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Description of Business and Basis of Presentation
12 Months Ended
Dec. 31, 2021
Description of Business and Basis of Presentation [Abstract]  
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Corporate History of COMSovereign

 

On March 6, 2020, the Company’s subsidiary, Sovereign Plastics LLC (“Sovereign Plastics”), acquired substantially all of the assets of a Colorado Springs, Colorado-based manufacturer of plastics and metal components to third-party manufacturers.

 

On May 16 2022, the Company’s subsidiary, Sovereign Plastics LLC (“Sovereign Plastics”), was sold to TheLandersCompanies LLC.

 

On July 6, 2020, the Company completed its acquisition (the “VNC Acquisition”) of Virtual Network Communications Inc., a Virginia corporation (“VNC”), pursuant to an Agreement and Plan of Merger and Reorganization dated as of May 21, 2020 (the “Merger Agreement”), by and among the Company and its wholly-owned subsidiaries, CHC Merger Sub 7, Inc. and VNC Acquisition LLC, VNC and Mohan Tammisetti, solely in his capacity as the representative of the security holders of VNC.  

 

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. See Note 3 – Business Acquisitions for further discussion.

 

On January 29, 2021, the Company, through its wholly-owned subsidiary, AZCOMS LLC (“AZCOMS”), completed the acquisition of a 140,000-square-foot building in Tucson, Arizona, and will hold and service the related debt as described in Note 9.

 

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. See Note 3 – Business Acquisitions for further discussion.

 

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. See Note 3 – Business Acquisitions for further discussion.

 

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 developer of “beyond state-of-the-art” mixed analog/digital signal processing solutions, intellectual property (IP) licensing, design and consulting services. See Note 3 – Business Acquisitions for further discussion.

 

On July 15, 2021, the Company completed the acquisition of RF Engineering & Energy Resource, LLC, a Michigan limited liability company (“RF Engineering”). RF Engineering is a specialist in the design, outsourced manufacturing and distribution of ultra-high performance microwave antennas and other branded solutions for the wireless and wireline industries in the United States and Latin America. See Note 3 – Business Acquisitions for further discussion.

 

On October 4, 2021, a Company completed the acquisition of SAGUNA Networks LTD, an Israeli-based software development company (“SAGUNA”). SAGUNA is a premier Multi-Access Edge Computing (“MEC”) cloud software developer. The acquisition significantly expanded the Company’s software technology offerings powering 5G wireless networks. See Note 3 – Business Acquisitions for further discussion.

 

Each of the Company’s subsidiaries was acquired to address a different opportunity or segment within the North American telecom infrastructure and service market. 

 

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. The historical information is not necessarily indicative of the Company’s future results of operations, financial position or cash flows.

 

As described in Note 12 – 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 consolidated financial statements and accompanying notes give effect to the Split as if it occurred at the beginning of the first period presented. 

 

Principle of Consolidation

 

The consolidated financial statements as of, and for the year ended December 31, 2020 and 2021 include the accounts of the Company and its subsidiaries: Drone AFS Corp., Lighter Than Air Systems Corp., DragonWave, Lextrum, Silver Bullet, VEO, InduraPower, Sovereign Plastics, VNC, Fastback, SKS, AZCOMS, RVision, Innovation Digital, RF Engineering and SAGUNA. All intercompany transactions and accounts have been eliminated.

 

Use of Estimates

 

The preparation of 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. The Company’s significant estimates consist of the valuation of stock-based compensation; the valuation of the assets and liabilities acquired; the valuation of the Company’s common shares issued in the transaction; the valuation of inventory; the allowance for credit losses; the valuation of equity securities; the valuation allowance for deferred tax assets; and impairment of long-lived assets and goodwill.