On January 31, 2019, ComSovereign acquired the capital stock of VEO, a San Diego, California-based 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.

On March 4, 2019, ComSovereign acquired the capital stock of Silver Bullet, 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.

On November 30, 2019, following our acquisition of ComSovereign, we changed our corporate name from Drone Aviation Holding Corp. to COMSovereign Holding Corp.

Reportable Segments and Reporting Units

Significant Components of Our Results of Operations

Cost of Goods Sold and Gross Profit

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.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

For the year ended December 31, 2021, total revenues increased $3.2 million, or 34%, which was offset by decreased sales in Drone Aviation of $1.3 million.

Cost of Goods Sold and Gross Profit

For the year ended December 31, 2021, research and development expenses increased $2.0 million, or 101%. This was derived primarily from our acquisitions in 2021 of $2.2 million.

For the year ended December 31, 2021, sales and marketing expenses increased $0.6 million, which primarily consisted of increases in payroll and related costs.

For the year ended December 31, 2021, general and administrative expenses increased $8.9 million, or 51%. This increase primarily consisted of increases in payroll and related costs of $8.4 million, with $2.3 million from 2021 acquisitions. The remaining increase was due primarily to increased support services, including consulting, professional, and legal fees.

For the year ended December 31, 2021, total other expenses decreased $5.3 million, or 41%. This decrease primarily consisted of a decrease of $8.5 million in interest expense due to a reduction of debt.

? The Market Approach which is based on the assumption that the value of an asset

(including a company) is equal to the value of a substitute asset with the same

characteristics. Therefore, the value of an asset can be inferred by finding

similar assets (or an interest in similar assets) that have been sold in recent

? The Income Approach which seeks to measure the future benefits that can be

quantified in monetary terms. The Income Approach typically involves two

general steps. The first is making a projection of the total cash flows

expected to accrue to an investor in the asset. Examples include cash flow

realizable from an interest in a business, rental savings from a favorable

contract (e.g., a lease or a license), or royalty savings from ownership of a

patent. The second step involves discounting these cash flows to present value

at a discount rate that considers the degree of risk (or uncertainty)

associated with the realization of the projected monetary benefits.

? The Cost Approach which is based on the premise that a prudent investor would

pay no more for an asset than its replacement or reproduction cost. The cost to

replace the asset would include the cost of constructing a similar asset of

equivalent utility at prices applicable at the time of the valuation analysis.

To calculate an estimate of the fair market value using the Cost Approach, the

replacement cost new is determined and reduced for depreciation of the asset.

As a result of their valuations, the Company determined that an impairment charge of $106.1 million, primarily due to goodwill of $62.4 million and intangibles of $43.7 million would be justified based on the future sales and costs forecasted by the Company through 2034.

2.0700 1.6100 0.7549 0.8399 $ 0.1690 Nxtg ETF - Telecommunication ETF $ 69.2000 74.0000 76.4400 76.5000 82.6100 75.8300 $ 64.1900 NASDAQ

Sales have not materialized as projected:

? an Ethernet Switch with a standard cost of $33.72 and a quote of $226.88 and

? an Ethernet Phy (Physical layer transceiver) with a standard cost of $7.22 with

In conjunction with the increase in price a chip lead times, capital availability has also been frozen. The Company is dependent, forthe near future, on additional investment capital to fund growth initiatives and production.

1https://supplychaindigital.com/supply-chain-risk-management/imf-lowers-economic-growth-citing-supply-chain-disruption

With the drop of the stock price in the second quarter of 2022, the company anticipates additional impairment of Goodwill will be realized by the end of 2022.

? $4.5 million related to payroll, accrued liabilities and accounts

? $1.0 million related to secured notes payable that were past due, of

? $9.0 million related to indebtedness that was due in the first quarter

? $3.4 million related to indebtedness that is due in the second quarter

? $2.8 million related to indebtedness that is due in the third quarter

? $1.9 million related to indebtedness that is due in the fourth quarter

Line of Credit and Debt Agreements

In connection with the acquisition of the business by Sovereign Plastics on March 6, 2020:

? we assumed an equipment financing loan with an aggregate principal

? We assumed an equipment financing loan with an aggregate principal

? we assumed an equipment financing loan with an aggregate principal

On January 31, 2022, AZCOMS completed the sale of the land and building for approximately $15.8 million and $5.2 million of the principal amount of this loan and all accrued interest and fees was fully repaid.

In connection with the acquisition of the business by Sovereign Plastics on March 6, 2020:

? we entered into several promissory notes with the sellers in the

Paycheck Protection Program of the CARES Act

We do 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.

See Note 2 - Summary of Significant Accounting Policies in the Notes to our financial statements included elsewhere in this report for our evaluation of accounting standards not yet adopted.

Critical Accounting Policies and Estimates

Accounts Receivable and Credit Policies

Beneficial Conversion Features and Warrants

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