Modern technology gives us many things.

COMSOVEREIGN : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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.


Business overview; Operational environment and key factors influencing the results of fiscal 2021 and 2020




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.


                                       38





Our Operating Units


Through a series of acquisitions, we and our existing subsidiaries have expanded our service and geographical offerings over the past two years. Our company consists of the following main operational 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, such 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 focused on the edge

developer of wireless telecommunication technologies and manufacturer of equipment

both 4G LTE Advanced and 5G compatible radio equipment. VNC designs, develops,

manufactures, offers and maintains a line of network products for wireless connection

network operators, mobile virtual network operators, cable TV system

operators, as well as state and business enterprises, which allow for new sources of

revenues and reduction of capital and operating expenses. VNC has also been developed

fast-deploying tactical systems that can be combined with tethered

balloons and drones offered by ours Drone aviation daughter and allowed and

operates in almost every place in the world. We acquired VNC in July 2020.

? Fastback. Skyline Partners Technology, LLCwhich conducts business under the name

Fastback Networks (“Fastback”) is a manufacturer of smart connections

radio (IBR) systems that provide a highly efficient wireless connection to

virtually any location, including those caused by Nonlinear Visibility (NLOS)

Limits. Fastback’s extended IBR products allow operators to save money

add capacity and density to their macrocells and expand the range of services

density with small cells. These solutions also allow operators to provide both

temporary cellular service and data service using mobile / portable radio systems

and provide a wireless Ethernet connection. We acquired Fastback in January

    2021.



? Drone aviation. Lighter Than Air Systems Corp.which conducts business on

name Drone aviation (“Drone aviation“), is located in Jacksonville, Florida and

develops and manufactures cost-effective, compact and improved connections

unmanned aerial vehicles (UAVs), including light air balloons and

drones that support surveillance sensors and communication networks. We

    acquired Drone Aviation in June 2014.



? Sky Sapience Ltd. Sky Sapience Ltd. (‘SKS’) is an Israeli producer

of drones with patented tethered turning technology that provides

long – lasting, mobile and in all weather conditions reconnaissance, surveillance and

Intelligence Opportunities (ISR) for customers around the world for both land and

marine applications. Its innovative technologies include optical fibers

connections that allow secure high-capacity communication, including support

for commercial 4G and 5G wireless networks. The leading line of SKS HoverMast from

drones connected to a quadrotor have a continuous ground power, fibers

optical communications for cyber immunity and the ability to work in

Environments rejected by GPS while providing a dramatically improved situation

consumer awareness and communication capabilities. 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.




                                       39




? 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, acts as a material, a component

source production chain and supply for all our subsidiaries as well

provides plastic and metal components to third-party manufacturers. His

ability to quickly prototype new products and machine castings,

metals and plastic castings have reduced the production cycle for many of ours

components from months to days. We have acquired the business that is currently underway

    by Sovereign Plastics in March 2020.



? RVision, Inc. RVision, Inc. (“RVision”) is a California-based developer of

technologically advanced video and communication products and physical

security solutions for government and private sectors

industry. He served governments and the military for almost two

decades with complex, environmentally friendly optical and infrared rays

cameras, hardened processors, custom tactical video hardware, software

solutions and related communication technologies. It has also evolved

nano-defractive optics with integrated, powered by artificial intelligence

electro-optical sensors and communication network connection 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 mixed analog-digital “outside modern technologies”

solutions for signal processing, intellectual property (IP) licensing, design and

consulting services. His signal processing and intellectual techniques

properties have significantly improved the bandwidth and accuracy of RF

transceiver systems and have provided capable technologies in the field of

communication and RADAR systems, signal intelligence (SIGINT) and electronic

combat (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-supplier of high quality microwave oven

    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.

By maintaining frequencies of (6-42 GHz), customers can now reduce cost savings

and safe proof of the future of their networks using 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.



Important 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.

                                       40





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.



Costs 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.



                                       41





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 costs consist of depreciation related to fixed assets, such as test equipment, research and development equipment, computer hardware, production facilities and improvements to leases, as well as depreciation related to intangible fixed assets.



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.



                                       42





Results of Operations



                                                Three Months Ended                 Six Months Ended
                                                     June 30,                          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 are over June 30, 2021 compared to the expiration of three and six months
June 30, 2020




Total Revenues



It’s over in three months June 30, 2021, total revenue was $ 3.61 million
compared to $ 3.01 million for the same period in 2020 an increase of $ 0.6 million. This increase consists mainly of revenues from $ 0.3 million since 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.



                                       43




Costs of goods sold and gross profit

It’s over in three months June 30, 2021, the cost of goods sold was $ 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 past six months June 30, 2021, the cost of goods sold was $ 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 are mainly due to the combination of products.

Expenditure on research and development

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 past six months June 30, 2021, depreciation and amortization costs were $ 7.3 million compared to $ 5.8 million for the same period in 2020 an increase of $ 1.5 million. This increase is mainly due to the increase in depreciable assets acquired through new acquisitions.



                                       44





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 past six months June 30, 2021, we had a net loss of $ 26.8 million
compared to the net loss of $ 14.6 million for the same period 2020, related to the elements 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.


                                       45




To June 30, 2021, we had undiscounted liabilities related to the payment of indebtedness as follows:

? $ 1.55 million related to accrued liabilities and liabilities that

           were past due;



? $ 51 thousand associated with indebtedness due in the third quarter

           of 2021;



? $ 2.23 million related to indebtedness due in the fourth quarter

           of 2021;

? $ 6.32 million associated with indebtedness due in the first quarter

           of 2022;



? $ 2.69 million associated with indebtedness 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.


Loan and debt agreement

Summary information regarding our debt agreements or other credit facilities is provided in Notes 13 and 19 to the notes to the consolidated financial statements set out in Part I, point 1 of this quarterly report.




                                       46

© Edgar Online, source Review

Comments are closed.