COMSOVEREIGN : Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)
Unless the context requires otherwise, references in this Quarterly Report to "Company, "we", "us" and "our" refer to theCOMSovereign 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" of our fiscal 2020 Annual Report
on Form 10-K filed with the U. S. Securities and Exchange Commission (the "SEC")
on March 30, 2021 .
Business overview; Operational environment and key factors influencing the results of fiscal 2021 and 2020
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 six months
ended June 30, 2021 , compared to six months ended June 30, 2020 unless otherwise
indicated.
Business Overview
We are a provider of technologically-advanced telecom solutions to network operators, mobile device carriers, governmental units and other enterprises worldwide. We have assembled a portfolio of communications, power and niche technologies, capabilities and products that enable the upgrading of latent 3G networks to 4G and 4G-LTE networks and will facilitate the rapid roll out of the 5G and "next-Generation" ("nG") networks of the future. We focus on special 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 fewU.S. -based providers of telecommunications equipment and services.
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Our Operating Units
Through a series of acquisitions, we and our existing subsidiaries have expanded our service and geographical offerings over the past two years. Our company consists of the following main operational units:
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DragonWave Corp. andDragonWave-X Canada, Inc. (collectively, "DragonWave"), are aDallas -based manufacturer of high-capacity microwave and millimeter wave point-to-point telecom backhaul radio units. DragonWave and its predecessor have been selling telecom backhaul radios since 2012 and its microwave radios have been installed in over 330,000 locations in more than 100 countries worldwide. According to a report of theU.S. Federal Communications
Commission, such as
of December 2019 , DragonWave was the second largest provider of
licensed point-to-point microwave backhaul radios in North
America. We
acquired DragonWaveNovember 2019 .
?
developer of wireless telecommunication technologies and manufacturer of equipment
both 4G LTE Advanced and 5G compatible radio equipment. VNC designs, develops,
manufactures, offers and maintains a line of network products for wireless connection
network operators, mobile virtual network operators, cable TV system
operators, as well as state and business enterprises, which allow for new sources of
revenues and reduction of capital and operating expenses. VNC has also been developed
fast-deploying tactical systems that can be combined with tethered
balloons and drones offered by ours
operates in almost every place in the world. We acquired VNC in
? Fastback.
Fastback Networks (“Fastback”) is a manufacturer of smart connections
radio (IBR) systems that provide a highly efficient wireless connection to
virtually any location, including those caused by Nonlinear Visibility (NLOS)
Limits. Fastback’s extended IBR products allow operators to save money
add capacity and density to their macrocells and expand the range of services
density with small cells. These solutions also allow operators to provide both
temporary cellular service and data service using mobile / portable radio systems
and provide a wireless Ethernet connection. We acquired Fastback in January
2021.
?
name
develops and manufactures cost-effective, compact and improved connections
unmanned aerial vehicles (UAVs), including light air balloons and
drones that support surveillance sensors and communication networks. We
acquiredDrone Aviation inJune 2014 .
?
of drones with patented tethered turning technology that provides
long – lasting, mobile and in all weather conditions reconnaissance, surveillance and
Intelligence Opportunities (ISR) for customers around the world for both land and
marine applications. Its innovative technologies include optical fibers
connections that allow secure high-capacity communication, including support
for commercial 4G and 5G wireless networks. The leading line of SKS HoverMast from
drones connected to a quadrotor have a continuous ground power, fibers
optical communications for cyber immunity and the ability to work in
Environments rejected by GPS while providing a dramatically improved situation
consumer awareness and communication capabilities. We acquired SKS in March
2021.
? InduraPower, Inc. InduraPower, Inc. ("InduraPower") is a Tucson,
Arizona -based developer and manufacturer of intelligent
batteries and
back-up power supplies for network systems and telecom nodes. It also
provides power designs and batteries for the aerospace, marine and
automotive industries. We acquired InduraPower in November 2019 .
?
Bullet") is a California -based engineering firm that designs and
develops next generation network systems and components,
including
large-scale network protocol development, software-defined radio
systems and wireless network designs. We acquired Silver Bullet in
November 2019 .
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?
developer of full-duplex wireless technologies and components,
including multi-reconfigurable radio frequency (RF) antennae and
software programs. This technology enables the doubling of a given
spectrum band by allowing simultaneous transmission and receipt of
radio signals on the same frequencies. We acquired Lextrum in
November 2019 .
? VEO Photonics, Inc. VEO Photonics, Inc. ("VEO"), based in San Diego,
California , is a research and development company innovating SiP
technologies for use in copper-to-fiber-to-copper switching,
high speed
computing, high-speed ethernet, autonomous vehicle applications, mobile
devices and 5G wireless equipment. We acquired VEO in November 2019 .
?
in
source production chain and supply for all our subsidiaries as well
provides plastic and metal components to third-party manufacturers. His
ability to quickly prototype new products and machine castings,
metals and plastic castings have reduced the production cycle for many of ours
components from months to days. We have acquired the business that is currently underway
by Sovereign Plastics inMarch 2020 .
?
technologically advanced video and communication products and physical
security solutions for government and private sectors
industry. He served governments and the military for almost two
decades with complex, environmentally friendly optical and infrared rays
cameras, hardened processors, custom tactical video hardware, software
solutions and related communication technologies. It has also evolved
nano-defractive optics with integrated, powered by artificial intelligence
electro-optical sensors and communication network connection products for
smart city / smart campus applications. We acquired
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solutions for signal processing, intellectual property (IP) licensing, design and
consulting services. His signal processing and intellectual techniques
properties have significantly improved the bandwidth and accuracy of RF
transceiver systems and have provided capable technologies in the field of
communication and RADAR systems, signal intelligence (SIGINT) and electronic
combat (EW), test and measurement systems and semiconductor devices. We
acquired Innovation Digital inJune 2021 .
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(“RF Engineering”) is a
antennas and accessories. Providing one of the industry's lowest cost of
ownership, RF Engineering has continued to innovate and expand recently
announcing the industry's first Universal Licensed Microwave Antenna.
By maintaining frequencies of (6-42 GHz), customers can now reduce cost savings
and safe proof of the future of their networks using this new universal plug
and play architecture. We acquired RF Engineering inJuly 2021 . Response to Global Pandemic InMarch 2020 , theWorld Health Organization categorized the COVID-19 outbreak as a pandemic and the President ofthe United States declared it a national emergency. Our first priority in the midst of this pandemic has been the health and safety of our workforce. While we believe the effect of the pandemic on our company was not significant in 2020, in 2021 it has affected our supply chain, delaying expected revenue from 2021 into 2022. We continue to monitor the market and environment for impacts to the business as the pandemic continues to evolve and its future effects remain uncertain.
Important components of our results of operations
Revenues
Our revenues are generated primarily from the sale of our products, which
consist primarily of backhaul telecom radios and tethered aerostats and drones.
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.
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We expect our revenues for the year ending December 31, 2021 ("fiscal 2021") to
exceed those of fiscal 2020, primarily due to our availability of working
capital, including from a portion of the net proceeds of the equity offerings we
completed in the first quarter of 2021, for the purchase of parts and components
and the manufacturing of products, primarily those of DragonWave in quantities
that greatly exceed the quantities that we were able to manufacture in 2020 as
well as our acquisitions of Fastback and SKS. However, due to the COVID-19
pandemic, we have experienced delays on the delivery of certain components
required for the manufacture of certain products, primarily those of DragonWave.
Primarily as a result of those delays, we have experienced manufacturing and
shipping delays that have adversely affected our revenues in fiscal 2021. We
expect to recognize a significant portion of those revenues in early 2022.
Additionally, primarily as a result of these delays, we now expect to commence
commercial production of certain new products in late 2021 or early 2022 that we
have previously produced in only limited quantities or as prototypes and for
which we had expected to ramp up production earlier in 2021, including, among
others, intelligent battery back-up power solutions for the telecom, aerospace
and transportation industries and airborne high-bandwidth, LTE-Advanced and
5G aerostats. During fiscal 2020, approximately 18% of our sales were to customers located outside ofthe 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 outsidethe United States may increase as we build up our 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 theU.S. government and its agencies, even if such systems are for implementation in foreign locations.
Costs 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
DragonWave's microwave products to a single third-party manufacturer, Benchmark,
which manufactures our products from its facilities. 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 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, as well as share-based compensation expenses. 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 expenses as
incurred. Development costs incurred prior to establishment of technological
feasibility also are expensed as incurred. We expect our research and
development costs to continue to increase as we develop new products and modify
existing products to meet the changes within the telecom landscape.
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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. We
expect our sales and marketing expense to increase materially in the year ending
December 31, 2021 as we ramp up our sales and marketing efforts to correspond to
our increased production efforts relating to certain of our telecom products.
General and Administrative
In addition to personnel costs, general and administrative expense consists of professional fees, such as legal, audit, accounting, information technology and consulting fees; share-based compensation; and facilities and other supporting overhead costs. We expect general and administrative expense to increase in absolute dollars as we continue to expand our product offerings and expand into new markets. During fiscal 2020, we incurred, and during fiscal 2021 we expect to continue to incur, increases in supporting overhead costs, professional fees, transfer agent fees and expenses; development costs and other expenses related to operating as a public company.
Depreciation and amortization
Depreciation costs consist of depreciation related to fixed assets, such as test equipment, research and development equipment, computer hardware, production facilities and improvements to leases, as well as depreciation related to intangible fixed assets.
Share-Based Compensation Share-based compensation consists of expense related to the issuance of equity instruments, which can be in many forms, such as incentive or nonqualified stock options, stock appreciation rights, stock bonuses, restricted stock, stock units and other forms of awards including performance-based awards under our long-term incentive plans or outside of such plans. The expense related to any share-based compensation grant is allocated to specific groupings in the Condensed Consolidated Statement of Operations in the same manner as the grantee's normal compensation expense and will vary depending upon the number of underlying shares of common stock, the fair value of the common stock on the date of grant and the vesting period. Interest Expense Interest expense is comprised of interest expense associated with our secured notes payable, notes payable and senior convertible debentures. The amortization of debt discounts is also recorded as part of interest expense. As many of our debt instruments were past due at various times during fiscal 2020 and, as a result, were accruing interest at increased interest rates, and as we have been able to refinance our debt or issue equity to reduce our outstanding debt in the first quarter of fiscal 2021, our interest expense is expected to decrease in fiscal 2021 due to lower interest rates on our debt or lower debt balances.
Provision for Income Taxes
Current and deferred income tax expense or benefit in any given period will depend upon a number of events and circumstances, one of which is the income tax net income or loss from operations for the period which is usually different from theU.S. GAAP net income from operations for the period due to differences in tax laws and timing differences. Management assesses our deferred tax assets in each reporting period, and if it is determined that it is not more likely than not to be realized, we will record a change in our valuation allowance
in
that period.
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Results of Operations
Three Months Ended Six Months Ended
June 30, June 30,
(Amounts in thousands, except share and
per share data) 2021 2020 2021 2020
Revenue $ 3,611 $ 3,010 $ 5,698 $ 5,495
Cost of Goods Sold 1,813 1,553 2,887 2,613
Gross Profit 1,798 1,457 2,811 2,882
Operating Expenses
Research and development 1,199 413 1,747 701 Sales and marketing 109 16 157 30 General and administrative 6,976 4,246 14,111 8,681 Depreciation and amortization 3,617 2,913 7,278 5,745 Impairment expense 281 - 281 - Gain on the sale of assets - - (83 ) (1 ) Total Operating Expenses 12,182 7,588
23,491 15,156 Net Operating Loss (10,384 ) (6,131 ) (20,680 ) (12,274 ) Other (Expense) Income Interest expense (547 ) (1,384 ) (1,016 ) (2,357 ) Other income 13 - - - Gain/(loss) on extinguishment of debt 323 - (5,025 ) - Foreign currency transaction loss/(gain) 18 (51 )
(62 ) 40 Total Other Expenses (193 ) (1,435 ) (6,103 ) (2,317 ) Net Loss$ (10,577 ) $ (7,566 ) $ (26,783 ) $ (14,591 ) Loss per common share: Basic$ (0.15 ) $ (0.18 ) $ (0.42 ) $ (0.34 ) Diluted$ (0.15 ) $ (0.18 ) $ (0.42 ) $ (0.34 ) Weighted-average shares outstanding: Basic 68,770,644 42,886,180 63,538,782 42,856,809 Diluted 68,770,644 42,886,180 63,538,782 42,856,809
Three and six months are over
Total Revenues
It’s over in three months
compared to
For the six months endedJune 30, 2021 , total revenues were$5.7 million compared to$5.5 million for the same period in 2020, an increase of$0.2 million . This increase primarily consisted of revenues of$1.6 million from the acquisition of Sky Sapience inFebruary 2021 , which offset the decrease in the revenues of DragonWave of$0.6 million and ofDrone Aviation of$0.7 million , which were affected by delays in production due to component shortages. 43
Costs of goods sold and gross profit
It’s over in three months
compared to
Gross profit for the three months endedJune 30, 2021 was 1.8 million with a gross profit margin of 50% compared to$1.46 million for the same period in 2020 with a gross profit margin of 48%.
For the past six months
compared to
Gross profit for the six months endedJune 30, 2021 was$2.81 million with a gross profit margin of 49% compared to$2.88 million for the same period in 2020 with a gross profit margin of 52%.
These changes in gross profit margin are mainly due to the combination of products.
Expenditure on research and development
For the three months endedJune 30, 2021 , research and development expenses were$1.2 million compared to$0.41 million for the same period in 2020, an increase of$0.79 million . This increase primarily consisted of increased expenditures of$0.5 million and$0.3 million relating to our acquisitions of Sky Sapience
and VNC, respectively. For the six months endedJune 30, 2021 , research and development expenses were$1.75 million compared to$0.7 million for the same period in 2020, an increase of$1.05 million . This increase primarily consisted of increased expenditures of$0.6 million and$0.4 million relating to our acquisitions of Sky Sapience
and VNC, respectively. Sales and Marketing Expense
For the three months endedJune 30, 2021 , sales and marketing expenses were$0.1 million compared to$0.0 million for the same period in 2020, an increase of 0.1 million This increase primarily consisted of increased expenditures relating to our acquisition of Sky Sapience. For the six months endedJune 30, 2021 , sales and marketing expense was$0.2 million compared to$0.0 million for the same period in 2020, an increase of$0.2 million . This increase primarily consisted of increased expenditures relating to our acquisition of Sky Sapience.
General and administrative expenses
For the three months endedJune 30, 2021 , general and administrative expenses were$7.0 million compared to$4.3 million for the same period in 2020, an increase of$2.7 million . This increase primarily consisted of$1.8 million in payroll related costs related primarily to the acquisitions we completed subsequent toJune 30, 2020 ,$0.2 million increase in rent,$0.2 million increase in director fees and$0.1 million increase in transfer agent fees. For the six months endedJune 30, 2021 , general and administrative expenses were$14.1 million compared to$8.7 million for the same period in 2020, an increase of$5.4 million . This increase primarily consisted of$2.4 million of additional expenses from new acquisitions and newly-formed companies, and$1.3 million on payroll for existing companies,$1.1 million of incremental advisory fees, and$0.3 million of increases in rent. Depreciation and Amortization For the three months endedJune 30, 2021 , depreciation and amortization expenses were$3.6 million compared to$2.9 million for the same period in 2020, an increase of$0.7 . This increase primarily due to the increase in depreciable assets we acquired from new acquisitions.
For the past six months
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Other Income and Expenses
For the three months ended June 30, 2021 , other income and expenses were $0.2
million compared to $1.4 million for the same period in 2020, a decrease of
$1.2 . This increase primarily consisted of decreased interest expense of $0.8
million due to lower interest rates and decreased borrowings.
For the six months ended June 30, 2021 , other income and expenses were $6.1
million compared to $2.3 million for the same period in 2020, an increase of
$3.8 million . This increase primarily consisted of loss on extinguishment of
debt of $5.2 million , which was offset by decreased interest expense of $1.3
million due to lower interest rates and decreased borrowings.
Net Loss
For the three months ended June 30, 2021 , we had a net loss of $10.6 million
compared to a net loss of $7.6 million for the same period in 2020, related
to the items described above.
For the past six months
compared to the net loss of
Going Concern
The accompanying Unaudited Condensed Consolidated Financial Statements and notes have been prepared assuming we will continue as a going concern. For the six months endedJune 30, 2021 , we generated negative cash flows from operations of$26.85 million and had an accumulated deficit of$91.41 million . Management anticipates that we will be dependent, for the near future, on additional debt facilities or investment capital to fund growth initiatives. We intend to position our company so that it will be able to raise additional funds through the capital markets, including but not limited to, securing a line or lines of credit, the issuance of debt, and/or accessing the equity markets. Our fiscal operating results and accumulated deficit, among other factors, raise substantial doubt about our ability to continue as a going concern. 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 our failure of to raise additional capital could adversely affect our future operations and viability.
Liquidity and capital resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As ofJune 30, 2021 , we had$5.4 million in cash compared to$0.73 million atDecember 31, 2020 , an increase of$4.67 million resulting primarily from net proceeds of two public offerings, debt financing and liabilities paid. As ofJune 30, 2021 , we had$1.71 million in accounts receivable compared to$0.79 million atDecember 31, 2020 , an increase of$0.92 resulting primarily from receivables gained through business acquisitions during the first six months of 2021. As ofJune 30, 2021 , we had total current assets of$21.56 million and total current liabilities of$20.71 million , or working capital of$0.85 million , compared to total current assets of$7.68 million and total current liabilities of$34.26 million , or negative working capital of$26.58 million atDecember 31, 2020 . This is an increase in working capital of$27.43 million over the working capital balance at the end of 2020 that was driven primarily by the two public offerings and debt financing completed during the first six months of 2021.
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To
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were past due;
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of 2021;
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of 2021;
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of 2022;
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of 2022;
? $3.67 million related to indebtedness that is due from the third
quarter through the end of 2022;
? $2.45 million related to indebtedness that is due in 2023; and
? $11.3 million related to indebtedness that is due during or after 2026.
We anticipate meeting our cash obligations on our indebtedness that is payable
on or prior to June 30, 2022 , primarily from liquidity management tools such as
a line of credit, from earnings from operations, including, in particular, the
operations of DragonWave, VNC, Fastback, SKS and Drone Aviation , and possibly
from the proceeds of additional indebtedness or equity raises.
Our future capital requirements for our operations will depend on many factors,
including the profitability of our businesses, the number and cash requirements
of other acquisition candidates that we pursue, and the costs of our operations.
We have been investing in research and development in anticipation of increasing
revenue opportunities in our cellular network solutions business, which has
contributed to our losses from operations.
We plan to generate positive cash flow from our recently-completed acquisitions
to address some of our liquidity needs. However, to execute our business plan,
service our existing indebtedness, finance our proposed acquisitions and
implement our business strategy, we anticipate that we will need to obtain
additional financing from time to time and may choose to raise additional funds
through public or private equity or debt financings, a bank line of credit,
borrowings from affiliates or other arrangements. We cannot be sure that any
additional funding, if needed, will be available on terms favorable to us or at
all. Furthermore, any additional capital raised through the sale of equity or
equity-linked securities may dilute our current stockholders' ownership in us
and could also result in a decrease in the market price of our common stock. The
terms of those securities issued by us in future capital transactions may be
more favorable to new investors and may include the issuance of warrants or
other derivative securities, which may have a further dilutive effect.
Furthermore, any debt financing, if available, may subject us to restrictive
covenants and significant interest costs. There can be no assurance that we will
be able to raise additional capital, when needed, to continue operations in
their current form.
We had capital expenditures of $3.78 million and $0.15 million during the six
months ended June 30, 2021 and 2020. We expect our capital expenditures for next
12 months will be consistent with our prior spending. These capital expenditures
will be primarily utilized for equipment needed to generate revenue and for
office equipment. We expect to fund such capital expenditures out of our working
capital.
Loan and debt agreement
Summary information regarding our debt agreements or other credit facilities is provided in Notes 13 and 19 to the notes to the consolidated financial statements set out in Part I, point 1 of this quarterly report.
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