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Index

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended January 31, 2025
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 0-7928
Comtech_logo_full_color_light_bkgrnd no tag horizontal (1) (002)_SIDE BY SIDE.jpg
(Exact name of registrant as specified in its charter)
Delaware   11-2139466
(State or other jurisdiction of incorporation /organization)   (I.R.S. Employer Identification Number)
305 N 54th Street,
Chandler, Arizona
   85226
(Address of principal executive offices)   (Zip Code)
(480) 333-2200
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class   Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.10 per share   CMTL Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
 Accelerated filer
☒
 Emerging growth company
☐
Non-accelerated filer
☐
 Smaller reporting company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes  ☒ No
As of March 7, 2025, the number of outstanding shares of Common Stock, par value $0.10 per share, of the registrant was 29,346,599 shares.

Index

COMTECH TELECOMMUNICATIONS CORP.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II. OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 4.
Item 5.
Item 6.
1
Index

PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Assets January 31, 2025 July 31, 2024
Current assets:
Cash and cash equivalents $ 26,666,000  32,433,000 
Accounts receivable, net 167,197,000  195,595,000 
Inventories, net 81,401,000  93,136,000 
Prepaid expenses and other current assets 14,283,000  15,387,000 
Total current assets 289,547,000  336,551,000 
Property, plant and equipment, net 45,228,000  47,328,000 
Operating lease right-of-use assets, net 30,231,000  31,590,000 
Goodwill 204,625,000  284,180,000 
Intangibles with finite lives, net 183,192,000  194,828,000 
Deferred financing costs, net 1,806,000  3,251,000 
Other assets, net 15,932,000  14,706,000 
Total assets $ 770,561,000  912,434,000 
Liabilities, Convertible Preferred Stock and Stockholders’ Equity    
Current liabilities:    
Accounts payable $ 43,056,000  42,477,000 
Accrued expenses and other current liabilities 53,470,000  62,245,000 
Current portion of credit facility, net 186,434,000  4,050,000 
Current portion of subordinated credit facility, net 28,729,000  — 
Operating lease liabilities, current 7,363,000  7,869,000 
Contract liabilities 65,616,000  65,834,000 
Interest payable 641,000  1,072,000 
Total current liabilities 385,309,000  183,547,000 
Non-current portion of credit facility, net —  173,527,000 
Operating lease liabilities, non-current 28,667,000  30,258,000 
Income taxes payable, non-current 2,516,000  2,231,000 
Deferred tax liability, net 5,899,000  6,193,000 
Long-term contract liabilities 20,253,000  21,035,000 
Warrant and derivative liabilities 72,746,000  5,254,000 
Other liabilities 4,146,000  4,060,000 
Total liabilities 519,536,000  426,105,000 
Commitments and contingencies (See Note 20)
Convertible preferred stock, par value $0.10 per share; authorized and issued 175,264 shares at January 31, 2025 (redemption value of $192,051,000 which includes accrued dividends of $1,430,000) 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)
 122,317,000  180,076,000 
Stockholders' equity:    
Preferred stock, par value $0.10 per share; authorized and unissued 1,824,736 and 1,828,173 shares at January 31, 2025 and July 31, 2024, respectively
 —  — 
Common stock, par value $0.10 per share; authorized 100,000,000 shares; issued 44,380,110 and 43,766,109 shares at January 31, 2025 and July 31, 2024, respectively
 4,438,000  4,377,000 
Additional paid-in capital 614,858,000  640,145,000 
Retained (deficit) earnings (48,739,000) 103,580,000 
570,557,000  748,102,000 
Less:    
Treasury stock, at cost (15,033,317 shares at January 31, 2025 and July 31, 2024)
 (441,849,000) (441,849,000)
Total stockholders’ equity 128,708,000  306,253,000 
Total liabilities, convertible preferred stock and stockholders’ equity $ 770,561,000  912,434,000 

See accompanying notes to condensed consolidated financial statements.
2
Index

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended January 31, Six months ended January 31,
  2025 2024 2025 2024
Net sales $ 126,574,000  134,225,000  $ 242,374,000  286,136,000 
Cost of sales 92,834,000  91,027,000  194,118,000  195,056,000 
Gross profit 33,740,000  43,198,000  48,256,000  91,080,000 
Expenses:    
Selling, general and administrative 33,832,000  30,307,000  85,476,000  63,002,000 
Research and development 4,354,000  6,843,000  8,067,000  14,655,000 
Amortization of intangibles 5,043,000  5,288,000  11,636,000  10,577,000 
Impairment of long-lived assets, including goodwill —  —  79,555,000  — 
Proxy solicitation costs 1,099,000  —  2,682,000  — 
CEO transition costs (331,000) —  267,000  — 
Gain on business divestiture, net —  (2,213,000) —  (2,213,000)
  43,997,000  40,225,000  187,683,000  86,021,000 
Operating (loss) income (10,257,000) 2,973,000  (139,427,000) 5,059,000 
Other expenses (income):    
Interest expense 11,008,000  5,265,000  20,540,000  10,197,000 
Interest (income) and other (126,000) 902,000  509,000  837,000 
Write-off of deferred financing costs —  —  1,412,000  — 
Change in fair value of warrants and derivatives 28,568,000  —  34,092,000  — 
Loss before (benefit from) provision for income taxes (49,707,000) (3,194,000) (195,980,000) (5,975,000)
(Benefit from) provision for income taxes (968,000) 7,364,000  1,166,000  6,020,000 
Net loss $ (48,739,000) (10,558,000) $ (197,146,000) (11,995,000)
(Loss) gain on extinguishment of convertible preferred
  stock		 —  (13,640,000) 51,179,000  (13,640,000)
Adjustments to reflect redemption value of convertible
  preferred stock:
Convertible preferred stock issuance costs —  (4,273,000) —  (4,273,000)
Deemed contributions (dividends) on convertible preferred stock 26,383,000  (2,061,000) (32,251,000) (3,884,000)
Net loss attributable to common stockholders $ (22,356,000) (30,532,000) $ (178,218,000) (33,792,000)
Net loss per common share (See Note 6):    
Basic $ (0.76) (1.07) $ (6.06) (1.18)
Diluted $ (0.76) (1.07) $ (6.06) (1.18)
Weighted average number of common shares outstanding
   – basic		 29,339,000  28,662,000  29,393,000  28,704,000 
Weighted average number of common and common
  equivalent shares outstanding – diluted		 29,339,000  28,662,000  29,393,000  28,704,000 
 
See accompanying notes to condensed consolidated financial statements.

3
Index


COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(Unaudited)

Three months ended January 31, 2025 and 2024
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 October 31, 2023 100,000  $ 114,034,000  43,268,782  $ 4,327,000  $ 638,652,000  $ 235,676,000  15,033,317  $ (441,849,000) $ 436,806,000 
Equity-classified stock award compensation
 —  —  —  —  2,189,000  —  —  —  2,189,000 
Issuance of employee stock purchase plan shares —  —  11,318  1,000  81,000  —  —  —  82,000 
Issuance of restricted stock, net of forfeiture —  —  (16,590) (2,000) 2,000  —  —  —  — 
Net settlement of stock-based awards
 —  —  242,779  25,000  (1,624,000) —  —  —  (1,599,000)
Extinguishment of convertible preferred stock (100,000) (115,721,000) —  —  —  (13,640,000) —  —  (13,640,000)
Issuance of convertible preferred stock 166,121  166,121,000  —  —  —  —  —  —  — 
Convertible preferred stock issuance costs —  (4,273,000) —  —  —  —  —  —  — 
Adjustment to reflect redemption value of convertible preferred stock (including accrued dividends) 6,334,000  —  —  —  (6,334,000) —  —  (6,334,000)
Reversal of dividend equivalents —  —  —  —  —  13,000  —  —  13,000 
Net loss —  —  —  —  —  (10,558,000) —  —  (10,558,000)
Balance as of January 31, 2024 166,121  $ 166,495,000  43,506,289  $ 4,351,000  $ 639,300,000  $ 205,157,000  15,033,317  $ (441,849,000) $ 406,959,000 
Balance as of October 31, 2024 175,264  $ 148,700,000  43,927,127  $ 4,393,000  $ 587,820,000  $ —  15,033,317  $ (441,849,000) $ 150,364,000 
Equity-classified stock award compensation
 —  —  —  —  1,170,000  —  —  —  1,170,000 
Issuance of employee stock purchase plan shares —  —  13,111  2,000  43,000  —  —  —  45,000 
Issuance of restricted stock, net of forfeiture —  —  37,216  3,000  (3,000) —  —  —  — 
Net settlement of stock-based awards
 —  —  402,656  40,000  (560,000) —  —  —  (520,000)
Adjustment to reflect redemption value of convertible preferred stock (including accrued dividends) —  (26,383,000) —  —  26,383,000  —  —  —  26,383,000 
Reversal of dividend equivalents —  —  —  —  5,000  —  —  —  5,000 
Net loss —  —  —  —  —  (48,739,000) —  —  (48,739,000)
Balance as of January 31, 2025 175,264  $ 122,317,000  44,380,110  $ 4,438,000  $ 614,858,000  $ (48,739,000) 15,033,317  $ (441,849,000) $ 128,708,000 

See accompanying notes to condensed consolidated financial statements.
4
Index

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(Unaudited)

Six months ended January 31, 2025 and 2024
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, 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
 —  —  —  —  4,834,000  —  —  —  4,834,000 
Issuance of employee stock purchase plan shares —  —  24,117  2,000  174,000  —  —  —  176,000 
Issuance of restricted stock, net of forfeiture —  —  (2,686) —  —  —  —  —  — 
Net settlement of stock-based awards
 —  —  388,587  39,000  (2,633,000) —  —  —  (2,594,000)
Extinguishment of convertible preferred stock (100,000) (115,721,000) —  —  —  (13,640,000) —  —  (13,640,000)
Issuance of convertible preferred stock 166,121  166,121,000  —  —  —  —  —  —  — 
Convertible preferred stock issuance costs (4,273,000) —  —  —  —  —  —  — 
Adjustment to reflect redemption value of convertible preferred stock (including accrued dividends) —  8,157,000  —  —  —  (8,157,000) —  —  (8,157,000)
Reversal of dividend equivalents —  —  —  —  —  36,000  —  —  36,000 
Net loss —  —  —  —  —  (11,995,000) —  —  (11,995,000)
Balance as of January 31, 2024 166,121  $ 166,495,000  43,506,289  $ 4,351,000  $ 639,300,000  $ 205,157,000  15,033,317  $ (441,849,000) $ 406,959,000 
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
 —  —  —  —  1,325,000  —  —  —  1,325,000 
Issuance of employee stock purchase plan shares —  —  27,586  3,000  80,000  —  —  —  83,000 
Issuance of restricted stock, net of forfeiture —  —  63,450  6,000  (6,000) —  —  —  — 
Net settlement of stock-based awards
 —  —  522,965  52,000  (819,000) —  —  —  (767,000)
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 reported in Warrant and Derivative Liabilities 175,264  93,479,000  —  —  —  —  —  —  — 
Adjustment to reflect redemption value of convertible preferred stock (including accrued dividends) —  32,251,000  —  —  (25,872,000) (6,379,000) —  —  (32,251,000)
Reversal of dividend equivalents —  —  —  —  5,000  27,000  —  —  32,000 
Net loss —  —  —  —  —  (197,146,000) —  —  (197,146,000)
Balance as of January 31, 2025 175,264  $ 122,317,000  44,380,110  $ 4,438,000  $ 614,858,000  $ (48,739,000) 15,033,317  $ (441,849,000) $ 128,708,000 

See accompanying notes to condensed consolidated financial statements.
5
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended January 31,
  2025 2024
Cash flows from operating activities:    
Net loss $ (197,146,000) (11,995,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property, plant and equipment 5,674,000  5,952,000 
Amortization of intangible assets with finite lives 11,636,000  10,577,000 
Amortization of stock-based compensation 1,325,000  4,834,000 
Amortization of cost to fulfill assets 261,000  480,000 
Paid-in-kind interest under term loan 5,528,000  — 
Accretion of interest on subordinated credit facility 1,563,000  — 
Amortization of deferred financing costs 2,157,000  1,543,000 
Write-off of deferred financing costs 1,412,000  — 
Change in fair value of warrants and derivatives 34,092,000  — 
Gain on business divestiture, net —  (2,213,000)
Changes in other liabilities —  (2,067,000)
Loss on disposal of property, plant and equipment 299,000  19,000 
Provision for allowance for doubtful accounts and contract assets 17,861,000  620,000 
Provision for excess and obsolete inventory 13,534,000  1,473,000 
Deferred income tax (benefit) expense (493,000) 1,135,000 
Impairment of long-lived assets, including goodwill 79,555,000  — 
Changes in assets and liabilities, net of effects of divestiture:    
Accounts receivable 10,537,000  (40,456,000)
Inventories (1,799,000) 913,000 
Prepaid expenses and other current assets 155,000  2,157,000 
Other assets (1,252,000) 2,397,000 
Accounts payable 1,386,000  (19,345,000)
Accrued expenses and other current liabilities (8,314,000) (3,089,000)
Contract liabilities (1,000,000) 2,807,000 
Other liabilities, non-current 185,000  172,000 
Interest payable (431,000) (51,000)
Income taxes payable 1,235,000  2,932,000 
Net cash used in operating activities (22,040,000) (41,205,000)
Cash flows from investing activities:    
Proceeds from business divestiture, net —  32,425,000 
Purchases of property, plant and equipment (4,068,000) (7,489,000)
Net cash (used in) provided by investing activities (4,068,000) 24,936,000 
Cash flows from financing activities:    
Proceeds from subordinated credit facility 25,000,000  — 
Proceeds from issuance of convertible preferred stock —  43,200,000 
Net borrowings under revolving loan —  22,619,000 
Repayment of term loan —  (18,738,000)
Proceeds from issuance of employee stock purchase plan shares 83,000  176,000 
Payment of deferred financing costs (3,158,000) (2,097,000)
Remittance of employees’ statutory tax withholding for stock awards (1,181,000) (3,798,000)
Payment of shelf registration costs (170,000) — 
Cash dividends paid on common stock (157,000) (265,000)
Payment of convertible preferred stock issuance costs (76,000) (3,833,000)
Net cash provided by financing activities 20,341,000  37,264,000 
Net (decrease) increase in cash and cash equivalents (5,767,000) 20,995,000 
Cash and cash equivalents at beginning of period 32,433,000  18,961,000 
Cash and cash equivalents at end of period $ 26,666,000  39,956,000 
See accompanying notes to condensed consolidated financial statements.
 (Continued)
6
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
Six months ended January 31,
2025 2024
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest $ 11,700,000  8,693,000 
Income taxes, net $ 639,000  1,951,000 
Non-cash investing and financing activities:
Adjustment to reflect redemption value of convertible preferred stock $ 32,251,000  8,157,000 
Term loan amendment fee paid-in-kind $ 3,250,000  — 
Accrued additions to property, plant and equipment $ 768,000  1,271,000 
Accrued shelf registration costs $ 47,000  20,000 
Accrued deferred financing costs $ 17,000  821,000 
Issuance of restricted stock $ 6,000  — 
Reversal of dividend equivalents $ (32,000) (36,000)
Unpaid convertible preferred stock issuance costs $ —  440,000 
See accompanying notes to condensed consolidated financial statements.

7
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1)     General

The accompanying Condensed Consolidated Financial Statements of Comtech Telecommunications Corp. and its subsidiaries ("Comtech," "we," "us," or "our") as of and for the three and six months ended January 31, 2025 and 2024 are unaudited. In the opinion of management, the information furnished reflects all material adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the unaudited interim periods. Our results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full fiscal year.

The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America requires us 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 Condensed Consolidated Financial Statements, and the reported amounts of net sales and expenses during the reported period. Actual results may differ from those estimates.

Our Condensed Consolidated Financial Statements should be read in conjunction with our audited consolidated financial statements, filed with the Securities and Exchange Commission ("SEC"), for the fiscal year ended July 31, 2024 and the notes thereto contained in our Annual Report on Form 10-K, and all of our other filings with the SEC.

During the three and six months ended January 31, 2025, we reclassified warrant liabilities as of July 31, 2024 from "Other Liabilities" to "Warrant and Derivative Liabilities" on the Condensed Consolidated Balance Sheets to conform to the current period presentation.

Liquidity and Going Concern

Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, we are required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern. This evaluation does not take into consideration the potential mitigating effect of our plans that have not been fully implemented or are not within our control as of the date the unaudited Condensed Consolidated Financial Statements are issued. When substantial doubt exists, we are required to evaluate whether the mitigating effect of our plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of our plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the unaudited Condensed Consolidated Financial Statements are issued, and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited Condensed Consolidated Financial Statements are issued.

As of the date these financial statements were issued (the "issuance date"), we evaluated whether the following conditions or events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern over the next twelve months beyond the issuance date.

Over the past three fiscal years, we incurred operating losses of $79,890,000, $14,660,000 and $33,752,000 in fiscal 2024, 2023 and 2022, respectively. More recently, we recognized an operating loss of $10,257,000 and $139,427,000 in the three and six months ended January 31, 2025. In addition, over the past three fiscal years, net cash used in operating activities was $54,495,000 and $4,433,000 in fiscal 2024 and 2023, respectively, and net cash provided by operating activities was $1,997,000 in fiscal 2022. More recently, net cash used in operating activities was $22,040,000 in the six months ended January 31, 2025. Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility, as discussed further below, and/or secure other sources of outside capital. While we believe we will be able to generate sufficient positive cash inflows, maximize our borrowing capacity and secure outside capital, there can be no assurance our plans will be successfully implemented and, as such, we may be unable to continue as a going concern over the next year beyond the issuance date.

8
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As discussed further in Note (10) – Credit Facility, on June 17, 2024, we entered into a credit facility with a new syndicate of lenders, which replaced our prior credit facility. As further discussed below, we subsequently amended the credit facility on October 17, 2024 and March 3, 2025 (the "Credit Facility"). The Credit Facility consists of a committed $162,000,000 term loan (“Term Loan”) and $56,821,000 revolving loan (“Revolver Loan”). At January 31, 2025 and March 10, 2025 (the date closest to the issuance date), total outstanding borrowings under the Credit Facility were $202,940,000 and $168,008,000, respectively. At January 31, 2025 and March 10, 2025, $32,500,000 and $23,416,000, respectively, was drawn on the Revolver Loan. As of the issuance date, our available sources of liquidity approximate $27,413,000, consisting of qualified cash and cash equivalents and the remaining available portion of the committed Revolver Loan.

The Credit Facility was amended on October 17, 2024 and March 3, 2025 to waive 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 and January 31, 2025, respectively. Cumulatively, the amendments also, among other things: (i) reduced the interest rate margins applicable to the Term Loan; (ii) permitted the incurrence of $65,000,000 of total senior unsecured subordinated debt (as described below); (iii) suspended testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants until October 31, 2025; (iv) suspended our ability to pay interest in-kind until after the interest rate margins are tested based on net leverage ratios; (v) provided the lenders a consent right with respect to Revolver Loan borrowings above $29,321,000; 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 requires compliance with restrictive and financial covenants, including: a maximum Net Leverage Ratio of 3.15x commencing with the four fiscal quarter period ending October 31, 2025; a minimum Fixed Charge Coverage Ratio of 1.25x commencing with the four fiscal quarter period ending October 31, 2025; a minimum Average Liquidity requirement at each fiscal quarter end of $17,500,000; and a minimum EBITDA of $35,000,000 for the four fiscal quarter period ending October 31, 2025. Such covenants adjust under the Credit Facility in future periods. Over the next twelve months beyond the issuance date, we believe that it is probable we will not be able to comply with one or more of these covenants.

As discussed further in Note (11) – Subordinated Credit Facility, on October 17, 2024, we entered into a Subordinated Credit Agreement with the existing holders of our Convertible Preferred Stock which provided for an initial subordinated unsecured term loan facility in the aggregate principal amount of $25,000,000. On March 3, 2025, we entered into an amendment to the Subordinated Credit Agreement (“Subordinated Credit Facility”). In addition to waiving certain defaults or events of default under the Subordinated Credit Facility, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of January 31, 2025, cumulatively, the Subordinated Credit Facility, among other things: (i) provides for a total $65,000,000 facility; and (ii) 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 of the Subordinated Credit Facility cured our defaults on certain financial covenants under the Credit Facility, as discussed above, and were principally used to repay a portion of the Term Loan and Revolving Loan on March 3, 2025 and to fund our general working capital needs. At January 31, 2025 and March 10, 2025 (the date closest to the issuance date), total outstanding borrowings under the Subordinated Credit Facility (excluding accreted interest) were $25,000,000 and $65,000,000, respectively.

Our ability to meet our current obligations as they become due may be impacted by our ability to remain compliant with the financial covenants required by the Credit Facility and Subordinated Credit Facility, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained. While we believe we will be able to secure such waivers or amendments, as needed, there can be no assurance such waivers or amendments will be secured or on terms that are acceptable to us. If we are unable to secure waivers or amendments, the lenders may declare an event of default, which would cause an immediate acceleration and repayment of all outstanding principal, interest and fees due under our Credit Facility and Subordinated Credit Facility. Absent our ability to repay the forgoing amounts upon the declaration of an event of default, the lenders may exercise their rights and remedies under the Credit Facility and Subordinated Credit Facility, which may include, among others, a seizure of substantially all of our assets and/or the liquidation of our operations. If an event of default occurs that allows the lenders to exercise these rights and remedies over the next year beyond the issuance date, we will be unable to continue as a going concern.

9
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of the issuance date, our plans to address our ability to continue as a going concern include, among other things:

•executing a strategy to transform Comtech (ongoing and future actions supporting our transformation strategy include: an exploration of strategic alternatives for our various businesses and product lines; the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and the implementation of additional operational initiatives to both achieve profitable results from operations as well as to align our go-forward cost structure with our future state business), as discussed further in Note (21) – Cost Reduction and Restructuring Related Activities;
•pursuing initiatives to reduce investments in working capital, namely accounts receivable and inventory;
•improving process disciplines to attain and maintain profitable operations by entering into more favorable sales or service contracts;
•reevaluating our business plans to identify opportunities (e.g., within each of our segments) to focus future investment on our most strategic, high-margin revenue opportunities;
•reevaluating our business plans to identify opportunities to further reduce capital expenditures;
•seeking opportunities to improve liquidity through any combination of debt and/or equity financing (including possibly restructuring our Credit Facility, Convertible Preferred Stock and/or Subordinated Credit Facility); and
•seeking other strategic transactions and/or measures including, but not limited to, the potential sale or divestiture of assets in addition to the wind down of our steerable antenna product line in Basingstoke, U.K.

While we believe the implementation of some or all of the elements of our plans over the next year beyond the issuance date will be successful, these plans are not all solely within management’s control and, as such, we can provide no assurance our plans are probable of being effectively implemented as of the issuance date. Therefore, the adverse conditions and events described above are uncertainties that raise substantial doubt about our ability to continue as a going concern. The accompanying Condensed Consolidated Financial Statements have been prepared on the basis that we will continue to operate as a going concern, which contemplates we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying Condensed Consolidated Financial Statements do not include any adjustments that may result from the outcome of these uncertainties.

CEO Transition Costs and Related
On March 12, 2024, Ken Peterman's employment with the Company was terminated for cause and the Board of Directors (the "Board") appointed John Ratigan as interim CEO and Mark Quinlan as Chairman of the Board ("Chairman"). Prior to the changes, John Ratigan served as our Chief Corporate Development Officer and Mark Quinlan served as a member of our Board. Upon termination of his employment, Ken Peterman was deemed to have resigned from his position as Chairman and as a director pursuant to his employment contract. On October 28, 2024, John Ratigan became our President and CEO. On November 26, 2024, existing Board members, Kenneth H. Traub and Lieutenant General (Retired) Bruce T. Crawford, were appointed Executive Chairman and Lead Independent Director, respectively, and Mark Quinlan resigned from his position as Chairman. On January 13, 2025, the Board named 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 director. During the three months ended January 31, 2025, we recorded a $331,000 net benefit associated with our CEO transition-related activities. Such net benefit primarily represents a recovery of certain legal matter related costs, partially offset by severance costs for Mr. Ratigan pursuant to his employment agreement. During the six months ended January 31, 2025, we recorded a $267,000 net expense associated with our CEO transition-related activities. Such net expense primarily represents certain legal matter related costs and third party CEO search firm expenses. There were no similar costs in the corresponding periods of the prior year.
10
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Proxy Solicitation Costs
On November 17, 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. During the three and six months ended January 31, 2025, we incurred $1,099,000 and $2,682,000 in proxy solicitation costs, consisting principally of legal and advisory fees. There were no similar costs in the corresponding periods of the prior year. In connection with the Cooperation Agreement and Investor Group’s nomination of candidates to the Board and related matters, the Investor Group is entitled to the reimbursement of its documented out-of-pocket fees and expenses, subject to certain limitations, in an amount not to exceed $350,000. Such amount was expensed and paid in the second quarter of fiscal 2025.

(2)     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 a detailed 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. Such operations were established in connection with our fiscal 2020 acquisition of CGC Technology Limited, which primarily served customers in Europe. Following the acquisition, Comtech continued to invest in the Basingstoke facility to advance LEO constellation-based antenna technologies in anticipation of significant production orders. Net sales for this product line in fiscal 2024, 2023 and 2022 were $4,001,000, $9,969,000 and $11,188,000, respectively. Operating losses for this product line in fiscal 2024, 2023 and 2022 were $32,331,000, $8,203,000 and $9,897,000, respectively. Taking into consideration the significant ongoing investment, as well as unfavorable contract terms on prospective antenna sales, we concluded such operations would not generate an attractive return on invested capital and made the decision to exit these operations (the "CGC Divestiture"). During the six months ended January 31, 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 the three and six months ended January 31, 2025, we expensed $863,000 and $5,788,000, respectively, in restructuring charges related to the wind-down of such operations, including 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.

11
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3)     Adoption of Accounting Standards and Updates

We are required to prepare our Condensed Consolidated Financial Statements in accordance with the FASB 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 the six months ended January 31, 2025, the following FASB ASUs have been issued and incorporated into the FASB ASC and have not yet been adopted by us as of January 31, 2025:

•FASB ASU No. 2023-07, which 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. The disclosure of other segment items by reportable segment are also required and would constitute the difference between segment revenues less these significant segment expenses and reported segment profit or loss. On an annual basis, the update requires an entity to disclose the CODM's title and position, as well as describe how the CODM uses the reported measures. Additionally, all existing annual disclosures about segment profit or loss must be provided on an interim basis in addition to the disclosure of significant segment expenses and other segment items. This ASU is effective for fiscal years beginning after December 15, 2023 (our fiscal year beginning on August 1, 2024) and for interim periods within fiscal years beginning after December 15, 2024 (our interim period beginning on August 1, 2025), with early adoption permitted. The adoption of this guidance will impact our disclosures only and we do not expect it to have a material impact on our Condensed Consolidated Financial Statements.

•FASB ASU No. 2023-09 enhances and establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Most notably under the new requirements is 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 Condensed Consolidated Financial Statements and disclosures.

•FASB ASU No. 2024-03, which 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. We are evaluating the impact of this ASU on our Condensed Consolidated Financial Statements and disclosures.
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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(4)     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.

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. This EAC process requires management judgment relative to assessing risks, estimating contract revenue and costs, and making assumptions for schedule and technical issues. 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.

The cost-to-cost method 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 line within our Terrestrial and Wireless Networks segment. For service-based contracts in our Terrestrial and Wireless Networks 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.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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:
  Three months ended January 31, Six months ended January 31,
  2025 2024 2025 2024
United States    
U.S. government 35.4  % 31.5  % 35.4  % 33.5  %
Domestic 45.5  % 42.9  % 46.9  % 41.5  %
Total United States 80.9  % 74.4  % 82.3  % 75.0  %
International 19.1  % 25.6  % 17.7  % 25.0  %
Total 100.0  % 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 the three and six months ended January 31, 2025 and 2024, except for the U.S. government, there were no customers that represented 10.0% or more of consolidated net sales. 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 10.0% or more of consolidated net sales for the three and six months ended January 31, 2025 and 2024.

The following tables summarize our disaggregation of revenue consistent with information reviewed by our CODM for the three and six months ended January 31, 2025 and 2024. 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:

Three months ended January 31, 2025 Six months ended January 31, 2025
Satellite and Space Communications Terrestrial and Wireless Networks Total Satellite and Space Communications Terrestrial and Wireless Networks Total
Geographical region and customer type
U.S. government $ 44,192,000  598,000  $ 44,790,000  $ 84,619,000  1,196,000  $ 85,815,000 
Domestic 8,987,000  48,603,000  57,590,000  13,834,000  99,763,000  113,597,000 
Total United States 53,179,000  49,201,000  102,380,000  98,453,000  100,959,000  199,412,000 
International 20,542,000  3,652,000  24,194,000  34,201,000  8,761,000  42,962,000 
Total $ 73,721,000  52,853,000  $ 126,574,000  $ 132,654,000  109,720,000  $ 242,374,000 
Contract type
Firm fixed-price $ 52,624,000  52,853,000  $ 105,477,000  $ 100,885,000  109,720,000  $ 210,605,000 
Cost reimbursable 21,097,000  —  21,097,000  31,769,000  —  31,769,000 
Total $ 73,721,000  52,853,000  $ 126,574,000  $ 132,654,000  109,720,000  $ 242,374,000 
Transfer of control
Point in time $ 34,852,000  615,000  $ 35,467,000  $ 65,026,000  1,337,000  $ 66,363,000 
Over time 38,869,000  52,238,000  91,107,000  67,628,000  108,383,000  176,011,000 
Total $ 73,721,000  52,853,000  $ 126,574,000  $ 132,654,000  109,720,000  $ 242,374,000 

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three months ended January 31, 2024 Six months ended January 31, 2024
Satellite and Space Communications Terrestrial and Wireless Networks Total Satellite and Space Communications Terrestrial and Wireless Networks Total
Geographical region and customer type
U.S. government $ 41,701,000  573,000  $ 42,274,000  $ 94,707,000  1,169,000  $ 95,876,000 
Domestic 8,804,000  48,830,000  57,634,000  24,756,000  94,020,000  118,776,000 
Total United States 50,505,000  49,403,000  99,908,000  119,463,000  95,189,000  214,652,000 
International 28,098,000  6,219,000  34,317,000  61,528,000  9,956,000  71,484,000 
Total $ 78,603,000  55,622,000  $ 134,225,000  $ 180,991,000  105,145,000  $ 286,136,000 
Contract type
Firm fixed-price $ 71,425,000  55,622,000  $ 127,047,000  $ 156,833,000  105,145,000  $ 261,978,000 
Cost reimbursable 7,178,000  —  7,178,000  24,158,000  —  24,158,000 
Total $ 78,603,000  55,622,000  $ 134,225,000  $ 180,991,000  105,145,000  $ 286,136,000 
Transfer of control
Point in time $ 32,571,000  685,000  $ 33,256,000  $ 78,312,000  1,332,000  $ 79,644,000 
Over time 46,032,000  54,937,000  100,969,000  102,679,000  103,813,000  206,492,000 
Total $ 78,603,000  55,622,000  $ 134,225,000  $ 180,991,000  105,145,000  $ 286,136,000 

The timing of revenue recognition, billings and collections results in receivables, unbilled receivables and contract liabilities on our Condensed 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 (7) - Accounts Receivable) and work in process inventory (see Note (8) - Inventories), there were no other material impairment losses recognized on contract assets during the three and six months ended January 31, 2025 and 2024, respectively. 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, $39,348,000 and $30,057,000 was recognized as revenue during the six months ended January 31, 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 the three months ended January 31, 2025 and 2024, incremental costs to obtain or fulfill contracts with an amortization period greater than one year were $789,000 and $769,000, respectively. During the six months ended January 31, 2025 and 2024, incremental costs to obtain or fulfill contracts with an amortization period greater than one year were $1,954,000 and $1,252,000, respectively.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Condensed 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 Condensed 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 Condensed 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 January 31, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was $763,801,000 (which represents the amount of our consolidated funded backlog). We estimate that a substantial portion of our remaining performance obligations at January 31, 2025 will be completed and recognized as revenue during the next twenty-four month period, with the rest thereafter. During the six months ended January 31, 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.

(5)    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 amounts of our senior debt approximate their fair values due to variable interest rates and pricing grids related to such debt, as amended.

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 (10) - Credit Facility, we used Level 3 inputs to value the warrants issued to lenders in connection with our Credit Facility. As of January 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 4.4%, volatility of 65.0%, and expected life of 6.4 years. We also used Level 3 inputs to value the combined embedded derivative liability associated with our Credit Facility. As of January 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 (11) - 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 January 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.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As further discussed in Note (18) - 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 January 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 5.9 years; risk free rate of 4.4%; expected volatility of 65.0%; and dividend yield of 0%. As of January 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 January 31, 2025 and July 31, 2024, other than the financial instruments discussed above, we had no other significant assets or liabilities included in our Condensed Consolidated Balance Sheets recorded at fair value, as such term is defined by FASB ASC 820.

(6)    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 Series B-2 Convertible Preferred Stock are not reflected in diluted EPS. Pursuant to FASB ASC 260 "Earnings Per Share" ("ASC 260"), 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 and the amount of stock-based compensation cost attributed to future services and not yet recognized.

There were no repurchases of our common stock during the three and six months ended January 31, 2025 and 2024. See Note (19) - Stockholders’ Equity for more information.

Weighted average stock options, RSUs and restricted stock outstanding of 1,314,000 and 1,111,000 shares for the three months ended January 31, 2025 and 2024, respectively, and 1,148,000 and 1,139,000 shares for the six months ended January 31, 2025 and 2024, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive.

Our EPS calculations exclude 694,000 and 719,000 weighted average performance shares outstanding for the three months ended January 31, 2025 and 2024, respectively, and 507,000 and 699,000 weighted average performance shares outstanding for the six months ended January 31, 2025 and 2024, 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 1,396,000 and 1,405,000 for the three and six months ended January 31, 2025, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive.

Weighted average common shares of 162,000 for the three and six months ended January 31, 2024 related to our acquisition of UHP in March 2021 were not included in our diluted EPS calculation 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.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Weighted average common shares underlying the assumed conversion of convertible preferred stock, on an if-converted basis, of 24,036,000 and 6,866,000, for the three months ended January 31, 2025 and 2024, respectively, and 23,545,000 and 5,812,000, for the six months ended January 31, 2025 and 2024, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive. As a result, the numerator for our basic and diluted EPS calculation for the three and six months ended January 31, 2025 and 2024 is the respective net loss attributable to common stockholders.

The following table reconciles the numerators and denominators used in the basic and diluted EPS calculations:
  Three months ended January 31, Six months ended January 31,
2025 2024 2025 2024
Numerator:    
Net loss $ (48,739,000) (10,558,000) $ (197,146,000) (11,995,000)
Gain (loss) on extinguishment of
  convertible preferred stock		 —  (13,640,000) 51,179,000  (13,640,000)
Convertible preferred stock issuance costs —  (4,273,000) —  (4,273,000)
Deemed contributions (dividends) on convertible preferred stock 26,383,000  (2,061,000) (32,251,000) (3,884,000)
Net loss attributable to common
  stockholders		 $ (22,356,000) (30,532,000) $ (178,218,000) (33,792,000)
Denominator:    
Denominator for basic and diluted
  calculation		 29,339,000  28,662,000  29,393,000  28,704,000 

As discussed further in Note (18) - Convertible Preferred Stock, such shares of preferred stock represent a "participating security" as defined in ASC 260. As a result, our EPS calculations for the three and six months ended January 31, 2025 and 2024 were based on the two-class method. Given the net loss attributable to common stockholders for the three and six months ended January 31, 2025 and 2024, there was no impact of applying the two-class method to our reported basic or diluted earnings per common share.

(7)     Accounts Receivable

Accounts receivable consist of the following at:
  January 31, 2025 July 31, 2024
Receivables from commercial and international customers $ 58,599,000  53,108,000 
Unbilled receivables from commercial and international customers 63,679,000  72,540,000 
Receivables from the U.S. government and its agencies 42,259,000  20,682,000 
Unbilled receivables from the U.S. government and its agencies 22,453,000  51,197,000 
Total accounts receivable 186,990,000  197,527,000 
Less allowance for doubtful accounts 19,793,000  1,932,000 
Accounts receivable, net $ 167,197,000  195,595,000 

Unbilled receivables as of January 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.

19
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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the six months ended January 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 $18,993,000, related to an international customer and reseller of our troposcatter technologies, was at risk of not being invoiced or collected, principally due to 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 $17,442,000 unbilled receivable contract asset within our allowance for doubtful accounts;

•reversed $1,004,000 of cumulative revenue and associated unbilled receivable contract assets as a result of being assessed late delivery penalties during the first quarter of fiscal 2025 on a separate contract to deliver Modular Transportable Transmission Systems (or "MTTS" troposcatter solutions) to the same international customer referenced above;

•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; and

•reversed $1,752,000 of cumulative revenue and $1,585,000 of associated unbilled receivable contract assets due to higher expected costs at completion identified during the six months ended January 31, 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, management estimates that a substantial portion of the remaining contract assets not yet billed at January 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" on the Condensed Consolidated Balance Sheets as of July 31, 2024.

As of January 31, 2025, the U.S. government (and its agencies) and an international customer and reseller of our troposcatter technologies, represented 34.6% and 13.3% of total accounts receivable, respectively. There were no other customers which accounted for greater than 10% of total accounts receivable.

As of July 31, 2024, the U.S. government (and its agencies), an international customer and reseller of our troposcatter technologies and AT&T, represented 36.4%, 11.3% and 10.9% of total accounts receivable, respectively. There were no other customers which accounted for greater than 10% of total accounts receivable.

(8)     Inventories

Inventories consist of the following at:
  January 31, 2025 July 31, 2024
Raw materials and components $ 70,600,000  72,820,000 
Work-in-process and finished goods 38,324,000  38,587,000 
Total inventories 108,924,000  111,407,000 
Less reserve for excess and obsolete inventories 27,523,000  18,271,000 
Inventories, net $ 81,401,000  93,136,000 

As of January 31, 2025 and July 31, 2024, the amount of inventory directly related to long-term contracts (including contracts-in-progress) was $3,026,000 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 $2,028,000 and $2,204,000, respectively.

20
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As discussed in Note (1) – General – Liquidity and Going Concern, 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 six months ended January 31, 2025, we recorded a non-cash charge of $11,369,000 within Cost of Sales on our Condensed Consolidated Statement of Operations. Such non-cash charge primarily related to the write down of inventory during the first quarter of fiscal 2025 associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued. As discussed in Note (2) – Business Divestitures, such non-cash charge also included the write down of inventory associated with the CGC Divestiture, which was determined during the first quarter of fiscal 2025 to no longer be salable.

During the six months ended January 31, 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.

(9)     Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following at:
  January 31, 2025 July 31, 2024
Accrued wages and benefits $ 19,339,000  22,131,000 
Accrued contract costs 9,561,000  17,267,000 
Accrued warranty obligations 8,578,000  7,049,000 
Accrued commissions and royalties 5,280,000  5,396,000 
Accrued legal costs 1,538,000  3,092,000 
Other 9,174,000  7,310,000 
Accrued expenses and other current liabilities $ 53,470,000  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 January 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 six months ended January 31, 2025 and 2024 were as follows:
Six months ended January 31,
  2025 2024
Balance at beginning of period $ 7,049,000  8,285,000 
Provision for warranty obligations 3,179,000  (27,000)
Charges incurred (1,650,000) (896,000)
Adjustments for changes in estimates —  (100,000)
PST Divestiture —  (418,000)
Balance at end of period $ 8,578,000  6,844,000 

21
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(10)     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 and, as further discussed below, we subsequently amended the credit facility on October 17, 2024 and March 3, 2025 (the "Credit Facility"). The Credit Facility consists of: (i) a $162,000,000 term loan (the "Term Loan" facility) and (ii) an asset-based revolving credit facility with revolving commitments in an aggregate principal amount of $56,821,000, 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.

On October 17, 2024, we entered into the first amendment to the Credit Facility in order to waive certain defaults or events of default that occurred, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants for our fourth quarter of fiscal 2024. The amendment also, among other things: (i) increased the interest rate margins applicable to the loans (as described in further detail below); (ii) modified certain financial and collateral reporting requirements; (iii) provided a consent right to the revolving lender and Agent with respect to $27,500,000 of revolver borrowings above $32,500,000; (iv) permitted the incurrence of $25,000,000 of senior unsecured subordinated debt (as described further in Note (11) – Subordinated Credit Facility); (v) 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 Agreement becomes due and payable (the "Senior Credit Facility Maturity Date"); and (vi) suspended certain financial covenant testing through the fiscal quarter ended January 31, 2025. We accounted for the October 17, 2024 amendment to our Credit Facility as a modification.

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 Condensed 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 Condensed Consolidated Statements of Operations as a non-cash expense or benefit. As of January 31, 2025 and July 31, 2024, the Lender warrant liability was remeasured to $2,769,000 and $4,544,000, respectively. For the three and six months ended January 31, 2025, we recorded non-cash benefits of $2,465,000 and $1,775,000, respectively, in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Condensed Consolidated Statements of Operations.

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 Condensed 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 Condensed Consolidated Statements of Operations as a non-cash expense or benefit. As of January 31, 2025 and July 31, 2024, the combined embedded derivative liability was remeasured to $4,545,000 and $3,041,000, respectively. For the three and six months ended January 31, 2025, we recorded a non-cash benefit of $447,000 and a non-cash expense of $1,504,000, respectively, in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Condensed Consolidated Statements of Operations.

22
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In connection with entering the Credit Facility and the first amendment to the Credit Facility, we paid fees of $15,035,000, including: (i) $9,979,000 of deferred financing fees (of which $6,626,000 and $3,353,000 was attributable to the Term Loan and Revolving Loan, respectively); and (ii) $5,056,000 of closing fees (representing approximately 3.0% of the Term Loan commitment plus certain other reimbursable expenses paid directly to the Term Loan lenders and accounted for as a discount against the Term Loan proceeds). Additionally, a $2,430,000 Term Loan exit fee, which was earned on the closing date and is payable directly to the Term Loan lenders at maturity or earlier was accounted for as a discount against the Term Loan proceeds. In connection with amending the Credit Facility on October 17, 2024, the borrowing capacity of the Revolver Loan was limited by the consent right of the revolving lender and Agent, thus a pro-rata amount of deferred financing fees totaling $1,412,000 were immediately expensed during six months ended January 31, 2025. Also, a $3,250,000 amendment fee was paid in kind and added to the outstanding Term Loan amount and accounted for as a discount against the Term Loan during the six months ended January 31, 2025.

As of January 31, 2025, total net deferred financing costs related to the Credit Facility were $7,692,000. Deferred financing fees and discounts attributable to the Term Loan are amortized as interest expense over the life of the debt through the Senior Credit Facility Maturity Date and are presented as a deduction to the borrowings outstanding under the Term Loan. Deferred financing fees attributable to the Revolving Loan are capitalized on the Condensed Consolidated Balance Sheets and amortized as interest expense over the life of the debt.

The amount of debt outstanding under our Credit Facility was as follows:
  January 31, 2025 July 31, 2024
Term Loan $ 170,440,000  $ 161,663,000 
Less unamortized deferred financing costs related to Term Loan 5,886,000  6,425,000 
Less unamortized discount related to Term Loan 15,165,000  13,202,000 
     Term Loan, net 149,389,000  142,036,000 
Revolving Loan 32,500,000  32,500,000 
Embedded derivative related to Credit Facility 4,545,000  3,041,000 
Amount outstanding under Credit Facility, net $ 186,434,000  177,577,000 
Less current portion of credit facility, net 186,434,000  4,050,000 
Non-current portion of credit facility, net $ —  $ 173,527,000 

During the six months ended January 31, 2025, we reclassified the combined embedded derivative liability balance as of July 31, 2024 from "Other Liabilities" on the Condensed Consolidated Balance Sheets to conform to the current period presentation. During the six months ended January 31, 2025, we had outstanding balances under our Credit Facility ranging from $194,163,000 to $202,940,000.

Interest expense related to our Credit Facility (both current and prior), including amortization of deferred financing costs, recorded during the three months ended January 31, 2025 and 2024 was $9,673,000 and $5,246,000, respectively. Interest expense related to our Credit Facility (both current and prior), including amortization of deferred financing costs, recorded during the six months ended January 31, 2025 and 2024 was $18,926,000 and $10,157,000, respectively. Our blended interest rate approximated 18.9% and 11.3%, respectively, for the three months ended January 31, 2025 and 2024 and 18.7% and 10.9%, respectively, for the six months ended January 31, 2025 and 2024.

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 of the Borrowing Base Parties; plus (b) 85% of the net book value of accounts receivables that the Borrowing Base Parties 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 of the Borrowing Base Parties, less (d) customary reserves. As of January 31, 2025 and July 31, 2024, our eligible Borrowing Base collateral, as defined under the Revolving Loan, was $132,446,000 and $114,661,000, respectively.

23
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Under the Credit Facility, as amended on October 17, 2024, the interest rate margins that are applicable to the Revolving Loan increased by 1.00% at each level. Accordingly, the Credit Facility, as amended on October 17, 2024, provides that Revolving Loans comprised of (i) Base Rate Loans shall bear interest at the Base Rate plus an additional margin ranging from 4.75% to 5.25%; and (ii) SOFR Loans shall bear interest at the Term SOFR rate plus an additional margin ranging from 5.75% to 6.25%, each depending on the average quarterly revolving loan usage during the applicable determination period. The Credit Facility, as amended on October 17, 2024, also provided that the interest rate margins on the Term Loans would be 12.00% per annum for Base Rate Loans and 13.00% per annum for SOFR Loans until the first business day of the month following January 31, 2025, when the Company delivered financial statements demonstrating compliance with the financial covenants under the Credit Facility. If demonstrated, the interest rate margins would have reverted to the margins provided under the Credit Facility prior to the amendment with respect to Term Loans, specifically, (i) Base Rate Loans shall bear interest at the Base Rate plus an additional margin ranging from 7.50% to 9.00%; and (ii) SOFR Loans shall bear interest at the Term SOFR rate plus an additional margin ranging from 8.50% to 10.00%, each depending on our Net Leverage Ratio during the applicable determination period. The Credit Facility provides for an unused line fee of 0.50% per annum on the average unused Revolving Loan commitment, with no fee payable on the $27,500,000 commitment 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. Pursuant to the first amendment of the Credit Facility, the next Term Loan repayment in the amount of $4,050,000 is due July 31, 2025 with quarterly Term Loan repayments of $1,012,500 payable on the last business day of each fiscal quarter thereafter, with the remaining Term Loan balance due on the Senior Credit Facility Maturity Date.

The Credit Facility contains: (a) customary representations, warranties and affirmative covenants; (b) customary conditions to drawing the Revolver; (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 Subsidiary 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 below); (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.

Under the Credit Facility, as subsequently amended on March 3, 2025 (as discussed below), we are required to comply with certain financial covenants, including: a maximum Net Leverage Ratio of 3.15x, commencing with the four fiscal quarter period ending October 31, 2025; a minimum Fixed Charge Coverage Ratio of 1.25x, commencing with the four fiscal quarter period ending October 31, 2025; a minimum Average Liquidity requirement at each fiscal quarter end of $17,500,000; and a minimum EBITDA of $35,000,000 for the four fiscal quarter period ending October 31, 2025. The second amendment to the Credit Facility, entered on March 3, 2025, suspends testing of the Net Leverage Ratio and Fixed Charge Coverage Ratio covenants until October 31, 2025. Over the next twelve months beyond the issuance date, we believe that it is probable we will not be able to comply with one or more of these covenants. As a result, all amounts outstanding under our Credit Facility have been presented as "Current portion of credit facility, net" on our Condensed Consolidated Balance Sheet as of January 31, 2025.

Capitalized terms used but not defined herein have the meanings set forth for such terms in the Credit Facility, which have been or will be documented and filed with the SEC.

Subsequent Event
On March 3, 2025, we entered into the second amendment to the Credit Facility to: (i) waive all defaults under the Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants for the four fiscal quarter period ended January 31, 2025; and (ii) amend the Credit Facility, as outlined below. As a result of this amendment, there are no ongoing events of default under the Credit Facility.

24
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Cumulatively, the Credit Facility, as amended through March 3, 2025, among other things: (i) reduced the interest rate margins applicable to the Term Loan (as described in further detail below); (ii) provided the lenders the right to appoint an independent director to the Board following the earlier to occur of: (x) an event of default, or (y) any date selected by the lenders after May 31, 2025; (iii) permitted the incurrence of $65,000,000 of total senior unsecured subordinated debt (as described further in Note (11) – Subordinated Credit Facility); (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) provided the lenders a consent right with respect to Revolver Loan borrowings above $29,321,000; and (vii) reduced the minimum quarterly average liquidity requirement from $20,000,000 to $17,500,000. In connection with the second amendment, partial principal repayments of $27,252,000 and $9,084,000 were made on the Term Loan and Revolving Loan, respectively, and commitments under the Revolving Loan Facility were permanently reduced by $3,179,000.

The March 3, 2025 amendment to the Credit Facility reduced the interest rate margin on the Term Loan from 13.00% to 10.50% per annum for SOFR Loans, until the first business day of the month following October 31, 2025, when we have delivered financial statements demonstrating compliance with the financial covenants under the Credit Facility. If demonstrated, the interest rate margins revert to the margins provided for under the Credit Facility with respect to Term Loans (as described above).
(11)     Subordinated Credit Facility
On October 17, 2024 (the "closing date"), we entered into a subordinated credit agreement with the existing holders of our convertible preferred stock and U.S. Bank Trust Company, National Association, as agent (the “Subordinated Credit Agreement”) which provided a subordinated unsecured term loan facility in the aggregate principal amount of $25,000,000 (the "Subordinated Credit Facility"). The proceeds of the Subordinated Credit Facility: (i) cured our default on certain financial covenants under the Credit Facility with respect to the fourth quarter of fiscal 2024; (ii) provided us with additional liquidity; and (iii) funded our general working capital needs.

The obligations under the Subordinated Credit Facility mature 90 days after the Senior Credit Facility Maturity Date, as discussed in Note (10) – Credit Facility. The Subordinated Credit Facility is subject to a Make-Whole Amount with respect to certain repayments or prepayments. The Make-Whole Amount is an amount equal to: (i) from the closing date 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 closing date through (but not including) the date that is the second anniversary of the closing date, the principal repayment amount multiplied by 50.0%; (iii) from the second anniversary of the 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 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 an initial embedded derivative liability of $3,318,000, which was allocated as a discount against the Subordinated Credit Facility proceeds. The embedded derivative liability is presented with the "Current portion of subordinated credit facility, net" on the Condensed 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 Condensed Consolidated Statements of Operations as a non-cash expense or benefit. As of January 31, 2025, the embedded derivative liability was remeasured to $7,245,000. For the three and six months ended January 31, 2025, we recorded a non-cash expense of $3,679,000 and $3,927,000, respectively, in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Condensed Consolidated Statements of Operations.

In connection with entering the Subordinated Credit Facility, we paid financing fees of $1,761,000, which were accounted for as deferred financing costs. Deferred financing costs, discounts and the Make-Whole Amount are amortized as interest expense through the Subordinated Credit Facility maturity date, and are presented as adjustments to the borrowings outstanding under such debt. Interest expense related to our Subordinated Credit Facility for the three and six months ended January 31, 2025 was $1,315,000 and $1,563,000, respectively.

25
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents a reconciliation of the amount outstanding under the Subordinated Credit Facility to its net carrying value:
January 31, 2025
Subordinated Credit Facility $ 25,000,000 
Less: Unamortized deferred financing costs 1,675,000 
Less: Unamortized discount 3,156,000 
Plus: Accretion of Make-Whole Amount 1,315,000 
Subordinated Credit Facility, net - subtotal 21,484,000 
Plus: Embedded derivative related to redemption features 7,245,000 
Amount outstanding under the Subordinated Credit Facility 28,729,000 
Less: Current portion of Subordinated Credit Facility, net (28,729,000)
Non-current portion of Subordinated Credit Facility, net $ — 

The obligations under the Subordinated Credit Facility are guaranteed by the same guarantors under the Credit Facility. The Subordinated Credit Facility contains 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.

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. Accordingly, consistent with the presentation of our Credit Facility as a current liability, the amount of debt outstanding under the Subordinated Credit Facility has also been presented as a current liability on our Condensed Consolidated Balance Sheet as of January 31, 2025.

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
On March 3, 2025, we entered into the first amendment to the Subordinated Credit Facility. In addition to waiving 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, cumulatively, the Subordinated Credit Facility, among other things: (i) provides for a total $65,000,000 facility; and (ii) suspended testing of the Net Leverage Ratio and Fixed Charge Coverage Ratio covenants under the Subordinated Credit Facility until October 31, 2025. The net proceeds of the Subordinated Credit Facility cured our defaults on certain financial covenants under the Credit Facility and were principally used to repay a portion of the Term Loan and Revolving Loan on March 3, 2025 and to fund our general working capital needs. At March 10, 2025 (the date closest to the issuance date), total outstanding borrowings under the Subordinated Credit Facility (excluding accreted interest) were $65,000,000.

The incremental $40,000,000 of subordinated debt generally has the same terms and is subject to the same conditions applicable to the Subordinated Credit Facility. The incremental $40,000,000 of subordinated debt is subject to a Make-Whole Amount with respect to certain repayments or prepayments. The Make-Whole Amount is an amount equal to: (i) from the closing date of the incremental Subordinated Credit Facility (the "Incremental Closing Date") 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 Incremental Closing Date through (but not including) the date that is the second anniversary of the closing date, the principal repayment amount multiplied by 50.0%; (iii) from the second anniversary of the Incremental 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 above) starting on the second anniversary of the closing date and calculated as of any such date of determination.

26
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(12)     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 have 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 January 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.

The components of lease expense are as follows:

Three months ended January 31, Six months ended January 31,
2025 2024 2025 2024
Operating lease expense $ 1,860,000  2,080,000  $ 3,774,000  4,338,000 
Short-term lease expense 32,000  65,000  64,000  173,000 
Variable lease expense 1,123,000  916,000  2,300,000  1,945,000 
Sublease income (11,000) (16,000) (28,000) (33,000)
Total lease expense $ 3,004,000  3,045,000  $ 6,110,000  6,423,000 

Additional information related to leases is as follows:
Six months ended January 31,
2025 2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases - Operating cash outflows $ 4,245,000  $ 4,439,000 
ROU assets obtained in the exchange for lease liabilities (non-cash):
Operating leases $ 1,853,000  $ 20,000 

27
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table is a reconciliation of future cash flows relating to operating lease liabilities presented on our Condensed Consolidated Balance Sheet as of January 31, 2025:

Remainder of fiscal 2025 $ 3,983,000 
Fiscal 2026 7,148,000 
Fiscal 2027 5,060,000 
Fiscal 2028 4,484,000 
Fiscal 2029 3,925,000 
Thereafter 16,884,000 
Total future undiscounted cash flows 41,484,000 
Less: Present value discount 5,454,000 
Lease liabilities $ 36,030,000 
Weighted-average remaining lease terms (in years) 7.68
Weighted-average discount rate 3.76%

As of January 31, 2025, we do not have any material rental commitments that have not already commenced.

During the three months ended January 31, 2025, we exited the lease for the smaller of our two facilities in Hampshire (Basingstoke), United Kingdom and de-recognized the associated right of use asset and lease liability. The impact of this lease exit on the Condensed Consolidated Statement of Operations was not material.

As of January 31, 2025, our Satellite and Space Communications segment leased one facility in Hampshire (Basingstoke), United Kingdom, where we previously manufactured high precision full motion fixed and mobile X/Y satellite tracking antennas. In connection with the CGC Divestiture discussed in Note (2) – Business Divestitures, we are addressing with our landlord our exit and termination of such facility lease. As these efforts are ongoing, further adjustments to the right of use assets and/or lease liabilities for such facility may be required in the future.

(13)     Income Taxes

Our effective tax rate for the three months ended January 31, 2025 was 1.9%, which includes a net discrete tax benefit of $76,000. Our effective tax rate for the six months ended January 31, 2025 was (0.6)%, which includes a net discrete tax benefit of $184,000 primarily related to proxy solicitation and CEO transition costs.

Our effective tax rate for the three months ended January 31, 2024 was (230.6)%, which includes a net discrete tax benefit of $286,000 primarily related to the PST Divestiture. Our effective tax rate for the six months ended January 31, 2024 was (100.8)%, which includes a net discrete tax expense of $1,762,000 primarily related to the anticipated timing of the settlement of contingent consideration related to the PST Divestiture.

Excluding discrete items, our effective tax rate for the three and six months ended January 31, 2025 and 2024 was (1.7)% and (52.0)%, respectively. For purposes of determining our estimated annual effective tax rate for fiscal 2025, the impairment of long-lived assets, including goodwill, the change in fair value of warrants and derivatives, proxy solicitation costs and CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate. The change in rate from (52.0)% to (1.7)% is primarily due to changes in expected product and geographic mix and not providing for tax benefits on U.S. deferred tax assets.

At January 31, 2025 and July 31, 2024, total unrecognized tax benefits were $8,742,000 and $8,605,000, respectively, including interest of $303,000 and $224,000, respectively. Unrecognized tax benefits result from income tax positions taken or expected to be taken on our income tax returns for which a tax benefit has not been recorded in our condensed consolidated financial statements. We believe it is reasonably possible that the gross unrecognized tax benefits could decrease by as much as $512,000 in the next twelve months due to the expiration of a statute of limitations related to federal, state and foreign tax positions.

28
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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our U.S. federal income tax returns for fiscal 2021 through 2023 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state income tax returns prior to fiscal 2020 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

(14)     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 condensed 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 January 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 January 31, 2025, we had granted stock-based awards representing the right to purchase and/or acquire an aggregate of 12,335,109 shares (net of 7,456,768 expired and canceled awards), of which an aggregate of 10,310,028 have been exercised or settled.

As of January 31, 2025, the following stock-based awards, by award type, were outstanding:
  January 31, 2025
Stock options 135,690 
Performance shares 668,103 
RSUs, restricted stock, share units and other stock-based awards 1,221,288 
Total 2,025,081 

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 January 31, 2025, we have cumulatively issued 1,078,696 shares of our common stock to participating employees in connection with our ESPP.

29
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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations:
  Three months ended January 31, Six months ended January 31,
  2025 2024 2025 2024
Cost of sales $ 96,000  131,000  $ 200,000  413,000 
Selling, general and administrative expenses 1,014,000  1,991,000  1,000,000  4,167,000 
Research and development expenses 60,000  67,000  125,000  254,000 
Stock-based compensation expense before income tax benefit 1,170,000  2,189,000  1,325,000  4,834,000 
Estimated income tax benefit (244,000) (484,000) (264,000) (1,068,000)
Net stock-based compensation expense $ 926,000  1,705,000  $ 1,061,000  3,766,000 

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 January 31, 2025, unrecognized stock-based compensation of $7,371,000, net of estimated forfeitures of $548,000, is expected to be recognized over a weighted average period of 2.0 years. Total stock-based compensation capitalized and included in ending inventory at both January 31, 2025 and July 31, 2024 was $198,000. There are no liability-classified stock-based awards outstanding as of January 31, 2025 or July 31, 2024.


Stock-based compensation expense, by award type, is summarized as follows:
Three months ended January 31, Six months ended January 31,
2025 2024 2025 2024
Stock options $ 3,000  12,000  $ 20,000  31,000 
Performance shares 302,000  585,000  (95,000) 942,000 
RSUs, restricted stock and share units 850,000  1,566,000  1,371,000  3,810,000 
ESPP 15,000  26,000  29,000  51,000 
Stock-based compensation expense before income tax benefit 1,170,000  2,189,000  1,325,000  4,834,000 
Estimated income tax benefit (244,000) (484,000) (264,000) (1,068,000)
Net stock-based compensation expense $ 926,000  1,705,000  $ 1,061,000  3,766,000 

During the six months ended January 31, 2025, we reversed a portion of our stock-based compensation expense related to performance shares due to lower-than-estimated achievement of fiscal 2022 performance share goals. Stock-based compensation expense for the six months ended January 31, 2025 also reflects the forfeiture of awards related to our former Chief Operating Officer, whose employment was terminated during our first quarter of 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 the six months ended January 31, 2025.

ESPP stock-based compensation expense includes the 15% discount offered to participants in the ESPP.

The estimated income tax benefit as shown in the above table 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 Condensed Consolidated Balance Sheets as of January 31, 2025 and July 31, 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.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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, 2024 141,190  $ 20.61     
Outstanding at October 31, 2024 141,190  $ 20.61 
Expired/canceled (5,500) 17.88     
Outstanding at January 31, 2025 135,690  $ 20.72  3.95 $ — 
Exercisable at January 31, 2025 128,440  $ 20.88  3.87 $ — 
Vested and expected to vest at January 31, 2025 135,287  $ 20.73  3.95 $ — 

Stock options outstanding as of January 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.

Performance Shares, RSUs, Restricted Stock, Share Units 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, 2024   1,800,288  $ 10.61 
Granted   1,154,859  5.04 
Settled   (204,292) 11.26 
Canceled/Forfeited   (128,892) 10.61 
Outstanding at October 31, 2024   2,621,963  8.11 
Granted   489,191  3.63 
Settled   (578,751) 9.41 
Canceled/Forfeited   (643,012) 5.48 
Outstanding at January 31, 2025 1,889,391  $ 6.61  $ 3,779,000 
   
Vested at January 31, 2025   125,904  $ 13.09  $ 252,000 
   
Vested and expected to vest at January 31, 2025   1,811,411  $ 6.60  $ 3,623,000 

During the six months ended January 31, 2025, 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. Through the issuance date, approximately $2,000,000 of such authorization remains subject to grant.

The total intrinsic value relating to fully-vested awards settled during the three and six months ended January 31, 2025 was $1,632,000 and $2,268,000, respectively. The total intrinsic value relating to fully-vested awards settled during the three and six months ended January 31, 2024 was $4,789,000 and $7,445,000, respectively.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 January 31, 2025, the number of outstanding performance shares included in the above table, and the related compensation expense generally assume achievement of the pre-established goals at a target level, except for two of our former CEOs whose achievement was based on maximum performance pursuant to their then pre-existing change-in-control agreements.

RSUs and restricted stock granted to non-employee directors prior to August 2022 had a vesting period of five years 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. 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.

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 the three and six months ended January 31, 2025, we reversed $5,000 and $32,000, respectively, of previously accrued dividend equivalents due to forfeitures and paid out $117,000 and $156,000, respectively. During the three and six months ended January 31, 2024, we reversed $13,000 and $36,000, respectively, of previously accrued dividend equivalents due to forfeitures and paid out $151,000 and $265,000, respectively. Accrued dividend equivalents were recorded as a reduction to retained earnings. As of January 31, 2025 and July 31, 2024, accrued dividend equivalents were $128,000 and $316,000, respectively.

With respect to the actual settlement of stock-based awards for income tax reporting, during the three and six months ended January 31, 2025, we recorded an income tax benefit of $95,000 and $120,000, respectively. With respect to the actual settlement of stock-based awards for income tax reporting, during the three and six months ended January 31, 2024, we recorded an income tax benefit of $141,000 and income tax expense of $303,000, respectively.

(15)     Segment Information

Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by FASB ASC 280 "Segment Reporting" 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. As of January 31, 2025, our CODM, for purposes of FASB ASC 280, is our Chairman, President and Chief Executive Officer, Kenneth H. Traub.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Satellite and Space Communications is organized into four technology areas: satellite modem and amplifier technologies, troposcatter technologies, 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, 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; professional engineering, training and field support services, including cybersecurity, for multiple U.S. government agencies; and procurement and supply chain management of high reliability Electrical, Electronic and Electromechanical ("EEE") parts for satellite, launch vehicle and manned space applications.

Terrestrial and Wireless Networks is organized into three service areas: next generation 911 and call delivery, Solacom 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, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach PSAPs; next generation 911 solutions, providing emergency call routing, location validation, 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 alerts 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.

Our CODM primarily uses a metric that we refer to as Adjusted EBITDA to measure an operating segment’s performance and to make decisions about resources to be allocated. Our Adjusted EBITDA metric for the Satellite and Space Communications and Terrestrial and Wireless Networks segments do not consider allocation of any indirect expenses that are unrelated to the segment's operations, or any of the following: interest, income taxes, depreciation, amortization of intangibles, impairment of long-lived assets, including goodwill, amortization of cost to fulfill assets, amortization of stock-based compensation, CEO transition costs, change in fair value of warrants and derivatives, proxy solicitation costs, restructuring costs, strategic emerging technology costs (for next-generation satellite technology) and write-off of deferred financing costs, and in the recent past, acquisition plan expenses, change in fair value of the convertible preferred stock purchase option liability, COVID-19 related costs, facility exit costs, strategic alternatives expenses and other and loss on business divestiture. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Any amounts shown in the Adjusted EBITDA calculation for our Satellite and Space Communications and Terrestrial and Wireless Networks segments are directly attributable to those segments. Our Adjusted EBITDA is also used by our management in assessing the Company's operating results. Although closely aligned, the Company's definition of Adjusted EBITDA is different than EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and, therefore, may not be comparable to similarly titled measures used by other companies.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Operating segment information, along with a reconciliation of segment Adjusted EBITDA to consolidated loss before income taxes is presented in the tables below:

Three months ended January 31, 2025 Six months ended January 31, 2025
Satellite and Space Communications Terrestrial and Wireless Networks Total Satellite and Space Communications Terrestrial and Wireless Networks Total
Net sales $ 73,721,000  52,853,000  $ 126,574,000  $ 132,654,000  109,720,000  $ 242,374,000 
Adjusted EBITDA $ 4,705,000  8,920,000  $ 13,625,000  $ (16,443,000) 19,904,000  $ 3,461,000 
Unallocated corporate expenses (10,722,000) (19,955,000)
Impairment of long-lived asset,
   including goodwill		 —  (79,555,000)
Restructuring expenses (3,400,000) (21,253,000)
Strategic emerging technology costs —  (280,000)
CEO transition costs 331,000  (267,000)
Proxy solicitation costs (1,099,000) (2,682,000)
Amortization of cost to fulfill assets —  (261,000)
Depreciation (2,779,000) (5,674,000)
Amortization of intangibles (5,043,000) (11,636,000)
Amortization of stock-based
   compensation		 (1,170,000) (1,325,000)
Change in fair value of warrants and
   derivatives		 (28,568,000) (34,092,000)
Write-off of deferred financing costs —  (1,412,000)
Interest (income) and other 126,000  (509,000)
Interest expense (11,008,000) (20,540,000)
Loss before income taxes $ (49,707,000) $ (195,980,000)
Purchases of property, plant and
   equipment		 $ 89,000  1,410,000  1,499,000  $ 139,000  3,518,000  3,657,000 
Unallocated amounts $ 154,000  $ 411,000 
Consolidated total $ 1,653,000  $ 4,068,000 
Total assets $ 293,176,000  448,610,000  741,786,000  $ 293,176,000  448,610,000  741,786,000 
Unallocated amounts $ 28,775,000  $ 28,775,000 
Consolidated total $ 770,561,000  $ 770,561,000 
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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three months ended January 31, 2024 Six months ended January 31, 2024
Satellite and Space Communications Terrestrial and Wireless Networks Total Satellite and Space Communications Terrestrial and Wireless Networks Total
Net sales $ 78,603,000  55,622,000  $ 134,225,000  $ 180,991,000  105,145,000  $ 286,136,000 
Adjusted EBITDA $ 7,062,000  13,727,000  $ 20,789,000  $ 22,193,000  23,364,000  $ 45,557,000 
Unallocated corporate expenses (5,678,000) (12,078,000)
Restructuring costs (2,726,000) (6,442,000)
Strategic emerging technology costs (978,000) (2,348,000)
Amortization of cost to fulfill assets (240,000) (480,000)
Depreciation (2,930,000) (5,952,000)
Amortization of intangibles (5,288,000) (10,577,000)
Amortization of stock-based
   compensation		 (2,189,000) (4,834,000)
Gain on business divestiture, net 2,213,000  2,213,000 
Interest (income) and other (902,000) (837,000)
Interest expense (5,265,000) (10,197,000)
Loss before income taxes $ (3,194,000) $ (5,975,000)
Purchases of property, plant and
   equipment		 $ 1,724,000  2,285,000  $ 4,009,000  $ 2,627,000  4,021,000  6,648,000 
Unallocated amounts $ 264,000  $ 841,000 
Consolidated total $ 4,273,000  $ 7,489,000 
Total assets $ 480,008,000  461,246,000  $ 941,254,000  $ 480,008,000  461,246,000  941,254,000 
Unallocated amounts $ 55,501,000  55,501,000 
Consolidated total $ 996,755,000  $ 996,755,000 

During the three months ended January 31, 2025, we revised the presentation of our operating segment information to report segment totals and to reconcile such segment totals to our Condensed Consolidated Financial Statements. Prior period information was adjusted to conform to the current period presentation.

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. See Note (1) - General for information related to CEO transition and proxy solicitation related costs. During the three and six months ended January 31, 2025, our Unallocated segment also incurred $1,970,000 and $5,993,000 of restructuring costs, respectively, focused on legal and advisory fees associated with: (i) our previously announced transformation strategy to explore strategic alternatives; and (ii) operational initiatives to align our cost structure with our future anticipated business, and to improve liquidity. During the three and six months ended January 31, 2024, our Unallocated segment incurred $1,271,000 and $4,190,000, respectively, of restructuring costs focused on streamlining our operations and legal and other expenses primarily related to the PST Divestiture.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the six months ended January 31, 2025, our Satellite and Space Communications segment recorded a $79,555,000 non-cash goodwill impairment charge (see Note (16) - Long-lived Assets, including Goodwill for additional information). During the three and six months ended January 31, 2025, our Satellite and Space Communications segment also recorded $1,430,000 and $15,170,000, respectively, of restructuring costs, which included for the six month period: (i) non-cash inventory write downs of $11,369,000, recorded in the first quarter of fiscal 2025 in Cost of Sales in our Condensed Consolidated Statements of Operations (see Note (8) - Inventories for additional information); and (ii) $3,801,000 of costs included in Selling, General and Administrative expenses in our Condensed Consolidated Statements of Operations related to our transformation strategy (principally, the CGC Divestiture). During the three and six months ended January 31, 2024, our Satellite and Space Communications segment recorded $1,454,000 and $2,244,000, respectively, of restructuring costs to streamline our operations and improve efficiency, including costs related to the relocation of certain of our satellite ground infrastructure production facilities to our 146,000 square foot facility in Chandler, Arizona. In addition, strategic emerging technology costs for next-generation satellite technology for the six months ended January 31, 2025 were $280,000. Similar strategic emerging technology costs of $978,000 and $2,348,000 were incurred during the three and six months ended January 31, 2024, respectively.

During the three and six months ended January 31, 2025 and 2024, our Terrestrial and Wireless Networks segment incurred nominal restructuring costs.

Interest expense in the tables above primarily relates to our credit facilities, and includes the amortization of deferred financing costs. See Note (10) - Credit Facility and Note (11) - Subordinated Credit Facility for further discussion.

Intersegment sales for both the three and six months ended January 31, 2025 and 2024 between the Satellite and Space Communications segment and the Terrestrial and Wireless Networks segment were nominal. All intersegment sales are eliminated in consolidation and are excluded from the tables above.

Unallocated assets at January 31, 2025 consist principally of cash and cash equivalents, corporate property, plant and equipment, operating lease right of use assets and deferred financing costs.

The large majority of our long-lived assets are located in the U.S.

(16)     Long-lived Assets, including Goodwill

The following table represents goodwill by reportable operating segment as of January 31, 2025 and July 31, 2024.

Satellite and Space Communications Terrestrial and Wireless Networks 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 January 31, 2025
 $ 30,535,000  174,090,000  $ 204,625,000 

At January 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 Terrestrial and Wireless Network segment.

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.

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COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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. 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. 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 Terrestrial and Wireless Networks reporting unit had an estimated fair value in excess of its carrying value of at least 24.7% and concluded that our goodwill 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. Following the same approach as outlined above, 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 $79,555,000 in the first quarter of fiscal 2025.

In performing the 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).

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 October 31, 2024 and July 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.

It is possible that, during the remainder of fiscal 2025 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 fluctuate. A sustained significant decline in our actual operating performance, as compared to our forecast, and/or a continued sustained decline in our common stock price, may require us to perform another interim quantitative impairment test during fiscal 2025, which may result in an impairment of our long-lived assets (including goodwill) assigned to one or both of our reporting units.
37
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

In any event, we are required to perform our next annual goodwill impairment analysis on August 1, 2025 (the start of our fiscal 2026). If our assumptions and related estimates change in the future, or if we change our reporting unit structure or other events and circumstances change, 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.

(17)     Intangible Assets

Intangible assets with finite lives are as follows:
  January 31, 2025
  Weighted Average
Amortization Period		 Gross Carrying
Amount		 Accumulated
Amortization		 Net Carrying
Amount
Customer relationships 20.2 $ 294,258,000  141,733,000  $ 152,525,000 
Technologies 13.6 106,149,000  83,490,000  22,659,000 
Trademarks and other 16.9 31,826,000  23,818,000  8,008,000 
Total   $ 432,233,000  249,041,000  $ 183,192,000 

  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 three and six months ended January 31, 2025 was $5,043,000 and $11,636,000, respectively. Amortization expense for the three and six months ended January 31, 2024 was $5,288,000 and $10,577,000, respectively. Amortization expense for the six months ended January 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 $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:
2025 $ 21,722,000 
2026 19,128,000 
2027 17,774,000 
2028 17,774,000 
2029 16,353,000 

We review net intangible assets with finite lives for impairment when an event occurs indicating the potential for impairment. Based on our assessment in the fourth quarter of fiscal 2024, we recognized an impairment loss of $9,925,000 in fiscal 2024 within our Satellite and Space Communications segment. See Note (16) - Long-Lived Assets, Including Goodwill for more information. We believe that the carrying values of our remaining net intangible assets were recoverable as of January 31, 2025. However, 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.

38
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(18)     Convertible Preferred Stock

Fiscal 2024 and Prior Activity
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 (10) - 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.

Fiscal 2025 Activity
On October 17, 2024, in connection with amending the Credit Facility discussed in Note (10) - 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 defined 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); and clarified the preferred holders’ existing consent rights, among other things. To effect the changes described above, we and the Investors entered into a new Subscription and Exchange Agreement (the "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" and, together with the Series B Reimbursement and the Series B-1 Fee, the “Additional Issuances”). 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.

39
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Series B-2 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-2 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-2 Convertible Preferred Stock that remain outstanding following the redemption of at least fifty percent (50%) of the Series B-2 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-2 Convertible Preferred Stock (the "Series B-2 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-2 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-2 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-2 Convertible Preferred Stock. Such Participating Dividend results in the Series B-2 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-2 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-2 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-2 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-2 Convertible Preferred Stock is $7.99, subject to certain adjustments set forth in the Series B-2 Certificate of Designations.

Holders of the Series B-2 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-2 Convertible Preferred Stock, authorizations or issuances of securities of the Company (other than the issuance 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-2 Convertible Preferred Stock, in each case, subject to the exceptions and qualifications set forth in the Series B-2 Certificate of Designations.

Holders have the right to require us to repurchase their Series B-2 Convertible Preferred Stock (at 1.0x 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-2 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-2 Convertible Preferred Stock in connection with a Change of Control (as defined in the Series B-2 Certificate of Designations) at 1.5x (or 1.0x in the case of Series B-2 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-2 Certificate of Designations.

40
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Upon a repurchase of the Series B-2 Convertible Preferred Stock at 1.0x 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 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 Condensed 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 Condensed Consolidated Statements of Operations as a non-cash expense or benefit. As of January 31, 2025 and July 31, 2024, the Warrant liability was remeasured to $243,000 and $710,000, respectively, resulting in a non-cash benefit for the three and six months ended January 31, 2025 of $2,820,000 and $467,000, respectively, recorded in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Condensed 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 identified several embedded derivatives that require bifurcation from the Series B-2 Convertible Preferred Stock under ASC 815, including the holders' right to: (i) require us to repurchase Series B-2 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-2 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-2 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 Condensed 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 Condensed Consolidated Statements of Operations as a non-cash expense or benefit. As of January 31, 2025, the embedded derivative liability was remeasured to $69,734,000, resulting in a non-cash expense for the three and six months ended January 31, 2025 of $30,620,000 and $30,902,000 recorded in "Other expenses (income) - Change in fair value of warrants and derivatives" on the Condensed Consolidated Statements of Operations.

41
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Series B-2 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. 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-2 Convertible Preferred Stock at January 31, 2025 based on its redemption value of $192,051,000, which includes $1,430,000 of accumulated and unpaid dividends. During the six months ended January 31, 2025, the adjustments charged against retained earnings and additional paid in capital to increase the carrying values of Convertible Preferred Stock, while outstanding, to their respective redemption values totaled $32,251,000.

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-2 Convertible Preferred Stock at January 31, 2025 $ 192,051,000 
Less: Carrying value of combined embedded derivatives at January 31, 2025 69,734,000 
Carrying value of Series B-2 Convertible Preferred Stock at January 31, 2025 122,317,000 
Less: Initial carrying value of Series B-2 Convertible Preferred Stock at October 17, 2024
 93,478,000 
Adjustment to increase the carrying value of Series B-2 Convertible Preferred Stock
   to its redemption value at January 31, 2025		 28,839,000 
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:
    Six months ended January 31, 2025 32,251,000 
    Less: Three months ended October 31, 2024 58,634,000 
    Three months ended January 31, 2025 $ (26,383,000)

Subsequent Event
On March 3, 2025, in connection with amending the Credit Facility, discussed in Note (10) - Credit Facility, and the Subordinated Credit Facility, discussed in Note (11) - Subordinated Credit Facility, we and the Investors agreed to change certain terms of the Series B-2 Convertible Preferred Stock. The changes provided the holders of Series B-3 Convertible Preferred Stock (as defined below) with a board observer right and the Investors with certain information access rights and were effected through a 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 (collectively, the “Series B-3 Convertible Preferred Stock”) and $650,000 in cash as a consent fee. We did not receive any cash proceeds from the exchange and issuance of Series B-3 Convertible Preferred Stock. As a result of the Series B-3 Exchange, no shares of Series B-2 Convertible Preferred Stock remain outstanding as of March 3, 2025.

42
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(19)     Stockholders’ Equity

Shelf Registration
On July 13, 2022, we filed a $200,000,000 shelf registration statement with the SEC for the sale of various types of securities, including debt securities. This shelf registration statement was declared effective by the SEC as of July 25, 2022 and expires on July 25, 2025. To date, we have not issued any securities pursuant to our $200,000,000 shelf registration statement. Because of delinquencies in our Exchange Act reporting, we cannot issue securities under the shelf registration statement without first filing a post-effective amendment to such shelf registration statement with the SEC.

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 during the six months ended January 31, 2025 and 2024.

Additional Paid in Capital
During the three and six months ended January 31, 2025, $(26,383,000) and $25,872,000, respectively, of the adjustments to the carrying values of outstanding Convertible Preferred Stock to their respective redemption values, while outstanding, were (credited)/charged to additional paid in capital so as not to exceed the available amount of retained earnings as of January 31, 2025.

(20)    Legal Proceedings and Other Matters

Former CEO Related Matters
On March 12, 2024, the Company terminated Ken Peterman, its 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 the Company’s prior financial and accounting practices. Mr. Peterman later filed a separate administrative complaint with the Department of Labor (Occupational Safety and Health Administration) making similar allegations and claiming that Comtech retaliated against him in violation of the Sarbanes-Oxley Act of 2002. The Company 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. 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. The Company believes Mr. Peterman's claims are entirely without merit and will defend itself vigorously in the matter. 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. The Company is not named as a defendant in either proceeding.

43
Index
COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CGC Divestiture Export Matters
As discussed further in Note (2) – Divestitures, during our fourth quarter of fiscal 2024, we ceased operations of our steerable antenna product line in Basingstoke, United Kingdom, which incurred cumulative operating losses since our acquisition of this business in fiscal 2020. In November 2024, as part of the wind down of such operations, we completed a disclosure to His Majesty’s Revenue and Customs agency in the United Kingdom (“HMRC”) related to potential violations of export compliance laws in the United Kingdom. On or about February 25, 2025, HMRC advised of its decision not to commence proceedings against the Company. We had not recorded a liability for contingent loss related to this matter.

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.

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.

(21)     Cost Reduction and Restructuring Related Activities

As of July 31, 2024, our severance liability was $1,029,000. During the six months ended January 31, 2025, in connection with our transformation strategy, we actioned multiple reductions in force principally within our Satellite and Space Communications and Unallocated segments. Such reductions approximated 13% of our workforce as of July 31, 2024, or approximately $26,000,000 in annualized labor costs. During the six months ended January 31, 2025, we recorded $2,338,000 of severance costs within Selling, general and administrative expenses in our Condensed Consolidated Statements of Operations. After net payments of $2,242,000 during the six months ended January 31, 2025, our severance liability was $1,125,000 as of January 31, 2025. As of January 31, 2025, we had approximately 1,500 employees, compared to 1,676 employees as of July 31, 2024.



44
Index
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this Quarterly Report on Form 10-Q contains, and oral statements made by our representatives from time to time may contain, forward-looking statements. Forward-looking statements can be identified by words such as: "anticipate," "believe," "continue," "could," "estimate," "expect," "future," "goal," "outlook," "intend," "likely," "may," "plan," "potential," "predict," "project," "seek," "should," "strategy," "target," "will," "would," and similar references to future periods. Forward-looking statements include, among others, statements regarding our expectations for our strategic alternatives process, our expectations for further portfolio-shaping opportunities, our expectations for other operational initiatives, the intended use of proceeds from the Credit Facility and Subordinated Credit Facility, our expectations for completing further financing initiatives, our future performance and financial condition, our plans to address our ability to continue as a going concern, the plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives of our management to be materially different from the results, performance or other expectations implied by these forward-looking statements. Factors that could cause actual results to differ materially from current expectations include, among other things: the outcome and effectiveness of the aforementioned strategic alternatives process, further portfolio-shaping opportunities, other operational initiatives, and the completion of further financing activities; our ability to access capital and liquidity so that we are able to continue as a going concern; our ability to implement changes in our executive leadership; the possibility that the expected synergies and benefits from our strategic activities will not be fully realized, or will not be realized within the anticipated time periods; the risk that acquired businesses will not be integrated successfully; impacts from, and uncertainties regarding, future actions that may be taken by activist stockholders; the possibility of disruption from acquisitions or dispositions, making it more difficult to maintain business and operational relationships or retain key personnel; the risk that we will be unsuccessful in implementing a tactical shift in our Satellite and Space Communications segment away from bidding on large commodity service contracts and toward pursuing contracts for our niche products and solutions with higher margins; the nature and timing of our receipt of, and our performance on, new or existing orders that can cause significant fluctuations in net sales and operating results; the timing and funding of government contracts; adjustments to gross profits on long-term contracts; risks associated with international sales; rapid technological change; evolving industry standards; new product announcements and enhancements; changing customer demands and/or procurement strategies and our ability to scale opportunities and deliver solutions to current and prospective customers; changes in prevailing economic and political conditions, including as a result of Russia's military incursion into Ukraine, the Israel-Hamas war and attacks in the Red Sea region; changes in the price of oil in global markets; changes in prevailing interest rates and foreign currency exchange rates; risks associated with our legal proceedings, customer claims for indemnification, and other similar matters; risks associated with our obligations under our credit facilities; risks associated with our large contracts; risks associated with supply chain disruptions; and other factors described in this and our other filings with the Securities and Exchange Commission ("SEC"). However, these risks are not the only risks that we face. Additional risks and uncertainties, not currently known to us or that do not currently appear to be material, may also materially adversely affect our business, financial condition and/or operating results in the future. We describe risks and uncertainties that could cause actual results and events to differ materially in the "Risk Factors" (Part I, Item 1A), "Management’s Discussion and Analysis of Financial Condition and Results of Operations" (Part II, Item 7) and "Quantitative and Qualitative Disclosures about Market Risk" (Part II, Item 7A) in our Annual Report on Form 10-K filed with the SEC on October 30, 2024 and the "Risk Factors" (Part II, Item 1A) in our Quarterly Report on Form 10-Q filed with the SEC on January 13, 2025. We do not intend to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law.

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OVERVIEW

We are a leading provider of satellite and space communications technologies, terrestrial and wireless network solutions, Next Generation 911 ("NG-911") and emergency services and cloud native capabilities. This includes the critical communications infrastructure that people, businesses, and governments rely on when durable, trusted connectivity is required, no matter where they are – on land, at sea, or in the air – and no matter what the circumstances – from armed conflict to a natural disaster. Our solutions are designed to fulfill our customers’ needs for secure wireless communications in the most demanding environments, including those where traditional communications are unavailable or cost-prohibitive, and in mission-critical and other scenarios where performance is crucial. Over the long-term, we anticipate future growth in our end markets due to a trend of increasing demand for global voice, video and data usage in recent years, in addition to the growth of emergency communication networks and related applications. We provide our solutions to both commercial and governmental customers.

We manage our business through two reportable operating segments: Satellite and Space Communications and Terrestrial and Wireless Networks. See Part I. - Financial Information - Item 1. Notes to Condensed Consolidated Financial Statements - Note (15) - Segment Information for further description and information related our segments.

Our Quarterly Financial Information
Quarterly and period-to-period sales and operating results may be significantly affected by, among other things, short-term or long-term contracts with our customers, allowances for bad debt, impairments of long-lived assets (including goodwill) and changes in the estimated fair value of derivative instruments and warrants. In addition, our gross profit is affected by a variety of factors, including, among other things, the mix of products, systems and services sold, production efficiencies, provisions for excess and obsolete inventories, estimates of warranty expense, price competition and general economic conditions. Our gross profit may also be affected by the impact of any cumulative adjustments to contracts that are accounted for over time. In particular, our contracts with the U.S. government (or prime contractors to the U.S. government) can be terminated for convenience at any time and orders are subject to unpredictable funding, deployment and technology decisions by our customers. Some of these contracts are indefinite delivery/indefinite quantity ("IDIQ") contracts and, as such, the U.S. government is not obligated to purchase any equipment or services under these contracts. We have, in the past, experienced and we continue to expect significant fluctuations in sales and operating results from quarter-to-quarter and period-to-period due to these factors. As such, comparisons between periods and our current results may not be indicative of a trend or future performance.

CRITICAL ACCOUNTING ESTIMATES

We consider certain accounting estimates to be critical due to the estimation process involved in each.

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. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (4) - Revenue Recognition for further information.

Impairment of Long-Lived Assets, Including Goodwill. As of January 31, 2025, total goodwill recorded on our Condensed Consolidated Balance Sheet aggregated $204.6 million (of which $30.5 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless Networks segment). Additionally, as of January 31, 2025, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $183.2 million (of which $44.1 million relates to our Satellite and Space Communications segment and $139.1 million relates to our Terrestrial and Wireless Networks segment). For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our Satellite and Space Communications and Terrestrial and Wireless Networks segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values. During our first quarter of fiscal 2025, we recorded a $79.6 million non-cash impairment charge in our Satellite and Space Communications segment related to long-lived assets, including goodwill. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (16) - Long-lived Assets, including Goodwill for further information. Ongoing and future actions supporting our transformation strategy could result in a material impairment of our goodwill and/or intangible assets.


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Provision for Warranty Obligations. We provide warranty coverage for most of our products, including products under long-term contracts, for a period of at least one year from the date of shipment. We record a liability for estimated warranty expense based on historical claims, product failure rates and other factors. Costs associated with some of our warranties that are provided under long-term contracts are incorporated into our estimates of total contract costs. There exist inherent risks and uncertainties in estimating warranty expenses, particularly on larger or longer-term contracts. If we do not accurately estimate our warranty costs, any changes to our original estimates could be material to our results of operations and financial condition.

Accounting for Income Taxes. Our deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and applying enacted tax rates expected to be in effect for the year in which we expect the differences to reverse. Our provision for income taxes is based on domestic (including federal, state and local) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives. The U.S. federal government is our most significant income tax jurisdictions.

For tax positions taken or expected to be taken in a tax return, we account for unrecognized tax benefits using a “more-likely-than-not” threshold for financial statement recognition and measurement. We may be challenged upon review by the applicable taxing authority and positions taken by us may not be sustained. We recognize all or a portion of the benefit of income tax positions only when we have made a determination that it is "more-likely-than-not" that the tax position will be sustained upon examination, based upon the technical merits of the position and other factors. For tax positions that are determined as "more-likely-than-not" to be sustained upon examination, the tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognize potential interest and penalties related to uncertain tax positions in income tax expense. 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 continuously evaluate additional facts representing positive and negative evidence in determining our ability to realize these deferred tax assets. Significant judgment is required in determining income tax provisions and tax positions. The ultimate outcome of tax exposures and risks involves significant uncertainties. If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations and financial condition.

Our U.S. federal income tax returns for fiscal 2021 through 2023 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state income tax returns prior to fiscal 2020 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

Capitalized Engineering Costs. We generally expense all research and development costs. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other personnel-related expenses associated with product development. Research and development expenses also include third-party development and programming costs. Costs incurred internally in researching and developing software to be sold are charged to expense until technological feasibility has been established for the software. Judgment is required in determining when technological feasibility of a product is established. Technological feasibility for our advanced communication software solutions is generally reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to customers and when we are able to validate the marketability of such product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. To date, cost capitalized related to software developed for the purpose of selling to third parties was not material, but could increase in the future.


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As it relates to software developed for the purpose of internal-use (e.g., hosted "SaaS" applications within our Terrestrial and Wireless Networks segment), costs capitalized primarily consist of direct labor and third-party vendor costs associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use of that software. For the three months ended January 31, 2025 and 2024, capitalized internal-use software costs were $0.5 million and $1.0 million, respectively. For the six months ended January 31, 2025 and 2024, capitalized internal-use software costs were $1.5 million and $1.6 million, respectively. Capitalized internal use software costs are amortized once the software is placed in service on the straight-line method over the estimated useful life of the software, which is generally three years.

Provisions for Excess and Obsolete Inventory. We record a provision for excess and obsolete inventory based on historical and projected usage trends. Other factors may also influence our provision, including decisions to restructure or exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we would be required to recognize such costs in our financial statements at the time of such determination. Any such charge could be material to our results of operations and financial condition. As discussed in Part I. - Financial Information - Item 1. - Note (8) - Inventories, 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 $11.4 million within Cost of Sales on our Condensed Consolidated Statement of Operations. Such non-cash charge related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued. Such non-cash charge also included the write down of inventory associated with the CGC Divestiture, which was determined during the first quarter of fiscal 2025 to no longer be salable.

Allowance for Doubtful Accounts. We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information. Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly. In addition, we seek to obtain insurance for certain domestic and international customers. We monitor billing events, collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. In light of ongoing tight credit market conditions and high interest rates, we continue to see requests from our customers for higher credit limits and longer payment terms. We have, on a limited basis, approved certain customer requests. Also, more recently, we experienced a significant increase in the overall level of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S. government and international customers. We continue to monitor our accounts receivable credit portfolio. Except as discussed below, to-date, there has been no material changes in our billed accounts receivable credit portfolio as a result of the challenging business conditions. Although our overall credit losses have historically been within the allowances we established, we may not be able to accurately predict our future credit loss experience, given the current poor business environment. Measurement of credit losses requires consideration of historical loss experience, including the need to adjust for changing business conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and the financial health of specific customers. Future changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition. As discussed in Part I. - Financial Information - Item 1. - Note (7) - Accounts Receivables, during the first quarter of fiscal 2025, we determined that an unbilled receivable contract asset in the amount of $19.0 million, related to an international customer and reseller of our troposcatter technologies, was at risk of not being invoiced or collected, principally due to the 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 $1.6 million 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 $17.4 million unbilled receivable contract asset within our allowance for doubtful accounts.


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Derivative Instruments and Warrant Liabilities. We evaluate our financial instruments, including our Credit Facility, Subordinated Credit Facility, Convertible Preferred Stock and warrants to issue our common stock pursuant to the terms of such instruments, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. Such evaluation considers a qualitative and quantitative assessment of whether the host instrument is more debt or equity-like, and if embedded derivatives should be bifurcated from the host instrument and/or combined for accounting purposes. For derivatives that are accounted for as liabilities, the derivative is initially recorded at its estimated fair value and is then re-valued at each reporting date, with changes in its estimated fair value reported in our Condensed Consolidated Financial Statements. To estimate such fair values, with the assistance of a third party valuation expert, we primarily use Monte Carlo simulation models, on a with and without basis, or Black-Scholes option pricing models, each adjusted for instrument-specific terms. Due to the nature of our derivative instruments and warrant liabilities, we must use Level 3 inputs for estimating fair value, which 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. Accordingly, our estimates and assumptions could prove to be inaccurate. Also, changes in such estimates and assumptions from period to period could be material to our results of operations and financial condition. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (5) – Fair Value Measurements and Financial Instruments for further information.

Fiscal 2025: Second Quarter Results and Business Outlook

Financial results for the second quarter of fiscal 2025 include:

•Consolidated net sales were $126.6 million, compared to $115.8 million in the first quarter of fiscal 2025 and $134.2 million in the second quarter of fiscal 2024;

•Gross margin was 26.7%, compared to 12.5% in our first quarter of fiscal 2025 and 32.2% in our second quarter of fiscal 2024;

•GAAP net loss attributable to common stockholders was $22.4 million and included, among other things: $5.0 million of intangible asset amortization, $3.4 million of restructuring costs, $1.2 million of amortization of stock-based compensation and $1.1 million of proxy solicitation costs;

•GAAP EPS net loss of $0.76 and Non-GAAP EPS net loss of $0.35;

•Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $2.9 million, or 2.3% of consolidated net sales, compared to an Adjusted EBITDA loss of $19.4 million for the first quarter of fiscal 2025 and Adjusted EBITDA of $15.1 million, or 11.3% of consolidated net sales, for the second quarter of fiscal 2024;

•New bookings (also referred to as orders) of $79.4 million, representing a quarterly book-to-bill ratio of 0.63x (a measure defined as bookings divided by net sales);

•Backlog of $763.8 million as of January 31, 2025, compared to $798.9 million as of July 31, 2024 and $680.1 million as of January 31, 2024;

•Revenue visibility of approximately $1.6 billion. We measure this revenue visibility as the sum of our $763.8 million of funded backlog, plus the total unfunded value of certain multi-year contracts that we have received and from which we expect future orders; and

•Cash flows used in operating activities were $0.2 million. Excluding $5.6 million in aggregate payments for restructuring costs, including severance, CEO transition costs and proxy solicitation costs, cash flows provided by operating activities during the more recent quarter would have been $5.4 million.

Non-GAAP financial measures discussed above are reconciled to the most directly comparable GAAP financial measures in the table included in the below section “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended January 31, 2025 and 2024” and “Comparison of the Results of Operations for the Six Months Ended January 31, 2025 and 2024.”


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Other Key Business Developments and Updates

Satellite and Space Communications

In September 2023, we were awarded a large, multi-year GFSR contract by the U.S. Army with a total potential value of $544.0 million. Through this program, we would provide ongoing communications and IT infrastructure support for the U.S. Army, Air Force, Navy, Marine Corps and NATO. The incumbent protested (and lost) the award of the contract to Comtech several times. We learned on March 12, 2025, that the Government Accountability Office had upheld the most recent protest by the incumbent; we have taken the matter under review pending receipt of further details.

In January 2025, L3Harris awarded us a sole source follow-on contract, valued in excess of $15.0 million, that calls for the delivery of our designed and manufactured modem technologies supporting the U.S. Air Force and U.S. Army Anti-Jam Modem (“A3M”). A3Ms are at the forefront of providing cutting-edge anti-jam satellite communications (“SATCOM”) capabilities to military personnel across diverse operational environments and geographies. Our A3M technologies are engineered to deliver software-defined, secure, and resilient anti-jam SATCOM capabilities for U.S. Air Force and U.S. Army platforms operating around the world. To date, we have received in excess of $26.0 million in sole source, follow-on contracts.

In January 2025, an international military end customer awarded us a contract, valued in excess of $4.5 million. Such contract calls for the delivery of our software-defined SLM-5650B and CDM-625 modems, upgrade kits, firmware and technical support. Such funded contract was in addition to a separate order received in December 2024 from another international customer seeking our SLM-5650B modems and valued in excess of $1.0 million.

During the second quarter of fiscal 2025, we were also awarded:

•approximately $4.0 million in funded orders from a long-time, existing international customer for the procurement of EEE space parts and services (deliveries associated with these orders are anticipated to begin in the latter part of fiscal 2025);

•additional funding of approximately $4.0 million for continued, ongoing training and support of complex cybersecurity operations for U.S. government customers;

•in excess of $2.0 million in funded orders calling for the supply of Very Small Aperture Terminal (“VSAT”) equipment and related services for the U.S. Army (in November 2024, the follow-on contract, referred to as "VSAT IV," was not initially awarded to Comtech; a decision reaffirmed by the U.S. Army on March 12, 2025; we are in the process of reviewing potential remedies); and

•a sole source production order, valued at approximately $2.0 million, from an existing customer for multi-orbit frequency converters.

As it relates to our troposcatter product line, throughout most of fiscal 2024, we experienced elevated levels of unbilled receivables due to the timing of our performance and billings related to certain large U.S. government and international customer contracts. During the six months ended January 31, 2025, we maintained deliveries of next-generation troposcatter terminals related to our U.S. Marine Corps and U.S. Army contracts, contributing to a meaningful reduction of our consolidated unbilled receivables (before allowances for doubtful accounts), from $123.7 million at July 31, 2024 to $86.1 million at January 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. While information remains limited at this point in time, we believe the end customer may be considering a possible termination of the contract, in whole or in part. As of February 28, 2025, our unbilled receivables related to the U.S. Marine Corps contract approximated $9.7 million. Future results of operations related to our troposcatter solutions product line will depend, in part, on the nature, timing and amounts associated with resolving this matter.

Subsequent to quarter end, in February 2025, we announced the launch of our new ELEVATE 2.0 multi-orbit SATCOM platform. Built upon our field-proven, multi-orbit VSAT products and nearly 60 years of experience developing innovative SATCOM ground systems for global customers, our ELEVATE 2.0 is designed to connect people across the globe with the best available networks on all SATCOM orbits in a single, low Size Weight and Power (“SWaP”) platform. The ELEVATE 2.0 platform is designed to provide users with a new software-defined, scalable and adaptable ground infrastructure needed to meet the always-on connectivity demands of governments, communities and businesses around the world, and we have already been awarded a significant contract for this new platform from a commercial customer in the Asia Pacific region.


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Terrestrial and Wireless Networks

During the second quarter of fiscal 2025, we were pleased to have been awarded the following:

•a funded order, valued at approximately $8.0 million, from a long-time, existing customer for location and mapping services intended for motorcycles and off-road vehicles;

•various funded orders, in excess of $3.0 million, primarily for location and maintenance and support services for one of the largest wireless carriers in the U.S.;

•incremental funding related to our NG-911 deployment in South Carolina, valued in excess of $2.0 million (during the quarter, we were again successful in expanding the number of PSAPs and counties being serviced by our solutions within the state);

•incremental funding, valued in excess of $2.0 million, from an existing customer requesting the continuation of NG-911 call routing services for voice over internet protocol ("VoIP") communications; and

•a funded order, valued in excess of $1.5 million, from an existing U.S. military customer requesting the extension of call handling maintenance and support services during its transition to our Solacom NG-911 Guardian call handling solution.

With strategic wins in the U.S., Canada and Australia, we believe Comtech's position as a trusted leader in 911, NG-911 and public safety applications positions us increasingly well when it comes to delivering similarly sophisticated solutions for other types of emergencies.

Unallocated and Other Matters, Including an Update on Comtech's Improved Capital Structure

In November 2024, we announced that our Board of Directors (the “Board”) unanimously elected Kenneth H. Traub as the Executive Chairman of our Company. Additionally, the Board named Mr. Traub as President and Chief Executive Officer, effective as of January 13, 2025.

In November 2024, we announced that our Board entered into a cooperation agreement with certain investors (the “Investor Group”). Pursuant to the agreement, we appointed Michael Hildebrandt, Senior Investment Professional at Freshford Capital Management, to the Board, effective immediately. Also, among other things: the Board will appoint an additional new independent director mutually acceptable to both our Board and the Investor Group (the “Additional Director”); and the Investor Group agreed to customary standstill restrictions and voting commitments until the nomination deadline for our Fiscal 2025 Annual Meeting of Stockholders, or until the nomination deadline for our Fiscal 2026 Annual Meeting of Stockholders if we nominate Mr. Hildebrandt and the Additional Director for reelection at the Fiscal 2025 Annual Meeting of Stockholders.

Subsequent to quarter end, on March 3, 2025, we entered into the second amendment to the Credit Facility to: (i) waive all defaults under the Credit Facility, specifically in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants for the four fiscal quarter period ended January 31, 2025; and (ii) amend the Credit Facility, as outlined below. As a result of this amendment, there are no ongoing events of default under the Credit Facility. Cumulatively, the Credit Facility as amended through March 3, 2025, among other things: (i) reduced the interest rate margins applicable to the Term Loan (generally, from 13.00% to 10.50% per annum for SOFR Loans); (ii) provided the lenders the right to appoint an independent director to the Board following the earlier to occur of: (x) an event of default, or (y) any date selected by the lenders after May 31, 2025; (iii) permitted the incurrence of $65.0 million of total senior unsecured subordinated debt (as described in further detail 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) provided the lenders a consent right with respect to Revolver Loan borrowings above $29.3 million; and; (vii) reduced the minimum quarterly average liquidity requirement from $20.0 million to $17.5 million.


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On March 3, 2025, we entered into the first amendment to the Subordinated Credit Facility. In addition to waiving 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, cumulatively, the Subordinated Credit Facility, among other things: (i) provides for a total $65.0 million facility; and (ii) suspended testing of the Net Leverage Ratio and Fixed Charge Coverage Ratio covenants under the Subordinated Credit Facility until October 31, 2025. The net proceeds of the Subordinated Credit Facility cured our defaults on certain financial covenants under the Credit Facility and were principally used to repay a portion of the Term Loan and Revolving Loan on March 3, 2025 and to fund our general working capital needs.

In connection with the above transactions, we: (i) agreed to change certain terms of our convertible preferred stock to provide, among other things, the holders with: (x) a board observer right, and (y) the holders with certain information access rights; and (ii) 2,916.76 additional shares of convertible preferred stock. We did not receive any cash proceeds from the exchange and issuance of convertible preferred stock.

Collectively, we believe the new capital infusion of $40.0 million, immediate reduction in our senior debt and waiver of certain financial covenants through October 31, 2025 provide us with enhanced financial flexibility, as we continue to transform our Company and pursue strategic alternatives. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility, Note (11) - Subordinated Credit Facility, and Note (18) - Convertible Preferred Stock for further information.

Business Outlook
During the second quarter of fiscal 2025, business conditions continue to be challenging, and the operating environment is largely unpredictable, due to many factors including, but not limited to: uncertainties related to our recently announced transformation strategy and associated actions we may take; uncertainties related to our ability to operate as a going concern; fluctuations in interest rates; inflationary pressures, including those related to actual or potential tariffs imposed on our supply chain; continuing resolutions associated with the U.S. Federal budget, as well as reduced or eliminated spending by the U.S. government as a result of the formation of the Department of Government Efficiency (the "DOGE"); repercussions of military conflicts in Russia, Ukraine and the Middle East; and a potential global recession. Order and production delays, contract protests and/or terminations, delayed cash collections from customers, disruptions in component availability and/or quality, increased pricing both for labor and parts, lower levels of factory utilization and higher logistics and operational costs resulting from such conditions have or could impact our business as well. In light of these business conditions and resulting challenges, we anticipate variability from time to time as we move through our transformation strategy. Accordingly, we are not providing forward-looking guidance on a GAAP or Non-GAAP basis.

Additional information related to our Business Outlook for Fiscal 2025 and a definition and explanation of Adjusted EBITDA is included in the below section Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of the Results of Operations for the Three Months Ended January 31, 2025 and 2024 and Comparison of the Results of Operations for the Six Months Ended January 31, 2025 and 2024.


COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARY 31, 2025 AND 2024

Net Sales. Consolidated net sales were $126.6 million and $134.2 million for the three months ended January 31, 2025 and 2024, respectively, representing a decrease of $7.6 million, or 5.7%. The period-over-period decrease reflects lower net sales in both segments, as further discussed below.

Satellite and Space Communications
Net sales in our Satellite and Space Communications segment were $73.7 million for the three months ended January 31, 2025 as compared to $78.6 million for the three months ended January 31, 2024, a decrease of $4.9 million or 6.2%. Related segment net sales for the three months ended January 31, 2025 primarily reflect lower net sales of our troposcatter solutions (including progress toward delivering next-generation troposcatter terminals to the U.S. Marine Corps and U.S. Army, as well as COMET terminals to an international customer), offset in part by higher net sales of our SATCOM solutions (including VSAT and similar equipment sales to the U.S. Army) and satellite ground infrastructure solutions. Our Satellite and Space Communications segment represented 58.2% of consolidated net sales for the three months ended January 31, 2025, as compared to 58.6% for the three months ended January 31, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended January 31, 2025 was 0.64x.


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Terrestrial and Wireless Networks
Net sales in our Terrestrial and Wireless Networks segment were $52.9 million for the three months ended January 31, 2025, as compared to $55.6 million for the three months ended January 31, 2024, a decrease of $2.7 million, or 4.9%. Related segment net sales for the three months ended January 31, 2025 primarily reflect lower net sales of our location based solutions and NG-911 services, offset in part by higher net sales of our call handling solutions. Our Terrestrial and Wireless Networks segment represented 41.8% of consolidated net sales for the three months ended January 31, 2025 as compared to 41.4% for the three months ended January 31, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended January 31, 2025 was 0.61x.

Bookings, sales and profitability in both segments can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our customers and changes in the general business environment. Period-to-period fluctuations in bookings are normal for our segments. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance. Also, we announced that we are exploring strategic alternatives for our businesses. Accordingly, future results of operations can be impacted by the timing and outcome of such initiatives. There can be no assurance that the exploration of strategic alternatives will result in a transaction or other strategic changes or outcomes.

Geography and Customer Type
Sales by geography and customer type, as a percentage of related sales, for the three months ended January 31, 2025 and 2024 are as follows:
  Three months ended January 31,
2025 2024 2025 2024 2025 2024
  Satellite and Space Communications Terrestrial and Wireless Networks Consolidated
U.S. government 59.9  % 53.1  % 1.1  % 1.0  % 35.4  % 31.5  %
Domestic 12.2  % 11.2  % 92.0  % 87.8  % 45.5  % 42.9  %
Total U.S. 72.1  % 64.3  % 93.1  % 88.8  % 80.9  % 74.4  %
International 27.9  % 35.7  % 6.9  % 11.2  % 19.1  % 25.6  %
Total 100.0  % 100.0  % 100.0  % 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 the three months ended January 31, 2025 and 2024, except for the U.S. government, there were no customers that represented 10% or more of consolidated net sales. International sales for the three months ended January 31, 2025 and 2024 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $24.2 million and $34.3 million, 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 10% or more of consolidated net sales for the three months ended January 31, 2025 and 2024.

Gross Profit. Gross profit was $33.7 million and $43.2 million for the three months ended January 31, 2025 and 2024, respectively. Gross profit, as a percentage of consolidated net sales, for the three months ended January 31, 2025 was 26.7% as compared to 32.2% for the three months ended January 31, 2024. Our gross profit (both in dollars and as a percentage of consolidated net sales) primarily reflects lower net sales and product mix changes within each of our segments, as discussed above. Gross profit, as a percentage of related segment net sales, is further discussed below.

Our Satellite and Space Communications segment's gross profit, in dollars and as a percentage of related segment net sales, for the three months ended January 31, 2025 decreased in comparison to the three months ended January 31, 2024. The gross profit in the more recent period reflects changes in products and services mix, as discussed above. In particular, net sales for the second quarter of fiscal 2025, as compared to the prior year period, included a higher amount of low margin VSAT and similar equipment sales to the U.S. Army and a lower amount of high margin COMET sales to an international customer.

Our Terrestrial and Wireless Networks segment's gross profit, in dollars and as a percentage of related segment net sales, for the three months ended January 31, 2025 decreased in comparison to the three months ended January 31, 2024. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above.


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Included in consolidated cost of sales for the three months ended January 31, 2025 and 2024 are provisions for excess and obsolete inventory of $1.6 million and $1.4 million, respectively. As discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory," we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends.

Our consolidated gross profit, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each segment, and therefore is inherently difficult to forecast. Our consolidated gross profit, as a percentage of consolidated net sales, may also be impacted by the timing and outcome of actions we may take related to our transformation strategy.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $33.8 million and $30.3 million for the three months ended January 31, 2025 and 2024, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 26.7% and 22.6% for the three months ended January 31, 2025 and 2024, respectively.

During the three months ended January 31, 2025 and 2024, we incurred $3.4 million and $2.7 million, respectively, of restructuring costs primarily to streamline our operations and improve efficiency (including those related to legal and professional fees associated with our pursuit of strategic alternatives, the wind down of our steerable antenna product line in the U.K. initiated in our fourth quarter of fiscal 2024, and severance costs). Excluding restructuring costs, selling, general and administrative expenses for the three months ended January 31, 2025 and 2024 would have been $30.4 million, or 24.0%, and $27.6 million, or 20.5%, respectively. The increase in our selling, general and administrative expenses, as a percentage of consolidated net sales, is primarily due to lower consolidated net sales, as discussed above. The increase in our selling, general and administrative expenses, in dollars, is due to higher legal and professional fees and cash-based incentive compensation, offset in part by lower stock-based compensation, as discussed below.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $1.0 million in the three months ended January 31, 2025, as compared to $2.0 million in the three months ended January 31, 2024. 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. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Research and Development Expenses. Research and development expenses were $4.4 million and $6.8 million for the three months ended January 31, 2025 and 2024, respectively. As a percentage of consolidated net sales, research and development expenses were 3.4% and 5.1% for the three months ended January 31, 2025 and 2024, respectively.

For the three months ended January 31, 2025 and 2024, research and development expenses of $1.5 million and $4.2 million, respectively, related to our Satellite and Space Communications segment, and $2.8 million and $2.5 million, respectively, related to our Terrestrial and Wireless Networks segment. The remaining research and development expenses in each period related to the amortization of stock-based compensation expense and were nominal. Lower research and development expenses reflect our prioritization of resources across various programs.

During the three months ended January 31, 2024, we incurred $1.0 million of strategic emerging technology costs in our Satellite and Space Communications segment for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations. As a result of our fourth quarter fiscal 2024 decision to cease operations related to our steerable antenna product line in the U.K., we do not expect to incur similar strategic emerging technology costs in the future.

Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the three months ended January 31, 2025 and 2024, customers reimbursed us $4.6 million and $2.5 million, respectively, which is not reflected in the reported research and development expenses but is included in net sales with the related costs included in cost of sales.


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In addition to increases in customer-funded research and development activities in recent years, during the three months ended January 31, 2025 and 2024, we also experienced an increase in engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $1.3 million and $1.8 million, respectively. As a result of these trends, a more focused prioritization of resources across various programs and the impact of prior reductions in force announced in fiscal 2023, our research and development expenses for financial reporting purposes has significantly decreased more recently as compared to historical periods.

Amortization of Intangibles. Amortization relating to intangible assets with finite lives for the three months ended January 31, 2025 was $5.0 million (of which $1.4 million was for the Satellite and Space Communications segment and $3.6 million was for the Terrestrial and Wireless Networks segment) compared to $5.3 million (of which $1.7 million was for the Satellite and Space Communications segment and $3.6 million was for the Terrestrial and Wireless Networks segment), respectively. The decrease in our Satellite and Space Communications segment's amortization during the more recent quarter reflects the impact of our decision to wind down our steerable antenna product line in the U.K.

Proxy Solicitation Costs. During the three months ended January 31, 2025, we incurred $1.1 million of proxy solicitation costs (including legal and advisory fees) in our Unallocated segment as a result of a now-settled proxy contest. There were no similar costs in the prior year.

CEO Transition Costs. During the three months ended January 31, 2025, we recorded a $0.3 million net benefit associated with our CEO transition-related activities. Such net benefit primarily represents a recovery of certain legal matter related costs, partially offset by severance costs related to a former CEO terminated during the second quarter of fiscal 2025. There were no similar costs in the corresponding period of the prior year.

Gain on Business Divestiture, Net. On November 7, 2023, we completed the PST Divestiture and recorded an estimated gain of $2.2 million in our Unallocated segment in the second quarter of fiscal 2024.

Operating Income (Loss). Operating loss for the three months ended January 31, 2025 was $10.3 million, as compared to operating income of $3.0 million for the three months ended January 31, 2024. Operating income (loss) by reportable segment is shown in the table below:
Three months ended January 31,
2025 2024 2025 2024 2025 2024 2025 2024
($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated
Operating income (loss) $ 1.2  1.9  3.4  8.1  (14.8) (7.0) $ (10.3) 3.0 
Percentage of related net sales 1.6  % 2.4  % 6.4  % 14.6  % NA NA NA 2.2  %

Our GAAP operating loss of $10.3 million for the three months ended January 31, 2025 reflects: (i) $5.0 million of amortization of intangibles; (ii) $3.4 million of restructuring costs (of which $1.4 million and $2.0 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $1.2 million of amortization of stock-based compensation; (iv) $1.1 million of proxy solicitation costs; and (v) a $0.3 million benefit related to CEO transition activities, as discussed above. Excluding such items, our consolidated operating income for the three months ended January 31, 2025 would have been $0.1 million.

Our GAAP operating income of $3.0 million for the three months ended January 31, 2024 reflects: (i) $5.3 million of amortization of intangibles; (ii) $2.7 million of restructuring costs (of which $1.5 million and $1.3 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $2.2 million of amortization of stock-based compensation; (iv) $1.0 million of strategic emerging technology costs; (v) $0.2 million of amortization of cost to fulfill assets, and (vi) a $2.2 million estimated gain on the PST Divestiture reported in our Unallocated segment, as discussed above. Excluding such items, our consolidated operating income for the three months ended January 31, 2024 would have been $12.2 million.

The decrease, excluding the above items, from $12.2 million of operating income to $0.1 million of operating income for the more recent period primarily reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales) and higher selling, general and administrative expenses, offset in part by lower research and development expenses, as discussed above. Operating income (loss) by reportable segment is further discussed below.


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The decrease in our Satellite and Space Communications segment operating income for the three months ended January 31, 2025 primarily reflects lower net sales and gross profit, both in dollars and as a percentage of related segment net sales, offset in part by lower research and development expenses, lower selling, general and administrative expenses (due to cost reduction actions) and lower amortization of intangibles, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for the three months ended January 31, 2025 primarily reflects lower net sales and gross profit, both in dollars and as a percentage of related segment net sales, and higher selling, general and administrative expenses and research and development expenses, as discussed above.

Excluding the impact of proxy solicitation costs, CEO transition costs, the gain on the PST Divestiture and its respective portion of restructuring charges in each period, Unallocated expenses for the three months ended January 31, 2025 would have been $12.1 million, as compared to $7.9 million for the three months ended January 31, 2024. The increase in Unallocated expenses, excluding such items, was primarily due to higher selling, general and administrative expenses, as discussed above.

Interest Expense and Other. Interest expense was $11.0 million and $5.3 million for the three months ended January 31, 2025 and 2024, respectively. The increase during the more recent period is primarily due to: higher average debt balances outstanding during the more recent period; higher interest rates and fees under our Credit Facility; and accreted interest on our Subordinated Credit Facility, as discussed further in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility and Note (11) - Subordinated Credit Facility. Our effective interest rate (including amortization of deferred financing costs) in the three months ended January 31, 2025 was approximately 21.5%, as compared to 11.3% in the prior year period. Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our Credit Facility approximates 14.2%, which reflects the benefit of the March 3, 2025 waiver and amendment to the Credit Facility, as compared to 9.4% in the prior year period.

Interest (Income) and Other. Interest (income) and other for both the three months ended January 31, 2025 and 2024 was nominal. All of our available cash and cash equivalents are currently invested in bank deposits and money market deposit accounts which, at this time, are currently yielding an immaterial interest rate.

Change in Fair Value of Warrants and Derivatives. During the three months ended January 31, 2025, we recorded a $28.6 million non-cash expense due to the remeasurement of warrants and derivatives related to our Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock. The remeasurement and resulting non-cash expense primarily reflects an increase in the estimated probability of events that could result in additional and/or accelerated payments to holders of our convertible preferred stock. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility, Note (11) - Subordinated Credit Facility and Note (18) - Convertible Preferred Stock for more information. These warrants and derivatives were not outstanding in the corresponding period of the prior year.

(Benefit from) Provision for Income Taxes. For the three months ended January 31, 2025, we recorded a tax benefit of $1.0 million, as compared to a tax expense of $7.4 million for the three months ended January 31, 2024. Our effective tax rate (excluding discrete tax items) for the three months ended January 31, 2025 and 2024 was (1.7)% and (52.0)%, respectively. The change in rate from (52.0)% to (1.7)% is primarily due to changes in expected product and geographic mix and not providing for tax benefits on U.S. deferred tax assets in the more recent period.

For purposes of determining our (1.7)% estimated annual effective tax rate for fiscal 2025, the impairment of long-lived assets, including goodwill, the change in fair value of warrants and derivatives, proxy solicitation costs and CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate.

During the three months ended January 31, 2025 and 2024, we recorded a net discrete tax benefit of $0.1 million and $0.3 million, respectively.

Our U.S. federal income tax returns for fiscal 2021 through 2023 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state income tax returns prior to fiscal 2020 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.


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Net Loss Attributable to Common Stockholders. During the three months ended January 31, 2025 and 2024, consolidated net loss attributable to common stockholders was $22.4 million and $30.5 million, respectively. In addition to those items discussed above, during: (i) the three months ended January 31, 2025, we recorded $26.4 million of net deemed contributions related to our Convertible Preferred Stock outstanding during the quarter; and (ii) during the three months ended January 31, 2024, we recorded: (x) a $13.6 million loss related to the exchange of our Series A-1 Convertible Preferred Stock for Series B Convertible Preferred Stock on January 22, 2024; (y) $4.3 million of Convertible Preferred Stock issuance costs; and (z) $2.1 million of net dividends related to our Convertible Preferred Stock outstanding during the quarter.

Adjusted EBITDA. Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the three months ended January 31, 2025 and 2024 are shown in the table below (numbers in the table may not foot due to rounding):

Three months ended January 31,
2025 2024 2025 2024 2025 2024 2025 2024
($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated
Net income (loss) $ 1.6  (0.5) 3.4  7.6  (53.8) (17.7) $ (48.7) (10.6)
(Benefit from) provision for income taxes (0.2) 0.3  (0.2) 0.7  (0.6) 6.3  (1.0) 7.4 
Interest (income) and other (0.3) 1.1  0.1  (0.2) —  —  (0.1) 0.9 
Interest expense —  0.9  —  —  11.0  4.4  11.0  5.3 
Change in fair value of warrants and derivatives —  —  —  —  28.6  —  28.6  — 
Amortization of stock-based compensation —  —  —  —  1.2  2.2  1.2  2.2 
Amortization of intangibles 1.4  1.7  3.6  3.6  —  —  5.0  5.3 
Depreciation 0.7  0.9  1.9  2.0  0.2  0.1  2.8  2.9 
Amortization of cost to fulfill assets —  0.2  —  —  —  —  —  0.2 
Restructuring costs 1.4  1.5  —  —  2.0  1.3  3.4  2.7 
Strategic emerging technology costs —  1.0  —  —  —  —  —  1.0 
Proxy solicitation costs —  —  —  —  1.1  —  1.1  — 
CEO transition costs —  —  —  —  (0.3) —  (0.3) — 
Gain on business divestiture, net —  —  —  —  —  (2.2) —  (2.2)
Adjusted EBITDA $ 4.7  7.1  8.9  13.7  (10.7) (5.7) $ 2.9  15.1 
Percentage of related net sales 6.4  % 9.0  % 16.9  % 24.7  % NA NA 2.3  % 11.3  %

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the three months ended January 31, 2025 as compared to the three months ended January 31, 2024 reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales) and higher selling, general and administrative expenses, offset in part by lower research and development expenses, as discussed above.

The decrease in our Satellite and Space Communications segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, reflects lower net sales and gross profit (both in dollars and as a percentage of related segment net sales), offset in part by lower selling, general and administrative and research and development expenses, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, is primarily due to lower gross profit (both in dollars and as a percentage of related segment net sales) and higher selling, general and administrative and research and development expenses, as discussed above.


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A reconciliation of our fiscal 2024 GAAP Net Loss to Adjusted EBITDA is shown in the table below (numbers in the table may not foot due to rounding):
($ in millions) Fiscal Year 2024
Reconciliation of GAAP Net Loss to Adjusted EBITDA:
Net loss $ (100.0)
Benefit from income taxes (0.3)
Interest expense 22.2 
Interest (income) and other 0.7 
Write-off of deferred financing costs 1.8 
Change in fair value of warrants and derivatives (4.3)
Amortization of stock-based compensation 6.1 
Amortization of intangibles 21.2 
Depreciation 12.2 
Impairment of long-lived assets, including goodwill 64.5 
Amortization of cost to fulfill assets 1.0 
Restructuring costs 12.5 
Strategic emerging technology costs 4.1 
CEO transition costs 2.9 
Loss on PST Divestiture 1.2 
Adjusted EBITDA $ 45.7 

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before interest, income taxes, depreciation, amortization of intangibles, impairment of long-lived assets, including goodwill, amortization of cost to fulfill assets, amortization of stock-based compensation, CEO transition costs, change in fair value of warrants and derivatives, proxy solicitation costs, restructuring costs, strategic emerging technology costs (for next-generation satellite technology) and write-off of deferred financing costs, and in the recent past, acquisition plan expenses, change in fair value of the convertible preferred stock purchase option liability, COVID-19 related costs, facility exit costs, strategic alternatives expenses and other and loss on business divestiture. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Although closely aligned, our definition of Adjusted EBITDA is different than EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is also a measure frequently requested by our investors and analysts. We believe that investors and analysts may use Adjusted EBITDA, along with other information contained in our SEC filings, including GAAP measures, in assessing our performance and comparability of our results with other companies. Our Non-GAAP measures reflect the GAAP measures as reported, adjusted for certain items as described herein and also excludes the effects of our outstanding convertible preferred stock.

These Non-GAAP financial measures have limitations as an analytical tool as they exclude the financial impact of transactions necessary to conduct our business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. These measures are adjusted as described in the reconciliation of GAAP to Non-GAAP measures in the tables presented herein, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. Investors are advised to carefully review the GAAP financial results that are disclosed in our SEC filings. As we have not provided future financial targets, there is no need to reconcile our business outlook to the most directly comparable GAAP measures. Furthermore, even if targets had been provided, items such as stock-based compensation, adjustments to the provision for income taxes, amortization of intangibles and interest expense, which are specific items that impact these measures, have not yet occurred, are out of our control, or cannot be predicted. For example, quantification of stock-based compensation expense requires inputs such as the number of shares granted and market price that are not currently ascertainable. Accordingly, reconciliations to the Non-GAAP forward looking metrics would not be available without unreasonable effort and such unavailable reconciling items could significantly impact our financial results.


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Reconciliations of our GAAP consolidated operating income (loss), net income (loss) attributable to common stockholders and net income (loss) per diluted common share to the corresponding Non-GAAP measures are shown in the tables below (numbers and per share amounts in the tables may not foot due to rounding). Non-GAAP net income (loss) attributable to common stockholders and non-GAAP net income (loss) per diluted common share reflect Non-GAAP provisions for income taxes based on year-to-date results, as adjusted for the Non-GAAP reconciling items included in the tables below. We evaluate our Non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time. Our Non-GAAP effective income tax rate can differ materially from our GAAP effective income tax rate.
Three months ended January 31, 2025
($ in millions, except for per share amount) Operating (Loss) Income Net Loss Attributable to Common Stockholders Net Loss per Diluted Common Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported
 $ (10.3) $ (22.4) $ (0.76)
    Adjustments to reflect redemption value of convertible preferred stock
 —  (26.4) (0.90)
    Change in fair value of warrants and derivatives —  28.6  0.98 
    Amortization of intangibles
 5.0  4.8  0.16 
    Restructuring costs
 3.4  3.2  0.11 
    Amortization of stock-based compensation
 1.2  1.1  0.04 
    Proxy solicitation costs
 1.1  1.0  0.03 
    CEO transition costs
 (0.3) (0.3) (0.01)
    Net discrete tax expense
 —  0.1  — 
Non-GAAP measures $ 0.1  $ (10.3) $ (0.35)
Three months ended January 31, 2024
($ in millions, except for per share amount) Operating (Loss) Income Net Loss Attributable to Common Stockholders Net Loss per Diluted Common Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported
 $ 3.0  $ (30.5) $ (1.07)
    Loss on extinguishment of convertible preferred stock
 —  13.6  0.48 
    Adjustments to reflect redemption value of convertible preferred stock
 —  6.3  0.22 
    Amortization of intangibles
 5.3  4.1  0.14 
    Restructuring costs
 2.7  2.1  0.07 
    Amortization of stock-based compensation
 2.2  1.7  0.06 
Strategic emerging technology costs 1.0  0.8  0.03 
Amortization of costs to fulfill assets 0.2  0.2  0.01 
Gain on business divestiture, net (2.2) (2.9) (0.10)
    Net discrete tax expense
 —  0.4  0.01 
Non-GAAP measures $ 12.2  $ (4.2) $ (0.15)


COMPARISON OF RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, 2025 AND 2024

Net Sales. Consolidated net sales were $242.4 million and $286.1 million for the six months ended January 31, 2025 and 2024, respectively, representing a decrease of $43.7 million, or 15.3%. The period-over-period decrease reflects significantly lower net sales in our Satellite and Space Communications segment offset, in part, by higher net sales in our Terrestrial and Wireless Networks segment, as further discussed below.


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Satellite and Space Communications
Net sales in our Satellite and Space Communications segment were $132.7 million for the six months ended January 31, 2025 as compared to $181.0 million for the six months ended January 31, 2024, a significant decrease of $48.3 million, or 26.7%. Related segment net sales for the six months ended January 31, 2025 primarily reflect lower net sales of our troposcatter and SATCOM solutions (including COMET terminals to an international customer, progress toward delivering next-generation troposcatter terminals to the U.S. Marine Corps and U.S. Army and VSAT equipment to the U.S. Army), high-power solid state amplifiers related to the PST Divestiture (which was completed in November 2023) and satellite ground station solutions (primarily EEE space components and antennas related sales, including those related to the CGC Divestiture initiated in our fourth quarter of fiscal 2024). Our Satellite and Space Communications segment represented 54.7% of consolidated net sales for the six months ended January 31, 2025 as compared to 63.3% for the six months ended January 31, 2024. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the six months ended January 31, 2025 was 0.80x.

Terrestrial and Wireless Networks
Net sales in our Terrestrial and Wireless Networks segment were $109.7 million for the six months ended January 31, 2025, as compared to $105.1 million for the six months ended January 31, 2024, an increase of $4.6 million, or 4.4%. Related segment net sales for the six months ended January 31, 2025 primarily reflect higher net sales of our call handling and NG-911 services, offset in part by lower net sales of our location based solutions. Our Terrestrial and Wireless Networks segment represented 45.3% of consolidated net sales for the six months ended January 31, 2025 as compared to 36.7% for the six months ended January 31, 2024. Our book-to-bill ratio in this segment for the six months ended January 31, 2025 was 0.92x.

Bookings, sales and profitability in both segments can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by our customers and changes in the general business environment. Period-to-period fluctuations in bookings are normal for our segments. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance. Also, we announced that we are exploring strategic alternatives for our businesses. Accordingly, future results of operations can be impacted by the timing and outcome of such initiatives. There can be no assurance that the exploration of strategic alternatives will result in a transaction or other strategic changes or outcomes.

Geography and Customer Type
Sales by geography and customer type, as a percentage of related sales, for the six months ended January 31, 2025 and 2024 are as follows:
  Six months ended January 31,
2025 2024 2025 2024 2025 2024
  Satellite and Space Communications Terrestrial and Wireless Networks Consolidated
U.S. government 63.8  % 52.3  % 1.1  % 1.1  % 35.4  % 33.5  %
Domestic 10.4  % 13.7  % 90.9  % 89.4  % 46.9  % 41.5  %
Total U.S. 74.2  % 66.0  % 92.0  % 90.5  % 82.3  % 75.0  %
International 25.8  % 34.0  % 8.0  % 9.5  % 17.7  % 25.0  %
Total 100.0  % 100.0  % 100.0  % 100.0  % 100.0  % 100.0  %

Sales to U.S. government customers include sales to the 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 the six months ended January 31, 2025 and 2024, except for the U.S. government, there were no customers that represented 10% or more of consolidated net sales. International sales for the six months ended January 31, 2025 and 2024 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $43.0 million and $71.5 million, 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 10% or more of consolidated net sales for the six months ended January 31, 2025 and 2024.


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Gross Profit. Gross profit was $48.3 million and $91.1 million for the six months ended January 31, 2025 and 2024, respectively, a decrease of $42.8 million. Gross profit, as a percentage of consolidated net sales, for the six months ended January 31, 2025 was 19.9% as compared to 31.8% for the six months ended January 31, 2024. Our gross profit for the six months ended January 31, 2025 (both in dollars and as a percentage of consolidated net sales) reflects: (i) overall product mix changes, as discussed above; (ii) a non-cash charge of $11.4 million related to the write down of certain inventories as a result of restructuring activities within our Satellite and Space Communications segment; (iii) the expensing of work in process inventory related to certain loss contracts in our satellite ground infrastructure product line; (iv) higher expected costs at completion, as we advanced certain nonrecurring engineering related projects in our satellite ground infrastructure product line through development and toward production; and (v) late delivery penalties related to a Modular Transportable Transmission Systems (or "MTTS") troposcatter solutions order. Excluding the non-cash inventory-related charge, our gross profit, as a percentage of consolidated net sales, for the six months ended January 31, 2025 would have been 24.6%, a decrease from the 31.8% reported in the six months ended January 31, 2024. Gross profit (both in dollars and as a percentage of consolidated net sales) in the six months ended January 31, 2024 was influenced by a large, high margin sale of COMET terminals to an international customer, which did not repeat in the six months ended January 31, 2025. Gross profit, as a percentage of related segment net sales, is further discussed below.

Our Satellite and Space Communications segment's gross profit, both in dollars and as a percentage of related segment net sales, for the six months ended January 31, 2025 decreased significantly in comparison to the six months ended January 31, 2024. The gross profit percentage in the more recent period reflects changes in products and services mix, as well as other segment related items, as discussed above.

Our Terrestrial and Wireless Networks segment's gross profit, both in dollars and as a percentage of related segment net sales, for the six months ended January 31, 2025 decreased in comparison to the six months ended January 31, 2024. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above.

Included in consolidated cost of sales for the six months ended January 31, 2025 and 2024 are provisions for excess and obsolete inventory of $13.5 million and $1.5 million, respectively. As discussed in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates - Provisions for Excess and Obsolete Inventory, we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage trends. As discussed above and in Part I. - Financial Information - Item 1. - Note (8) - Inventories, in connection with our initiatives to transform our Company, during the six months ended January 31, 2025, we recorded a non-cash charge of $11.4 million within Cost of Sales on our Condensed Consolidated Statement of Operations related to the write down of inventory associated with approximately 70 products within our satellite ground infrastructure product line that were discontinued. Such non-cash charge also included the write down of inventory associated with the CGC Divestiture that was no longer considered salable during the period.

Our consolidated gross profit, as a percentage of consolidated net sales, depends on the volume of sales, sales mix and related gross profit for each segment, and therefore is inherently difficult to forecast. Our consolidated gross profit, as a percentage of consolidated net sales, may also be impacted by the timing and outcome of actions we may take related to our transformation strategy.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $85.5 million and $63.0 million for the six months ended January 31, 2025 and 2024, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 35.3% and 22.0% for the six months ended January 31, 2025 and 2024, respectively.


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During the first quarter of fiscal 2025, we determined that an unbilled receivable contract asset in the amount of $19.0 million, 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 the 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 $1.6 million 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 $17.4 million unbilled receivable contract asset within our allowance for doubtful accounts. Also, during the six months ended January 31, 2025 and 2024, we incurred $9.9 million and $6.4 million of restructuring costs within selling, general and administrative expenses, respectively, primarily to streamline our operations and improve efficiency (including those related to legal and professional fees associated with our pursuit of strategic alternatives, the wind down of our steerable antenna product line in the U.K. initiated in our fourth quarter of fiscal 2024, and severance costs). Excluding such provision for doubtful accounts and restructuring costs, selling, general and administrative expenses for the six months ended January 31, 2025 and 2024 would have been $58.2 million, or 24.0% and $56.6 million or 19.8%, respectively, of consolidated net sales. The increase in our selling, general and administrative expenses, as a percentage of consolidated net sales, is primarily due to significantly lower consolidated net sales, as discussed above. The increase in our selling, general and administrative expenses, in dollars, is due to higher legal and professional fees and cash-based incentive compensation, offset in part by lower stock-based compensation, as discussed below.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $1.0 million in the six months ended January 31, 2025, as compared to $4.2 million in the six months ended January 31, 2024. During the six months ended January 31, 2025, we reversed a portion of our stock-based compensation expense related to performance shares due to lower-than-estimated achievement of fiscal 2022 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 was terminated during the more recent period. Additionally, 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. Amortization of stock-based compensation is not allocated to our two reportable operating segments.

Research and Development Expenses. Research and development expenses were $8.1 million and $14.7 million for the six months ended January 31, 2025 and 2024, respectively, representing a decrease of $6.6 million, or 45.0%. As a percentage of consolidated net sales, research and development expenses were 3.3% and 5.1% for the six months ended January 31, 2025 and 2024, respectively.

For the six months ended January 31, 2025 and 2024, research and development expenses of $2.4 million and $8.9 million, respectively, related to our Satellite and Space Communications segment and $5.6 million and $5.5 million, respectively, related to our Terrestrial and Wireless Networks segment. The remaining research and development expenses of $0.1 million and $0.3 million in the six months ended January 31, 2025 and 2024, respectively, related to the amortization of stock-based compensation expense. Lower research and development expenses reflect our prioritization of resources across various programs.

During the six months ended January 31, 2025 and 2024, we incurred $0.3 million and $2.3 million, respectively, of strategic emerging technology costs in our Satellite and Space Communications segment for next-generation satellite technology to advance our solutions offerings to be used with new broadband satellite constellations. As a result of our fourth quarter fiscal 2024 decision to cease operations related to our steerable antenna product line in the U.K., we do not expect to incur similar strategic emerging technology costs in the future.

Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the six months ended January 31, 2025 and 2024, customers reimbursed us $6.1 million and $6.5 million, respectively, which is not reflected in the reported research and development expenses, but is included in net sales with the related costs included in cost of sales.

In addition to increases in customer-funded research and development activities in recent years, during the six months ended January 31, 2025 and 2024, we also experienced an increase in engineering efforts related to cost to fulfill contract assets and internal use software, for which we capitalized $3.4 million and $2.9 million, respectively. As a result of these trends, a more focused prioritization of resources across various programs and the impact of prior reductions in force announced in fiscal 2023, our research and development expenses for financial reporting purposes has significantly decreased more recently as compared to historical periods.


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Amortization of Intangibles. Amortization relating to intangible assets with finite lives for the six months ended January 31, 2025 and 2024 was $11.6 million (of which $4.4 million was for the Satellite and Space Communications segment and $7.2 million was for the Terrestrial and Wireless Networks segment) compared to $10.6 million (of which $3.3 million was for the Satellite and Space Communications segment and $7.2 million was for the Terrestrial and Wireless Networks segment), respectively. The increase in our Satellite and Space Communications segment's amortization during the more recent period reflects the impact of our decision to wind down our steerable antenna product line in the U.K.

Impairment of Long-Lived Assets, including Goodwill. Based on lower-than-expected financial performance during the first quarter of fiscal 2025 within our Satellite and Space Communications segment, and other factors, we determined that we were required to perform an interim quantitative goodwill impairment test as of October 31, 2024. Based on our quantitative evaluation, we determined that our Satellite and Space Communications reporting unit had an estimated fair value below its carrying value and concluded that our goodwill in this reporting unit was impaired. As a result, in the first quarter of fiscal 2025, we recognized a $79.6 million non-cash goodwill impairment charge in our Satellite and Space Communications reporting unit. In addition to testing goodwill for impairment, we also assessed the recoverability of the carrying values of our other long-lived assets in this segment, including identifiable intangible assets with finite useful lives. Based on our evaluation, we determined that the fair values of such assets were not impaired. See Part I. - Financial Information - Item 1. - Note (16) - Long-Lived Assets, including Goodwill for further information.

Proxy Solicitation Costs. During six months ended January 31, 2025, we incurred $2.7 million of proxy solicitation costs (including legal and advisory fees) in our Unallocated segment as a result of a now-settled proxy contest. There were no similar costs in the prior year.

CEO Transition Costs. For the six months ended January 31, 2025, we recorded a $0.3 million net expense associated with our CEO transition-related activities. Such net expense primarily represents certain legal matter related costs and third party CEO search firm expenses. There were no similar costs in the corresponding period of the prior year.

Gain on Business Divestiture, Net. On November 7, 2023, we completed the PST Divestiture and recorded an estimated gain of $2.2 million in our Unallocated segment in the second quarter of fiscal 2024.

Operating (Loss) Income. Operating loss for the six months ended January 31, 2025 was $139.4 million, as compared to operating income of $5.1 million for the six months ended January 31, 2024. Operating (loss) income by reportable segment is shown in the table below:
Six months ended January 31,
2025 2024 2025 2024 2025 2024 2025 2024
($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated
Operating (loss) income $ (117.6) 12.0  8.7  12.2  (30.5) (19.1) $ (139.4) 5.1 
Percentage of related net sales NA 6.6  % 7.9  % 11.6  % NA NA NA 1.8  %

Our GAAP operating loss of $139.4 million for the six months ended January 31, 2025 reflects: (i) a non-cash goodwill impairment charge of $79.6 million; (ii) $21.3 million of restructuring costs, including a non-cash inventory write down during the quarter (of which $15.2 million, $0.1 million and $6.0 million related to our Satellite and Space Communications, Terrestrial and Wireless Networks and Unallocated segments, respectively); (iii) $11.6 million of amortization of intangibles; (iv) $2.7 million of proxy solicitation costs; (v) $1.3 million of amortization of stock-based compensation; (vi) $0.3 million of CEO transition costs; (vii) $0.3 million of strategic emerging technology costs; and (viii) $0.3 million of amortization of cost to fulfill assets, as discussed above. Excluding such items, our consolidated operating loss for the six months ended January 31, 2025 would have been $22.2 million.

Our GAAP operating income of $5.1 million for the six months ended January 31, 2024 reflects: (i) $10.6 million of amortization of intangibles; (ii) $6.4 million of restructuring costs (of which $2.2 million and $4.2 million related to our Satellite and Space Communications and Unallocated segments, respectively); (iii) $4.8 million of amortization of stock-based compensation; (iv) $2.3 million of strategic emerging technology costs; (v) $0.5 million of amortization of cost to fulfill assets, and (vi) a $2.2 million estimated gain on the PST Divestiture reported in our Unallocated segment, as discussed above. Excluding such items, our consolidated operating income for the six months ended January 31, 2024 would have been $27.5 million, or 9.6% of consolidated net sales.


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The decrease, excluding the above items, from $27.5 million of operating income to $22.2 million of operating loss for the more recent period primarily reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales) and higher selling, general and administrative expenses, offset in part by lower research and development expenses, as discussed above. Operating income (loss) by reportable segment is further discussed below.

The decrease in our Satellite and Space Communications segment operating income for the six months ended January 31, 2025 primarily reflects a non-cash goodwill impairment charge of $79.6 million, significantly lower net sales and gross profit, both in dollars and as a percentage of related segment net sales (including an $11.4 million non-cash charge related to the write down of certain inventory and impact of the PST and CGC divestitures), higher selling, general and administrative expenses (due primarily to a $17.4 million non-cash charge related to an allowance for doubtful accounts) and higher amortization of intangibles, offset in part by lower research and development expenses, as discussed above.

The decrease in our Terrestrial and Wireless Networks segment operating income, both in dollars and as a percentage of the related segment net sales, for the six months ended January 31, 2025 primarily reflects lower gross profit (as a percentage of the related segment net sales) and higher selling, general and administrative expenses, as discussed above.

Excluding the gain on the PST Divestiture and the impact of proxy solicitation costs, CEO transition costs and its respective portion of restructuring charges in each period, Unallocated expenses for the six months ended January 31, 2025 would have been $21.5 million, as compared to $17.1 million for the six months ended January 31, 2024. The increase in Unallocated expenses, excluding such items, was primarily due to higher selling, general and administrative expenses, as discussed above.

Interest Expense and Other. Interest expense was $20.5 million and $10.2 million for the six months ended January 31, 2025 and 2024, respectively. The increase during the more recent period is primarily due to: higher average debt balances outstanding during the more recent period; higher interest rates and fees under our Credit Facility; and accreted interest on our Subordinated Credit Facility, as discussed further in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility and Note (11) - Subordinated Credit Facility. Our effective interest rate (including amortization of deferred financing costs) in the six months ended January 31, 2025 was approximately 20.3%, as compared to 10.9% in the prior year period. Our current cash borrowing rate (which excludes the amortization of deferred financing costs) under our Credit Facility approximates 14.2%, which reflects the benefit of the March 3, 2025 waiver and amendment to the Credit Facility, as compared to 9.4% in the prior year period.

Interest (Income) and Other. Interest (income) and other for both the six months ended January 31, 2025 and 2024 was nominal. All of our available cash and cash equivalents are currently invested in bank deposits and money market deposit accounts which, at this time, are currently yielding an immaterial interest rate.

Write-off of Deferred Financing Costs. During the six months ended January 31, 2025, in connection with the October 17, 2024 amendment to the Credit Facility and due to the borrowing capacity of the Revolver Loan being limited by the lenders' consent right, a pro-rata amount of financing fees totaling $1.4 million were immediately expensed during six months ended January 31, 2025.

Change in Fair Value of Warrants and Derivatives. During the six months ended January 31, 2025, we recorded a $34.1 million non-cash expense due to the remeasurement of warrants and derivatives related to our Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock. The remeasurement and resulting non-cash expense primarily reflects an increase in the estimated probability of events that could result in additional and/or accelerated payments to holders of our convertible preferred stock. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility, Note (11) - Subordinated Credit Facility and Note (18) - Convertible Preferred Stock for more information. These warrants and derivatives were not outstanding in the corresponding period of the prior year.

Provision for Income Taxes. For the six months ended January 31, 2025 and 2024, we recorded a tax expense of $1.2 million and $6.0 million, respectively. Our effective tax rate (excluding discrete tax items) for the six months ended January 31, 2025 and 2024 was (1.7)% and (52.0)%, respectively. The change in rate from (52.0)% to (1.7)% is primarily due to changes in expected product and geographical mix and not providing for tax benefits on U.S. deferred tax assets in the more recent period.

For purposes of determining our (1.7)% estimated annual effective tax rate for fiscal 2025, the impairment of long-lived assets, including goodwill, the change in fair value of warrants and derivatives, proxy solicitation costs and CEO transition costs are considered significant, unusual or infrequently occurring discrete tax items and are excluded from the computation of our effective tax rate.


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During the six months ended January 31, 2025, we recorded a net discrete tax benefit of $0.2 million primarily related to proxy solicitation costs and CEO transition costs. During the six months ended January 31, 2024, we recorded a net discrete tax expense of $1.8 million primarily related to the anticipated timing of the settlement of contingent consideration related to the PST Divestiture.

Our U.S. federal income tax returns for fiscal 2021 through 2023 are subject to potential future IRS audit. None of our state income tax returns prior to fiscal 2020 are subject to audit. Future tax assessments or settlements could have a material adverse effect on our consolidated results of operations and financial condition.

Net Loss Attributable to Common Stockholders. During the six months ended January 31, 2025 and 2024, consolidated net loss attributable to common stockholders was $178.2 million and $33.8 million, respectively. In addition to those items discussed above: (i) the more recent period includes a $51.2 million gain related to the exchange of our Series B-1 Convertible Preferred Stock for Series B-2 Convertible Preferred Stock on October 17, 2024, offset in part by $32.3 million of net dividends related to our Convertible Preferred Stock outstanding during the period; and (ii) the prior year period includes: (x) a $13.6 million loss related to the exchange of our Series A-1 Convertible Preferred Stock for Series B Convertible Preferred Stock on January 22, 2024; (y) $4.3 million of Convertible Preferred Stock issuance costs; and (z) $3.9 million of dividends related to our Convertible Preferred Stock outstanding during the period.

Adjusted EBITDA. Adjusted EBITDA (both in dollars and as a percentage of related net sales) for both the six months ended January 31, 2025 and 2024 are shown in the table below (numbers in the table may not foot due to rounding):
Six months ended January 31,
2025 2024 2025 2024 2025 2024 2025 2024
($ in millions) Satellite and Space Communications Terrestrial and Wireless Networks Unallocated Consolidated
Net income (loss) $ (117.8) 8.8 8.8 11.7 (88.1) (32.6) $ (197.1) (12.0)
(Benefit from) provision for income taxes (0.2) 0.5 (0.2) 0.4 1.6 5.1 1.2 6.0
Interest (income) and other 0.4 0.8 0.1 — — — 0.5 0.8
Interest expense — 1.8 — — 20.5 8.4 20.5 10.2
Write-off of deferred financing costs — — — — 1.4 — 1.4 —
Change in fair value of warrants and derivatives — — — — 34.1 — 34.1 —
Amortization of stock-based compensation — — — — 1.3 4.8 1.3 4.8
Amortization of intangibles 4.4 3.3 7.2 7.2 — — 11.6 10.6
Impairment of long-lived assets, including
   goodwill		 79.6 — — — — — 79.6 —
Depreciation 1.5 1.8 3.9 3.9 0.2 0.2 5.7 6.0
Amortization of cost to fulfill assets 0.3 0.5 — — — — 0.3 0.5
Restructuring costs 15.2 2.2 0.1 — 6.0 4.2 21.3 6.4
Strategic emerging technology costs 0.3 2.3 — — — — 0.3 2.3
Proxy solicitation costs — — — — 2.7 — 2.7 —
CEO transition costs — — — — 0.3 — 0.3 —
Gain on business divestiture, net — — — — — (2.2) — (2.2)
Adjusted EBITDA $ (16.4) 22.2 19.9 23.4 (20.0) (12.1) $ (16.5) 33.5
Percentage of related net sales NA 12.3  % 18.1  % 22.2  % NA NA NA 11.7  %

The decrease in consolidated Adjusted EBITDA, both in dollars and as a percentage of consolidated net sales, for the six months ended January 31, 2025 as compared to the six months ended January 31, 2024 reflects lower consolidated net sales and gross profit (both in dollars and as a percentage of consolidated net sales) and higher selling, general and administrative expenses (primarily a $17.4 million non-cash charge related to an allowance for doubtful accounts), offset in part by lower research and development expenses, as discussed above.

The decrease in our Satellite and Space Communications segment's Adjusted EBITDA reflects significantly lower net sales and gross profit (both in dollars and as a percentage of related segment net sales) and higher selling, general and administrative expenses (primarily a $17.4 million non-cash charge related to an allowance for doubtful accounts), offset in part by lower research and development expenses, as discussed above.

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The decrease in our Terrestrial and Wireless Networks segment's Adjusted EBITDA, both in dollars and as a percentage of related segment net sales, reflects lower gross profit (both in dollars and as a percentage of related segment net sales) and higher selling, general and administrative expenses, as discussed above.

A reconciliation of our fiscal 2024 GAAP Net Loss to Adjusted EBITDA is shown in the table below (numbers in the table may not foot due to rounding):
($ in millions) Fiscal Year 2024
Reconciliation of GAAP Net Loss to Adjusted EBITDA:
Net loss $ (100.0)
Benefit from income taxes (0.3)
Interest expense 22.2 
Interest (income) and other 0.7 
Write-off of deferred financing costs 1.8 
Change in fair value of warrants and derivatives (4.3)
Amortization of stock-based compensation 6.1 
Amortization of intangibles 21.2 
Depreciation 12.2 
Impairment of long-lived assets, including goodwill 64.5 
Amortization of cost to fulfill assets 1.0 
Restructuring costs 12.5 
Strategic emerging technology costs 4.1 
CEO transition costs 2.9 
Loss on PST Divestiture 1.2 
Adjusted EBITDA $ 45.7 

Our Adjusted EBITDA is a Non-GAAP measure that represents earnings (loss) before interest, income taxes, depreciation, amortization of intangibles, impairment of long-lived assets, including goodwill, amortization of cost to fulfill assets, amortization of stock-based compensation, CEO transition costs, change in fair value of warrants and derivatives, proxy solicitation costs, restructuring costs, strategic emerging technology costs (for next-generation satellite technology) and write-off of deferred financing costs, and in the recent past, acquisition plan expenses, change in fair value of the convertible preferred stock purchase option liability, COVID-19 related costs, facility exit costs, strategic alternatives expenses and other and loss on business divestiture. These items, while periodically affecting our results, may vary significantly from period to period and may have a disproportionate effect in a given period, thereby affecting the comparability of results. Although closely aligned, our definition of Adjusted EBITDA is different than EBITDA (as such term is defined in our Credit Facility) utilized for financial covenant calculations and also may differ from the definition of EBITDA or Adjusted EBITDA used by other companies and therefore may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is also a measure frequently requested by our investors and analysts. We believe that investors and analysts may use Adjusted EBITDA, along with other information contained in our SEC filings, including GAAP measures, in assessing our performance and comparability of our results with other companies. Our Non-GAAP measures reflect the GAAP measures as reported, adjusted for certain items as described herein and also excludes the effects of our outstanding convertible preferred stock.

These Non-GAAP financial measures have limitations as an analytical tool as they exclude the financial impact of transactions necessary to conduct our business, such as the granting of equity compensation awards, and are not intended to be an alternative to financial measures prepared in accordance with GAAP. These measures are adjusted as described in the reconciliation of GAAP to Non-GAAP measures in the tables presented herein, but these adjustments should not be construed as an inference that all of these adjustments or costs are unusual, infrequent or non-recurring. Non-GAAP financial measures should be considered in addition to, and not as a substitute for or superior to, financial measures determined in accordance with GAAP. Investors are advised to carefully review the GAAP financial results that are disclosed in our SEC filings. As we have not provided future financial targets, there is no need to reconcile our business outlook to the most directly comparable GAAP measures. Furthermore, even if targets had been provided, items such as stock-based compensation, adjustments to the provision for income taxes, amortization of intangibles and interest expense, which are specific items that impact these measures, have not yet occurred, are out of our control, or cannot be predicted. For example, quantification of stock-based compensation expense requires inputs such as the number of shares granted and market price that are not currently ascertainable. Accordingly, reconciliations to the Non-GAAP forward looking metrics would not be available without unreasonable effort and such unavailable reconciling items could significantly impact our financial results.

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Reconciliations of our GAAP consolidated operating income (loss), net income (loss) attributable to common stockholders and net income (loss) per diluted common share to the corresponding Non-GAAP measures are shown in the tables below (numbers and per share amounts in the tables may not foot due to rounding). Non-GAAP net income (loss) attributable to common stockholders and non-GAAP net income (loss) per diluted common share reflect Non-GAAP provisions for income taxes based on year-to-date results, as adjusted for the Non-GAAP reconciling items included in the tables below. We evaluate our Non-GAAP effective income tax rate on an ongoing basis, and it can change from time to time. Our Non-GAAP effective income tax rate can differ materially from our GAAP effective income tax rate. In addition, due to the GAAP net loss for the period, Non-GAAP net income per diluted common share for the six months ended January 31, 2024 was computed using weighted average diluted shares outstanding of 28,958,000 during the period.
Six months ended January 31, 2025
($ in millions, except for per share amount) Operating Loss Net Loss Attributable to Common Stockholders Net Loss per Diluted Common Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported
 $ (139.4) $ (178.2) $ (6.06)
    Change in fair value of warrants and derivatives —  34.1  1.16 
    Adjustments to reflect redemption value of convertible preferred stock
 —  32.3  1.10 
    Gain on extinguishment of convertible preferred stock
 —  (51.2) (1.74)
    Impairment of long-lived assets, including goodwill
 79.6  79.6  2.71 
    Restructuring costs
 21.3  20.3  0.69 
    Amortization of intangibles
 11.6  11.2  0.38 
    Proxy solicitation costs
 2.7  2.5  0.09 
    Amortization of stock-based compensation
 1.3  1.2  0.04 
    CEO transition costs
 0.3  0.3  0.01 
    Strategic emerging technology costs
 0.3  0.3  0.01 
    Amortization of cost to fulfill assets
 0.3  0.3  0.01 
    Net discrete tax expense
 —  0.1  — 
Non-GAAP measures $ (22.2) $ (47.4) $ (1.61)
Six months ended January 31, 2024
($ in millions, except for per share amount) Operating
Income		 Net (Loss) Income Attributable to Common Stockholders Net (Loss) Income per Diluted Common Share
Reconciliation of GAAP to Non-GAAP Earnings:
GAAP measures, as reported
 $ 5.1  $ (33.8) $ (1.18)
    Loss on extinguishment of convertible preferred stock
 13.6  0.48 
    Adjustment to reflect redemption value of convertible preferred stock
 —  8.2  0.29 
    Amortization of intangibles
 10.6  8.2  0.28 
    Restructuring costs
 6.4  5.0  0.17 
    Amortization of stock-based compensation
 4.8  3.8  0.13 
    Strategic emerging technology costs
 2.3  1.8  0.06 
    Amortization of cost to fulfill assets
 0.5  0.5  0.02 
    Gain on business divestiture, net
 (2.2) (1.4) (0.05)
    Net discrete tax expense
 —  1.0  0.03 
Non-GAAP measures $ 27.5  $ 6.7  $ 0.23 

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LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents were $26.7 million and $32.4 million at January 31, 2025 and July 31, 2024, respectively. For the six months ended January 31, 2025, our cash flows reflect the following:

•Net cash used in operating activities was $22.0 million and $41.2 million for the six months ended January 31, 2025 and 2024, respectively. The period-over-period decrease in cash used in operating activities reflects overall changes in net working capital requirements, principally the timing of progress toward completion on contracts accounted for over time, including related shipments, billings and collections, and payments to vendors. Over the past several quarters, we have experienced elevated levels of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S. government and international customers. While such contract assets are trending lower more recently, in fiscal 2025, due to shipments, billings and collections from our customers, such contract activity has resulted in a material increase in working capital requirements. Net cash used in operating activities in the more recent period also reflects lower net sales and gross profit in the first half of fiscal 2025, as compared to the first half of fiscal 2024.

•Net cash used in investing activities for the six months ended January 31, 2025 was $4.1 million and primarily reflects capital expenditures to build-out cloud-based computer networks to support our previously announced NG-911 contract wins and capital investments and building improvements in connection with our manufacturing facilities. Net cash provided by investing activities for the six months ended January 31, 2024 was $24.9 million and includes $32.5 million of net cash proceeds from the PST Divestiture.

•Net cash provided by financing activities was $20.3 million and $37.3 million for the six months ended January 31, 2025 and 2024, respectively. During the six months ended January 31, 2025, we entered into a Subordinated Credit Facility with existing holders of our convertible preferred stock and received proceeds of $21.8 million, net of transaction related costs. During the six months ended January 31, 2024, we received proceeds of $39.4 million from the holders of our convertible preferred stock, net of issuance costs, had net borrowings under our prior credit facility of $3.9 million and paid deferred financing costs of $2.1 million. We also made $1.2 million and $3.8 million of payments to remit employees' statutory tax withholding requirements related to the net settlement of stock-based awards during the six months ended January 31, 2025 and 2024, respectively.

The Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock are discussed below and in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements – Note (10) – Credit Facility, Note (11) - Subordinated Credit Facility and Note (18) – Convertible Preferred Stock.

Liquidity and Going Concern
Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern, we are required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern. This evaluation does not take into consideration the potential mitigating effect of our plans that have not been fully implemented or are not within our control as of the date the unaudited Condensed Consolidated Financial Statements are issued. When substantial doubt exists, we are required to evaluate whether the mitigating effect of our plans sufficiently alleviates substantial doubt about our ability to continue as a going concern. The mitigating effect of our plans, however, is only considered if both (i) it is probable that the plans will be effectively implemented within one year after the date that the unaudited Condensed Consolidated Financial Statements are issued, and (ii) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited Condensed Consolidated Financial Statements are issued.

As of the date these financial statements were issued (the "issuance date"), we evaluated whether the following conditions or events, considered in the aggregate, raise substantial doubt about our ability to continue as a going concern over the next twelve months beyond the issuance date.


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Over the past three fiscal years, we incurred operating losses of $79.9 million, $14.7 million and $33.8 million in fiscal 2024, 2023 and 2022, respectively. More recently, we recognized an operating loss of $10.2 million and $139.4 million in the three and six months ended January 31, 2025. In addition, over the past three fiscal years, net cash used in operating activities was $54.5 million and $4.4 million in fiscal 2024 and 2023, respectively, and net cash provided by operating activities was $2.0 million in fiscal 2022. More recently, net cash used in operating activities was $22.0 million in the six months ended January 31, 2025. Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to generate positive cash inflows from operations, maximize our borrowing capacity under our Credit Facility, as discussed further below, and/or secure other sources of outside capital. While we believe we will be able to generate sufficient positive cash inflows, maximize our borrowing capacity and secure outside capital, there can be no assurance our plans will be successfully implemented and, as such, we may be unable to continue as a going concern over the next year beyond the issuance date.

As discussed further in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility, on June 17, 2024, we entered into a credit facility with a new syndicate of lenders, which replaced our prior credit facility. As further discussed below, we subsequently amended the credit facility on October 17, 2024 and March 3, 2025 (the "Credit Facility"). The Credit Facility consists of a committed $162.0 million term loan (“Term Loan”) and $56.8 million revolving loan (“Revolver Loan”). At January 31, 2025 and March 10, 2025 (the date closest to the issuance date), total outstanding borrowings under the Credit Facility were $202.9 million and $168.0 million, respectively. At January 31, 2025 and March 10, 2025, $32.5 million and $23.4 million was drawn on the Revolver Loan. As of the issuance date, our available sources of liquidity approximate $27.4 million, consisting of qualified cash and cash equivalents and the remaining available portion of the committed Revolver Loan.

The Credit Facility was amended on October 17, 2024 and March 3, 2025 to waive 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 and January 31, 2025, respectively. Cumulatively, the amendments also, among other things: (i) reduced the interest rate margins applicable to the Term Loan; (ii) permitted the incurrence of $65.0 million of senior unsecured subordinated debt (as described below); (iii) suspended testing of the Net Leverage Ratio and the Fixed Charge Coverage Ratio covenants until October 31, 2025; (iv) suspended our ability to pay interest in-kind until after the interest rate margins are tested based on net leverage ratios; (v) provided the lenders a consent right with respect to Revolver Loan borrowings above $29.3 million; 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 requires compliance with restrictive and financial covenants, including: a maximum Net Leverage Ratio of 3.15x commencing with the four fiscal quarter period ending October 31, 2025; a minimum Fixed Charge Coverage Ratio of 1.25x commencing with the four fiscal quarter period ending October 31, 2025; a minimum Average Liquidity requirement at each fiscal quarter end of $17.5 million; and a minimum EBITDA of $35.0 million for the four fiscal quarter period ending October 31, 2025. Such covenants adjust under the Credit Facility in future periods. Over the next twelve months beyond the issuance date, we believe that it is probable we will not be able to comply with one or more of these covenants.

As discussed further in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements – Note (11) - Subordinated Credit Facility, on October 17, 2024, we entered into a Subordinated Credit Agreement with the existing holders of our Convertible Preferred Stock, which provided for an initial subordinated unsecured term loan facility in the aggregate principal amount of $25.0 million. On March 3, 2025, we entered into an amendment to the Subordinated Credit Agreement (the “Subordinated Credit Facility”). In addition to waiving certain defaults or events of default under the Subordinated Credit Facility, including in connection with our Net Leverage Ratio and Fixed Charge Coverage Ratio covenants as of January 31, 2025, cumulatively, the Subordinated Credit Facility, among other things: (i) provides for a total $65.0 million facility; and (ii) 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 of the Subordinated Credit Facility cured our defaults on certain financial covenants under the Credit Facility, as discussed above, and were principally used to repay a portion of the Term Loan and Revolving Loan on March 3, 2025 and to fund our general working capital needs. At January 31, 2025 and March 10, 2025 (the date closest to the issuance date), total outstanding borrowings under the Subordinated Credit Facility (excluding accreted interest) were $25.0 million and $65.0 million, respectively.


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Our ability to meet our current obligations as they become due may be impacted by our ability to remain compliant with the financial covenants required by the Credit Facility and Subordinated Credit Facility, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained. While we believe we will be able to secure such waivers or amendments, as needed, there can be no assurance such waivers or amendments will be secured or on terms that are acceptable to us. If we are unable to secure waivers or amendments, the lenders may declare an event of default, which would cause an immediate acceleration and repayment of all outstanding principal, interest and fees due under our Credit Facility and Subordinated Credit Facility. Absent our ability to repay the forgoing amounts upon the declaration of an event of default, the lenders may exercise their rights and remedies under the Credit Facility and Subordinated Credit Facility, which may include, among others, a seizure of substantially all of our assets and/or the liquidation of our operations. If an event of default occurs that allows the lenders to exercise these rights and remedies over the next year beyond the issuance date, we will be unable to continue as a going concern.

As of the issuance date, our plans to address our ability to continue as a going concern include, among other things:

•executing a strategy to transform Comtech (ongoing and future actions supporting our transformation strategy include: an exploration of strategic alternatives for our various businesses and product lines; the pursuit of further portfolio-shaping opportunities to enhance profitability, efficiency and focus; and the implementation of additional operational initiatives to both achieve profitable results from operations as well as to align our go-forward cost structure with our future state business), as discussed further in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements – Note (21) – Cost Reduction and Restructuring Related Activities;
•pursuing initiatives to reduce investments in working capital, namely accounts receivable and inventory;
•improving process disciplines to attain and maintain profitable operations by entering into more favorable sales or service contracts;
•reevaluating our business plans to identify opportunities (e.g., within each of our segments) to focus future investment on our most strategic, high-margin revenue opportunities;
•reevaluating our business plans to identify opportunities to further reduce capital expenditures;
•seeking opportunities to improve liquidity through any combination of debt and/or equity financing (including possibly restructuring our Credit Facility, Convertible Preferred Stock and/or Subordinated Credit Facility); and
•seeking other strategic transactions and/or measures including, but not limited to, the potential sale or divestiture of assets in addition to the wind down of our steerable antenna product line in Basingstoke, U.K.

While we believe the implementation of some or all of the elements of our plans over the next year beyond the issuance date will be successful, these plans are not all solely within management’s control and, as such, we can provide no assurance our plans are probable of being effectively implemented as of the issuance date. Therefore, the adverse conditions and events described above are uncertainties that raise substantial doubt about our ability to continue as a going concern. The accompanying Condensed Consolidated Financial Statements in Part I. - Item 1. have been prepared on the basis that we will continue to operate as a going concern, which contemplates we will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying Condensed Consolidated Financial Statements do not include any adjustments that may result from the outcome of these uncertainties.

Our material cash requirements are for working capital, debt service (including interest and fees), capital expenditures, income tax payments, facilities lease payments and dividends related to our Convertible Preferred Stock, which are payable in kind or in cash under certain circumstances.

Our material cash requirements could increase beyond our current expectations due to factors, including but not limited to: (i) an inability to meet our current obligations under our Credit Facility and/or Subordinated Credit Facility as they become due, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained; (ii) a future redemption by the holders of our Convertible Preferred Stock; (iii) general economic conditions; (iv) a change in customer or government spending priorities and/or contracting decisions; (v) larger than usual customer orders; or (vi) actions we may take related to our strategic transformation.

Also, in light of our recently announced strategic transformation initiatives, we continue to review and evaluate our capital allocation plans. Furthermore, we may choose to raise additional funds through equity and debt financing transactions to provide additional flexibility or to pursue acquisitions. Although it is difficult in the current economic and credit environment to predict the terms and conditions of financing that may be available in the future, we believe that we would have sufficient access to credit from financial institutions and/or financing from public and private debt and equity markets.


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In addition to making capital investments for our high-volume manufacturing centers, we have been making significant capital expenditures and building out cloud-based computer networks to support our previously announced NG-911 contract wins. We expect capital investments for these and other initiatives to continue throughout fiscal 2025 and beyond.

Our investment policy relating to our cash and cash equivalents is intended to minimize principal loss while at the same time maximize the income we receive without significantly increasing risk. To minimize risk, we generally invest excess cash and cash equivalents in money market mutual funds (both government and commercial), certificates of deposit, bank deposits, and U.S. Treasury securities. Money market mutual funds we invest in are direct obligations of the U.S. government, bank securities guaranteed by the Federal Deposit Insurance Corporation, certificates of deposit and commercial paper and other securities issued by other companies. While we cannot predict future market conditions or market liquidity, we believe our investment policies are appropriate in the current environment. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.

On July 13, 2022, we filed a $200.0 million shelf registration statement with the SEC for the sale of various types of securities, including debt securities. This shelf registration statement was declared effective by the SEC as of July 25, 2022 and expires on July 25, 2025. To date, we have not issued any securities pursuant to our $200.0 million shelf registration statement. Because of delinquencies in our Exchange Act reporting, we cannot issue securities under the shelf registration statement without first filing a post-effective amendment to such shelf registration statement with the SEC.

On September 29, 2020, our Board of Directors authorized a $100.0 million stock repurchase program, which replaced our prior program. The $100.0 million 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 of our common stock during the six months ended January 31, 2025 and 2024.

In fiscal 2023, we adjusted the Company’s capital allocation plans and determined to forgo a common stock dividend. Future common stock dividends, if any, remain subject to compliance with financial covenants under our Credit Facility, as well as Board approval and certain voting rights of holders of our Convertible Preferred Stock.

At January 31, 2025, cash and cash equivalents includes $0.3 million of cash deposited as collateral in connection with outstanding standby letters of credit to guarantee future performance on certain customer contracts.

Commitments
In the normal course of business, other than as discussed below, we routinely enter into binding and non-binding purchase obligations primarily covering anticipated purchases of inventory and equipment. We do not expect that these commitments, as of January 31, 2025, will materially adversely affect our liquidity. At January 31, 2025, cash payments due under contractual obligations (including estimated interest expense on our Credit Facility, as further described below), excluding purchase orders that we entered into in our normal course of business, are as follows:
($ in thousands) Total Due Within 1 Year
Credit Facility - principal payments $ 202,940  6,076 
Credit Facility - interest payments 76,714  24,387 
Operating lease obligations 41,484  7,781 
Subordinated Credit Facility 25,000  — 
Contractual cash obligations $ 346,138  38,244 


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As stated above, the amounts in the above table represent cash payments due under contractual obligations. Interest payments presented were calculated based the outstanding borrowings at January 31, 2025, as adjusted for the partial paydown of the Term Loan and Revolver Loan in connection with the March 3, 2025 amendments to the Credit Facility and Subordinated Credit Facility, which also reduced interest rate margins applicable to the Term Loan. Interest was calculated based on the SOFR forward curve plus the applicable margin pursuant to the March 3, 2025 amendment and does not assume any interest paid-in-kind. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (10) - Credit Facility and Note (11) - Subordinated Credit Facility for additional information on the commitments under our Credit Facility and Subordinated Credit Facility, respectively, and Note (12) - Leases for additional information on our lease commitments. Over the next twelve months beyond the issuance date, we believe that it is probable we will not be able to comply with one or more of our financial covenants related to our Credit Facility and Subordinated Credit Facility. As a result, all amounts outstanding under our Credit Facility and Subordinated Credit Facility have been presented as current liabilities on our Condensed Consolidated Balance Sheets as of January 31, 2025.

As discussed in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (18) – Convertible Preferred Stock, the holders of the Convertible Preferred Stock have the option to redeem such shares for cash: (i) in the event of the occurrence of an asset sale meeting certain criteria; (ii) on or after April 30, 2027 in the event of a satisfaction of the existing Credit Facility; and (iii) in all other cases, October 31, 2028. As the Convertible Preferred Stock are not mandatorily redeemable for cash, the redemption value of such shares are not presented in the table above.

In the ordinary course of business, we include indemnification provisions in certain of our customer contracts. Pursuant to these agreements, we have agreed to indemnify, hold harmless and reimburse the indemnified party for certain losses suffered or incurred by the indemnified party, including but not limited to losses related to third-party intellectual property claims. It is not possible to determine the maximum potential amount under these agreements due to a history of nominal claims and the unique facts and circumstances involved in each particular agreement.

As discussed further in Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (20) - Legal Proceedings and Other Matters, we are subject to certain pending and threatened legal actions and a number of indemnification demands and we are incurring ongoing legal expenses in connection with these matters. Our insurance policies may not cover the cost of defending and/or resolving such matters. As a result, pending or future claims asserted against us by a party could result in legal costs and damages that could have a material adverse effect on our consolidated results of operations and financial condition.

We have entered into employment and/or change of control agreements, as well as indemnification agreements with certain of our executive officers, directors 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.

Our Condensed Consolidated Balance Sheet at January 31, 2025 includes total liabilities of $8.7 million for uncertain tax positions, including interest, any or all of which may result in a cash payment. The future payments related to uncertain tax positions have not been presented in the table above due to the uncertainty of the amounts and timing of any potential cash settlement with the taxing authorities.

RECENT ACCOUNTING PRONOUNCEMENTS

We are required to prepare our Condensed 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 is commonly referred to as "GAAP." The FASB ASC is subject to updates by the FASB, which are known as Accounting Standards Updates ("ASUs"). See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (3) – Adoption of Accounting Standards and Updates for further information.


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Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Our earnings and cash flows are subject to fluctuations due to changes in interest rates primarily from borrowings under our Credit Facility. Based on the amount of outstanding debt under our Credit Facility, a hypothetical change in interest rates by 10% would change interest expense by approximately $3.3 million over a one-year period. Although we do not currently use interest rate derivative instruments to manage exposure to interest rate changes, we may choose to do so in the future in connection with our Credit Facility.

Our earnings and cash flows are also subject to fluctuations due to changes in interest rates on our investment of available cash balances. As of January 31, 2025, we had cash and cash equivalents of $26.7 million, which consisted of cash and highly-liquid money market deposit accounts. Many of these investments are subject to fluctuations in interest rates, which could impact our results. Based on our investment portfolio balance as of January 31, 2025, a hypothetical change in interest rates of 10% would have a nominal impact on interest income over a one-year period. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liquid market.


Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934), was carried out by us under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on this evaluation, we concluded that our disclosure controls and procedures were not effective as of January 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 condensed consolidated financial statements and other financial information included in this Form 10-Q 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").

Material Weaknesses in Internal Control over Financial Reporting

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.

As previously disclosed in our Annual Report on Form 10-K for the year ended July 31, 2024, we did not design and maintain an effective control environment commensurate with our financial reporting requirements based on the criteria in the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Framework (2013), 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 and other assets.

Additionally, as previously disclosed in our Quarterly Report on Form 10-Q for the three months ended October 31, 2024, we identified an additional deficiency that individually represents a material weakness in our internal control over financial reporting. Specifically, we did not have a sufficient complement of internal and external resources with appropriate technical accounting expertise to perform control activities, or to reach appropriate accounting conclusions for complex accounting matters and transactions, which included debt, convertible preferred stock and related embedded derivatives.

Deficiencies in control activities contributed to accounting errors and the potential for there to have been material accounting errors within revenue, inventory, other assets, debt, convertible preferred stock and related embedded derivatives.

Remediation Plan


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Our remediation efforts are ongoing and we will continue our initiatives to hire additional skilled resources in the program management and accounting and finance related functions, and design, implement and document policies, procedures and internal controls. Management is committed to the remediation of the material weaknesses described above.

To date, management undertook the following remedial actions in conjunction with the above 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; and
•Engaged third-party consultants with the appropriate technical knowledge and expertise to perform a comprehensive review of our accounting and reporting functions.

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:

•Ensuring that formal documentation of policies and controls are in place;
•Designing and implementing additional and/or enhancing existing controls over revenue, inventory, other assets and complex accounting matters and transactions;
•Conducting training sessions for all control owners and relevant personnel to improve documentation that supports effective control activities, including evidence over the completeness and accuracy of information used in controls; and
•Conducting specialized training sessions for those employees involved in the estimate at completion (“EAC”) process on any 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.

We plan to fully implement and operate redesigned processes and procedures in future quarters. The material weaknesses will not be considered remediated until these controls have operated for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively.

Changes In Internal Control Over Financial Reporting

Other than for the on-going remediation efforts described above, 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 January 31 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on Effectiveness of Controls

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.



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PART II
OTHER INFORMATION
Item 1.     Legal Proceedings

See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (20) – Legal Proceedings and Other Matters of this Form 10-Q for information regarding legal proceedings and other matters.

Item 1A. Risk Factors

Except as set forth in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2024, filed with the SEC on January 13, 2025, there have been no material changes to the description of the risk factors affecting our business previously disclosed in “Part I. - Item 1A. - Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended July 31, 2024, as filed with the SEC on October 30, 2024, which are hereby incorporated by reference.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.     Other Information

Securities Trading Plans of Directors and Officers

During the six months ended January 31, 2025, none of our directors or officers adopted or terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as each term is defined in Item 408(a) of Regulation S-K).



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Item 6.    Exhibits

Exhibit 3.1 – Certificate of Designations designating the Series B-3 Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated March 4, 2025)

Exhibit 3.2 – Certificate of Elimination eliminating the Series B-2 Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K, dated March 4, 2025)

Exhibit 4.1 – Form of Warrant Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, dated March 4, 2025)

Exhibit 10.1 – Cooperation Agreement, dated November 17, 2024, by and among Comtech Telecommunications Corp. and Michael Porcelain, Fred Kornberg and Oleg Timoshenko (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated November 18, 2024)

Exhibit 10.2 - Employment Agreement between Comtech Telecommunications Corp. and Kenneth H. Traub, dated as of November 27, 2024 (incorporated by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q, dated January 13, 2025)

Exhibit 10.3 - Employment Agreement Amendment No. 1 between Comtech Telecommunications Corp. and Kenneth H. Traub, dated as of January 13, 2025

Exhibit 10.4 - Employment Agreement between Comtech Telecommunications Corp. and Jeffery Robertson, dated as of February 26, 2024

Exhibit 10.5 - Employment Agreement Amendment No. 1 between Comtech Telecommunications Corp. and Jeffery Robertson, dated as of January 10, 2025

Exhibit 10.6 – Form of Cash-Settled Performance Award Agreement Pursuant to Comtech Telecommunications Corp. 2023 Equity and Incentive Plan (incorporated by reference to Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q, dated January 13, 2025)

Exhibit 10.7 – Form of Indemnification Agreement by and among Comtech Telecommunications Corp. and the Board of Directors and Certain Officers (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated December 13, 2024)

Exhibit 10.8 – Separation Agreement and Release between Comtech Telecommunications Corp. and John Ratigan (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated January 13, 2025)

Exhibit 10.9 – Comtech Telecommunications Corp. 2023 Equity and Incentive Plan, as amended

Exhibit 10.10 – 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 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated March 4, 2025)

Exhibit 10.11 – 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 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, dated March 4, 2025)

Exhibit 10.12 – Subscription and Exchange Agreement, dated as of March 3, 2025, by and among Comtech Telecommunications Corp. and the Investors named therein (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, dated March 4, 2025)

Exhibit 10.13 – Form of Voting Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, dated March 4, 2025)


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Exhibit 10.14 – Registration Rights Agreement, dated as of March 3, 2025, by and among Comtech Telecommunications Corp. and the Investors named therein (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, dated March 4, 2025)

Exhibit 31.1 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS - The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended January 31, 2025, formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity, (iv) Condensed Consolidated Statement of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements

Exhibit 101.SCH - Inline XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL - Inline XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.LAB - Inline XBRL Taxonomy Extension Labels Linkbase Document

Exhibit 101.PRE - Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 101.DEF - Inline XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 104 - Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities 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.
(Registrant)

   
Date: March 12, 2025
By:  /s/ Kenneth H. Traub
(Date) Kenneth H. Traub, Chairman of the Board
President and Chief Executive Officer
  (Principal Executive Officer)
   
Date: March 12, 2025
By:  /s/ Michael A. Bondi
(Date) Michael A. Bondi
Chief Financial Officer
(Principal Financial and Accounting Officer)



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EX-10.3 2 exhibit103-comtechxexecuti.htm EX-10.3 Document

Exhibit 10.3

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EMPLOYMENT AGREEMENT
AMENDMENT No. 1 (the “Amendment”)
January 13, 2025
WHEREAS, on or about November 27, 2024, Kenneth Traub (“Executive”) signed an Employment Agreement (the “Employment Agreement”) with Comtech Telecommunications Corp. (the “Company”), attached hereto as Exhibit A;
WHEREAS, the Compensation Committee of the Board of Directors of the Company recommended the terms of this Amendment for approval to the Board of Directors (the “Board”) and the Board approved the same on or about January 11, 2025; and
WHEREAS, the Effective Date of this Amendment shall be January 13, 2025;
NOW THEREFORE, the Employment Agreement is amended as follows:
Section 3.1 of the Employment Agreement (“Position, Duties and Responsibilities”) shall be replaced in its entirety with the following:

Position, Duties and Responsibilities. During the Employment Term, Executive shall be employed and serve as Chairman, President and Chief Executive Officer of the Company (together with such other position or positions consistent with Executive’s title as the Board shall specify from time to time) and shall have such duties, authority and responsibilities commensurate with such title. Executive also agrees to serve as an officer and/or director of any other member of the Company Group, in each case without additional compensation.
Section 4.1 of the Employment Agreement (“Base Salary”) shall be replaced in its entirety with the following:

Base Salary. Executive shall be paid an annualized base salary of $1,000,000 in periodic installments in accordance with the Company’s customary payroll practices, subject to annual review, with adjustments, if any, as may be approved by the Board of Directors.
The Employment Agreement is amended to include a new Paragraph 4.7, providing as follows:




Sign-on Bonus. Executive shall be eligible to receive a sign-on bonus equal to $650,000 (the “Sign-on Bonus”), payable as follows:
(a)$225,000 on the first regularly scheduled payroll date following February 28, 2025; and
(b)$425,000 on the first regularly scheduled payroll date following May 31, 2025.

If the Company terminates the Executive in accordance with Section 5.4 of the Employment Agreement or the Executive voluntarily terminates employment in accordance with Section 5.7 of the Employment Agreement within twelve (12) months of the Effective Date, Executive shall be obligated to immediately return to the Company the full amount of the Sign-on Bonus paid to Executive as of such termination and agrees for such purposes that the Company may deduct the same from monies otherwise owed to Executive.
Section 5.1 of the Employment Agreement (“Termination of Employment”) shall be replaced in its entirety with the following:

General. The Employment Term, and Executive’s employment hereunder, shall terminate upon the earliest to occur of (i) Executive’s death, (ii) a termination by reason of a Disability, (iii) a termination by the Company with or without Cause, and (iv) a termination by Executive with or without Good Reason. Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein or in any plan or grant, all of Executive’s rights to Base Salary, Annual Bonus, Sign-on Bonus, employee benefits and other compensatory amounts hereunder (if any) shall cease upon the termination of Executive’s employment hereunder (the “Termination Date”).
Section 5.5 of the Employment Agreement (“Termination by the Company without Cause”) is amended to include a new Paragraph 5.5(f) as follows:
(f)    A pro-rata portion of the Sign-on Bonus, subject to Section 5.9.
Section 5.5 of the Employment Agreement (“Termination by the Company without Cause”) is amended as follows:
Notwithstanding the foregoing, the payments and benefits described in clauses (b), (c), (d), (e) and (f) above shall immediately terminate, and the Company shall have no further obligations to Executive with respect thereto, in the event that Executive breaches, as fully adjudicated and determined by a court of competent jurisdiction or a duly appointed arbitrator, Section 9 of this Agreement.



Section 5.8 of the Employment Agreement (“Termination of Employment in Connection With a Change of Control”) is amended as follows:
Termination of Employment in Connection With a Change in Control. Notwithstanding the terms set forth in Section 5.5 and 5.6, if Executive’s employment with the Company is terminated pursuant to Section 5.5 or Section 5.6 hereof (i) within 90 days prior to the effective time of a Change in Control or (ii) from the effective time of a Change in Control until the date that is 12 months after the occurrence of a Change in Control, subject to the same conditions on payment and benefits set forth in Section 5.5, (i) Executive shall be entitled to the payments and benefits provided in Sections 5.5(a), (b), (c), (e) and (f) hereof…
All other terms of the Employment Agreement shall remain the same.

IN WITNESS THEREOF, the Parties hereto have executed this Amendment as of the date first above-written.


COMTECH TELECOMMUNICATIONS CORP.
By: /s/ Michael Bondi        
Name: Michael Bondi
Title: Chief Financial Officer
                        
EXECUTIVE

                            By: /s/ Kenneth Traub        
Name: Kenneth Traub
EX-10.4 3 exhibit104-comtechxexecuti.htm EX-10.4 Document

Exhibit 10.4
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EMPLOYMENT AGREEMENT
This Employment Agreement (this “Agreement”) is made and entered into as of February 26, 2024, by and between Jeff Robertson(“Executive”) and Comtech Telecommunications Corp., a Delaware corporation (the “Company”).
WHEREAS, the Company desires to continue to employ Executive and to enter into this Agreement embodying the terms of such employment, and Executive desires to enter into this Agreement and to accept such terms of employment, subject to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, the Company and Executive hereby agree as follows:
1.Definitions. Capitalized terms not otherwise defined in this Agreement shall have the meaning set forth on Appendix A, attached hereto.
2.Employment Term. Executive’s employment with the Company pursuant to the terms of this Agreement shall be effective as of March 12, 2024, (the “Effective Date”), and shall continue until the third anniversary of the Effective Date (the “Initial Term”) and thereafter shall continue on a year-to-year basis (each, a “Renewal Term”), unless either party provides the other written notice of non-renewal at least ninety (90) days prior to the expiration of the Initial Term or any Renewal Term, as applicable (a “Notice of Non-Renewal”); provided, that the Initial Term or any Renewal Term may be ended earlier pursuant to Section 5 of this Agreement.
3.Position, Duties and Responsibilities; Performance.
3.1.Position, Duties and Responsibilities. During the Employment Term, Executive shall be employed and serve as Business Unit President (Terrestrial & Wireless) of the Company (together with such other position or positions consistent with Executive’s title as the Board or the CEO shall specify from time to time) and shall have such duties, authority and responsibilities commensurate with such title. Executive also agrees to serve as an officer and/or director of any other member of the Company Group, in each case without additional compensation, provided that company-supplied directors and officers insurance is in place and covers the Executive. The Executive shall report directly to the CEO.


3.2.Performance. Executive shall devote Executive’s full business time, attention, skill, and efforts to the performance of Executive’s duties under this Agreement and, except as provided below, shall not engage in any other business or occupation, including any outside employment or consulting services, during the Employment Term, including, without limitation, any activity that (x) conflicts with the interests of the Company or any other member of the Company Group, (y) interferes with the performance of Executive’s duties for the Company, or (z) interferes with Executive’s exercise of Executive’s judgment in the Company’s best interests. Notwithstanding the foregoing, nothing in this Section 3.2 shall preclude Executive from (i) serving, with the prior written consent of the Board, as a member of the boards of directors or advisory boards (or their equivalents in the case of a non-corporate entity) of for-profit public or private companies (other than the Company) or as a member of the boards of directors or advisory boards (or their equivalents) of other social, community or charitable organizations, (ii) engaging in charitable activities, social and community affairs (including as an informal advisor to charitable, social or community organizations), (iii) delivering lectures, engaging in social media, participating in symposiums, panel discussions, fireside chats, industry and professional engagements and various other thought leadership endeavors, and (iv) managing Executive’s personal investments and related affairs or engaging as a passive investor in other companies (collectively, the “Permitted Activities”); provided, however, that the activities set out in clauses (i), (ii), (iii), and (iv) shall be limited by Executive so as not to materially interfere, individually or in the aggregate, with the performance of Executive’s duties and responsibilities hereunder and do not conflict with any applicable Company policy on conduct.
3.3.Place of Performance. Executive shall spend time, as is necessary to perform Executive’s duties, at the Company’s Headquarters, although Executive understands that the Company’s scope of operations and future business interests will require Executive to travel frequently to other offices of the Company Group, as well as travel to various other customers, partners, suppliers and other entities relevant to, or potentially relevant to the Company’s current and future potential business interests across the United States and globally during the Employment Term. Executive will use Executive’s judgement to prioritize the focus of Executive’s efforts in this regard and operate in the long-term best interest of the Company.
4.Compensation.
During the Employment Term, Executive shall be entitled to the following compensation:
4.1.Sign-On Bonus. Executive shall receive a one-time sign-on bonus valued at $300,000 on the date of grant, subject to a three-year vesting period commencing from the actual respective grant date and receipt is conditioned upon your continued active employment through the award date.
4.2.Base Salary. Executive shall be paid an annualized base salary of $500,000 (pro-rated in your first year) in periodic installments in accordance with the Company’s customary payroll practices, subject to annual review, with adjustments, if any, as may be approved by the Compensation Committee.
4.3.Annual Bonus. For each completed fiscal year of the Employment Term, Executive shall be eligible to receive an annual bonus (the “Annual Bonus”). As of the Effective Date, Executive’s annual target bonus opportunity shall be equal to 75% of Base Salary (the “Target Bonus”) (pro-rated in your first year), based on the achievement of individual performance goals and Company performance goals (such Company performance goals that are the same as the Company performance goals applicable to the other senior executive officers of the Company, as a group) as are established by the Compensation Committee; provided, that, depending on the results, Executive’s actual bonus may be lower or higher than the target amount, with a minimum bonus opportunity of 0% of Base Salary and a maximum bonus opportunity of 150% of Base Salary (or such other amount as determined by the Compensation Committee). The Annual Bonus shall otherwise be subject to the terms and conditions adopted by the Compensation Committee under which bonuses are generally payable to senior executives of the Company, as in effect from time to time. The Annual Bonus, if any, shall be paid promptly after completion of the Company’s audited year-end financial statements for the fiscal year to which the Annual Bonus relates (but in any event no later than two and one-half months following the conclusion of the fiscal year to which the Annual Bonus relates) and at the same time as annual bonuses are paid to the other senior executive officers of the Company. In order to be eligible to earn an Annual Bonus, except as otherwise set forth in Section 5.5, Executive must be employed by the Company through the date of payment of the Annual Bonus.
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4.4.Equity Incentive. Subject to approval by the Compensation Committee, following the Effective Date, Executive shall be eligible to receive equity awards pursuant to the Company’s annual equity incentive program and subject to the terms of the Equity Plan and the applicable award agreements with respect to such equity awards. Executive shall be entitled to receive an annual Long-Term Incentive as follows pro-rated the first year of employment:
RSU $80,000
LTIP (Cash) $40,000
Perf Shares $80,000
Total LTI $200,000
* The first grant of LTI is expected to occur in August 2024

4.5.Employee Benefits. During the Employment Term, Executive shall be entitled to participate in health, insurance, retirement, and other benefits provided generally to similarly situated employees of the Company, subject to the terms of any such benefit plans. Executive shall also be entitled to the same number of holidays, vacation days, and sick days, as well as any other benefits, in each case as are generally allowed to similarly situated employees of the Company in accordance with the Company policy as in effect from time to time. Nothing contained herein shall be construed to limit the Company’s ability to amend, suspend, or terminate any employee benefit plan or policy at any time without providing Executive notice, and the right to do so is expressly reserved.
4.6.Business Expenses. Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by Executive in connection with the performance of Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies and procedures and the terms and conditions of this Agreement.
4.7.Transition Services. In the event of an involuntary termination, the Company will pay $30,000 towards transition services within 60 days of termination of employment.
5.Termination of Employment.
5.1.General. The Employment Term, and Executive’s employment hereunder, shall terminate upon the earliest to occur of (i) Executive’s death, (ii) a termination by reason of a Disability, (iii) a termination by the Company with or without Cause, and (iv) a termination by Executive with or without Good Reason. Except as otherwise expressly required by law (e.g., COBRA) or as specifically provided herein or in any plan or grant, all of Executive’s rights to Base Salary, Annual Bonus, employee benefits and other compensatory amounts hereunder (if any) shall cease upon the termination of Executive’s employment hereunder (the “Termination Date”).
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5.2.Deemed Resignation. Upon any termination of Executive’s employment for any reason, except as may otherwise be requested by the Company in writing and agreed upon in writing by Executive, Executive shall be deemed to have resigned from any and all directorships, committee memberships, and any other positions Executive holds with the Company or any other member of the Company Group or any other entities for which Executive serves as a representative of the Company.
5.3.Termination Due to Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. The Company may terminate Executive’s employment immediately upon the occurrence of a Disability upon the giving of written notice to Executive while the Disability exists, such termination to be effective upon Executive’s receipt of such written notice of such termination. Upon Executive’s death or in the event that Executive’s employment is terminated due to Executive’s Disability, Executive or Executive’s estate or Executive’s beneficiaries, as the case may be, shall be entitled to (a) the Accrued Obligations, and (b) any unpaid Annual Bonus in respect of any completed fiscal year that has ended prior to the date of such termination, which amount shall be paid at such time annual bonuses are paid to other senior executives of the Company, in accordance with Section 4.2. Following Executive’s death or a termination of Executive’s employment by reason of a Disability, except as set forth in this Section 5.3, Executive shall have no further rights to any compensation or any other benefits under this Agreement.
5.4.Termination by the Company for Cause or Upon the Expiration of the Term. The Company may terminate Executive’s employment at any time for Cause, effective upon delivery to Executive of written notice of such termination; provided, however, that Executive’s termination will be subject to any applicable cure period set forth in the definition of Cause and if applicable, will only be effective if Executive fails to cure the event or circumstance constituting “Cause” within such cure period. In the event that the Company terminates Executive’s employment for Cause or upon the expiration of the Term, Executive shall be entitled only to the Accrued Obligations. Following such termination of Executive’s employment for Cause or upon the expiration of the Term, except as set forth in this Section 5.4, Executive shall have no further rights to any compensation or any other benefits under this Agreement.
5.5.Termination by the Company without Cause. The Company may terminate Executive’s employment at any time without Cause, effective upon delivery to Executive of written notice of such termination. In the event that Executive’s employment is terminated by the Company without Cause (other than due to death or Disability), Executive shall be entitled to:
(a)The Accrued Obligations;
(b)Any unpaid Annual Bonus in respect of any completed fiscal year that has ended prior to the date of such termination, which amount shall be paid at such time annual bonuses are paid to other senior executives of the Company, in accordance with Section 4.2;
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(c)Subject to satisfaction of the performance objectives applicable for the fiscal year in which such termination occurs, as determined by the Compensation Committee, an amount equal to (A) the Annual Bonus otherwise payable to Executive for the fiscal year in which such termination occurred, assuming Executive had remained employed through the applicable payment date, multiplied by (B) a fraction, the numerator of which is the number of days elapsed from the commencement of such fiscal year through the date of such termination and the denominator of which is the number of days in the fiscal year in which the termination occurred, which amount shall be paid at such time annual bonuses are paid to other senior executives of the Company, in accordance with Section 4.2;
(d)An amount equal to one times Executive’s Base Salary at the time of the Termination Date, such amount to be paid quarterly in equal installments upon the last day of each fiscal quarter following the Termination Date (the “Payment Date”); and
(e)If Executive timely and properly elects continuation coverage under the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”), the Company shall reimburse Executive for the monthly COBRA premium paid by Executive for Executive’s dependents. Any such reimbursement for the period prior to the Payment Date shall be paid to Executive in a lump sum on the Payment Date and any reimbursement for any month (or portion thereof) on and after the Payment Date shall be paid to Executive on a monthly basis, subject to the Executive timely remitting the premium payment. Executive shall be eligible to receive such reimbursement until the earliest of: (i) the twelve (12) month anniversary of Executive’s termination date (the “Benefits Reimbursement Period”); and (ii) the date Executive is no longer eligible to receive COBRA continuation coverage.
Notwithstanding the foregoing, the payments and benefits described in clauses (b), (c), (d) and (e) above shall immediately terminate, and the Company shall have no further obligations to Executive with respect thereto, in the event that Executive breaches Section 9 of this Agreement. Following such termination of Executive’s employment by the Company without Cause, except as set forth in this Section 5.5, Executive shall have no further rights to any compensation or any other benefits under this Agreement. For the avoidance of doubt, Executive’s sole and exclusive remedy upon a termination of employment by the Company without Cause shall be receipt of the Severance Benefits.
5.6.Termination by Executive with Good Reason. Executive may terminate Executive’s employment with Good Reason in accordance with the time periods and cure periods set forth in the definition of Good Reason. Executive shall be entitled to the same payments and benefits as provided in Section 5.5 hereof for a termination by the Company without Cause, subject to the same conditions on payment and benefits as described in Section 5.5 hereof. Following such termination of Executive’s employment by Executive with Good Reason, except as set forth in this Section 5.6, Executive shall have no further rights to any compensation or any other benefits under this Agreement. For the avoidance of doubt, Executive’s sole and exclusive remedy upon a termination of employment with Good Reason shall be receipt of the Severance Benefits.
5.7.Termination by Executive without Good Reason or Upon the Expiration of the Term. Executive may terminate Executive’s employment without Good Reason by providing the Company ninety (90) days’ prior written notice of such termination (a “Termination Without Good Reason”). In the event of a Termination Without Good Reason or by the Executive upon the expiration of the Term, Executive shall be entitled only to the Accrued Obligations. In the event of a Termination without Good Reason, the Company may, in its sole and absolute discretion, by written notice accelerate such date of termination without changing the characterization of such termination as a termination by Executive without Good Reason. Following a Termination Without Good Reason or upon the expiration of the Term, except as set forth in this Section 5.7, Executive shall have no further rights to any compensation or any other benefits under this Agreement.
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5.8. Termination of Employment in Connection With a Change in Control. Notwithstanding the terms set forth in Section 5.5 and 5.6, if Executive’s employment with the Company is terminated pursuant to Section 5.5 or Section 5.6 hereof (i) within 90 days prior to the effective time of a Change in Control or (ii) from the effective time of a Change in Control until the date that is 12 months after the occurrence of a Change in Control, subject to the same conditions on payment and benefits set forth in Section 5.5, (i) Executive shall be entitled to the payments and benefits provided in Sections 5.5(a), (b), (c) and (e) hereof, , (ii) Executive shall be entitled to an amount equal to one and a half (1.5) times the sum of (y) an amount equal to Executive’s Base Salary at the time of the Termination Date plus (z) an amount equal to Executive’s Target Bonus for the year in which the Termination Date occurs, such amount to be to be paid quarterly in equal installments upon the last day of each fiscal quarter following the Termination Date; provided, however, in the event such termination occurs within the 90 day period prior to the effective time of a Change in Control, the amount due to Executive under clause (ii) that is in excess of the amount previously paid to Executive under Section 5.5(d), shall be paid within sixty (60) days following the effective time of such Change in Control, and (iii) all equity incentive awards held by Executive with are subject to performance-based vesting conditions will vest based upon target performance, effective as of the date of Executive’s termination and will be settled within 60 days of the later of the Termination Date or, if later, Change in Control (or, to the extent required to comply with Section 409A of the Code, such later time as specified in the applicable award agreement). For the avoidance of doubt, Executive shall not be entitled to duplicate amounts under Section 5.5(d) and clause (ii) of the foregoing sentence. With respect to clause (iii) of the foregoing sentence, in the event of a termination of employment which occurs prior to a Change in Control, any such award shall remain outstanding for ninety (90) days following such termination of employment and, if no Change in Control has occurred as of such date, shall be treated in accordance with the terms of the applicable award agreement (including, if applicable, treating any unvested performance-based equity incentive awards as forfeited as of the Termination Date).
5.9.Transaction Payment. As Business Unit President (Terrestrial & Wireless), Executive shall be accountable for product and service sustainment, new product and service development and for the overall growth and health of the Business Unit. In the event that the Board of Directors approves a Change of Control, however, in addition to the benefits set forth above, Executive shall be entitled to the following:
(a)If the Company experiences a change in control other than divestiture of the Public Safety Terrestrial and Wireless businesses within eighteen (18) months from the date of the first management presentation to present the business unit for sale, Executive shall be entitled to a single payment of $600,000, either in cash or RSUs (at the discretion of the company). If the payment is made in RSUs, the RSUs will be granted on the date of the signing of the transaction.
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(b)If the Company closes a transaction that divests the Public Safety Terrestrial and Wireless businesses within eighteen (18) months from the date of the first management presentation to present the business unit for sale, Executive shall be entitled to a Transaction Payment based on the Net Purchase Price, commencing from a baseline valuation of $500,000,000. This payment will be calculated at a starting rate of 0.4%, increasing on a sliding scale up to a maximum of 0.6% for a valuation of $900,000,000 or more and capped at a total potential payment of $5,100,000, where each increase in the applicable % shall apply only incrementally (e.g., at a sale price of $1,000,000,000, the fee would be $4,700,000). Consultant shall be entitled to a minimum Transaction Payment of $1,500,000 in the event of such a divestiture. For all purposes hereof, “Net Purchase Price” means the total amount paid at closing as consideration for the acquisition of the Business in a Transaction by the Potential Acquiror, which consideration may include(i) cash (other than balance sheet cash), (ii) assets, (iii) the aggregate principal amount of securities (including promissory notes), (iv) the principal amount of any loans that are an integral part of such Transactions and (v) assumed long-term interest bearing liabilities. For the avoidance of doubt, such Net Purchase Price shall be calculated on an enterprise value basis, such that the amounts actually paid by the Potential Acquiror may be adjusted upwards by the amount of any debt- or debt-like items assumed by the Potential Acquirer or paid thereby on the Company’s behalf and/or adjusted downwards by the amount of cash and cash-like items acquired by such Potential Acquiror. Notwithstanding the foregoing and for the avoidance of doubt, Net Purchase Price shall not include (x) any payments made in connection with compensatory arrangements for employment or provision of services or (y) the value of any ongoing commercial or transition service arrangements entered into in connection with a Transaction. Net Purchase Price shall further be calculated net of all fees incurred by the Company and its affiliates in connection with the Transaction, including but not limited to the fees paid to any investment bank, financial advisor or other third party.
6.Release. Notwithstanding any provision herein to the contrary, the payment of any amount or provision of any benefit pursuant to Section 5.5, Section 5.6 or 5.8 (other than the Accrued Obligations) (collectively, the “Severance Benefits”) shall be conditioned upon Executive’s execution, delivery to the Company, and non-revocation of the Release of Claims (and the expiration of any revocation period contained in such Release of Claims) within sixty (60) days following the date of Executive’s termination of employment hereunder. If Executive fails to execute the Release of Claims in such a timely manner so as to permit any revocation period to expire prior to the end of such sixty (60) day period, or timely revokes Executive’s acceptance of such release following its execution, Executive shall not be entitled to any of the Severance Benefits.
7.Section 280G. Notwithstanding anything to the contrary in this Agreement, this Section 6 shall apply in the event of (i) a “change in the ownership or effective control” of the Company or (ii) a “change in the ownership of a substantial portion of the assets” of the Company, each within the meaning of Section 280G of the Code (collectively, an “Excise Tax Event”). If an Excise Tax Event is consummated, and as a result any payments and benefits provided for in this Agreement, together with any other payments and benefits which Executive has the right to receive from the Company or any of its affiliates, would constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), then the payments and benefits provided for in this Agreement shall be either (a) reduced (but not below zero) so that the present value of such total amounts and benefits received by Executive from the Company and its affiliates will be one dollar ($1.00) less than three times Executive’s “base amount” (as defined in Section 280G(b)(3) of the Code) and so that no portion of such amounts and benefits received by Executive shall be subject to the excise tax imposed by Section 4999 of the Code, or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are hereinafter collectively referred to as the “Excise Tax”), or (b) paid in full, whichever produces the better net after-tax position to Executive (taking into account any applicable Excise Tax and any other applicable taxes). The reduction of payments and benefits hereunder, if applicable, shall be made in the following order: (1) by reducing the amounts of any payments or benefits that would not constitute deferred compensation under Section 409A, to the extent necessary to decrease the payments subject to the Excise Tax, as agreed by the Company and Executive; (2) next, by reducing, payments or benefits to be paid in cash hereunder and that constitute deferred compensation under Section 409A in the order in which such payment or benefit would be paid or provided (beginning with such payment or benefit that would be made last in time and continuing, to the extent necessary, through to such payment or benefit that would be made first in time); and (3) finally, by reducing any non-cash or in-kind benefit to be provided hereunder and that constitute deferred compensation under Section 409A in a similar order to that described in clause (2). The determination as to whether any such reduction in the amount of the payments and benefits provided hereunder is necessary shall be made by the Company in good faith. If a reduced payment or benefit is made or provided and through error or otherwise that payment or benefit, when aggregated with other payments and benefits from the Company (or its affiliates) used in determining if a “parachute payment” exists, exceeds one dollar ($1.00) less than three times Executive’s base amount, then Executive shall immediately repay such excess to the Company upon notification that an overpayment has been made. Nothing in this Section 6 shall require the Company to be responsible for, or have any liability or obligation with respect to, Executive’s Excise Tax liabilities.
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8.Cooperation. The parties agree that certain matters in which Executive will be involved during the Employment Term may necessitate Executive’s cooperation in the future. Accordingly, following the termination of Executive’s employment for any reason, to the extent reasonably requested by the Board, Executive shall cooperate with the Company in connection with matters arising out of Executive’s service to the Company; provided, that, the Company shall make reasonable efforts to minimize disruption of Executive’s other activities. The Company shall reimburse Executive for reasonable expenses incurred in connection with such cooperation and, to the extent that Executive is required to spend substantial time on such matters, the Company shall compensate Executive at an hourly rate based on Executive’s Base Salary on the Termination Date, unless such time is as a witness in a legal proceeding, in which case the Company will only pay costs and expenses as permitted by law.
9.Confidential Information. Executive recognizes that the nature of Executive’s services are such that Executive will have access to information that constitutes trade secrets, is of a confidential nature, is of great value to the Company Group or is the foundation on which the business of the Company is predicated (“Confidential Information”). Executive agrees, during Executive’s employment and thereafter, not to disclose to any person other than the Company Group’s employees or the Company Group’s legal counsel or other parties authorized by the Company Group to receive confidential information nor use for any purpose, other than the performance of this Agreement, any Confidential Information. Confidential Information includes data or material (regardless of form) which is: (a) a trade secret; (b) provided, disclosed or delivered to Executive by the Company, any officer, director, employee, agent, attorney, accountant, consultant or other person or entity employee by the Company in any capacity, any customer, borrower or business associate of the Company Group or any public authority having jurisdiction over the Company Group of any business activity conducted by the Company Group; or (c) produced, developed, obtained or prepared by or on behalf of Executive or the Company Group (whether or not such information was developed in the performance of this Agreement) with respect to the Company Group or any assets, business activities, officers, directors, employees, borrowers or customers of the foregoing. However, Confidential Information will not include any information, data or material which at the time of disclosure or use was generally available to the public other than by a breach of this Agreement, was available to the party to whom disclosed on a non-confidential basis by disclosure or access provided by the Company Group or a third party, or was otherwise developed or obtained independently by the person to whom disclosed without a breach of this Agreement. The foregoing notwithstanding, nothing in this Agreement prohibits Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, Congress, and any agency Inspector General, or making other disclosures that are protected under the whistleblower provisions of federal law or regulation. On request by the Company, the Company will be entitled to a copy of any Confidential Information in the possession of Executive. The provisions of this Section 8 will survive the termination, expiration or cancellation of Executive’s employment. Executive will deliver to the Company all originals and copies of the documents or materials containing Confidential Information. Executive further agrees that if Executive executes additional Company policies or agreements to protect the Confidential Information, this Agreement shall be read in conjunction with any such policies or Agreements to provide the broadest and greatest protection to the Confidential Information.
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10.Protective Covenants.
10.1.Acknowledgment. Executive acknowledges and agrees that the services to be rendered by Executive to the Company are of a special and unique character; that Executive will obtain knowledge and skill relevant to the Company’s industry, methods of doing business and marketing strategies by virtue of Executive’s employment; and that the protective covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company Group. Executive further acknowledges and agrees that the nature of Executive’s position gives Executive access to and knowledge of Confidential Information and places Executive in a position of trust and confidence with the Company Group. Executive further understands and acknowledges that the intellectual services he provides to the Company Group are unique, special, and extraordinary. Executive further understands and acknowledges that the Company Group’s ability to reserve these for the exclusive knowledge and use of the Company Group is of great competitive importance and commercial value to the Company Group, and that improper use or disclosure by Executive is likely to result in unfair or unlawful competitive activity.
10.2.Non-Competition. Executive covenants and agrees that during Executive’s employment with the Company and for a period of twelve (12) consecutive months after the Termination Date, irrespective of the reason for the termination (the “Restricted Period”), Executive will not directly or indirectly, engage in any business (as an owner, joint venturer, partner, stockholder, director, officer, consultant, agent or otherwise, other than as the owner of less than 1% of the outstanding class of a publicly traded security) which competes with the business in which the Company is presently engaged or may be engaged at any time during the Employment Term. Nothing in this Section 9.2 shall be construed as limiting Executive’s duty of loyalty to the Company while he is employed by the Company, or any other duty he may otherwise have to the Company while he is employed by the Company.
10.3.Non-Solicitation of Employees. Executive covenants and agrees that during the Restricted Period, Executive shall not, individually or jointly with others, directly or indirectly, recruit, hire, encourage, or attempt to recruit or hire, or by assisting others, any employees of the Company Group with whom Executive worked, had business contact, or about whom Executive gained non-public or Confidential Information (the “Company Group’s employees or former employees”), nor shall Executive contact or communicate with same, other than on behalf of the Company Group, for the purpose of inducing, assisting, encouraging and/or facilitating the Company Group’s employees to terminate their employment with the Company Group or find employment or work with another person or entity.
Additionally, Executive shall not provide or pass along to any person or entity the name, contact and/or background information about any of the Company Group’s employees or provide references or any other information about them.
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Additionally, Executive shall not provide or pass along to the Company Group’s employees any information regarding potential jobs or entities or persons to work for, including but not limited to, job openings, job postings, or the names or contact information of individuals or companies hiring people or accepting job applications. Further, Executive shall not offer employment to or work to any employees of the Company Group’s employees or former employees. For purposes of this covenant “Company Group’s employees or former employees” shall refer to employees of the Company Group Executive supervised, was supervised by, or otherwise worked with in any capacity during the twelve (12) month period prior to the Termination Date.
10.4.Non-Solicitation of Customers. Executive understands and acknowledges that because of Executive’s experience with and relationship to the Company Group, he will have access to and learn about much or all of the Company Group’s customer information and goodwill. “Customer Information” includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, order history, order preferences, chain of command, pricing information and other information identifying facts and circumstances specific to the customer and relevant to Company’s industry. Executive understands and acknowledges that loss of this customer relationship and/or goodwill will cause significant and irreparable harm to the Company. Executive agrees and covenants, that during the Restricted Period, Executive shall not, directly or indirectly, solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, and instant message), attempt to contact or meet with the Company’s current or prospective customers for purposes of offering or accepting goods or services similar to or competitive with those offered by the Company.
10.5.Reasonableness. The Company and Executive have attempted to specify a reasonable period of time and reasonable restrictions to which the provisions of this Section 9 shall apply. The Company and Executive agree, however, that if a court or agency of competent jurisdiction determines that any of the terms of this Section 9 are not enforceable because they are overbroad or for any other reason, the provisions of this Section 9 shall be reformed and modified to reflect restrictions that are determined to be reasonable by such court or agency of competent jurisdiction.
11.Non-Disparagement. Executive agrees and covenants that he will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company Group or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties. This Section 10 does not, in any way, restrict or impede Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided, that such compliance does not exceed that required by the law, regulation or order. Executive shall promptly provide written notice of any such order to the CEO. The Company agrees and covenants that, as soon as reasonably practicable following the date hereof, it shall instruct its executive officers and directors to refrain from making any defamatory or disparaging remarks, comments, or statements concerning Executive to any third parties.
12.Remedies. In the event of a breach or threatened breach by Executive of Sections 7 - 10 of this Agreement, Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.
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13.Arbitration. The Company and Executive mutually consent to the final resolution by binding arbitration in New York, New York, of any and all claims or disputes the Company may have against or with Executive, and/or Executive may have against or with Company. Arbitration shall be administered exclusively by American Arbitration Association and shall be conducted consistent with the rules, regulations and requirements thereof for employment disputes as well as any requirements imposed by state law. Any arbitral award determination shall be final and binding upon the Parties. Notwithstanding the foregoing, expressly excluded from Arbitration are any claims Executive may have for workers’ compensation benefits or unemployment compensation benefits. Also excluded are claims for declaratory relief or injunctive relief and/or damages arising from alleged unfair competition or solicitation, theft of trade secrets or business property, or the enforceability or breach of protective covenants.
14.Proprietary Rights.
14.1.Work Product. Executive acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by Executive individually or jointly with others during the period of Executive’s employment by the Company and relating in any way to the business or contemplated business, research or development of the Company (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of the Company.
14.2.Work Made for Hire; Assignment. Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, Executive hereby irrevocably assigns to the Company, for no additional consideration, Executive’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement.
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14.3.Further Assurances; Power of Attorney. During and after Executive’s employment, Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect and transfer to the Company the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to the Company any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by the Company. Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on Executive’s behalf in Executive’s name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Executive does not promptly cooperate with the Company’s request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be effected by Executive’s subsequent incapacity.
14.4.No License. Executive understands that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software or other tools made available to Executive by the Company.
15.Exit Obligations. Upon voluntary or involuntary termination of Executive’s employment, Executive shall (i) provide or return to the Company any and all Company Group property and all Company Group documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of Executive, whether they were provided to Executive by the Company Group or any of its business associates or created by Executive in connection with Executive’s employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in Executive’s possession or control, including those stored on any non-Company Group devices, networks, storage locations and media in Executive’s possession or control.
16.Publicity.
17.Executive hereby agrees that before any use or display by the Company Group and its agents, representatives, and licensees of Executive’s name, voice, likeness, image, appearance, and biographical information (collectively, 'Personal Attributes') in, on, or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic forms and media throughout the world, at any time during or after the period of Executive’s employment by the Company, for all legitimate commercial and business purposes of the Company Group ('Permitted Uses'), the Company Group must first submit the proposed use to the Executive and obtain the Executive's approval of such use, which approval shall not be unreasonably withheld, delayed, or conditioned.
17.1.Upon the Executive's approval of such use, Executive hereby irrevocably consents to the Permitted Uses of the Personal Attributes and waives any and all rights to review or approve any further use or display by the Company Group, their agents, representatives, and licensees. Executive further irrevocably consents to the Company Group’s and its agents’, representatives’, and licensees’ exercise of their rights in connection with any Permitted Uses without further consent from or royalty, payment, or other compensation to Executive.
17.2.Executive hereby forever waives and releases the Company Group and its directors, officers, employees, and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of Executive’s employment by the Company, arising directly or indirectly from the Company Group’s and its agents’, representatives’, and licensees’ exercise of their rights in connection with any Permitted Uses
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18.Taxes. The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law. Executive acknowledges and represents that the Company has not provided any tax advice to Executive in connection with this Agreement and that Executive has been advised by the Company to seek tax advice from Executive’s own tax advisors regarding this Agreement and payments that may be made to Executive pursuant to this Agreement, including specifically, the application of the provisions of Section 409A of the Code to such payments.
19.Set Off; Mitigation. The Company’s obligation to pay Executive the amounts provided and to make the arrangements provided hereunder shall be subject to set-off, or recoupment of agreed amounts owed by Executive to the Company or its affiliates; provided, however, that to the extent any amount so subject to set-off, counterclaim, or recoupment is payable in installments hereunder, such set-off, counterclaim, or recoupment shall not modify the applicable payment date of any installment, and to the extent an obligation cannot be satisfied by reduction of a single installment payment, any portion not satisfied shall remain an outstanding obligation of Executive and shall be applied to the next installment only at such time the installment is otherwise payable pursuant to the specified payment schedule, no right shall exist with regard to setoff or recoupment to the extent it would violate Section 409A of the Code and there shall be no right to setoff or recoupment with regard to any not agreed upon amounts. Executive shall not be required to mitigate the amount of any payment provided pursuant to this Agreement by seeking other employment or otherwise, the amount of any payment provided for pursuant to this Agreement shall not be reduced by any compensation earned as a result of Executive’s other employment or otherwise.
20.Governing Law. This Agreement, for all purposes, shall be construed in accordance with the laws of the State of New York without regard to conflicts of law principles; provided, however, that any provisions relating to equity compensation shall also be subject to any federal or state securities laws that may be applicable and the rules of any stock exchange on which the relevant equity is listed for trading.
21.Entire Agreement. Except as expressly set forth herein, this Agreement contains all of the understandings and representations between Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter, except that nothing herein shall be deemed to alter or amend that certain Indemnification Agreement between Executive and the Company or any of Executive’s obligations pursuant to any agreement or plan concerning confidential and proprietary information, intellectual property, or any other protective or restrictive covenants, each of which is intended to be preserved hereby and shall be in addition to, and not in lieu of, the similar restrictions and covenants set forth herein. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement.
22.Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by Executive and by an executive officer of the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
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23.Severability. Should any provision of this Agreement be held by a court or arbitrator of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement. The parties further agree that any such court or arbitrator is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. The parties expressly agree that this Agreement as so modified by the court or arbitrator shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.
24.Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any Section or paragraph.
25.Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
26.Additional Section 409A Provisions.
Notwithstanding any provision in this Agreement to the contrary:
26.1.Any payment that is deemed nonqualified deferred compensation (withing the meaning of Section 409A of the Code) and otherwise required to be made hereunder to Executive at any date as a result of the termination of Executive’s employment shall be delayed for such period of time as may be necessary to meet the requirements of Section 409A(a)(2)(B)(i) of the Code (the “Delay Period”). On the first business day following the expiration of the Delay Period, Executive shall be paid, in a single cash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence, and any remaining payments not so delayed shall continue to be paid pursuant to the payment schedule set forth herein.
26.2.Each payment in a series of payments hereunder shall be deemed to be a separate payment for purposes of Section 409A of the Code.
26.3.Notwithstanding anything herein to the contrary, the payment (or commencement of a series of payments) hereunder of any nonqualified deferred compensation (within the meaning of Section 409A of the Code) upon a termination of employment shall be delayed until such time as Executive has also undergone a “separation from service” as defined in Treas. Reg. 1.409A-1(h), at which time such nonqualified deferred compensation (calculated as of the date of Executive’s termination of employment hereunder) shall be paid (or commence to be paid) to Executive on the schedule set forth in Section 5 as if Executive had undergone such termination of employment (under the same circumstances) on the date of Executive’s ultimate “separation from service.”
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26.4.To the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A of the Code), (i) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided, that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.
26.5.To the extent any payment of nonqualified deferred compensation (within the meaning of Section 409A of the Code) is subject to the Executive’s execution and non-revocation of a Release of Claims and the period to consider and revoke such Release of Claims spans two taxable years, then the payment of such nonqualified deferred compensation shall be payable in the later of the two taxable years to the extent necessary to comply with Section 409A of the Code.
26.6.While the payments and benefits provided hereunder are intended to be structured in a manner to avoid the implication of any penalty taxes under Section 409A of the Code, in no event whatsoever shall any member of the Company Group be liable for any additional tax, interest, or penalties that may be imposed on Executive as a result of Section 409A of the Code for failing to comply with Section 409A of the Code (other than for withholding obligations or other obligations applicable to employers, if any, under Section 409A of the Code) provided that the Company Group act in reasonable good faith in connection with complying with Section 409A of the Code.
27.Successors and Assigns; No Third-Party Beneficiaries.
27.1.This Agreement shall inure to the benefit of the Company and its respective permitted successors and assigns. Neither this Agreement nor any of the rights, obligations, or interests arising hereunder may be assigned by the Company to any person other than to an acquiror of all or substantially all of the assets of the Company who assumes the agreement in writing.
27.2.Executive’s rights and obligations under this Agreement shall not be transferable by Executive by assignment or otherwise, without the prior written consent of the Company; provided, however, that if Executive shall die, all amounts then payable to Executive hereunder shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee, or if there be no such designee, to Executive’s estate.
27.3.Except as otherwise set forth in Section 5.3 or Section 25.2 hereof, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Company, the other members of the Company Group, and Executive any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.
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28.Notification to Subsequent Employer. When Executive’s employment with the Company terminates, Executive agrees to notify any subsequent employer of the protective covenants sections contained in this Agreement. Executive will also deliver a copy of such notice to the Company before Executive commences employment with any subsequent employer. In addition, Executive authorizes the Company to provide a copy of the protective covenants sections of this Agreement to third parties, including but not limited to, Executive’s subsequent, anticipated or possible future employer.
29.Notice.
29.1.Place of Delivery. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom or which it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided; provided, that unless and until some other address be so designated, all notices and communications by Executive to the Company shall be mailed or delivered to the Company at its principal executive office, and all notices and communications by the Company to Executive may be given to Executive personally or may be mailed to Executive at Executive’s last known address, as reflected in the Company’s records.
29.2.Date of Delivery. Any notice so addressed shall be deemed to be given (i) if delivered by hand, on the date of such delivery, (ii) if mailed by courier or by overnight mail, on the first business day following the date of such mailing, and (iii) if mailed by registered or certified mail, on the third business day after the date of such mailing.
30.Representations of Executive. Executive represents and warrants to the Company that:
30.1.Executive is entering into this Agreement voluntarily and that Executive’s employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by Executive of any agreement to which Executive is a party or by which Executive may be bound;
30.2.Executive has not violated, and in connection with Executive’s employment with the Company will not violate, any non-solicitation, non-competition, or other similar covenant or agreement with any Person by which Executive is or may be bound; and
30.3.In connection with Executive’s employment with the Company, Executive will not use any confidential or proprietary information Executive may have obtained in connection with employment or service with any prior service recipient.
31.Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
32.Acknowledgment of Full Understanding. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF EXECUTIVE’S CHOICE BEFORE SIGNING THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

COMTECH TELECOMMUNICATIONS CORP.
    
                             By:             
                                Name: Ken Peterman
                                Title: Chief Executive Officer
    
    
                        EXECUTIVE
    
                            By:            
                                Name: Jeff Robertson
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Appendix A
Definitions

“Accrued Obligations” shall mean (i) all accrued but unpaid Base Salary through the date of termination of Executive’s employment, (ii) any unpaid or unreimbursed expenses incurred in accordance with Section 4.6 hereof, (iii) any benefits provided under the Company’s employee benefit plans upon a termination of employment, including the Equity Plan and related award grants, and (iv) all rights to indemnification and directors and officers liability insurance coverage.
“Base Salary” shall mean the salary provided in Section 4.1, as in effect from time to time.
“Board” shall mean the Board of Directors of the Company.
“Cause” shall mean (i) Executive’s willful misconduct, gross negligence, dishonesty, misappropriation, breach of fiduciary duty or fraud with regard to the Company or any of its assets or businesses, (ii) Executive’s conviction of or pleading of guilty or nolo contendere with regard to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude; (iii) Executive’s failure to perform Executive’s duties (other than a failure resulting from Executive’s Disability), (iv) Executive’s failure to comply with any valid and legal directive of the Board; (v) Executive’s material violation of the Company’s written policies or codes of conduct, including written policies relating to discrimination, harassment, performance of illegal or unethical activities, and ethical misconduct; or (vi) Executive’s material breach of any obligation under this Agreement or any other written agreement with the Company. Except for a failure, breach or refusal which, by its nature, cannot reasonably be expected to be cured, Executive shall have ten (10) business days from the delivery date of the notice of termination within which to cure any acts constituting Cause. The Company may place Executive on paid leave for up to 60 days while it is determining whether there is a basis to terminate Executive’s employment for Cause. Such paid leave will not constitute Good Reason.
“CEO” shall mean the Company’s Chief Executive Officer.
“Change in Control” shall have the meaning set forth in the Equity Plan.
“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
“Company Group” shall mean the Company together with any of its direct or indirect subsidiaries.
“Compensation Committee” shall mean the Compensation Committee of the Board.
“Disability” shall have the meaning set forth in the Equity Plan.
    Appendix A-1


“Employment Term” shall mean the period during which Executive is employed by the Company, as specified in Section 2 hereof.
“Equity Plan” shall mean the Company’s 2000 Stock Incentive Plan, as amended from time to time or any other equity incentive plan which is sponsored by the Company or its affiliate or successor and in effect as of the Termination Date.
“Good Reason” shall mean the occurrence of any of the following, in each case during the Employment Term without Executive’s written consent: (i) a material reduction in Executive’s Base Salary, (ii) any material breach by the Company of any material provision of this Agreement, (iii) the Company’s failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law, (iv) a material diminution in Executive’s responsibilities from those applicable to Executive as of the Effective Date (or as modified thereafter consistent with this Agreement); or (v) a material diminution in the duties associated with the positions described in Section 2 as such duties are constituted as of the Effective Date; provided, that in no event shall Executive’s resignation be for “Good Reason” unless (x) an event or circumstance set forth in clauses (i), (ii), (iii), (iv), or (v) shall have occurred and Executive provides the Company with written notice thereof within thirty (30) days after the initial occurrence or existence of such event or circumstance, which notice specifically identifies the event or circumstance that Executive believes constitutes Good Reason, (y) the Company fails to correct the circumstance or event so identified within thirty (30) days after the receipt of such notice, and (z) Executive resigns within sixty (60) days after the date of delivery of the notice referred to in clause (x) above. Executive acknowledges and agrees that Executive’s exclusive remedy in the event of any breach of this Agreement shall be to assert Good Reason pursuant to the terms and conditions of Section 5.6. Notwithstanding the foregoing, the Board’s decision to remove Executive as a member of the Board or as a member of any other directorship or committee of the Company Group shall not constitute Good Reason.
“Release of Claims” shall mean the Release of Claims in the form provided to Executive on or following the Termination Date.
    Appendix A-2
EX-10.5 4 exhibit105-comtechxexecuti.htm EX-10.5 Document

Exhibit 10.5

image_0.jpg
EMPLOYMENT AGREEMENT
AMENDMENT No. 1 (the “Amendment”)
January 10, 2025
WHEREAS, on or about February 26, 2024, Jeff Robertson (“Robertson”) signed an Employment Agreement (the “Employment Agreement”) with Comtech Telecommunications Corp. (the “Company”), attached hereto as Exhibit A; and
WHEREAS, the Compensation Committee of the Board of Directors of the Company approved the terms of this Amendment, effective as of January 10, 2025;
NOW THEREFORE, the Employment Agreement is amended as follows:
Section 4.2 of the Employment Agreement is replaced in its entirety with the following:
Base Salary. Effective September 1, 2024, Executive shall be paid an annualized base salary of $550,000 in periodic installments in accordance with the Company’s customary payroll practices, subject to annual review, with adjustments, if any, as may be approved by the Compensation Committee.
Sections 5.9 (a) and 5.9 (b) of the Employment Agreement are replaced in their entirety with the following:

(a)[RESERVED].

(b)If the Company closes a transaction that divests the Public Safety Terrestrial and Wireless businesses or consummates a change of control transaction that includes the Public Safety Terrestrial and Wireless businesses while Executive remains an employee of the Company, Executive shall be entitled to a Transaction Payment based on the Net Purchase Price, commencing from a baseline valuation of $500,000,000. This payment will be calculated at a starting rate of 0.4%, increasing on a sliding scale up to a maximum of 0.6% for a valuation of $900,000,000 or more and capped at a total potential payment of $5,100,000, where each increase in the applicable % shall apply only incrementally (e.g., at a sale price of $1,000,000,000, the fee would be $4,700,000). Consultant shall be entitled to a minimum Transaction Payment of
$1,500,000 in the event of such a divestiture.


image_1a.jpg

For all purposes hereof, “Net Purchase Price” means the total amount paid at closing as consideration for the acquisition of the Business in a Transaction by the Potential Acquiror, which consideration may include(i) cash (other than balance sheet cash), (ii) assets, (iii) the aggregate principal amount of securities (including promissory notes), (iv) the principal amount of any loans that are an integral part of such Transactions and (v) assumed long-term interest bearing liabilities. For the avoidance of doubt, such Net Purchase Price shall be calculated on an enterprise value basis, such that the amounts actually paid by the Potential Acquiror may be adjusted upwards by the amount of any debt- or debt-like items assumed by the Potential Acquirer or paid thereby on the Company’s behalf and/or adjusted downwards by the amount of cash and cash-like items acquired by such Potential Acquiror. Notwithstanding the foregoing and for the avoidance of doubt, Net Purchase Price shall not include (x) any payments made in connection with compensatory arrangements for employment or provision of services or (y) the value of any ongoing commercial or transition service arrangements entered into in connection with a Transaction. Net Purchase Price shall further be calculated net of all fees incurred by the Company and its affiliates in connection with the Transaction, including but not limited to the fees paid to any investment bank, financial advisor or other third party.

The Employment Agreement is amended to include a new Paragraph 5.9 (c), providing as follows:

(c) Upon closing of a transaction under either Paragraph 5.9 (a) or 5.9 (b) while Executive remains an employee of the Company, (i) Executive’s awarded but unvested RSUs shall vest in full and shall be settled within 30 days following the closing of such transaction or such later date as required to comply with Section 409A of the Code, and (ii) Executive’s Long-Term Performance Shares shall be accelerated on a pro-rata basis based on the number of days in the applicable performance period through the date of the closing of such transaction and on the performance measurement, but shall not be settled until the applicable Certification Date.
Section 6 of the Employment Agreement is amended as follows:
6. Release. Notwithstanding any provision herein to the contrary, the payment of any amount or provision of any benefit pursuant to Sections 5.5, Section 5.6, or 5.8 (other than the Accrued Obligations) (collectively, the “Severance Benefits”) or Section 5.9 (the “Transaction Payment”) shall be conditioned upon Executive’s execution, delivery to the Company, and non- revocation of the Release of Claims (and the expiration of any revocation period contained in such Release of Claims) within sixty (60) days following the date of Executive’s termination of employment hereunder.

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If Executive fails to execute the Release of Claims in such a timely manner so as to


permit any revocation period to expire prior to the end of such sixty (60) day period, or timely revokes Executive’s acceptance of such release following its execution, Executive shall not be entitled to any of the Severance Benefits or the Transaction Payment.
All other terms of the Employment Agreement shall remain the same.
IN WITNESS THEREOF, the Parties hereto have executed this Amendment as of the date first above-written.

COMTECH TELECOMMUNICATIONS CORP.

By:/s/ Ken Traub            
Name: Ken Traub
Title: Executive Chairman of the Board


EXECUTIVE

By:/s/ Jeff Robertson            
Name: Jeff Robertson
Title: President, Terrestrial & Wireless
EX-10.9 5 exhibit109comtechtelecommu.htm EX-10.9 Document


Exhibit 10.9
Appendix A-1
COMTECH TELECOMMUNICATIONS CORP.
2023 EQUITY AND INCENTIVE PLAN

I. INTRODUCTION
1.1    Purposes. The purposes of the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan (this “Plan”) are (i) to align the interests of the Company’s stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Company’s growth and success, (ii) to advance the interests of the Company by attracting and retaining Non-Employee Directors, officers, other employees, consultants, independent contractors and agents and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.
1.2    Certain Definitions.
"Affiliate" shall mean each of the following: (i) any Subsidiary; (ii) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; and (iii) any other entity in which the Company or any of its Affiliates has a material equity interest and which is designated as an "Affiliate" by resolution of the Committee.
“Agreement” shall mean the written or electronic agreement evidencing an award hereunder between the Company and the recipient of such award.
“Board” shall mean the Board of Directors of the Company.
"Board Measurement Period” shall have the meaning set forth in Section 5.8(c)(2).
"Cause" shall mean, with respect to a participant's termination of service: (i) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the participant at the time of the grant of the Award (or where there is such an agreement but it does not define "cause" (or words of like import)), termination due to a participant's commission of a fraud or a felony in connection with his or her duties as an employee of the Company or an Affiliate, willful misconduct or any act of disloyalty, dishonesty, fraud, breach of trust or confidentiality as to the Company or an Affiliate or any other act which is intended to cause or may reasonably be expected to cause economic or reputational injury to the Company or an Affiliate; or (ii) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines "cause" (or words of like import), as defined under such agreement; provided, however, that with regard to any agreement that conditions "cause" on occurrence of a change in control, such definition of "cause" shall not apply until a change in control actually takes place and then only with regard to a termination thereafter. Notwithstanding the foregoing, in the case of a participant who is a Non-Employee Director, "cause" shall mean an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.
“Change in Control” shall have the meaning set forth in Section 5.8(c).
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Compensation Committee of the Board, or a subcommittee thereof, or such other committee designated by the Board, in each case, consisting of two or more members of the Board, each of whom is intended to be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the Nasdaq Stock Market or, if the Common Stock is not listed on the Nasdaq Stock Market, within the meaning of the rules of the principal stock exchange on which the Common Stock is then traded; provided, however, the “Committee” shall mean the Board (or a designated subcommittee of the Board) with respect to awards granted to Non-Employee Directors; provided, further, that the Board may, in its discretion, serve as the Committee under the Plan.
“Common Stock” shall mean the common stock, par value $0.10 per share, of the Company, and all rights appurtenant thereto.





“Company” shall mean Comtech Telecommunications Corp., a corporation organized under the laws of the State of Delaware, or any successor thereto.
“Detrimental Activity” shall mean (i) the disclosure to anyone outside the Company or its affiliates, or the use in any manner other than in the furtherance of the Company's or its affiliate's business, without written authorization from the Company, of any confidential information or proprietary information, relating to the business of the Company or its affiliates, acquired by a participant prior to the participant's termination of employment or service; (ii) activity while employed by, or otherwise providing services to, the Company or its affiliates that results, or if known could result, in the participant's termination of employment or service for Cause; (iii) any attempt, directly or indirectly, to solicit, induce or hire (or the identification for solicitation, inducement or hire of) any non-clerical employee of the Company or its affiliates to be employed by, or to perform services for, the participant or any person or entity with which the participant is associated (including, but not limited to, due to the participant's employment by, consultancy for, directorship with, equity interest in, or creditor relationship with such person or entity) or any person or entity from which the participant receives direct or indirect compensation or fees as a result of such solicitation, inducement or hire (or the identification for solicitation, inducement or hire) without, in all cases, written authorization from the Company; (iv) any attempt, directly or indirectly, to solicit in a competitive manner any current or prospective customer of the Company or its Affiliates with whom participant had material contact during participant’s employment with the Company or its Affiliates or about whom participant had confidential information as a result of participant’s employment with the Company or its Affiliates, in each case without prior written authorization from the Company; (v) the participant's Disparagement, or inducement of others to do so, of the Company or its affiliates or their past and present officers, directors, employees or products; (vi) without written authorization from the Company, the rendering of services for any organization, or engaging, directly or indirectly, in any business, which is competitive with the Company or its affiliates, or which organization or business, or the rendering of services to such organization or business, is otherwise prejudicial to or in conflict with the interests of the Company or its affiliates, (vii) breach of any material agreement between the participant and the Company or an affiliate (including, without limitation, any employment agreement or non-competition or non-solicitation agreement), or (viii) a violation of the Company’s Standards of Business Conduct as adopted by the Company from time to time and as in effect on the date the award is granted. Unless otherwise determined by the Committee at grant, Detrimental Activity shall not be deemed to occur after the end of the one-year period following the participant’s termination of employment or service. Section (iv) above shall not apply (A) to any participant whose primary work location is in the state of California as set forth in in the Company’s records; and (B) to any customer or prospective customer with whom a participant had a prior business relationship to the extent the participant’s primary work location is in the state of New York as set forth in the Company’s records. For purposes of subsections (i), (iii), (iv) and (vi) above, the Chief Executive Officer and the General Counsel of the Company shall each have authority to provide the participant with written authorization to engage in the activities contemplated thereby and no other person shall have authority to provide the participant with such authorization, provided that in the case of the Chief Executive Officer and the General Counsel of the Company, the Board shall have authority to provide the participant with written authorization to engage in the activities contemplated by subsections (i), (iii), (iv) and (vi) above and no other person shall have authority to provide the participant with such authorization.
“Disparagement” shall, subject to Section 5.17, mean making comments or statements to the press, the Company's or its affiliates' employees, consultants or any individual or entity with whom the Company or its affiliates has a business relationship which would adversely affect in any manner: the conduct of the business of the Company or its affiliates (including, without limitation, any products or business plans or prospects), or the business reputation of the Company or its affiliates, or any of their products, or their past or present officers, directors or employees.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Fair Market Value” shall mean the closing transaction price of a share of Common Stock as reported on the Nasdaq Stock Market on the date as of which such value is being determined or, if the Common Stock is not listed on the Nasdaq Stock Market, the closing transaction price of a share of Common Stock on the principal national stock exchange on which the Common Stock is traded on the date as of which such value is being determined or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported; provided, however, that the Company may in its discretion use the closing transaction price of a share of Common Stock on the day preceding the date as of which such value is being determined to the extent the Company determines such method is more practical for administrative purposes, such as for purposes of tax withholding. If the Common Stock is not listed on a national stock exchange or if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate and in compliance with Section 409A of the Code.
“Family Member” shall mean “family member” as defined in Section A1(a)(5) of the general instructions of Form S-8.





“Free-Standing SAR” shall mean an SAR which is not granted in tandem with, or by reference to, an option, which entitles the holder thereof to receive, upon exercise, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of such SARs which are exercised.
“Incentive Stock Option” shall mean an option to purchase shares of Common Stock that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an Incentive Stock Option.
“Non-Employee Director” shall mean any director of the Company who is not an officer or employee of the Company or any Affiliate.
“Nonqualified Stock Option” shall mean an option to purchase shares of Common Stock which is not an Incentive Stock Option.
“Other Stock Award” shall mean an award granted pursuant to Section 3.4 of the Plan.
“Performance Award” shall mean a right to receive an amount of cash, Common Stock, or a combination of both, contingent upon the attainment of specified Performance Measures within a specified Performance Period.
“Performance Measures” shall mean the criteria and objectives, established by the Committee, which shall be satisfied or met (i) as a condition to the grant or exercisability of all or a portion of an option or SAR or (ii) during the applicable Restriction Period or Performance Period as a condition to the vesting of the holder’s interest, in the case of a Restricted Stock Award, of the shares of Common Stock subject to such award, or, in the case of a Restricted Stock Unit Award, Other Stock Award or Performance Award, to the holder’s receipt of the shares of Common Stock subject to such award or of payment with respect to such award. One or more of the following business criteria for the Company, on a consolidated basis, and/or for specified subsidiaries, business or geographical units or operating areas of the Company (except with respect to the total shareholder return and earnings per share criteria) or individual basis, may be used by the Committee in establishing Performance Measures under this Plan: the attainment by a share of Common Stock of a specified Fair Market Value for a specified period of time; increase in stockholder value; earnings per share; return on or net assets; return on equity; return on investments; return on capital or invested capital; total stockholder return; earnings or income of the Company before or after taxes and/or interest; earnings before interest, taxes, depreciation and amortization (“EBITDA”); EBITDA margin; operating income; revenues; operating expenses, attainment of expense levels or cost reduction goals; market share; cash flow, cash flow per share, cash flow margin or free cash flow; interest expense; economic value created; gross profit or margin; operating profit or margin; net cash provided by operations; price-to-earnings growth; and strategic business criteria, consisting of one or more objectives based on meeting specified goals relating to market penetration, customer acquisition, business expansion, cost targets, customer satisfaction, reductions in errors and omissions, reductions in lost business, management of employment practices and employee benefits, supervision of litigation, supervision of information technology, quality and quality audit scores, efficiency, and acquisitions or divestitures, or such other goals as the Committee may determine whether or not listed herein. Each such goal may be determined on a pre-tax or post-tax basis or on an absolute or relative basis, and may include comparisons based on current internal targets, the past performance of the Company (including the performance of one or more subsidiaries, divisions, or operating units) or the past or current performance of other companies or market indices (or a combination of such past and current performance). In addition to the ratios specifically enumerated above, performance goals may include comparisons relating to capital (including, but not limited to, the cost of capital), shareholders’ equity, shares outstanding, assets or net assets, sales, or any combination thereof. In establishing a Performance Measure or determining the achievement of a Performance Measure, the Committee may provide that achievement of the applicable Performance Measures may be amended or adjusted to include or exclude components of any Performance Measure, including, without limitation, foreign exchange gains and losses, asset write-downs, acquisitions and divestitures, change in fiscal year, unbudgeted capital expenditures, special charges such as restructuring or impairment charges, debt refinancing costs, extraordinary or noncash items, unusual, infrequently occurring, nonrecurring or one-time events affecting the Company or its financial statements or changes in law or accounting principles. Performance Measures shall be subject to such other special rules and conditions as the Committee may establish at any time.
“Performance Period” shall mean any period designated by the Committee during which (i) the Performance Measures applicable to an award shall be measured and (ii) the conditions to vesting applicable to an award shall remain in effect.





“Prior Plan” shall mean the Comtech Telecommunications Corp. 2000 Stock Incentive Plan, as amended and restated effective as of December 15, 2022, and each other equity plan maintained by the Company under which awards are outstanding as of the effective date of this Plan.
“Restricted Stock” shall mean shares of Common Stock which are subject to a Restriction Period and which may, in addition thereto, be subject to the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Award” shall mean an award of Restricted Stock under this Plan.
“Restricted Stock Unit” shall mean a right to receive one share of Common Stock or, in lieu thereof and to the extent set forth in the applicable Agreement, the Fair Market Value of such share of Common Stock in cash, which shall be contingent upon the expiration of a specified Restriction Period and which may, in addition thereto, be contingent upon the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Unit Award” shall mean an award of Restricted Stock Units under this Plan.
“Restriction Period” shall mean any period designated by the Committee during which (i) the Common Stock subject to a Restricted Stock Award may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating to such award, or (ii) the conditions to vesting applicable to a Restricted Stock Unit Award or Other Stock Award shall remain in effect.
“SAR” shall mean a stock appreciation right which may be a Free-Standing SAR or a Tandem SAR.
“Stock Award” shall mean a Restricted Stock Award, Restricted Stock Unit Award or Other Stock Award.
“Subsidiary” shall mean any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.
“Substitute Award” shall mean an award granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, including a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an option or SAR.
“Tandem SAR” shall mean an SAR which is granted in tandem with, or by reference to, an option (including a Nonqualified Stock Option granted prior to the date of grant of the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion of such option, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Common Stock subject to such option, or portion thereof, which is surrendered.
“Tax Date” shall have the meaning set forth in Section 5.5.
“Ten Percent Holder” shall have the meaning set forth in Section 2.1(a).
1.3    Administration. This Plan shall be administered by the Committee. Any one or a combination of the following awards may be made under this Plan to eligible persons: (i) options to purchase shares of Common Stock in the form of Incentive Stock Options or Nonqualified Stock Options; (ii) SARs in the form of Tandem SARs or Free-Standing SARs; (iii) Stock Awards in the form of Restricted Stock, Restricted Stock Units or Other Stock Awards; and (iv) Performance Awards. The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan and determine the form, amount and timing of each award to such persons and, if applicable, the number of shares of Common Stock subject to an award, the number of SARs, the number of Restricted Stock Units, the dollar value subject to a Performance Award, the purchase price or base price associated with the award, the time and conditions of exercise or settlement of the award and all other terms and conditions of the award, including, without limitation, the form of the Agreement evidencing the award. The Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding options and SARs shall become exercisable in part or in full, (ii) all or a portion of the Restriction Period applicable to any outstanding awards shall lapse, (iii) all or a portion of the Performance Period





applicable to any outstanding awards shall lapse and (iv) the Performance Measures (if any) applicable to any outstanding awards shall be deemed to be satisfied at the target, maximum or any other level. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and may impose, incidental to the grant of an award, conditions with respect to the award, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority hereunder to the Board (or any members thereof) or, subject to applicable law, to a subcommittee of the Board, a member of the Board, the Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority to a member of the Board, the Chief Executive Officer or other executive officer of the Company with regard to the selection for participation in this Plan of an officer, director or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award to such an officer, director or other person.
No member of the Board or Committee, and neither the Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board and the Committee and the Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation, as amended, and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.
1.4    Eligibility. Participants in this Plan shall consist of such officers, other employees, Non-Employee Directors, consultants, independent contractors, agents, and persons expected to become officers, other employees, Non-Employee Directors, consultants, independent contractors and agents of the Company and its Affiliates as the Committee in its sole discretion may select from time to time. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Except as otherwise provided for in an Agreement, for purposes of this Plan, references to employment by the Company shall also mean employment by an Affiliate, and references to employment shall include service as a Non-Employee Director, consultant, independent contractor or agent. The Committee shall determine, in its sole discretion, the extent to which a participant shall be considered employed during an approved leave of absence. The aggregate value of cash compensation and the grant date fair value of shares of Common Stock that may be awarded or granted during any fiscal year of the Company to any Non-Employee Director shall not exceed $500,000; provided, however, that this limit shall not apply to distributions of previously deferred compensation under a deferred compensation plan maintained by the Company or compensation received by the director in his or her capacity as an executive officer or employee of the Company.
1.5    Shares Available. Subject to adjustment as provided in Section 5.7 and to all other limits set forth in this Plan, the number of shares of Common Stock that shall be available for all awards under this Plan, other than Substitute Awards, shall equal the sum of (i) 3,795,000 shares of Common Stock and (ii) the number of shares of Common Stock available under the Comtech Telecommunications Corp. 2000 Stock Incentive Plan, as amended and restated effective as of December 15, 2022, as of the effective date of the Plan. Subject to adjustment as provided in Section 5.7, no more than 1,600,000 shares of Common Stock in the aggregate may be issued under the Plan in connection with Incentive Stock Options. The number of shares of Common Stock that remain available for future grants under the Plan shall be reduced by the sum of the aggregate number of shares of Common Stock which become subject to outstanding options, outstanding Free-Standing SARs, outstanding Stock Awards and outstanding Performance Awards denominated in shares of Common Stock, other than Substitute Awards.
To the extent that shares of Common Stock subject to an outstanding option, SAR, Stock Award or Performance Award granted under the Plan or a Prior Plan, other than Substitute Awards, are not issued or delivered by reason of (i) the expiration, termination, cancellation or forfeiture of such award (excluding shares subject to an option cancelled upon settlement in shares of a related Tandem SAR or shares subject to a Tandem SAR cancelled upon exercise of a related option) or (ii) the settlement of such award in cash, then such shares of Common Stock shall again be available under this Plan; provided, however, that shares of Common Stock subject to an award under this Plan or a Prior Plan shall not again be available for issuance under this Plan if such shares are (x) shares that were subject to an option or stock-settled SAR and were not issued or delivered upon the net settlement or net exercise of such option or SAR, (y) shares delivered to or withheld by the Company to pay the purchase price or the withholding taxes related to an outstanding award or (z) shares repurchased by the Company on the open market with the proceeds of an option exercise.





    The number of shares of Common Stock available for awards under this Plan shall not be reduced by (i) the number of shares of Common Stock subject to Substitute Awards or (ii) available shares under a stockholder approved plan of a company or other entity which was a party to a corporate transaction with the Company (as appropriately adjusted to reflect such corporate transaction) which become subject to awards granted under this Plan (subject to applicable stock exchange requirements).
Shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof.
1.6     Minimum Vesting Requirements. Notwithstanding any other provision of the Plan to the contrary, awards granted under the Plan (other than cash-based awards) shall vest no earlier than the first anniversary of the date on which the award is granted; provided, that the following awards shall not be subject to the foregoing minimum vesting requirement: any (i) Substitute Awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its Subsidiaries, (ii) Shares delivered in lieu of fully vested cash obligations, (iii) Awards to Non-Employee Directors that vest on earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) any additional awards the Committee may grant, up to a maximum of five percent (5%) of the available share reserve authorized for issuance under the Plan pursuant to Section 1.5 (subject to adjustment under Section 5.7); and, provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any award, including in cases of retirement, death, disability or a Change in Control, in the terms of the Award Agreement or otherwise.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1    Stock Options. The Committee may, in its discretion, grant options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. Each option, or portion thereof, that is not an Incentive Stock Option, shall be a Nonqualified Stock Option. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which options designated as Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary) exceeds the amount (currently $100,000) established by the Code, such options shall constitute Nonqualified Stock Options.
Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a)    Number of Shares and Purchase Price. The number of shares of Common Stock subject to an option and the purchase price per share of Common Stock purchasable upon exercise of the option shall be determined by the Committee; provided, however, that the purchase price per share of Common Stock purchasable upon exercise of an option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such option; provided further, that if an Incentive Stock Option shall be granted to any person who, at the time such option is granted, owns capital stock possessing more than 10 percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary) (a “Ten Percent Holder”), the purchase price per share of Common Stock shall not be less than the price (currently 110% of Fair Market Value) required by the Code in order to constitute an Incentive Stock Option.
    Notwithstanding the foregoing, in the case of an option that is a Substitute Award, the purchase price per share of the shares subject to such option may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate purchase price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate purchase price of such shares.
(b) Option Period and Exercisability. The period during which an option may be exercised shall be determined by the Committee; provided, however, that no option shall be exercised later than ten years after its date of grant; provided further, that if an Incentive Stock Option shall be granted to a Ten Percent Holder, such option shall not be exercised later than five years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an option or to the exercisability of all or a portion of an option. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. An exercisable option, or portion thereof, may be exercised only with respect to whole shares of Common Stock.





(c)    Method of Exercise. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash, (B) by delivery (either actual delivery or by attestation procedures established by the Company) of shares of Common Stock having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the date of exercise, equal to the amount necessary to satisfy such obligation, (D) in cash by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise, (E) any other method designated by the Committee or (F) a combination of the foregoing, in each case to the extent set forth in the Agreement relating to the option, (ii) if applicable, by surrendering to the Company any Tandem SARs which are cancelled by reason of the exercise of the option and (iii) by executing such documents as the Company may reasonably request. Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the participant. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until the full purchase price therefor and any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).

2.2    Stock Appreciation Rights. The Committee may, in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a)    Number of SARs and Base Price. The number of SARs subject to an award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted at the same time that such Incentive Stock Option is granted. The base price of a Tandem SAR shall be the purchase price per share of Common Stock of the related option. The base price of a Free-Standing SAR shall be determined by the Committee; provided, however, that such base price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such SAR (or, if earlier, the date of grant of the option for which the SAR is exchanged or substituted).
Notwithstanding the foregoing, in the case of an SAR that is a Substitute Award, the base price per share of the shares subject to such SAR may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate base price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate base price of such shares.
(b)    Exercise Period and Exercisability. The period for the exercise of an SAR shall be determined by the Committee; provided, however, that (i) no Tandem SAR shall be exercised later than the expiration, cancellation, forfeiture or other termination of the related option and (ii) no Free-Standing SAR shall be exercised later than ten years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an SAR or to the exercisability of all or a portion of an SAR. The Committee shall determine whether an SAR may be exercised in cumulative or non-cumulative installments and in part or in full at any time. An exercisable SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole shares of Common Stock and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR is exercised for shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c), or such shares shall be transferred to the holder in book entry form with restrictions on the shares duly noted, and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section 3.2(d). Prior to the exercise of a stock-settled SAR, the holder of such SAR shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such SAR.





(c)    Method of Exercise. A Tandem SAR may be exercised (i) by giving written notice to the Company specifying the number of whole SARs which are being exercised, (ii) by surrendering to the Company any options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents as the Company may reasonably request. A Free-Standing SAR may be exercised (A) by giving written notice to the Company specifying the whole number of SARs which are being exercised and (B) by executing such documents as the Company may reasonably request. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
2.3    Termination of Employment or Service. All of the terms relating to the exercise, cancellation or other disposition of an option or SAR (i) upon a termination of employment with or service to the Company of the holder of such option or SAR, as the case may be, whether by reason of disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
2.4    No Repricing. The Committee shall not, without the approval of the stockholders of the Company, (i) reduce the purchase price or base price of any previously granted option or SAR, (ii) cancel any previously granted option or SAR in exchange for another option or SAR with a lower purchase price or base price or (iii) cancel any previously granted option or SAR in exchange for cash or another award if the purchase price of such option or the base price of such SAR exceeds the Fair Market Value of a share of Common Stock on the date of such cancellation, in each case, other than in connection with a Change in Control or the adjustment provisions set forth in Section 5.7.
2.5    No Dividend Equivalents.    Notwithstanding anything in an Agreement to the contrary, the holder of an option or SAR shall not be entitled to receive dividend equivalents with respect to the number of shares of Common Stock subject to such option or SAR.
III. STOCK AWARDS
3.1    Stock Awards. The Committee may, in its discretion, grant Stock Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Stock Award shall specify whether the Stock Award is a Restricted Stock Award, a Restricted Stock Unit Award or, in the case of an Other Stock Award, the type of award being granted.
3.2    Terms of Restricted Stock Awards. Restricted Stock Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a)    Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Award shall be determined by the Committee.
(b)    Vesting and Forfeiture. The Agreement relating to a Restricted Stock Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of the shares of Common Stock subject to such award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period or (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c)    Stock Issuance. During the Restriction Period, the shares of Restricted Stock shall be held by a custodian in book entry form with restrictions on such shares duly noted or, alternatively, a certificate or certificates representing a Restricted Stock Award shall be registered in the holder’s name and may bear a legend, in addition to any legend which may be required pursuant to Section 5.6, indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to the Restricted Stock Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate, which would permit transfer to the Company of all or a portion of the shares of Common Stock subject to the Restricted Stock Award in the event such award is forfeited in whole or in part. Upon termination of any applicable Restriction Period (and the satisfaction or attainment of applicable Performance Measures), subject to the Company’s right to require payment of any taxes in accordance with Section 5.5, the restrictions shall be





removed from the requisite number of any shares of Common Stock that are held in book entry form, and all certificates evidencing ownership of the requisite number of shares of Common Stock shall be delivered to the holder of such award.
d)    Rights with Respect to Restricted Stock Awards. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, and subject to the terms and conditions of a Restricted Stock Award, the holder of such award shall have all rights as a stockholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that (i) a distribution or dividend with respect to shares of Common Stock, including a regular cash dividend, shall be deposited with the Company and shall be subject to the same restrictions as the shares of Common Stock with respect to which such distribution was made.

3.3    Terms of Restricted Stock Unit Awards. Restricted Stock Unit Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a)    Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Unit Award, including the number of shares that are earned upon the attainment of any specified Performance Measures, and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Unit Award shall be determined by the Committee.
(b)    Vesting and Forfeiture. The Agreement relating to a Restricted Stock Unit Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Restricted Stock Unit Award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period or (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c)    Settlement of Vested Restricted Stock Unit Awards. The Agreement relating to a Restricted Stock Unit Award shall specify (i) whether such award may be settled in shares of Common Stock or cash or a combination thereof and (ii) whether the holder thereof shall be entitled to receive, on a current or deferred basis, dividend equivalents, and, if determined by the Committee, interest on, or the deemed reinvestment of, any deferred dividend equivalents, with respect to the number of shares of Common Stock subject to such award. Any dividend equivalents with respect to Restricted Stock Units that are subject to vesting conditions shall be subject to the same vesting conditions as the underlying awards. Prior to the settlement of a Restricted Stock Unit Award, the holder of such award shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such award.
3.4    Other Stock Awards.  Subject to the limitations set forth in the Plan, the Committee is authorized to grant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, including without limitation shares of Common Stock granted as a bonus and not subject to any vesting conditions, dividend equivalents, deferred stock units, stock purchase rights and shares of Common Stock issued in lieu of obligations of the Company to pay cash under any compensatory plan or arrangement, subject to such terms as shall be determined by the Committee. The Committee shall determine the terms and conditions of such awards, which may include the right to elective deferral thereof, subject to such terms and conditions as the Committee may specify in its discretion. Any distribution, dividend or dividend equivalents with respect to Other Stock Awards that are subject to vesting conditions shall be subject to the same vesting conditions as the underlying awards.
3.5    Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Restriction Period or Performance Period relating to a Stock Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
IV. PERFORMANCE AWARDS





4.1    Performance Awards. The Committee may, in its discretion, grant Performance Awards, including cash incentive awards, to such eligible persons as may be selected by the Committee.
4.2    Terms of Performance Awards. Performance Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a)    Value of Performance Awards and Performance Measures. The method of determining the value of the Performance Award and the Performance Measures and Performance Period applicable to a Performance Award shall be determined by the Committee. Performance Awards which are settled in cash and are granted with a Performance Period of one year shall be designated as “Annual Incentive Awards.” Performance Awards which are settled in cash must also be subject to at least one Performance Measure.
(b)    Vesting and Forfeiture. The Agreement relating to a Performance Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Performance Award if the specified Performance Measures are satisfied or met during the specified Performance Period and for the forfeiture of such award if the specified Performance Measures are not satisfied or met during the specified Performance Period.
(c)    Settlement of Vested Performance Awards. The Agreement relating to a Performance Award shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash or a combination thereof. If a Performance Award is settled in shares of Restricted Stock, such shares of Restricted Stock shall be issued to the holder in book entry form or a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c) and the holder of such Restricted Stock shall have such rights as a stockholder of the Company as determined pursuant to Section 3.2(d). Any dividends or dividend equivalents with respect to a Performance Award shall be subject to the same restrictions as such Performance Award. Prior to the settlement of a Performance Award in shares of Common Stock, including Restricted Stock, the holder of such award shall have no rights as a stockholder of the Company.
4.3    Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Performance Period relating to a Performance Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
V. GENERAL
5.1    Effective Date and Term of Plan. This Plan shall be submitted to the stockholders of the Company for approval at the Company’s 2024 annual meeting of stockholders and, if approved by the Company’s stockholders, shall become effective as of the date on which the Plan was approved by stockholders. This Plan shall terminate as of the first annual meeting of the Company’s stockholders to occur on or after the tenth anniversary of its effective date, unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination.
Awards hereunder may be made at any time prior to the termination of this Plan, provided that no Incentive Stock Option may be granted later than ten years after the date on which the Plan was approved by the Board. In the event that this Plan is not approved by the stockholders of the Company, this Plan and any awards hereunder shall be void and of no force or effect.
5.2    Amendments. The Board may amend this Plan as it shall deem advisable; provided, however, that no amendment to the Plan shall be effective without the approval of the Company’s stockholders if (i) stockholder approval is required by applicable law, rule or regulation, including any rule of the Nasdaq Stock Market, or any other stock exchange on which the Common Stock is then traded, or (ii) such amendment seeks to modify the Non-Employee Director compensation limit set forth in Section 1.3 or the prohibition on repricing set forth in Section 2.4 hereof; provided further, that no amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder.
5.3    Agreement. Each award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an Agreement is issued by the Company and, to the extent required by the Company, executed or electronically accepted by the recipient of such award. Upon such execution or acceptance and delivery of the Agreement to the Company within the time period specified by the Company, such award shall be effective as of the effective date set forth in the Agreement.





5.4    Non-Transferability.
(a)    No award shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company. Except to the extent permitted by this Section 5.4 or the Agreement relating to an award, each award may be exercised or settled during the holder’s lifetime only by the holder or the holder’s legal representative or similar person. Except as permitted by this Section 5.4, no award may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any award, such award and all rights thereunder shall immediately become null and void.
(b)    Notwithstanding the foregoing, the Committee may in its sole discretion permit awards (other than Incentive Stock Options) to be transferred by the holder, without consideration, subject to such rules as the Committee may adopt, to (i) any person who is a Family Member of the holder; (ii) a trust solely for the benefit of the holder or the holder’s Family Members; (iii) a partnership or limited liability company whose only partners or members are the holder and the holder’s Family Members and where such persons hold more than 50 percent of the voting interests; or (iv) any other transferee as may be approved either (A) by the Board or the Committee, or (B) as provided in the applicable Agreement (each transferee described in clause (i), (ii), (iii) or (iv) above is hereinafter referred to as a “Permitted Transferee”); provided, that the holder provides the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the holder in writing that such transfer would comply with the requirements of the Plan; and provided, further, an award that is “nonqualified deferred compensation” subject to Section 409A of the Code shall not be transferred more than 30 days prior to the date such award is settled.
(c)    The terms of any award transferred in accordance with Section 5.4(b) shall apply to the Permitted Transferee, and any reference in the Plan or in any applicable Agreement to the “Participant,” “Grantee,” or similar terms shall be deemed to refer to the Permitted Transferee (including, but not limited to, the ability to exercise an award, if applicable), except that (i) no Permitted Transferee shall be entitled to transfer any award, other than by will or the laws of descent and distribution; (ii) neither the Committee nor the Company shall be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the holder under the Plan or otherwise; (iii) the consequences of the termination of the holder under the terms of the Plan and the applicable Agreement shall continue to apply with respect to the transferred award, including, without limitation, that a Stock Option or SAR shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Agreement; and (iv) any non-competition, non-solicitation, non-disparagement, non-disclosure, or other restrictive covenants contained in any Agreement or other agreement between the holder and the Company or any Affiliate shall continue to apply to the holder and the consequences of the violation of such covenants shall continue to be applied with respect to the transferred award, including, without limitation, any forfeiture provisions as may be set forth in the Plan or the applicable Agreement and the terms of any recoupment or clawback policy of the Company as may be in effect from time to time.

5.5    Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an award made hereunder, payment by the holder of such award of any federal, state, local or other taxes which may be required to be withheld or paid in connection with such award. An Agreement may provide that (i) the Company shall withhold whole shares of Common Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the “Tax Date”), or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means: (A) a cash payment to the Company; (B) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole shares of Common Stock having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation; (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, in either case equal to the amount necessary to satisfy any such obligation; (D) in the case of the exercise of an option, a cash payment by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise, (E) any other method designated by the Committee or (F) a combination of the foregoing, in each case to the extent set forth in the Agreement relating to the award. Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate (or, if permitted by the Company, such other rate as will not cause adverse accounting consequences under the accounting rules then in effect, and is permitted under applicable IRS withholding rules). Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder.





5.6    Restrictions on Shares. Each award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.
5.7    Adjustment. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation or any successor or replacement accounting standard) that causes the per share value of shares of Common Stock to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the number and class of securities available under this Plan, the terms of each outstanding option and SAR (including the number and class of securities subject to each outstanding option or SAR and the purchase price or base price per share), the terms of each outstanding Stock Award (including the number and class of securities subject thereto), and the terms of each outstanding Performance Award (including the number and class of securities subject thereto, if applicable), shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and SARs in accordance with Section 409A of the Code. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of participants. In either case, the decision of the Committee regarding any such adjustment shall be final, binding and conclusive.
5.8    Change in Control.
(a)    Assumption or Substitution of Certain Awards. Unless otherwise provided in an Agreement or a participant's effective employment, change in control, severance or other similar agreement in effect on the date of grant of the appliable award, in the event of a Change in Control of the Company in which the successor company assumes or substitutes for the applicable award, if a participant's employment with such successor company (or the Company) or an Affiliate thereof terminates within 24 months following such Change in Control (or such other period set forth in the Agreement, including prior thereto if applicable) without cause or under the circumstances specified in the Agreement: (i) options and SARs outstanding as of the date of such termination of employment will immediately vest, become fully exercisable, and may thereafter be exercised for 36 months (or the period of time set forth in the applicable Agreement, but in no event beyond the end of the regularly scheduled term of such options or SARs) and (ii) the restrictions, limitations and other conditions applicable to Performance Awards or Stock Awards outstanding as of the date of such termination of employment shall lapse and such Awards shall become free of all restrictions, limitations and conditions and become fully vested (with the attainment of the performance goals determined as set forth in the Agreement or as otherwise determined by the Committee). For the purposes of this Section, an award shall be considered assumed or substituted for, if following the Change in Control the award confers the right to purchase or receive, for each share of Common Stock subject to the award immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) received in the transaction constituting a Change in Control by holders of shares of Common Stock for each share of Common Stock held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if such consideration received in the transaction constituting a Change in Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an award, for each share of Common Stock subject thereto, will be solely common stock of the successor company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the transaction constituting a Change in Control. The determination of such substantial equality of value of consideration shall be made by the Committee (as in effect prior to the Change in Control) in its sole discretion and its determination shall be conclusive and binding.





(b)    Awards Not Assumed or Substituted. Subject to the terms of the applicable Agreements, in the event of a “Change in Control” in which the awards are not effectively assumed or substituted in accordance with Section 5.8(a), the Board, as constituted prior to the Change in Control, may, in its discretion:
(1) require that (i) some or all outstanding options and SARs shall become exercisable in full or in part, either immediately or upon a subsequent termination of employment, (ii) the Restriction Period applicable to some or all outstanding Stock Awards shall lapse in full or in part, either immediately or upon a subsequent termination of employment, (iii) the Performance Period applicable to some or all outstanding awards shall lapse in full or in part, and (iv) the Performance Measures applicable to some or all outstanding awards shall be deemed to be satisfied at the target, maximum or any other level;
(2) require that shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control, or a parent corporation thereof, be substituted for some or all of the shares of Common Stock subject to an outstanding award, with an appropriate and equitable adjustment to such award as determined by the Board in accordance with Section 5.7; and/or
(3) require outstanding awards, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (i) a cash payment or other property in an amount equal to (A) in the case of an option or an SAR, the aggregate number of shares of Common Stock then subject to the portion of such option or SAR surrendered, whether or not vested or exercisable, multiplied by the excess, if any, of the Fair Market Value of a share of Common Stock as of the date of the Change in Control, over the purchase price or base price per share of Common Stock subject to such option or SAR, (B) in the case of a Stock Award or a Performance Award denominated in shares of Common Stock, the number of shares of Common Stock then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(i), whether or not vested, multiplied by the Fair Market Value of a share of Common Stock as of the date of the Change in Control, and (C) in the case of a Performance Award denominated in cash, the value of the Performance Award then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(1); (ii) shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (i) above; or (iii) a combination of the payment of cash or other property pursuant to clause (i) above and the issuance of shares pursuant to clause (ii) above.
(c)    For purposes of this Plan, a “Change in Control” shall be deemed to have occurred:
(1) upon any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities;
(2) during any period of two (2) consecutive years (the “Board Measurement Period”), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (1), (3), or (4) of this section) or a director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board; (3) upon a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in (a) above) acquires more than 50% of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control of the Company; or





(4) upon approval by the stockholders of the Company of a plan of complete liquidation of the Company or the consummation of the sale or disposition by the Company of all or substantially all of the Company's assets other than the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least 50% or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale;
provided, that with respect to any nonqualified deferred compensation that becomes payable on account of the Change in Control, the transaction or event described in clause (1), (2), (3) or (4) also constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5) if required in order for the payment not to violate Section 409A of the Code.

5.9    Deferrals. The Committee may determine that the delivery of shares of Common Stock or the payment of cash, or a combination thereof, upon the settlement of all or a portion of any award made hereunder shall be deferred, or the Committee may, in its sole discretion, approve deferral elections made by holders of awards. Deferrals shall be for such periods and upon such terms as the Committee may determine in its sole discretion, subject to the requirements of Section 409A of the Code.
5.10    No Right of Participation, Employment or Service. Unless otherwise set forth in an employment agreement, no person shall have any right to participate in this Plan. Neither this Plan nor any award made hereunder shall confer upon any person any right to continued employment by or service with the Company or any Affiliate or affect in any manner the right of the Company or any Affiliate to terminate the employment or service of any person at any time without liability hereunder.
5.11    Rights as Stockholder. No person shall have any right as a stockholder of the Company with respect to any shares of Common Stock or other equity security of the Company which is subject to an award hereunder unless and until such person becomes a stockholder of record with respect to such shares of Common Stock or equity security.
5.12    Designation of Beneficiary. To the extent permitted by the Company, a holder of an award may file with the Company a written designation of one or more persons as such holder’s beneficiary or beneficiaries (both primary and contingent) in the event of the holder’s death or incapacity. To the extent an outstanding option or SAR granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option or SAR pursuant to procedures prescribed by the Company. Each beneficiary designation shall become effective only when filed in writing with the Company during the holder’s lifetime on a form prescribed by the Company. The spouse of a married holder domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Company of a new beneficiary designation shall cancel all previously filed beneficiary designations. If a holder fails to designate a beneficiary, or if all designated beneficiaries of a holder predecease the holder, then each outstanding award held by such holder, to the extent vested or exercisable, shall be payable to or may be exercised by such holder’s executor, administrator, legal representative or similar person.
5.13    Awards Subject to Clawback. The awards granted under this Plan and any cash payment or shares of Common Stock delivered pursuant to such an award are subject to forfeiture, recovery by the Company or other action pursuant to the applicable award Agreement or any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
5.14    Governing Law. This Plan, each award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.





5.15    Foreign Employees. Without amending this Plan, the Committee may grant awards to eligible persons who are foreign nationals and/or reside outside of the United States on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its Affiliates operates or has employees.
5.16    Detrimental Activity. Unless otherwise determined by the Committee at grant, each Award shall provide that in the event the participant engages in Detrimental Activity prior to, or during the one year period following, the later of the participant’s termination of employment or service or any vesting of the Award, the Committee may direct (at any time within one year thereafter) that all Options and SARs (whether or not vested) and all unvested Awards shall be immediately forfeited to the Company and that the participant shall pay over to the Company an amount equal to the gain realized at the time of exercise or vesting of any Awards that were exercised or vested during such one-year period.
5.17    Protected Rights. Nothing contained in this Plan is intended to limit the participant’s ability to (i) report possible violations of law or regulation to, or file a charge or complaint with, the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Department of Justice, the Congress, any Inspector General, or any other federal, state or local governmental agency or commission (“Government Agencies”), (ii) communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company or (iii) under applicable United States federal law to (A) disclose in confidence trade secrets to federal, state, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law or (B) disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure.
5.18    Severability. The provisions of the Plan shall be deemed severable. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction or any governmental regulatory agency, or impermissible under the rules of any securities exchange on which the Common Stock is listed or by reason of change in a law or regulation, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid by a court of competent jurisdiction, such unlawfulness or invalidity shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or impermissible, then such unlawfulness, invalidity or impermissibility shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid, unenforceable or impermissible, and the maximum payment or benefit that would not be unlawful, invalid or impermissible shall be made or provided under the Plan.
























Appendix A-2

AMENDMENT TO THE COMTECH TELECOMMUNICATIONS CORP. 2023 EQUITY AND INCENTIVE PLAN

WHEREAS, Comtech Telecommunications Corp. (the “Company”) has previously adopted the Comtech Telecommunications Corp. 2023 Equity and Incentive Plan (the “Plan”) which was approved by stockholders effective as of December 14, 2023 at the Company’s Fiscal 2023 Annual Meeting of Stockholders; and

WHEREAS, the Company wishes to amend the Plan to increase the number of shares of common stock of the Company, par value $0.10 per share, available for issuance under the Plan by 2,195,000; and

NOW, THEREFORE, the Plan shall be amended, effective as of the date on which the stockholders approve such amendment at the Company’s Fiscal 2024 Annual Meeting of Stockholders, as follows:

1.The first sentence of Section 1.5 is deleted and replaced with the following:

Subject to adjustment as provided in Section 5.7 and to all other limits set forth in this Plan, the number of shares of Common Stock that shall be available for all awards under this Plan, other than Substitute Awards, shall equal the sum of (i) 3,795,000 shares of Common Stock and (ii) the number of shares of Common Stock available under the Comtech Telecommunications Corp. 2000 Stock Incentive Plan, as amended and restated effective as of December 15, 2022, as of the effective date of the Plan.

2.Except as modified herein, the remaining terms of the Plan shall remain unchanged and in full force and effect.

IN WITNESS WHEREOF, the undersigned officer of the Company, acting pursuant to the authority granted to him by the Board of Directors of the Company, has executed this instrument on this 27 day of November, 2024.


COMTECH TELECOMMUNICATIONS CORP.


By:image_0.jpg
Name: Donald E. Walther
Title: Chief Legal Officer and Corporate Secretary I, Kenneth H. Traub, certify that:
EX-31.1 6 exhibit311fy25q2.htm EX-31.1 Document

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



1.I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c.evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: March 12, 2025
/s/ Kenneth H. Traub
Kenneth H. Traub, Chairman of the Board
President and Chief Executive Officer


EX-31.2 7 exhibit312fy25q2.htm EX-31.2 Document

Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Michael A. Bondi, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c.evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Date: March 12, 2025
/s/ Michael A. Bondi
Michael A. Bondi
Chief Financial Officer


EX-32.1 8 exhibit321fy25q2.htm EX-32.1 Document

Exhibit 32.1



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Comtech Telecommunications Corp. (the “Company”) on Form 10-Q for the period ended January 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth H. Traub, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: March 12, 2025
 
/s/ Kenneth H. Traub
Kenneth H. Traub, Chairman of the Board
President and Chief Executive Officer



EX-32.2 9 exhibit322fy25q2.htm EX-32.2 Document

Exhibit 32.2



CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Comtech Telecommunications Corp. (the “Company”) on Form 10-Q for the period ended January 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Bondi, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



Date: March 12, 2025
 
/s/ Michael A. Bondi
Michael A. Bondi
Chief Financial Officer