COMSovereign Holding (COMS) Risk Analysis

Our board of directors has the authority to fix and determine the relative rights and preferences of our preferred stock. Currently our board of directors has the authority to designate and issue up to 100,000,000 shares of our "blank check" preferred stock without further stockholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.

The trading market for our common stock will rely in part on the research and reports that equity research analysts, over whom we have no control, publish about us and our business. We may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our Company, the market price for our common stock could decline. In the event we obtain securities or industry analyst coverage, the market price of our common stock could decline if one or more equity analysts downgrade our common stock or if those analysts issue unfavorable commentary, even if it is inaccurate, or cease publishing reports about us or our business.

Certain anti-takeover provisions of Nevada law could have the effect of delaying or preventing a third-party from acquiring us, even if the acquisition arguably could benefit our stockholders. Nevada's "combinations with interested stockholders" statutes, NRS 78.411 through 78.444, inclusive, prohibit specified types of business "combinations" between certain Nevada corporations and any person deemed to be an "interested stockholder" for two years after such person first becomes an "interested stockholder" unless the corporation's board of directors approves the combination, or the transaction by which such person becomes an "interested stockholder", in advance, or unless the combination is approved by the board of directors and sixty percent of the corporation's voting power not beneficially owned by the interested stockholder, its affiliates and associates. Further, in the absence of prior approval certain restrictions may apply even after such two-year period. However, these statutes do not apply to any combination of a corporation and an interested stockholder after the expiration of four years after the person first became an interested stockholder. For purposes of these statutes, an "interested stockholder" is any person who is (1) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term "combination" is sufficiently broad to cover most significant transactions between a corporation and an "interested stockholder." These statutes generally apply to Nevada corporations with 200 or more stockholders of record. However, a Nevada corporation may elect in its articles of incorporation not to be governed by these particular laws, but if such election is not made in the corporation's original articles of incorporation, the amendment (1) must be approved by the affirmative vote of the holders of stock representing a majority of the outstanding voting power of the corporation not beneficially owned by interested stockholders or their affiliates and associates, and (2) is not effective until 18 months after the vote approving the amendment and does not apply to any combination with a person who first became an interested stockholder on or before the effective date of the amendment. We did not make such an election in our original articles of incorporation and have not amended our articles of incorporation to so elect. Nevada's "acquisition of controlling interest" statutes, NRS 78.378 through 78.3793, inclusive, contain provisions governing the acquisition of a controlling interest in certain Nevada corporations. These "control share" laws provide generally that any person that acquires a "controlling interest" in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights. Our bylaws provide that these statutes do not apply to us or any acquisition of our common stock. Absent such provision in our bylaws, these laws would apply to us as of a particular date if we were to have 200 or more stockholders of record (at least 100 of whom have addresses in Nevada appearing on our stock ledger at all times during the 90 days immediately preceding that date) and do business in the State of Nevada directly or through an affiliated corporation, unless our articles of incorporation or bylaws in effect on the tenth day after the acquisition of a controlling interest provide otherwise. These laws provide that a person acquires a "controlling interest" whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the NRS, would enable that person to exercise (1) one fifth or more, but less than one third, (2) one third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer cross one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become "control shares" to which the voting restrictions described above apply. Various provisions of our bylaws may delay, defer, or prevent a tender offer or takeover attempt of us that a stockholder might consider in his or her best interest. Our bylaws may be adopted, amended, or repealed by the affirmative vote of the holders of at least a majority of our outstanding shares of capital stock entitled to vote for the election of directors, and except as provided by Nevada law, our board of directors shall have the power to adopt, amend or repeal the bylaws by a vote of not less than a majority of our directors. The interests of these stockholders and directors may not be consistent with your interests, and they may make changes to the bylaws that are not in line with your concerns. Nevada law also provides that directors may resist a change or potential change in control if the directors determine that the change is opposed to, or not in the best interests of, the corporation. The existence of the foregoing provisions and other potential anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Our articles of incorporation provide that we possess and may exercise all powers of indemnification of our officers, directors, employees, agents and other persons and our bylaws also require us to indemnify our officers and directors as permitted under the provisions of the Nevada Revised Statutes ("NRS"). We also have contractual indemnification obligations under our agreements with our directors and officers. The foregoing indemnification obligations could result in our Company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers. These provisions and resultant costs may also discourage our Company from bringing a lawsuit against directors, officers, and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors, officers and employees even though such actions, if successful, might otherwise benefit our Company and stockholders.

In addition to changes to market prices based on our results of operations and the factors discussed elsewhere in this "Risk Factors" section, the market price of and trading volume for our common stock may change for a variety of other reasons, not necessarily related to our actual operating performance. The capital markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In addition, the average daily trading volume of the securities of small companies can be very low, which may contribute to future volatility. Factors that could cause the market price of our common stock to fluctuate significantly include: - the results of operating and financial performance and prospects of other companies in our industry;- strategic actions by us or our competitors, such as acquisitions or restructurings;- announcements of innovations, increased service capabilities, new or terminated customers or new, amended or terminated contracts by our competitors;- the public's reaction to our press releases, other public announcements, and filings with the SEC;- lack of securities analyst coverage or speculation in the press or investment community about us or market opportunities in the telecommunications services and staffing industry;- changes in government policies in the United States and, as our international business increases, in other foreign countries;- changes in earnings estimates or recommendations by securities or research analysts who track our common stock or failure of our actual results of operations to meet those expectations;- market and industry perception of our success, or lack thereof, in pursuing our growth strategy;- changes in accounting standards, policies, guidance, interpretations, or principles;- any lawsuit and judgments involving us, our services or our products;- arrival and departure of key personnel;- sales of common stock by us, our investors, or members of our management team; and - changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters. Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of our common stock and could seriously harm the market price of our common stock, regardless of our operating performance. This may prevent you from being able to sell your shares at or above the price you paid for your shares of our common stock, if at all. In addition, following periods of volatility in the market price of a company's securities, stockholders often institute securities class action litigation against that company. Our involvement in any class action suit or other legal proceeding could divert our senior management's attention and could adversely affect our business, financial condition, results of operations and prospects.

Our Series A Preferred Stock is not convertible into shares of our common stock and earns dividends at a fixed rate. Accordingly, an increase in market price of our common stock will not necessarily result in an increase in the market price of our Series A Preferred Stock. The market value of our Series A Preferred Stock may depend more on dividend and interest rates for other preferred stock, commercial paper and other investment alternatives and our actual and perceived ability to pay dividends on, and in the event of dissolution satisfy the liquidation preference with respect to, our Series A Preferred Stock.

Our Series A Preferred Stock will be a perpetual equity security. This means that it will have no maturity or mandatory redemption date and will not be redeemable at the option of the holders. Our Series A Preferred Stock may be redeemed by us at our option either in whole or in part, from time to time, at any time on or after April 29, 2024, or upon the occurrence of a defined change of control. Any decision we may make at any time to propose a redemption of our Series A Preferred Stock will depend upon, among other things, our evaluation of our capital position, the composition of our stockholders' equity and general market conditions at that time.

Sales of substantial amounts of shares of our common stock, or the perception that these sales could occur, could adversely affect the market price of our common stock and could impair our future ability to raise capital through common stock offerings. Our executive officers and directors beneficially own, collectively, a substantial percentage of our outstanding common stock. If one or more of them were to sell a substantial portion of the shares they hold, it could cause our stock price to decline.

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"). 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. If the Company does not regain compliance within the applicable compliance period, Nasdaq will provide written notification to the Company that the Preferred Stock will be subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq Listing Qualifications Panel. There can be no assurance that, if the Company decides to appeal the delisting determination, such appeal would be successful. If our Preferred Stock is delisted from Nasdaq, among other things, it would likely lead to a number of negative implications, including no market for the Preferred Stock and no ability for you to sell the Preferred Stock, reduced or no liquidity for the Preferred Stock, greater difficulty in obtaining financing, loss of institutional investor interest and fewer business development opportunities.

Other than in connection with certain change of control transactions, our Series A Preferred Stock does not contain provisions that protect you if our common stock is delisted from Nasdaq. Since our Series A Preferred Stock has no stated maturity date, you may be forced to hold your shares of our Series A Preferred Stock and receive stated dividends on the stock when, as and if authorized by our board of directors and declared by us with no assurance as to ever receiving the liquidation preference. In addition, if our common stock is delisted from Nasdaq, it is likely that our Series A Preferred Stock will be delisted as well. Accordingly, if our common stock is delisted from Nasdaq, your ability to transfer or sell your shares of our Series A Preferred Stock may be limited and the market value of our Series A Preferred Stock will be materially adversely affected. 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"). On March 31, 2023, the Company filed a notice of late filing on Form 12b-25 with the Securities and Exchange Commission (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 has not filed its Form 10-K for the year ended December 31, 2022, and 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. 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"). If the Company fails to timely regain compliance with Minimum Market Value of Publicly Held Shares Requirement our 9.25% Series A Cumulative Redeemable Perpetual Preferred Stock will be subject to delisting from Nasdaq. 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. There is no assurance, however, that we will be able to maintain compliance with Nasdaq's listing requirements in the future. If we are not able to maintain compliance, our common stock and our Series A Preferred Stock will be suspended and subject to delisting. If our common stock and our Series A Preferred Stock 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 common stock and our Series A Preferred Stock, reduced liquidity in our common stock and Preferred Stock, the loss of federal preemption of state securities laws with respect to shares issued in future offerings, greater difficulty in obtaining financing, potential loss of confidence by employees, loss of institutional investor interest and fewer business development opportunities.

Voting rights as a holder of our Series A Preferred Stock will be extremely limited. Shares of our common stock are currently the only class of our securities carrying full voting rights. Voting rights for holders of our Series A Preferred Stock exist primarily with respect to voting on amendments to our articles of incorporation (in some cases, voting together with the holders of other parity Preferred Stock), that materially and adversely affect the rights, preferences, privileges or voting powers of our Series A Preferred Stock or create additional classes or series of preferred stock that are senior to our Series A Preferred Stock and the ability to elect (voting separately as a class together with the holders of all other parity Preferred Stock) two additional directors to our board of directors in the event that 18 monthly dividends (whether or not consecutive) payable on our Series A Preferred Stock are in arrears, which occurred on November 20, 2023. Dividends on our Series A Preferred Stock declared by us will be authorized by our board of directors in its sole discretion out of assets legally available for distribution and will depend upon a number of factors, including our earnings, our financial condition, restrictions under applicable law, our need to comply with the terms of our existing financing arrangements, the capital requirements of our Company and other factors as our board of directors may deem relevant from time to time. We may have to fund any declared dividends from working capital, borrow to provide funds for such dividends, or sell assets to the extent dividends exceed earnings or cash flows from operations. Funding dividends from working capital would restrict our operations. If we are required to sell assets to fund dividends, such asset sales may occur at a time or in a manner that is not consistent with our disposition strategy. If we borrow to fund dividends, our leverage ratios and future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been. We suspended dividends in May 2022, and may not be able to pay dividends in the future.

Our Series A Preferred Stock ranks junior to all of our existing and future indebtedness, any classes or series of our capital stock expressly designated as ranking senior to our Series A Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up, and other non-equity claims on us and our assets available to satisfy claims against us, including claims in bankruptcy, liquidation or similar proceedings. Our articles of incorporation currently authorize the issuance of up to 100,000,000 shares of preferred stock, $0.0001 par value per share, in one or more classes or series. In addition, a majority of our entire board of directors may, with stockholder approval, amend our articles of incorporation to increase or decrease the aggregate number of shares of our capital stock or the number of shares of our capital stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of our common stock or preferred stock and set the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption of the classified or reclassified shares. Our board of directors may, without notice to or the consent of holders of our Series A Preferred Stock, authorize the issuance and sale of additional shares of Series A Preferred Stock and authorize and issue additional shares of stock ranking junior to or on parity with our Series A Preferred Stock from time to time. The issuance of additional shares of Series A Preferred Stock or additional shares of stock ranking on parity with our Series A Preferred Stock would dilute the interests of the holders of our Series A Preferred Stock, and the issuance of shares of any class or series of our capital stock expressly designated as ranking senior to our Series A Preferred Stock (with the requisite vote of holders of our Series A Preferred Stock and other classes of stock ranking on parity with our Series A Preferred Stock as described in this prospectus supplement) or the incurrence of additional indebtedness could affect our ability to pay dividends on, redeem or pay the liquidation preference on our Series A Preferred Stock. None of the provisions relating to our Series A Preferred Stock contain any terms relating to or limiting our indebtedness or affording the holders of our Series A Preferred Stock protection in the event of a highly-leveraged or other transaction, including a merger or the sale, lease or conveyance of all or substantially all our assets, that might adversely affect the holders of Series A Preferred Stock, so long as the rights of the holders of our Series A Preferred Stock are not materially and adversely affected.

Our Series A Preferred Stock has not been rated by any nationally recognized statistical rating organization, which may negatively affect the market value of our Series A Preferred Stock and your ability to sell shares of Series A Preferred Stock. No assurance can be given, however, that one or more rating agencies might not independently determine to issue such a rating or that such a rating, if issued, would not adversely affect the market price of our Series A Preferred Stock. In addition, we may elect in the future to obtain a rating of our Series A Preferred Stock, which could adversely impact the market price of our Series A Preferred Stock. Ratings only reflect the views of the rating agency or agencies issuing the ratings and such ratings could be revised downward or withdrawn entirely at the discretion of the issuing rating agency if in its judgment circumstances so warrant. Any such downward revision or withdrawal of a rating could have an adverse effect on the market price of our Series A Preferred Stock.

Our Series A Preferred Stock has been listed and trading on The Nasdaq Capital Market only since October 27, 2021, and has a limited history. There is no guarantee that our Series A Preferred Stock will remain listed on The Nasdaq Capital Market or any other nationally recognized exchange. If our Series A Preferred Stock is delisted from The Nasdaq Capital Market or another nationally recognized exchange, we could face significant material adverse consequences, including: - a limited availability of market quotations for our Series A Preferred Stock;- reduced liquidity with respect to our Series A Preferred Stock;- a determination that our Series A Preferred Stock is "penny stock," which will require brokers trading in our Series A Preferred Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our Series A Preferred Stock; and - a decreased ability to issue additional securities or obtain additional financing in the future.

In addition to changes to market prices based on our results of operations and the factors discussed elsewhere in this "Risk Factors" section, the market price of and trading volume for our Series A Preferred Stock may change for a variety of other reasons, not necessarily related to our actual operating performance. The capital markets have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Series A Preferred Stock. In addition, the average daily trading volume of the securities of small companies can be very low, which may contribute to future volatility. Factors that could cause the market price of our Series A Preferred Stock to fluctuate significantly include: - the results of operating and financial performance and prospects of other companies in our industry;- actual or anticipated variations in operating results of us and our competitors;- strategic actions by us or our competitors, such as acquisitions or restructurings;- announcements of innovations, increased service capabilities, new or terminated customers or new, amended or terminated contracts by our competitors;- the public's reaction to our press releases, other public announcements, and filings with the SEC;- lack of securities analyst coverage or speculation in the press or investment community about us or market opportunities in the telecommunications services and staffing industry;- changes in government policies in the United States and, as our international business increases, in other foreign countries;- changes in earnings estimates or recommendations by securities or research analysts who track our common stock or failure of our actual results of operations to meet those expectations;- market and industry perception of our success, or lack thereof, in pursuing our growth strategy;- changes in accounting standards, policies, guidance, interpretations, or principles;- any lawsuit involving us, our services or our products;- arrival and departure of key personnel;- sales of common stock by us, our investors or members of our management team;- changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters;- prevailing interest rates, increases in which may have an adverse effect on the market price of our Series A Preferred Stock;- trading prices of similar securities;- our history of dividend payments and the suspension of dividend payments;- the annual yield from dividends on our Series A Preferred Stock as compared to yields on other financial instruments;- general economic and financial market conditions;- government action or regulation;- changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry; and - our issuance of additional preferred equity or debt securities. Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of our Series A Preferred Stock and could seriously harm the market price of our Series A Preferred Stock, regardless of our operating performance. In addition, following periods of volatility in the market price of a company's securities, stockholders often institute securities class action litigation against that company. Our involvement in any class action suit or other legal proceeding could divert our senior management's attention and could adversely affect our business, financial condition, results of operations and prospects.