COMTECH TELECOMMUNICATIONS CORP /DE/

Our cash and cash equivalents were $35.0 million and $35.4 million at July 31, 2026 and 2025, respectively. For fiscal 2026, our cash flows reflect the following:

•Net cash provided by operating activities was $25.0 million for fiscal 2026, as compared to net cash used in operating activities of $29.2 million for fiscal 2025. The significant period-over-period improvement reflects favorable changes in net working capital management, due primarily to improved accountability and process disciplines, as well as the timing of and progress toward completion on contracts accounted for over time, including related performance, billings and collections. These activities allowed us to reduce billed accounts receivable and contract assets (i.e., unbilled accounts receivable) during the more recent period.

Cash interest payments were approximately $5.0 million and $12.9 million for fiscal 2026 and 2025, respectively. The decrease in the more recent period primarily reflects the impact of the July 21, 2025 amendments to our Credit Facility and Subordinated Credit Facility, which replaced a significant portion of cash interest bearing debt under our Credit Facility with a $35.0 million priority term loan under our Subordinated Credit Facility that is subject to interest paid-in-kind. Also, as discussed below, due to our improved operational and financial performance and liquidity position, in fiscal 2026, we fully repaid our Revolving Loan under the Credit Facility.

In fiscal 2026, we received a nominal net tax refund, as compared to paying $0.7 million of cash taxes in fiscal 2025.

Operating cash flows in fiscal 2026 and 2025 include $7.8 million and $19.7 million, respectively, in aggregate payments during each respective period for restructuring costs (including severance), proxy solicitation costs and CEO transition costs.

•Net cash used in investing activities in fiscal 2026 was $14.7 million and primarily reflects capital expenditures to build-out cloud-based computer networks and internal use software applications and capital investments and building improvements in connection with our leased facilities. Net cash used in investing activities in fiscal 2025 was $8.2 million.

•Net cash used in financing activities was $32.5 million for fiscal 2026, as compared to net cash provided by financing activities of $24.4 million for fiscal 2025. In fiscal 2026, due to our improved operational and financial performance and liquidity position, we fully repaid our Revolving Loan under the Credit Facility. Also, in addition to repaying term loan principal under our Credit Facility as scheduled, we voluntarily prepaid portions of our term loans outstanding under both the Credit Facility and Subordinated Credit Facility. During fiscal 2025, we entered into the Subordinated Credit Facility and received related proceeds of $100.0 million, made term loan repayments of $56.7 million and net Revolving Loan repayments of $14.9 million under our Credit Facility, and paid$4.5 million in deferred financing costs and debt discounts.

The Strategic Transaction, Credit Facility, Subordinated Credit Facility and Convertible Preferred Stock are discussed below and in Notes to Consolidated Financial Statements - Note (2) - Business Divestiture, Note (8) - Credit Facility, Note (9) - Subordinated Credit Facility and Note (17) - Convertible Preferred Stock included in Part II - Item 8. Financial Statements and Supplementary Data, included in this Form 10-K (which discussion is incorporated herein by reference).

Liquidity

At July 31, 2026 and October 13, 2026 (the date closest to the issuance date):

•total outstanding borrowings under our Credit Facility were $108.5 million at each such date, with no amounts drawn on the Revolving Loan;

•total outstanding borrowings under our Subordinated Credit Facility were $102.0 million and $103.1 million, respectively, including interest paid-in-kind or accrued on the subordinated priority term loan amount outstanding at each date; such amounts do not include the 50%, or $32.5 million, Make-Whole Amount associated with the $65.0 million portion of the Subordinated Credit Facility;

•the liquidation preference of our outstanding convertible preferred stock was $223.2 million and $227.1 million respectively (excluding potential increases in the liquidation preference and other obligations that could be triggered by, among other things, breaches of covenants and/or asset sales resulting in a change in control of the Company); and

•our available sources of consolidated liquidity totaled $61.3 million and $51.3 million, respectively, which includes qualified cash and cash equivalents of $34.0 million and $24.0 million, respectively (including cash and cash equivalents related to discontinued operations), and the available portion of the Revolving Loan of $27.3 million as of each such date.

On June 14, 2026, we entered into the Purchase Agreement to sell the Disposal Group to Gilat. The Purchase Agreement provides for a base purchase price of $157.5 million in cash, subject to customary adjustments as defined in the Purchase Agreement. Upon execution of the Purchase Agreement, we received a $10.0 million Advance Payment. The Strategic Transaction is expected to close in calendar 2026, subject to certain closing conditions and regulatory approvals. The consummation of the Strategic Transaction does not require the approval of our common stockholders.

On June 14, 2026, in connection with entering into the Purchase Agreement, we entered into:

•An additional amendment to our existing Credit Facility (the “Fourth Amendment”), which among other things: (a) provides consent to the consummation of the Strategic Transaction; (b) acknowledges and agrees that the Strategic Transaction shall not result in a Change of Control as defined in the Credit Facility, as amended; (c) suspends, through the four quarter period ending July 31, 2027, testing of the Net Leverage Ratio, Fixed Charge Coverage Ratio and Minimum EBITDA covenants; (d) clarifies that the Advance Payment will not be required to be applied to prepay the applicable obligations in accordance with the terms of the Credit Facility until the Strategic Transaction closes; and (e) provides that the Maximum Revolver Amount under the Credit Facility shall not be reduced to an amount less than $27,250,000 as a result of the prepayment of the Term Loan in accordance with the terms of the Credit Facility. The Fourth Amendment also: (i) sets the applicable margin for Base Rate Loans and SOFR Loans at 9.50% and 10.50%, respectively, through the maturity of the Credit Facility; (ii) provides for a fee to be applied to the Term Loan balance outstanding at various intervals after the closing of the Strategic Transaction; and (iii) reduces the prepayment penalty associated with the application of the net proceeds from the Strategic Transaction by 1.00%. On July 30, 2026, we further amended the Credit Facility (the "Fifth Amendment") to, among other things, waive any excess cash flow prepayment that would have been payable for the fiscal year ended July 31, 2026.

•An additional amendment to our existing Subordinated Credit Facility (“Amendment No. 3”), which among other things: (a) provides consent to the consummation of the Strategic Transaction; (b) acknowledges and agrees that the Strategic Transaction shall not result in a Change of Control as defined in the Subordinated Credit Facility; (c) suspends, through the four quarter period ending July 31, 2027, testing of the Net Leverage Ratio, Fixed Charge Coverage Ratio and Minimum EBITDA covenants; (d) clarifies that the Advance Payment will not be required to be applied to prepay the applicable obligations in accordance with the terms of the Subordinated Credit Facility until the Strategic Transaction closes; and (e) modifies the calculation of the Make-Whole Amount applicable to certain tranches of subordinated term loans by deferring the respective trigger dates for such Make-Whole Amount adjustments to April 1, 2027. In connection with Amendment No. 3, we also issued warrants to the subordinated lenders to purchase up to 625,000 shares of our common stock at an exercise price of $0.10 per share. The warrants, and the shares of our common stock underlying the warrants, will vest and become exercisable on October 17, 2026, and are automatically and irrevocably forfeitable if the related subordinated term loans (including, without limitation, payment of (x) all accrued and unpaid interest thereon and (y) the applicable Make-Whole Amount payable in connection therewith) are repaid in full prior to vesting.

•An exchange agreement (the “Series B-4 Exchange Agreement”) with the holders of Series B-3 Convertible Preferred Stock, pursuant to which the holders, among other things: (a) provided consent to the consummation of the Strategic Transaction; (b) waived any rights to repayment or repurchase of shares of Series B-3 Convertible Preferred Stock in connection therewith; (c) agreed that holders of Convertible Preferred Stock may not: (i) exercise their optional repurchase rights until October 31, 2029, except upon consummation of certain qualified asset sales by us or upon a Change of Control as defined in the Series B-4 Certificate of Designations, or (ii) elect to receive dividends in cash earlier than October 31, 2028. To effect these changes, upon consummation of the Strategic Transaction, all 178,180.34 shares of Series B‑3 Convertible Preferred Stock will be exchanged for 178,180.34 shares of Series B‑4 Convertible Preferred Stock, which have substantially similar terms as those of the Series B-3 Convertible Preferred Stock except for the changes described above. In connection with the exchange, new Voting Agreements and a new Registration Rights Agreement with the holders of our Series B-4 Convertible Preferred Stock will automatically take effect, each having substantially similar terms to the existing agreements. The Series B-4 Convertible Preferred Stock maintains the $7.99 conversion price of the Series B-3 Convertible Preferred Stock. We did not incur any fees to the holders of Series B-3 Convertible Preferred Stock in connection with the foregoing.

Upon closing the Strategic Transaction, we will use the net cash proceeds to substantially reduce debt and then seek a comprehensive recapitalization of the business with the intention to further enhance our financial flexibility and reduce the cost of capital.

Collectively, the Strategic Transaction and fiscal 2026 amendments to our Credit Facility, Subordinated Credit Facility and convertible preferred stock agreements, represent a successful outcome of our previously announced strategic review process.

As we await regulatory approval of the Strategic Transaction, we will be executing a transformation plan to further align the organization to be purpose-built to support Allerium's anticipated growth from increasing demand for next-generation public safety technologies and services.

As of the issuance date, we expect cash and cash equivalents and cash flows from both operating and financing activities to be our principal sources of liquidity. We believe these sources of liquidity will be sufficient to fund our operating and cash commitments for investing and financing activities over the next year beyond the issuance date. Over the next year beyond the issuance date, we believe that we will be able to generate sufficient positive cash inflows and maximize the remaining available portion of the Revolving Loan under our Credit Facility to continue as a going concern and comply with the covenants contained in our existing credit facilities. Our ability to meet future anticipated liquidity needs over the next year beyond the issuance date will largely depend on our ability to execute on our operational strategy and transformation plan, generate positive cash inflows from operations, maximize the remaining available portion of the Revolving Loan under our Credit Facility and or secure outside capital. Our ability to do so may also be affected by general economic, financial and other factors which are beyond our control.

Our material cash requirements are for working capital, debt service (including interest and related fees), capital expenditures, tax payments, facilities lease payments and dividends related to our Convertible Preferred Stock, which are payable in kind or in cash under certain circumstances. Also, as discussed above, in accordance with our existing credit facilities, we must use 65% of the net proceeds from the Strategic Transaction to prepay the majority of our Credit Facility, with the remaining 35% used to prepay debt outstanding under our Subordinated Credit Facility, starting with repaying the subordinated priority term loan. As a result of these contractual repayment obligations, and given that the Disposal Group met the criteria to be reported as "held for sale" as of year end, $85.3 million and $46.0 million, respectively, of the term loans outstanding under the Credit Facility and Subordinated Credit Facility (including principal, interest paid-in-kind and Make Whole Amounts, as applicable, and excluding deferred financing costs and debt discounts) were classified as current liabilities in our Consolidated Balance Sheet as of July 31, 2026.

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 facilities as they become due, or to obtain future waivers or amendments from the lenders in the event compliance is not maintained; (ii) general economic conditions; (iii) a change in the timing or amounts of customer spending priorities and or contracting decisions; (iv) larger than usual customer orders; (v) a future redemption by the holders of our Convertible Preferred Stock; or (vi) actions we may take related to our transformation plan.

For example, more recently as part of our transformation plan, we have been making significant capital expenditures and building out cloud-based computer networks and internal use software applications to support Allerium's customers. We expect capital investments for these and other initiatives to continue in fiscal 2027 and beyond.

In light of our transformation plan 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.

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 September 29, 2020, our Board of Directors authorized a $100.0 million stock repurchase program. The 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 and the terms of our Credit Facility. There were no repurchases of our common stock during fiscal 2026 and 2025.

In fiscal 2023, we adjusted our 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 and Subordinated Credit Facility, as well as Board approval and certain voting rights of holders of our Convertible Preferred Stock.

At July 31, 2026, we had no outstanding standby letters of credit to guarantee future performance on certain customer contracts and no commercial letters of credit outstanding.

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, equipment and or services. We do not expect that these commitments, as of July 31, 2026, will materially adversely affect our liquidity. At July 31, 2026, cash payments due under contractual obligations are as follows:

The amounts in the above table: (i) include estimates of interest expense related to both our Credit Facility and Subordinated Credit Facility (as discussed below), and (ii) exclude purchase orders that we entered into in our normal course of business.

In accordance with our existing credit facilities, we must use 65% of the net proceeds from the Strategic Transaction to prepay the majority of our Credit Facility, with the remaining 35% to prepay subordinated debt outstanding under our Subordinated Credit Facility, starting with repaying the subordinated priority term loan. As a result of these contractual repayment obligations, and given that the Disposal Group met the criteria to be reported as "held for sale" as of July 31, 2026, $85.3 million and $46.0 million, respectively, of the term loans outstanding under the Credit Facility and Subordinated Credit Facility (including principal, interest paid-in-kind and Make Whole Amounts, as applicable, and excluding deferred financing costs and debt discounts) were classified as current liabilities in our Consolidated Balance Sheet as of July 31, 2026.

Interest payments related to our Credit Facility were estimated based on the outstanding borrowings at July 31, 2026 and assume the prepayment of the majority of our Credit Facility on December 31, 2026 upon consummation of the Strategic Transaction, as described above. Interest related to the Credit Facility was calculated based on the SOFR forward curve, plus the applicable margin, and does not assume any interest paid-in-kind.

The Subordinated Credit Facility Make-Whole Amount represents $65.0 million of the outstanding Subordinated Credit Facility principal amount, multiplied by the applicable make-whole rate for each applicable tranche as of July 31, 2026. Except for those portions of the Subordinated Credit Facility and Make-Whole Amount as of July 31, 2026 that we estimated to be repaid upon consummation of the Strategic Transaction, the remaining obligations under the Subordinated Credit Facility are not included in the "Due Within 1 Year" column given the timing of such payments are subject to the timing of certain repayments, prepayments and maturity date associated with the Credit Facility.

Additional information about our commitments related to the Strategic Transaction, Credit Facility, Subordinated Credit Facility, Convertible Preferred Stock and leasing arrangements is included in Notes to Consolidated Financial Statements - Note (2) - Business Divestiture, Note (8) - Credit Facility, Note (9) - Subordinated Credit Facility, Note (10) - Leases and Note (17) - Convertible Preferred Stock included in Part II - Item 8. Financial Statements and Supplementary Data, included in this Form 10-K (which discussion is incorporated herein by reference).

As discussed further in Notes to Consolidated Financial Statements - Note (17) - Convertible Preferred Stock, included in Part II - Item 8. Financial Statements and Supplementary Data (which discussion is incorporated herein by reference), included in this Form 10-K, prior to June 14, 2026, the holders of the Convertible Preferred Stock had 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. On June 14, 2026, in connection with entering into the Exchange Agreement, the holders waived any rights to repayment or repurchase of shares of Series B-3 Convertible Preferred Stock in connection with the Strategic Transaction and agreed that holders of Series B-3 Convertible Preferred Stock may not exercise their optional repurchase rights until October 31, 2029, except upon consummation of certain qualified asset sales by us or upon a Change of Control as defined in the Series B-4 Certificate of Designations. 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 Notes to Consolidated Financial Statements - Note (14) - Commitments and Contingencies, included in Part II - Item 8.- Financial Statements and Supplementary Data, included in this Form 10-K (which discussion is incorporated herein by reference), we are subject to 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 indemnification claims or providing indemnification. As a result, pending or future claims asserted against us by a party that we have agreed 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.

We entered into employment and/or change of control 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.

As further discussed in Notes to Consolidated Financial Statements - Note (11) - Income Taxes included in Part II - Item 8. Financial Statements and Supplementary Data, included in this Form 10-K (which discussion is incorporated herein by reference), our Consolidated Balance Sheet at July 31, 2026 includes total liabilities of $4.0 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.