UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
or
For the transition period from ______________ to ______________
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of principal executive office) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 10, 2021, there were
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
ITEM 1: Financial Statements
COMSOVEREIGN HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
| (Amounts in thousands, except share data) | June 30, 2021 | December 31, 2020 | ||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | — | |||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Finance lease right-of-use-assets | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued liabilities – related party | ||||||||
| Contract liabilities | ||||||||
| Accrued warranty liability | — | |||||||
| Notes payable – related party | — | |||||||
| Current portion of operating lease liabilities | ||||||||
| Current portion of finance lease liabilities | ||||||||
| Current portion of long-term debt, net of unamortized discounts and debt issuance costs | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Long-term debt, net of unamortized discounts and debt issuance costs | ||||||||
| Contract liabilities | ||||||||
| Accrued warranty liability | — | |||||||
| Operating lease liabilities | ||||||||
| Finance lease liabilities | — | |||||||
| Total Non-Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (Note 17) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost, | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
1
COMSOVEREIGN HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (Amounts in thousands, except share and per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Impairment expense | ||||||||||||||||
| Gain on the sale of assets | ( | ) | ( | ) | ||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Net Operating Loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (Expense) Income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||||||
| Gain/(loss) on extinguishment of debt | ( | ) | ||||||||||||||
| Foreign currency transaction loss/(gain) | ( | ) | ( | ) | ||||||||||||
| Total Other Expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per common share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
2
COMSOVEREIGN HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (Amounts in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other Comprehensive Gain: | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ||||||||||||||
| Total Comprehensive Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
3
COMSOVEREIGN HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
For the Three and Six Months Ended June 30, 2021 and 2020
| (Amounts in thousands, except | Preferred Stock | Common Stock | Additional Paid-In | Accumulated Other Comprehensive | Treasury | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||
| share data) | Shares | Amount | Shares | Amount | Capital | Loss | Shares | Deficit | Equity | |||||||||||||||||||||||||||
| January 1, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Issuance of common stock for exercise of options | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock as vendor compensation | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for public offering | — | |||||||||||||||||||||||||||||||||||
| Share-based compensation | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for extinguishment of debt and interest | — | |||||||||||||||||||||||||||||||||||
| Issuance of warrants for extinguishment of debt and interest | — | — | — | — | ||||||||||||||||||||||||||||||||
| Issuance of common stock for Sky Sapience Ltd. acquisition | — | |||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| March 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Issuance of common stock for exercise of options | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock as vendor compensation | — | — | ||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for RVision, Inc. acquisition | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for Innovation Digital, LLC acquisition | — | |||||||||||||||||||||||||||||||||||
| Issuance of Warrants for debt issuance costs | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| June 30, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
4
COMSOVEREIGN HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)
(Unaudited)
For the Three and Six Months Ended June 30, 2021 and 2020
| (Amounts in thousands, except | Preferred Stock | Common Stock | Additional Paid-In | Accumulated Other Comprehensive | Treasury | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||
| share data) | Shares | Amount | Shares | Amount | Capital | Loss | Shares | Deficit | Equity | |||||||||||||||||||||||||||
| January 1, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Issuance of common stock for settlement of accounts payable | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt issue costs | — | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | — | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for payment of accrued interest | — | |||||||||||||||||||||||||||||||||||
| Warrants issued in conjunction with debt agreements | — | — | ||||||||||||||||||||||||||||||||||
| Beneficial conversion feature | — | — | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
5
COMSOVEREIGN HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| (Amounts in thousands) | For the Six Months Ended June 30, 2021 | For the Six Months Ended | ||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Amortization of financing right-of-use asset | ||||||||
| Impairment Expense | ||||||||
| Operating lease expense | ||||||||
| Bad debt expense | ||||||||
| Gain on the sale of assets | ( | ) | ( | ) | ||||
| Share-based compensation | ||||||||
| Amortization of debt discounts and debt issuance costs | ||||||||
| Share-based vendor payments | ||||||||
| Loss on extinguishment of debt | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ||||||||
| Prepaids | ( | ) | ||||||
| Other current assets | ||||||||
| Other non-current assets | ( | ) | ||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Contract liabilities | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| (Repayments)/advances from related party | ( | ) | ||||||
| Accrued warranty | ( | ) | ( | ) | ||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Business acquisitions, net of cash received | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Acquisition of intangible assets | ( | ) | ||||||
| Note Receivable for Acquisition | ( | ) | ||||||
| Proceeds from disposal of property and equipment | ||||||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Principal payment on finance lease | ( | ) | ( | ) | ||||
| Payments on related party notes | ( | ) | ||||||
| Payment on line of credit | ( | ) | ||||||
| Proceeds from sale of common stock from offering | ||||||||
| Offering costs | ( | ) | ||||||
| Proceeds from issuance of debt | ||||||||
| Proceeds from exercise of options | ||||||||
| Debt issuance costs | ( | ) | ( | ) | ||||
| Repayment of debt | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rates on cash | ||||||||
| Net increase /(decrease) in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid during the period: | ||||||||
| Taxes | $ | $ | ||||||
| Interest | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Debt incurred to sellers for Skyline Partners Technology LLC | ||||||||
| Issuance of common stock for Sky Sapience Ltd. Acquisition | ||||||||
| Issuance of common stock for Innovation Digital, LLC | ||||||||
| Debt incurred to sellers for Innovation Digital, LLC | ||||||||
| Issuance of common stock for RVision, Inc. | ||||||||
| Issuance of common stock for extinguishment of debt and interest | ||||||||
| Issuance of warrants for extinguishment of debt and interest | ||||||||
| Issuance of common stock for conversion of debt and interest | ||||||||
| Original issue discount and non-cash debt issuance costs | ||||||||
| Issuance of Warrants as debt issuance costs | ||||||||
| Recognition of operating lease right-of-use asset and liability | ||||||||
| Acquisition of building with secured note payable | ||||||||
| Capital asset additions transferred from inventory and prepaid | ||||||||
| Lease deposits recognized from Sky Sapience Ltd. Acquisition | ||||||||
| Recognition of operating right-of-use asset and liability rent abatement | ||||||||
| Recognition of finance lease right-of-use asset and liability | ||||||||
| Debt incurred to sellers for acquisitions | ||||||||
| Issuance of common stock to settle interest | ||||||||
| Beneficial conversion feature | ||||||||
| Common stock issued for payment of accounts payable | ||||||||
| Common stock issued as debt issuance costs | ||||||||
See accompanying Notes to the Unaudited Condensed Consolidated Financial Statements
6
COMSOVEREIGN HOLDING CORP.
Notes to Consolidated Financial Statements
June 30, 2021
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
COMSovereign Holding Corp. (the “Company”), formerly known as Drone Aviation Holding Corp., is a provider of technologically-advanced telecom solutions to network operators, mobile device carriers, governmental units and other enterprises worldwide. The Company has assembled a portfolio of communications, power and portable infrastructure technologies, capabilities and products that enable the upgrading of latent 3G networks to 4G and 4G-LTE networks and will facilitate the rapid rollout of the 5G and “next-Generation” (“nG”) networks of the future. The Company focuses on novel capabilities, including signal modulations, antennae, software, hardware and firmware technologies that enable increasingly efficient data transmission across the radio-frequency spectrum. The Company’s product solutions are complemented by a broad array of services including technical support, systems design and integration, and sophisticated research and development programs. The Company competes globally on the basis of its innovative technology, broad product offerings, high-quality and cost-effective customer solutions, as well as the scale of its global customer base and distribution. In addition, the Company believes it is in a unique position to rapidly increase its near-term domestic sales as it is among the few U.S.-based providers of telecommunications equipment and services.
On January 29, 2021, the Company completed the acquisition of Skyline Partners Technology LLC, a Colorado limited liability company that does business under the name Fastback Networks (“Fastback”). Fastback is a manufacturer of intelligent backhaul radio (IBR) systems that deliver high-performance wireless connectivity to virtually any location, including those challenged by Non-Line of Sight (NLOS) limitations.
On February 25, 2021, the Company completed the acquisition of Sky Sapience Ltd., a company organized under the laws of the State of Israel (“SKS”). SKS is an Israeli-based manufacturer of drones with a patented tethered hovering technology that provides long-duration, mobile and all-weather Intelligence, Surveillance and Reconnaissance (ISR) capabilities to customers worldwide for both land- and marine-based applications.
On April 1, 2021, the Company completed the acquisition of RVision, Inc., a Nevada corporation (“RVision”). RVision is a developer of technologically-advanced video and communications products and physical security solutions designed for government and private sector commercial industries.
On June 3, 2021, the Company completed the acquisition of Innovation Digital, LLC, a California limited liability company (“Innovation Digital”). Innovation Digital is a premier provider of “beyond state-of-the-art” mixed analog/digital signal processing solutions, intellectual property (IP) licensing, and design and consulting services.
See Note 11 – Business Acquisitions for further discussion of the Company’s acquisitions.
Basis of Presentation
The accompanying financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Historical information is not necessarily indicative of the Company’s future results of operations, financial position or cash flows.
As described in Note 15 – Stockholders’ Equity, effective January 21, 2021, the Company enacted a 1-for-3 reverse stock split (the “Split”) of the Company’s common stock. The Condensed Consolidated financial statements and accompanying notes give effect to the Split as if it occurred at the beginning of the first period presented.
7
Principles of Consolidation
The
results for the three and six months ended June 30, 2021 are not necessarily indicative of the Company’s results of operations,
financial position or cash flows that may be expected for the full fiscal year or future operating periods.
The unaudited Condensed Consolidated Financial Statements as of, and for the three and six months ended, June 30, 2021 and 2020 include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated.
COVID-19 and Market Update
In March 2020, the World Health Organization categorized the COVID-19 outbreak as a pandemic and the President of the United States declared it a national emergency. The Company continues to monitor the market and environment for impacts to the business as the pandemic continues to evolve and its future effects remain uncertain.
Reclassifications
Certain immaterial June 30, 2020 amounts have been reclassified to be consistent with the current period presentation.
Use of Estimates
The preparation of unaudited financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes in the Company’s significant accounting policies as of and for the six months ended June 30, 2021, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Accounting Standards Not Yet Adopted
In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-04, Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) (ASU 2021-04). This guidance clarifies an issuer’s accounting for certain modifications of freestanding equity-classified written call options and provides a “principles-based” framework to determine whether an issuer should recognize the modification or exchange and an adjustment to equity or an expense. The Company is currently evaluating the potential impact ASU 2021-04 will have on the Condensed Consolidated Financial Statements.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance simplifies the accounting for certain convertible instruments and contracts in an entity’s own equity. As a smaller reporting entity, this standard will become effective for fiscal years beginning after December 15, 2023, including interim periods within those years. The Company is currently evaluating the potential impact ASU 2020-06 will have on the Condensed Consolidated Financial Statements.
8
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments that use LIBOR as a reference rate and is effective upon issuance through December 31, 2022. The Company has performed an evaluation of and will continue to evaluate, through December 31, 2022, the impact of this ASU. This ASU does not currently and is not expected to have in the future, a material effect on the Condensed Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. This standard will become effective for interim and annual periods beginning after December 15, 2022 and earlier adoption is permitted. The Company is currently evaluating the potential impact the adoption of this ASU will have on the Condensed Consolidated Financial Statements.
Accounting Standards Adopted
During the six months ended June 30, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740). This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes. The impact that adopting this ASU has not had any material effect on the Condensed Consolidated Financial Statements.
3. GOING CONCERN
U.S. GAAP requires management to assess a company’s ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosures in certain circumstances.
The
accompanying Unaudited Condensed Consolidated Financial Statements and notes have been prepared assuming the Company will continue as
a going concern. For the six months ended June 30, 2021, the Company generated negative cash flows from operations of $
Management anticipates that the Company will be dependent, for the near future, on additional debt facilities or investment capital to fund growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, including but not limited to, securing a line or lines of credit, the issuance of debt, and/or accessing the equity markets.
The Company’s fiscal operating results and accumulated deficit, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern. The Company will continue to pursue the actions outlined above, as well as work towards increasing revenue and operating cash flows, to meet its future liquidity requirements. However, there can be no assurance that the Company will be successful in any capital-raising efforts that it may undertake, and the failure of the Company to raise additional capital could adversely affect its future operations and viability.
9
4. REVENUE
The following table is a summary of the Company’s timing of revenue recognition for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (Amounts in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Timing of revenue recognition: | ||||||||||||||||
| Services and products transferred at a point in time | $ | $ | $ | $ | ||||||||||||
| Services and products transferred over time | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
The Company disaggregates revenue by source and geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Revenue by source consisted of the following for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (Amounts in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenue by products and services: | ||||||||||||||||
| Products | $ | $ | $ | $ | ||||||||||||
| Services | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
Revenue by geographic destination consisted of the following for the for the three and six months ended June 30, 2021 and 2020:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (Amounts in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenue by geography: | ||||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| International | ||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||
10
Contract Balances
The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. As of June 30, 2021, the Company did not have a contract assets balance.
The following table is a summary of the Company’s opening and closing balances of contract liabilities related to contracts with customers.
| (Amounts in thousands) | Total | |||
| Balance at December 31, 2020 | $ | |||
| Additions through advance billings to or payments from vendors | ||||
| Additions through business acquisition | ||||
| Revenue recognized that was included in the prior period balance | ( | ) | ||
| Revenue recognized from current period advance billings to or payments from vendors | ( | ) | ||
| Revenue recognized from amounts acquired through business acquisition | ( | ) | ||
| Balance at June 30, 2021 | $ | |||
The increase in contract liabilities during the six months ended June 30, 2021 was primarily due to invoiced amounts that did not yet meet the revenue recognition criteria, partially offset by the revenue recognition criteria being met for previously deferred revenue.
5. ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following as of June 30, 2021 and December 31, 2020:
| (Amounts in US$’s) | June 30, 2021 | December 31, 2020 | ||||||
| Account receivables | $ | $ | ||||||
| Less: Allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Total account receivables, net | $ | $ | ||||||
The
Company recognized $
11
6. INVENTORY
Inventory consisted of the following as of June 30, 2021 and December 31, 2020:
| (Amounts in thousands) | June 30, 2021 | December 31, 2020 | ||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total inventory | ||||||||
| Reserve | ( | ) | ( | ) | ||||
| Total inventory, net | $ | $ | ||||||
7. PREPAID
Prepaid expenses consisted of the following as of June 30, 2021 and December 31, 2020:
| (Amounts in thousands) | June 30, 2021 |
December 31, 2020 |
||||||
| Prepaid products and services | $ | $ | ||||||
| Deferred offering expenses | — | |||||||
| Prepaid rent and security deposit | ||||||||
| $ | $ | |||||||
8. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following as of June 30, 2021 and December 31, 2020:
| (Amounts in thousands) | June 30, 2021 | December 31, 2020 | ||||||
| Shop machinery and equipment | $ | $ | ||||||
| Computers and electronics | ||||||||
| Office furniture and fixtures | ||||||||
| Building | ||||||||
| Land | ||||||||
| Leasehold improvements | ||||||||
| Less - accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
The
Company recognized $
12
9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following as of June 30, 2021 and December 31, 2020:
| (Amounts in thousands) | June 30, 2021 | December 31, 2020 | ||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued liabilities | ||||||||
| Accrued payroll | ||||||||
| Total accounts payable and accrued expenses | $ | $ | ||||||
10. LEASES
Operating Leases
The Company has operating leases for office, manufacturing and warehouse space, office equipment, and vehicles.
As part of the SKS business
acquisition on February 25, 2021, the Company assumed a lease of flexible office space with a remaining term of approximately
As part of the SKS business
acquisition on February 25, 2021, the Company assumed vehicle leases with a remaining weighted average term of approximately
In April 2021, the Company entered into a 60-month office equipment lease with monthly payments and no renewal options. The lease did not include an implicit rate of return; therefore, the Company used an incremental borrowing rate based on other leases with similar terms.
In April 2021, a subsidiary of the Company entered into several vehicle leases with approximately 36-month terms. Monthly payments range from $1 thousand to $2 thousand. Each lease had an implicit rate of 6.0% and no renewal options.
In May 2021, a subsidiary of
13
Other information related to the Company’s operating leases are as follows:
| (Amounts in thousands) | For the six months ended June 30, 2021 | |||
| Operating lease ROU Asset – December 31, 2020 | $ | |||
| Increase | ||||
| Decrease | ||||
| Amortization | ( | ) | ||
| Operating lease ROU Asset – June 30, 2021 | $ | |||
| Operating lease liability – December 31, 2020 | $ | |||
| Increase | ||||
| Decrease | ( | ) | ||
| Amortization | ( | ) | ||
| Operating lease liability – June 30, 2021 | $ | |||
| Operating lease liability – short term | $ | |||
| Operating lease liability – long term | ||||
| Operating lease liability – total | $ | |||
| Operating lease cost | $ | |||
| Variable lease cost | $ | |||
| Short-term lease cost | $ | |||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from operating leases | $ | |||
The following table presents the weighted-average remaining lease term and weighted average discount rates related to the Company’s operating leases as of June 30, 2021 and December 31, 2020, respectively:
| June 30, 2021 | December 31, 2020 | |||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate | % | % | ||||||
The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Condensed Consolidated Balance Sheet as of June 30, 2021:
| (Amounts in thousands) | Operating Leases | |||
| Remainder of 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total minimum lease payments | ||||
| Less: effect of discounting | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Less: current obligations under leases | ( | ) | ||
| Long-term lease obligations | $ | |||
14
Finance Leases
The Company has finance leases for certain manufacturing and office equipment.
Information related to the Company’s finance leases are as follows:
| (Amounts in thousands) | For the six months ended June 30, 2021 | |||
| Finance lease ROU Asset – December 31, 2020 | $ | |||
| Increase | ||||
| Amortization | ( | ) | ||
| Finance lease ROU Asset – June 30, 2021 | $ | |||
| Finance lease liability – December 31, 2020 | $ | |||
| Increase | ||||
| Interest accretion | ||||
| Payment | ( | ) | ||
| Operating lease liability – June 30, 2021 | $ | |||
| Finance lease liability – short term | $ | |||
| Finance lease liability – long term | ||||
| Finance lease liability – total | $ | |||
The following table presents the weighted-average remaining lease term and weighted average discount rates related to the Company’s finance leases as of June 30, 2021 and December 31, 2020, respectively:
| June 30, 2021 | December 31, 2020 | |||||||
| Weighted average remaining lease term | ||||||||
| Weighted average discount rate | % | % | ||||||
The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the finance lease liabilities recorded on the Condensed Consolidated Balance Sheet as of June 30, 2021:
| (Amounts in thousands) | Finance Leases | |||
| Remainder of 2021 | $ | |||
| 2022 | ||||
| Thereafter | ||||
| Total minimum lease payments | ||||
| Less: effect of discounting | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Less: current obligations under leases | ( | ) | ||
| Long-term lease obligations | $ | |||
15
11. BUSINESS ACQUISITIONS
Skyline Partners Technology LLC
On January 29, 2021, the Company
completed the acquisition of Fastback for cash consideration paid of $
The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
| (Amounts in thousands) | Fair Value | |||
| Cash | $ | |||
| Accounts receivable | ||||
| Inventory | ||||
| Prepaid expenses | ||||
| Property & equipment | ||||
| Intangible assets: | ||||
| Intellectual Property | ||||
| Software | ||||
| Goodwill | ||||
| Total assets | ||||
| Accounts payable | ||||
| Accrued liabilities | ||||
| Notes payable | ||||
| Contract liabilities, current | ||||
| Accrued warranty liability – long term | ||||
| Total purchase consideration | $ | |||
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.
16
Sky Sapience Ltd.
On February 25, 2021, the
Company completed the acquisition of SKS. The total preliminary purchase price consideration amounted to $
The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
| (Amounts in thousands) | Fair Value | |||
| Cash | $ | |||
| Accounts receivable | ||||
| Inventory | ||||
| Prepaid expenses | ||||
| Other current assets | ||||
| Property & equipment | ||||
| Operating lease right-of-use assets | ||||
| Intangible assets: | ||||
| Goodwill | ||||
| Total assets | ||||
| Accounts payable | ||||
| Accrued liabilities | ||||
| Contract liabilities, current | ||||
| Operating lease liabilities, current | ||||
| Operating lease liabilities - long term | ||||
| Total purchase consideration | $ | |||
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.
17
RVision, Inc.
On April 1, 2021, the Company
completed the acquisition of RVision. The Company acquired
The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
| (Amounts in thousands) | Fair Value | |||
| Cash | $ | |||
| Accounts receivable | ||||
| Prepaid expenses | ||||
| Inventory | ||||
| Property & equipment | ||||
| Operating lease right-of-use asset | ||||
| Intangible assets: | ||||
| Goodwill | ||||
| Total assets | ||||
| Accounts payable | ||||
| Accrued liabilities | ||||
| Operating lease liabilities, current | ||||
| Contract liabilities, current | ||||
| Notes payable | ||||
| Operating lease liabilities – long term | ||||
| Total purchase consideration | $ | |||
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.
18
Innovation Digital, LLC
On June 3, 2021, the Company
completed the acquisition of Innovation Digital. The total preliminary purchase price consideration amounted to $
The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
| (Amounts in thousands) | Fair Value | |||
| Property & equipment | $ | |||
| Operating lease right-of-use asset | ||||
| Other Non-Current Assets | ||||
| Intangible assets: | ||||
| Goodwill | ||||
| Total assets | ||||
| Accounts payable | ||||
| Operating lease liabilities, current | ||||
| Notes payable | ||||
| Operating lease liabilities – long term | ||||
| Total purchase consideration | $ | |||
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.
19
12. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table sets forth the changes in the carrying amount of goodwill for the six months ended June 30, 2021:
| (Amounts in thousands) | Total | |||
| Balance at December 31, 2020 | $ | |||
| 2021 Acquisitions | ||||
| Balance at June 30, 2021 | $ | |||
The following table sets forth the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of June 30, 2021 and December 31, 2020:
| (Amounts in thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||
| Definite-lived intangible assets: | ||||||||||||
| Trade names | $ | $ | ( | ) | $ | |||||||
| Licenses | ( | ) | ||||||||||
| Technology | ( | ) | ||||||||||
| Customer relationships | ( | ) | ||||||||||
| Intellectual property | ( | ) | ||||||||||
| Noncompete | ( | ) | ||||||||||
| Total definite-lived intangible assets at December 31, 2020 | $ | $ | ( | ) | $ | |||||||
| Trade names | $ | $ | ( | ) | $ | |||||||
| Licenses | ( | ) | ||||||||||
| Technology | ( | ) | ||||||||||
| Customer relationships | ( | ) | ||||||||||
| Intellectual property | ( | ) | ||||||||||
| Noncompete | ( | ) | ||||||||||
| Capitalized software | ( | ) | ||||||||||
| Total definite-lived intangible assets at June 30, 2021 | $ | $ | ( | ) | $ | |||||||
Amortization expense of intangible assets was $
| Asset Class | Weighted- Average Amortization period | |||
| Trade names | ||||
| Licenses | ||||
| Technology | ||||
| Customer relationships | ||||
| Intellectual property | ||||
| Noncompete | ||||
| Capitalized software | ||||
| All Intangible assets | ||||
20
As of June 30 2021, the expected amortization expense for the unamortized acquired intangible assets for the next five years and thereafter was as follows:
| (Amounts in thousands) | Estimated | |||
| Remainder of 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total | $ | |||
13. DEBT AGREEMENTS
Secured Notes Payable
A subsidiary of the Company
had previously entered into a promissory note not to exceed the principal amount of $
A subsidiary of the Company
had previously entered into a promissory note in the principal amount of $
A subsidiary of the Company
had previously entered into a promissory note in the principal amount of $
21
A subsidiary of the Company
had previously entered into a loan agreement under which it received $
On February 26, 2020, the
Company entered into a $
In connection with the acquisition
a subsidiary on March 6, 2020,
On March 19, 2020,
In connection with the acquisition a subsidiary on March 6, 2020, the
Company: assumed various equipment financing loans with aggregate principal balances of approximately $
22
On December 8, 2020, the Company
entered into a secured loan agreement in the aggregate principal amount of $
On January 15, 2021,
23
Notes Payable
In connection with previous
acquisitions of two subsidiaries, the Company assumed the obligations of the seller on a promissory note in the principal amount of $
In connection with previous
acquisitions of two subsidiaries, the Company assumed the obligations of the seller of a promissory note in the principal amount of $
A subsidiary of the Company
had previously entered into a 90-day promissory note in the principal amount of $
A subsidiary of the company had previously entered into several promissory
notes in the aggregate principal amount of $
On
March 5, 2020,
24
In connection with the acquisition
of a subsidiary on March 6, 2020, the Company, entered into promissory notes or agreed to pay the sellers an aggregate principal amount
of $
In addition, the Company assumed
a note payable in the amount of $
On May 29, 2020, the Company
entered into a promissory note in the principal amount of $
Between July 2, 2020 and August
21, 2020, the Company borrowed an aggregate of $
Between November 4, 2020 and November 24, 2020, the Company borrowed
an aggregate of $0.55 million from accredited investors and issued to such investors promissory notes evidencing such loans.
25
In connection with an acquisition
of a subsidiary on January 29, 2021,
Various subsidiaries of the
Company received loan proceeds or the Company assumed in conjunction with various acquisitions an aggregate amount of $
In connection with the acquisition
of a subsidiary by the Company on April 1, 2021, the Company assumed two notes payable with aggregate principal balances of $
Senior Debentures
In
26
Convertible Notes Payable
On July 7, 2020,
On August 21, 2020,
In connection with its acquisition a subsidiary on January 29, 2021, the Company issued to the sellers $11.15 million aggregate principal amount of convertible promissory notes. The individual principal amounts of the notes ranged from $6 thousand to $5.58 million. These notes initially bear interest at the rate of 1.01% per annum, which is to be adjusted to the prime rate as published by the Wall Street Journal on each annual anniversary of the issuance date, and mature on January 29, 2026. Interest is payable in cash annually in arrears on each January 1. Commencing on January 29, 2022, the outstanding principal and accrued interest on these notes may be converted in full to shares of the Company’s common stock at a conversion price of $5.22 per share, subject to adjustment. Upon an event of default, the interest rate will automatically increase to 15% per annum compounded annually, and all unpaid principal and accrued interest may become due on-demand. Principal and any unpaid accrued interest are due on the maturity date. Upon maturity, the interest rate will automatically increase to 15% per annum compounded annually on any unpaid principal. As of June 30, 2021, an aggregate principal amount of $11.15 million was outstanding.
In connection with its acquisition
of a subsidiary on June 3, 2021,
27
Senior Convertible Promissory Note
On
May 27, 2021,
Senior Convertible Debentures
The
On July 2, 2020,
28
Certain agreements governing the secured notes payable, notes payable and senior convertible debentures contain customary covenants, such as debt service coverage ratios, limitations on liens, dispositions, mergers, entry into other lines of business, investments and the incurrence of additional indebtedness.
All debt agreements are subject to customary events of default. If an event of default occurs with respect to the debt agreements and is continuing, the lenders may accelerate the applicable amounts due.
Future maturities contractually required by the Company under long-term debt obligations are as follows for the years ending December 31:
| (Amounts in thousands) | ||||
| Remainder of 2021 | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total debt | ||||
| Less unamortized discounts and debt issuance costs | ( | ) | ||
| Total net debt | ||||
| Less current portion of long-term debt, net of unamortized discounts and debt issuance costs | ( | ) | ||
| Total long-term debt, net of unamortized discounts and debt issuance costs | $ | |||
See Note 19 – Subsequent Events for details regarding additional debt incurred after June 30, 2021.
14. RELATED PARTY TRANSACTIONS
Accrued Liabilities – Related Party
As
of June 30, 2021 and December 31, 2020, the accrued liabilities – related party balance was $
On
November 10, 2017, the Company and Global Security Innovative Strategies, LLC (“GSIS”), a company in which David Aguilar,
a member of the Company’s Board of Directors, is a principal, entered in an agreement (the “GSIS Agreement”) pursuant
to which GSIS agreed to provide business development support and general consulting services for sales opportunities with U.S. government
agencies and other identified prospects and consulting support services for the Company. The GSIS Agreement had an initial term of six
months beginning on November 1, 2017. On September 26, 2018, the parties amended the GSIS Agreement to extend the period of service through
September 2019 with monthly automatic renewals thereafter. The Company also agreed to issue an option to purchase
Notes Payable – Related Party
On August 5, 2019, Daniel
L. Hodges, the Company’s Chairman and Chief Executive Officer, and his wife, loaned a subsidiary of the Company $
29
On July 1, 2020,
Between
October 15, 2020 and December 28, 2020, the Company borrowed an aggregate of $0.6 million from Dr.
Between
November 13, 2020 and December 24, 2020,
15. STOCKHOLDERS’ EQUITY
For the six months ended June 30, 2021
As of June 30, 2021, the Company
had
On May 26, 2020, the Board of Directors of the Company and stockholders holding a majority of the outstanding shares of the Company’s common stock approved resolutions authorizing the Board of Directors to effect the Split of the Company’s common stock at an exchange ratio of up to 1-for-3, with the Board of Directors retaining the discretion as to whether to implement the Split. On December 16, 2020, the Company’s Board of Directors approved a ratio for the Split of 1-for-3, which was effected on January 21, 2021. The Condensed Consolidated Financial Statements and accompanying notes give effect to this Split as if it occurred at the beginning of the first period presented.
Earnings Per Share
Potential common shares issuable
to employees, non-employees and directors upon exercise or conversion of shares are excluded from the computation of diluted earnings
per common share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss available
to common stockholders. Stock options and warrants are anti-dilutive when the exercise price of these instruments is greater than the
average market price of the Company’s common stock for the period (out-of-the-money), regardless of whether the Company is in a
period of net loss available to common stockholders. The following weighted-average potential common shares were excluded from the diluted
loss per common share as their effect was anti-dilutive as of June 30, 2021 and 2020, respectively: stock options of
Public Offerings
On
January 26, 2021 (the “First Offering Closing Date”), the Company sold an aggregate of
30
The common stock and the warrants of the First Offering were offered and sold to the public pursuant to the Company’s registration statement on Form S-1 (File No. 333-248490), filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) under the Securities Act, on August 28, 2020, as amended, and which became effective on January 21, 2021.
On
the First Offering Closing Date, the Company received gross proceeds of approximately $
On
January 27, 2021, the Representative exercised its over-allotment option for the First Offering to purchase
Pursuant
to the First Offering Underwriting Agreement, the Company also agreed to issue to the Representative warrants (the “Representative’s
First Offering Warrants”) to purchase up to a total of
The
total expenses of the First Offering were approximately $
On
February 10, 2021 (the “Second Offering Closing Date”), the Company sold an aggregate of
The common stock was offered and sold to the public pursuant to the Company’s registration statement on Form S-1 (File No. 333-252780), filed by the Company with the SEC under the Securities Act, on February 5, 2021, and the Company’s registration statement on Form S-1 (File No. 333-252974), filed by the Company with the SEC under Rule 462(b) of the Securities Act on February 10, 2021, each of which became effective on February 10, 2021.
The
Company received gross proceeds of approximately $
Pursuant
to the Second Offering Underwriting Agreement, the Company also issued to the Representative warrants (the “Representative’s
Second Offering Warrants”) to purchase up to a total of
The
total expenses of the Second Offering were approximately $
31
Consulting Agreements and Settlements with Vendors
On
January 31, 2020,
On
December 9, 2020, the Company entered into an agreement with a consultant that required the payment of
16. SHARE-BASED COMPENSATION
2020 Long-Term Incentive Plan
On April 22, 2020, the Company’s Board of Directors adopted the 2020 Long-Term Incentive Plan (the “2020 Plan”), which was approved by the stockholders on or about May 6, 2020. Employees, officers, directors and consultants that provide services to the Company or one of its subsidiaries may be selected to receive awards under the 2020 Plan. Awards under the 2020 Plan may be in the form of incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards and performance-based awards.
As originally approved, a total of
The 2020 Plan will terminate on May 1, 2030. The maximum term of options, stock appreciation rights and other rights to acquire common stock under the 2020 Plan is ten years after the initial date of the award.
32
Restricted Stock Awards
On
December 2, 2019, the Company’s Board of Directors granted an aggregate of
On
January 26, 2021, the Company’s Board of Directors granted an aggregate of
For
all RSAs that are currently outstanding, if the Participant’s employment with, engagement by, or service to the Company terminates
for any reason (other than due to disability, retirement or death, or termination by employee for “Good Cause” as defined
pursuant to a written employment contract) prior to the vesting of all or any portion of the RSAs granted, such RSAs shall immediately
be cancelled. If the Participant’s employment with, engagement by, or service to the Company terminates due to the Participant’s
death, disability or retirement, or by termination by such employee for “Good Cause” as defined pursuant to a written employment
contract, the Participant shall become
Stock Options
On
April 1, 2021, from shares available to be issued under the 2020 Long-Term Incentive Plan, the Board of Directors of the Company granted
options to purchase an aggregate
Also, on April 1, 2021, the
Board of Directors of the Company authorized the issuance of options to purchase an aggregate of
On
May 5, 2021, the Board of Directors of the Company authorized the issuance of options to purchase an aggregate of
33
On
June 29, 2021, the Board of Directors approved the modification of
The following table summarizes the assumptions used to estimate the fair value of options granted during the six months ended June 30, 2021:
| 2021 | ||||
| Expected dividend yield | % | |||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Expected life of options | ||||
The following tables represent stock option activity for the three months ended June 30, 2021 and 2020:
| (Amounts in thousands except per share data) | Number of Options | Weighted- Average Exercise Price per Share | Weighted- Average Contractual Life in Years | Aggregate Intrinsic Value | ||||||||||||
| Outstanding – December 31, 2020 | $ | $ | ||||||||||||||
| Exercisable – December 31, 2020 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Cancelled or Expired | ( | ) | ||||||||||||||
| Outstanding – June 30, 2021 | $ | $ | ||||||||||||||
| Exercisable – June 30, 2021 | $ | $ | ||||||||||||||
| (Amounts in thousands except per share data) | Number of Options | Weighted- Average Exercise Price per Share | Weighted- Average Contractual Life in Years | Aggregate Intrinsic Value | ||||||||||||
| Outstanding – December 31, 2019 | $ | $ | ||||||||||||||
| Exercisable – December 31, 2019 | ||||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled or Expired | ( | ) | ||||||||||||||
| Outstanding – June 30, 2020 | $ | $ | ||||||||||||||
| Exercisable – June 30, 2020 | $ | $ | ||||||||||||||
The
Company recognized $
34
Warrants
On
January 26, 2021, the Company issued warrants to purchase an aggregate of
On
January 26, 2021, the Company issued warrants to purchase an aggregate of
On
January 26, 2021, the Company issued warrants to purchase an aggregate of
On
January 26, 2021, the Company issued warrants to purchase an aggregate of
On
February 12, 2021, the Company issued warrants to purchase an aggregate of
On
May 27, 2021, the Company issued warrants to purchase an aggregate of
All
warrants are valued utilizing the Black-Scholes pricing model using the assumptions listed below. The weighted average grant date fair
value of all warrants issued during the six months ended June 30, 2021, was $
The following table summarizes the assumptions used to estimate the fair value of warrants granted during the six months ended June 30, 2021:
| 2021 | ||||
| Expected dividend yield | % | |||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Contractual life of warrants | ||||
35
The following tables represents warrant activity for the three months ended June 30, 2021 and 2020:
| (Amounts in thousands except per share data) | Number of Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | ||||||||||||
| Outstanding – December 31, 2020 | $ | $ | ||||||||||||||
| Exercisable – December 31, 2020 | $ | $ | ||||||||||||||
| Granted/Issued | ||||||||||||||||
| Exercised | ||||||||||||||||
| Forfeited or Expired | ( | ) | ||||||||||||||
| Outstanding – June 30, 2021 | $ | $ | ||||||||||||||
| Exercisable – June 30, 2021 | $ | $ | ||||||||||||||
| (Amounts in thousands except per share data) | Number of Warrants | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life in Years | Aggregate Intrinsic Value | ||||||||||||
| Outstanding – December 31, 2019 | $ | $ | ||||||||||||||
| Exercisable – December 31, 2019 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited or Expired | — | — | ||||||||||||||
| Outstanding – June 30, 2020 | $ | $ | ||||||||||||||
| Exercisable – June 30, 2020 | $ | $ | ||||||||||||||
36
17. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Management does not believe the final disposition any of these matters is likely to have a material adverse impact on the Company’s financial condition, results of operations or cash flows, except as follows.
On May 22, 2020,
18. CONCENTRATION
Financial
instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of trade accounts receivable.
The Company performs ongoing credit evaluations of its customers and generally does not require collateral related to its trade
accounts receivable. At June 30, 2021, accounts receivable from
19. SUBSEQUENT EVENTS
Corporate Acquisitions
On July 16, 2021, the Company completed the acquisition of RF Engineering
& Energy Resource, LLC, a Michigan limited liability company (“RF Engineering”), pursuant to an Agreement and Plan of
Merger and Reorganization (the “Merger Agreement”) dated as of July 16, 2021 among the Company, COMS Merger Sub V, LLC, RF
Engineering, and the owners of RF Engineering. In accordance with the terms of the Merger Agreement, on July 16, 2021, the Company acquired
all of the ownership interest of RF Engineering in exchange for $
PPP Loans
Subsequent to June 30, 2021, the Company received notice of the forgiveness
of certain loans under the PPP loan program of an aggregate principal amount of $
37
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Unless the context requires otherwise, references in this Quarterly Report to “Company, “we”, “us” and “our” refer to the COMSovereign Holding Corp. and its subsidiaries.
Forward-Looking Statements
This Quarterly Report on Form 10-Q, including “Item 2. Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations,” contains “forward-looking statements” that represent our beliefs, projections and predictions about future events. From time to time in the future, we may make additional forward-looking statements in presentations, at conferences, in press releases, in other reports and filings and otherwise. Forward-looking statements are all statements other than statements of historical fact, including statements that refer to plans, intentions, objectives, goals, targets, strategies, hopes, beliefs, projections, prospects, expectations or other characterizations of future events or performance, and assumptions underlying the foregoing. The words “may,” “could,” “should,” “would,” “will,” “project,” “intend,” “continue,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “plan,” “potential,” “opportunity,” “scheduled,” “goal,” “target,” and “future,” variations of such words, and other comparable terminology and similar expressions and references to future periods are often, but not always, used to identify forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Readers should carefully review the risk factors included under “Item 1A. Risk Factors” of our fiscal 2020 Annual Report on Form 10-K filed with the U. S. Securities and Exchange Commission (the “SEC”) on March 30, 2021.
Overview of Business; Operating Environment and Key Factors Impacting Fiscal 2021 and 2020 Results
The following MD&A is intended to help readers understand the results of our operations and financial condition and is provided as a supplement to, and should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and the related notes (“Notes”) in Part 1 of this Quarterly Report on Form 10-Q.
Growth and percentage comparisons made herein generally refer to the six months ended June 30, 2021, compared to six months ended June 30, 2020 unless otherwise indicated.
Business Overview
We are a provider of technologically-advanced telecom solutions to network operators, mobile device carriers, governmental units and other enterprises worldwide. We have assembled a portfolio of communications, power and niche technologies, capabilities and products that enable the upgrading of latent 3G networks to 4G and 4G-LTE networks and will facilitate the rapid roll out of the 5G and “next-Generation” (“nG”) networks of the future. We focus on special capabilities, including signal modulations, antennae, software, hardware and firmware technologies that enable increasingly efficient data transmission across the electromagnetic spectrum. Our product solutions are complemented by a broad array of services, including technical support, systems design and integration, and sophisticated research and development programs. While we compete globally on the basis of our innovative technology, the breadth of our product offerings, our high-quality cost-effective customer solutions, and the scale of our global customer base and distribution, our primary focus is on the North American telecom infrastructure and service market. We believe we are in a unique position to rapidly increase our near-term domestic sales as we are among the few U.S.-based providers of telecommunications equipment and services.
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Our Operating Units
Through a series of acquisitions, we and our operating subsidiaries have expanded our service offerings and geographic reach over the past two years. Our company is comprised of the following principal operating units:
| ● | DragonWave-X, LLC. DragonWave-X, LLC and its operating subsidiaries, DragonWave Corp. and DragonWave-X Canada, Inc. (collectively, “DragonWave”), are a Dallas-based manufacturer of high-capacity microwave and millimeter wave point-to-point telecom backhaul radio units. DragonWave and its predecessor have been selling telecom backhaul radios since 2012 and its microwave radios have been installed in over 330,000 locations in more than 100 countries worldwide. According to a report of the U.S. Federal Communications Commission, as of December 2019, DragonWave was the second largest provider of licensed point-to-point microwave backhaul radios in North America. We acquired DragonWave November 2019. |
| ● | Virtual NetCom, LLC. Virtual NetCom, Inc. (“VNC”) is an edge compute focused wireless telecommunications technology developer and equipment manufacturer of both 4G LTE Advanced and 5G capable radio equipment. VNC designs, develops, manufactures, markets, and supports a line of network products for wireless network operators, mobile virtual network operators, cable TV system operators, and government and business enterprises that enable new sources of revenue, and reduce capital and operating expenses. VNC also has developed rapidly deployable, tactical systems that can be combined with the tethered aerostats and drones offered by our Drone Aviation subsidiary and enabled and operated in nearly any location in the world. We acquired VNC in July 2020. |
| ● | Fastback. Skyline Partners Technology, LLC, which does business under the name Fastback Networks (“Fastback”), is a manufacturer of intelligent backhaul radio (IBR) systems that deliver high-performance wireless connectivity to virtually any location, including those challenged by Non-Line of Sight (NLOS) limitations. Fastback’s advanced IBR products allow operators to economically add capacity and density to their macrocells and expand service coverage density with small cells. These solutions also allow operators to both provide temporary cellular and data service utilizing mobile/portable radio systems and provide wireless Ethernet connectivity. We acquired Fastback in January 2021. |
| ● | Drone Aviation. Lighter Than Air Systems Corp., which does business under the name Drone Aviation (“Drone Aviation”), is based in Jacksonville, Florida and develops and manufactures cost-effective, compact and enhanced tethered unmanned aerial vehicles (UAVs), including lighter-than-air aerostats and drones that support surveillance sensors and communications networks. We acquired Drone Aviation in June 2014. |
| ● | Sky Sapience Ltd. Sky Sapience Ltd. (“SKS”) is an Israeli-based manufacturer of drones with a patented tethered hovering technology that provides long-duration, mobile and all-weather Intelligence, Surveillance and Reconnaissance (ISR) capabilities to customers worldwide for both land and marine-based applications. Its innovative technologies include fiber optic tethers that enable secure, high-capacity communications, including support for commercial 4G and 5G wireless networks. SKS’s flagship HoverMast line of quadrotor-tethered drones feature uninterruptible ground-based power, fiber optic communications for cyber immunity, and the ability to operate in GPS-denied environments while delivering dramatically-improved situational awareness and communications capabilities to users. We acquired SKS in March 2021. |
| ● | InduraPower, Inc. InduraPower, Inc. (“InduraPower”) is a Tucson, Arizona-based developer and manufacturer of intelligent batteries and back-up power supplies for network systems and telecom nodes. It also provides power designs and batteries for the aerospace, marine and automotive industries. We acquired InduraPower in November 2019. |
| ● | Silver Bullet Technology Inc. Silver Bullet Technology Inc. (“Silver Bullet”) is a California-based engineering firm that designs and develops next generation network systems and components, including large-scale network protocol development, software-defined radio systems and wireless network designs. We acquired Silver Bullet in November 2019. |
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| ● | Lextrum, Inc. Lextrum, Inc. (“Lextrum”) is a Tucson, Arizona-based developer of full-duplex wireless technologies and components, including multi-reconfigurable radio frequency (RF) antennae and software programs. This technology enables the doubling of a given spectrum band by allowing simultaneous transmission and receipt of radio signals on the same frequencies. We acquired Lextrum in November 2019. |
| ● | VEO Photonics, Inc. VEO Photonics, Inc. (“VEO”), based in San Diego, California, is a research and development company innovating SiP technologies for use in copper-to-fiber-to-copper switching, high-speed computing, high-speed ethernet, autonomous vehicle applications, mobile devices and 5G wireless equipment. We acquired VEO in November 2019. |
| ● | Sovereign Plastics LLC. Sovereign Plastics LLC (“Sovereign Plastics”), based in Colorado Springs, Colorado, operates as the material, component manufacturing and supply chain source for all of our subsidiaries, and also provides plastic and metal components to third-party manufacturers. Its ability to rapidly prototype new product offerings and machine moldings, metals and plastic castings has reduced the production cycle for many of our components from months to days. We acquired the business currently conducted by Sovereign Plastics in March 2020. |
| ● | RVision, Inc. RVision, Inc. (“RVision”) is a California-based developer of technologically-advanced video and communications products and physical security solutions designed for government and private sector commercial industries. It has been serving governments and the military for nearly two decades with sophisticated, environmentally-rugged optical and infrared cameras, hardened processors, custom tactical video hardware, software solutions, and related communications technologies. It also has developed nano-defractive optics with integrated, artificial intelligence-driven electro-optical sensors and communication network connectivity products for smart city/smart campus applications. We acquired RVision in April 2021. |
| ● | Innovation Digital, LLC. Innovation Digital, LLC (“Innovation Digital”) is a California-based developer of “beyond state-of-the-art” mixed analog/digital signal processing solutions, intellectual property (IP) licensing, design and consulting services. Its signal processing techniques and intellectual property have significantly enhanced the bandwidth and accuracy of RF transceiver systems and have provided enabling technologies in the fields of communications and RADAR systems, signals intelligence (SIGINT) and electronic warfare (EW), test and measurement systems, and semiconductor devices. We acquired Innovation Digital in June 2021. |
| ● | RF Engineering & Energy Resources, LLC. RF Engineering & Energy Resources, LLC (“RF Engineering”) is a Michigan-based provider of high-quality microwave antennas and accessories. Providing one of the industry's lowest cost of ownership, RF Engineering has continued to innovate and expand recently announcing the industry's first Universal Licensed Microwave Antenna. Supporting frequencies from (6-42 GHz), customers can now reduce sparing costs and safely future proof their networks by leveraging this new Universal plug and play architecture. We acquired RF Engineering in July 2021. |
Response to Global Pandemic
In March 2020, the World Health Organization categorized the COVID-19 outbreak as a pandemic and the President of the United States declared it a national emergency. Our first priority in the midst of this pandemic has been the health and safety of our workforce. While we believe the effect of the pandemic on our company was not significant in 2020, in 2021 it has affected our supply chain, delaying expected revenue from 2021 into 2022. We continue to monitor the market and environment for impacts to the business as the pandemic continues to evolve and its future effects remain uncertain.
Significant Components of Our Results of Operations
Revenues
Our revenues are generated primarily from the sale of our products, which consist primarily of backhaul telecom radios and tethered aerostats and drones. At contract inception, we assess the goods and services promised in the contract with customers and identify a performance obligation for each. To determine the performance obligation, we consider all 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 expected to be received in exchange for transferring goods and services. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have been met.
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We expect our revenues for the year ending December 31, 2021 (“fiscal 2021”) to exceed those of fiscal 2020, primarily due to our availability of working capital, including from a portion of the net proceeds of the equity offerings we completed in the first quarter of 2021, for the purchase of parts and components and the manufacturing of products, primarily those of DragonWave in quantities that greatly exceed the quantities that we were able to manufacture in 2020 as well as our acquisitions of Fastback and SKS. However, due to the COVID-19 pandemic, we have experienced delays on the delivery of certain components required for the manufacture of certain products, primarily those of DragonWave. Primarily as a result of those delays, we have experienced manufacturing and shipping delays that have adversely affected our revenues in fiscal 2021. We expect to recognize a significant portion of those revenues in early 2022. Additionally, primarily as a result of these delays, we now expect to commence commercial production of certain new products in late 2021 or early 2022 that we have previously produced in only limited quantities or as prototypes and for which we had expected to ramp up production earlier in 2021, including, among others, intelligent battery back-up power solutions for the telecom, aerospace and transportation industries and airborne high-bandwidth, LTE-Advanced and 5G aerostats.
During fiscal 2020, approximately 18% of our sales were to customers located outside of the United States. While our near-term focus is on the North American telecom and infrastructure and service market, a key element of our growth strategy is to expand our worldwide customer base and our international operations, initially through agreements with third-party resellers, distributors and other partners that can market and sell our products in foreign jurisdictions. We expect that over the short term our percentage of sales outside the United States may increase as we build up our sales and service teams. Notwithstanding such percentage increase, we expect the sales of tethered aerostats and drones will primarily be to the domestic market customers, primarily to the U.S. government and its agencies, even if such systems are for implementation in foreign locations.
Cost of Goods Sold and Gross Profit
Our cost of goods sold is comprised primarily of the costs of manufacturing products, procuring finished goods from our third-party manufacturers, third-party logistics and warehousing provider costs, shipping and handling costs and warranty costs. We presently outsource the manufacturing of DragonWave’s microwave products to a single third-party manufacturer, Benchmark, which manufactures our products from its facilities. Cost of goods sold also includes costs associated with supply operations, including personnel-related costs, provision for excess and obsolete inventory, third-party license costs and third-party costs related to the services we provide. Additionally, cost of goods sold does not include any depreciation and amortization expenses as we separate depreciation and amortization expense into its own category within operating expenses.
Gross profit has been and will continue to be affected by various factors, including changes in our supply chain and evolving product mix. The margin profile of our current products and future products will vary depending on operating performance, features, materials, manufacturer and supply chain. Gross margin will vary as a function of changes in pricing due to competitive pressure, our third-party manufacturing, our production costs, costs of shipping and logistics, provision for excess and obsolete inventory and other factors. We expect our gross margins will fluctuate from period to period depending on the interplay of these various factors.
Operating Expenses
We classify our operating expense as research and development, sales and marketing, and general and administrative. Personnel costs are the primary component of each of these operating expense categories, which consist of cash-based personnel costs, such as salaries, sales commissions, benefits and bonuses, as well as share-based compensation expenses. Additionally, we separate depreciation and amortization expense into its own category.
Research and Development
In addition to personnel-related costs, research and development expense consists of costs associated with the design, development and certification of our products. We generally recognize research and development expenses as incurred. Development costs incurred prior to establishment of technological feasibility also are expensed as incurred. We expect our research and development costs to continue to increase as we develop new products and modify existing products to meet the changes within the telecom landscape.
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Sales and Marketing
In addition to personnel costs for sales, marketing, service and product management personnel, sales and marketing expense consists of the expenses associated with our training programs, trade shows, marketing programs, promotional materials, demonstration equipment, national and local regulatory approvals of our products, travel, entertainment and recruiting. We expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of our sales, marketing, service and product management organization in support of our investment in our growth opportunities, whether through the development and rollout of new or modified products or through acquisitions. We expect our sales and marketing expense to increase materially in the year ending December 31, 2021 as we ramp up our sales and marketing efforts to correspond to our increased production efforts relating to certain of our telecom products.
General and Administrative
In addition to personnel costs, general and administrative expense consists of professional fees, such as legal, audit, accounting, information technology and consulting fees; share-based compensation; and facilities and other supporting overhead costs. We expect general and administrative expense to increase in absolute dollars as we continue to expand our product offerings and expand into new markets. During fiscal 2020, we incurred, and during fiscal 2021 we expect to continue to incur, increases in supporting overhead costs, professional fees, transfer agent fees and expenses; development costs and other expenses related to operating as a public company.
Depreciation and Amortization
Depreciation and amortization expense consists of depreciation related to fixed assets such as test equipment, research and development equipment, computer hardware, production fixtures and leasehold improvements, as well as amortization related to definite-lived intangibles.
Share-Based Compensation
Share-based compensation consists of expense related to the issuance of equity instruments, which can be in many forms, such as incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including performance-based awards under our long-term incentive plans or outside of such plans. The expense related to any share-based compensation grant is allocated to specific groupings in the Condensed Consolidated Statement of Operations in the same manner as the grantee’s normal compensation expense and will vary depending upon the number of underlying shares of common stock, the fair value of the common stock on the date of grant and the vesting period.
Interest Expense
Interest expense is comprised of interest expense associated with our secured notes payable, notes payable and senior convertible debentures. The amortization of debt discounts is also recorded as part of interest expense. As many of our debt instruments were past due at various times during fiscal 2020 and, as a result, were accruing interest at increased interest rates, and as we have been able to refinance our debt or issue equity to reduce our outstanding debt in the first quarter of fiscal 2021, our interest expense is expected to decrease in fiscal 2021 due to lower interest rates on our debt or lower debt balances.
Provision for Income Taxes
Current and deferred income tax expense or benefit in any given period will depend upon a number of events and circumstances, one of which is the income tax net income or loss from operations for the period which is usually different from the U.S. GAAP net income from operations for the period due to differences in tax laws and timing differences. Management assesses our deferred tax assets in each reporting period, and if it is determined that it is not more likely than not to be realized, we will record a change in our valuation allowance in that period.
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Results of Operations
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (Amounts in thousands, except share and per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenue | $ | 3,611 | $ | 3,010 | $ | 5,698 | $ | 5,495 | ||||||||
| Cost of Goods Sold | 1,813 | 1,553 | 2,887 | 2,613 | ||||||||||||
| Gross Profit | 1,798 | 1,457 | 2,811 | 2,882 | ||||||||||||
| Operating Expenses | ||||||||||||||||
| Research and development | 1,199 | 413 | 1,747 | 701 | ||||||||||||
| Sales and marketing | 109 | 16 | 157 | 30 | ||||||||||||
| General and administrative | 6,976 | 4,246 | 14,111 | 8,681 | ||||||||||||
| Depreciation and amortization | 3,617 | 2,913 | 7,278 | 5,745 | ||||||||||||
| Impairment expense | 281 | — | 281 | — | ||||||||||||
| Gain on the sale of assets | — | — | (83 | ) | (1 | ) | ||||||||||
| Total Operating Expenses | 12,182 | 7,588 | 23,491 | 15,156 | ||||||||||||
| Net Operating Loss | (10,384 | ) | (6,131 | ) | (20,680 | ) | (12,274 | ) | ||||||||
| Other (Expense) Income | ||||||||||||||||
| Interest expense | (547 | ) | (1,384 | ) | (1,016 | ) | (2,357 | ) | ||||||||
| Other income | 13 | — | — | — | ||||||||||||
| Gain/(loss) on extinguishment of debt | 323 | — | (5,025 | ) | — | |||||||||||
| Foreign currency transaction loss/(gain) | 18 | (51 | ) | (62 | ) | 40 | ||||||||||
| Total Other Expenses | (193 | ) | (1,435 | ) | (6,103 | ) | (2,317 | ) | ||||||||
| Net Loss | $ | (10,577 | ) | $ | (7,566 | ) | $ | (26,783 | ) | $ | (14,591 | ) | ||||
| Loss per common share: | ||||||||||||||||
| Basic | $ | (0.15 | ) | $ | (0.18 | ) | $ | (0.42 | ) | $ | (0.34 | ) | ||||
| Diluted | $ | (0.15 | ) | $ | (0.18 | ) | $ | (0.42 | ) | $ | (0.34 | ) | ||||
| Weighted-average shares outstanding: | ||||||||||||||||
| Basic | 68,770,644 | 42,886,180 | 63,538,782 | 42,856,809 | ||||||||||||
| Diluted | 68,770,644 | 42,886,180 | 63,538,782 | 42,856,809 | ||||||||||||
Three and Six Months Ended June 30, 2021 compared to Three and Six Months Ended June 30, 2020
Total Revenues
For the three months ended June 30, 2021, total revenues were $3.61 million compared to $3.01 million for the same period in 2020, an increase of $0.6 million. This increase primarily consisted of revenues of $0.3 million from the acquisition of Sky Sapience in February 2021.
For the six months ended June 30, 2021, total revenues were $5.7 million compared to $5.5 million for the same period in 2020, an increase of $0.2 million. This increase primarily consisted of revenues of $1.6 million from the acquisition of Sky Sapience in February 2021, which offset the decrease in the revenues of DragonWave of $0.6 million and of Drone Aviation of $0.7 million, which were affected by delays in production due to component shortages.
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Cost of Goods Sold and Gross Profit
For the three months ended June 30, 2021, cost of goods sold were $1.81 million compared to $1.55 million for the same period in 2020, an increase of $0.26 million.
Gross profit for the three months ended June 30, 2021 was 1.8 million with a gross profit margin of 50% compared to $1.46 million for the same period in 2020 with a gross profit margin of 48%.
For the six months ended June 30, 2021, cost of goods sold were $2.89 million compared to $2.61 million for the same period in 2020, an increase of $0.28 million.
Gross profit for the six months ended June 30, 2021 was $2.81 million with a gross profit margin of 49% compared to $2.88 million for the same period in 2020 with a gross profit margin of 52%.
These changes in gross profit margin resulted primarily from the mix of products.
Research and Development Expense
For the three months ended June 30, 2021, research and development expenses were $1.2 million compared to $0.41 million for the same period in 2020, an increase of $0.79 million. This increase primarily consisted of increased expenditures of $0.5 million and $0.3 million relating to our acquisitions of Sky Sapience and VNC, respectively.
For the six months ended June 30, 2021, research and development expenses were $1.75 million compared to $0.7 million for the same period in 2020, an increase of $1.05 million. This increase primarily consisted of increased expenditures of $0.6 million and $0.4 million relating to our acquisitions of Sky Sapience and VNC, respectively.
Sales and Marketing Expense
For the three months ended June 30, 2021, sales and marketing expenses were $0.1 million compared to $0.0 million for the same period in 2020, an increase of 0.1 million This increase primarily consisted of increased expenditures relating to our acquisition of Sky Sapience.
For the six months ended June 30, 2021, sales and marketing expense was $0.2 million compared to $0.0 million for the same period in 2020, an increase of $0.2 million. This increase primarily consisted of increased expenditures relating to our acquisition of Sky Sapience.
General and Administrative Expenses
For the three months ended June 30, 2021, general and administrative expenses were $7.0 million compared to $4.3 million for the same period in 2020, an increase of $2.7 million. This increase primarily consisted of $1.8 million in payroll related costs related primarily to the acquisitions we completed subsequent to June 30, 2020, $0.2 million increase in rent, $0.2 million increase in director fees and $0.1 million increase in transfer agent fees.
For the six months ended June 30, 2021, general and administrative expenses were $14.1 million compared to $8.7 million for the same period in 2020, an increase of $5.4 million. This increase primarily consisted of $2.4 million of additional expenses from new acquisitions and newly-formed companies, and $1.3 million on payroll for existing companies, $1.1 million of incremental advisory fees, and $0.3 million of increases in rent.
Depreciation and Amortization
For the three months ended June 30, 2021, depreciation and amortization expenses were $3.6 million compared to $2.9 million for the same period in 2020, an increase of $0.7. This increase primarily due to the increase in depreciable assets we acquired from new acquisitions.
For the six months ended June 30, 2021, depreciation and amortization expenses were $7.3 million compared to $5.8 million for the same period in 2020, an increase of $1.5 million. This increase primarily due to the increase in depreciable assets we acquired from new acquisitions.
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Other Income and Expenses
For the three months ended June 30, 2021, other income and expenses were $0.2 million compared to $1.4 million for the same period in 2020, a decrease of $1.2. This increase primarily consisted of decreased interest expense of $0.8 million due to lower interest rates and decreased borrowings.
For the six months ended June 30, 2021, other income and expenses were $6.1 million compared to $2.3 million for the same period in 2020, an increase of $3.8 million. This increase primarily consisted of loss on extinguishment of debt of $5.2 million, which was offset by decreased interest expense of $1.3 million due to lower interest rates and decreased borrowings.
Net Loss
For the three months ended June 30, 2021, we had a net loss of $10.6 million compared to a net loss of $7.6 million for the same period in 2020, related to the items described above.
For the six months ended June 30, 2021, we had net loss of $26.8 million compared to a net loss of $14.6 million for the same period 2020, related to the items described above.
Going Concern
The accompanying Unaudited Condensed Consolidated Financial Statements and notes have been prepared assuming we will continue as a going concern. For the six months ended June 30, 2021, we generated negative cash flows from operations of $26.85 million and had an accumulated deficit of $91.41 million.
Management anticipates that we will be dependent, for the near future, on additional debt facilities or investment capital to fund growth initiatives. We intend to position our company so that it will be able to raise additional funds through the capital markets, including but not limited to, securing a line or lines of credit, the issuance of debt, and/or accessing the equity markets.
Our fiscal operating results and accumulated deficit, among other factors, raise substantial doubt about our ability to continue as a going concern. We will continue to pursue the actions outlined above, as well as work towards increasing revenue and operating cash flows to meet our future liquidity requirements. However, there can be no assurance that we will be successful in any capital-raising efforts that we may undertake, and our failure of to raise additional capital could adversely affect our future operations and viability.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of June 30, 2021, we had $5.4 million in cash compared to $0.73 million at December 31, 2020, an increase of $4.67 million resulting primarily from net proceeds of two public offerings, debt financing and liabilities paid. As of June 30, 2021, we had $1.71 million in accounts receivable compared to $0.79 million at December 31, 2020, an increase of $0.92 resulting primarily from receivables gained through business acquisitions during the first six months of 2021.
As of June 30, 2021, we had total current assets of $21.56 million and total current liabilities of $20.71 million, or working capital of $0.85 million, compared to total current assets of $7.68 million and total current liabilities of $34.26 million, or negative working capital of $26.58 million at December 31, 2020. This is an increase in working capital of $27.43 million over the working capital balance at the end of 2020 that was driven primarily by the two public offerings and debt financing completed during the first six months of 2021.
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As of June 30, 2021, we had undiscounted obligations relating to the payment of indebtedness as follows:
| ● | $1.55 million related to accrued liabilities and accounts payable that were past due; |
| ● | $51 thousand related to indebtedness that is due in the third quarter of 2021; |
| ● | $2.23 million related to indebtedness that is due in the fourth quarter of 2021; | |
| ● | $6.32 million related to indebtedness that is due in the first quarter of 2022; |
| ● | $2.69 million related to indebtedness that is due in the second quarter of 2022; |
| ● | $3.67 million related to indebtedness that is due from the third quarter through the end of 2022; |
| ● | $2.45 million related to indebtedness that is due in 2023; and | |
| ● | $11.3 million related to indebtedness that is due during or after 2026. |
We anticipate meeting our cash obligations on our indebtedness that is payable on or prior to June 30, 2022, primarily from liquidity management tools such as a line of credit, from earnings from operations, including, in particular, the operations of DragonWave, VNC, Fastback, SKS and Drone Aviation, and possibly from the proceeds of additional indebtedness or equity raises.
Our future capital requirements for our operations will depend on many factors, including the profitability of our businesses, the number and cash requirements of other acquisition candidates that we pursue, and the costs of our operations. We have been investing in research and development in anticipation of increasing revenue opportunities in our cellular network solutions business, which has contributed to our losses from operations.
We plan to generate positive cash flow from our recently-completed acquisitions to address some of our liquidity needs. However, to execute our business plan, service our existing indebtedness, finance our proposed acquisitions and implement our business strategy, we anticipate that we will need to obtain additional financing from time to time and may choose to raise additional funds through public or private equity or debt financings, a bank line of credit, borrowings from affiliates or other arrangements. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute our current stockholders’ ownership in us and could also result in a decrease in the market price of our common stock. The terms of those securities issued by us in future capital transactions may be more favorable to new investors and may include the issuance of warrants or other derivative securities, which may have a further dilutive effect. Furthermore, any debt financing, if available, may subject us to restrictive covenants and significant interest costs. There can be no assurance that we will be able to raise additional capital, when needed, to continue operations in their current form.
We had capital expenditures of $3.78 million and $0.15 million during the six months ended June 30, 2021 and 2020. We expect our capital expenditures for next 12 months will be consistent with our prior spending. These capital expenditures will be primarily utilized for equipment needed to generate revenue and for office equipment. We expect to fund such capital expenditures out of our working capital.
Line of Credit and Debt Agreements
Summary information with respect to our debt agreements or other credit facilities is set forth in Notes 13 and 19 of the Notes to the Consolidated Financial Statements set forth in Part I, Item 1 of this Quarterly Report.
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Sources and Uses of Cash
| For the Six Months Ended June 30, | ||||||||
| (Amounts in thousands) | 2021 | 2020 | ||||||
| Cash flows (used in) operating activities | $ | (26,852 | ) | $ | (1,192 | ) | ||
| Cash flows (used in) investing activities | (7,948 | ) | (648 | ) | ||||
| Cash flows provided by financing activities | 39,473 | 1,396 | ||||||
| Effect of exchange rate | - | 1 | ||||||
| Net increase/(decrease) in cash and cash equivalents | $ | 4,673 | $ | (443 | ) | |||
Operating Activities
For the six months ended June 30, 2021, net cash used in operating activities was $26.85 million. Net cash used in operating activities primarily consisted of the net operating loss of $26.78 million, which was partially offset by depreciation and amortization of $7.28 million, loss on extinguishment of debt of $5.03 million, share-based compensation to employees and payments to vendors of $2.05 million, operating lease and bad debt expense of $0.69 million, debt issuance costs of $0.25 million, and impairment expense of $0.28. Additionally, working capital changes used $15.56 million in cash during the period.
For the six months ended June 30, 2020, net cash used in operating activities was $1.19 million. Net cash used in operating activities primarily consisted of the net operating loss of $14.59 million, which was partially offset by depreciation and amortization of $5.75 million, amortized discounts and debt issuance costs on our outstanding debt of $1.55 million, and operating lease and bad debt expense of $0.64 million. Additionally, working capital changes provided $5.47 million in cash during the period.
Investing Activities
For the six months ended June 30, 2021, net cash used in investing activities was $7.95 million. Investing activities primarily consisted of business acquisitions with direct cashflow impact of $4.25 million and capital expenditures of $3.78 million.
For the six months ended June 30, 2020, net cash used in investing activities was $0.65 million. Investing activities primarily consisted of business acquisitions with direct cashflow impact of $0.25 million, capital expenditures of $0.15 million and note receivable from acquisition of $0.25.
Financing Activities
For the six months ended June 30, 2021, financing activities provided cash of $39.47 million. Financing activities primarily consisted of net proceeds from the sale of common stock from the public offerings of $39.66 million and net proceeds of borrowings of $9.35 million, which was offset by the repayment of debt of $8.48 million, the repayment of related party notes of $0.85 million and cash discounts and debt issuance costs of $0.19 million.
For the six months ended June 30, 2020, financing activities provided cash of $1.4 million. Financing activities primarily consisted the proceeds from the issuance of debt of $4.02 million, which was offset by the payment on the line of credit of $2.0 million and the repayment of debt of $0.58 million.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.
47
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required under Regulation S-K for smaller reporting companies.
Item 4. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures.
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. This term refers to the controls and procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report.
As previously disclosed in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, management has identified the following material weaknesses in our disclosure controls and procedures:
| ● | a lack of effective segregation of certain accounting duties due to the small size of our accounting staff; |
| ● | a lack of timely reconciliations of the account balances affected by the improperly recorded or omitted transactions; and |
| ● | there is a lack of documented and tested internal controls to meet the requirements of Section 404(a) of the Sarbanes-Oxley Act of 2002. |
Our remediation of the material weaknesses in our internal control over financial reporting is ongoing.
(b) Changes in Internal Control Over Financial Reporting.
There have been no changes in our internal control over financial reporting as of and for the six months ended June 30, 2021, as compared to the internal control over financial reporting weaknesses described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
48
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments in any of the legal proceedings discussed in Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2020, except as follows.
On May 22, 2020, Michael Powell, a former employee of a subsidiary of our company, filed suit against us and certain of our subsidiaries, including DragonWave-X, LLC, DragonWave-X, Inc., Transform-X, Inc., and COMSovereign Corp, in the Pima County Arizona Superior Court, Case No. C20202216. On December 7, 2020, Mr. Powell filed his first amended complaint against our company, DragonWave Corp., and Transform-X, Inc. Mr. Powell alleged that he entered into an employment agreement with DragonWave-X, Inc. in July 2018, was terminated without cause in May 2019, and claimed he was owed approximately $182 thousand in wages and $50 thousand in bonuses. Mr. Powell sought approximately $697 thousand in treble damages, punitive damages, consequential damages, interest and attorneys’ fees and costs. In July 2021, we reached and paid a final settlement on this matter totaling $100 thousand.
Item 1A. Risk Factors
Readers should carefully review the risk factors included under “Item 1A. Risk Factors” of our fiscal 2020 Annual Report on Form 10-K filed with the SEC on March 30, 2021 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 filed with the SEC on May 17, 2021.
49
Item 2. Unregistered Securities Sales of Equity Securities and Use of Proceeds
There have been no sales of unregistered securities within the period covered by this report that would be required to be disclosed pursuant to Item 701 of Regulation S-K, with the exception of the following:
On January 22, 2021 and April 24, 2021, respectively, we issued to a consulting firm for services rendered, 8,169 shares of our common stock that were valued at $2.00 per share and 7,571 shares of our common stock that were valued at $2.67 per share. Such shares were issued by us in reliance upon the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder, and the certificate representing such shares has a legend imprinted on it stating that the shares have not been registered under the Securities Act and cannot be transferred until properly registered under the Securities Act or pursuant to an exemption from such registration.
On April 24, 2021, we issued 50,000 shares of our common stock upon the exercise of previously issued options. Such shares were issued by us in reliance upon the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder, and the certificate representing such shares has a legend imprinted on it stating that the shares have not been registered under the Securities Act and cannot be transferred until properly registered under the Securities Act or pursuant to an exemption from such registration.
On June 17, 2021, we issued 10,000 shares of our common stock upon the exercise of previously issued options. Such shares were issued by us in reliance upon the exemption from registration available under Section 4(a)(2) of the Securities Act, including Regulation D promulgated thereunder, and the certificate representing such shares has a legend imprinted on it stating that the shares have not been registered under the Securities Act and cannot be transferred until properly registered under the Securities Act or pursuant to an exemption from such registration.
Item 3. Default Upon Senior Securities
None
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
None
50
Item 6. Exhibits
The following documents are filed as a part of this report or incorporated herein by reference:
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
51
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| COMSovereign Holding Corp. | ||
| Date: August 16, 2021 | /s/ Daniel L. Hodges | |
| Daniel L. Hodges | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: August 16, 2021 | /s/ Martin R. Wade III | |
| Martin R. Wade III | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
52
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Daniel L. Hodges certify that:
| (1) | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021 of COMSovereign Holding Corp. (the “Registrant”); |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| (4) | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in the report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| (5) | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Dated: August 16, 2021 | By: | /s/ Daniel L. Hodges |
| Daniel L. Hodges | ||
| Chairman and Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Martin R. Wade III certify that:
| (1) | I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021 of COMSovereign Holding Corp. (the “Registrant”); |
| (2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| (3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report; |
| (4) | The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have: |
| (a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | disclosed in the report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and |
| (5) | The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting. |
| Dated: August 16, 2021 | By: | /s/ Martin R. Wade III |
| Martin R. Wade III | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of COMSovereign Holding Corp. (the “Company”) for the fiscal quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel L. Hodges, Chairman and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. |
| Dated: August 16, 2021 | By: | /s/ Daniel L. Hodges |
| Daniel L. Hodges | ||
| Chairman and Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of COMSovereign Holding Corp. (the “Company”) for the fiscal quarter ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martin R. Wade III, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. |
| Dated: August 16, 2021 | By: | /s/ Martin R. Wade III |
| Martin R. Wade III | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Condensed Consolidated Balance Sheet (Parentheticals) - $ / shares |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
| Preferred stock, shares issued | ||
| Preferred stock, shares outstanding | ||
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 300,000,000 | 300,000,000 |
| Common stock, shares issued | 71,541,070 | 49,444,689 |
| Common stock, shares outstanding | 71,541,070 | 49,444,689 |
| Treasury stock, at cost | 100,000 | 100,000 |
Condensed Consolidated Statement of Operations (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Revenue | $ 3,611 | $ 3,010 | $ 5,698 | $ 5,495 |
| Cost of Goods Sold | 1,813 | 1,553 | 2,887 | 2,613 |
| Gross Profit | 1,798 | 1,457 | 2,811 | 2,882 |
| Operating Expenses | ||||
| Research and development | 1,199 | 413 | 1,747 | 701 |
| Sales and marketing | 109 | 16 | 157 | 30 |
| General and administrative | 6,976 | 4,246 | 14,111 | 8,681 |
| Depreciation and amortization | 3,617 | 2,913 | 7,278 | 5,745 |
| Impairment expense | 281 | 281 | ||
| Gain on the sale of assets | (83) | (1) | ||
| Total Operating Expenses | 12,182 | 7,588 | 23,491 | 15,156 |
| Net Operating Loss | (10,384) | (6,131) | (20,680) | (12,274) |
| Other (Expense) Income | ||||
| Interest expense | (547) | (1,384) | (1,016) | (2,357) |
| Other income | 13 | |||
| Gain/(loss) on extinguishment of debt | 323 | (5,025) | ||
| Foreign currency transaction loss/(gain) | 18 | (51) | (62) | 40 |
| Total Other Expenses | (193) | (1,435) | (6,103) | (2,317) |
| Net Loss | $ (10,577) | $ (7,566) | $ (26,783) | $ (14,591) |
| Loss per common share: | ||||
| Basic (in Dollars per share) | $ (0.15) | $ (0.18) | $ (0.42) | $ (0.34) |
| Diluted (in Dollars per share) | $ (0.15) | $ (0.18) | $ (0.42) | $ (0.34) |
| Weighted-average shares outstanding: | ||||
| Basic (in Shares) | 68,770,644 | 42,886,180 | 63,538,782 | 42,856,809 |
| Diluted (in Shares) | 68,770,644 | 42,886,180 | 63,538,782 | 42,856,809 |
Condensed Consolidated Statement of Comprehensive Loss(Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Net Loss | $ (10,577) | $ (7,566) | $ (26,783) | $ (14,591) |
| Other Comprehensive Gain: | ||||
| Foreign currency translation adjustment | (1) | |||
| Total Comprehensive Loss | $ (10,577) | $ (7,566) | $ (26,783) | $ (14,590) |
Description of Business and Basis of Presentation |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Accounting Policies [Abstract] | |
| DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
COMSovereign Holding Corp. (the “Company”), formerly known as Drone Aviation Holding Corp., is a provider of technologically-advanced telecom solutions to network operators, mobile device carriers, governmental units and other enterprises worldwide. The Company has assembled a portfolio of communications, power and portable infrastructure technologies, capabilities and products that enable the upgrading of latent 3G networks to 4G and 4G-LTE networks and will facilitate the rapid rollout of the 5G and “next-Generation” (“nG”) networks of the future. The Company focuses on novel capabilities, including signal modulations, antennae, software, hardware and firmware technologies that enable increasingly efficient data transmission across the radio-frequency spectrum. The Company’s product solutions are complemented by a broad array of services including technical support, systems design and integration, and sophisticated research and development programs. The Company competes globally on the basis of its innovative technology, broad product offerings, high-quality and cost-effective customer solutions, as well as the scale of its global customer base and distribution. In addition, the Company believes it is in a unique position to rapidly increase its near-term domestic sales as it is among the few U.S.-based providers of telecommunications equipment and services.
On January 29, 2021, the Company completed the acquisition of Skyline Partners Technology LLC, a Colorado limited liability company that does business under the name Fastback Networks (“Fastback”). Fastback is a manufacturer of intelligent backhaul radio (IBR) systems that deliver high-performance wireless connectivity to virtually any location, including those challenged by Non-Line of Sight (NLOS) limitations.
On February 25, 2021, the Company completed the acquisition of Sky Sapience Ltd., a company organized under the laws of the State of Israel (“SKS”). SKS is an Israeli-based manufacturer of drones with a patented tethered hovering technology that provides long-duration, mobile and all-weather Intelligence, Surveillance and Reconnaissance (ISR) capabilities to customers worldwide for both land- and marine-based applications.
On April 1, 2021, the Company completed the acquisition of RVision, Inc., a Nevada corporation (“RVision”). RVision is a developer of technologically-advanced video and communications products and physical security solutions designed for government and private sector commercial industries.
On June 3, 2021, the Company completed the acquisition of Innovation Digital, LLC, a California limited liability company (“Innovation Digital”). Innovation Digital is a premier provider of “beyond state-of-the-art” mixed analog/digital signal processing solutions, intellectual property (IP) licensing, and design and consulting services.
See Note 11 – Business Acquisitions for further discussion of the Company’s acquisitions.
Basis of Presentation
The accompanying financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Historical information is not necessarily indicative of the Company’s future results of operations, financial position or cash flows.
As described in Note 15 – Stockholders’ Equity, effective January 21, 2021, the Company enacted a 1-for-3 reverse stock split (the “Split”) of the Company’s common stock. The Condensed Consolidated financial statements and accompanying notes give effect to the Split as if it occurred at the beginning of the first period presented.
Principles of Consolidation
The results for the three and six months ended June 30, 2021 are not necessarily indicative of the Company’s results of operations, financial position or cash flows that may be expected for the full fiscal year or future operating periods. The unaudited Condensed Consolidated Financial Statements included herein should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
The unaudited Condensed Consolidated Financial Statements as of, and for the three and six months ended, June 30, 2021 and 2020 include the accounts of the Company and all of its subsidiaries. All intercompany transactions and accounts have been eliminated.
COVID-19 and Market Update
In March 2020, the World Health Organization categorized the COVID-19 outbreak as a pandemic and the President of the United States declared it a national emergency. The Company continues to monitor the market and environment for impacts to the business as the pandemic continues to evolve and its future effects remain uncertain.
Reclassifications
Certain immaterial June 30, 2020 amounts have been reclassified to be consistent with the current period presentation.
Use of Estimates
The preparation of unaudited financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Summary of Significant Accounting Policies |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Accounting Policies [Abstract] | |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes in the Company’s significant accounting policies as of and for the six months ended June 30, 2021, as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Accounting Standards Not Yet Adopted
In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-04, Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) (ASU 2021-04). This guidance clarifies an issuer’s accounting for certain modifications of freestanding equity-classified written call options and provides a “principles-based” framework to determine whether an issuer should recognize the modification or exchange and an adjustment to equity or an expense. The Company is currently evaluating the potential impact ASU 2021-04 will have on the Condensed Consolidated Financial Statements.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance simplifies the accounting for certain convertible instruments and contracts in an entity’s own equity. As a smaller reporting entity, this standard will become effective for fiscal years beginning after December 15, 2023, including interim periods within those years. The Company is currently evaluating the potential impact ASU 2020-06 will have on the Condensed Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments that use LIBOR as a reference rate and is effective upon issuance through December 31, 2022. The Company has performed an evaluation of and will continue to evaluate, through December 31, 2022, the impact of this ASU. This ASU does not currently and is not expected to have in the future, a material effect on the Condensed Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. This standard will become effective for interim and annual periods beginning after December 15, 2022 and earlier adoption is permitted. The Company is currently evaluating the potential impact the adoption of this ASU will have on the Condensed Consolidated Financial Statements.
Accounting Standards Adopted
During the six months ended June 30, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740). This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes. The impact that adopting this ASU has not had any material effect on the Condensed Consolidated Financial Statements. |
Going Concern |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| GOING CONCERN | 3. GOING CONCERN
U.S. GAAP requires management to assess a company’s ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosures in certain circumstances.
The accompanying Unaudited Condensed Consolidated Financial Statements and notes have been prepared assuming the Company will continue as a going concern. For the six months ended June 30, 2021, the Company generated negative cash flows from operations of $28.85 million and had an accumulated deficit of $91.41 million.
Management anticipates that the Company will be dependent, for the near future, on additional debt facilities or investment capital to fund growth initiatives. The Company intends to position itself so that it will be able to raise additional funds through the capital markets, including but not limited to, securing a line or lines of credit, the issuance of debt, and/or accessing the equity markets.
The Company’s fiscal operating results and accumulated deficit, among other factors, raise substantial doubt about the Company’s ability to continue as a going concern. The Company will continue to pursue the actions outlined above, as well as work towards increasing revenue and operating cash flows, to meet its future liquidity requirements. However, there can be no assurance that the Company will be successful in any capital-raising efforts that it may undertake, and the failure of the Company to raise additional capital could adversely affect its future operations and viability. |
Revenue |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Revenue Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| REVENUE | 4. REVENUE
The following table is a summary of the Company’s timing of revenue recognition for the three and six months ended June 30, 2021 and 2020:
The Company disaggregates revenue by source and geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
Revenue by source consisted of the following for the three and six months ended June 30, 2021 and 2020:
Revenue by geographic destination consisted of the following for the for the three and six months ended June 30, 2021 and 2020:
Contract Balances
The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. As of June 30, 2021, the Company did not have a contract assets balance.
The following table is a summary of the Company’s opening and closing balances of contract liabilities related to contracts with customers.
The increase in contract liabilities during the six months ended June 30, 2021 was primarily due to invoiced amounts that did not yet meet the revenue recognition criteria, partially offset by the revenue recognition criteria being met for previously deferred revenue. |
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Accounts Receivable, Net |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Accounts Receivable, after Allowance for Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||
| ACCOUNTS RECEIVABLE, NET | 5. ACCOUNTS RECEIVABLE, NET
Accounts receivable consisted of the following as of June 30, 2021 and December 31, 2020:
The Company recognized $0.20 million and $0.13 million of bad debt expense for the three months ended June 30, 2021 and 2020, respectively, and $0.20 million and $0.38 million for the six months ended June 30, 2021 and 2020, respectively. |
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Inventory |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY | 6. INVENTORY
Inventory consisted of the following as of June 30, 2021 and December 31, 2020:
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Prepaid |
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| PREPAID | 7. PREPAID
Prepaid expenses consisted of the following as of June 30, 2021 and December 31, 2020:
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Property and Equipment, Net |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | 8. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following as of June 30, 2021 and December 31, 2020:
The Company recognized $0.44 million and $0.29 million of depreciation expense for the three months ended June 30, 2021 and 2020, respectively, and $0.8 million and $0.52 million for the six months ended June 30, 2021 and 2020, respectively. |
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Accounts Payable and Accrued Expenses |
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following as of June 30, 2021 and December 31, 2020:
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Leases |
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| Leases Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | 10. LEASES
Operating Leases
The Company has operating leases for office, manufacturing and warehouse space, office equipment, and vehicles.
As part of the SKS business acquisition on February 25, 2021, the Company assumed a lease of flexible office space with a remaining term of approximately 28 months that will expire on July 1, 2023. Monthly payments are $16 thousand during the remaining life of the lease. The lease did not include an implicit rate of return; therefore, the Company used an incremental borrowing rate based on other leases with similar terms.
As part of the SKS business acquisition on February 25, 2021, the Company assumed vehicle leases with a remaining weighted average term of approximately 11 months. Monthly average payments are $2 thousand during the remaining life of the leases. The leases included an implicit rate of return from 5.41% to 6% and no renewal options.
In April 2021, the Company entered into a 60-month office equipment lease with monthly payments and no renewal options. The lease did not include an implicit rate of return; therefore, the Company used an incremental borrowing rate based on other leases with similar terms. In April 2021, a subsidiary of the Company entered into several vehicle leases with approximately 36-month terms. Monthly payments range from $1 thousand to $2 thousand. Each lease had an implicit rate of 6.0% and no renewal options.
In May 2021, a subsidiary of the Company entered into an amendment to its existing facility lease to extend the expiration date through June 20, 2022 and to increase the annual base to $12 thousand per month. The lease did not include an implicit rate of return; therefore, the Company used an incremental borrowing rate based on other leases with similar terms. The modification resulted in additional right-of-use asset and lease liability of $0.12 million As part of the RVision business acquisition on April 1, 2021, the Company assumed a lease of office space with a remaining term of approximately 35 months that will expire on March 31, 2024. Monthly payments ae $7 thousand during the remaining life of the lease. The lease did not include an implicit rate of return; therefore, the Company used an incremental borrowing rate based on other leases with similar terms.
Other information related to the Company’s operating leases are as follows:
The following table presents the weighted-average remaining lease term and weighted average discount rates related to the Company’s operating leases as of June 30, 2021 and December 31, 2020, respectively:
The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the Condensed Consolidated Balance Sheet as of June 30, 2021:
Finance Leases
The Company has finance leases for certain manufacturing and office equipment.
Information related to the Company’s finance leases are as follows:
The following table presents the weighted-average remaining lease term and weighted average discount rates related to the Company’s finance leases as of June 30, 2021 and December 31, 2020, respectively:
The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the finance lease liabilities recorded on the Condensed Consolidated Balance Sheet as of June 30, 2021:
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Business Acquisitions |
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| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUSINESS ACQUISITIONS | 11. BUSINESS ACQUISITIONS
Skyline Partners Technology LLC
On January 29, 2021, the Company completed the acquisition of Fastback for cash consideration paid of $1.32 million and the issuance of $1.50 million aggregate principal amount of term notes and $11.15 million aggregate principal amount of convertible notes that are convertible into common stock at a conversion price of $5.22 per share, subject to adjustment. See Note 13 – Debt Agreements for further discussion of the notes. Fastback’s products complement and enhance the Company’s 5g connectivity offerings. All resulting goodwill is expected to be tax deductible.
The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.
Sky Sapience Ltd.
On February 25, 2021, the Company completed the acquisition of SKS. The total preliminary purchase price consideration amounted to $11.78 million, subject to working capital and other post-closing adjustments, representing (i) cash paid on the closing date of $2.71 million, (ii) 2,555,209 shares of the Company’s common stock with a fair value of $9.07 million or $3.55 per share, of which an aggregate of 1,151,461 shares is being held in an escrow fund for the purpose of satisfying any post-closing indemnification claims against the sellers under the share purchase agreement. SKS’s products complement and enhance the Company’s tethered drone product portfolio for commercial communications, defense and national security markets. All resulting goodwill is expected to be tax deductible. The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.
RVision, Inc.
On April 1, 2021, the Company completed the acquisition of RVision. The Company acquired 100% of the outstanding capital stock of RVision in exchange for 2,000,000 shares of its common stock with a fair value of $5.5 million or $2.75 per share. Pursuant to the terms of the acquisition, the Company filed a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), to register the resale of 1,000,000 of such shares of common stock, and agreed to include the remaining shares in any registration statement the Company files under the Securities Act for a primary offering within one year of the closing date, subject to certain exceptions. RVision’s products complement and enhance the Company’s communication offerings and provides additional access to governmental and private sector commercial industries. All resulting goodwill is expected to be tax deductible.
The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.
Innovation Digital, LLC
On June 3, 2021, the Company completed the acquisition of Innovation Digital. The total preliminary purchase price consideration amounted to $8.94 million, representing cash consideration paid of $1.0 million, 3,165,322 shares of common stock with a fair value of $7.34 million or $2.32 per share, and a promissory note in the principal amount of $0.60 million that is convertible into common stock at a conversion price of $2.35. Pursuant to the terms of the acquisition, the Company has agreed to filed a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), to register the resale of the 3,165,322 shares of common stock. See Note 13 – Debt Agreements for further discussion of the notes. Innovation digital enhances the Company’s portfolio of intellectual property and licensing capabilities. All resulting goodwill is expected to be tax deductible.
The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:
This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q. |
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Goodwill and Other Intangible Assets |
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| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GOODWILL AND OTHER INTANGIBLE ASSETS | 12. GOODWILL AND OTHER INTANGIBLE ASSETS
The following table sets forth the changes in the carrying amount of goodwill for the six months ended June 30, 2021:
The following table sets forth the gross carrying amounts and accumulated amortization of the Company’s intangible assets as of June 30, 2021 and December 31, 2020:
Amortization expense of intangible assets was $3.17 million and $2.62 million for the three months ended June 30, 2021 and 2020, respectively, and $6.47 million and $5.23 million for the six months ended June 30, 2021 and 2020, respectively. During the six months ended June 30, 2021, the Company impaired obsolete software that was replaced during the year. Impairment expense for the three and six months ended June 30, 2021 was $0.28 million. There was no impairment expense for the three and six months ended June 30, 2020. The Company’s amortization is generally based on no residual value using the straight-line amortization method as it best represents the benefit of the intangible assets. However, capitalized software is amortized using the greater of (1) the net realizable value test, which is based on the proportion of current gross revenues to the total of current and estimated future gross revenues for the project or (2) straight-line amortization. The following table sets forth the weighted-average amortization period, in total and by major intangible asset class:
As of June 30 2021, the expected amortization expense for the unamortized acquired intangible assets for the next five years and thereafter was as follows:
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Debt Agreements |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT AGREEMENTS | 13. DEBT AGREEMENTS
Secured Notes Payable
A subsidiary of the Company had previously entered into a promissory note not to exceed the principal amount of $0.55 million that bore interest at 8.5% per annum with a maturity date of August 31, 2018. On September 11, 2019, the note was amended with both parties agreeing that the outstanding balance of $0.81 million would be due on February 28, 2020. This promissory note was secured by substantially all of the assets of the subsidiary. As of December 31, 2020, an aggregate principal amount of $0.79 million was outstanding under this note. The aggregate principal amount of this note was fully repaid during fiscal 2021.
A subsidiary of the Company had previously entered into a promissory note in the principal amount of $0.45 million that bore interest at 9.0% per annum and was scheduled to mature on March 1, 2022. As of December 31, 2020, an aggregate principal amount of and $0.15 million, was outstanding under this note. This promissory note was secured by all assets, certain real estate and cash accounts of the subsidiary, and was guaranteed by certain management of the subsidiary. The aggregate principal amount of this note was fully repaid during fiscal 2021.
A subsidiary of the Company had previously entered into a promissory note in the principal amount of $50 thousand that bore interest at 7.9% per annum and was scheduled to mature on September 1, 2021. This promissory note was secured by business equipment, certain real estate and cash accounts of the subsidiary and was guaranteed by certain management of the subsidiary. As of December 31, 2020, an aggregate principal amount of $11 thousand was outstanding under this note. The aggregate principal amount of this note was fully repaid during fiscal 2021.
A subsidiary of the Company had previously entered into a loan agreement under which it received $2.0 million bearing interest at the rate of 9.0% per annum and is scheduled to mature on November 26, 2021. Upon an event of default, the interest rate would automatically increase to 15% per annum on any unpaid principal and interest, compounded monthly, and all unpaid principal and accrued interest would become due on-demand. Accrued interest is calculated on a compound basis and is payable semi-annually in May and November of each year. Principal is scheduled to be due in full at maturity but can be prepaid in full or in part without penalty. The loan is secured by all of the assets of the subsidiary and is guaranteed by the Company. The debt issuance costs were the result of the issuance of 350,000 shares of common stock and a cash payment of $80 thousand. The Company defaulted on this loan during fiscal 2020, which caused the interest rate to increase to a monthly compounded rate of 15% per annum, a late charge of 5% was incurred, and the loan and accrued interest became due on-demand. Amounts recorded as debt discounts and issuance costs were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year, as a result of the loan becoming due on-demand from the default event. As of December 31, 2020, an aggregate principal amount of $2.0 million was outstanding under this loan. On January 26, 2021, $1.0 million of the principal amount of this loan and all accrued interest with a combined total of $1.23 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 295,674 shares of common stock, along with warrants to purchase up to 295,674 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. The extinguishment on January 26, 2021 cured all events of default. As of June 30, 2021, an aggregate principal amount of $1.0 million was outstanding under this loan.
On February 26, 2020, the Company entered into a $0.6 million secured business loan that bore interest at 78.99% per annum which matured on December 26, 2020. The loan was secured by the assets of the Company. As of December 31, 2020, an aggregate principal amount of $75 thousand was outstanding and past due under this loan. The aggregate principal amount of this loan was fully repaid during 2021.
In connection with the acquisition a subsidiary on March 6, 2020, the Company assumed a secured loan with FirstBank in the principal amount of $0.98 million that bore interest at 5% per annum, with a maturity date of June 1, 2020. This loan was subsequently extended to September 15, 2020 and the interest rate was increased to 36% per annum for any principal balance remaining unpaid past the extended maturity date. The loan was secured by certain assets of the subsidiary. This loan was subjected to covenants, whereby the subsidiary was required to meet certain financial and non-financial covenants at the end of each fiscal year. As of December 31, 2020, an aggregate principal amount of $0.86 million was outstanding and past due under this loan. The aggregate principal amount of this loan was fully repaid during fiscal 2021.
On March 19, 2020, the Company entered into a secured loan agreement in the amount of $2.01 million that bore interest at 5% per annum with a maturity date of August 31, 2020, which was subsequently extended to October 15, 2020. Upon maturity, the interest rate automatically increased to 18% per annum, and a late charge of 5% was charged for any balance overdue by more than 10 days. The loan was secured by certain intellectual property assets of the Company. As of December 31, 2020, an aggregate principal amount of $2.01 million was outstanding and past due under this loan. On January 26, 2021, the aggregate principal amount of this loan and accrued interest with a combined total of $2.25 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, plus a 10,000 unit conversion bonus, resulting in the issuance of 552,231 shares of common stock, along with warrants to purchase up to 552,231 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026.
In connection with the acquisition a subsidiary on March 6, 2020, the Company: assumed various equipment financing loans with aggregate principal balances of approximately $0.2 million, which were secured by the related equipment, that bore interest ranging from 6.7% to 8.5% per annum. Monthly principal and interest payments were due over the term. As of December 31, 2020, aggregate principal balances of approximately $0.18 million were outstanding and past due under these loans. The aggregate principal amounts of these loans were fully repaid during fiscal 2021.
On December 8, 2020, the Company entered into a secured loan agreement in the aggregate principal amount of $1.1 million with an original issue discount of $0.1 million, that bore interest at the rate of 10% per annum and matured on January 6, 2021. Upon an event of default, the interest rate would automatically increase to 36% per annum on any unpaid principal, or the maximum amount permitted by applicable law, compounded monthly, and all unpaid principal and accrued interest would become due on-demand. The loan was guaranteed by a subsidiary of the Company and was secured by the Company’s equity interest in the subsidiary, all of the assets of the subsidiary and certain intellectual property assets of the Company. Daniel L. Hodges, the Company’s Chief Executive Officer, transferred a total of 23,334 shares of his personally owned, issued and outstanding common stock to the lender and brokers, as part of this transaction. The shares had a total fair value of $0.14 million. The Company accounted for this as a contribution from Mr. Hodges, as debt issuance costs. The Company incurred debt issuance costs to the placement agent of this transaction in the amount of $50 thousand. As of December 31, 2020, an aggregate principal amount of $1.1 million was outstanding under this loan. On January 26, 2021, $0.4 million of the principal amount of this loan and accrued interest with a combined total of $0.5 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 119,418 shares of common stock, along with warrants to purchase up to 119,418 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. The remaining $0.7 million principal amount of this loan was fully repaid during fiscal 2021.
On January 15, 2021, in connection with its acquisition of the new manufacturing facility in Tucson, Arizona, a subsidiary entered into a secured loan agreement pursuant to which it received a loan in the amount of up to $5.36 million that bears interest on the outstanding loan balance at the greater of (i) 8% per annum or (ii) 6.75% per annum in excess of the 1-month LIBOR rate, and matures on January 15, 2022. At the closing of the loan, the lender withheld $0.51 million of the loan amount as an interest reserve. In addition, $0.88 million of the loan amount was withheld and may be disbursed at later dates to pay for lender-approved improvements to the property secured by the loan. Interest is payable monthly. The loan is due in full at maturity. Upon an event of default, the interest rate on the loan will increase by an additional 5.00% per annum, and the outstanding principal amount of the loan, accrued interest thereon and fees may become due on-demand. Upon the maturity date or earlier date upon which the unpaid balance of the loan may become immediately payable due to acceleration, and on any prepayments of the loan, the subsidiary will owe an exit fee equal to the greater of (a) $54 thousand, or (b) 1.00% of the unpaid loan balance and all unpaid accrued interest and fees. Subject to certain terms and conditions and upon payment of a fee, the subsidiary may request a six-month extension of the maturity date. The loan is secured by the land, building and certain other assets of the subsidiary and is guaranteed by the Company and Daniel L. Hodges, the Company’s Chief Executive Officer. In addition, all rights to leases and rent related to the land and building assets have been assigned to the lender for potential non-performance by the subsidiary of its obligations under the loan. This loan is subject to certain financial and non-financial covenants on the part of the subsidiary at the end of each fiscal quarter and fiscal year. The Company incurred debt issuance costs for transaction in the amount of $0.16 million. As of June 30, 2021, an aggregate principal amount of $4.48 million was outstanding under this loan.
In connection with its acquisition of a subsidiary on January 29, 2021, the Company assumed the obligations of the sellers on a secured loan in the principal amount of $0.21 million that bears interest on the outstanding loan balance at the greater of (i) 5.75% per annum in excess of the Prime Rate or (ii) $4 thousand per month, with a maturity date of April 30, 2021. Interest is payable monthly. Upon an event of default, the interest rate on the loan will increase by an additional 5.00% per annum, and the outstanding principal amount of the loan, accrued interest thereon and fees may become due on-demand. The loan was secured by the assets of the subsidiary. The principal amount of this loan was fully repaid during fiscal 2021.
Notes Payable
In connection with previous acquisitions of two subsidiaries, the Company assumed the obligations of the seller on a promissory note in the principal amount of $0.5 million that bore interest at 12.0% per annum with a maturity date of October 17, 2017, which was subsequently extended to September 30, 2020 and the interest rate was reduced to 10% per annum. Accrued interest and the full principal balance were due at maturity. Upon maturity, the interest rate increased to 15% per annum for any balance overdue by more than 5 days. During 2020, all unpaid accrued interest from October 1, 2019 through December 31, 2019 was converted into 4,832 shares of common stock. As of December 31, 2020, an aggregate principal amount of $0.5 million was outstanding and past due under this note. On January 26, 2021, the aggregate principal amount of this note and accrued interest with a combined total of $0.56 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 135,324 shares of common stock, along with warrants to purchase up to 135,324 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026.
In connection with previous acquisitions of two subsidiaries, the Company assumed the obligations of the seller of a promissory note in the principal amount of $0.18 million that bore interest at the rate of 15% per annum and was due on November 30, 2017, which was subsequently extended to September 30, 2020 and the interest rate was reduced to 10% per annum. Accrued interest and principal were due and payable at maturity. Upon maturity, the interest rate increased to 15% per annum for any balance overdue by more than 5 days. As of December 31, 2020, an aggregate principal amount of $0.18 million was outstanding and past due. The aggregate principal amount of this note was fully repaid during fiscal 2021.
A subsidiary of the Company had previously entered into a 90-day promissory note in the principal amount of $4.4 million with an original issue discount of $0.4 million. Subsequently, this note was amended to accrue interest at the rate of 8% per annum and to extend the maturity date with new payment terms. In September 2019, the promissory note was increased to $5.0 million as all unpaid accrued interest was added to the principal balance and to extend the maturity date to March 20, 2020 and increase the interest rate to 10% per annum. In April 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 33,334 fully paid and non-assessable shares of its common stock that have been treated as debt issuance costs. As of December 31, 2020, an aggregate principal amount of $3.5 million was outstanding under this note. On January 26, 2021, the aggregate principal amount of this note and accrued interest with a combined total of $4.21 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 1,014,716 shares of common stock, along with warrants to purchase up to 1,014,716 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026.
A subsidiary of the company had previously entered into several promissory notes in the aggregate principal amount of $0.45 million that bore an effective interest rate of 133% per annum due to a single payment incentive, which matured on December 6, 2019. Of these promissory notes, an aggregate principal amount of $0.2 million was owed to three employees. Accrued interest and principal were due and payable at maturity. These notes had been past due and were accruing interest at a rate of 18% per annum. As of December 31, 2020, the aggregate principal amount of $67 thousand was outstanding and past due under these notes. The aggregate principal amount of these notes was fully repaid during fiscal 2021.
On March 5, 2020, the Company sold a promissory note in the principal amount of $0.5 million with an original issue discount of $54 thousand, that matured on November 30, 2020. Additionally, in lieu of interest, the Company issued to the lender 16,667 shares of its common stock with a fair value of $57 thousand, which was recognized as a debt discount and amortized to interest expense over the term of the note. Any principal balance remaining unpaid past the maturity date accrued interest at a rate of 15% per annum. As of December 31, 2020, an aggregate principal amount of $0.5 million was outstanding and past due under this note. On January 26, 2021, the aggregate principal amount of this note and accrued interest with a combined total of $0.51 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 123,305 shares of common stock, along with warrants to purchase up to 123,305 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026.
In connection with the acquisition of a subsidiary on March 6, 2020, the Company, entered into promissory notes or agreed to pay the sellers an aggregate principal amount of $0.58 million that did not bear interest and required monthly principal payments. As of December 31, 2020, an aggregate amount of $0.55 million was outstanding and past due. However, there were no penalties associated with this default. The aggregate principal amount of these notes was fully repaid during fiscal 2021.
In addition, the Company assumed a note payable in the amount of $87 thousand bearing interest at 3% per annum and with a maturity date of February 16, 2023. Monthly payments of principal and interest are due over the term. As of June 20, 2020 and December 31, 2020, an aggregate principal amount of $33 thousand and $83 thousand, respectively, was outstanding under this note.
On May 29, 2020, the Company entered into a promissory note in the principal amount of $0.29 million with an original issue discount of $40 thousand and a maturity date of September 30, 2020. The balance was due at maturity, with interest accruing at a rate of 12% per annum for any principal balance remaining unpaid past the maturity date. As of December 31, 2020, an aggregate principal amount of $0.29 million was outstanding and past due under this note. On January 26, 2021, the aggregate principal amount of this note, a 10% principal bonus, and accrued interest with a combined total of $0.33 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 79,579 shares of common stock, along with warrants to purchase up to 79,579 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026.
Between July 2, 2020 and August 21, 2020, the Company borrowed an aggregate of $1.2 million from accredited investors and issued to such investors promissory notes evidencing such loans. The principal amounts of the notes were between $50 thousand and $200 thousand. The notes had maturity dates between October 13, 2020 and November 30, 2020 that bore interest at a rate of 15% per annum, with interest accrued 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 96,634 shares of his personally owned, issued and outstanding common stock, with a fair value of $0.48 million, to the accredited investors and brokers, as part of this transaction. The Company accounted for this as a contribution from Mr. Hodges and as debt discounts and issuance costs. The amounts recorded as debt discounts and issuance costs were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year. As of December 31, 2020, an aggregate principal amount of $1.2 million was outstanding and past due under these notes. On January 26, 2021, $0.75 million of the aggregate principal amount of these notes, a 10% principal bonus, and accrued interest with a combined total of $0.89 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 213,496 shares of common stock, along with warrants to purchase up to 213,496 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. The remaining $0.45 million aggregate principal amount of these notes was fully repaid during fiscal 2021.
Between November 4, 2020 and November 24, 2020, the Company borrowed an aggregate of $0.55 million from accredited investors and issued to such investors promissory notes evidencing such loans. The principal amounts of the notes were between $50 thousand and $100 thousand. The notes had maturity dates between January 31, 2021 and February 23, 2021 that bore interest at a rate of 15% per annum, with interest accrued 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 38,334 shares of his personally owned, issued and outstanding common stock, with a fair value of $0.26 million, to the accredited investors, as part of this transaction. The Company accounted for this as a contribution from Mr. Hodges and as debt discounts and issuance costs. The Company defaulted on these notes during the 2020 fiscal year, causing the interest rate to increase to an annually-compounded rate of 18% per annum, and the note and accrued interest to become due on-demand. The amounts recorded as debt discounts were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year. As of December 31, 2020, an aggregate principal amount of $0.55 million was outstanding under these notes. On January 26, 2021, $0.5 million of the aggregate principal amount of these notes, a 10% principal bonus, and accrued interest with a combined total of $0.57 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 136,324 shares of common stock, along with warrants to purchase up to 136,324 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. The remaining $50 thousand aggregate principal amount of these notes was fully repaid during fiscal 2021.
In connection with an acquisition of a subsidiary on January 29, 2021, the Company issued to the sellers $1.5 million aggregate principal amount of term promissory notes. The individual principal amounts of the notes ranged from $1 thousand to $393 thousand. These notes bore interest at the rate of 10% per annum and matured on the earlier of (i) January 1, 2022, (ii) the date on which an aggregate of $6.0 million worth of products and services are sold following the acquisition date by (A) Fastback or (B) the Company and its subsidiaries (other than Fastback) to certain specified Fastback customers, or (iii) the date on which the Company issues and sells shares of its common stock or debt securities to investors in a bona-fide arms-length financing transaction for aggregate consideration of at least $12.0 million. Interest was payable in cash semi-annually in arrears on each June 1 and December 1, commencing on June 1, 2021, and on the maturity date. Principal and any unpaid accrued interest was due on the maturity date. These notes matured on February 10, 2021 upon the Company’s closing of a public offering, as disclosed in Note 15- Stockholders’ Equity. However, the representative of the Fastback sellers requested that the Company withhold payment of principal and interest on these notes until a dispute among such sellers could be resolved. As payment was withheld at the request of the sellers’ representative, no event of default occurred and interest was accrued only through the maturity date. These notes were fully repaid during fiscal 2021.
Various subsidiaries of the Company received loan proceeds or the Company assumed in conjunction with various acquisitions an aggregate amount of $0.77 million under the Paycheck Protection Program (“PPP”). The PPP loans have maturity dates ranging from two to five 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. During the six months ended June 30, 2021, an aggregate of $0.32 million of these notes has been forgiven. This forgiveness was recorded as a gain on extinguishment of debt in the Condensed Consolidated Statement of Operations. As of June 20, 2021 and December 31, 2020, an aggregate principal amount of $0.45 million and $0.58 million, respectively, was outstanding under these loans. As described in Note 19 – Subsequent Events, an additional $0.1 million of these notes was forgiven subsequent to June 30, 2021.
In connection with the acquisition of a subsidiary by the Company on April 1, 2021, the Company assumed two notes payable with aggregate principal balances of $0.3 million. These notes bore interest at 6% and were paid in full immediately following the completion of the acquisition by the Company.
Senior Debentures
In connection with previous acquisitions of two subsidiaries, the Company assumed the obligations of the seller of $0.1 million aggregate principal amount of 8% Senior Convertible Debentures of the seller that bore interest at the rate of 8% per annum and matured on December 31, 2019. Interest was payable semi-annually in cash or, at the seller’s option, in shares of the seller’s common stock at the conversion price that was equal to the lesser of (1) $24.00 or (2) 80% of the common stock price offered under the next equity offering. On April 30, 2020, these debentures were modified to remove the conversion feature and only have settlement through cash. During fiscal 2020, these debentures became past due and interest accrued at a rate of 15% per annum. As of December 31, 2020, an aggregate principal amount of $84 thousand was outstanding under these debentures. The aggregate principal amount of this debenture was fully repaid during fiscal 2021.
Convertible Notes Payable
On July 7, 2020, the Company sold a convertible promissory note in the principal amount of $0.29 million with an original issue discount of $36 thousand that bore interest at a rate of 12.5% per annum, and warrants to purchase 52,910 shares of common stock. Warrants to purchase up to 9,260 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, as disclosed in the Company’s Annual Report on Form 10-K. In connection with this note, the Company recognized debt discounts of $0.22 million. On July 28, 2020, the Company defaulted on this note by not filing a registration statement under the Securities Act by July 28, 2020. As a result, the aggregate principal balance increased by penalties and interest of $88 thousand. In addition, the interest rate was increased to 24% per annum, and the note and accrued interest became due on demand. As of December 31, 2020, there was an aggregate principal amount of $0.37 million outstanding and past due under this note. On January 22, 2021, the note holder converted the full principal of $0.37 million and all accrued interest with a combined total of $0.42 million into 155,013 shares of common stock.
On August 21, 2020, the Company sold a convertible promissory note in the principal amount of $1.7 million with an original issue discount of $0.2 million that bore interest at a rate of 5.0% per annum and matured on November 20, 2020. Accrued interest and principal were due on the maturity date. Upon maturity, the interest rate automatically increased 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 was 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. As additional consideration for the loan, the Company issued to the lender 133,334 shares of common stock at a fair value of $10.05 per share. Warrants to purchase up to 17,857 shares of common stock that are exercisable for a purchase price of $8.40 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 these transactions, the Company recognized aggregate debt discounts of $1.73 million. On November 21, 2020, the Company defaulted on this note by not repaying the principal and accrued interest by the maturity date, which resulted in the aggregate principal balance increasing by penalties and interest of $0.54 million. In addition, the interest rate was increased to 24% per annum. As of December 31, 2020, an aggregate principal amount of $2.24 million was outstanding and past due under this note. The aggregate principal amount of this note was fully repaid during fiscal 2021. In connection with its acquisition a subsidiary on January 29, 2021, the Company issued to the sellers $11.15 million aggregate principal amount of convertible promissory notes. The individual principal amounts of the notes ranged from $6 thousand to $5.58 million. These notes initially bear interest at the rate of 1.01% per annum, which is to be adjusted to the prime rate as published by the Wall Street Journal on each annual anniversary of the issuance date, and mature on January 29, 2026. Interest is payable in cash annually in arrears on each January 1. Commencing on January 29, 2022, the outstanding principal and accrued interest on these notes may be converted in full to shares of the Company’s common stock at a conversion price of $5.22 per share, subject to adjustment. Upon an event of default, the interest rate will automatically increase to 15% per annum compounded annually, and all unpaid principal and accrued interest may become due on-demand. Principal and any unpaid accrued interest are due on the maturity date. Upon maturity, the interest rate will automatically increase to 15% per annum compounded annually on any unpaid principal. As of June 30, 2021, an aggregate principal amount of $11.15 million was outstanding.
In connection with its acquisition of a subsidiary on June 3, 2021, the Company issued to the seller, who became an employee of the Company, a convertible promissory note in the principal amount of $0.6 million that bears interest at the rate of 5% per annum, maturing on June 3, 2022. Accrued interest and principal is due at maturity. Commencing December 3, 2021, the outstanding principal and accrued interest on this note may be converted into shares of the Company’s common stock at an initial conversion price of $2.35 per share, subject to certain terms, conditions and adjustments. As of June 30, 2021, the full principal amount of $0.6 million of this note was outstanding. Senior Convertible Promissory Note
On May 27, 2021, the Company sold a senior secured convertible promissory note in the principal amount of $11.0 million with an original issue discount of $1.0 million bearing an interest rate of 6% per annum that matures on May 27, 2023 and is subject to certain restrictive covenants. This note is convertible at any time following the earlier of the 6-month anniversary of the date of issuance or the date of effectiveness of a registration statement covering the applicable conversion shares at a conversion price of $4.50, subject to adjustment. The Company also issued to the buyer warrants to purchase up to 1,8200,000 shares of common stock with an exercise price of $4.50 per share, subject to adjustment, any time prior to May 27, 2026, and a grant date fair value of $0.505 per share. The Company also paid aggregate cash debt issuance costs of $0.69 million. The resulting aggregate debt discount recorded by the Company amounted to $2.6 million. Principal payments of $0.61 million plus interest are required to be paid monthly commencing six months after the date of issuance. This note is guaranteed by each of the Company’s subsidiaries and is secured by a first priority lien on all of the assets and properties of the Company and the assets and properties of its subsidiaries, subject only to the liens securing approximately $1.0 million principal amount of outstanding indebtedness of one of its subsidiaries. As of June 30, 2021, an aggregate principal amount of $11.0 million was outstanding.
Senior Convertible Debentures
The Company had previously sold $0.25 million aggregate principal amount of 10% Senior Convertible Debentures that bore interest at a rate of 10% per annum and were scheduled to mature on December 31, 2021. Interest was paid semi-annually in arrears in June and December of each year in cash or, at the Company's option, in shares of common stock at the conversion price that is equal to the lesser of (1) $7.50 or (2) a future effective price per share of any common stock sold by the Company. Upon an event of default, the interest rate shall automatically increase to 15% per annum. In connection with these debentures, the Company recognized aggregate debt discounts of $0.25 million. On April 21, 2020, all unpaid accrued interest through December 31, 2019 was converted into 2,234 shares of common stock. Also on April 21, 2020, all the outstanding warrants were exercised at $0.03 per share into 94,510 issued shares of the Company’s common stock, resulting in full recognition in interest expense of the remaining debt discount. 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 the Company’s common stock and the conversion price was changed from $7.50 per share to $2.268 per share. The Company defaulted on these debentures during the 2020 fiscal year, causing the interest rate to increase to 15% per annum, and the debentures and accrued interest to become due on demand. Any remaining amounts recorded as debt discounts were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year. As of December 31, 2020, an aggregate principal amount of $0.25 million was outstanding and past due under these debentures. On January 26, 2021, the holder of these debentures converted the aggregate principal and interest of $0.28 million into 125,186 shares of common stock. On July 2, 2020, the Company sold $1.0 million aggregate principal amount of 9% Senior Convertible Debentures to an accredited investor that bore interest at a rate of 9% per annum and a maturity date of September 30, 2020, subsequently extended to November 30, 2020. Accrued interest and principal were due at maturity, with interest paid in cash or, at the Company’s option, in shares of common stock at the conversion price of $3.00 per share. Upon an event of default, the interest rate would automatically increase to 15% per annum. The debentures were convertible into shares of the Company’s common stock at a conversion price of $3.00 per share. The Company also issued warrants to purchase 33,334 shares of common stock that are exercisable for a purchase price of $3.00 per share, at any time on or prior to the earlier of December 31, 2022 or the second anniversary of the Company’s consummation of a public offering of its common stock in connection with an up-listing of the common stock to a national securities exchange. In connection with these debentures, the Company recorded total debt discounts of $0.16 million. Amounts recorded as debt discounts were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year, as a result of the debentures becoming due on demand from the default event. As of December 31, 2020, an aggregate principal amount of $1.0 million was outstanding and past due under these debentures. On January 26, 2021, the holder of these debentures converted the principal amount of $0.9 million into 300,000 shares of common stock. The remaining principal amount of $0.1 million and accrued interest with a combined total of $0.16 million, was fully extinguished on January 26, 2021 at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 38,713 shares of common stock of the Company, along with warrants to purchase up to 38,713 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026.
Certain agreements governing the secured notes payable, notes payable and senior convertible debentures contain customary covenants, such as debt service coverage ratios, limitations on liens, dispositions, mergers, entry into other lines of business, investments and the incurrence of additional indebtedness.
All debt agreements are subject to customary events of default. If an event of default occurs with respect to the debt agreements and is continuing, the lenders may accelerate the applicable amounts due.
Future maturities contractually required by the Company under long-term debt obligations are as follows for the years ending December 31:
See Note 19 – Subsequent Events for details regarding additional debt incurred after June 30, 2021. |
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Related Party Transactions |
6 Months Ended |
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Jun. 30, 2021 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | 14. RELATED PARTY TRANSACTIONS
Accrued Liabilities – Related Party
As of June 30, 2021 and December 31, 2020, the accrued liabilities – related party balance was $31 thousand and $30 thousand, respectively, which represented amounts owed to various contractors, officers and employees of the Company as described below.
On November 10, 2017, the Company and Global Security Innovative Strategies, LLC (“GSIS”), a company in which David Aguilar, a member of the Company’s Board of Directors, is a principal, entered in an agreement (the “GSIS Agreement”) pursuant to which GSIS agreed to provide business development support and general consulting services for sales opportunities with U.S. government agencies and other identified prospects and consulting support services for the Company. The GSIS Agreement had an initial term of six months beginning on November 1, 2017. On September 26, 2018, the parties amended the GSIS Agreement to extend the period of service through September 2019 with monthly automatic renewals thereafter. The Company also agreed to issue an option to purchase 100,000 shares of the Company’s common stock at an exercise price of $1.00. This option immediately vested and terminates on September 26, 2022. Pursuant to the GSIS Agreement, GSIS is paid a fee of $10 thousand per month. In addition, GSIS is paid for the expenses incurred in connection with the performance of its duties under the GSIS Agreement. Either party may terminate or renew the GSIS Agreement at any time, for any reason or no reason, upon at least 30 days’ notice to the other party. As of June 30, 2021 and December 31, 2020, GSIS was owed $31 thousand and $30 thousand, respectively, for normal monthly retainers and expenses incurred and these amounts were recorded in accrued liabilities – related party.
Notes Payable – Related Party
On August 5, 2019, Daniel L. Hodges, the Company’s Chairman and Chief Executive Officer, and his wife, loaned a subsidiary of the Company $0.2 million at an interest rate of 5.0% per annum and an 18.0% default interest rate with a maturity date of December 31, 2020. Interest was payable monthly while the full principal balance was due at maturity. During fiscal 2020, this loan became past due and was accruing interest at an increased default rate of 18.0% per annum. As of December 31, 2020, $0.2 million was outstanding and past due under the loan. The aggregate principal amount of this note was fully repaid during the first quarter of fiscal year 2021. On July 1, 2020, Brent Davies, a member of the Company’s Board of Directors and Audit Committee, loaned the Company $50 thousand at an interest rate of 4.80% per annum with an original maturity date of August 31, 2020. This note was amended to extend the maturity date to November 30, 2020. Interest and the full principal balance were due at maturity. During fiscal 2020, this loan became past due and was accruing interest at an increased default rate of 18.0% per annum. As of December 31, 2020, $50 thousand was outstanding and past due under the loan. The aggregate principal amount of this note was fully repaid during the first quarter of fiscal year 2021.
Between October 15, 2020 and December 28, 2020, the Company borrowed an aggregate of $0.6 million from Dr. Dustin McIntire, the Company’s Chief Technology Officer, and issued promissory notes evidencing such loans. The principal amounts of the notes were between $0.1 million and $0.4 million, and such notes bore interest at 10% per annum and were due between January 14, 2021 and March 28, 2021. As of December 31, 2020, $0.6 million was outstanding under these notes. The aggregate principal amount of these notes was fully repaid during the first quarter of fiscal year 2021.
Between November 13, 2020 and December 24, 2020, the Company borrowed an aggregate of $0.16 million from Richard J. Berman, a member of the Company’s Board of Directors, and issued promissory notes evidencing such loans. The principal amounts of the notes were between $40 thousand and $120 thousand, and such notes bore interest at 8% per annum and were due between February 12, 2021 and March 23, 2021. As of December 31, 2020, $0.16 million was outstanding under these notes. On January 26, 2021, the aggregate principal amount of this note, a 10% principal bonus, and all accrued interest with a combined total of $0.18 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 42,776 shares of common stock, along with warrants to purchase up to 42,776 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. |
Stockholders’ Equity |
6 Months Ended |
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Jun. 30, 2021 | |
| Stockholders' Equity Note [Abstract] | |
| STOCKHOLDERS’ EQUITY | 15. STOCKHOLDERS’ EQUITY
For the six months ended June 30, 2021
As of June 30, 2021, the Company had 100,000,000 shares of preferred stock authorized for issuance, none of which were issued and outstanding and 300,000,000 shares of common stock authorized for issuance and 71,541,070 shares of common stock issued and outstanding.
On May 26, 2020, the Board of Directors of the Company and stockholders holding a majority of the outstanding shares of the Company’s common stock approved resolutions authorizing the Board of Directors to effect the Split of the Company’s common stock at an exchange ratio of up to 1-for-3, with the Board of Directors retaining the discretion as to whether to implement the Split. On December 16, 2020, the Company’s Board of Directors approved a ratio for the Split of 1-for-3, which was effected on January 21, 2021. The Condensed Consolidated Financial Statements and accompanying notes give effect to this Split as if it occurred at the beginning of the first period presented. Earnings Per Share
Potential common shares issuable to employees, non-employees and directors upon exercise or conversion of shares are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss available to common stockholders. Stock options and warrants are anti-dilutive when the exercise price of these instruments is greater than the average market price of the Company’s common stock for the period (out-of-the-money), regardless of whether the Company is in a period of net loss available to common stockholders. The following weighted-average potential common shares were excluded from the diluted loss per common share as their effect was anti-dilutive as of June 30, 2021 and 2020, respectively: stock options of 3,320,181 and 2,548,345, unvested restricted stock units of 328,543 and 314,938, warrants of 775,362 and 94,465, and convertible notes that, if converted, would result in an estimated 4,835,781 and 229,348 shares of common stock.
Public Offerings
On January 26, 2021 (the “First Offering Closing Date”), the Company sold an aggregate of 3,855,422 units at a price to the public of $4.15 per unit (the “First Offering”), each unit consisting of one share of the Company’s common stock, and a warrant to purchase one share of common stock at an exercise price of $4.50 per share (the “First Offering Warrants”), pursuant to an Underwriting Agreement, dated as of January 21, 2021 (the “First Offering Underwriting Agreement”), between the Company and the representative (the “Representative”) of the several underwriters named in the Underwriting Agreement. In addition, pursuant to the First Offering Underwriting Agreement, the Company granted the Representative a 45-day option to purchase up to 578,312 additional shares of common stock, and/or 578,312 additional First Offering Warrants, to cover over-allotments in connection with the First Offering, which the Representative partially exercised to purchase 578,312 Warrants on the First Offering Closing Date. For additional information on these First Offering Warrants, see Note 16 – Share-Based Compensation.
The common stock and the warrants of the First Offering were offered and sold to the public pursuant to the Company’s registration statement on Form S-1 (File No. 333-248490), filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) under the Securities Act, on August 28, 2020, as amended, and which became effective on January 21, 2021.
On the First Offering Closing Date, the Company received gross proceeds of approximately $16.0 million, before deducting underwriting discounts and commissions of eight percent (8%) of the gross proceeds and estimated offering expenses.
On January 27, 2021, the Representative exercised its over-allotment option for the First Offering to purchase 329,815 additional shares of common stock, which closed on January 29, 2021. The Company received gross proceeds of approximately $1.37 million before deducting underwriting discounts and commissions of eight percent (8%) of the gross proceeds.
Pursuant to the First Offering Underwriting Agreement, the Company also agreed to issue to the Representative warrants (the “Representative’s First Offering Warrants”) to purchase up to a total of 154,216 shares of common stock (4% of the shares of common stock sold in the First Offering). See Note 16 – Share-Based Compensation.
The total expenses of the First Offering were approximately $2.7 million, which included the underwriting discounts and commissions and the Representative’s reimbursable expenses relating to the First Offering. As part of this offering, the Company also issued warrants to purchase 100,000 shares of the Company’s common stock at $4.15 per share to compensate a vendor for certain offering costs. See Note 16 – Share-Based Compensation.
On February 10, 2021 (the “Second Offering Closing Date”), the Company sold an aggregate of 5,647,059 shares of the Company’s common stock, at a price to the public of $4.25 per share (the “Second Offering”), pursuant to an Underwriting Agreement, dated as of February 10, 2021 (the “Second Offering Underwriting Agreement”), between the Company the Representative of the several underwriters named in the Second Offering Underwriting Agreement. In addition, pursuant to the Second Offering Underwriting Agreement, the Company granted the Representative a 45-day option to purchase up to 847,058 additional shares of common stock to cover over-allotments in connection with the Second Offering, which the Representative exercised in full on February 11, 2021.
The common stock was offered and sold to the public pursuant to the Company’s registration statement on Form S-1 (File No. 333-252780), filed by the Company with the SEC under the Securities Act, on February 5, 2021, and the Company’s registration statement on Form S-1 (File No. 333-252974), filed by the Company with the SEC under Rule 462(b) of the Securities Act on February 10, 2021, each of which became effective on February 10, 2021.
The Company received gross proceeds of approximately $27.6 million, before deducting underwriting discounts and commissions of eight percent (8%) of the gross proceeds and estimated offering expenses.
Pursuant to the Second Offering Underwriting Agreement, the Company also issued to the Representative warrants (the “Representative’s Second Offering Warrants”) to purchase up to a total of 225,882 shares of common stock (4% of the shares of common stock sold in the Second Offering), of which warrants to purchase 198,776 shares of common stock were registered under the Securities Act and warrants to purchase 27,106 shares of common stock were issued in a private placement to the Representative. See Note 16 – Share-Based Compensation.
The total expenses of the Second Offering were approximately $2.6 million, which included the underwriting discounts and commissions and the Representative’s reimbursable expenses relating to the Second Offering.
Consulting Agreements and Settlements with Vendors
On January 31, 2020, the Company entered into an agreement with a consultant to replace an existing consulting agreement between the consultant and the Company to allow the consultant to elect to take from 50% to 100% of its compensation in the form of common stock based on an agreed upon conversion calculation. Any difference between the amount due and the actual fair value of the shares issued in payment is recorded as general and administrative expense in the Company’s Condensed Consolidated Financial Statements. Common stock to be issued to the consultant will be paid on a quarterly basis. During the six months ended June 30, 2021 and 2020, respectively, the Company issued 15,740 shares of its common stock with a fair value of $69 thousand and 55,032 shares of its common stock, with a fair value of $193 thousand to the consultant for services previously rendered.
On December 9, 2020, the Company entered into an agreement with a consultant that required the payment of 5,000 shares of its common stock with a fair value of $31 thousand at the inception of the contract with the obligation to perform services in the future. These shares of common stock were issued on December 14, 2020. As of December 31, 2020, 2,125 of these shares of common stock had vested and expense of $13 thousand has been recognized, through satisfaction of the performance obligation. During the first quarter of the fiscal 2021 year, the remaining shares of 2,875 vested and $18 thousand of additional expense was recognized. |
Share-Based Compensation |
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| SHARE-BASED COMPENSATION | 16. SHARE-BASED COMPENSATION
2020 Long-Term Incentive Plan
On April 22, 2020, the Company’s Board of Directors adopted the 2020 Long-Term Incentive Plan (the “2020 Plan”), which was approved by the stockholders on or about May 6, 2020. Employees, officers, directors and consultants that provide services to the Company or one of its subsidiaries may be selected to receive awards under the 2020 Plan. Awards under the 2020 Plan may be in the form of incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including cash awards and performance-based awards.
As originally approved, a total of 3,333,334 shares of the Company’s common stock were authorized for issuance with respect to awards granted under the 2020 Plan. As approved by the stockholders on or about June 25, 2021, the amount authorized to be issued under the 2020 Plan has been increased to 8,333,334 shares of the Company’s common stock. Any shares subject to awards that are not paid, delivered or exercised before they expire or are cancelled or terminated, or fail to vest, as well as shares used to pay the purchase or exercise price of awards or related tax withholding obligations, will become available for other award grants under the 2020 Plan. As of June 30, 2021, 5,430,505 options have been issued under the 2020 Plan, of which 33,334 were forfeited, 63,333 have been exercised, and 2,936,163 shares authorized under the 2020 Plan remained available for award purposes. The 2020 Plan will terminate on May 1, 2030. The maximum term of options, stock appreciation rights and other rights to acquire common stock under the 2020 Plan is ten years after the initial date of the award.
Restricted Stock Awards
On December 2, 2019, the Company’s Board of Directors granted an aggregate of 633,336 Restricted Stock Awards (“RSAs”) to nine officers and directors (“Participant”) at a grant date fair value of $2.46 per share. The original vesting period for these RSAs is as follows: 283,339 were to vest on the one-year anniversary of the grant date; 283,331 were to vest on the two-year anniversary of the original grant date; and 66,666 were scheduled to vest on the three-year anniversary of the original grant date. As of December 31, 2020, 283,339 RSAs had vested. In the first quarter of fiscal 2021, the Company modified the RSA awards for two individuals to accelerate the final vesting of their awards in consideration of the individuals’ separation and/or retirement. This modification resulted in the vesting of an additional 50,000 RSAs. An incremental compensation expense was recognized for the modification totaling $0.17 million during the six months ended June 30, 2021. As of June 30, 2021, the remaining unvested RSAs from these awards, totaling 299,997, are scheduled to vest as follows: 233,331 are scheduled to vest on the two-year anniversary of the original grant date; and 66,666 were scheduled to vest on the three-year anniversary of the original grant date.
On January 26, 2021, the Company’s Board of Directors granted an aggregate of 66,667 RSAs to one director at a grant date fair value of $4.50 per share. The vesting period for these RSAs is as follows: 33,334 vest on the one-year anniversary of the grant date and 33,333 vest on the two-year anniversary of the original grant date.
For all RSAs that are currently outstanding, if the Participant’s employment with, engagement by, or service to the Company terminates for any reason (other than due to disability, retirement or death, or termination by employee for “Good Cause” as defined pursuant to a written employment contract) prior to the vesting of all or any portion of the RSAs granted, such RSAs shall immediately be cancelled. If the Participant’s employment with, engagement by, or service to the Company terminates due to the Participant’s death, disability or retirement, or by termination by such employee for “Good Cause” as defined pursuant to a written employment contract, the Participant shall become 100% vested in the RSAs granted as of the date of any such termination. There were no RSAs that were forfeited in the six months ended June 30, 2021. For the three and six months ended June 30, 2021, respectively, the Company recognized $0.18 million and $0.53 million of compensation expense related to RSAs and had unrecognized compensation cost as of June 30, 2021 for RSAs of $0.64 million.
Stock Options
On April 1, 2021, from shares available to be issued under the 2020 Long-Term Incentive Plan, the Board of Directors of the Company granted options to purchase an aggregate 2,458,163 shares of common stock with exercise prices ranging from $2.75 to $3.025 per share and a grant date fair value ranging from $0.961 to $1.042 per share. These options have a three-year service period and vest ratably on the first, second and third anniversary of their grant date.
Also, on April 1, 2021, the Board of Directors of the Company authorized the issuance of options to purchase an aggregate of 1,778,837 shares of common stock with an exercise price of $2.75 per share. These shares were in excess of the number of shares available under the 2020 Plan at that time and are subject to the approval by the Company’s stockholders of an increase to the shares available in the 2020 Plan as noted above. Effective with the approval of the stockholders on June 25, 2021, these shares are considered granted and have a grant date fair value ranging from $0.759 to 0.768 per share. Of these, 753,837 have a three-year service period and vest ratably on the first, second and third anniversary of their authorization for issuance and 1,025,000 have a two-year service period and vest ratably on the first and second anniversary of their authorization for issuance.
On May 5, 2021, the Board of Directors of the Company authorized the issuance of options to purchase an aggregate of 295,000 shares of common stock with an exercise price of $2.75 per share. These shares were in excess of the number of shares available under the 2020 Plan at that time and are subject to the approval by the Company’s stockholders of an increase to the shares available in the 2020 Plan as noted above. Effective with the approval of the stockholders on June 25, 2021, these shares are considered granted and have a grant date fair value of $0.873 per share. Of these, 270,000 have a one-year service period and vest ratably on the six month and twelve-month anniversary of their authorization for issuance and 25,000 vested immediately upon grant.
On June 29, 2021, the Board of Directors approved the modification of 655,002 options previously issued outside of the corporate plan. These options were scheduled to expire 90 days after the March 31, 2021 retirement of a long-time employee. This modification extended the expiration date of these options through December 15, 2021. The Company has recognized incremental compensation expense of $0.13 million related to this modification.
The following table summarizes the assumptions used to estimate the fair value of options granted during the six months ended June 30, 2021:
The following tables represent stock option activity for the three months ended June 30, 2021 and 2020:
The Company recognized $0.34 million and $0.35 million of share-based compensation expense related to options for the three and six months ended June 30, 2021, respectively. There was no share-based compensation expense related to options for the three and six months ended June 30, 2020. Compensation expense related to stock options is recorded in general and administrative in the Condensed Consolidated Statement of Operations. As of June 20, 2021, the Company has $3.95 million of unrecognized compensation expense related to options. There was no unrecognized compensation expense related to options for the six months ended June 30, 2020.
Warrants
On January 26, 2021, the Company issued warrants to purchase an aggregate of 2,751,556 shares of the Company’s common stock as partial consideration for the debt extinguishments disclosed in Note 13 – Debt Agreements and Note 14 – Related Party Transactions. The warrants have an exercise price of $4.50 per share and an expiration date of January 26, 2026. The issuance date fair value of these warrants was estimated to be $1.597 per share. None of these warrants were exercised during the six months ended June 30, 2021.
On January 26, 2021, the Company issued warrants to purchase an aggregate of 100,000 shares of the Company’s common stock as consideration for certain costs related to the First Offering as disclosed in Note 15 – Stockholders’ Equity. The Representative’s First Offering Warrants are subject to a lock-up for 180 days from the commencement of sales in the First Offering, including a mandatory lock-up period in accordance with FINRA Rule 5110(e), and will be non-exercisable for six (6) months after January 21, 2021. The warrants have an exercise price of $4.15 per share and an expiration date of January 21, 2026. The issuance date fair value of these warrants was estimated to be $1.703 per share. None of these warrants were exercised during the six months ended June 30, 2021.
On January 26, 2021, the Company issued warrants to purchase an aggregate of 154,216 shares of the Company’s common stock as the Representative’s First Offering Warrants as discussed in Note 15 – Stockholders’ Equity. The warrants have an exercise price of $5.1875 per share and an expiration date of January 21, 2026. The issuance date fair value of these warrants was estimated to be $1.376 per share. None of these warrants were exercised during the six months ended June 30, 2021.
On January 26, 2021, the Company issued warrants to purchase an aggregate of 4,433,734 shares of the Company’s common stock as portion of the Units offered in the Company’s First offering as disclosed in Note 15 – Stockholders’ Equity. The warrants have an exercise price of $4.50 per share and an expiration date of January 26, 2026. The issuance date fair value of these warrants was estimated to be $1.597 per share. None of these warrants were exercised during the six months ended June 30, 2021.
On February 12, 2021, the Company issued warrants to purchase an aggregate of 225,882 shares of the Company’s common stock as the Representative’s Second Offering Warrants as discussed in Note 15 – Stockholders’ Equity. The Representative’s Second Offering Warrants are subject to a lock-up for 180 days from the commencement of sales in the Second Offering, including a mandatory lock-up period in accordance with FINRA Rule 5110(e), and will be non-exercisable for six (6) months after February 10, 2021. The warrants have an exercise price of $5.3125 per share and an expiration date of February 10, 2026. The issuance date fair value of these warrants was estimated to be $1.918 per share. None of these warrants were exercised during the six months ended June 30, 2021.
On May 27, 2021, the Company issued warrants to purchase an aggregate of 1,820,000 shares of the Company’s common stock in conjunction with a debt agreement as discussed in Note 13 – Debt Agreements. These warrants have an exercise price of $4.50, subject to adjustment, a grant date fair value of $0.505 per share, and expire on May 27, 2026. All warrants are valued utilizing the Black-Scholes pricing model using the assumptions listed below. The weighted average grant date fair value of all warrants issued during the six months ended June 30, 2021, was $1.390 per share.
The following table summarizes the assumptions used to estimate the fair value of warrants granted during the six months ended June 30, 2021:
The following tables represents warrant activity for the three months ended June 30, 2021 and 2020:
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Commitments and Contingencies |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | 17. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Management does not believe the final disposition any of these matters is likely to have a material adverse impact on the Company’s financial condition, results of operations or cash flows, except as follows. On May 22, 2020, Michael Powell, a former employee of a subsidiary of the Company, filed suit against the Company and certain subsidiaries of the Company, including DragonWave-X, LLC, DragonWave-X, Inc., Transform-X, Inc., and COMSovereign Corp, in the Pima County Arizona Superior Court, Case No. C20202216. On December 7, 2020, Mr. Powell filed his first amended complaint against the Company, DragonWave Corp., and Transform-X, Inc. Mr. Powell alleged that he entered into an employment agreement with DragonWave-X, Inc. in July 2018, was terminated without cause in May 2019, and claimed he was owed approximately $182 thousand in wages and $50 thousand in bonuses. Mr. Powell sought approximately $697 thousand in treble damages, punitive damages, consequential damages, interest and attorneys’ fees and costs. In July, 2021, the Company reached and paid a final settlement on this matter totaling $100 thousand. |
Concentration |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Risks and Uncertainties [Abstract] | |
| CONCENTRATION | 18. CONCENTRATION
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of trade accounts receivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral related to its trade accounts receivable. At June 30, 2021, accounts receivable from two customers comprised approximately $1.1 million or 36.8% of the Company’s gross trade accounts receivable, and $0.74 million of this balance has been characterized as uncollectible. In addition, for the six months ended June 30, 2021, there were no customers that individually exceeded 10% of revenue. |
Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | 19. SUBSEQUENT EVENTS
Corporate Acquisitions
On July 16, 2021, the Company completed the acquisition of RF Engineering & Energy Resource, LLC, a Michigan limited liability company (“RF Engineering”), pursuant to an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) dated as of July 16, 2021 among the Company, COMS Merger Sub V, LLC, RF Engineering, and the owners of RF Engineering. In accordance with the terms of the Merger Agreement, on July 16, 2021, the Company acquired all of the ownership interest of RF Engineering in exchange for $550,000 in cash and 992,780 shares of common stock with an initial estimated fair value of approximately $2.2 million.
PPP Loans
Subsequent to June 30, 2021, the Company received notice of the forgiveness of certain loans under the PPP loan program of an aggregate principal amount of $0.1 million. |
Accounting Policies, by Policy (Policies) |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Accounting Policies [Abstract] | |
| Accounting Standards Not Yet Adopted | Accounting Standards Not Yet Adopted
In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2021-04, Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) (ASU 2021-04). This guidance clarifies an issuer’s accounting for certain modifications of freestanding equity-classified written call options and provides a “principles-based” framework to determine whether an issuer should recognize the modification or exchange and an adjustment to equity or an expense. The Company is currently evaluating the potential impact ASU 2021-04 will have on the Condensed Consolidated Financial Statements.
In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This guidance simplifies the accounting for certain convertible instruments and contracts in an entity’s own equity. As a smaller reporting entity, this standard will become effective for fiscal years beginning after December 15, 2023, including interim periods within those years. The Company is currently evaluating the potential impact ASU 2020-06 will have on the Condensed Consolidated Financial Statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). This guidance provides optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for borrowing instruments that use LIBOR as a reference rate and is effective upon issuance through December 31, 2022. The Company has performed an evaluation of and will continue to evaluate, through December 31, 2022, the impact of this ASU. This ASU does not currently and is not expected to have in the future, a material effect on the Condensed Consolidated Financial Statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05 and ASU 2019-11 (collectively, Topic 326). Topic 326 requires measurement and recognition of expected credit losses for financial assets held. This standard will become effective for interim and annual periods beginning after December 15, 2022 and earlier adoption is permitted. The Company is currently evaluating the potential impact the adoption of this ASU will have on the Condensed Consolidated Financial Statements.
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| Accounting Standards Adopted | Accounting Standards Adopted
During the six months ended June 30, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740). This guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplifies areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws and rate changes. The impact that adopting this ASU has not had any material effect on the Condensed Consolidated Financial Statements. |
Revenue (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of timing of revenue recognition |
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| Schedule of revenue by products and services |
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| Schedule of revenue by geography |
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| Schedule of opening and closing balances of contract liabilities |
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Accounts Receivable, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||
| Accounts Receivable, after Allowance for Credit Loss [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of accounts receivable, net |
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Inventory (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventory |
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Prepaid (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| Prepaid [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of prepaid expenses |
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Property and Equipment, Net (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment, net |
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Accounts Payable and Accrued Expenses (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of accounts payable and accrued expenses |
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Leases (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of other information related to our operating leases |
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| Schedule of weighted-average remaining lease term and weighted average discount rates of operating leases |
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| Schedule of total remaining years to lease liabilities |
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| Schedule of total remaining years to lease liabilities |
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| Schedule of weighted-average remaining lease term and weighted average discount rates of finance leases |
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| Schedule of total remaining years to the finance lease liabilities |
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Business Acquisitions (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Skyline Partners Technology LLC [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisitions (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of allocation of total preliminary estimated purchase price |
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| Sky Sapience Ltd. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Acquisitions (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of allocation of total preliminary estimated purchase price |
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Goodwill and Other Intangible Assets (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of changes in carrying amount of goodwill |
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| Schedule of gross carrying amounts and accumulated amortization |
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| Schedule of intangible asset |
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| Schedule of amortization expense for intangible assets |
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Debt Agreements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of future maturities of long-term debt |
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Share-Based Compensation (Tables) |
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| Schedule of assumptions used to estimate fair value stock options granted |
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| Schedule of stock option activity |
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| Stock Options [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation (Tables) [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of stock option activity |
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Description of Business and Basis of Presentation (Details) |
6 Months Ended |
|---|---|
Jun. 30, 2021 | |
| Accounting Policies [Abstract] | |
| Description of agreement | The unaudited Condensed Consolidated Financial Statements included herein should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. |
Going Concern (Details) - Management's Liquidity Plans [Member] $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Going Concern (Details) [Line Items] | |
| Cash flows from operations | $ (28,850) |
| Accumulated deficit | $ (91,410) |
Revenue (Details) - Schedule of timing of revenue recognition - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Timing of revenue recognition: | ||||
| Services and products transferred at a point in time | $ 3,473 | $ 2,953 | $ 5,370 | $ 5,115 |
| Services and products transferred over time | 138 | 57 | 328 | 380 |
| Total revenue | $ 3,611 | $ 3,010 | $ 5,698 | $ 5,495 |
Revenue (Details) - Schedule of revenue by products and services - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Revenue by products and services: | ||||
| Total revenue | $ 3,611 | $ 3,010 | $ 5,698 | $ 5,495 |
| Products [Member] | ||||
| Revenue by products and services: | ||||
| Total revenue | 3,250 | 2,697 | 4,867 | 4,572 |
| Services [Member] | ||||
| Revenue by products and services: | ||||
| Total revenue | $ 361 | $ 313 | $ 831 | $ 923 |
Revenue (Details) - Schedule of revenue by geography - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Revenue by geography: | ||||
| Total revenue | $ 3,611 | $ 3,010 | $ 5,698 | $ 5,495 |
| North America [Member] | ||||
| Revenue by geography: | ||||
| Total revenue | 2,550 | 2,735 | 4,281 | 4,925 |
| International [Member] | ||||
| Revenue by geography: | ||||
| Total revenue | $ 1,061 | $ 275 | $ 1,417 | $ 570 |
Revenue (Details) - Schedule of opening and closing balances of contract liabilities $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Schedule of opening and closing balances of contract liabilities [Abstract] | |
| Balance at December 31, 2020 | $ 864 |
| Revenue recognized from amounts acquired through business acquisition | (1,031) |
| Balance at June 30, 2021 | 2,968 |
| Additions through advance billings to or payments from vendors | 768 |
| Additions through business acquisition | 3,315 |
| Revenue recognized that was included in the prior period balance | (554) |
| Revenue recognized from current period advance billings to or payments from vendors | $ (394) |
Accounts Receivable, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Accounts Receivable, after Allowance for Credit Loss [Abstract] | ||||
| Bad debt expense | $ 200 | $ 130 | $ 200 | $ 380 |
Accounts Receivable, Net (Details) - Schedule of accounts receivable, net - USD ($) |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of accounts receivable, net [Abstract] | ||
| Account receivables | $ 2,984 | $ 2,474 |
| Less: Allowance for doubtful accounts | (1,271) | (1,687) |
| Total account receivables, net | $ 1,713 | $ 787 |
Inventory (Details) - Schedule of inventory - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of inventory [Abstract] | ||
| Raw materials | $ 4,041 | $ 1,765 |
| Work in progress | 1,249 | 461 |
| Finished goods | 3,096 | 3,305 |
| Total inventory | 8,386 | 5,531 |
| Reserve | (1,239) | (993) |
| Total inventory, net | $ 7,147 | $ 4,538 |
Prepaid (Details) - Schedule of prepaid expenses - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of prepaid expenses [Abstract] | ||
| Prepaid products and services | $ 7,154 | $ 172 |
| Deferred offering expenses | 569 | |
| Prepaid rent and security deposit | 84 | 732 |
| Prepaid expenses, net | $ 7,238 | $ 1,473 |
Property and Equipment, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation expense | $ 440 | $ 290 | $ 800 | $ 520 |
Property and Equipment, Net (Details) - Schedule of property and equipment, net - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 20,554 | $ 11,158 |
| Less - accumulated depreciation | (10,805) | (8,872) |
| Property and equipment, net | 9,749 | 2,286 |
| Shop machinery and equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 11,239 | 9,961 |
| Computers and electronics [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 1,393 | 575 |
| Office furniture and fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 627 | 348 |
| Building [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 4,801 | |
| Land [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 1,330 | |
| Leasehold improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 1,164 | $ 274 |
Accounts Payable and Accrued Expenses (Details) - Schedule of accounts payable and accrued expenses - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of accounts payable and accrued expenses [Abstract] | ||
| Accounts payable | $ 2,593 | $ 5,583 |
| Accrued interest | 155 | 2,029 |
| Accrued liabilities | 1,538 | 1,649 |
| Accrued payroll | 1,191 | 3,992 |
| Total accounts payable and accrued expenses | $ 5,477 | $ 13,253 |
Leases (Details) - USD ($) $ in Thousands |
1 Months Ended | ||||
|---|---|---|---|---|---|
May 31, 2021 |
Apr. 30, 2021 |
Feb. 25, 2021 |
Jun. 30, 2021 |
Dec. 31, 2020 |
|
| Leases (Details) [Line Items] | |||||
| Weighted average remaining operating lease term | 3 years 5 months 12 days | 4 years 2 months 8 days | |||
| Monthly payments of operating lease | $ 2 | ||||
| Lease agreement, description | the Company entered into an amendment to its existing facility lease to extend the expiration date through June 20, 2022 and to increase the annual base to $12 thousand per month. The lease did not include an implicit rate of return; therefore, the Company used an incremental borrowing rate based on other leases with similar terms. The modification resulted in additional right-of-use asset and lease liability of $0.12 millionAs part of the RVision business acquisition on April 1, 2021, the Company assumed a lease of office space with a remaining term of approximately 35 months that will expire on March 31, 2024. Monthly payments ae $7 thousand during the remaining life of the lease. | In April 2021, a subsidiary of the Company entered into several vehicle leases with approximately 36-month terms. Monthly payments range from $1 thousand to $2 thousand. Each lease had an implicit rate of 6.0% and no renewal options. | |||
| Office Space [Member] | |||||
| Leases (Details) [Line Items] | |||||
| Weighted average remaining operating lease term | 28 months | ||||
| Monthly payments of operating lease | $ 16 | ||||
| Vehicles [Member] | |||||
| Leases (Details) [Line Items] | |||||
| Weighted average remaining operating lease term | 11 months | ||||
| Minimum [Member] | Vehicles [Member] | |||||
| Leases (Details) [Line Items] | |||||
| Leases included an implicit rates | 5.41% | ||||
| Maximum [Member] | Vehicles [Member] | |||||
| Leases (Details) [Line Items] | |||||
| Leases included an implicit rates | 6.00% | ||||
Leases (Details) - Schedule of other information related to our operating leases - Other information related [Member] $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Leases (Details) - Schedule of other information related to our operating leases [Line Items] | |
| Operating lease ROU Asset | $ 2,725 |
| Increase | 1,217 |
| Decrease | |
| Amortization | (495) |
| Operating lease ROU Asset | 3,447 |
| Operating lease liability | 2,885 |
| Increase | 1,217 |
| Decrease | (30) |
| Amortization | (453) |
| Operating lease liability | 3,619 |
| Operating lease liability – short term | 1,106 |
| Operating lease liability – long term | 2,513 |
| Operating lease liability – total | 3,619 |
| Operating lease cost | 595 |
| Variable lease cost | |
| Short-term lease cost | 102 |
| Cash paid for amounts included in the measurement of lease liabilities: | |
| Operating cash flows from operating leases | $ 598 |
Leases (Details) - Schedule of weighted-average remaining lease term and weighted average discount rates of operating leases |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of weighted-average remaining lease term and weighted average discount rates of operating leases [Abstract] | ||
| Weighted average remaining lease term | 3 years 5 months 12 days | 4 years 2 months 8 days |
| Weighted average discount rate | 6.00% | 5.95% |
Leases (Details) - Schedule of total remaining years to lease liabilities - Operating Leases [Member] $ in Thousands |
Jun. 30, 2021
USD ($)
|
|---|---|
| Leases (Details) - Schedule of total remaining years to lease liabilities [Line Items] | |
| Remainder of 2021 | $ 675 |
| 2022 | 1,179 |
| 2023 | 1,048 |
| 2024 | 707 |
| 2025 | 384 |
| Thereafter | 3 |
| Total minimum lease payments | 3,996 |
| Less: effect of discounting | (377) |
| Present value of future minimum lease payments | 3,619 |
| Less: current obligations under leases | (1,106) |
| Long-term lease obligations | $ 2,513 |
Leases (Details) - Schedule of finance leases information $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Schedule of finance leases information [Abstract] | |
| Finance lease ROU Asset – December 31, 2020 | $ 68 |
| Finance lease ROU Asset – June 30, 2021 | 56 |
| Finance lease liability – December 31, 2020 | 55 |
| Finance lease liability – March 31, 2021 | 26 |
| Finance lease liability – short term | 26 |
| Finance lease liability – long term | |
| Finance lease liability – total | 26 |
| Increase | |
| Amortization | (12) |
| Increase | |
| Interest accretion | 1 |
| Payment | $ (30) |
Leases (Details) - Schedule of weighted-average remaining lease term and weighted average discount rates of finance leases |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of weighted-average remaining lease term and weighted average discount rates of finance leases [Abstract] | ||
| Weighted average remaining lease term | 9 months | 1 year 1 month 6 days |
| Weighted average discount rate | 7.20% | 3.91% |
Leases (Details) - Schedule of total remaining years to the finance lease liabilities - Finance Leases Member [Member] $ in Thousands |
Jun. 30, 2021
USD ($)
|
|---|---|
| Leases (Details) - Schedule of total remaining years to the finance lease liabilities [Line Items] | |
| Remainder of 2021 | $ 19 |
| 2022 | 8 |
| Thereafter | |
| Total minimum lease payments | 27 |
| Less: effect of discounting | (1) |
| Present value of future minimum lease payments | 26 |
| Less: current obligations under leases | (26) |
| Long-term lease obligations |
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization expense of intangible assets | $ 3,170 | $ 2,620 | $ 6,470 | $ 5,230 |
| Impairment expense | $ 280 | |||
Goodwill and Other Intangible Assets (Details) - Schedule of changes in carrying amount of goodwill $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Schedule of changes in carrying amount of goodwill [Abstract] | |
| Balance at December 31, 2020 | $ 64,898 |
| 2021 Acquisitions | 37,317 |
| Balance at June 30, 2021 | $ 102,215 |
Goodwill and Other Intangible Assets (Details) - Schedule of amortization expense for intangible assets $ in Thousands |
Jun. 30, 2021
USD ($)
|
|---|---|
| Schedule of amortization expense for intangible assets [Abstract] | |
| Remainder of 2021 | $ 6,513 |
| 2022 | 12,687 |
| 2023 | 12,602 |
| 2024 | 10,493 |
| 2025 | 5,159 |
| 2026 | 2,326 |
| Thereafter | 1,493 |
| Total | $ 51,273 |
Debt Agreements (Details) - USD ($) |
1 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 03, 2021 |
Jan. 15, 2021 |
Dec. 08, 2020 |
Jul. 07, 2020 |
Jul. 02, 2020 |
Mar. 06, 2020 |
Mar. 05, 2020 |
Nov. 07, 2019 |
Sep. 11, 2019 |
May 27, 2021 |
Jan. 29, 2021 |
Jan. 26, 2021 |
Nov. 24, 2020 |
Aug. 21, 2020 |
Apr. 30, 2020 |
Mar. 19, 2020 |
Feb. 26, 2020 |
Nov. 30, 2019 |
Sep. 24, 2019 |
Apr. 30, 2019 |
Aug. 31, 2016 |
Jun. 30, 2021 |
Dec. 31, 2020 |
Dec. 31, 2021 |
Sep. 30, 2020 |
Jun. 30, 2020 |
May 29, 2020 |
Dec. 31, 2019 |
Oct. 31, 2017 |
|
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument maturity date | Feb. 16, 2023 | ||||||||||||||||||||||||||||
| Principal amount | $ 87,000 | $ 450,000 | $ 67,000 | $ 0.29 | |||||||||||||||||||||||||
| Debt instrument interest rate | 3.00% | 10.00% | 12.00% | ||||||||||||||||||||||||||
| Aggregate principal amount outstanding loan | 2,000,000.0 | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 33,000 | $ 1,500,000 | 83,000 | ||||||||||||||||||||||||||
| Secured loan agreement, description | the Company assumed a secured loan with FirstBank in the principal amount of $0.98 million that bore interest at 5% per annum, with a maturity date of June 1, 2020. This loan was subsequently extended to September 15, 2020 and the interest rate was increased to 36% per annum for any principal balance remaining unpaid past the extended maturity date. The loan was secured by certain assets of the subsidiary. This loan was subjected to covenants, whereby the subsidiary was required to meet certain financial and non-financial covenants at the end of each fiscal year. As of December 31, 2020, an aggregate principal amount of $0.86 million was outstanding and past due under this loan. | ||||||||||||||||||||||||||||
| Loan converted into common stock, decription | in connection with its acquisition of the new manufacturing facility in Tucson, Arizona, a subsidiary entered into a secured loan agreement pursuant to which it received a loan in the amount of up to $5.36 million that bears interest on the outstanding loan balance at the greater of (i) 8% per annum or (ii) 6.75% per annum in excess of the 1-month LIBOR rate, and matures on January 15, 2022. At the closing of the loan, the lender withheld $0.51 million of the loan amount as an interest reserve. In addition, $0.88 million of the loan amount was withheld and may be disbursed at later dates to pay for lender-approved improvements to the property secured by the loan. Interest is payable monthly. The loan is due in full at maturity. Upon an event of default, the interest rate on the loan will increase by an additional 5.00% per annum, and the outstanding principal amount of the loan, accrued interest thereon and fees may become due on-demand. Upon the maturity date or earlier date upon which the unpaid balance of the loan may become immediately payable due to acceleration, and on any prepayments of the loan, the subsidiary will owe an exit fee equal to the greater of (a) $54 thousand, or (b) 1.00% of the unpaid loan balance and all unpaid accrued interest and fees. Subject to certain terms and conditions and upon payment of a fee, the subsidiary may request a six-month extension of the maturity date. The loan is secured by the land, building and certain other assets of the subsidiary and is guaranteed by the Company and Daniel L. Hodges, the Company’s Chief Executive Officer. In addition, all rights to leases and rent related to the land and building assets have been assigned to the lender for potential non-performance by the subsidiary of its obligations under the loan. This loan is subject to certain financial and non-financial covenants on the part of the subsidiary at the end of each fiscal quarter and fiscal year. The Company incurred debt issuance costs for transaction in the amount of $0.16 million. As of June 30, 2021, an aggregate principal amount of $4.48 million was outstanding under this loan. | $1.0 million of the principal amount of this loan and all accrued interest with a combined total of $1.23 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 295,674 shares of common stock, along with warrants to purchase up to 295,674 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. The extinguishment on January 26, 2021 cured all events of default. As of June 30, 2021, an aggregate principal amount of $1.0 million was outstanding under this loan. | |||||||||||||||||||||||||||
| Loan interest rate | 5.00% | ||||||||||||||||||||||||||||
| Accrued interest percentage | 10.00% | 18.00% | 10.00% | ||||||||||||||||||||||||||
| Interest rate percentage | 15.00% | 15.00% | |||||||||||||||||||||||||||
| Aggregate amount | $ 500,000 | ||||||||||||||||||||||||||||
| Debt discount amount | $ 40 | ||||||||||||||||||||||||||||
| Principal bonus percentage | 10.00% | ||||||||||||||||||||||||||||
| Accrued interest | $ 890,000 | ||||||||||||||||||||||||||||
| Extinguished rate (in Dollars per share) | $ 4.15 | ||||||||||||||||||||||||||||
| Common stock, shares issued (in Shares) | 213,496 | 71,541,070 | 49,444,689 | ||||||||||||||||||||||||||
| Purchase of common stock shares (in Shares) | 213,496 | ||||||||||||||||||||||||||||
| Purchase price per share (in Dollars per share) | $ 4.50 | ||||||||||||||||||||||||||||
| Debt instrument description | The principal amounts of the notes were between $50 thousand and $100 thousand. The notes had maturity dates between January 31, 2021 and February 23, 2021 that bore interest at a rate of 15% per annum, with interest accrued 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 38,334 shares of his personally owned, issued and outstanding common stock, with a fair value of $0.26 million, to the accredited investors, as part of this transaction. The Company accounted for this as a contribution from Mr. Hodges and as debt discounts and issuance costs. The Company defaulted on these notes during the 2020 fiscal year, causing the interest rate to increase to an annually-compounded rate of 18% per annum, and the note and accrued interest to become due on-demand. The amounts recorded as debt discounts were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year. As of December 31, 2020, an aggregate principal amount of $0.55 million was outstanding under these notes. On January 26, 2021, $0.5 million of the aggregate principal amount of these notes, a 10% principal bonus, and accrued interest with a combined total of $0.57 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 136,324 shares of common stock, along with warrants to purchase up to 136,324 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. The remaining $50 thousand aggregate principal amount of these notes was fully repaid during fiscal 2021. | ||||||||||||||||||||||||||||
| Debt instrument maturity period, description | the Company issued to the seller, who became an employee of the Company, a convertible promissory note in the principal amount of $0.6 million that bears interest at the rate of 5% per annum, maturing on June 3, 2022. Accrued interest and principal is due at maturity. Commencing December 3, 2021, the outstanding principal and accrued interest on this note may be converted into shares of the Company’s common stock at an initial conversion price of $2.35 per share, subject to certain terms, conditions and adjustments. As of June 30, 2021, the full principal amount of $0.6 million of this note was outstanding.Senior Convertible Promissory Note On May 27, 2021, the Company sold a senior secured convertible promissory note in the principal amount of $11.0 million with an original issue discount of $1.0 million bearing an interest rate of 6% per annum that matures on May 27, 2023 and is subject to certain restrictive covenants. This note is convertible at any time following the earlier of the 6-month anniversary of the date of issuance or the date of effectiveness of a registration statement covering the applicable conversion shares at a conversion price of $4.50, subject to adjustment. The Company also issued to the buyer warrants to purchase up to 1,8200,000 shares of common stock with an exercise price of $4.50 per share, subject to adjustment, any time prior to May 27, 2026, and a grant date fair value of $0.505 per share. The Company also paid aggregate cash debt issuance costs of $0.69 million. The resulting aggregate debt discount recorded by the Company amounted to $2.6 million. Principal payments of $0.61 million plus interest are required to be paid monthly commencing six months after the date of issuance. This note is guaranteed by each of the Company’s subsidiaries and is secured by a first priority lien on all of the assets and properties of the Company and the assets and properties of its subsidiaries, subject only to the liens securing approximately $1.0 million principal amount of outstanding indebtedness of one of its subsidiaries. As of June 30, 2021, an aggregate principal amount of $11.0 million was outstanding. | the Company sold a convertible promissory note in the principal amount of $0.29 million with an original issue discount of $36 thousand that bore interest at a rate of 12.5% per annum, and warrants to purchase 52,910 shares of common stock. Warrants to purchase up to 9,260 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, as disclosed in the Company’s Annual Report on Form 10-K. In connection with this note, the Company recognized debt discounts of $0.22 million. On July 28, 2020, the Company defaulted on this note by not filing a registration statement under the Securities Act by July 28, 2020. As a result, the aggregate principal balance increased by penalties and interest of $88 thousand. In addition, the interest rate was increased to 24% per annum, and the note and accrued interest became due on demand. As of December 31, 2020, there was an aggregate principal amount of $0.37 million outstanding and past due under this note. On January 22, 2021, the note holder converted the full principal of $0.37 million and all accrued interest with a combined total of $0.42 million into 155,013 shares of common stock. | the Company sold $1.0 million aggregate principal amount of 9% Senior Convertible Debentures to an accredited investor that bore interest at a rate of 9% per annum and a maturity date of September 30, 2020, subsequently extended to November 30, 2020. Accrued interest and principal were due at maturity, with interest paid in cash or, at the Company’s option, in shares of common stock at the conversion price of $3.00 per share. Upon an event of default, the interest rate would automatically increase to 15% per annum. The debentures were convertible into shares of the Company’s common stock at a conversion price of $3.00 per share. The Company also issued warrants to purchase 33,334 shares of common stock that are exercisable for a purchase price of $3.00 per share, at any time on or prior to the earlier of December 31, 2022 or the second anniversary of the Company’s consummation of a public offering of its common stock in connection with an up-listing of the common stock to a national securities exchange. In connection with these debentures, the Company recorded total debt discounts of $0.16 million. Amounts recorded as debt discounts were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year, as a result of the debentures becoming due on demand from the default event. As of December 31, 2020, an aggregate principal amount of $1.0 million was outstanding and past due under these debentures. On January 26, 2021, the holder of these debentures converted the principal amount of $0.9 million into 300,000 shares of common stock. The remaining principal amount of $0.1 million and accrued interest with a combined total of $0.16 million, was fully extinguished on January 26, 2021 at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 38,713 shares of common stock of the Company, along with warrants to purchase up to 38,713 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. | the Company sold a senior secured convertible promissory note in the principal amount of $11.0 million with an original issue discount of $1.0 million bearing an interest rate of 6% per annum that matures on May 27, 2023 and is subject to certain restrictive covenants. This note is convertible at any time following the earlier of the 6-month anniversary of the date of issuance or the date of effectiveness of a registration statement covering the applicable conversion shares at a conversion price of $4.50, subject to adjustment. The Company also issued to the buyer warrants to purchase up to 1,8200,000 shares of common stock with an exercise price of $4.50 per share, subject to adjustment, any time prior to May 27, 2026, and a grant date fair value of $0.505 per share. The Company also paid aggregate cash debt issuance costs of $0.69 million. The resulting aggregate debt discount recorded by the Company amounted to $2.6 million. Principal payments of $0.61 million plus interest are required to be paid monthly commencing six months after the date of issuance. This note is guaranteed by each of the Company’s subsidiaries and is secured by a first priority lien on all of the assets and properties of the Company and the assets and properties of its subsidiaries, subject only to the liens securing approximately $1.0 million principal amount of outstanding indebtedness of one of its subsidiaries. As of June 30, 2021, an aggregate principal amount of $11.0 million was outstanding. | the Company issued to the sellers $1.5 million aggregate principal amount of term promissory notes. The individual principal amounts of the notes ranged from $1 thousand to $393 thousand. These notes bore interest at the rate of 10% per annum and matured on the earlier of (i) January 1, 2022, (ii) the date on which an aggregate of $6.0 million worth of products and services are sold following the acquisition date by (A) Fastback or (B) the Company and its subsidiaries (other than Fastback) to certain specified Fastback customers, or (iii) the date on which the Company issues and sells shares of its common stock or debt securities to investors in a bona-fide arms-length financing transaction for aggregate consideration of at least $12.0 million. Interest was payable in cash semi-annually in arrears on each June 1 and December 1, commencing on June 1, 2021, and on the maturity date. Principal and any unpaid accrued interest was due on the maturity date. These notes matured on February 10, 2021 upon the Company’s closing of a public offering, as disclosed in Note 15- Stockholders’ Equity. However, the representative of the Fastback sellers requested that the Company withhold payment of principal and interest on these notes until a dispute among such sellers could be resolved. As payment was withheld at the request of the sellers’ representative, no event of default occurred and interest was accrued only through the maturity date. These notes were fully repaid during fiscal 2021.Various subsidiaries of the Company received loan proceeds or the Company assumed in conjunction with various acquisitions an aggregate amount of $0.77 million under the Paycheck Protection Program (“PPP”). The PPP loans have maturity dates ranging from two to five 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. During the six months ended June 30, 2021, an aggregate of $0.32 million of these notes has been forgiven. This forgiveness was recorded as a gain on extinguishment of debt in the Condensed Consolidated Statement of Operations. As of June 20, 2021 and December 31, 2020, an aggregate principal amount of $0.45 million and $0.58 million, respectively, was outstanding under these loans. As described in Note 19 – Subsequent Events, an additional $0.1 million of these notes was forgiven subsequent to June 30, 2021. In connection with the acquisition of a subsidiary by the Company on April 1, 2021, the Company assumed two notes payable with aggregate principal balances of $0.3 million. These notes bore interest at 6% and were paid in full immediately following the completion of the acquisition by the Company. Senior Debentures In connection with previous acquisitions of two subsidiaries, the Company assumed the obligations of the seller of $0.1 million aggregate principal amount of 8% Senior Convertible Debentures of the seller that bore interest at the rate of 8% per annum and matured on December 31, 2019. Interest was payable semi-annually in cash or, at the seller’s option, in shares of the seller’s common stock at the conversion price that was equal to the lesser of (1) $24.00 or (2) 80% of the common stock price offered under the next equity offering. On April 30, 2020, these debentures were modified to remove the conversion feature and only have settlement through cash. During fiscal 2020, these debentures became past due and interest accrued at a rate of 15% per annum. As of December 31, 2020, an aggregate principal amount of $84 thousand was outstanding under these debentures. The aggregate principal amount of this debenture was fully repaid during fiscal 2021. Convertible Notes Payable On July 7, 2020, the Company sold a convertible promissory note in the principal amount of $0.29 million with an original issue discount of $36 thousand that bore interest at a rate of 12.5% per annum, and warrants to purchase 52,910 shares of common stock. Warrants to purchase up to 9,260 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, as disclosed in the Company’s Annual Report on Form 10-K. In connection with this note, the Company recognized debt discounts of $0.22 million. On July 28, 2020, the Company defaulted on this note by not filing a registration statement under the Securities Act by July 28, 2020. As a result, the aggregate principal balance increased by penalties and interest of $88 thousand. In addition, the interest rate was increased to 24% per annum, and the note and accrued interest became due on demand. As of December 31, 2020, there was an aggregate principal amount of $0.37 million outstanding and past due under this note. On January 22, 2021, the note holder converted the full principal of $0.37 million and all accrued interest with a combined total of $0.42 million into 155,013 shares of common stock. On August 21, 2020, the Company sold a convertible promissory note in the principal amount of $1.7 million with an original issue discount of $0.2 million that bore interest at a rate of 5.0% per annum and matured on November 20, 2020. Accrued interest and principal were due on the maturity date. Upon maturity, the interest rate automatically increased 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 was 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. As additional consideration for the loan, the Company issued to the lender 133,334 shares of common stock at a fair value of $10.05 per share. Warrants to purchase up to 17,857 shares of common stock that are exercisable for a purchase price of $8.40 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 these transactions, the Company recognized aggregate debt discounts of $1.73 million. On November 21, 2020, the Company defaulted on this note by not repaying the principal and accrued interest by the maturity date, which resulted in the aggregate principal balance increasing by penalties and interest of $0.54 million. In addition, the interest rate was increased to 24% per annum. As of December 31, 2020, an aggregate principal amount of $2.24 million was outstanding and past due under this note. The aggregate principal amount of this note was fully repaid during fiscal 2021.In connection with its acquisition a subsidiary on January 29, 2021, the Company issued to the sellers $11.15 million aggregate principal amount of convertible promissory notes. The individual principal amounts of the notes ranged from $6 thousand to $5.58 million. These notes initially bear interest at the rate of 1.01% per annum, which is to be adjusted to the prime rate as published by the Wall Street Journal on each annual anniversary of the issuance date, and mature on January 29, 2026. Interest is payable in cash annually in arrears on each January 1. Commencing on January 29, 2022, the outstanding principal and accrued interest on these notes may be converted in full to shares of the Company’s common stock at a conversion price of $5.22 per share, subject to adjustment. Upon an event of default, the interest rate will automatically increase to 15% per annum compounded annually, and all unpaid principal and accrued interest may become due on-demand. Principal and any unpaid accrued interest are due on the maturity date. Upon maturity, the interest rate will automatically increase to 15% per annum compounded annually on any unpaid principal. As of June 30, 2021, an aggregate principal amount of $11.15 million was outstanding. | the Company sold a convertible promissory note in the principal amount of $1.7 million with an original issue discount of $0.2 million that bore interest at a rate of 5.0% per annum and matured on November 20, 2020. Accrued interest and principal were due on the maturity date. Upon maturity, the interest rate automatically increased 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 was 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. As additional consideration for the loan, the Company issued to the lender 133,334 shares of common stock at a fair value of $10.05 per share. Warrants to purchase up to 17,857 shares of common stock that are exercisable for a purchase price of $8.40 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 these transactions, the Company recognized aggregate debt discounts of $1.73 million. On November 21, 2020, the Company defaulted on this note by not repaying the principal and accrued interest by the maturity date, which resulted in the aggregate principal balance increasing by penalties and interest of $0.54 million. In addition, the interest rate was increased to 24% per annum. As of December 31, 2020, an aggregate principal amount of $2.24 million was outstanding and past due under this note. | |||||||||||||||||||||||
| Aggregated amount | $ 320,000 | ||||||||||||||||||||||||||||
| Common stock conversion price, description | Company had previously sold $0.25 million aggregate principal amount of 10% Senior Convertible Debentures that bore interest at a rate of 10% per annum and were scheduled to mature on December 31, 2021. Interest was paid semi-annually in arrears in June and December of each year in cash or, at the Company's option, in shares of common stock at the conversion price that is equal to the lesser of (1) $7.50 or (2) a future effective price per share of any common stock sold by the Company. Upon an event of default, the interest rate shall automatically increase to 15% per annum. In connection with these debentures, the Company recognized aggregate debt discounts of $0.25 million. On April 21, 2020, all unpaid accrued interest through December 31, 2019 was converted into 2,234 shares of common stock. Also on April 21, 2020, all the outstanding warrants were exercised at $0.03 per share into 94,510 issued shares of the Company’s common stock, resulting in full recognition in interest expense of the remaining debt discount. 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 the Company’s common stock and the conversion price was changed from $7.50 per share to $2.268 per share. The Company defaulted on these debentures during the 2020 fiscal year, causing the interest rate to increase to 15% per annum, and the debentures and accrued interest to become due on demand. Any remaining amounts recorded as debt discounts were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year. As of December 31, 2020, an aggregate principal amount of $0.25 million was outstanding and past due under these debentures. On January 26, 2021, the holder of these debentures converted the aggregate principal and interest of $0.28 million into 125,186 shares of common stock. | ||||||||||||||||||||||||||||
| Equipment Financing Loan [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 180,000 | ||||||||||||||||||||||||||||
| Promissory Note [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument maturity date | Feb. 28, 2020 | Aug. 31, 2018 | |||||||||||||||||||||||||||
| Principal amount | $ 550,000 | ||||||||||||||||||||||||||||
| Debt instrument interest rate | 8.50% | ||||||||||||||||||||||||||||
| Related parties agreed outstanding balance | $ 810,000 | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding loan | 790,000 | ||||||||||||||||||||||||||||
| Promissory Note Two [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument maturity date | Mar. 01, 2022 | ||||||||||||||||||||||||||||
| Debt instrument interest rate | 9.00% | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding loan | 150,000 | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 750,000 | $ 450,000 | $ 1,200,000 | ||||||||||||||||||||||||||
| Promissory Note Two [Member] | Accredited Investors [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument interest rate | 15.00% | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 1,200,000 | ||||||||||||||||||||||||||||
| Accrued interest compounded rate | 18.00% | ||||||||||||||||||||||||||||
| Promissory Note Three [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Principal amount | $ 500,000 | $ 50,000 | |||||||||||||||||||||||||||
| Debt instrument interest rate | 12.00% | 7.90% | |||||||||||||||||||||||||||
| Aggregate principal amount outstanding loan | 11,000 | ||||||||||||||||||||||||||||
| Convertible Notes Payable [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument maturity date | Nov. 26, 2021 | ||||||||||||||||||||||||||||
| Debt instrument interest rate | 15.00% | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | 75,000 | ||||||||||||||||||||||||||||
| Net proceeds received | $ 2,000,000.0 | ||||||||||||||||||||||||||||
| Bearing interest rate | 9.00% | ||||||||||||||||||||||||||||
| Secured loan agreement, description | The debt issuance costs were the result of the issuance of 350,000 shares of common stock and a cash payment of $80 thousand. The Company defaulted on this loan during fiscal 2020, which caused the interest rate to increase to a monthly compounded rate of 15% per annum, a late charge of 5% was incurred, and the loan and accrued interest became due on-demand. Amounts recorded as debt discounts and issuance costs were fully amortized and recognized in interest expense in the Condensed Consolidated Statement of Operations during the 2020 fiscal year, as a result of the loan becoming due on-demand from the default event. | ||||||||||||||||||||||||||||
| Loan converted into common stock, decription | In connection with its acquisition of a subsidiary on January 29, 2021, the Company assumed the obligations of the sellers on a secured loan in the principal amount of $0.21 million that bears interest on the outstanding loan balance at the greater of (i) 5.75% per annum in excess of the Prime Rate or (ii) $4 thousand per month, with a maturity date of April 30, 2021. Interest is payable monthly. | ||||||||||||||||||||||||||||
| Secured Notes Payable [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument maturity date | Dec. 26, 2020 | ||||||||||||||||||||||||||||
| Debt instrument interest rate | 78.99% | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 600,000 | 1,100,000 | |||||||||||||||||||||||||||
| Loan converted into common stock, decription | On January 26, 2021, $0.4 million of the principal amount of this loan and accrued interest with a combined total of $0.5 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 119,418 shares of common stock, along with warrants to purchase up to 119,418 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. The remaining $0.7 million principal amount of this loan was fully repaid during fiscal 2021. | ||||||||||||||||||||||||||||
| Notes Payable [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument interest rate | 10.00% | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 1,100,000 | ||||||||||||||||||||||||||||
| Secured loan agreement, description | In April 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 33,334 fully paid and non-assessable shares of its common stock that have been treated as debt issuance costs. As of December 31, 2020, an aggregate principal amount of $3.5 million was outstanding under this note. On January 26, 2021, the aggregate principal amount of this note and accrued interest with a combined total of $4.21 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 1,014,716 shares of common stock, along with warrants to purchase up to 1,014,716 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. | the Company entered into a secured loan agreement in the amount of $2.01 million that bore interest at 5% per annum with a maturity date of August 31, 2020, which was subsequently extended to October 15, 2020. Upon maturity, the interest rate automatically increased to 18% per annum, and a late charge of 5% was charged for any balance overdue by more than 10 days. The loan was secured by certain intellectual property assets of the Company. As of December 31, 2020, an aggregate principal amount of $2.01 million was outstanding and past due under this loan. On January 26, 2021, the aggregate principal amount of this loan and accrued interest with a combined total of $2.25 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, plus a 10,000 unit conversion bonus, resulting in the issuance of 552,231 shares of common stock, along with warrants to purchase up to 552,231 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026 | |||||||||||||||||||||||||||
| Original issue discount | $ 100,000 | ||||||||||||||||||||||||||||
| Interest rate, description | Upon an event of default, the interest rate would automatically increase to 36% per annum on any unpaid principal, or the maximum amount permitted by applicable law, compounded monthly, and all unpaid principal and accrued interest would become due on-demand. The loan was guaranteed by a subsidiary of the Company and was secured by the Company’s equity interest in the subsidiary, all of the assets of the subsidiary and certain intellectual property assets of the Company. | ||||||||||||||||||||||||||||
| Loan guaranteed, description | Daniel L. Hodges, the Company’s Chief Executive Officer, transferred a total of 23,334 shares of his personally owned, issued and outstanding common stock to the lender and brokers, as part of this transaction. The shares had a total fair value of $0.14 million. The Company accounted for this as a contribution from Mr. Hodges, as debt issuance costs. The Company incurred debt issuance costs to the placement agent of this transaction in the amount of $50 thousand. | ||||||||||||||||||||||||||||
| Promissory Note Eight [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument interest rate | 15.00% | ||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 180,000 | 180,000 | |||||||||||||||||||||||||||
| October 2017 [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Principal amount | $ 4,400,000 | ||||||||||||||||||||||||||||
| Debt instrument interest rate | 8.00% | ||||||||||||||||||||||||||||
| Interest rate percentage | 10.00% | ||||||||||||||||||||||||||||
| Issue discount amount | $ 400,000 | ||||||||||||||||||||||||||||
| Accrued interest | $ 5,000,000.0 | ||||||||||||||||||||||||||||
| Promissory Note Seven [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Principal amount | $ 580,000 | $ 450,000 | |||||||||||||||||||||||||||
| Interest rate increased | 133.00% | ||||||||||||||||||||||||||||
| Aggregate principal amount | $ 200,000 | ||||||||||||||||||||||||||||
| Promissory Note Seven [Member] | Subsequent Event [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 550,000 | ||||||||||||||||||||||||||||
| New Promissory Note [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Promissory note, description | the Company sold a promissory note in the principal amount of $0.5 million with an original issue discount of $54 thousand, that matured on November 30, 2020. Additionally, in lieu of interest, the Company issued to the lender 16,667 shares of its common stock with a fair value of $57 thousand, which was recognized as a debt discount and amortized to interest expense over the term of the note. Any principal balance remaining unpaid past the maturity date accrued interest at a rate of 15% per annum. | ||||||||||||||||||||||||||||
| DragonWave and Lextrum [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Secured loan agreement, description | connection with previous acquisitions of two subsidiaries, the Company assumed the obligations of the seller of $0.1 million aggregate principal amount of 8% Senior Convertible Debentures of the seller that bore interest at the rate of 8% per annum and matured on December 31, 2019. Interest was payable semi-annually in cash or, at the seller’s option, in shares of the seller’s common stock at the conversion price that was equal to the lesser of (1) $24.00 or (2) 80% of the common stock price offered under the next equity offering. On April 30, 2020, these debentures were modified to remove the conversion feature and only have settlement through cash. During fiscal 2020, these debentures became past due and interest accrued at a rate of 15% per annum. As of December 31, 2020, an aggregate principal amount of $84 thousand was outstanding under these debentures. | ||||||||||||||||||||||||||||
| Chief Executive Officer [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Issued and outstanding common stock (in Shares) | 96,634 | ||||||||||||||||||||||||||||
| Issued and outstanding common stock fair vale | $ 480,000 | ||||||||||||||||||||||||||||
| Equipment Financing Loan [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Aggregate principal amount outstanding | $ 200,000 | ||||||||||||||||||||||||||||
| Minimum [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Principal amount | $ 1,000 | ||||||||||||||||||||||||||||
| Minimum [Member] | Equipment Financing Loan [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument interest rate | 6.70% | ||||||||||||||||||||||||||||
| Maximum [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Principal amount | $ 393,000 | ||||||||||||||||||||||||||||
| Maximum [Member] | Equipment Financing Loan [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument interest rate | 8.50% | ||||||||||||||||||||||||||||
| PPP Loans [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Principal amount | $ 770,000 | $ 580,000 | $ 450,000 | ||||||||||||||||||||||||||
| Debt instrument interest rate | 1.00% | ||||||||||||||||||||||||||||
| Additional amount | $ 100,000 | ||||||||||||||||||||||||||||
| PPP Loans [Member] | Subsidiary of Common Parent [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Debt instrument interest rate | 0.30% | ||||||||||||||||||||||||||||
| principal amount of outstanding loan | $ 0.06 | ||||||||||||||||||||||||||||
| PPP Loans [Member] | Minimum [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Loan maturity | 2 years | ||||||||||||||||||||||||||||
| PPP Loans [Member] | Maximum [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Loan maturity | 5 years | ||||||||||||||||||||||||||||
| Common Stock [Member] | |||||||||||||||||||||||||||||
| Debt Agreements (Details) [Line Items] | |||||||||||||||||||||||||||||
| Converted shares (in Shares) | 4,832 | ||||||||||||||||||||||||||||
Debt Agreements (Details) - Schedule of future maturities of long-term debt - USD ($) $ in Thousands |
Jun. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of future maturities of long-term debt [Abstract] | ||
| Remainder of 2021 | $ 2,284 | |
| 2022 | 12,679 | |
| 2023 | 2,446 | |
| 2024 | ||
| 2025 | ||
| Thereafter | 11,303 | |
| Total debt | 28,712 | |
| Less unamortized discounts and debt issuance costs | (2,572) | |
| Total net debt | 26,140 | |
| Less current portion of long-term debt, net of unamortized discounts and debt issuance costs | (11,211) | |
| Total long-term debt, net of unamortized discounts and debt issuance costs | $ 14,929 | $ 706 |
Related Party Transactions (Details) - USD ($) |
1 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Nov. 13, 2020 |
Oct. 15, 2020 |
Jul. 01, 2020 |
Jan. 26, 2021 |
Sep. 26, 2018 |
Jun. 30, 2021 |
Jan. 29, 2021 |
Dec. 31, 2020 |
May 29, 2020 |
Mar. 06, 2020 |
Aug. 05, 2019 |
|
| Related Party Transactions (Details) [Line Items] | |||||||||||
| Accrued liabilities - related party | $ 31,000 | $ 30,000 | |||||||||
| Professional services | $ 31,000 | $ 30,000 | |||||||||
| Interest rate | 10.00% | 12.00% | 3.00% | ||||||||
| Related party transactions, description | On January 26, 2021, the aggregate principal amount of this note, a 10% principal bonus, and all accrued interest with a combined total of $0.18 million, was fully extinguished at the rate of $4.15 per unit, as defined in our public offering and disclosed in Note 15- Stockholders’ Equity, resulting in the issuance of 42,776 shares of common stock, along with warrants to purchase up to 42,776 shares of common stock that are exercisable for a purchase price of $4.50 per share at any time on or prior to January 26, 2026. | ||||||||||
| Mr. Hodges and his wife [Member] | |||||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||||
| Aggregate principal amount | $ 200,000 | ||||||||||
| Interest rate | 5.00% | ||||||||||
| Default interest rate | 18.00% | 18.00% | |||||||||
| Outstanding amount | $ 0.2 | ||||||||||
| Global Security Innovative Strategies [Member] | |||||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||||
| Options to purchase of stock (in Shares) | 100,000 | ||||||||||
| Option price (in Dollars per share) | $ 1.00 | ||||||||||
| Payment for management fee | $ 10,000 | ||||||||||
| Brent Davies [Member] | |||||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||||
| Related party transactions, description | Brent Davies, a member of the Company’s Board of Directors and Audit Committee, loaned the Company $50 thousand at an interest rate of 4.80% per annum with an original maturity date of August 31, 2020. This note was amended to extend the maturity date to November 30, 2020. Interest and the full principal balance were due at maturity. During fiscal 2020, this loan became past due and was accruing interest at an increased default rate of 18.0% per annum. As of December 31, 2020, $50 thousand was outstanding and past due under the loan. | ||||||||||
| Mr. McIntire [Member] | |||||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||||
| Outstanding amount | $ 600,000 | ||||||||||
| Related party transactions, description | Dustin McIntire, the Company’s Chief Technology Officer, and issued promissory notes evidencing such loans. The principal amounts of the notes were between $0.1 million and $0.4 million, and such notes bore interest at 10% per annum and were due between January 14, 2021 and March 28, 2021. | ||||||||||
| Richard J. Berman [Member] | |||||||||||
| Related Party Transactions (Details) [Line Items] | |||||||||||
| Related party transactions, description | the Company borrowed an aggregate of $0.16 million from Richard J. Berman, a member of the Company’s Board of Directors, and issued promissory notes evidencing such loans. The principal amounts of the notes were between $40 thousand and $120 thousand, and such notes bore interest at 8% per annum and were due between February 12, 2021 and March 23, 2021. As of December 31, 2020, $0.16 million was outstanding under these notes. | ||||||||||
Stockholders’ Equity (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 10, 2021 |
Dec. 09, 2020 |
Jan. 31, 2021 |
Jan. 29, 2021 |
Jan. 26, 2021 |
Jan. 21, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Jun. 30, 2020 |
Jun. 30, 2021 |
Jun. 30, 2020 |
Jan. 27, 2021 |
Dec. 31, 2020 |
|
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Preferred stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | ||||||||||
| Common stock, shares authorized | 300,000,000 | 300,000,000 | 300,000,000 | ||||||||||
| Common stock, shares issued | 71,541,070 | 71,541,070 | |||||||||||
| Weighted-average potential common shares were excluded from the diluted loss per common share | 68,770,644 | 42,886,180 | 63,538,782 | 42,856,809 | |||||||||
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||||||
| Additional purchase of securities, description | In addition, pursuant to the Second Offering Underwriting Agreement, the Company granted the Representative a 45-day option to purchase up to 847,058 additional shares of common stock to cover over-allotments in connection with the Second Offering, which the Representative exercised in full on February 11, 2021. | the Company granted the Representative a 45-day option to purchase up to 578,312 additional shares of common stock, and/or 578,312 additional First Offering Warrants, to cover over-allotments in connection with the First Offering, which the Representative partially exercised to purchase 578,312 Warrants on the First Offering Closing Date. For additional information on these First Offering Warrants, see Note 16 – Share-Based Compensation. | |||||||||||
| Gross proceeds received (in Dollars) | $ 27,600 | $ 1,370 | |||||||||||
| Gross proceeds deduction, percentage | 8.00% | 8.00% | 8.00% | ||||||||||
| Representative warrants to purchase of shares of common stock | 225,882 | 154,216 | |||||||||||
| Warrants to purchase shares of common stock | 198,776 | ||||||||||||
| Description of consulting agreement | the Company entered into an agreement with a consultant to replace an existing consulting agreement between the consultant and the Company to allow the consultant to elect to take from 50% to 100% of its compensation in the form of common stock based on an agreed upon conversion calculation. Any difference between the amount due and the actual fair value of the shares issued in payment is recorded as general and administrative expense in the Company’s Condensed Consolidated Financial Statements. Common stock to be issued to the consultant will be paid on a quarterly basis. During the six months ended June 30, 2021 and 2020, respectively, the Company issued 15,740 shares of its common stock with a fair value of $69 thousand and 55,032 shares of its common stock, with a fair value of $193 thousand to the consultant for services previously rendered. | ||||||||||||
| Consultant payment of common stock | 5,000 | ||||||||||||
| Fair value of amount (in Dollars) | $ 31 | ||||||||||||
| Common stock of vested | 2,125 | ||||||||||||
| Common stock of expense (in Dollars) | $ 13 | ||||||||||||
| Remaining shares of vested | 2,875 | ||||||||||||
| Additional recognized expense (in Dollars) | $ 18 | ||||||||||||
| Vendor [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Common stock, par value (in Dollars per share) | $ 4.15 | ||||||||||||
| Stock Option [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Weighted-average potential common shares were excluded from the diluted loss per common share | 3,320,181 | 2,548,345 | |||||||||||
| Unvested restricted stock units [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Weighted-average potential common shares were excluded from the diluted loss per common share | 328,543 | 314,938 | |||||||||||
| Warrants [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Weighted-average potential common shares were excluded from the diluted loss per common share | 775,362 | 94,465 | |||||||||||
| Warrants issued | 100,000 | ||||||||||||
| Common Stock [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Weighted-average potential common shares were excluded from the diluted loss per common share | 4,835,781 | 229,348 | |||||||||||
| First Offering [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Sale of aggregate units of shares | 3,855,422 | ||||||||||||
| Common stock, par value (in Dollars per share) | $ 4.15 | ||||||||||||
| Common stock exercise price (in Dollars per share) | $ 4.50 | ||||||||||||
| Gross proceeds received (in Dollars) | $ 16,000 | ||||||||||||
| Purchase of additional shares of common stock | 329,815 | ||||||||||||
| Sale of common stock, percentage | 4.00% | ||||||||||||
| Total expenses of public offering (in Dollars) | $ 2,700 | ||||||||||||
| Second Offering [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Sale of aggregate units of shares | 5,647,059 | ||||||||||||
| Sale of common stock, percentage | 4.00% | ||||||||||||
| Total expenses of public offering (in Dollars) | $ 2,600 | ||||||||||||
| Sale of stock, price per unit (in Dollars per share) | $ 4.25 | ||||||||||||
| Private Placement [Member] | |||||||||||||
| Stockholders’ Equity (Details) [Line Items] | |||||||||||||
| Warrants to purchase shares of common stock | 27,106 | ||||||||||||
Share-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
May 05, 2021 |
Apr. 02, 2021 |
Feb. 12, 2021 |
Dec. 02, 2019 |
Jun. 29, 2021 |
Jun. 25, 2021 |
May 27, 2021 |
Jan. 26, 2021 |
Jun. 30, 2021 |
Jun. 30, 2021 |
|
| Share-Based Compensation (Details) [Line Items] | ||||||||||
| Common stock authorized awards to granted (in Shares) | 3,333,334 | 3,333,334 | ||||||||
| Number of shares (in Shares) | 655,002 | 8,333,334 | 1,820,000 | |||||||
| Number of shares issued (in Shares) | 5,430,505 | |||||||||
| Number of shares forfeited (in Shares) | 33,334 | |||||||||
| Exercised shares (in Shares) | 63,333 | |||||||||
| Number of common shares authorized (in Shares) | 2,936,163 | |||||||||
| Aggregate of restricted stock (in Shares) | 633,336 | |||||||||
| Fair value of per share | $ 0.873 | $ 2.46 | $ 0.505 | |||||||
| Restricted stock units, description | The original vesting period for these RSAs is as follows: 283,339 were to vest on the one-year anniversary of the grant date; 283,331 were to vest on the two-year anniversary of the original grant date; and 66,666 were scheduled to vest on the three-year anniversary of the original grant date. As of December 31, 2020, 283,339 RSAs had vested. In the first quarter of fiscal 2021, the Company modified the RSA awards for two individuals to accelerate the final vesting of their awards in consideration of the individuals’ separation and/or retirement. This modification resulted in the vesting of an additional 50,000 RSAs. An incremental compensation expense was recognized for the modification totaling $0.17 million during the six months ended June 30, 2021. As of June 30, 2021, the remaining unvested RSAs from these awards, totaling 299,997, are scheduled to vest as follows: 233,331 are scheduled to vest on the two-year anniversary of the original grant date; and 66,666 were scheduled to vest on the three-year anniversary of the original grant date. | |||||||||
| Fair value of per share | $ 4.50 | |||||||||
| Vesting period, description | The vesting period for these RSAs is as follows: 33,334 vest on the one-year anniversary of the grant date and 33,333 vest on the two-year anniversary of the original grant date. | |||||||||
| Vested percentage | 100.00% | 100.00% | ||||||||
| Recognized of compensation expense (in Dollars) | $ 130 | $ 180 | $ 530 | |||||||
| Unrecognized compensation cost (in Dollars) | 640 | |||||||||
| Aggregate of purchase shares (in Shares) | 2,458,163 | |||||||||
| Exercise price | $ 2.75 | $ 2.75 | $ 4.50 | |||||||
| Aggregate of shares common stock (in Shares) | 295,000 | 1,778,837 | ||||||||
| Service period description | Of these, 270,000 have a one-year service period and vest ratably on the six month and twelve-month anniversary of their authorization for issuance and 25,000 vested immediately upon grant. | Of these, 753,837 have a three-year service period and vest ratably on the first, second and third anniversary of their authorization for issuance and 1,025,000 have a two-year service period and vest ratably on the first and second anniversary of their authorization for issuance. | ||||||||
| Recognized of share-based compensation expense (in Dollars) | $ 340 | 350 | ||||||||
| Unrecognized compensation expense (in Dollars) | $ 3,950 | |||||||||
| Exercise per share price | $ 5.3125 | |||||||||
| Estimated per share | $ 1.918 | |||||||||
| Aggregate of purchase shares (in Shares) | 225,882 | |||||||||
| Weighted average grant date fair value per share | $ 1.390 | |||||||||
| Minimum [Member] | ||||||||||
| Share-Based Compensation (Details) [Line Items] | ||||||||||
| Fair value of per share | $ 0.961 | $ 0.759 | ||||||||
| Exercise price | 2.75 | |||||||||
| Maximum [Member] | ||||||||||
| Share-Based Compensation (Details) [Line Items] | ||||||||||
| Fair value of per share | 1.042 | $ 0.768 | ||||||||
| Exercise price | $ 3.025 | |||||||||
| Warrant [Member] | ||||||||||
| Share-Based Compensation (Details) [Line Items] | ||||||||||
| Exercise price | $ 4.15 | |||||||||
| Aggregate of shares common stock (in Shares) | 2,751,556 | |||||||||
| Exercise per share price | $ 4.50 | |||||||||
| Estimated per share | $ 1.597 | |||||||||
| Warrant to purchase (in Shares) | 100,000 | |||||||||
| Expiration date | Jan. 21, 2026 | |||||||||
| Warrants price per share | $ 1.703 | |||||||||
| Warrant One [Member] | ||||||||||
| Share-Based Compensation (Details) [Line Items] | ||||||||||
| Exercise price | $ 5.1875 | |||||||||
| Warrant to purchase (in Shares) | 154,216 | |||||||||
| Warrants price per share | $ 1.376 | |||||||||
| Warrants Two [Member] | ||||||||||
| Share-Based Compensation (Details) [Line Items] | ||||||||||
| Exercise price | $ 4.50 | |||||||||
| Warrant to purchase (in Shares) | 4,433,734 | |||||||||
| Warrants price per share | $ 1.597 | |||||||||
| Board of Directors [Member] | ||||||||||
| Share-Based Compensation (Details) [Line Items] | ||||||||||
| Aggregate of restricted stock (in Shares) | 66,667 | |||||||||
Commitments and Contingencies (Details) |
1 Months Ended |
|---|---|
May 22, 2020 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Inventory, description | Michael Powell, a former employee of a subsidiary of the Company, filed suit against the Company and certain subsidiaries of the Company, including DragonWave-X, LLC, DragonWave-X, Inc., Transform-X, Inc., and COMSovereign Corp, in the Pima County Arizona Superior Court, Case No. C20202216. On December 7, 2020, Mr. Powell filed his first amended complaint against the Company, DragonWave Corp., and Transform-X, Inc. Mr. Powell alleged that he entered into an employment agreement with DragonWave-X, Inc. in July 2018, was terminated without cause in May 2019, and claimed he was owed approximately $182 thousand in wages and $50 thousand in bonuses. Mr. Powell sought approximately $697 thousand in treble damages, punitive damages, consequential damages, interest and attorneys’ fees and costs. |
Concentration (Details) $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2021
USD ($)
| |
| Concentration (Details) [Line Items] | |
| Number of customers | 2 |
| Accounts receivable (in Dollars) | $ 1,100 |
| Trade accounts receivable | 36.80% |
| Uncollectible balance (in Dollars) | $ 740 |
| Customer One [Member] | |
| Concentration (Details) [Line Items] | |
| Trade accounts receivable | 10.00% |
Subsequent Events (Details) - USD ($) $ in Thousands |
1 Months Ended | |
|---|---|---|
Jul. 16, 2021 |
Jun. 30, 2021 |
|
| Subsequent Events (Details) [Line Items] | ||
| Aggregate principal amount | $ 100 | |
| Subsequent Event [Member] | ||
| Subsequent Events (Details) [Line Items] | ||
| Exchange for cash | $ 550,000 | |
| Common Stock, shares (in Shares) | 992,780 | |
| Estimated fair value | $ 2,200 |