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EX-99.1 - UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF COMSOVEREIGN AS OF SEPTEMBER 30, - ComSovereign Holding Corp.f8k112719a1ex99-1_comsov.htm
8-K/A - AMENDMENT NO. 1 TO CURRENT REPORT - ComSovereign Holding Corp.f8k112719a1_comsovereign.htm

Exhibit 99.2

COMSOVEREIGN HOLDING CORP.

PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF SEPTEMBER 30, 2019 (Unaudited)

Expressed in US$'s except share and per share amounts

 

   Historical ComSovereign Corp   Historical Drone Aviation Holding Corp   Pro Forma Adjustments   Pro Forma Consolidation 
ASSETS                
Current Assets:                
Cash  $661,167   $1,624,758   $-   $2,285,925 
Accounts Receivable   1,083,912    1,631,414    -    2,715,326 
Receivables - related party   110,775    -    -    110,775 
Inventory   3,670,626    826,647    -    4,497,273 
Deferred offering costs   -    174,475         174,475 
Short Term Investment   216,774    -    -    216,774 
Prepaid Expenses   1,700,153    212,841    -    1,912,994 
Other Current Assets   119,942    -    -    119,942 
Total Current assets   7,563,350    4,470,135    -    12,033,485 
                     
Right of use leased assets   -    122,802    -    122,802 
Property & Equipment, net   437,540    121,929    -    559,469 
Intangible Assets, net   91,731,811    486,667    10,167,496[1][2]   102,385,974 
Goodwill   14,718,531    99,799    17,488,919[1]   32,307,249 
Total Assets  $114,451,232   $5,301,332   $27,656,415   $147,408,979 
                     
LIABILITIES AND STOCKHOLDERS’ EQUITY                    
Current Liabilities                    
Accounts Payable  $1,508,051   $433,620   $-   $1,941,671 
Accrued Interest   887,209    -    -    887,209 
Accrued Liabilities – related party   1,388,633    -    -    1,388,633 
Accrued Liabilities   1,466,434    53,097    -    1,519,531 
Payroll Liability   190,098    -    -    190,098 
Deferred Revenue   469,480    22,500    -    491,980 
Accrued Warranty Liability   114,729    -    -    114,729 
Notes Payable   10,442,980    -    -    10,442,980 
Current portion of Long Term Debt   109,616    -    -    109,616 
Operating Lease Liability - current   -    86,070         86,070 
Bank Line of Credit   -    2,000,000    -    2,000,000 
Total Current Liabilities   16,577,229    2,595,287    -    19,172,516 
                     
Operating Lease Liability - long term   -    37,606         37,606 
Total Liabilities   16,577,229    2,632,893    -    19,210,122 
                     
Stockholders’ Equity                    
Preferred Stock   260    -    -    260 
Common Stock   3,089    2,756    (2,756)[1]   3,089 
Treasury Stock   -    (50,000)   50,000[1]   - 
Additional Paid-In Capital   84,186,371    41,662,837    (10,802,852)[1]   115,046,356 
Accumulated Earnings   13,684,283    (38,947,154)   38,412,023[1]   13,149,152 
Total Stockholders’ Equity   97,874,003    2,668,439    27,656,415    128,198,857 
Total Liabilities and Stockholders’ Equity  $114,451,232   $5,301,332   $27,656,415   $147,408,979 

 

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COMSOVEREIGN HOLDING CORP.

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2019 (Unaudited)

Expressed in US$'s except share and per share amounts

 

    Historical ComSovereign Corp     Historical Drone Aviation Holding Corp     Pro Forma Adjustments     Pro Forma Consolidation  
Revenue   $ 3,797,340     $ 4,120,834     $ -     $ 7,918,174  
Cost of Goods Sold     2,145,208       1,769,606       -       3,914,814  
Gross Profit     1,652,131       2,351,228       -       4,003,359  
                                 
Operating Expenses                                
Research and Development     261,631       75,011       -       336,642  
Sales and Marketing     22,835       181,685       -       204,520  
General and Administrative     10,671,601       2,475,731       535,131 [2]     13,682,463  
                                 
Total Operating Expenses     10,956,067       2,732,427       535,131       14,223,625  
                                 
Net Operating (Loss)     (9,303,935 )     (381,199 )     (535,131     (10,220,265 )
                                 
Other Income (Expense)                                
Other Income (Expense)     95,266       -       -       95,266  
Exchange Rate Gain (Loss)     95,497       -       -       95,497  
Interest Income     9,637       944       -       10,581  
Interest (Expense)     (1,615,984 )     (94,806 )     -       (1,710,790 )
Gain on Bargain Purchase     24,403,803       -       -       24,403,803  
      22,988,219       (93,862 )     -       22,894,357  
                                 
Net Income (Loss)   $ 13,684,283     $ (475,061 )   $ (535,131   $ 12,674,091  
                                 
Net Income (Loss) per share – Basic           $ (0.02 )           $ 0.10  
Weighted Average Shares Outstanding – Basic             27,232,357       101,093,886 [3]     128,326,243  

 

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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS INFORMATION

Expressed in US$'s except share and per share amounts 

 

On November 27, 2019, COMSovereign Holding Corp. (formerly known as Drone Aviation Holding Corp.) (the “Company”) acquired ComSovereign Corp., a private company that was organized in January 2019 (“ComSovereign”).  In such transaction (the “Acquisition”), ComSovereign was considered to be the acquiring company for accounting and financial reporting purposes, and the Acquisition was considered under existing U.S. generally accepted accounting principles (“GAAP”) to be a reverse acquisition under the acquisition method of accounting for business combinations. Accordingly, in the Company’s financial statements following the Acquisition, ComSovereign’s assets and liabilities will be recorded at their pre-acquisition carrying amounts and the historical operations that are reflected in the financial statements will be those of ComSovereign. Assets and liabilities of the Company as of the transaction date (November 27, 2019) will be measured and recognized at fair value as of such date and added to the assets and liabilities of ComSovereign as of such date, and the results of operations of the Company following the Acquisition will be added to the results of operations of ComSovereign.

 

The following unaudited pro forma combined financial statements of the Company were prepared using the acquisition method of accounting under GAAP and the regulations of the Securities and Exchange Commission (the “SEC”), which are subject to change and interpretation, and give effect to the acquisition by the Company of ComSovereign. The unaudited pro forma combined balance sheet as of September 30, 2019, and the unaudited pro forma combined statement of operations and comprehensive loss for the nine months ended September 30, 2019 assumes the Acquisition took place on January 1, 2019, and combines the historical financial statements of the Company and ComSovereign for the nine months ended September 30, 2019. The historical statement of operations and comprehensive loss of the Company for nine months ended September 30, 2019 was derived from its unaudited consolidated financial statements included in its Quarterly Report on Form 10-Q, filed with the SEC on November 14, 2019.  The pro forma assumptions and adjustments are described in the accompanying notes presented in the following pages.

 

In the unaudited pro forma combined financial statements, the historical financial statements have been adjusted to give pro forma effect to events that are (i) directly attributable to the Acquisition, (ii) factually supportable, and (iii) with respect to the statement of operations, expected to have a continuing impact on the combined results. The pro forma combined financial statements and pro forma adjustments have been prepared based on preliminary estimates of fair value. Certain valuations are currently in process. Differences between these preliminary estimates and the final acquisition accounting may occur and could have a material impact on the accompanying unaudited pro forma combined financial statements and the Company’s future results of operations and financial position.

 

The unaudited pro forma combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the acquisition. The unaudited pro forma combined financial data also do not include any integration costs. The unaudited pro forma combined financial statements have been prepared for illustrative purposes only and, as the Company and ComSovereign were not under common control or management for the period presented, are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had the Company and ComSovereign been a combined company during the specified period.

 

Purchase Price

 

On November 27, 2019, the Company entered into a transaction that was accounted for as a reverse acquisition in accordance with ASC 805 Business Combinations. ASC 805-40-55-8 through ASC 805-40-55-17 provides for a method of determining the purchase price of the Company, the accounting acquiree, based on the fair value of the Company’s common stock retained by its pre-transaction shareholders.

 

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The allocation of total preliminary estimated purchase price to the Company’s acquired tangible assets and assumed liabilities based on the estimated fair values as of September 30, 2019 was as follows; 

 

   Fair Value 
Working Capital  $3,092,445 
Other Assets   227,923 
Non-Compete   925,303 
Intangible Assets     
Intellectual Property   3,712,257 
Trade Name   1,225,667 
Customer Relationships   1,619,032 
Goodwill Estimate   17,488,718 
Total Intangible Assets and Goodwill  $24,045,674 
TOTAL CONSIDERATION  $28,291,344 

 

Pro Forma Adjustments

 

1: To reflect the elimination of the Company’s historical stockholders’ equity balances and to reflect the preliminary estimated fair value adjustment to intangible assets acquired in the Acquisition, including the recognition of goodwill.

 

2: Adjustment to record amortization expense for the identifiable intangible assets as if the Acquisition had occurred on January 1, 2019. The identifiable intangible assets are amortized to depreciation and amortization using the straight-line method.

 

3: To adjust basic weighted average shares outstanding to reflect the acquisition of ComSovereign.

 

 

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