Filed Pursuant to
Rule 424(b)(5)
Registration
No. 333-259307
This
preliminary prospectus supplement relates to an effective
registration statement under the Securities Act of 1933,
as amended, but is not complete and may be changed. This
preliminary prospectus supplement and the accompanying prospectus
are not an offer to sell these securities and are not soliciting an
offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
SUBJECT TO
COMPLETION, DATED SEPTEMBER 28, 2021
PRELIMINARY PROSPECTUS
SUPPLEMENT
(To Prospectus dated
September 14, 2021)
Shares

COMSovereign
Holding Corp.
9.25%
Series A Cumulative Redeemable Perpetual Preferred
Stock
(Liquidation
Preference $25.00 per share)
We are
offering shares
of our 9.25% Series A Cumulative Redeemable Perpetual
Preferred Stock, par value $0.0001 per share (the “Series A
Preferred Stock”).
We will pay
cumulative dividends on the Series A Preferred Stock from, and
including, the date of original issue at a rate of 9.25% per annum
of the $25.00 liquidation preference per share (equivalent to an
annual rate of $2.3125 per share). Dividends on the Series A
Preferred Stock will be payable monthly in arrears on or about the
20th day of each month,
beginning ,
20, 2021. The
Series A Preferred Stock will rank senior to our common stock
with respect to distribution rights and rights upon our
liquidation, dissolution or winding up.
Generally, we
may not redeem the Series A Preferred Stock prior
to ,
2024, except pursuant to the special optional redemption provision
described below. On or
after ,
2024, we may, at our option, redeem the Series A
Preferred Stock, in whole or in part, at any time or from time to
time, for cash at a redemption price of $25.00 per share, plus any
accrued and unpaid dividends on such Series A Preferred Stock
up to, but excluding, the date of redemption. In addition, upon the
occurrence of a Change of Control (as defined in this prospectus
supplement) we may, at our option, redeem the Series A
Preferred Stock, in whole or in part within 120 days after the
first date on which such Change of Control occurred, by paying
$25.00 per share, plus any accrued and unpaid dividends up to, but
excluding, the date of redemption. The shares of our Series A
Preferred Stock have no stated maturity and are not subject to
mandatory redemption or any sinking fund.
Holders of
shares of the Series A Preferred Stock will generally have no
voting rights except for limited voting rights if we fail to pay
dividends for 18 or more monthly periods (whether or not
consecutive) and in certain other circumstances.
We will be
restricted in our ability to issue or create any class or series of
stock ranking senior to the Series A Preferred Stock with respect
to dividends or other distributions, so long as the Series A
Preferred Stock is outstanding, unless holders of at least
two-thirds of the then outstanding Series A Preferred Stock
and each of our other class or series of preferred stock ranking on
parity with the Series A Preferred Stock with respect to payment of
distributions and the distribution of assets upon our liquidation,
dissolution or winding up and upon which like voting rights have
been conferred and are exercisable (the “Parity Preferred Stock”)
consent to the same.
Prior to this
offering, there has been no market for the Series A Preferred
Stock. We have applied to list the Series A Preferred Stock on
The Nasdaq Capital Market under the symbol “COMSP.” Our common
stock is traded on The Nasdaq Capital Market under the symbol
“COMS.”
Investing in
the Series A Preferred Stock involves risk. See
“Risk
Factors” beginning on
page S-12
of this
prospectus supplement and the risks set forth under the caption
“Item 1A. Risk Factors” in our most recent Annual Report
on Form 10-K
and in our
subsequent Quarterly Reports on Form 10-Q, as well
as additional risks that may be described in future reports or
information that we file with the Securities and Exchange
Commission (the “SEC”) which are incorporated by reference in this
prospectus supplement and the accompanying prospectus.
Neither the SEC
nor any state securities commission has approved or disapproved of
these securities or determined if this prospectus supplement or the
accompanying prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
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Public offering
price
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$
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$
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Underwriting
discount
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$
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Proceeds,
before expenses, to us
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This offering
is being completed on a “firm commitment” basis by the
underwriters.
We have granted
the underwriters an option to purchase up to an
additional shares
of the Series A Preferred Stock within 30 days from the
date of this prospectus supplement solely to cover
over-allotments.
We expect to
deliver shares of the Series A Preferred Stock to the
underwriters on or
about ,
2021 through the book-entry facilities of The Depository Trust Company
(“DTC”).
Sole Book Running
Manager
Benchmark
Company
The date of
this prospectus supplement
is ,
2021.
Table of
Contents
TABLE OF
CONTENTS
Prospectus
Supplement
Prospectus
You
should rely only on the information contained in or incorporated by
reference into this prospectus supplement, the accompanying
prospectus or any applicable free writing prospectus. We have not,
and the underwriters have not, authorized any other person to
provide you with different or additional information. If anyone
provides you with different or additional information, you should
not rely on it. This prospectus supplement and the accompanying
prospectus do not constitute an offer to sell, or a solicitation of
an offer to purchase, any securities in any jurisdiction where it
is unlawful to make such offer or solicitation. You should assume
that the information appearing in this prospectus supplement, the
accompanying prospectus, any applicable free writing prospectus and
the documents incorporated by reference herein or therein is
accurate only as of their respective dates or on the date or dates
which are specified in these documents. Our business, financial
condition, liquidity, results of operations and prospects may have
changed since those dates.
S-i
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ABOUT THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is this prospectus
supplement, which describes the terms of this offering of
Series A Preferred Stock and also adds to and updates
information contained in the accompanying prospectus and the
documents incorporated by reference. The second part is the
accompanying prospectus, which gives more general information, some
of which may not apply to the Series A Preferred Stock we are
offering.
To the extent the information contained in this prospectus
supplement differs or varies from the information contained in the
accompanying prospectus or documents incorporated by reference
prior to the date of this prospectus supplement, the information in
this prospectus supplement supersedes such information. In
addition, to the extent any information incorporated by reference
in this prospectus supplement or the accompanying prospectus from a
filing we make with the SEC after the date of this prospectus
supplement adds to, updates or changes information contained in
this prospectus supplement, the accompanying prospectus or an
earlier filing we made with the SEC that is incorporated by
reference in this prospectus supplement or the accompanying
prospectus, the information in such later filing shall be deemed to
modify, update and supersede such information in this prospectus
supplement, the accompanying prospectus or the earlier filing with
the SEC.
This prospectus supplement does not contain all of the information
that is important to you. You should read the accompanying
prospectus as well as the documents incorporated by reference in
this prospectus supplement and the accompanying prospectus. See
“Incorporation of Certain Information by Reference” and “Where You
Can Find More Information.”
Neither we nor any of the underwriters or any of their respective
representatives is making any representation to you regarding the
legality of an investment in our Series A Preferred Stock by
you under applicable laws. You should consult with your own
advisors as to legal, tax, business, financial and related aspects
of an investment in our Series A Preferred Stock.
Except where we or the context otherwise indicate, the information
in this prospectus supplement assumes no exercise of the
underwriters’ option to purchase additional shares of Series A
Preferred Stock described on the cover page of this prospectus.
We further note that the representations, warranties and covenants
made by us in any agreement that is filed as an exhibit to any
document that is incorporated by reference in the prospectus
supplement and accompanying prospectus were made solely for the
benefit of the parties to such agreement, including, in some cases,
for the purpose of allocating risk among the parties to such
agreements, and should not be deemed to be a representation,
warranty or covenant to you. Moreover, such representations,
warranties or covenants were accurate only as of the date when
made. Accordingly, such representations, warranties and covenants
should not be relied on as accurately representing the current
state of our affairs.
No action has been or will be taken in any jurisdiction by us or
The Benchmark Company, LLC that would permit a public offering of
the Series A Preferred Stock or the possession or distribution
of this prospectus supplement and the accompanying prospectus in
any jurisdiction, other than in the United States. Persons
outside the United States who come into possession of this
prospectus supplement and the accompanying prospectus must inform
themselves about, and observe any restrictions relating to, the
offering of the Series A Preferred Stock and the distribution
of this prospectus supplement and the accompanying prospectus
outside the United States. This prospectus supplement and the
accompanying prospectus do not constitute, and may not be used in
connection with, an offer to sell, or a solicitation of an offer to
buy, any securities offered by this prospectus supplement and the
accompanying prospectus by any person in any jurisdiction in which
it is unlawful for such person to make such an offer or
solicitation.
Unless otherwise indicated or unless the context requires
otherwise, references in this prospectus supplement and the
accompanying prospectus to “we,” “us,” “our” and the “Company”
refer to COMSovereign Holding Corp., a Nevada corporation, and its
subsidiaries.
S-ii
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INDUSTRY AND MARKET
DATA
We obtained the industry and market data included in or
incorporated by reference into this prospectus supplement from our
own research as well as from industry and general publications,
surveys and studies conducted by third parties. This data involves
a number of assumptions and limitations, and you are cautioned not
to give undue weight to such estimates. In addition, projections,
assumptions and estimates of our future performance and the future
performance of the industry in which we operate is necessarily
subject to a high degree of uncertainty and risk due to a variety
of factors, including those described in “Risk Factors” and
elsewhere in this prospectus supplement. These and other factors
could cause results to differ materially from those expressed in
the estimates made by the independent parties and by us. Further,
industry and general publications, studies and surveys generally
state that they have been obtained from sources believed to be
reliable, although they do not guarantee the accuracy or
completeness of such information. While we believe that these
publications, studies and surveys are reliable, we have not
independently verified the data contained in them. In addition,
while we believe that the results and estimates from our internal
research are reliable, such results and estimates have not been
verified by any independent source.
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CAUTIONARY NOTE
REGARDING FORWARD-LOOKING
STATEMENTS
When used in this prospectus supplement and the accompanying
prospectus, including the documents that we have incorporated by
reference, in future filings with the SEC or in press releases or
other written or oral communications, statements which are not
historical in nature, including those containing words such as
“believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,”
“intend,” “should,” “may” or the negative of these words and
phrases or similar words or phrases which are predictions of or
indicate future events or trends and which do not relate solely to
historical matters, are intended to identify “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995 (set
forth in Section 27A of the Securities Act of 1933,
as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the
“Exchange Act”)). In particular, statements pertaining to our
trends, liquidity and capital resources, among others, contain
forward-looking statements. You can
also identify forward-looking
statements by discussions of strategy, plans or intentions.
Examples of forward-looking statements
include, but are not limited to, statements about the
following:
• our
prospects, including our future business, revenues, expenses, net
income, earnings per share, gross margins, profitability, cash
flows, cash position, liquidity, financial condition and results of
operations, backlog of orders and revenue, our targeted growth
rate, our goals for future revenues and earnings, and our
expectations about realizing the revenues in our backlog and in our
sales pipeline;
• the
potential impact of COVID-19 on our
business and results of operations;
• the
effects on our business, financial condition and results of
operations of current and future economic, business, market and
regulatory conditions, including the current economic and market
conditions and their effects on our customers and their capital
spending and ability to finance purchases of our products,
services, technologies and systems;
• the
effects of fluctuations in sales on our business, revenues,
expenses, net income, earnings per share, margins, profitability,
cash flows, capital expenditures, liquidity, financial condition
and results of operations;
• our
products, services, technologies and systems, including their
quality and performance in absolute terms and as compared to
competitive alternatives, their benefits to our customers and their
ability to meet our customers’ requirements, and our ability to
successfully develop and market new products, services,
technologies and systems;
• our
markets, including our market position and our market share;
• our
ability to successfully develop, operate, grow and diversify our
operations and businesses;
• our
business plans, strategies, goals and objectives, and our ability
to successfully achieve them;
• the
sufficiency of our capital resources, including our cash and cash
equivalents, funds generated from operations, availability of
borrowings under our credit and financing arrangements and other
capital resources, to meet our future working capital, capital
expenditure, lease and debt service and business growth needs;
• the
value of our assets and businesses, including the revenues, profits
and cash flows they are capable of delivering in the future;
• the
effects on our business operations, financial results, and
prospects of business acquisitions, combinations, sales, alliances,
ventures and other similar business transactions and
relationships;
• industry
trends and customer preferences and the demand for our products,
services, technologies and systems; and
• the
nature and intensity of our competition, and our ability to
successfully compete in our markets.
S-iv
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These statements are necessarily subjective, are based upon our
current plans, intentions, objectives, goals, strategies, beliefs,
projections and expectations, and involve known and unknown risks,
uncertainties and other important factors that could cause our
actual results, performance or achievements, or industry results,
to differ materially from any future results, performance or
achievements described in or implied by such statements. Actual
results may differ materially from expected results described in
our forward-looking statements,
including with respect to correct measurement and identification of
factors affecting our business or the extent of their likely
impact, the accuracy and completeness of the publicly-available information with respect to the factors
upon which our business strategy is based, or the success of our
business.
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. Important factors that may cause actual results, our
performance or achievements, or industry results to differ
materially from those contemplated by such forward-looking statements include, without limitation,
those discussed under the caption “Risk Factors” in this prospectus
supplement as well as other risks and factors identified from time
to time in our SEC filings.
S-v
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PROSPECTUS SUPPLEMENT
SUMMARY
This summary highlights
information contained elsewhere or incorporated by reference in
this prospectus supplement and the accompanying prospectus. This
summary is not complete and does not contain all of the information
that you should consider before investing in the Series A
Preferred Stock. We urge you to read this entire prospectus
supplement, the accompanying prospectus and the documents
incorporated by reference carefully, including the financial
statements and notes to those financial statements incorporated by
reference herein and therein. Please read the section of this
prospectus supplement entitled “Risk Factors” for more information
about important risks that you should consider before investing in
the Series A Preferred Stock.
Our
Company
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 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 roll out of the 5G and “next-Generation” (“nG”) networks of the future. We
focus on novel 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.
We provide the following categories of product offerings and
solutions to our customers:
• Telecom and Network
Products and Solutions. We design,
develop, market and sell technologically-advanced products for telecom network operators,
mobile device carriers and other enterprises, including the
following:
• Backhaul Telecom
Radios. We offer a line of
high-capacity packet microwave
solutions that drive next-generation
intellectual property (“IP”) networks. Our carrier-grade point-to-point packet
microwave systems transmit broadband voice, video and data. Our
solutions enable service providers, government agencies,
enterprises and other organizations to meet their increasing
bandwidth requirements rapidly and affordably. The principal
application of our product portfolio is wireless network transport,
including a range of products ideally suited to support the
emergence of underlying small cell networks. Additional solutions
include leased-line replacement, last
mile fiber extension and enterprise networks.
• In-Band
Full-Duplex
Technologies. We
have developed proprietary wireless transmission technologies that
alleviate the performance limitations of the principal transmission
technologies used by most networks today. Time Division Duplex
(“TDD”) transmission technology used by many communications systems
utilizes a single channel for transmission of data alternating
between downlink or uplink, which limits capacity/throughput.
Frequency Division Duplex (“FDD”) technologies in the marketplace
today use two independent channels for downlink and uplink but
require twice the spectrum. Neither TDD nor FDD can simultaneously
transmit and receive on a single channel — a limitation
that network advancements and 5G will require for optimal
performance. In late 2021, we intend to commence offering products
incorporating our proprietary In-Band
Full-Duplex technologies that
simultaneously transmit and receive data on a single channel, which
resolves the limitation of current TDD and FDD transmissions by
increasing network performance and doubling spectrum
efficiency.
• Edge Compute Capable
Small Cell 4G LTE and 5G Access
Radios. We offer Citizens Broadband
Radio Service frequency and other small cell radios that are
designed to connect to other access radios or to connect directly
to mobile devices such as mobile phones and other
Internet-of-things devices. Recently, we developed we believe
the world’s first fully-virtualized 5G
core network on a microcomputer the size of a credit card,
enabling, for the first time, the ability to
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have the 5G network collocated on the network edge with the small
cell communicating with the devices themselves. The small cells
support edge-based application hosting
and enable third-party service
integration.
• Intelligent Batteries
and Back-Up
Power
Solutions. We are developing for the
telecom industry a full line of environmentally-friendly, non-volatile advanced intelligent lithium-ion batteries and back-up power units that charge quickly, have a life
span approximately five times longer than conventional
lead-acid batteries, and can be
monitored remotely. We are also currently offering and developing
models that provide power for a wide range of applications,
including cellular towers and other radio access network
infrastructures, automobiles, boats, spacecraft and other
vehicles.
• Tethered Drones and
Aerostats. We design, manufacture,
sell and provide logistical services for specialized tethered
aerial monitoring and communications platforms serving national
defense and security customers for use in applications such as
intelligence, surveillance and reconnaissance (“ISR”) and
communications. We focus primarily on a suite of tethered aerostats
known as the Winch Aerostat Small Platform, which are principally
designed for military and security applications and provide secure
and reliable aerial monitoring for extended durations while being
tethered to the ground via a high-strength armored tether. Our recently-acquired 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 are also developing processes that we believe will significantly
advance the state-of-the-art in silicon
photonic (“SiP”) devices for use in advanced data interconnects,
communication networks and computing systems. We believe our novel
approach will allow us to overcome the limitations of current SiP
modulators, dramatically increase computing bandwidth and reduce
drive power while offering lower operating costs.
Our engineering and management teams have extensive experience in
optical systems and networking, digital signal processing,
large-scale application-specific integrated circuit design and
verification, SiP design and integration, system software
development, hardware design, high-speed electronics design and network planning,
installation, maintenance and servicing. We believe this broad
expertise in a wide range of advanced technologies, methodologies
and processes enhances our innovation, design and development
capabilities, and has enabled us, and we believe will continue to
enable us, to develop and introduce future-generation communications and computing
technologies. In the course of our product development cycles, we
engage with our customers as they design their current and
next-generation network equipment in
order to gauge current and future market needs.
Our more than 700 customers include a majority of the leading
global telecommunication operators, as well as many data center
managers and leading multi-system
operators, and hundreds of enterprise customers, including many
Fortune 500 companies. We have long-standing, direct relationships with our customers
and serve them through a direct sales force and a global network of
channel partners.
Our
Operating Units
Through a series of acquisitions, we and our operating subsidiaries
have expanded our service offerings and geographic reach over the
past three years. On November 27, 2019, we completed the
acquisition of ComSovereign Corp. (“ComSovereign”) in a
stock-for-stock transaction with a total purchase price of
approximately $80 million (the “ComSovereign Acquisition”).
ComSovereign had been formed in January 2019 and, prior to its
acquisition by our company, had completed five acquisitions of
companies with unique products in development for, or then being
marketed to, the telecommunications market. As a result of our
acquisitions, our company is comprised of the following principal
operating units, each of which was acquired to address a different
opportunity or sector of the North American telecom infrastructure
and service market. Our subsidiary holdings are held in three
divisions, Telecoms, Drone and Power.
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Our Telecoms Division 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.
DragonWave was acquired by ComSovereign in April 2019 prior to
the ComSovereign Acquisition.
• Virtual Network
Communications Inc. Virtual Network
Communications 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 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.
• 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. ComSovereign acquired Silver
Bullet in March 2019 prior to the ComSovereign
Acquisition.
• 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. ComSovereign
acquired Lextrum in April 2019 prior to the ComSovereign
Acquisition.
• 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, 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 and electronic warfare,
test and measurement systems, and semiconductor devices. We
acquired Innovation Digital in June 2021.
• 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.
ComSovereign acquired VEO in January 2019 prior to the
ComSovereign Acquisition.
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• RF
Engineering & Energy Resource,
LLC. RF Engineering & Energy
Resource, LLC (“RF Engineering”) is a Michigan-based provider of high-quality microwave antennas and accessories. By
providing one of the industry’s lowest cost of ownership, RF
Engineering has continued to innovate and expand, and it recently
announced 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.
Our Drone Division is comprised of the following principal
operating units:
• 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, 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 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.
• 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.
Our Power Division is comprised of the following principal
operating units:
• 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. ComSovereign acquired
InduraPower in January 2019 prior to the ComSovereign
Acquisition.
• 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 Sovereign Plastics in
March 2020.
Risks Associated With Our
Business
Our ability to execute our business strategy is subject to numerous
risks, as more fully described in the section captioned “Risk
Factors” immediately following this prospectus summary. You should
read these risks before you invest in our securities. In
particular, risks associated with our business include, but are not
limited to, the following:
• Since
our recent acquisition of ComSovereign in November 2019, we
lack an established operating history on which to evaluate our
consolidated business and determine if we will be able to execute
our business plan, and we can give no assurance that our operations
will result in profits.
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• We
incurred net losses in our fiscal years ended
December 31, 2020 and 2019 with
negative cash flows, and we cannot assure you as to when, or if, we
will become profitable and generate positive cash flows.
• We
expect to continue to incur losses from operations and negative
cash flows, which raise substantial doubt about our ability to
continue as a going concern.
• We
may not generate sufficient cash flows to cover our operating
expenses.
• We
have significant debt and if we are unable to repay our debt when
it becomes due, our business, financial condition and results of
operations could be materially harmed.
• If
we are unable to obtain additional funding when needed, our
business operations will be harmed, and if we do obtain additional
financing, our then-existing
stockholders may suffer substantial dilution.
• Raising
capital in the future could cause dilution to our existing
stockholders and may restrict our operations or require us to
relinquish rights.
• The
COVID-19 pandemic may negatively
affect our operations depending on the severity and longevity of
the pandemic.
• Rapid
technological change in our market and/or changes in customer
requirements could cause our products to become obsolete or require
us to redesign our products, which would have a material adverse
effect on our business, operating results and financial
condition.
• Product
development is a long, expensive and uncertain process, and our
failure to develop marketable products in our various markets could
adversely affect our business, prospects and financial
condition.
• We
compete with companies that have significantly more resources for
their research and development efforts than we have or have
received government contracts for the development of new
products.
• Product
quality problems, defects, errors or vulnerabilities in our
products could harm our reputation and adversely affect our
business, financial condition, results of operations and
prospects.
• If
we lose our rights to use software we currently license from third
parties, we could be forced to seek alternative technology, which
could increase our operating expenses and could adversely affect
our ability to compete.
• If
sufficient radio spectrum is not allocated for use by our products
or if we fail to obtain regulatory approval for our products, our
ability to market our products may be restricted.
• If
critical components or raw materials used to manufacture our
products become scarce or unavailable, then we may incur delays in
manufacturing and delivery of our products, which could damage our
business.
• Our
future profitability may depend on achieving cost reductions from
increasing manufacturing quantities of our products. Failing to
achieve such reductions in manufacturing costs could materially
affect our business.
• Our
potential customers for our DragonWave radios and our Drone
Aviation aerostat and drone products are likely to include
U.S. Government or Government-related entities that are subject to
appropriations by Congress. Reduced funding for defense procurement
and research and development programs would likely adversely impact
our ability to generate revenues.
• We
may be unable to successfully integrate our recent and future
acquisitions, which could adversely affect our business, financial
condition, results of operations and prospects.
• There
may be health and safety risks relating to wireless products.
• If
a successful product liability claim were made against us, our
business could be seriously harmed.
• Our
tethered aerostat and drone business and operations are subject to
the risks of hurricanes, tropical storms, and other natural
disasters.
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Our
Corporate Information
We were incorporated as Drone Aviation Holding Corp. in the State
of Nevada on April 17, 2014. An amendment to our Articles of
Incorporation changing our name to COMSovereign Holding Corp. was
effected on November 30, 2019. Our principal executive offices
are located at 5000 Quorum Drive, Suite 400, Dallas,
Texas 75254, and our telephone number is
(469) 930-2661. Our website
address is www.COMSovereign.com,
and many of our subsidiaries also have their own websites linked to
and that may be accessed from our principal corporate website.
Information on our website and on that of our subsidiaries is not
part of this prospectus supplement.
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THE OFFERING
The following is a brief
summary of certain terms of this offering. For a more complete
description of the terms of the Series A Preferred Stock, see
“Description of the Series A Preferred Stock” in this
prospectus supplement and “Description of Capital
Stock — Description of Preferred Stock” in the
accompanying prospectus.
Issuer
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COMSovereign Holding Corp., a Nevada corporation.
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Securities Offered
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shares
of our 9.25% Series A Cumulative Redeemable Preferred Stock
(plus up to an additional
shares
to cover over-allotments, if any). We
reserve the right to reopen this series and issue additional shares
of Series A Preferred Stock either through public or private
sales at any time and from time to time.
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Ranking
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The Series A Preferred Stock will rank, with respect to
distribution rights and rights upon our liquidation, dissolution or
winding up:
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• senior to all classes
or series of our common stock and to any other class or series of
our capital stock expressly designated as ranking junior to the
Series A Preferred Stock;
• on parity with any
class or series of our capital stock expressly designated as
ranking on parity with the Series A Preferred Stock, none of
which exists on the date hereof; and
• junior to any other
class or series of our capital stock expressly designated as
ranking senior to the Series A Preferred Stock, none of which
exists on the date hereof.
The term “capital stock” does not include convertible or
exchangeable debt securities, which, prior to conversion or
exchange, will rank senior in right of payment to the Series A
Preferred Stock. The Series A Preferred Stock will also rank
junior in right of payment to our other existing and future debt
obligations.
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Dividends
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Holders of shares of the Series A Preferred Stock will be
entitled to receive cumulative cash dividends on the Series A
Preferred Stock when, as and if authorized by our board of
directors and declared by us from, and including, the date of
original issuance, payable monthly in arrears on or about the
20th day of each
month, beginning on
20, 2021, at the rate of 9.25% per annum of the $25.00 liquidation
preference per share (equivalent to an annual rate of $2.3125 per
share). The first dividend payable on the Series A Preferred
Stock on
20, 2021 will be a pro rata dividend from, and including, the
original issuance date to and including
20, 2021 and will be in the amount of
$ per
share.
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In addition to the dividends set forth above, in the event of any
dividend or distribution declared on or paid on our common stock,
the holders of Series A Preferred Stock shall be entitled to such
dividends paid and distributions made to the holders of our common
stock to the same extent as if such holders of Series A
Preferred Stock had converted the Series A Preferred Stock into
shares of our common stock at an assumed conversion price equal to
the quotient obtained by dividing the $25.00 liquidation preference
of the Series A Preferred Stock by the closing price of shares of
our common stock on the exchange upon which our common stock is
then listed or quoted on the record date (the
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“Record Date”) for determining dividends on our common stock or if
no Record Date has been set, then the date upon which the dividend
is declared upon the shares of our common stock (the “Declaration
Date” and together with the Record Date, the “Distribution Date”)
as if the holders of Series A Preferred Stock held such shares of
common stock on such date. If, on the Distribution Date, our common
stock is not listed or quoted on an exchange or the OTC Markets,
the closing price of a share of common stock shall be determined by
an independent appraiser selected in good faith by the holders of a
majority in interest of the Series A Preferred Stock then
outstanding and reasonably acceptable to us, the fees and expenses
of which shall be paid by us. Payments under the preceding sentence
shall be made concurrently with the dividend or distribution to the
holders of our common stock.
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Dividends on the Series A Preferred Stock will accrue whether
or not (i) we have earnings, (ii) there are funds legally
available for the payment of such dividends and (iii) such
dividends are authorized or declared.
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Liquidation Preference
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If we liquidate, dissolve or wind up, holders of shares of the
Series A Preferred Stock will have the right to receive
$25.00 per share of the Series A Preferred Stock, plus an
amount per share equal to any accrued and unpaid dividends (whether
or not authorized or declared) up to, but excluding, the date of
payment, before any distribution or payment is made to holders of
our common stock and any other class or series of capital stock
ranking junior to the Series A Preferred Stock with respect to
distribution rights and rights upon our liquidation, dissolution or
winding up. We may only issue equity securities ranking senior to
the Series A Preferred Stock with respect to distribution
rights and rights upon our liquidation, dissolution or winding up
if we obtain the affirmative vote of the holders of at least
two-thirds of the outstanding shares
of Series A Preferred Stock together with Parity Preferred
Stock. The rights of holders of shares of the Series A
Preferred Stock to receive their liquidation preference will be
subject to the proportionate rights of any other class or series of
our capital stock ranking on parity with the Series A
Preferred Stock as to liquidation, and junior to the rights of any
class or series of our capital stock expressly designated as
ranking senior to the Series A Preferred Stock.
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Optional Redemption
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We may not redeem the Series A Preferred Stock prior to
, 2024,
except pursuant to the special optional redemption provision
described below. On and after
,
2024, the Series A Preferred Stock will be redeemable at our
option, in whole or in part, at any time or from time to time, for
cash at a redemption price of $25.00 per share, plus any accrued
and unpaid dividends (whether or not authorized or declared) up to,
but excluding, the date of redemption. Any partial redemption will
be on a pro rata basis.
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Special Optional Redemption
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Upon the occurrence of a Change of Control (as defined below), we
may, at our option, redeem the Series A Preferred Stock, in
whole or in part within 120 days after the first date on which
such Change of Control occurred, by paying $25.00 per share, plus
any accrued and unpaid dividends up to, but excluding, the date of
redemption.
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A “Change of Control” is when, after the original issuance of the
Series A Preferred Stock, the following have occurred and are
continuing:
• the acquisition by any
person, including any syndicate or group deemed to be a “person”
under Section 13(d)(3) of the Exchange Act, of
beneficial ownership, directly or indirectly, through a purchase,
merger or other acquisition transaction or series of purchases,
mergers or other acquisition transactions of stock of our company
entitling that person to exercise more than 50% of the total voting
power of all stock of our company entitled to vote generally in the
election of our directors (except that such person will be deemed
to have beneficial ownership of all securities that such person has
the right to acquire, whether such right is currently exercisable
or is exercisable only upon the occurrence of a subsequent
condition); and
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• following the closing
of any transaction referred to in the bullet point above, neither
we nor the acquiring or surviving entity has a class of common
securities listed on the New York Stock Exchange (“NYSE”) or
the Nasdaq Stock Market (“Nasdaq”) or listed or quoted on an
exchange or quotation system that is a successor to the NYSE or
Nasdaq.
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No Maturity, Sinking Fund or Mandatory Redemption
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The Series A Preferred Stock has no stated maturity date and
is not subject to mandatory redemption or any sinking fund. We are
not required to set aside funds to redeem the Series A
Preferred Stock. Accordingly, the Series A Preferred Stock
will remain outstanding indefinitely unless we decide to redeem or
otherwise repurchase the shares of Series A Preferred Stock at our
option.
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Limited Voting Rights
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Holders of shares of the Series A Preferred Stock generally
have no voting rights. However, if we are in arrears on dividends
on the Series A Preferred Stock for 18 or more monthly
periods, whether or not consecutive, holders of shares of the
Series A Preferred Stock (voting separately as a class
together with the holders of all Parity Preferred Stock) will be
entitled to vote at either (i) a special meeting called upon the
written request of the holders of at least 25% of the Series A
Preferred Stock and Parity Preferred Stock or (ii) at our next
annual meeting and each subsequent annual or special meeting of
stockholders for the election of two additional directors to serve
on our board of directors until all unpaid dividends with respect
to the Series A Preferred Stock and Parity Preferred Stock
have been paid. In addition, the affirmative vote of the holders of
at least two-thirds of the outstanding
shares of the Series A Preferred Stock, together with the
holders of all Parity Preferred Stock (voting together as a single
class), is required for us to (i) authorize, create or issue, or
increase the number of authorized or issued shares of, any class or
series of stock ranking senior to the Series A Preferred Stock
(the “Senior Capital Stock”), or reclassify any authorized shares
of our common stock into such Senior Capital Stock, or create,
authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such Senior Capital Stock,
(ii) to amend, alter or repeal any provision of our charter so as
to materially and adversely affect the rights, preferences,
privileges or voting powers of the Series A Preferred Stock.
If the proposed charter amendments would materially and adversely
affect the
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rights, preferences, privileges or voting powers of the
Series A Preferred Stock disproportionately relative to other
Parity Preferred Stock, the affirmative vote of the holders of at
least two-thirds of the outstanding
shares of the Series A Preferred Stock, voting separately as a
class, will also be required.
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Information Rights
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During any period in which we are not subject to Section 13 or
15(d) of the Exchange Act and any shares of Series A Preferred
Stock are outstanding, we will use our best efforts to (i) make
available on the our investor webpage, copies of our Annual Reports
on Form 10-K and Quarterly Reports on
Form 10-Q that we would have been
required to file with the SEC pursuant to Section 13 or 15(d) of
the Exchange Act if we were subject thereto (other than any
exhibits that would have been required) and (ii) promptly, upon
request, supply copies of such reports to any holders of Series A
Preferred Stock. We will use our best efforts to post on our
website, mail or otherwise provide the information to the holders
of the Series A Preferred Stock within 15 days after the respective
dates by which a periodic report on Form 10-K or Form 10-Q, as
the case may be, in respect of such information would have been
required to be filed with the SEC, if we were subject to Section 13
or 15(d) of the Exchange Act, in each case, based on the dates on
which we would be required to file such periodic reports if we were
a “non-accelerated filer” within the
meaning of the Exchange Act.
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Listing
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Currently, no market exists for the Series A Preferred Stock.
We have applied to list the Series A Preferred Stock on The
Nasdaq Capital Market under the symbol “COMSP.” We will use our
best efforts to have the listing application for the Series A
Preferred Stock approved. If the application is approved, we expect
trading of the Series A Preferred Stock on The Nasdaq Capital
Market to begin on the date the Series A Preferred Stock is
first issued. The underwriters have advised us that they intend to
make a market in the Series A Preferred Stock prior to
commencement of any trading on The Nasdaq Capital Market. However,
the underwriters will have no obligation to do so, and we cannot
assure you that a market for the Series A Preferred Stock will
develop or be maintained subsequent to commencement of trading on
The Nasdaq Capital Market.
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Use of Proceeds
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We expect that the net proceeds of this offering will be
approximately $
million (or approximately
$ million if the
underwriters’ over-allotment option to
purchase additional shares is exercised in full) after deducting
the underwriting discount and estimated offering expenses payable
by us. We intend to use approximately
$ million of the
net proceeds from this offering for the repayment of outstanding
indebtedness and the balance for general corporate and working
capital purposes. Pending permanent use of the net proceeds from
this offering, we will invest the net proceeds in short-term, interest-bearing investments, which may include
interest-bearing bank accounts, money
market funds, certificates of deposit and U.S. government
securities. See “Use of Proceeds.”
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Transfer Agent
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The transfer agent for the Series A Preferred Stock will be
ClearTrust, LLC.
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Certain U.S. Federal Income Tax Considerations
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For a discussion of the material federal income tax consequences of
purchasing, owning and disposing of the Series A Preferred Stock,
please see the section entitled “Material U.S. Federal Income Tax
Considerations.” You should consult your tax advisor with respect
to the U.S. federal income tax consequences of owning the Series A
Preferred Stock in light of your own particular situation and with
respect to any tax consequences arising under the laws of any
state, local, foreign or other taxing jurisdiction.
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Settlement Date
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Delivery of the shares of Series A Preferred Stock will be
made against payment therefor on or about
,
2021.
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Risk Factors
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An investment in the Series A Preferred Stock involves various
risks. Before deciding to invest in the Series A Preferred
Stock, please carefully read the section entitled “Risk Factors”
herein and the risk factors described in our Annual Report on
Form 10-K for the fiscal year
ended December 31, 2020 as may be amended, supplemented or
superseded from time to time by other reports that we file with the
SEC and incorporated by reference herein.
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RISK FACTORS
Investing in the
Series A Preferred Stock involves risks. In addition to other
information in this prospectus supplement, you should carefully
consider the risks described in our Annual Report on
Form 10-K
for the fiscal year ended
December 31, 2020 under “Item 1A. Risk Factors,” as
well as other information and data set forth in this prospectus
supplement, the accompanying prospectus and the documents
incorporated by reference herein and therein before making an
investment decision with respect to the Series A Preferred
Stock. The occurrence of any of the following risks could
materially and adversely affect our business, prospects, financial
condition, results of operations and our ability to make cash
distributions to our stockholders, which could cause you to lose
all or a part of your investment in the Series A Preferred
Stock. Some statements in this prospectus supplement, including
statements in the following risk factors, constitute
forward-looking
statements. See “Cautionary
Note Regarding Forward-Looking
Statements.”
Risks Related to this
Offering
The Series A Preferred
Stock is a new issuance, with no stated maturity date, and does not
have an established trading market, which may negatively affect its
market value and your ability to transfer or sell your
shares.
The Series A Preferred Stock is a new issue of securities with
no established trading market. We have filed an application to list
the Series A Preferred Stock on The Nasdaq Capital Market, but
there can be no assurance that Nasdaq will approve the
Series A Preferred Stock for listing.
Even if Nasdaq approves the Series A Preferred Stock for
listing, there is no guarantee that the Series A Preferred
Stock will remain listed on The Nasdaq Capital Market or any other
nationally recognized exchange. If the Series A Preferred
Stock is delisted from The Nasdaq Capital Market or another
nationally recognized exchange, we could face significant material
adverse consequences, including:
• a
limited availability of market quotations for the Series A
Preferred Stock;
• reduced
liquidity with respect to the Series A Preferred Stock;
• a
determination that the Series A Preferred Stock is “penny
stock,” which will require brokers trading in the Series A
Preferred Stock to adhere to more stringent rules, possibly
resulting in a reduced level of trading activity in the secondary
trading market for the Series A Preferred Stock; and
• a
decreased ability to issue additional securities or obtain
additional financing in the future.
Moreover, even if Nasdaq approves the Series A Preferred Stock
for listing, an active trading market on The Nasdaq Capital
Market for the Series A Preferred Stock may not develop or, if
it does develop, may not last, in which case the market price of
the Series A Preferred Stock could be materially and adversely
affected.
The underwriters have advised us that they intend to make a market
in the Series A Preferred Stock prior to commencement of any
trading on The Nasdaq Capital Market. However, the underwriters
will have no obligation to do so, and we cannot assure you that a
market for the Series A Preferred Stock will develop or be
maintained prior or subsequent to commencement of trading on The
Nasdaq Capital Market.
The Series A Preferred
Stock has not been rated.
The Series A Preferred Stock has not been rated by any
nationally recognized statistical rating organization, which may
negatively affect the market value of the Series A Preferred
Stock and your ability to sell shares of Series A Preferred
Stock. No assurance can be given, however, that one or more rating
agencies might not independently determine to issue such a rating
or that such a rating, if issued, would not adversely affect the
market price of the Series A Preferred Stock. In addition, we
may elect in the future to obtain a rating of the Series A
Preferred Stock, which could adversely impact the market price of
the Series A Preferred Stock. Ratings only reflect the views
of the rating agency or agencies issuing the ratings and such
ratings could be revised downward or withdrawn entirely at the
discretion of the issuing rating agency if in its judgment
circumstances so warrant. Any such downward revision or withdrawal
of a rating could have an adverse effect on the market price of the
Series A Preferred Stock.
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Market interest rates and
other factors may affect the value of the Series A Preferred
Stock.
One of the factors that will influence the prices of the
Series A Preferred Stock will be the dividend yield on the
Series A Preferred Stock relative to market interest rates. An
increase in market interest rates could cause the market prices of
the Series A Preferred Stock to go down. The trading prices of
the shares of the Series A Preferred Stock will also depend on
many other factors, which may change from time to time,
including:
• the
market for similar securities;
• government
action or regulation;
• general
economic conditions or conditions in the financial markets; and
• our
financial condition, performance and prospects.
Investors who purchase Series A Preferred Stock in this
offering may experience a decrease, which could be substantial and
rapid, in the market price of the Series A Preferred Stock,
including decreases unrelated to our operating performance or
prospects.
Shares of the Series A
Preferred Stock are subordinate to our existing and future debt,
and your interests could be diluted by the issuance of additional
preferred stock, including additional shares of the Series A
Preferred Stock, and by other transactions.
The Series A Preferred Stock will rank junior to all of our
existing and future indebtedness, any classes or series of our
capital stock expressly designated as ranking senior to the
Series A Preferred Stock as to distribution rights and rights
upon our liquidation, dissolution or winding up, and other
non-equity claims on us and our assets
available to satisfy claims against us, including claims in
bankruptcy, liquidation or similar proceedings. Our articles of
incorporation currently authorize the issuance of up to 100,000,000
shares of preferred stock, $0.0001 par value per share, in one or
more classes or series. In addition, a majority of our entire board
of directors may, with stockholder approval, amend our articles of
incorporation to increase or decrease the aggregate number of
shares of our capital stock or the number of shares of our capital
stock of any class or series that we have authority to issue and
classify or reclassify any unissued shares of our common stock or
preferred stock and set the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or
other distributions, qualifications and terms and conditions of
redemption of the classified or reclassified shares. Our board of
directors may, without notice to or the consent of holders of
Series A Preferred Stock, authorize the issuance and sale of
additional shares of Series A Preferred Stock and authorize
and issue additional shares of stock ranking junior to or on parity
with the Series A Preferred Stock from time to time. The
issuance of additional shares of Series A Preferred Stock or
additional shares of stock ranking on parity with the Series A
Preferred Stock would dilute the interests of the holders of
Series A Preferred Stock, and the issuance of shares of any
class or series of our capital stock expressly designated as
ranking senior to the Series A Preferred Stock (with the
requisite vote of holders of Series A Preferred Stock and
other classes of stock ranking on parity with the Series A
Preferred Stock as described in this prospectus supplement) or the
incurrence of additional indebtedness could affect our ability to
pay dividends on, redeem or pay the liquidation preference on the
Series A Preferred Stock. None of the provisions relating to
the Series A Preferred Stock contain any terms relating to or
limiting our indebtedness or affording the holders of Series A
Preferred Stock protection in the event of a highly-leveraged or other transaction, including a
merger or the sale, lease or conveyance of all or substantially all
our assets, that might adversely affect the holders of
Series A Preferred Stock, so long as the rights of the holders
of Series A Preferred Stock are not materially and adversely
affected.
As a holder of Series A
Preferred Stock, you will have extremely limited voting
rights.
Your voting rights as a holder of Series A Preferred Stock
will be limited. Shares of our common stock are currently the only
class of our securities carrying full voting rights. Voting rights
for holders of Series A Preferred Stock exist primarily with
respect to voting on amendments to our articles of incorporation
(in some cases, voting together with the holders of Parity
Preferred Stock), that materially and adversely affect the rights,
preferences, privileges or voting powers of the Series A
Preferred Stock or create additional classes or series of preferred
stock that are senior to the Series A Preferred Stock and the
ability to elect (voting separately as a class together with
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the holders of all other Parity Preferred Stock) two additional
directors to our board of directors in the event that 18 monthly
dividends (whether or not consecutive) payable on the Series A
Preferred Stock are in arrears. See “Description of the
Series A Preferred Stock — Limited Voting
Rights.”
Our cash available for
distribution may not be sufficient to pay dividends on the
Series A Preferred Stock at expected levels, and we cannot
assure you of our ability to pay dividends in the future. We may
use borrowed funds or funds from other sources to pay dividends,
which may adversely impact our operations.
We intend to pay regular monthly dividends to holders of our
Series A Preferred Stock. Dividends declared by us will be
authorized by our board of directors in its sole discretion out of
assets legally available for distribution and will depend upon a
number of factors, including our earnings, our financial condition,
restrictions under applicable law, our need to comply with the
terms of our existing financing arrangements, the capital
requirements of our company and other factors as our board of
directors may deem relevant from time to time. We may have to fund
dividends from working capital, borrow to provide funds for such
dividends, use proceeds of this offering or other similar offerings
or sell assets to the extent dividends exceed earnings or cash
flows from operations. Funding dividends from working capital would
restrict our operations. If we are required to sell assets to fund
dividends, such asset sales may occur at a time or in a manner that
is not consistent with our disposition strategy. If we borrow to
fund dividends, our leverage ratios and future interest costs would
increase, thereby reducing our earnings and cash available for
distribution from what they otherwise would have been. We may not
be able to pay dividends in the future.
If our common stock is
delisted, your ability to transfer or sell your shares of the
Series A Preferred Stock may be limited and the market value
of the Series A Preferred Stock will be materially adversely
affected.
Other than in connection with Change of Control transaction, the
Series A Preferred Stock does not contain provisions that
protect you if our common stock is delisted from Nasdaq. Since the
Series A Preferred Stock has no stated maturity date, you may
be forced to hold your shares of the Series A Preferred Stock
and receive stated dividends on the stock when, as and if
authorized by our board of directors and declared by us with no
assurance as to ever receiving the liquidation preference. In
addition, if our common stock is delisted from Nasdaq, it is likely
that the Series A Preferred Stock will be delisted as well.
Accordingly, if our common stock is delisted from Nasdaq, your
ability to transfer or sell your shares of the Series A
Preferred Stock may be limited and the market value of the
Series A Preferred Stock will be materially adversely
affected.
Our ability to pay dividends
is limited by the requirements of Nevada law.
Our ability to pay dividends on the Series A Preferred Stock
is limited by the laws of Nevada. Under Nevada law, a Nevada
corporation generally may not make a distribution if, after giving
effect to the distribution, the corporation would not be able to
pay its debts as they become due in the usual course of business,
or the corporation’s total assets would be less than the sum of its
total liabilities plus, unless the corporation’s charter provides
otherwise, the amount that would be needed, if the corporation were
dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the
distribution. Accordingly, we generally may not make a distribution
on the Series A Preferred Stock if, after giving effect to the
distribution, we would not be able to pay our debts as they become
due in the usual course of business or our total assets would be
less than the sum of our total liabilities plus, unless the terms
of such class or series of stock provide otherwise, the amount that
would be needed to satisfy the preferential rights upon dissolution
of the holders of shares of any class or series of stock then
outstanding, if any, with preferential rights upon dissolution
senior to those of the Series A Preferred Stock.
Our management team may
invest or spend the proceeds of this offering in ways with which
you may not agree or in ways which may not yield a significant
return.
Our management will have broad discretion over the use of proceeds
from this offering. The net proceeds from this offering will be
used primarily for the repayment of certain indebtedness, working
capital and general corporate purposes. Our management will have
considerable discretion in the application of the net proceeds, and
you will not have the opportunity, as part of your investment
decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes
that do not increase our operating results or enhance the value of
our Series A Preferred Stock. The failure of our management to
use these funds effectively could have a material adverse effect on
our business, cause the market price of our Series A Preferred
Stock to
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decline and potentially impair the operation and expansion of our
business. Pending their use, we may invest the net proceeds from
this offering in interest-bearing bank accounts, money market funds,
certificates of deposit and U.S. government securities. These
investments may not yield a favorable return to our
stockholders.
We may redeem the
Series A Preferred Stock and you may not receive dividends
that you anticipate if we do redeem the Series A Preferred
Stock.
On or
after ,
2024 we may, at our option, redeem the Series A Preferred
Stock, in whole or in part, at any time or from time to time. Also,
upon the occurrence of a Change of Control, we may, at our option,
redeem the Series A Preferred Stock, in whole or in part,
within 120 days after the first date on which such Change of
Control occurred. We may have an incentive to redeem the
Series A Preferred Stock voluntarily if market conditions
allow us to issue other preferred stock or debt securities at a
rate that is lower than the dividend rate on the Series A
Preferred Stock. If we redeem the Series A Preferred Stock,
then from and after the redemption date, dividends will cease to
accrue on shares of Series A Preferred Stock, the shares of
Series A Preferred Stock shall no longer be deemed outstanding
and all rights as a holder of those shares will terminate, except
the right to receive the redemption price plus accumulated and
unpaid dividends, if any, payable upon redemption.
Holders of shares of the
Series A Preferred Stock should not expect us to redeem the
Series A Preferred Stock on or after the date they become
redeemable at our option.
The Series A Preferred Stock will be a perpetual equity
security. This means that it will have no maturity or mandatory
redemption date and will not be redeemable at the option of the
holders. The Series A Preferred Stock may be redeemed by us at
our option either in whole or in part, from time to time, at any
time on or
after ,
2024, or upon the occurrence of a Change of Control. Any decision
we may make at any time to propose a redemption of the
Series A Preferred Stock will depend upon, among other things,
our evaluation of our capital position, the composition of our
stockholders’ equity and general market conditions at that
time.
The market price of the
Series A Preferred Stock could be substantially affected by
various factors.
The market price of the Series A Preferred Stock could be
subject to wide fluctuations in response to numerous factors. The
price of the Series A Preferred Stock that will prevail in the
market after this offering may be higher or lower than the offering
price depending on many factors, some of which are beyond our
control and may not be directly related to our operating
performance.
These factors include, but are not limited to, the following:
• prevailing
interest rates, increases in which may have an adverse effect on
the market price of the Series A Preferred Stock;
• trading
prices of similar securities;
• our
history of timely dividend payments;
• the
annual yield from dividends on the Series A Preferred Stock as
compared to yields on other financial instruments;
• general
economic and financial market conditions;
• government
action or regulation;
• the
financial condition, performance and prospects of us and our
competitors;
• changes
in financial estimates or recommendations by securities analysts
with respect to us or our competitors in our industry;
• our
issuance of additional preferred equity or debt securities; and
• actual
or anticipated variations in quarterly operating results of us and
our competitors.
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As a result of these and other factors, investors who purchase the
Series A Preferred Stock in this offering may experience a
decrease, which could be substantial and rapid, in the market price
of the Series A Preferred Stock, including decreases unrelated
to our operating performance or prospects.
The Series A Preferred
Stock is not convertible into shares of our common stock, and
investors will not realize a corresponding upside if the price of
the common stock increases.
The Series A Preferred Stock is not convertible into shares of
our common stock and earns dividends at a fixed rate. Accordingly,
an increase in market price of our common stock will not
necessarily result in an increase in the market price of our
Series A Preferred Stock. The market value of the
Series A Preferred Stock may depend more on dividend and
interest rates for other preferred stock, commercial paper and
other investment alternatives and our actual and perceived ability
to pay dividends on, and in the event of dissolution satisfy the
liquidation preference with respect to, the Series A Preferred
Stock.
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USE OF PROCEEDS
We expect that the net proceeds from this offering will be
approximately
$ (or
approximately
$ if
the underwriters’ over-allotment
option to purchase additional shares is exercised in full), after
deducting the underwriting discount and estimated offering expenses
payable by us. We intend to use approximately
$
million of the net proceeds from this offering for the repayment of
certain indebtedness and the balance for general corporate and
working capital purposes.
We intend to use approximately
$
million of the net proceeds of this offering to redeem, or to pay
when due the outstanding principal of and interest on, the senior
secured convertible promissory notes we issued to affiliates of The
Lind Partners, LLC in May and August 2021 (the “Notes”). The Notes
are currently outstanding in the aggregate principal amount of
$16,800,000, bear interest at the rate of 6% per annum, mature as
to $11,000,000 aggregate principal amount on May 27, 2023 and as to
5,800,000 aggregate principal amount on August 25, 2023, and are
convertible into shares of our common stock at a conversion price
of $3.00 per share, subject to adjustment (the “Conversion Price”);
provided that the holder of a Note will not have the right to
convert any portion of the Note if the holder, together with its
affiliates, would beneficially own in excess of 4.99% of the number
of shares of our common stock outstanding immediately after giving
effect to its conversion and under no circumstances may convert the
Note if the holder, together with its affiliates, would
beneficially own in excess of 9.99% of the number of shares of
common stock outstanding immediately after giving effect to its
conversion.
So long as the shares of our common stock we would issue are
registered for resale under the Securities Act or may be sold
without restriction on the number of shares or manner of sale, we
have the right to make interest and principal payments on the Notes
in the form of additional shares of common stock, which shares will
be valued at 90% of the average of the five lowest daily volume
weighted average price per share of our common stock during the ten
trading days immediately preceding the date of issuance of such
shares of common stock (the “Repayment Share Price”); provided,
however, that with respect to the first interest payment, the
holders of the Notes have the right to direct that the payment of
such interest be made in shares of our common stock. We have the
right to prepay the Notes at any time with no penalty; however,
should we exercise such right, the holders of the Notes will have
the option of converting 33 1/3% of the outstanding principal
amount of the Notes into shares of our common stock at a conversion
price equal to the lower of (A) the Repayment Share Price, or (B)
the Conversion Price. Pursuant to the Notes, subject to certain
exceptions, if we issue shares of our preferred stock, unless
otherwise waived in writing by the holders of the Notes, we will be
required to use the proceeds of such issuance to repay the Notes.
If we issue any equity interests for aggregate proceeds of greater
than $20,000,000, excluding offering costs or other expenses, we
will be required to direct 20% of such proceeds from such issuance
to repay the Notes.
The Notes are guaranteed by us and each of our subsidiaries and are
secured by a first priority lien on all of our assets and
properties and the assets and properties of our subsidiaries,
subject only to the mortgage lien on our manufacturing facility in
Tucson, Arizona and the liens securing approximately $1 million
principal amount of outstanding indebtedness of one of our
subsidiaries.
The net proceeds of the Notes were used to pay the cash portion of
the purchase prices of our acquisitions of Innovation Digital and
RF Engineering and for working capital and general corporate
purposes.
We intend to use approximately
$
million of the net proceeds of this offering to repay, at maturity,
a secured promissory note of DragonWave that was issued in November
2019 in the original principal amount of $2 million, bears interest
at the rate of 9% per annum and matures on November 26, 2021. This
promissory note is secured by the assets of DragonWave and is
guaranteed by our company. At June 30, 2021, $1 million principal
amount of this promissory note remained outstanding.
Until we use the net proceeds of this offering for the purposes
discussed above, such funds will be managed through a treasury
management program under the supervision of our Chief Financial
Officer and invested in short-term,
interest-bearing investments,
which may include interest-bearing bank accounts, money market funds,
certificates of deposit and U.S. government securities.
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DESCRIPTION OF THE SERIES A
PREFERRED STOCK
The following summary of
the material terms and provisions of the Series A Preferred
Stock does not purport to be complete and is qualified in its
entirety by reference to our amended and restated articles of
incorporation, including the Certificate of Designations setting
forth the terms of the Series A Preferred Stock and our second
amended and restated bylaws, each of which is available from us and
will be filed with the SEC. This description of the particular
terms of the Series A Preferred Stock supplements, and to the
extent inconsistent therewith replaces, the description of the
general terms and provisions of our preferred stock set forth in
the accompanying prospectus.
General
Our board of directors has classified shares of our authorized but
unissued preferred stock as, and approved a Certificate of
Designations setting forth the terms of, a series of our preferred
stock, designated as the 9.25% Series A Cumulative Redeemable
Perpetual Preferred Stock. When issued in accordance with this
prospectus supplement and the accompanying prospectus, the
Series A Preferred Stock will be validly issued, fully paid
and nonassessable. Our board of directors may authorize the
issuance and sale of additional shares of Series A Preferred
Stock from time to time.
We have applied to list the Series A Preferred Stock on The
Nasdaq Capital Market under the symbol “COMSP.” If the application
is approved, we expect trading of the Series A Preferred Stock
on The Nasdaq Capital Market to begin on the date the Series A
Preferred Stock is first issued.
Ranking
The Series A Preferred Stock will rank, with respect to
distribution rights and rights upon voluntary or involuntary
liquidation, dissolution or winding up of our affairs:
• senior
to all classes or series of our common stock and to any other class
or series of our capital stock expressly designated as ranking
junior to the Series A Preferred Stock;
• on
parity with any class or series of our capital stock expressly
designated as ranking on parity with the Series A Preferred
Stock, none of which exists on the date hereof; and
• junior
to any other class or series of our capital stock expressly
designated as ranking senior to the Series A Preferred Stock,
none of which exists on the date hereof.
The term “capital stock” does not include convertible or
exchangeable debt securities, which, prior to conversion or
exchange, will rank senior in right of payment to the Series A
Preferred Stock. The Series A Preferred Stock will also rank
junior in right of payment to our other existing and future debt
obligations.
Dividends
Subject to the preferential rights of the holders of any class or
series of our capital stock ranking senior to the Series A
Preferred Stock with respect to distribution rights, holders of
shares of the Series A Preferred Stock will be entitled to
receive, when, as and if authorized by our board of directors and
declared by us out of funds legally available for the payment of
dividends, cumulative cash dividends at the rate of 9.25% per annum
of the $25.00 liquidation preference per share of the Series A
Preferred Stock (equivalent to the fixed annual amount of $2.3125
per share of the Series A Preferred Stock).
Dividends on the Series A Preferred Stock will accrue and be
cumulative from, and including, the date of original issue and will
be payable to holders quarterly in arrears on or about the
20th day of each
month or, if such day is not a business day, on either
the immediately preceding business day or next succeeding
business day at our option, in each case with the same force
and effect as if made on such date. The term “business day”
means each day, other than a Saturday or a Sunday, which is
not a day on which banks in New York are required by law,
regulation or executive order to close.
The amount of any dividend payable on the Series A Preferred
Stock for any period greater or less than a full dividend period
will be prorated and computed on the basis of a 360-day year consisting of twelve 30-day months. A dividend period is the
respective period commencing on and including the 20th day of each
month and ending on and
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including the day preceding the 20th day of
the next succeeding month (other than the initial dividend period
and the dividend period during which any shares of Series A
Preferred Stock shall be redeemed). Dividends will be payable to
holders of record as they appear in our stock records at the close
of business on the applicable record date, which shall be the
last day of the immediately preceding calendar month.
The first dividend on the Series A Preferred stock is
scheduled to be paid on
20, 2021 and will be a pro rata dividend from, and including, the
original issue date to and including
20, 2021 in the amount of
$ per
share.
Dividends on the Series A Preferred Stock will accrue whether
or not:
• we
have earnings;
• there
are funds legally available for the payment of those dividends;
or
• those
dividends are authorized or declared.
Except as described in this paragraph and the next paragraph,
unless full cumulative dividends on the Series A Preferred
Stock for all past dividend periods shall have been or
contemporaneously are declared and paid in cash or declared and a
sum sufficient for the payment thereof in cash is set apart for
payment, we will not:
• declare
and pay or declare and set aside for payment of dividends, and we
will not declare and make any distribution of cash or other
property, directly or indirectly, on or with respect to any shares
of our common stock or shares of any other class or series of our
capital stock ranking, as to distributions, on parity with or
junior to the Series A Preferred Stock, for any period; or
• redeem,
purchase or otherwise acquire for any consideration, or make any
other distribution of cash or other property, directly or
indirectly, on or with respect to, or pay or make available any
monies for a sinking fund for the redemption of, any shares of our
common stock or shares of any other class or series of our capital
stock ranking, as to distributions and upon liquidation, on parity
with or junior to the Series A Preferred Stock.
The foregoing sentence, however, will not prohibit:
• dividends
payable solely in shares of our common stock or shares of any other
class or series of our capital stock ranking junior to the
Series A Preferred Stock as to payment of distributions and
the distribution of assets upon our liquidation, dissolution and
winding up; and
• the
conversion into or in exchange for other shares of any class or
series of capital stock ranking junior to the Series A
Preferred Stock as to payment of distributions and the distribution
of assets upon our liquidation, dissolution and winding up.
When we do not pay dividends in full (or do not set apart a sum
sufficient to pay them in full) on the Series A Preferred
Stock and the shares of any other class or series of capital stock
ranking, as to distributions, on parity with the Series A
Preferred Stock, we will declare any dividends upon the
Series A Preferred Stock and each such other class or series
of capital stock ranking, as to distributions, on parity with the
Series A Preferred Stock pro rata, so that the amount of
dividends declared per share of Series A Preferred Stock and
such other class or series of capital stock will in all cases bear
to each other the same ratio that accrued dividends per share on
the Series A Preferred Stock and such other class or series of
capital stock (which will not include any accrual in respect of
unpaid dividends on such other class or series of capital stock for
prior dividend periods if such other class or series of capital
stock does not have a cumulative dividend) bear to each other. No
interest, or sum of money in lieu of interest, will be payable in
respect of any dividend payment or payments on the Series A
Preferred Stock which may be in arrears.
Holders of shares of Series A Preferred Stock are not entitled
to any dividend, whether payable in cash, property or shares of
capital stock, in excess of full cumulative dividends on the
Series A Preferred Stock as described above. Any dividend
payment made on the Series A Preferred Stock will first be
credited against the earliest accrued but unpaid dividends due with
respect to those shares which remain payable. Accrued but unpaid
dividends on the Series A Preferred Stock will accumulate as
of the dividend payment date on which they first become
payable.
We do not intend to declare dividends on the Series A
Preferred Stock, or pay or set apart for payment dividends on the
Series A Preferred Stock, if the terms of any of our
agreements, including any agreements relating to our indebtedness,
prohibit such a declaration, payment or setting apart for payment
or provide that such declaration,
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payment or setting apart for payment would constitute a breach of
or default under such an agreement. Likewise, no dividends will be
authorized by our board of directors and declared by us or paid or
set apart for payment if such authorization, declaration or payment
is restricted or prohibited by law. We are and may in the future
become a party to agreements that restrict or prevent the payment
of dividends on, or the purchase or redemption of, our capital
stock. Under certain circumstances, these agreements could restrict
or prevent the payment of dividends on or the purchase or
redemption of Series A Preferred Stock. These restrictions may
be indirect (for example, covenants requiring us to maintain
specified levels of net worth or assets) or direct. We do not
believe that these restrictions currently have any adverse impact
on our ability to pay dividends to holders or make redemptions of
the Series A Preferred Stock.
In addition to the dividends set forth above, in the event of any
dividend or distribution declared on or paid on our common stock,
the holders of Series A Preferred Stock shall be entitled to such
dividends paid and distributions made to the holders of our common
stock to the same extent as if such holders of Series A Preferred
Stock had converted the Series A Preferred Stock into shares of our
common stock at an assumed conversion price equal to the quotient
obtained by dividing the $25.00 liquidation preference of the
Series A Preferred Stock by the closing price of shares of our
common stock on the exchange upon which our common stock is then
listed or quoted on the Record Date for determining dividends on
our common stock or if no Record Date has been set, then the
Declaration Date as if the holders of Series A Preferred Stock held
such shares of common stock on such date. If, on the Distribution
Date, our common stock is not listed or quoted on an exchange or
the OTC Markets, the closing price of a share of common stock shall
be determined by an independent appraiser selected in good faith by
the holders of a majority in interest of the Series A Preferred
Stock then outstanding and reasonably acceptable to us, the fees
and expenses of which shall be paid by us. Payments under the
preceding sentence shall be made concurrently with the dividend or
distribution to the holders of our common stock.
Liquidation
Preference
Upon any voluntary or involuntary liquidation, dissolution or
winding up of our affairs, before any distribution or payment shall
be made to holders of shares of our common stock or any other class
or series of our capital stock ranking, as to rights upon any
voluntary or involuntary liquidation, dissolution or winding up of
our affairs, junior to the Series A Preferred Stock, holders
of shares of Series A Preferred Stock will be entitled to be
paid out of our assets legally available for distribution to our
stockholders, after payment of or provision for our debts and other
liabilities and any class or series of our capital stock ranking,
as to rights upon any voluntary or involuntary liquidation,
dissolution or winding up of our affairs, senior to the
Series A Preferred Stock, a liquidation preference of $25.00
per share of the Series A Preferred Stock, plus an amount
equal to any accrued and unpaid dividends (whether or not
authorized or declared) up to, but excluding, the date of payment.
If, upon our voluntary or involuntary liquidation, dissolution or
winding up, our available assets are insufficient to pay the full
amount of the liquidating distributions on all outstanding shares
of Series A Preferred Stock and the corresponding amounts
payable on all shares of each other class or series of capital
stock ranking, as to rights upon liquidation, dissolution or
winding up, on parity with the Series A Preferred Stock in the
distribution of assets, then holders of shares of Series A
Preferred Stock and each such other class or series of capital
stock ranking, as to rights upon any voluntary or involuntary
liquidation, dissolution or winding up, on parity with the
Series A Preferred Stock will share ratably in any
distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively
entitled.
Holders of shares of Series A Preferred Stock will be entitled
to written notice of any voluntary or involuntary liquidation,
dissolution or winding up of our affairs stating the payment date
or dates when, and the place or places where, the amounts
distributable in such circumstances shall be payable not fewer than
30 days and not more than 60 days prior to the
distribution payment date. After payment of the full amount of the
liquidating distributions to which they are entitled, holders of
shares of Series A Preferred Stock will have no right or claim
to any of our remaining assets. Our consolidation or merger with or
into any other corporation, trust or other entity, or the voluntary
sale, lease, transfer or conveyance of all or substantially all of
our property or business, will not be deemed to constitute a
liquidation, dissolution or winding up of our affairs.
In determining whether a distribution (other than upon voluntary or
involuntary liquidation), by dividend, redemption or other
acquisition of shares of our capital stock or otherwise, is
permitted under Nevada law, amounts that would be needed, if we
were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of holders of shares of
Series A Preferred Stock will not be added to our total
liabilities.
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Optional
Redemption
Except with respect to the special optional redemption described
below, we cannot redeem the Series A Preferred Stock prior to
,
2024. On and after
,
2024, we may, at our option, upon not fewer than 30 and not more
than 60 days’ written notice, redeem the Series A
Preferred Stock, in whole or in part, at any time or from time to
time, for cash at a redemption price of $25.00 per share, plus any
accrued and unpaid dividends (whether or not authorized or
declared) up to, but excluding, the date fixed for redemption,
without interest, to the extent we have funds legally available for
that purpose.
If fewer than all of the outstanding shares of the Series A
Preferred Stock are to be redeemed, the shares of Series A
Preferred Stock will be redeemed pro rata (as nearly as may be
practicable without creating fractional shares) or by lot as we
determine. In order for their shares of Series A Preferred
Stock to be redeemed, holders must surrender their shares at the
place, or in accordance with the book-entry procedures, designated in the notice of
redemption. Holders will then be entitled to the redemption price
and any accrued and unpaid dividends payable upon redemption
following surrender of the shares as detailed below. If a notice of
redemption has been given, if the funds necessary for the
redemption have been set aside by us in trust for the benefit of
the holders of any shares of Series A Preferred Stock called
for redemption and if irrevocable instructions have been given to
pay the redemption price and any accrued and unpaid dividends, then
from and after the redemption date, dividends will cease to accrue
on such shares of Series A Preferred Stock and such shares of
Series A Preferred Stock will no longer be deemed outstanding.
At such time, all rights of the holders of such shares will
terminate, except the right to receive the redemption price plus
any accrued and unpaid dividends payable upon redemption, without
interest. So long as no dividends payable on the Series A
Preferred Stock and any Parity Preferred Stock are in arrears for
any past dividend periods that have ended and subject to the
provisions of applicable law, we may from time to time repurchase
all or any part of the Series A Preferred Stock, including the
repurchase of shares of Series A Preferred Stock in
open-market transactions and
individual purchases at such prices as we negotiate, in each case
as duly authorized by our board of directors. Regardless of whether
dividends are paid in full on the Series A Preferred Stock or
any Parity Preferred Stock, we may purchase or acquire shares of
Series A Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares
of Series A Preferred Stock.
Unless full cumulative dividends on all shares of Series A
Preferred Stock have been or contemporaneously are declared and
paid or are declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods that have
ended, no shares of Series A Preferred Stock will be redeemed
unless all outstanding shares of Series A Preferred Stock are
simultaneously redeemed and we will not purchase or otherwise
acquire directly or indirectly any shares of Series A
Preferred Stock or any class or series of our capital stock
ranking, as to distributions or upon liquidation, dissolution or
winding up, on parity with or junior to the Series A Preferred
Stock (except by exchange for our capital stock ranking junior to
the Series A Preferred Stock as to distributions and upon
liquidation, dissolution or winding up).
We will mail a notice of redemption, postage prepaid, not fewer
than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series A
Preferred Stock to be redeemed at their respective addresses as
they appear on our stock transfer records as maintained by the
transfer agent named in “— Transfer Agent.” No failure to
give, nor defect in, such notice, nor in the mailing thereof, shall
affect the validity of the proceedings for the redemption of any
shares of Series A Preferred Stock except as to the holder to
whom notice was defective or not given. In addition to any
information required by law or by the applicable rules of any
exchange upon which the Series A Preferred Stock may be listed
or admitted to trading, each notice will state:
• the
redemption date;
• the
redemption price;
• the
number of shares of Series A Preferred Stock to be
redeemed;
• the
place or places where the certificates, if any, representing shares
of Series A Preferred Stock are to be surrendered for payment
of the redemption price;
• procedures
for surrendering noncertificated shares of Series A Preferred
Stock for payment of the redemption price;
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• that
dividends on the shares of Series A Preferred Stock to be
redeemed will cease to accumulate on such redemption date; and
• that
payment of the redemption price and any accumulated and unpaid
dividends will be made upon presentation and surrender of such
Series A Preferred Stock.
If fewer than all of the shares of Series A Preferred Stock
held by any holder are to be redeemed, the notice mailed to such
holder will also specify the number of shares of Series A
Preferred Stock held by such holder to be redeemed.
If a redemption date falls after a dividend record date and on or
prior to the corresponding dividend payment date, each holder of
shares of the Series A Preferred Stock at the close of
business of such dividend record date will be entitled to the
dividend payable on such shares on the corresponding dividend
payment date notwithstanding the redemption of such shares on or
prior to such dividend payment date. Except as described above, we
will make no payment or allowance for unpaid dividends, whether or
not in arrears, on Series A Preferred Stock for which a notice
of redemption has been given.
All shares of Series A Preferred Stock that we redeem or
repurchase will be retired and restored to the status of authorized
but unissued shares of preferred stock, without designation as to
series or class.
Special Optional
Redemption
Upon the occurrence of a Change of Control (as defined below), we
may, at our option, redeem the Series A Preferred Stock, in
whole or in part within 120 days after the first date on which
such Change of Control occurred, by paying $25.00 per share, plus
any accrued and unpaid dividends up to, but excluding, the date of
redemption.
We will mail to you, if you are a record holder of the
Series A Preferred Stock, a notice of redemption no fewer than
30 days nor more than 60 days before the redemption date.
We will send the notice to your address shown on our share transfer
books. A failure to give notice of redemption or any defect in the
notice or in its mailing will not affect the validity of the
redemption of any Series A Preferred Stock except as to the
holder to whom notice was defective. Each notice will state the
following:
• the
redemption date;
• the
redemption price;
• the
number of shares of Series A Preferred Stock to be
redeemed;
• the
place or places where the certificates, if any, representing shares
of Series A Preferred Stock are to be surrendered for payment
of the redemption price;
• procedures
for surrendering noncertificated shares of Series A Preferred
Stock for payment of the redemption price;
• that
dividends on the shares of Series A Preferred Stock to be
redeemed will cease to accumulate on such redemption date;
• that
payment of the redemption price and any accumulated and unpaid
dividends will be made upon presentation and surrender of such
Series A Preferred Stock; and
• that
the Series A Preferred Stock is being redeemed pursuant to our
special optional redemption right in connection with the occurrence
of a Change of Control and a brief description of the transaction
or transactions constituting such Change of Control.
If we redeem fewer than all of the outstanding shares of
Series A Preferred Stock, the notice of redemption mailed to
each stockholder will also specify the number of shares of
Series A Preferred Stock that we will redeem from each
stockholder. In this case, we will determine the number of shares
of Series A Preferred Stock to be redeemed, on a pro rata
basis, as described above in “— Optional Redemption.”
If we have given a notice of redemption, have set aside sufficient
funds for the redemption in trust for the benefit of the holders of
the Series A Preferred Stock called for redemption and have
given irrevocable instructions to pay the redemption price and any
accrued and unpaid dividends, then from and after the
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redemption date, those shares of Series A Preferred Stock will
be treated as no longer being outstanding, no further dividends
will accrue and all other rights of the holders of those shares of
Series A Preferred Stock will terminate. The holders of those
shares of Series A Preferred Stock will retain their right to
receive the redemption price for their shares and any accrued and
unpaid dividends up to, but excluding, the redemption date, without
interest.
The holders of Series A Preferred Stock at the close of
business on a dividend record date will be entitled to receive the
dividend payable with respect to the Series A Preferred Stock
on the corresponding payment date notwithstanding the redemption of
the Series A Preferred Stock between such record date and the
corresponding payment date or our default in the payment of the
dividend due. Except as provided above, we will make no payment or
allowance for unpaid dividends, whether or not in arrears, on
Series A Preferred Stock to be redeemed.
A “Change of Control” is when, after the original issuance of the
Series A Preferred Stock, the following have occurred and are
continuing:
• the
acquisition by any person, including any syndicate or group deemed
to be a “person” under Section 13(d)(3) of the
Exchange Act, of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or
series of purchases, mergers or other acquisition transactions of
stock of our company entitling that person to exercise more than
50% of the total voting power of all stock of our company entitled
to vote generally in the election of our directors (except that
such person will be deemed to have beneficial ownership of all
securities that such person has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the
occurrence of a subsequent condition); and
• following
the closing of any transaction referred to in the bullet point
above, neither we nor the acquiring or surviving entity has a class
of common securities listed on the NYSE or Nasdaq.
No
Maturity, Sinking Fund or Mandatory Redemption
The Series A Preferred Stock has no stated maturity date and
we are not required to redeem the Series A Preferred Stock at
any time. We are not required to set aside funds to redeem the
Series A Preferred Stock. Accordingly, the Series A
Preferred Stock will remain outstanding indefinitely, unless we
decide, at our option, to exercise our redemption right. The
Series A Preferred Stock is not subject to any sinking
fund.
Limited Voting
Rights
Holders of shares of the Series A Preferred Stock generally do
not have any voting rights, except as set forth below.
If dividends on the Series A Preferred Stock are in arrears
for 18 or more monthly periods, whether or not consecutive (which
we refer to as a “preferred dividend default”), holders of shares
of the Series A Preferred Stock (voting separately as a class
together with the holders of the Parity Preferred Stock) will be
entitled to vote for the election of a total of two additional
directors to serve on our board of directors (which we refer to as
“preferred stock directors”), until all unpaid dividends for past
dividend periods with respect to the Series A Preferred Stock
and any Parity Preferred Stock have been paid. In such a case, the
number of directors serving on our board of directors will be
increased by two. The preferred stock directors will be elected by
a plurality of the votes cast in the election for a one-year term and each preferred stock director will
serve until his successor is duly elected and qualifies or until
the director’s right to hold the office terminates, whichever
occurs earlier, subject to such preferred stock director’s earlier
death, disqualification, resignation or removal. The election will
take place at:
• either
(i) a special meeting called upon the written request of holders of
at least 25% of the outstanding shares of Series A Preferred
Stock together with any Parity Preferred Stock, if this request is
received more than 90 days before the date fixed for our next
annual or special meeting of stockholders or, (ii) if we receive
the request for a special meeting within 90 days before the
date fixed for our next annual or special meeting of stockholders,
at our annual or special meeting of stockholders; and
• each
subsequent annual meeting (or special meeting held in its place)
until all dividends accumulated on the Series A Preferred
Stock and on any Parity Preferred Stock have been paid in full or
declared and a sum sufficient for the payment thereof set aside for
payment for all past dividend periods.
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If we do not call a special meeting within 45 days after request
from the holders of 25% of our Series A Preferred Stock
outstanding, then the holders of record of at least 25% of the
outstanding Series A Preferred Stock may designate a holder to call
the meeting at our expense and such meeting may be called by the
holder so designated upon notice similar to that required for
annual meetings of stockholders and shall be held at the place
designated by the holder calling such meeting. We shall pay all
costs and expenses of calling and holding any meeting and of
electing directors, including, without limitation, the cost of
preparing, reproducing and mailing the notice of such meeting, the
cost of renting a room for such meeting to be held, and the cost of
collecting and tabulating votes.
If and when all accumulated dividends on the Series A
Preferred Stock and all other classes or series of preferred stock
upon which like voting rights have been conferred and are
exercisable shall have been paid in full, holders of shares of
Series A Preferred Stock shall be divested of the voting
rights set forth above (subject to re-vesting in the event of each and every preferred
dividend default) and the term and office of such preferred stock
directors so elected will terminate and the number of directors
will be reduced accordingly.
Any preferred stock director may be removed at any time with or
without cause by the vote of, and may not be removed otherwise than
by the vote of, the holders of record of a majority of the
outstanding shares of Series A Preferred Stock and other
Parity Preferred Stock entitled to vote thereon when they have the
voting rights described above (voting as a single class). So long
as a preferred dividend default continues, any vacancy in the
office of a preferred stock director may be filled by written
consent of the preferred stock director remaining in office, or if
none remains in office, by a vote of the holders of record of a
majority of the outstanding shares of Series A Preferred Stock
when they have the voting rights described above (voting as a
single class with all other Parity Preferred Stock). The preferred
stock directors shall each be entitled to one vote on any matter
before our board of directors.
In addition, so long as any shares of Series A Preferred Stock
remain outstanding, we will not, without the consent or the
affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock together with each other Parity Preferred Stock
(voting together as a single class):
• authorize,
create or issue, or increase the number of authorized or issued
shares of, any class or series of stock ranking senior to such
Series A Preferred Stock with respect to distribution rights
and rights upon our liquidation, dissolution or winding up, or
reclassify any of our authorized capital stock into any such
shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any such
shares; or
• amend,
alter or repeal the provisions of our amended and restated articles
of incorporation, including the terms of the Series A
Preferred Stock, whether by merger, consolidation, transfer or
conveyance of all or substantially all of our assets or otherwise,
so as to materially and adversely affect the rights, preferences,
privileges or voting powers of the Series A Preferred
Stock,
except that with respect to the occurrence of any of the events
described in the second bullet point immediately above, so long as
the Series A Preferred Stock remains outstanding with the
terms of the Series A Preferred Stock materially unchanged or
the holders of shares of Series A Preferred Stock receive
stock of the successor with substantially identical rights, taking
into account that, upon the occurrence of an event described in the
second bullet point above, we may not be the surviving entity, the
occurrence of such event will not be deemed to materially and
adversely affect the rights, preferences, privileges or voting
powers of the Series A Preferred Stock, and in such case such
holders shall not have any voting rights with respect to the events
described in the second bullet point immediately above.
Furthermore, if holders of shares of the Series A Preferred
Stock receive the greater of the full trading price of the
Series A Preferred Stock on the date of an event described in
the second bullet point immediately above or the $25.00 per share
liquidation preference plus any accrued and unpaid dividends
thereon pursuant to the occurrence of any of the events described
in the second bullet point immediately above, then such holders
shall not have any voting rights with respect to the events
described in the second bullet point immediately above. If any
event described in the second bullet point above would materially
and adversely affect the rights, preferences, privileges or voting
powers of the Series A Preferred Stock disproportionately
relative to other classes or series of preferred stock ranking on
parity with the Series A Preferred Stock with respect to
distribution rights and rights upon our liquidation, dissolution or
winding up, the affirmative vote of the holders of at least
two-thirds of the outstanding shares
of the Series A Preferred Stock, voting separately as a class,
will also be required.
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Holders of shares of Series A Preferred Stock will not be
entitled to vote with respect to any increase in the total number
of authorized shares of our common stock or preferred stock, any
increase in the number of authorized shares of Series A
Preferred Stock or the creation or issuance of any other class or
series of capital stock, or any increase in the number of
authorized shares of any other class or series of capital stock, in
each case ranking on parity with or junior to the Series A
Preferred Stock with respect to the payment of distributions and
the distribution of assets upon liquidation, dissolution or winding
up.
Holders of shares of Series A Preferred Stock will not have
any voting rights with respect to, and the consent of the holders
of shares of Series A Preferred Stock is not required for, the
taking of any corporate action, including any merger or
consolidation involving us or a sale of all or substantially all of
our assets, regardless of the effect that such merger,
consolidation or sale may have upon the powers, preferences, voting
powers or other rights or privileges of the Series A Preferred
Stock, except as set forth above.
In addition, the voting provisions above will not apply if, at or
prior to the time when the act with respect to which the vote would
otherwise be required would occur, we have redeemed or called for
redemption upon proper procedures all outstanding shares of
Series A Preferred Stock.
In any matter in which Series A Preferred Stock may vote (as
expressly provided in the Certificate of Designations setting forth
the terms of the Series A Preferred Stock), each share of
Series A Preferred Stock shall be entitled to one vote per
$25.00 of liquidation preference. As a result, each share of
Series A Preferred Stock will be entitled to one vote.
Transfer Agent
The transfer agent for the Series A Preferred Stock will be
ClearTrust, LLC. ClearTrust, LLC’s address is 16540 Pointe
Village Dr., Suite 210, Lutz, FL 33558 and its telephone
number is (813) 235-4490.
Book-Entry
Procedures
The Series A Preferred Stock will only be issued in the form
of global securities held in book-entry form. DTC or its nominee will be the sole
registered holder of the Series A Preferred Stock. Owners of
beneficial interests in the Series A Preferred Stock
represented by the global securities will hold their interests
pursuant to the procedures and practices of DTC. As a result,
beneficial interests in any such securities will be shown on, and
transfers will be effected only through, records maintained by DTC
and its direct and indirect participants and any such interest may
not be exchanged for certificated securities, except in limited
circumstances. Beneficial owners will not be holders and will not
be entitled to any rights provided to the holders of the
Series A Preferred Stock under the global securities or our
amended and restated articles of incorporation, as amended. We and
any of our agents may treat DTC as the sole holder and registered
owner of the global securities.
DTC has advised us as follows: DTC is a limited-purpose trust company organized under the
New York Banking Law, a “banking organization” within the
meaning of the New York Uniform Commercial Code, and a
“clearing agency” registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC facilitates the
settlement of transactions amongst participants through electronic
computerized book-entry changes in
participants’ accounts, eliminating the need for physical movement
of securities certificates. DTC’s participants include securities
brokers and dealers, including the underwriters, banks, trust
companies, clearing corporations and other organizations, some of
whom and/or their representatives own DTC. Access to DTC’s
book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
The Series A Preferred Stock, represented by one or more
global securities, will be exchangeable for certificated securities
with the same terms only if:
• DTC
is unwilling or unable to continue as depositary or if DTC ceases
to be a clearing agency registered under the Exchange Act and
a successor depositary is not appointed by us within 90 days;
or
• we
decide to discontinue use of the system of book-entry transfer through DTC (or any successor
depositary).
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MATERIAL U.S. FEDERAL
INCOME TAX CONSIDERATIONS
This section describes the material U.S. federal income tax
consequences of the acquisition, ownership and disposition of the
Series A Preferred Stock. It applies to you only if you
acquire shares of Series A Preferred Stock upon their original
issuance at their original offering price. This section does not
purport to be a complete analysis of all potential U.S. federal
income tax considerations, does not describe other
U.S. federal tax consequences (such as estate and gift tax
consequences), nor does it describe any tax consequences arising
under the laws of any state, local or foreign jurisdiction.
This section is based on the Internal Revenue Code of 1986, as
amended (the “Code”), existing and proposed regulations under the
Code, and published rulings and court decisions as of the date
hereof, all of which are subject to change. Any such change may be
applied retroactively and may adversely affect the
U.S. federal income tax consequences described herein. We have
not sought, and do not expect to seek, a ruling from the Internal
Revenue Service (the “IRS”) or any other U.S. federal, state,
or local taxing authority, or the opinion of legal counsel, with
respect to any tax issue affecting the Company. There can be no
assurance the IRS or a court will not take a contrary position to
that discussed below regarding the acquisition, ownership and
disposition of the Series A Preferred Stock.
This section does not cover all aspects of U.S. federal income
taxation that may be relevant to the acquisition, ownership or
disposition of the Series A Preferred Stock by purchasers in light
of their particular circumstances. In particular, this section does
not describe all of the consequences that may be relevant to you if
you are a member of a class of holders subject to special rules,
including, but not limited to, tax-exempt organizations, insurance companies, banks
or other financial institutions, entities or arrangements that are
treated as partnerships for U.S. federal income tax purposes,
S corporations or other pass-through
entities and investors in such entities, dealers in securities or
currencies, regulated investment companies, real estate investment
trusts, U.S. persons whose functional currency is not the
U.S. dollar, U.S. expatriates, persons subject to the
alternative minimum tax, traders in securities that elect to use a
mark-to-market method of accounting for their securities
holdings, accrual basis taxpayers subject to special tax accounting
rules under Section 451(b) of the Code, “qualified
foreign pension funds” as described in Section 897(1)(2) of the
Code and entities all of the interests of which are held by
qualified foreign pension funds, controlled foreign corporations,
passive foreign investment companies or corporations that
accumulate earnings to avoid U.S. federal income tax, certain
former citizens or former long-term
residents of the United States, holders who have acquired our
Series A Preferred Stock through the exercise of a stock
option or otherwise as compensation, retirement plans, individual
retirement accounts or other tax-deferred accounts, and persons that will hold the
shares of Series A Preferred Stock as a position in a hedging
transaction, “straddle,” “conversion transaction” or other risk
reduction transaction.
If a partnership (or any other entity or arrangement treated as a
partnership for U.S. federal income tax purposes) holds shares
of Series A Preferred Stock, the U.S. federal income tax
treatment of a partner of that partnership generally will depend
upon the status of the partner and the activities of the
partnership. If you are a partnership or a partner of a partnership
holding shares of Series A Preferred Stock, you should consult
your tax advisors as to the particular U.S. federal income tax
consequences of holding and disposing of shares of Series A
Preferred Stock.
This discussion applies only to purchasers who purchase and hold
the shares of Series A Preferred Stock as a capital asset
within the meaning of Section 1221 of the Code (generally
property held for investment).
Tax consequences may vary depending upon the particular status of
an investor. This discussion is for information purposes only and
is not tax advice. Potential investors should consult with their
own tax advisers in determining the specific tax consequences and
risks to them of purchasing, holding and disposing of shares of
Series A Preferred Stock, including the application to their
particular situation of the U.S. federal income tax
considerations discussed below, as well as the application of
state, local, foreign or other tax laws.
U.S. Holders
The following is a summary of the material U.S. federal income
tax consequences that will apply to a U.S. holder of
Series A Preferred Stock. For purposes of this discussion, a
U.S. holder means a beneficial owner of shares of
Series A Preferred Stock that is, for U.S. federal income
tax purposes, (1) an individual citizen or resident of the
United States, (2) a corporation (or other entity treated as a
corporation for U.S. federal income tax purposes) created or
organized in or under the laws of the United States or of any
state thereof or the District of Columbia, (3) an estate the
income of which is subject to U.S. federal income taxation
regardless of its source, or (4) a trust if
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(i) a court within the United States is able to exercise
primary supervision over its administration and one or more United
States persons (as defined in the Code) have the authority to
control all of its substantial decisions or (ii) it has a
valid election in effect under applicable U.S. Treasury
regulations to be treated as a “United States person” as
defined in Section 7701(a)(30) of the Code.
Distributions. Distributions
made to a U.S. holder with respect to the Series A Preferred
Stock will be taxable as dividend income when paid to the extent of
our current or accumulated earnings and profits as determined for
U.S. federal income tax purposes. To the extent that the
amount of a distribution with respect to the shares of
Series A Preferred Stock exceeds our current and accumulated
earnings and profits, such distribution will be treated first as a
tax-free return of capital to the
extent of the U.S. holder’s adjusted tax basis in such
Series A Preferred Stock (and will reduce a U.S. holder’s
tax basis in the Series A Preferred Stock, but not below zero)
and thereafter as gain from the disposition of the Series A
Preferred Stock as described under “U.S. Holders-Sale, Exchange, Redemption or Certain Other
Taxable Dispositions.”
We presently have no accumulated earnings and profits and we may
not have sufficient current or accumulated earnings and profits
during future years for distributions with respect to the
Series A Preferred Stock to be treated as dividend income.
Distributions constituting dividend income received by an
individual U.S. holder in respect of Series A Preferred
Stock will be “qualified dividend income” if the Series A
Preferred Stock has been held for more than 90 days during the
181-day period beginning 90 days
before the ex-dividend date. Qualified
dividend income generally is taxed at favorable rates applicable to
long-term capital gains. In addition,
if a dividend received by an individual holder that qualifies for
the “qualified dividend income” rate is an “extraordinary dividend”
within the meaning of Section 1059 of the Code, any loss
recognized by such individual holder on a subsequent disposition of
the stock will be treated as long-term
capital loss to the extent of such “extraordinary dividend,”
irrespective of such holder’s holding period for the stock.
Distributions with respect to the Series A Preferred Stock
constituting dividend income paid to holders that are
U.S. corporations or entities taxed as corporations generally
will qualify for the dividends-received deduction if the applicable holding
period is met. Corporate holders of Series A Preferred Stock
should also consider the effect of Section 246A of the Code,
which reduces the dividends-received
deduction allowed to a corporate shareholder that has incurred
indebtedness that is “directly attributable” to an investment in
portfolio stock such as preferred stock. Further, corporate holders
of Series A Preferred Stock should consider the effect of
Section 246(c) of the Code, which, among other things,
disallows the dividends-received
deduction in respect of any dividend on a share of stock that is
held for less than the minimum holding period (generally, for
preferred stock, at least 91 days during the 181 day
period beginning on the date which is 90 days before the date
on which the Series A Preferred Stock becomes ex-dividend with respect to such dividend). Also, if
a corporate holder of Series A Preferred Stock receives a
dividend on the Series A Preferred Stock that is an
“extraordinary dividend” within the meaning of Section 1059 of
the Code, such holder in certain instances must reduce its tax
basis in the Series A Preferred Stock by the amount of the
“nontaxed portion” of such “extraordinary dividend” that results
from the application of the dividends-received deduction. If the “nontaxed portion” of
such “extraordinary dividend” exceeds such corporate holder’s
basis, any excess will be taxed as gain as if such holder had
disposed of its Series A Preferred Stock in the year the
“extraordinary dividend” is paid. Each domestic corporate holder of
Series A Preferred Stock is urged to consult with its tax
advisors with respect to the eligibility for and amount of any
dividends received deduction and the application of Sections 246A,
246(c) and 1059 of the Code to any dividends it receives.
The availability of the reduced dividend tax rate for individuals
and the dividends-received deduction
for U.S. corporations are subject to certain exceptions for
short-term and hedged positions and
other applicable limitations. You should consult your own tax
adviser regarding the availability of the reduced dividend tax rate
and the dividends-received deduction
in light of your particular circumstances.
Deemed
Distributions. Under
Section 305 of the Code, U.S. holders may be treated as receiving a
deemed dividend on the Series A Preferred Stock upon an increase in
the redemption price of the Series A Preferred Stock. While
the matter is not entirely clear, if our board of directors does
not declare a distribution on the Series A Preferred Stock in
respect of any dividend period before the related dividend payment
date, the deferred dividend may be treated as an increase in the
redemption price of the Series A Preferred Stock. Although the
matter is not entirely clear, we believe such a deferred dividend
should not be treated as a deemed dividend on the Series A
Preferred Stock. If the IRS takes a contrary position, a U.S.
holder may be required to include a deemed dividend in income
currently with respect to any deferred dividend on the Series A
Preferred Stock.
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Sale, Exchange, Redemption
or Certain Other Taxable
Dispositions. A U.S. holder
generally will recognize capital gain or loss on a sale, exchange
or other taxable disposition of the Series A Preferred Stock
equal to the difference between the amount realized (which does not
include any declared but unpaid distributions, which will be
treated in the manner described above) upon the disposition and
such U.S. holder’s adjusted tax basis in the securities sold
or exchanged. A U.S. holder’s initial tax basis in the
Series A Preferred Stock generally will be equal to its cost.
Such capital gain or loss will be long-term capital gain or loss if the
U.S. holder’s holding period for the securities sold or
exchanged is more than one year at the time of disposition.
Long-term capital gains of
non-corporate taxpayers generally are
taxed at the same lower maximum tax rates applicable to qualified
dividend income summarized above. The capital gains of a
U.S. holder other than long-term
capital gains are taxed at the rates applicable to ordinary income.
The deductibility of net capital losses is subject to
limitations.
Our redemption of the Series A Preferred Stock generally would
be a taxable event. A U.S. holder would be treated as if it
had disposed of its Series A Preferred Stock if the
redemption, based on the facts and circumstances, is treated for
U.S. federal income tax purposes as:
• a
complete termination of the U.S. holder’s stock interest in
us;
• a
substantially disproportionate redemption of stock with respect to
the U.S. holder; or
• not
essentially equivalent to a dividend with respect to the
U.S. holder.
In determining whether any of these tests has been met, shares of
stock deemed to be owned by the U.S. holder by reason of
certain constructive ownership rules set forth in Section 318
of the Code, as well as shares actually owned and Series A
Preferred Stock held by the U.S. holder, must be taken into
account. A U.S. holder that owns (actually or constructively) only
an insubstantial percentage of our total equity interests and that
exercises no control over our corporate affairs may be entitled to
sale or exchange treatment on a redemption of the Series A
Preferred Stock if such holder experiences a reduction in its
equity interest (taking into account any constructively owned
equity interests) as a result of the redemption.
If we redeem the Series A Preferred Stock in a redemption that
results in a U.S. holder meeting one of the tests described above,
the U.S. holder generally would recognize taxable gain or loss
equal to the sum of the amount of cash and fair market value of
property (other than stock of us or a successor to us) paid in the
redemption less the U.S. holder’s tax basis in the
Series A Preferred Stock. This gain or loss would be
long-term capital gain or loss if the
U.S. holder has held the Series A Preferred Stock for
more than one year at the time of the redemption.
If the redemption does not meet any of the tests described above,
the redemption will be treated as a distribution subject to the
rules described under “U.S. Holders-Distributions.” If the redemption of the
Series A Preferred Stock is treated as a distribution that is
taxable as a dividend, U.S. holders should consult with their
own tax advisors regarding the allocation of their basis in the
redeemed and remaining shares of Series A Preferred Stock.
Because the determination as to whether any of the alternative
tests described above is satisfied with respect to any particular
holder of the Series A Preferred Stock will depend upon the facts
and circumstances as of the time the determination is made, U.S.
holders should consult with their own tax advisors regarding the
tax treatment of a redemption.
Medicare
Tax. A U.S. holder that is an
individual or estate, or a trust that does not fall into a special
class of trusts that is exempt from such tax, will be subject to a
3.8% Medicare tax on all or a portion of its “net investment
income,” which generally will include its dividend income and its
net gains from the disposition of Series A Preferred Stock,
unless such dividend income or net gains are derived in the
ordinary course of the conduct of a trade or business (other than a
trade or business that consists of certain passive or trading
activities). If you are a U.S. holder that is an individual,
estate, or trust, you are urged to consult your tax adviser
regarding the applicability of the Medicare tax to your income and
gains in respect of your investment in the Series A Preferred
Stock.
Backup Withholding and
Information Reporting. When required,
we or our paying agent will report to the holders of Series A
Preferred Stock and to the IRS amounts paid on or with respect to
the Series A Preferred Stock during each calendar year and the
amount of tax, if any, withheld from such payments. A
U.S. holder will be subject to backup withholding on any
dividends paid on the Series A Preferred Stock and proceeds
from the disposition of the Series A Preferred Stock at the
applicable rate if the U.S. holder (a) fails to provide
us or our paying agent with a correct taxpayer identification
number or certification of exempt status, (b) has been
notified by the IRS that it is
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subject to backup withholding as a result of the failure to
properly report payments of interest or dividends, or (c) in
certain circumstances, has failed to certify under penalty of
perjury that it is not subject to backup withholding. A
U.S. holder may be eligible for an exemption from backup
withholding by providing a properly completed IRS
Form W-9 to us or our paying
agent. Any amounts withheld under the backup withholding rules
generally will be allowed as a refund or a credit against a
U.S. holder’s U.S. federal income tax liability provided
the required information is properly furnished to the IRS by the
U.S. holder on a timely basis.
Non-U.S. Holders
The following is a summary of the material U.S. federal income tax
consequences that will apply to a non-U.S. holder of the Series A Preferred
Stock. For this purpose, a non-U.S. holder is a beneficial owner of
Series A Preferred Stock that is neither a U.S. holder
nor a partnership (including any entity or arrangement that is
treated as a partnership for U.S. federal income tax purposes).
Distributions. Generally,
distributions treated as dividend income paid to a non-U.S. holder with respect to the
Series A Preferred Stock (including any redemption that is
taxed as a dividend under the rules described above under
“U.S. Holders-Sale, Exchange,
Redemption or Certain Other Taxable Dispositions”) will be subject
to withholding of U.S. federal income tax at a 30% rate, or
such lower rate as may be specified by an applicable income tax
treaty, provided the non-U.S. holder furnishes the withholding agent
with a properly completed IRS Form W-8BEN or W-8BEN-E (or suitable
substitute form) certifying under penalty of perjury that such
holder is eligible for treaty benefits. The 30% withholding does
not apply if the dividends are “effectively connected” with a trade
or business carried on by the non-U.S. holder within the United
States and, if an income tax treaty applies, are attributable
to a U.S. permanent establishment or fixed base maintained by
the non-U.S. holder and the
non-U.S. holder provides the
payor with a properly completed IRS Form W-8ECI (or a suitable substitute form). Subject to
the discussions under “Information Reporting and Backup Withholding
on Non-U.S. Holders” and “FATCA
Withholding,” in such case, the dividends generally will be subject
to U.S. federal income tax on a net basis at applicable
individual or corporate rates and, in the case of a non-U.S. holder that is a corporation, may be
subject to a “branch profits tax” at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
Withholding may also be required in respect of dividends paid to a
non-U.S. holder, as described under
“Non-U.S. Holders — FATCA
Withholding”. If a non-U.S. holder is
subject to withholding at a rate in excess of a reduced rate for
which such holder is eligible under a tax treaty or otherwise, the
holder may be able to obtain a refund of or credit for any amounts
withheld in excess of the applicable rate by filing a refund claim
with the IRS. Investors are encouraged to consult with their tax
advisors regarding the possible implications of these withholding
requirements on their investment in the Series A Preferred
Stock.
Distributions not treated as dividends for U.S. federal income
tax purposes will constitute a return of capital and will first be
applied against and reduce a non-U.S. holder’s tax basis in the Series A
Preferred Stock, but not below zero. Distributions in excess of our
current and accumulated earnings and profits and in excess of a
non-U.S. holder’s tax basis in
its Series A Preferred Stock will be treated as gain from the
sale of Series A Preferred Stock as described under
“Non-U.S. Holders-Sale, Exchange, Redemption or Certain Other
Taxable Dispositions” below.
If we are considered a USRPHC (as defined below) and a distribution
on the Series A Preferred Stock may exceed our current and
accumulated earnings and profits, we will satisfy our withholding
requirements either by treating the entire distribution as a
dividend, subject to the withholding rules described above (and
withhold at a minimum rate of 15% or such lower rate as may be
specified by an applicable income tax treaty for distributions from
a USRPHC), or by treating only the amount of the distribution equal
to a reasonable estimate of our current and accumulated earnings
and profits as a dividend, with the excess portion of the
distribution possibly being subject to withholding at a rate of 15%
or such lower rate as may be specified by an applicable income tax
treaty.
Sale, Exchange, Redemption
or Certain Other Taxable
Dispositions. Subject to the
discussion of backup withholding and FATCA below, a non-U.S. holder generally will not be subject to
U.S. federal income or withholding tax with respect to gain
realized on the sale, exchange, redemption (provided the redemption
is treated as a sale or exchange under the rules described above
under “U.S. Holders-Sale,
Exchange, Redemption or Certain Other Taxable Dispositions”) or
other taxable disposition of the Series A Preferred Stock
unless:
• the
gain is effectively connected with a U.S. trade or business of
the non-U.S. holder (and if a tax
treaty applies, the gain is attributable to a U.S. permanent
establishment or fixed base maintained by such non-U.S. holder);
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• in
the case of an individual, such non-U.S. holder is present in the United
States for 183 or more days in the taxable year of the
sale or disposition and certain other conditions are satisfied;
or
• we
have been a “U.S. real property holding corporation” (a
“USRPHC”) for U.S. federal income tax purposes at any time
during shorter of the the five-year
period ending on the date of disposition of the Series A
Preferred Stock or the period that the non-U.S. holder held the Series A Preferred Stock and
certain other conditions are met.
A non-U.S. holder described in
the first bullet point above generally will be subject to
U.S. federal income tax on the net gain derived from the sale
in the same manner as a U.S. holder. If a non-U.S. holder is eligible for the benefits of
a tax treaty between the United States and its country of
residence, any such gain will be subject to U.S. federal
income tax in the manner specified by the treaty. To claim the
benefit of a treaty, a non-U.S. holder must properly submit the
appropriate IRS Form W-8 (or
suitable successor or substitute form). A non-U.S. holder that is a foreign corporation
and is described in the first bullet point above will be subject to
tax on gain under regular U.S. federal income tax rates
applicable to corporations and, in addition, may be subject to a
branch profits tax at a 30% rate or a lower rate if so specified by
an applicable income tax treaty. An individual non-U.S. holder described in the second bullet
point above will be subject to a flat 30% U.S. federal income
tax on the gain derived from the sale or a lower rate if so
specified by an applicable income tax treaty, which may be offset
by U.S. source capital losses, subject to certain
limitations.
With regard to the third bullet point above, generally, a
corporation is a USRPHC for U.S. federal income tax purposes if the
fair market value of its “United States real property
interests” equals or exceeds 50% of the sum of the fair market
value of its worldwide real property interests and its other assets
used or held for use in a trade or business. We do not expect to be
a USRPHC for U.S. federal income tax purposes. However, even
if we are or become a USRPHC, gain arising from the sale or other
taxable disposition by a non-U.S.
holder generally will not be subject to U.S. federal income tax if
any class of our stock is “regularly traded” on an “established
securities market” (each as defined by applicable Treasury
regulations), and the fair market value of such non-U.S. holder’s Series A Preferred Stock does not
exceed the fair market value of 5 percent of the entire class of
Series A Preferred Stock at any time during the five-year period ending either on the date of
disposition of such interest or other applicable determination date
(if the Series A Preferred Stock were treated as regularly traded
on an established securities market) or the regularly traded class
of our stock with the lowest fair market value at the time of
acquisition of the Series A Preferred Stock and at certain other
times described in the applicable Treasury regulations (if the
Series A Preferred Stock were not treated as regularly traded on an
established securities market), as further described in the
applicable Treasury regulations. If the exemption described in the
prior sentence were not available and the USRPHC rules applied,
then, among other things, a non-U.S.
holder would be required to file a U.S. federal income tax return
and generally would be taxed in the same manner as gain that is
effectively connected with the conduct of a trade or business in
the United States, except that the branch profits tax will not
apply. Non-U.S. holders should
consult their own advisors about the consequences that could result
if we are, or become, a USRPHC.
A payment made to a non-U.S. holder in
redemption of the Series A Preferred Stock may be treated as a
dividend, rather than as a payment in exchange for the stock, in
the circumstances discussed under
“U.S. Holders — Sale, Exchange, Redemption or
Certain Other Taxable Dispositions,” in which event the payment
would be subject to tax as discussed under “Non-U.S. Holders — Distributions.”
Information Reporting and
Backup Withholding on Non-U.S. Holders. Payment
of dividends and the tax withheld with respect thereto are subject
to information reporting requirements. These information reporting
requirements apply regardless of whether withholding was reduced or
eliminated by an applicable income tax treaty, or withholding was
not required because the dividends were effectively connected with
a trade or business in the United States conducted by the
non-U.S. holder. Copies of the
information returns reporting such dividends and withholding may
also be made available by the IRS under the provisions of an
applicable income tax treaty or agreement to the tax authorities in
the country in which the non-U.S. holder resides. U.S. backup
withholding generally will apply on payment of dividends to
non-U.S. holders unless such
non-U.S. holders furnish to the
payor an IRS Form W-8BEN or
W-8BEN-E
(or other applicable form) certifying, under penalty of perjury,
that the person is a non-U.S. person (and the withholding agent does
not have actual knowledge or reason to know that such holder is a
U.S. person), or such non-U.S. holders otherwise establish an
exemption.
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Payment by a U.S. office of a broker of the proceeds of a sale
of the Series A Preferred Stock is subject to both backup
withholding and information reporting unless the non-U.S. holder, or beneficial owner thereof, as
applicable, certifies that it is a non-U.S. holder on IRS Form W-8BEN or W-8BEN-E (or other
applicable form) and the withholding agent does not have actual
knowledge or reason to know that such holder is a U.S. person, or
otherwise establishes an exemption. Subject to certain exceptions,
backup withholding and information reporting generally will not
apply to a payment of proceeds from the sale of the Series A
Preferred Stock if such sale is effected through a foreign office
of a broker without certain specified U.S. connections.
Any amounts withheld under the backup withholding rules generally
will be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability
provided the required information is properly furnished to the IRS
by the U.S. holder on a timely basis.
FATCA Withholding
Under Sections 1471 through 1474 of the Code, commonly known as the
Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax
may apply to payments of dividends on stock made to foreign
financial institutions (including amounts paid to a foreign
financial institution on behalf of a holder) and certain other
non-financial foreign entities.
Withholding under FATCA generally will not apply where such
payments are made to (i) a “foreign financial institution” (as
defined in the Code and U.S. Treasury regulations) that
undertakes, under either an agreement with the U.S. Treasury
or pursuant to an intergovernmental agreement between the
jurisdiction in which it is a resident and the U.S. Treasury,
to identify accounts held by certain U.S. persons or
U.S.-owned foreign entities, annually
report certain information about such accounts, and withhold 30% on
payments to noncompliant foreign financial institutions and certain
other account holders; (ii) a “non-financial foreign entity” (as defined in the Code
and U.S. Treasury regulations) that either certifies it does
not have any substantial U.S. owners or furnishes identifying
information regarding each substantial U.S. owner to the
U.S. Treasury; or (iii) a foreign financial institution
or non-financial foreign entity that
is exempt from these rules.
Non-U.S. holders should consult
their own tax advisers with respect to the U.S. federal income
tax consequences of FATCA on their ownership and disposition of
shares of our Series A Preferred Stock.
This summary is for general information only and is not intended to
constitute a complete description of all tax consequences for
non-U.S. holders relating to the
purchase, ownership and disposition of the Series A Preferred
Stock. Prospective purchasers of Series A Preferred Stock
should consult their independent tax advisors regarding the
U.S. federal, state, local, and foreign income and other tax
consequences of the purchase, ownership and disposition of the
Series A Preferred Stock based on their particular
circumstances.
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UNDERWRITING
The Benchmark Company, LLC (“Benchmark”) is acting as
representative of the underwriters named below. Subject to the
terms and conditions stated in the underwriting agreement,
dated ,
2021, each underwriter named below has severally, and not jointly,
agreed to purchase from us, and we have agreed to sell to that
underwriter, the number of shares of Series A Preferred Stock
set forth opposite that underwriter’s name in the table below.
Underwriters
|
|
Number of
Shares
|
The
Benchmark Company, LLC
|
|
|
Total
|
|
|
The underwriting agreement provides that the underwriters must buy
all of the shares of our Series A Preferred Stock offered
hereby if they buy any of them. Our shares of Series A
Preferred Stock, however, are offered subject to a number of
conditions, including:
• receipt
and acceptance of our shares by the underwriters; and
• the
underwriters’ right to reject orders in whole or in part.
In connection with this offering, the underwriters or securities
dealers may distribute prospectuses electronically.
We expect that delivery of the Series A Preferred Stock will
be made against payment therefor on or
about ,
2021, which will be the second business day following the
trade date of the Series A Preferred Stock (such settlement
cycle being herein referred to as “T + 2”). Under
Rule 15c6-1 under the
Exchange Act, trades in the secondary market generally are
required to settle in two business days, unless the parties to
any such trade expressly agree otherwise. Accordingly, purchasers
who wish to trade Series A Preferred Stock on the date of
pricing or the next business day will be required, by virtue
of the fact that the Series A Preferred Stock initially will
settle T + 2, to specify an alternate settlement cycle at the time
of any such trade to prevent a failed settlement. Purchasers of the
Series A Preferred Stock who wish to trade the Series A
Preferred Stock on the date of pricing of the Series A
Preferred Stock or the next business day should consult their
own advisor.
Underwriting Discounts and
Commissions
The representative has advised us that the underwriters propose
initially to offer the shares of Series A Preferred Stock to
the public at the public offering price set forth on the cover page
of this prospectus supplement and to certain dealers at the public
offering price minus a concession not in excess of
$ per
share. Sales
of shares made outside of the United States may be made by
affiliates of the underwriters. If all the shares are not sold at
the public offering price, the representatives may change the
offering price and the other selling terms. The following table
shows the public offering price, underwriting discount and
proceeds, before expenses, that we will pay to the underwriters in
connection with this offering. The information assumes either no
exercise or full exercise by the underwriters of their option to
purchase additional shares of Series A Preferred Stock to
cover over-allotments, if any.
Underwriters
|
|
Per
Share
|
|
Without
Over-Allotment
|
|
With Over-Allotment
|
Public Offering Price
|
|
$
|
|
|
$
|
|
|
$
|
|
Underwriting Discount (8.0%)
|
|
$
|
|
|
$
|
|
|
$
|
|
Proceeds to Us, before expenses
|
|
$
|
|
|
$
|
|
|
$
|
|
Certain expenses associated with this offering, exclusive of the
underwriting discount and the expenses set forth in the next
sentence, are estimated to be approximately
$
and will be payable by us. In addition to the underwriting
discount, we will reimburse the underwriters for their reasonable
out-of-pocket expenses incurred in connection with their
engagement as underwriters, including, without limitation, “road
show” expenses and legal fees up to a maximum aggregate amount of
$100,000 if this offering is consummated. In addition to the
foregoing, we will also reimburse the underwriters for background
checks on our senior management in an amount not to exceed $7,500.
We have paid a $25,000 advance to Benchmark, which
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shall be applied against actual out-of-pocket-accountable expenses, which will be
returned to us to the extent such out-of-pocket accountable expenses are not
actually incurred in accordance with FINRA Rule 5110(f)(2)(C).
We will also pay to Benchmark by deduction from the net proceeds of
this offering, a non-accountable
expense allowance equal to 1.0% of the gross proceeds received by
us from the sale of the Series A Preferred Stock, including
any Series A Preferred Stock that may be issued pursuant to
the exercise of the underwriters’ over-allotment option.
Over-Allotment
Option
We have granted to the underwriters an option, exercisable for
30 days from the date of this prospectus supplement, to
purchase up
to additional
shares of Series A Preferred Stock at the public offering
price listed on the cover page of this prospectus supplement, less
underwriting discounts and commissions. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase about the same percentage of the
additional Series A Preferred Stock as the number listed next
to the underwriter’s name in the preceding table bears to the total
number of Series A Preferred Stock listed next to the names of
all underwriters in the preceding table.
Right of First
Refusal
Subject to the closing of this offering, until twelve months
from the closing date of this offering, Benchmark shall have a
right of first refusal to act as our sole book-running manager for each and every future
issuance of shares of Series A Preferred Stock, for us, or any
of our successors or subsidiaries, on terms customary to Benchmark
during such twelve month period.
Indemnification
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act or to
contribute to payments the underwriters may be required to make in
respect of any of those liabilities.
Price Stabilization; Short
Positions and Penalty Bids
In order to facilitate the offering of the Series A Preferred
Stock, the underwriters may engage in transactions that stabilize,
maintain or otherwise affect the price of the Series A
Preferred Stock. Specifically, the underwriters may sell more
shares than they are obligated to purchase under the underwriting
agreement, creating a short position. A short sale is covered if
the short position is no greater than the number of shares
available for purchase by the underwriters under the
over-allotment option to purchase
additional shares. The underwriters can close out a covered short
sale by exercising the over-allotment
option or purchasing shares in the open market. In determining the
source of shares to close out a covered short sale, the
underwriters will consider, among other things, the open market
price of shares compared to the price available under the option.
The underwriters may also sell shares in excess of the option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open market. A
naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on
the price of the Series A Preferred Stock in the open market
after pricing that could adversely affect investors who purchase in
this offering. The underwriters may also impose a penalty bid. This
occurs when a particular underwriter repays to the representative a
portion of the underwriting discount received by it because the
representative has repurchased shares sold by or for the account of
that underwriter in stabilizing or short covering transactions.
These stabilizing transactions, short sales, purchases to cover
positions created by short sales, the imposition of penalty bids
and syndicate covering transactions may have the effect of raising
or maintaining the market price of our Series A Preferred
Stock or preventing or retarding a decline in the price of our
Series A Preferred Stock. As a result of these activities, the
price thereof may be higher than otherwise might exist in the open
market. Neither we nor the underwriters make any representation
that the underwriters will engage in these transactions, or make
any representation with respect to the effect of any such
transactions. As an additional means of facilitating this offering,
the underwriters may bid for, and purchase, Series A Preferred
Stock in the open market to stabilize the price of the
Series A Preferred Stock. These activities may raise or
maintain the market price of the Series A Preferred Stock
above independent market levels or prevent or retard a decline in
the market price of the Series A Preferred Stock. The
underwriters are not required to engage in these activities and may
end any of these activities at any time.
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Electronic
Distribution
A prospectus supplement and accompanying base prospectus in
electronic format may be made available on the Internet sites or
through other online services maintained by the underwriters
participating in this offering, or by their affiliates. In those
cases, prospective investors may view offering terms online and,
depending upon the particular underwriter, prospective investors
may be allowed to place orders online. The underwriters may agree
with us to allocate a specific number of shares of Series A
Preferred Stock for sale to online brokerage account holders. Any
such allocation for online distributions will be made by the
underwriters on the same basis as other allocations. Other than the
prospectus supplement and accompanying base prospectus in
electronic format, the information on any underwriter’s website and
any information contained in any other website maintained by an
underwriter is not part of the prospectus or the registration
statement of which this prospectus forms a part, has not been
approved and/or endorsed by us or any underwriter in its capacity
as underwriter and should not be relied upon by investors.
Conflicts of
Interest
From time to time, the underwriters and/or their affiliates have
provided, and may in the future provide, various investment banking
and other financial services for us for which services it has
received and, may in the future receive, customary fees. Except for
the services provided in connection with this offering, the
underwriters have not provided any investment banking or other
financial services during the 180-day
period preceding the date of this prospectus.
Listing
Prior to the Series A Preferred Stock offering, there has been
no public market for the Series A Preferred Stock. We have
applied to list the Series A Preferred Stock on The Nasdaq
Capital Market under the symbol “COMSP.” If the application is
approved, we expect trading of the Series A Preferred Stock on
The Nasdaq Capital Market to begin on the date the Series A
Preferred Stock is first issued.
Transfer Agent
The transfer agent for our Series A Preferred Stock to be
issued in this offering is ClearTrust, LLC located at 16540 Pointe
Village Dr., Suite 210, Lutz, FL 33558.
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LEGAL MATTERS
Certain legal matters relating to this offering, including certain
tax matters, will be passed upon for us by Pryor Cashman LLP,
New York, New York. Certain legal matters of Nevada law,
including the validity of the shares of Series A Preferred
Stock to be issued by us and offered hereby, will be passed upon
for us by Flangas Law Group, Las Vegas, Nevada. Certain legal
matters relating to this offering will be passed upon for the
underwriters by Sheppard, Mullin, Richter & Hampton, LLP,
New York, New York.
EXPERTS
The financial statements incorporated by reference into this
prospectus supplement as of December 31, 2020 and 2019 and for
the year ended December 31, 2020 and the period
January 10, 2019 (inception) through December 31, 2019
have been audited by Haskell & White LLP, an independent
registered public accounting firm, to the extent and for the
periods set forth in their report incorporated by reference herein
and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE
INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. These filings are available to
the public at the SEC’s website at www.sec.gov.
This prospectus supplement is part of a registration statement on
Form S-3 that we have filed with
the SEC under the Securities Act. This prospectus supplement does
not contain all of the information in the registration statement.
We have omitted certain parts of the registration statement, as
permitted by the rules and regulations of the SEC. You may
view and print copies of the registration statement, including
exhibits, at the SEC’s website at www.sec.gov.
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INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the information we
file with them into this prospectus supplement. This means that we
can disclose important information about us and our financial
condition to you by referring you to another document filed
separately with the SEC instead of having to repeat the information
in this prospectus supplement. The information incorporated by
reference is considered to be part of this prospectus supplement
and later information that we file with the SEC will automatically
update and supersede this information. This prospectus supplement
incorporates by reference any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the
Exchange Act, between the date of the initial registration
statement and prior to effectiveness of the registration statement
and the documents listed below that we have previously filed with
the SEC:
• our
Annual Report on
Form 10-K for the year ended
December 31, 2020 filed with the
SEC on March 30, 2021;
• our
Quarterly Reports on Form 10-Q
for the quarters ended March 31,
2021 and June 30, 2021 filed with
the SEC on
May 17, 2021 and
August 16, 2021,
respectively;
• our
Current Reports on Form 8-K,
filed with the SEC on
January 27, 2021,
February 4, 2021,
February 16, 2021,
February 23, 2021,
March 1, 2021,
April 6, 2021,
April 22, 2021,
June 3, 2021,
June 8, 2021,
June 28, 2021,
June 30, 2021,
August 20, 2021 and
August 30, 2021 (other than
portions of those documents furnished or not otherwise deemed to be
filed);
• our
definitive Proxy Statement on Schedule 14A for
our 2021 Annual Meeting of Stockholders filed with the SEC on
April 30, 2021;
• the
description of our common stock contained in the registration
statement on
Form 8-A/A, filed with the
SEC on December 22, 2020, and any
other amendment or report filed for the purpose of updating such
description; and
• the
description of our Series A Preferred Stock contained in the
registration statement on Form 8-A filed with the SEC
on ,
2021.
We also incorporate by reference all documents that we file with
the SEC on or after the date of this prospectus supplement pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
and prior to the sale of all the securities offered hereby. Nothing
in this prospectus supplement shall be deemed to incorporate
information furnished but not filed with the SEC.
You may request a copy of the filings incorporated herein by
reference, including exhibits to such documents that are
specifically incorporated by reference, at no cost, by writing or
calling us at the following address or telephone number:
COMSovereign Holding Corp.
5000 Quorum Drive, Suite 400
Dallas, TX 75254
(469) 930-2661
Attention: Kevin Sherlock, Esq.
Corporate Secretary
Statements contained in this prospectus supplement or the
accompanying prospectus as to the contents of any contract or other
documents are not necessarily complete, and in each instance you
are referred to the copy of the contract or other document filed as
an exhibit to the registration statement or incorporated herein or
therein, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto.
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ComSovereign Holding Corp.
$65,000,000
Common
Stock
Preferred Stock
Debt Securities
Warrants
Rights
Units
We may offer from time to time shares of our common stock,
preferred stock, senior debt securities (which may be convertible
into or exchangeable for common stock), subordinated debt
securities (which may be convertible into or exchangeable for
common stock), warrants, rights and units that include any of these
securities. The aggregate initial offering price of the securities
sold under this prospectus will not exceed $65,000,000. We will
offer the securities in amounts, at prices and on terms to be
determined at the time of the offering.
Each time we sell securities hereunder, we will attach a supplement
to this prospectus that contains specific information about the
terms of the offering, including the price at which we are offering
the securities to the public. The prospectus supplement may also
add, update or change information contained or incorporated in this
prospectus. We may also authorize one or more free writing
prospectuses to be provided to you in connection with these
offerings. You should read this prospectus, the information
incorporated by reference in this prospectus, the applicable
prospectus supplement and any applicable free writing prospectus
carefully before you invest in our securities.
The securities hereunder may be offered directly by us, through
agents designated from time to time by us or to or through
underwriters or dealers. If any agents, dealers or underwriters are
involved in the sale of any securities, their names, and any
applicable purchase price, fee, commission or discount arrangement
between or among them will be set forth, or will be calculable from
the information set forth, in the applicable prospectus supplement.
See the section entitled “About This Prospectus” for more
information.
Our common stock and certain of our outstanding warrants are listed
on the NASDAQ Capital Market under the symbols COMS and COMSW,
respectively.
Investing in securities
involves certain risks. See “Risk Factors” beginning on page 6
of this prospectus and in the applicable prospectus supplement, as
updated in our future filings made with the Securities and Exchange
Commission that are incorporated by reference into this prospectus.
You should carefully read and consider these risk factors before
you invest in our securities.
Neither the Securities and
Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
The date of this prospectus is September 14, 2021.
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The distribution of this prospectus may be restricted by law in
certain jurisdictions. You should inform yourself about and observe
any of these restrictions. If you are in a jurisdiction where
offers to sell, or solicitations of offers to purchase, the
securities offered by this document are unlawful, or if you are a
person to whom it is unlawful to direct these types of activities,
then the offer presented in this prospectus does not extend to
you.
We have not authorized anyone to give any information or make any
representation about us that is different from, or in addition to,
that contained in this prospectus, including in any of the
materials that we have incorporated by reference into this
prospectus, any accompanying prospectus supplement, and any free
writing prospectus prepared or authorized by us. Therefore, if
anyone does give you information of this sort, you should not rely
on it as authorized by us. You should rely only on the information
contained or incorporated by reference in this prospectus and any
accompanying prospectus supplement.
You
should not assume that the information contained in this prospectus
and any accompanying supplement to this prospectus is accurate on
any date subsequent to the date set forth on the front of the
document or that any information we have incorporated by reference
is correct on any date subsequent to the date of the document
incorporated by reference, even though this prospectus and any
accompanying supplement to this prospectus is delivered or
securities are sold on a later date. Neither the delivery of this
prospectus, nor any sale made hereunder, shall under any
circumstances create any implication that there has been no change
in our affairs since the date hereof or that the information
incorporated by reference herein is correct as of any time
subsequent to the date of such information.
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ABOUT THIS
PROSPECTUS
This prospectus is part of a registration statement on
Form S-3 we filed with the
Securities and Exchange Commission, or the SEC, using a “shelf”
registration process. Under this shelf registration process, we
may, from time to time, offer and sell any combination of the
securities described in this prospectus in one or more offerings.
The aggregate initial offering price of all securities sold under
this prospectus will not exceed $65,000,000.
This prospectus provides certain general information about the
securities that we may offer hereunder. Each time we sell
securities, we will provide a prospectus supplement that will
contain specific information about the terms of the offering and
the offered securities. We may also authorize one or more free
writing prospectuses to be provided to you that may contain
material information relating to these offerings. In each
prospectus supplement, we will include the following
information:
• the
number and type of securities that we propose to sell;
• the
public offering price;
• the
names of any underwriters, agents or dealers through or to which
the securities will be sold;
• any
compensation of those underwriters, agents or dealers;
• any
additional risk factors applicable to the securities or our
business and operations; and
• any
other material information about the offering and sale of the
securities.
In addition, the prospectus supplement or free writing prospectus
may also add, update or change the information contained in this
prospectus or in documents incorporated by reference in this
prospectus. The prospectus supplement or free writing prospectus
will supersede this prospectus to the extent it contains
information that is different from, or that conflicts with, the
information contained in this prospectus or incorporated by
reference in this prospectus. You should read and consider all
information contained in this prospectus, any accompanying
prospectus supplement and any free writing prospectus that we have
authorized for use in connection with a specific offering, in
making your investment decision. You should also read and
consider the information contained in the documents identified
under the heading “Incorporation of Certain Documents by Reference”
and “Where You Can Find More Information” in this
prospectus.
Unless the context otherwise requires, the terms “the Company,”
“we,” “us,” and “our” in this prospectus each refer to COMSovereign
Holding Corp., our subsidiaries and our consolidated entities.
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FORWARD-LOOKING
STATEMENTS
Some of the statements contained or incorporated by reference in
this prospectus may be “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the
Exchange Act and may involve material risks, assumptions and
uncertainties. Forward-looking
statements typically are identified by the use of terms such as
“may,” “will,” “should,” “believe,” “might,” “expect,”
“anticipate,” “intend,” “plan,” “estimate” and similar words,
although some forward-looking
statements are expressed differently.
Although we believe that the expectations reflected in such
forward-looking statements are
reasonable, these statements are not guarantees of future
performance and involve certain risks and uncertainties that are
difficult to predict and which may cause actual outcomes and
results to differ materially from what is expressed or forecasted
in such forward-looking statements.
These forward-looking statements speak
only as of the date on which they are made and except as required
by law, we undertake no obligation to publicly release the results
of any revision or update of these forward-looking statements, whether as a result of new
information, future events or otherwise. If we do update or correct
one or more forward-looking
statements, you should not conclude that we will make additional
updates or corrections with respect thereto or with respect to
other forward-looking statements. A
detailed discussion of risks and uncertainties that could cause
actual results and events to differ materially from our
forward-looking statements is included
in our periodic reports filed with the SEC and in the “Risk
Factors” section of this prospectus.
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THE COMPANY
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 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 roll out of the 5G and “next-Generation” (“nG”) networks of the future. We
focus on novel 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.
We provide the following categories of product offerings and
solutions to our customers:
• Telecom and Network
Products and Solutions. We design,
develop, market and sell technologically-advanced products for telecom network operators,
mobile device carriers and other enterprises, including the
following:
• Backhaul Telecom
Radios. We offer a line of
high-capacity packet microwave
solutions that drive next-generation
IP networks. Our carrier-grade
point-to-point packet microwave systems transmit broadband
voice, video and data. Our solutions enable service providers,
government agencies, enterprises and other organizations to meet
their increasing bandwidth requirements rapidly and affordably. The
principal application of our product portfolio is wireless network
transport, including a range of products ideally suited to support
the emergence of underlying small cell networks. Additional
solutions include leased-line
replacement, last mile fiber extension and enterprise networks.
• In-Band
Full-Duplex
Technologies. We
have developed proprietary wireless transmission technologies that
alleviate the performance limitations of the principal transmission
technologies used by most networks today. Time Division Duplex
(TDD) transmission technology used by many communications systems
utilizes a single channel for transmission of data alternating
between downlink or uplink, which limits capacity/throughput.
Frequency Division Duplex (FDD) technologies in the marketplace
today use two independent channels for downlink and uplink but
require twice the spectrum. Neither TDD nor FDD can simultaneously
transmit and receive on a single channel — a limitation
that network advancements and 5G will require for optimal
performance. In late 2021, we intend to commence marketplace
demonstrations of products incorporating our proprietary
In-Band Full-Duplex technologies that simultaneously transmit
and receive data on a single channel, which resolves the limitation
of current TDD and FDD transmissions by increasing network
performance and doubling spectrum efficiency. We intend to begin
commercializing this technology in the first half of 2022.
• Edge Compute Capable
Small Cell 4G LTE and 5G Access
Radios. We offer Citizens Broadband
Radio Service (CBRS) frequency and other small cell radios that are
designed to connect to other access radios or to connect directly
to mobile devices such as mobile phones and other IoT devices.
Recently, we developed the world’s first fully-virtualized 5G core network on a microcomputer
the size of a credit card, enabling, for the first time, the
ability to have the 5G network collocated on the network edge with
the small cell communicating with the devices themselves. The small
cells support edge-based application
hosting and enable third-party service
integration.
• Intelligent Batteries
and Back-Up
Power
Solutions. We are developing for the
telecom industry a full line of environmentally-friendly, non-volatile advanced intelligent lithium-ion batteries and back-up power units that charge quickly, have a life
span approximately five times longer than
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conventional lead-acid batteries, and
can be monitored remotely. We are also currently offering and
developing models that provide power for a wide range of
applications, including cellular towers and other radio access
network (RAN) infrastructures, automobiles, boats, spacecraft and
other vehicles.
• Tethered Drones and
Aerostats. We design, manufacture,
sell and provide logistical services for specialized tethered
aerial monitoring and communications platforms serving national
defense and security customers for use in applications such as
intelligence, surveillance and reconnaissance (“ISR”) and
communications. We focus primarily on a suite of tethered aerostats
known as the Winch Aerostat Small Platform (“WASP”), which are
principally designed for military and security applications and
provide secure and reliable aerial monitoring for extended
durations while being tethered to the ground via a high-strength armored tether. Our recently-acquired 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 are also developing processes that we believe will significantly
advance the state-of-the-art in silicon
photonic (SiP) devices for use in advanced data interconnects,
communication networks and computing systems. We believe our novel
approach will allow us to overcome the limitations of current SiP
modulators, dramatically increase computing bandwidth and reduce
drive power while offering lower operating costs.
Our engineering and management teams have extensive experience in
optical systems and networking, digital signal processing,
large-scale application-specific integrated circuit (ASIC) design and
verification, SiP design and integration, system software
development, hardware design, high-speed electronics design and network planning,
installation, maintenance and servicing. We believe this broad
expertise in a wide range of advanced technologies, methodologies
and processes enhances our innovation, design and development
capabilities, and has enabled us, and we believe will continue to
enable us, to develop and introduce future-generation communications and computing
technologies. In the course of our product development cycles, we
engage with our customers as they design their current and
next-generation network equipment in
order to gauge current and future market needs.
Our more than 700 customers include a majority of the leading
global telecommunication operators, as well as many data center
managers and leading multi-system
operators (MSOs), and hundreds of enterprise customers, including
many Fortune 500 companies. We have long-standing, direct relationships with our customers
and serve them through a direct sales force and a global network of
channel partners.
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. On November 27, 2019, we completed the
acquisition of ComSovereign Corp. (“ComSovereign”) in a
stock-for-stock transaction with a total purchase price of
approximately $75 million (the “ComSovereign Acquisition”).
ComSovereign had been formed in January 2019 and, prior to its
acquisition by our company, had completed five acquisitions of
companies with unique products in development for, or then being
marketed to, the telecommunications market. As a result of our
acquisitions, our company is comprised of the following principal
operating units, each of which was acquired to address a different
opportunity or sector of the North American telecom infrastructure
and service market. Our subsidiary holdings are held in three
division, Telecoms, Drone, and Power.
Our Telecoms Division 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.
DragonWave was acquired by ComSovereign in April 2019 prior to
the ComSovereign Acquisition.
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• Virtual Network
Communications Inc. Virtual Network
Communications 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.
• 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. ComSovereign acquired Silver
Bullet in March 2019 prior to the ComSovereign
Acquisition.
• 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. ComSovereign acquired
Lextrum in April 2019 prior to the ComSovereign
Acquisition.
• 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.
• 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.
ComSovereign acquired VEO in January 2019 prior to the
ComSovereign Acquisition.
• RF
Engineering & Energy Resource,
LLC. RF Engineering & Energy
Resource, LLC (“RF Engineering”) is a Michigan-based provider of high-quality microwave antennas and accessories. By
providing one of the industry’s lowest cost of ownership, RF
Engineering has continued to innovate and expand, and it recently
announced 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.
Our Drone Division is comprised of the following principal
operating units:
• 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.
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• 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.
• 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.
Our Power Division is comprised of the following principal
operating units:
• 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. ComSovereign acquired
InduraPower in January 2019 prior to the ComSovereign
Acquisition.
• 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.
Risks Associated With Our
Business
Our ability to execute our business strategy is subject to numerous
risks, as more fully described in the section captioned “Risk
Factors” immediately following this prospectus summary. You should
read these risks before you invest in our common stock. In
particular, risks associated with our business include, but are not
limited to, the following:
• Since
our recent acquisition of ComSovereign in November 2019, we
lack an established operating history on which to evaluate our
consolidated business and determine if we will be able to execute
our business plan, and we can give no assurance that our operations
will result in profits.
• We
incurred net losses in our fiscal years ended
December 31, 2020 and 2019 with
negative cash flows, and we cannot assure you as to when, or if, we
will become profitable and generate positive cash flows.
• We
expect to continue to incur losses from operations and negative
cash flows, which raise substantial doubt about our ability to
continue as a going concern.
• We
may not generate sufficient cash flows to cover our operating
expenses.
• We
have significant debt and if we are unable to repay our debt when
it becomes due, our business, financial condition and results of
operations could be materially harmed.
• If
we are unable to obtain additional funding when needed, our
business operations will be harmed, and if we do obtain additional
financing, our then-existing
stockholders may suffer substantial dilution.
• Raising
capital in the future could cause dilution to our existing
stockholders and may restrict our operations or require us to
relinquish rights.
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• The
COVID-19 pandemic may negatively
affect our operations depending on the severity and longevity of
the pandemic.
• Rapid
technological change in our market and/or changes in customer
requirements could cause our products to become obsolete or require
us to redesign our products, which would have a material adverse
effect on our business, operating results and financial
condition.
• Product
development is a long, expensive and uncertain process, and our
failure to develop marketable products in our various markets could
adversely affect our business, prospects and financial
condition.
• We
compete with companies that have significantly more resources for
their research and development efforts than we have or have
received government contracts for the development of new
products.
• Product
quality problems, defects, errors or vulnerabilities in our
products could harm our reputation and adversely affect our
business, financial condition, results of operations and
prospects.
• If
sufficient radio spectrum is not allocated for use by our products
or if we fail to obtain regulatory approval for our products, our
ability to market our products may be restricted.
• If
critical components or raw materials used to manufacture our
products become scarce or unavailable, then we may incur delays in
manufacturing and delivery of our products, which could damage our
business.
Our
Corporate Information
We were incorporated as Drone Aviation Holding Corp. in the State
of Nevada on April 17, 2014. An amendment to our Articles of
Incorporation changing our name to COMSovereign Holding Corp. was
effected on November 30, 2019. Our principal executive offices
are located at 5000 Quorum Drive, Suite 400, Dallas,
Texas 75254, and our telephone number is
(469) 930-2661. Our website
address is www.COMSovereign.com,
and many of our subsidiaries also have their own websites linked to
and that may be accessed from our principal corporate website.
Information on our website and on that of our subsidiaries is not
part of this prospectus.
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RISK FACTORS
An investment in our securities involves a high degree of risk.
Before making any investment decision, you should carefully
consider the risk factors set forth below, the information under
the caption “Risk Factors” in any applicable prospectus supplement,
any related free writing prospectus that we may authorize to be
provided to you and the information under the caption “Risk
Factors” in our annual report on Form 10-K and quarterly reports on
Form 10-Q that are incorporated
by reference into this prospectus, as updated by our subsequent
filings under the Securities Exchange Act of 1934,
as amended, or the Exchange Act.
These risks could materially affect our business, results of
operations or financial condition and affect the value of our
securities. Additional risks and uncertainties that are not yet
identified may also materially harm our business, operating results
and financial condition and could result in a complete loss of your
investment. You could lose all or part of your investment. For more
information, see “Where You Can Find More Information.”
Risks Related to Our
Securities and the Offering
Future sales or other
dilution of our equity could depress the market price of our common
stock.
Sales of our common stock, preferred stock, warrants, rights or
convertible debt securities, or any combination of the foregoing,
in the public market, or the perception that such sales could
occur, could negatively impact the price of our common stock.
In addition, the issuance of additional shares of our common stock,
securities convertible into or exercisable for our common stock,
other equity-linked securities,
including preferred stock, warrants or rights or any combination of
these securities pursuant to this prospectus will dilute the
ownership interest of our common shareholders and could depress the
market price of our common stock and impair our ability to raise
capital through the sale of additional equity securities.
We may need to seek additional capital. If this additional
financing is obtained through the issuance of equity securities,
debt securities convertible into equity or options, warrants or
rights to acquire equity securities, our existing shareholders
could experience significant dilution upon the issuance, conversion
or exercise of such securities.
Our management will have
broad discretion over the use of the proceeds we receive from the
sale our securities pursuant to this prospectus and might not apply
the proceeds in ways that increase the value of your
investment.
Our management will have broad discretion to use the net proceeds
from any offerings under this prospectus, and you will be relying
on the judgment of our management regarding the application of
these proceeds. Except as described in any prospectus supplement or
in any related free writing prospectus that we may authorize to be
provided to you, the net proceeds received by us from our sale of
the securities described in this prospectus will be added to our
general funds and will be used for general corporate purposes. Our
management might not apply the net proceeds from offerings of our
securities in ways that increase the value of your investment and
might not be able to yield a significant return, if any, on any
investment of such net proceeds. You may not have the opportunity
to influence our decisions on how to use such proceeds.
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USE OF PROCEEDS
Except as may be stated in the applicable prospectus supplement and
any related free writing prospectus that we may authorize to be
provided to you, we intend to use the net proceeds we receive from
the sale of the securities offered by this prospectus for general
corporate purposes, which may include, among other things,
repayment of debt, repurchases of common stock, capital
expenditures, the financing of possible acquisitions or business
expansions, increasing our working capital and the financing of
ongoing operating expenses and overhead.
DESCRIPTION OF CAPITAL
STOCK
The following is a summary of our capital stock and certain
provisions of our certificate of incorporation and bylaws. This
summary does not purport to be complete and is qualified in its
entirety by the provisions of our articles of incorporation, as
amended, our bylaws and applicable provisions of the Nevada Revised
Statutes or the NRS.
See “Where You Can Find More Information” elsewhere in this
prospectus for information on where you can obtain copies of our
articles of incorporation and our bylaws, which have been filed
with and are publicly available from the SEC. Our authorized
capital stock consists of 300,000,000 shares of common stock, par
value $0.0001 per share, and 100,000,000 shares of preferred stock,
par value $0.0001 per share.
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DESCRIPTION OF COMMON
STOCK
As of September 1, 2021, there were 72,533,850 shares of our
common stock issued outstanding held by approximately 320
stockholders of record.
General
The following summary of certain provisions of our common stock
does not purport to be complete. This description is summarized
from, and is qualified in its entirety by reference to, our amended
and restated articles of incorporation and our amended and restated
bylaws, to which you should refer and both of which are included as
exhibits to the registration statement of which this prospectus is
a part. The summary below is also qualified by provisions of
applicable law, including Chapters 78 and 92A of the Nevada Revised
Statutes (the “NRS”), as applicable to corporations.
Voting, Dividend and Other
Rights. Each outstanding share of
common stock entitles the holder to one vote on all matters
presented to the shareholders for a vote. Holders of shares of
common stock have no cumulative voting, pre-emptive, subscription or conversion rights. All
shares of common stock to be issued pursuant to this registration
statement will be duly authorized, fully paid and non-assessable. Our board of directors determines if
and when distributions may be paid out of legally available funds
to the holders. To date, we have not declared any dividends with
respect to our common stock. Our declaration of any cash dividends
in the future will depend on our board of directors’ determination
as to whether, in light of our earnings, financial position, cash
requirements and other relevant factors existing at the time, it
appears advisable to do so. We do not anticipate paying cash
dividends on the common stock in the foreseeable future.
Rights Upon
Liquidation. Upon liquidation,
subject to the right of any holders of the preferred stock to
receive preferential distributions, each outstanding share of
common stock may participate pro rata in the assets remaining after
payment of, or adequate provision for, all our known debts and
liabilities.
Majority
Voting. The holders of a majority of
the outstanding shares of common stock constitute a quorum at any
meeting of the shareholders. A plurality of the votes cast at a
meeting of shareholders elects our directors. The common stock does
not have cumulative voting rights. Therefore, the holders of a
majority of the outstanding shares of common stock can elect all of
our directors. In general, a majority of the votes cast at a
meeting of shareholders must authorize shareholder actions other
than the election of directors. Most amendments to our articles of
incorporation require the vote of the holders of a majority of all
outstanding voting shares.
All issued and outstanding shares of common stock are fully paid
and nonassessable. Shares of our common stock that may be offered,
from time to time, under this prospectus will be fully paid and
nonassessable.
Transfer Agent and
Registrar
The transfer agent and registrar for our common stock is
ClearTrust, LLC. ClearTrust, LLC’s address is 16540 Pointe
Village Drive, Suite 210, Lutz, FL 33558 and its telephone
number is (813) 235-4490.
Stock Exchange
Listing
Our common stock is listed for quotation on the Nasdaq Capital
Market under the symbol “COMS.”
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DESCRIPTION OF PREFERRED
STOCK
As of September 1, 2021, no shares of preferred stock had been
issued or were outstanding.
The following summary of certain provisions of our preferred stock
does not purport to be complete. This description is summarized
from, and is qualified in its entirety by reference to, our amended
and restated articles of incorporation and our amended and restated
bylaws, to which you should refer and both of which are included as
exhibits to the registration statement of which this prospectus is
a part. The summary below is also qualified by provisions of
applicable law, including Chapters 78 and 92A of the NRS as
applicable to corporations.
General
Our board of directors has the authority to issue up to 100,000,000
shares of preferred stock in one or more series and to determine
the rights and preferences of the shares of any such series without
stockholder approval. Our board of directors may issue preferred
stock in one or more series and has the authority to fix the
designation and powers, rights and preferences and the
qualifications, limitations or restrictions with respect to each
class or series of such class without further vote or action by the
stockholders, unless action is required by applicable law or the
rules of any stock exchange on which our securities may be listed.
The ability of our board of directors to issue preferred stock
without stockholder approval could have the effect of delaying,
deferring or preventing a change of control of us or the removal of
existing management. Further, our board of director may authorize
the issuance of preferred stock with voting or conversion rights
that could adversely affect the voting power or other rights of the
holders of our common stock. Additionally, the issuance of
preferred stock may have the effect of decreasing the market price
of our common stock.
We will file as an exhibit to the registration statement of which
this prospectus is a part, or will incorporate by reference from
reports that we file with the SEC, the form of any certificate of
designation that describes the terms of the series of preferred
stock we are offering before the issuance of that series of
preferred stock. This description will include, but not be limited
to, the following:
• the
title and stated value;
• the
number of shares we are offering;
• the
liquidation preference per share;
• the
purchase price;
• the
dividend rate, period and payment date and method of calculation
for dividends;
• whether
dividends will be cumulative or non-cumulative and, if cumulative, the date from
which dividends will accumulate;
• the
provisions for a sinking fund, if any;
• the
provisions for redemption or repurchase, if applicable, and any
restrictions on our ability to exercise those redemption and
repurchase rights;
• whether
the preferred stock will be convertible into our common stock, and,
if applicable, the conversion price, or how it will be calculated,
and the conversion period;
• whether
the preferred stock will be exchangeable into debt securities, and,
if applicable, the exchange price, or how it will be calculated,
and the exchange period;
• voting
rights, if any, of the preferred stock;
• preemptive
rights, if any;
• restrictions
on transfer, sale or other assignment, if any;
• a
discussion of any material United States federal income tax
considerations applicable to the preferred stock;
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• the
relative ranking and preferences of the preferred stock as to
dividend rights and rights if we liquidate, dissolve or wind up our
affairs;
• any
limitations on the issuance of any class or series of preferred
stock ranking senior to or on a parity with the series of preferred
stock as to dividend rights and rights if we liquidate, dissolve or
wind up our affairs; and
• any
other specific terms, preferences, rights or limitations of, or
restrictions on, the preferred stock.
Transfer Agent and
Registrar
The transfer agent and registrar for our preferred stock will be
set forth in the applicable prospectus supplement.
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DESCRIPTION OF DEBT
SECURITIES
General
We may issue debt securities, in one or more series, as either
senior or subordinated debt or as senior or subordinated
convertible debt. When we offer to sell debt securities, we will
describe the specific terms of any debt securities offered from
time to time in a supplement to this prospectus, which may
supplement or change the terms outlined below. Senior debt
securities will be issued under one or more senior indentures,
dated as of a date prior to such issuance, between us and a trustee
to be named in a prospectus supplement, as amended or supplemented
from time to time. Any subordinated debt securities will be issued
under one or more subordinated indentures, dated as of a date prior
to such issuance, between us and a trustee to be named in a
prospectus supplement, as amended or supplemented from time to
time. The indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended.
Before we issue any debt securities, the form of indentures will be
filed with the SEC and incorporated by reference as an exhibit to
the registration statement of which this prospectus is a part or as
an exhibit to a current report on Form 8-K. For the complete terms of the debt
securities, you should refer to the applicable prospectus
supplement and the form of indentures for those particular debt
securities. We encourage you to read the applicable prospectus
supplement and the form of indenture for those particular debt
securities before you purchase any of our debt securities.
We will describe in the applicable prospectus supplement the terms
of the series of debt securities being offered, including:
• the
title;
• whether
or not such debt securities are guaranteed;
• the
principal amount being offered, and if a series, the total amount
authorized and the total amount outstanding;
• any
limit on the amount that may be issued;
• whether
or not we will issue the series of debt securities in global form,
the terms and who the depositary will be;
• the
maturity date;
• the
annual interest rate, which may be fixed or variable, or the method
for determining the rate and the date interest will begin to
accrue, the dates interest will be payable and the regular record
dates for interest payment dates or the method for determining such
dates;
• whether
or not the debt securities will be secured or unsecured, and the
terms of any secured debt;
• the
terms of the subordination of any series of subordinated debt;
• the
place where payments will be payable;
• restrictions
on transfer, sale or other assignment, if any;
• our
right, if any, to defer payment of interest and the maximum length
of any such deferral period;
• the
date, if any, after which, and the price at which, we may, at our
option, redeem the series of debt securities pursuant to any
optional or provisional redemption provisions and the terms of
those redemption provisions;
• the
date, if any, on which, and the price at which we are obligated,
pursuant to any mandatory sinking fund or analogous fund provisions
or otherwise, to redeem, or at the holder’s option to purchase, the
series of debt securities and the currency or currency unit in
which the debt securities are payable;
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• any
restrictions our ability and/or the ability of our subsidiaries
to:
• incur
additional indebtedness;
• issue
additional securities;
• create
liens;
• pay
dividends and make distributions in respect of our capital stock
and the capital stock of our subsidiaries;
• redeem
capital stock;
• place
restrictions on our subsidiaries’ ability to pay dividends, make
distributions or transfer assets;
• make
investments or other restricted payments;
• sell
or otherwise dispose of assets;
• enter
into sale-leaseback transactions;
• engage
in transactions with stockholders and affiliates;
• issue
or sell stock of our subsidiaries; or
• effect
a consolidation or merger;
• whether
the indenture will require us to maintain any interest coverage,
fixed charge, cash flow-based,
asset-based or other financial
ratios;
• a
discussion of any material United States federal income tax
considerations applicable to the debt securities;
• information
describing any book-entry
features;
• provisions
for a sinking fund purchase or other analogous fund, if any;
• the
denominations in which we will issue the series of debt
securities;
• the
currency of payment of debt securities if other than
U.S. dollars and the manner of determining the equivalent
amount in U.S. dollars; and
• any
other specific terms, preferences, rights or limitations of, or
restrictions on, the debt securities, including any additional
events of default or covenants provided with respect to the debt
securities, and any terms that may be required by us or advisable
under applicable laws or regulations.
Conversion or Exchange
Rights
We will set forth in the prospectus supplement the terms on which a
series of debt securities may be convertible into or exchangeable
for our common stock or our other securities. We will include
provisions as to whether conversion or exchange is mandatory, at
the option of the holder or at our option. We may include
provisions pursuant to which the number of shares of our common
stock or our other securities that the holders of the series of
debt securities receive would be subject to adjustment.
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DESCRIPTION OF
WARRANTS
We may issue warrants for the purchase of common stock, preferred
stock and/or debt securities in one or more series. We may issue
warrants independently or together with common stock, preferred
stock and/or debt securities, and the warrants may be attached to
or separate from these securities. While the terms summarized below
will apply generally to any warrants that we may offer, we will
describe the particular terms of any series of warrants in more
detail in the applicable prospectus supplement. The terms of any
warrants offered under a prospectus supplement may differ from the
terms described below.
We will file as exhibits to the registration statement of which
this prospectus is a part, or will incorporate by reference from
reports that we file with the SEC, the form of warrant agreement,
including a form of warrant certificate, that describes the terms
of the particular series of warrants we are offering before the
issuance of the related series of warrants. The following summaries
of material provisions of the warrants and the warrant agreements
are subject to, and qualified in their entirety by reference to,
all the provisions of the warrant agreement and warrant certificate
applicable to the particular series of warrants that we may offer
under this prospectus. We urge you to read the applicable
prospectus supplements related to the particular series of warrants
that we may offer under this prospectus, as well as any related
free writing prospectuses, and the complete warrant agreements and
warrant certificates that contain the terms of the warrants.
General
We will describe in the applicable prospectus supplement the terms
of the series of warrants being offered, including:
• the
offering price and aggregate number of warrants offered;
• the
currency for which the warrants may be purchased;
• if
applicable, the designation and terms of the securities with which
the warrants are issued and the number of warrants issued with each
such security or each principal amount of such security;
• if
applicable, the date on and after which the warrants and the
related securities will be separately transferable;
• in
the case of warrants to purchase debt securities, the principal
amount of debt securities purchasable upon exercise of one warrant
and the price at, and currency in which, this principal amount of
debt securities may be purchased upon such exercise;
• in
the case of warrants to purchase common stock or preferred stock,
the number of shares of common stock or preferred stock, as the
case may be, purchasable upon the exercise of one warrant and the
price at which these shares may be purchased upon such
exercise;
• the
effect of any merger, consolidation, sale or other disposition of
our business on the warrant agreements and the warrants;
• the
terms of any rights to redeem or call the warrants;
• any
provisions for changes to or adjustments in the exercise price or
number of securities issuable upon exercise of the warrants;
• the
dates on which the right to exercise the warrants will commence and
expire;
• the
manner in which the warrant agreements and warrants may be
modified;
• a
discussion of any material or special United States federal
income tax consequences of holding or exercising the warrants;
• the
terms of the securities issuable upon exercise of the warrants;
and
• any
other specific terms, preferences, rights or limitations of or
restrictions on the warrants.
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Before exercising their warrants, holders of warrants will not have
any of the rights of holders of the securities purchasable upon
such exercise, including:
• in
the case of warrants to purchase debt securities, the right to
receive payments of principal of, or premium, if any, or interest
on, the debt securities purchasable upon exercise or to enforce
covenants in the applicable indenture; or
• in
the case of warrants to purchase common stock or preferred stock,
the right to receive dividends, if any, or payments upon our
liquidation, dissolution or winding up or to exercise voting
rights, if any.
Exercise of
Warrants
Each warrant will entitle the holder to purchase the securities
that we specify in the applicable prospectus supplement at the
exercise price that we describe in the applicable prospectus
supplement. Holders of the warrants may exercise the warrants at
any time up to the specified time on the expiration date that we
set forth in the applicable prospectus supplement. After the close
of business on the expiration date, unexercised warrants will
become void.
Holders of the warrants may exercise the warrants by delivering the
warrant certificate representing the warrants to be exercised
together with specified information, and paying the required amount
to the warrant agent in immediately available funds, as provided in
the applicable prospectus supplement. We will set forth on the
reverse side of the warrant certificate and in the applicable
prospectus supplement the information that the holder of the
warrant will be required to deliver to the warrant agent.
If any warrants represented by the warrant certificate are not
exercised, we will issue a new warrant certificate for the
remaining amount of warrants. If we so indicate in the applicable
prospectus supplement, holders of the warrants may surrender
securities as all or part of the exercise price for warrants.
Outstanding
Warrants
As of September 1, 2021, we had outstanding warrants that were
exercisable to purchase an aggregate of 11,691,593 shares of common
stock at a weighted average exercise price of $3.8781 per share
that expire between November 9, 2021 and August 25,
2026.
Transfer Agent and
Registrar
The transfer agent and registrar for any warrants will be set forth
in the applicable prospectus supplement.
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DESCRIPTION OF
RIGHTS
General
We may issue rights to purchase our common stock or preferred
stock, in one or more series. Rights may be issued independently or
together with any other offered security and may or may not be
transferable by the person purchasing or receiving the subscription
rights. In connection with any rights offering to our stockholders,
we may enter into a standby underwriting arrangement with one or
more underwriters pursuant to which such underwriters will purchase
any offered securities remaining unsubscribed after such rights
offering. In connection with a rights offering to our stockholders,
we will distribute certificates evidencing the rights and a
prospectus supplement to our stockholders on the record date that
we set for receiving rights in such rights offering. The applicable
prospectus supplement or free writing prospectus will describe the
following terms of rights in respect of which this prospectus is
being delivered:
• the
title of such rights;
• the
securities for which such rights are exercisable;
• the
exercise price for such rights;
• the
date of determining the security holders entitled to the rights
distribution;
• the
number of such rights issued to each security holder;
• the
extent to which such rights are transferable;
• if
applicable, a discussion of the material United States federal
income tax considerations applicable to the issuance or exercise of
such rights;
• the
date on which the right to exercise such rights shall commence, and
the date on which such rights shall expire (subject to any
extension);
• the
conditions to completion of the rights offering;
• any
provisions for changes to or adjustments in the exercise price or
number of securities issuable upon exercise of the rights;
• the
extent to which such rights include an over-subscription privilege with respect to
unsubscribed securities;
• if
applicable, the material terms of any standby underwriting or other
purchase arrangement that we may enter into in connection with the
rights offering; and
• any
other terms of such rights, including terms, procedures and
limitations relating to the exchange and exercise of such
rights.
Each right will entitle the holder thereof the right to purchase
for cash such amount of shares of common stock or preferred stock,
or any combination thereof, at such exercise price as shall in each
case be set forth in, or be determinable as set forth in, the
prospectus supplement relating to the rights offered thereby.
Rights may be exercised at any time up to the close of business on
the expiration date for such rights set forth in the prospectus
supplement. After the close of business on the expiration date, all
unexercised rights will become void. Rights may be exercised as set
forth in the prospectus supplement relating to the rights offered
thereby. Upon receipt of payment and the proper completion and due
execution of the rights certificate at the office of the rights
agent, if any, or any other office indicated in the prospectus
supplement, we will forward, as soon as practicable, the shares of
common stock and/or preferred stock purchasable upon such exercise.
We may determine to offer any unsubscribed offered securities
directly to persons other than stockholders, to or through agents,
underwriters or dealers or through a combination of such methods,
including pursuant to standby underwriting arrangements, as set
forth in the applicable prospectus supplement.
Rights Agent
The rights agent for any rights we offer will be set forth in the
applicable prospectus supplement.
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DESCRIPTION OF
UNITS
The following description, together with the additional information
that we include in any applicable prospectus supplement, summarizes
the material terms and provisions of the units that we may offer
under this prospectus. While the terms we have summarized below
will apply generally to any units that we may offer under this
prospectus, we will describe the particular terms of any series of
units in more detail in the applicable prospectus supplement. The
terms of any units offered under a prospectus supplement may differ
from the terms described below.
We will incorporate by reference from reports that we file with the
SEC, the form of unit agreement that describes the terms of the
series of units we are offering, and any supplemental agreements,
before the issuance of the related series of units. The following
summaries of material terms and provisions of the units are subject
to, and qualified in their entirety by reference to, all the
provisions of the unit agreement and any supplemental agreements
applicable to a particular series of units. We urge you to read the
applicable prospectus supplements related to the particular series
of units that we may offer under this prospectus, as well as any
related free writing prospectuses and the complete unit agreement
and any supplemental agreements that contain the terms of the
units.
General
As specified in the applicable prospectus supplement, we may issue,
in one more series, units consisting of common stock, preferred
stock, debt securities and/or warrants or rights for the purchase
of common stock, preferred stock and/or debt securities in any
combination. The applicable prospectus supplement will
describe:
• the
securities comprising the units, including whether and under what
circumstances the securities comprising the units may be separately
traded;
• the
terms and conditions applicable to the units, including a
description of the terms of any applicable unit agreement governing
the units; and
• a
description of the provisions for the payment, settlement, transfer
or exchange of the units.
The provisions described in this section, as well as those set
forth in any prospectus supplement or as described under
“Description of Common Stock,” “Description of Preferred Stock,”
“Description of Debt Securities,” “Description of Warrants” and
“Description of Rights” will apply to each unit, as applicable, and
to any common stock, preferred stock, debt security, warrant, or
right included in each unit, as applicable.
Unit
Agent
The name and address of the unit agent for any units we offer will
be set forth in the applicable prospectus supplement.
Issuance in Series
We may issue units in such amounts and in such numerous distinct
series as we may determine.
Enforceability of Rights by
Holders of Units
Each unit agent will act solely as our agent under the applicable
unit agreement and will not assume any obligation or relationship
of agency or trust with any holder of any unit. A single bank or
trust company may act as unit agent for more than one series of
units. A unit agent will have no duty or responsibility in case of
any default by us under the applicable unit agreement or unit,
including any duty or responsibility to initiate any proceedings at
law or otherwise, or to make any demand upon us. Any holder of a
unit may, without the consent of the related unit agent or the
holder of any other unit, enforce by appropriate legal action its
rights as holder under any security included in the unit.
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PLAN OF
DISTRIBUTION
The securities covered by this prospectus may be offered and sold
from time to time pursuant to one or more of the following
methods:
• through
agents;
• to
or through underwriters;
• to
or through broker-dealers (acting as
agent or principal);
• in
“at the market offerings” within the meaning of
Rule 415(a)(4) of the Securities Act, to or through a
market maker or into an existing trading market, on an exchange, or
otherwise;
• directly
to purchasers, through a specific bidding or auction process or
otherwise; or
• through
a combination of any such methods of sale.
Agents, underwriters or broker-dealers
may be paid compensation for offering and selling the securities.
That compensation may be in the form of discounts, concessions or
commissions to be received from us, from the purchasers of the
securities or from both us and the purchasers. Any underwriters,
dealers, agents or other investors participating in the
distribution of the securities may be deemed to be “underwriters,”
as that term is defined in the Securities Act, and compensation and
profits received by them on sale of the securities may be deemed to
be underwriting commissions, as that term is defined in the rules
promulgated under the Securities Act.
Each time securities are offered by this prospectus, the prospectus
supplement, if required, will set forth:
• the
name of any underwriter, dealer or agent involved in the offer and
sale of the securities;
• the
terms of the offering;
• any
discounts concessions or commissions and other items constituting
compensation received by the underwriters, broker-dealers or agents;
• any
over-allotment option under which any
underwriters may purchase additional securities from us; and
• any
initial public offering price.
The securities may be sold at a fixed price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices
relating to the prevailing market prices or at negotiated prices.
The distribution of securities may be effected from time to time in
one or more transactions, by means of one or more of the following
transactions, which may include cross or block trades:
• transactions
on the NASDAQ Capital Market or any other organized market where
the securities may be traded;
• in
the over-the-counter market;
• in
negotiated transactions;
• under
delayed delivery contracts or other contractual commitments; or
• a
combination of such methods of sale.
If underwriters are used in a sale, securities will be acquired by
the underwriters for their own account and may be resold from time
to time in one or more transactions. Our securities may be offered
to the public either through underwriting syndicates represented by
one or more managing underwriters or directly by one or more firms
acting as underwriters. If an underwriter or underwriters are used
in the sale of securities, an underwriting agreement will be
executed with the underwriter or underwriters at the time an
agreement for the sale is reached. This prospectus and the
prospectus supplement will be used by the underwriters to resell
the shares of our securities.
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If 5% or more of the net proceeds of any offering of our securities
made under this prospectus will be received by a FINRA member
participating in the offering or affiliates or associated persons
of such FINRA member, the offering will be conducted in accordance
with FINRA Rule 5121.
To comply with the securities laws of certain states, if
applicable, the securities offered by this prospectus will be
offered and sold in those states only through registered or
licensed brokers or dealers.
Agents, underwriters and dealers may be entitled to indemnification
by us against specified liabilities, including liabilities incurred
under the Securities Act, or to contribution by us to payments they
may be required to make in respect of such liabilities. The
prospectus supplement will describe the terms and conditions of
such indemnification or contribution. Some of the agents,
underwriters or dealers, or their respective affiliates, may be
customers of, engage in transactions with or perform services for
us in the ordinary course of business. We will describe in the
prospectus supplement naming the underwriter the nature of any such
relationship.
Certain persons participating in the offering may engage in
over-allotment, stabilizing
transactions, short-covering
transactions and penalty bids in accordance with Regulation M
under the Exchange Act. We make no representation or
prediction as to the direction or magnitude of any effect that such
transactions may have on the price of the securities. For a
description of these activities, see the information under the
heading “Underwriting” in the applicable prospectus supplement.
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LEGAL MATTERS
The validity of the shares of common stock and preferred stock and
certain other matters of Nevada law will be passed upon for us by
Flangas Law Group, Las Vegas, Nevada. Certain matters of
U.S. federal and New York State law will be passed upon
for us by Pryor Cashman LLP, New York, New York.
Additional legal matters may be passed upon for us or any
underwriters, dealers or agents, by counsel that we name in the
applicable prospectus supplement.
EXPERTS
The financial statements incorporated by reference into this
prospectus as of December 31, 2020 and 2019 and for the year
ended December 31, 2020 and the period January 10, 2019
(inception) through December 31, 2019 have been audited by
Haskell & White LLP, an independent registered public
accounting firm, to the extent and for the periods set forth in
their report incorporated by reference herein and are included in
reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
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INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
The SEC allows us to “incorporate by reference” the information we
file with them into this prospectus. This means that we can
disclose important information about us and our financial condition
to you by referring you to another document filed separately with
the SEC instead of having to repeat the information in this
prospectus. The information incorporated by reference is considered
to be part of this prospectus and later information that we file
with the SEC will automatically update and supersede this
information. This prospectus incorporates by reference any future
filings made with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act, between the date of the
initial registration statement and prior to effectiveness of the
registration statement and the documents listed below that we have
previously filed with the SEC:
• our
Annual Report on
Form 10-K for the year ended
December 31, 2020 filed with the
SEC on March 30, 2021;
• our
Quarterly Report on
Form 10-Q for the quarter
ended March 31, 2021 filed with
the SEC on May 17, 2021;
• our
Quarterly Report on
Form 10-Q for the quarter
ended June 30, 2021 filed with
the SEC on August 16, 2021;
• our
Current Reports on Form 8-K,
filed with the SEC on
January 27, 2021,
February 4, 2021,
February 16, 2021,
February 23, 2021,
March 1, 2021,
March 25, 2021,
April 6, 2021,
April 22, 2021,
May 17, 2021,
June 3, 2021,
June 8, 2021,
June 28, 2021,
June 30, 2021,
August 17, 2021,
August 20, 2021 and
August 30, 2021 (other than
portions of those documents furnished or not otherwise deemed to be
filed); and
• the
description of our common stock contained in the registration
statement on
Form 8-A/A, dated
December 22, 2020, File
No. 001-39379, and any other
amendment or report filed for the purpose of updating such
description.
We also incorporate by reference all documents that we file with
the SEC on or after the effective time of this prospectus pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
and prior to the sale of all the securities registered hereunder or
the termination of the registration statement. Nothing in this
prospectus shall be deemed to incorporate information furnished but
not filed with the SEC.
Any statement contained in this prospectus or in a document
incorporated or deemed to be incorporated by reference in this
prospectus shall be deemed to be modified or superseded for
purposes of this prospectus to the extent that a statement
contained herein or in the applicable prospectus supplement or in
any other subsequently filed document that also is or is deemed to
be incorporated by reference modifies or supersedes the statement.
Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this
prospectus.
You may request a copy of the filings incorporated herein by
reference, including exhibits to such documents that are
specifically incorporated by reference, at no cost, by writing or
calling us at the following address or telephone number:
COMSovereign Holding
Corp.
5000 Quorum Drive, Suite 400
Dallas, TX 75254
(469) 930-2661
Attention: Kevin Sherlock, Esq.
Corporate Secretary
Statements contained in this prospectus as to the contents of any
contract or other documents are not necessarily complete, and in
each instance you are referred to the copy of the contract or other
document filed as an exhibit to the registration statement or
incorporated herein, each such statement being qualified in all
respects by such reference and the exhibits and schedules
thereto.
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WHERE YOU CAN FIND MORE
INFORMATION
This prospectus is part of a registration statement on
Form S-3 that we filed with the
SEC registering the securities that may be offered and sold
hereunder. The registration statement, including exhibits thereto,
contains additional relevant information about us and these
securities, as permitted by the rules and regulations of the SEC,
we have not included in this prospectus. A copy of the registration
statement can be obtained at the address set forth below or at the
SEC’s website as noted below. You should read the registration
statement, including any applicable prospectus supplement, for
further information about us and these securities.
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. Our SEC filings are available
to the public over the Internet at the SEC’s website at
http:/www.sec.gov. You may
also read and copy any document we file at the SEC’s public
reference room, 100 F Street, N.E., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference
room. Because our common stock is listed on the NASDAQ Capital
Market, you may also inspect reports, proxy statements and other
information at the offices of the NASDAQ Capital Market.
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COMSovereign
Holding Corp.
Shares
of 9.25% Series A
Cumulative Redeemable Perpetual Preferred Stock
Liquidation Preference $25.00 per Share
_________________________________
Prospectus
Supplement
_________________________________
Benchmark
Company
,
2021