COMTECH TELECOMMUNICATIONS CORP /DE/ 10-Q

Item 1A. Risk Factors Our current cash and liquidity projections raise substantial doubt about our ability to continue as a going concern. As discussed in " Notes to Condensed Consolidated Financial Statements – Note (1) – General," and in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources ,” we have evaluated whether there are any conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern over the next twelve months. Based on our current business plans, including projected capital expenditures, we do not believe our current level of cash and cash equivalents or liquidity expected to be generated from future cash flows will be sufficient to fund our operations over the next twelve months and repay current obligations under the Credit Facility, raising substantial doubt about the Company’s ability to continue as a going concern as of the date of this Quarterly Report on Form 10-Q. Although we are actively pursuing strategies to mitigate these conditions and events and alleviate such substantial doubt about our ability to continue as a going concern, there can be no assurance that our plans will be successful. Our ability to meet our current obligations as they come due may be impacted by our ability to remain compliant with the financial covenants under our Credit Facility or to obtain waivers or amendments that impact the related financial covenants. If we are unable to satisfy certain covenants and not able to obtain waivers or amendments, such event would constitute an Event of Default (as such term is defined under the Credit Facility) and could cause an immediate acceleration and repayment of all outstanding principal, interest and fees due under the Credit Facility. If there is an Event of Default, there can be no assurances that we will be able to continue as a going concern, which could force us to delay, reduce or discontinue certain aspects of our business strategy. Additionally, our ability to meet future anticipated liquidity needs will largely depend on our ability to generate positive cash inflows from operations, as well as refinance our Credit Facility, and/or secure other sources of outside capital. Our ability to generate cash in the future or have sufficient access to credit from financial institutions and/or financing from public and/or private debt and equity markets on acceptable terms, or at all, (i) is subject to (a) general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control and (b) a majority vote consent right of the holders of the Convertible Preferred Stock (as discussed further in Note (17) – " Convertible Preferred Stock "), and (ii) could (x) dilute the ownership interest of our stockholders, (y) include terms that adversely affect the rights of our common stockholders, or (z) restrict our ability to take specific actions such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. Also, our transition to sustained profitability is dependent upon the successful completion of our ongoing One Comtech transformation and integration of individual businesses into two segments and related restructuring activities to optimize our cost structure. If we are unable to obtain sufficient, timely financial resources, our business, financial condition and results of operations could be materially and adversely affected and we may be forced to terminate, significantly curtail or cease our operations or to pursue other strategic alternatives, including commencing a case under the U.S. Bankruptcy Code. In addition, the perception that we may not be able to continue as a going concern may cause customers, vendors and others to review and alter their business relationships and terms with us, and may affect our credit rating. If we seek additional financing to fund operations and there remains substantial doubt about our ability to continue as a going concern, financing sources may be unwilling to provide such funding to us on commercially reasonable terms, or at all. Uncertainty regarding our ability to continue as a going concern could also have a material and adverse impact on the price of our common stock, which could negatively impact our ability to obtain additional stock-based financing or enter into strategic transactions. 50 Index Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not applicable. Item 4. Mine Safety Disclosures Not applicable.