UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 1.01 Entry into a Material Definitive Agreement.
On August 25, 2021, COMSovereign Holding Corp. (“we,” “us,” or “our company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an investor, pursuant to which we sold to the investor a senior secured convertible promissory note in the original principal amount of $5,800,000 (the “Note”) and warrants (the “Warrants”) to purchase up to 1,315,789 shares of our common stock, par value $0.0001 per share (the “Common Stock”), for a purchase price of $5,000,000 (representing an original issue discount of 16.0% on the Note), which $5,000,000 was paid on August 26, 2021.
Pursuant to the Purchase Agreement, we have agreed with the investor to file a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), no later than September 27, 2021 to register the shares of our Common Stock issuable upon conversion of the Note or exercise of the Warrants, and the conversion of an outstanding convertible promissory note we issued to an affiliate of the investor on May 27, 2021 or exercise of the related May 27, 2021 warrants, and to use our best efforts to have such registration statement declared effective by the Securities and Exchange Commission as soon as practicable after filing such registration statement, but in no event later than November 30, 2021.
The Note bears interest at the rate of 6% per annum from the date of funding and matures on August 25, 2025. We are required to make monthly payments commencing five business days after the registration statement is declared effective, but in no event later than November 30, 2021, and principal payments in 18 equal monthly installments of $322,222 each. So long as shares of our Common Stock are registered for resale under the Securities Act of 1933, as amended (the “Securities Act”), or may be sold without restriction on the number of shares or manner of sale, we have the right to make interest and principal payments in the form of additional shares of Common Stock, which shares will be valued at 90% of the average of the five lowest daily volume weighted average price per share of the Common Stock during the ten trading days immediately preceding the date of issuance of such shares of Common Stock (the “Repayment Share Price”); provided, however, that with respect to the first interest payment, the holder of the Note has the right to direct that the payment of such interest be made in shares of Common Stock.
The Note is convertible by the holder in whole or in part at any time after the registration statement is declared effective into shares of Common Stock at a conversion price of $3.00 per share, subject to adjustment. However, the holder of the Note will not have the right to convert any portion of the Note if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of our Common Stock outstanding immediately after giving effect to its conversion and under no circumstances may convert the Note if the holder, together with its affiliates, would beneficially own in excess of 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to its conversion. We have the right to prepay the Note at any time with no penalty (the “Buy-Back Right”). However, should we exercise our Buy-Back Right, the holder of the Note will have the option of converting 33 1/3% of the outstanding principal amount of the Note into shares of Common Stock at a conversion price equal to the lower of (A) the Repayment Share Price, or (B) the conversion price then in effect.
The Note is guaranteed by each of our subsidiaries and is secured by a first priority lien on all of our assets and properties and substantially all of the assets and properties of our subsidiaries.
The Warrants are exercisable to purchase up to 1,315,789 shares of Common Stock for a purchase price of $3.00 per share, subject to adjustment, at any time on or prior to August 25, 2026, and may be exercised on a cashless basis if the shares of Common Stock underlying the Warrants are not then registered under the Securities Act. The Warrants have the same exercise limitation as is included in the Note.
On August 25, 2021, in connection with the transactions contemplated by the Purchase Agreement, we entered into a First Amendment and Limited Waiver to the Securities Purchase Agreement dated as of May 27, 2021 (the “May 2021 Purchase Agreement”) we previously entered into with an affiliate of the investor to, among other matters, permit the transactions contemplated by the Purchase Agreement, including the grant to the new investor of a pro rata security interest in the assets we pledged to secure the convertible note we issued under the May 2021 Purchase Agreement, and to amend the registration rights granted thereunder to coincide with the registration rights we granted under the Purchase Agreement. In addition, on August 25, 2021, in connection with such transactions, we also amended and restated the convertible note we issued under the May 2021 Purchase Agreement to reduce the initial conversion price of such note to $3.00 per share and to accelerate the initial conversion date of such note to coincide with the initial conversion date of the Note.
The foregoing descriptions of the Purchase Agreement and related exhibits, including the Note, the Warrants, and the guarantee and security agreements, and the foregoing description of the amendment to the May 2021 Purchase Agreement and related convertible note, do not purport to be complete and are qualified in their entirety by reference to the complete text of such agreements, copies of which are attached as exhibits to this Current Report on Form 8-K and are incorporated by reference herein to this Item 1.01 in their entirety.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference into this Item 3.02 in its entirety. The equity securities issuable pursuant to the Purchase Agreement were issued in a transaction exempt from registration under the Securities Act in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. The investor receiving our equity securities has represented that it was an “accredited investor,” as defined in Regulation D, and was acquiring the securities described herein for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. Accordingly, the shares of common stock have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.
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Item 8.01. Other Information.
On August 26, 2021, we issued a press release announcing the financing transaction described in this Current Report on Form 8-K. A copy of the press release is furnished herewith as Exhibit 99.1.
The information under this Item 8.01, including Exhibit 99.1, is deemed “furnished” and not “filed” under Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| * | Schedules, exhibits and similar supporting attachments to this exhibit are omitted pursuant to Item 601(b)(2) of Regulation S-K. We agree to furnish a supplemental copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: August 30, 2021 | COMSovereign Holding Corp. | |
| By: | /s/ Daniel L. Hodges | |
| Daniel L. Hodges | ||
| Chief Executive Officer | ||
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