$ 50,000

$ 500,000

5.00%

133.00%

7.90%

The Company assumed a secured loan with FirstBank in the principal amount of $979,381 bearing interest at 5% per annum and with a maturity date of June 1, 2020. On August 5, 2020, the maturity date of this loan was extended to September 15, 2020, with a single payment of all unpaid principal and accrued interest then due, and the interest rate was increased to 36% per annum for any principal balance remaining unpaid past the extended maturity date. The loan is secured by certain assets of Sovereign Plastics. This loan is subjected to covenants, whereby Sovereign Plastics is required to meet certain financial and non-financial covenants at the end of each fiscal year. As of September 30, 2020, an aggregate principal amount of $855,120 was outstanding and past due under this loan.

In connection with this loan, DragonWave incurred $20,000 of debt discounts and $4,700,000 of debt issuance costs. The debt issuance costs were the result of the issuance of 1,050,000 shares of common stock of the Company and a cash payment of $80,000. For the three and nine months ended September 30, 2020, $587,500 and $1,762,500 of these costs were amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations, respectively. As of September 30, 2020, there were $9,167 of debt discounts and $2,741,667 of debt issuance costs remaining.

Warrants to purchase an aggregate shares

15,765

4,000

Common stock conversion price, description

Interest is paid semi-annually in arrears in June and December of each year in cash or, at ComSovereign’s option, in shares of common stock at the conversion price that is equal to the lesser of (1) $2.50 or (2) a future effective price per share of any common stock sold by ComSovereign. Upon an event of default, the interest rate shall automatically increase to 15% per annum. In connection with these debentures, ComSovereign recognized a BCF of $69,000 and a debt discount of $181,000 associated with the issuance of warrants, both of which were recorded as debt discounts. On April 21, 2020, all unpaid accrued interest through December 31, 2019 was converted into 6,700 shares of issued common stock of the Company. Also on April 21, 2020, all the outstanding warrants were exercised at $0.01 per share into 283,530 issued shares of the Company’s common stock, resulting in full recognition in interest expense of the remaining debt discount of approximately $139,000 associated with the issuance of warrants. On April 30, 2020, these debentures were amended to provide for the conversion of the debentures into shares of the Company’s common stock instead of ComSovereign’s common stock. Additionally, the conversion price was changed from $2.50 per share to $0.756 per share. During the three and nine months ended September 30, 2020, $6,900 and $183,600 of the costs recorded as debt discounts were amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations, respectively. As of September 30, 2020 and December 31, 2019, there were $41,400 and $225,000 of debt discounts remaining, respectively. As of September 30, 2020, an aggregate principal amount of $250,000 was outstanding under these debentures.

Debt discount, description

The Company sold a convertible promissory note in the principal amount of $1,700,000 with an original issue discount of $200,000 that bears interest at a rate of 5.0% per annum and matures on November 20, 2020. Accrued interest and principal are due on the maturity date. Upon maturity, the interest rate shall automatically increase to the lesser of 18% per annum or the maximum amount permitted by applicable law on any unpaid principal and accrued interest. Following the maturity date, the note is convertible into shares of common stock at a conversion price equal to 65% of the lowest volume weighted average price of the common stock during the 20 consecutive trading days immediately preceding the conversion date, and as such a BCF has not yet been measured. As additional consideration for the loan, the Company issued to the lender 400,000 shares of common stock at a fair value of $3.35 per share. Warrants to purchase up to 53,571 shares of common stock that are exercisable for a purchase price of $2.80 per share at any time on or prior to August 20, 2025, were also issued to an unrelated third party as a placement fee for the transaction. In connection with this note, the Company recognized a debt discount of $1,340,000 associated with the issuance of shares to the note holder, and debt issuance costs of $223,649, which were all recorded as debt discounts. During the three and nine months ended September 30, 2020, $775,231 of the amounts recorded as debt discounts were amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations. As of September 30, 2020, there were $988,418 of debt discounts remaining, and an aggregate principal amount of $1,700,000 was outstanding under this note.

The Company sold to the same investor as the April 29, 2020 note an additional convertible promissory note in the principal amount of $285,714 with an original issue discount of $35,714 that bears interest at a rate of 12.5% per annum, and warrants to purchase an additional 158,730 shares of common stock. Warrants to purchase up to 27,778 shares of common stock, were also issued to an unrelated third party as a placement fee for the transaction. Terms and maturities are similar to the April 29, 2020 note and warrants. In connection with this note, the Company recognized a BCF of $139,810, a debt discount of $50,128 associated with the issuance of warrants to the note holder, and debt issuance costs of $35,539, which were all recorded as debt discounts. On July 28, 2020, the Company defaulted on this note under the related Registration Rights Agreement by not filing a registration statement within 90 days of the initial April 29, 2020 note origination date. As a result, the aggregate principal balance increased by $88,423, which was composed of an $86,339 penalty payment-in-kind and a $2,084 interest payment-in-kind, representing 130% of the outstanding principal and accrued interest balance on the default date. In addition, the interest rate was increased to 24% per annum, and the note and accrued interest is due on-demand. During the three and nine months ended September 30, 2020, $261,191 of the amounts recorded as debt discounts were amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations. As of September 30, 2020, there were $0 of debt discounts remaining as a result of the note now due on-demand from the default not being cured as of the filing of this Form 10-Q, and an aggregate principal amount of $374,137 was outstanding under this note.

The Company also issued warrants to purchase 158,730 shares of common stock that are exercisable for a purchase price of $0.99 per share at any time on or prior to April 29, 2025. Warrants to purchase up to 27,778 shares of common stock, at an exercise price of 110% of the initial conversion price of the notes (i.e., an exercise price of $0.99), at any time on or prior to April 29, 2025, were also issued to an unrelated third party as a placement fee for the transaction. In connection with this note, the Company recognized a BCF of $114,904, a debt discount of $44,944 associated with the issuance of warrants to the note holder, and debt issuance costs of $39,333, which were all recorded as debt discounts. On July 28, 2020, the Company defaulted on this note under the related Registration Rights Agreement by not filing a registration statement within 90 days of the note origination date. As a result, the aggregate principal balance increased by $97,322, which was composed of an $88,393 penalty payment-in-kind and an $8,929 interest payment-in-kind, representing 130% of the outstanding principal and accrued interest balance on the default date. In addition, the interest rate was increased to 24% per annum, and the note and accrued interest was due on-demand. On September 29, 2020, the note holder converted the full principal of $383,306 and all accrued interest of $16,087 into 443,470 shares of common stock of the Company. During the three and nine months ended September 30, 2020, $195,188 and $234,895, respectively, of the amounts recorded as debt discounts were amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations.

Debt instrument interest rate

13.33%

12.50%

9.00%

10.00%

9.00%

Principal amount

$ 64,865

61,287

Principal amount

$ 95,810

Interest and principal payments, description

Monthly principal and interest payments of approximately $2,361 are due over the term.

Debt Agreement (Textual)

Principal amount

$ 165,987

Aggregate principal amount outstanding

$ 1,200,000

Secured loan agreement, description

The notes have maturity dates between October 13, 2020 and November 30, 2020 and bear interest at a rate of 15% per annum, with interest accruing at an annually compounded rate of 18% per annum for any principal balance remaining unpaid past the maturity date. Daniel L. Hodges, the Company’s Chief Executive Officer, transferred a total of 289,900 shares of his personally owned, issued and outstanding common stock of the Company to the accredited investors and brokers, as part of this transaction. The shares had a total fair value of $478,726. The Company accounted for this as a contribution from Mr. Hodges, with $398,540 assigned as debt discounts for additional consideration to the accredited investors, and $80,186 assigned as debt issuance costs to the brokers. The Company incurred additional debt issuance costs to the brokers of this transaction in the amount of $21,000. During the three and nine months ended September 30, 2020, $320,514 of the amounts recorded as debt discounts were amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations. As of September 30, 2020, there were $179,212 of debt discounts remaining, and an aggregate principal amount of $1,200,000 was outstanding under these notes, with $1,000,000 of this principal amount past due as of the filing date of this Form 10-Q.

Principal amount

$ 285,714

Maturity date

Jan. 29, 2021

^[1]

Warrants to purchase an aggregate shares

158,730

Principal amount

$ 24,028

455,184

$ 455,184

$ 103,659

Debt instrument interest rate

1.00%

Paycheck protection program, description

The PPP loan has a maturity of 2 years and an interest rate of 1% per annum. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable pursuant to section 1106 of the CARES Act, after a period of up to 24 weeks, as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness shall be calculated in accordance with the requirements of the PPP, including the provisions of Section 1106 of the CARES Act, although no more than 40 percent of the amount forgiven can be attributable to non-payroll costs. Further, the amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the period of up to 24 weeks.

Debt Agreement (Textual)

Aggregate principal amount outstanding

$ 211,667

Maturity date

Dec. 26, 2020

Sep. 15, 2020

^[1]

Aggregate principal amount outstanding

$ 24,028

Debt Agreement (Textual)

Aggregate principal amount outstanding

41,390

Principal amount

$ 1,000,000

Maturity date

Sep. 30, 2020

Dec. 31, 2021

Senior convertible debentures interest percent

9.00%

Original issue discount

$ 63,880

Warrants to purchase an aggregate shares

132,500

100,000

Debt discount amount

$ 1,100,000

Warants cancelled, description

The warrants were cancelled and 132,500 warrants were issued for $1.50 per share.

Debt Agreement (Textual)

Aggregate principal amount outstanding

$ 250,000

Maturity date

Dec. 31, 2021

Interest rate increased

15.00%

Debt Agreement (Textual)

Extinguished in exchange

1,000,000

Aggregate principal amount outstanding

$ 100,000

3,500,000

Maturity date

Dec. 31, 2020

Senior convertible debentures interest percent

8.00%

Aggregate principal amount outstanding

$ 25,000

Maturity date

Dec. 31, 2019

Principal amount

$ 200,000

$ 290,000

$ 137,500

1,872

400,000

Fair value per share

$ 1.51

Debt instrument interest rate

18.00%

12.00%

9.00%

12.00%

8.775%

18.00%

Maturity date

Sep. 01, 2019

Jul. 09, 2019

Nov. 26, 2021

Oct. 17, 2017

Sep. 15, 2020

$ 3,828

Net proceeds received

$ 2,000,000

Secured loan agreement, description

In connection with this loan, DragonWave incurred $20,000 of debt discounts and $4,700,000 of debt issuance costs. The debt issuance costs were the result of the issuance of 1,050,000 shares of common stock of the Company and a cash payment of $80,000. During fiscal 2019, $196,667 of these costs were amortized and recognized in interest expense in the Consolidated Statement of Operations. As of December 31, 2019, there were $19,167 of debt discounts and $4,504,167 of debt issuance costs remaining.

Aggregate principal amount outstanding

$ 2,007,971

Maturity date

Aug. 31, 2020

Oct. 15, 2020

Secured loan agreement, description

The promissory note was increased to $5,000,000 as all unpaid accrued interest was added to the principal balance. Additionally, the maturity date was extended to March 30, 2020 and the interest rate was changed to 10% per annum. Under this new amendment, interest payments are due and payable monthly. On April 21, 2020, the maturity date of this note was extended to August 31, 2020, the interest rate was increased to 12% per annum, and the Company provided to the lender 100,000 fully paid and non-assessable shares of its common stock that have been treated as debt issuance costs.

Debt Agreement (Textual)

Debt instrument interest rate

3.00%

Interest and principal payments, description

Monthly payments in the amount of $3,773 for principal and interest are due over the term.

Principal amount

$ 500,000

409,586

$ 550,000

Debt instrument interest rate

8.50%

Maturity date

Nov. 30, 2020

Aug. 31, 2018

Aggregate shares of common stock

50,000

Purchase price of the share

$ 446,000

Interest and principal payments, description

Beginning April 1, 2017, equal monthly payments of $1,011 for interest and principal are due on the note for 60 consecutive months.

Principal amount

$ 5,250,000

Net proceed received from promissory note

$ 3,485,000

Common stock at a price

$ 0.01

Common stock conversion price, description

As incentive to enter into the promissory note, the noteholder was issued 500,000 shares of ComSovereign's common stock for the total purchase price of $4.40 per share, or $2,200,000, of which only $5,000 was paid in cash.

Debt Agreement (Textual)

Extinguished in exchange

123,278

Aggregate principal amount outstanding

$ 450,100

$ 66,700

$ 450,100

Debt instrument maturity period, description

An aggregate principal amount of $200,100 was owed to three related parties out of the $450,100 promissory notes.

Accrued interest

$ 51,516

Interest rate increased

133.00%

Debt Agreement (Textual)

Debt instrument interest rate

8.00%

Net proceeds received

$ 4,000,000

Debt Agreement (Textual)

Principal amount

$ 50,000

Debt instrument interest rate

7.785%

Promissory note, description

InduraPower did not fulfil the requirements to maintain a balance of at least $155,159 at J.P. Morgan while the promissory note is outstanding and maintain a debt service coverage ratio of at least 1.25. Due to this breach of clauses, the promissory note holder is contractually entitled to request immediate repayment of the outstanding promissory note, and/or increase the interest rate up to an additional 18% per annum.

Debt Agreement (Textual)

Aggregate principal amount outstanding

$ 186,709

224,288

Debt instrument maturity period, description

The maturity date was extended until September 30, 2020 and the interest rate was reduced to 10% per annum. All unpaid accrued interest from October 2017 through September 30, 2019 was converted into 150,000 shares of common stock of ComSovereign. Accrued interest and the full principal balance are due at maturity. As of December 31, 2019, an aggregate principal amount of $500,000 was outstanding under this note. On April 30, 2020, the Company also issued 14,496 shares of common stock in lieu of an aggregate cash interest payment payable by ComSovereign through December 31, 2019 on this outstanding note payable.

Interest and principal payments, description

Accrued interest only payments were due monthly beginning October 1, 2016 through March 1, 2017. Monthly payments of $9,341 for interest and principal are due on this note for the following 60 consecutive months.

Debt Agreement (Textual)

Aggregate principal amount outstanding

500,000

Debt instrument maturity period, description

On October 1, 2019, the maturity date was extended until September 30, 2020 and the interest rate was reduced to 10% per annum. All unpaid accrued interest from October 2017 through September 30, 2019 was converted into 150,000 shares of common stock of ComSovereign. Accrued interest and the full principal balance are due at maturity. As of December 31, 2019, an aggregate principal amount of $500,000 was outstanding under this note. On April 30, 2020, the Company also issued 14,496 shares of common stock in lieu of an aggregate cash interest payment payable by ComSovereign through December 31, 2019 on this outstanding note payable.

Aggregate shares of common stock

150,000

Debt Agreement (Textual)

Aggregate principal amount outstanding

175,000

Debt instrument maturity period, description

ComSovereign assumed the obligations of the seller of a promissory note in the principal amount of $175,000 that bore interest at the rate of 15% per annum and was due on November 30, 2017. The interest rate increased to 18% per annum when the note became past due. On October 1, 2019, ComSovereign amended the promissory note to extend the maturity date to September 30, 2020 and to change the interest rate to 10% per annum. Both parties to the note also agreed to convert all unpaid accrued interest into 10,000 shares of common stock of ComSovereign, valued at $44,000. Accrued interest and principal are due and payable at maturity. Upon maturity, the interest rate shall increase to 15% per annum for any balance overdue by more than 5 days. This note is currently past due. As of September 30, 2020, the aggregate principal amount of $175,000 was outstanding under this note.

ComSovereign amended the promissory note to extend the maturity date to September 30, 2020 and to change the interest rate to 10% per annum. Both parties to the note also agreed to convert all unpaid accrued interest into 10,000 shares of common stock of ComSovereign, valued at $44,000. Accrued interest and principal are due and payable at maturity.

Aggregate shares of common stock

10,000

Principal amount

200,000

Principal amount

$ 200,000

Debt instrument maturity period, description

The full $200,000 balance was due at maturity.

Original issue discount

$ 6,000

Debt Agreement (Textual)

Aggregate principal amount outstanding

5,000,000

Debt Agreement (Textual)

Debt instrument interest rate

15.00%