STAR EQUITY HOLDINGS, INC.

ITEM 1A.RISK FACTORS

In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which we filed with the SEC on March 22, 2024. Except as noted below, the risks and uncertainties described in Item 1A - Risk Factors of our Annual Report on Form 10-K have not materially changed. Any of the risks discussed in this Quarterly Report on Form 10-Q or any of the risks disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

Our business strategy includes acquisitions, and acquisitions entail numerous risks, including the risk of management diversion and increased costs and expenses, all of which could negatively affect the Companys profitability.

Our business strategy includes, among other things, strategic acquisitions, as well as potential opportunistic acquisitions and strategic actions with respect to our existing investments, such as restructurings, strategic partnerships and collaborations, and activist activity. This overall acquisition and investment strategy entails several potential risks, including diverting managements attention from other business concerns, incurring substantial legal and other advisory fees (including, in the case of activist activity, proxy solicitation fees), and financing such acquisitions with additional equity and/or debt. Additionally, to the extent that we are already invested in the entities that are the subject of our acquisitions and other activities, our actions may be temporarily disruptive to the value of the investments, which could adversely affect our financial condition.

In addition, once completed, acquisitions may entail further risks, including: unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations. These include: increased regulatory compliance relating to the acquired business; difficulties in assimilating acquired businesses, their personnel and their financial reporting systems, which would prevent the expected benefits from the transaction from being realized within the anticipated timeframe; negative effects on existing business relationships with suppliers and customers; and loss of key employees of the acquired businesses. In addition, any future acquisitions could cause us to incur additional debt and related interest expense, as well as contingent liabilities and amortization expense related to intangible assets, which could have a material adverse effect on our business, financial condition, operating results and cash flows, or the issuance of additional equity, which could dilute our stockholders equity interests.

There can be no assurance that we will be able to negotiate any pending acquisition successfully, receive the required approvals for any acquisition or otherwise conclude any acquisition successfully, or that any acquisition will achieve the anticipated synergies or other positive results. Overall, if our acquisition strategy is not successful or if acquisitions are not well integrated into our existing operations, the Companys profitability, business, and financial condition could be negatively affected.

We may sustain losses in our investment portfolio, which could have an adverse effect on our results of operations, financial condition and liquidity.

A portion of our assets consists of equity securities which are adjusted to fair value each period, as well as other investments. An adverse change in economic conditions or setbacks to such companies, their operations or business models may result in a decline in the value of these investments. Such declines in value are principally recognized in net income or loss in accordance with GAAP. Any adverse changes in the financial markets and declines in value of our investments may result in additional losses and could have an adverse effect on our results of operations, financial condition and liquidity.

Risks RelatWe have identified to a material weakness in our Common Stock and our Company Preferred Stock

If we caninternal control over financial reporting. If our remediation of the material weakness is not continue to satisfy the Nasdaq Globeffective, or if we experience additional Market continued listing standards andmaterial weaknesses in the future or other Nasdaq rules, our Common Stock could be delisted, which would harm our business,wise fail to maintain an effective system of internal controls in the trading price of our Common Stock,future, we may not be able to accurately or timely report our ability to raise addifinancial condition or results of operational capital and the liquidity of ts, which may adversely affect investor confidence in us and, as a result, the market forvalue of our Ccommon Sstock.

Our

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We Common Stock is currhave idently listified on the Nasdaq Global Market. To maa material weakness in our intain the listing of our Common Stock on The Nasdaq Global Market, we are required to meet certain listing requirementernal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, including, among others, either: (i) a minimum clos internal control over financial reporting bid price of $1.00 per share,, such that there is a market value of publicly held shares (excluding shares held byreasonable possibility that a material misstatement of our executive officers,

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dannual or interim firectors and 10% or more stockholders) of at least $5.0 million and stockholders equity of at least $10 million; or (ii) a minimum closnancial statements will not be prevented or detected on a timely basis. Our management identified a material weakness in our internal control over financial reporting bid price of $1.00 per share,as we did not have a market valuesufficient complement of publicly held shaaccounting resources to addres (excluds complex accounting shares held by our executive officers, directors and 10% or more stockholders)matters.

To remediate the material weakness, management has taken steps to increase the skills and experience of at least $15.0 millionour accounting and total assetfinancial reporting staff by increasing reviews of at least $50.0 millionunusual and significant transactions and total revenue of at least $50.0 million (in the latest fiscinvesting in the continuing education and public company accounting training of our accounting and financial year or in two of the last three fisprofessionals. We have also retained additional outside financial consultants to conduct technical years). There is noaccounting reviews, when necessary.

We cannot assurance e you that we will be ablethe measures we have taken to maintain codate, and are continuing to implianceement, with these requirements.

On February 14, 2024, we received a letter from the Listing Qualifications staff of Tll be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses. If the Nasdaq Stock Market (Nasdaq)steps we take do notifying us correct that wee material were no longer in compliance with thakness in a timely manner, we will be unable to conclude that we minimum bid price requirement for coaintain effective internal control over financial reporting. Accordingly, there could continued listing on the Nasdaq Global Market, as the bid price to be a reasonable possibility that a material misstatement of our commonfinancial stock had been below $1.00 for a perioatements would not be prevented of 30 consecutive business days. The notification letter had no immr detected on a timely basis.

If we fail to remediate effect on oour lexisting on the Nasdaq Global Market. Nasdaq has provided us with 180 days, or until August 12, 2024, to regain material weakness or identify new material weaknesses in our internal controls over financial reporting, if we are unable to compliancey with the minimum bid price rerequirement by having a closing bid price of at least $1.00 per share for a minimum of 10 consecus of Section 404 of the Sarbanes-Oxley Act in a timely manner, or if we are unable to conclude that our internal controls over financial reporting are effective business days. If our Common Stock were to be delisted from Nasdaq, investors may lose confidence in the accuracy and was not eligible for quotation or listing on anocompleteness of our financial reports and ther market or exchange, trading price of our Ccommon Sstock could be conducted onnegatively in the over-the-counter markeaffected. As a result or on an electronic bulletin board established for unlisted securitiesf such failures, we could also become such as the Pink Sheets orbject to investigations by the OTC Bulletin Board. In such event, it could become mostock exchange on which our securities are difficult to dispose of,listed, the SEC or obtain accurate price quotations for, our Common Stockther regulatory authorities, and there would likely also be a reductibecome subject to litigation in our coverage by securities analystfrom investors and the news mediastockholders, which could cause the price of oharm our Common Stock to decline further. On July 2, 2024 we received a letter from the Listing Qualificareputation and financial conditions Department of The NASDAQ Stock Market (Nasdaq) advising us that we had regained compliance with Nasdaq's minimum bid price require or divert financial and managements as  resour common stock closed above the $1.00 minimum bid price for the 10 consecutiveces from our regular business days ended July 1, 2024activities.