Vislink Technologies (VISL) Risk Factors

Preparing financial statements conforming to generally accepted U.S. 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 circumstances differ from those in our assumptions. This 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 our deferred tax assets, the valuation of equity and derivative instruments, and debt discounts, and the valuation of the assets and liabilities acquired by us.

Our management is responsible for establishing and maintaining internal controls over financial reporting. Internal control over financial reporting is a process designed by and under the supervision of our principal executive and principal financial officers or persons performing similar functions and effected by our Board, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes under generally accepted accounting principles and includes those policies and procedures that: - pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;         - provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements following generally accepted accounting principles and that our receipts and expenditures are being made only by authorizations of its management and board; and         - provide reasonable assurance regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on its financial statements. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements will be prevented or detected. Also, projections of any effectiveness evaluation to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. Our management evaluated the effectiveness of our internal control over financial reporting and our disclosure controls as of December 31, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013). In their assessment of the effectiveness of internal control over financial reporting and our disclosure controls as of December 31, 2023 and 2022, respectively, our certifying officers concluded that such controls were ineffective and that there were control deficiencies that constituted material weaknesses because (i) we currently do not employ the appropriate number of accounting personnel to ensure (a) we maintain proper segregation of duties, (b) conduct a tolerable risk assessment, and (ii) we have not adequately documented a complete assessment of the effectiveness of the design and operation of our internal control over financial reporting. We are designing and implementing measures to improve our internal control over financial reporting and disclosure controls to remediate the material weaknesses related to our financial reporting as of December 31, 2023. As a result, until we can remediate this situation, there are no assurances that the material weaknesses in our disclosure controls and procedures and internal control over financial reporting will not result in errors in our financial statements, which could lead to a restatement of those financial statements. We are in the process of affecting the following: - additional review procedures within our accounting and finance department,   - implementation of application controls in our accounting system, and   - implementation of suitable accounting controls and processes. If we cannot conclude on an ongoing basis that we have effective internal control over financial reporting and disclosure controls under Section 404 of the Sarbanes Oxley Act of 2002, in that case, our independent registered public accounting firm may not issue an unqualified opinion or cause us to be untimely concerning our reporting obligations. If we cannot conclude that we have effective internal control over financial reporting and disclosure controls, investors could lose confidence in our reported financial information, which could have a material adverse effect on the trading price of our common stock. Failure to remedy any material weakness in our internal control over financial reporting and disclosure controls or to implement or maintain other effective control systems required of public companies could also restrict our future access to the capital markets. We will not fully correct the identified material weaknesses until the ongoing steps described above are effectively attained and operating efficiently for an appropriate time.

We may provide preliminary financial results or forward-looking financial guidance to our investors from time to time. Such statements are based on our current views, expectations, and assumptions, and they involve unknown risks and uncertainties that may cause actual results, performance, achievements, or share prices to materially differ from future 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 or expectations or the occurrence of risks related to our performance and business, including those discussed in these risk factors. Failure to meet financial guidance or expectations regarding our future performance could harm our reputation and cause our stock price to decline.

We have incurred net losses since inception, including net losses of $9.1 million and $13.6 million for the years ended December 31, 2023, and 2022, respectively. As a result of ongoing losses, as of December 31, 2023, we had an accumulated deficit of $309.2 million, $8.5 million of cash, and $5.7 million of investments in governmental securities. We expect to continue to incur significant sales and marketing, product development, regulatory, and other expenses as we seek to expand existing relationships with our customers, obtain new customers, reach new markets, and develop new products or add new features to our existing products. Our net income (loss) may fluctuate significantly from fiscal period to period. We will need to generate significant additional revenues and/or cost-cutting to achieve and sustain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period. Our failure to gain or maintain profitability could negatively impact the value of our common stock.

We must test our finite-lived intangible assets for impairment if events occur or circumstances change that would indicate that the remaining net book value of the intangible assets might not be recoverable. These events or circumstances could include a significant change in the business climate, including a substantial, sustained decline in an entity's market value, legal factors, operating performance indicators, competition, sale, or disposition of a considerable portion of our business, potential government actions, and other factors. If our finite-lived intangible assets' fair value is less than their book value in the future, we could be required to record impairment charges. The amount of any future 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.

Our business strategy may include, among other things, strategic acquisitions, as well as potential opportunistic acquisitions and strategic actions. An acquisition strategy may entail several risks, including diverting management's attention from other business concerns, the incurrence of substantial legal and other advisory fees, and the potential need to finance such acquisitions with additional equity and/or debt. Once completed, acquisitions, including those we have made over the past several years, may entail additional risks, including unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations; increased regulatory compliance relating to the acquired business; difficulties in assimilating acquired businesses, their personnel and their financial reporting systems, which would prevent the expected benefits from the transaction from being realized within the anticipated timeframe; negative effects on existing business relationships with suppliers and customers; and loss of key employees of the acquired businesses. In addition, any future acquisitions could result in the incurrence of additional debt and related interest expense, contingent liabilities, and amortization expense related to intangible assets, which could have a material adverse effect on our business, financial condition, operating results, and cash flows, or the issuance of additional equity, which could dilute our stockholder's equity interests. There can be no assurance that we can negotiate any acquisitions we may pursue successfully, receive the required approvals for any acquisition, otherwise conclude any acquisition successfully, or that any acquisition will achieve the anticipated synergies or other positive results. Overall, if our acquisition strategy is not successful or if acquisitions are not well integrated into our existing operations, the Company's profitability, business, and financial condition could be negatively affected.