Item 1.01 Entry into a Material Definitive Agreement.
On October 26, 2021, COMSovereign Holding Corp. (the "Company") entered into an
underwriting agreement (the "Underwriting Agreement") with The Benchmark
Company, LLC, as representative of the underwriters named in Schedule A thereto
(collectively, the "Underwriters"), to issue and sell (the "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. Pursuant to the terms of
the Underwriting Agreement, the Company granted the Underwriters a 30-day option
to purchase up to an additional 48,000 shares of Series A Preferred Stock. The
Series A Preferred Stock was offered and sold pursuant to a prospectus
supplement, dated October 26, 2021 (the "Prospectus Supplement"), and a base
prospectus, dated September 14, 2021, relating to the Company's effective shelf
registration statement (the "Registration Statement") on Form S-3 (File No.
333-259307). The Offering closed on October 29, 2021. The Underwriting Agreement
is filed as Exhibit 1.1 to this Current Report on Form 8-K, and the description
of the material terms of the Underwriting Agreement is qualified in its entirety
by reference to such exhibit.
The Series A Preferred Stock has been listed on The Nasdaq Capital Market under
the symbol "COMSP".
The net proceeds to the Company from this Offering were approximately $7.1
million after deducting underwriting discounts and commissions and expenses
payable by the Company. The Company intends to use $2.75 million of the net
proceeds from the Offering for the repayment of certain indebtedness and the
balance for general corporate and working capital purposes.
A copy of the opinion of Flangas Law Group, Nevada counsel to the Company,
relating to the legality of the shares of Series A Preferred Stock is filed as
Exhibit 5.1 hereto. A copy of the opinion of Pryor Cashman LLP, special counsel
to the Company, relating to disclosure of material U.S. federal income tax
considerations in the Prospectus Supplement, is filed as Exhibit 8.1 hereto.
Item 3.03 Material Modification to Rights of Security Holders.
On October 26, 2021, the Company filed a Certificate of Designations of 9.25%
Series A Cumulative Redeemable Perpetual Preferred Stock (the "Certificate of
Designations") with the Secretary of State of the State of Nevada, which
classified and designated 690,000 shares of the Company's authorized preferred
stock, par value $0.0001 per share, as 9.25% Series A Cumulative Redeemable
Perpetual Preferred Stock.
The Series A Preferred Stock will rank senior to all classes or series of the
Company's common stock, par value $0.0001 per share (the "Common Stock"), with
respect to distribution rights and rights upon voluntary or involuntary
liquidation, dissolution or winding up of the Company. Upon issuance of the
Series A Preferred Stock, the ability of the Company to declare dividends with
respect to, or redeem, purchase or acquire, or make a liquidation payment on,
any other shares of capital stock ranking junior to or on a parity with the
Series A Preferred Stock, will be subject to certain restrictions in the event
that the Company does not declare dividends on the Series A Preferred Stock
during any dividend period. When, as, and if authorized by the Company's board
of directors and declared by the Company, 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 will be payable monthly in
arrears on or about the twentieth (20th) day of each month, beginning on
November 20, 2021. Dividends on the Series A Preferred Stock are cumulative.
The Series A Preferred Stock will generally not be redeemable by the Company
before April 29, 2024, except as described below upon the occurrence of a change
of control (as defined in the Certificate of Designations). On and after April
29, 2024, the Company may, at its option, redeem the Series A Preferred Stock,
in whole or in part, at any time or from time to time, for cash at a redemption
price of $25.00 per share, plus any accrued and unpaid dividends (whether or not
authorized or declared) up to, but excluding, the date of redemption. The Series
A Preferred Stock has no stated maturity date and is not subject to any sinking
fund or mandatory redemption provisions and will remain outstanding indefinitely
unless redeemed or otherwise repurchased by the Company as described below.
Upon the occurrence of a Change of Control, the Company may, at its option,
redeem the Series A Preferred Stock, in whole or in part within 120 days after
the first date on which such Change of Control occurred, by paying $25.00 per
share, plus any accrued and unpaid dividends up to, but excluding, the date of
redemption.
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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).
The foregoing description is not complete and is qualified in its entirety by
the full terms of the Series A Preferred Stock as set forth in the Certificate
of Designations. A copy of the Certificate of Designations is filed as Exhibit
3.2 to the Company's Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on October 26, 2021, and the information in
the Certificate of Designations is incorporated into this Item 3.03 by
reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
On October 26, 2021, the Company filed the Certificate of Designations with the
Nevada Secretary of State designating the powers, preferences and privileges of
the Series A Preferred Stock. The Certificate of Designations was effective upon
filing. The information about the Certificate of Designations under Item 3.03 of
this report, including the summary description of the powers, preferences and
privileges of the Series A Preferred Stock, is hereby incorporated by reference
into this Item 5.03.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits:
Exhibit
Number Description
1.1 Underwriting Agreement, dated as of October 26, 2021, between the
Company and The Benchmark Company, LLC, as representative of the
underwriters named in Schedule A thereto.
3.1 Certificate of Designations, designating the Company's 9.25% Series A
Cumulative Redeemable Perpetual Preferred Stock (incorporated by
reference to Exhibit 3.2 to the Registration Statement on Form 8-A filed
by the Company with the Securities and Exchange Commission on October
26, 2021).
5.1 Opinion of Flangas Law Group.
8.1 Tax Opinion of Pryor Cashman LLP.
23.1 Consent of Flangas Law Group (contained in its opinion filed as
Exhibit 5.1 and incorporated herein by reference).
23.2 Consent of Pryor Cashman LLP (contained in its opinion filed as
Exhibit 8.1 and incorporated herein by reference).
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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