What changed in this filing

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Item 1A. Risk Factors

2022-09-29 compared with 2021-10-04 · 184 added, 149 removed, 650 unchanged (34% of the section changed)

Forward-Looking Statements

The following describes major risks to our business and should be considered carefully.

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For a more complete discussion of the material risks facing our business, please see below:

• We are unable to predict the extent to which the ongoing COVID-19 pandemic and supply chain constraints will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.

• Our fiscal 2022 business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.

• We are unable to predict the extent to which the ongoing COVID-19 pandemic and related supply chain constraints will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.

• Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.

• If global economic business and political conditions deteriorate as compared to the current environment it could have a material adverse impact on our business outlook and our business, operating results and financial condition.

• New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results.

• We have significant operations in locations which could be materially and adversely impacted in the event of a terrorist attack or other significant disruptions (including natural disasters).

• The military conflict between Russia and Ukraine, and the global response to it could adversely impact our revenues, gross margins and financial results.

Business Risks

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• A change in our relationship with our large wireless carrier customers could have a material adverse effect.

• If our wireless carrier partners change the pricing and other terms by which they offer our products to their end-customers could have a material adversely affect.

• A change by wireless carrier partners in the pricing and other terms by which they offer our products to their end-customers could have a material adverse affect.

Strategic Growth Risks

• We face a number of risks relating to the expected long-term growth of our business.

• Loss of our executive officers or other key personnel or other changes to our management team could disrupt our operations and growth plans or harm our business.

• We must service the debt and maintain compliance with various covenants under a Credit Facility that imposes restrictions on our business.

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• Changes in U.S.

tax law could adversely affect our business and financial condition.

federal, state and foreign tax law could adversely affect our business and financial condition.

federal, state and foreign tax returns are subject to audit and a resulting tax assessment or settlement could have a material adverse effect on our business, results of operations and financial condition.

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• Future issuances of our shares of common stock could dilute a stockholder's ownership interest in Comtech and reduce the market price of our shares of common stock.

• Actions of activist stockholders could impact the pursuit of our business strategies and adversely affect our results of operations, financial condition and/or share price.

• Provisions in our corporate documents and Delaware law could delay or prevent a change in control of Comtech.

• A disruption in our Common Stock dividend program could negatively impact our stock price.

The ongoing COVID-19 pandemic and supply chain constraints have impacted our business, operating results and financial condition, as well as the operations and financial performance of many of the customers and suppliers in industries that we serve.

The ongoing COVID-19 pandemic and related supply chain constraints have impacted our business, operating results and financial condition, as well as the operations and financial performance of many of the customers and suppliers in industries that we serve.

We are unable to predict the extent to which the pandemic, supply chain constraints and related effects will adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.

The COVID-19 pandemic and related disease control measures have significantly impacted the global economy and has created significant supply chain constraints.

These issues have had and could continue to have material adverse effects on our business, financial position, results of operations and cash flows.

These issues have had and could continue to have adverse effects on our business, financial position, results of operations and cash flows.

Although there has been an increase in vaccinations throughout the United States, vaccinations internationally have progressed at a slower rate and the impact of new strains of the virus are uncertain.

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Poor business conditions due to the COVID-19 pandemic have resulted in the suppression of end-market demand for many of our products such as satellite ground station technologies and other short-lead time products.

Because the timing, impact, severity and duration of these conditions are impossible to predict and remain ongoing, there is a risk that such conditions will have a material adverse effect on our future consolidated results of operations.

Because the timing, impact, severity and duration of these conditions are impossible to predict and remain ongoing, there is a risk that such conditions will have an adverse effect on our future consolidated results of operations, in particular in light of ongoing global supply chain disruptions, part shortages and extended lead times for components.

The impact of the pandemic on our business has included or could in the future include:

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• permanent closures of our direct and indirect suppliers, resulting in adverse effects to our supply chain;

• temporary shortages of skilled employees available to staff manufacturing, production and assembly facilities due to stay at home orders and travel restrictions within as well as into and out of countries;

• increases in operational expenses and other costs related to requirements implemented to mitigate the impact of the pandemic;

• temporary shortages of skilled employees available to staff manufacturing, production and assembly facilities due to stay at home orders in many markets and travel restrictions within as well as into and out of countries;

• increases in operational expenses and other costs related to requirements implemented to mitigate the impact of the pandemic on our business and workforce;

• supply chain disruptions, including increased freight costs;

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• reductions in short- and long-term demand for our products, or other disruptions in technology buying patterns;

• adverse effects on economies and financial markets globally or in various markets throughout the world, potentially leading to a prolonged economic downturn or reductions in business and consumer spending, which may result in decreased net revenue, gross margins, or earnings and/or in increased expenses and difficulty in managing inventory levels;

• adverse effects on economies and financial markets globally or in various markets throughout the world, potentially leading to a prolonged economic downturn or reductions in business and consumer spending, which may adversely affect our results of operations and cause difficulty in managing inventory levels;

• delays to and/or lengthening of our sales or development cycles or qualification activity;

• challenges for us, our direct and indirect suppliers and our customers in obtaining financing due to turmoil in financial markets;

• workforce disruptions due to illness, quarantines, governmental actions, other restrictions, and/or the social distancing measures we have taken to mitigate the impact of COVID-19 at certain of our locations around the world in an effort to protect the health and well-being of our employees, customers, suppliers and of the communities in which we operate (including working from home, restricting the number of employees attending events or meetings in person, limiting the number of people in our buildings and factories at any one time, further restricting access to our facilities, suspending employee travel and inability to meet in person with customers);

• workforce disruptions due to illness, quarantines, governmental actions, other restrictions, and/or the social distancing measures to mitigate the impact of COVID-19 at certain of our locations around the world in an effort to protect the health and well-being of our employees, customers, suppliers and of the communities in which we operate (including potential returns to restricting the number of employees attending events or meetings in person, limiting the number of people in our buildings and factories at any one time, restricting access to our facilities, suspending employee travel and meeting in person with customers);

• increased vulnerability to cyberattacks due to the significant number of employees working remotely;

• our management team continuing to commit significant time, attention and resources to monitoring the COVID-19 pandemic and seeking to mitigate its effects on our business and workforce.

The ultimate extent of the impact of COVID-19 and supply chain constraints on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted at this time.

These impacts, individually or in the aggregate, could have a material and adverse effect on our business, results of operations and financial condition.

Such effect may be exacerbated in the event the pandemic and the measures taken in response to it, and their effects, persist for an extended period of time, or if there are periodic resurgences of the outbreak.

Under any of these circumstances, the resumption of normal business operations may be delayed or hampered by lingering effects of COVID-19 on our operations, direct and indirect suppliers, partners, and customers.

Our fiscal 2022 business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.

The ultimate extent of the impact of COVID-19 and supply chain constraints on our business, financial condition and results of operations will depend on future developments, which are still highly uncertain and cannot be predicted at this time.

These impacts, individually or in the aggregate, have had and could continue to have adverse effects on our business, results of operations and financial condition.

Such effect may be exacerbated in the event the pandemic, the measures taken in response to it, and their effects, persist for an extended period of time, or if there are periodic resurgences of COVID-19.

New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results.

The global supply chain for certain raw materials and components, including those used in our satellite ground station and troposcatter equipment, has experienced significant strain in recent periods.

The constrained supply environment has adversely affected, and could further affect, availability and lead times of raw materials and components, thereby impeding our ability to meet customer demand in circumstances where we cannot timely secure supply of components that meet our quality standards.

Even when raw materials and components are available, they often come with higher prices reflecting an imbalance between supply and demand, as well as inflationary pressures affecting global markets.

The effects of the COVID-19 pandemic, inflation, labor challenges and the ongoing conflict between Russia and Ukraine have caused, and we expect will continue to cause further delays in the supply chain.

Despite our attempts to mitigate the impact on our business, constrained supply conditions have and are expected to continue to adversely impact our costs of goods sold and may impact the timing and amount of revenue we realize.

During fiscal 2022, we experienced disruptions in our supply chain relating to later-than-expected delivery of certain key components from several suppliers that adversely impacted our revenue in fiscal 2022.

In addition, the ongoing supply chain issues have affected the quality of the components we receive.

Certain parts received in fiscal 2022 did not meet our quality specifications and we were unable to use them.

We obtain certain components and subsystems from a single source or a limited number of sources.

Some of our single source suppliers, particularly those that provide satellite ground station and troposcatter components, have reported to us that they are having disruptions in their respective supply chains.

These single source components, which includes items such as cooling fans and power supplies, are in limited supply.

In some cases, we have now depleted our stock inventory and we are on waiting lists to obtain additional components.

In order to ship certain items during fiscal 2023, we must obtain additional components to produce certain finished goods.

We continue to seek new suppliers and inventory elsewhere.

In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components.

Heading into our fiscal 2023, we have a significant portion of our targeted revenues in our backlog.

However, if shipments from our backlog are delayed or we are unable to obtain expected orders or components, our business outlook will prove to be inaccurate.

These aforementioned supply chain constraints, and their related challenges could result in future shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our revenue, gross margins and financial results.

There can be no assurance that the impacts of all the aforementioned conditions will not continue, or worsen, in the future.

Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.

Historically, our business outlook is difficult to forecast and backlog (sometimes referred to herein as orders or bookings), net sales and operating results may vary significantly from period to period due to a number of factors including:

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Similarly, sales of certain of our public safety and location technologies are subject to sudden changes in wireless carrier procurement strategies, including decisions to sole-source such solutions or to perform such solutions internally.

As a result of any such conditions or changes, bookings and backlog related to these solutions are extremely sensitive to short-term fluctuations in customer demand.

In addition, a large portion of our Government Solutions segment's net sales are derived in part from large U.S.

government programs or large foreign government opportunities that are subject to lengthy sales cycles (including funding requirements) and are therefore difficult to predict.

If global economic business and political conditions deteriorate as compared to the current environment it could have a material adverse impact on our business outlook and our business, operating results and financial condition.

In addition to the unique business risks related to COVID-19, many of the end-markets for our products and services may be significantly impacted for other issues that result in adverse global economic conditions.

As a result, bookings and backlog related to these solutions are extremely sensitive to short-term fluctuations in customer demand.

In addition, a large portion of our consolidated net sales are derived in part from large U.S.

federal and state government programs or large foreign government opportunities that are subject to lengthy sales cycles (including funding requirements) and are therefore difficult to predict.

If global economic business and political conditions deteriorate as compared to the current environment it could have an adverse impact on our business outlook and our business, operating results and financial condition.

Many of the end-markets for our products and services may be significantly impacted for other issues that result in adverse global economic conditions.

For example, many of our international end-customers are in emerging and developing countries that are subject to sweeping economic and political changes.

Many governments around the world are under pressure to reduce their spending.

In recent years, global oil and natural gas prices have been volatile and significantly impaired the ability of certain of our government customers in the oil and gas producing regions of the world to invest in telecommunications products and infrastructure.

In recent years, global oil and natural gas prices have been volatile and have significantly impaired the ability of certain of our government customers in the oil and gas producing regions of the world to invest in telecommunications products and infrastructure.

Additionally, the relative strength of the U.S.

dollar against many international currencies has negatively impacted the purchasing power for many of our international end-customers because most of our sales are denominated in U.S.

We generate significant sales from many emerging and developing countries.

We believe that the current global economic business environment is unstable and sudden negative changes could result in the immediate suppression of end-market demand for many of our products such as satellite ground station technologies and other short-lead time products.

The timing, impact, severity and duration of these conditions are impossible to predict.

In addition, many of our international customers (including our Middle Eastern and African customers) rely on European bank financing to procure funding for large systems, many of which include our equipment.

We believe that European financing has been and continues to be difficult to obtain.

Volatility of financing conditions may cause our customers to be reluctant to spend funds required to purchase our equipment or projects could be postponed or canceled.

We generate significant sales from many emerging and developing countries and any such reduced purchasing power of our customers could adversely impact our sales and backlog.

In addition, many of our international customers (including our Middle Eastern and African customers) rely on European bank or government financing to procure funding for large systems, many of which include our equipment.

We believe that European financing has been and will continue to be difficult to obtain.

Volatility of financing conditions may cause our customers to be reluctant to spend funds required to purchase our equipment and could cause their projects to be postponed or canceled.

In addition, if an adverse economic environment and lack of financing results in insolvencies for our customers, it would adversely impact the recoverability of our accounts receivable and/or inventories which would, in turn, adversely impact our results of operations.

The United Kingdom ("U.K.") exited from the European Union ("E.U.") on January 31, 2020.

Such exit, commonly referred to as "Brexit," has created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations and profitability.

Such exit, commonly referred to as "Brexit," has created and may continue to create economic and political uncertainties and impacts that could have an adverse effect on our business, operations and profitability.

Although the U.K.

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We maintain production, engineering and sales facilities in the U.K.

and adverse consequences concerning Brexit could result in a deterioration in global economic conditions, instability in global financial markets, political uncertainty, volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

In the past, our overall business has not been immune from adverse economic conditions.

or global economic conditions deteriorate further, or political conditions become unstable, or additional economic sanctions are imposed on some of our end-customers, it could adversely impact our business in a number of ways, including:

• Difficulty in forecasting our results of operations - It is difficult to accurately forecast our results of operations during periods of adverse conditions as we cannot predict the severity or the duration of such conditions or the impact it could have on our current and prospective customers.

If our current or prospective customers materially postpone, reduce or even forgo purchases of our products and services to a greater extent than we anticipate, or if we are unable to secure certain parts that are currently in limited supply due to supplier constraints, our business outlook will prove to be inaccurate.

• Additional reductions in telecommunications equipment and systems spending may occur - In the past, our businesses have been negatively affected by uncertain economic environments in the overall market and, more specifically, in the telecommunications sector.

and adverse consequences of Brexit could result in a deterioration in global economic conditions, instability in global financial markets, political and regulatory uncertainty, volatility in currency exchange rates, or adverse changes in the cross-border agreements currently in place, any of which could have an adverse impact on our financial results in the future.

The timing, impact, severity and duration of these conditions are difficult to predict.

or global economic conditions deteriorate, or political conditions become unstable, or additional economic sanctions are imposed on some of our end-customers, it could adversely impact our business in a number of ways.

In the past, our businesses have been negatively affected by uncertain economic environments in the overall market and, more specifically, in the telecommunications sector.

Our customers have reduced their budgets for spending on telecommunications equipment and systems and in some cases postponed or reduced the purchase of our products and systems.

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If this occurs, it would adversely affect our business outlook, net sales, profitability and the recoverability of our assets, including intangible assets such as goodwill.

• Our customers may not be able to obtain financing - Although many of our products are relatively inexpensive when compared to the total systems or networks that they are incorporated into, our sales are affected by our customers' ability to obtain the financing they may require to build out their total systems or networks and fund ongoing operations.

Many of our emerging market customers obtain financing for network buildouts from European commercial banks and/or governments.

Our customers' inability to obtain adequate financing would adversely affect our net sales.

In addition, if the economic environment and lack of financing results in insolvencies for our customers, it would adversely impact the recoverability of our accounts receivable which would, in turn, adversely impact our results of operations.

We have significant operations in Arizona, Florida, California, Washington State, Maryland, New York and other locations which could be materially and adversely impacted in the event of a terrorist attack and government responses thereto or significant disruptions (including natural disasters) to our business.

Terrorist attacks, the U.S.

and other governments' responses thereto, and threats of war could materially adversely impact our business, results of operations and financial condition.

For example, our 911 hosted location-based services and satellite teleport services operations depend on our ability to maintain our computer and equipment and systems in effective working order, and to protect our systems against damage from fire, natural disaster, power loss, telecommunications failure, sabotage, unauthorized access to our system or similar events.

Although many of our mission-critical systems and equipment are designed with built-in redundancy and security, any unanticipated interruption or delay in our operations or breach of security could have a material adverse effect on our business, results of operations and financial condition.

and other governments' responses thereto, and threats of war could adversely impact our business, results of operations and financial condition.

For example, our 911 hosted location-based services and satellite teleport services operations depend on our ability to maintain our computer and equipment and systems in effective working order, and to protect our systems against damage from fire, natural disaster, terrorist attack, power loss, telecommunications failure, sabotage, unauthorized access to our system or similar events.

Any unanticipated interruption or delay in our operations or breach of security could have an adverse effect on our business, results of operations and financial condition.

Our property and business interruption insurance may not be adequate to compensate us for any losses that may occur in the event of a terrorist attack, threat, system failure or a breach of security.

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The COVID-19 pandemic, a terrorist attack or similar future event may disrupt our operations or those of our customers or suppliers and may affect the availability of materials needed to manufacture our products or the means to transport those materials to manufacturing facilities and finished products to customers.

If a natural disaster or other business interruption occurred with respect to our high-volume technology manufacturing center, we do not have immediate access to other manufacturing facilities and, as a result, our business, results of operations and financial condition would be materially adversely affected.

To support our long-term business goals for our satellite earth station product line, in fiscal 2021, we commenced a 15-year lease for a new 146,000 square foot facility in Chandler, Arizona and began shifting production of our satellite earth station products from our existing Tempe, Arizona locations.

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We design and manufacture our over-the-horizon microwave equipment and systems in Florida, where major hurricanes have occurred in the past, and amplifiers in Santa Clara, California, an area close to major earthquake fault lines, and also manufacture amplifiers in Melville, New York, an area subject to hurricanes.

Additionally, certain of our Commercial Solutions segment activities are conducted in Washington State which is also near a fault line.

Additionally, certain of our Terrestrial and Wireless Networks segment activities are conducted in Washington State near a fault line.

We maintain operations in Maryland near a U.S.

Navy facility which is more prone to a terrorist attack.

Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Tempe, Arizona and our antenna production facility in the United Kingdom), could be subject to natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and man-made disasters or disruptions.

Navy facility which may be more prone to a terrorist attack.

Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Arizona and our antenna production facility in the United Kingdom), could be subject to natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and man-made disasters or disruptions.

We cannot be sure that our systems will operate appropriately if we experience hardware or software failure, intentional disruptions of service by third parties, an act of God or an act of war.

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destruction of facilities;

and/or loss of life, all of which could materially increase our costs and expenses and materially adversely affect our business, results of operations and financial condition.

In addition, the ongoing COVID-19 pandemic has resulted in travel restrictions and business shutdowns both domestically and globally, including in locations in which we have significant operations.

and/or loss of life, all of which could materially increase our costs and expenses and adversely affect our business, results of operations and financial condition.

In addition, the COVID-19 pandemic has resulted in travel restrictions and business shutdowns both domestically and globally, including in locations in which we have significant operations.

These or any further political, governmental or other actions to contain the spread or treat the impact of COVID-19, and the resulting developments, are highly uncertain and unpredictable and could result in social, economic and labor instability.

These uncertainties could have a material adverse effect on the continuity of our business and our financial condition, the results of operations and cash flows.

These uncertainties could have an adverse effect on the continuity of our business and our financial condition, the results of operations and cash flows.

The military conflict between Russia and Ukraine, and the global response to it could adversely impact our revenues, gross margins and financial results.

government and other nations have imposed significant restrictions on most companies’ ability to do business in Russia.

It is not possible to predict the broader or longer-term consequences of this conflict, which could include further sanctions, embargoes, regional instability, geopolitical shifts, adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets.

Such geo-political instability and uncertainty could have a negative impact on our ability to sell to, ship products to, collect payments from, and support customers in certain regions based on trade restrictions, embargoes, export control law restrictions, and logistics restrictions including closures of air space, and could increase the costs, risks and adverse impacts from these new challenges.

We may also be the subject of increased cyber-attacks as a result of the conflict.

The military conflict between Russia and Ukraine has impacted our sales pipeline and continues to have significant repercussions for our business.

Although sales into Russia represented approximately 1% of our consolidated net sales in fiscal 2022 and 2021, consolidated net sales into Russia in fiscal 2023 and beyond were expected to significantly grow.

As a result of the economic sanctions against Russia, we are assuming no new sales in Russia in fiscal 2023 and the foreseeable future.

As a result of this conflict, in fiscal 2022, certain customers (including the U.S.

and Ukrainian government) paused procurement and deployment of satellite and troposcatter communication systems, and instead began purchasing war-fighting equipment.

For example, we had several opportunities to provide wireless communication systems (including troposcatter systems) to Ukraine for a variety of both defense and communications uses.

Funding for these systems was expected to be provided by Ukraine and by the U.S.

government and these items were expected to be awarded and shipped in the second half of fiscal 2022.

As result of the conflict in Ukraine, it has become difficult to predict the timing or dollar amount of these types of awards.

Additionally, funding for opportunities with other customers that we expected to book and ship has also been shifted to other programs and/or temporarily delayed as a result of changes in defense spending priorities.

Prior to this conflict, we maintained a small group of employees in Moscow, Russia who supported certain UHP-branded satellite communications products.

We are actively hiring new employees, expanding our Canadian operations and shifting certain commercial software development and support activities outside of Russia.

However, as we are currently in an environment where software engineering talent is already in high demand and commands a premium, we expect to incur additional annual expenses in connection with this personnel shift for our UHP products.

We may not be able to timely ramp up our operations in Canada or elsewhere on a sufficient scale to support anticipated growth of our UHP products, which could adversely impact future revenues, gross margins and operations.

Business Risks

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commercial customers relates to large, multi-year contracts to provide state and local governments (and their agencies) with public safety and location technology solutions.

Although the contracts themselves represent legal, binding obligations of these governments, funding is often subject to the approval of budgets (for example, on an annual or bi-annual basis).

Funding of these contracts is often subject to the approval of budgets (for example, on an annual or bi-annual basis).

Although funding for these multi-year contracts are dependent on future budgets being approved, we include the full estimated value of these large, multi-year contracts in our backlog given the critical nature of the services being provided and the positive historical experience of our state and local government customers passing their respective budgets.

There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, particularly during periods of macroeconomic instability.

There can be no assurance that our backlog will result in actual revenue in any particular period, or at all, particularly during periods of economic instability.

Nor can there be any assurance that any contract included in backlog will be profitable.

The actual amount and timing of any revenue is subject to various contingencies, many of which are beyond our control.

The actual recognition of revenue on contracts included in backlog may never occur or may change because a program schedule could change, a customer may not follow up with order details (e.g., delivery instructions), fluctuations in currency exchange rates after an order is placed could cause our products to become too expensive for a foreign customer, a customer’s program could be canceled, a contract could be reduced, modified or terminated early due to changes in a customer’s priorities, funding may not be included in future budgets, actual indirect rates being reimbursed on U.S.

government contracts may ultimately be less than those indirect rates included in our initial proposals, or an option that we had assumed would be exercised is not exercised.

The actual recognition of revenue on contracts included in backlog may never occur or may change because a program schedule could change;

a customer may not follow up with order details (e.g., delivery instructions), fluctuations in currency exchange rates after an order is placed could cause our products to become too expensive for a foreign customer;

a customer’s program could be canceled, a contract could be reduced, modified or terminated early due to changes in a customer’s priorities;

funding may not be included in future budgets;

actual indirect rates being reimbursed on U.S.

government contracts may ultimately be less than those indirect rates included in our initial proposals;

or an option that we had assumed would be exercised is not exercised.

We record a provision for excess and obsolete inventory based on historical and projected usage trends and other factors, including the consideration of the amount of backlog we have on hand at any particular point in time.

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Future events could result in either upward or downward adjustments to those estimates which could negatively impact our profitability.

Operating margin is materially adversely affected when contract costs that cannot be billed to the customer are incurred.

Operating margin could be materially adversely affected when contract costs that cannot be billed to the customer are incurred.

This cost growth can occur if initial estimates used for calculating the contract price were incorrect, or if estimates to complete increase.

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A decrease in Department of Defense or Department of Homeland Security expenditures, the elimination or curtailment of a material program in which we are involved (such as the withdrawal of troops from Afghanistan or other parts of the world), or changes in payment patterns of our customers as a result of changes in U.S.

government spending could have a material adverse effect on our business, results of operations and financial condition.

Ultimately, the U.S.

government may be unable to timely complete its budget process or fully agree upon spending priorities.

As such, it is possible that a shutdown of the U.S.

government spending could have an adverse effect on our business, results of operations and financial condition.

It is possible that a shutdown of the U.S.

government may occur, or interim budgets may be adopted.

As such, we may experience delayed orders, delayed payments and declines in net sales, profitability and cash flows.

As such, we may experience delayed orders, delayed payments and adverse impacts on our results of operations.

We may experience related supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors.

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government of approximately $2.4 million.

We disagree with the DCAA’s assessment and would vigorously protest any adjustment.

We have not recorded any reserve related to these audits but ultimately an adjustment may be issued.

We disagree with the DCAA’s assessment and would vigorously protest any adjustment, but ultimately an adjustment may be issued.

Although we record contract revenues based upon costs we expect to realize upon final audit, we cannot predict the outcome of any such future audits and adjustments, and we may be required to materially reduce our revenues or profits upon completion and final negotiation of audits.

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Violations of any of these laws, rules or regulations, and other business practices that are regarded as unethical, could interrupt the sales of our products and services, result in the cancellation of orders or the termination of customer relationships, and could damage our reputation, any of which developments could have a material adverse effect on our business, results of operations and financial condition.

• We price most of our products in U.S.

dollars - Today, most of our sales are denominated in U.S.

Over the last few years, the U.S.

dollar has strengthened significantly against many international currencies.

As such, many of our international customers experienced a drop in their purchasing power as it relates to their ability to purchase our products.

To date, we have not materially changed our selling prices and have experienced lower sales volumes in certain cases.

dollar strengthens from current levels against many international currencies, our customers may reduce their spending or postpone purchases of our products and services to a greater extent than we currently anticipate which could have a material adverse effect on our business, results of operations and financial condition.

• We must comply with all applicable export control laws and regulations of the U.S.

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• We may be affected by the future imposition of tariffs and trade restrictions - The current U.S.

administration has generally not amended the trade policies and tariffs on imported products from the prior administration, and increased sanctions against Russia.

administration has generally not amended the trade policies and tariffs on imported products from the prior administration, and has increased sanctions against Russia.

Our inability to effectively manage the negative impacts of U.S.

and foreign trade policies, including, in connection with our business with customers outside of the United States or with newly sanctioned entities could adversely affect our business and financial results.

A change in our relationship with our large wireless carrier customers could have a material adverse effect.

A change in our relationship with our large wireless carrier customers could have a material adverse effect on our business, results of operations and financial condition.

Although we have a long history of providing services to many of our wireless carrier partners, a change in purchasing or procurement strategies by a wireless carrier partner could result in the loss of business from that partner.

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These negotiations are complex and may take long periods of time.

Even when we successfully negotiate a multi-period contract, our wireless carrier contracts, such as the ones with Verizon which accounted for 10.7% of our sales in fiscal 2021, provide for terminations with notice and provide a mechanism for the wireless carrier to renegotiate lower fees and/or change services.

Even when we successfully negotiate a multi-period contract, our wireless carrier contracts, such as the ones with Verizon which collectively accounted for 11.1% of our sales in fiscal 2022, provide for terminations with notice and provide a mechanism for the wireless carrier to renegotiate lower fees and/or change services.

Fee pressure from these carriers is constant and ongoing.

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If our wireless carrier partners change the pricing and other terms by which they offer our products to their end-customers or do not continue to provide our services at all or renegotiate lower fees with us, our business, results of operations, and financial condition could be suddenly and materially adversely affected.

We generate a significant portion of our revenue from customers that are wireless carriers, such as Verizon which accounted for 10.7% of our revenues in fiscal 2021.

We generate a significant portion of our revenue from customers that are wireless carriers.

In addition, a portion of our revenue is derived from subscription fees that we receive from our wireless carrier partners for end-users who subscribe to our service on a standalone basis or in a bundle with other services.

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Our wireless carrier agreements and certain customers require us to meet specific requirements including operational uptime requirements or be subject to penalties.

If we are unable to meet contractual requirements with our wireless carrier partners, such as Verizon, they could terminate our agreements or we may be required to refund a portion of monthly subscriptions fees they have paid us.

If we are unable to meet contractual requirements with our wireless carrier partners, they could terminate our agreements or we may be required to refund a portion of monthly subscriptions fees they have paid us.

Strategic Growth Risks

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Our business and operating results may be negatively impacted if we are unable to manage this growth.

Our business is uniquely subject to certain risks related to its long term growth.

These risks include:

• The loss of key technical and/or management personnel could adversely affect our business - Our future success depends on the continued contributions of key technical and management personnel.

Many of our key and technical management personnel would be difficult to replace and are not subject to employment or non-competition agreements.

The management skills that have been appropriate for us in the past may not continue to be appropriate if we grow and diversify.

Filling new positions may be difficult in the current competitive labor market.

Moreover, many of our key and technical management personnel would be difficult to replace and are not subject to employment or non-competition agreements.

We currently have research and development employees in areas that are located a great distance away from our U.S.

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Competition for such personnel from other companies, academic institutions, government entities and other organizations is intense.

Although we believe that we have been successful to-date in recruiting and retaining key personnel, we may not be successful in attracting and retaining the personnel we will need to grow and operate profitably.

Also, the management skills that have been appropriate for us in the past may not continue to be appropriate if we grow and diversify.

Although we believe that we have been successful to date in recruiting and retaining key personnel, we may not be successful in attracting and retaining the personnel we will need to grow and operate profitably, especially in the current competitive labor market.

• We may not be able to improve our processes and systems to keep pace with anticipated growth - The future growth of our business may place significant demands on our managerial, operational, production and financial resources.

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We must carefully manage research and development capabilities and production and inventory levels to meet product demand, new product introductions and product and technology transitions.

Our planned moves to new high volume manufacturing facilities in Chandler, Arizona and Basingstoke, U.K.

may be delayed and subject to unforeseen costs (both capital and operational), which could impede our ability to complete customer orders and thereby have a material adverse effect on our business, results of operations and financial condition.

If we are not able to timely and effectively manage our growth and maintain the quality standards required by our existing and potential customers, it could have a material adverse effect on our business, results of operations and financial condition.

Our planned moves to new high volume manufacturing facility in Chandler, Arizona may be delayed and subject to unforeseen costs (both capital and operational), which could impede our ability to complete customer orders and thereby have a material adverse effect on our business, results of operations and financial condition.

If we are not able to timely and effectively manage our growth and maintain the quality standards required by our existing and potential customers, it could have an adverse effect on our business, results of operations and financial condition.

• Our markets are highly competitive and there can be no assurance that we can continue to compete effectively - The markets for our products are highly competitive.

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Although we obtain certain components and subsystems from a single source or a limited number of sources, we believe that most components and subsystems are available from alternative suppliers and subcontractors.

During the past two years or so, partly driven by the COVID-19 pandemic and as a result of overall increased industry-wide demand, lead times for many components have increased as well as freight costs.

During the past three years, partly driven by the COVID-19 pandemic and as a result of overall increased industry-wide demand, lead times for many components have increased as well as freight costs.

In addition, threats of or actual tariffs could limit our ability to obtain certain parts on a cost-effective basis, or at all.

A significant interruption in the delivery of such items could have a material adverse effect on our business, results of operations and financial condition.

A significant interruption in the delivery of such items could have an adverse effect on our business, results of operations and financial condition.

Similarly, if our high-volume technology manufacturing center located in Arizona is unable to produce sufficient product or maintain quality, it could have a material adverse effect on our business, results of operations and financial condition.

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As such, there can be no assurance that, in the future, we will be able to obtain credit insurance on a basis consistent with our past practices.

Loss of our executive officers or other key personnel or other changes to our management team could disrupt our operations and growth plans or harm our business.

We depend on the efforts of our executive officers and certain key personnel.

Any unplanned turnover or our failure to develop an adequate succession plan or business continuity plan for one or more of our executive officers, including our Chief Executive Officer (“CEO”), or other key positions could deplete our institutional knowledge base and erode our competitive advantage.

The loss or limited availability of the services of one or more of our executive officers or other key personnel, or our inability to recruit and retain qualified executive officers or other key personnel in the future, could, at least temporarily, have an adverse effect on our operating results and financial condition.

Leadership transitions can be inherently difficult to manage, and an inadequate transition may cause disruption to our business an growth plans, including to our relationships with our customers and employees.

We have incurred indebtedness under a Credit Facility, and may incur substantial additional indebtedness in the future, and may not be able to service that debt in the future and we must maintain compliance with various covenants that impose restrictions on our business.

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Our Credit Facility contains various affirmative and negative covenants that may restrict our ability to, among other things, permit liens on our property, change the nature of our business, transact business with affiliates and/or merge or consolidate with any other person or sell or convey certain of our assets to any one person.

As of July 31, 2021, our Secured Leverage Ratio (as defined in the Credit Facility) was 2.53x trailing twelve month ("TTM") Consolidated EBITDA (as defined in the Credit Facility) compared to the maximum allowable Leverage Ratio of 3.75x TTM Consolidated EBITDA.

Our Interest Expense Coverage Ratio as of July 31, 2021 was 13.05x TTM Adjusted EBITDA compared to the Minimum Interest Expense Coverage Ratio of 3.25x TTM Adjusted EBITDA.

We anticipate maintaining compliance with the terms and financial covenants in our Credit Facility for the foreseeable future, however, there can be no assurance that we will be able to meet these covenants.

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Our substantial debt obligations could impede, restrict or delay the implementation of our business strategy or prevent us from entering into transactions that would otherwise benefit our business.

• we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows for other purposes, including business development efforts, capital expenditures, dividends or strategic acquisitions;

• if we are not able to generate sufficient cash flows to meet our substantial debt service obligations or to fund our other liquidity needs, we may have to take actions such as selling assets or raising additional equity or reducing or delaying capital expenditures, strategic acquisitions, investments and joint ventures, or restructuring our debt;

• we may be required to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flows for other purposes, including but not limited to business development efforts, capital expenditures, dividends or strategic acquisitions;

• we may not be able to fund future working capital, capital investments and other business activities;

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Any decision regarding future borrowings will be based on the facts and circumstances existing at the time, including market conditions and our credit ratings.

The holders of our Series A Preferred Convertible Stock have a majority vote consent right over our ability to amend, restate, or replace the Credit Agreement on terms that are materially different to those of the Credit Agreement or that adversely affect the Company’s ability to fulfill its repurchase obligations of the Series A Preferred Convertible Stock.

If we need to amend, restate or replace the Credit Agreement on materially different terms or terms adverse to the interests of the holders of our Series A Preferred Convertible Stock, and we are unable to obtain the consent of such holders, we may be unable to obtain required financing or liquidity on favorable terms, or at all.

Acquisitions of companies and investments could prove difficult to integrate, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.

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• increase expenses, including expenses of managing the growth of such acquired businesses.

There can be no assurance that any future acquisition or investment will be successful within the anticipated time frame, or at all, will be as valuable as the amount we eventually pay to acquire it, and will not adversely affect our business, results of operations or financial condition.

There can be no assurance that any future acquisition or investment will be successful within the anticipated time frame, or at all, will be as valuable as the amount we pay to acquire it, and will not adversely affect our business, results of operations or financial condition.

In addition, if we consummate future acquisitions using our equity securities or securities convertible into our equity securities, existing stockholders may be diluted, which could have a material adverse effect on the market price of our common stock.

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government could result in fines being imposed against us or our suspension for a period of time of authority to operate under certain government programs or from eligibility for bidding on, or for award of, new government contracts, which could have a material adverse effect on our business, results of operations and financial condition.

In connection with our fiscal 2020 acquisition of CGC Technology Limited ("CGC") and our fiscal 2021 acquisition of UHP Networks, Inc.

(“UHP”), we now have a facility in Basingstoke, U.K.

and opened a new office in Moscow, Russia.

We have implemented and submitted for review by DCSA new stringent policies, protocols, procedures and organizational resolutions, including an updated Technology Control Plan, that prescribe the access controls and protective security measures necessary to preclude unauthorized access by foreign-national customers, vendors, visitors, or employees to classified information and unclassified export-controlled information.

We have limited experience operating in these foreign jurisdictions and if we are unable to comply with local laws or U.S.

laws related to such activity in foreign jurisdictions, or the DCSA or other U.S.

government agencies directs us to implement changes, our operations could be restricted and/or we could be subject to fines and penalties, both of which could have a material adverse effect on our business, results of operations and financial condition.

Our investments in recorded goodwill and other intangible assets could be impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure.

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Additionally, as of July 31, 2022, net intangibles recorded on our Consolidated Balance Sheet aggregated $247.3 million.

For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our Commercial Solutions and Government Solutions segment each constitute a reporting unit and we must make various assumptions in determining their estimated fair values.

For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our Satellite and Space Communications and Terrestrial and Wireless Networks segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values.

Reporting units are defined by how our Chief Executive Officer ("CEO") manages the business, which includes resource allocation decisions.

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however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

On August 1, 2021 (the first day of our fiscal 2022), we performed our annual quantitative assessment and estimated the fair value of each of our reporting units using a combination of the income and market approaches.

Based on our quantitative evaluation, we determined that our Commercial Solutions and Government Solutions reporting units had estimated fair values in excess of their carrying values of at least 22.7% and 94.1%, respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment.

As a result of our segment restructuring in the fourth quarter of fiscal 2022 from the Commercial Solutions and Government Solutions segments to the Satellite and Space Communications and Terrestrial and Wireless Networks segments, we performed an interim, quantitative assessment as of July 29, 2022 and estimated the fair value of each of our reporting units, both before and after the change, using a combination of the income and market approaches.

Based on our quantitative evaluations, we determined that our Satellite and Space Communications and Terrestrial and Wireless Networks reporting units had estimated fair values in excess of their carrying values of at least 18.4% and 11.6%, respectively, and concluded that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment.

Given its proximity to our next regularly scheduled annual goodwill impairment testing date, we utilized our July 29, 2022 interim, quantitative assessment to conclude that our goodwill was not impaired and that neither of our two reporting units was at risk of failing the quantitative assessment as of August 1, 2022.

It is possible that, during fiscal 2023 or beyond, business conditions (both in the U.S.

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A significant decline in our customers' spending that is greater than we anticipate or a shift in funding priorities may also have a negative effect on future orders, sales, income and cash flows and we might be required to perform a quantitative assessment during fiscal 2023 or beyond.

If assumed net sales and cash flow projections are not achieved in future periods or our common stock price significantly declines from current levels, our Commercial Solutions and Government Solutions reporting units could be at risk of failing the quantitative assessment and goodwill and intangibles assigned to the respective reporting units could be impaired.

If assumed net sales and cash flow projections are not achieved in future periods or our common stock price significantly declines from current levels, our Satellite and Space Communications and Terrestrial and Wireless Networks reporting units could be at risk of failing the quantitative assessment and goodwill and intangibles assigned to the respective reporting units could be impaired.

In any event, we are required to perform the next annual goodwill impairment analysis on August 1, 2023 (the start of our fiscal 2024).

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We could be negatively impacted by a system failure, lack of or failure of redundant system components, security breach through cyber-attack, cyber intrusion or otherwise, by other significant disruption of our IT networks or those we operate for certain customers, or third-party data center facilities, servers and related systems.

If such occurs, in some cases, we may have to reimburse our customers for damages that they may have incurred, pay contract penalties, or provide refunds.

Similar to all companies in our industry, we are under constant cyber-attack and are subject to an ongoing risk of security breaches and disruptions of our IT networks and related systems, including third-party data center facilities, whether through actual breaches, cyber-attacks or cyber intrusions via the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization.

If any such events occur, we may have to reimburse our customers for damages that they may have incurred, pay contract penalties, or provide refunds.

Similar to all companies in our industry, we are under constant cyber-attack and are subject to an ongoing risk of security breaches and disruptions of our IT networks and related systems, including third-party data center facilities, whether through actual breaches, cyber-attacks (including ransomware) or cyber intrusions via the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization.

Actual security breaches or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, have increased in recent years and have become more complex.

Our IT networks and systems, as well as third-party data center facilities, have been and, we believe, continue to be under constant attack.

Our IT networks and systems, as well as third-party data center facilities, have been and, we believe will continue to be under constant attack.

We face an added risk of a security breach or other significant disruption to certain of our equipment used on some of our customers' IT networks and related systems which may involve managing and protecting information relating to public safety agencies, wireless carriers as well as national security and other sensitive government functions.

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These types of information, IT networks and related systems are critical to the operation of our business and essential to our ability to perform day-to-day operations, and, in some cases, are critical to the operations of certain of our customers.

Although we make significant efforts to maintain the security and integrity of these types of information, IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that actual security breaches or disruptions will not be successful or damaging.

Even the most well protected information, networks, data centers, systems and facilities remain potentially vulnerable because security breaches, particularly cyber-attacks and intrusions, and disruptions have occurred and will occur again in the future.

There can be no assurance that our security efforts and measures will be effective or that actual security breaches or disruptions will not be successful or damaging.

Techniques used in such breaches and cyber-attacks are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.

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• Require significant management attention and resources to remedy the damage that results;

• Make payments to our customers to reimburse them for damages, pay them penalties or provide refunds;

• Require us to make payments to our customers to reimburse them for damages, pay them penalties or provide refunds;

• Damage our reputation with our customers (particularly agencies of the U.S.

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Changes in U.S.

tax law could adversely affect our business and financial condition.

federal, state and foreign tax law could adversely affect our business and financial condition.

The laws, rules, and regulations dealing with U.S.

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The final determination of tax examinations and any related litigation could be materially different than what is reflected in historical income tax provisions and accruals.

Our federal income tax returns for fiscal 2018 through 2020 are subject to potential future Internal Revenue Service ("IRS") audit.

federal income tax returns for fiscal 2019 through 2021 are subject to potential future Internal Revenue Service ("IRS") audit.

None of our state income tax returns prior to fiscal 2018 are subject to audit.

In addition to income tax audits, TCS is subject to ongoing state excise tax audits by the Washington State Department of Revenue.

Although adjustments relating to past audits of our federal income tax returns were immaterial, a resulting tax assessment or settlement for other periods or other jurisdictions that may be selected for future audit could have a material adverse effect on our business, consolidated results of operations and financial condition.

Although adjustments relating to past audits of our federal income tax returns were immaterial, a tax assessment or settlement for other periods or other jurisdictions that may be selected for future audit could have a material adverse effect on our business, consolidated results of operations and financial condition.

We may be subject to environmental liabilities.

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We are also subject to the Restriction of Hazardous Substance ("RoHS") directive which restricts the use of lead, mercury and other substances in electrical and electronic products.

The failure to comply with current or future environmental requirements could result in the imposition of substantial fines, suspension of production, alteration of our manufacturing processes or cessation of operations that could have a material adverse effect on our business, results of operations and financial condition.

The failure to comply with current or future environmental requirements could result in the imposition of substantial fines, suspension of production, alteration of our manufacturing processes, cessation of operations or reputational damage that could have a material adverse effect on our business, results of operations and financial condition.

In addition, the handling, treatment or disposal of hazardous substances by us or our predecessors may have resulted, or could in the future result, in contamination requiring investigation or remediation, or lead to other liabilities, any of which could have a material adverse effect on our business, results of operations and financial condition.

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There also are some safety risks associated with the use of wireless handsets while driving.

Concerns over these safety risks and the effect of any legislation that may be adopted in response to these risks could limit our ability to market and sell our products and services.

Concerns over these safety risks and the effect of any legislation that may be adopted in response to these risks could limit our ability to market and sell our products and services, which could negatively impact our business, consolidated results of operations and financial condition.

• The regulatory environment for VoIP services is developing - The FCC has determined that VoIP services are not subject to the same regulatory scheme as traditional wireline and wireless telephone services.

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Because securities laws, related regulations and financial reporting standards pertaining to our business are relatively complex, our business faces increased risks including the following:

• If we identify a material weakness in the future, our costs may unexpectedly increase - Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 and related SEC rules, we are required to furnish a report of management’s assessment of the effectiveness of our internal controls as part of our Annual Report on Form 10-K.

Our independent registered public accountants are required to attest to and provide a separate opinion.

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To the extent that this accounting standard makes it less attractive to grant stock-based awards to employees, we may incur increased compensation costs, change our equity compensation strategy or find it difficult to attract, retain and motivate employees, each of which could have a material adverse effect on our business, results of operations and financial condition.

Also, the accounting rules and regulations that we must comply with are complex.

Accounting rules and regulations are continually changing in ways that could materially impact our financial statements.

As further discussed in "Notes to Consolidated Financial Statements - Note (1) - Summary of Significant Accounting and Reporting Policies" included in "Part II - Item 8.

- Financial Statements and Supplementary Data," included in this Annual Report on Form 10-K, we note the following:

• We must maintain compliance with new complex revenue recognition rules - On August 1, 2018 (our first quarter of fiscal 2019), we adopted ASU No.

2014-09 "Revenue from Contracts with Customers (Topic 606)," which replaces numerous requirements in U.S.

GAAP, including industry specific requirements, and provides a single revenue recognition model for contracts with customers.

The ASU applies to all open contracts existing as of August 1, 2018.

We adopted this ASU using the modified retrospective method and there was no material impact on our business, results of operations and financial condition.

• We must maintain compliance with new complex lease accounting rules - In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," to revise existing lease accounting guidance.

The update requires most leases to be recorded on the balance sheet as a lease liability, with a corresponding right-of-use asset.

We adopted Topic 842 on August 1, 2019, the beginning of our first quarter of fiscal 2020.

Except for recording a total right-of-use asset and corresponding lease liability on our Consolidated Balance Sheet, which amount approximates 4.0% of our total consolidated assets at July 31, 2019, our adoption of Topic 842 did not have a material impact to our statements of operations or cash flows.

Also, as further discussed in "Notes to Consolidated Financial Statements - Note (1) - Summary of Significant Accounting and Reporting Policies" included in "Part II - Item 8.

- Financial Statements and Supplementary Data," included in this Form 10-K, the accounting rules and regulations that we must comply with are complex and are continually changing in ways that could materially impact our financial statements.

We must comply with these new rules on a go-forward basis.

Because of the uncertainties of the estimates, judgments and assumptions associated with these new accounting standards, as well as with any future guidance or interpretations related to them, we may incur additional costs and cannot provide any assurances that we will be able to comply with such complex rules.

Because of the uncertainties of the estimates, judgments and assumptions associated with new accounting standards, as well as with any future guidance or interpretations related to them, we may incur additional costs and cannot provide any assurances that we will be able to comply with such complex rules.

Our costs to comply with the aforementioned and other regulations continue to increase and we may have to add additional accounting staff, engage consultants or change our internal practices, standards and policies which could significantly increase our costs to comply with ongoing or future requirements.

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In many cases, we are unable to obtain insurance and are self-insured.

Any such claim could have a material adverse effect on our business, results of operations and financial condition.

For additional information related to these lawsuits, see "Notes to Consolidated Financial Statements - Note (12)(a) - Commitments and Contingencies - Legal Proceedings and Other Matters" included in "Part II - Item 8.- Financial Statements and Supplementary Data," included in this Annual Report on Form 10-K.

Any such claim, including any out of pocket payments we are required to make and the costs of the defense against such claim, could result in material costs and have an adverse effect on our business, results of operations and financial condition.

Protection of our intellectual property is limited and pursuing infringers of our patents and other intellectual property rights can be costly.

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We rely on a combination of patent, copyright, trademark, service mark, trade secret and unfair competition laws, restrictions in licensing agreements, confidentiality provisions and various other contractual provisions to protect our intellectual property and related proprietary rights, but these legal means provide only limited protection.

Although a number of patents have been issued to us and we have obtained a number of other patents as a result of our acquisitions, we cannot assure you that our issued patents will be upheld if challenged by another party.

Additionally, with respect to any patent applications which we have filed, we cannot assure you that any patents will be issued as a result of these applications.

The departure of any of our key management and technical personnel, the breach of their confidentiality and non-disclosure obligations to us or the failure to achieve our intellectual property objectives could have a material adverse effect on our business, results of operations and financial condition.

We cannot guarantee that our issued and acquired patents will be upheld if challenged by another party.

Additionally, with respect to any patent applications which we have filed, we cannot guarantee that any patents will be issued as a result of these applications.

The departure of any of our key management and technical personnel, the breach of their confidentiality and non-disclosure obligations to us or the failure to achieve our intellectual property objectives could have an adverse effect on our business, results of operations and financial condition.

Our ability to compete successfully and achieve future revenue growth will depend, in part, on our ability to protect our proprietary technology and operate without infringing upon the rights of others.

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Third parties, however, may claim that we, our products, operations or any products or technology we obtain from other parties are infringing their intellectual property rights, and we may be unaware of intellectual property rights of others that may impact some of our assets, technology and products.

From time to time we receive letters from third parties who allege we are infringing their intellectual property and ask us to license such intellectual property.

We review the merits of each such letter and respond as we deem appropriate.

From time to time our customers are parties to allegations of intellectual property infringement claims based on our customers’ incorporation and use of our products and services, which may lead to demands from our customers for us to indemnify them for costs in defending those allegations.

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Open source license terms may be ambiguous and many of the risks associated with usage of open source software cannot be eliminated, and could if not properly addressed, negatively affect our business.

If we were found to have inappropriately used open source software, we may be required to release our proprietary source code, re-engineer our products and client applications, discontinue the sale of our products or services in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could materially adversely affect our business, results of operations, and financial condition.

If we were found to have inappropriately used open source software, we may be required to release our proprietary source code, re-engineer our products and client applications, discontinue the sale of our products or services in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, results of operations, and financial condition.

Competitive Risks

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New entrants seeking to gain market share by introducing new technology and new products may make it more difficult for us to sell our products and services and could create increased pricing pressure, reduced profit margins, increased sales and marketing expenses, or the loss of market share or expected market share, any of which could have a material adverse effect on our business, results of operations and financial condition.

For example, many companies are developing new technologies and the shift towards open standards such as IP-based satellite networks will likely result in increased competition and some of our products may become commoditized.

Our Commercial Solutions segment provides various technologies that are utilized on mobile phones.

Our Terrestrial and Wireless Networks segment provides various technologies that are utilized on mobile phones.

Applications from competitors for location-based or text-based messaging platforms may be preloaded on mobile devices by original equipment manufacturers, or OEMs, or offered by OEMs directly.

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We believe that we must continue to dedicate a significant amount of resources to research and development efforts to maintain our competitive position.

If we continue to expend a significant amount of resources on research and development, but our efforts do not lead to the successful introduction of product and service enhancements that are competitive in the marketplace, our business, results of operations and financial condition could be materially adversely affected.

If we continue to expend a significant amount of resources on research and development, but our efforts do not lead to the successful introduction of product and service enhancements more quickly than our competitors that are competitive in the marketplace, our business, results of operations and financial condition could be materially adversely affected.

Several of our potential competitors are substantially larger than we are and have greater financial, technical and marketing resources than we do.

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more funds to deploy products and services;

and the ability to lower prices (or not charge any price) of competitive products and services because they are selling larger volumes.

and the ability to lower prices of (or not charge any price for) competitive products and services because they are selling larger volumes.

Furthermore, we cannot be sure that our competitors will not develop competing products, systems, services or technologies that gain market acceptance in advance of our products, systems, services or technologies, or that our competitors will not develop new products, systems, services or technologies that cause our existing products, systems, services or technologies to become non-competitive or obsolete, which could adversely affect our results of operations.

Our Commercial Solutions segment provides public safety and location technologies to various state and local municipalities and to a large extent, we are reliant on the success of our wireless partners and distributors to meet our growth objectives.

Our Terrestrial and Wireless Networks segment provides public safety and location technologies to various state and local municipalities and to a large extent, we are reliant on the success of our wireless partners and distributors to meet our growth objectives.

In some cases, our wireless partners may have different objectives, or our distributors may not be successful.

We also began an evaluation and repositioning of certain of our location technology solutions within our Commercial Solutions segment in order to focus on providing higher margin solution offerings and increase our penetration into the public safety space.

We also began an evaluation and repositioning of certain of our location technology solutions within our Terrestrial and Wireless Networks segment in order to focus on providing higher-margin solution offerings and increase our penetration into the public safety space.

To date, we have ceased offering certain location technology solutions, have worked with customers to wind-down certain legacy contracts and have not renewed certain contracts.

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We rely upon various third-party companies and their technology to provide services to our customers and if we are unable to obtain such services at reasonable prices, or at all, our gross margins and our ability to provide the services of our wireless applications business could be materially adversely affected.

We rely on various third-party companies and their technology in our business.

Risks from our reliance with these third parties include:

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• Third-party data centers or third-party networks may fail - Many products and services of our advanced communication solutions, in particular our public safety and location technology solutions, are provided through a combination of our servers, which are hosted at third-party data centers, and on the networks, as well as within the data centers of our wireless carrier partners.

The third-party facilities are in Irvine, California, San Francisco, California, Dallas, Texas and Raleigh, North Carolina, and we may use others as required.

We also use third-party data center facilities in the Phoenix, Arizona area to provide for disaster recovery.

Additionally, certain non-911 products, technologies, and solutions are currently hosted in cloud-based applications operated by third parties such as Amazon Web Services and Microsoft.

As such, our business relies to a significant degree on the efficient and uninterrupted operation of the third-party data centers, customer data centers, and cloud providers we use.

Our business relies to a significant degree on the efficient and uninterrupted operation of the third-party data centers, customer data centers, and cloud providers we use.

Network failures, disruptions or capacity constraints in our third-party data center facilities or in our servers maintained at their location could affect the performance of the products and services of our wireless applications and 911 business and harm our reputation and our revenue.

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Factors that could have a significant impact on the market price of our stock include, among others:

• strategic transactions, such as acquisitions and divestures;

• strategic transactions, such as acquisitions and divestures by us and our competitors;

• our ability to successfully integrate and manage recent acquisitions;

• issuance of potentially dilutive equity or equity-type securities;

• issuance of debt;

• our issuance of potentially dilutive equity or equity-type securities;

• our issuance of debt;

• our ability to successfully access equity and debt capital markets;

• future announcements concerning us or our competitors;

• shareholder activism involving our common stock, board of directors or corporate governance;

• receipt or non-receipt of substantial orders for products and services;

• quality deficiencies in services or products;

• results of technological innovations;

• new commercial products;

• results of technological innovations and new commercial products;

• changes in recommendations of securities analysts;

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government policies;

• changes in economic conditions generally, particularly in the telecommunications sector;

• changes in economic conditions generally, particularly in the terrestrial and wireless networks and satellite and space communications markets;

• changes in securities market conditions, generally;

• changes in prevailing interest rates;

• changes in the status of litigation and legal matters (including changes in the status of export matters);

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• rumors or allegations regarding our financial disclosures or practices;

• the ongoing and future effects of the COVID-19 pandemic.

Shortfalls in our sales or earnings in any given period relative to the levels expected by securities analysts could immediately, significantly and adversely affect the trading price of our common stock.

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Any of these events may dilute a stockholder's ownership interest in Comtech and have an adverse impact on the price of our common stock.

Actions of activist stockholders could impact the pursuit of our business strategies and adversely affect our results of operations, financial condition and/or share price.

Our Board of Directors and management team value constructive input from investors, regularly engage in dialogue with our stockholders, and are committed to acting in the best interests of all of our stockholders;

however, we have been, and may in the future be, subject to actions, campaigns, or proposals that may not align with our business strategies or the interests of our other stockholders.

Accordingly, there is no assurance that the actions taken by the Board of Directors and management in seeking to maintain constructive engagement with certain stockholders will be successful in preventing the occurrence of stockholder activist campaigns.

Campaigns by activist stockholders to effect changes at publicly traded companies often demand that companies undertake or pursue financial restructuring, increase debt, issue special dividends, repurchase shares, or undertake sales of assets or other transactions, including strategic transactions.

Campaigns may also be initiated by activist stockholders advocating for particular environmental or social causes.

Activist stockholders who disagree with the composition of a company’s board of directors, or with its strategy and/or management often seek to involve themselves in the governance and strategic direction of a company through various activities.

As discussed elsewhere in this report, we have been, and may in the future be, subject to activities and campaigns initiated by activist stockholders.

Responding to proxy contests and other actions by activist stockholders can be costly and time-consuming, and could divert the attention of our Board of Directors, management team and employees from the management of our operations and the pursuit of our business strategies.

Further, actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Perceived uncertainties as to our future direction, strategy or leadership created as a consequence of activist stockholder campaigns or initiatives may result in the loss of potential business opportunities and make it more difficult to attract and retain investors, customers, employees, and other business partners.

Also, we could be required to incur significant expenses related to any activist stockholder matters (included but not limited to legal fees, fees for financial advisors, fees for public relation advisors and proxy solicitation expenses).

As a result, activist stockholder campaigns could adversely affect our business, results of operations, financial condition and/or share price in ways that can be difficult to predict or foresee.

Even if we are successful in any proxy contest or in defending against any unsolicited takeover attempt, our business could be adversely affected by any such proxy contest or unsolicited takeover attempt due to:

• perceived uncertainties as to future direction may result in the loss of potential acquisitions, collaborations or other strategic opportunities, and may make it more difficult to attract and retain qualified personnel, customers, suppliers, and other business partners;

• if individuals are elected or appointed to our Board of Directors with a specific agenda or who do not agree with our strategic plan, the ability of our Board of Directors to function effectively could be adversely affected, which could in turn adversely affect our ability to effectively and timely implement our strategic plan and create additional value for our stockholders, and/or adversely affect our business, operating results and financial condition.

We cannot predict, and no guarantees can be given, as to the outcome or timing of any matters relating to the foregoing actions by stockholders and our responses thereto or the ultimate impact on our business, liquidity, financial condition or results of operations.

Any of these matters or any further actions by stockholders and our responses thereto may impact and result in volatility or stagnation of our share price.

Provisions in our corporate documents and Delaware law could delay or prevent a change in control of Comtech.

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This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control.

Future Common Stock dividends remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval.

Future Common Stock dividends remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval and certain voting rights of holders of our Series A Convertible Preferred Stock.

Our Board of Directors may, at its discretion, decrease the targeted annual dividend amount or entirely discontinue the payment of dividends at any time.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors