Acquisition and Expansion - The company reported a total purchase price of approximately $80 million for the acquisition of ComSovereign Corp. on November 27, 2019[298]. - DragonWave, acquired by ComSovereign in April 2019, has installed microwave radios in over 330,000 locations across more than 100 countries, making it the second largest provider of licensed point-to-point microwave backhaul radios in North America as of December 2019[299]. - The company has engaged in a series of acquisitions to expand its service offerings and geographic reach over the past three years[298]. Research and Development - The company is developing the world's first fully-virtualized 5G core network on a microcomputer the size of a credit card, enabling edge-based application hosting[322]. - Research and development expenses are expected to continue increasing as the company develops new products to meet changes in the telecom landscape[311]. - The company is developing processes to advance silicon photonic devices, aiming to increase computing bandwidth and reduce operating costs[323]. - Research and development expenses for the six months ended June 30, 2022, remained stable at $1.7 million compared to the same period in 2021[347]. - Research and development expense for the three months ended June 30, 2022, was $0.5 million, a decrease of $0.7 million compared to $1.2 million for the same period in 2021[375]. Financial Performance - Total revenues for the six months ended June 30, 2022, were $4.1 million, an increase of $0.6 million or 18% compared to $3.5 million for the same period in 2021, driven by increased sales from acquired companies[344]. - For the three months ended June 30, 2022, total revenues were $2.1 million, a decrease of $0.3 million, or 13%, compared to $2.4 million for the same period in 2021[372]. - For the six months ended June 30, 2022, cost of goods sold was $4.5 million, an increase of $2.6 million, or 138%, compared to $1.9 million for the same period in 2021[373]. - Cost of goods sold for the three months ended June 30, 2022, was $3.0 million, a 135% increase from $1.3 million for the same period in 2021, primarily due to one-time inventory sales and production costs[345]. - Gross profit for the three months ended June 30, 2022, was $(0.9) million, a decrease of $2.0 million or 179% compared to $1.1 million for the same period in 2021, attributed to lower-margin product sales and increased manufacturing costs[346]. - Gross profit for the six months ended June 30, 2022, was $(0.3) million, a decrease of $2.0 million, or 120%, compared to $1.6 million for the same period in 2021[374]. Expenses and Impairments - General and administrative expenses for the three months ended June 30, 2022, were $5.4 million, down from $6.6 million in the same period in 2021, reflecting a decrease in professional service costs[350]. - General and administrative expenses for the six months ended June 30, 2022, were $11.2 million, a decrease of $2.3 million compared to $13.4 million for the same period in 2021[377]. - Impairment expense for the three and six months ended June 30, 2022, was $15.8 million, significantly higher than $0.3 million for the same periods in 2021, due to revenue re-calendarization[352]. - The loss on lease abandonment for the three and six months ended June 30, 2022, was $11.3 million, compared to $0 for the same periods in 2021, primarily related to the Tucson lease[354]. - The company recorded goodwill and intangible asset impairment of $7.2 million and $8.6 million, respectively, as a result of interim impairment testing[388]. Compliance and Restructuring - The company is not in compliance with Nasdaq Listing Rule 5550(a)(2) due to the price of its common stock falling below the $1.00 minimum closing bid price requirement[307]. - The company has proposed a reverse stock split to its stockholders to comply with Nasdaq Listing Rules[308]. - The company has idled employees from its Power division and RF Engineering & Energy Resource, LLC as part of its restructuring efforts[298][303]. - The company is integrating its previously separate reporting units and employing a single integrated sales function starting January 1, 2023[305]. International Operations - Approximately 7% and 16% of revenues for the three and six months ended June 30, 2022, respectively, were derived from sales outside North America, a significant decrease from 44% and 40% in the same periods of 2021[364]. - The company expects to expand its international operations through agreements with third-party resellers and distributors, despite a focus on the North American market[364]. Capital Requirements - As of June 30, 2022, the company had negative working capital of $9.2 million, compared to negative working capital of $3.6 million as of December 31, 2021[381]. - For the six months ended June 30, 2021, net cash used in operating activities was $26.2 million, primarily due to a net operating loss from continuing operations of $26.7 million[385]. - The company continues to explore opportunities with third parties to provide additional capital but has not entered into any agreement to provide the necessary capital[384]. - Future capital requirements will depend on profitability and operational costs, with potential dilution of current stockholders' ownership if additional equity is raised[383].
COMSovereign (COMS) - 2022 Q2 - Quarterly Report