CMTL 10-K & 10-Q changes, risk factors and insider trading

•New and ongoing challenges relating to current supply chain constraints and impacts from inflation,constraints, including for satellite ground station and troposcatter components, and impacts from inflation and any new or increased tariffs on imports and other trade restrictions, could adversely impact our revenue, gross margins and financial results.

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

•Ongoing instability and conflicts in global markets, including in the Ukraine and Eastern Europe, Israel, Lebanon,Ukraine, the Gaza StripStrip, Israel, Lebanon and other countries in the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.

Strategic Transformation Plan Risks

•We may fail to realize all of the anticipated benefits of our strategic and operational initiatives, including the strategic alternatives for our Terrestrial and Wireless Networks segment and further portfolio-shaping opportunities, or those benefits may take longer to realize than expected.

•Our transformation strategyplan may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.

•Our current cash and liquidity projections raisemay substantialnot doubt about our ability to continuematerialize as a going concern.anticipated.

•Our efforts to invoice and collect unbilled receivablesaccounts receivable may be unsuccessful.

•Divestitures of portions of our business in the course of pursuingcarrying strategicout alternativesour transformation plan and revisitingreshaping our product portfolio could prove difficult to carve out, disrupt our business, dilute stockholder value or adversely affect operating results or the market price of our common stock.

•Our investments in recorded goodwill and other intangible assets have been impaired and may be further impaired as a result of future business conditions, a deterioration of the global economy or if we change our reporting unit structure asfor weany pursue strategic alternatives.reason.

•All of our business activities are subject to rapid technological change, new entrants, the introduction of other distribution models and long development and testing periodsperiods, each of which may harm our competitive position.

New and ongoing challenges relating to current supply chain constraints and impacts from inflation,constraints, including for satellite ground station and troposcatter components, and impacts from inflation and any new or increased tariffs on imports and other trade restrictions, could adversely impact our revenue, gross margins and financial results.

The effects of inflation and labor challenges have caused, and we expect will continue to cause further delays in the supply chain. Despite our attempts to mitigate the impact on our business, constrained supply chain conditions have and are expected to continue to adversely impact our costs of goods sold and may impact the timing and amount of revenue we realize. DuringIn fiscalour 2024,recent past, we experienced disruptions in our supply chain relating to later-than-expected delivery of certain key components from several suppliers that adversely impacted our revenue in fiscal 2024.revenues. In addition, the ongoing supply chain issues have affected the quality of the components we receive.receive, Certain parts receivedwhich in fiscalsome 2024cases didcaused such components to not meet our quality specifications and we were unable to use them.specifications.

We obtain certain components and subsystems from a single source or a limited number of sources. Some of our single source suppliers, particularly those that provide satellite ground station and troposcatter components, have in the past reported to us that they are having disruptions in their respective supply chains. These single source components, which include items such as RF filters and custom fiber connectors are in limited supply with very long lead times. In some cases, we have now depleted our stock inventory and we are on waiting lists to obtain additional components. In order to ship certain items duringin fiscalthe 2024,future, we must obtain additional components to produce certain finished goods. We continue to seek new suppliers and inventory elsewhere. In light of current challenges in the supply chain, we may not be able to qualify alternate suppliers for our components.components timely, or at all.

Heading into our fiscal 2025,2026, we have a significant portion of our targetedanticipated revenues in ourfunded backlog. However, if shipments from our backlog are delayeddelayed, we are unable to perform as expected on orders accounted for over time, or we are unable to obtain expected orders or components, we may not achieve our business outlookoutlook. will prove to be inaccurate. TheseThe aforementioned supply chain constraints, and their related challenges could result inin, among other things, future shortages, increased material costs or use of cash, engineering design changes, late delivery penalties and delays in new product introductions, each of which could adversely impact our revenue, gross margins and financial results. There can be no assurance that the impacts of any or all the aforementioned conditions will not continue, or worsen, in the future.

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

Many of the end-markets for our products and services may be significantly impacted forby other issues that result in adverse global economic conditions. For example, many of our international end-customers are in emerging and developing countries that are subject to sweeping economic and political changes. Many governments around the world are under pressure to reduce their spending. From time to time, global oil and natural gas prices have been volatile and have significantly impaired the ability of certain of our government customers in the oil and gas producing regions of the world to invest in telecommunications products and infrastructure. Additionally, from time to time, the relative strength of the U.S. dollar against many international currencies has negatively impacted the purchasing power for many of our international end-customers because most of our sales are denominated in U.S. dollars. We generate significant sales from many emerging and developing countries and any such reduced purchasing power of our customers could adversely impact our sales and backlog.

If credit in financial markets outside of the U.S. remains difficult to obtain, our international customers and suppliers may find it difficult to obtain financing, which could result in a decrease inin, or cancellation ofof, orders for our products and increased transaction costs (e.g., insurance, performance bonds). Volatility of financing conditions may cause our customers to be reluctant to spend funds required to purchase our solutions and could cause their projects to be postponed or canceled. In addition, if an adverse economic environment and lack of financing results in insolvencies for our customers, it would adversely impact the recoverability of our accounts receivable and/or inventories which would, in turn, adversely impact our results of operations.

We design and manufacture our over-the-horizon microwave equipment and systems in Florida, where major hurricanes have occurred in the past, and amplifiers in Santa Clara, California, an area close to major earthquake fault lines. Additionally, certain of our Terrestrial and Wireless NetworksAllerium segment activities are conducted in Washington State near a fault line. We maintain operations in Maryland near a U.S. Navy facility which may be more prone to a terrorist attack. Our operations in these and other locations (such as in our high-volume technology manufacturing center located in Arizona), could be subject to natural disasters or other significant disruptions, including hurricanes, tornadoes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, acts of terrorism, power shortages and blackouts, telecommunications failures, and other natural and man-made disasters or disruptions.

We cannot be sure that our systems will operate appropriately if we experience hardware or software failure,failures, intentional disruptions of service by third parties, an act of God or an act of war. A failure in our systems could cause delays in transmitting data, and as a result we may lose customers or face litigation that could involve material costs and distract management from operating our business.

Ongoing instability and conflicts in global markets, including in Ukraine, the UkraineGaza and Eastern Europe,Strip, Israel, Lebanon, theand Gazaother Stripcountries andin the Middle East and Asia, and the attending possibility of economic sanctions, have created and may continue to create economic and political disruption that could adversely impact our revenue, gross margins and financial results.

The military conflict between Russia and Ukraine has impacted our sales pipeline and continues to have repercussions for our business. Although sales into Russia represented approximately 1% of our consolidated net sales in fiscal 2024 and 2023, consolidated net sales into Russia in fiscal 2025 and beyond had been expected to grow. As a result of the economic sanctions against Russia, however, we have stopped accepting new orders in Russia and initiated a windwound down ofour Russian operations in fiscal 2024. We intend to repatriate proceeds from former operations in Russia as permitted by law; however, our ability to do so may be negatively impacted by continuing sanctions against Russia, as well as by the laws within Russia.

As a result of this conflict, from time to time oversince theFebruary past two years,2023, we believe that certain customers (including the U.S. government, Ukraine and neighboring countries) paused procurement and deployment of satellite and troposcatter communication systems, and instead began purchasing war-fighting equipment. Accordingly, it has become difficult to predict the timing or dollar amount of our contract awards in the region. Additionally, funding for opportunities with other customers that we expected to book and ship has also been shifted to other programs and/or temporarily delayed as a result of changes in defense spending priorities.

Our sales to government customers are highly dependent on the U.S. defense budget, which in turn is driven by an annual appropriation by Congress. These appropriations rarely align with the performance period of our contracts—; for instance, most of our government contracts are only partially funded at inception. DoD budgets are driven by factors that are outside our control (such as economic conditions, administration policy shifts within the Executive branch and geopolitical events). Any one or combination of these factors may adversely impact our operations, resulting in a decline of sales and operating income.

Strategic Transformation Plan Risks

We may fail to realize all of the anticipated benefits of our strategic and operational initiatives, including the strategic alternatives for our Terrestrial and Wireless Networks segment and further portfolio-shaping opportunities, or those benefits may take longer to realize than expected.

On October 17, 2024, we announced that weWe are executingcontinuing to execute a strategyplan to transform Comtech intothrough athe pure-playexploration satelliteof strategic alternatives for our various businesses and spaceproduct communicationslines, company.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. There can be no assurance that the explorationany of strategicthese alternativesinitiatives will result in a transactionoutcomes on terms acceptable to us or otherat strategic changes or outcomes.all. Even if a transaction or seriesany of transactionsthese initiatives were completed, there can be no assurance as to the timing of completing these activities. Moreover, we may not realize any or all of the anticipated benefits from our pursuit of strategicthese alternatives for our Terrestrial and Wireless Networks segment, or the anticipated benefits from further portfolio-shaping opportunities,initiatives, and related transactions could in fact adversely affect our business. Our ability to realize the anticipated benefits of our transformation strategy and further portfolio-shaping opportunitiesplan will depend, to a large extent, on our ability to continue to focus on satellite and space communicationson, and to achieveachieve, more predictable growth inrelated theto absenceour ofremaining any divested businesses, including the Terrestrial and Wireless Networks segment.business. Some of the anticipated benefits may not occur for a significant period of time. In addition, we may retain certain liabilities or obligations related to ourany Terrestrial and Wireless Networks segment or otherdisposed businesses that may arise under contract or law, or may have difficulties enforcing our rights, contractual or otherwise, against the buyer. The focusoutcome onof becomingthese a pure-play satellite and space communications companyinitiatives and the related transactions may not enhance long-term stockholder value as anticipated. Further, our strategictransformation transformationplan could result in near termnear-term restructuring charges and a material impairment of our goodwill and/or intangible assets, among other things.

Many of these factors will be outside of our control and any one of them could result in increased costs, including restructuring charges, decreases in the amount of expected revenues and diversion of management’s time and energy,attention, which could adversely affect our business, financial condition and results of operations. In addition, the process of such strategictransformation transformations,plan, including divesting assets, carries an inherent risk of market fluctuations and economic uncertainties that could undermine the value we expect to realize.

Our transformation strategyplan may require a substantial portion of the time and attention of our management team, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.

Our management team has spent, and continues to spend, a significant amount of time and effort focusing on our transformation strategy.plan. This diversion of attention may have an adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the time it takes to complete our transformation strategyplan is protracted. During the pendency of the transformation strategy,plan, our employees may face considerable distraction and uncertaintyuncertainty, and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a materially adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations. Likewise, we could experience losses of customers who may be concerned about our ongoing long-term viability.

Our current cash and liquidity projections raisemay substantialnot doubt about our ability to continuematerialize as a going concern.anticipated.

•improvingImproved processoperating disciplines to attain and maintain profitable operationsprofitability by entering intointo, moreor favorablerenegotiating, sales or service contracts with more favorable pricing and payment terms;

We are a leading global provider of next-generationsatellite and space communications technologies, terrestrial and wireless network solutions, Next Generation 911 emergency systems ("NG-911") and secureemergency wirelessservices and satellitecloud communicationsnative technologies.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. WeOver the long-term, we anticipate future growth in our businessend 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.

•Satellite and Space Communications - is organized into four technology areas: satellite modem and amplifier technologies, troposcatter technologies, cybersecurity training (formerly, known as government services) and space components. This segment offers customers: satellite ground infrastructure technologies, services and system integration that facilitate the transmission of voice, video and data over GEO, MEO and LEO satellite constellations, including traveling wave tube power amplifiers, satellite modems, VSAT platforms and frequency converters; over-the-horizon microwave solutions that can transmit digitized voice, video, and data over distances up to 200 miles using the troposphere and diffraction; professionaladvanced engineering,cybersecurity training and fieldin support services, including cybersecurity, for multipleof U.S. government agenciesand certain commercial and university customers; and procurement and supply chain management of high reliability Electrical, Electronic and Electromechanical ("EEE") parts for satellite, launch vehicle and manned space applications.

•Allerium (formerly, 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: SMS text to 911 services, providing alternate paths for individuals who need to request assistance (via text messaging) a method to reach Public Safety Answering Points ("PSAPs")services; 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.

Quarterly and period-to-period sales and operating results may be significantly affected byby, eitheramong other things, short-term or long-term contracts with our customers.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, includingincluding, 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 ourOur contracts with the U.S. government (or prime contractors to the U.S. government) can be terminated for convenience by it at any time and orders are subject to unpredictable funding, deployment and technology decisions by theour U.S. government.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.

Please see the "StrategicTransformation TransformationPlan" section discussed above, as well as disclosures in Item 1A – “Risk Factors” under Part I of this Form 10-K for more information about risks pertaining to our business and those factors that can influence our future results.

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 "Notes to Consolidated Financial Statements - Note (1)(d) - Revenue Recognition" included in "Part II - Item 8. Financial Statements and Supplementary Data,"Data (which discussion is incorporated herein by reference), and "Part II - Item 9A. Controls and Procedures," included in this Form 10-K, for further information.

Impairment of GoodwillLong-Lived andAssets, OtherIncluding Intangible Assets.Goodwill. As of July 31, 2024,2025, total goodwill recorded on our Consolidated Balance Sheet aggregated $284.2$204.6 million (of which $110.1$30.5 million relates to our Satellite and Space Communications segment and $174.1 million relates to our Terrestrial and Wireless NetworksAllerium segment). Additionally, as of July 31, 2024,2025, net intangibles recorded on our Consolidated Balance Sheet aggregated $194.8$173.1 million (of which $48.4$41.2 million relates to our Satellite and Space Communications segment and $146.4$131.9 million relates to our Terrestrial and Wireless NetworksAllerium segment). For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values. See Notes to Consolidated Financial Statements - Note (15) - Long-lived Assets, including Goodwill and Note (16) - Intangible Assets included in Part II - Item 8. Financial Statements and Supplementary Data (which discussion is incorporated herein by reference), included in this Form 10-K, for further information. Ongoing and future actions supporting our transformation strategy could result in a material impairment of our goodwill and/or intangible assets.

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 in our GAAP results 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 20212022 through 20232025 are subject to potential future Internal Revenue Service ("IRS") audit. None of our state and foreign income tax returns prior to fiscal 20202021 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, costs capitalized related to internallysoftware developed softwarefor the purpose of selling to bethird soldparties werewas not material, but could increase in the future.

WeAs capitalizeit certain costs relatedrelates to software developed for the purpose of internal-use software (e.g., hosted "SaaS" applications within our Terrestrial and Wireless NetworksAllerium segment), costs capitalized primarily consistingconsist 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. Once the software is placed in service, these costs are amortized on the straight-line method over the estimated useful life of the software. During fiscal 2025 and 2024, internal-use software costs capitalized were $3.9 million and $3.8 million.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. See "Notes to Consolidated Financial Statements - Note (1)(f) - Inventories" included in "Part II - Item 8. Financial Statements and Supplementary Data,"Data (which discussion is incorporated herein by reference), and "Part II - Item 9A. Controls and Procedures," included in this Form 10-K, for further information.information (including a discussion of provisions recorded in our first quarter of fiscal 2025 associated with certain discontinued products and operations within our Satellite and Space Communications segment).

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, in fiscal 2024, we experiencedcan afrom time to time experience significant increaseincreases in the overall level of contract assets (i.e., unbilled receivables) related to large, long-term contracts with certain U.S. governmentgovernment, domestic and international customers. We continue tocontinuously monitor our accounts receivable credit portfolio. To-date, there has been no material changes in our credit portfolio as a result of the challenging business conditions.

AlthoughExcept as discussed in Notes to Consolidated Financial Statements - Note (4) - Accounts Receivable included in Part II - Item 8. Financial Statements and Supplementary Data (which discussion is incorporated herein by reference), included in this Form 10-K, our overall credit losses have historically been within the allowances we established,established. However, we may not be able to accurately predict our future credit loss experience, given the current poor business environment.experience. 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.

For a definition and explanation of Adjusted EBITDA, see "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 20242025 and 20232024 - Adjusted EBITDA."

Fiscal 20242025 HighlightsResults and Business Outlook for Fiscal 2025

•Revenue visibility of approximately $1.8 billion as of July 31, 2024, an increase from the $1.1 billion as of July 31, 2023.2025. We measure this revenue visibility as the sum of our $798.9$672.1 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

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 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Comparison of Fiscal 20242025 and 2023."2024.

Other Key Business Developments and Updates

In Septemberfiscal 2023,2024, we won a highly competitive $48.6 million contract to deliver next-generation Enterprise Digital Intermediate Frequency Multi-Carrier (“EDIM”) modems for the U.S. Army's satellite communications ("SATCOM") digitization and modernization programs. The advanced, software defined EDIM modem is intended to: support multiple satellite providers; become one of the primary modems used for U.S. military SATCOM, eventually replacing the Enhanced Bandwidth Efficient Modem ("EBEM"); and provide the U.S. Army, Navy and Air Force with a digitized, hybrid satellite network architecture. The EDIM modem would allow SATCOM users to easily roam across orbital regimes, blend capabilities from traditionally disparate networks and maintain assured, resilient connectivity in the most demanding of environments. We are progressing with our efforts on this contract and pleased to have recently secured incremental funding from the customer for additional work.work, as well as funding for initial production quantities to be delivered following the completion of final acceptance testing, currently anticipated in fiscal 2026.

ThereExcept as set forth below, 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, 2025, as filed with the SEC on November 10, 2025, which is hereby incorporated by reference.

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, or the negative of those words and expressions, as well as statements in future tense. Forward-looking statements include, among others, statements regarding ourthe expectationsexpected forcompletion of, the anticipated benefits of, and our strategicplans, alternativesstrategies process,and objectives relating to, the pending transaction with Gilat Satellite Networks Ltd, including the time frame in which such proposed transaction will occur, our expectations for further portfolio-shaping opportunities, our expectations for other operational initiatives, our expectations for completing further financing initiatives, our future performance and financial condition, 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. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved. Forward-looking information is based on information available at the time and/or our good faith belief with respect to future events, and is subject to risks and uncertainties that are difficult to predict and many of which are outside of our control. Factors that could cause actual results to differ materially from current expectations include, among other things: our ability to consummate the outcometransactions andon effectivenessa timely basis or at all; unexpected costs, liabilities or delays in connection with the proposed transaction; the significant transaction costs associated with the proposed transaction; negative effects of the aforementionedannouncement, strategicpendency alternativesor process,consummation of the transaction on the market price of our common stock or operating results, including as a result of changes in key customer, supplier, employee or other business relationships; the risk of litigation or regulatory actions; our inability to retain and hire key personnel; further portfolio-shaping opportunities, other operational initiatives, and the completion of further financing activities; our ability to access capital and liquidity; our ability to implement changes in our executive leadership; the possibility that the expected 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; the timing and amount of adjustments to gross profits on long-term contracts; risks associated with international sales; rapid technological change; evolving industry standards; new product announcements and enhancements or rebranding; changing customer demands and/or procurement strategies and our ability to scale opportunities and deliver solutions to current and prospective customers; changes and uncertainty in prevailing economic and political conditions (including financial and capital market conditions), including as a result of military conflicts or any tariff, trade restrictions or similar matters; impact of government shutdowns; changes to government procurement practices; 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) sections in our Annual Report on Form 10-K filed with the SEC on November 10, 2025, as the same may be updated from time to time in our various filings with the SEC. 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.

We are a leading provider of satellite and space communications technologies, terrestrial and wireless network solutions, Next Generation 9119-1-1 ("NG-911NG9-1-1") 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, as well as both domestic and international customers.

Impairment of Long-Lived Assets, Including Goodwill. As of JanuaryApril 31,30, 2026, 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 Allerium segment). Additionally, as of JanuaryApril 31,30, 2026, net intangibles recorded on our Condensed Consolidated Balance Sheet aggregated $163.0$158.4 million (of which $38.3$37.3 million relates to our Satellite and Space Communications segment and $124.7$121.1 million relates to our Allerium segment). For purposes of reviewing impairment and the recoverability of goodwill and other intangible assets, our segments each constitute a reporting unit and we must make various assumptions in determining their estimated fair values. See Part I. - Financial Information - Item 1. - Notes to Condensed Consolidated Financial Statements - Note (15) - Long-lived Assets, including Goodwill for further information. Ongoing and future actions supporting our transformation plan could result in a material impairment of our goodwill and/or intangible assets.

As it relates to software developed for the purpose of internal-use (e.g., hosted "SaaS" applications within our Allerium 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 JanuaryApril 31,30, 2026 and 2025, internal-use software costs capitalized were $1.6$1.4 million and $0.5$1.2 million, respectively. For the sixnine months ended JanuaryApril 31,30, 2026 and 2025, internal-use software costs capitalized were $3.1$4.6 million and $1.5$2.7 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.

Fiscal 2026: SecondThird Quarter Results and Business Outlook

Financial results for the secondthird quarter of fiscal 2026 include:

•Consolidated net sales were $106.8$106.0 million, compared to $126.6$126.8 million in the secondthird quarter of fiscal 2025;2025. asApproximately 17% of the decrease in consolidated sales occurred in the Allerium segment – Allerium reported net sales consistent with the third quarter of fiscal 2025, excluding $3.0 million of net sales in the prior year period related to a negotiated, retroactive billing event to recover costs incurred in previous quarters. As anticipated, the decline in net sales in the Satellite and Space Communications (“S&S”) segment primarily reflects the decision to phase out and eliminate certain low margin and working capital intensive revenuesrevenues, such as well as the impact of the recent U.S. government shutdown. Examples include contracts for services, including the Very Small Aperture Terminal (“VSAT”) Satellite Systems and Services Contract and the Global Field Service Representative (“GFSR”) contract, as well as legacythe troposcatter related products and services; Allerium reported higher net sales in all threeimpact of its product areas compared to the priorU.S. yeargovernment periodshutdown on funding for certain programs;

•Gross margin wasincreased 33.9%,to 34.0%, compared to 26.7%30.7% in our secondthird quarter of fiscal 2025; the improvement in our quarterly gross margin percentage builds upon the quarterly trend achieved throughout fiscal 2025 and the first quartertwo quarters of fiscal 2026 to reduce cost of goods sold and to improve overall product mix;

•GAAP net loss attributable to common stockholders was $20.2$14.3 million and included, among other things: (i) non-cash net charges of $19.9$11.3 million, of which (a) $6.6$10.8 million related to net paid-in-kind dividends associated with our Convertible Preferred Stock; (b) $7.2 million related to the amortization of deferred financing costs, debt discount, accreted interest and interest paid-in-kind associated with our senior and subordinated credit facilities; (b) $6.5 million related to net paid-in-kind dividends associated with our Convertible Preferred Stock; (c) $5.0$4.6 million related to the amortization of intangible assets; and (d) $1.4$1.2 million related to the amortization of stock-based compensation; offset in part by (e) a $12.5 million benefit related to the remeasurement of warrants and derivatives; and (e) $0.4 million related to the amortization of stock-based compensation; and (ii) cash charges of $1.9 million, of which (x) $1.6$2.4 million relatedconsisting toprimarily of restructuring costs; and (y) $0.3 million related to CEO transition costs;

•Adjusted EBITDA (a Non-GAAP financial measure discussed below) of $9.1$8.2 million, compared to $2.9$12.6 million for the secondthird quarter of fiscal 2025;

•Backlog of $731.6$696.1 million as of JanuaryApril 31,30, 2026, compared to $672.1 million as of July 31, 2025 and $763.8$708.1 million as of JanuaryApril 31,30, 2025;

•Revenue visibility of approximately $1.1 billion as of JanuaryApril 31,30, 2026; we measure this revenue visibility as the sum of our $731.6$696.1 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 provided by operating activities were $4.9$6.1 million, our fourthfifth consecutive quarter of positive operating cash flows; this includes $4.2$2.4 million in aggregate payments for restructuring costs, including severance, and CEO transition costs; cash flows provided by operating activities would have been $9.1$8.5 million without these costs; operating cash flows in the secondthird quarter of fiscal 2026 include $4.9$4.1 million of total net cash paid principally for interest andand, to a much lesser extent, income taxes.

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 JanuaryApril 31,30, 2026 and 2025” and “Comparison of the Results of Operations for the SixNine Months Ended JanuaryApril 31,30, 2026 and 2025.”

During the secondthird quarter of fiscal 2026, wesome wereof the larger orders awarded variousto ordersS&S includinginclude:

•over $5.5$7.0 million ofin fundedfunding orders fromfor several international government end customers of our troposcatter Family of Systems ("FoS"), including our rapidly deployable multi-path radios ("MPRs") andtroposcatter Modular Transportable Transmission Systems ("MTTS"), intended for use by an international government end customer;

•approximately $6.0 million in incremental funding in excess of $4.5 million for ongoing training and support of complex cybersecurity operations for U.S. government customers;

•inover excess$3.2 million of $1.0 million in follow-onfunded orders for high-powervarious amplifiers in supporttypes of an electronic warfareantennas and countermeasuresradio spacefeeds program led byfor a domestic prime contractor to the U.S. government agency; and

In December 2024 (fiscal 2025), we received notice from our prime contractor to stop work associated with a legacy U.S. Marine Corps contract.contract, Wewhich initiatedhas litigationsince againstbeen theterminated primefor contractorconvenience inand orderfor towhich enforcewe ourhave rights.submitted Asa oftermination Julyclaim. 31, 2025, $15.7 million of totalTotal receivables related to our contract remained outstanding. In November 2025, we entered into discussions with our prime contractor to explore a comprehensive settlement of our pending litigation. Based on a settlement reached in February 2026, along with our cost mitigation actions taken, we reduced cumulative net sales and receivables related to this contract by $2.9 million. Considering these adjustments and $0.2 million of cash collections during the first half of fiscal 2026, total receivables related to oursuch contract were $12.6$10.5 million as of JanuaryApril 31,30, 2026. Litigation related to this matter has been paused while the parties carry out their respective duties under the terms of the settlement agreement, including submission of our termination settlement proposal to the customer. While we believe that we have meritorious termination claims, some or all of our receivablesreceivable could be at risk of not being collected. Future results of operations related to our troposcatter solutions product line depend, in part, on the nature, timing and amount associated with resolving this matter.

With strategic wins in the U.S., Canada and Australia, we believe Allerium's position as a trusted leader in 911,9-1-1, NG-911NG9-1-1 and public safety applications positions us increasingly well to deliver similarly sophisticated solutions for other types of emergencies. New emergency-requesting devices, such as "wearables," vehicles, smart speakers and AI-capable cameras, along with new delivery methods, such as satellite networks, are expected to drive innovation and growth within the public safety market over time.

During the secondthird quarter of fiscal 2026, we were awarded various orders including:

•approximately $1.5$6.0 million of additional funding related to providea softwarerenewal engineeringof NG9-1-1 services tofor Allerium's largesta customer in supportthe midwestern region of newthe features for wireless communication applicationsU.S.; and

While business conditions and our operational and financial performance have improved over the past several quarters, the operating environment remains largely unpredictable due to many factors, including but not limited to those matters discussed throughout this Form 10-Q and in our Cautionary Statement Regarding Forward-Looking Statements in this Form 10-Q. Such conditions and factors have caused and could cause variability in our financial results from period to period. Accordingly, we are not providing forward-looking guidance on a GAAP or Non-GAAP basis.

Additional information related to our Business Outlook for Fiscal 2026 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 JanuaryApril 31,30, 2026 and 2025” and “Comparison of the Results of Operations for the SixNine Months Ended JanuaryApril 31,30, 2026 and 2025.”

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JANUARYAPRIL 31,30, 2026 AND 2025 Net Sales. Consolidated net sales were $106.8$106.0 million and $126.6$126.8 million for the three months ended JanuaryApril 31,30, 2026 and 2025, respectively, representing a decrease of $19.8$20.8 million, or 15.6%.16.4%. The period-over-periodSuch decrease primarily reflects lower net sales in our Satellite and Space Communications segment,segment offsetand, into parta bylesser higher sales inextent, our Allerium segment, as further discussed below.segment.

Net sales in our Satellite and Space Communications segment were $50.6$50.3 million for the three months ended JanuaryApril 31,30, 2026, as compared to $73.7$67.6 million for the three months ended JanuaryApril 31,30, 2025, a decrease of $23.1$17.3 million, or 31.3%.25.6%. As anticipated, the decline in net sales in the S&S segment primarily reflects the decision to phase out and eliminate certain low margin and working capital intensive revenuesrevenues, such as well as the impact of the recent U.S. government shutdown. Examples include contracts for services, including the Very Small Aperture Terminal (“VSAT”) Satellite Systems and Services Contract and the Global Field Service Representative (“GFSR”) contract, as well as legacythe troposcatterimpact relatedof productsthe andU.S. services.government shutdown on funding for certain programs. As part of this repositioning, S&S is pursuing sales of innovative, higher-margin solutions such as digital common ground modems, network solutions and rapidly deployable troposcatter Modular Transportable Transmission Systems ("MTTS") and multi-path radios ("MPRs"). This segment represented 47.4%47.5% of consolidated net sales for the three months ended JanuaryApril 31,30, 2026, as compared to 58.2%53.3% for the three months ended JanuaryApril 31,30, 2025. Our book-to-bill ratio (a measure defined as bookings divided by net sales) in this segment for the three months ended January 31, 2026 and 2025 was 0.68x and 0.64x, respectively, and reflects the aforementioned decision to phase out and eliminate certain low margin revenues, as well as order delays related to the recent U.S. government shutdown.

Net sales in our Allerium segment were $56.2$55.7 million for the three months ended JanuaryApril 31,30, 2026, as compared to $52.9$59.2 million for the three months ended JanuaryApril 31,30, 2025, ana increasedecrease of $3.3$3.5 million, or 6.2%.5.9%. Net sales in the more recent period primarily reflect lower net sales of next-generation 9-1-1 ("NG9-1-1") and call routing solutions. In particular, net sales for the threethird monthsquarter endedof Januaryfiscal 31,2025 2026included reflectover higher$3.0 netmillion salesof incremental NG9-1-1 services revenue due to reaching an agreement with a statewide customer to retroactively invoice for certain recurring services provided in allthe threepast. productSuch areasbenefit (location-based,did next-generationnot 911repeat ("NG-911")in andfiscal call handling solutions).2026. This segment represented 52.6%52.5% of consolidated net sales for the three months ended JanuaryApril 31,30, 2026, as compared to 41.8%46.7% for the three months ended JanuaryApril 31,30, 2025. Our book-to-bill ratio in this segment for the three months ended JanuaryApril 31,30, 2026 and 2025 was 2.51x0.32x and 0.61x,0.91x, respectively,respectively. andThe includesratio overfor $107.0the millionmost recent quarter reflects the timing of incremental funding toward alarge, multi-year contract extension,awards, valuedand inis excessnot unusual given Allerium's strong book-to-bill ratios of $130.01.06x million,and by2.51x, Allerium’s largest customer, a leading telecommunications companyrespectively, in the U.S.first and second quarters of fiscal 2026.

Sales by geography and customer type, as a percentage of related sales, for the three months ended JanuaryApril 31,30, 2026 and 2025 are as follows:

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 JanuaryApril 31,30, 2026 and 2025, 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 JanuaryApril 31,30, 2026 and 2025 (which include sales to U.S. domestic companies for inclusion in products that are sold to international customers) were $30.9$24.8 million and $24.2$29.7 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 JanuaryApril 31,30, 2026 and 2025.

Gross Profit. Gross profit was $36.2$36.1 million and $33.7$38.9 million for the three months ended JanuaryApril 31,30, 2026 and 2025, respectively, ana increasedecrease of $2.5$2.8 million, or 7.4%.7.2%. Gross profit, as a percentage of consolidated net sales, for the three months ended JanuaryApril 31,30, 2026 was 33.9%34.0% as compared to 26.7%30.7% for the three months ended JanuaryApril 31,30, 2025. Our gross profit for the three months ended JanuaryApril 31,30, 2026 (both in dollars and as a percentage of consolidated net sales) reflects overall product mix changes, as discussed above, and improved operational and financial performance as a result of our transformation initiatives to, among other things, enhance operational efficiency, streamline product lines with a focus on strategic, higher operating margin products and reduce cost structures. Consolidated gross profit (both in dollars and as a percentage of consolidated net sales) for the prior year period also reflects Allerium's retroactive billing event discussed above. The improvement in our quarterly gross profitmargin percentage for the second quarter of fiscal 2026 builds upon the quarterly trend achieved throughout fiscal 2025 and the first quartertwo quarters of fiscal 2026. 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, for the three months ended JanuaryApril 31,30, 2026 decreasedwas and,comparable asto three months ended April 30, 2025. As a percentage of related segment net sales, gross profit increased in comparison to the three months ended January 31, 2025.significantly. Gross profit in the more recent period reflects changes in products and services mix, as discussed above. Gross profit also benefited from this segment's transition from low or no margin non-recurring engineering contracts to higher volume manufacturing orders.

Our Allerium segment's gross profit, both in dollars and as a percentage of related segment net sales, for the three months ended JanuaryApril 31,30, 2026 increaseddecreased in comparison to the three months ended JanuaryApril 31,30, 2025. The gross profit percentage in the more recent period reflects changes in products and services mix, as discussed above. InNet additionsales and gross profit for the third quarter of fiscal 2025 also included over $3.0 million of incremental NG9-1-1 services revenue due to reaching an agreement with a statewide customer to retroactively invoice for certain recurring services provided in the past. Such benefit ofdid costnot reductionrepeat initiatives,in suchfiscal gross margin also reflects the continued adoption of our solutions by new customers, as well as the migration of more PSAPs onto our NG-911 core services and platforms, as we progress through initial deployments of our solutions to monthly recurring revenue streams.2026.

Included in consolidated cost of sales for the three months ended JanuaryApril 31,30, 2026 and 2025 are provisions for excess and obsolete inventory of $0.9$0.6 million and $1.6$1.0 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.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $27.7$29.3 million and $33.8$30.2 million for the three months ended JanuaryApril 31,30, 2026 and 2025, respectively. As a percentage of consolidated net sales, selling, general and administrative expenses were 25.9%27.7% and 26.7%23.8% for the three months ended JanuaryApril 31,30, 2026 and 2025, respectively.