NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description
of Business
Vislink is a global technology business
specializing in the collection, delivery, and management of high quality, live video and associated data from the scene of the
action to the viewing screen. For the broadcast markets, Vislink provides solutions for the collection of live news, sports, and
entertainment events. Vislink also furnishes the surveillance and defense markets with real-time video intelligence solutions
using a variety of tailored transmission products. The Vislink team also provides professional and technical services utilizing
a staff of technology experts with decades of applied knowledge and real-world experience to the areas of a terrestrial microwave,
satellite, fiber optic, surveillance, and wireless communications systems, to deliver a broad spectrum of customer solutions.
LIVE BROADCAST:
Vislink delivers an extensive portfolio
of solutions for live news, sports, and entertainment industries. These solutions encompass the video collection, transmission,
management, and distribution of content, via microwave, satellite, cellular, IP, and MESH networks. With over 50 years in operation,
Vislink has the expertise and technology portfolio to deliver fully integrated, seamless, end-to-end solutions.
Vislink’s live broadcast solutions
are well known across the industry. A vast majority of all outside wireless broadcast video content is transmitted using our equipment,
with more than 200,000 systems installed worldwide. We work closely with the majority of the world’s broadcasters. Vislink
wireless cameras and ultra-compact encoders help bring many of the world’s most prestigious sporting and entertainment events
to life. Recent examples include globally watched international sporting contests, award shows, racing events, and annual music
and cultural events.
MILITARY AND GOVERNMENT:
Building on our knowledge of live video
delivery, Vislink has developed high-quality solutions to meet the operational and industry challenges of the surveillance and
defense markets. Vislink solutions are specifically designed with interagency cooperation in mind, utilizing a common international
protocol, or IP, platform, and a web interface for video delivery. Vislink provides comprehensive video, audio, and data
communications solutions to the law enforcement and public safety community, including Airborne, Unmanned Systems, Maritime and
Tactical Mobile Command Posts. These solutions may include airborne downlinks, terrestrial point-to-point, tactical mobile
command, maritime, UAV, and personal portable products that meet the demands of field operations, command centers, and central
receiving sites. Short-range and long-range solutions are available in areas that include established infrastructure as
well as extremely remote areas, helping to make valuable video intelligence available regardless of location. Vislink public safety
and surveillance solutions are deployed worldwide, including throughout the US, Europe, and the Middle East, at the local, regional,
and federal levels of operation, for criminal investigation, crisis management, mobile command posts, and field operations.
SATELLITE
COMMUNICATIONS:
Vislink’s
satellite solutions are supported by more than 30 years of technical expertise. They ensure robust, secure communications while
delivering low transmission costs for any organization that needs high quality, reliable satellite transmission. Vislink offers
turnkey solutions that begin with a state of the art coding, compression, and modulation engines and end with our robust, lightweight
antenna systems. Vislink Satellite solutions focus heavily on being the smallest, lightest, and most efficient in their categories,
making transportation and ease of use a key driver in the customer experience. Vislink offers an extensive range of satellite
designs that allow customers to optimize bit rate, size, weight, and total cost. Our satellite systems are used extensively across
the globe, with over 2000 systems deployed by governments, militaries, and broadcasters alike.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements are prepared under the United States generally accepted accounting
principles (“US GAAP”) for interim financial information and following the instructions to Form 10-Q and Regulation
S-X. Accordingly, these financial statements do not include all information or notes required by GAAP for annual financial statements.
They should be read in conjunction with the consolidated financial statements as filed on the Company’s Annual Report on
Form 10-K for the year ended December 31, 2019, filed with the United States Securities and Exchange Commission (the “SEC”)
on April 1, 2020. In the opinion of management, the unaudited condensed consolidated financial statements included herein contain
all adjustments necessary to present fairly the Company’s consolidated financial position as of June 30, 2020, the results
of its operations and cash flows for the six months ended June 30, 2020, and 2019. Such adjustments are of a routine recurring
nature. The results of operations for the six months ended June 30, 2020, may not be indicative of results for a full year, any
other interim period or any future year period.
Principles
of Consolidation
The
preparation of the accompanying financial statements conforms with US GAAP, as found in the Accounting Standards Codification
(“ASC”), the Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”)
and the rules and regulations of the SEC. The accompanying consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, IMT and Vislink.
Upon
consolidation, the elimination of all intercompany accounts and transactions took place among the consolidated entities.
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use
of Estimates
The
preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates,
judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated
financial statements. These estimates also affect the reported amounts of
revenues and expenses during the reporting periods. Significant accounting estimates
reflected in the Company’s condensed consolidated financial statements include the useful lives of property, plant, and
equipment, impairment of long-lived assets, allowance for accounts receivable doubtful accounts, allowance for inventory obsolescence
reserve, allowance for deferred tax assets, valuation of warranty reserves, contingent consideration liabilities, and the accrual
of potential liabilities. Actual results could differ from estimates, and any such differences
may be material to our financial statements.
We
are not presently aware of any events or circumstances
arising from the COVID-19 pandemic that would require us to update our estimates or judgments or revise the carrying value of
our assets or liabilities. There have been no new or material changes to the accounting estimates discussed in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2019, that are of significance, or potential significance, to the Company.
Risks
and Uncertainties
The
Company’s operations will be subject to significant risks and uncertainties, including financial, operational, regulatory,
and other risks associated, including the potential risk of business failure. The recent global COVID-19 outbreak has caused
an economic crisis, and the extent of the impact of this pandemic on the Company’s business is highly uncertain and difficult
to predict, as this virus continues to grow, and state and local governments work to control this outbreak. Any economic disruption
could have a disadvantageous material effect on our business and reduce our capital resources and access to capital, with possible
unfavorable implications on our financial condition and results of operations. Policymakers around the globe have responded with
fiscal policy actions to support their industries and economies, but the magnitude and overall effectiveness of these interventions
remain uncertain.
We
cannot give assurances that the COVID-19 pandemic will not in the future materially impact the Company’s financial
condition, or that any initiatives or programs that the Company may undertake, if any, as of the date of the issuance of
these unaudited condensed consolidated financial statements will prove effective in mitigating any negative impacts from
COVID-19. Also, we cannot provide assurances that the COVID-19 public health effort will not be intensified to such an
extent, particularly in response to any resurgence in infections, that would prevent us from conducting any business
operations in our target markets or at all for an indefinite period. The Company can give no assurance that a material impact
on the Company’s financial condition has not resulted or will not result in the future, particularly as the state,
local and international restrictions impacting our business continues to evolve.
Impairment
of Long-Lived Assets
Management
usually evaluates indefinite-lived intangible assets for impairment annually during the fourth quarter or more frequently if an
event occurs, or circumstances change (“triggering events”) that would be more likely than not reduce the fair
value of a reporting unit or intangible asset below its carrying value. As a result of the significant impact the COVID-19 pandemic
has had on the Company’s operations, we analyzed these triggering events affecting our customers and target
markets in early May 2020. We record impairment losses for long-lived assets used in our business, including right-of-use operating
lease assets, if the asset’s carrying amount is not recoverable when the estimated undiscounted cash flows expected to result
from the use of an asset and its eventual disposition is less than the carrying amount.
As
part of the Company’s impairment analysis, the fair value of a reporting unit is determined using both the income and market
approaches. The income approach requires management to estimate a number of factors for each reporting unit, including
the projected future operating results, economic projections, anticipated future cash flows and discount rates considering the
impact of COVID-19, among other potential consequences. The market approach estimates fair value using comparable marketplace
fair value data from a similar industry grouping.
Although
the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due
to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other
underlying assumptions, including the impact of COVID-19, could have a significant effect on either the fair value of the reporting
units and indefinite-lived intangibles, including right-of-use operating lease assets and indefinite-lived intangible impairment
charges. These estimates can be affected by several factors including, but not limited to, the impact of COVID-19, its severity,
duration and its impact on global economies, general economic conditions as well as its impact on our operating results and financial
conditions. The Company will continue to monitor these potential impacts, including the effects of COVID-19 and economic, industry
and market trends and the impact these may have on our operations. The Company did not note any impairment for the three and six
months ended June 30, 2020, and 2019.
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Inventories
The
Company records inventory at the lower of cost, on a first-in, first-out basis, or net realizable value. Net realizable value
is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal,
and transportation. Inventory valuation adjustments are on the face of the unaudited condensed consolidated statements of operations
for the six months ended June 30, 2020, and 2019.
Revenue
Recognition
We
account for the Company’s operating results under ASC Topic 606 adopted on January 1, 2019. It is a comprehensive revenue
recognition model that requires revenue to be recognized when the Company transfers control of the promised goods or services
to our customers at an amount that reflects the consideration that we expect to receive. The application of ASC Topic 606 requires
us to use more judgment and make more estimates than under previously issued guidance.
The
Company generates all its revenue from contracts with customers. The Company recognizes revenue when we satisfy a performance
obligation by transferring control of the promised goods or services to a customer in an amount that reflects the consideration
that we expect to receive in exchange for those services.
The
Company determines revenue recognition through the following steps:
1.
Identification of the contract, or contracts, with a customer;
2.
Identification of the performance obligations in the contract;
3.
Determination of the transaction price;
4.
Allocation of the transaction price to the performance obligations in the contract; and
5.
Recognition of revenue, when, or as, we satisfy a performance obligation.
At
contract inception, the Company assesses the goods and services promised in our contracts with customers and identifies a performance
obligation for each. To determine the performance obligations, the Company considers all the products and services promised in
the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction
of the performance obligation is not subject to significant judgment. We measure revenue as the amount of consideration we expect
to receive in exchange for transferring goods and services. Excluded from income are the value-added sales taxes, and other charges
we collect concurrent with revenue-producing activities.
Remaining
performance obligations, or backlog, represents the aggregate amount of the transaction price allocated to the remaining obligations
that the Company has not performed under its customer contracts. The Company has elected to use the optional exemption in ASC
606-10-50-14, which exempts an entity from such disclosures if a performance obligation is part of a contract with an original
expected duration of one year or less.
Leases
We
determine if an arrangement is a lease at inception. We recognize lease expense for lease payments on a straight-line basis over
the lease term. The Company includes operating leases as ROU assets as “Right of use assets, operating leases” in
the consolidated balance sheets. For lease liabilities, operating lease liabilities are included in “Operating lease obligations,
current” and “Operating lease liabilities, net of current portion,” in the consolidated balance sheets. We recognize
Operating lease ROU assets and liabilities on the commencement date based on the present value of lease payments for all leases
with a term longer than 12 months. There is no separation of lease and non-lease components for all our contracts of real estate.
The
ROU assets and related lease liabilities recorded under ASC 842 are calculated based on the present value of the lease payments
using (1) the rate implicit in the lease or (2) the lessee’s incremental borrowing rate (“IBR”), defined as
the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to
the lease payments in a comparable economic environment. As most of our leases do not provide an implicit rate, we generally use
our incremental borrowing rates based on an analysis of prior collateralized borrowings over similar terms of the lease payments
at the commencement date, to estimate the IBR under ASC 842. There were no capital leases, which are now titled “finance
leases” under ASC 842, in the Company’s lease portfolio as of June 30, 2020.
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-Based
Compensation
The
Company accounts for stock compensation with persons classified as employees for accounting purposes following ASC 718 “Compensation-Stock
Compensation,” which recognizes awards at fair value on the date of grant and recognition of compensation over the service
period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes Option Pricing Model.
The fair value of common stock issued for services is determined based on the Company’s stock price on the date of issuance.
Under
ASU 2018-07, the scope of Topic 718 was expanded to include share-based payment transactions for acquiring goods and services
from non-employees. Equity-classified non-employee share-based payment awards are no longer measured at the earlier of the date
at which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance
is complete. Instead, they are now measured at the grant date. Non-employee share-based payment awards with performance conditions
are measured at the lowest aggregate fair value under today’s guidance, which often results in zero value. ASU 718 aligns
the accounting for non-employee share-based payment awards with performance conditions with accounting for employee share-based
payment awards under Topic 718 by requiring entities to consider the probability of satisfying performance conditions. Current
guidance requires entities to use the contractual term for the measurement of the non-employee share-based payment awards. ASU
718 allows entities to make an award-by-award election to use either the expected term (consistent with employee share-based payment
awards) or the contractual term for non-employee awards
Loss
Per Share
The
Company reports a loss per share under ASC Topic 260, “Earnings Per Share,” which establishes standards for computing
and presenting earnings per share. The calculation of basic loss per share of common stock divides the net loss allocable to common
stockholders by the weighted-average shares of common stock outstanding during the period, without consideration of common stock
equivalents. The calculation of diluted loss per share adjusts the weighted-average shares of common stock outstanding for the
dilutive effect of common stock equivalents, including stock options and warrants for the period as determined using the treasury
stock method. For purposes of the diluted net loss per share calculation, common stock equivalents are excluded from the calculation
because their effect would be anti-dilutive. Therefore, basic and diluted net loss per share applicable to common stockholders
is the same for periods with a net loss.
The
following table illustrates the anti-dilutive potential common stock equivalents excluded from the calculation of loss per share
(in thousands):
|
|
Six months Ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Anti-dilutive potential common stock equivalents excluded from the calculation of loss per share:
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
70
|
|
|
|
97
|
|
Convertible debt
|
|
|
—
|
|
|
|
*49
|
|
Warrants
|
|
|
178
|
|
|
|
198
|
|
|
|
|
248
|
|
|
|
344
|
|
*
The Company paid down the total principal balance in the fiscal year 2019.
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments
GAAP
requires disclosing the fair value of financial instruments to the extent practicable for financial instruments that are recognized
or unrecognized in the consolidated balance sheet. The fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the fair value amount consider the tax consequences of
realization or settlement.
In
assessing the fair value of financial instruments, the Company uses a variety of methods and assumptions, based on estimates of
market conditions and risks existing at the time. For specific instruments, including accounts receivable and accounts payable,
the Company estimated that the carrying amount approximated fair value because of the short maturities of these instruments. All
debt is based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair
value.
GAAP
establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs consist of items
that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent
of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy
is described below:
Level
1 –
|
Quoted
prices in active markets for identical assets or liabilities, there are no fair valued assets or liabilities classified under
Level 1 as of June 30, 2020.
|
|
|
Level
2 –
|
Observable
prices that are based on inputs not quoted on active markets but corroborated by market data, there are no fair valued assets
or liabilities classified under Level 2 as of June 30, 2020.
|
|
|
Level
3 –
|
Unobservable
inputs are used when little or no market data is available; the fair value hierarchy gives the lowest priority to Level 3
inputs (see Note 9).
|
Foreign
Currency and Other Comprehensive (Loss)/Income
The
functional currency of our foreign subsidiary is typically the applicable local currency, which is British Pounds. The
translation from the respective foreign currency to United States Dollars (US Dollar) is performed for balance sheet accounts
using current exchange rates in effect at the balance sheet date and for income statement accounts using an average exchange
rate during the period. Included as a separate component of accumulated other comprehensive (loss)/income are gains or losses
resulting from such translation. Gains or losses resulting from foreign currency transactions are included in foreign
currency income or loss except for the effect of exchange rates on long-term inter-company transactions considered to be a
long-term investment, which is accumulated and credited or charged to other comprehensive income.
We
recognize transaction gains and losses in our results of operations based on the difference between the foreign exchange rates
on the transaction date and on the reporting date. The Company includes, as a component of general and administrative expenses,
the foreign currency exchange gains and losses in the accompanying Unaudited Condensed Consolidated Statements of Operations.
The
Company has recognized foreign exchanges gains and losses and changes in accumulated comprehensive income approximately as follows:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net foreign exchange transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses
|
|
$
|
75,000
|
|
|
$
|
130,000
|
|
|
$
|
659,000
|
|
|
$
|
41,000
|
|
Accumulated comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on currency translation adjustment
|
|
$
|
28,000
|
|
|
$
|
34,000
|
|
|
$
|
249,000
|
|
|
$
|
1,000
|
|
The
Company uses OANDA, a Canadian-based foreign exchange company and website providing currency conversion, as a source
of quotes of exchange rates adopted for the foreign exchange transactions. Below are the applicable translation rates applied
on amounts from British Pounds into United States dollars for the respective periods:
|
●
|
As
of June 30, 2020 – British Pounds $1.232606 to US Dollars $1.00.
|
|
|
|
|
●
|
The
average rate for the six months ended June 30, 2020 – British Pounds $1.260461 to US Dollars $1.00.
|
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Subsequent
Events
See Note 14 for subsequent events occurring
after the date of these consolidated financial statements.
Recently
Issued Accounting Principles
In
June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13 “Financial Instruments-Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” which requires the measurement and recognition
of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment
model with an expected loss methodology. In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU
No. 2016-13 for public business entities eligible to be smaller reporting companies defined by the SEC to fiscal years beginning
after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of
this ASC on its consolidated financial statements.
Other
recent accounting standards issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified
Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present
or future condensed consolidated financial statements.
2
— LIQUIDITY AND FINANCIAL CONDITION
The
Company incurred a loss from operations of approximately $5.4 million and cash used in operating activities of $7.7 million for
the six months ended June 30, 2020. The Company had approximately $11.2 million in working capital, $258 million in accumulated
deficits, and $5.1 million of cash on hand as of June 30, 2020.
The
COVID-19 pandemic and related economic repercussions have created significant uncertainty. To mitigate any concern that the Company
may not have the ability to continue as a going concern, the Company began taking liquidity preservation actions designed to dismiss
doubt about our potential to fund operations for the next 12 months amply.
Strategic
Initiatives
The
Company began taking liquidity preservation actions in late March and early April including:
|
●
|
Implementation
of proactive spending reductions to improve liquidity, including
a partial workforce reduction, the furlough of employees, reduced discretionary spending, resulting in a projected annual
savings of approximately $5.0 million in fiscal 2020.
|
|
●
|
Effective
May 1, 2020, the Company entered into new lease arrangements at two new locations in Hackettstown, NJ, on a 90-day cycle for
each site, effectively lowering rental fees by approximately 81%.
|
Paycheck
Protection Program (“PPP”) and Liquidity
Further,
we benefited from the support afforded to us under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”),
which has provided temporary relief related to maintaining payroll and some overhead expenses through the period of emergency.
The stated goal is to keep workers paid and employed during the period of the crisis. The Company received approximately $1.2
million on April 10, 2020, under the sponsorship of PPP, in the form of a promissory note, as discussed further in Note 5.
NOTE
1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2
— LIQUIDITY AND FINANCIAL CONDITION (continued)
Capital-raising
events
During
the past six months, the Company has been able to raise funds as follows successfully:
|
●
|
On
February 14, 2020, the Company closed on an equity financing and received gross proceeds of approximately $5,998,000, less
offering costs of $560,000 for net proceeds of $5,438,000. The Company issued 2,074,167 shares of common stock, 2,074,167
warrants to purchase 1,555,625 shares of Common Stock, 2,471,200 pre-funded warrants with each pre-funded warrant exercisable
for one share of Common Stock, together with 2,471,200 Warrants to purchase 1,853,400 shares of Common Stock.
|
|
|
|
|
●
|
On
May 5, 2020, the Company filed a shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission
(“SEC”) and declared effective on May 13, 2020. On June 5, 2020, under the registration statement, the Company
issued 1,333,333 shares of common stock and received gross proceeds of approximately $5,101,000.
|
Together,
with the capital raises, the PPP loan, and the Company-wide protocols invoked as a result of the worldwide consequences encountered
from the COVID-19 health emergency, and based on forward-looking estimates of our business operations and results, we believe
we will have sufficient funds to continue our operations for at least twelve months from the date of these financial statements.
The ability to recognize revenue and ultimately cash receipts is contingent upon, but not limited to, acceptable performance of
the delivered equipment and services. There may be a material influence in our asset’s carrying value if we are unable to
close on some revenue-producing opportunities in the near term. The achievement of our efforts to maintain adequate liquidity
is not assured, particularly in light of the significant uncertainty arising from the COVID-19 pandemic and the related economic
downturn in the United States and abroad.
3
— INTANGIBLE ASSETS
Intangible
assets consist of the following finite assets:
|
|
Patents and Licenses
|
|
|
Trade Names and Technology
|
|
|
Customer Relationships
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Costs
|
|
Amortization
|
|
|
Costs
|
|
|
Amortization
|
|
|
Costs
|
|
|
Amortization
|
|
|
Net
|
|
Balance as of December 31, 2019
|
|
$
|
12,378,000
|
|
$
|
(10,504,000
|
)
|
|
$
|
1,450,000
|
|
|
$
|
(690,000
|
)
|
|
$
|
2,880,000
|
|
|
$
|
(2,592,000
|
)
|
|
$
|
2,922,000
|
|
Additions
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Amortization
|
|
|
—
|
|
|
(333,000
|
)
|
|
|
—
|
|
|
|
(111,000
|
)
|
|
|
—
|
|
|
|
(87,000
|
)
|
|
|
(531,000
|
)
|
Balance as of June 30, 2020
|
|
$
|
12,378,000
|
|
$
|
(10,837,000
|
)
|
|
$
|
1,450,000
|
|
|
$
|
(801,000
|
)
|
|
$
|
2,880,000
|
|
|
$
|
(2,679,000
|
)
|
|
$
|
2,391,000
|
|
Patents
and Licenses:
The
Company amortizes filed patents and licenses over their useful lives, which range between 19.8 to 20 years. The amortization of
the costs incurred by processing provisional patents and pending applications begins after determining it is successfully reviewed
and filed.
Other
Intangible Assets:
The
Company amortizes these other intangible assets over their estimated useful lives of 3 to 15 years. The prior acquisition of the
Company’s subsidiaries, IMT and Vislink, created these intangible assets of trade names, technology, and customer lists.
The
Company has recognized net capitalized intangible costs as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Patents and Licenses
|
|
$
|
1,541,000
|
|
|
$
|
1,874,000
|
|
Trade Names and Technology
|
|
|
649,000
|
|
|
|
760,000
|
|
Customer Relationships
|
|
|
201,000
|
|
|
|
288,000
|
|
|
|
$
|
2,391,000
|
|
|
$
|
2,922,000
|
|
The
Company has recognized the amortization of intangible assets as follows:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Patents and Licenses
|
|
$
|
166,000
|
|
|
$
|
167,000
|
|
|
$
|
333,000
|
|
|
$
|
332,000
|
|
Trade Names and Technology
|
|
|
55,000
|
|
|
|
56,000
|
|
|
|
111,000
|
|
|
|
111,000
|
|
Customer Relationships
|
|
|
9,000
|
|
|
|
219,000
|
|
|
|
87,000
|
|
|
|
435,000
|
|
|
|
$
|
230,000
|
|
|
$
|
442,000
|
|
|
$
|
531,000
|
|
|
$
|
878,000
|
|
The
weighted average remaining life of the amortization of the Company’s intangible assets is approximately 3.4 years. The following
table represents the estimated amortization expense for total intangible assets for the succeeding five years:
Period ending June 30,
|
|
|
|
2021
|
|
$
|
950,000
|
|
2022
|
|
|
872,000
|
|
2023
|
|
|
184,000
|
|
2024
|
|
|
119,000
|
|
2025
|
|
|
119,000
|
|
Thereafter
|
|
|
147,000
|
|
|
|
$
|
2,391,000
|
|
NOTE
4 — NOTES PAYABLE
The
table below represents the Company’s notes payable as of June 30, 2020, and December 31, 2019:
|
|
Principal
|
|
|
|
6/30/20
|
|
|
12/31/19
|
|
Effective as of September 27, 2019, the Board of Directors of the Company consented to assume the remaining balance of a note held by a former related party MB Technology Holdings, LLC (“MBTH”). MBTH originally borrowed funds for the benefit of the Company with the proceeds forwarded to the Company reflecting due to a related party, ultimately converted into shares. The note matures on September 18, 2020, with an annual interest rate of 8.022%. One payment of $18,519 of accrued interest plus $230,860 of principal, totaling $249,379, is due on September 18, 2020. Interest expense for the three months and six months ending June 30, 2020, is approximately $4,600 and $14,500, respectively. Interest expense for the three months and six months ending June 30, 2019, $-0-.
|
|
$
|
231,000
|
|
|
$
|
231,000
|
|
On October 2, 2019, the Company’s subsidiary, Integrated Microwave Technology (“IMT”), incurred a working capital loan of $150,000, with an annual interest rate of 1.9%, maturing on April 24, 2020. IMT has made approximately $93,000 in principal payments. Interest expense for the three months and six months ending June 30, 2020, was approximately $16,000 and $31,000, respectively. Interest expense for the three months and six months ending June 30, 2019, was $-0-.
|
|
|
15,000
|
|
|
|
108,000
|
|
On April 13, 2020, the Company financed a portion of the cost of its D&O insurance policy agreement and issued a note payable in the amount of approximately $213,000. The loan’s terms are for nine months at a 5.95% annual interest rate, with a monthly principal and interest payment of approximately $25,000. The Company has made principal payments of approximately $47,000, and interest expense for the three months and six months ending June 30, 2020, is $1,200. Interest expense for the three months and six months ending June 30, 2019, was $-0-.
|
|
|
166,000
|
|
|
|
-0-
|
|
|
|
$
|
412,000
|
|
|
$
|
339,000
|
|
NOTE
5 – PAYROLL PROTECTION PROGRAM LOAN
On
April 5, 2020, we entered into a promissory note with Texas Security Bank, according to the Paycheck Protection Program (“PPP”)
under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan matures on April 5, 2022,
and bears interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months
after the date of disbursement, commencing on November 5, 2020. On April 10, 2020, we received approximately $1,168,000 in loan
proceeds. The PPP Loan contains events of default and other provisions customary for a loan of this type. The Payroll Protection
Program provides that (1) the use of PPP Loan amount shall be limited to certain qualifying expenses, (2) 100 percent of the principal
amount of the loan is guaranteed by the Small Business Administration and (3) an amount up to the full principal amount may qualify
for loan forgiveness following the terms of CARES Act. The amount to be forgiven is indeterminate as of the issuance date of these
financial statements. As of June 30, 2020, the Company was in full compliance with all covenants concerning the PPP Loan.
Management
is treating the governmental grant under Topic ASC 470. The Company has recognized a liability for the full amount of the proceeds
received. Any amount forgiven falls under ASC 405-20 and would be treated as a gain on loan extinguishment on the statement of
operations. The PPP proceeds are cash inflows from financing activities on the statement of cash flows. Any amounts forgiven are
a non-cash financing activity.
NOTE
6 — LEASES
The
Company’s leasing arrangements include agreements for office space, deployment sites, and storage warehouses, both domestically
and internationally. The operating leases contain various terms and provisions, with a remaining duration of 1 month to 4.5 years.
Certain individual leases contain rent escalation clauses and lease concessions that require additional rental payments in the
later years of the term. We recognize rent expense for these types of contracts on a straight-line basis over the minimum lease
term. Additionally, the Company sublets a portion of its space under operating leases with a remaining lease term of approximately
three months at our Hemel location.
On
April 28, 2020, the Company negotiated two new leases for the landlord for office and storage space for our Hackettstown, New
Jersey location. The effective date of the new lease agreement is May 1, 2020, expiring on April 30, 2021. On January 24,
2020, the Company negotiated a new lease agreement with the landlord at our Billerica, MA location, decreasing square footage
required to 8,204 from 39,237 square feet or approximately 79%. The effective date of the new lease agreement is on March 24,
2020, with a reduced monthly obligation expiring on December 31, 2026. Additionally, we early terminated a lease agreement
and removed approximately $904,000 of Right-Of-Use Assets; $533,000 of Operating Lease Liabilities; $371,000 of Accumulated
Amortization on the Operating Lease from the Consolidated Balance Sheet; and recognized a lease termination gain of
approximately $21,000 in the Consolidated Statement of Operations and Comprehensive Loss as of June 30, 2020.
NOTE
6 — LEASES (continued)
As
of June 30, 2020, ROU Assets and lease liabilities were approximately $1.66 million, net, and $1.6 million ($0.33 million of
which are current liabilities), respectively. The weighted-average remaining term for our lease contracts was 4.9 years on
June 30, 2020, with maturity dates ranging from July 2020 to December 2026. The weighted-average discount rate was 9.4% on
June 30, 2020.
Adjustments
for straight-line rental expenses for the respective periods were not material. As such, the majority of costs recognized is reflected
in cash used in operating activities for the respective periods. This expense consisted primarily of payments for base rent on
office and warehouse leases. Amounts related to short-term lease costs and taxes and variable service charges on leased properties
were immaterial. Besides, we have the right, but not the obligation, to renew individual leases for various renewal terms.
The
following table illustrates specific operating lease data for the three months and six months ending June 30, 2020, and 2019:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Lease cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
163,000
|
|
|
$
|
300,000
|
|
|
$
|
365,000
|
|
|
$
|
602,000
|
|
Short-term lease cost
|
|
|
41,000
|
|
|
|
22,000
|
|
|
|
144,000
|
|
|
|
53,000
|
|
Variable lease cost
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Sublease income
|
|
|
(21,000
|
)
|
|
|
(65,000
|
)
|
|
|
(67,000
|
)
|
|
|
(100,000
|
)
|
Total lease cost
|
|
$
|
183,000
|
|
|
$
|
257,000
|
|
|
$
|
442,000
|
|
|
$
|
555,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts in lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
|
|
|
|
|
|
|
|
$
|
414,000
|
|
|
$
|
607,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
|
|
|
|
|
|
|
|
|
$
|
546,000
|
|
|
$
|
2,899,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term—operating leases
|
|
|
|
|
|
|
|
|
|
|
4.9 years
|
|
|
|
3.6 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average discount rate—operating leases
|
|
|
|
|
|
|
|
|
|
|
9.4
|
%
|
|
|
9.2
|
%
|
Maturities
of our operating lease liabilities were as follows as of June 30, 2020:
|
|
Amount
|
|
2021
|
|
$
|
466,000
|
|
2022
|
|
|
381,000
|
|
2023
|
|
|
355,000
|
|
2024
|
|
|
350,000
|
|
2025
|
|
|
291,000
|
|
Thereafter
|
|
|
162,000
|
|
Total undiscounted operating lease payments
|
|
|
2,005,000
|
|
Less: amount representing an imputed interest
|
|
|
406,000
|
|
Total present value of operating lease liabilities
|
|
|
1,599,000
|
|
Less: Current operating lease liabilities
|
|
|
334,000
|
|
Non-current operating lease liabilities
|
|
$
|
1,265,000
|
|
Sublets:
|
|
|
|
|
2020
|
|
$
|
29,000
|
|
2021
|
|
|
—
|
|
|
|
$
|
29,000
|
|
NOTE
6 — LEASES (continued)
The
table below lists the location and lease expiration date from 2020 through 2026:
Location:
|
|
Square
Footage
|
|
|
Lease-End Date
|
|
Approximate Future
Payments
|
|
Colchester, UK – Waterside House
|
|
16,000
|
|
|
Mar
|
2025
|
|
|
$
|
1,183,000
|
|
Hemel, UK
|
|
12,870
|
|
|
Oct
|
2020
|
|
|
|
56,000
|
|
Singapore
|
|
950
|
|
|
Jul
|
2020
|
|
|
|
3,000
|
|
Anaheim, CA
|
|
1,944
|
|
|
Jul
|
2021
|
|
|
|
34,000
|
|
Sarasota, FL
|
|
1,205
|
|
|
Sep
|
2022
|
|
|
|
77,000
|
|
Billerica, MA
|
|
39,327
|
|
|
Dec
|
2026
|
|
|
|
652,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sublets:
|
|
|
|
|
|
|
|
|
|
|
|
Hemel, UK
|
|
6,435
|
|
|
Oct
|
2020
|
|
|
$
|
29,000
|
|
NOTE
7 — RELATED PARTY TRANSACTIONS
The
Company executed an amended related party agreement with MB Merchant Group, LLC (“MBMG”) on February 25, 2020, agreeing
to provide only the following services to the Company:
|
●
|
to
conduct merger and acquisition searches, negotiating and structuring deal terms and other related services in connection with
suitable closing acquisitions for the Company,
|
|
|
|
|
●
|
to
seek and secure financing for the Company, except in those regions in which the Company had previously appointed a business
representative to explore such opportunities exclusively, subject in each case to prior approval by the Company’s Chief
Executive Officer on a case-by-case basis.
|
MBMG
will no longer provide strategic planning and financial structuring services or technical consulting services, review patent applications,
or provide consulting services concerning specific legal matters. Lastly, the Company negotiated the final settlement of a remaining
balance due to MBMG of nearly $561,000 remitting approximately $230,000, recognizing a gain on settlement of related party obligations
in the amount of $331,000.
The
following table represents a summary of related party transactions for the three and six months ended June 30, 2020, and
2019:
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Consulting fees incurred, recurring
|
|
$
|
—
|
|
|
$
|
150,000
|
|
|
$
|
200,000
|
|
|
$
|
300,000
|
|
Consulting fees incurred, non-recurring
|
|
$
|
—
|
|
|
$
|
9,593
|
|
|
$
|
120,000
|
|
|
$
|
34,593
|
|
Common stock issued in satisfaction of amounts due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quantity of shares issued
|
|
|
—
|
|
|
|
4,283
|
|
|
|
—
|
|
|
|
12,469
|
|
Value of shares issued
|
|
$
|
—
|
|
|
$
|
1,466
|
|
|
$
|
—
|
|
|
$
|
31,466
|
|
Amounts repaid to MBMG in cash
|
|
$
|
—
|
|
|
$
|
71,000
|
|
|
$
|
*825,000
|
|
|
$
|
301,000
|
|
*includes
a final settlement in the amount of $230,000
The
Company recorded fees incurred from related-party transactions in general and administrative expenses on the accompanying Consolidated
Statements of Operations and included such payments due to related parties on the Consolidated Balance Sheet. The balances outstanding
to MBMG on June 30, 2020, and December 31, 2019, were $-0- and $505,000, respectively.
NOTE
8 — DERIVATIVE LIABILITIES
Under
the guidance of ASC 815, Accounting for Derivative Instruments and Hedging Activities, the Company, identified common stock warrants
in various offerings containing a net cash settlement provision whereby, upon certain fundamental events, the holders could put
the warrants back to the Company for cash. We identified and classified the following transactions as derivative liabilities:
warrants issued in connection with the August 2015 underwritten offering, the February 2016 Series B Preferred Stock Offering,
the May 2016 financing, the July 2016 financing, the August 2017 underwritten offering, and the May 2018 Financing.
The
Company records derivative liabilities on its consolidated balance sheet at their fair value on the date of issuance. We revalue
the derivative liabilities on each subsequent balance sheet until exercised or expired, with any changes in the fair value between
reporting periods recorded as other income or expense. The Company uses option pricing models and assumptions based upon the individual
characteristics of the instruments on the valuation date. We use assumptions for future financings, expected volatility, expected
life, yield, and risk-free interest rate to estimate the fair value of these liabilities.
The
following are the key assumptions that were used in connection with the valuation of the warrants exercisable into common stock
as of June 30, 2020, and 2019:
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Number of shares underlying the warrants
|
|
|
77,064
|
|
|
|
82,135
|
|
The fair market value of stock
|
|
|
$3.54
|
|
|
|
$9.60
|
|
Exercise price
|
|
|
$0.91 to $ 827.28
|
|
|
|
$27.00 to $ 144,000.00
|
|
Volatility
|
|
|
145% to 197%
|
|
|
|
101% to 149%
|
|
Risk-free interest rate
|
|
|
0.17% to 0.19%
|
|
|
|
1.71% to 1.76%
|
|
Expected dividend yield
|
|
|
—
|
|
|
|
—
|
|
Warrant life (years)
|
|
|
0.9 to 2.9
|
|
|
|
0.5 to 3.9
|
|
Level
3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the
fair value of the liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s
accounting and finance department, which reports to the Chief Financial Officer, determines its valuation policies and procedures.
The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are
the responsibility of the Company’s accounting and finance department. The Chief Financial Officer approves the determination
of the unobservable inputs for Level 3 fair value measurements and fair value calculations.
Level
3 Valuation Techniques:
Level
3 financial liabilities consist of the derivative liabilities for which there is no current market for these securities such that
the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within
Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.
The Company deems financial instruments that do not have fixed settlement provisions to be derivative instruments. Under US GAAP,
the fair value of these warrants is classified as a liability on the Company’s consolidated balance sheets because, according
to the terms of the warrants, a fundamental transaction could give rise to an obligation of the Company to pay cash to its warrant
holders. Such instruments do not have fixed settlement provisions and have also been recorded as derivative liabilities. Corresponding
changes in the fair value of the derivative liabilities are recognized in earnings on the Company’s consolidated statements
of operations in each subsequent period.
The
Company’s derivative liabilities are carried at fair value and were classified as Level 3 in the fair value hierarchy due
to the use of significant unobservable inputs. To calculate fair value, the Company uses a binomial model style simulation, as
the standard Black-Scholes model would not capture the value of certain features of the warrant derivative liabilities.
The
following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at
fair value on a recurring basis:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June
|
|
|
June
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Beginning balance
|
|
$
|
13,000
|
|
|
$
|
1,192,000
|
|
|
$
|
30,000
|
|
|
$
|
1,118,000
|
|
Recognition of warrant liabilities on issuance dates
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Change in fair value of derivative liabilities
|
|
|
98,000
|
|
|
|
(747,000
|
)
|
|
|
81,000
|
|
|
|
(673,000
|
)
|
Ending balance
|
|
$
|
111,000
|
|
|
$
|
445,000
|
|
|
$
|
111,000
|
|
|
$
|
445,000
|
|
NOTE
9 — STOCKHOLDERS’ EQUITY
Common
Stock Issuances
During
the six months ended June 30, 2020, the Company:
|
●
|
On
February 14, 2020, the Company closed on an equity financing for 2,074,167 shares of common stock, 2,074,167 warrants to purchase
1,555,625 shares of Common Stock, 2,471,200 pre-funded warrants, with each Pre-Funded Warrant exercisable for one share of
Common Stock, and together with 2,471,200 Warrants to purchase 1,853,400 shares of Common Stock. The holders of these warrants
are limited to settlement in shares of common stock; there is no provision for net cash settlement alternatives; therefore,
the Company classified these warrants as equity. The Company received gross proceeds of approximately $5,998,000, less offering
costs of $712,000 for net proceeds of $5,286,000. The Company has earmarked the use of the net proceeds from equity financing
for working capital and general corporate purposes.
|
|
|
|
|
●
|
On
June 4, 2020, the Company closed on an equity financing, as part of a shelf registration consummated on May 5, 2020, issuing
1,333,333 shares of common stock. The Company received gross proceeds of approximately $5,101,000, less offering costs of
$223,000 for net proceeds of $4,878,000. The Company has earmarked the use of the net proceeds from equity financing for working
capital and general corporate purposes.
|
|
|
|
|
●
|
Issued
9,055,441 shares of common stock for the exercise of 10,963,975 pre-funded and public warrants, upon exercise of the holders,
receiving approximately $11,000 in net proceeds.
|
|
|
|
|
●
|
Issued
46,124 shares of common stock in satisfaction of amounts deferred for consultant agreements in the amount of $65,000. The
determination of the fair value of the common stock is at the time of issuance.
|
|
|
|
|
●
|
Recognized
approximately $616,000 of compensation costs associated with outstanding stock options recorded in general and administrative
expenses with the offset as a credit to additional paid in capital.
|
Common
stock warrants
The
Company granted 7,016,567 common stock warrants, warrant holders exercised 10,963,975 of their warrants, and 896 warrants expired
during the six months ended June 30, 2020. The weighted average exercise prices of warrants outstanding at June 30, 2020, is $83.40
with a weighted average remaining contractual life of 1.63 years. As of June 30, 2020, these outstanding warrants contained no
intrinsic value.
The following table sets forth common stock purchase warrants outstanding as of June 30, 2020:
|
|
Weighted
Quantity
of
Warrants
(in shares)
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding, December 31, 2019
|
|
|
4,188,075
|
|
|
$
|
6.60
|
|
Warrants granted
|
|
|
7,016,567
|
|
|
$
|
1.20
|
|
Warrants exercised
|
|
|
(10,963,975
|
)
|
|
$
|
(1.20
|
)
|
Warrants canceled/expired
|
|
|
(896
|
)
|
|
$
|
(2,470.80
|
)
|
Outstanding, June 30, 2020
|
|
|
239,771
|
|
|
$
|
83.40
|
|
Exercisable, June 30, 2020
|
|
|
239,771
|
|
|
$
|
83.40
|
|
NOTE
9 — STOCKHOLDERS’ EQUITY (continued)
Common
Stock Options
The
following table illustrates approximate stock-based compensation data for the three months and six months ending June 30,
2020, and 2019:
|
|
For the Three Months Ended
|
|
|
For the Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Stock-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortization of stock options issued
|
|
$
|
187,000
|
|
|
$
|
600,000
|
|
|
$
|
573,000
|
|
|
$
|
1,209,000
|
|
Weighted average remaining contractual life — options outstanding
|
|
|
|
|
|
|
|
|
|
|
7.02
years
|
|
|
|
|
|
Weighted average remaining contractual life — options exercisable
|
|
|
|
|
|
|
|
|
|
|
6.93
years
|
|
|
|
|
|
Remaining expense of stock-based compensation
|
|
|
|
|
|
|
|
|
|
$
|
72,000
|
|
|
|
|
|
Remaining amortization period
|
|
|
|
|
|
|
|
|
|
|
1.5 years
|
|
|
|
|
|
Intrinsic value per share
|
|
|
|
|
|
|
|
|
|
$
|
-0-
|
|
|
|
|
|
The
Company estimates forfeiture and volatility using historical information. We base the risk-free interest rate on the implied yield
available on U.S. Treasury zero-coupon issues over the equivalent lives of the options. The expected life of the options represents
the estimated period using the simplified method. In the Black-Scholes model used, the Company has not paid dividends on its common
stock, and there is no assumption of dividend payment(s).
The
weighted average fair value of options granted during the six months ended June 30, 2020, and 2019, which was $-0- and
$22.20, respectively. Each option is estimated on the date of grant, using the Black-Scholes model and the following assumptions
(all in weighted averages):
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Exercise price
|
|
$
|
—
|
|
|
$
|
22.20
|
|
Volatility
|
|
|
—
|
|
|
|
149.22
|
%
|
Risk-free interest rate
|
|
|
—
|
|
|
|
2.68
|
%
|
Expected dividend yield
|
|
|
—
|
|
|
|
0
|
%
|
Expected term (years)
|
|
|
—
|
|
|
|
6
|
|
The
Company’s historical share option exercise experience does not provide a reasonable basis to estimate the expected term.
We use the simplified method to determine the expected term for employees, which represents the period that options granted are
expected to be outstanding. Expected volatility is based on the average of the weekly share price changes over the shorter of
the expected term or the period from the placement on Nasdaq Capital Markets Exchange to the date of the grant. The model uses
the U.S. Treasury note rate as the risk-free rate over the expected term of the option. The Company has not paid dividends on
its common stock, and no assumption of dividend payment(s) is made in the model.
A
summary of the status of the Company’s stock option plans on June 30, 2020, is as follows:
|
|
Number of Options
(in shares)
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding, December 31, 2019
|
|
|
84,175
|
|
|
$
|
88.98
|
|
Options granted
|
|
|
—
|
|
|
$
|
—
|
|
Options exercised
|
|
|
—
|
|
|
$
|
—
|
|
Options canceled/expired
|
|
|
(13,917
|
)
|
|
$
|
(88.20
|
)
|
Outstanding, June 30, 2020
|
|
|
70,258
|
|
|
$
|
89.16
|
|
NOTE
9 — STOCKHOLDERS’ EQUITY (continued)
Common
Stock Options (continued)
On
January 22, 2020, the Company entered into an employment agreement with Carleton M. Miller in connection with his appointment
as Chief Executive Officer of the Company, under which Mr. Miller received a time-based option and performance-based option. Mr.
Miller received an inducement award of a time-based option to purchase 359,247 shares of the Company’s stock and a performance-based
option to purchase 250,000 shares of the Company’s common stock, both under NASDAQ Listing Rule 5653(c)(4) outside of the
Company’s existing equity compensation plans, in each case to Mr. Miller’s continued employment by the Company on
the applicable vesting date.
CEO.
Inducement Award — Time Vested Option
On
January 22, 2020, as part of the CEO’s employment agreement, an inducement award of a ten year, non-statutory option to
purchase 359,247 shares of the Company stock was granted. The award has an exercise price of $0.285, vesting commencement date
of January 22, 2020, expiration date of January 22, 2030, and the options vest as follows: 25% of such option shares shall vest
on January 22, 2021; and, the remaining 75% will vest in substantially equal monthly installments over the thirty-six (36) month
period after that, subject to the CEO’s continued employment by the Company on the applicable vesting date.
For
the time vested option award, the compensation cost is measured based on the fair value of an award at the date of the grant.
The Company uses the Black Scholes-Merton formula as a valuation technique under the guidance of ASC. Topic 718 for estimating
the fair values of employee share options and similar instruments. For employee equity-classified awards, compensation cost is
recognized over the employee’s requisite service period with a corresponding credit to equity (additional paid-in capital).
The employee’s requisite service period begins at the service inception date and ends when the requisite service has been
provided. In determining the award’s grant-date fair value, the following assumptions were used (all in weighted averages):
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Exercise price
|
|
$
|
1.71
|
|
|
$
|
—
|
|
Volatility
|
|
|
153.02
|
%
|
|
|
—
|
|
Risk-free interest rate
|
|
|
1.57
|
%
|
|
|
—
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
—
|
|
Expected term (years)
|
|
|
6.3
|
|
|
|
—
|
|
The
risk-free rate is based on the rate for the US Treasury note over the expected term of the option. The expected term for employees
represents the period that options granted are expected to be outstanding using the simplified method, as the Company’s
historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. For
non-employee options, the expected term is the full term of the option. Expected volatility is based on the average of the weekly
share price changes over the shorter of the expected term or the period from the placement on Nasdaq Capital Markets Exchange
to the date of the grant. The Company estimates forfeiture and volatility using historical information. The risk-free interest
rate is based on the implied yield available on US Treasury zero-coupon issues over the equivalent lives of the options. The expected
life of the options represents the estimated period using the simplified method. The Company has not paid dividends on its common
stock, and no assumption of dividend payment(s) is made in the model.
The
weighted average fair value of options granted during the six months ended June 30, 2020, and 2019 was $1.65 and $-0-, respectively.
As of June 30, 2020, the weighted average remaining contractual life was 9.57 years for options outstanding and options exercisable,
respectively. The intrinsic value of options exercisable at June 30, 2020, was $2.22 per share.
During
the three and six months ended June 30, 2020, the Company recorded approximately $23,000 and $41,000, respectively, as
stock compensation expense from the amortization of time vested stock options issued. No expense was recorded in the fiscal year
2019. As of June 30, 2020, the remaining stock compensation expense is approximately $550,000, with 3.56 years remaining for the
amortization period.
A
summary of the status of the Company’s time vested stock options for Mr. Miller on June 30, 2020, is as follows:
|
|
Number of Options
(in shares)
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding, December 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
Options granted
|
|
|
359,247
|
|
|
$
|
1.65
|
|
Options exercised
|
|
|
—
|
|
|
$
|
—
|
|
Options canceled/expired
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding, June 30, 2020
|
|
|
359,247
|
|
|
$
|
1.60
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2020
|
|
|
—
|
|
|
$
|
—
|
|
NOTE
9 — STOCKHOLDERS’ EQUITY (continued)
Common
Stock Options (continued)
CEO.
Inducement Award — Performance-Based Option
On January 22, 2020, as part of Mr. Miller’s
employment agreement, an inducement award of a ten year, non-statutory, option to purchase 250,000 shares of the Company stock
was granted. The award has an exercise price of $0.285, vesting commencement date of January 22, 2020, and the expiration date
of January 22, 2030. The Option Shares will vest in three (3) equal tranches upon attainment of the following applicable performance
conditions for each tranche; provided that the CEO remains in continuous employment with the Company through the applicable date
of achievement of the performance conditions:
|
●
|
Tranche
1: 83,333 Option Shares will vest upon the Company’s attainment, on or before the fifth (5th) anniversary of the Vesting
Commencement Date, of Cumulative EBITDA of more than $6,000,000 accumulated over four consecutive fiscal quarters.
|
|
|
|
|
●
|
Tranche
2: 83,333 Option Shares will vest upon the Company’s attainment, on or before the fifth (5th) anniversary of the Vesting
Commencement Date, of Cumulative EBITDA of more than $15,000,000 accumulated over four consecutive fiscal quarters.
|
|
|
|
|
●
|
Tranche
3: 83,333 Option Shares will vest upon the Company’s attainment, on or before the fifth (5th) anniversary of the Vesting
Commencement Date, of Cumulative EBITDA of more than $23,000,000 accumulated over four consecutive fiscal quarters.
|
For
the performance-based option award, the compensation cost is measured based on the fair value of an award at the date of the grant.
The Company uses the Black Scholes-Merton formula as a valuation technique under the guidance of ASC. Topic 718 for estimating
the fair values of employee share options and similar instruments. For employee equity-classified awards, compensation cost is
recognized over the employee’s requisite service period with a corresponding credit to equity (additional paid-in capital).
The employee’s requisite service period begins at the service inception date and ends when the requisite service has been
provided. In determining the award’s grant-date fair value, the following assumptions were used (all in weighted averages):
|
|
For
the six months ended
|
|
|
|
June
30,
|
|
|
|
2020
|
|
|
2019
|
|
Exercise
price
|
|
$
|
1.71
|
|
|
$
|
—
|
|
Volatility
|
|
|
153.02
|
%
|
|
|
—
|
|
Risk-free
interest rate
|
|
|
1.57
|
%
|
|
|
—
|
|
Expected
dividend yield
|
|
|
0
|
%
|
|
|
—
|
|
Expected
term (years)
|
|
|
6.5
|
|
|
|
—
|
|
The
risk-free rate is based on the rate for the US Treasury note over the expected term of the option. The expected term for employees
represents the period that options granted are expected to be outstanding using the simplified method, as the Company’s
historical share option exercise experience does not provide a reasonable basis upon which to estimate the expected term. For
non-employee options, the expected term is the full term of the option. Expected volatility is based on the average of the weekly
share price changes over the shorter of the expected term or the period from the placement on Nasdaq Capital Markets Exchange
to the date of the grant. The Company estimates forfeiture and volatility using historical information. The risk-free interest
rate is based on the implied yield available on US Treasury zero-coupon issues over the equivalent lives of the options. The expected
life of the options represents the estimated period using the simplified method. The Company has not paid dividends on its common
stock, and no assumption of dividend payment(s) is made in the model
The
weighted average fair value of options granted during the six months ended June 30, 2020, and 2019 was $1.65 and $-0-,
respectively. As of June 30, 2020, the weighted average remaining contractual life was 9.57 years for both options outstanding
and options exercisable. The intrinsic value of options exercisable at June 30, 2020, was $2.10.
As
of June 30, 2020, the Company is unable to determine the probability that any of the required metrics for vesting will be achieved.
The unrecognized stock-based compensation expense for the performance-based award was approximately $414,000 as of June 30, 2020.
When the Company determines that the remaining performance metrics’ achievement becomes probable, the Company will record
a cumulative catch-up stock-based compensation amount, and the remaining unrecognized amount will be recorded over the remaining
requisite service period of the awards.
NOTE
9 — STOCKHOLDERS’ EQUITY (continued)
Common
Stock Options (continued)
CEO.
Inducement Award — Performance-Based Option (continued)
A
summary of the status of the Company’s performance-based stock options for Mr. Miller on June 30, 2020, is as follows:
|
|
Number of Options
(in shares)
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding, December 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
Options granted
|
|
|
250,000
|
|
|
$
|
1.650
|
|
Options exercised
|
|
|
—
|
|
|
$
|
—
|
|
Options canceled/expired
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding, June 30, 2020
|
|
|
250,000
|
|
|
$
|
1.650
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2020
|
|
|
—
|
|
|
$
|
—
|
|
CFO
Inducement Award — Time Vested Option
On
February 27, 2020, the Company
entered into an employment
agreement with Michael Bond in connection
with his appointment as Chief Financial
Officer of the Company, effective
as of April 1, 2020.
As
part of the employment agreement, an inducement award of a ten year, non-statutory option to purchase 811,007 shares of the Company
stock was granted. The award has an exercise price of $0.96, vesting commencement date of April 1, 2020, expiration date of April
1, 2030, and the options vest as follows: 25% of such option shares shall vest on April 1, 2021; and, the remaining 75% will vest
in substantially equal monthly installments over the thirty-six (36) month period after that, subject to the CEO’s continued
employment by the Company on the applicable vesting date.
For
the time vested option award, the compensation cost is measured based on the fair value of an award at the date of the grant.
The Company uses the Black Scholes-Merton formula as a valuation technique under the guidance of ASC Topic 718 for estimating
the fair values of employee share options and similar instruments. For employee equity-classified awards, compensation cost is
recognized over the employee’s requisite service period with a corresponding credit to equity (additional paid-in capital).
The employee’s requisite service period begins at the service inception date and ends when the requisite service has been
provided. In determining the award’s grant-date fair value, the following assumptions were used (all in weighted averages):
|
|
For the six months ended
|
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Exercise price
|
|
$
|
.96
|
|
|
$
|
—
|
|
Volatility
|
|
|
155.00
|
%
|
|
|
—
|
|
Risk-free interest rate
|
|
|
0.62
|
%
|
|
|
—
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
—
|
|
Expected term (years)
|
|
|
6.3
|
|
|
|
—
|
|
The
Company’s historical share option exercise experience does not provide a reasonable basis to estimate the expected term.
We use the simplified method to determine the expected term for employees, which represents the period that options granted are
expected to be outstanding. Expected volatility is based on the average of the weekly share price changes over the shorter of
the expected term or the period from the placement on Nasdaq Capital Markets Exchange to the date of the grant. The model uses
the U.S. Treasury note rate as the risk-free rate over the expected term of the option. The Company has not paid dividends on
its common stock, and no assumption of dividend payment(s) is made in the model.
The
weighted average fair value of options granted during the six months ended June 30, 2020, and 2019 was $0.91 and $-0-, respectively.
As of June 30, 2020, the weighted average remaining contractual life was 9.76 years for options outstanding and options exercisable,
respectively. The intrinsic value of options exercisable at June 30, 2020, was $2.81 per share.
During
the three and six months ended June 30, 2020, the Company did not record as stock compensation expense. No expense was recorded
in the fiscal year 2019. As of June 30, 2020, the remaining stock compensation expense is approximately $123,000, with 3.76 years
remaining for the amortization period.
A
summary of the status of the Company’s time vested stock options for Mr. Bond on June 30, 2020, is as follows:
|
|
Number of Options (in shares)
|
|
|
Weighted Average Exercise
Price
|
|
Outstanding, December 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
Options granted
|
|
|
135,168
|
|
|
$
|
.91
|
|
Options exercised
|
|
|
—
|
|
|
$
|
—
|
|
Options canceled/expired
|
|
|
—
|
|
|
|
$
|
|
Outstanding, June 30, 2020
|
|
|
135,168
|
|
|
$
|
.91
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2020
|
|
|
—
|
|
|
$
|
—
|
|
NOTE
10 — COMMITMENTS AND CONTINGENCIES
Legal:
The
Company is subject, from time to time, to claims by third parties under various legal theories. The defense of such claims, or
any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial
condition, and cash flows. Under ASC Topic 450, the Company must accrue a loss contingency if the information is available before
the issuance of the financial statements.
Based upon a lawsuit filed by Hale Capital
Partners, LP (“Hale”) against the Company on July 19, 2019, we may be potentially liable for professional fees incurred
by Hale in connection with a canceled financing transaction in the amount of $140,000. The Company deems these fees excessive
and is vigorously defending the claim, including asserting counterclaims against Hale. The $140,000 was accrued and included in
accrued expenses in the condensed consolidated balance sheet as of June 30, 2020. As of June 30, 2020, no other legal actions
were pending that the Company expects to be material.
Pension:
The
Company, at its discretion, may make a matching contribution to the 401(k) plan in which its employees participate. We also have
a Group Personal Plan in our UK Subsidiary, investing funds with Royal London. UK employees are entitled to join the plan to which
the Company contributes varying amounts subject to status. Additionally, the Company operates a stakeholder pension scheme in
the UK.
The
table below represents the Company’s matching contributions as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company matching contributions - 401K Plan
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company matching contributions - Group Personal Pension Plan, UK
|
|
$
|
35,000
|
|
|
$
|
51,000
|
|
|
$
|
78,000
|
|
|
$
|
84,000
|
|
NOTE
10 — COMMITMENTS AND CONTINGENCIES (continued)
Nasdaq
Compliance:
On
September 26, 2019, we received a written notification from the Nasdaq Stock Market L.L.C. (“Nasdaq”) indicating that
the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) as the Company’s closing bid price was below $1.00
per share for the previous thirty (30) consecutive business days.
The Company was subject to an initial 180-calendar day compliance
period granted through the Nasdaq Listing Rule 5810(c)(3)(A), or until March 24, 2020, to regain compliance with the minimum bid
price requirements. On March 25, 2020, the Company received notice from Nasdaq indicating that, while the Company has not regained
compliance with the Minimum Bid Price Requirement, Nasdaq has determined that the Company is eligible for an additional 180-day
period, or until September 21, 2020, to regain compliance. Nasdaq staff based its determination on (i) the Company meeting the
continued listing requirement for the market value of its publicly held shares and all other Nasdaq initial listing standards,
except for the Minimum Bid Price Requirement, and (ii) the Company is providing written notice to Nasdaq of its intent to cure
the deficiency during this second compliance period, if necessary by effecting a reverse stock split. If at any time during this
second 180-day period, the closing bid price of the Common Stock is at least $1 per share for a minimum of 10 consecutive business
days, Nasdaq has stated that they will provide the Company with written confirmation of compliance. Delisting of our Common Stock
will occur if compliance cannot be demonstrated by September 21, 2020, by Nasdaq through written notification.
On
April 17, 2020, the Company received written notice from Nasdaq that Nasdaq has determined to toll the compliance periods for
bid price and market value of publicly held shares (“MVPHS”) requirements (collectively, the “Price-based Requirements”)
through June 30, 2020. As a result, companies presently in compliance periods or any Price-based Requirements will remain at that
same stage of the process and will not be subject to being delisted for these concerns. Beginning on July 1, 2020, the Company
received the balance of its pending compliance period in effect at the start of the tolling period to regain compliance.
Accordingly,
since the Company had 158 calendar days remaining in its bid price compliance period as of April 16, 2020, it has 158 calendar
days from July 1, 2020, or until December 7, 2020, to regain compliance. The Company can regain compliance, either during the
suspension or during the compliance period resuming after the suspension, by evidencing compliance with the Price-based Requirements
for a minimum of 10 consecutive trading days. If the Company does not regain compliance within the allotted compliance period(s),
including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s shares of common stock
will be subject to delisting.
On
June 30, 2020, the Company held its annual meeting. At the annual meeting, the Company’s stockholders approved a proposal
to amend its Certificate of Incorporation to authorize the Board to effect a reverse stock split at a ratio of between 1 for 5
and 1 for 50 at any time before September 21, 2020, the date provided initially by Nasdaq to regain compliance with this requirement.
On
April 30, 2020, the Company received a public reprimand letter (the “Letter”) from the Staff (the “Staff”)
of the Listing Qualifications Department of The Nasdaq Stock Market L.L.C. (“Nasdaq”). The Letter notified the Company
that it’s recent Offering of 12,445,000 shares of common stock, par value $0.00001 per share, of the Company (“Common
Stock”), pre-funded warrants to purchase 14,827,200 shares of Common Stock, and warrants to purchase up to 20,454,150 shares
of Common Stock, completed on February 14, 2020 (the “Offering”) did not satisfy Nasdaq Listing Rule 5635(d) because
(a) the Staff determined that the Offering did not meet the Nasdaq definition of a public offering under Listing Rule IM-5635-3
and (b) the Offering involved the issuance of 20% or more of the pre-transaction shares outstanding at less than the minimum price,
as defined by Nasdaq rules. Consequently, the Staff determined that approval by the shareholders of the Company was required for
the Offering, and because such shareholder approval was not received, the Staff concluded that the Company violated the Nasdaq’s
shareholder approval rules. Additionally, the Letter notified the Company that on two separate occasions following transactions
completed in November 2019 and February 2020, the Company failed to file a Change in Outstanding Shares form, as required by Listing
Rule 5250(e)(1), which filings were subsequently made on March 12, 2020.
The
Staff determined that delisting the Company’s Common Stock was not an appropriate sanction and closed its review by issuing
the public reprimand letter under Nasdaq Listing Rule 5810(c)(4). As previously reported on a Current Report on Form 8-K, filed
with the US Securities and Exchange Commission on February 14, 2020, based on Nasdaq’s published rules and published guidance
at the time of the Offering, the Company believed the Offering was a “public offering” under Rule 5635(d). The receipt
of the Letter does not affect the listing of the Company’s Common Stock.
If
the Company’s common stock is delisted from the Nasdaq Capital Market and is not eligible for quotation on another market
or exchange, trading of its common stock could be conducted in the over-the-counter market or on an electronic bulletin board
established for unlisted securities such as those sponsored by the OTC. Markets Group. In such event, it could become more difficult
to dispose of or obtain accurate price quotations for, the Company’s common stock, and there would likely also be a reduction
in the Company’s coverage by securities analysts and the news media, which could cause the price of its common stock to
decline further. Also, if not listed on a major exchange, the Company may have difficulty in raising additional capital.
NOTE
10 — COMMITMENTS AND CONTINGENCIES (continued)
Nasdaq
Compliance (continued):
On
July 31, 2020, the Company’s Board of Directors approved a 1-for-6 reverse stock split (the “Reverse Stock Split”)
of the Company’s common stock as part of the Company’s efforts to satisfy the Price-based Requirements. The Reverse
Stock Split became effective at 5 p.m. ET on July 31, 2020. The Common Stock began trading on a split-adjusted basis on Monday,
August 3, 2020, under the new CUSIP number 92836Y3. On July 30, 2020, the Company filed an amendment to the Company’s Certificate
of Incorporation to effect the 1-for-6 reverse stock split of all of the Company’s outstanding shares of Common Stock. Upon
the filing of the Certificate of Amendment with the Secretary of State of the State of Delaware (the “Effective Time”),
every six outstanding shares of Common Stock were combined and converted into one (1) share of Common Stock.
NOTE
11 — CONCENTRATIONS
Customer
concentration risk
During
the three and six months ended June 30, 2020, the Company did not record sales to a single customer above 10% of the Company’s
total consolidated sales. During the three and six months ended June 30, 2019, the Company did record sales of approximately
$1,546,000 (22%) and $2,038,000 (14%), respectively to a single customer above 10% of the Company’s total
consolidated sales.
For the period ended June 30, 2020, no
customer accounted for more than 10% of the Company’s total accounts receivable. On June 30, 2019, approximately 19%
of the Company’s consolidated net accounts receivable were due from one customer for approximately $1,064,000.
Vendor
concentration risk
Approximately
$1,010,000 (37%) of the Company’s inventory purchases were generated from one vendor during the three months ended June
30, 2020. Approximately $1,793,000 (31%) and $1,084,000 (19%) of the Company’s inventory purchases were generated from two
vendors during the six months ended June 30, 2020.
On
June 30, 2020, the Company recorded approximately $494,000 (18%) and $318,000 (11%) of accounts payable to two vendors over 10%
of the Company’s consolidated accounts payable. On June 30, 2019, the Company recorded approximately $944,000 (13%) and
$1,459,000 (19%) of accounts payable to two vendors above 10% of the Company’s consolidated accounts payable.
NOTE
12 – REVENUE
The
Company has one operating segment, and the decision-making group is the senior executive management team. In the following table,
revenue is disaggregated by primary geographical markets and revenue sources.
|
|
|
|
|
|
|
|
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Three
Months Ending
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|
Six
Months Ending
|
|
|
June
30,
|
|
June
30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
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Primary geographical markets:
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North
America
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|
$
|
2,079,000
|
|
|
$
|
2,485,000
|
|
|
$
|
4,155,000
|
|
|
$
|
6,404,000
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|
South America
|
|
|
47,000
|
|
|
|
69,000
|
|
|
|
68,000
|
|
|
|
88,000
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|
Europe
|
|
|
2,780,000
|
|
|
|
2,279,000
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|
|
|
4,743,000
|
|
|
|
4,629,000
|
|
Asia
|
|
|
731,000
|
|
|
|
2,148,000
|
|
|
|
836,000
|
|
|
|
3,538,000
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|
Rest
of World
|
|
|
371,000
|
|
|
|
371,000
|
|
|
|
1,558,000
|
|
|
|
899,000
|
|
|
|
$
|
6,008,000
|
|
|
$
|
7,352,000
|
|
|
$
|
11,360,000
|
|
|
$
|
15,558,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Primary revenue source:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment sales
|
|
$
|
4,637,000
|
|
|
$
|
6,027,000
|
|
|
$
|
9,617,000
|
|
|
$
|
13,558,000
|
|
Installation, integration,
and repairs
|
|
|
987,000
|
|
|
|
808,000
|
|
|
|
1,316,000
|
|
|
|
1,409,000
|
|
Warranties
|
|
|
45,000
|
|
|
|
70,000
|
|
|
|
88,000
|
|
|
|
114,000
|
|
Other
(See Note 13)
|
|
|
339,000
|
|
|
|
447,000
|
|
|
|
339,000
|
|
|
|
447,000
|
|
|
|
$
|
6,008,000
|
|
|
$
|
7,352,000
|
|
|
$
|
11,360,000
|
|
|
$
|
15,558,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Long-Lived Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
|
|
|
|
|
|
|
$
|
4,046,000
|
|
|
$
|
5,667,000
|
|
United
Kingdom
|
|
|
|
|
|
|
|
|
|
|
1,845,000
|
|
|
|
2,624,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,891,000
|
|
|
$
|
8,291,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE
13 — REBATES
The
amounts generated in Note 11 as part of Primary revenue source “other,” were a result of rebates issued to the Company’s
filing appropriate governmental forms related to the research costs incurred by our U.K. subsidiary in prior fiscal years. The
Company expects to continue filing applicable rebate forms for the 2020 fiscal year, but can provide no assurances that such rebates
will be available in future financial periods at similar levels, or at all.
NOTE
14 — SUBSEQUENT EVENTS
On
June 30, 2020, at the Company’s annual meeting of stockholders, an approval to amend the Company’s Certificate of
Incorporation to effect a reverse stock split of all of the outstanding shares of the Company’s common stock, par value
$0.00001 per share (the “Common Stock”), at a specific ratio within a range from 1-for-5 to 1-for-50,
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 September 21, 2020 (the “Reverse Split”). On July 31, 2020, the Board of Directors approved
a 1-for-6 reverse stock split. Upon effectiveness of the reverse stock split, every six shares of an outstanding common stock
decreased to one share of common stock. We have retroactively applied the reverse split throughout this quarterly report to all
periods presented.