutes “qualified small business stock” within the meaning
of Section 1202 of the Code;
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integral
parts or controlled entities of foreign sovereigns;
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controlled
foreign corporations;
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passive
foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax; or
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persons that acquire our Common Stock, Pre-Funded Warrants or Warrants as compensation for services.
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In
addition, if a partnership, including any entity or arrangement classified as a partnership for U.S. federal income tax purposes,
holds our Common Stock, Pre-Funded Warrants or Warrants, the tax treatment of a partner generally will depend on the status
of the partner, the activities of the partnership, and certain determinations made at the partner level. Accordingly, partnerships
that hold our Common Stock, Pre-Funded Warrants or Warrants, and partners in such partnerships, should consult their tax
advisors regarding the U.S. federal income tax consequences to them of the purchase, ownership, and disposition of such securities.
You
are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation,
as well as any tax consequences of the purchase, ownership and disposition of our Common Stock, Pre-Funded Warrants or Warrants
arising under the U.S. federal estate or gift tax rules or under the laws of any U.S. state or local or any non-U.S. or other
taxing jurisdiction or under any applicable tax treaty.
Definition
of a U.S. Holder
For
purposes of this summary, a “U.S. Holder” is any beneficial owner of our Common Stock, Pre-Funded Warrants or Warrants
that is a “U.S. person,” and is not a partnership, or an entity treated as a partnership or disregarded from its
owner, each for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or
is treated as any of the following:
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an
individual who is a citizen or resident of the United States;
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a
corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;
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an
estate, the income of which is subject to U.S. federal income tax regardless of its source; or
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a
trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more U.S. persons (within the
meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect to be treated as a U.S. person for U.S.
federal income tax purposes.
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For
purposes of this summary, a “Non-U.S. Holder” is any beneficial owner of our Common Stock, Pre-Funded Warrants
or Warrants that is not a U.S. Holder or a partnership, or other entity treated as a partnership or disregarded from
its owner, each for U.S. federal income tax purposes.
Treatment
of Pre-Funded Warrants
Although
it is not entirely free from doubt, a Pre-Funded Warrant should be treated as a share of our Common Stock for U.S.
federal income tax purposes and a holder of Pre-Funded Warrants should generally be taxed in the same manner as a holder
of Common Stock, as described below. Accordingly, no gain or loss should be recognized upon the exercise of a Pre-Funded
Warrant and, upon exercise, the holding period of a Pre-Funded Warrant should carry over to the share of Common Stock
received. Similarly, the tax basis of the Pre-Funded Warrant should carry over to the share of Common Stock
received upon exercise, increased by the exercise price of $0.001. Each holder should consult his, her or its own tax advisor
regarding the risks associated with the acquisition of Pre-Funded Warrants pursuant to this offering (including potential
alternative characterizations). The balance of this discussion generally assumes that the characterization described above is
respected for U.S. federal income tax purposes.
Tax
Consequences to U.S. Holders
Distributions
on Common Stock
As
discussed above under “
Dividend Information – Dividend Policy
,” we do not currently expect to make distributions
on our Common Stock. In the event that we do make distributions of cash or other property, distributions paid on Common
Stock, other than certain pro rata distributions of Common Stock, will be treated as a dividend to the extent paid
out of our current or accumulated earnings and profits and will be includible in income by the U.S. Holder and taxable as ordinary
income when received. If a distribution exceeds our current and accumulated earnings and profits, the excess will be first treated
as a tax-free return of the U.S. Holder’s investment, up to the U.S. Holder’s tax basis in our Common Stock.
Any remaining excess will be treated as a capital gain. Subject to applicable limitations, dividends paid to certain non-corporate
U.S. Holders may be eligible for taxation as “qualified dividend income” and therefore may be taxable at rates applicable
to long-term capital gains. U.S. Holders should consult their tax advisers regarding the availability of the reduced tax rate
on dividends in their particular circumstances. Dividends received by a corporate U.S. Holder will be eligible for the dividends-received
deduction if the U.S. Holder meets certain holding period and other applicable requirements.
Constructive
Dividends on Warrants
Under
Section 305 of the Code, an adjustment to the number of shares of Common Stock that will be issued on the exercise of the
Warrants, or an adjustment to the exercise price of the Warrants, may be treated as a constructive distribution
to a U.S. Holder of the Warrants if, and to the extent that, such adjustment has the effect of increasing such U.S. Holder’s
proportionate interest in our “earnings and profits” or assets, depending on the circumstances of such adjustment
(for example, if such adjustment is to compensate for a distribution of cash or other property to our stockholders). Adjustments
to the exercise price of a Warrant made pursuant to a bona fide reasonable adjustment formula that has the effect of preventing
dilution of the interest of the holders of the Warrants should generally not result in a constructive distribution. Any
constructive distributions would generally be subject to the tax treatment described above under “Dividends on Common Stock”.
Sale
or Other Disposition of Common Stock
For
U.S. federal income tax purposes, gain or loss realized on the sale or other disposition of our Common Stock will be capital
gain or loss, and will be long-term capital gain or loss if the U.S. Holder held our Common Stock for more than one year.
The amount of the gain or loss will equal the difference between the U.S. Holder’s tax basis in our Common Stock
disposed of and the amount realized on the disposition. Long-term capital gains recognized by non-corporate U.S. Holders will
be subject to reduced tax rates. The deductibility of capital losses is subject to limitations.
Sale
or Other Disposition, Exercise or Expiration of Warrants
For
U.S. federal income tax purposes, gain or loss realized on the sale or other disposition of a Warrant (other than by exercise)
will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder held the Warrant for more than
one year at the time of the sale or other disposition. The amount of the gain or loss will equal the difference between the U.S.
Holder’s tax basis in the Warrant disposed of and the amount realized on the disposition.
In
general, a U.S. Holder will not be required to recognize income, gain or loss upon the exercise of a Warrant by payment
of the exercise price, except to the extent of cash paid in lieu of a fractional share. A U.S. Holder’s tax basis in a share
of our Common Stock received upon exercise will be equal to the sum of (1) the U.S. Holder’s tax basis in the Warrant
and (2) the exercise price of the Warrant. A U.S. Holder’s holding period in the stock received upon exercise
will commence on the day or the day after such U.S. Holder exercises the Warrant. No discussion is provided herein regarding
the U.S. federal income tax treatment on the exercise of a Warrant on a cashless basis, and U.S. Holders are urged to consult
their tax advisors as to the exercise of a Warrant on a cashless basis.
If
a Warrant expires without being exercised, a U.S. Holder will recognize a capital loss in an amount equal to such U.S.
Holder’s tax basis in the Warrant. This loss will be long-term capital loss if, at the time of the expiration, the
U.S. Holder’s holding period in the Warrant is more than one year. The deductibility of capital losses is subject
to limitations.
Tax
Consequences to Non-U.S. Holders
Distributions
As
discussed in the section entitled “
Dividend Information—Dividend Policy
,” we do not anticipate paying
any dividends on our Common Stock in the foreseeable future. If we make distributions on our Common Stock or on
our Warrants (as described above under “Constructive Dividends on Warrants”), those payments will constitute
dividends for U.S. federal income tax purposes to the extent we have current or accumulated earnings and profits, as determined
under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings
and profits, they will constitute a return of capital and will first reduce a Non-U.S. Holder’s basis in our Common Stock
or Warrants, as applicable, but not below zero. Any excess will be treated as capital gain and will be treated as described
below under the “—Gain on Sale or Other Disposition of Common Stock or Warrants” section. Any such distributions
would be subject to the discussions below regarding back-up withholding and Foreign Account Tax Compliance Act, or FATCA.
Subject
to the discussion below on effectively connected income, any dividend paid to a Non-U.S. Holder generally will be subject to U.S.
withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable
income tax treaty. To receive a reduced treaty rate, a Non-U.S. Holder must provide us or our agent with an IRS Form W-8BEN, IRS
Form W-8 BEN-E or another appropriate version of IRS Form W-8 (or a successor form), which must be updated periodically, and which,
in each case, must certify qualification for the reduced rate. Non-U.S. Holders should consult their tax advisors regarding their
entitlement to benefits under any applicable income tax treaty.
Dividends
paid to a Non-U.S. Holder that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within
the United States and that are not eligible for relief from U.S. (net basis) income tax under an applicable income tax treaty,
generally are exempt from the (gross basis) withholding tax described above. To obtain this exemption from withholding tax, the
Non-U.S. Holder must provide the applicable withholding agent with an IRS Form W-8ECI or successor form or other applicable IRS
Form W-8 certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business
within the United States. Such effectively connected dividends, if not eligible for relief under a tax treaty, would not be subject
to a withholding tax, but would be taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and
credits and if, in addition, the Non-U.S. Holder is a corporation, may also be subject to a branch profits tax at a rate of 30%
(or such lower rate as may be specified by an applicable income tax treaty).
If
you are eligible for a reduced rate of withholding tax pursuant to a tax treaty, you may be able to obtain a refund of any excess
amounts withheld if you timely file an appropriate claim for refund with the IRS.
Exercise
or Expiration of Warrants
In
general, a Non-U.S. Holder will not be required to recognize income, gain or loss upon the exercise of a Warrant by payment
of the exercise price, except to the extent of cash paid in lieu of a fractional share. However, no discussion is provided herein
regarding the U.S. federal income tax treatment on the exercise of a Warrant on a cashless basis, and Non-U.S. Holders
are urged to consult their tax advisors as to the exercise of a Warrant on a cashless basis.
If
a Warrant expires without being exercised, a Non-U.S. Holder that is engaged in a U.S. trade or business to which any income
from the Warrant would be effectively connected or who is present in the United States for a period or periods aggregating
183 days or more during the calendar year in which the expiration occurs (and certain other conditions are met) will recognize
a capital loss in an amount equal to such Non-U.S. Holder’s tax basis in the Warrant.
Gain
on Sale or Other Disposition of Common Stock or Warrants
Subject
to the discussion below regarding backup withholding and FATCA, a Non-U.S. Holder generally will not be required to pay U.S. federal
income tax on any gain realized upon the sale or other disposition of our Common Stock or Warrants unless:
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the
gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States and
not eligible for relief under an applicable income tax treaty, in which case the Non-U.S. Holder will be required to pay tax
on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and for a Non-U.S. Holder that
is a corporation, such Non-U.S. Holder may be subject to the branch profits tax at a 30% rate (or such lower rate as may be
specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items;
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the
Non-U.S. Holder is an individual who is present in the United States for a period or periods aggregating 183 days or more
during the calendar year in which the sale or disposition occurs and certain other conditions are met, in which case the Non-U.S.
Holder will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by U.S. source capital
losses (even though the Non-U.S. Holder is not considered a resident of the United States) (subject to applicable income tax
or other treaties); or
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we are a “U.S. real property holding corporation” for U.S. federal income tax purposes, or a USRPHC,
at any time within the shorter of the five-year period preceding the disposition or the Non-U.S. Holder’s holding period
for our
Common Stock or Warrants. We believe we are not
currently and do not anticipate becoming a USRPHC. However, because the determination of whether we are a USRPHC depends on the
fair market value of our United States real property interests relative to the fair market value of our other business assets,
there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, gain arising from
the sale or other taxable disposition by a Non-U.S. Holder of our Common Stock will not be subject to United States federal income
tax if (A) in the case of our Common Stock, (a) shares of our Common Stock are “regularly traded,” as defined by applicable
Treasury Regulations, on an established securities market, such as Nasdaq, and (b) the Non-U.S. Holder owns or owned, actually
and constructively, 5% or less of the shares of our Common Stock throughout the five-year period ending on the date of the sale
or exchange; and (B) in the case of our Warrants, either (a)(i) shares of our Common Stock are “regularly traded,”
as defined by applicable Treasury Regulations, on an established securities market, such as Nasdaq, (ii) our Warrants are not considered
regularly traded on an established securities market and (iii) the Non-U.S. Holder does not own, actually or constructively, Warrants
with a fair market value greater than the fair market value of 5% of the shares of our Common Stock, determined as of the date
that such Non-U.S. Holder acquired its Warrants, or (b)(i) our Warrants are considered regularly traded on an established securities
market, and (ii) the Non-U.S. Holder owns or owned, actually and constructively, 5% or less of our Warrants throughout the five-year
period ending on the date of the sale or exchange. Our Warrants are not expected to be regularly traded on an established securities
market. If the foregoing exception does not apply, such Non-U.S. Holder’s proceeds received on the disposition of shares
of oru Common Stock will generally be subject to withholding at a rate of 15% and such Non-U.S. Holder will generally be taxed
on any gain in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that
the branch profits tax generally will not apply.
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Information
Reporting and Backup Withholding
Information
returns may be filed with the IRS in connection with distributions on our Common Stock or constructive dividends on Warrants,
and the proceeds of a sale or other disposition of our Common Stock or Warrants. A non-exempt U.S. Holder may be
subject to U.S. backup withholding on these payments if it fails to provide its taxpayer identification number to the withholding
agent and comply with certification procedures or otherwise establish an exemption from backup withholding.
A
Non-U.S. Holder may be subject to U.S. information reporting and backup withholding on these payments unless the Non-U.S. Holder
complies with certification procedures to establish that it is not a U.S. person (within the meaning of the Code). The certification
requirements generally will be satisfied if the Non-U.S. Holder provides the applicable withholding agent with a statement on
the applicable IRS Form W-8BEN or IRS Form W-8BEN-E (or suitable substitute or successor form), together with all appropriate
attachments, signed under penalties of perjury, stating, among other things, that such Non-U.S. Holder is not a U.S. Person. Applicable
Treasury Regulations provide alternative methods for satisfying this requirement. In addition, the amount of distributions on
common stock or constructive dividends on common stock paid to a Non-U.S. Holder, and the amount of any U.S. federal tax withheld
therefrom, must be reported annually to the IRS and the holder. This information may be made available by the IRS under the provisions
of an applicable tax treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides.
Payment
of the proceeds of the sale or other disposition of our Common Stock or Warrants to or through a non-U.S. office
of a U.S. broker or of a non-U.S. broker with certain specified U.S. connections generally will be subject to information reporting
requirements, but not backup withholding, unless the Non-U.S. Holder certifies under penalties of perjury that it is not a U.S.
person or an exemption otherwise applies. Payments of the proceeds of a sale or other disposition of our Common Stock or
Warrants to or through a U.S. office of a broker generally will be subject to information reporting and backup withholding,
unless the Non-U.S. Holder certifies under penalties of perjury that it is not a U.S. person or otherwise establishes an exemption.
Backup
withholding is not an additional tax. The amount of any backup withholding from a payment generally will be allowed as a credit
against the holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required
information is timely furnished to the IRS.
Foreign
Account Tax Compliance Act
FATCA
imposes withholding tax on certain types of payments made to foreign financial institutions and certain other non-U.S. entities.
The legislation imposes a 30% withholding tax on dividends on, or, subject to the discussion of certain proposed Treasury Regulations
below, gross proceeds from the sale or other disposition of, our Common Stock or Warrants paid to a “foreign
financial institution” or to certain “non-financial foreign entities” (each as defined in the Code), unless
(i) the foreign financial institution undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity
either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying
information regarding each substantial United States owner, or (iii) the foreign financial institution or non-financial foreign
entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to
the diligence and reporting requirements in (i) above, it must enter into an agreement with the U.S. Treasury requiring, among
other things, that it undertake to identify accounts held by “specified United States persons” or “United States-owned
foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30%
on payments to account holders whose actions prevent it from complying with these reporting and other requirements. If the country
in which a payee is resident has entered into an “intergovernmental agreement” with the United States regarding FATCA,
that agreement may permit the payee to report to that country rather than to the U.S. Department of the Treasury. The U.S. Treasury
recently released proposed Treasury Regulations which, if finalized in their present form, would eliminate the federal withholding
tax of 30% applicable to the gross proceeds of a sale or other disposition of our Common Stock. In its preamble to such
proposed Treasury Regulations, the U.S. Treasury stated that taxpayers may generally rely on the proposed regulations until final
regulations are issued. Prospective investors should consult their own tax advisors regarding the possible impact of these rules
on their investment in our Common Stock or Warrants, and the possible impact of these rules on the entities through
which they hold our Common Stock or Warrants, including, without limitation, the process and deadlines for meeting
the applicable requirements to prevent the imposition of this 30% withholding tax under FATCA.
The
preceding discussion of U.S. federal tax considerations is for general information only. It is not tax advice. Each prospective
investor should consult its tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of
purchasing, holding and disposing of our Common Stock or Warrants, including the consequences of any proposed change
in applicable laws.
UNDERWRITING
We
and the underwriters named below have entered into an underwriting agreement with respect to the shares of Common Stock or Pre-Funded
Warrants and accompanying Warrants being offered. A.G.P./Alliance Global Partners, LLC is acting as the representative of the
several underwriters (the “Representative”) and as the sole book-running manager for this offering. In connection
with this offering and subject to certain terms and conditions, the underwriters have agreed to purchase, and we have agreed to
sell, all of the securities in this offering to the underwriters.
Underwriter
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Number of shares of Common Stock
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Number of
Pre-Funded Warrants
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Number of Accompanying Warrants
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A.G.P./Alliance Global Partners
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1,550,000
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4,450,000
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6,000,000
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Total
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1,550,000
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4,450,000
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6,000,000
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The
underwriters have agreed to purchase all the securities offered by us other than those covered by the over-allotment option to
purchase additional securities described below, if it purchases any such securities, and the underwriters’ obligations are
several, which means that the underwriters are required to purchase a specific number of shares of Common Stock or Pre-Funded
Warrants and/or accompanying Warrants but are not responsible for the commitment of any other underwriter to purchase any securities.
The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement.
Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions and
representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’
certificates and legal opinions.
The
underwriters are offering the securities, subject to prior sale, when, as and if issued to and accepted by them, subject to approval
of legal matters by the Representative’s counsel and other conditions specified in the underwriting agreement. The underwriters
reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Over-allotment
Option
We
have also granted the underwriters an option, exercisable for up to 45 days from the date of this prospectus, to purchase up to
an additional 900,000 shares of Common Stock and/or additional Warrants to purchase up to 900,000 additional
shares of Common Stock, at the public offering price, less underwriting discounts and commissions. The underwriters may exercise
the option solely to cover over-allotments. If the over-allotment option is exercised in full, assuming such option is exercised
to purchase shares of Common Stock, the total public offering price, underwriting compensation (including discounts, but not
including any other compensation described hereunder) and proceeds to us before offering expenses will be approximately $13.8
million, $966,000 and $12.8 million, respectively, and excluding the proceeds, if any, from the exercise of the Pre-Funded
Warrants and Warrants offered hereby.
Indemnification
We
have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments
that the underwriters may be required to make in respect of those liabilities.
Underwriter
Compensation
We
have agreed to sell the securities to the underwriters at the offering price of $1.86 per share of Common Stock and
accompanying Warrant and $1.85907 per Pre-Funded Warrant and accompanying Warrant, which represents the offering price
of such securities set forth on the cover page of this prospectus, less the applicable 7% underwriting discount.
We
have also agreed to pay a non-accountable expense allowance to the underwriters which shall not exceed $12,500. In addition, we
have agreed to reimburse the underwriters for accountable legal expenses incurred by them in connection with this transaction
in the amount of $50,000. The total expenses of the underwriters, which are subject to payment or reimbursement by us, shall not
exceed $62,500. We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount,
will be approximately $200,000.
Discount,
Commissions and Expenses
The
underwriters have advised us that they propose to offer the shares of Common Stock and accompanying Warrants at the public offering
price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $0.07
per share of Common Stock and accompanying Warrant. After this offering, the public offering price and concession to dealers
may be changed by the Representative. No such change shall change the amount of proceeds to be received by us as set forth on
the cover page of this prospectus. The shares of Common Stock and accompanying Warrants are offered by the underwriters as stated
herein, subject to receipt and acceptance by them and subject to their right to reject any order in whole or in part. The underwriters
had informed us that they do not intended to confirm sales to any accounts over which they exercises discretionary authority.
The
following table summarizes the underwriting discount we will pay to the underwriters and proceeds, before expenses , to us.
These amounts are shown assuming both no exercise and full exercise of the over-allotment option.
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Per Share and
Accompanying
Warrant
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Per Pre-
Funded
Warrant and
Accompanying
Warrant
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Total without
Over-
Allotment
Option
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Total with
Over-
Allotment
Option
(1)
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Public offering price
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$
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2.00
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$
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1.999
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$
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11,995,550
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$
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13,795,550
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Total underwriting discount (7%)
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|
$
|
0.14
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|
$
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0.13993
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$
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839,689
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|
$
|
965,689
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Proceeds to us, before expenses
(2)
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$
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1.86
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$
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1.85907
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|
$
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11,155,861
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$
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12,829,861
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(1)
Assumes exercise of the underwriters’ over-allotment to purchase shares of Common Stock.
(2
)
Excluding the proceeds, if any, from the exercise of the Pre-Funded Warrants and Warrants.
Lock-Up
Agreements and Trading Restrictions
Our
executive officers and directors have agreed to a 90-day “lock-up” from the date of this prospectus of shares of common
stock that they beneficially own, including the issuance of common stock upon the exercise of currently outstanding convertible
securities and options and options which may be issued. This means that, for a period of 90 days following the effective date
of this prospectus, such persons may not offer, sell, pledge or otherwise dispose of these securities without the prior written
consent of the representative.
The
representative has no present intention to waive or shorten the lock-up period; however, the terms of the lock-up agreements may
be waived at its discretion. In determining whether to waive the terms of the lockup agreements, the representative may base its
decision on its assessment of the relative strengths of the securities markets and companies similar to ours in general, and the
trading pattern of, and demand for, our securities in general.
In
addition, the underwriting agreement provides that we will not, for a period of 90 days following the effective date of this prospectus,
offer, sell or distribute any of our securities, without the prior written consent of the representative, subject to certain exceptions.
Beginning
on the pricing date of this offering and ending 60 days after such date (the “Leak-out Period”), certain investors
who decide to purchase more than $1,000,000 of securities offered in this offering, if they decide to sell any securities during
the Leak-out Period, may only be permitted to sell securities in such amount as shall equal up to 35% in the aggregate of the
average daily volume of the Common Stock on any given trading day, as reported by Nasdaq.
Stabilization
The
rules of the SEC generally prohibit the underwriters from trading in our securities on the open market during this offering. However,
the underwriters are allowed to engage in some open market transactions and other activities during this offering that may cause
the market price of our securities to be above or below that which would otherwise prevail in the open market. These activities
may include stabilization, short sales and over-allotments, syndicate covering transactions and penalty bids.
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Stabilizing
transactions consist of bids or purchases made by the representative for the purpose of preventing or slowing a decline in
the market price of our securities while this offering is in progress.
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Short
sales and over-allotments occur when the representative sells more of our shares of common stock than it purchases from us
in this offering. To cover the resulting short position, the representative may exercise the over-allotment option described
above or may engage in syndicate covering transactions. There is no contractual limit on the size of any syndicate covering
transaction. The representative will make available a prospectus in connection with any such short sales. Purchasers of shares
sold short by the representative are entitled to the same remedies under the federal securities laws as any other purchaser
of shares covered by the registration statement.
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Syndicate
covering transactions are bids for or purchases of our securities on the open market by the representative in order to reduce
a short position.
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Penalty
bids permit the representative to reclaim a selling concession from a syndicate member when the shares of common stock originally
sold by the syndicate member are purchased in a syndicate covering transaction to cover syndicate short positions.
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If
the underwriters commence these activities, they may discontinue them at any time without notice. The underwriters will carry
out any such transactions on Nasdaq.
Listing
Our
Common Stock is listed on Nasdaq under the symbol “VISL”.
Electronic
Distribution
A
prospectus in electronic format may be made available on websites or through other online services maintained by the underwriters
of this offering, or by their affiliates. Other than the prospectus in electronic format, the information on any underwriters’
website and any information contained in any other website maintained by the underwriters is not part of this prospectus or the
registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the Representative
in its capacity as an underwriter.
Other
Relationships
The
underwriters and their respective affiliates have engaged in, and may in the future engage in, investment banking and other commercial
dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary
fees and commissions for these transactions. In the course of its businesses, the Representative and its affiliates may actively
trade our securities or loans for its own account or for the accounts of customers, and, accordingly, the Representative and its
affiliates may at any time hold long or short positions in such securities or loans.
Except
for services provided in connection with this offering, and except as set forth in this section, the Representative has not provided
any investment banking or other financial services during the 180-day period preceding the date of this prospectus and we do not
expect to retain the Representative to perform any investment banking or other financial services for at least 90 days after the
date of this prospectus.
Notice
to Investors in the United Kingdom
In
relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant
Member State”) an offer to the public of any securities which are the subject of the offering contemplated by this prospectus
may not be made in that Relevant Member State except that an offer to the public in that Relevant Member State of any such securities
may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant
Member State:
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(a)
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to
legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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(b)
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to
any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total
balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its
last annual or consolidated accounts;
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(c)
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by
the underwriters to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive);
or
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(d)
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in
any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of these securities
shall result in a requirement for the publication by the issuer or the underwriters of a prospectus pursuant to Article 3
of the Prospectus Directive.
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For
the purposes of this provision, the expression an “offer to the public” in relation to any of the securities in any
Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer
and any such securities to be offered so as to enable an investor to decide to purchase any such securities, as the same may be
varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression”
Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member
State.
The
Representative has represented, warranted and agreed that:
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(a)
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it
has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or
inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000
(the FSMA)) received by it in connection with the issue or sale of any of the securities in circumstances in which section
21(1) of the FSMA does not apply to the issuer; and
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(b)
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it
has complied with and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation
to the securities in, from or otherwise involving the United Kingdom.
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European
Economic Area
In
particular, this document does not constitute an approved prospectus in accordance with European Commission’s Regulation
on Prospectuses no. 809/2004 and no such prospectus is to be prepared and approved in connection with this offering. Accordingly,
in relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (being the Directive
of the European Parliament and of the Council 2003/71/EC and including any relevant implementing measure in each Relevant Member
State) (each, a Relevant Member State), with effect from and including the date on which the Prospectus Directive is implemented
in that Relevant Member State (the Relevant Implementation Date) an offer of securities to the public may not be made in that
Relevant Member State prior to the publication of a prospectus in relation to such securities which has been approved by the competent
authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent
authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that it may, with effect from
and including the Relevant Implementation Date, make an offer of securities to the public in that Relevant Member State at any
time:
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to
legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
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to
any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total
balance sheet of more than €43,000,000; and (3) an annual net turnover of more than €50,000,000, as shown in the
last annual or consolidated accounts; or
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in
any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus
Directive.
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For
the purposes of this provision, the expression an “offer of securities to the public” in relation to any of the securities
in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the
offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the
same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State. For these purposes
the shares offered hereby are “securities.”
LEGAL
MATTERS
Sullivan
& Worcester LLP will render a legal opinion as to the validity of the securities to be registered hereby. Gracin & Marlow,
LLP, New York, New York is acting as counsel to the underwriters in connection with this offering.
EXPERTS
Our
audited consolidated financial statements as of December 31, 2018 and 2017 and for the two years in the period ended December
31, 2018 are incorporated by reference in this prospectus have been audited by Marcum LLP, independent registered public accountants,
to the extent and for the periods set forth in their report incorporated by reference herein, and in reliance on such report given
upon the authority of said firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We
file annual, quarterly and current reports, proxy statements and other information with the SEC. We have also filed with the SEC
under the Securities Act a registration statement on Form S-1 with respect to the securities offered by this prospectus. This
prospectus, which constitutes part of the registration statement, does not contain all the information set forth in the registration
statement or the exhibits and schedules which are part of the registration statement, portions of which are omitted as permitted
by the rules and regulations of the SEC. Statements made in this prospectus regarding the contents of any contract or other document
are summaries of the material terms of the contract or document. With respect to each contract or document filed as an exhibit
to the registration statement, reference is made to the corresponding exhibit. For further information pertaining to us and the
securities offered by this prospectus, reference is made to the registration statement, including the exhibits and schedules thereto,
copies of which may be inspected without charge at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C.
20549 on official business days during the hours of 10 a.m. to 3 p.m. Copies of all or any portion of the registration statement
may be obtained from the SEC at prescribed rates. Information on the Public Reference Room may be obtained by calling the SEC
at 1-800-SEC-0330. In addition, the SEC maintains an Internet site that contains reports, proxy and information statements and
other information regarding issuers that file electronically with the SEC. The web site can be accessed at
www.sec.gov.
The internet address of the Company is
www.vislinktechnologies.com
. Information contained on our website is not a part
of, and is not incorporated into, this prospectus, and the inclusion of our website address in this prospectus is an inactive
textual reference only.
MATERIAL
CHANGES
None.
INCORPORATION
BY REFERENCE
We
incorporated by reference the filed documents listed below (excluding those portions of any Current Report on Form 8-K that are
not deemed “filed” pursuant to the General Instructions of Form 8-K), except as superseded, supplemented or modified
by this prospectus or any subsequently filed document incorporated by reference herein as described below:
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our
Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on April 1, 2019;
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our
Quarterly Report on Form 10-Q for the three months ended March 31, 2019, filed with the SEC on May 15, 2019;
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Our
Definitive Proxy Statement on Schedule 14A for our annual meeting of stockholders held on April 30, 2019, filed with the SEC
on January 3, 2019 and March 19, 2019, as supplemented by Definitive Additional Materials, filed with the SEC on January 29,
2019 and April 23, 2019, respectively; Amendment No. 1 to Definitive Proxy Statement on Schedule 14A, filed with the SEC on
April 25, 2019; and
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our
Current Reports on Form 8-K filed with the SEC on January 29, 2019, February 26, 2019, March 5, 2019, April 3, 2019, May 3,
2019, May 17, 2019 and June 7, 2019.
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We
incorporate by reference in this prospectus any future filings we make with the SEC under Sections 13(a), 13(c), 14, or 15(d)
of the Exchange Act (excluding any information furnished and not filed with the SEC) after the date on which the registration
statement that includes this prospectus was initially filed with the SEC (including all such documents we may file with the SEC
after the date of the initial registration statement and prior to the effectiveness of the registration statement) and until all
offerings under this prospectus are terminated.
Any
statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for all purposes
to the extent that a statement contained in this prospectus or in any other subsequently filed document which is also incorporated
or deemed to be incorporated by reference, modifies or supersedes such statement. Any statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this prospectus. You may request a copy of these filings
(other than an exhibit to a filing unless that exhibit is specifically incorporated by reference into that filing) at no cost
by writing, telephoning or e-mailing us at the following address, telephone number or e-mail address:
Vislink
Technologies, Inc.
240
S. Pineapple Avenue, Suite 701
Sarasota,
FL 34236
(941)
953-9035
johnm@coreir.com
Copies
of these filings are also available through the “Investor” section of our website at
www.vislinktechnologies.com.
For other ways to obtain a copy of these filings, please refer to “Where You Can Find More Information” above.
1,550,000
Shares of Common Stock
Pre-Funded
Warrants to Purchase 4,450,000 Shares of Common Stock
Common
Warrants to Purchase up to 6,000,000 Shares of Common Stock
PROSPECTUS
Sole
Book-Running Manager
A.G.P.
July
11
, 2019
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