Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File No. 001-39379

COMSOVEREIGN HOLDING CORP.

(Exact name of registrant as specified in its charter)

Nevada		46-5538504
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6890 E Sunrise Drive, Suite 120-506, Tucson, AZ		85750
(Address of principal executive office)		(Zip Code)

(206) 796-0173

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	COMS	The Nasdaq Stock Market LLC
Warrants to purchase Common Stock	COMSW	The Nasdaq Stock Market LLC
9.25% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share	COMSP	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of January 8, 2024, there were 2,695,238 shares of registrant’s common stock outstanding.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	1

	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022.	2

	Condensed Consolidated Statements of Changes in Stockholders’ (Deficiency) Equity for the Three Months Ended March 31, 2023 and 2022.	3

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022.	4 - 5

	Notes to the Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29

Item 4.	Controls and Procedures	29

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Default Upon Senior Securities	31

Item 4.	Mine Safety Disclosures	32

Item 5.	Other Information	32

Item 6.	Exhibits	32

	Signatures	33

PART I. FINANCIAL INFORMATION

ITEM 1: Financial Statements

COMSOVEREIGN HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
(Amounts in thousands, except share and per share data)	2023			2022
	(unaudited)

Assets
Current assets:
Cash	$	3,063		$	1,868
Accounts receivable, net		482			1,126
Inventory, net		4,336			3,966
Prepaid expenses		3,531			3,571
Note and obligation receivable - current		650			650
Other current assets		112			150
Assets held for sale - current		-			651
Total current assets		12,174			11,982
Property and equipment, net		341			377
Operating lease right-of-use assets		87			97
Intangible assets, net		1,197			1,428
Goodwill		6,612			7,310
Note and obligation receivable - long-term		1,950			1,350
Assets held for sale - long-term		-			2,374
Total assets	$	22,361		$	24,918

Liabilities and Stockholders’ Deficiency
Current liabilities:
Accounts payable	$	4,229		$	3,656
Accrued interest		626			477
Accrued liabilities		3,524			3,006
Accrued payroll		2,010			1,758
Contract liabilities - current		4,285			3,232
Accrued warranty liability - current		488			488
Operating lease liabilities - current		1,453			1,321
Note payable - related party		100			100
Debt - current, net of unamortized discounts and debt issuance costs		11,709			11,536
Liabilities held for sale - current		-			2,342
Total current liabilities		28,424			27,916
Debt – long-term		550			1,895
Contract liabilities – long-term		152			152
Operating lease liabilities - long-term		9,672			9,816
Liabilities held for sale - long-term		-			140
Total liabilities		38,798			39,919

Commitments and contingencies (Note 17)
Stockholders’ Deficiency
Preferred stock, $0.0001 par value, 100,000,000 shares authorized; Series A Cumulative Redeemable Perpetual Preferred Stock, 690,000 shares designated, 320,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		-			-
Common stock, $0.0001 par value, 300,000,000 shares authorized; 2,683,571 and 2,381,136 shares issued and 2,683,238 and 2,380,803 shares outstanding as of March 31, 2023 and December 31, 2022, respectively		-			-
Additional paid-in capital		286,076			282,582
Treasury stock, at cost, 333 shares as of March 31, 2023 and December 31, 2022		(50	)		(50	)
Accumulated deficit		(302,486	)		(297,556	)
Accumulated other comprehensive income		23			23
Total Stockholders’ Deficiency		(16,437	)		(15,001	)
Total Liabilities and Stockholders’ Deficiency	$	22,361		$	24,918

The accompanying notes are an integral part of the condensed consolidated financial statements.

COMSOVEREIGN HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended
	March 31,
(Amounts in thousands, except share and per share data)	2023			2022

Revenue	$	483		$	2,053
Cost of goods sold		301			1,483
Gross profit		182			570
Operating expenses (income)
Research and development ⁽¹⁾		57			1,172
Sales and marketing ⁽¹⁾		-			66
General and administrative ⁽¹⁾		2,179			5,780
Depreciation and amortization		69			741
Impairment		896			-
Gain on sale (SKS) ⁽²⁾		(454	)		-
Gain on the sale of assets		-			(8,441	)
Total operating expenses (income), net		2,747			(682	)
(Loss) income from operations		(2,565	)		1,252
Other expense
Interest expense		(419	)		(879	)
Loss on extinguishment of debt		-			(173	)
Loss on inducement of debt conversions		(1,946	)		-
Total other expense		(2,365	)		(1,052	)
(Loss) income from continuing operations		(4,930	)		200
Loss from discontinued operations, net of tax		-			(64	)
Net (loss) income		(4,930	)		136
Dividend on preferred stock		(185	)		(123	)
Net (loss) income attributable to common stockholders	$	(5,115	)	$	13
Net (loss) income per share
- Basic and diluted from continuing operations	$	(1.97	)	$	0.09
- Basic and diluted from discontinued operations	$	-		$	(0.08	)
Weighted average number of common shares outstanding

- Basic and diluted		2,593,028			835,527

⁽¹⁾	These are exclusive of depreciation and amortization
⁽²⁾	Sky Sapience (“SKS”)

The accompanying notes are an integral part of the condensed consolidated financial statements.

COMSOVEREIGN HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIENCY) EQUITY

(unaudited)

	FOR THE THREE MONTHS ENDED MARCH 31, 2023
												Accumulated
									Additional			Other										Total
	Preferred Stock				Common Stock				Paid-In			Comprehensive		Treasury Stock					Accumulated			Stockholders’
(Amounts in thousands, except share data)	Shares		Amount		Shares		Amount		Capital			Income		Shares		Amount			Deficit			Deficiency
Balance - January 1, 2023		320,000	$	-		2,381,136	$	-	$	282,582		$	23		333	$	(50	)	$	(297,556	)	$	(15,001	)
Issuance of common stock for conversion of debt		-		-		280,625		-		3,547			-		-		-			-			3,547
Round ups pursuant to the reverse split		-		-		21,810		-		-			-		-		-			-			-
Preferred dividend		-		-		-		-		(185	)		-		-		-			-			(185	)
Share-based compensation		-		-		-		-		132			-		-		-			-			132
Net loss		-		-		-		-		-			-		-		-			(4,930	)		(4,930	)
Balance - March 31, 2023		320,000	$	-		2,683,571	$	-	$	286,076		$	23		333	$	(50	)	$	(302,486	)	$	(16,437	)

	FOR THE THREE MONTHS ENDED MARCH 31, 2022
												Accumulated
									Additional			Other										Total
	Preferred Stock				Common Stock				Paid-In			Comprehensive		Treasury Stock					Accumulated			Stockholders’
(Amounts in thousands, except share data)	Shares		Amount		Shares		Amount		Capital			Income		Shares		Amount			Deficit			Equity
Balance - January 1, 2022		320,000	$	-		819,851	$	-	$	266,021		$	23		333	$	(50	)	$	(217,843	)	$	48,151
Issuance of common stock for conversion of debt		-		-		15,761		-		1,150			-		-		-			-			1,150
Issuance of common stock for exercise of options		-		-		2,098		-		31			-		-		-			-			31
Preferred dividend		-		-		-		-		(123	)		-		-		-			-			(123	)
Share-based compensation		-		-		-		-		535			-		-		-			-			535
Net income		-		-		-		-		-			-		-		-			136			136
Balance - March 31, 2022		320,000	$	-		837,710	$	-	$	267,614		$	23		333	$	(50	)	$	(217,707	)	$	49,880

The accompanying notes are an integral part of the condensed consolidated financial statements.

COMSOVEREIGN HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	For the Three Months Ended
	March 31,
(Amounts in thousands, except share data)	2023			2022

Cash Flows From Operating Activities:
Net (loss) income	$	(4,930	)	$	136
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Loss from discontinued operations, net of tax		-			64
Depreciation		36			357
Amortization		33			384
Impairment		896			-
Non-cash rent expense		463			271
Bad debt expense		-			49
Gain on sale (SKS) ⁽¹⁾		(454	)		-
Gain on the sale of assets		-			(8,441	)
Share-based compensation		132			535
Amortization of debt discounts and debt issuance costs		3			574
Loss on extinguishment of debt		-			173
Loss on inducement of debt conversions		1,946			-
Changes in operating assets and liabilities:
Accounts receivable, net		644			(983	)
Inventory, net		(370	)		217
Prepaid expenses		40			(495	)
Other assets		154			(1,045	)
Accounts payable		499			(1,000	)
Accrued interest		324			(41	)
Accrued liabilities		333			(56	)
Contract liabilities		1,053			1,055
Operating lease liabilities		(465	)		(868	)
Related party notes		-			(86	)
Other current liabilities		252			738
Total Adjustments		5,519			(8,598	)
Net Cash Provided By (Used In) Operating Activities		589			(8,462	)
Cash Flows From Investing Activities:
Proceeds from sale of SKS ⁽¹⁾		436			-
Proceeds from building sale, net of transaction costs		-			15,102
Purchases of property and equipment		-			(193	)
Net Cash Provided By Investing Activities		436			14,909
Cash Flows From Financing Activities:
Principal payment on finance lease		-			(7	)
Proceeds from issuance of related party note		-			100
Proceeds from issuance of debt		170			-
Proceeds from exercise of options		-			31
Preferred stock dividend		-			(123	)
Repayment of debt		-			(7,588	)
Net Cash Provided By (Used In) Financing Activities		170			(7,587	)
Net Cash Used in Discontinued Operations		-			(335	)
Net Increase (Decrease) In Cash		1,195			(1,475	)
Cash - Beginning of Period		1,868			1,873
Cash - End of Period	$	3,063		$	398

⁽¹⁾	Proceeds from the gain on sale of Sky Sapience (“SKS”) are net of $35,000 cash sold.

The accompanying notes are an integral part of the condensed consolidated financial statements.

COMSOVEREIGN HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued

(unaudited)

	For the Three Months Ended
	March 31,
(Amounts in thousands, except share data)	2023		2022

Supplemental Disclosures of Cash Flow Information:

Cash paid during the period for:
Interest	$	76	$	105
Non-cash investing and financing activities:
Accrual of preferred dividends not paid yet	$	185	$	-
Reclassification of assets and liabilities held for sale	$	543	$	-
Issuance of common stock for conversions of debt and interest	$	3,547	$	1,150
Recognition of operating lease right-of-use asset and liability	$	-	$	10,052

The accompanying notes are an integral part of the condensed consolidated financial statements.

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

NOTE 1 DESCRIPTION OF BUSINESS

COMSovereign Holding Corp. (“COMSovereign”) and subsidiaries (collectively the “Company”) a provider of solutions to network operators, mobile device carriers, governmental units and other enterprises worldwide. We have assembled a portfolio of communications 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 6G 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.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes in the Company’s significant accounting policies as of and for the three months ended March 31, 2023, as compared to the significant accounting policies described in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022.

Basis of Presentation

The accompanying financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations and financial position for the three months ended March 31, 2023 and cash flows for the three months ended March 31, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. The amounts reported in the unaudited condensed consolidated financial statements, and the tables in the notes hereto, of the Quarterly Report on Form 10-Q as of March 31, 2023 and for the three months ended March 31, 2023 and 2022, are presented in United States dollars and are rounded in thousands with the exception of share and per share data. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2022 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on December 7, 2023.

Effective February 10, 2023, the Company enacted a 1-for-100 reverse stock split (the “2023 Split”) of the Company’s common stock. These consolidated financial statements and accompanying notes give effect to the reverse stock split as if it occurred at the beginning of the first period presented.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. These reclassifications had no effect on the previously reported results of operations or loss per share.

Correction of an Error

See Note 20 - Correction of an Error.

Principles of Consolidation

The unaudited condensed consolidated financial statements as of March 31, 2023 and December 31, 2022, and for the three months ended March 31, 2023 and 2022, include the accounts of the Company and its subsidiaries. All intercompany transactions and accounts have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates consist of the valuation of stock-based compensation; the valuation of the assets and liabilities acquired; the valuation of the Company’s equity securities issued in transactions; the valuation of inventory; the allowance for credit losses; the valuation of equity securities; the valuation allowance for deferred tax assets; and impairment of long-lived assets and goodwill.

Long-Lived Assets and Goodwill

The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. As of March 31, 2023, the Company determined that it was not more likely than not that the reporting unit’s fair value was below its carrying amount due to a decline in the Company’s market capitalization. Accordingly, it was not necessary to perform impairment testing as of March 31, 2023. However, please see Note 20 – Correction of an Error for details related to the recognition of additional 2022 impairment expense.

In determining whether a quantitative assessment is required, the Company will evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after performing the qualitative assessment, an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the entity would perform the quantitative impairment test described in ASC 350. However, if, after applying the qualitative assessment, the entity concludes that it is not more than likely that the fair value is less than the carrying amount, the quantitative impairment test is not required. The Company bases these assumptions on its historical data and experience, industry projections, micro and macro general economic condition projections, and its expectations.

The Company calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches and compares it to the carrying values. For the income approach, the Company uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. For the market approach, the Company uses internal analyses based primarily on market comparables. The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and its expectations. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment.

Discontinued Operations

On June 21, 2022, the Company completed the sale of its Sovereign Plastics business unit to TheLandersCompanies LLC for total consideration of $2.0 million in a secured note with interest of 5% and a maturity date of May 31, 2025. The results of Sovereign Plastics are reflected in the accompanying statements of operations for the three months ended March 31, 2022 as loss from discontinued operations, net of tax (see Note 3 – Discontinued Operations and Assets and Liabilities Held for Sale for additional information).

Assets and Liabilities Held for Sale

On March 20, 2023, the Company completed the sale of its Sky Sapience business unit to Titan Innovations Ltd. for total consideration of $1.8 million. Accordingly, assets and liabilities of Sky Sapience are reflected in the accompanying condensed consolidated balance sheet as “Assets held for sale” and “Liabilities held for sale”, respectively, as of December 31, 2022 (see Note 3 – Discontinued Operations and Assets and Liabilities Held for Sale for additional information).

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement) as follows:

Level 1 – Observable inputs that reflect quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market corroborated inputs.

Level 3 – Unobservable inputs for which there is little, if any, market activity for the asset or liability being measured. These inputs may be used with standard pricing models or other valuation or internally-developed methodologies that result in management’s best estimate of fair value.

The Company utilizes fair value measurements primarily in conjunction with the valuation of assets acquired and liabilities assumed in a business combination. In addition, certain nonfinancial assets and liabilities are to be measured at fair value on a nonrecurring basis in accordance with applicable U.S. GAAP. In general, nonfinancial assets including goodwill, other intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when an impairment is recognized.

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

As allowed by applicable FASB guidance, the Company has elected not to apply the fair value option for financial assets and liabilities to any of its currently eligible financial assets or liabilities. The Company’s financial instruments consist of cash, accounts receivable, accounts payable and notes payable. The Company has determined that the book value of its outstanding financial instruments as of March 31, 2023 and December 31, 2022 approximated their fair value due to their short-term nature.

Reportable Segments and Reporting Units

A reporting unit (“RU”) is a component of an operating segment that is a business activity for which discrete financial information is available and segment management regularly reviews the operating results of that component. The Company’s legal operating subsidiaries are not organized to qualify as individual segments, however, each operating entity had separate financial information and an operating manager, who oversees the business and financial activities, reporting to the Chief Operating Decision Maker (“CODM”). Therefore, during 2022, the Company operated as one reportable segment and each legal entity was deemed to be a separate reporting unit.

As of January 1, 2023, the Company began operating as a single reporting unit. As part of the Company’s restructuring, the Company integrated its previously separate reporting units, including employing a single integrated sales function, and the Chief Executive Officer is managing the Company and making decisions based on the Company’s consolidated operating results.

Recently Adopted Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaced the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. ASU 2016-13 was originally effective for fiscal years beginning after December 15, 2019, with early adoption permitted. In October 2019, the FASB issued ASU No. 2019-10, “Financial Instruments-Credit Losses (Topic 326): Effective Dates”, to finalize the effective date delays for private companies, not-for-profits, and smaller reporting companies applying the current expected credit losses (“CECL”) standards. The ASU is now effective for reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU on January 1, 2023 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

NOTE 3 DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

Sovereign Plastics LLC

Sovereign Plastics is a manufacturer of plastic and metal components to third-party manufacturers based out of Colorado Springs, Colorado. The Company’s Board of Directors, in consultation with management as well as its financial and legal advisors, considered a number of factors, including the risks and challenges facing Sovereign Plastics in the future as compared to the opportunities available to Sovereign Plastics in the future, and the availability of strategic alternatives. On June 13, 2022, after careful consideration, the Board of Directors unanimously approved the sale of Sovereign Plastics.

On June 21, 2022, the Company completed the sale of its Sovereign Plastics business unit to TheLandersCompanies LLC for total consideration of $2.0 million in a secured note with interest of 5% and a maturity date of May 31, 2025. As a result of the sale, in the second quarter of 2022, the Company recognized a $1.1 million gain on the sale of Sovereign Plastics which was included in “Loss from discontinued operations, net of tax” in the accompanying consolidated statements of operations and comprehensive loss for the period ended March 31, 2022. See Note 12 – Note and Obligation Receivable for additional information.

Sky Sapience Ltd.

Sky Sapience was acquired on February 25, 2021 and is a 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 based out of Israel. The Company’s Board of Directors, in consultation with management as well as its financial and legal advisors, considered a number of factors, including the risks and challenges facing Sky Sapience in the future as compared to the opportunities available to Sky Sapience in the future, and the availability of strategic alternatives. On December 21, 2022, after careful consideration, the Board of Directors unanimously approved the sale of Sky Sapience.

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

On March 20, 2023, the Company completed the sale of its Sky Sapience business unit to Titan Innovations Ltd. for total consideration of $1.8 million. The sale of Sky Sapience didn’t qualify for discontinued operations presentation because the sale didn’t represent a strategic shift that had a major effect on the Company’s operations (the Company will continue to be in the drone business). Sky Sapience’s assets and liabilities met the criteria to be classified as held for sale as of December 31, 2022 as follows:

	Sky Sapience
	December 31,
(Amounts in thousands, except share and per share data)	2022
Assets
Cash	$	35
Inventory, net		535
Prepaid and deferred expenses		56
Other current assets		25
Assets held for sale - current		651
Property and equipment, net		640
Operating lease right-of-use assets		269
Intangible assets, net		246
Goodwill		1,219
Assets held for sale - long-term		2,374
Total assets held for sale	$	3,025

Liabilities
Accounts payable	$	233
Accrued liabilities		321
Accrued payroll		321
Contract liabilities - current		1,347
Operating lease liabilities - current		120
Liabilities held for sale - current		2,342
Operating lease liabilities - long-term		140
Liabilities held for sale - long-term		140
Total liabilities held for sale	$	2,482

Upon the completion of the sale of SKS during the first quarter of 2023, the Company recorded a gain on sale of $0.5 million which consisted of total liabilities assumed of $2.5 million, an obligation receivable of $0.6 million, and cash proceeds of $0.5 million, partially offset by total assets acquired of $3.0 million and closing costs in connection with the sale to a consultant of $0.1 million. See Note 12 – Note and Obligation Receivable.

NOTE 4 GOING CONCERN

U.S. GAAP requires management to assess a company’s ability to continue as a going concern within one year from the financial statement issuance and to provide related note disclosures in certain circumstances.

The accompanying condensed consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2023, the Company generated cash flows from operations of $0.6 million and had an accumulated deficit of $302.5 million and a working capital deficit of $16.3 million. These factors raise substantial doubt about our ability to continue as a going concern.

Management anticipates that the Company will be dependent, for the near future, on additional investment capital to fund growth initiatives. Based on current cash on hand and subsequent activity as described herein (see Note 21 – Subsequent Events – Debt and Equity Developments), the Company presently only has enough cash on hand to operate on a month-to-month basis, without raising additional capital or selling assets. Because of the Company’s limited cash availability, its operations have been scaled back to the extent possible (see Note 19 – Other Business Developments – Business Developments). Management continues to explore opportunities with third parties and related parties; however, it has not entered into any agreement to provide the necessary additional capital, except as disclosed herein.

The Company will continue to pursue the actions outlined above, as well as work towards increasing revenue and operating cash flows to meet its future liquidity requirements. However, there can be no assurance that the Company will be successful in any capital-raising or profit-enhancing efforts that it may undertake, and these planned actions do not alleviate the substantial doubt. If the Company is not able to obtain additional financing on a timely basis, it may have to further delay vendor payments and/or initiate cost reductions, which would have a material adverse effect on its business, financial condition and results of operations, and ultimately, it could be forced to discontinue operations, liquidate assets and/or seek reorganization under the U.S. bankruptcy code. Determining the extent to which conditions or events raise substantial doubt about the Company’s ability to continue as a going concern and the extent to which mitigating plans sufficiently alleviate any such substantial doubt requires significant judgment and estimation by the Company. The Company makes assumptions that management’s plans will be effectively implemented but may not alleviate substantial doubt and its ability to continue as a going concern.

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

NOTE 5 REVENUE

Revenue by type consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Drones	$	243	$	353
Telecom hardware		207		1,289
Support & maintenance		31		40
Software		2		-
Optic repairs		-		314
Consulting		-		57
Total revenue	$	483	$	2,053

The following table is a summary of the Company’s timing of revenue recognition for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Timing of revenue recognition:
Services and products transferred at a point in time	$	451	$	1,955
Services and products transferred over time		32		98
Total revenue	$	483	$	2,053

The Company disaggregates revenue by source and geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Revenue by source consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Revenue by products and services:
Products	$	451	$	1,955
Services		32		98
Total revenue	$	483	$	2,053

Revenue by geographic destination consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Revenue by geography:
North America	$	482	$	1,549
International		1		504
Total revenue	$	483	$	2,053

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Contract Balances

The Company records contract assets when it has a right to consideration and records accounts receivable when it has an unconditional right to consideration. Contract liabilities consist of cash payments received (or unconditional rights to receive cash) in advance of fulfilling performance obligations. As of March 31, 2023 and December 31, 2022, the Company did not have a material contract assets balance.

The following table is a summary of the Company’s opening and closing balances of contract liabilities related to contracts with customers.

(Amounts in thousands)	Total
Balance at December 31, 2022	$	3,384
New invoices not yet earned		1,066
Revenue earned		(13	)
Balance at March 31, 2023	$	4,437

Of the $3.4 million contract balance as of December 31, 2022, $13 thousand was recognized as revenue during the three months ended March 31, 2023 and $1.9 million is expected to be recognized during the remainder of 2023 resulting in the remaining contract balance of $1.5 million, which will be recognized as revenue when the Company meets the performance obligation, the timing of which is uncertain at this time.

NOTE 6 EARNINGS (LOSS) PER SHARE

The Company accounts for earnings or loss per share pursuant to Accounting Standards Codification (“ASC”) 260, Earnings Per Share, which requires disclosure on the financial statements of “basic” and “diluted” earnings (loss) per share. Basic earnings (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options, restricted stock awards and warrants for each period.

Potential common shares issuable to employees, non-employees and directors upon exercise or conversion of shares are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss attributable to common shareholders. Stock options and warrants are anti-dilutive when the exercise price of these instruments is greater than the average market price of the Company’s common stock for the period (out-of-the-money), regardless of whether the Company is in a period of net loss attributable to common shareholders.

The following weighted-average potential common shares were excluded from the diluted loss per common share as their effect was anti-dilutive as of March 31, 2023 and 2022, respectively:

	March 31,
	2023		2022
Options		24,954		66,808
Warrants		115,899		128,149
Convertible notes⁽¹⁾		189,601		52,080
		330,454		247,037

⁽¹⁾	The potentially dilutive shares associated with convertible notes were calculated based on the conditions as of the calculation date.

NOTE 7 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash is represented by operating accounts or money market accounts maintained with insured financial institutions, including cash equivalents, defined as all short-term, highly-liquid investments with maturities of three months or less when purchased. The Company had no cash equivalents as of March 31, 2023 and December 31, 2022, respectively. During the year ended December 31, 2022, $195,000 of restricted cash was released upon the sale of a building (see Note 11 – Property and Equipment, Net for additional information related to the sale of the building). The remaining $47,000 was released upon the abandonment of overseas equipment leases and $35,000 was transferred in the sale of Sky Sapience.

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

NOTE 8 ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Accounts receivable	$	1,723		$	2,372
Less: allowance for doubtful accounts		(1,241	)		(1,246	)
Total accounts receivable, net	$	482		$	1,126

The Company had $0 and $49 thousand of bad debt expense for the three months ended March 31, 2023 and 2022, respectively.

NOTE 9 INVENTORY, NET

Inventory consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Raw materials	$	3,563		$	3,685
Work in progress		794			560
Finished goods		738			480
Total inventory		5,095			4,725
Reserve		(759	)		(759	)
Total inventory, net	$	4,336		$	3,966

NOTE 10 PREPAID EXPENSES

Prepaid expenses consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,		December 31,
(Amounts in thousands)	2023		2022
Prepaid products and services	$	3,517	$	3,557
Prepaid rent and security deposit		14		14
Total prepaid expenses	$	3,531	$	3,571

Prepaids and deferred expenses include cash paid in advance for rent and security deposits, inventory and other. As of March 31, 2023 and December 31, 2022, prepaid products and services were comprised of deposits for radio inventory of $2.9 million.

NOTE 11 PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Shop machinery and equipment	$	672		$	672
Computers and electronics		766			766
Office furniture and fixtures		68			68
Leasehold improvements		41			41
Total property and equipment		1,547			1,547
Less: accumulated depreciation		(1,206	)		(1,170	)
Total property and equipment, net	$	341		$	377

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

For the three months ended March 31, 2023 and 2022, the Company had $0.0 million and $0.2 million, respectively, in investments in capital expenditures.

On January 31, 2022, the Company sold its Tucson, Arizona office building (the “Tucson Building”) for $15.8 million in cash. The Tucson Building had a carrying value of $6.7 million, including the $4.8 million cost basis of the building, the $1.3 million cost basis of the land, and the $0.8 million related to building improvements, partially offset by $0.2 million of accumulated depreciation. The Company recognized an $8.4 million gain on sale of assets, which is net of $0.7 million of related transaction costs. See Note 13 – Leases for additional information about the subsequent leaseback of the office building.

During the year ended December 31, 2022, the Company derecognized the property and equipment associated with the following transactions (see Note 13 – Leases and Note 19 – Other Business Developments for additional information):

Abandonment of Tucson Building lease – gross assets of $0.6 million with a net book value of $0.1 million on February 1, 2022;

Sale of DragonWave-X Canada, Inc. assets – gross assets of $8.5 million with a net book value of $0.0 million on May 23, 2022; and

Transfer of Innovation Digital, LLC assets – gross assets of $0.1 million with a net book value of $0.1 million on June 23, 2022.

The Company recognized $0.0 million and $0.5 million of depreciation expense for the three months ended March 31, 2023 and 2022, respectively.

NOTE 12 NOTE AND OBLIGATION RECEIVABLE

On June 21, 2022, the Company completed the sale of its Sovereign Plastics business unit to TheLandersCompanies LLC for total consideration of $2.0 million in a secured note with interest of 5% and a maturity date of May 31, 2025. The payment schedule of the note is as follows: $0.65 million is due on May 31, 2023, $0.65 million is due on May 31, 2024, and $0.70 million is due on May 31, 2025. While management remains confident of collection, the payment due on May 31, 2023 hasn’t been collected to date. As of March 31, 2023, the note receivable of $2.0 million and accrued interest in aggregate of $0.1 million is included on the condensed consolidated balance sheet.

On March 20, 2023, the Company completed the sale of its Sky Sapience business unit to Titan Innovations Ltd. The consideration included a $0.6 million obligation receivable, which is due March 20, 2025. See Note 3 – Discontinued Operations and Assets and Liabilities Held for Sale for more information on the sale of Sky Sapience.

NOTE 13 LEASES

Operating Leases

The Company has operating leases for office, manufacturing and warehouse space, along with office equipment. Balances as of March 31, 2023 and December 31, 2022 for operating leases were as follows:

	March 31,		December 31,
(Amounts in thousands)	2023		2022
Operating lease ROU assets	$	87	$	97
Operating lease liability	$	11,125	$	11,137

Other information related to the Company’s operating leases are as follows:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Operating lease cost	$	488	$	611
Short-term lease cost	$	-	$	9

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	-	$	10,052

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	463	$	549

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The following table presents the weighted-average remaining lease term and weighted average discount rates related to the Company’s operating leases as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
	2023			2022
Weighted average remaining lease term (years)		7.79			7.90
Weighted average discount rate		5.51	%		5.52	%

The table below reconciles the fixed component of the undiscounted cash flows for each of the first five years and the total remaining years to the lease liabilities recorded on the condensed consolidated balance sheet as of March 31, 2023:

	Operating
(Amounts in thousands)	Leases
2023	$	1,358
2024		1,720
2025		1,625
2026		1,386
2027		1,424
Thereafter		6,862
Total minimum lease payments		14,375
Less: effect of discounting		(3,250	)
Present value of future minimum lease payments		11,125
Less: current obligations under leases		(1,453	)
Long-term lease obligations	$	9,672

NOTE 14 DEBT

Debt consisted of the following as of March 31, 2023 and December 31, 2022:

			March 31, 2023						December 31, 2022
(Amounts in thousands)	Note Reference	Maturity Date	Amount Outstanding			Interest Rate			Amount Outstanding			Interest Rate
Secured Notes Payable
Secured senior convertible note payable	A	5/27/23	$	51			6.0	%	$	51			6.0	%
Secured senior convertible note payable	B	8/25/23		59			6.0	%		59			6.0	%
Secured note payable	C	10/25/23		368			6.0	%		368			6.0	%
Secured note payable	D	11/8/23		263			6.0	%		263			6.0	%
Secured note payable	E	11/26/21		775			15.0	%		775			15.0	%
Secured note payable	F	7/29/24		550			8.0	%		550			8.0	%
Secured note payable	G	6/30/23		50			-			50			-
SBA loan	H	5/15/50		150			3.8	%		150			3.8	%
Total secured notes payable				2,266						2,266

Unsecured Notes Payable
Note payable - related party	I	12/31/23		100			5.5	%		100			3.0	%
Note payable	J	7/29/23		26			15.0	%		26			15.0	%
Note payable	K	7/30/23		90			8.0	%		-			-
Note payable	L	8/1/23		80			8.0	%		-			-
Total notes payable				296						126

Unsecured Convertible Notes Payable
Convertible note payable	M	1/29/26		9,805			15.0	%		11,150			3.3	%
Total convertible notes payable				9,805						11,150

Total debt				12,367						13,542
Less: unamortized discounts and debt issuance costs				(8	)					(11	)
Total long-term debt, less discounts and debt issuance costs				12,359						13,531
Less: current portion of debt				(11,809	)					(11,636	)
Long-term portion of debt			$	550					$	1,895

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Debt activity during the three months ended March 31, 2023 included the following:

For Note F, on March 14, 2023, the Company amended Note F to extend the maturity date to July 29, 2024 with an interest rate of 8% and the ability to convert principal and interest into shares of the Company’s common stock at a 10% discount to the closing price on which the conversion is elected effective September 15, 2023. In addition, the note became secured with a second priority security interest on the assets of its Lighter Than Air Systems Corp. (d/b/a Drone Aviation Corp) business and agreed to extend the term of the advisory agreement pursuant to the original note for an additional two years and issue an additional 12,000 shares of the Company’s common stock per year while the note is outstanding. On April 13, 2023, the Company issued 12,000 shares of the Company’s common stock to the advisor pursuant to the terms of the advisory agreement as consideration for their services.

For Note K, on January 17, 2023, the Company sold an unsecured promissory note in the principal amount of $90,000, which was due on or before July 30, 2023. Of the $90,000 of proceeds from the first note, usage of $88,000 is restricted to make interest payments due to certain holders of Note M. The note becomes immediately due and payable if the Company raises at least $2.5 million in an equity or debt offering and will accrue 8% interest per annum, which increases to 15% per annum if the note isn’t repaid by the maturity date. The issuance of a second note (Note L) made the principal and accrued interest of both notes convertible if they aren’t repaid by the maturity date and the conversion price will equal 81% of the closing market price of the common stock on the day that the holder elects to convert the note(s), subject to a floor price of $5.00 per share. The Company did not repay the note on maturity and therefore the note became convertible as of the maturity date and is in default.

For Note L, on February 1, 2023, the Company sold an unsecured promissory note in the principal amount of $80,000, which was due on or before August 1, 2023. The note becomes immediately due and payable if the Company raises at least $2.5 million in an equity or debt offering and accrues 8% interest per annum, which increases to 15% per annum if the note isn’t repaid by the maturity date. The issuance of this note made the principal and accrued interest of Note K convertible if they aren’t repaid by the maturity date and the conversion price will equal 81% of the closing market price of the common stock on the day that the holder elects to convert the note(s), subject to a floor price of $5.00 per share. The Company did not repay the note on maturity and therefore the note became convertible as of the maturity date and is in default.

For Note M, on May 24, 2022, the Company received notice from counsel for holders of $11.2 million of convertible promissory notes issued in connection with the acquisition of FastBack that the Company had failed to file its Annual Report on Form 10-K in a timely manner, as required by the terms of the convertible promissory notes. While the note holders have the right to accelerate the maturity of the principal, the notice simply indicated that the holders were reserving their rights. On January 20, 2023, the Company paid cash for interest in the amount of $75,985. In addition, during January 2023, pursuant to a limited time offer, certain note holders agreed to amend their note and convert an aggregate of $1.3 million principal of their notes and $0.3 million of accrued interest into 280,625 shares of the Company’s common stock pursuant to a limited time offer for conversions at a discounted rate of 81% of the closing market price of the Company’s common stock on the day special conversion notices were received. As a result of the conversions, which were recorded using inducement accounting, the Company recognized a $1.9 million of loss on inducement of debt conversions, which is included in income from continuing operations in the income statement, which represents the fair value of the 280,625 shares of common stock issued pursuant to the limited time offer, less the fair value of the 3,068 shares of common stock that would have been issuable pursuant to the original terms of the convertible notes. Interest is being accrued at the 15.0% default rate during 2023.

Certain agreements governing the secured notes payable, unsecured notes payable, and unsecured convertible notes payable contain customary covenants, such as limitations on liens, dispositions, mergers, entry into other lines of business, investments and the incurrence of additional indebtedness.

All debt agreements are subject to customary events of default. If an event of default occurs with respect to the debt agreements and is continuing, the lenders may accelerate the applicable amounts due. The Company is in default on several debt agreements and has accrued the proper penalties or disclosed any additional contingencies that resulted from the default.

Future maturities contractually required by the Company under long-term debt obligations are as follows as of March 31, 2023:

(Amounts in thousands)	Total
2023	$	11,817
2024		550
2025		-
2026		-
2027		-
Thereafter		-
Total	$	12,367

NOTE 15 STOCKHOLDERS’ EQUITY

Reverse Stock Split

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

Dividends

During the three months ended March 31, 2023 and 2022, the Company recorded $184,992 and $123,328, respectively, of dividends paid or payable to the holders of the 9.25% Series A Preferred Stock.

On or about May 25, 2022, the Company announced that it had suspended the payment of dividends on the Series A Preferred Stock to preserve cash. Since June 20, 2022, dividends on the Series A Preferred Stock are accruing at the rate of approximately $61,664 per month. The total arrearage on the date of filing for the accrued dividends is approximately $1,171,616.

Common Stock

During the three months ended March 31, 2023, the Company issued an aggregate of 280,625 shares of common stock for conversions of debt and interest (see Note 14 – Debt for additional information) and issued 21,810 shares of common stock upon the round-up of common shares pursuant to the 1-for-100 reverse stock split effective February 10, 2023.

During the three months ended March 31, 2022, the Company issued an aggregate of 15,761 shares of common stock with a fair value of $1.2 million for conversions of debt and interest and issued 2,098 shares of common stock for gross proceeds of $31,000 upon the exercise of options.

NOTE 16 SHARE-BASED COMPENSATION

Restricted Stock Awards

A summary of the restricted stock unit (“RSA”) activity during the three months ended March 31, 2023 is presented below:

				Weighted-
				Average
	Number of			Grant Date Value
	RSA’s			Per Share
RSA’s non-vested - January 1, 2023		333		$	450
Granted		-			-
Forfeited		-			-
Vested		(333	)		450
RSA’s non-vested - March 31, 2023		-		$	-

During the three months ended March 31, 2023, the Company recognized $12,502 of share-based compensation expense associated with restricted stock awards. During the three months ended March 31, 2022, the Company recognized $78,496 of share-based compensation expense associated with restricted stock awards. Compensation expense related to restricted stock awards is recorded in general and administrative expense in the condensed consolidated statement of operations. As of March 31, 2023, there was no unrecognized stock-based compensation expense related to restricted stock awards.

Stock Options

There were no stock options issued during the three months ended March 31, 2023 and 2022.

The following table presents stock option activity for the three months ended March 31, 2023:

				Weighted		Weighted
				Average Exercise		Average Contractual		Aggregate
	Number of			Price		Life in		Intrinsic
	Options			Per Share		Years		Value
Outstanding - December 31, 2022		26,554		$	223
Exercised		-			-
Cancelled or Expired		(1,600	)		291
Outstanding - March 31, 2023		24,954		$	219		2.78	$	-
Exercisable - March 31, 2023		17,496		$	195		2.34	$	-

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

The following table presents information related to stock options as of March 31, 2023:

Options Outstanding				Options Exercisable
				Weighted
Exercise		Outstanding		Average		Exercisable
Price		Number of		Remaining Life		Number of
Per Share		Options		In Years		Options
	$ 0.01 - $ 50.00		-		-		-
	$ 50.01 - $100.00		5,688		2.27		5,688
	$ 100.01 - $ 150.00		-		-		-
	$ 150.01 - $ 200.00		2,900		0.75		2,900
	$ 200.01 - $ 250.00		-		-		-
	$ 250.01 - $ 300.00		16,033		2.92		8,575
	$ 300.01 - $ 350.00		333		2.27		333
			24,954		2.34		17,496

The Company recognized $119,991 of share-based compensation expense related to options for the three months ended March 31, 2023, compared to $456,604 of share-based compensation expense related to options for the three months ended March 31, 2022. Compensation expense related to stock options is recorded in general and administrative expense in the condensed consolidated statement of operations. At March 31, 2023, the Company had $221,545 of unrecognized compensation expense related to options, which will be recognized over the weighted average remaining vesting period of 0.6 years.

NOTE 17 COMMITMENTS AND CONTINGENCIES

From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Management does not believe that after the final disposition any of these matters is likely to have a material adverse impact on the Company’s financial condition, results of operations or cash flows, except as follows.

On January 27, 2022, a former employee filed suit against the Company in the Tulsa County Oklahoma District Court, Case No. CJ-2022-00221. The plaintiff has alleged that she was entitled to six months of severance pay after her employment contract was not renewed, and that her option agreements did not expire thirty days after cessation of her employment, and claims she is owed approximately $75,000 in severance and $250,000 in damages for her options. The Company filed an answer on or about March 18, 2022. The Company disputes the plaintiff’s allegations, has not accrued for any contingent losses, and intends to vigorously defend the lawsuit.

On June 16, 2022, the Company received notice from certain former shareholders of SAGUNA claiming breaches of the SAGUNA stock purchase agreement and claiming that all of the former shareholders of SAGUNA have suffered damages totaling approximately $13.9 million, which they calculated as the value related to the consideration issued to those former shareholders for the acquisition of SAGUNA. The Company denies those claims and has not accrued any contingent loss. However, the Company may face legal claims or proceedings regarding those claims.

By notice dated July 14, 2022, the Company received notice from a distributor that has a distribution agreement with InduraPower claiming that InduraPower, and the Company as guarantor, has breached the distribution agreement, and are claiming approximately $2.0 million in damages, which includes a claim for $0.5 million of foregone profit. The Company had received $1.3 million in cash as a deposit against future product deliveries which is included in contract liabilities – current. In addition, the Company fully accrued the remaining claim of $0.7 million in accrued liabilities in the condensed consolidated balance sheet as of December 31, 2022.

On or about July 17, 2022, the former employees of SKS filed an insolvency request against SKS in the Nazareth District Court, Israel, No. 35035-06-22. The action represents $400,000 of claims of the former employees, which were fully accrued as of September 30, 2022. The claims of the former employees were resolved pursuant to the SKS Sale Agreement and the action was dismissed on or about January 9, 2023.

On or about August 22, 2022, two former FastBack employees filed suit against the Company, DragonWave and FastBack in the Alameda County Superior Court, California, Case No. 22CV016666. The plaintiffs allege that their payroll was late and that the Company failed to make one payroll, failed to timely pay wages three times, failed to pay accrued vacation time, and owes penalties under California law. Each plaintiff claimed damages of no less than $66,500. The Company has accrued for the wage claims for services provided but has not accrued for penalties. On April 4, 2023, the Company resolved this lawsuit.

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

On or about September 20, 2022, the Company was served with a suit that was filed on or about May 27, 2022 by the holder of a Transform-X Inc. (“Transform-X”) promissory note, suing the Company, Daniel Hodges, and Transform-X in the Richland County Court of Common Pleas, South Carolina, Case No. 2022CP4002806. The plaintiff alleges that for $125,000 he purchased an 8% promissory note in 2018 from Transform-X which has not been paid. Plaintiff alleges that the Company is also liable under the Transform-X promissory note. This lawsuit was removed to the United States District of South Carolina, Civil Action No.:3:22-cv-03645-MGL. The Company filed an Answer on October 27, 2022 and the proceedings are currently in the discovery phase. The Company strongly disputes the plaintiff’s allegations, has not accrued for any contingent losses, and intends to vigorously defend the lawsuit.

On or about November 14, 2022, an intellectual property law firm filed suit against the Company in the United States District Court for the Southern District of California, San Diego. The plaintiff alleges that they performed work for the Company and its subsidiaries subsequent to September 30, 2022 and are owed approximately $75,000, which was fully accrued as of March 31, 2023.

On January 9, 2023, a former employee of a subsidiary of InduraPower, filed suit against the Company and the former CEO, Daniel Hodges, in the Pima County Superior Court, Arizona, Case No. C20230116. The plaintiff has alleged that he is owed for unpaid minimum wages and overtime wages, breach of employment contract, retaliatory termination, and alleges an unspecified amount in damages. The Company strongly disputes plaintiff’s allegations and intends to vigorously defend the lawsuit.

On or about January 10, 2023, a recruiting and staffing company obtained a default judgment against the Company in County Court, Collin County, Texas, Case No. 004-01539-2022, for $145,917 and post-judgment interest at 7%. As of March 31, 2023, the Company accrued for the full amount of the judgment. The judgment holder obtained a garnishment order against the Company’s banking accounts and has received approximately $17,600 in cash through the date of this filing.

See Note 21 – Subsequent Events – Litigation, Claims and Contingencies Developments for post-March 31, 2023 developments.

NOTE 18 CONCENTRATIONS

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of trade accounts receivable. The Company performs ongoing credit evaluations of its customers and generally does not require collateral related to its trade accounts receivable. At March 31, 2023, accounts receivable, net, from three customers comprised an aggregate of approximately 83% of the Company’s total trade accounts receivable, and none of these balances were characterized as uncollectible.

In addition, for the three months ended March 31, 2023, revenue from four customers individually exceeded 10% of revenue and comprised approximately 88% of the Company’s total revenue. For the three months ended March 31, 2022, three customers individually exceeded 10% of the Company’s total revenue and, in total, comprised approximately 37% of the Company’s total revenue. At March 31, 2023 and 2022, no account payables from vendors accounted for 10% or more of the Company’s total expenses.

NOTE 19 OTHER BUSINESS DEVELOPMENTS

Nasdaq Compliance Developments

Throughout most of 2022, our common stock was not in compliance with the $1.00 minimum closing bid price requirement. We were given grace periods and regained compliance on or about February 27, 2023, by having the closing bid price of our common stock exceed $1.00 for a minimum of ten (10) consecutive trading days during the grace period by implementing a 1-for-100 reverse stock split of our outstanding common stock on February 10, 2023.

On February 27, 2023, the Company regained compliance with Nasdaq Listing Rule 5550(a)(2), the $1.00 minimum closing bid price requirement (“minimum bid price”) price of the Company’s common stock following the successful filing of its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022 pursuant to Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports (“filing requirements”) with the Securities and Exchange Commission (“SEC”).

COMSOVEREIGN HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2023

On March 31, 2023, the Company filed a notice of late filing on Form 12b-25 with the SEC to report that its Annual Report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”) would not be timely filed. On April 18, 2023, the Company received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) stating that because the Company has not yet filed the Form 10-K, the Company is no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC. On May 17, 2023, the Company received a notice from Nasdaq stating that because the Company has not yet filed the Form 10-K or its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Form 10-Q”), the Company is not in compliance with Nasdaq Listing Rules. On August 16, 2023, the Company received a notice from Nasdaq stating that because the Company has not yet filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, the Company is not in compliance with Nasdaq Listing Rules. On October 16, 2023, the Company received notice from the Listing Qualifications Staff (the “Staff”) indicating that the Staff had determined to delist the Company’s securities unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Staff’s determination was based upon the Company’s continued non-compliance with the filing requirement set forth in Nasdaq Listing Rule 5250(c)(1) because the Company had not filed its Form 10-K for the year ended December 31, 2022, and has not filed the Forms 10-Q for the periods ended March 31, 2023 and June 30, 2023. On November 16, 2023, the Company received a notice from Nasdaq stating that because the Company has not yet filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, the Company is not in compliance with Nasdaq Listing Rules.

The Company requested and obtained a hearing before the Panel as well as a further stay of any additional action by Nasdaq pending the issuance of a decision by the Panel. There can be no assurance that a favorable decision will be obtained.

If the Company fails to timely regain compliance with the Nasdaq Listing Rule within any grace period granted by the Nasdaq Hearings Panel, the Company’s common stock, warrants and 9.25% Series A Cumulative Redeemable Perpetual Preferred Stock will be subject to delisting from Nasdaq. There is no assurance that the Company will regain compliance during any grace periods or be able to maintain compliance with Nasdaq’s listing requirements in the future. If we are not able to regain compliance during a grace period, Nasdaq will notify us that our common stock, warrants, and 9.25% Series A Cumulative Redeemable Perpetual Preferred Stock will be delisted from The Nasdaq Capital Market.

Business Developments

In January 2023, the Company idled the employees of RF Engineering & Energy Resource, LLC.

NOTE 20 CORRECTION OF AN ERROR

During the review of the Company’s condensed consolidated financial statements for the three months ended March 31, 2023, the Company identified errors in the reporting of historical goodwill impairment (included in impairment expense) and intangible asset impairment (included in impairment expense). The errors resulted in an understatement of impairment expense for the year ended December 31, 2022. Based on management’s evaluation of the SEC Staff’s Accounting Bulletins Nos. 99 (“SAB 99”) and 108 (“SAB 108”) and interpretations therewith, the Company concluded that the aforementioned errors were not material to the Company’s previously filed 2022 consolidated financial statements. This is further supported by the fact that all errors are of a non-cash nature, do not impact Adjusted EBITDA (earnings before income tax, depreciation and amortization, impairment expense, and stock-based compensation), and would not likely have materially impacted a reasonable investor’s opinion of the Company’s financial condition and results of operations.

Because the correction of these errors was not deemed to be material to the results for the year ended December 31, 2022, and the errors are not expected to be material to the year ended December 31, 2023, to correct these errors, the Company recorded the corrections as out-of-period adjustments in the three-month period ended March 31, 2023. See the table below for the details of the corrections:

	For the Three Months Ended
Condensed Consolidated Statements of Operations:	March 31, 2023
(Amounts in thousands)	Before Adjustment			Adjustment			As Reported
Impairment	$	-		$	896		$	896
Net loss from continuing operations	$	(4,034	)	$	(896	)	$	(4,930	)
Net loss from continuing operations – basic and diluted per share	$	(1.63	)	$	(0.34	)	$	(1.97	)

NOTE 21 SUBSEQUENT EVENTS

Debt and Equity Developments

On April 13, 2023, pursuant to certain contractual arrangements for services in exchange for a fixed number of shares of common stock of the Company, the Company issued 12,000 shares of the Company’s common stock to an advisor in consideration for services with an aggregate fair value of $28,080 (Note F – see Note 14 – Debt for additional information).

On May 26, 2023, pursuant to the note agreement, $100,000 of penalties and interest were capitalized into principal (Note E – see Note 14 – Debt).

On September 1, 2023, Dustin H. McIntire, our CTO, loaned $260,000 to the Company which was used to secure a software license for the Company. Upon being notified of the proposed loan, the Audit Committee reviewed the transaction under the related party transaction policy and approved the transaction. The Company gave Mr. McIntire a secured convertible promissory note for the $260,000 loan, due December 31, 2024, with eight per cent (8%) interest, secured by the software license. The holder may convert all or a portion of the note at any time into shares of the Company’s common stock at the closing price on which the conversion is elected or into bridge financing with identical terms as such bridge financing or offering.

Litigation, Claims and Contingencies Developments

On or about May 22, 2023, a landlord filed suit against the Company in the Circuit Court, Fairfax County, Virgina, Case No. 202307755, for breach of a commercial lease. The plaintiff obtained a default judgment in the amount of approximately $130,000 which remains unpaid as of the date of this filing. As of March 31, 2023, the Company accrued for the full amount of the judgment in accrued liabilities on the condensed consolidated balance sheet.

Nasdaq Compliance Developments

On June 21, 2023, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the last 30 consecutive business days, the Company’s minimum Market Value of Publicly Held Shares, as defined by Nasdaq (“MVPHS”), of the Company’s 9.25% Series A Cumulative Redeemable Perpetual Preferred Stock (“Preferred Stock”) has been below the minimum $1 million requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5555(a)(4) (the “Minimum Market Value of Publicly Held Shares Requirement”). Under Nasdaq rules, the Company will have the opportunity to appeal the delisting decision to a Nasdaq Hearings Panel. There can be no assurance that, if the Company decides to appeal the delisting determination, such appeal would be successful.

In accordance with Nasdaq Listing Rule 5810(c)(3)(D), the Company has been provided a compliance period of 180 calendar days from receipt of the letter, or until December 18, 2023, to regain compliance with the Minimum Market Value of Publicly Held Shares Requirement. To regain compliance with the Minimum Market Value of Publicly Held Shares Requirement, the Company’s Preferred Stock MVPHS must be $1 million or more for a minimum of 10 consecutive business days during the compliance period ending on December 18, 2023. There can be no assurance that the Company will be able to regain compliance with either listing requirement.

On November 16, 2023, the Company received a notice from Nasdaq stating that because the Company has not yet filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, the Company is not in compliance with Nasdaq Listing Rules. As a result, the Company is required to present its views of the deficiency to the Panel in writing no later than December 22, 2023.

On December 12, 2023, the Company received notice from Nasdaq indicating that the Staff had determined that an additional basis exists to delist the Company’s securities because the Company reported stockholders’ equity of less than $2,500,000 in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which is the minimum requirement set forth in Nasdaq Listing Rule 5550(b)(1), and did not otherwise satisfy the alternative minimum requirements for market value of listed securities or net income from continuing operations.

The Company previously requested and was granted a hearing before the Nasdaq Hearings Panel (the “Panel”), as well as a further stay of any suspension action by Nasdaq pending the issuance of a decision by the Panel and the expiration of any extension the Panel may grant to the Company following the hearing. At the hearing, the Company intends to present its plan to regain compliance with all applicable continued listing criteria and request an extension to do so. If the Panel denies the Company’s request for continued listing or if the Company is unable to evidence compliance within any extension of time that may be granted by the Panel, Nasdaq will provide written notification that the Company’s securities will be delisted and, as such, there can be no assurance that the Company will be able to maintain the listing of its securities on Nasdaq.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, references in this Quarterly Report to “Company, “we”, “us” and “our” refer to the COMSovereign Holding Corp. and its subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including “Item 2. Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations,” contains “forward-looking statements” that represent our beliefs, projections and predictions about future events. From time to time in the future, we may make additional forward-looking statements in presentations, at conferences, in press releases, in other reports and filings and otherwise. Forward-looking statements are all statements other than statements of historical fact, including statements that refer to plans, intentions, objectives, goals, targets, strategies, hopes, beliefs, projections, prospects, expectations or other characterizations of future events or performance, and assumptions underlying the foregoing. The words “may,” “could,” “should,” “would,” “will,” “project,” “intend,” “continue,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “plan,” “potential,” “opportunity,” “scheduled,” “goal,” “target,” and “future,” variations of such words, and other comparable terminology and similar expressions and references to future periods are often, but not always, used to identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Readers should carefully review the risk factors included under “Item 1A. Risk Factors” that are included in our fiscal 2022 Annual Report on Form 10-K filed with the U. S. Securities and Exchange Commission (the “SEC”) on December 7, 2023.

Overview of Business; Operating Environment and Key Factors Impacting Our Operating Results

The following MD&A is intended to help readers understand the results of our operations and financial condition and is provided as a supplement to, and should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes (“Notes”) in Part 1 of this Quarterly Report on Form 10-Q.

Growth and percentage comparisons made herein generally refer to the three months ended March 31, 2023, compared to the three months ended March 31, 2022, unless otherwise indicated.

Business Overview

We are a provider of solutions to network operators, mobile device carriers, governmental units and other enterprises worldwide. We have assembled a portfolio of communications 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 6G 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:

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Wireless Transport Solutions. 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.

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Edge Compute Capable 4G LTE and 5G Network in a Box. We offer both 4G/LTE and 5G New Radio (“NR”) based Network in a Box capable of connecting to other access radios or directly to mobile devices such as mobile phones and other Internet-of-things devices. The all-in-one mobile networks support edge-based application hosting and enable third-party service integration.

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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 tactical 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.

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 optical modulators, dramatically increase computing bandwidth, and reduce drive power while offering lower operating costs. In addition, we are seeking to leverage our AI capabilities in our Non-Line of Sight (NLOS) unlicensed radio enhancing and extending these capabilities to further support our customers’ environments while expanding and extending our footprint of AI capabilities through new partnerships.

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 Business

Our CORE business is comprised of the following products:

●

Licensed Microwave (formerly operated as DragonWave-X LLC). DragonWave-X, LLC and its operating subsidiaries, DragonWave Corp. and DragonWave-X Canada, Inc. (collectively, “DragonWave”)), are a 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. On May 23, 2022, the Company sold the assets of DragonWave’s Canadian subsidiary, and transferred the related employees and assigned the Canadian lease of DragonWave’s Canadian subsidiary, to a third party.

●

4G and 5G Edge Compute (formerly Virtual NetCom, LLC). Virtual NetCom, LLC (“VNC”)) is an edge compute focused wireless telecommunications technology developer and equipment manufacturer of both 4G LTE Advanced and 5G NR 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. We acquired the product (formerly VNC) in July 2020.

●

Unlicensed Microwave (formerly FastBack). Skyline Partners Technology LLC, which conducted 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 existing cellular networks 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.

●

Engineering Services (formerly Silver Bullet Technology, Inc.) enables us to provide engineering services including the design and develop of 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.

●

Mobile Edge Compute (formerly SAGUNA Networks Ltd.) based in Yokneam, Israel, is the software developer behind the award-winning SAGUNA Edge Cloud, which transforms communication networks into powerful cloud-computing infrastructures for applications and services, including augmented and virtual reality, Internet of Things (“IoT”), edge analytics, high-definition video, connected cars, autonomous drones and more. SAGUNA allows these next-generation applications to run closer to the user in a wireless network, dramatically cutting down on latency, which is a fundamental and critical requirement of 5G networks. SAGUNA’s Edge Cloud operates on general purpose computing hardware but can be optimized to support the latest artificial intelligence and machine learning features through dedicated accelerators. We acquired SAGUNA in October 2021. In order to conserve cash, SAGUNA idled the employees in June 2022.

Our NONCORE business is comprised of the following products:

●

Drones (formerly Lighter Than Air Systems Corp., which did business under the name Drone Aviation) based in Jacksonville, Florida 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.

●

Silicon Photonics (formerly VEO Photonics, Inc.) based in San Diego, California, is a research and development group 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. In order to conserve cash, VEO idled the employees in June 2022.

As part of the Company’s restructuring, commencing January 1, 2023, the Company integrated its previously separate reporting units, including employing a single integrated sales function, and the Chief Executive Officer manages the Company and makes decisions based on the Company’s consolidated operating results.

Nasdaq Compliance Developments

As previously disclosed in our Form 10-K filed on December 7, 2023, we are not in compliance with Nasdaq Continued Listing Rules. Throughout most of 2022, our common stock was not in compliance with the $1.00 minimum closing bid price requirement. We were given grace periods and regained compliance on or about February 27, 2023, by having the closing bid price of our common stock exceed $1.00 for a minimum of ten (10) consecutive trading days during the grace period by implementing a 1-for-100 reverse stock split of our outstanding common stock on February 10, 2023.

On February 27, 2023, the Company regained compliance with Nasdaq Listing Rule 5550(a)(2), the $1.00 minimum closing bid price requirement (“minimum bid price”) price of the Company’s common stock, and Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports (“filing requirements”) with the Securities and Exchange Commission (“SEC”) following the successful filing of its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022.

On March 31, 2023, the Company filed a notice of late filing on Form 12b-25 with the SEC to report that its Annual Report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”) would not be timely filed. On April 18, 2023, the Company received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) stating that because the Company has not yet filed the Form 10-K, the Company is no longer in compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC. On May 17, 2023, the Company received a notice from Nasdaq stating that because the Company has not yet filed the Form 10-K or its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, the Company is not in compliance with Nasdaq Listing Rules. On August 16, 2023, the Company received a notice from Nasdaq stating that because the Company has not yet filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, the Company is not in compliance with Nasdaq Listing Rules. On October 16, 2023, the Company received notice from the Listing Qualifications Staff (the “Staff”) indicating that the Staff had determined to delist the Company’s securities unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The Staff’s determination was based upon the Company’s continued non-compliance with the filing requirement set forth in Nasdaq Listing Rule 5250(c)(1) because the Company had not filed its Form 10-K for the year ended December 31, 2022, and has not filed the Forms 10-Q for the periods ended March 31, 2023 and June 30, 2023. On November 16, 2023, the Company received a notice from Nasdaq stating that because the Company has not yet filed its Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, the Company is not in compliance with Nasdaq Listing Rules.

Significant Components of Our Results of Operations

Revenues

Our revenues are generated primarily from the sale of our products, which consist primarily of telecom hardware, repairs, support & maintenance, drones, consulting, warranties and other. At contract inception, we assess the goods and services promised in the contract with customers and identify a performance obligation for each. To determine the performance obligation, we consider all products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. We measure revenue as the amount of consideration expected to be received in exchange for transferring goods and services. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have been met.

During the three months ended March 31, 2023 and 2022, approximately 0% and 16%, respectively, of our revenues were derived from sales outside of the United States. While our near-term focus is on the North American telecom and infrastructure and service market, a key element of our growth strategy is to expand our worldwide customer base and our international operations, initially through agreements with third-party resellers, distributors and other partners that can market and sell our products in foreign jurisdictions. We expect that over the short term our percentage of sales outside the United States may increase as we build up our domestic sales and service teams. Notwithstanding such percentage increase, we expect the sales of tethered aerostats and drones will primarily be to the domestic market customers, primarily to the U.S. government and its agencies, even if such systems are for integration into foreign locations.

Cost of Goods Sold and Gross Profit

Our cost of goods sold is comprised primarily of the costs of manufacturing products, procuring finished goods from our third-party manufacturers, third-party logistics and warehousing provider costs, shipping and handling costs and warranty costs. We presently outsource the manufacturing of our FastBack and DragonWave products to two outsourced manufacturers, SMC for FastBack products and Benchmark for DragonWave products. Cost of goods sold also includes costs associated with supply operations, including personnel-related costs, provision for excess and obsolete inventory, third-party license costs and third-party costs related to the services we provide. Additionally, cost of goods sold does not include any depreciation and amortization expenses as we separate depreciation and amortization expense into its own category within operating expenses.

Gross profit has been and will continue to be affected by various factors, including changes in our supply chain and evolving product mix. The margin profile of our current products and future products will vary depending on operating performance, features, materials, manufacturer, and supply chain. Gross margin will vary as a function of product mix, changes in pricing due to competitive pressure, our third-party manufacturing, our production costs, costs of shipping and logistics, provision for excess and obsolete inventory and other factors. We expect our gross margins will fluctuate from period to period depending on the interplay of these various factors.

Operating Expenses

We classify our operating expense as research and development, sales, and marketing, and general and administrative. Personnel costs are the primary component of each of these operating expense categories, which consist of cash-based personnel costs, such as salaries, sales commissions, benefits, and bonuses. Additionally, we separate depreciation and amortization expense into its own category.

Research and Development

In addition to personnel-related costs, research and development expense consists of costs associated with the design, development, and certification of our products. We generally recognize research and development expense as incurred. Development costs incurred prior to establishment of technological feasibility are expensed as incurred.

Sales and Marketing

In addition to personnel costs for sales, marketing, service and product management personnel, sales and marketing expense consists of the expenses associated with our training programs, trade shows, marketing programs, promotional materials, demonstration equipment, national and local regulatory approvals of our products, travel, entertainment and recruiting. We expect sales and marketing expense to continue to increase in absolute dollars as we increase the size of our sales, marketing, service, and product management organization in support of our investment in our growth opportunities, whether through the development and rollout of new or modified products or through acquisitions and partnerships.

General and Administrative

In addition to personnel costs, general and administrative expenses consist of professional fees, such as legal, audit, accounting, information technology and consulting fees; share-based compensation; and facilities and other supporting overhead costs.

Depreciation and Amortization

Depreciation and amortization expense consists of depreciation related to fixed assets such as test equipment, research and development equipment, computer hardware, production fixtures and leasehold improvements, as well as amortization related to definite-lived intangibles.

Impairment Expense

We account for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. During the fourth quarter of 2020, we adopted ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Impairment expense is recorded when the carrying value of a reporting unit (including goodwill and intangibles) exceeds the fair value of the reporting unit.

Gain or Loss on Sales

A gain or loss on sales is recognized on sales of legal entities or sales of long-lived assets and included in income from continuing operations in the income statement. The amount of consideration promised in a contract that is included in the calculation of a gain or loss includes both the transaction price and the carrying amount of liabilities assumed.

Gain on the Sale of Assets

A gain or loss is recognized on the sale and leaseback of long-lived assets and included in income from continuing operations in the income statement. The amount of consideration promised in a contract that is included in the calculation of a gain or loss includes the transaction price and the carrying amount of assets acquired, liabilities assumed, and closing costs.

Interest Expense

Interest expense is comprised of interest expense associated with our secured notes payables, unsecured notes payables and unsecured convertible notes payables. The amortization of debt discounts is also recorded as part of interest expense.

Results of Operations

	For the Three Months Ended
	March 31,
(Amounts in thousands, except share and per share data)	2023			2022

Revenue	$	483		$	2,053
Cost of goods sold		301			1,483
Gross profit		182			570
Operating expenses (income)
Research and development ⁽¹⁾		57			1,172
Sales and marketing ⁽¹⁾		-			66
General and administrative ⁽¹⁾		2,179			5,780
Depreciation and amortization		69			741
Impairment		896			-
Gain on sale (SKS) ⁽²⁾		(454	)		-
Gain on the sale of assets		-			(8,441	)
Total operating expenses (income), net		2,747			(682	)
(Loss) income from operations		(2,565	)		1,252
Other expense
Interest expense		(419	)		(879	)
Loss on extinguishment of debt		-			(173	)
Loss on inducement of debt conversions		(1,946	)		-
Total other expense		(2,365	)		(1,052	)
(Loss) income from continuing operations		(4,930	)		200
Loss from discontinued operations, net of tax		-			(64	)
Net (loss) income	$	(4,930	)	$	136

⁽¹⁾	These are exclusive of depreciation and amortization
⁽³⁾	Sky Sapience (“SKS”)

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Total Revenues

For the three months ended March 31, 2023 total revenues were $0.5 million compared to $2.1 million for the three months ended March 31, 2022. The decrease of $1.6 million, or 76%, primarily consisted of decreases in our mobile network backhaul products and aerostat products and accessories due to the Company’s liquidity challenges and idling and sales of businesses.

Cost of Goods Sold and Gross Profit

For the three months ended March 31, 2023, cost of goods sold was $0.3 million compared to $1.5 million for the three months ended March 31, 2022. The decrease of $1.2 million, or 80%, is primarily due to reduced revenues. The Company sells multiple products with varying profit margins. The product mix had higher margins during the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Gross profit for the three months ended March 31, 2023 was $0.2 million compared to $0.6 million for the three months ended March 31, 2022. The decrease in gross profit margin of $0.4 million, or 68%, was driven primarily by decreased revenues during the current quarter compared to the corresponding period in fiscal year 2022.

Research and Development Expense

For the three months ended March 31, 2023, research and development expense was $0.1 million compared to $1.2 million for the three months ended March 31, 2022. The decrease of $1.1 million consisted primarily of contract labor and payroll related costs due to the suspension of research and development activity as a result of liquidity challenges.

While costs have recently been reduced due to the Company’s liquidity challenges, management expects that these costs will increase modestly as liquidity improves and the Company expands resources somewhat in order to focus on revenue enhancement.

Sales and Marketing Expense

For the three months ended March 31, 2023, sales and marketing expense was $0.0 million compared to $0.1 million for the three months ended March 31, 2022. The decrease of $0.1 million primarily consisted of decreases in sales costs and cutbacks due to the Company’s liquidity challenges.

General and Administrative Expenses

For the three months ended March 31, 2023, general and administrative expense was $2.2 million compared to $5.8 million for the three months ended March 31, 2022. The decrease of $3.6 million primarily consisted of decreases in payroll and professional expenses attributable to cost reductions due to our liquidity challenges.

Depreciation and Amortization

For the three months ended March 31, 2023, depreciation and amortization was $0.1 million compared to $0.7 million for the three months ended March 31, 2022. The decrease of $0.6 million was primarily due to the sale of our Tucson Building (see Note 11 – Property and Equipment, Net) and equipment during early 2022.

Impairment Expense

For the three months ended March 31, 2023 the Company recorded impairment expense of $0.9 million in connection with the impairment of its goodwill and intangible assets (see Note 20 – Correction of an Error).

Gain on Sale of SKS

For the three months ended March 31, 2023, there was a gain of $0.5 million due to the sale of SKS comprised of a note receivable for $0.6 million and cash proceeds of $0.5 million, partially offset by net assets of $0.6 million and closing costs in connection with the sale of $0.1 million.

Gain on the Sale of Assets

For the three months ended March 31, 2022 there was a gain of $8.4 million due to the sale of our Tucson Building (see Note 13 – Leases) and equipment.

Other Expense

For the three months ended March 31, 2023, other expense was $2.4 million compared to $1.1 million for the three months ended March 31, 2022. The increase of $1.3 million primarily consisted of an increase in loss on inducement of debt conversions of $1.9 million offset by decreases in the loss on extinguishment of debt of $0.2 million and interest expense of $0.4 million.

(Loss) Income from Continuing Operations

For the three months ended March 31, 2023, we had a net loss from continuing operations of $4.9 million compared to net income from continuing operations of $0.2 million for the three months ended March 31, 2022, related to the items described above.

Loss from Discontinued Operations

For the three months ended March 31, 2023, we had a net loss from discontinued operations of $0 compared to a net loss from discontinued operations of $0.1 million for the three months ended March 31, 2022.

Liquidity and Capital Resources

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its cash requirements. As of March 31, 2023, we had $3.1 million in cash compared to $1.9 million on December 31, 2022, an increase of $1.2 million resulting primarily from $0.6 million of cash provided by operating activities, $0.4 million of cash provided by the sale of SKS (see Note 3 – Discontinued Operations and Assets and Liabilities Held for Sale), and $0.2 million of proceeds from debt.

As of March 31, 2023, we had a working capital deficit of $16.3 million compared to a working capital deficit of $15.9 million as of December 31, 2022.

As of March 31, 2023, we had undiscounted obligations relating to the payment of indebtedness as follows:

●

$11.8 million related to indebtedness that is due during the remainder of 2023; and

●

$0.6 million related to indebtedness that is due during 2024.

Subsequent to March 31, 2023, the following developments should be noted:

●

an additional promissory note with a face value of $0.3 million was issued.

Our future capital requirements for our operations will depend on many factors, including the profitability of our businesses, and the costs of our operations. We cannot be sure that any additional funding, if needed, will be available. Any additional capital raised through the sale of equity or equity-linked securities may dilute our current stockholders’ ownership and could also result in a decrease in the market price of our common stock. Debt financing, if available, may subject us to restrictive covenants and significant interest costs.

Going Concern

The accompanying unaudited condensed consolidated financial statements and notes have been prepared assuming that we will continue as a going concern. At March 31, 2023, we had an accumulated deficit of $302.5 million and we had a working capital deficit of $16.3 million. These factors raise substantial doubt about our ability to continue as a going concern.

Our historical operating results, accumulated deficit and working capital, among other factors, raise substantial doubt about our ability to continue as a going concern. Based on our current cash on hand and subsequent activity as described herein, we presently only have enough cash on hand to operate on a month-to-month basis, without raising additional capital or selling assets. Because of our limited cash availability, our operations have been scaled back to the extent possible. We continue to explore opportunities with third parties and related parties to provide additional capital; however, we have not entered into any agreement to provide the necessary capital. In the near term, there will be limited opportunities to raise capital of significance until our Nasdaq compliance issues are resolved, as discussed in Nasdaq Compliance Developments herein.

We will continue to pursue the actions outlined above, as well as work towards increasing revenue and operating cash flows to meet our future liquidity requirements. However, there can be no assurance that we will be successful in any capital-raising efforts that we may undertake, and these planned actions do not alleviate the substantial doubt. If we are not able to obtain additional financing on a timely basis, we may have to delay vendor payments and/or initiate cost reductions, which would have a material adverse effect on our business, financial condition and results of operations, and ultimately, we could be forced to discontinue operations, liquidate assets and/or seek reorganization under the U.S. bankruptcy code. Determining the extent to which conditions or events raise substantial doubt about the Company’s ability to continue as a going concern and the extent to which mitigating plans sufficiently alleviate any such substantial doubt requires significant judgment and estimation by the Company. The Company makes assumptions that management’s plans will be effectively implemented but may not alleviate substantial doubt and its ability to continue as a going concern.

Sources and Uses of Cash

	For the Three Months
	Ended March 31,
(Amounts in thousands)	2023		2022
Cash flows provided by (used in) operating activities	$	589	$	(8,462	)
Cash flows provided by investing activities		436		14,909
Cash flows provided by (used in) by financing activities		170		(7,587	)
Net cash used in discontinued operations		-		(335	)
Net increase (decrease) in cash	$	1,195	$	(1,475	)

Operating Activities

For the three months ended March 31, 2023, net cash provided by operating activities was $0.6 million. Net cash provided by operating activities primarily consisted of net loss from continuing operations of $4.9 million, which was partially offset by adjustments for non-cash expenses of $3.1 million and net cash used to fund changes in the levels of operating assets and liabilities of $2.5 million.

For the three months ended March 31, 2022, net cash used in operating activities was $8.5 million. Net cash used in operating activities primarily consisted of the net income from continuing operations of $0.2 million, which was offset by deductions for non-cash income of $6.1 million, and net cash used to fund changes in the levels of operating assets and liabilities of $2.6 million.

Investing Activities

For the three months ended March 31, 2023, net cash provided by investing activities was $0.4 million. Investing activities consisted of proceeds from the sale of SKS of $0.4 million.

For the three months ended March 31, 2022, net cash provided by investing activities was $14.9 million. Investing activities primarily consisted of proceeds from the building sale of $15.1 million, which was partially offset by the acquisition of property and equipment of $0.2 million.

Financing Activities

For the three months ended March 31, 2023, net cash provided by financing activities was $0.2 million. Financing activities consisted of proceeds of debt of $0.2 million.

For the three months ended March 31, 2022, net cash used in financing activities was $7.6 million. Financing activities primarily consisted of repayment of debt of $7.6 million.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that have had or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates

There have been no material changes to the Company’s significant accounting policies as set forth in the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2022.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not required under Regulation S-K for smaller reporting companies.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.

The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. This term refers to the controls and procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission. Our Chief Executive Officer and Acting Principal Financial and Accounting Officer has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Acting Principal Financial and Accounting Officer has concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report.

As previously disclosed in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, management concluded that the following material weaknesses that were first identified in 2021, continued to exist in our disclosure controls and procedures:

●

we do not effectively segregate certain accounting duties due to the small size of our accounting staff;

●

there is a lack of timely reconciliations of account balances; and

●

there is a lack of documented and tested internal controls to meet the requirements of Section 404(a) of the Sarbanes-Oxley Act of 2002.

Our remediation of the material weaknesses in our internal control over financial reporting is ongoing.

(b) Changes in Internal Control Over Financial Reporting.

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Neither our Company nor any of our subsidiaries currently is a party to any legal proceeding that, individually or in the aggregate, is material to our Company as a whole, except as disclosed in Item 3 of our Annual Report on Form 10-K for the year ended December 31, 2022 as filed with the SEC on December 7, 2023 and as follows.

On January 9, 2023, a former employee of a subsidiary of InduraPower, filed suit against the Company and the former CEO, Daniel Hodges, in the Pima County Superior Court, Arizona, Case No. C20230116. The plaintiff has alleged that he is owed for unpaid minimum wages and overtime wages, breach of employment contract, retaliatory termination, and alleges an unspecified amount in damages. The Company filed an answer to the complaint and the proceedings are currently in the discovery phase. The Company strongly dispute plaintiff’s allegations and intends to vigorously defend the lawsuit.

On or about January 10, 2023, a recruiting and staffing company obtained a default judgment against the Company in County Court, Collin County, Texas, Case No. 004-01539-2022, for $145,917 and post-judgment interest at 7%. As of March 31, 2023, the Company accrued for the full amount of the judgment. The judgment holder obtained a garnishment order against Company’s banking accounts and has received approximately $17,600 in cash through the date of this filing.

Item 1A. Risk Factors

Readers should carefully review the risk factors included under “Item 1A. Risk Factors” of our fiscal 2022 Annual Report on Form 10-K filed with the SEC on December 7, 2023.

Our stockholders’ equity fails to meet the minimum requirement for continued listing requirements of the Nasdaq Capital Market. Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if we are delisted from the Nasdaq Capital Market.

On December 12, 2023, the Company received written notice from Nasdaq that because the Company’s stockholders’ equity as reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 was ($15,001,000), we do not meet the minimum stockholders’ equity requirement of $2,500,000 as set forth in Nasdaq Listing Rule 5550(b)(1), and do not otherwise satisfy the alternative minimum requirements for market value of listed securities ($35 million) or net income from continuing operations ($500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years), and therefore the Company’s securities are subject to delisting.

If our securities were delisted from Nasdaq, among other things, it would likely lead to a number of negative implications, including an adverse effect on the price of our securities, reduced liquidity in our securities, no market for our securities and no ability for you to sell our securities, greater difficulty in obtaining financing, potential loss of confidence by employees, loss of institutional investor interest and fewer business development opportunities.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There have been no sales of unregistered securities within the reporting period that would be required to be disclosed pursuant to Item 701 of Regulation S-K, with the exception of the following:

Between January 18, 2023 and February 2, 2023, we issued to seven investors an aggregate of 280,625 shares of our common stock upon the special limited time offer to convert certain principal of outstanding senior secured convertible promissory notes at a discounted rate of 81% of the closing market price on the day the special notices were received. The weighted average conversion price was $5.71 per share and such shares were issued by us in reliance upon the exemption from registration available under Section 3(a)(9) of the Securities Act.

Item 3. Default Upon Senior Securities

(a) Defaults Upon Senior Securities

In connection with our acquisition of Fastback on January 29, 2021, we issued to the sellers $11.2 million aggregate principal amount of convertible promissory notes that mature on January 29, 2026. There is a provision in the convertible promissory notes that an event of default could be declared if the Company fails to file its requisite its securities filings timely. The Company was delinquent with its Form 10-Q filings. To date, while the convertible promissory note holders have reserved their rights, the convertible promissory notes have not been declared in default, and the Company has a plan to regain compliance with such filings. Upon the filing of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, the Company will be compliant with the filing requirement. No adverse actions have been taken against the Company and we expect none insofar as filing compliance is regained. During January 2023, pursuant to a limited time offer, certain Fastback convertible promissory note holders agreed to amend their notes and convert an aggregate of $1.3 million principal of their notes and $0.3 million of accrued interest into 280,625 shares of the Company’s common stock.

On May 27, 2021, we entered into a securities purchase agreement with an investor, pursuant to which we sold to the investor a senior secured convertible promissory note in the original principal amount of $11.0 million and warrants to purchase up to 18,200 shares of our common stock, par value $0.0001 per share, for a purchase price of $10.0 million (representing an original issue discount of 10.0% on the note), of which we received $5.0 million on May 28, 2021 and $5.0 million on June 2, 2021. On August 25, 2021, we entered into a first amendment and limited waiver to the securities purchase agreement dated as of May 27, 2021 and amended and restated the convertible note.

The amended note bears interest at the rate of 6% per annum from the date of funding and matures on May 27, 2023. We were required to make monthly interest and principal payments in 18 equal monthly installments of $611,000 each, commencing in November 2021. We had the right to make interest and principal payments in the form of 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 the common stock during the ten trading days immediately preceding the date of issuance of such shares of common stock. On or about April 15, 2022, this note went into default because the Company failed to timely file its Annual Report on Form 10-K. Pursuant to the terms of that note, a mandatory default amount of five percent (5%) of the outstanding principal amount was added to the principal amount. Additionally, the holder was able to demand, from time to time, repayment in the form of shares of common stock, which shares will be valued at 80% of the average of the three lowest daily volume weighted average price per share of the common stock during the twenty trading days immediately preceding the date of issuance of a notice of conversion. As of the date of this filing, this note had a remaining combined principal and interest balance of approximately $77,000.

On August 25, 2021, we entered into a securities purchase agreement with an investor, pursuant to which we sold to the investor a senior secured convertible promissory note in the original principal amount of $5.8 million and warrants to purchase up to 13,158 shares of our common stock, par value $0.0001 per share (the “Common Stock”), for a purchase price of $5.0 million (representing an original issue discount of 16.0% on the note), which $5.0 million was received on August 26, 2021.

The note bears interest at the rate of 6% per annum from the date of funding and matures on August 25, 2023. We were required to make monthly interest and principal payments in 18 equal monthly installments of $322,000 each, commencing in November 2021. So long as shares of our common stock are registered for resale under the Securities Act of 1933, as amended, or may be sold without restriction on the number of shares or manner of sale, we had the right to make interest and principal payments in the form of additional shares of common stock, which shares would be valued at 90% of the average of the five lowest daily volume weighted average price per share of the common stock during the ten trading days immediately preceding the date of issuance of such shares of common stock. On or about April 15, 2022, this note went into default because the Company failed to timely file its Annual Report on Form 10-K. Pursuant to the terms of that note, a mandatory default amount of five percent (5%) of the outstanding principal amount was added to the principal amount. Additionally, the holder was able to demand, from time to time, repayment in the form of shares of common stock, which shares will be valued at 80% of the average of the three lowest daily volume weighted average price per share of the common stock during the twenty trading days immediately preceding the date of issuance of a notice of conversion. As of the date of this filing, this note had a remaining combined principal and interest balance of approximately $185,000.

In November 2019, DragonWave entered into a secured loan agreement with an individual lender pursuant to which DragonWave received a $2.0 million loan that bears interest at the rate of 9% per annum and originally matured on November 26, 2021. Accrued interest is calculated on a compound basis and is payable semi-annually in May and November of each year. Principal was due in full at maturity but can be prepaid in full or in part without penalty. The loan is secured by all of the assets of DragonWave and is guaranteed by ComSovereign Corp. In January 2021, a total of $1.0 million of principal of this note, plus all related accrued interest and charges, was extinguished in exchange for shares of common stock and warrants to purchase shares of common stock. In January 2022, a total of $500,000 was paid to the note holder. As of the date of this filing, this note had a remaining principal balance of $500,000.

(b) Material Arrearage in the Payment of Dividends.

On October 29, 2021, the Company sold in a public offering 320,000 shares of the Company’s newly-designated 9.25% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), at a public offering price of $25.00 per share, which is the initial liquidation preference of the Series A Preferred Stock.

The Series A Preferred Stock has been listed on The Nasdaq Capital Market under the symbol “COMSP”.

Dividends at the rate of 9.25% per annum of the $25.00 liquidation preference per share (equivalent to an annual rate of $2.3125) on the Series A Preferred Stock are payable monthly in arrears on or about the twentieth (20th) day of each month. Dividends on the Series A Preferred Stock are cumulative. The Company paid dividends commencing on or about November 20, 2021, and paid the monthly dividend through May 20, 2022.

On or about May 25, 2022, the Company announced that it had suspended the payment on the Series A Preferred Stock to preserve cash. Since June 20, 2022, dividends on the Series A Preferred Stock are accruing at the rate of approximately $61,664 per month. The total arrearage on the date of filing for the accrued dividends is approximately $1,171,616.

Holders of the Series A Preferred Stock generally have no voting rights, except for limited voting rights, including if the Company fails to pay dividends on the Series A Preferred Stock for 18 or more monthly periods (whether or not consecutive). On November 18, 2023, we reached 18 monthly periods of dividend arrears. Therefore, the holders of shares of the Series A 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 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 have been paid.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information

None

Item 6. Exhibits

The following documents are filed as a part of this report or incorporated herein by reference:

Exhibit Number		Description
31.1		Certification of the Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certifications of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certifications of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	COMSovereign Holding Corp.

Date: January 9, 2024	/s/ David A. Knight
	David A. Knight
	Chief Executive Officer
	(Principal Executive Officer)

Date: January 9, 2024	/s/ David A. Knight
	David A. Knight
	Acting Principal Financial and Accounting Officer

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Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Knight, certify that:

(1)	I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 of COMSovereign Holding Corp. (the “Registrant”);

(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

(4)

The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

disclosed in the report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

(5)	The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: January 9, 2024	By:	/s/ David A. Knight
		David A. Knight
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Knight, certify that:

(1)	I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023 of COMSovereign Holding Corp. (the “Registrant”);

(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

(4)

(a)

(b)

(c)

(d)

(5)	The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Dated: January 9, 2024	By:	/s/ David A. Knight
		David A. Knight
		Acting Principal Financial and Accounting Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of COMSovereign Holding Corp. (the “Company”) for the fiscal quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Knight, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

Dated: January 9, 2024	By:	/s/ David A. Knight
		David A. Knight
		Chief Executive Officer
		(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of COMSovereign Holding Corp. (the “Company”) for the fiscal quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Knight, Acting Principal Financial and Accounting Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report.

Dated: January 9, 2024	By:	/s/ David A. Knight
		David A. Knight
		Acting Principal Financial and Accounting Officer

Document And Entity Information - shares	3 Months Ended
Document And Entity Information - shares	Mar. 31, 2023	Jan. 08, 2024
Document Information Line Items
Entity Registrant Name	COMSOVEREIGN HOLDING CORP.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		2,695,238
Amendment Flag	false
Entity Central Index Key	0001178727
Entity Current Reporting Status	No
Entity Filer Category	Non-accelerated Filer
Document Period End Date	Mar. 31, 2023
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-39379
Entity Incorporation, State or Country Code	NV
Entity Tax Identification Number	46-5538504
Entity Address, Address Line One	6890 E Sunrise Drive
Entity Address, Address Line Two	Suite 120-506
Entity Address, City or Town	Tucson
Entity Address, State or Province	AZ
Entity Address, Postal Zip Code	85750
City Area Code	(206)
Local Phone Number	796-0173
Entity Interactive Data Current	No
Common Stock, par value $0.0001 per share
Document Information Line Items
Trading Symbol	COMS
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Security Exchange Name	NASDAQ
Warrants to purchase Common Stock
Document Information Line Items
Trading Symbol	COMSW
Title of 12(b) Security	Warrants to purchase Common Stock
Security Exchange Name	NASDAQ
9.25% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share
Document Information Line Items
Trading Symbol	COMSP
Title of 12(b) Security	9.25% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.0001 per share
Security Exchange Name	NASDAQ

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Current assets:
Cash	$ 3,063	$ 1,868
Accounts receivable, net	482	1,126
Inventory, net	4,336	3,966
Prepaid expenses	3,531	3,571
Note and obligation receivable - current	650	650
Other current assets	112	150
Assets held for sale - current		651
Total current assets	12,174	11,982
Property and equipment, net	341	377
Operating lease right-of-use assets	87	97
Intangible assets, net	1,197	1,428
Goodwill	6,612	7,310
Note and obligation receivable - long-term	1,950	1,350
Assets held for sale - long-term		2,374
Total assets	22,361	24,918
Current liabilities:
Accounts payable	4,229	3,656
Accrued interest	626	477
Accrued liabilities	3,524	3,006
Accrued payroll	2,010	1,758
Contract liabilities - current	4,285	3,232
Accrued warranty liability - current	488	488
Operating lease liabilities - current	1,453	1,321
Debt - current, net of unamortized discounts and debt issuance costs	11,709	11,536
Liabilities held for sale - current		2,342
Total current liabilities	28,424	27,916
Debt – long-term	550	1,895
Contract liabilities – long-term	152	152
Operating lease liabilities - long-term	9,672	9,816
Liabilities held for sale - long-term		140
Total liabilities	38,798	39,919
Commitments and contingencies
Stockholders’ Deficiency
Preferred stock, $0.0001 par value, 100,000,000 shares authorized; Series A Cumulative Redeemable Perpetual Preferred Stock, 690,000 shares designated, 320,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively
Common stock, $0.0001 par value, 300,000,000 shares authorized; 2,683,571 and 2,381,136 shares issued and 2,683,238 and 2,380,803 shares outstanding as of March 31, 2023 and December 31, 2022, respectively
Additional paid-in capital	286,076	282,582
Treasury stock, at cost, 333 shares as of March 31, 2023 and December 31, 2022	(50)	(50)
Accumulated deficit	(302,486)	(297,556)
Accumulated other comprehensive income	23	23
Total Stockholders’ Deficiency	(16,437)	(15,001)
Total Liabilities and Stockholders’ Deficiency	22,361	24,918
Related Party
Current liabilities:
Note payable - related party	$ 100	$ 100

Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares	Mar. 31, 2023	Dec. 31, 2022
Preferred stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	100,000,000	100,000,000
Common stock, par value (in Dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	2,683,571	2,381,136
Common stock, shares outstanding	2,683,238	2,380,803
Treasury stock, at cost	333	333
Series A Cumulative Redeemable Perpetual Preferred Stock
Preferred stock, shares designated	690,000	690,000
Preferred stock, shares issued	320,000	320,000
Preferred stock, shares outstanding	320,000	320,000

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Income Statement [Abstract]

Revenue

$ 483

$ 2,053

Cost of goods sold

301

1,483

Gross profit

182

570

Operating expenses (income)

Research and development

^[1]

1,172

Sales and marketing

^[1]

General and administrative

^[1]

2,179

5,780

Depreciation and amortization

741

Impairment

896

Gain on sale (SKS)

^[2],[3]

(454)

Gain on the sale of assets

(8,441)

Total operating expenses (income), net

2,747

(682)

(Loss) income from operations

(2,565)

1,252

Other expense

Interest expense

(419)

(879)

Loss on extinguishment of debt

(173)

Loss on inducement of debt conversions

(1,946)

Total other expense

(2,365)

(1,052)

(Loss) income from continuing operations

(4,930)

200

Loss from discontinued operations, net of tax

(64)

Net (loss) income

(4,930)

136

Dividend on preferred stock

(185)

(123)

Net (loss) income attributable to common stockholders

$ (5,115)

$ 13

Net (loss) income per share

Net (loss) income per share, Basic (in Dollars per share)

$ (1.97)

$ 0.09

Basic from discontinued operations (in Dollars per share)

$ (0.08)

Weighted average number of common shares outstanding

Weighted average number of common shares outstanding basic (in Shares)

2,593,028

835,527

[1]	These are exclusive of depreciation and amortization
[2]	Proceeds from the gain on sale of Sky Sapience (“SKS”) are net of $35,000 cash sold.
[3]	Sky Sapience (“SKS”)

Condensed Consolidated Statements of Operations (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Income Statement [Abstract]
Net (loss) income per share, Diluted	$ (1.97)	$ 0.09
Diluted from discontinued operations		$ (0.08)
Weighted average number of common shares outstanding diluted (in Shares)	2,593,028	835,527

Condensed Consolidated Statements of Stockholders’ (Deficiency) Equity (Unaudited) - USD ($) $ in Thousands	Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Income	Treasury Stock	Accumulated Deficit	Total
Balance at Dec. 31, 2021			$ 266,021	$ 23	$ (50)	$ (217,843)	$ 48,151
Balance (in Shares) at Dec. 31, 2021	320,000	819,851			333
Issuance of common stock for conversion of debt			1,150				1,150
Issuance of common stock for conversion of debt (in Shares)		15,761
Issuance of common stock for exercise of options			31				31
Issuance of common stock for exercise of options (in Shares)		2,098
Preferred dividend			(123)				(123)
Share-based compensation			535				535
Net Income (loss)						136	136
Balance at Mar. 31, 2022			267,614	23	$ (50)	(217,707)	49,880
Balance (in Shares) at Mar. 31, 2022	320,000	837,710			333
Balance at Dec. 31, 2022			282,582	23	$ (50)	(297,556)	(15,001)
Balance (in Shares) at Dec. 31, 2022	320,000	2,381,136			333
Issuance of common stock for conversion of debt			3,547				3,547
Issuance of common stock for conversion of debt (in Shares)		280,625
Round ups pursuant to the reverse split
Round ups pursuant to the reverse split (in Shares)		21,810
Preferred dividend			(185)				(185)
Share-based compensation			132				132
Net Income (loss)						(4,930)	(4,930)
Balance at Mar. 31, 2023			$ 286,076	$ 23	$ (50)	$ (302,486)	$ (16,437)
Balance (in Shares) at Mar. 31, 2023	320,000	2,683,571			333

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Cash Flows From Operating Activities:

Net (loss) income

$ (4,930)

$ 136

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Loss from discontinued operations, net of tax

Depreciation

357

Amortization

384

Impairment

896

Non-cash rent expense

463

271

Bad debt expense

Gain on sale (SKS)

^[1],[2]

(454)

Gain on the sale of assets

(8,441)

Share-based compensation

132

535

Amortization of debt discounts and debt issuance costs

574

Loss on extinguishment of debt

173

Loss on inducement of debt conversions

1,946

Changes in operating assets and liabilities:

Accounts receivable, net

644

(983)

Inventory, net

(370)

217

Prepaid expenses

(495)

Other assets

154

(1,045)

Accounts payable

499

(1,000)

Accrued interest

324

(41)

Accrued liabilities

333

(56)

Contract liabilities

1,053

1,055

Operating lease liabilities

(465)

(868)

Related party notes

(86)

Other current liabilities

252

738

Total Adjustments

5,519

(8,598)

Net Cash Provided By (Used In) Operating Activities

589

(8,462)

Cash Flows From Investing Activities:

Proceeds from sale of SKS

^[1]

436

Proceeds from building sale, net of transaction costs

15,102

Purchases of property and equipment

(193)

Net Cash Provided By Investing Activities

436

14,909

Cash Flows From Financing Activities:

Principal payment on finance lease

(7)

Proceeds from issuance of related party note

100

Proceeds from issuance of debt

170

Proceeds from exercise of options

Preferred stock dividend

(123)

Repayment of debt

(7,588)

Net Cash Provided By (Used In) Financing Activities

170

(7,587)

Net Cash Used in Discontinued Operations

(335)

Net Increase (Decrease) In Cash

1,195

(1,475)

Cash - Beginning of Period

1,868

1,873

Cash - End of Period

3,063

398

Cash paid during the period for:

Interest

105

Non-cash investing and financing activities:

Accrual of preferred dividends not paid yet

185

Reclassification of assets and liabilities held for sale

543

Issuance of common stock for conversions of debt and interest

3,547

1,150

Recognition of operating lease right-of-use asset and liability

$ 10,052

[1]	Proceeds from the gain on sale of Sky Sapience (“SKS”) are net of $35,000 cash sold.
[2]	Sky Sapience (“SKS”)

Description of Business

3 Months Ended

Mar. 31, 2023

Description of Business [Abstract]

DESCRIPTION OF BUSINESS

NOTE 1 DESCRIPTION OF BUSINESS

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

Summary of Significant Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Reclassifications

Correction of an Error

See Note 20 - Correction of an Error.

Principles of Consolidation

Use of Estimates

Long-Lived Assets and Goodwill

Discontinued Operations

Assets and Liabilities Held for Sale

Fair Value Measurements

Reportable Segments and Reporting Units

Recently Adopted Accounting Standards

Discontinued Operations and Assets and Liabilities Held for Sale

3 Months Ended

Mar. 31, 2023

Discontinued Operations and Assets and Liabilities Held for Sale [Abstract]

DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

NOTE 3 DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

Sovereign Plastics LLC

On June 21, 2022, the Company completed the sale of its Sovereign Plastics business unit to TheLandersCompanies LLC for total consideration of $2.0 million in a secured note with interest of 5% and a maturity date of May 31, 2025. As a result of the sale, in the second quarter of 2022, the Company recognized a $1.1 million gain on the sale of Sovereign Plastics which was included in “Loss from discontinued operations, net of tax” in the accompanying consolidated statements of operations and comprehensive loss for the period ended March 31, 2022. See Note 12 – Note and Obligation Receivable for additional information.

Sky Sapience Ltd.

	Sky Sapience
	December 31,
(Amounts in thousands, except share and per share data)	2022
Assets
Cash	$	35
Inventory, net		535
Prepaid and deferred expenses		56
Other current assets		25
Assets held for sale - current		651
Property and equipment, net		640
Operating lease right-of-use assets		269
Intangible assets, net		246
Goodwill		1,219
Assets held for sale - long-term		2,374
Total assets held for sale	$	3,025

Liabilities
Accounts payable	$	233
Accrued liabilities		321
Accrued payroll		321
Contract liabilities - current		1,347
Operating lease liabilities - current		120
Liabilities held for sale - current		2,342
Operating lease liabilities - long-term		140
Liabilities held for sale - long-term		140
Total liabilities held for sale	$	2,482

Going Concern

3 Months Ended

Mar. 31, 2023

Going Concern [Abstract]

GOING CONCERN

NOTE 4 GOING CONCERN

Revenue

3 Months Ended

Mar. 31, 2023

Revenue [Abstract]

REVENUE

NOTE 5 REVENUE

Revenue by type consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Drones	$	243	$	353
Telecom hardware		207		1,289
Support & maintenance		31		40
Software		2		-
Optic repairs		-		314
Consulting		-		57
Total revenue	$	483	$	2,053

The following table is a summary of the Company’s timing of revenue recognition for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Timing of revenue recognition:
Services and products transferred at a point in time	$	451	$	1,955
Services and products transferred over time		32		98
Total revenue	$	483	$	2,053

The Company disaggregates revenue by source and geographic destination to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Revenue by source consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Revenue by products and services:
Products	$	451	$	1,955
Services		32		98
Total revenue	$	483	$	2,053

Revenue by geographic destination consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Revenue by geography:
North America	$	482	$	1,549
International		1		504
Total revenue	$	483	$	2,053

Contract Balances

The following table is a summary of the Company’s opening and closing balances of contract liabilities related to contracts with customers.

(Amounts in thousands)	Total
Balance at December 31, 2022	$	3,384
New invoices not yet earned		1,066
Revenue earned		(13	)
Balance at March 31, 2023	$	4,437

Earnings (Loss) Per Share

3 Months Ended

Mar. 31, 2023

Earnings (Loss) Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

NOTE 6 EARNINGS (LOSS) PER SHARE

The following weighted-average potential common shares were excluded from the diluted loss per common share as their effect was anti-dilutive as of March 31, 2023 and 2022, respectively:

	March 31,
	2023		2022
Options		24,954		66,808
Warrants		115,899		128,149
Convertible notes⁽¹⁾		189,601		52,080
		330,454		247,037

⁽¹⁾	The potentially dilutive shares associated with convertible notes were calculated based on the conditions as of the calculation date.

Cash, Cash Equivalents, and Restricted Cash

3 Months Ended

Mar. 31, 2023

Cash, Cash Equivalents, and Restricted Cash [Abstract]

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

NOTE 7 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Accounts Receivable, Net

3 Months Ended

Mar. 31, 2023

Accounts Receivable, Net [Abstract]

ACCOUNTS RECEIVABLE, NET

NOTE 8 ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Accounts receivable	$	1,723		$	2,372
Less: allowance for doubtful accounts		(1,241	)		(1,246	)
Total accounts receivable, net	$	482		$	1,126

The Company had $0 and $49 thousand of bad debt expense for the three months ended March 31, 2023 and 2022, respectively.

Inventory, Net

3 Months Ended

Mar. 31, 2023

Inventory, Net [Abstract]

INVENTORY, NET

NOTE 9 INVENTORY, NET

Inventory consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Raw materials	$	3,563		$	3,685
Work in progress		794			560
Finished goods		738			480
Total inventory		5,095			4,725
Reserve		(759	)		(759	)
Total inventory, net	$	4,336		$	3,966

Prepaid Expenses

3 Months Ended

Mar. 31, 2023

Prepaid Expenses [Abstract]

PREPAID EXPENSES

NOTE 10 PREPAID EXPENSES

Prepaid expenses consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,		December 31,
(Amounts in thousands)	2023		2022
Prepaid products and services	$	3,517	$	3,557
Prepaid rent and security deposit		14		14
Total prepaid expenses	$	3,531	$	3,571

Property and Equipment, Net

3 Months Ended

Mar. 31, 2023

Property and Equipment, Net [Abstract]

PROPERTY AND EQUIPMENT, NET

NOTE 11 PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Shop machinery and equipment	$	672		$	672
Computers and electronics		766			766
Office furniture and fixtures		68			68
Leasehold improvements		41			41
Total property and equipment		1,547			1,547
Less: accumulated depreciation		(1,206	)		(1,170	)
Total property and equipment, net	$	341		$	377

For the three months ended March 31, 2023 and 2022, the Company had $0.0 million and $0.2 million, respectively, in investments in capital expenditures.

Abandonment of Tucson Building lease – gross assets of $0.6 million with a net book value of $0.1 million on February 1, 2022;

Sale of DragonWave-X Canada, Inc. assets – gross assets of $8.5 million with a net book value of $0.0 million on May 23, 2022; and

Transfer of Innovation Digital, LLC assets – gross assets of $0.1 million with a net book value of $0.1 million on June 23, 2022.

The Company recognized $0.0 million and $0.5 million of depreciation expense for the three months ended March 31, 2023 and 2022, respectively.

Note and Obligation Receivable

3 Months Ended

Mar. 31, 2023

Note and Obligation Receivable [Abstract]

NOTE AND OBLIGATION RECEIVABLE

NOTE 12 NOTE AND OBLIGATION RECEIVABLE

On June 21, 2022, the Company completed the sale of its Sovereign Plastics business unit to TheLandersCompanies LLC for total consideration of $2.0 million in a secured note with interest of 5% and a maturity date of May 31, 2025. The payment schedule of the note is as follows: $0.65 million is due on May 31, 2023, $0.65 million is due on May 31, 2024, and $0.70 million is due on May 31, 2025. While management remains confident of collection, the payment due on May 31, 2023 hasn’t been collected to date. As of March 31, 2023, the note receivable of $2.0 million and accrued interest in aggregate of $0.1 million is included on the condensed consolidated balance sheet.

Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

LEASES

NOTE 13 LEASES

Operating Leases

The Company has operating leases for office, manufacturing and warehouse space, along with office equipment. Balances as of March 31, 2023 and December 31, 2022 for operating leases were as follows:

	March 31,		December 31,
(Amounts in thousands)	2023		2022
Operating lease ROU assets	$	87	$	97
Operating lease liability	$	11,125	$	11,137

Other information related to the Company’s operating leases are as follows:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Operating lease cost	$	488	$	611
Short-term lease cost	$	-	$	9

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	-	$	10,052

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	463	$	549

The following table presents the weighted-average remaining lease term and weighted average discount rates related to the Company’s operating leases as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
	2023			2022
Weighted average remaining lease term (years)		7.79			7.90
Weighted average discount rate		5.51	%		5.52	%

	Operating
(Amounts in thousands)	Leases
2023	$	1,358
2024		1,720
2025		1,625
2026		1,386
2027		1,424
Thereafter		6,862
Total minimum lease payments		14,375
Less: effect of discounting		(3,250	)
Present value of future minimum lease payments		11,125
Less: current obligations under leases		(1,453	)
Long-term lease obligations	$	9,672

Debt

3 Months Ended

Mar. 31, 2023

Debt [Abstract]

DEBT

NOTE 14 DEBT

Debt consisted of the following as of March 31, 2023 and December 31, 2022:

			March 31, 2023						December 31, 2022
(Amounts in thousands)	Note Reference	Maturity Date	Amount Outstanding			Interest Rate			Amount Outstanding			Interest Rate
Secured Notes Payable
Secured senior convertible note payable	A	5/27/23	$	51			6.0	%	$	51			6.0	%
Secured senior convertible note payable	B	8/25/23		59			6.0	%		59			6.0	%
Secured note payable	C	10/25/23		368			6.0	%		368			6.0	%
Secured note payable	D	11/8/23		263			6.0	%		263			6.0	%
Secured note payable	E	11/26/21		775			15.0	%		775			15.0	%
Secured note payable	F	7/29/24		550			8.0	%		550			8.0	%
Secured note payable	G	6/30/23		50			-			50			-
SBA loan	H	5/15/50		150			3.8	%		150			3.8	%
Total secured notes payable				2,266						2,266

Unsecured Notes Payable
Note payable - related party	I	12/31/23		100			5.5	%		100			3.0	%
Note payable	J	7/29/23		26			15.0	%		26			15.0	%
Note payable	K	7/30/23		90			8.0	%		-			-
Note payable	L	8/1/23		80			8.0	%		-			-
Total notes payable				296						126

Unsecured Convertible Notes Payable
Convertible note payable	M	1/29/26		9,805			15.0	%		11,150			3.3	%
Total convertible notes payable				9,805						11,150

Total debt				12,367						13,542
Less: unamortized discounts and debt issuance costs				(8	)					(11	)
Total long-term debt, less discounts and debt issuance costs				12,359						13,531
Less: current portion of debt				(11,809	)					(11,636	)
Long-term portion of debt			$	550					$	1,895

Debt activity during the three months ended March 31, 2023 included the following:

Future maturities contractually required by the Company under long-term debt obligations are as follows as of March 31, 2023:

(Amounts in thousands)	Total
2023	$	11,817
2024		550
2025		-
2026		-
2027		-
Thereafter		-
Total	$	12,367

Stockholders’ Equity

3 Months Ended

Mar. 31, 2023

Stockholders’ Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 15 STOCKHOLDERS’ EQUITY

Reverse Stock Split

Dividends

During the three months ended March 31, 2023 and 2022, the Company recorded $184,992 and $123,328, respectively, of dividends paid or payable to the holders of the 9.25% Series A Preferred Stock.

Common Stock

Share-Based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Compensation [Abstract]

SHARE-BASED COMPENSATION

NOTE 16 SHARE-BASED COMPENSATION

Restricted Stock Awards

A summary of the restricted stock unit (“RSA”) activity during the three months ended March 31, 2023 is presented below:

				Weighted-
				Average
	Number of			Grant Date Value
	RSA’s			Per Share
RSA’s non-vested - January 1, 2023		333		$	450
Granted		-			-
Forfeited		-			-
Vested		(333	)		450
RSA’s non-vested - March 31, 2023		-		$	-

Stock Options

There were no stock options issued during the three months ended March 31, 2023 and 2022.

The following table presents stock option activity for the three months ended March 31, 2023:

				Weighted		Weighted
				Average Exercise		Average Contractual		Aggregate
	Number of			Price		Life in		Intrinsic
	Options			Per Share		Years		Value
Outstanding - December 31, 2022		26,554		$	223
Exercised		-			-
Cancelled or Expired		(1,600	)		291
Outstanding - March 31, 2023		24,954		$	219		2.78	$	-
Exercisable - March 31, 2023		17,496		$	195		2.34	$	-

The following table presents information related to stock options as of March 31, 2023:

Options Outstanding				Options Exercisable
				Weighted
Exercise		Outstanding		Average		Exercisable
Price		Number of		Remaining Life		Number of
Per Share		Options		In Years		Options
	$ 0.01 - $ 50.00		-		-		-
	$ 50.01 - $100.00		5,688		2.27		5,688
	$ 100.01 - $ 150.00		-		-		-
	$ 150.01 - $ 200.00		2,900		0.75		2,900
	$ 200.01 - $ 250.00		-		-		-
	$ 250.01 - $ 300.00		16,033		2.92		8,575
	$ 300.01 - $ 350.00		333		2.27		333
			24,954		2.34		17,496

Commitments and Contingencies

3 Months Ended

Mar. 31, 2023

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 17 COMMITMENTS AND CONTINGENCIES

See Note 21 – Subsequent Events – Litigation, Claims and Contingencies Developments for post-March 31, 2023 developments.

Concentrations

3 Months Ended

Mar. 31, 2023

Concentrations [Abstract]

CONCENTRATIONS

NOTE 18 CONCENTRATIONS

Other Business Developments

3 Months Ended

Mar. 31, 2023

Other Business Developments [Abstract]

OTHER BUSINESS DEVELOPMENTS

NOTE 19 OTHER BUSINESS DEVELOPMENTS

Nasdaq Compliance Developments

Business Developments

In January 2023, the Company idled the employees of RF Engineering & Energy Resource, LLC.

Correction of an Error

3 Months Ended

Mar. 31, 2023

Correction of an Error [Abstract]

CORRECTION OF AN ERROR

NOTE 20 CORRECTION OF AN ERROR

	For the Three Months Ended
Condensed Consolidated Statements of Operations:	March 31, 2023
(Amounts in thousands)	Before Adjustment			Adjustment			As Reported
Impairment	$	-		$	896		$	896
Net loss from continuing operations	$	(4,034	)	$	(896	)	$	(4,930	)
Net loss from continuing operations – basic and diluted per share	$	(1.63	)	$	(0.34	)	$	(1.97	)

Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 21 SUBSEQUENT EVENTS

Debt and Equity Developments

On May 26, 2023, pursuant to the note agreement, $100,000 of penalties and interest were capitalized into principal (Note E – see Note 14 – Debt).

Litigation, Claims and Contingencies Developments

Nasdaq Compliance Developments

Accounting Policies, by Policy (Policies)	3 Months Ended
Accounting Policies, by Policy (Policies)	Mar. 31, 2023
Summary of Significant Accounting Policies [Abstract]
Basis of Presentation	*Basis of Presentation* The accompanying financial statements of the Company were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations and financial position for the three months ended March 31, 2023 and cash flows for the three months ended March 31, 2023 are not necessarily indicative of the operating results for the full year ending December 31, 2023 or any other period. The amounts reported in the unaudited condensed consolidated financial statements, and the tables in the notes hereto, of the Quarterly Report on Form 10-Q as of March 31, 2023 and for the three months ended March 31, 2023 and 2022, are presented in United States dollars and are rounded in thousands with the exception of share and per share data. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2022 and for the year then ended, which were filed with the Securities and Exchange Commission (“SEC”) on Form 10-K on December 7, 2023. Effective February 10, 2023, the Company enacted a 1-for-100 reverse stock split (the “2023 Split”) of the Company’s common stock. These consolidated financial statements and accompanying notes give effect to the reverse stock split as if it occurred at the beginning of the first period presented.
Reclassifications	*Reclassifications* Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. These reclassifications had no effect on the previously reported results of operations or loss per share.
Correction of an Error	*Correction of an Error* See Note 20 - Correction of an Error.
Principle of Consolidation	*Principles of Consolidation* The unaudited condensed consolidated financial statements as of March 31, 2023 and December 31, 2022, and for the three months ended March 31, 2023 and 2022, include the accounts of the Company and its subsidiaries. All intercompany transactions and accounts have been eliminated.
Use of Estimates	*Use of Estimates* The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates consist of the valuation of stock-based compensation; the valuation of the assets and liabilities acquired; the valuation of the Company’s equity securities issued in transactions; the valuation of inventory; the allowance for credit losses; the valuation of equity securities; the valuation allowance for deferred tax assets; and impairment of long-lived assets and goodwill.
Long-Lived Assets and Goodwill	*Long-Lived Assets and Goodwill* The Company accounts for long-lived assets in accordance with the provisions of ASC 360-10-35, Property, Plant and Equipment, Impairment or Disposal of Long-lived Assets. This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company accounts for goodwill and intangible assets in accordance with ASC 350, Intangibles – Goodwill and Other. Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. ASC 350 requires that goodwill and other intangibles with indefinite lives be tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of an asset has decreased below its carrying value. As of March 31, 2023, the Company determined that it was not more likely than not that the reporting unit’s fair value was below its carrying amount due to a decline in the Company’s market capitalization. Accordingly, it was not necessary to perform impairment testing as of March 31, 2023. However, please see Note 20 – Correction of an Error for details related to the recognition of additional 2022 impairment expense. In determining whether a quantitative assessment is required, the Company will evaluate relevant events or circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after performing the qualitative assessment, an entity concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the entity would perform the quantitative impairment test described in ASC 350. However, if, after applying the qualitative assessment, the entity concludes that it is not more than likely that the fair value is less than the carrying amount, the quantitative impairment test is not required. The Company bases these assumptions on its historical data and experience, industry projections, micro and macro general economic condition projections, and its expectations. The Company calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches and compares it to the carrying values. For the income approach, the Company uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. For the market approach, the Company uses internal analyses based primarily on market comparables. The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and its expectations. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment.
Discontinued Operations	*Discontinued Operations* On June 21, 2022, the Company completed the sale of its Sovereign Plastics business unit to TheLandersCompanies LLC for total consideration of $2.0 million in a secured note with interest of 5% and a maturity date of May 31, 2025. The results of Sovereign Plastics are reflected in the accompanying statements of operations for the three months ended March 31, 2022 as loss from discontinued operations, net of tax (see Note 3 – Discontinued Operations and Assets and Liabilities Held for Sale for additional information).
Assets and Liabilities Held for Sale	*Assets and Liabilities Held for Sale* On March 20, 2023, the Company completed the sale of its Sky Sapience business unit to Titan Innovations Ltd. for total consideration of $1.8 million. Accordingly, assets and liabilities of Sky Sapience are reflected in the accompanying condensed consolidated balance sheet as “Assets held for sale” and “Liabilities held for sale”, respectively, as of December 31, 2022 (see Note 3 – Discontinued Operations and Assets and Liabilities Held for Sale for additional information).
Fair Value Measurements	*Fair Value Measurements* Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). ASC 820 established a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement) as follows: Level 1 – Observable inputs that reflect quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 – Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market corroborated inputs. Level 3 – Unobservable inputs for which there is little, if any, market activity for the asset or liability being measured. These inputs may be used with standard pricing models or other valuation or internally-developed methodologies that result in management’s best estimate of fair value. The Company utilizes fair value measurements primarily in conjunction with the valuation of assets acquired and liabilities assumed in a business combination. In addition, certain nonfinancial assets and liabilities are to be measured at fair value on a nonrecurring basis in accordance with applicable U.S. GAAP. In general, nonfinancial assets including goodwill, other intangible assets and property and equipment are measured at fair value when there is an indication of impairment and are recorded at fair value only when an impairment is recognized. As allowed by applicable FASB guidance, the Company has elected not to apply the fair value option for financial assets and liabilities to any of its currently eligible financial assets or liabilities. The Company’s financial instruments consist of cash, accounts receivable, accounts payable and notes payable. The Company has determined that the book value of its outstanding financial instruments as of March 31, 2023 and December 31, 2022 approximated their fair value due to their short-term nature.
Reportable Segments and Reporting Units	*Reportable Segments and Reporting Units* A reporting unit (“RU”) is a component of an operating segment that is a business activity for which discrete financial information is available and segment management regularly reviews the operating results of that component. The Company’s legal operating subsidiaries are not organized to qualify as individual segments, however, each operating entity had separate financial information and an operating manager, who oversees the business and financial activities, reporting to the Chief Operating Decision Maker (“CODM”). Therefore, during 2022, the Company operated as one reportable segment and each legal entity was deemed to be a separate reporting unit. As of January 1, 2023, the Company began operating as a single reporting unit. As part of the Company’s restructuring, the Company integrated its previously separate reporting units, including employing a single integrated sales function, and the Chief Executive Officer is managing the Company and making decisions based on the Company’s consolidated operating results.
Recently Adopted Accounting Standards	*Recently Adopted Accounting Standards* In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 replaced the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 requires use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. ASU 2016-13 was originally effective for fiscal years beginning after December 15, 2019, with early adoption permitted. In October 2019, the FASB issued ASU No. 2019-10, “Financial Instruments-Credit Losses (Topic 326): Effective Dates”, to finalize the effective date delays for private companies, not-for-profits, and smaller reporting companies applying the current expected credit losses (“CECL”) standards. The ASU is now effective for reporting periods beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU on January 1, 2023 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

Discontinued Operations and Assets and Liabilities Held for Sale (Tables)

3 Months Ended

Mar. 31, 2023

Discontinued Operations [Abstract]

Schedule of Assets and Liabilities of Discontinued Operations

Sky Sapience’s assets and liabilities met the criteria to be classified as held for sale as of December 31, 2022 as follows:

	Sky Sapience
	December 31,
(Amounts in thousands, except share and per share data)	2022
Assets
Cash	$	35
Inventory, net		535
Prepaid and deferred expenses		56
Other current assets		25
Assets held for sale - current		651
Property and equipment, net		640
Operating lease right-of-use assets		269
Intangible assets, net		246
Goodwill		1,219
Assets held for sale - long-term		2,374
Total assets held for sale	$	3,025

Liabilities
Accounts payable	$	233
Accrued liabilities		321
Accrued payroll		321
Contract liabilities - current		1,347
Operating lease liabilities - current		120
Liabilities held for sale - current		2,342
Operating lease liabilities - long-term		140
Liabilities held for sale - long-term		140
Total liabilities held for sale	$	2,482

Revenue (Tables)

3 Months Ended

Mar. 31, 2023

Revenue [Abstract]

Schedule of Revenue

Revenue by type consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Drones	$	243	$	353
Telecom hardware		207		1,289
Support & maintenance		31		40
Software		2		-
Optic repairs		-		314
Consulting		-		57
Total revenue	$	483	$	2,053

Schedule of timing of revenue recognition

The following table is a summary of the Company’s timing of revenue recognition for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Timing of revenue recognition:
Services and products transferred at a point in time	$	451	$	1,955
Services and products transferred over time		32		98
Total revenue	$	483	$	2,053

Schedule of Revenue by Source

Revenue by source consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Revenue by products and services:
Products	$	451	$	1,955
Services		32		98
Total revenue	$	483	$	2,053

Schedule of Revenue by Geographic Destination

Revenue by geographic destination consisted of the following for the three months ended March 31, 2023 and 2022:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Revenue by geography:
North America	$	482	$	1,549
International		1		504
Total revenue	$	483	$	2,053

Schedule of Opening and Closing Balances of Contract Liabilities

The following table is a summary of the Company’s opening and closing balances of contract liabilities related to contracts with customers.

(Amounts in thousands)	Total
Balance at December 31, 2022	$	3,384
New invoices not yet earned		1,066
Revenue earned		(13	)
Balance at March 31, 2023	$	4,437

Earnings (Loss) Per Share (Tables)

3 Months Ended

Mar. 31, 2023

Earnings (Loss) Per Share [Abstract]

Schedule of Weighted-Average Potential Common Shares

The following weighted-average potential common shares were excluded from the diluted loss per common share as their effect was anti-dilutive as of March 31, 2023 and 2022, respectively:

	March 31,
	2023		2022
Options		24,954		66,808
Warrants		115,899		128,149
Convertible notes⁽¹⁾		189,601		52,080
		330,454		247,037

⁽¹⁾	The potentially dilutive shares associated with convertible notes were calculated based on the conditions as of the calculation date.

Accounts Receivable, Net (Tables)

3 Months Ended

Mar. 31, 2023

Accounts Receivable, Net [Abstract]

Schedule of Accounts Receivable

Accounts receivable consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Accounts receivable	$	1,723		$	2,372
Less: allowance for doubtful accounts		(1,241	)		(1,246	)
Total accounts receivable, net	$	482		$	1,126

Inventory, Net (Tables)

3 Months Ended

Mar. 31, 2023

Inventory, Net [Abstract]

Schedule of Inventory

Inventory consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Raw materials	$	3,563		$	3,685
Work in progress		794			560
Finished goods		738			480
Total inventory		5,095			4,725
Reserve		(759	)		(759	)
Total inventory, net	$	4,336		$	3,966

Prepaid Expenses (Tables)

3 Months Ended

Mar. 31, 2023

Schedule of prepaid expenses [Abstract]

Schedule of Prepaid Expenses

Prepaid expenses consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,		December 31,
(Amounts in thousands)	2023		2022
Prepaid products and services	$	3,517	$	3,557
Prepaid rent and security deposit		14		14
Total prepaid expenses	$	3,531	$	3,571

Property and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2023

Property and Equipment, Net [Abstract]

Schedule of Property and Equipment, Net

Property and equipment, net consisted of the following as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
(Amounts in thousands)	2023			2022
Shop machinery and equipment	$	672		$	672
Computers and electronics		766			766
Office furniture and fixtures		68			68
Leasehold improvements		41			41
Total property and equipment		1,547			1,547
Less: accumulated depreciation		(1,206	)		(1,170	)
Total property and equipment, net	$	341		$	377

Leases (Tables)

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Schedule of Operating Leases

The Company has operating leases for office, manufacturing and warehouse space, along with office equipment. Balances as of March 31, 2023 and December 31, 2022 for operating leases were as follows:

	March 31,		December 31,
(Amounts in thousands)	2023		2022
Operating lease ROU assets	$	87	$	97
Operating lease liability	$	11,125	$	11,137

Schedule of Other Information Related To Operating Leases

Other information related to the Company’s operating leases are as follows:

	For the Three Months Ended
	March 31,
(Amounts in thousands)	2023		2022
Operating lease cost	$	488	$	611
Short-term lease cost	$	-	$	9

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	-	$	10,052

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	463	$	549

Schedule of Weighted-Average Remaining Lease Term and Weighted Average Discount Rates

The following table presents the weighted-average remaining lease term and weighted average discount rates related to the Company’s operating leases as of March 31, 2023 and December 31, 2022:

	March 31,			December 31,
	2023			2022
Weighted average remaining lease term (years)		7.79			7.90
Weighted average discount rate		5.51	%		5.52	%

Schedule of Total Remaining Years to Lease Liabilities Operating Leases

	Operating
(Amounts in thousands)	Leases
2023	$	1,358
2024		1,720
2025		1,625
2026		1,386
2027		1,424
Thereafter		6,862
Total minimum lease payments		14,375
Less: effect of discounting		(3,250	)
Present value of future minimum lease payments		11,125
Less: current obligations under leases		(1,453	)
Long-term lease obligations	$	9,672

Debt (Tables)

3 Months Ended

Mar. 31, 2023

Debt [Abstract]

Schedule of Debt Consisted

Debt consisted of the following as of March 31, 2023 and December 31, 2022:

			March 31, 2023						December 31, 2022
(Amounts in thousands)	Note Reference	Maturity Date	Amount Outstanding			Interest Rate			Amount Outstanding			Interest Rate
Secured Notes Payable
Secured senior convertible note payable	A	5/27/23	$	51			6.0	%	$	51			6.0	%
Secured senior convertible note payable	B	8/25/23		59			6.0	%		59			6.0	%
Secured note payable	C	10/25/23		368			6.0	%		368			6.0	%
Secured note payable	D	11/8/23		263			6.0	%		263			6.0	%
Secured note payable	E	11/26/21		775			15.0	%		775			15.0	%
Secured note payable	F	7/29/24		550			8.0	%		550			8.0	%
Secured note payable	G	6/30/23		50			-			50			-
SBA loan	H	5/15/50		150			3.8	%		150			3.8	%
Total secured notes payable				2,266						2,266

Unsecured Notes Payable
Note payable - related party	I	12/31/23		100			5.5	%		100			3.0	%
Note payable	J	7/29/23		26			15.0	%		26			15.0	%
Note payable	K	7/30/23		90			8.0	%		-			-
Note payable	L	8/1/23		80			8.0	%		-			-
Total notes payable				296						126

Unsecured Convertible Notes Payable
Convertible note payable	M	1/29/26		9,805			15.0	%		11,150			3.3	%
Total convertible notes payable				9,805						11,150

Total debt				12,367						13,542
Less: unamortized discounts and debt issuance costs				(8	)					(11	)
Total long-term debt, less discounts and debt issuance costs				12,359						13,531
Less: current portion of debt				(11,809	)					(11,636	)
Long-term portion of debt			$	550					$	1,895

Schedule of Future Maturities Contractually Required by the Company under Long-Term Debt Obligations

Future maturities contractually required by the Company under long-term debt obligations are as follows as of March 31, 2023:

(Amounts in thousands)	Total
2023	$	11,817
2024		550
2025		-
2026		-
2027		-
Thereafter		-
Total	$	12,367

Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2023

Share-Based Compensation [Abstract]

Schedule of the Restricted Stock Unit

A summary of the restricted stock unit (“RSA”) activity during the three months ended March 31, 2023 is presented below:

				Weighted-
				Average
	Number of			Grant Date Value
	RSA’s			Per Share
RSA’s non-vested - January 1, 2023		333		$	450
Granted		-			-
Forfeited		-			-
Vested		(333	)		450
RSA’s non-vested - March 31, 2023		-		$	-

Schedule of Stock Option Activity

The following table presents stock option activity for the three months ended March 31, 2023:

				Weighted		Weighted
				Average Exercise		Average Contractual		Aggregate
	Number of			Price		Life in		Intrinsic
	Options			Per Share		Years		Value
Outstanding - December 31, 2022		26,554		$	223
Exercised		-			-
Cancelled or Expired		(1,600	)		291
Outstanding - March 31, 2023		24,954		$	219		2.78	$	-
Exercisable - March 31, 2023		17,496		$	195		2.34	$	-

Schedule of Presents Information Related to Stock Options

The following table presents information related to stock options as of March 31, 2023:

Options Outstanding				Options Exercisable
				Weighted
Exercise		Outstanding		Average		Exercisable
Price		Number of		Remaining Life		Number of
Per Share		Options		In Years		Options
	$ 0.01 - $ 50.00		-		-		-
	$ 50.01 - $100.00		5,688		2.27		5,688
	$ 100.01 - $ 150.00		-		-		-
	$ 150.01 - $ 200.00		2,900		0.75		2,900
	$ 200.01 - $ 250.00		-		-		-
	$ 250.01 - $ 300.00		16,033		2.92		8,575
	$ 300.01 - $ 350.00		333		2.27		333
			24,954		2.34		17,496

Correction of an Error (Tables)

3 Months Ended

Mar. 31, 2023

Correction of an Error [Abstract]

Schedule of Correction of an Error

	For the Three Months Ended
Condensed Consolidated Statements of Operations:	March 31, 2023
(Amounts in thousands)	Before Adjustment			Adjustment			As Reported
Impairment	$	-		$	896		$	896
Net loss from continuing operations	$	(4,034	)	$	(896	)	$	(4,930	)
Net loss from continuing operations – basic and diluted per share	$	(1.63	)	$	(0.34	)	$	(1.97	)

Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions		1 Months Ended	3 Months Ended
	Jun. 21, 2022	Jun. 21, 2022	Mar. 31, 2023
Summary of Significant Accounting Policies [Abstract]
Total consideration	$ 2.0	$ 2.0
Interest rate	5.00%
Total consideration			$ 1.8
Sovereign Plastics [Member]
Summary of Significant Accounting Policies [Abstract]
Maturity date	May 31, 2025	May 31, 2025

Discontinued Operations and Assets and Liabilities Held for Sale (Details) - USD ($)
$ in Thousands

1 Months Ended

3 Months Ended

Mar. 20, 2023

Jun. 21, 2022

Mar. 31, 2023

Mar. 31, 2022

Discontinued Operations and Assets and Liabilities Held for Sale [Line Items]

Total consideration

$ 2,000

Recognized gain on sale

$ 1,100

Sale of business consideration

$ 1,800

$ 454

^[1],[2]

Obligation receivable

$ 600

Proceeds from sale of business

$ 2,000

Sovereign Plastics [Member]

Discontinued Operations and Assets and Liabilities Held for Sale [Line Items]

Interest percentage

5.00%

Maturity date

May 31, 2025

SKS [Member]

Discontinued Operations and Assets and Liabilities Held for Sale [Line Items]

Sale of business consideration

500

Total liabilities assumed

2,500

Obligation receivable

600

Proceeds from sale of business

500

Total assets acquired

3,000

Other consultant costs

$ 100

[1]	Proceeds from the gain on sale of Sky Sapience (“SKS”) are net of $35,000 cash sold.
[2]	Sky Sapience (“SKS”)

Discontinued Operations and Assets and Liabilities Held for Sale (Details) - Schedule of Assets and Liabilities of Discontinued Operations - Sovereign Plastics [Member] $ in Thousands	Dec. 31, 2022 USD ($)
Assets
Cash	$ 35
Inventory, net	535
Prepaid and deferred expenses	56
Other current assets	25
Assets held for sale - current	651
Property and equipment, net	640
Operating lease right-of-use assets	269
Intangible assets, net	246
Goodwill	1,219
Assets held for sale - long-term	2,374
Total assets held for sale	3,025
Liabilities
Accounts payable	233
Accrued liabilities	321
Accrued payroll	321
Contract liabilities - current	1,347
Operating lease liabilities - current	120
Liabilities held for sale - current	2,342
Operating lease liabilities - long-term	140
Liabilities held for sale - long-term	140
Total liabilities held for sale	$ 2,482

Going Concern (Details) - USD ($) $ in Thousands	3 Months Ended
Going Concern (Details) - USD ($) $ in Thousands	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Going Concern [Abstract]
Cash flows from operations	$ 589	$ (8,462)
Accumulated deficit	(302,486)		$ (297,556)
Working capital deficit	$ 16,300

Revenue (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
Revenue (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Revenue [Abstract]
Deferred revenue		$ 3.4
Balance of deferred revenue		$ 13.0
Recognized and recorded as revenue	$ 1.9
Remaining contract balance	$ 1.5

Revenue (Details) - Schedule of Revenue - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Principal Transaction Revenue [Line Items]
Total revenue	$ 483	$ 2,053
Drones [Member]
Principal Transaction Revenue [Line Items]
Total revenue	243	353
Telecom hardware [Member]
Principal Transaction Revenue [Line Items]
Total revenue	207	1,289
Support & maintenance [Member]
Principal Transaction Revenue [Line Items]
Total revenue	31	40
Software [Member]
Principal Transaction Revenue [Line Items]
Total revenue	2
Optic repairs [Member]
Principal Transaction Revenue [Line Items]
Total revenue		314
Consulting [Member]
Principal Transaction Revenue [Line Items]
Total revenue		$ 57

Revenue (Details) - Schedule of Timing of Revenue Recognition - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Timing of revenue recognition:
Total revenue	$ 483	$ 2,053
Services and Products Transferred at a Point in Time [Member]
Timing of revenue recognition:
Total revenue	451	1,955
Services and Products Transferred Over Time [Member]
Timing of revenue recognition:
Total revenue	$ 32	$ 98

Revenue (Details) - Schedule of Revenue by Source - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue by products and services:
Total revenue	$ 483	$ 2,053
Product [Member]
Revenue by products and services:
Total revenue	451	1,955
Service [Member]
Revenue by products and services:
Total revenue	$ 32	$ 98

Revenue (Details) - Schedule of Revenue by Geographic Destination - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Revenue by geography:
Total revenue	$ 483	$ 2,053
North America [Member]
Revenue by geography:
Total revenue	482	1,549
International [Member]
Revenue by geography:
Total revenue	$ 1	$ 504

Revenue (Details) - Schedule of Opening and Closing Balances of Contract Liabilities $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($)
Schedule of Opening and Closing Balances of Contract Liabilities [Abstract]
Beginning balance	$ 3,384
New invoices not yet earned	1,066
Revenue earned	(13)
Ending balance	$ 4,437

Earnings (Loss) Per Share (Details) - Schedule of Weighted-Average Potential Common Shares - shares

3 Months Ended

Mar. 31, 2023

Mar. 31, 2022

Schedule Of Weighted Average Potential Common Shares Abstract

Options

24,954

66,808

Warrants

115,899

128,149

Convertible notes

^[1]

189,601

52,080

Total

330,454

247,037

[1]	The potentially dilutive shares associated with convertible notes were calculated based on the conditions as of the calculation date.

Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Cash, Cash Equivalents, and Restricted Cash [Line Items]
Restricted cash		$ 195,000
Equipment leases	$ 47,000
Restricted cash held for sale	$ 35,000

Accounts Receivable, Net (Details) - USD ($)	3 Months Ended
Accounts Receivable, Net (Details) - USD ($)	Mar. 31, 2023	Mar. 31, 2022
Accounts Receivable, Net [Abstract]
Bad debt expense	$ 0	$ 49,000

Accounts Receivable, Net (Details) - Schedule of Accounts Receivable - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Schedule of Accounts Receivable [Abstract]
Accounts receivable	$ 1,723	$ 2,372
Less: allowance for doubtful accounts	(1,241)	(1,246)
Total accounts receivable, net	$ 482	$ 1,126

Inventory, Net (Details) - Schedule of Inventory - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Schedule of Inventory [Abstract]
Raw materials	$ 3,563	$ 3,685
Work in progress	794	560
Finished goods	738	480
Total inventory	5,095	4,725
Reserve	(759)	(759)
Total inventory, net	$ 4,336	$ 3,966

Prepaid Expenses (Details) - USD ($) $ in Millions	Mar. 31, 2023	Dec. 31, 2022
Prepaid Expenses [Abstract]
Inventory deposits	$ 2.9	$ 2.9

Prepaid Expenses (Details) - Schedule of Prepaid Expenses - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Schedule of Prepaid Expenses [Abstract]
Prepaid products and services	$ 3,517	$ 3,557
Prepaid rent and security deposit	14	14
Total prepaid expenses	$ 3,531	$ 3,571

Property and Equipment, Net (Details) - USD ($) $ in Millions			1 Months Ended	3 Months Ended
	Feb. 01, 2022	Jan. 31, 2022	Jun. 23, 2022	Mar. 31, 2023	May 23, 2022	Mar. 31, 2022
Property and Equipment, Net [Line Items]
Capital expenditure				$ 0.0		$ 0.2
Cash		$ 15.8
Carrying value		6.7
Cost basis of building		4.8
Cost basis of land		1.3
Building improvements		0.8
Accumulated depreciation		0.2
Gain on sale of assets		8.4
Transaction cost		$ 0.7
Depreciation expense				$ 0.0		$ 0.5
Tucson Building lease [Member]
Property and Equipment, Net [Line Items]
Gross assets	$ 0.6
Net book value	$ 0.1
DragonWave-X Canada [Member]
Property and Equipment, Net [Line Items]
Gross assets					$ 8.5
Net book value					$ 0.0
Innovation Digital, LLC [Member]
Property and Equipment, Net [Line Items]
Gross assets			$ 0.1
Net book value			$ 0.1

Property and Equipment, Net (Details) - Schedule of Property and Equipment, Net - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 1,547	$ 1,547
Less: accumulated depreciation	(1,206)	(1,170)
Total property and equipment, net	341	377
Shop machinery and equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	672	672
Computers and electronics [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	766	766
Office furniture and fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	68	68
Leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 41	$ 41

Note and Obligation Receivable (Details) - USD ($) $ in Thousands		3 Months Ended
	Jun. 21, 2022	Mar. 31, 2023	Mar. 20, 2023
Note and Obligation Receivable [Line Items]
Total consideration	$ 2,000
Percentage of interest	5.00%
Note receivable		$ 2,000
Accrued interest		$ 100
Obligation receivable			$ 600
Due on May 31, 2023 [Member]
Note and Obligation Receivable [Line Items]
Total consideration	$ 650
Due on May 31, 2024 [Member]
Note and Obligation Receivable [Line Items]
Total consideration	650
May 31, 2025 [Member]
Note and Obligation Receivable [Line Items]
Total consideration	$ 700
TheLandersCompanies LLC [Member]
Note and Obligation Receivable [Line Items]
Maturity date	May 31, 2025

Leases (Details) - Schedule of Operating Leases - USD ($) $ in Thousands	Mar. 31, 2023	Dec. 31, 2022
Schedule of Operating Leases [Abstract]
Operating lease ROU assets	$ 87	$ 97
Operating lease liability	$ 11,125	$ 11,137

Leases (Details) - Schedule of Other Information Related to Operating Leases - Other information related [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Schedule of Other Information Related to Operating Leases [Abstract]
Operating lease cost	$ 488	$ 611
Short-term lease cost		9
Right-of-use assets obtained in exchange for lease obligations
Operating leases		10,052
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$ 463	$ 549

Leases (Details) - Schedule of Weighted-Average Remaining Lease Term and Weighted Average Discount Rates	Mar. 31, 2023	Dec. 31, 2022
Schedule of weighted-average remaining lease term and weighted average discount rates [Abstract]
Weighted average remaining lease term (years)	7 years 9 months 14 days	7 years 10 months 24 days
Weighted average discount rate	5.51%	5.52%

Leases (Details) - Schedule of Total Remaining Years to Lease Liabilities Operating Leases - Operating Leases [Member] $ in Thousands	Mar. 31, 2023 USD ($)
Schedule of total remaining years to lease liabilities operating leases [Abstract]
2023	$ 1,358
2024	1,720
2025	1,625
2026	1,386
2027	1,424
Thereafter	6,862
Total minimum lease payments	14,375
Less: effect of discounting	(3,250)
Present value of future minimum lease payments	11,125
Less: current obligations under leases	(1,453)
Long-term lease obligations	$ 9,672

Debt (Details) - USD ($)					1 Months Ended	3 Months Ended
Debt (Details) - USD ($)	Mar. 14, 2023	Feb. 01, 2023	Jan. 17, 2023	May 24, 2022	Jan. 31, 2023	Mar. 31, 2023	Mar. 31, 2022	Apr. 13, 2023	Jan. 20, 2023
Debt (Details) [Line Items]
Loss on inducement of debt conversion						$ 1,946,000
Subsequent Event [Member]
Debt (Details) [Line Items]
Shares of issued common stock								12,000
Note F [Member]
Debt (Details) [Line Items]
Maturity date	Jul. 29, 2024
Interest rate	8.00%
Discount rate	10.00%
Term of advisory services	2 years
Shares of issued common stock	12,000
Note K [Member]
Debt (Details) [Line Items]
Interest rate			15.00%
Principal amount			$ 90,000
Proceeds amount			90,000
Restricted amount			88,000
Debt offering			$ 2,500,000
Accrue interest Percentage			8.00%
Conversion price			81.00%
Conversion price per share			$ 5
Note L [Member]
Debt (Details) [Line Items]
Interest rate		15.00%
Principal amount		$ 80,000
Debt offering		$ 2.5
Accrue interest Percentage		8.00%
Conversion price		81.00%
Conversion price per share		$ 5
Note M [Member]
Debt (Details) [Line Items]
Discount rate					81.00%
Shares of issued common stock						280,625
Principal amount					$ 1,300,000
Accrue interest Percentage						15.00%
Convertible promissory notes				$ 11,200,000
Payment of interest									$ 75,985
Purchase of warrants					0.3
Share of common stock					280,625	3,068
Loss on inducement of debt conversion						$ 1,900,000

Debt (Details) - Schedule of Debt Consisted - Long-Term Debt [Member] - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Secured Notes Payable
Amount Outstanding	$ 9,805	$ 11,150
Total debt	12,367	13,542
Less: unamortized discounts and debt issuance costs	(8)	(11)
Total long-term debt, less discounts and debt issuance costs	12,359	13,531
Less: current portion of debt	(11,809)	(11,636)
Long-term portion of debt	$ 550	1,895
Secured Senior Convertible Note Payable [Member]
Secured Notes Payable
Maturity Date	May 27, 2023
Amount Outstanding	$ 51	$ 51
Interest Rate	6.00%	6.00%
Secured Senior Convertible Note Payable One [Member]
Secured Notes Payable
Maturity Date	Aug. 25, 2023
Amount Outstanding	$ 59	$ 59
Interest Rate	6.00%	6.00%
Secured Note Payable C [Member]
Secured Notes Payable
Maturity Date	Oct. 25, 2023
Amount Outstanding	$ 368	$ 368
Interest Rate	6.00%	6.00%
Secured Note Payable D [Member]
Secured Notes Payable
Maturity Date	Nov. 08, 2023
Amount Outstanding	$ 263	$ 263
Interest Rate	6.00%	6.00%
Secured Note Payable E [Member]
Secured Notes Payable
Maturity Date	Nov. 26, 2021
Amount Outstanding	$ 775	$ 775
Interest Rate	15.00%	15.00%
Secured Note Payable F [Member]
Secured Notes Payable
Maturity Date	Jul. 29, 2024
Amount Outstanding	$ 550	$ 550
Interest Rate	8.00%	8.00%
Secured Note Payable H [Member]
Secured Notes Payable
Maturity Date	Jun. 30, 2023
Amount Outstanding	$ 50	$ 50
Interest Rate
SBA loan [Member]
Secured Notes Payable
Maturity Date	May 15, 2050
Amount Outstanding	$ 150	$ 150
Interest Rate	3.80%	3.80%
Secured Note Payable Two [Member]
Secured Notes Payable
Amount Outstanding	$ 2,266	$ 2,266
Note payable - related party [Member]
Secured Notes Payable
Maturity Date	Dec. 31, 2023
Amount Outstanding	$ 100	$ 100
Interest Rate	5.50%	3.00%
Notes Payable [Member]
Secured Notes Payable
Maturity Date	Jul. 29, 2023
Amount Outstanding	$ 26	$ 26
Interest Rate	15.00%	15.00%
Note Payable One [Member]
Secured Notes Payable
Maturity Date	Jul. 30, 2023
Amount Outstanding	$ 90
Interest Rate	8.00%
Note Payable Two [Member]
Secured Notes Payable
Maturity Date	Aug. 01, 2023
Amount Outstanding	$ 80
Interest Rate	8.00%
Total Notes Payable [Member]
Secured Notes Payable
Amount Outstanding	$ 296	$ 126
Convertible note payable [Member]
Secured Notes Payable
Maturity Date	Jan. 29, 2026
Amount Outstanding	$ 9,805	$ 11,150
Interest Rate	15.00%	3.30%

Debt (Details) - Schedule of Future Maturities Contractually Required by the Company Under Long-Term Debt Obligations $ in Thousands	Mar. 31, 2023 USD ($)
Schedule Of Future Maturities Contractually Required By The Company Under Long Term Debt Obligations [Abstract]
2023	$ 11,817
2024	550
2025
2026
2027
Thereafter
Total	$ 12,367

Stockholders’ Equity (Details) - USD ($) $ in Thousands		3 Months Ended
Stockholders’ Equity (Details) - USD ($) $ in Thousands	Jun. 20, 2022	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022
Stockholders’ (Deficiency) Equity [Line Items]
Reverse stock split, description		1-for-100
Dividends paid		$ 184,992	$ 123,328
Preferred stock dividend amount	$ 61,664
Cumulative accrued dividends	$ 1,171,616
Aggregate shares (in Shares)		280,625	15,761
Common stock issued (in Shares)		2,683,571		2,381,136
Common stock fair value			$ 1,200
Proceeds from exercise of options			$ 31,000
Series A Preferred Stock [Member]
Stockholders’ (Deficiency) Equity [Line Items]
Percentage of payable to holders		9.25%	9.25%
Common Stock [Member]
Stockholders’ (Deficiency) Equity [Line Items]
Common stock issued (in Shares)		21,810	2,098

Share-Based Compensation (Details) - USD ($)	3 Months Ended
Share-Based Compensation (Details) - USD ($)	Mar. 31, 2023	Mar. 31, 2022
Share-Based Compensation [Line Items]
Unrecognized stock option	$ 221,545
Average remaining vesting period	7 months 6 days
Restricted Stock Units (RSUs) [Member]
Share-Based Compensation [Line Items]
Share-based compensation expense	$ 12,502	$ 78,496
Equity Option [Member]
Share-Based Compensation [Line Items]
Share-based compensation expense	$ 119,991	$ 456,604

Share-Based Compensation (Details) - Schedule of the Restricted Stock Unit	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Schedule of the Restricted Stock Unit [Abstract]
Number of RSA’s beginning balance \| shares	333
Weighted-Average Grant Date Value Per Share, beginning balance \| $ / shares	$ 450
Number of RSA’s, Granted \| shares
Weighted-Average Grant Date Value Per Share, Granted \| $ / shares
Number of RSA’s, Forfeited \| shares
Weighted-Average Grant Date Value Per Share, Forfeited \| $ / shares
Number of RSA’s, Vested \| shares	(333)
Weighted-Average Grant Date Value Per Share, Vested \| $ / shares	$ 450
Number of RSA’s, ending balance \| shares
Weighted-Average Grant Date Value Per Share, ending balance \| $ / shares

Share-Based Compensation (Details) - Schedule of Stock Option Activity - Stock Option [Member]	3 Months Ended
	Mar. 31, 2023 USD ($) $ / shares shares
Schedule of Stock Option Activity [Line Items]
Number of Options,Beginning Balance \| shares	26,554
Weighted- Average Exercise Price Per Share, Beginning Balance \| $ / shares	$ 223
Number of Options, Exercisable \| shares	17,496
Weighted- Average Exercise Price Per Share, Exercisable \| $ / shares	$ 195
Weighted- Average Contractual Life in Years, Exercisable	2 years 4 months 2 days
Aggregate Intrinsic Value, Exercisable \| $
Number of Options, Exercised \| shares
Weighted- Average Exercise Price Per Share, Exercised \| $ / shares
Number of Options, Cancelled or Expired \| shares	(1,600)
Weighted- Average Exercise Price Per Share, Cancelled or Expired \| $ / shares	$ 291
Number of Options, Ending Balance \| shares	24,954
Weighted- Average Exercise Price Per Share, Ending Balance \| $ / shares	$ 219
Weighted- Average Contractual Life in Year, Ending Balance	2 years 9 months 10 days
Aggregate Intrinsic Value, Ending balance \| $

Share-Based Compensation (Details) - Schedule of Presents Information Related to Stock Options	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Options Outstanding [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares	24,954
Options Outstanding [Member] \| $0.01 - $50.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares
Options Outstanding [Member] \| $50.01 - $100.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares	5,688
Options Outstanding [Member] \| $100.01 - $150.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares
Options Outstanding [Member] \| $150.01 - $200.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares	2,900
Options Outstanding [Member] \| $200.01 - $250.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares
Options Outstanding [Member] \| $250.01 - $300.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares	16,033
Options Outstanding [Member] \| $300.01 - $350.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Outstanding Number of Options \| shares	333
Options Outstanding [Member] \| Minimum [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares
Options Outstanding [Member] \| Minimum [Member] \| $0.01 - $50.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	0.01
Options Outstanding [Member] \| Minimum [Member] \| $50.01 - $100.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	50.01
Options Outstanding [Member] \| Minimum [Member] \| $100.01 - $150.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	100.01
Options Outstanding [Member] \| Minimum [Member] \| $150.01 - $200.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	150.01
Options Outstanding [Member] \| Minimum [Member] \| $200.01 - $250.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	200.01
Options Outstanding [Member] \| Minimum [Member] \| $250.01 - $300.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	250.01
Options Outstanding [Member] \| Minimum [Member] \| $300.01 - $350.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	300.01
Options Outstanding [Member] \| Maximum [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares
Options Outstanding [Member] \| Maximum [Member] \| $0.01 - $50.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	50
Options Outstanding [Member] \| Maximum [Member] \| $50.01 - $100.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	100
Options Outstanding [Member] \| Maximum [Member] \| $100.01 - $150.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	150
Options Outstanding [Member] \| Maximum [Member] \| $150.01 - $200.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	200
Options Outstanding [Member] \| Maximum [Member] \| $200.01 - $250.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	250
Options Outstanding [Member] \| Maximum [Member] \| $250.01 - $300.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	300
Options Outstanding [Member] \| Maximum [Member] \| $300.01 - $350.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Exercise Price Per Share \| $ / shares	$ 350
Options Exercisable [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years	2 years 4 months 2 days
Exercisable Number of Options \| shares	17,496
Options Exercisable [Member] \| $0.01 - $50.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years
Exercisable Number of Options \| shares
Options Exercisable [Member] \| $50.01 - $100.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years	2 years 3 months 7 days
Exercisable Number of Options \| shares	5,688
Options Exercisable [Member] \| $100.01 - $150.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years
Exercisable Number of Options \| shares
Options Exercisable [Member] \| $150.01 - $200.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years	9 months
Exercisable Number of Options \| shares	2,900
Options Exercisable [Member] \| $200.01 - $250.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years
Exercisable Number of Options \| shares
Options Exercisable [Member] \| $250.01 - $300.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years	2 years 11 months 1 day
Exercisable Number of Options \| shares	8,575
Options Exercisable [Member] \| $300.01 - $350.00 [Member]
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]
Weighted Average Remaining Life in Years	2 years 3 months 7 days
Exercisable Number of Options \| shares	333

Commitments and Contingencies (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended
	Jun. 16, 2022	Jan. 27, 2022	Mar. 31, 2023	Jan. 10, 2023	Sep. 30, 2022	Aug. 22, 2022	Jul. 14, 2022
Commitments and Contingencies [Abstract]
Owed severance		$ 75,000
Damages		$ 250,000
Suffered damages amount	$ 13,900
Agreement							$ 2,000
Company denies							$ 500
Contract liabilities			$ 1,300
Accrued liabilities			700
Outstanding Amount			75,000	$ 145,917	$ 400,000
Payroll						$ 66,500
Alleges			$ 125,000
Promissory note			8.00%
Judgment interest percentage				7.00%
Other Payments			$ 17,600

Concentrations (Details) - Customer Concentration Risk [Member]	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Trade Accounts Receivable [Member] \| Customers [Member]
Concentrations [Line Items]
Concentration risk, percentage	83.00%
Revenue Benchmark [Member] \| Customers [Member]
Concentrations [Line Items]
Concentration risk, percentage	88.00%
Revenue Benchmark [Member] \| Customers one [Member]
Concentrations [Line Items]
Concentration risk, percentage	10.00%	10.00%
Revenue Benchmark [Member] \| Customers Two [Member]
Concentrations [Line Items]
Concentration risk, percentage		37.00%
Revenue Benchmark [Member] \| Vendors [Member]
Concentrations [Line Items]
Concentration risk, percentage	10.00%	10.00%

Other Business Developments (Details) - $ / shares	3 Months Ended
Other Business Developments (Details) - $ / shares	Mar. 31, 2023	Feb. 27, 2023	Feb. 10, 2023
Other Business Developments [Abstract]
Bid price requirement	$ 1	$ 1	$ 1
Reverse stock split, description	1-for-100
Preferred stock rate	9.25%
Series A Cumulative Redeemable Perpetual Preferred Stock [Member]
Other Business Developments [Abstract]
Preferred stock rate	9.25%

Correction of an Error (Details) - Schedule of Correction of an Error $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2023 USD ($) $ / shares
Before Adjustment [Member]
Condensed Income Statements, Captions [Line Items]
Impairment expense
Net loss from continuing operations	$ (4,034)
Net loss from continuing operations – basic per share (in Dollars per share) \| $ / shares	$ (1.63)
Adjustment [Member]
Condensed Income Statements, Captions [Line Items]
Impairment expense	$ 896
Net loss from continuing operations	$ (896)
Net loss from continuing operations – basic per share (in Dollars per share) \| $ / shares	$ (0.34)
As Reported [Member]
Condensed Income Statements, Captions [Line Items]
Impairment expense	$ 896
Net loss from continuing operations	$ (4,930)
Net loss from continuing operations – basic per share (in Dollars per share) \| $ / shares	$ (1.97)

Correction of an Error (Details) - Schedule of Correction of an Error (Parentheticals)	3 Months Ended
	Mar. 31, 2023 $ / shares
Before Adjustment [Member]
Condensed Income Statements, Captions [Line Items]
Net loss from continuing operations – diluted per share (in Dollars per share)	$ (1.63)
Adjustment [Member]
Condensed Income Statements, Captions [Line Items]
Net loss from continuing operations – diluted per share (in Dollars per share)	(0.34)
As Reported [Member]
Condensed Income Statements, Captions [Line Items]
Net loss from continuing operations – diluted per share (in Dollars per share)	$ (1.97)

Subsequent Events (Details) - USD ($)						3 Months Ended
Subsequent Events (Details) - USD ($)	Dec. 12, 2023	Sep. 01, 2023	Jun. 21, 2023	May 26, 2023	May 22, 2023	Mar. 31, 2023	Dec. 18, 2023	Apr. 13, 2023
Subsequent Events [Line Items]
Preferred stock rate						9.25%
Subsequent Event [Member]
Subsequent Events [Line Items]
Common stock shares issued (in Shares)								12,000
Aggregate fair value								$ 28,080
Capitalized principal amount				$ 100,000
Combined principal and interest balance					$ 130,000
Forecast [Member]
Subsequent Events [Line Items]
Loans		$ 260,000
Convertible promissory note		$ 260,000
Interest rate		8.00%
Preferred stock rate			9.25%
Required preferred stock			$ 1,000,000				$ 1,000,000
Reported of shareholder equity in 10K	$ 2,500,000

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