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For a more complete discussion of the material risks facing our business, please see below:
−Removed: • 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.
+Added: • New and ongoing challenges relating to current supply chain constraints, including for satellite ground station and troposcatter components, and impacts from inflation and any new or increased tariffs on imports and other trade restrictions, could adversely impact our revenue, gross margins and financial results.
• 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.
• We have significant operations in 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.
−Removed: • Ongoing instability and conflicts in global markets, including in the Ukraine and Eastern Europe, Israel, Lebanon, the Gaza Strip and the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
−Removed: Strategic Transformation Risks
−Removed: • We may fail to realize all of the anticipated benefits of our operational initiatives, including the strategic alternatives for our Terrestrial and Wireless Networks segment and further portfolio-shaping opportunities, or those benefits may take longer to realize than expected.
−Removed: • Our transformation strategy may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
+Added: • Ongoing instability and conflicts in global markets, including in Ukraine, the Gaza Strip, Israel, Lebanon and other countries in the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
+Added: Transformation Plan Risks
+Added: • We may fail to realize all of the anticipated benefits of our strategic and operational initiatives, or those benefits may take longer to realize than expected.
+Added: • Our transformation plan may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
Business Risks
−Removed: • Our current cash and liquidity projections raise substantial doubt about our ability to continue as a going concern.
+Added: • Our cash and liquidity projections may not materialize as anticipated.
• Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.
• Our backlog is subject to customer cancellation or modification and such cancellations or modifications could result in a decline in sales and increased provisions for excess and obsolete inventory.
−Removed: • Our efforts to invoice and collect unbilled receivables may be unsuccessful.
+Added: • Our efforts to invoice and collect unbilled accounts receivable may be unsuccessful.
• Contract cost growth on our firm fixed-price contracts exposes us to reduced profitability and the potential loss of future business and other risks.
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• We must service the debt and maintain compliance with various covenants under a credit facility that imposes restrictions on our business.
−Removed: • Divestitures of portions of our business in the course of pursuing strategic alternatives and revisiting our portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.
−Removed: • Our investments in recorded goodwill and other intangible assets have been impaired and may be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure as we pursue strategic alternatives.
+Added: • Divestitures of portions of our business in the course of carrying out our transformation plan and reshaping our product portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.
+Added: • Our investments in recorded goodwill and other intangible assets have been impaired and may be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure for any reason.
Cybersecurity Risks
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• Provisions in our corporate documents and Delaware law could delay or prevent a change in control of Comtech.
−Removed: 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.
+Added: New and ongoing challenges relating to current supply chain constraints, including for satellite ground station and troposcatter components, and impacts from inflation and any new or increased tariffs on imports and other trade restrictions, 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.
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Despite our attempts to mitigate the impact on our business, constrained supply chain 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.
−Removed: During fiscal 2024, 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 2024.
−Removed: In addition, the ongoing supply chain issues have affected the quality of the components we receive.
−Removed: Certain parts received in fiscal 2024 did not meet our quality specifications and we were unable to use them.
+Added: In our recent past, we experienced disruptions in our supply chain relating to later-than-expected delivery of certain key components from several suppliers that adversely impacted our revenues.
+Added: In addition, supply chain issues have affected the quality of the components we receive, which in some cases caused such components to not meet our specifications.
+Added: In addition, the U.S.
+Added: recently implemented further changes to trade policies, including adding new or modifying existing tariffs on imports, in some cases significantly.
+Added: The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available.
+Added: Although some of these tariffs have been paused or reduced, there is significant uncertainty as trade negotiations are ongoing and outcomes are unpredictable.
+Added: Tariffs and any retaliatory actions, if implemented, could significantly increase the cost of our products and result in lower demand for our products, delivery delays, and terminations of orders by customers.
+Added: The uncertainty in the trade environment may also contribute to broader macroeconomic and financial market weakness and volatility, such as inflationary pressures affecting interest rates and volatility in the stock market affecting the price of our common stock.
+Added: While we continue to evaluate the potential impact of the new tariffs on our business, given the volatility and uncertainty regarding the scope and duration of such tariffs and other aspects of U.S.
+Added: and foreign government trade policies, their ultimate impact on our operations and financial results remains uncertain.
We obtain certain components and subsystems from a single source or a limited number of sources.
−Removed: 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.
+Added: Some of our single source suppliers, particularly those that provide satellite ground station and troposcatter components, have in the past reported to us that they are having disruptions in their respective supply chains.
These single source components, which include items such as RF filters and custom fiber connectors are in limited supply with very long lead times.
In some cases, we have now depleted our stock inventory and we are on waiting lists to obtain additional components.
−Removed: In order to ship certain items during fiscal 2024, we must obtain additional components to produce certain finished goods.
+Added: In order to ship certain items in the future, we must obtain additional components to produce certain finished goods.
We continue to seek new suppliers and inventory elsewhere.
−Removed: In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components.
−Removed: Heading into our fiscal 2025, we have a significant portion of our targeted revenues in our backlog.
−Removed: 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.
−Removed: 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.
−Removed: There can be no assurance that the impacts of all the aforementioned conditions will not continue, or worsen, in the future.
+Added: In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components timely, or at all.
+Added: Heading into fiscal 2026, we have a significant portion of our anticipated revenues in funded backlog.
+Added: However, if shipments from our backlog are delayed, we are unable to perform as expected on orders accounted for over time, or we are unable to obtain expected orders or components, we may not achieve our business outlook.
+Added: The aforementioned supply chain constraints, and their related challenges could result in, among other things, future shortages, increased material costs or use of cash, engineering design changes, late delivery penalties and delays in new product introductions, each of which could adversely impact our revenue, gross margins and financial results.
+Added: There can be no assurance that the impacts of any or all the aforementioned conditions will not continue, or worsen, in the future.
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.
−Removed: Many of the end-markets for our products and services may be significantly impacted for other issues that result in adverse global economic conditions.
+Added: Many of the end-markets for our products and services may be significantly impacted by 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.
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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.
−Removed: Additionally, certain of our Terrestrial and Wireless Networks segment activities are conducted in Washington State near a fault line.
+Added: Additionally, certain of our Allerium segment activities are conducted in Washington State near a fault line.
We maintain operations in Maryland near a U.S.
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Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Arizona), 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.
−Removed: 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.
+Added: We cannot be sure that our systems will operate appropriately if we experience hardware or software failures, intentional disruptions of service by third parties, an act of God or an act of war.
A failure in our systems could cause delays in transmitting data, and as a result we may lose customers or face litigation that could involve material costs and distract management from operating our business.
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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.
−Removed: Ongoing instability and conflicts in global markets, including in the Ukraine and Eastern Europe, Israel, Lebanon, the Gaza Strip and the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
+Added: Ongoing instability and conflicts in global markets, including in Ukraine, the Gaza Strip, Israel, Lebanon, and other countries in the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.
government and other nations have imposed significant restrictions on most companies’ ability to do business in Russia.
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We may also be the subject of increased cyber-attacks as a result of the conflict.
−Removed: The military conflict between Russia and Ukraine has impacted our sales pipeline and continues to have repercussions for our business.
−Removed: Although sales into Russia represented approximately 1% of our consolidated net sales in fiscal 2024 and 2023, consolidated net sales into Russia in fiscal 2025 and beyond had been expected to grow.
−Removed: As a result of the economic sanctions against Russia, however, we have stopped accepting new orders in Russia and initiated a wind down of operations in fiscal 2024.
−Removed: As a result of this conflict, from time to time over the past two years, we believe that certain customers (including the U.S.
+Added: The conflict between Russia and Ukraine impacted our sales pipeline and continues to have repercussions for our business.
+Added: As a result of the economic sanctions against Russia, we stopped accepting new orders in Russia and wound down our Russian operations in fiscal 2024.
+Added: We intend to repatriate proceeds from former operations in Russia as permitted by law;
+Added: however, our ability to do so may be negatively impacted by continuing sanctions against Russia, as well as by the laws within Russia.
+Added: As a result of this conflict, from time to time since February 2023, we believe that certain customers (including the U.S.
government, Ukraine and neighboring countries) paused procurement and deployment of satellite and troposcatter communication systems, and instead began purchasing war-fighting equipment.
Accordingly, it has become difficult to predict the timing or dollar amount of our contract awards in the region.
−Removed: For example, we anticipated being awarded several opportunities to provide wireless communication systems (including troposcatter systems) to Ukraine and neighboring countries for a variety of both defense and communications uses.
−Removed: However, while we continue to track such opportunities and believe that they will ultimately be awarded to us, such opportunities continue to be delayed.
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.
−Removed: Prior to this conflict, we maintained a small group of employees who supported certain UHP-branded satellite communications products.
−Removed: In fiscal 2024, we continued to expand our operations and shift certain commercial software development and support activities to Canada.
−Removed: 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.
−Removed: 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.
Government's budget deficit, as well as a breach of the debt ceiling, could have an adverse impact on our operations.
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defense budget, which in turn is driven by an annual appropriation by Congress.
−Removed: These appropriations rarely align with the performance period of our contracts—for instance, most of our government contracts are only partially funded at inception.
+Added: These appropriations rarely align with the performance period of our contracts;
+Added: for instance, most of our government contracts are only partially funded at inception.
DoD budgets are driven by factors that are outside our control (such as economic conditions, administration policy shifts within the Executive branch and geopolitical events).
Any one or combination of these factors may adversely impact our operations, resulting in a decline of sales and operating income.
−Removed: Strategic Transformation Risks
−Removed: We may fail to realize all of the anticipated benefits of our operational initiatives, including the strategic alternatives for our Terrestrial and Wireless Networks segment and further portfolio-shaping opportunities, or those benefits may take longer to realize than expected.
−Removed: On October 17, 2024, we announced that we are executing a strategy to transform Comtech into a pure-play satellite and space communications company.
−Removed: There can be no assurance that the exploration of strategic alternatives will result in a transaction on terms acceptable to us or other strategic changes or outcomes.
−Removed: Even if a transaction or series of transactions were completed, there can be no assurance as to the timing of completing these activities.
−Removed: Moreover, we may not realize any or all of the anticipated benefits from our pursuit of strategic alternatives for our Terrestrial and Wireless Networks segment, or the anticipated benefits from further portfolio-shaping opportunities, and related transactions could in fact adversely affect our business.
−Removed: Our ability to realize the anticipated benefits of our transformation strategy and further portfolio-shaping opportunities will depend, to a large extent, on our ability to continue to focus on satellite and space communications and to achieve more predictable growth in the absence of any divested businesses, including the Terrestrial and Wireless Networks segment.
+Added: Transformation Plan Risks
+Added: We may fail to realize all of the anticipated benefits of our strategic and operational initiatives, or those benefits may take longer to realize than expected.
+Added: We are continuing to execute a plan to transform Comtech through the exploration of strategic alternatives for our various businesses and product lines, the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus, and the implementation of additional operational initiatives to both achieve profitable results from operations, as well as to align our go-forward cost structure with our future state business.
+Added: There can be no assurance that any of these initiatives will result in outcomes on terms acceptable to us or at all.
+Added: Even if any of these initiatives were completed, there can be no assurance as to the timing of completing these activities.
+Added: Moreover, we may not realize any or all of the anticipated benefits from our pursuit of these initiatives, and related transactions could in fact adversely affect our business.
+Added: Our ability to realize the anticipated benefits of our transformation plan will depend, to a large extent, on our ability to continue to focus on, and to achieve, more predictable growth related to our remaining business.
Some of the anticipated benefits may not occur for a significant period of time.
−Removed: In addition, we may retain certain liabilities or obligations related to our Terrestrial and Wireless Networks segment or other businesses that may arise under contract or law, or may have difficulties enforcing our rights, contractual or otherwise, against the buyer.
−Removed: The focus on becoming a pure-play satellite and space communications company and the related transactions may not enhance long-term stockholder value as anticipated.
−Removed: Further, our strategic transformation could result in near term restructuring charges and a material impairment of our goodwill and/or intangible assets, among other things.
−Removed: Many of these factors will be outside of our control and any one of them could result in increased costs, including restructuring charges, decreases in the amount of expected revenues and diversion of management’s time and energy, which could adversely affect our business, financial condition and results of operations.
−Removed: In addition, the process of such strategic transformations, including divesting assets, carries an inherent risk of market fluctuations and economic uncertainties that could undermine the value we expect to realize.
−Removed: Our transformation strategy may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
−Removed: Our management team has spent, and continues to spend, a significant amount of time and effort focusing on our transformation strategy.
−Removed: This diversion of attention may have an adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the time it takes to complete our transformation strategy is protracted.
−Removed: During the pendency of the transformation strategy, our employees may face considerable distraction and uncertainty and we may experience increased levels of employee attrition.
+Added: In addition, we may retain certain liabilities or obligations related to any disposed businesses that may arise under contract or law, or may have difficulties enforcing our rights, contractual or otherwise, against the buyer.
+Added: The outcome of these initiatives and the related transactions may not enhance long-term stockholder value as anticipated.
+Added: Further, our transformation plan could result in near-term restructuring charges and a material impairment of our goodwill and/or intangible assets, among other things.
+Added: Many of these factors will be outside of our control and any one of them could result in increased costs, including restructuring charges, decreases in the amount of expected revenues and diversion of management’s attention, which could adversely affect our business, financial condition and results of operations.
+Added: In addition, the process of such transformation plan, including divesting assets, carries an inherent risk of market fluctuations and economic uncertainties that could undermine the value we expect to realize.
+Added: Our transformation plan may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
+Added: Our management team has spent, and continues to spend, a significant amount of time and effort focusing on our transformation plan.
+Added: This diversion of attention may have an adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the time it takes to complete our transformation plan is protracted.
+Added: During the pendency of the transformation plan, our employees may face considerable distraction and uncertainty, and we may experience increased levels of employee attrition.
A loss of key personnel or material erosion of employee morale could have a materially adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations.
The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations.
−Removed: Likewise, we could experience losses of customers who may be concerned about our ongoing long-term viability.
+Added: Likewise, we could experience losses of customers who may be concerned about our long-term viability.
Business Risks
−Removed: Our current cash and liquidity projections raise substantial doubt about our ability to continue as a going concern.
−Removed: Pursuant to the requirements of ASC Topic 205-40, " Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern ," we are required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern.
−Removed: This evaluation does not take into consideration the potential mitigating effect of our plans that have not been fully implemented or are not within our control as of the date the audited Consolidated Financial Statements are issued.
−Removed: When substantial doubt exists, we are required to evaluate whether the mitigating effect of our plans sufficiently alleviates substantial doubt about our ability to continue as a going concern.
−Removed: The mitigating effect of our plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the Consolidated Financial Statements are issued, and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.
−Removed: As of the date these financial statements were issued (the "issuance date"), we evaluated whether the following adverse conditions, when considered in the aggregate, raise substantial doubt about our ability to continue as a going concern over the next twelve months beyond the issuance date.
−Removed: Over the past three fiscal years, we incurred operating losses of $79.9 million, $14.7 million and $33.8 million in fiscal 2024, 2023 and 2022, respectively.
−Removed: In addition, over the past three fiscal years, net cash used in operating activities was $54.5 million and $4.4 million in fiscal 2024 and 2023, respectively, and net cash provided by operating activities was $2.0 million in fiscal 2022.
−Removed: Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility, as discussed further below, and or secure other sources of outside capital.
−Removed: While we believe we will be able to generate sufficient positive cash inflows, maximize our borrowing capacity and secure outside capital, there can be no assurance our plans will be successfully implemented and, as such, we may be unable to continue as a going concern over the next year beyond the issuance date.
−Removed: As discussed further in " Notes to Consolidated Financial Statements - Note (8) - Credit Facility " included in " Part II - Item 8.
−Removed: Financial Statements and Supplementary Data, " included in this Form 10-K (which discussion is incorporated herein by reference), on June 17, 2024, we entered into a $222.0 million credit facility with a new syndicate of lenders, which replaced our prior credit facility.
−Removed: As further discussed below, we subsequently amended the credit facility on October 17, 2024 (the "Credit Facility").
−Removed: The Credit Facility consists of a committed $162.0 million term loan (“Term Loan”) and $60.0 million revolver loan (“Revolver Loan”).
−Removed: At July 31, 2024 and October 25, 2024 (the date closest to the issuance date), total outstanding borrowings under the Credit Facility were $194.2 million and $199.1 million, respectively.
−Removed: At both July 31, 2024 and October 25, 2024, $32.5 million was drawn on the Revolver Loan.
−Removed: As of the issuance date, our available sources of liquidity approximate $28.7 million, consisting solely of qualified cash and cash equivalents.
−Removed: That is, our available sources of liquidity do not include the remaining portion of the committed Revolver Loan due to the lenders' consent right, discussed below, to any borrowings that exceed $32.5 million.
−Removed: The Credit Facility, among other things, requires compliance with new restrictive and financial covenants, including:
−Removed: a maximum allowable Net Leverage Ratio of 3.25x for the fiscal quarter ending January 31, 2025;
−Removed: a minimum Fixed Charge Coverage Ratio of 1.20x for the fiscal quarter ending January 31, 2025;
−Removed: a minimum Average Liquidity requirement at each
−Removed: quarter end of $20.0 million;
−Removed: and a minimum EBITDA of $35.0 million for the fiscal quarter ending October 31, 2025.
−Removed: Such ratios adjust under the Credit Facility in future periods.
−Removed: The Credit Facility was amended on October 17, 2024 to waive certain defaults or events of default, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of July 31, 2024.
−Removed: The amendment also provides for, among other things:
−Removed: (i) increases the interest rate margins applicable to the loans;
−Removed: (ii) modifies certain financial and collateral reporting requirements;
−Removed: (iii) provides a lender consent right with respect to $27.5 million of Revolver Loan borrowings above $32.5 million;
−Removed: (iv) permits the incurrence of $25.0 million of senior unsecured subordinated debt (as described below);
−Removed: (v) amends the maturity date to the earlier of (x) July 31, 2028 or (y) 90 days prior to the earliest date that the debt under the Subordinated Credit Agreement (as defined below) becomes due and payable;
−Removed: and (vi) suspends financial covenant testing through the end of our fiscal quarter ending January 31, 2025.
−Removed: In addition, we entered into a Subordinated Credit Agreement with the existing holders of our Convertible Preferred Stock (the “Subordinated Credit Agreement”) on October 17, 2024, which provides a subordinated unsecured term loan facility in the aggregate principal amount of $25.0 million (the “Subordinated Credit Facility”).
−Removed: The proceeds of the Subordinated Credit Facility:
−Removed: (i) cured our default on certain financial covenants under the Credit Facility, as discussed above;
−Removed: (ii) provides additional liquidity to us;
−Removed: and (iii) funds our general working capital needs, including support of our strategic transformation initiatives, as discussed below.
−Removed: Our ability to meet our current obligations as they become due may be impacted by our ability to remain compliant with the financial covenants required by the Credit Facility, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained.
−Removed: While we believe we will be able to secure such waivers or amendments, as needed, there can be no assurance such waivers or amendments will be secured or on terms that are acceptable to us.
−Removed: If we are unable to secure waivers or amendments, the lenders may declare an event of default, which would cause an immediate acceleration and repayment of all outstanding principal, interest and fees due under our Credit Facility.
−Removed: Absent our ability to repay the forgoing amounts upon the declaration of an event of default, the lenders may exercise their rights and remedies under the Credit Facility, which may include, among others, a seizure of substantially all of our assets and/or the liquidation of our operations.
−Removed: If an event of default occurs that allows the lenders to exercise these rights and remedies over the next year beyond the issuance date, we will be unable to continue as a going concern.
−Removed: As of the issuance date, our plans to address our ability to continue as a going concern include, among other things:
−Removed: • executing a strategy to transform Comtech into a pure-play satellite and space communications company (ongoing and future actions supporting our transformation strategy include:
−Removed: an exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway;
−Removed: the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus;
−Removed: and the implementation of additional operational initiatives to both achieve profitable results from operations as well as to align our go-forward cost structure with a pure-play focus on satellite and space communications), as discussed further in Note (18) – “Cost Reduction Activities;”
−Removed: • pursuing initiatives to reduce investments in working capital, namely accounts receivable and inventory;
−Removed: • improving process disciplines to attain and maintain profitable operations by entering into more favorable sales or service contracts;
−Removed: • reevaluating our business plans to identify opportunities (e.g., within our Satellite and Space Communications segment) to focus future investment on our most strategic, high-margin revenue opportunities;
−Removed: • reevaluating our business plans to identify opportunities to further reduce capital expenditures;
−Removed: • seeking opportunities to improve liquidity through any combination of debt and/or equity financing (including possibly restructuring our Credit Facility, Convertible Preferred Stock and/or Subordinated Credit Agreement);
−Removed: • seeking other strategic transactions and/or measures including, but not limited to, the potential sale or divestiture of assets.
−Removed: While we believe the implementation of some or all of the elements of our plans over the next year beyond the issuance date will be successful, these plans are not all solely within management’s control and, as such, we can provide no assurance our plans are probable of being effectively implemented as of the issuance date.
−Removed: Therefore, the adverse conditions and events described above are uncertainties that raise substantial doubt about our ability to continue as a going concern.
−Removed: The accompanying consolidated financial statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future.
−Removed: Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Our cash and liquidity projections may not materialize as anticipated.
+Added: In fiscal 2025, 2024 and 2023, we reported operating losses of $139.1 million, $79.9 million and $14.7 million, respectively, and net cash used in operating activities of $8.3 million, $54.5 million and $4.4 million, respectively.
+Added: At July 31, 2025 and November 7, 2025 (the date closest to the issuance date), total outstanding borrowings under our Credit Facility were $133.9 million and $135.0 million, respectively.
+Added: Of such amounts, $17.6 million was drawn on the Revolver Loan at both dates.
+Added: At July 31, 2025, October 31, 2025 and November 7, 2025, our available sources of liquidity totaled $47.0 million, $51.0 million and $50.3 million, respectively, which includes qualified cash and cash equivalents of $37.4 million, $41.4 million and $40.7 million, respectively, and the remaining available portion of the Revolver Loan of $9.6 million as of each such date.
+Added: As of the issuance date, we expect cash and cash equivalents and cash flows from both operating and financing activities to be our principal sources of liquidity.
+Added: We also believe these sources of liquidity will be sufficient to fund our operating and cash commitments for investing and financing activities over the next year beyond the issuance date.
+Added: During fiscal 2025 and through the issuance date, we have taken the following actions, and implemented the following plans, to improve our operational and financial performance, enhance our liquidity and financial condition and ability to meet our financial covenants contained in our credit facilities:
+Added: • Engaged in portfolio-shaping opportunities to enhance profitability, efficiency and focus, including the elimination of legacy solutions that were not contributing meaningfully to net sales and or gross profits;
+Added: • Prioritized efforts to complete low or no margin non-recurring engineering contracts in order to accelerate our migration to higher volume and higher margin manufacturing related orders with improved cash conversion cycles;
+Added: • Developed and launched new products and services around differentiated technology and solutions;
+Added: • Improved operating profitability by entering into, or renegotiating, sales or service contracts with more favorable pricing and payment terms;
+Added: • Reduced our cost structure to better align operating expenses with revenue expectations, including facility and headcount rationalization and optimization;
+Added: • Through new leadership and improved accountability and process disciplines implemented throughout the organization, reduced our investments in working capital (e.g., accounts receivable and inventory), as well as capital expenditures;
+Added: • Through a series of capital injections, aggregating $100.0 million in the form of subordinated debt, and amendments to our credit facilities:
+Added: (i) significantly reduced senior debt and related cash interest payments due under our Credit Facility;
+Added: (ii) increased the available portion of our Revolver Loan;
+Added: (iii) deferred the scheduled repayment of a portion of the Term Loan and the scheduled payment of certain fees due under the Credit Facility;
+Added: (iv) suspended testing of our Net Leverage Ratio, Fixed Charge Coverage Ratio and Minimum EBITDA covenants under our credit facilities until January 31, 2027;
+Added: and (v) reduced the minimum quarterly average liquidity requirement under our credit facilities.
+Added: Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to execute on our operational strategy, generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility and or secure outside capital.
+Added: Based on the foregoing, over the next year beyond the issuance date, we believe that we will:
+Added: (i) be able to generate sufficient positive cash inflows and maximize our borrowing capacity under our Credit Facility to continue as a going concern, and (ii) comply with the covenants contained in our credit facilities.
+Added: However, our ability to do so may also be affected by general economic, financial and other factors which are beyond our control.
+Added: As such, there can be no assurances that our plans will be successful or that our projections will materialize.
Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.
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Any such charges could be materially adverse to our results of operations and financial condition.
−Removed: Our efforts to invoice and collect unbilled receivables may be unsuccessful.
−Removed: As of July 31, 2024, we had $123.7 million of contract assets recorded on our Consolidated Balance Sheet, commonly referred to as unbilled receivables.
−Removed: generally accepted accounted principles, such contract assets generally result from timing differences between (a) when we must recognize revenue on contracts based on our activities to satisfy performance obligations related to products that have no alternative use and for which we have the right to payment in the event of a contract termination, and (b) when we can invoice our customers under the terms of those associated contracts (i.e., which is often based on our successful achievement of a milestone, such as an acceptance test or physical delivery of a product).
+Added: Our efforts to invoice and collect unbilled accounts receivable may be unsuccessful.
+Added: As of July 31, 2025, we had $90.7 million of contract assets recorded in Accounts Receivable, Net on our Consolidated Balance Sheet , commonly referred to as unbilled receivables.
+Added: generally accepted accounting principles, such contract assets generally result from timing differences between (a) when we must recognize revenue on contracts based on our activities to satisfy performance obligations related to products that have no alternative use and for which we have the right to payment in the event of a contract termination, and (b) when we can invoice our customers under the terms of those associated contracts (i.e., which is often based on our successful achievement of a milestone, such as an acceptance test or physical delivery of a product).
Unbilled receivables remain at risk for collection due to several factors, including but not limited to our inability to meet invoicing milestones, customer contracts being terminated for default or actual indirect rates on cost reimbursable contracts ultimately being less than those rates estimated for revenue recognition purposes.
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government) were $151.3 million, $182.3 million and $172.0 million, or 30.3%, 33.7% and 31.3% of our consolidated net sales, respectively.
−Removed: In addition, a large portion of our existing backlog consists of orders related to U.S.
−Removed: government contracts and our Business Outlook for Fiscal 2025 and beyond depends, in part, on significant new orders from the U.S.
+Added: In addition, 12.1% of our existing backlog consists of orders related to U.S.
+Added: government contracts and our Business Outlook depends, in part, on significant new orders from the U.S.
government, which undergoes extreme budgetary pressures from time to time.
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government spending may prove to be incorrect.
−Removed: The federal debt limit continues to be actively debated as plans for long-term national fiscal policy are discussed.
−Removed: The outcome of these discussions, which could be affected by the presidential and congressional elections in 2024, could have a significant impact on defense spending broadly and programs we support in particular.
−Removed: The failure of Congress to approve future budgets and/or increase the debt ceiling of the U.S.
+Added: Further, elections have introduced increased regulatory and economic uncertainty, including shifts in the spending priorities of the U.S.
+Added: presidential administration and Congress and what challenges budget reductions will present for us and our industry generally.
+Added: For example, in January 2025, President Trump announced an executive order establishing the Department of Government Efficiency, or "DOGE," to reform federal government processes and reduce expenditures.
+Added: government has and may continue to implement initiatives focused on efficiencies, affordability and cost reductions, such as those pursued by the DOGE, which may impact the availability of funding for U.S.
+Added: government customers as a result of the elimination of departments and personnel.
+Added: Changes in federal policy by the executive branch and regulatory agencies may occur over time through the new presidential administration’s and/or Congress’s policy and personnel changes, which could lead to changes involving the defense industry.
+Added: However, the nature, timing and economic and political effects of such potential changes remain highly uncertain.
+Added: Any future changes in U.S.
+Added: policy and the response of the U.S.
+Added: to global geopolitical developments could affect us in substantial and unpredictable ways.
+Added: At this time, it is unclear whether and how any future changes or uncertainty surrounding future changes will adversely affect our operating environment and, therefore, demand for our products, our business, financial condition and results of operations.
+Added: The federal debt limit in the U.S.
+Added: continues to be actively debated as plans for long-term national fiscal policy are discussed.
+Added: The outcome of these discussions, now influenced by the new presidential administration and changes in Congress following the 2024 elections, could have a significant impact on defense spending broadly and programs we support in particular.
+Added: Continued uncertainty around the approval by Congress of future budgets and/or increases in the debt ceiling of the U.S.
on a timely basis could delay or result in the loss of contracts for the procurement of our products and services and we may be asked or required to continue to perform for some period of time on certain of our U.S.
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government is unable to make timely payments.
−Removed: A decrease in DoD or Department of Homeland Security expenditures, the elimination or curtailment of a material program in which we are involved, or changes in payment patterns of our customers as a result of changes in U.S.
+Added: A decrease in U.S.
+Added: government spending, the elimination or curtailment of a material program in which we are involved, or changes in payment patterns of our customers as a result of changes in U.S.
government spending could have an adverse effect on our business, results of operations and financial condition.
−Removed: On September 25, 2024, the U.S.
−Removed: Senate voted to pass a bipartisan Continuing Resolution (CR;
−Removed: 9747) to extend federal spending and avert a government shutdown through December 20, 2024.
−Removed: House passed the measure that same day and the measure was signed by President Biden prior to the beginning of fiscal year 2025.
−Removed: Accordingly, it is still possible that a partial shutdown of the U.S.
−Removed: government may occur, or additional interim budgets may be adopted.
−Removed: As such, we may experience delayed orders, delayed payments and adverse impacts on our results of operations.
+Added: In October 2025, the U.S.
+Added: federal government entered a shutdown due to a lapse in appropriations, resulting from a failure by Congress to pass a budget or continuing resolution.
+Added: The shutdown has led to the suspension of non-essential government operations and services, delays in contract awards and renewals and interruptions in agency communications and decision-making processes.
+Added: Consequently, the ongoing U.S.
+Added: federal government shutdown has further heightened uncertainty.
+Added: Prolonged or repeated shutdowns may result in delayed contract awards, delayed payments and adverse impacts on our results of operations and or cash flows.
We may experience related supply chain delays, disruptions or other problems associated with financial constraints faced by our suppliers and subcontractors.
1 unchanged sentence
Additionally, cost cutting, efficiency initiatives, reprioritization, other affordability analyses, and changes in budgetary priorities by our governmental customers, including the U.S.
−Removed: government, could adversely impact both of our operating segments.
−Removed: We are unable to predict the impact these or similar events could have on our business, financial position, results of operations or cash flows.
+Added: government, could adversely impact our operating segments.
+Added: We are unable to predict the impact these or similar events could have on our business, financial position, results of operations or cash flows, which could disrupt program execution and impact the timing of payments for government customers.
Our contracts with the U.S.
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government for its convenience or upon an event of default by us.
−Removed: Termination for convenience provisions provide us with little to no recourse related to:
+Added: Termination for convenience provisions could provide us with little to no recourse related to:
our potential recovery of costs incurred or costs committed, potential settlement expenses and hypothetical profit on work completed prior to termination.
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There can be no assurance that we will win additional contracts or that actual contracts that are awarded will ultimately be profitable.
−Removed: • Failure to comply with government contractor obligations can result in adverse consequences for the company - As a supplier to the U.S.
+Added: • Failure to comply with government contractor obligations can result in adverse consequences for us - As a supplier to the U.S.
government, we must comply with numerous regulations, including those governing security, contracting practices and classified information.
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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.
−Removed: Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of payments, fines and suspension or debarment from U.S.
+Added: Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of or refund of payments, fines and suspension or debarment from U.S.
government contracting or subcontracting for a period of time.
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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.
−Removed: • We must comply with all applicable export control laws and regulations of the U.S., the U.K.
+Added: • We must comply with all applicable export control laws and regulations of the U.S.
and other countries - Certain of our products and systems may require licenses from U.S.
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Treasury Department's OFAC.
−Removed: We are also subject to similar restrictions in the U.K.
−Removed: and other countries.
+Added: We are also subject to similar restrictions in other countries.
+Added: Additionally, changes in regulatory requirements which could restrict our ability to deliver services to our international customers, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation could negatively impact our business.
+Added: For the fiscal years ended July 31, 2025, 2024 and 2023, we conducted no business with states designated as sponsors of terrorism.
• We must comply with the FCPA and similar laws elsewhere - We are subject to the FCPA and other foreign laws prohibiting corrupt payments to government officials, which generally bar bribes or unreasonable gifts to foreign governments or officials.
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Although we have implemented policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, agents, or subsidiaries will not commit acts that violate these laws for which we may be ultimately held responsible.
−Removed: Additionally, changes in regulatory requirements which could restrict our ability to deliver services to our international customers, including the addition of a country to the list of sanctioned countries under the IEEPA or similar legislation could negatively impact our business.
−Removed: For the fiscal years ended July 31, 2024, 2023 and 2022, we conducted no business with states designated as sponsors of terrorism.
• We must maintain a company-wide Office of Trade Compliance - In the past, we have self-reported violations of export control laws or regulations to the U.S.
−Removed: Department of State, Directorate of Defense Trade Controls ("DDTC"), DoC, OFAC and similar regulatory authorities in the jurisdictions where we have operations, including His Majesty's Revenue & Customs ("HMRC") in the United Kingdom.
+Added: Department of State, Directorate of Defense Trade Controls ("DDTC"), Department of Commerce ("DoC"), OFAC and similar regulatory authorities in the jurisdictions where we have operations, including His Majesty's Revenue & Customs ("HMRC") in the U.K.
+Added: We have a pending self-disclosure with the DDTC regarding exports of certain variants of our modems, as further described in " Notes to Consolidated Financial Statements - Note (14)(a) - Commitments and Contingencies - Legal Proceedings and Other Matters - U.S.
+Added: Export Matter " included in " Part II - Item 8.
+Added: Financial Statements and Supplementary Data ," included in this Form 10-K.
In addition, we have made various commitments to U.S.
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If we were unable to comply with such requirements with respect to a significant quantity of our products, our sales in those countries could be restricted, which could have a material adverse effect on our business, results of operations and financial condition.
−Removed: • We may be affected by the future imposition of tariffs and trade restrictions - The current U.S.
−Removed: administration has generally not amended the trade policies and tariffs on imported products from the prior administration, and has increased sanctions against Russia.
+Added: • We may be affected by current and future impositions of tariffs and trade restrictions - The U.S.
+Added: has continued to adjust its trade policies in recent years, including adding new or modifying existing tariffs on imports, in some cases significantly, and other restrictive trade policies.
+Added: Although some of these tariffs have been paused or reduced, there is significant uncertainty as trade negotiations are ongoing and outcomes are unpredictable.
Our inability to effectively manage the negative impacts of U.S.
−Removed: 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.
+Added: and foreign trade policies, including, in connection with our business with customers outside of the U.S.
+Added: 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 on our business, results of operations and financial condition.
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Nevertheless, we may occasionally have commercial disputes with them (e.g., over the quality, timeliness or cost of their products or payment patterns in connection with rendered goods and services).
−Removed: As suppliers evaluate our financial condition on an ongoing basis, they may also take steps to revise payment terms (e.g., by requiring payment in advance of delivery or payment milestones) that may negatively impact the anticipated timing of components required for the assembly of our products or services rendered in support of our programs.
+Added: Suppliers may also take steps to revise payment terms (e.g., by requiring payment in advance of delivery or payment milestones) that may negatively impact the anticipated timing of components required for the assembly of our products or services rendered in support of our programs.
Additionally, our subcontractors and suppliers may experience financial difficulties which may impact their ability to execute against their contractual commitments and delay or otherwise disrupt deliveries.
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Our estimates regarding future warranty obligations may change based on a variety of factors, impacting future cost of revenue.
−Removed: Our products are complex, and we cannot ensure that our extensive testing will detect all defects.
+Added: The solutions we provide customers are complex.
+Added: We cannot ensure that our extensive testing of our solutions will detect all defects.
Quality issues reported by our customers for products covered under warranty could adversely impact our reputation and negatively affect our operating results.
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These risks include:
−Removed: • We may not be ultimately successful in transformation activities - The pursuit of strategic alternatives and portfolio reshaping is a complex undertaking.
−Removed: Managing the disposition of multiple production facilities and their attending employee populations is difficult and may negatively impact business prospects in the short and long term.
−Removed: Additionally, in the course of evaluating our portfolio, we determined that our Satellite and Space Communications reporting unit had an estimated fair value below its carrying value and concluded that our goodwill in this reporting unit was impaired, as noted in the “Impairment of long-lived assets, including goodwill" line item on our Consolidated Statements of Operations.
−Removed: • The loss of key technical and/or management personnel in the course of our restructuring could adversely affect our business - The pursuit of strategic alternatives and reshaping of our portfolio businesses will require the continued contributions of key technical and management personnel.
+Added: • We may not be ultimately successful in transformation activities - Carrying out our transformation plan, including portfolio reshaping, is a complex undertaking.
+Added: Managing the restructuring of multiple production facilities and their attending employee populations is difficult and may negatively impact business prospects in the short and long term.
+Added: Additionally, in the course of evaluating our portfolio, we may determine that one or both of our reporting units has an estimated fair value below its carrying value and conclude that goodwill in such reporting unit is impaired.
+Added: • The loss of key technical and/or management personnel in the course of restructuring could adversely affect our business - Carrying out our transformation plan, including portfolio reshaping, will require the continued contributions of key technical and management personnel.
The management skills that have been appropriate for us in the past may not continue to be appropriate if we grow and diversify.
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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.
−Removed: Additionally, in light of various factors including but not limited to our announcement to pursue strategic alternatives, we have postponed and or re-prioritized certain initiatives (e.g., our drive toward an common company-wide ERP tool), which may result in certain inefficiencies and or increased costs in the future.
+Added: Additionally, in light of various factors including but not limited to our announced transformation plan, we have postponed or re-prioritized certain initiatives (e.g., our drive toward a common company-wide ERP tool), which may result in certain inefficiencies or increased costs in the future.
• 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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We expect the DoD’s increased use of commercial off-the-shelf products and components in military equipment will encourage new competitors to enter the market.
−Removed: Also, although the implementation of advanced telecommunications services is in its early stages in many developing countries, we believe competition will continue to intensify as businesses and foreign governments realize the market potential of telecommunications services.
+Added: Also, although the implementation of next-generation communications services is in its early stages in many developing countries, we believe competition will continue to intensify as businesses and foreign governments realize the market potential of such services.
Many of our competitors have financial, technical, marketing, sales and distribution resources greater than ours.
2 unchanged sentences
If our sole-source proposals are rejected in favor of a competitor’s proposal, it could result in the termination of existing contracts, which could have a material adverse effect on our business, results of operations and financial condition.
−Removed: • We may not be able to obtain sufficient components to meet expected demand - Our dependence on component availability, government furnished equipment, subcontractors and key suppliers, including the core manufacturing expertise of our high-volume technology manufacturing center located in Arizona exposes us to risk.
+Added: • We may not be able to obtain sufficient components to meet expected demand - Our dependence on component availability, government furnished equipment, subcontractors as key suppliers and the core manufacturing expertise of our high-volume technology manufacturing center located in Arizona exposes us to risk.
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.
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We depend on the efforts of our executive officers and certain key personnel.
−Removed: 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.
−Removed: In March 2024, we terminated our former President and CEO for cause due to conduct unrelated to Comtech’s business strategy, financial results or previously filed financial statements and appointed John Ratigan, who was our Chief Corporate Development Officer, as interim CEO.
−Removed: Ratigan was appointed as President and CEO on October 28, 2024, following a lengthy search process during which internal and external candidates were evaluated by a retained search firm and interviewed by our Board of Directors.
−Removed: Additionally, Maria Hedden, our Chief Operating Officer, resigned from the Company on September 13, 2024.
+Added: 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 have an adverse effect on our operating results and financial condition.
+Added: On January 13, 2025, we announced that Mr.
+Added: Kenneth Traub was appointed to serve as our President and CEO, in addition to his role as our Chairman.
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 and growth plans, including to our relationships with our customers and employees.
−Removed: We have incurred indebtedness under a credit facility and an unsecured subordinated loan, 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.
−Removed: On June 17, 2024, we entered into a new $222.0 million credit facility with a syndicate of lenders (the "Credit Facility").
−Removed: As of July 31, 2024, total borrowings outstanding under the Credit Facility were $194.2 million, of which $190.1 million is reflected in the non-current portion of long-term debt on our Consolidated Balance Sheet.
−Removed: Subsequent to year end, to enhance our liquidity while we pursue strategic alternatives, other restructuring related activities and the collection of our unbilled receivables, we amended our Credit Facility to, among other things, relax certain financial and non-financial covenants.
−Removed: We also entered into a $25.0 million senior subordinated unsecured loan agreement with our existing preferred shareholders.
−Removed: See " Notes to Consolidated Financial Statements " included in " Part II - Item 8.
−Removed: Financial Statements and Supplementary Data " included in this Form 10-K, for further information.
−Removed: On the Maturity Date of the Credit Facility, if we do not have sufficient funds to repay our debt when due, it may be necessary to refinance our debt through additional debt or equity financings.
+Added: We have indebtedness outstanding under a Credit Facility and Subordinated Credit Facility, and may incur substantial additional indebtedness in the future.
+Added: We may not be able to service our debt obligations in the future and we must maintain compliance with various covenants that impose restrictions on our business.
+Added: On June 17, 2024, we entered into a senior credit facility with a syndicate of lenders, which was subsequently amended on October 17, 2024, March 3, 2025 and July 21, 2025 (the "Credit Facility").
+Added: The Credit Facility consists of a term loan and an asset-based revolver loan.
+Added: As of July 31, 2025 and November 7, 2025, total borrowings outstanding under the Credit Facility were $133.9 million and $135.0 million, respectively.
+Added: See Notes to Consolidated Financial Statements - Note (8) Credit Facility included in Part II - Item 8.
+Added: Financial Statements and Supplementary Data for more information.
+Added: On October 17, 2024, we entered into a subordinated credit facility with the existing holders of our convertible preferred stock, which was subsequently amended on March 3, 2025 and July 21, 2025 (the “Subordinated Credit Facility”).
+Added: As of July 31, 2025 and November 7, 2025, total borrowings outstanding under the Subordinated Credit Facility were $100.1 million and $101.5 million, respectively.
+Added: Such amount does not include the $25.7 million make-whole amount associated with the $65.0 million portion of the Subordinated Credit Facility.
+Added: See Notes to Consolidated Financial Statements - Note (9) Subordinated Credit Facility included in Part II - Item 8.
+Added: Financial Statements and Supplementary Data for more information.
+Added: If we do not have sufficient funds to repay our debt obligations when due, either at maturity or sooner under certain circumstances, it may be necessary to refinance our debt through additional debt or equity financings.
If, at the time of any such refinancing, prevailing interest rates or other factors result in higher interest rates on such refinancing, increases in interest expense could have a material adverse effect on our business, results of operations and financial condition.
−Removed: In addition, if we are not able to obtain favorable terms pursuant to any such refinancing, the size of our Credit Facility could be reduced, more restrictive covenants could be imposed on our business and features of the Credit Facility could otherwise be altered or eliminated.
−Removed: Our Credit Facility contains various affirmative and negative covenants that may restrict our ability to, among other things, incur additional indebtedness, 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.
−Removed: 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.
−Removed: Further, our ability to comply with covenants, terms of and conditions on our Credit Facility may be affected by events beyond our control.
−Removed: Failure to comply with covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations and permit the agents under the Credit Facility to enforce on the collateral pledged to the secured parties thereunder.
+Added: In addition, if we are not able to obtain favorable terms pursuant to any such refinancing, the size of our credit facilities could be reduced, more restrictive covenants could be imposed on our business and features of our credit facilities could otherwise be altered or eliminated.
+Added: Our credit facilities contain various affirmative and negative covenants that may restrict our ability to, among other things, incur additional indebtedness, 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.
+Added: We anticipate maintaining compliance with the terms and financial covenants in our credit facilities for the foreseeable future;
+Added: however, there can be no assurance that we will be able to meet these covenants.
+Added: Further, our ability to comply with covenants, terms of and conditions on our credit facilities may be affected by events beyond our control.
+Added: Failure to comply with covenants could result in an event of default, which, if not cured or waived, could accelerate our repayment obligations and permit the agents under our Credit Facility to enforce on the collateral pledged to the secured parties thereunder.
+Added: The Subordinated Credit Facility includes a cross-default provision, whereby a default under the Credit Facility constitutes a default under the Subordinated Credit Facility.
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.
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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.
−Removed: Divestitures of portions of our business in the course of pursuing strategic alternatives and revisiting our portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.
−Removed: We expect to pursue strategic alternatives for our Terrestrial and Wireless Networks segment while evaluating further portfolio shaping opportunities.
−Removed: Future divestitures may result in the use of significant amounts of cash, increases to amortization expense and future write-offs of intangibles.
+Added: Divestitures of portions of our business in the course of carrying out our transformation plan and reshaping our product portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.
+Added: As part of our transformation plan, we are exploring strategic alternatives for our various business and product lines, including the potential sale or divestiture of assets or businesses.
+Added: Future divestitures may result in the use of significant amounts of cash, increases to amortization expense and future write-offs of assets including intangibles.
Divestiture related activities also involve risks that include failing to:
1 unchanged sentence
• accurately forecast the financial impact of the transaction, including accounting charges and transaction expenses;
−Removed: • support products and services, research and development, sales and marketing, support and other operations during the pendency of disposition activity;
+Added: • support products and services, research and development, sales and marketing and other operations during the pendency of disposition activity;
• retain key management personnel and other key employees;
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• divert management’s attention away from the operation of our businesses;
−Removed: • result in additional significant goodwill and intangibles write-offs in the event a disposition negatively impacts our future results of operations and or cash flows;
+Added: • result in significant goodwill and intangibles write-offs in the event a disposition negatively impacts our future results of operations and or cash flows;
• increase expenses, including transaction expenses associated with the disposition;
−Removed: There can be no assurance that our pursuit of strategic alternatives will be successful within the anticipated time frame, or at all.
+Added: • result in contract termination liabilities with customers and or vendors;
+Added: • result in insolvencies of the entities being divested.
+Added: There can be no assurance that our transformation plan, including our pursuit of strategic alternatives, will be successful within the anticipated time frame, or at all.
There can also be no assurance that such activity will not adversely affect our business, results of operations or financial condition.
−Removed: After completing restructuring activities and related expenses, our decision to cease operations of our steerable antenna product line in Basingstoke, UK is expected to result in future annual cash savings relative to the past three fiscal years.
−Removed: If we are unsuccessful in negotiating termination liabilities with our customers or vendors, however, our UK entity may become insolvent and our assumptions with respect to the liquidity of our Basingstoke operations may not materialize.
−Removed: Our investments in recorded goodwill and other intangible assets could be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure as we pursue strategic alternatives.
+Added: 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 for any reason.
As of July 31, 2025, goodwill recorded on our Consolidated Balance Sheet aggregated $204.6 million.
Additionally, as of July 31, 2025, net intangibles recorded on our Consolidated Balance Sheet aggregated $173.1 million.
−Removed: 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.
−Removed: Reporting units are defined by how our CEO manages the business, which includes resource allocation decisions.
−Removed: We may, in the future, change our management approach which in turn may change the way we define our reporting units, as such term is defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350 " Intangibles - Goodwill and Other.
−Removed: " A change to our management approach may require us to perform an interim goodwill impairment test and possibly record impairment charges in a future period.
+Added: See Notes to Consolidated Financial Statements - Note (15) Long-lived Assets, Including Goodwill and Note (16) - Intangible Assets included in Part II - Item 8.
+Added: Financial Statements and Supplementary Data for more information, including a discussion of recent impairments recognized in our Satellite and Space Communications segment.
+Added: For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our Satellite and Space Communications and Allerium segments each constitute a reporting unit, as such term is defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350 " Intangibles - Goodwill and Other, " and we must make various assumptions in determining their estimated fair values.
+Added: We may, in the future, change the way we define our reporting units, which would require us to perform a goodwill impairment test and possibly record impairment charges.
In accordance with FASB ASC 350, " Intangibles - Goodwill and Other," we perform a goodwill impairment analysis at least annually (in the first quarter of each fiscal year), unless indicators of impairment exist in interim periods.
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however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.
−Removed: During the fourth quarter of fiscal year 2024, our lower-than-expected financial performance, cured default on certain credit facility covenants and sustained decrease in our stock price since August 1, 2023 were each considered triggering events requiring an interim quantitative impairment test as of July 31, 2024.
−Removed: Based on our quantitative evaluation, we determined that our Terrestrial and Wireless Networks reporting unit had an estimated fair value in excess of its carrying value of at least 24.7% and concluded that our goodwill in this reporting unit was not impaired.
−Removed: However, we determined that our Satellite and Space Communications reporting unit had an estimated fair value below its carrying value and concluded that our goodwill in this reporting unit was impaired.
−Removed: As a result, in the fourth quarter of fiscal 2024, we recognized a non-cash $48,925,000 goodwill impairment charge in our Satellite and Space Communications reporting unit.
−Removed: Such loss is included in the “ Impairment of long-lived assets, including goodwill " line item on our Consolidated Statements of Operations .
−Removed: Due to their proximity, the quantitative impairment test as of July 31, 2024 is deemed to satisfy our annual goodwill impairment test requirement as of August 1, 2024 (the first day of fiscal 2025).
−Removed: It is possible that, during fiscal 2025 or beyond, business conditions (both in the U.S.
+Added: On August 1, 2025 (the first day of fiscal 2026), we performed our annual quantitative assessment using market participant assumptions to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value.
+Added: Ultimately, based on our quantitative evaluation, we determined that our Satellite and Space Communications and Allerium reporting units had estimated fair values in excess of their carrying values of at least 19.9% and 7.3%, 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.
+Added: It is possible that, during the remainder of fiscal 2026 or beyond, business conditions (both in the U.S.
and internationally) could deteriorate from the current state, our current or prospective customers could materially postpone, reduce or even forgo purchases of our products and services to a greater extent than we currently anticipate, or our common stock price could further fluctuate.
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 2026 or beyond.
−Removed: 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.
−Removed: Also, as announced on October 17, 2024, we are executing a strategy to transform Comtech into a pure-play satellite and space communications company.
−Removed: Ongoing and future actions supporting our transformation strategy include:
−Removed: an exploration of strategic alternatives for our Terrestrial and Wireless Networks segment, which is well underway;
−Removed: the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus;
−Removed: and the implementation of additional operational initiatives to both achieve profitable results from operations as well as to align our go-forward cost structure with a pure-play focus on satellite and space communications.
−Removed: Such activities could result in a material impairment of our goodwill and/or intangible assets.
−Removed: See " Strategic Transformation " section above for more information.
+Added: If assumed net sales and cash flow projections are not achieved in future periods, our common stock price significantly declines from current levels, and /or we complete certain actions related to our transformation plan, our Satellite and Space Communications and Allerium 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, 2026 (the start of our fiscal 2027).
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Net Intangibles with Finite Lives
−Removed: Similar to goodwill, we also review the recoverability of our net intangibles with finite lives whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
+Added: Similar to goodwill, we also assess the recoverability of the carrying value of our long-lived assets, including identifiable intangible assets with finite useful lives, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Recoverability of an asset or asset group to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group.
If the carrying amount of the asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group.
−Removed: Accordingly, in addition to testing goodwill associated with our Satellite and Space Communications reporting unit for impairment, during the fourth quarter of fiscal year 2024, we also assessed the recoverability of the carrying values of our other long-lived assets, including identifiable intangible assets with finite useful lives.
−Removed: Such testing also considered our decision in the fourth quarter of fiscal year 2024 to cease our steerable antenna operations located in the United Kingdom.
−Removed: Based on our evaluation, we determined that the fair value of the asset group related to such operations was lower than its carrying value and recorded a non-cash $15,600,000 long-lived asset impairment charge in our Satellite and Space Communications segment.
−Removed: Such loss is included in the “ Impairment of long-lived assets, including goodwill " line item on our Consolidated Statements of Operations .
−Removed: Of the total amount, $9,925,000 relates to net intangible assets with finite lives, $1,151,000 relates to operating lease right-of-use assets, $2,651,000 relates to property, plant and equipment and $1,873,000 relates to other assets.
−Removed: We determined that the carrying values of our remaining net intangibles were recoverable as of July 31, 2024.
+Added: Based on our fiscal 2025 assessment, we believe that the carrying values of our net intangible assets were recoverable as of July 31, 2025.
Any impairment charges that we may record in the future could be material to our results of operations and financial condition.
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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.
−Removed: We face risk of Cybersecurity threats ranging from, ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, which target the defense industrial base and other critical infrastructure sectors are persistent.
−Removed: Our corporate information security organization, led by our Chief Information Security Officer ("CISO"), manages our overall information security strategy.
−Removed: The current CISO has extensive information technology experience and partners closely with our Technology, Innovation & Cyber Committee of the Board of Directors.
−Removed: More broadly, we routinely audit our systems and practices against the DFARS and proposed Cybersecurity Maturity Model Certification ("CMMC") program, DoD’s cybersecurity requirements for handling government contracts and Controlled Unclassified Information ("CUI"), respectively.
+Added: We face risks of cybersecurity threats ranging from, ransomware and denial-of-service, to attacks from more advanced and persistent, highly organized adversaries, including nation state actors, which target the defense industrial base and other critical infrastructure sectors.
+Added: Our cybersecurity management team, also referred to as “InfoSec,” manages our overall information security strategy.
+Added: InfoSec partners closely with our Technology, Innovation & Cyber Committee of the Board of Directors to oversee and manage cybersecurity-related risks.
+Added: More tactically, we routinely audit our systems and practices against the DFARS and Cybersecurity Maturity Model Certification ("CMMC") program, DoD’s cybersecurity requirements for handling government contracts and Controlled Unclassified Information ("CUI"), respectively.
Nevertheless, 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.
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Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is virtually impossible for us to entirely mitigate this risk.
−Removed: A security breach or other significant disruption (including as a result of a lack of redundancy and/or failure of such redundancy) involving these types of information, IT networks and related systems could:
+Added: A security breach or other significant disruption (including as a result of a lack of redundancy and/or failure of such redundancy) involving these types of information, IT networks and related systems could, among other things:
• Disrupt the proper functionality of these networks, data center facilities and systems and therefore our operations and/or those of certain of our customers;
−Removed: • Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or our customers, including employee information, trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;
+Added: • Result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or our customers, including employee information and trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;
• Compromise national security and other sensitive government functions;
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federal, state and local and foreign income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S.
−Removed: Treasury Department.
+Added: Treasury Department, as well as similar agencies of international governments.
Changes to tax laws (which changes may have immediate and/or retroactive application) could adversely affect us or holders of our common stock.
−Removed: In recent years, many changes have been made to applicable tax laws and changes are likely to continue to occur in the future.
+Added: In recent years, many changes have been made to applicable tax laws, such as those caused by the recent enactment of the One Big Beautiful Bill Act in the U.S.
+Added: ("OBBBA"), and changes are likely to continue to occur in the future.
It cannot be predicted whether, when, in what form, or with what effective dates, new tax laws may be enacted, or regulations and rulings may be enacted, promulgated or issued under existing or new tax laws, which could result in an increase in our tax liability or require changes in the manner in which we operate in order to minimize or mitigate any adverse effects of changes in tax law or in the interpretation thereof.
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Changes in, or our failure to comply with, applicable laws and regulations could materially adversely harm our business, results of operations, and financial condition.
−Removed: • Our future growth is dependent, in part, on developing NG-911 compliant products - The FCC requires that certain location information be provided to network operators for public safety answering points when a subscriber makes a 911 call.
+Added: • Our future growth is dependent, in part, on developing NG-911 compliant products - The FCC requires, among other things, that certain location information be provided to network operators for public safety answering points when a subscriber makes a 911 call.
Technical failures, greater regulation by federal, state or foreign governments or regulatory authorities, time delays or the significant costs associated with developing or installing improved location technology could slow down or stop the deployment of our mobile location products.
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If we are unable to develop unique and proprietary solutions that are superior to and/or more cost effective than other market offers, our 911 business could get replaced by new market entrants, resulting in a material adverse effect on our business, results of operations and financial condition.
−Removed: • Under the FCC’s mandate, our 911 and emerging 988 businesses are dependent on state and local governments - Under the FCC’s mandate, wireless carriers are required to provide 911 services only if state and local governments request the service.
+Added: • Under the FCC’s mandate, our 911 business and emerging 988 opportunities are dependent on state and local governments - Under the FCC’s mandate, wireless carriers are required to provide 911 services only if state and local governments request the service.
As part of a state or local government’s decision to request 911, they have the authority to develop cost recovery mechanisms.
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If state and local governments do not widely request that 911 services be provided or we become subject to significant pressures from wireless carriers with respect to pricing of 911 services, our 911 business would be harmed and future growth of our business would be reduced.
−Removed: Over the past two years, the 988 Suicide & Crisis Lifeline has seen both growth and challenges as it continues to be rolled out across the U.S.
−Removed: federal government has allocated significant funding to this initiative, with over $432.0 million earmarked for expanding services, including regional call centers and crisis intervention teams.
+Added: The 988 Suicide & Crisis Lifeline has seen both growth and challenges as it continues to be rolled out across the U.S.
+Added: federal government has allocated funding to this initiative, earmarked for expanding services, including regional call centers and crisis intervention teams.
This funding is aimed at distributing emergency-type communications more efficiently, by providing a direct response for mental health crises.
−Removed: Some states, like Michigan, have launched their own versions of 988 services with additional state and federal support.
+Added: Some states, like Michigan, California and Washington, have launched their own versions of 988 services with additional state and federal support.
However, despite these efforts, the system is still far from fully optimized.
−Removed: Challenges include staffing shortages, particularly for behavioral health professionals, and the need for technological improvements like georouting to better connect callers with the appropriate local services.
+Added: Challenges include staffing shortages, particularly for behavioral health professionals, and the need for technological improvements, like geo-routing to better connect callers with the appropriate local services.
Some states are also exploring sustainable funding models, such as implementing 988 surcharges similar to those used for 911 services, to ensure long-term viability.
−Removed: At the federal level, the 988 Implementation Act introduced in 2023 seeks to expand access further by requiring health insurance plans to cover crisis services and addressing gaps in care for populations like those on Medicare.
+Added: federal level, the 988 Implementation Act introduced in 2023 seeks to expand access further by requiring health insurance plans to cover crisis services and addressing gaps in care for populations like those on Medicare.
This law is expected to enhance the reach and effectiveness of the lifeline by building out a more comprehensive mental health response infrastructure tailored to each community’s needs.
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Overall, the 988 lifeline is seen as a critical step in improving mental health responses, but it faces significant hurdles in achieving full efficacy in the coming years.
−Removed: If deployment of those funds is delayed, stopped or never occurs, our results of operations or financial condition in future periods could be materially and adversely affected.
+Added: If deployment of those funds is delayed, stopped or never occurs, our future prospects may be negatively impacted.
Regulation of the mobile communications industry and VoIP is evolving, and unfavorable changes or our failure to comply with existing and potential new legislation or regulations could harm our business and operating results.
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Over the past several years, there have been a number of laws and regulations enacted that affect companies conducting business on the Internet, including the European General Data Protection Regulation ("GDPR").
−Removed: The GDPR imposes certain privacy related requirements on companies that receive or process personal data of residents of the European Union that are currently different than those in the United States and include significant penalties for non-compliance.
−Removed: Similarly, there are a number of state privacy laws, as well as legislative proposals in the United States, at both the federal and state level, that could impose new obligations in areas affecting our business, such as liability for personal data protection.
+Added: The GDPR imposes certain privacy related requirements on companies that receive or process personal data of residents of the European Union that are currently different than those in the U.S.
+Added: and include significant penalties for non-compliance.
+Added: Similarly, there are a number of state privacy laws, as well as legislative proposals in the U.S., at both the federal and state level, that could impose new obligations in areas affecting our business, such as liability for personal data protection.
In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.
Our costs to comply with the GDPR as well any other similar laws and regulations that emerge may negatively impact our business.
+Added: In addition, privacy legislation may regulate the use of artificial intelligence and machine learning within our product development, testing, deployment, or other business functions, including the use of algorithms and automated processing, in ways that could materially affect our business, or which may lead to significant increases in the cost of compliance.
• We may face increased compliance costs in connection with health and safety requirements for mobile devices - If wireless handsets pose health and safety risks, we may be subject to new regulations and demand for our products and services may decrease.
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We apply the provisions of ASC 718, Compensation - Stock Compensation, which requires us to record compensation expense in our statement of operations for employee and director stock-based awards using a fair value method.
−Removed: In the first quarter of fiscal 2018, we adopted FASB ASU No.
+Added: We adopted FASB ASU No.
2016-09 which modified certain aspects of ASC 718, including the requirement to recognize excess tax benefits and shortfalls in the income statement.
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The ongoing application of this standard could impact the future value of our common stock and may result in greater stock price volatility.
−Removed: 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.
+Added: To the extent that this accounting standard makes it less attractive to grant stock-based awards to employees, we may incur increased cash 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, as further discussed in Notes to Consolidated Financial Statements - Note (1) - Summary of Significant Accounting and Reporting Policies included in Part II - Item 8.
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If we are unable to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and financial results.
−Removed: After consultation with our independent registered public accounting firm and our management team, our audit committee concluded that we:
−Removed: (a) lacked a sufficient complement of resources with an appropriate level of knowledge and experience to establish effective process and controls.
−Removed: As a result, we identified a material weakness in our internal control over financial reporting.
−Removed: The control environment material weakness contributed to other material weaknesses within our system of internal control over financial reporting at the control activity level, where we did not design and implement effective control activities, including controls related to revenue, inventory and other assets.
−Removed: Deficiencies in control activities contributed to accounting errors and the potential for there to have been material accounting errors within revenue, inventory and other assets.
+Added: After consultation with our independent registered public accounting firm, we concluded that we did not design and maintain an effective control environment commensurate with our financial reporting requirements based on the criteria in the COSO framework, as we lacked a sufficient complement of resources with an appropriate level of knowledge and experience to establish effective process and controls.
+Added: This control environment material weakness contributed to other material weaknesses within our system of internal control over financial reporting at the control activity level, where we did not design and implement effective control activities, including controls related to:
+Added: revenue, inventory, other assets, contract liabilities, and complex accounting matters and transactions (including debt, convertible preferred stock and related embedded derivatives).
+Added: Deficiencies in control activities contributed to misstatements and the potential for there to have been material misstatements within these areas.
+Added: An international component of our Allerium segment also had ineffective controls.
+Added: Specifically, we did not design and maintain effective general information technology controls (“GITCs”) and business process controls in the following areas:
+Added: (i) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to financial applications, programs and data to appropriate company personnel;
+Added: (ii) program change management controls to ensure that changes to information technology (“IT”) programs and data affecting financial applications and underlying accounting records are properly identified, tested, authorized and implemented with appropriate segregation of duties;
+Added: and (iii) business process controls to ensure that journal entries were not amended prior to posting, as the enterprise resource planning (“ERP”) system which the international component operates did not restrict approvers from changing journal entries prior to posting.
+Added: While no material misstatements were identified with respect to this international component in fiscal 2025, these deficiencies impact control activities over all financial statement account balances, classes of transactions and disclosures and contributed to the potential for there to have been material misstatements within the international component.
+Added: Such international component accounted for 5.7%, 4.1% and 3.3% of our consolidated total assets and 7.6%, 5.9% and 4.6% of our consolidated net sales as of and for the three fiscal years ended July 31, 2025, 2024 and 2023, respectively.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
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Accordingly, we may not be able to prevent the misappropriation of our technology or prevent others from developing similar technology.
−Removed: Furthermore, policing the unauthorized use of our products is difficult and expensive.
+Added: Furthermore, policing unauthorized use of our products is difficult and expensive.
Litigation may be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others.
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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.
+Added: We may face infringement claims in connection with our use of artificial intelligence and machine learning within our product development, testing, and deployment, or other business functions.
+Added: Such claims may arise in the context of both third-party litigation and regulatory exposure from use of third-party content contained in generation results from large-language models or other algorithmic results or outcomes that are utilized in our products or services without required attribution or permission.
+Added: Such claims, if successful, may combine to (a) make it more costly for us to apply artificial intelligence and machine learning within our business, (b) lead to regulatory fines or penalties, (c) result in payments of monetary damages, or (d) require us to alter our product offerings or business practices.
Competitive Risks
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The introduction of products and services or future industry standards embodying new technologies and approaches could render any of our products and services obsolete or non-competitive.
−Removed: New satellite operators such as Starlink have driven significant changes in the way communications equipment is procured, and may further disrupt our markets.
+Added: The emergence of low Earth orbit ("LEO") satellite operators such as Starlink, OneWeb and Project Kuiper, have driven significant changes in the way communications equipment is procured, and may further disrupt our markets.
The introduction of optical communications technology, including from satellite to satellite and satellite to ground, as well as potential offerings for satellite / cellular direct connectivity, may impact our future business.
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For example, many companies are developing new technologies and the shift towards open standards will likely result in increased competition and some of our products may become commoditized as a result.
−Removed: Our Terrestrial and Wireless Networks segment provides various technologies that are utilized on mobile devices.
+Added: Our Allerium segment provides various technologies that are utilized on mobile devices.
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 may also lose end users or face erosion in our average revenue per user if these competitors deliver their products without charge to the consumer by generating revenue from advertising or as part of other applications or services.
−Removed: Our expected growth and our financial position depends on, among other things, our ability to keep pace with such changes and developments and to respond to the increasing variety of electronic equipment users and transmission technologies.
+Added: Our expected growth and our financial position depend on, among other things, our ability to keep pace with such changes and developments and to respond to the increasing variety of electronic equipment users and transmission technologies.
We may not have the financial or technological resources to keep pace with such changes and developments or be successful in our research and development and we may not be able to identify and respond to technological improvements made by our competitors in a timely or cost-effective fashion.
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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.
−Removed: 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.
+Added: Our Allerium 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.
−Removed: 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.
−Removed: 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.
−Removed: Going forward, we intend to continue to work with our partners and expand our direct and indirect sales and distribution channels in this area.
+Added: We intend to continue to work with our partners and expand our direct and indirect sales and distribution channels in this area.
If we are not successful in doing so, we may not be able to achieve our long-term business goals.
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government policies;
−Removed: • changes in economic conditions generally, particularly in the terrestrial and wireless networks and satellite and space communications markets;
+Added: • changes in economic conditions generally, particularly in the markets we serve;
• changes in securities market conditions, generally;
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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.
−Removed: 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.
−Removed: However, there is no assurance that the actions taken by the Board of Directors and management team in seeking to maintain constructive engagement with certain stockholders will be successful in preventing the occurrence of stockholder activist campaigns.
−Removed: Such campaigns may not align with our business strategies or what the Board of Directors believes is in the best interest of all of our stockholders.
−Removed: Campaigns by activist stockholders to effect changes at publicly traded companies can result in different types of demands, such as 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.
−Removed: Activist stockholders who disagree with the composition of a company’s board of directors, or with its strategy or leadership often seek to involve themselves or their designees in the governance and strategic direction of a company through various activities, including the nomination of director candidates.
−Removed: In September 2024, Michael Porcelain, a former Chief Executive Officer and President of the Company, nominated a group of eight candidates to stand for election at our fiscal 2024 annual meeting of stockholders.
−Removed: During the course of our Board's discussions with Mr.
−Removed: Porcelain and in public communications, Mr.
−Removed: Porcelain has made certain proposals for our Board’s consideration regarding the composition of the Board and management team.
−Removed: We expect to continue to engage with Mr.
−Removed: Porcelain and certain stockholders associated with him on these and related topics.
−Removed: Responding to proxy contests and other actions by activist stockholders, including the current campaign by Mr.
−Removed: Porcelain, 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.
−Removed: 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.
−Removed: Also, we could be required to incur significant expenses related to any activist stockholder matters, including the current campaign by Mr.
−Removed: Porcelain, or accompanying litigation (including but not limited to legal fees, fees for financial advisors, fees for public relation advisors and proxy solicitation expenses).
−Removed: 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.
−Removed: Even if we are successful in any proxy contest or other activism campaign, any such proxy contest or activist stockholder campaign could adversely affect our business due to:
−Removed: • perceived uncertainties as to future direction, strategy or leadership that may result in the loss of potential business opportunities, acquisitions, collaborations or other strategic opportunities, and that may make it more difficult to attract and retain qualified personnel, investors, customers, suppliers, and other business partners;
−Removed: • the risk that individuals may be elected to our Board of Directors with a specific agenda or who do not agree with our strategic plan, adversely affecting the ability of our Board of Directors to function effectively, 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, results of operations and financial condition.
−Removed: We cannot predict, and no guarantees can be given, as to the outcome or timing of any matters relating to the foregoing actions by activist stockholders and our responses thereto or the ultimate impact on our business, results of operations or financial condition.
−Removed: Any of these matters or any further actions by activist stockholders and our responses thereto may impact the trading value of our securities.
+Added: Our Board of Directors and executive management 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.
+Added: However, there is no assurance that certain shareholders will not conduct activist campaigns that may not align with our business strategies or what the Board of Directors believes is in the best interest of all of our stockholders, and may be costly to us and distracting to our Board of Directors and executive management.
+Added: In September 2024, shareholders Fred Kornberg, Michael Porcelain and Oleg Timoshenko (the "Investor Group") nominated eight candidates to stand for election at our fiscal 2024 annual meeting of stockholders.
+Added: On November 17, 2024, we entered into a Cooperation Agreement with the Investor Group, the terms of which are described in the Company’s Form 8-K filed with the SEC on November 18, 2024.
+Added: In September 2025, we provided notice to the Investor Group regarding our intention to renominate Michael Hildebrandt at our fiscal 2025 annual meeting of stockholders, thus extending the Cooperation Agreement until 30 days prior to the director nomination deadline for our fiscal 2026 annual meeting of stockholders.
Provisions in our corporate documents and Delaware law could delay or prevent a change in control of Comtech.
We have taken a number of actions that could have the effect of discouraging, delaying or preventing a merger, acquisition or divestiture involving Comtech that our stockholders may consider favorable.
−Removed: For example, we currently have a classified board which will be fully declassified at our 2024 Annual Meeting of Stockholders and the employment contract with our CEO and agreements with other of our executive officers provide for substantial payments in certain circumstances or in the event of a change of control of Comtech.
+Added: For example, the employment contract with our CEO and agreements with other of our executive officers provide for substantial payments in certain circumstances or in the event of a change of control of Comtech.
In the future, we may adopt a stockholder rights plan which could cause substantial dilution to a stockholder, and substantially increase the cost paid by a stockholder who attempts to acquire us on terms not approved by our Board of Directors.
5 unchanged sentences
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.