COMTECH TELECOMMUNICATIONS CORP /DE/ 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As of the end of the period covered by this Annual Report on Form 10-K, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities and Exchange Act of 1934, as amended (the "Exchange Act")), which have been designed to provide reasonable assurance that the information required to be disclosed by us, in reports filed under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, carried out by us under the supervision of our Chief Executive Officer and Chief Financial Officer, and with the participation of our management, we concluded that our disclosure controls and procedures were not effective, as of July 31, 2025, as a result of the material weaknesses in our internal control over financial reporting discussed below. Notwithstanding our material weaknesses, we have concluded that the consolidated financial statements and other financial information included in this Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the U.S. ("U.S. GAAP"). A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. 82 Management’s Report on Internal Control Over Financial Reporting Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2025. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control – Integrated Framework (2013) (the "COSO framework") . Based on our assessment, we determined that, as of July 31, 2025, our internal control over financial reporting was not effective based on those criteria as a result of material weaknesses described below. 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. 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 processes and controls. 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, other assets, contract liabilities and complex accounting matters and transactions (including debt, convertible preferred stock and related embedded derivatives). Deficiencies in control activities contributed to misstatements and the potential for there to have been material misstatements within these areas. An international component of our Allerium segment had ineffective controls. Specifically, we did not design and maintain effective general information technology controls (“GITCs”) and business process controls in the following areas: (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; (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; 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 does not restrict approvers from changing journal entries prior to posting. 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. Deloitte and Touche LLP, our independent registered public accounting firm, has performed an audit of our internal control over financial reporting as of July 31, 2025. Deloitte’s audit reports appear on pages F-2 and F-3 of this annual report. Changes In Internal Control Over Financial Reporting Other than for the material weakness related to our international component described above, which 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, and for the on-going remediation efforts described below, there have been no changes in our internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act that occurred during our fiscal quarter ended July 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 83 Remediation Plan Our remediation efforts are ongoing and we will continue our initiatives to hire and engage additional skilled resources in program management and accounting and finance related functions, and implement and document policies, procedures and internal controls. Management is committed to the remediation of the material weaknesses described above. To date, management has undertaken the following remedial actions in conjunction with its remediation plan: • Reorganized and reassigned responsibilities for executing specific internal controls over financial reporting to staff within the finance organization whose experience aligns more closely with these responsibilities; • Hired more qualified staff with sufficient knowledge and experience to strengthen our financial reporting; • Engaged third-party consultants to perform a comprehensive review of our accounting and reporting functions to assist in designing our remediation plan; • Designed and began implementing a comprehensive remediation plan to enhance our internal control environment that was approved by the Audit Committee; • Initiated and will continue the process to document, implement and redesign controls, policies, and procedures with an appropriate level of precision to detect a material misstatement, and to retain sufficient documentation to support the operating effectiveness of controls over revenue, inventory, other assets, contract liabilities, debt, convertible preferred stock and related embedded derivatives; • While management has made significant progress in remediating controls relating to complex accounting matters and transactions by engaging a third-party specialist with the requisite knowledge, experience and resources, the material weakness will not be considered remediated until the implemented controls operate for a sufficient period of time and management had concluded, through testing, that the related controls are effective; • We engaged a third-party specialist with sufficient knowledge and experience to oversee our internal audit function; such individual is independent of management and reports directly to the Audit Committee; and • With respect to our international component's operations, accounting and financial reporting, management initiated and will continue to implement proper segregation of duties and enhance control activities over GITCs. We will continue to monitor the effectiveness of our remediation plan and refine the remediation plan as appropriate. These actions represent significant progress in addressing the material weaknesses. However, they do not represent the full suite of improvements that we plan to make in order to strengthen our internal control over financial reporting. Additional components of our remediation plan include: • Conducting training sessions for all control owners and relevant personnel to improve documentation that supports effective control activities, including evidence of the completeness and accuracy of information used in controls; • For those employees involved in the estimate at completion (“EAC”) process, conducting specialized training sessions related to newly designed or enhanced control activities that were put in place for preparing and reviewing an EAC and its impact on the accuracy of financial reporting; and • With respect to our international component's operations, accounting and financial reporting, updating and documenting its policies and procedures, including IT policies and procedures and the enhancement of certain control activities over user access, change management and the review of third-party services organization reports. Remediation of the identified material weaknesses and strengthening of our internal control environment will require a substantial effort throughout fiscal 2026 and beyond, as necessary. We will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. 84 ITEM 9B. OTHER INFORMATION Securities Trading Plans of Directors and Officers During the three months ended July 31, 2025, none of our directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or adopted or terminated a non-Rule 10b5-1 trading arrangement (as each term is defined in Item 408(a) of Regulation S-K). Transaction Bonus Agreements and Restricted Stock Awards On November 7, 2025, the Company approved transaction bonuses for several employees, including certain of its named executive officers, pursuant to which such recipients will be eligible to receive a cash bonus equal to a specified percentage of Transaction Proceeds in connection with a Qualifying Transaction. The percentages of Transaction Proceeds payable to each named executive officer are as follows: Mr. Bondi – 0.19%, Mr. Walther – 0.19%, Mr. Robertson – 0.216%, and Mr. Traub – 0.739%. The bonuses will be paid on the first scheduled payroll date following the closing of the Qualifying Transaction, subject to applicable tax withholdings and other authorized deductions; provided that any portion of a bonus attributable to certain contingent proceeds will be paid on the same schedule and under the same terms and conditions as apply to such contingent proceeds (but in no event later than the fifth anniversary of the closing of the Qualifying Transaction). Each recipient must remain in continued employment with the Company through the closing of a Qualifying Transaction in order to receive the bonus, and will forfeit the bonus if (i) the recipient resigns for any reason or is terminated for cause prior to the Qualifying Transaction or (ii) the Company terminates the recipient’s employment without cause more than three months prior to the Qualifying Transaction; except, that if the Company terminates a recipient’s employment without cause within three months prior to the Qualifying Transaction, the recipient will remain eligible to receive the bonus. In addition, Mr. Traub’s agreement provides that if the Company terminates his employment without Cause or he resigns for Good Reason on or prior to first anniversary of the closing of the Qualifying Transaction, in lieu of the lump sum cash severance payment that he would otherwise be entitled to under his employment agreement, he will be entitled to a cash amount equal to one and a half (1.5) times the sum of his base salary and target bonus. For purposes of the bonus, (a) "Qualifying Transaction" means the consummation of a Specified Permitted Individual Disposition (as defined in the Company’s Credit Facility as in effect as of November 7, 2025) on or prior to December 31, 2026, and (b) “Transaction Proceeds” means the aggregate cash and non-cash consideration received by the Company in connection with the Qualifying Transaction (before deducting any transaction expenses, indebtedness or similar purchase price reductions set forth in the definitive agreement for such Qualifying Transaction). In addition, on November 7, 2025, the Company approved grants of restricted stock unit awards under the 2023 Plan for the fiscal year 2026, including to its named executive officers, pursuant to a form of restricted stock unit award agreement which provides that the recipients will receive pro-rated vesting upon a termination without Cause (as defined in the 2023 Plan); provided, however, that if the recipient is terminated without Cause (as defined in the 2023 Plan) at or within 12 months following a Qualifying Transaction (as defined above) and prior to the vesting of the first vesting tranche of such award, the recipient will instead receive vesting acceleration with respect to the first vesting tranche of the award. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Certain information concerning directors and officers is incorporated by reference to our Proxy Statement for the Annual Meeting of Stockholders (the "Proxy Statement") which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. 85 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information regarding securities authorized for issuance under equity compensation plans and certain information regarding security ownership of certain beneficial owners and management is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Information regarding certain relationships and related transactions is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information regarding principal accountant fees and services is incorporated by reference to the Proxy Statement, which will be filed with the Securities and Exchange Commission no more than 120 days after the close of our fiscal year. 86 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) (1) The Registrant’s financial statements together with a separate index are annexed hereto. (2) The Financial Statement Schedule listed in a separate index is annexed hereto. (3) Exhibits required by Item 601 of Regulation S-K are listed below. Exhibit Number Description of Exhibit Incorporated By Reference to Exhibit 3(a)(i) Restated Certificate of Incorporation of the Registrant, dated August 18, 2006 Exhibit 3(a)(i) to the Registrant’s 2006 Form 10-K 3(a)(ii) Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Comtech Telecommunications Corp., dated December 28, 2021 Exhibit 3.1 to the Registrant's Form 8-K, filed December 30, 2021 3(a)(iii) Third Amended and Restated By-Laws of the Registrant, dated September 26, 2017 Exhibit 3(a)(ii) to the Registrant’s 2017 Form 10-K 3(a)(iv) Certificate of Designations of Series B-1 Convertible Preferred Stock, dated June 17, 2024 Exhibit 3.1 to the Registrant's Form 8-K filed June 18, 2024 3(a)(v) Certificate of Elimination of Series B-1 Convertible Preferred Stock, dated October 23, 2024 Exhibit 3(a)(v) to the Registrant's 2024 Form 10-K 3(a)(vi) Certificate of Designations of Series B-2 Convertible Preferred Stock, dated October 17, 2024 Exhibit 3.1 to the Registrant’s Form 8-K, filed October 18, 2024 3(a)(vii) Certificate of Elimination eliminating the Series B- 2 Convertible Preferred Stock, dated March 4, 2025 Exhibit 3.2 to the Registrant’s Form 8-K, filed March 4, 2025 3(a)(viii) Certificate of Designations designating the Series B- 3 Convertible Preferred Stock, dated March 4, 2025 Exhibit 3.1 to the Registrant’s Form 8-K, filed March 4, 2025 4(a)(i) Form of Warrant Agreement Exhibit 4.1 to the Registrant’s Form 8-K, filed March 4, 2025 4(a)(ii) Description of Comtech Telecommunications Corp.'s Securities Registered Pursuant to Section 12 of the Exchange Act 10(a)* Third Amended and Restated 2001 Employee Stock Purchase Plan Appendix B to the Registrant’s Proxy Statement, filed November 18, 2022 10(b)* 2000 Stock Incentive Plan, Amended and Restated, dated December 15, 2022 Appendix A to the Registrant’s Proxy Statement, filed November 18, 2022 10(c)(1)* Form of Stock Option Agreement pursuant to the 2000 Stock Incentive Plan Exhibit 10(f)(7) to the Registrant’s 2005 Form 10-K 10(c)(2)* Form of Stock Option Agreement for Non-employee Directors pursuant to the 2000 Stock Incentive Plan - 2020 Exhibit 10(d)(3) to the Registrant's 2020 Form 10-K 10(d)(1)* Form of Cash-Settled Performance Unit Agreement pursuant to the 2000 Stock Incentive Plan Exhibit 10(e)(2) to the Registrant's 2023 Form 10-K 10(e)(1)* Form of Long-Term Performance Share Award Agreement pursuant to the 2000 Stock Incentive Plan - 2018 Exhibit 10(f)(2) to the Registrant's 2019 Form 10-K 10(f)(1)* Form of Restricted Stock Agreement (eligible for dividend equivalents) for Non-employee Directors pursuant to the 2000 Stock Incentive Plan - 2019 Exhibit 10(g)(3) to the Registrant's 2019 Form 10-K 10(f)(2)* Form of Restricted Stock Agreement (eligible for dividend equivalents) for Non-employee Directors pursuant to the 2000 Stock Incentive Plan - 2022 Exhibit 10(g)(4) to the Registrant's 2022 Form 10-K 10(g)(1)* Form of Restricted Stock Unit Agreement for Employees pursuant to the 2000 Stock Incentive Plan - 2017 Exhibit 10(h)(1) to the Registrant’s 2017 Form 10-K 87 Exhibit Number Description of Exhibit Incorporated By Reference to Exhibit 10(g)(2)* Form of Restricted Stock Unit Agreement (eligible for dividend equivalents) for Non-employee Directors pursuant to the 2000 Stock Incentive Plan Exhibit 10(aa) to the Registrant’s 2016 Form 10-K 10(g)(3)* Form of Restricted Stock Unit Agreement (eligible for dividend equivalents) for Non-employee Directors pursuant to the 2000 Stock Incentive Plan - 2020 Exhibit 10.1 to the Registrant's Form 10-Q, filed June 3, 2020 10(g)(4)* Form of Restricted Stock Unit Agreement (eligible for dividend equivalents) for Non-employee Directors pursuant to the 2000 Stock Incentive Plan - 2022 Exhibit 10(h)(7) to the Registrant's 2022 Form 10-K 10(g)(5)* Form of Restricted Stock Unit Agreement (eligible for dividend equivalents) for Employees pursuant to the 2000 Stock Incentive Plan - 2022 Exhibit 10(h)(8) to the Registrant's 2022 Form 10-K 10(h)(1)* Form of Other Stock-Based Award Agreement pursuant to the 2000 Stock Incentive Plan Exhibit 10(i)(3) to the Registrant's 2023 Form 10-K 10(i)(1)* Form of Share Unit Agreement (eligible for dividend equivalents) for Employees pursuant to the 2000 Stock Incentive Plan Exhibit 10.2 to the Registrant's Form 10-Q, filed December 9, 2013 10(i)(2)* Form of Share Unit Agreement (eligible for dividend equivalents) for Employees pursuant to the 2000 Stock Incentive Plan - 2018 Exhibit 10(j)(2) to the Registrant's 2018 Form 10-K 10(j)* Form of Indemnification Agreement between the Registrant and the Named Executive Officers and Certain Other Executive Officers Exhibit 10.1 to Registrant’s Form 8-K, filed on March 8, 2007 10(k)(1)* Form of Change-in-Control Agreement (Tier 1) Exhibit 10(l)(1) to the Registrant's 2022 Form 10-K 10(k)(2)* Form of Change-in-Control Agreement (Tier 2) between the Registrant and Certain Named Executive Officers (other than the CEO) and Certain Other Executive Officers Exhibit 10(l)(2) to the Registrant's 2022 Form 10-K 10(k)(3)* Form of Change-in-Control Agreement (Tier 2) between the Registrant and Certain Named Executive Officers (other than the CEO) and Certain Other Executive Officers (California Employees) Exhibit 10.3 to the Registrant’s Form 8-K, filed June 7, 2017 10(k)(4)* Form of Change-in-Control Agreement (Tier 2) between the Registrant and Certain Named Executive Officers (other than the CEO) and Certain Other Executive Officers (Divisional/Subsidiary Presidents) Exhibit 10.4 to the Registrant’s Form 8-K, filed June 7, 2017 10(k)(5)* Form of Change-in-Control Agreement (Tier 2) between the Registrant and Certain Named Executive Officers (other than the CEO) and Certain Other Executive Officers (California Divisional/Subsidiary Presidents) Exhibit 10.5 to the Registrant’s Form 8-K, filed June 7, 2017 10(k)(6)* Form of Change-in-Control Agreement (Tier 3) between the Registrant and Certain Non-Executive Officers Exhibit 10.6 to the Registrant’s Form 8-K, filed June 7, 2017 10(l)* Retirement and Transition Agreement, dated September 30 2019 Exhibit 10.1 to the Registrant's Form 10-Q, filed December 4, 2019 10(m)(1) Credit Agreement, dated as of June 17, 2024, among Comtech Telecommunications Corp. and the lenders named therein Exhibit 10.1 to the Registrant’s Form 8-K, filed June 18, 2024 88 Exhibit Number Description of Exhibit Incorporated By Reference to Exhibit 10(m)(2) Waiver and Amendment No. 1 to Credit Agreement, dated as of October 17, 2024, by and among Comtech Telecommunications Corp., as borrower, the lenders named therein, TCW Asset Management Company LLC, as term loan agent, and Wingspire Capital LLC, as revolving agent Exhibit 10.1 to the Registrant’s Form 8-K, filed October 18, 2024 10(m)(3) Subordinated Credit Agreement, dated as of October 17, 2024, by and among Comtech Telecommunications Corp., as borrower, the lenders named therein, and U.S. Bank Trust Company, National Association, as agent Exhibit 10.2 to the Registrant’s Form 8-K, filed October 18, 2024 10(m)(4) Waiver and Amendment No. 2 to Credit Agreement, dated as of March 3, 2025, by and among Comtech Telecommunications Corp., as borrower, the lenders named therein, TCW Asset Management Company LLC, as term loan agent, and Wingspire Capital LLC, as revolving agent Exhibit 10.1 to the Registrant’s Form 8-K, filed March 4, 2025 10(m)(5) Waiver and Amendment No 1. to Subordinated Credit Agreement, dated as of March 3, 2025, by and among Comtech Telecommunications Corp., as borrower, the guarantors named therein, the lenders named therein, and U.S. Bank Trust Company, National Association, as agent. Exhibit 10.2 to the Registrant’s Form 8-K, filed March 4, 2025 10(m)(6) Amendment No. 3 to Credit Agreement, dated as of July 21, 2025, by and among Comtech Telecommunications Corp., as borrower, the lenders named therein, TCW Asset Management Company LLC, as administrative agent, and Wingspire Capital LLC, as revolving agent. Exhibit 10.1 to the Registrant’s Form 8-K, filed July 22, 2025 10(m)(7) Amendment No 2. to Subordinated Credit Agreement, dated as of July 21, 2025, by and among Comtech Telecommunications Corp., as borrower, the guarantors named therein, the lenders named therein, and U.S. Bank Trust Company, National Association, as agent. Exhibit 10.2 to the Registrant’s Form 8-K, filed July 22, 2025 10(n)(1) Subscription and Exchange Agreement, dated as of October 17, 2024, by and among Comtech Telecommunications Corp. and the Investors named therein Exhibit 10.3 to the Registrant’s Form 8-K, filed October 18, 2024 10(n)(2) Subscription and Exchange Agreement, dated as of March 3, 2025, by and among Comtech Telecommunications Corp. and the Investors named therein Exhibit 10.3 to the Registrant’s Form 8-K, filed March 4, 2025 10(n)(3) Form of Voting Agreement Exhibit 10.4 to the Registrant’s Form 8-K, filed March 4, 2025 10(n)(4) Registration Rights Agreement, dated as of March 3, 2025, by and among Comtech Telecommunications Corp. and the Investors named therein Exhibit 10.5 to the Registrant’s Form 8-K, filed March 4, 2025 10(o) Cooperation Agreement dated December 16, 2021, by and among Comtech Telecommunications Corp., Outerbridge Partners, LP, Outerbridge Capital Management, LLC, Outerbridge Partners GP, LLC, Outerbridge Bartleby Fund, LP, Outerbridge Bartleby GP, LLC, and Rory Wallace Exhibit 10.1 to the Registrant's Form 8-K, filed December 21, 2021 10(p)(1)* Employment Agreement, dated December 31, 2021, between Comtech and Michael Porcelain Exhibit 10.1 to the Registrant's Form 8-K, filed January 5, 2022 10(p)(2)* Restricted Stock Unit Agreement with Michael Porcelain Pursuant to the Comtech Telecommunications Corp. 2000 Stock Incentive Plan Exhibit 10.2 to the Registrant's Form 10-Q, filed March 10, 2022 10(p)(3)* Separation Agreement and General Release with Michael Porcelain, dated August 9, 2022 Exhibit 10.1 to the Registrant's Form 8-K, filed August 10, 2022 10(q)(1)* CEO Employment Agreement with Ken Peterman, dated September 12, 2022 Exhibit 10.1 to the Registrant’s Form 8-K, filed September 13, 2022 89 Exhibit Number Description of Exhibit Incorporated By Reference to Exhibit 10(q)(2)* Restricted Stock Unit Agreement with Ken Peterman Pursuant to the Comtech Telecommunications Corp. 2000 Stock Incentive Plan Exhibit 10.2 to the Registrant’s Form 8-K, filed September 13, 2022 10(q)(3)* Long-Term Performance Share Award Agreement with Ken Peterman Pursuant to the Comtech Telecommunications Corp. 2000 Stock Incentive Plan Exhibit 10.3 to the Registrant’s Form 8-K, filed September 13, 2022 10(q)(4)* Long-Term Performance Share Award (VWAP) Agreement with Ken Peterman Pursuant to the Comtech Telecommunications Corp. 2000 Stock Incentive Plan Exhibit 10.4 to the Registrant’s Form 8-K, filed September 13, 2022 10(r)* Form of Executive Employment Agreement Exhibit 10.1 to the Registrant’s Form 8-K, filed January 9, 2024 10(s)(1)* Employment Agreement between Comtech Telecommunications Corp. and John Ratigan Exhibit 10.1 to the Registrant’s Form 8-K, filed April 1, 2024 10(s)(2)* Employment Agreement Amendment 1 between Comtech Telecommunications Corp. and John Ratigan Exhibit 10.2 to the Registrant’s Form 8-K, filed April 1, 2024 10(s)(3)* Employment Agreement, dated October 28, 2024, between Comtech Telecommunications Corp. and John Ratigan Exhibit 10.7 to the Registrant’s Form 10-Q, filed January 13, 2025 10(s)(4)* Separation Agreement, dated January 10, 2025, by and between Comtech Telecommunications Corp. and John Ratigan Exhibit 10.1 to the Registrant’s Form 8-K, filed January 13, 2025 10(t)* Form of Retention Bonus Agreement Exhibit 10.1 to the Registrant’s Form 8-K, filed May 2, 2024 10(u)* Comtech Telecommunications Corp. 2023 Equity and Incentive Plan , as amended Exhibit 10.9 to the Registrant’s Form 10-Q, filed March 12, 2025 10(v)(1)* Form of Restricted Stock Unit Agreement pursuant to the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan Exhibit 10.5 to the Registrant’s Form 10-Q, filed June 18, 2024 10(v)(2)* Form of Long Term Performance Award Agreement pursuant to the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan Exhibit 10.6 to the Registrant’s Form 10-Q, filed June 18, 2024 10(v)(3)* Form of Other Stock Award Agreement pursuant to the 2023 Equity and Incentive Plan Exhibit 10(v)(3) to the Registrant’s 2024 Form 10-K 10(v)(4)* Form of Restricted Stock Unit Agreement to Non-employee Directors pursuant to the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan Exhibit 10(v)(4) to the Registrant’s 2024 Form 10-K 10(v)(5)* Form of Restricted Stock Agreement to Non-employee Directors pursuant to the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan Exhibit 10(v)(5) to the Registrant’s 2024 Form 10-K 10(v)(6)* Form of Cash-Settled Performance Award Agreement Pursuant to Comtech Telecommunications Corp. 2023 Equity and Incentive Plan Exhibit 10.9 to the Registrant’s Form 10-Q, filed January 13, 2025 10(w)(1)* Employment Agreement, dated November 27, 2024, between Comtech Telecommunications Corp. and Kenneth H. Traub Exhibit 10.8 to the Registrant’s Form 10-Q, filed January 13, 2025 10(w)(2)* Employment Agreement Amendment No. 1, dated January 13, 2025, between Comtech Telecommunications Corp. and Kenneth H. Traub Exhibit 10.3 to the Registrant’s Form 10-Q, filed March 12, 2025 10(x)(1)* Employment Agreement, dated February 26, 2024, between Comtech Telecommunications Corp. and Jeffery Robertson Exhibit 10.4 to the Registrant’s Form 10-Q, filed March 12, 2025 10(x)(2)* Employment Agreement Amendment No. 1, dated January 10, 2025, between Comtech Telecommunications Corp. and Jeffery Robertson Exhibit 10.5 to the Registrant’s Form 10-Q, filed March 12, 2025 90 Exhibit Number Description of Exhibit Incorporated By Reference to Exhibit 10(y) Cooperation Agreement, dated November 17, 2024, by and among Comtech Telecommunications Corp. and Michael Porcelain, Fred Kornberg and Oleg Timoshenko Exhibit 10.1 to the Registrant’s Form 8-K, filed November 18, 2024 10(z)* Form of Indemnification Agreement by and among Comtech Telecommunications Corp. and the Board of Directors and Certain Officers Exhibit 10.1 to the Registrant’s Form 8-K, filed December 13, 2024 19 Insider Trading Policies and Procedures of the Company Exhibit 19 to the Registrant’s 2024 Form 10-K 21 Subsidiaries of the Registrant 23.1 Consent of Independent Registered Public Accounting Firm 31.1 Certification of CEO and Chairman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of CEO and Chairman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97 Clawback Policy of the Company Exhibit 97 to the Registrant's 2024 Form 10-K 101.INS The following financial statements from the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2025, formatted in inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Stockholders' Equity, (iv) Consolidated Statement of Cash Flows, and (v) Notes to Consolidated Financial Statements 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) * Management contract or compensatory plan or arrangement. ITEM 16. FORM 10-K SUMMARY None. 91 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COMTECH TELECOMMUNICATIONS CORP. November 10, 2025 By: /s/Kenneth H. Traub (Date) Kenneth H. Traub, Chairman of the Board President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title November 10, 2025 /s/Kenneth H. Traub Chairman of the Board (Date) Kenneth H. Traub President and Chief Executive Officer (Principal Executive Officer) November 10, 2025 /s/Michael A. Bondi Chief Financial Officer (Date) Michael A. Bondi (Principal Financial and Accounting Officer) November 10, 2025 /s/Wendi Carpenter Director (Date) Wendi Carpenter November 10, 2025 /s/Bruce T. Crawford Director (Date) Bruce T. Crawford November 10, 2025 /s/Michael J. Hildebrandt Director (Date) Michael J. Hildebrandt November 10, 2025 /s/Mark Quinlan Director (Date) Mark Quinlan November 10, 2025 /s/Lloyd A. Sprung Director (Date) Lloyd A. Sprung November 10, 2025 /s/Lawrence J. Waldman Director (Date) Lawrence J. Waldman 92 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) F- 2 Consolidated Financial Statements: Balance Sheets as of July 31, 2025 and 2024 F- 9 Statements of Operations for each of the years in the three-year period ended July 31, 2025 F- 10 Statements of Convertible Preferred Stock and Stockholders' Equity for each of the years in the three-year period ended July 31, 2025 F- 11 Statements of Cash Flows for each of the years in the three-year period ended July 31, 2025 F- 12 Notes to Consolidated Financial Statements F- 14 Additional Financial Information Pursuant to the Requirements of Form 10-K: Schedule II – Valuation and Qualifying Accounts and Reserves S- 1 Schedules not listed above have been omitted because they are either not applicable or the required information has been provided elsewhere in the consolidated financial statements or notes thereto. F - 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Comtech Telecommunications Corp. Chandler, Arizona Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Comtech Telecommunications Corp. and subsidiaries (the "Company") as of July 31, 2025 and 2024, the related consolidated statements of operations, convertible preferred stock and stockholders’ equity, and cash flows, for each of the three years in the period ended July 31, 2025, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended July 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of July 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 10, 2025, expressed an adverse opinion on the Company’s internal control over financial reporting because of material weaknesses. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Net Sales – Over Time Accounting Using the Cost-to-Cost Measure for Specific Identified Material Contracts — Refer to Note 1 to the financial statements Critical Audit Matter Description The Company’s determination of revenue recognition for specific identified material contracts accounted for over time involves estimating the total costs needed to complete the specific identified contracts and updating those estimates throughout the life of those specific identified contracts. This requires management to make significant estimates related to forecasts of future costs for the identified specific contracts. Changes in these estimates for the identified specific contracts could have a significant impact on the Company’s results of operations. Given the significant judgment and estimates used in management’s projections, auditing the Company’s estimates at completion and estimates to completion involved especially subjective judgment. F - 2 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s determination of revenue recognition for specific identified material contracts accounted for over time included the following, among others: • We tested the effectiveness of the controls over the development of the initial contract cost to complete estimate and monitoring of estimates at completion and estimates to completion. • For each specific identified material contract selected, we performed the following: ▪ Evaluated whether the contract was properly included in management’s calculation of over time revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation. ▪ Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers. ▪ Confirmed certain items with the customer, such as contract amount, approved change orders, invoices received, payments made, liquidated damages, if any, and amounts owed to the Company. ▪ Tested management’s identification of distinct performance obligations by evaluating whether the underlying goods, services, or both were highly interdependent and interrelated. ▪ Evaluated the estimates of total cost and profit for the performance obligation by: • Performing a retrospective review by comparing the estimated margins at contract inception to the actual margins as of year-end in order to assess management’s ability to accurately estimate costs. • Inquiring and corroborating the estimates to complete and the estimates at completion with the Project Manager (i.e., someone outside of Finance/Accounting) to understand significant variances in costs and completeness of the estimates at completion and estimates to completion. • Testing the estimates to complete through a combination of tests of details, in which we selected individual costs within the estimate to complete and obtained supporting documentation, and where we developed an expectation of the estimate to complete and compared it to the recorded balance. ▪ Tested the accuracy and completeness of costs incurred during the current fiscal year. This testing included agreeing labor costs to employee timesheets and agreeing the labor rate to either rates agreed upon with the customer in the contract or rates from the Company’s payroll records. • Tested the mathematical accuracy of management’s calculation of revenue for the performance obligation. Goodwill - Refer to Note 15 to the financial statements Critical Audit Matter Description The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company used a combination of a market approach and the income approach, also known as the discounted cash flow ("DCF") method, to determine the present value of cash flows to estimate fair value. In the DCF, the future cash flows for the Company’s reporting units were projected based on their estimates, at that time, of future revenues, operating income and other factors (such as working capital and capital expenditures). Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both. Given the Satellite and Space Communications segment's financial performance in the first quarter of fiscal 2025, and considering triggering events within this segment prior to the issuance of the first quarter fiscal 2025 financial statements, the Company determined that they were required to perform another quantitative impairment test on an interim basis as of October 31, 2024. Following the same approach as outlined above, ultimately, based on the quantitative evaluations, the Company determined that the carrying value of the Satellite and Space Communications reporting unit exceeded its fair value and recognized a goodwill impairment loss of $79.6 million in the first quarter of fiscal 2025. The goodwill balance was $204.6 million as of July 31, 2025, of which $174.1 million was allocated to the Allerium Reporting Unit (formerly, Terrestrial and Wireless Networks) and $30.5 million was allocated to the Satellite and Space Communications Reporting Unit (“Satellite and Space Communications”). The fair value of Allerium exceeded its carrying value by 7.3% as of the measurement date and, therefore, no impairment was recognized. The fair value of the Satellite and Space Communications reporting unit exceeded its carrying value by 19.9% as of the measurement date and, therefore, no impairment was recognized. F - 3 We identified goodwill for Allerium and Satellite and Space Communications as a critical audit matter because of the significant judgments made by management to estimate the fair value of the reporting unit and the differences between their fair value and carrying value. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to selection of the discount rate and forecasts of future revenue and operating margins. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the discount rate and forecasts of future revenue and operating margins used by management to estimate the fair value of Allerium and Satellite and Space Communications included the following, among others: • We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of the fair value of the reporting units, such as controls related to management’s selection of the discount rate and forecasts of future revenue and operating margins. • We evaluated management’s ability to accurately forecast future revenues and operating margins by comparing actual results to management’s historical forecasts. • We evaluated the reasonableness of management’s revenue forecasts and forecasts of operating margins by comparing the forecasts to: • Historical revenues and operating margins. • Internal communications to management and the Board of Directors. • Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies. • With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) discount rate by: • Testing the source information underlying the determination of the discount rate and the mathematical accuracy of the calculation. • Developing a range of independent estimates and comparing those to the discount rate selected by management. • Assessing the concluded fair value of the sum of the aggregate reporting units relative to the business enterprise as a whole based on market prices as of the impairment assessment date. Debt - Refer to Notes 8 and 9 to the Financial Statements Critical Audit Matter Description The Company has current and long-term debt of $4.1 million and $210.0 million, respectively, as of July 31, 2025. Debt is recorded at initial fair value, which normally reflects the proceeds received by the Company, net of debt issuance costs. Debt is subsequently stated at amortized cost. Debt issuance costs, discounts and premiums are generally amortized to interest expense using the effective interest method, over the term of the debt. Debt issuance costs related to a recognized debt liability are presented as a direct deduction of the carrying amount of that debt, consistent with debt discounts. Debt issuance costs related to the Company's revolving facility are deferred and recorded as an asset. Debt issuance costs paid to lenders related to a recognized debt liability are netted against the proceeds from the related debt while debt issuance costs paid to third parties are expensed as incurred. Debt instruments are also evaluated by the Company for the existence of features that must be separated and accounted for as a derivative. During the year ended July 31, 2025, the Company entered into various debt transactions that involved issuance of new debt and modification of existing debt. We identified the accounting for debt and the related debt transactions, as a critical audit matter because of the complexity involved in (i) evaluating the accounting for the new debt agreements or debt amendments including whether such transactions resulted in a debt modification or extinguishment and the associated impact on debt issuance costs, and (ii) evaluating the existence of and accounting for features embedded in new or amended debt agreements that must be separated and accounted for as a derivative. This required an increased extent of effort due to the potential magnitude and complexity of the debt transactions, including the assistance of our professionals with specialized knowledge and skills in the relevant technical accounting guidance required when performing audit procedures to address these matters. F - 4 How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the accounting for debt and related debt transactions included the following, among others: • We tested the effectiveness of controls over debt including those over the application of relevant technical accounting guidance to complex and significant debt transactions. • We evaluated and tested management's debt modification or extinguishment analysis by: ▪ Testing the accuracy and completeness, including mathematical accuracy, of management's analysis. ▪ Evaluating management's analysis over whether the debt transactions met the conditions to be treated as a debt modification or extinguishment by evaluating it against the relevant technical accounting guidance. • We evaluated the conclusions reached by management on its analysis of the terms in the new or amended debt agreements to evaluate the existence of features in the new or amended debt agreements that must be separated and accounted for as a derivative by: ▪ Reading the terms for all debt agreements to evaluate the existence of features in the new or amended debt agreements that must be separated and accounted for as a derivative. ▪ Evaluating management's analysis identifying the existence of and accounting for the features in the new or amended debt agreements that must be separated and accounted for as a derivative by evaluating it against the relevant technical accounting guidance. Liquidity - Refer to Note 1 to the financial statements Critical Audit Matter Description The Company’s ability to meet future anticipated liquidity needs over the next year beyond the issuance date of the financial statements will largely depend on their ability to execute on their operational strategy, generate positive cash inflows from operations, maximize the Company’s borrowing capacity under the Credit Facility. The Company’s ability to do so may also be affected by general economic, financial and other factors which are beyond their control. Based on the foregoing, over the next year beyond the issuance date of the financial statements, the Company believes that they will: (i) be able to generate sufficient positive cash inflows, maximize their borrowing capacity to continue as a going concern, and (ii) comply with the covenants contained in their credit facilities. To assess the Company's ability to meet obligations as they come due and assess future compliance with debt covenants for at least twelve months from the issuance date of the financial statements, the Company has forecasted future financial results which requires significant judgment and estimation. Auditing management's disclosure regarding liquidity and going concern, specifically the judgments and estimates in the Company's forecasted financial results involved especially subjective judgment and significant audit effort. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company's evaluation and disclosure of liquidity and going concern included the following, among others: • We tested the effectiveness of internal controls over the Company's going concern evaluation, including the inputs, estimates and assumptions used in their forecasted financial results. • We evaluated the Company's forecasted financial results and ability to meet obligations as they come due for at least twelve months from the issuance date of the financial statements by: ▪ Testing management's key assumptions, including ability to achieve forecasted results through executing on the Company's operational strategy. ▪ Obtaining the Company's amended debt agreements and assessing whether the terms were appropriately considered when concluding on the Company's debt covenant compliance. ▪ Comparing the Company's forecasted future financial results to (1) historical results and previous forecasts, (2) internal communications to management and the Board of Directors, (3) historical variances in forecasted balances against actual results including for the first two months of fiscal year 2026 and (4) macroeconomic factors. F - 5 • We evaluated the completeness of the Company's future obligations, including whether such obligations were consistent with evidence obtained in other areas of the audit. /s/ DELOITTE & TOUCHE LLP Jericho, New York November 10, 2025 We have served as the Company’s auditor since 2015. F - 6 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Comtech Telecommunications Corp. Chandler, Arizona Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Comtech Telecommunications Corp. and subsidiaries (the "Company") as of July 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of July 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended July 31, 2025, of the Company and our report dated November 10, 2025, expressed an unqualified opinion on those financial statements and financial statement schedule. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Material Weaknesses 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 company’s annual or interim financial statements will not be prevented or detected on a timely basis. F - 7 The following material weaknesses have been identified and included in management's assessment: The Company did not design and maintain an effective control environment commensurate with their financial reporting requirements based on the criteria in the COSO framework, as the Company lacked a sufficient complement of resources with an appropriate level of knowledge and experience to establish effective process and controls. The control environment material weakness contributed to other material weaknesses within the Company’s system of internal control over financial reporting at the control activity level, where the Company did not design and implement effective control activities, including controls related to revenue, inventory, other assets, contract liabilities, and complex accounting matters and transactions (including debt, convertible preferred stock and related embedded derivatives). An international component of the Allerium segment (the “international component”) had ineffective controls. Specifically, the Company did not design and maintain effective general information technology controls (“GITCs”) and business process controls in the following areas: (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; (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; 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 does not restrict approvers from changing journal entries prior to posting. These deficiencies impact control activities over all financial statement account balances, classes of transactions, and disclosures within the international component. These material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements, and financial statement schedule, as of and for the year ended July 31, 2025, of the Company, and this report does not affect our report on such financial statements. /s/ DELOITTE & TOUCHE LLP Jericho, New York November 10, 2025 F - 8 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Balance Sheets As of July 31, 2025 and 2024 Assets 2025 2024 Current assets: Cash and cash equivalents $ 40,019,000 32,433,000 Accounts receivable, net 144,837,000 195,595,000 Inventories, net 68,955,000 93,136,000 Prepaid expenses and other current assets 16,375,000 15,387,000 Total current assets 270,186,000 336,551,000 Property, plant and equipment, net 43,410,000 47,328,000 Operating lease right-of-use assets, net 30,812,000 31,590,000 Goodwill 204,625,000 284,180,000 Intangibles with finite lives, net 173,105,000 194,828,000 Deferred financing costs, net 1,907,000 3,251,000 Other assets, net 16,790,000 14,706,000 Total assets $ 740,835,000 912,434,000 Liabilities, Convertible Preferred Stock and Stockholders’ Equity Current liabilities: Accounts payable $ 25,965,000 42,477,000 Accrued expenses and other current liabilities 58,423,000 62,245,000 Current portion of credit facility, net 4,050,000 4,050,000 Operating lease liabilities, current 7,250,000 7,869,000 Contract liabilities 62,546,000 65,834,000 Interest payable 15,000 1,072,000 Total current liabilities 158,249,000 183,547,000 Non-current portion of credit facility, net 114,414,000 173,527,000 Non-current portion of subordinated credit facility, net 95,588,000 — Operating lease liabilities, non-current 29,376,000 30,258,000 Income taxes payable, non-current 1,818,000 2,231,000 Deferred tax liability, net 4,619,000 6,193,000 Long-term contract liabilities 21,005,000 21,035,000 Warrant and derivative liabilities 17,849,000 5,254,000 Other liabilities 3,950,000 4,060,000 Total liabilities 446,868,000 426,105,000 Commitments and contingencies (See Note 14) Convertible preferred stock, par value $ 0.10 per share; authorized and issued 178,181 shares at July 31, 2025 (redemption value of $ 204,153,000 , which includes accrued dividends of $ 1,520,000 ) and authorized and issued 171,827 shares at July 31, 2024 (redemption value of $ 180,076,000 , which includes accrued dividends of $ 1,341,000 ) 189,545,000 180,076,000 Stockholders’ equity: Preferred stock, par value $ 0.10 per share; authorized and unissued 1,821,819 and 1,828,173 shares at July 31, 2025 and 2024, respectively — — Common stock, par value $ 0.10 per share; authorized 100,000,000 shares; issued 44,443,626 shares and 43,766,109 shares at July 31, 2025 and 2024, respectively 4,444,000 4,377,000 Additional paid-in capital 548,722,000 640,145,000 Retained (deficit) earnings ( 6,895,000 ) 103,580,000 546,271,000 748,102,000 Less: Treasury stock, at cost ( 15,033,317 shares at July 31, 2025 and 2024) ( 441,849,000 ) ( 441,849,000 ) Total stockholders’ equity 104,422,000 306,253,000 Total liabilities, convertible preferred stock and stockholders’ equity $ 740,835,000 912,434,000 See accompanying notes to consolidated financial statements. F - 9 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Operations Fiscal Years Ended July 31, 2025, 2024 and 2023 2025 2024 2023 Net sales $ 499,528,000 540,403,000 549,994,000 Cost of sales 371,654,000 383,224,000 365,534,000 Gross profit 127,874,000 157,179,000 184,460,000 Expenses: Selling, general and administrative 143,487,000 123,198,000 120,003,000 Research and development 17,408,000 24,077,000 48,631,000 Amortization of intangibles 21,723,000 21,154,000 21,396,000 Impairment of long-lived assets, including goodwill 79,555,000 64,525,000 — CEO transition costs 2,117,000 2,916,000 9,090,000 Proxy solicitation costs 2,682,000 — — Loss on business divestiture — 1,199,000 — 266,972,000 237,069,000 199,120,000 Operating loss ( 139,098,000 ) ( 79,890,000 ) ( 14,660,000 ) Other expenses (income): Interest expense 45,650,000 22,153,000 14,961,000 Interest (income) and other 155,000 678,000 1,226,000 Write-off of deferred financing costs and debt discounts 8,977,000 1,832,000 — Change in fair value of warrants and derivatives ( 38,498,000 ) ( 4,273,000 ) — Loss before benefit from income taxes ( 155,382,000 ) ( 100,280,000 ) ( 30,847,000 ) Benefit from income taxes ( 80,000 ) ( 295,000 ) ( 3,948,000 ) Net loss $ ( 155,302,000 ) ( 99,985,000 ) ( 26,899,000 ) Gain (loss) on extinguishment of convertible preferred stock 51,179,000 ( 19,555,000 ) — Adjustments to reflect redemption value of convertible preferred stock: Dividend on convertible preferred stock ( 100,128,000 ) ( 11,551,000 ) ( 7,007,000 ) Convertible preferred stock issuance costs — ( 4,349,000 ) — Net loss attributable to common stockholders $ ( 204,251,000 ) ( 135,440,000 ) ( 33,906,000 ) Net loss per share: Basic $ ( 6.95 ) ( 4.70 ) ( 1.21 ) Diluted $ ( 6.95 ) ( 4.70 ) ( 1.21 ) Weighted average number of common shares outstanding – basic 29,405,000 28,799,000 28,002,000 Weighted average number of common and common equivalent shares outstanding – diluted 29,405,000 28,799,000 28,002,000 See accompanying notes to consolidated financial statements. F - 10 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity Fiscal Years Ended July 31, 2025, 2024 and 2023 Convertible Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings (Deficit) Treasury Stock Stockholders' Equity Shares Amount Shares Amount Shares Amount Balance as of July 31, 2022 100,000 $ 105,204,000 42,672,827 $ 4,267,000 $ 625,484,000 $ 278,683,000 15,033,317 $ ( 441,849,000 ) $ 466,585,000 Equity-classified stock award compensation — — — — 10,257,000 — — — 10,257,000 CEO transition costs related to equity-classified stock-based awards (See Note 12) — — — — 3,764,000 — — — 3,764,000 Issuance of employee stock purchase plan shares — — 54,617 5,000 429,000 — — — 434,000 Issuance of restricted stock, net of forfeiture — — 93,091 9,000 ( 9,000 ) — — — — Net settlement of stock-based awards — — 275,736 29,000 ( 3,000,000 ) — — — ( 2,971,000 ) Adjustment to reflect redemption value of convertible preferred stock (including accrued dividends) — 7,007,000 — — — ( 7,007,000 ) — — ( 7,007,000 ) Cash dividends declared ($ 0.20 per share) — — — — — ( 5,549,000 ) — — ( 5,549,000 ) Accrual of dividend equivalents, net of reversal ($ 0.20 per share) — — — — — ( 315,000 ) — — ( 315,000 ) Net loss — — — — — ( 26,899,000 ) — — ( 26,899,000 ) Balance as of July 31, 2023 100,000 112,211,000 43,096,271 4,310,000 636,925,000 238,913,000 15,033,317 ( 441,849,000 ) 438,299,000 Equity-classified stock award compensation — — — — 6,096,000 — — — 6,096,000 Issuance of employee stock purchase plan shares — — 52,604 5,000 249,000 — — — 254,000 Issuance of restricted stock, net of forfeiture — — ( 2,686 ) — — — — — — Net settlement of stock-based awards — — 619,920 62,000 ( 3,125,000 ) — — — ( 3,063,000 ) Extinguishment of convertible preferred stock ( 100,000 ) ( 115,721,000 ) — — — ( 19,555,000 ) — — ( 19,555,000 ) Issuance of convertible preferred stock 171,827 172,035,000 — — — — — — — Convertible preferred stock issuance costs — ( 4,349,000 ) — — — — — — — Adjustment to reflect redemption value of convertible preferred stock (including accrued dividends) — 15,900,000 — — — ( 15,900,000 ) — — ( 15,900,000 ) Reversal of dividend equivalents — — — — — 107,000 — — 107,000 Net loss — — — — — ( 99,985,000 ) — — ( 99,985,000 ) Balance as of July 31, 2024 171,827 180,076,000 43,766,109 4,377,000 640,145,000 103,580,000 15,033,317 ( 441,849,000 ) 306,253,000 Equity-classified stock award compensation — — — — 3,120,000 — — — 3,120,000 Issuance of employee stock purchase plan shares — — 53,801 5,000 113,000 — — — 118,000 Issuance of restricted stock, net of forfeiture — — 63,450 6,000 ( 6,000 ) — — — — Net settlement of stock-based awards — — 560,266 56,000 ( 915,000 ) — — — ( 859,000 ) Extinguishment of convertible preferred stock ( 171,827 ) ( 183,489,000 ) — — — 51,179,000 — — 51,179,000 Issuance of convertible preferred stock (at fair value), excluding embedded derivatives 178,181 96,700,000 — — ( 3,221,000 ) — — — ( 3,221,000 ) Adjustment to reflect redemption value of convertible preferred stock (including accrued dividends) — 96,258,000 — — ( 89,879,000 ) ( 6,379,000 ) — — ( 96,258,000 ) Convertible preferred stock amendment fees — — — — ( 650,000 ) — — — ( 650,000 ) Reversal of dividend equivalents — — — — 15,000 27,000 — — 42,000 Net loss — — — — — ( 155,302,000 ) — — ( 155,302,000 ) Balance as of July 31, 2025 178,181 $ 189,545,000 44,443,626 $ 4,444,000 $ 548,722,000 $ ( 6,895,000 ) 15,033,317 $ ( 441,849,000 ) $ 104,422,000 See accompanying notes to consolidated financial statements. F - 11 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows Fiscal Years Ended July 31, 2025, 2024 and 2023 2025 2024 2023 Cash flows from operating activities: Net loss $ ( 155,302,000 ) ( 99,985,000 ) ( 26,899,000 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of property, plant and equipment 11,798,000 12,159,000 11,922,000 Amortization of intangible assets with finite lives 21,723,000 21,154,000 21,396,000 Amortization of stock-based compensation 3,120,000 6,096,000 10,107,000 Amortization of cost to fulfill assets 261,000 960,000 959,000 Paid-in-kind interest under term loan 5,528,000 337,000 — Amortization of deferred financing costs, debt discount and accreted interest related to subordinated credit facility 8,460,000 — — Amortization of deferred financing costs and debt discount related to credit facility 4,968,000 3,985,000 1,852,000 Write-off of deferred financing costs and debt discounts 8,977,000 1,832,000 — Change in fair value of warrants and derivatives ( 38,498,000 ) ( 4,273,000 ) — CEO transition costs related to equity-classified stock-based awards — — 3,764,000 Change in fair value of convertible preferred stock purchase option liability — — — Loss on business divestiture — 1,199,000 — Changes in other liabilities — ( 4,110,000 ) ( 4,133,000 ) Loss on disposal of property, plant and equipment 310,000 889,000 48,000 Provision for allowance for doubtful accounts and contract assets 17,608,000 1,422,000 261,000 Provision for excess and obsolete inventory 16,202,000 2,801,000 4,871,000 Deferred income tax benefit ( 1,700,000 ) ( 2,990,000 ) ( 6,060,000 ) Impairment of long-lived assets, including goodwill 79,555,000 64,525,000 — Changes in assets and liabilities, net of effects of divestitures: Accounts receivable 33,150,000 ( 38,305,000 ) ( 39,709,000 ) Inventories 7,708,000 ( 7,763,000 ) ( 14,885,000 ) Prepaid expenses and other current assets ( 1,161,000 ) 4,282,000 1,656,000 Other assets ( 2,074,000 ) ( 717,000 ) ( 3,356,000 ) Accounts payable ( 15,194,000 ) ( 18,930,000 ) 20,362,000 Accrued expenses and other current liabilities ( 8,964,000 ) 755,000 671,000 Contract liabilities ( 3,318,000 ) 2,755,000 10,194,000 Other liabilities, non-current ( 12,000 ) 14,000 ( 324,000 ) Interest payable ( 1,057,000 ) ( 296,000 ) 1,197,000 Income taxes payable ( 380,000 ) ( 2,291,000 ) 1,673,000 Net cash used in operating activities ( 8,292,000 ) ( 54,495,000 ) ( 4,433,000 ) Cash flows from investing activities: Proceeds from business divestiture, net — 33,225,000 — Purchases of property, plant and equipment ( 8,565,000 ) ( 13,083,000 ) ( 18,311,000 ) Net cash (used in) provided by investing activities ( 8,565,000 ) 20,142,000 ( 18,311,000 ) Cash flows from financing activities: Proceeds from subordinated credit facility 100,000,000 — — Contribution for constructing long-lived assets 2,814,000 — — Proceeds from term loan — 157,140,000 — Repayment of term loan ( 56,746,000 ) ( 48,800,000 ) ( 1,875,000 ) Net (payments) borrowings under revolving loans ( 14,859,000 ) ( 85,300,000 ) 36,900,000 Payment of deferred financing costs and debt discount ( 4,545,000 ) ( 10,294,000 ) ( 3,809,000 ) Proceeds from issuance of convertible preferred stock — 43,200,000 — Payment of convertible preferred stock issuance costs and fees ( 726,000 ) ( 4,272,000 ) — Cash dividends paid on common stock ( 158,000 ) ( 268,000 ) ( 8,661,000 ) Remittance of employees' statutory tax withholding for stock awards ( 1,248,000 ) ( 3,815,000 ) ( 2,869,000 ) Proceeds from issuance of employee stock purchase plan shares 118,000 254,000 470,000 Payment of shelf registration costs ( 207,000 ) ( 20,000 ) ( 101,000 ) Repayment of principal amounts under finance lease and other obligations — — ( 4,000 ) Net cash provided by financing activities 24,443,000 47,825,000 20,051,000 (Continued) F - 12 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Consolidated Statements of Cash Flows (continued) Fiscal Years Ended July 31, 2025, 2024 and 2023 2025 2024 2023 Net increase (decrease) in cash and cash equivalents $ 7,586,000 13,472,000 ( 2,693,000 ) Cash and cash equivalents at beginning of year 32,433,000 18,961,000 21,654,000 Cash and cash equivalents at end of year $ 40,019,000 32,433,000 18,961,000 Supplemental cash flow disclosure Cash paid during the year for: Interest $ 27,724,000 18,097,000 11,914,000 Income taxes, net $ 1,876,000 4,877,000 361,000 Non-cash investing and financing activities: Adjustment to reflect redemption value of convertible preferred stock $ 96,258,000 15,900,000 7,007,000 Term loan amendment fees paid-in-kind $ 5,815,000 — — Accrued term loan amendment fee $ 2,809,000 — — Accrued additions to property, plant and equipment $ 317,000 961,000 993,000 Issuance of restricted stock $ 6,000 — 9,000 Accrued remittance of employees' statutory tax withholdings for fully-vested share units $ 3,000 424,000 1,204,000 Cash dividends declared on common stock but unpaid, including (reversal) accrual of dividend equivalents $ ( 42,000 ) ( 107,000 ) 315,000 Accrued deferred financing costs $ — 1,114,000 — Accrued shelf registration costs $ — 170,000 — Unpaid convertible preferred stock issuance costs $ — 77,000 — See accompanying notes to consolidated financial statements. F - 13 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Summary of Significant Accounting and Reporting Policies (a) Principles of Consolidation The accompanying consolidated financial statements include the accounts of Comtech Telecommunications Corp. and its subsidiaries ("Comtech," "we," "us," or "our"), all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation. (b) Nature of Business We design, produce and market innovative products, systems and services for advanced communications solutions. We conduct our business through two reportable operating segments: Satellite and Space Communications and Allerium (formerly, Terrestrial and Wireless Networks). Our business is highly competitive and characterized by rapid technological change. Our growth and financial position depends on our ability to keep pace with such changes and developments and to respond to the sophisticated requirements of an increasing variety of methods and devices used to transmit and receive secure wireless communications, among other things. Many of our competitors are substantially larger, and have significantly greater financial, marketing and operating resources and broader product lines than our own. A significant technological or sales breakthrough by others, including smaller competitors or new companies, could have a material adverse effect on our business. In addition, certain of our customers have technological capabilities in our product areas and could choose to replace our products with their own. International sales expose us to certain risks, including barriers to trade, fluctuations in foreign currency exchange rates (which may make our products less price competitive), political and economic instability, availability of suitable export financing, export license requirements, tariff regulations, and other United States ("U.S.") and foreign regulations that may apply to the export of our products, as well as the generally greater difficulties of doing business abroad. We attempt to reduce the risk of doing business in foreign countries by seeking contracts denominated in U.S. dollars, advance or milestone payments, credit insurance and irrevocable letters of credit in our favor. (c) Liquidity In fiscal 2025, 2024 and 2023, we reported operating losses of $ 139,098,000 , $ 79,890,000 and $ 14,660,000 , respectively, and net cash used in operating activities of $ 8,292,000 , $ 54,495,000 and $ 4,433,000 , respectively. At July 31, 2025 and November 7, 2025 (the date closest to the issuance date), total outstanding borrowings under our Credit Facility was $ 133,901,000 and $ 135,000,000 , respectively. Of such amounts, $ 17,641,000 was drawn on the Revolver Loan at both dates. At July 31, 2025, October 31, 2025 and November 7, 2025, our available sources of liquidity totaled $ 46,972,000 , $ 50,988,000 and $ 50,284,000 , respectively, which includes qualified cash and cash equivalents of $ 37,363,000 , $ 41,379,000 and $ 40,675,000 , respectively, and the remaining available portion of the Revolver Loan of $ 9,609,000 as of each such date. 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. 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. F - 14 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued 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: • 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; • 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; • Developed and launched new products and services around differentiated technology and solutions; • Improved operating profitability by entering into, or renegotiating, sales or service contracts with more favorable pricing and payment terms; • Reduced our cost structure to better align operating expenses with revenue expectations, including facility and headcount rationalization and optimization; • 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; and • Through a series of capital injections, aggregating $ 100,000,000 in the form of subordinated debt, and amendments to our credit facilities: (i) significantly reduced senior debt and related cash interest payments due under our Credit Facility; (ii) increased the available portion of our Revolver Loan; (iii) deferred the scheduled repayment of a portion of the Term Loan and the scheduled payment of certain fees due under the Credit Facility; (iv) suspended testing of our Net Leverage Ratio, Fixed Charge Coverage Ratio and Minimum EBITDA covenants under our credit facilities until January 31, 2027; and (v) reduced the minimum quarterly average liquidity requirement under our credit facilities. 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. Our ability to do so may also be affected by general economic, financial and other factors which are beyond our control. Based on the foregoing, over the next year beyond the issuance date, we believe that we will: (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. F - 15 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (d) Revenue Recognition In accordance with FASB ASC 606 - " Revenue from Contracts with Customers " ("ASC 606"), we record revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. Under ASC 606, we follow a five-step model to: (1) identify the contract with our customer; (2) identify our performance obligations in our contract; (3) determine the transaction price for our contract; (4) allocate the transaction price to our performance obligations; and (5) recognize revenue using one of the following two methods: • Over time - We recognize revenue using the over time method when there is a continuous transfer of control to the customer over the contractual period of performance. This generally occurs when we enter into a long-term contract relating to the design, development or manufacture of complex equipment or technology platforms to a buyer’s specification (or to provide services related to the performance of such contracts) for which we have determined there is no alternative use, as defined in ASC 606. Continuous transfer of control is typically supported by contract clauses which allow our customers to unilaterally terminate a contract for convenience, pay for costs incurred plus a reasonable profit and take control of work-in-process. Revenue recognized over time is generally based on the extent of progress toward completion of the related performance obligations. The selection of the method to measure progress requires judgment and is based on the nature of the products or services provided. In certain instances, typically for firm fixed-price contracts, we use the cost-to-cost measure because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure, the extent of progress toward completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion, including warranty costs. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Costs to fulfill generally include direct labor, materials, subcontractor costs, other direct costs and an allocation of indirect costs. When these contracts are modified, the additional goods or services are generally not distinct from those already provided. As a result, these modifications form part of an existing contract and we must update the transaction price and our measure of progress for the single performance obligation and recognize a cumulative catch-up to revenue and gross profits. A cost-to-cost measure of progress is principally used to account for contracts in our Satellite and Space Communications segment and, to a lesser extent, certain location-based and messaging infrastructure contracts in our public safety and location technologies product lines within our Allerium segment. For over time contracts using a cost-to-cost measure of progress, we have an estimate at completion ("EAC") process in which management reviews the progress and execution of our performance obligations and calculates an estimated contract profit based on total estimated contract revenue and cost. Since certain contracts extend over a long period of time, the impact of revisions in revenue and/or cost estimates during the progress of work may impact current period earnings through a cumulative adjustment. Additionally, if the EAC process indicates a loss, a provision is made for the total anticipated loss in the period that it becomes evident. Contract revenue and cost estimates for significant contracts are generally reviewed and reassessed at least quarterly. For service-based contracts in our Allerium segment, we also recognize revenue over time. These services are typically recognized as a series of services performed over the contract term using the straight-line method, or based on our customers’ actual usage of the networks and platforms which we provide. • Point in time - When a performance obligation is not satisfied over time, we must record revenue using the point in time accounting method which generally results in revenue being recognized upon shipment or delivery of a promised good or service to a customer. This generally occurs when we enter into short term contracts or purchase orders where items are provided to customers with relatively quick turn-around times. Modifications to such contracts and/or purchase orders, which typically provide for additional quantities or services, are accounted for as a new contract because the pricing for these additional quantities or services are based on standalone selling prices. F - 16 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Point in time accounting is principally applied to contracts in our satellite ground infrastructure product line (which includes satellite modems and traveling wave tube amplifiers). The contracts related to these product lines do not meet the requirements for over time revenue recognition because our customers cannot utilize the equipment for its intended purpose during any phase of our manufacturing process; customers do not simultaneously receive and/or consume the benefits provided by our performance; customers do not control the asset (i.e., prior to delivery, customers cannot direct the use of the asset, sell or exchange the equipment, etc.); and, although many of our contracts have termination for convenience clauses and/or an enforceable right to payment for performance completed to date, our performance creates an asset with an alternative use through the point of delivery. In determining that our equipment has alternative use, we considered the underlying manufacturing process for our products. In the early phases of manufacturing, raw materials and work in process (including subassemblies) consist of common parts that are highly fungible among many different types of products and customer applications. Finished products are either configured to our standard configuration or based on our customers’ specifications. Finished products, whether built to our standard specification or to a customers’ specification, can be sold to a variety of customers and across many different end use applications with minimal rework, if needed, and without incurring a significant economic loss. When identifying a contract with our customer, at inception, we consider approvals and commitments from both parties, if the rights of the parties are identified, if the payment terms are identified, if it has commercial substance, the transaction price to which we are entitled and if collectability is probable. When identifying performance obligations, we consider whether there are multiple promises and how to account for them. In our contracts, multiple promises are separated if they are distinct, both individually and in the context of the contract. If multiple promises in a contract are highly interrelated or comprise a series of distinct services performed over time, they are combined into a single performance obligation. In some cases, we may also provide the customer with an additional service-type warranty, which we recognize as a separate performance obligation. Service-type warranties do not represent a significant portion of our consolidated net sales. When service-type warranties represent a separate performance obligation, the revenue is deferred and recognized ratably over the extended warranty period. Our contracts, from time-to-time, may also include options for additional goods and services. To date, these options have not represented material rights to the customer as the pricing for them reflects standalone selling prices. As a result, we do not consider options we offer to be performance obligations for which we must allocate a portion of the transaction price. In many cases, we provide assurance-type warranty coverage for some of our products for a period of at least one year from the date of delivery. When identifying the transaction price, we typically utilize the contract's stated price as a starting point. The transaction price in certain arrangements may include estimated amounts of variable consideration, including award fees, incentive fees or other provisions that can either increase or decrease the transaction price. We estimate variable consideration as the amount to which we expect to be entitled, and we include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the estimation uncertainty is resolved. The estimation of this variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (e.g., historical, current and forecasted) that is reasonably available to us. When allocating the contract’s transaction price, we consider each distinct performance obligation. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions, including geographic or regional specific factors, competitive positioning, internal costs, profit objectives and internally approved pricing guidelines related to the performance obligations. F - 17 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Most of our contracts with customers are denominated in U.S. dollars and typically are either firm fixed-price or cost reimbursable type contracts (including fixed-fee, incentive-fee and time-and-material type contracts). In almost all of our contracts with customers, we are the principal in the arrangement and report revenue on a gross basis. Transaction prices for contracts with U.S. domestic and international customers are usually based on specific negotiations with each customer and in the case of the U.S. government, sometimes based on estimated or actual costs of providing the goods or services in accordance with applicable regulations. Sales by geography and customer type, as a percentage of consolidated net sales, are as follows: Fiscal Years Ended July 31, 2025 2024 2023 United States U.S. government 30.3 % 33.7 % 31.3 % Domestic 48.7 % 44.8 % 44.7 % Total United States 79.0 % 78.5 % 76.0 % International 21.0 % 21.5 % 24.0 % Total 100.0 % 100.0 % 100.0 % Sales to U.S. government customers include sales to the U.S. Department of Defense ("DoD"), intelligence and civilian agencies, as well as sales directly to or through prime contractors. Domestic sales include sales to commercial customers, as well as to U.S. state and local governments. For fiscal 2025 and 2024, except for the U.S. government, there were no customers that represented more than 10% of consolidated net sales. For fiscal 2023, i ncluded in domestic sales are sales to a top tier mobile network operator, which were 10.6 % of consolidated net sales. International sales for fiscal 2025, 2024 and 2023 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $ 105,095,000 , $ 115,924,000 and $ 132,117,000 , respectively. Except for the U.S., no individual country (including sales to U.S. domestic companies for inclusion in products that are sold to a foreign country) represented more than 10.0% of consolidated net sales for fiscal 2025, 2024 and 2023. The following tables summarize our disaggregation of revenue consistent with information reviewed by our Chief Operating Decision Maker ("CODM") for the fiscal years ended July 31, 2025, 2024 and 2023. We believe these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors which impact our business. See Note (13) - "Segment Information " for more information related to our segments. Fiscal Year Ended July 31, 2025 Satellite and Space Communications Allerium Total Geographical region and customer type U.S. government $ 148,411,000 2,910,000 $ 151,321,000 Domestic 35,956,000 207,156,000 243,112,000 Total United States 184,367,000 210,066,000 394,433,000 International 84,898,000 20,197,000 105,095,000 Total $ 269,265,000 230,263,000 $ 499,528,000 Contract type Firm fixed-price $ 213,167,000 230,263,000 $ 443,430,000 Cost reimbursable 56,098,000 — 56,098,000 Total $ 269,265,000 230,263,000 $ 499,528,000 Transfer of control Point in time $ 147,859,000 1,886,000 $ 149,745,000 Over time 121,406,000 228,377,000 349,783,000 Total $ 269,265,000 230,263,000 $ 499,528,000 F - 18 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Fiscal Year Ended July 31, 2024 Satellite and Space Communications Allerium Total Geographical region and customer type U.S. government $ 179,816,000 2,504,000 $ 182,320,000 Domestic 48,793,000 193,366,000 242,159,000 Total United States 228,609,000 195,870,000 424,479,000 International 95,460,000 20,464,000 115,924,000 Total $ 324,069,000 216,334,000 $ 540,403,000 Contract type Firm fixed-price $ 275,428,000 216,334,000 $ 491,762,000 Cost reimbursable 48,641,000 — 48,641,000 Total $ 324,069,000 216,334,000 $ 540,403,000 Transfer of control Point in time $ 135,070,000 1,578,000 $ 136,648,000 Over time 188,999,000 214,756,000 403,755,000 Total $ 324,069,000 216,334,000 $ 540,403,000 Fiscal Year Ended July 31, 2023 Satellite and Space Communications Allerium Total Geographical region and customer type U.S. government $ 168,411,000 3,567,000 $ 171,978,000 Domestic 56,568,000 189,331,000 245,899,000 Total United States 224,979,000 192,898,000 417,877,000 International 112,777,000 19,340,000 132,117,000 Total $ 337,756,000 212,238,000 $ 549,994,000 Contract type Firm fixed-price $ 288,482,000 212,238,000 $ 500,720,000 Cost reimbursable 49,274,000 — 49,274,000 Total $ 337,756,000 212,238,000 $ 549,994,000 Transfer of control Point in time $ 197,808,000 2,968,000 $ 200,776,000 Over time 139,948,000 209,270,000 349,218,000 Total $ 337,756,000 212,238,000 $ 549,994,000 F - 19 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our Consolidated Balance Sheets . Under typical payment terms for our contracts accounted for over time, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly) or upon achievement of contractual milestones. For certain contracts with provisions that are intended to protect customers in the event we do not satisfy our performance obligations, billings occur subsequent to revenue recognition, resulting in unbilled receivables. Under ASC 606, unbilled receivables constitute contract assets. Except for certain unbilled receivables (see Note (4) - "Accounts Receivable" ), there were no material impairment losses recognized on contract assets during the fiscal years ended July 31, 2025, 2024 and 2023. On large long-term contracts, and for contracts with international customers that do not do business with us regularly, payment terms typically require advanced payments and deposits. Under ASC 606, payments received from customers in excess of revenue recognized to-date results in a contract liability. These contract liabilities are not considered to represent a significant financing component of the contract because we believe these cash advances and deposits are generally used to meet working capital demands which can be higher in the earlier stages of a contract. Also, advanced payments and deposits provide us with some measure of assurance that the customer will perform on its obligations under the contract. Under the typical payment terms for our contracts accounted for at a point in time, costs are accumulated in inventory until the time of billing, which generally coincides with revenue recognition. Of the current contract liability balance of $ 65,834,000 at July 31, 2024 and $ 66,351,000 at July 31, 2023, $ 54,686,000 and $ 48,902,000 was recognized as revenue during fiscal years 2025 and 2024, respectively. We recognize the incremental costs to obtain or fulfill a contract as an expense when incurred if the amortization period of the asset is one year or less; otherwise, such costs are capitalized and amortized over the estimated life of the contract. During fiscal year 2025 and 2024, incremental costs to obtain or fulfill contracts with an amortization period greater than one year were $ 2,887,000 and $ 2,863,000 , respectively. Commissions payable to our internal sales and marketing employees or contractors that are incremental to the acquisition of long-term customer contracts are capitalized and amortized consistent with the pattern of revenue recognition through cost of sales on our Consolidated Statements of Operations . Commissions payable that are not incremental to the acquisition of long-term contracts are expensed as incurred in selling, general and administrative expenses on our Consolidated Statements of Operations . As for commissions payable to our third-party sales representatives related to large long-term contracts, we consider these types of commissions both direct and incremental costs to obtain and fulfill such contracts. Therefore, such commissions are included in total estimated costs at completion for such contracts and expensed over time through cost of sales on our Consolidated Statements of Operations . Remaining performance obligations represent the transaction price of firm orders for which work has not been performed as of the end of a fiscal period. Remaining performance obligations, which we refer to as backlog, exclude unexercised contract options and potential orders under indefinite delivery / indefinite quantity ("IDIQ") contracts. As of July 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 672,053,000 (which represents the amount of our consolidated funded backlog). We estimate that a substantial portion of our remaining performance obligations at July 31, 2025 will be completed and recognized as revenue during the next twenty-four month period, with the rest thereafter. During fiscal 2025, revenue recognized from performance obligations satisfied, or partially satisfied, in previous periods (for example due to changes in the transaction price) was not material. (e) Cash and Cash Equivalents Our cash equivalents are short-term, highly liquid investments that are both readily convertible to known amounts of cash and have insignificant risk of change in value as a result of changes in interest rates. Our cash and cash equivalents, as of July 31, 2025 and 2024, amounted to $ 40,019,000 and $ 32,433,000 , respectively, and primarily consist of bank deposits and money market deposit accounts insured by the Federal Deposit Insurance Corporation. Cash equivalents are carried at cost, which approximates fair value. At July 31, 2025, cash and cash equivalents includes $ 91,000 of cash deposited as collateral in connection with outstanding standby letters of credit to guarantee future performance on certain customer contracts. F - 20 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (f) Inventories Our inventories are stated at the lower of cost and net realizable value, the latter of which is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Our inventories are reduced to their estimated net realizable value by a charge to cost of sales in the period such excess costs are determined. Our inventories are principally recorded using either average or standard costing methods. Work-in-process (including our contracts-in-progress) and finished goods inventory reflect all accumulated production costs, which are comprised of direct production costs and overhead, and is reduced by amounts recorded in cost of sales as the related revenue is recognized. Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred and are not included in our cost of sales or work-in-process (including our contracts-in-progress) and finished goods inventory. (g) Long-Lived Assets Our machinery and equipment, which are recorded at cost, are depreciated or amortized over their estimated useful lives ( three to eight years) under the straight-line method. Capitalized internal use software costs are amortized once the software is ready for its intended use under the straight-line method over the estimated useful life of the software, which is generally three years. Capitalized internal use software is considered ready for its intended use after all substantial testing is completed. Capitalized values of properties and leasehold improvements under leases are amortized over the life of the lease or the estimated life of the asset, whichever is less. Goodwill represents the excess cost of a business acquisition over the fair value of the net assets acquired. In accordance with FASB ASC 350 "Intangibles - Goodwill and Other" goodwill is not amortized. We periodically, at least on an annual basis in the first quarter of each fiscal year, review goodwill, considering factors such as projected cash flows and revenue and earnings multiples, to determine whether the carrying value of the goodwill is impaired. If we fail the quantitative assessment of goodwill impairment, we would be required to recognize an impairment loss equal to the amount that a reporting unit's carrying value exceeded its fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We define our reporting units to be the same as our operating segments. We performed our annual goodwill impairment assessment for fiscal 2026 on August 1, 2025 (the first day of our fiscal 2026). See Note (15) - " Long-lived Assets, including Goodwill " for additional information. Unless there are future indicators that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, such as a significant adverse change in our future financial performance, our next impairment assessment for goodwill will be performed and completed in the first quarter of fiscal 2027. Any impairment charges that we may record in the future could be material to our results of operations and financial condition. We assess the recoverability of the carrying value of our other 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. We evaluate the recoverability of such assets based upon the expectations of undiscounted cash flows from such assets. If the sum of the expected future undiscounted cash flows were less than the carrying amount of the asset, a loss would be recognized for the difference between the fair value and the carrying amount. (h) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. F - 21 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued In assessing the need for a valuation allowance for deferred tax assets, we consider all positive and negative evidence, including past financial performance, timing and judgments about future taxable income and tax planning strategies. Valuation allowances are established, when necessary, to reduce net deferred tax assets to the amount "more-likely-than-not" expected to be realized. We measure and account for uncertain tax positions taken or expected to be taken in income tax returns in accordance with the provisions of FASB ASC 740-10-25 " Income Taxes, " which prescribes a two-step evaluation process for tax positions. The first step is recognition based on a determination of whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The second step is to measure a tax position that meets the more-likely-than-not threshold. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements. Our policy is to recognize potential interest and penalties related to uncertain tax positions in income tax expense. (i) Earnings Per Share Our basic earnings per share ("EPS") is computed based on the weighted average number of common shares (including vested but unissued stock units, share units, performance shares and restricted stock units ("RSUs")) outstanding during each respective period. Our diluted EPS reflects the dilution from potential common stock issuable pursuant to the exercise of equity-classified stock-based awards, warrants issued to our lenders in connection with entering the Credit Facility, settlement of escrow arrangements related to our acquisition of UHP Networks Inc. ("UHP") and the assumed conversion of Convertible Preferred Stock, if dilutive, outstanding during each respective period. The warrants contingently issuable to our preferred shareholders upon a repurchase of the respective series of Convertible Preferred Stock are not reflected in diluted EPS. Pursuant to FASB ASC 260 " Earnings Per Share, " shares whose issuance is contingent upon the satisfaction of certain conditions are included in diluted EPS based on the number of shares, if any, that would be issuable if the end of the reporting period were the end of the contingency period. When calculating our diluted earnings per share, we consider the amount an employee must pay upon assumed exercise of stock-based awards, the amount of stock-based compensation cost attributed to future services and not yet recognized and the amount a holder must pay upon assumed exercise of warrants. There were no repurchases of our common stock during the fiscal years ended July 31, 2025, 2024 and 2023. See Note (18) - " Stockholders’ Equity " for more information. Weighted average stock options, RSUs and restricted stock outstanding of 1,161,000 , 1,050,000 and 972,000 shares for fiscal 2025, 2024 and 2023, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive. Our EPS calculations exclude 583,000 , 534,000 and 385,000 weighted average performance shares outstanding for fiscal 2025, 2024 and 2023, respectively, as the performance conditions have not yet been satisfied. However, the numerator for EPS calculations for each respective period is reduced by the compensation expense related to these awards. Weighted average common shares related to warrants issued in connection with entering the Credit Facility on June 17, 2024 of 1,389,000 and 174,000 for fiscal 2025 and 2024, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive. Weighted average common shares of 98,000 and 260,000 related to our acquisition of UHP in March 2021 were not included in our diluted EPS calculation for fiscal 2024 and 2023, respectively, because their effect would have been anti-dilutive. As of July 31, 2024, all of the shares held in escrow related to the UHP acquisition were settled. Weighted average common shares of 24,340,000 , 13,581,000 and 4,570,000 underlying the assumed conversion of Convertible Preferred Stock, on an if-converted basis, were not included in our diluted EPS calculation for fiscal 2025, 2024 and 2023, respectively, because their effect would have been anti-dilutive. As a result, the numerator for our basic and diluted EPS calculation for fiscal 2025, 2024 and 2023 is the respective net loss attributable to common stockholders. F - 22 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations: Fiscal Years Ended July 31, 2025 2024 2023 Numerator: Net loss $ ( 155,302,000 ) ( 99,985,000 ) ( 26,899,000 ) Gain (loss) on extinguishment of convertible preferred stock 51,179,000 ( 19,555,000 ) — Convertible preferred stock issuance costs — ( 4,349,000 ) — Dividend on convertible preferred stock ( 100,128,000 ) ( 11,551,000 ) ( 7,007,000 ) Net loss attributable to common stockholders $ ( 204,251,000 ) ( 135,440,000 ) ( 33,906,000 ) Denominator: Denominator for basic and diluted calculation 29,405,000 28,799,000 28,002,000 As discussed further in Note (17) - " Convertible Preferred Stock ," such shares of preferred stock represent a "participating security" as defined in ASC 260. As a result, our EPS calculations for fiscal 2025, 2024 and 2023 were based on the two-class method. Given the net loss attributable to common stockholders for fiscal 2025, 2024 and 2023, there was no impact of applying the two-class method to our reported basic or diluted earnings per common share. (j) Fair Value Measurements and Financial Instruments Using the fair value hierarchy described in FASB ASC 820 " Fair Value Measurements and Disclosures," we valued our cash and cash equivalents using Level 1 inputs that were based on quoted market prices. We believe that the carrying amounts of our other current financial assets (such as accounts receivable) and other current liabilities (including accounts payable, accrued expenses and the current portion of long-term debt) approximate their fair values due to their short-term maturities. Additionally, the carrying amount of the non-current portion of our Credit Facility approximated its fair value due to the variable interest rates and pricing grid related to such debt. Level 3 inputs are unobservable inputs developed using the best available information under the circumstances. Level 3 inputs are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect our assumptions related to how market participants would use similar inputs to price the asset or liability. As further discussed in Note (8) - " Credit Facility," we used Level 3 inputs to value the warrants issued to lenders in connection with our Credit Facility. As of July 31, 2025, we determined the fair value of such warrants based on the Black-Scholes option pricing model using the following estimates: exercise price of $ 0.10 , risk free rate of 4.0 %, volatility of 65.0 %, and expected life of 5.9 years. We also used Level 3 inputs to value the combined embedded derivative liability associated with our Credit Facility. As of July 31, 2025, we determined the fair value of the combined embedded derivative liability using a with-and-without scenario-based discounted cash flow method, which reflected our estimates regarding the probability and timing of events that could result in additional payments of interest and/or fees to such lenders as stated in our Credit Facility. As further discussed in Note (9) - "Subordinated Credit Facility," we used Level 3 inputs to value the make-whole amount and combined embedded derivative liability associated with our Subordinated Credit Facility. As of July 31, 2025, we determined the fair value of the combined embedded derivative liability using a with-and-without scenario-based discounted cash flow method, which reflected our estimates regarding the probability and timing of events that could result in additional payments of interest and/or accelerated payments of principal and make-whole amounts to such lenders as stated in our Subordinated Credit Facility. The calculated fair value of the debt outstanding under the Subordinated Credit Facility approximated its carry value as of July 31, 2025. F - 23 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued As further discussed in Note (17) - " Convertible Preferred Stock," we used Level 3 inputs to value the warrants contingently issuable and combined embedded derivative liability associated with our Convertible Preferred Stock. As of July 31, 2025, we determined the fair value of Convertible Preferred Stock warrants using the Monte Carlo simulation model with the following assumptions: expected life of 6.0 years; risk free rate of 4.0 %; expected volatility of 65.0 %; and dividend yield of 0 %. As of July 31, 2025, we determined the fair value of the combined embedded derivative liability using a with-and-without scenario-based discounted cash flow method, which reflected our estimates regarding the probability and timing of events that could result in additional and/or accelerated payments to our preferred shareholders, or the conversion of the Convertible Preferred Stock into common stock, pursuant to the terms of our Convertible Preferred Stock. As of July 31, 2025 and 2024, other than the financial instruments discussed above, we had no other significant assets or liabilities included in our Consolidated Balance Sheets recorded at fair value, as such term is defined by FASB ASC 820. (k) Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements and the reported amounts of net sales and expenses during the reported period. We make significant estimates in many areas of our accounting, including but not limited to the following: liquidity and going concern assessments, revenue recognition related to contracts accounted for over time, stock-based compensation, recoverability of long-lived assets (including goodwill), provision for excess and obsolete inventories, allowance for doubtful accounts, warranty obligations and income taxes (including valuation allowances related to deferred tax assets). Actual results may differ from those estimates. (l) Comprehensive Income In accordance with FASB ASC 220 " Comprehensive Income ," we report all changes in equity during a period, except those resulting from investment by owners and distribution to owners, for the period in which they are recognized. Comprehensive income is the total of net income and all other non-owner changes in equity (or other comprehensive income) such as unrealized gains/losses on securities classified as available-for-sale, foreign currency translation adjustments and minimum pension liability adjustments. Comprehensive income (loss) was the same as our net income (loss) in fiscal 2025, 2024 and 2023. (m) Reclassifications Certain reclassifications have been made to previously reported consolidated financial statements to conform to the fiscal 2025 presentation. (n) Adoption of Accounting Standards and Updates We are required to prepare our consolidated financial statements in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") which is the source for all authoritative U.S. generally accepted accounting principles, which are commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs"). During fiscal 2025, we adopted: • FASB ASU No. 2023-07, which among other things, requires the disclosure of significant segment expenses, by reportable segment, regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss. Our adoption of this ASU impacted our disclosures only through the retrospective application to all prior periods presented. See Note (13) - "Segment Information"  for more information. F - 24 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued During fiscal 2025, the following FASB ASUs have been issued and incorporated into the FASB ASC and have not yet been adopted by us as of July 31, 2025: • FASB ASU No. 2023-09, which among other things, enhances and establishes new income tax disclosure requirements, in addition to modifying and eliminating certain existing requirements. Most notably, this ASU requires greater disaggregation of information in the effective tax rate reconciliation, including the inclusion of both percentages and amounts, specific categories and additional information for reconciling items meeting a quantitative threshold defined by the guidance. Additionally, disclosures of income taxes paid and income tax expense must be disaggregated by federal, state and foreign taxes, with income taxes paid further disaggregated for individual jurisdictions that represent 5 percent or more of total income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024 (our fiscal year beginning on August 1, 2025), with early adoption permitted. We are evaluating the impact of this ASU on our consolidated financial statements and disclosures. • FASB ASU No. 2024-03, which among other things, requires more detailed disclosures of certain categories of expenses (including purchases of inventory, employee compensation, depreciation, and amortization) that are components of existing expense captions presented on the face of the income statement. All entities are required to apply the guidance prospectively with an option for retrospective application. This ASU is effective for annual reporting periods beginning after December 15, 2026 (our fiscal year beginning on August 1, 2027), and interim periods within annual reporting periods beginning after December 15, 2027 (our interim period beginning on August 1, 2028), with early adoption permitted, as clarified in ASU No. 2025-01 issued January 6, 2025. The adoption of this ASU will impact our disclosures only and we do not expect it to have a material impact on our Consolidated Financial Statements. • FASB ASU No. 2025-05, which among other things, provides all entities with a practical expedient that allows for the assumption that current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating credit losses for such assets. This ASU is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods (our fiscal year beginning on August 1, 2026), with early adoption permitted. We are evaluating the impact of this ASU on our consolidated financial statements and disclosures. • FASB ASU 2025-06, which among other things, amends the criteria for recognizing and capitalizing costs related to internal-use software by replacing the previous project stage model with a principles-based framework. Under this ASU, costs are capitalized when management has authorized and committed to funding a software project, and it is probable that the project will be completed and the software used as intended. This ASU is effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual periods (our fiscal year beginning on August 1, 2028), on either a prospective, retrospective or modified prospective transition method. We are evaluating the impact of this ASU on our consolidated financial statements and disclosures (2) CEO Transition Costs and Related CEO transition-related costs are expensed in our Unallocated segment and relate to the following: Fiscal 2025 - On October 28, 2024, the Board appointed John Ratigan as our President and Chief Executive Officer ("CEO"). On October 31, 2024, Kenneth H. Traub was appointed as an independent member of the Board. On November 26, 2024, Mr. Traub was appointed Executive Chairman and Mark Quinlan resigned from his position as Chairman while remaining as a member of the Board. Also on November 26, 2024, Lieutenant General (Retired) Bruce T. Crawford, was appointed Lead Independent Director. On January 13, 2025, the Board appointed Mr. Traub as President and CEO in addition to his current role as Chairman, replacing Mr. Ratigan effective immediately. Pursuant to his separation agreement and release, Mr. Ratigan resigned from his position as President and CEO and as a member of the Board. CEO transition costs of $ 2,117,000 incurred during fiscal 2025 consisted of net legal expenses related to a former CEO, severance related to Mr. Ratigan, third party CEO search firm expenses and expense related to Mr. Traub's sign-on bonus. F - 25 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Fiscal 2024 - On March 12, 2024, Ken Peterman, our former Chairman of the Board, President and CEO, was terminated for cause and the Board of Directors appointed Mr. Ratigan as interim CEO and Mr. Quinlan as Chairman of the Board of Directors. Prior to the changes, Mr. Ratigan served as our Chief Corporate Development Officer and Mr. Quinlan served as a member of our Board of Directors. Upon termination of his employment, Mr. Peterman was deemed to have resigned from his position as Chairman of the Board of Directors and as a director pursuant to his employment contract. CEO transition costs of $ 2,916,000 incurred during fiscal 2024 primarily consisted of legal expenses. Fiscal 2023 - On August 9, 2022, our Board of Directors appointed Mr. Peterman as our Chairman of the Board, President and CEO. Transition costs related to his predecessor, our former President and CEO, Michael D. Porcelain, pursuant to his separation agreement with the Company, were $ 7,424,000 , of which $ 3,764,000 related to the acceleration of unamortized stock based compensation, with the remaining $ 3,660,000 related to his severance payments and benefits upon termination of employment. The cash portion of the transition costs of $ 3,660,000 was paid to Mr. Porcelain in October 2022. Also, in connection with Mr. Peterman entering into an employment agreement with the Company, effective as of August 9, 2022, we incurred a $ 1,000,000 expense related to a cash sign-on bonus, which was paid to Mr. Peterman in January 2023. (3) Business Divestitures PST Divestiture - On November 7, 2023, we completed the divestiture of our solid-state RF microwave high power amplifiers and control components product line, which was included in our Satellite and Space Communications segment, pursuant to a stock sale agreement entered into on October 11, 2023 (the "PST Divestiture"). The final sales price for this divestiture was $ 35,459,000 of which we received $ 33,277,000 in cash proceeds, net of transaction costs. Based on the carrying amount of net assets related to the PST Divestiture, we recognized a GAAP pre-tax loss of $ 1,199,000 in fiscal 2024. CGC Divestiture - In fiscal 2024, we performed an evaluation of our Satellite and Space Communications segment's product portfolio to identify opportunities to further divest, separate and/or rationalize non-core businesses or facilities. Consistent with this effort, in our fourth quarter of fiscal 2024, we made the decision to exit our operations in Basingstoke, United Kingdom (the "CGC Divestiture"). During fiscal 2025, we reversed $ 4,157,000 of net sales and $ 1,403,000 of related accrued contract costs, respectively, to account for the termination of various revenue contracts with customers, all of which was recorded in the first quarter of fiscal 2025. During fiscal 2025, we expensed $ 3,485,000 in restructuring charges related to the wind-down of such operations. In addition to such restructuring charges, we also recorded a $ 2,948,000 write-down related to inventory no longer considered salable in the first quarter of fiscal 2025. While anticipated to improve our future profitability, actions related to the CGC Divestiture may result in additional near-term restructuring charges. (4) Accounts Receivable Accounts receivable consists of the following at July 31, 2025 and 2024: 2025 2024 Receivables from commercial and international customers $ 57,713,000 53,108,000 Unbilled receivables from commercial and international customers 69,987,000 72,540,000 Receivables from the U.S. government and its agencies 15,610,000 20,682,000 Unbilled receivables from the U.S. government and its agencies 20,683,000 51,197,000 Total accounts receivable 163,993,000 197,527,000 Less allowance for doubtful accounts 19,156,000 1,932,000 Accounts receivable, net $ 144,837,000 195,595,000 Unbilled receivables as of July 31, 2025 relate to contracts-in-progress for which revenue has been recognized, but for which we have not yet earned the right to bill the customer for work performed to-date. Under ASC 606, unbilled receivables constitute contract assets. F - 26 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued During the fiscal year ended July 31, 2025, we reversed cumulative revenues and associated contract receivables due to changes in estimates of revenue and costs for certain contracts. With respect to such changes in estimates, we: • determined that an unbilled receivable contract asset in the amount of $ 17,685,000 , related to an international customer and reseller of our troposcatter technologies, was at risk of not being invoiced or collected, principally due to a change in our customer's near-term ability to secure certain opportunities in its pipeline. As a result, and considering that we offered a price concession (i.e., variable consideration) to our customer in the first quarter of fiscal 2025, we reversed $ 1,551,000 of cumulative revenue and associated unbilled receivable contract assets related to this transaction, and recorded a non-cash charge to fully reserve for the remaining $ 16,134,000 unbilled receivable contract asset within our allowance for doubtful accounts; • reversed $ 4,157,000 of cumulative revenue and $ 3,003,000 of associated unbilled receivable contract assets as a result of terminating certain customer contracts during the first quarter of fiscal 2025 in connection with the CGC Divestiture; • reversed $ 3,030,000 of cumulative revenue and $ 2,324,000 of associated unbilled receivable contract assets due to an increase in our estimates of engineering activities, budgeted time and related costs to complete a development project that commenced in fiscal 2023 in our Satellite and Space Communications segment and with an international customer; and • reversed $ 2,286,000 of cumulative revenue and $ 2,234,000 of associated unbilled receivable contract assets due to higher expected costs at completion identified during fiscal 2025, as we advanced certain nonrecurring engineering related projects in our satellite ground infrastructure product line through development and toward production. After adjusting for those amounts identified above, and excluding unbilled receivables related to the U.S. Marine Corps contract discussed below, management estimates that a substantial portion of the remaining contract assets not yet billed at July 31, 2025 will be billed and collected within one year . Accounts receivable in the table above excludes $ 824,000 of long-term unbilled receivables presented within "Other assets, net" in the Consolidated Balance Sheets as of July 31, 2024. As of July 31, 2025, the U.S. government (and its agencies) and two domestic top tier mobile network operators represented 25.1 %, 14.5 % and 10.5% of net accounts receivable, respectively. There were no other customers which accounted for greater than 10.0% of net accounts receivable. As of July 31, 2024, the U.S. government (and its agencies), an international customer and reseller of our troposcatter related technologies and a domestic top tier mobile network operator represented 36.7 %, 11.4 %, and 11.0 % of net accounts receivable, respectively. There were no other customers which accounted for greater than 10.0% of net accounts receivable. In our troposcatter product line, throughout most of fiscal 2024, we experienced elevated levels of receivables due to the timing of our performance on and billings and collections related to certain large U.S. government and international customer contracts. During principally the first half of fiscal 2025, we maintained deliveries of next-generation troposcatter terminals related to our U.S. Marine Corps and Army end user contracts, contributing to a 26% year-over-year reduction in our consolidated receivables as of July 31, 2025. In December 2024, however, we received a notice from our prime contractor to stop work associated with the U.S. Marine Corps contract. Such contract was subsequently terminated. We have initiated litigation against the prime contractor in order to enforce our rights and recover $ 15,701,000 of total receivables related to this contract as of July 31, 2025. While we believe that we have meritorious claims, some or all of such receivables could be at risk of not being collected. Future results of operations related to our troposcatter solutions product line depend, in part, on the nature, timing and amount associated with resolving this matter. F - 27 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (5) Inventories Inventories consist of the following at July 31, 2025 and 2024: 2025 2024 Raw materials and components $ 64,022,000 72,820,000 Work-in-process and finished goods 31,356,000 38,587,000 Total inventories 95,378,000 111,407,000 Less reserve for excess and obsolete inventories 26,423,000 18,271,000 Inventories, net $ 68,955,000 93,136,000 As of July 31, 2025 and 2024, the amount of inventory directly related to long-term contracts (including contracts-in-progress) was $ 2,612,000 and $ 2,869,000 , respectively, and the amount of inventory related to contracts from third-party commercial customers who outsource their manufacturing to us was $ 1,583,000 and $ 2,204,000 , respectively. As discussed in Note (1)(c) – Summary of Significant Accounting and Reporting Policies – Liquidity, in connection with our initiatives to transform our Company (e.g., reevaluating our business plans to identify opportunities to focus future investment on our most strategic, high-margin revenue opportunities), during the first quarter of fiscal 2025, we recorded a non-cash charge of $ 11,369,000 within Cost of sales on our Consolidated Statement of Operations. Such non-cash charge primarily related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued. As discussed in Note (3) – Business Divestitures , such non-cash charge also included the write down of inventory associated with the CGC Divestiture, which inventory was determined during the first quarter of fiscal 2025 to no longer be salable. During fiscal 2025, we also expensed $ 1,082,000 of work in process inventory related to certain loss contracts in our satellite ground infrastructure product line accounted for under the point in time revenue recognition model. (6) Property, Plant and Equipment Property, plant and equipment consist of the following at July 31, 2025 and 2024: 2025 2024 Machinery and equipment $ 138,678,000 142,405,000 Internal-use software 33,595,000 28,869,000 Leasehold improvements 17,698,000 17,175,000 189,971,000 188,449,000 Less accumulated depreciation and amortization 146,561,000 141,121,000 Property, plant and equipment, net $ 43,410,000 47,328,000 Depreciation and amortization expense on property, plant and equipment amounted to $ 11,798,000 , $ 12,159,000 and $ 11,917,000 for the fiscal years ended July 31, 2025, 2024 and 2023, respectively. F - 28 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (7) Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following at July 31, 2025 and 2024: 2025 2024 Accrued wages and benefits $ 21,158,000 22,131,000 Accrued contract costs 6,676,000 17,267,000 Accrued warranty obligations 8,475,000 7,049,000 Accrued commissions and royalties 4,867,000 5,396,000 Accrued contributions for constructing long-lived assets 2,789,000 — Accrued legal costs 830,000 3,092,000 Other 13,628,000 7,310,000 Accrued expenses and other current liabilities $ 58,423,000 62,245,000 Accrued contract costs represent direct and indirect costs on contracts as well as estimates of amounts owed for invoices not yet received from vendors or reflected in accounts payable. Accrued warranty obligations as of July 31, 2025 relate to estimated liabilities for assurance type warranty coverage that we provide to our customers. We generally provide warranty coverage for some of our products for a period of at least one year from the date of delivery. We record a liability for estimated warranty expense based on historical claims, product failure rates, consideration of contractual obligations, future costs to resolve software issues and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs. Changes in our accrued warranty obligations during the fiscal years ended July 31, 2025 and 2024 were as follows: 2025 2024 Balance at beginning of year $ 7,049,000 8,285,000 Provision for warranty obligations 4,172,000 1,213,000 Charges incurred ( 2,746,000 ) ( 1,538,000 ) Adjustments for changes in estimates — ( 493,000 ) PST Divestiture — ( 418,000 ) Balance at end of year $ 8,475,000 7,049,000 Accrued contributions for constructing long-lived assets represents our obligation to utilize amounts received in fiscal 2025 from the City of Gatineau, a province in Quebec, Canada, to fund the relocation of our existing leased facility to a new location. (8) Credit Facility On June 17, 2024, we entered into a senior secured loan facility with a syndicate of lenders, which replaced our prior credit facility. As further discussed below, we subsequently amended the credit facility on October 17, 2024, March 3, 2025 and July 21, 2025 (the "Credit Facility"). At July 31, 2025, the Credit Facility consists of a remaining $ 116,260,000 term loan (the "Term Loan" facility) and (ii) an asset-based revolving credit facility with revolving commitments in an aggregate principal amount of $ 54,750,000 , subject to borrowing base limitations as described below (the "Revolving Loan" facility). At closing, the proceeds were used to repay the prior credit facility in full and for working capital and other general corporate purposes. The obligations under the Credit Facility are guaranteed by certain of our domestic and foreign subsidiaries (the "Guarantors"), who have granted for the benefit of the lenders, a lien on, and first priority security interest in, substantially all of our tangible and intangible assets. F - 29 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The Credit Facility was amended on October 17, 2024 (the "First Amendment") which, among other things: (i) waived all defaults under the Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of July 31, 2024; (ii) increased the interest rate margins applicable to the Term Loan to 12.00 % per annum for Base Rate Loans and 13.00 % per annum for SOFR Loans and increased interest rate margins applicable to the Revolving Loan by 1.00 % at each level; (iii) permitted the incurrence of $ 25,000,000 of total unsecured subordinated debt (as described below); (iv) suspended testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants until January 31, 2025; (v) provided the lenders a consent right with respect to Revolver Loan borrowings above $ 32,500,000 ; and (vi) amended 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 Facility (as defined below) becomes due and payable. The Credit Facility was amended again on March 3, 2025 (the "Second Amendment") which, among other things: (i) waived all defaults under the Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of January 31, 2025; (ii) decreased the interest rate margins applicable to the Term Loan from 12.00 % per annum to 9.50 % per annum for Base Rate Loans and from 13.00 % per annum to 10.50 % per annum for SOFR Loans; (iii) permitted the incurrence of an additional $ 40,000,000 of total unsecured subordinated debt (as described below); (iv) suspended testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants until October 31, 2025; (v) suspended our ability to pay interest in-kind until after the interest rate margins are tested based on net leverage ratios; (vi) permitted partial principal repayments of $ 27,252,000 and $ 9,084,000 on the Term Loan and Revolving Loan, respectively, and waived the prepayment fees that would have been payable under the Credit Facility with regard to such repayments; (vii) permanently reduced commitments under the Revolving Loan Facility by $ 3,179,000 and provided the lenders a consent right with respect to Revolver Loan borrowings above $ 29,321,000 ; (viii) reduced the minimum quarterly average liquidity requirement from $ 20,000,000 to $ 17,500,000 ; and (ix) provided the lenders the right to appoint an independent director to our Board of Directors after May 31, 2025 (which has been satisfied as of the issuance date). The Credit Facility was further amended on July 21, 2025 (the "Third Amendment") which, among other things: (i) suspends, until the four-quarter period ending January 31, 2027, testing of the Net Leverage Ratio, the Fixed Charge Coverage Ratio and the Minimum EBITDA covenants; (ii) altered the interest rate margins applicable to Term Loans (as described in further detail below); (iii) delays the scheduled repayment of a portion of the principal of the Term Loans (as described in further detail below); (iv) delays the scheduled repayment of fees due pursuant to the Second Amendment; (v) reduced the minimum EBITDA requirement (as described in further detail below); (vi) reduced the minimum quarterly average liquidity requirement from $ 17,500,000 to $ 15,000,000 ; (vii) permits us to engage in the sale or disposition of certain properties and assets approved by the Administrative Agent (the “Specified Permitted Individual Disposition”), on the terms, and subject to documentation, reasonably acceptable to the Administrative Agent, so long as 65 % of the net cash proceeds are applied against the outstanding principal amount of the obligations under the Credit Facility and 35 % of the net cash proceeds are applied against the outstanding principal amount of the subordinated term loans under the Subordinated Credit Facility (as defined below); and (viii) required us to adopt management incentive and retention arrangements for our key personnel in connection with the contemplation of our strategic alternatives. The Third Amendment provides that the interest rate margins on the Term Loans are 9.50 % and 10.50 % for Base Rate Loans and SOFR Loans, respectively, until the first business day of the month following January 31, 2027, when we have delivered financial statements demonstrating compliance with the financial covenants under the Credit Facility. If demonstrated, the interest rate margins revert to: (i) for Base Rate Loans, a margin ranging from 7.50 % to 9.00 % and (ii) for SOFR Loans, a margin ranging from 8.50 % to 10.00 %, in each case, based on whether our Net Leverage Ratio during the applicable determination period ranges from less than 1.75 x to greater than or equal to 3.25 x, respectively. F - 30 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The Third Amendment defers $ 3,037,500 of scheduled term loan repayments otherwise due on July 31, 2025 until: (x) the maturity of the Credit Facility, or (y) January 31, 2026, in the case that we had not filed by December 31, 2025, either (i) a Form 10-K annual report accompanied by an opinion of our independent registered public accounting firm free from any “going concern” or like qualification or exception with respect to our consolidated financial statements for the relevant fiscal year ended, or (ii) a Form 10-Q quarterly report that included footnote disclosure (with which our independent registered public accounting firm would not disagree) in the financial statements accompanied thereby that affirmatively included management's assessment that there is no longer a substantial doubt about our ability to continue as a going concern. With the filing of our Form 10-K for the fiscal year ended July 31, 2025, we have determined that the $ 3,037,500 will be due upon the maturity of the Credit Facility. Under the Third Amendment, once financial covenant testing resumes on January 31, 2027, in addition to complying with the minimum quarterly average liquidity requirement, we will be required to comply with: (i) a maximum Net Leverage Ratio of 2.75 x as of January 31, 2027; 2.75 x as of April 30, 2027 and 2.65 x as of July 31, 2027 and thereafter; (ii) a minimum Fixed Charge Coverage Ratio of 1.30 x commencing with the four fiscal quarter period ending January 31, 2027 and 1.35 x commencing with the four fiscal quarter period ending July 31, 2027 and thereafter; and (iii) minimum EBITDA of: (a) $ 32,500,000 for the four-quarter period ending January 31, 2027; (b) $ 35,000,000 for the four-quarter period ending April 30, 2027; (c) $ 37,500,000 for the four-quarter period ending July 31, 2027; and $ 40,000,000 for the four-quarter period ending October 31, 2027 and thereafter. We accounted for the October 17, 2024, March 3, 2025 and July 21, 2025 amendments to our Credit Facility as debt modifications. At the time of entering into the Third Amendment, and through and including the issuance date, there were no ongoing events of default. Over the next twelve months beyond the issuance date, we believe that it is probable we will be able to comply with the covenants required by the Credit Facility. As a result, we have presented our debt obligations as either current or long-term on the Consolidated Balance Sheet , based on their scheduled repayment or maturity dates. Additional Credit Facility Details In connection with entering the Credit Facility, the Term Loan lenders received 1,435,884 detachable warrants ("Lender warrants") granted at an exercise price of $ 0.10 per common share which entitles the Term Loan lenders to purchase 1,435,884 shares of our common stock from us at any time and from time to time after the Closing Date and on or prior to June 17, 2031, subject to certain adjustments. If the Term Loan is refinanced, the Term Loan lenders have the right to sell up to 50.0 % of the warrants back to us for cash, at a 10.0 % discount to the 30 -day volume weighted average price of our common stock, subject to certain adjustments. We determined that the Lender warrants met the definition of a freestanding financial instrument that should be accounted for as a liability. We established an initial Lender warrant liability of $ 3,011,000 which was allocated as a discount against the Term Loan proceeds. The Lender warrant liability is classified in "Warrant and derivative liabilities" on the Consolidated Balance Sheets and is remeasured to its estimated fair value each reporting period, using Level 3 fair value inputs, until the Lender warrants are exercised or expire. Changes in the estimated fair value of the Lender warrant liability are recognized in our Consolidated Statement of Operations as a non-cash expense or benefit. As of July 31, 2025 and 2024, the Lender warrant liability was remeasured to $ 3,007,000 and $ 4,544,000 , respectively, resulting in a non-cash benefit of $ 1,537,000 and a non-cash expense of $ 1,533,000 for the years ended July 31, 2025 and 2024, respectively, recorded in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Consolidated Statements of Operations . F - 31 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Additionally, we identified several embedded derivatives that require bifurcation from the Credit Facility under ASC 815-15 - "Embedded Derivatives," ("ASC 815"). Certain of these embedded features include contingent event of default and going concern interest rate increases and/or fees, which qualify for accounting as one combined embedded derivative liability. We established an initial embedded derivative liability of $ 3,116,000 , which was allocated as a discount against the Term Loan proceeds. The combined embedded derivative liability is presented with the host instrument as part of the amount outstanding under the Credit Facility on the Consolidated Balance Sheets and is remeasured to its estimated fair value each reporting period, using Level 3 fair value inputs, until the embedded derivative features have zero probability of occurring or expire. Changes in the estimated fair value of the combined embedded derivative liability are recognized in our Consolidated Statement of Operations as a non-cash expense or benefit. As of July 31, 2025 and 2024, the combined embedded derivative liability was remeasured to $ 1,890,000 and $ 3,041,000 , respectively, resulting in non-cash benefits of $ 1,151,000 and $ 75,000 , for the years ended July 31, 2025 and 2024, respectively, recorded in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Consolidated Statements of Operations . The following table summarizes the activity relating to deferred financing costs and discounts under the Credit Facility: Deferred Financing Costs Discount Term Loan Revolver Total Term Loan Total Credit facility fees $ 6,626,000 3,353,000 $ 9,979,000 $ 7,486,000 $ 17,465,000 Term loan proceeds allocated to lender warrants — — — 3,011,000 3,011,000 Term loan proceeds allocated to embedded derivative — — — 3,116,000 3,116,000 Amortization ( 201,000 ) ( 102,000 ) ( 303,000 ) ( 411,000 ) ( 714,000 ) Balance at July 31, 2024 $ 6,425,000 3,251,000 $ 9,676,000 $ 13,202,000 $ 22,878,000 Amendment fees — 975,000 975,000 9,326,000 10,301,000 Write-off due to prepayments and reduced commitments ( 1,788,000 ) ( 1,707,000 ) ( 3,495,000 ) ( 5,482,000 ) ( 8,977,000 ) Amortization ( 1,114,000 ) ( 612,000 ) ( 1,726,000 ) ( 3,242,000 ) ( 4,968,000 ) Balance at July 31, 2025 $ 3,523,000 1,907,000 $ 5,430,000 $ 13,804,000 $ 19,234,000 Deferred financing fees and discounts attributable to the Term Loan are amortized as interest expense over the life of the debt through the maturity date using the effective interest method and are presented as a deduction to the non-current borrowings outstanding under the Term Loan. Deferred financing fees attributable to the Revolving Loan are capitalized on the Consolidated Balance Sheets and amortized as interest expense over the life of the debt using the straight-line method. T he amount outstanding under our Credit Facility was as follows: July 31, 2025 July 31, 2024 Term loan $ 116,260,000 161,663,000 Less: Unamortized deferred financing costs related to term loan 3,523,000 6,425,000 Less: Unamortized discount related to term loan 13,804,000 13,202,000 Term loan, net 98,933,000 142,036,000 Revolving loan 17,641,000 32,500,000 Embedded derivative related to credit facility 1,890,000 3,041,000 Amount outstanding under credit facility, net 118,464,000 177,577,000 Less: Current portion of credit facility 4,050,000 4,050,000 Non-current portion of credit facility, net $ 114,414,000 173,527,000 F - 32 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued During the fiscal year ended July 31, 2025, we reclassified the combined embedded derivative liability balance as of July 31, 2024 from "Other liabilities" on the Consolidated Balance Sheets to conform to the current period presentation. During the fiscal year ended July 31, 2025, we had outstanding balances under our Credit Facility ranging from $ 133,901,000 to $ 202,940,000 . Availability under the Revolving Loan is subject to eligibility criteria set forth in the Credit Facility, and equal to a borrowing base in an amount equal to, from time to time: (a) 85 % of the net book value of billed and invoiced accounts receivables; plus (b) 85 % of the net book value of accounts receivables we have the right to bill but have not yet billed up to the lesser of (i) 12.5 % of the amount calculated pursuant to the sum of clauses (a) and (b) and (ii) $ 15,000,000 of such accounts; plus (c) 60 % of the net book value of all inventory, less (d) customary reserves. As of July 31, 2025 and July 31, 2024, our eligible Borrowing Base collateral, as defined under the Revolving Loan, was $ 101,222,000 and $ 114,661,000 , respectively. Interest expense related to our Credit Facility (both current and prior), including amortization of deferred financing costs and debt discount, recorded during the fiscal years ended July 31, 2025, 2024 and 2023 was $ 34,713,000 , $ 22,058,000 and $ 14,931,000 , respectively. Our blended interest rate approximated 18.51 %, 12.26 % and 8.89 % for fiscal 2025, 2024 and 2023, respectively. Interest expense related to our Credit Facility also includes an unused line fee of 0.50 % per annum on the average unused Revolver Loan commitment, with no fee payable on the $ 27,500,000 of the $ 54,750,000 commitment that is subject to the consent right of the revolving lender and Agent. The Term Loan is subject to 2.50 % amortization per annum. The first Term Loan repayment of $ 675,000 was paid on July 31, 2024. The next Term Loan repayment of $ 1,012,500 was paid on July 31, 2025, reflecting the deferral of $ 3,037,500 provided by the Third Amendment. Future quarterly Term Loan repayments of $ 1,012,500 are payable on the last business day of each fiscal quarter, with the remaining Term Loan balance due on the maturity date. The Credit Facility contains: (a) customary representations, warranties and affirmative covenants; (b) customary conditions to drawing the Revolver Loan; (c) customary negative covenants, subject to negotiated exceptions, including but not limited to: (i) liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, including the disposition of assets by any Loan Party to any Subsidiary that is not a Loan Party, (vi) restricted payments, including stockholder dividends, (vii) distributions, including the repayment of subordinated intercompany and third party indebtedness, and (viii) certain other restrictive agreements; (d) certain financial covenants (see above); (e) customary optional and mandatory prepayment events; and (f) customary events of default (subject to grace periods, as appropriate), such as payment defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a defined change in control and the failure to observe the negative covenants and other covenants related to the operation of our business. In addition, under certain circumstances, we may be required to enter into amendments to the Credit Facility in connection with any further syndication of the Credit Facility. Capitalized terms used but not defined herein have the meanings set forth for such terms in the Credit Facility, which has been documented and filed with the SEC. Subsequent Event In connection with our filing of Form 12b-25 with the SEC on October 30, 2025, we entered into an agreement, effective October 29, 2025, with our Credit Facility lenders to allow for an extension of time to deliver certain items that were originally due on October 29, 2025 and October 31, 2025. F - 33 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (9) Subordinated Credit Facility On October 17, 2024, we entered into a subordinated credit facility with the existing holders of our convertible preferred stock and U.S. Bank Trust Company, National Association, as agent, which provided an initial subordinated unsecured term loan facility in the aggregate principal amount of $ 25,000,000 (the “Subordinated Credit Agreement”). As further discussed below, on March 3, 2025 and July 21, 2025, we entered into amendments to the Subordinated Credit Agreement (the "Subordinated Credit Facility”). On March 3, 2025, we entered into an amendment ("Amendment No. 1") which, in addition to providing incremental aggregate principal of $ 40,000,000 , waived all defaults under the Subordinated Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of January 31, 2025 and suspended testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants under the Subordinated Credit Facility until October 31, 2025. The net proceeds were principally used to repay a portion of the Term Loan and Revolver Loan on March 3, 2025, fund our general working capital needs and enabled us to negotiate the Second Amendment to the Credit Facility, including the waiver of existing defaults. On July 21, 2025, we entered into a second amendment (“Amendment No. 2”) which, among other things: (i) provided for the incurrence of a $ 35,000,000 incremental facility (as described in further detail below); (ii) suspends, until the four-quarter period ending January 31, 2027, testing of the Net Leverage Ratio, the Fixed Charge Coverage Ratio and the Minimum EBITDA covenants in the Subordinated Credit Facility; (iii) modified the interest rate applicable to the subordinated term loans (as described in further detail below); (iv) reduced the minimum EBITDA requirement (as described in further detail below); (v) reduced the minimum quarterly average liquidity requirement from $ 17,500,000 to $ 15,000,000 ; (vi) permits us to engage in the Specified Permitted Individual Disposition, on the terms, and subject to documentation, reasonably acceptable to the Subordinated Agent (subject to the same requirement with respect to the application of any net cash proceeds as discussed in Note (8) - Credit Facility; and (vii) required us to adopt management incentive and retention arrangements for its key personnel in connection with the contemplation of our strategic alternatives (also as discussed Note (8) - Credit Facility ). Amendment No. 2 provides for an incremental priority subordinated unsecured term loan facility in the aggregate principal amount of $ 35,000,000 . We used the net proceeds to pay certain transaction costs, fees and expenses incurred in connection with amendments to our credit facilities and to prepay, without premium: (i) $ 28,481,000 of the outstanding Term Loans under the Credit Facility, and (ii) $ 5,775,000 of the outstanding Revolver Loan under the Credit Facility. As part of this prepayment, we permanently reduced Revolver Loan commitments under the Credit Facility by $ 2,071,000 . The interest on the $ 35,000,000 shall be paid-in-kind quarterly, in arrears, by capitalizing and adding the unpaid and accrued amount of such interest to the aggregate outstanding principal amount of the incremental priority subordinated credit facility on the last business day of each quarter. This tranche of subordinated debt will rank senior in right of payment to the existing subordinated term loans under the Subordinated Credit Facility. Unlike the existing subordinated term loans, the incremental priority subordinated credit facility is not subject to any make-whole premium. Under Amendment No. 2, the interest rate applicable to the incremental priority subordinated credit facility shall be the greater of: (x) the highest per annum interest rate then-applicable to the Term Loans under the Credit Facility, and (y) Term SOFR (as defined in the Credit Facility) plus 10.5 %. Under Amendment No. 2, once financial covenant testing resumes on January 31, 2027, in addition to complying with the minimum quarterly average liquidity requirement, we will be required to comply with: (i) a maximum Net Leverage Ratio of 3.30 x as of January 31, 2027, 3.30 x as of April 30, 2027 and 3.18 x as of July 31, 2027 and thereafter; (ii) a minimum Fixed Charge Coverage Ratio of 1.04 x commencing with the four fiscal quarter period ending January 31, 2027 and 1.08 x commencing with the four fiscal quarter period ending July 31, 2027 and thereafter; and (iii) minimum EBITDA of: (a) $ 26,000,000 for the four-quarter period ending January 31, 2027; (b) $ 28,000,000 for the four-quarter period ending April 30, 2027; (c) $ 30,000,000 for the four-quarter period ending July 31, 2027; and $ 32,000,000 for the four-quarter period ending October 31, 2027 and thereafter. F - 34 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued At the time of entering into Amendment No. 2, and through and including the issuance date, there were no ongoing events of default. Over the next twelve months beyond the issuance date, we believe that it is probable we will be able to comply with the covenants required by the Subordinated Credit Facility. As a result, we have presented our debt obligations as long-term on the Consolidated Balance Sheet , based on their scheduled maturity dates. The outstanding portion of debt related to the Subordinated Credit Facility will not be considered debt for purposes of our financial covenant testing under the Credit Facility. However, the Subordinated Credit Facility includes a cross-default provision, whereby a default under the Credit Facility constitutes a default under the Subordinated Credit Facility. Additional Subordinated Credit Facility Details The obligations under the Subordinated Credit Facility mature 90 days after the Credit Facility. Unlike the $ 35,000,000 tranche discussed above, the other two tranches of the Subordinated Credit Facility, which aggregate $ 65,000,000 of principal, are subject to Make-Whole Amounts with respect to certain repayments or prepayments equal to: (i) from the respective closing date of each tranche through (but not including) the date that is nine months thereafter, the principal repayment amount multiplied by 33.0 %; (ii) from the date that is nine months after the applicable closing date through (but not including) the date that is the second anniversary of such closing date, the principal repayment amount multiplied by 50.0 %; (iii) from the second anniversary of the applicable closing date and thereafter, the principal repayment amount multiplied by 75.0 % plus, in the case of clause (iii), interest accrued on the principal amount outstanding at the Make-Whole Interest Rate (as defined below) starting on the second anniversary of the applicable closing date and calculated as of any such date of determination. The Make-Whole Interest Rate is a rate equal to 16.0 % per annum, which is increased by 2.0 % per annum upon the occurrence and during the continuation of an event of default under the Subordinated Credit Facility. We identified an embedded derivative related to redemption features that requires bifurcation from the Subordinated Credit Facility under ASC 815 . We established a total embedded derivative liability of $ 16,864,000 , which was allocated as a discount against the Subordinated Credit Facility proceeds. The embedded derivative liability is presented with the "Non-current portion of subordinated credit facility, net" on the Consolidated Balance Sheet and is remeasured to its estimated fair value each reporting period, using Level 3 fair value inputs. Changes in the estimated fair value of the embedded derivative liability are recognized in our Consolidated Statements of Operations as a non-cash expense or benefit. As of July 31, 2025, the embedded derivative liability was remeasured to $ 5,753,000 . For the fiscal year ended July 31, 2025, we recorded a non-cash benefit of $ 11,111,000 , in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Consolidated Statements of Operations . Deferred financing costs, discounts and the Make-Whole Amount are amortized as interest expense through the Subordinated Credit Facility maturity date using the effective interest method, and are presented as adjustments to the borrowings outstanding under such debt. Interest expense related to our Subordinated Credit Facility for the fiscal year ended July 31, 2025 was $ 10,876,000 , which included $ 2,416,000 of immediately expensed financing fees related to Amendment No. 1 and Amendment No. 2 due to accounting for such amendments as debt modifications. The following table reconciles the amount outstanding under the Subordinated Credit Facility to its net carrying value: July 31, 2025 Subordinated credit facility $ 100,144,000 Less: Unamortized deferred financing costs 1,528,000 Less: Unamortized discount 15,404,000 Plus: Accretion of make-whole amount 6,623,000 Subordinated credit facility, net - subtotal 89,835,000 Embedded derivative related to redemption features 5,753,000 Amount outstanding under the subordinated credit facility, net 95,588,000 Less: Current portion of subordinated credit facility — Non-current portion of subordinated credit facility, net $ 95,588,000 F - 35 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The obligations under the Subordinated Credit Facility are guaranteed by the same guarantors under the Credit Facility and contain customary representations, warranties and affirmative covenants, in each case substantially consistent with the representations and warranties and affirmative covenants under the Credit Facility. The Subordinated Credit Facility contains customary negative covenants, subject to negotiated exceptions, including but not limited to: (i) liens, (ii) investments, (iii) indebtedness, (iv) significant corporate changes, including mergers and acquisitions, (v) dispositions, (vi) restricted payments, including stockholder dividends, (vii) customary optional and mandatory prepayment events, and (viii) certain other restrictive agreements. Capitalized terms used but not defined herein have the meanings set forth for such terms in the Subordinated Credit Facility, which has been documented and filed with the SEC. Subsequent Event In connection with our filing of Form 12b-25 with the SEC on October 30, 2025, we entered into an agreement, effective October 29, 2025, with our Subordinated Credit Facility lenders to allow for an extension of time to deliver certain items that were originally due on October 29, 2025 and October 31, 2025. (10) Leases Our leases historically relate to the leasing of facilities and equipment. In accordance with FASB ASC 842 - "Leases" ("ASC 842"), we determine at inception whether an arrangement is, or contains, a lease and whether the lease should be classified as an operating or a financing lease. At lease commencement, we recognize a right-of-use ("ROU") asset and lease liability based on the present value of the future lease payments over the estimated lease term. We elected to not recognize a ROU asset or lease liability for any leases with terms of twelve months or less. Instead, for such short-term leases, we recognize lease expense on a straight-line basis over the lease term. Certain of our leases include options to extend the term of the lease or to terminate the lease early. When it is reasonably certain that we will exercise a renewal option or will not exercise a termination option, we include the impact of exercising or not exercising such option, respectively, in the estimate of the lease term. As our lease agreements do not explicitly state the discount rate implicit in the lease, we use our incremental borrowing rate ("IBR") on the commencement date to calculate the present value of future lease payments. Such IBR represents our estimated rate of interest to borrow on a collateralized basis over a term commensurate with the expected lease term. Some of our leases include payments that are based on the Consumer Price Index ("CPI") or other similar indices. These variable lease payments are included in the calculation of the ROU asset and lease liability using the index as of the lease commencement date. Other variable lease payments, such as common area maintenance, property taxes, and usage-based amounts, are required by ASC 842 to be excluded from the ROU asset and lease liability and expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset would also consider, to the extent applicable, any deferred rent upon adoption, lease pre-payments or initial direct costs of obtaining the lease (e.g., such as commissions). For all classes of leased assets, we elected the practical expedient to not separate lease components (i.e., the actual item being leased, such as the facility or piece of equipment) from non-lease components (i.e., the distinct elements of a contract not related to securing the use of the leased asset, such as common area maintenance and consumable supplies). Certain of our facility lease agreements (which are classified as operating leases) contain rent holidays or rent escalation clauses. For rent holidays and rent escalation clauses during the lease term, we record rental expense on a straight-line basis over the term of the lease. As of July 31, 2025, none of our leases contained a residual value guarantee and covenants included in our lease agreements are customary for the types of facilities and equipment being leased. F - 36 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The components of lease expense are as follows: Fiscal years ended July 31, 2025 2024 2023 Finance lease expense: Amortization of ROU assets $ — — 5,000 Operating lease expense 7,489,000 8,414,000 10,439,000 Short-term lease expense 137,000 293,000 435,000 Variable lease expense 4,560,000 4,381,000 4,031,000 Sublease income ( 28,000 ) ( 67,000 ) ( 67,000 ) Total lease expense $ 12,158,000 13,021,000 14,843,000 Additional information related to leases is as follows: Fiscal years ended July 31, 2025 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating leases - Operating cash outflows $ 8,277,000 8,983,000 10,604,000 Finance leases - Financing cash outflows — — 4,000 ROU assets obtained in the exchange for lease liabilities (non-cash): Operating leases $ 5,428,000 677,000 3,211,000 The following table is a reconciliation of future cash flows relating to operating lease liabilities presented on our Consolidated Balance Sheets as of July 31, 2025: Operating Fiscal 2026 $ 7,637,000 Fiscal 2027 5,949,000 Fiscal 2028 5,392,000 Fiscal 2029 4,850,000 Fiscal 2030 4,449,000 Thereafter 14,663,000 Total future undiscounted cash flows 42,940,000 Less: Present value discount 6,314,000 Lease liabilities $ 36,626,000 Weighted-average remaining lease terms (in years) 7.60 Weighted-average discount rate 4.47 % As of July 31, 2025, we do not have any material rental commitments that have not commenced. (11) Income Taxes Loss before benefit from income taxes consists of the following: Fiscal Years Ended July 31, 2025 2024 2023 U.S. $ ( 135,111,000 ) ( 65,374,000 ) ( 21,327,000 ) Foreign ( 20,271,000 ) ( 34,906,000 ) ( 9,520,000 ) $ ( 155,382,000 ) ( 100,280,000 ) ( 30,847,000 ) F - 37 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The benefit from income taxes included in the accompanying Consolidated Statements of Operations consists of the following: Fiscal Years Ended July 31, 2025 2024 2023 Federal – current $ 673,000 377,000 ( 258,000 ) Federal – deferred — ( 2,345,000 ) ( 4,623,000 ) State and local – current 514,000 1,181,000 1,412,000 State and local – deferred — ( 834,000 ) ( 815,000 ) Foreign – current 433,000 1,137,000 958,000 Foreign – deferred ( 1,700,000 ) 189,000 ( 622,000 ) Benefit from income taxes $ ( 80,000 ) ( 295,000 ) ( 3,948,000 ) The benefit from income taxes differed from the amounts computed by applying the U.S. Federal income tax rate as a result of the following: Fiscal Years Ended July 31, 2025 2024 2023 Amount Rate Amount Rate Amount Rate Computed "expected" tax benefit $ ( 32,630,000 ) 21.0 % ( 21,059,000 ) 21.0 % ( 6,478,000 ) 21.0 % Increase (reduction) in income taxes due to: State and local income taxes, net of valuation allowance and federal benefit 406,000 ( 0.2 ) ( 127,000 ) 0.1 440,000 ( 1.4 ) Stock-based compensation 1,017,000 ( 0.6 ) 1,891,000 ( 1.9 ) 692,000 ( 2.2 ) Research and experimentation credits ( 1,125,000 ) 0.7 ( 1,251,000 ) 1.2 ( 2,576,000 ) 8.4 Foreign-derived intangible income deduction — — 43,000 — ( 517,000 ) 1.7 Revaluation of warrants and embedded derivatives ( 8,085,000 ) 5.2 ( 897,000 ) 0.9 — — Nondeductible executive compensation 102,000 ( 0.1 ) — — 1,484,000 ( 4.8 ) PST Divestiture — — 1,384,000 ( 1.4 ) — — Change in U.S. federal and foreign valuation allowances 24,929,000 ( 16.0 ) 10,177,000 ( 10.0 ) 2,834,000 ( 9.2 ) Foreign income tax rate differential ( 804,000 ) 0.5 ( 389,000 ) 0.4 ( 269,000 ) 0.9 Goodwill impairment 15,975,000 ( 10.3 ) 9,549,000 ( 9.5 ) — — Other, net 135,000 ( 0.1 ) 384,000 ( 0.5 ) 442,000 ( 1.6 ) Benefit from income taxes $ ( 80,000 ) 0.1 % ( 295,000 ) 0.3 % ( 3,948,000 ) 12.8 % F - 38 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at July 31, 2025 and 2024 are presented below: 2025 2024 Deferred tax assets: Inventory and warranty reserves $ 7,026,000 4,685,000 Compensation and commissions 4,414,000 3,401,000 Federal, state and foreign research and experimentation credits 18,134,000 17,559,000 Capitalized U.S. research and experimental expenditures 11,188,000 12,177,000 Stock-based compensation 1,505,000 2,409,000 Foreign scientific research and experimental development expenditures 2,006,000 1,720,000 Federal, state and foreign net operating losses 24,373,000 18,289,000 Federal and state capital losses 14,473,000 14,473,000 Lease liabilities 8,455,000 8,999,000 Deferred revenue, non-current 3,390,000 4,664,000 Interest expense limitation 13,411,000 3,423,000 Other 7,054,000 1,278,000 Less: valuation allowance ( 70,973,000 ) ( 44,888,000 ) Total deferred tax assets, net 44,456,000 48,189,000 Deferred tax liabilities: Plant and equipment ( 3,379,000 ) ( 4,781,000 ) Lease right-of-use assets ( 6,757,000 ) ( 7,116,000 ) Intangibles ( 38,752,000 ) ( 42,563,000 ) Total deferred tax liabilities ( 48,888,000 ) ( 54,460,000 ) Net deferred tax liabilities $ ( 4,432,000 ) ( 6,271,000 ) At July 31, 2025, our net deferred tax liability of $ 4,432,000 includes $ 187,000 of foreign net deferred tax assets that were recorded as "Other assets, net" in our Consolidated Balance Sheets . At July 31, 2024, our net deferred tax liability of $ 6,271,000 includes $ 78,000 of foreign net deferred tax liabilities that were recorded as "Other liabilities" in our Consolidated Balance Sheets . Federal and State At July 31, 2025, we have federal research and experimentation credit carryforwards of $ 8,447,000 which begin to expire in 2032. We have state research and experimentation credit carryforwards of $ 9,048,000 which begin to expire in 2026. We believe that it is more-likely-than-not that the benefit from these credits will not be realized. In recognition of this risk, we have provided for a valuation allowance of $ 17,495,000 on the deferred tax assets relating to these credits. At July 31, 2025, we have $ 962,000 of federal net operating loss carryforwards, which do not expire (but are subject to annual deduction limitations based on a percentage of taxable income). We have state net operating loss carryforwards of $ 3,758,000 , which begin to expire in 2026. We believe that it is more-likely-than-not that the benefit from these carryforwards will not be realized. In recognition of this risk, we have provided for a valuation allowance of $ 4,720,000 on the deferred tax assets relating to these carryforwards. At July 31, 2025, we have federal and state capital loss carryforwards of $ 14,473,000 , which expire in 2026. We believe it is more-likely-than-not that the benefit from these carryforwards will not be realized. In recognition of this risk, we have provided for a full valuation allowance on the deferred tax assets relating to these carryforwards. F - 39 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued With respect to our remaining U.S. federal and state net deferred tax assets as of July 31, 2025, we believe it is more-likely-than-not that the benefit from such assets will not be realized. In recognition of this risk, we have provided a valuation allowance of $ 13,456,000 on these net deferred tax assets. Foreign At July 31, 2025, we have foreign deferred tax assets relating to research and experimentation credits of $ 489,000 , which begin to expire in 2043. We have foreign deferred tax assets relating to net operating loss carryforwards of $ 19,513,000 in the United Kingdom that do not expire. We believe that it is more-likely-than-not that certain foreign deferred tax assets, including these net operating loss carryforwards, may not be realized. In recognition of this risk, we have provided for a valuation allowance of $ 20,829,000 on these deferred tax assets. Our foreign earnings and profits are not material and, as such, we have not recorded any deferred tax liability on unremitted foreign earnings. Unrecognized Tax Positions At July 31, 2025 and 2024, total unrecognized tax benefits were $ 8,084,000 and $ 8,605,000 , respectively, including interest of $ 240,000 and $ 224,000 , respectively. At July 31, 2025 and 2024, $ 1,818,000 and $ 2,231,000 , respectively, of our unrecognized tax benefits were recorded as non-current income taxes payable on our Consolidated Balance Sheets . The remaining unrecognized tax benefits of $ 6,266,000 and $ 6,374,000 at July 31, 2025 and 2024, respectively, were presented as an offset to the associated deferred tax assets on our Consolidated Balance Sheets . Of the total unrecognized tax benefits, $ 7,180,000 and $ 7,679,000 at July 31, 2025 and 2024, respectively, net of the reversal of the federal benefit recognized as a deferred tax asset relating to state reserves, would favorably impact our effective tax rate, if recognized. We believe it is reasonably possible that the gross unrecognized tax benefits could decrease by as much as $ 196,000 in the next 12 months due to the expiration of statute of limitations related to federal, state and foreign tax positions. Our policy is to recognize potential interest and penalties relating to uncertain tax positions in income tax expense. The following table summarizes the activity related to our unrecognized tax benefits for fiscal years 2025, 2024 and 2023 (excluding interest): 2025 2024 2023 Balance at beginning of period $ 8,381,000 8,956,000 9,675,000 Increase related to current period 89,000 181,000 681,000 Increase related to prior periods 8,000 130,000 51,000 Expiration of statute of limitations ( 569,000 ) ( 622,000 ) ( 1,406,000 ) Decrease related to prior periods ( 65,000 ) ( 264,000 ) ( 45,000 ) Balance at end of period $ 7,844,000 8,381,000 8,956,000 Our U.S. federal income tax returns for fiscal 2022 through 2025 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state and foreign income tax returns prior to fiscal 2021 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition. In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted, resulting in significant changes to U.S. tax law. U.S. GAAP, specifically ASC 740, requires that the effects of an applicable change in tax law be recognized in the period of enactment. Accordingly, our financial statements and footnote disclosures for fiscal 2025 reflect the impact of those provisions of the OBBBA that are currently applicable to us, such as changes to bonus depreciation rules which resulted in an estimated increased deduction of $ 1,254,000 . We continue to assess the potential impacts of certain other provisions of the OBBBA which go into effect in the future and are not currently applicable to us, such as those provisions related to changes in the tax treatment of U.S. research and experimental expenditures (and related deductions) and limitations imposed on business interest expense deductions. Such provisions, once applicable to us, could materially affect our results of operations in the future. F - 40 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (12) Stock-Based Compensation Overview In December 2023, our stockholders approved the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan (the “2023 Plan”), which replaced the Amended and Restated 2000 Stock Incentive Plan. Under the 2023 Plan, the initial number of shares of common stock available for all awards, other than substitute awards granted in connection with a corporate transaction, was 1,669,683 shares of common stock plus certain expired or cancelled awards recycled back into the 2023 Plan. Also, on November 25, 2024, our Board of Directors approved an amendment to the 2023 Plan to increase the number of available shares of common stock authorized for issuance under the 2023 Plan by 2,195,000 shares. Stockholders approved the amendment to the 2023 Plan at the 2024 Annual Meeting on January 13, 2025. We issue stock-based awards to certain of our employees and our Board of Directors pursuant to the 2023 Plan, as amended and/or restated from time to time and our 2001 Employee Stock Purchase Plan, as amended and/or restated from time to time (the "ESPP"), and recognize related stock-based compensation in our consolidated financial statements. The 2023 Plan provides for the granting to employees and consultants of Comtech (including prospective employees and consultants): (i) incentive and non-qualified stock options, (ii) restricted stock units ("RSUs"), (iii) RSUs with performance measures (which we refer to as "performance shares"), (iv) restricted stock, (v) stock units (reserved for issuance to non-employee directors) and share units (reserved for issuance to employees) (collectively, "share units") and (vi) stock appreciation rights ("SARs"), among other types of awards. Our non-employee directors are eligible to receive non-discretionary grants of stock-based awards, subject to certain limitations. As of July 31, 2025, the aggregate number of shares of common stock which may be issued may not exceed 15,757,500 . Stock options granted may not have a term exceeding ten years or, in the case of an incentive stock award granted to a stockholder who owns stock representing more than 10.0 % of the voting power, no more than five years . We expect to settle all outstanding awards under the Plan and employee purchases under the ESPP with the issuance of new shares of our common stock. As of July 31, 2025, we had granted stock-based awards representing the right to purchase and/or acquire an aggregate of 12,182,430 shares (net of 7,643,074 expired and canceled awards), of which an aggregate of 10,382,855 have been exercised or settled. As of July 31, 2025, the following stock-based awards, by award type, were outstanding: July 31, 2025 Stock options 124,470 Performance shares 593,680 RSUs, restricted stock, share units and other stock-based awards 1,081,425 Total 1,799,575 Our ESPP provides for the issuance of up to 1,300,000 shares of our common stock. Our ESPP is intended to provide our eligible employees the opportunity to acquire our common stock at 85 % of fair market value on the first or last day of each calendar quarter, whichever is lower. Through July 31, 2025, we have cumulatively issued 1,104,911 shares of our common stock to participating employees in connection with our ESPP. F - 41 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Stock-based compensation for awards issued is reflected in the following line items in our Consolidated Statements of Operations : Fiscal Years Ended July 31, 2025 2024 2023 Cost of sales $ 392,000 778,000 1,110,000 Selling, general and administrative expenses 2,479,000 4,777,000 7,960,000 Research and development expenses 249,000 541,000 1,037,000 Stock-based compensation expense before CEO transition costs 3,120,000 6,096,000 10,107,000 CEO transition costs related to equity-classified stock-based awards — — 3,764,000 Total stock-based compensation expense before income tax benefit 3,120,000 6,096,000 13,871,000 Estimated income tax benefit — ( 1,298,000 ) ( 2,552,000 ) Net stock-based compensation expense $ 3,120,000 4,798,000 11,319,000 Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair value of the award and is generally expensed over the vesting period of the award. At July 31, 2025, unrecognized stock-based compensation of $ 4,778,000 , net of estimated forfeitures of $ 342,000 , is expected to be recognized over a weighted average period of 1.7 years. Total stock-based compensation capitalized and included in ending inventory at both July 31, 2025 and 2024 was $ 198,000 . There are no liability-classified stock-based awards outstanding as of July 31, 2025 or 2024. Stock-based compensation expense, by award type, is summarized as follows: Fiscal Years Ended July 31, 2025 2024 2023 Stock options $ 29,000 60,000 87,000 Performance shares 72,000 480,000 973,000 RSUs, restricted stock, share units and other stock-based awards 2,973,000 5,477,000 8,926,000 ESPP 46,000 79,000 121,000 Stock based compensation expense before CEO transition costs 3,120,000 6,096,000 10,107,000 CEO transition costs related to equity-classified stock-based awards — — 3,764,000 Total stock-based compensation expense before income tax benefit 3,120,000 6,096,000 13,871,000 Estimated income tax benefit — ( 1,298,000 ) ( 2,552,000 ) Net stock-based compensation expense $ 3,120,000 4,798,000 11,319,000 During fiscal 2025, we reversed a portion of our stock-based compensation expense related to performance shares due to lower-than-estimated achievement of fiscal 2022 and 2023 performance share goals. Stock-based compensation expense for the more recent period also reflects the forfeiture of awards related to our former Chief Operating Officer and Chief Executive Officer, whose employment were both terminated during fiscal 2025. With respect to stock-based compensation expense reported in the prior year period, we had determined to settle fiscal 2024 non-equity annual incentive awards accrued during such period with stock-based awards in lieu of cash. Also, contributing to the higher stock-based compensation expense in the prior year period was our annual grant of stock-based awards to non-executive employees. Such grants of stock-based awards to non-executive employees did not occur during fiscal 2025. ESPP stock-based compensation expense primarily relates to the 15 % discount offered to participants in the ESPP. F - 42 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The estimated income tax benefit as shown in the above tables was computed using income tax rates expected to apply when the awards are settled. Such deferred tax asset was recorded net as part of our non-current deferred tax liability on our Consolidated Balance Sheet as of July 31, 2025 and 2024. The actual income tax benefit recognized for tax reporting is based on the fair market value of our common stock at the time of settlement and can significantly differ from the estimated income tax benefit recorded for financial reporting. There is no estimated income tax benefit recognized for fiscal 2025 in light of the valuation allowance established on all U.S. deferred tax assets. Stock Options The following table summarizes the Plan's activity: Awards (in Shares) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding at July 31, 2022 483,480 $ 24.43 Expired/canceled ( 242,970 ) 24.89 Outstanding at July 31, 2023 240,510 23.96 Expired/canceled ( 99,320 ) 28.72 Outstanding at July 31, 2024 141,190 20.61 Expired/canceled ( 16,720 ) 21.77 Outstanding at July 31, 2025 124,470 $ 20.45 3.57 $ — Exercisable at July 31, 2025 124,470 $ 20.45 3.57 $ — Vested and expected to vest at July 31, 2025 124,470 $ 20.45 3.57 $ — Stock options outstanding as of July 31, 2025 have exercise prices ranging from $ 17.88 - $ 28.35 , representing the fair market value of our common stock on the date of grant, a contractual term of ten years and a vesting period of five years . F - 43 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Performance Shares, RSUs, Restricted Stock, Share Unit Awards and Other Stock-based Awards The following table summarizes the Plan's activity relating to performance shares, RSUs, restricted stock, share units and other stock-based awards: Awards (in Shares) Weighted Average Grant Date Fair Value Aggregate Intrinsic Value Outstanding at July 31, 2022 1,110,750 $ 19.05 Granted 1,550,951 10.79 Settled ( 632,267 ) 16.69 Canceled/Forfeited ( 153,204 ) 16.67 Outstanding at July 31, 2023 1,876,230 13.21 Granted 1,731,760 6.71 Settled ( 1,042,860 ) 9.77 Canceled/Forfeited ( 764,842 ) 9.28 Outstanding at July 31, 2024 1,800,288 10.61 Granted 1,677,677 4.57 Settled ( 855,870 ) 9.37 Canceled/Forfeited ( 946,990 ) 6.54 Outstanding at July 31, 2025 1,675,105 $ 6.53 $ 3,635,000 Vested at July 31, 2025 122,554 $ 13.03 $ 266,000 Vested and expected to vest at July 31, 2025 1,632,321 $ 6.61 $ 3,542,000 The total intrinsic value relating to fully-vested awards settled during the fiscal years ended July 31, 2025, 2024 and 2023 was $ 2,420,000 , $ 7,844,000 and $ 6,782,000 , respectively. The performance shares granted to employees principally vest over a three-year performance period, if pre-established performance goals are attained, or as specified pursuant to the Plan and related agreements. As of July 31, 2025, the number of outstanding performance shares included in the above table, and the related compensation expense prior to consideration of estimated pre-vesting forfeitures, assume achievement of the pre-established goals at a target level, except for performance shares granted in fiscal 2023 which reflect lower-than-estimated achievement. RSUs and restricted stock granted to non-employee directors prior to August 2022 had a vesting period of five years and were convertible into shares of our common stock generally at the time of termination, on a one -for-one basis for no cash consideration, or earlier under certain circumstances. Commencing in August 2022, such awards have a vesting period of one year . RSUs granted to employees prior to August 2022 have a vesting period of five years and are convertible into shares of our common stock generally at the time of vesting, on a one -for-one basis for no cash consideration. Commencing in August 2022, such RSUs have a vesting period of three years . Share units granted prior to July 31, 2017 were vested when issued and are convertible into shares of our common stock, generally at the time of termination, on a one-for-one basis for no cash consideration, or earlier under certain circumstances. Share units granted on or after July 31, 2017 were granted to certain employees in lieu of non-equity incentive compensation and are convertible into shares of our common stock on the one-year anniversary of the respective grant date. In July 2024 and 2023, we granted shares of our common stock to certain employees in lieu of non-equity incentive compensation. F - 44 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The fair value of performance shares, RSUs, restricted stock, share units and other stock-based awards is determined using the closing market price of our common stock on the date of grant, less the present value of any estimated future dividend equivalents such awards are not entitled to receive and an applicable estimated discount for any post-vesting transfer restrictions. RSUs, performance shares and restricted stock are entitled to dividend equivalents, as applicable, unless forfeited before vesting occurs. Share units and other stock-based awards would be entitled to dividend equivalents while the underlying shares are unissued. Dividend equivalents are subject to forfeiture, similar to the terms of the underlying stock-based awards, and are payable in cash generally at the time of settlement of the underlying award. During fiscal 2025 and 2024, we reversed $ 42,000 and $ 107,000 of previously accrued dividend equivalents due to forfeitures and paid out $ 157,000 and $ 268,000 , respectively. During fiscal 2023, we accrued $ 315,000 of dividend equivalents (net of forfeitures) and paid out $ 366,000 . Accrued dividend equivalents were recorded as a reduction to retained earnings. As of July 31, 2025 and 2024, accrued dividend equivalents were $ 117,000 and $ 316,000 , respectively. With respect to the actual settlement of stock-based awards for income tax reporting, for the fiscal year ended July 31, 2025, we have not recognized any tax benefit or expense in light of the valuation allowance established for all U.S. deferred tax assets. For fiscal years ended July 31, 2024 and 2023, we recorded an income tax expense of $ 723,000 and $ 591,000 , respectively. Subsequent Event In the first quarter of fiscal 2026, our Board of Directors authorized the issuance of stock-based awards with a total unrecognized compensation expense, net of estimated forfeitures, of approximately $ 6,700,000 . (13) Segment Information Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by FASB ASC 280 "Segment Reporting" ("ASC 280") is based on the way that the CODM organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. On January 13, 2025, the Board of Directors appointed Kenneth H. Traub as President and Chief Executive Officer in addition to his role as Chairman. Mr. Traub is our CODM for purposes of ASC 280. Our two reportable operating segments are described below. Our Satellite and Space Communications reportable operating segment is organized into four technology areas: satellite modem and amplifier technologies, troposcatter technologies, cybersecurity training (formerly, known as government services) and space components. This segment offers customers: satellite ground infrastructure technologies, services and system integration that facilitate the transmission of voice, video and data over GEO, MEO and LEO satellite constellations, including traveling wave tube power amplifiers, satellite modems, VSAT platforms and frequency converters; over-the-horizon microwave solutions that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction; advanced cybersecurity training in support of U.S. government and certain commercial and university customers; and procurement and supply chain management of high reliability Electrical, Electronic and Electromechanical ("EEE") parts for satellite, launch vehicle and manned space applications. Our Allerium reportable operating segment (formerly, Terrestrial and Wireless Networks) is organized into three service areas: next generation 911 and call delivery, call handling solutions, and trusted location and messaging solutions. This segment offers customers: Wireless/VolP 911 location and routing services to connect emergency calls to Public Safety Answering Points ("PSAPs"); SMS text to 911 services; next generation 911 solutions, providing emergency call routing, location validation, and policy-based routing rules, logging and security functionality; Emergency Services IP Network transport infrastructure for emergency services communications and support of next generation 911 services; call handling applications for PSAPs; wireless emergency alert solutions for network operators; and software and equipment for location-based and text messaging services for various applications, including for public safety, commercial and government services. The rebranding to Allerium did not change the composition of this reportable operating segment. F - 45 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued In connection with our adoption of ASU No. 2023-07 in fiscal 2025, and considering our transformation plan and most recent CODM's increased focus on profitability and cash flow generation on a GAAP basis, our CODM determined to use GAAP operating income to measure our reportable operating segments' performance and to make decisions about resources to be allocated to each segment. Accordingly, the segment tables below have been recast on that basis. The CODM uses GAAP operating income to assess the results of each reportable operating segment against their respective plans and forecasts and, more generally, to peers and competitors in the markets in which we operate. The CODM also uses this metric to make decisions about allocating capital and personnel resources to the segments, evaluating which project(s) to undertake and or to prioritize, and determining the compensation of employees. The amounts shown for segment GAAP operating income include expenses which are directly attributable to the segment and considers both cash and non-cash expenses such as: depreciation, amortization of intangibles, impairment of long-lived assets, including goodwill, amortization of cost to fulfill assets, restructuring costs and strategic emerging technology costs (for next-generation satellite technology). Our GAAP operating income metric for each segment does not include the allocation of any indirect expenses which are unrelated to the segment's operations. Reportable operating segment information, along with a reconciliation of segment GAAP operating income to consolidated income (loss) before income taxes is presented in the tables below: Fiscal Year Ended July 31, 2025 Satellite and Space Communications Allerium Total Net sales $ 269,265,000 230,263,000 $ 499,528,000 Cost of sales 227,786,000 143,475,000 Selling, general and administrative 60,699,000 36,602,000 Research and development 5,590,000 11,570,000 Amortization of intangibles 7,254,000 14,469,000 Impairment of long-lived assets, including goodwill 79,555,000 — Segment operating (loss) income $ ( 111,619,000 ) 24,147,000 $ ( 87,472,000 ) Unallocated corporate expenses 46,827,000 Proxy solicitation costs 2,682,000 CEO transition costs 2,117,000 Interest expense 45,650,000 Interest (income) and other 155,000 Write-off of deferred financing costs 8,977,000 Change in fair value of warrants and derivatives ( 38,498,000 ) Loss before income taxes $ ( 155,382,000 ) Purchases of property, plant and equipment $ 338,000 7,816,000 $ 8,154,000 Unallocated purchases of property, plant and equipment 411,000 Consolidated purchases of property, plant and equipment $ 8,565,000 Depreciation expense $ 8,300,000 3,010,000 $ 11,310,000 Unallocated depreciation expense 488,000 Consolidated depreciation expense $ 11,798,000 Total segment assets as of July 31, 2025 $ 249,465,000 454,200,000 $ 703,665,000 Unallocated assets as of July 31, 2025 37,170,000 Consolidated assets as of July 31, 2025 $ 740,835,000 F - 46 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Fiscal Year Ended July 31, 2024 Satellite and Space Communications Allerium Total Net sales $ 324,069,000 216,334,000 $ 540,403,000 Cost of sales 245,346,000 137,100,000 Selling, general and administrative 48,799,000 32,475,000 Research and development 12,916,000 10,620,000 Amortization of intangibles 6,685,000 14,469,000 Impairment of long-lived assets, including goodwill 64,525,000 — Segment operating (loss) income $ ( 54,202,000 ) 21,670,000 $ ( 32,532,000 ) Unallocated corporate expenses 44,442,000 CEO transition costs 2,916,000 Interest expense 22,153,000 Interest (income) and other 678,000 Write-off of deferred financing costs 1,832,000 Change in fair value of warrants and derivatives ( 4,273,000 ) Loss before income taxes $ ( 100,280,000 ) Purchases of property, plant and equipment $ 2,890,000 8,569,000 $ 11,459,000 Unallocated purchases of property, plant and equipment 1,624,000 Consolidated purchases of property, plant and equipment $ 13,083,000 Depreciation expense $ 3,867,000 7,927,000 $ 11,794,000 Unallocated depreciation expense 365,000 Consolidated depreciation expense $ 12,159,000 Total segment assets as of July 31, 2024 $ 421,780,000 456,425,000 $ 878,205,000 Unallocated assets as of July 31, 2024 34,229,000 Consolidated assets as of July 31, 2024 $ 912,434,000 F - 47 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Fiscal Year Ended July 31, 2023 Satellite and Space Communications Allerium Total Net sales $ 337,756,000 212,238,000 $ 549,994,000 Cost of sales 241,544,000 123,670,000 Selling, general and administrative 51,505,000 36,920,000 Research and development 22,354,000 25,241,000 Amortization of intangibles 7,312,000 14,084,000 Segment operating income $ 15,041,000 12,323,000 $ 27,364,000 Unallocated corporate expenses 32,934,000 CEO transition costs 9,090,000 Interest expense 14,961,000 Interest (income) and other 1,226,000 Loss before income taxes $ ( 30,847,000 ) Purchases of property, plant and equipment $ 7,244,000 10,075,000 $ 17,319,000 Unallocated purchases of property, plant and equipment 992,000 Consolidated purchases of property, plant and equipment $ 18,311,000 Depreciation expense $ 4,121,000 7,637,000 $ 11,758,000 Unallocated depreciation expense 164,000 Consolidated depreciation expense $ 11,922,000 Total segment assets as of July 31, 2023 $ 515,449,000 460,034,000 $ 975,483,000 Unallocated assets as of July 31, 2023 20,754,000 Consolidated assets as of July 31, 2023 $ 996,237,000 Unallocated expenses result from corporate expenses, such as executive compensation, accounting, legal and other regulatory compliance related costs and also includes all of our amortization of stock-based compensation. During fiscal 2025, 2024 and 2023, our Unallocated segment incurred $ 9,512,000 , $ 8,043,000 and $ 3,907,000 , respectively, of restructuring costs primarily focused on legal and other expenses related to strategic alternatives and divestiture activities, as well as other initiatives to streamline our operations, align our cost structure with our future anticipated business and improve our liquidity. During fiscal 2025, our Unallocated segment incurred $ 2,682,000 of proxy solicitation costs, consisting principally of legal and advisory fees. In November 2024, we entered into a cooperation agreement (the “Cooperation Agreement”) with Fred Kornberg, Michael Porcelain and Oleg Timoshenko (collectively the “Investor Group”). Pursuant to the Cooperation Agreement, our Board appointed Michael J. Hildebrandt to serve on the Board and agreed to nominate, support and recommend Mr. Hildebrandt for election at our Fiscal 2024 Annual Meeting of Stockholders (the "2024 Annual Meeting"). Also, we agreed not to renominate two incumbent directors for election at the 2024 Annual Meeting and the Investor Group agreed to withdraw its nomination of candidates for election to the Board at the 2024 Annual Meeting to, instead, support our slate of directors for election. Pursuant to the Cooperation Agreement, we and the Investor Group will cooperate to identify an additional candidate to be appointed to the Board at a later date as an independent director. In September 2025, we provided notice to the Investor Group regarding our renomination of Mr. Hildebrandt at the Fiscal 2025 Annual Meeting of Stockholders. Accordingly, the Cooperation Agreement was extended until 30 days prior to the nomination deadline of our Fiscal 2026 Annual Meeting of Stockholders. During fiscal 2025, 2024 and 2023, our Unallocated segment incurred $ 2,117,000 , $ 2,916,000 and $ 9,090,000 , respectively, of CEO transition costs. See Note (2) - CEO Transition Costs for further information. Interest expense in the above tables includes accreted interest related to our Subordinated Credit Facility, the amortization of deferred financing costs and debt discounts related to both credit facilities and the immediate expensing of certain financing fees related to refinancing and or amending our credit facilities. See Note (8) - Credit Facility and Note (9) - Subordinated Credit Facility for further discussion. F - 48 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Intersegment sales in fiscal 2025, 2024 and 2023 between the Satellite and Space Communications segment and the Allerium segment were nominal. All intersegment sales are eliminated in consolidation and are excluded from the tables above. Unallocated assets at July 31, 2025 consist principally of cash and cash equivalents, income taxes receivable, corporate property, plant and equipment and deferred financing costs. The large majority of our long-lived assets are located in the U.S. (14) Commitments and Contingencies (a) Legal Proceedings and Other Matters Former CEO Related Matters On March 12, 2024, we terminated Ken Peterman, our President and CEO at the time, for Cause pursuant to the terms of his employment agreement dated September 12, 2022 (the “Employment Agreement”). On November 21, 2024 (as amended on December 31, 2024), Mr. Peterman filed a claim with the American Arbitration Association, alleging that Comtech materially breached the Employment Agreement in the termination for Cause and that the termination was a retaliation for whistleblowing by Mr. Peterman in connection with certain of our prior financial and accounting practices. Mr. Peterman claims he is owed direct contractual damages in an amount in excess of $ 6,000,000 and consequential damages for injury to his professional reputation in excess of $ 35,000,000 . We believe Mr. Peterman's claims are entirely without merit and will defend ourselves vigorously in the matter. We filed a Counterclaim against Mr. Peterman alleging that his misconduct and attempts to conceal the same constituted a breach of his fiduciary duties. Mr. Peterman later filed a separate administrative complaint with the Department of Labor (Occupational Safety and Health Administration) making similar allegations and claiming that we retaliated against him in violation of the Sarbanes-Oxley Act of 2002. We independently investigated, with the assistance of an outside advisor, Mr. Peterman's allegations that he was a whistleblower and determined that such allegations were not substantiated. The U.S. Department of Labor dismissed Mr. Peterman’s administrative complaint on or about April 22, 2025. The appeal period has now expired. Nevertheless, on July 18, 2025, Peterman filed a complaint in the USDC Southern District of New York, largely reciting the same claims he included in the prior Sarbanes-Oxley complaint. We promptly informed Peterman’s attorney that the suit was frivolous and sought leave of the Court to seek dismissal. Peterman’s counsel responded by withdrawing the lawsuit on September 5, 2025. Separately, on December 11, 2024, Mr. Peterman was indicted by the United States Attorney for the Eastern District of New York and arrested on charges of insider trading and securities fraud. He was also charged with similar allegations by the SEC in a civil lawsuit filed in the Eastern District of New York the same day. We are not named as a defendant in either proceeding. U.S. Export Matter In late 2023, we initiated an export compliance review pertaining to certain variants of our modems and determined that we potentially violated U.S. export compliance laws. Upon learning of the potential violations and due to our commitment to comply with global export compliance laws, we immediately and voluntarily initiated a historical review of our exports of the associated products, as well as related documentation submitted to export control authorities. Based on such review, in February and June 2024, we voluntarily disclosed to the Directorate of Defense Trade Controls (“DDTC”) a potential misclassification of certain exports under an EAR classification and promptly sought export licenses under the more restrictive ITAR classification for future exports pending the outcome of the matter. At that time, we concluded that the likelihood of a loss contingency associated with such potential violations was remote. F - 49 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued While our review is ongoing, we estimate there were approximately 70 exports for which export licenses were not obtained, with an estimated total transaction value of less than $ 2,000,000 . Our review efforts to date indicate that the countries exported to were: the United Kingdom, Canada, Italy, Singapore, India, Germany, Australia, Hungary, Spain, Denmark, South Korea, Greece, Indonesia, Philippines and New Zealand. DDTC may choose to close the matter without penalty or to impose penalties on us in connection with the above-referenced shipments. Penalties, if imposed, can be the greater of twice the amount of the transaction that is the basis for the violation, or $ 1,271,078 per violation, with discretionary adjustment downward by the DDTC for voluntary disclosure and other positive mitigating factors. On May 22, 2025, DDTC issued a Request for Information, to which we replied. The DDTC investigation remains pending, however, in light of this request, we reevaluated our prior assessment of loss contingencies associated with this matter and determined that we may no longer conclude that the likelihood of a loss contingency is remote. Rather, it is now reasonably possible that a loss contingency (e.g., monetary penalties) exists related to this matter. Such penalties, if any, are not currently estimable by us given the early stage of our review, as well as that of the DDTC, and multiple positive mitigating factors that could affect the ultimate outcome, including but not limited to: the voluntary nature of our disclosure; our historical compliance record; the number of exports involved; the parties to whom the units were shipped; and the nature of the potential violation(s). In parallel, we submitted a Classification Jurisdiction ("CJ") request to DDTC on July 30, 2025, in support of its initial classifications of the exports under investigation. The CJ remains pending. Based on such determination, we have not accrued for any loss contingencies related to this matter as of July 31, 2025. Other Matters In the ordinary course of business, we include indemnification provisions in certain of our customer contracts to indemnify, hold harmless and reimburse such customers for certain losses, including but not limited to losses related to third-party claims of intellectual property infringement arising from the customer’s use of our products or services. We may also, from time to time, receive indemnification requests from customers related to third-party claims that 911 calls were improperly routed during an emergency. We evaluate such claims as and when they arise. We do not always agree with customers that they are entitled to indemnification and in such cases reject their claims. Despite maintaining that we have properly carried out our duties, we may seek coverage under our various insurance policies; however, we cannot be sure that we will be able to maintain or obtain insurance coverage at acceptable costs or in sufficient amounts or that our insurer will not disclaim coverage as to such claims. Accordingly, pending or future claims asserted against us by a party that we are obligated to indemnify could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition. There are also certain other pending and threatened legal actions which arise in the normal course of business. Although the ultimate outcome of these matters is difficult to accurately predict, we believe that the outcome of these other matters will not have a material adverse effect on our consolidated financial condition or results of operations. (b) Employment Change of Control and Indemnification Agreements We have entered into employment and/or change of control agreements, as well as indemnification agreements with certain of our executive officers and certain key employees. All of these agreements may require payments by us, in certain circumstances, including, but not limited to, a change in control of the Company or termination of the employee. F - 50 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (15) Long-lived Assets, including Goodwill The following table represents goodwill by reportable operating segment as of July 31, 2025 and July 31, 2024: Satellite and Space Communications Allerium Total Balance as of July 31, 2024 $ 110,090,000 174,090,000 $ 284,180,000 Goodwill impairment ( 79,555,000 ) — ( 79,555,000 ) Balance as of July 31, 2025 $ 30,535,000 174,090,000 $ 204,625,000 In accordance with FASB ASC 350, we perform a goodwill impairment analysis at least annually (on the first day of the first quarter of each fiscal year, or August 1st), unless indicators of impairment exist in interim periods. If we fail the quantitative assessment of goodwill impairment ("quantitative assessment"), we would be required to recognize an impairment loss equal to the amount that a reporting unit's carrying value exceeded its fair value; however, any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. At July 31, 2025 and July 31, 2024, accumulated goodwill impairment losses related to our Satellite and Space Communications segment totaled $ 128,480,000 and $ 48,925,000 , respectively. There are no accumulated impairments for our Allerium segment. Fiscal 2025 and Prior Assessments During the fourth quarter of fiscal year 2024, our lower-than-expected financial performance in our Satellite and Space Communications segment, default on certain credit facility covenants and the sustained decrease in stock price since August 1, 2023 were considered triggering events which required a quantitative impairment test as of July 31, 2024. We performed a quantitative assessment using market participant assumptions to determine if the fair value of each of our reporting units with goodwill exceeded its carrying value. Ultimately, based on our quantitative evaluations, we determined that the carrying value of our Satellite and Space Communications reporting unit exceeded its fair value and recognized a goodwill impairment loss of $ 48,925,000 in fiscal 2024. We also determined that our Allerium reporting unit had an estimated fair value in excess of its carrying value of at least 24.7 % and concluded that our goodwill for this reporting unit was not impaired. Given our Satellite and Space Communications segment's financial performance in the first quarter of fiscal 2025, and considering triggering events within this segment prior to the issuance of our first quarter fiscal 2025 financial statements, we determined that we were required to perform another quantitative impairment test on an interim basis as of October 31, 2024. Ultimately, based on our quantitative evaluations, we determined that the carrying value of our Satellite and Space Communications reporting unit exceeded its fair value and recognized another goodwill impairment loss of $ 79,555,000 in the first quarter of fiscal 2025. In performing the above quantitative assessments, we estimated the fair value of each of our reporting units using a combination of the income and market approaches. The income approach, also known as the discounted cash flow ("DCF") method, utilizes the present value of cash flows to estimate fair value. The future cash flows for our reporting units were projected based on our estimates, at that time, of future revenues, operating income and other factors (such as working capital and capital expenditures). For purposes of conducting our impairment analysis, we assumed revenue growth rates and cash flow projections that are below our actual long-term expectations. The discount rates used in our DCF method were based on a weighted-average cost of capital ("WACC") determined from relevant market comparisons, adjusted upward for specific reporting unit risks (primarily the uncertainty of achieving projected operating cash flows). A terminal value growth rate was applied to the final year of the projected period, which reflects our estimate of stable, perpetual growth. We then calculated a present value of the respective cash flows for each reporting unit to arrive at an estimate of fair value under the income approach. Under the market approach, we estimated a fair value based on comparable companies' market multiples of revenues and earnings before interest, taxes, depreciation and amortization and factored in a control premium. Finally, we compared our estimates of fair values to our total public market capitalization and assessed implied control premiums based on our common stock price of $ 3.72 and $ 3.17 as of the dates of testing (October 31, 2024 and July 31, 2024, respectively). F - 51 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued In tandem with our quantitative impairment test as of July 31, 2024 and decision in July 2024 to exit our operations in Basingstoke, United Kingdom (which became a separate asset group, the “U.K. Asset Group”), we assessed the recoverability of the carrying value of the U.K. Asset Group under the accounting standards for assets held and used as of July 31, 2024 and determined that the undiscounted future cash flows to complete the exit of our Basingstoke operations indicated that the carrying amount of the U.K. Asset Group was not recoverable. As a result, we recorded a $ 15,600,000 non-cash long-lived asset impairment charge within the Satellite and Space Communications segment in fiscal 2024. We allocated $ 9,925,000 of this impairment to the carrying value of Intangibles with Finite Lives, net, $ 2,651,000 to Property, Plant & Equipment, net , $ 1,873,000 to Other Assets, net and $ 1,151,000 to Operating Lease Right-of-Use Assets, net . In light of our quantitative interim impairment tests as of July 31, 2024 and October 31, 2024, we assessed the recoverability of the remaining carrying values of long-lived assets within the Satellite and Space Communications segment. The undiscounted future cash flows of the asset group indicated that the carrying amount of the asset group was recoverable. Fiscal 2026 Assessment and Forward 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. In making this assessment, we considered, among other things, expectations of projected net sales and cash flows, assumptions impacting the weighted average cost of capital, trends in trading multiples of comparable companies, changes in our stock price and changes in the carrying values of our reporting units with goodwill. We also considered overall business conditions. In performing the quantitative assessment, we estimated the fair value of each of our reporting units using a combination of the income and market approaches, as discussed above. We compared our estimates of fair values to our total public market capitalization and assessed implied control premiums based on our common stock price of $ 2.05 as of the date of testing. 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. 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. 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 our next annual goodwill impairment analysis on August 1, 2026 (the start of our fiscal 2027). If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and circumstances change (e.g., a sustained decrease in the price of our common stock (considered on both absolute terms and relative to peers)), we may be required to record impairment charges when we perform these tests, or in other future periods. Any impairment charges that we may record in the future could be material to our results of operations and financial condition. F - 52 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (16) Intangible Assets Intangible assets with finite lives as of July 31, 2025 and 2024 are as follows: July 31, 2025 Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships 20.2 $ 294,258,000 148,863,000 $ 145,395,000 Technologies 13.6 106,149,000 85,439,000 20,710,000 Trademarks and other 16.9 31,826,000 24,826,000 7,000,000 Total $ 432,233,000 259,128,000 $ 173,105,000 July 31, 2024 Weighted Average Amortization Period Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships 20.2 $ 302,058,000 141,601,000 $ 160,457,000 Technologies 14.8 113,149,000 87,809,000 25,340,000 Trademarks and other 16.7 32,926,000 23,895,000 9,031,000 Total $ 448,133,000 253,305,000 $ 194,828,000 The weighted average amortization period in the above table excludes fully amortized intangible assets. Amortization expense for the fiscal years ended July 31, 2025, 2024 and 2023 was $ 21,723,000 , $ 21,154,000 and $ 21,396,000 , respectively. Amortization expense for the fiscal year ended July 31, 2025 includes $ 1,343,000 of accelerated amortization, recorded in the first quarter of fiscal 2025, due to the impact of the CGC Divestiture. Also, during the first quarter of fiscal 2025, we wrote-off all $ 15,900,000 of fully amortized intangible assets related to the CGC Divestiture. The estimated amortization expense consists of the following for the fiscal years ending July 31: 2026 $ 19,128,000 2027 17,774,000 2028 17,774,000 2029 16,353,000 2030 14,446,000 We review net intangible assets with finite lives for impairment when an event occurs indicating the potential for impairment. Based on our fiscal 2025 assessment, we believe that the carrying values of our net intangible assets were recoverable as of July 31, 2025. Based on our fiscal 2024 assessment, we recognized an impairment loss of $ 9,925,000 related to net intangible assets with finite lives within our Satellite and Space Communications segment. See Note (1)(g) - " Summary of Significant Accounting and Reporting Policies, Long-Lived Assets " for more information. If business conditions deteriorate, we may be required to record impairment losses, and/or increase the amortization of intangibles in the future. Any impairment charges that we may record in the future could be material to our results of operations and financial condition. F - 53 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (17) Convertible Preferred Stock Fiscal 2024 and Prior On October 18, 2021, we entered into a Subscription Agreement (the “Subscription Agreement”) with certain affiliates and related funds of White Hat Capital Partners LP and Magnetar Capital LLC (collectively, the “Investors”). On October 19, 2021, pursuant to the terms of the Subscription Agreement, the Investors purchased an aggregate of 100,000 shares of Series A Convertible Preferred Stock, with a par value of $ 0.10 per share, for an aggregate purchase price of $ 100,000,000 . White Hat Capital Partners LP is affiliated with Mark Quinlan, who serves as a member of our Board of Directors. On December 13, 2023, we and the Investors agreed to change certain terms of the Series A Convertible Preferred Stock, effected through an Exchange Agreement, pursuant to which the Investors exchanged (the “Series A Exchange”) all 100,000 shares of Series A Convertible Preferred Stock outstanding for 100,000 shares of our newly issued Series A-1 Convertible Preferred Stock, par value $ 0.10 per share (the “Series A-1 Convertible Preferred Stock”), with an initial liquidation preference of $ 1,134.20 per share. As a result of the Series A Exchange, no shares of Series A Convertible Preferred Stock remain outstanding. On January 22, 2024, we entered into a Subscription and Exchange Agreement with the Investors, relating to: (i) the issuance and sale of 45,000 shares of Series B Convertible Preferred Stock, par value $ 0.10 per share (the “Series B Convertible Preferred Stock”), for an aggregate purchase price of $ 45,000,000 , or $ 1,000 per share (the “Primary Issuance”), (ii) the exchange of 100,000 shares of our Series A-1 Convertible Preferred Stock for 115,721.22 shares of Series B Convertible Preferred Stock (the “Series B Exchange”) and (iii) the issuance to the Investors of 5,400 shares of Series B Convertible Preferred Stock in lieu of cash for certain expense reimbursements (the “Series B Reimbursement” and, together with the Primary Issuance and the Series B Exchange, the “Series B Issuance”). As a result of the Series B Exchange, no shares of Series A-1 Convertible Preferred Stock remain outstanding. We received $ 43,200,000 of cash proceeds from the Primary Issuance, net of $ 1,800,000 for certain expense reimbursements. On June 17, 2024, in connection with entering into the Credit Facility discussed in Note (8) - "Credit Facility," we and the Investors agreed to change certain terms of the Series B Convertible Preferred Stock. The changes altered the preferred holders’ existing consent rights and existing put rights alongside payments upon a change of control following specified asset sales, in each case consistent with the Credit Facility. To effect these changes, we and the Investors entered into a Subscription and Exchange Agreement, pursuant to which the Investors: (i) exchanged, in a transaction exempt from registration under the Securities Act of 1933, all of the 166,121.22 shares of Series B Convertible Preferred Stock outstanding for 166,121.22 shares of our newly issued Series B-1 Convertible Preferred Stock, par value $ 0.10 per share (the "Series B-1 Exchange"), with an initial liquidation preference of $ 1,036.58 per share, and (ii) received 5,705.83 additional shares of Series B-1 Convertible Preferred Stock as a consent fee (the "Series B-1 Fee"). As a result of the Series B-1 Exchange, no shares of Series B Convertible Preferred Stock remain outstanding. We did not receive any cash proceeds from the Series B-1 Exchange. F - 54 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Fiscal 2025 On October 17, 2024, in connection with amending the Credit Facility, we and the Investors agreed to change certain terms of the Series B-1 Convertible Preferred Stock. The changes: altered the date on which preferred holders can opt to have us repurchase their Series B-2 Convertible Preferred Shares (as discussed below) in certain circumstances; provided for increases to the dividend rate in certain circumstances; and provided for an option for the preferred holders to elect to receive dividends in cash (to the extent permitted by law). To effect the changes described above, we and the Investors entered into a Subscription and Exchange Agreement, pursuant to which the Investors: (i) exchanged all of the 171,827.05 shares of Series B-1 Convertible Preferred Stock outstanding for 171,827.05 shares of our newly issued Series B-2 Convertible Preferred Stock, par value $ 0.10 per share (the “Series B-2 Exchange”), with an initial liquidation preference of $ 1,067.87 per share; and (ii) received 3,436.53 additional shares of Series B-2 Convertible Preferred Stock as a consent fee (the "Series B-2 Fee"). As a result of the Series B-2 Exchange, no shares of Series B-1 Convertible Preferred Stock remain outstanding. We did not receive any cash proceeds from the Series B-2 Exchange. On March 3, 2025, in connection with amending the Credit Facility and Subordinated Credit Facility (as discussed in Note (9) - "Subordinated Credit Facility") , we and the Investors agreed to change certain terms of the Series B-2 Convertible Preferred Stock. The changes provided the Investors with a board observer right and certain information access rights. These changes were effected through a Subscription and Exchange Agreement (the "Series B-3 Subscription and Exchange Agreement"), pursuant to which the Investors: (i) exchanged (the “Series B-3 Exchange”) all of the 175,263.58 shares of Series B-2 Convertible Preferred Stock outstanding for 175,263.58 shares of our newly issued Series B-3 Convertible Preferred Stock, par value $ 0.10 per share, with an initial liquidation preference of $ 1,104.48 per share (the per share liquidation preference of the Series B-2 Convertible Preferred Stock as of the date of issuance); and (ii) received 2,916.76 additional shares of Series B-3 Convertible Preferred Stock (the “Series B-3 Fee” and, together with the Series B Reimbursement, the Series B-1 Fee and the Series B-2 Fee, the “Additional Issuances”) and $ 650,000.00 in cash as a consent fee. As a result of the Series B-3 Exchange, no shares of Series B-2 Convertible Preferred Stock remain outstanding. We did not receive any cash proceeds from the Series B-3 Exchange. The Series B-3 Convertible Preferred Stock ranks senior to the shares of our common stock, with respect to the payment of dividends and the distribution of assets upon a liquidation, dissolution or winding up of the Company. Each share of Series B-3 Convertible Preferred Stock is entitled to a cumulative dividend (the “Dividend”) at the rate of 9.00 % per annum, compounding quarterly, paid-in-kind, or 7.75 % per annum, compounding quarterly, paid in cash, at our election (except as described below), or 6.50 % per annum, in respect of any shares of Series B-3 Convertible Preferred Stock that remain outstanding following the redemption of at least fifty percent ( 50 %) of the Series B-3 Convertible Preferred Stock pursuant to the exercise of an asset sale or change in control put right or an asset sale call right, as described below. The Dividend rate may also increase following certain events, including certain asset sales that constitute a change in control, as set forth in the certificate of designations governing the Series B-3 Convertible Preferred Stock (the "Series B-3 Certificate of Designations"). For any quarter in which the Dividend is not paid in cash, such Dividend becomes part of the liquidation preference of the Series B-3 Convertible Preferred Stock. In addition, no dividend or other distribution on our common stock will be declared or paid on our common stock unless, at the time of such declaration and payment, an equivalent dividend or distribution is declared and paid on the Series B-3 Convertible Preferred Stock (the “Participating Dividend”), provided that in the case of any such dividend in the form of cash, in lieu of a cash payment, such Participating Dividend will become part of the liquidation preference of the Series B-3 Convertible Preferred Stock. Such Participating Dividend results in the Series B-3 Convertible Preferred Stock meeting the definition of a "participating security" for purposes of our earnings per share calculations. Following the satisfaction of all obligations under the Credit Facility in full and the termination of all of commitments under the Credit Facility (a “CA Satisfaction”), and (i) our failure to fully satisfy an exercised put right (other than a put right exercised in connection with an Asset Sale that constitutes a change in control) or (ii) beginning on or after April 30, 2027 (or later in certain circumstances), holders of the Series B-3 Convertible Preferred Stock will be entitled to elect to have us pay the Dividend in cash (to the extent permitted by law). The shares of Series B-3 Convertible Preferred Stock are convertible into shares of common stock at the option of the holder thereof at any time. At any time after July 22, 2027, we have the right to mandate conversion of the Series B-3 Convertible Preferred Stock, subject to certain restrictions based on the price of our common stock in the preceding thirty ( 30 ) trading days. The conversion price for the Series B-3 Convertible Preferred Stock is $ 7.99 , subject to certain adjustments set forth in the Series B-3 Certificate of Designations. F - 55 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Holders of the Series B-3 Convertible Preferred Stock are entitled to vote with the holders of our common stock on an as-converted basis, and are entitled to a separate class vote with respect to, among other things, amendments to our organizational documents that have an adverse effect on the Series B-3 Convertible Preferred Stock, authorizations or issuances of securities of the Company (other than certain qualified or private offerings of up to $ 50,000,000 of shares of common stock), the payment of dividends, related party transactions, repurchases or redemptions of securities of the Company, dispositions of businesses or assets involving consideration having a fair value in excess of $ 75,000,000 (or $ 20,000,000 following a CA Satisfaction), the incurrence of certain indebtedness and certain amendments or extensions of our Credit Facility on terms and conditions that, taken as a whole, (A) are materially different from the existing Credit Facility or (B) adversely affect our ability to perform our obligations in connection with an optional repurchase of the Series B-3 Convertible Preferred Stock, in each case, subject to the exceptions and qualifications set forth in the Series B-3 Certificate of Designations. Holders have the right to require us to repurchase their Series B-3 Convertible Preferred Stock (at 1.0 x the liquidation preference, plus accrued and unpaid dividends) on a date occurring either: (a) on or after October 31, 2028, (b) upon the consummation of an asset sale meeting certain criteria, or (c) on or after April 30, 2027 following a CA Satisfaction. We have the right to repurchase all, or less than all, of the Series B-3 Convertible Preferred Stock upon the consummation of an asset sale meeting the same criteria, other than an asset sale that would result in a change-of-control. In addition, each holder will have the right to cause us to repurchase its Series B-3 Convertible Preferred Stock in connection with a Change of Control (as defined in the Series B-3 Certificate of Designations) at 1.5 x (or 1.0x in the case of Series B-3 Convertible Preferred Stock issued in the Additional Issuances) the liquidation preference, plus accrued and unpaid dividends. Any repurchase described above would be subject to the terms set forth in the Series B-3 Certificate of Designations. Upon a repurchase of the Series B-3 Convertible Preferred Stock at 1.0 x the liquidation preference, we will issue each respective holder a warrant (a “Warrant”). A Warrant will represent the right to acquire our common stock, as further described in the Series B-3 Subscription and Exchange Agreement, for a term of five years and six months from the issuance of such Warrant, at an initial exercise price equal to the conversion price on the date of issuance of such Warrant, subject to certain adjustments. We determined that our obligation to issue a Warrant met the definition of a freestanding financial instrument that should be accounted for as a liability. The Warrant liability is classified in "Warrant and Derivative Liabilities" on the Consolidated Balance Sheets and is remeasured to its estimated fair value each reporting period, using Level 3 fair value inputs, until the Warrant is exercised or expires. Changes in the estimated fair value of the Warrant are recognized in our Consolidated Statements of Operations as a non-cash expense or benefit. As of July 31, 2025 and July 31, 2024, the Warrant liability was remeasured to $ 234,000 and $ 710,000 , resulting in non-cash benefits of $ 476,000 and $ 5,730,000 , respectively, recorded in " Other expenses (income) - Change in fair value of warrants and derivatives " on the Consolidated Statements of Operations . We accounted for the cancellation of our Series B-1 Convertible Preferred Stock as an extinguishment based on a qualitative and quantitative assessment of the terms of the preferred shares exchanged. We recognized a $ 51,179,000 gain on extinguishment in the first quarter of fiscal 2025, representing the difference between the carrying value of the Series B-1 Convertible Preferred Stock and the issuance date fair value of the Series B-2 Convertible Preferred Stock. As the Series B-1 Convertible Preferred Stock was classified as temporary equity, the gain on extinguishment was included as an offset in determining net loss attributable to common stockholders and credited to retained earnings as a return from the holders. We accounted for the Series B-3 Exchange as a modification. F - 56 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued We identified several embedded derivatives that require bifurcation from the Series B-2 Convertible Preferred Stock (and subsequent issuance of the Series B-3 Convertible Preferred Stock) under ASC 815, including the holders' right to: (i) require us to repurchase Series B-3 Convertible Preferred Stock upon the consummation of an asset sale meeting certain criteria, or in connection with a change in control; (ii) convert Series B-3 Convertible Preferred Shares into shares of our common stock; (iii) increase the dividend rate in certain circumstances; and (iv) elect to receive cash dividends in certain circumstances. When evaluating such embedded derivatives, we determined that the Series B-3 Convertible Preferred Stock was more akin to a debt-like host than an equity-like host. We also determined that such features qualify for accounting as one combined embedded derivative liability. We established an initial embedded derivative liability of $ 38,832,000 , which was recorded as a reduction to the initial fair value of the Series B-2 Convertible Preferred Stock and presented with "Warrant and Derivative Liabilities" on the Consolidated Balance Sheets. The combined embedded derivative liability is remeasured to its estimated fair value each reporting period, using Level 3 fair value inputs. Changes in the estimated fair value of the combined embedded derivative liability are recognized in our Consolidated Statements of Operations as a non-cash expense or benefit. As of July 31, 2025, the embedded derivative liability was remeasured to $ 14,608,000 , resulting in a non-cash benefit of $ 24,224,000 for the fiscal year ended July 31, 2025, recorded in " Other expenses (income) - Change in fair value of warrants and derivatives " on the Consolidated Statements of Operations. Upon the Series B-2 Exchange, the initial estimated fair value of the Series B-2 Convertible Preferred Stock was $ 132,310,000 . We reduced the initial estimated fair value of the Series B-2 Convertible Preferred Stock to establish the initial combined embedded derivative liability, as discussed above. We also adjusted the carrying value of the Series B-3 Convertible Preferred Stock at July 31, 2025 based on its redemption value of $ 204,153,000 , which includes $ 5,978,000 of accumulated and unpaid dividends. During the fiscal year ended July 31, 2025, as presented in the table below, the adjustments charged against retained earnings and additional paid in capital to increase the carrying value of each respective Series B Convertible Preferred Stock, while outstanding, to their respective redemption values totaled $ 96,258,000 . The following table presents the allocation of the initial estimated fair value of the Series B-2 Convertible Preferred Stock to its host instrument and combined embedded derivatives on October 17, 2024: Initial estimated fair value of Series B-2 Convertible Preferred Stock $ 132,310,000 Initial estimated fair value and carrying value of combined embedded derivatives 38,832,000 Initial carrying value of Series B-2 Convertible Preferred Stock $ 93,478,000 The following table presents a reconciliation of the adjustments to increase the carrying values of the Convertible Preferred Stock to their redemption values while outstanding: Redemption value of Series B-3 Convertible Preferred Stock at July 31, 2025 $ 204,153,000 Less: Carrying value of combined embedded derivatives at July 31, 2025 14,608,000 Carrying value of Series B-3 Convertible Preferred Stock at July 31, 2025 189,545,000 Less: Initial carrying value of Series B-2 Convertible Preferred Stock on October 17, 2024 93,478,000 Less: Initial carrying value of Series B-3 Fee on March 3, 2025 3,221,000 Adjustment to increase the carrying value of Series B-3 Convertible Preferred Stock to its redemption value at July 31, 2025 and Series B-2 Convertible Preferred Stock (while outstanding) 92,846,000 Adjustment to increase carrying value of Series B-1 Convertible Preferred Stock to its redemption value (while outstanding) 3,412,000 Total adjustments to redemption values charged to Stockholder's Equity for the fiscal year ended July 31, 2025 $ 96,258,000 In accordance with ASC 480, Distinguishing Liabilities from Equity , specifically ASC 480-10-S99-3A(2), SEC Staff Announcement: Classification and Measurement of Redeemable Securities , we classified the respective Series B Convertible Preferred Stock outside of permanent equity, as temporary equity, since the redemption of such shares is at the option of the holder on a fixed date or upon the occurrence of certain events that are not solely within our control. F - 57 COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (18) Stockholders’ Equity Common Stock Repurchase Program On September 29, 2020, our Board of Directors authorized a $ 100,000,000 stock repurchase program, which replaced our prior program. The $ 100,000,000 stock repurchase program has no time restrictions and repurchases may be made from time to time in open-market or privately negotiated transactions, or by other means in accordance with federal securities laws. There were no repurchases made during the fiscal years ended July 31, 2025 or 2024. Additional Paid in Capital During the fiscal year ended July 31, 2025, $ 89,879,000 of the adjustments to the carrying values of outstanding Convertible Preferred Stock to their respective redemption values, while outstanding, were charged to additional paid in capital so as not to exceed the available amount of retained earnings as of July 31, 2025. (19) Cost Reduction and Related Restructuring Activities In fiscal 2025, in connection with our transformation strategy, we implemented multiple reductions in force throughout our organization and in all of our segments. Inclusive of actions taken in August 2025 (i.e., the start of our fiscal 2026), such reductions approximated 23 % of our workforce as of July 31, 2024, or approximately $ 47,000,000 in annualized labor costs. Related to these activities, in fiscal 2025, we recorded $ 3,633,000 of severance costs within selling, general and administrative expenses in our Consolidated Statements of Operations . After net payments of $ 3,900,000 during fiscal 2025, our severance liability as of July 31, 2024 decreased from $ 1,029,000 to $ 762,000 as of July 31, 2025. At July 31, 2025, we had approximately 1,385 employees (including contractors), compared to 1,676 as of July 31, 2024. As of the issuance date, we had approximately 1,347 employees (including temporary employees and contractors), which reflects the completion of a reduction in force within our Allerium segment in August 2025. We recorded severance costs of $ 2,616,000 and $ 3,872,000 during fiscal 2024 and 2023, respectively. F - 58 Schedule II COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES Valuation and Qualifying Accounts and Reserves Fiscal Years Ended July 31, 2025, 2024 and 2023 Column A Column B Column C Additions Column D Column E Description Balance at beginning of period Charged to cost and expenses Transfers (deductions) - describe Balance at end of period Allowance for doubtful accounts receivable: Year ended July 31, 2025 $ 1,932,000 17,608,000 (A) ( 384,000 ) (B) $ 19,156,000 2024 2,089,000 1,422,000 (A) ( 1,579,000 ) (B) 1,932,000 2023 2,337,000 261,000 (A) ( 509,000 ) (B) 2,089,000 Inventory reserves: Year ended July 31, 2025 $ 18,271,000 16,202,000 (C) ( 8,050,000 ) (D) $ 26,423,000 2024 24,659,000 2,801,000 (C) ( 9,189,000 ) (D) 18,271,000 2023 23,121,000 4,871,000 (C) ( 3,333,000 ) (D) 24,659,000 Valuation allowance for deferred tax assets: Year ended July 31, 2025 $ 44,888,000 26,413,000 (E) ( 328,000 ) (E) $ 70,973,000 2024 34,478,000 12,343,000 (E) ( 1,933,000 ) (E) 44,888,000 2023 31,227,000 4,617,000 (E) ( 1,366,000 ) (E) 34,478,000 (A) Provision for doubtful accounts. See Note (4) - "Accounts Receivable" for further discussion of the fiscal 2025 provision. (B) Write-off of uncollectible receivables. Fiscal 2024 reflects the PST Divestiture. See Note (3) - "Business Divestitures" for further discussion. (C) Provision for excess and obsolete inventory. See Note (5) - "Inventories" for further discussion of the fiscal 2025 provision. (D) Write-off of inventory. Fiscal 2025 includes $ 2,900,000 related to our decision to wind-down our Basingstoke, U.K. operations. Fiscal 2024 reflects the PST Divestiture. See Note (3) - "Business Divestitures" for further discussion. (E) Change in valuation allowance. See Note (11) - " Income Taxes " for further discussion. S - 1