Securities and exchange commission


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relates to services to be provided over future years and, as a

result, the stock awards are subject to certain restrictions which

may be removed earlier upon CCC attaining certain business plan

milestones, as provided in the agreement, but no later than ten

years from the date of the award. The excess of market value over

cost of the shares awarded of $633,000 was recorded as deferred

compensation and is being amortized to expense over a ten-year

period subject to the aforementioned accelerated provisions, if

appropriate, as evaluated on an annual basis. The deferred

compensation is reflected as a reduction of stockholders' equity in

the accompanying consolidated balance sheet. During fiscal 1997,

60,000 of such shares were forfeited due to the termination of an

officer's employment prior to vesting.
In October 1998, a total of 225,000 (after effect of three-for-two

stock split - see Note 9(e)) restricted shares of the Companys'

common stock were granted by the Board of Directors to the principal

officers and employees of the Companys' new subsidiary, Comtech

Mobile Datacom Corp.("CMDC"), at a cost of $.10 per share. The award

relates to services to be provided over future years and, as a

result, the stock awards are subject to certain restrictions which

may be removed earlier upon CMDC attaining certain business plan

milestones, as provided in the agreement, but no later than ten

years from the date of the award. The excess of market value over

cost of the

F-16
shares awarded of $1,041,000 was recorded as deferred compensation

and is being amortized to expense over a ten-year period subject to

the aforementioned accelerated provisions, if appropriate, as

evaluated on an annual basis. The deferred compensation is reflected

as a reduction of stockholders' equity in the accompanying

consolidated balance sheet as of July 31,1999.
(d) Stock Split
On July 6, 1999, the Company's Board of Directors authorized a

three-for-two stock split effected in the form of a 50% stock

dividend payable July 30, 1999 to stockholders of record on July 16,

1999. All share and per share amounts in the accompanying

consolidated financial statements have been restated to reflect the

stock split.
(10) Segment and Principal Customer Information
Effective July 31, 1999, the Company adopted SFAS No. 131,"Disclosures

about Segments of an Enterprise and Related Information." Reportable

operating segments are determined based on the Company's management

approach. The management approach, as defined by SFAS No. 131, is

based on the way that the chief operating decision-maker organizes

the segments within an enterprise for making operating decisions and

assessing performance. While the Company's results of operations are

primarily reviewed on a consolidated basis, the chief operating

decision-maker also manages the enterprise in four segments:
(I)Telecommunications Transmission, (II) RF Microwave Amplifiers,

(III) Mobile Data Communications Services and (IV) Wireless Local

Loop, which is being discontinued. Telecommunications Transmission

products include modems, frequency converters, satellite VSAT

transceivers and antennas and over-the-horizon microwave

communications products and systems. RF Microwave Amplifier products

include high-power amplifier products that use the microwave and

radio frequency spectrums. Mobile Data Communications Services

include two-way messaging links between mobile platforms or remote

sites and user headquarters using satellite, terrestrial microwave

or Internet links. Corporate assets consist principally of cash,

deferred tax assets and intercompany receivables. Corporate losses

result from such corporate expenses as legal, accounting and

executive. Sales between segments were negligible. Eliminations

consist of intercompany balances.
(in thousands)

Mobile Data Corporate

Telecommunications RF Microwave Communications and

Fiscal 1999 Transmission Amplifiers Services Others Eliminations Total

----------- ------------ ---------- -------- ------ ------------ -----
Net sales $23,045 14,523 318 -- 37,886

Operating income (loss) 2,296 2,503 (309) (1,663) 2,827

Interest income 10 -- 55 65

Interest expense 38 152 11 3 204

Depreciation and

amortization 461 714 87 248 1,510

Expenditure for

long-lived assets 791 326 1,734 3 2,854

Total assets 16,907 8,409 2,691 15,494 (13,654) 29,847

Mobile Data Corporate

Telecommunications RF Microwave Communications and

Fiscal 1998 Transmission Amplifiers Services Others Eliminations Total

----------- ------------ ---------- -------- ------ ------------ -----
Net sales $13,047 17,067 -- -- 30,114

Operating income (loss) 123 2,565 -- (1,236) 1,452

Interest income -- -- 36 36

Interest expense 52 160 -- 22 234

Depreciation and

amortization 506 653 -- 47 1,206

Expenditure for

long-lived assets 669 850 -- -- 1,519

Total assets 4,433 9,207 -- 11,930 (5,860) 19,710
(continued)

F-17

Net sales $12,513 12,233 -- -- 24,746

Operating income (loss) 356 1,296 -- (1,014) 638

Interest income -- 14 -- 19 33

Interest expense 58 214 -- 12 284

Depreciation and

amortization 515 550 -- (10) 1,055

Expenditure for

long-lived assets 440 511 -- -- 951

Total assets 8,116 9,346 -- 12,502 (12,004) 17,960
Sales to one customer in fiscal 1999 and to different customers in fiscal

1998 and 1997 represented 27.0% and 12.2% and 10.2% of the

consolidated net sales, respectively. Such sales were made from the

Telecommunications Transmission business segment in 1999 and 1997,

and from the RF Microwave Amplifier business segment in 1998.
During fiscal 1999, 1998 and 1997, approximately 16%, 20% and 17%,

respectively, of the Company's net sales resulted from contracts

with the United States government and its agencies. Export sales

comprised 60%, 46% and 57% of net sales in fiscal 1999, 1998 and

1997, respectively. Export sales include sales to domestic companies

for inclusion in products which will be sold to international

customers.
(11) Commitments and Contingencies
(a) Operating Leases
The Company is obligated under noncancellable operating lease

agreements. At July 31, 1999, the future minimum lease payments

under operating leases are as follows:
2000 $ 355,000

2001 355,000

2002 193,000

2003 196,000

-------------

$ 1,099,000

=============
Lease expense charged to operations was $301,000, $140,000 and $123,000 in

fiscal 1999, 1998 and 1997, respectively.
(b) United States Government Contracts
Certain of the Company's contracts are subject to audit by applicable

governmental agencies. Until such audits are completed, the ultimate

profit on these contracts cannot be determined; however, it is

management's belief that the final contract settlements will not

have a material adverse effect on the Company's consolidated

financial condition.
(c) Litigation
The Company is subject to certain legal actions which arise out of the

normal course of business. It is management's belief that the

outcome of these actions will not have a material adverse effect on

the Company's consolidated financial position.


F-18
(d) Employment Contract
Mr. Kornberg, the Company's Chairman of the Board of Directors, Chief

Executive Officer and President is employed pursuant to an agreement

which was amended and restated in January 1998 which provides, among

other things, for his employment until 2003 at a current basic

compensation of $295,000 per annum plus such additional amounts, if

any, as the Board of Directors may from time to time determine.
(12) Acquisitions
In the first quarter of fiscal 1999, the Company formed two

subsidiaries, Comtech Mobile Datacom Corp. ("CMDC") and Comtech

Wireless, Inc. ("CWI") to acquire the assets and assume certain

liabilities of two businesses. The purchase price of the business

acquired by CMDC amounted to $628,000 consisting of cash of

$100,000, 150,000 shares of restricted common stock, valued at

$528,000, and warrants to purchase 150,000 shares of common stock at

an exercise price of $6.57 per share. The purchase price of the

business acquired by CWI amounted to $350,000 consisting of $100,000

of cash and a non-recourse note payable of $250,000. The assets

acquired were inventories and equipment. Both acquisitions were

accounted for as purchases whereby the assets and liabilities of the

businesses acquired were consolidated with those of the Company from

their respective acquisition dates. The excess of the purchase price

over the fair value of the net assets of the business acquired by

CMDC approximated $1,701,000 and is being amortized over a 20-year

period. This amount is included in intangible assets in the

accompanying consolidated balance sheet. Effective July 31, 1999,

the operations of the business acquired by CWI are being

discontinued (see Note 13). The pro forma effect of the acquisition

of CMDC was not material to the results of operations for the years

ended July 31,1999 and 1998.
(13) Discontinued Operations
Based upon CWI's disappointing fiscal 1999 results of operations and its

uncertain future prospects, in September 1999, the Board of

Directors approved a plan to liquidate CWI by January 31, 2000. The

consolidated financial statements of the Company have been

reclassified to reflect the effects of the Company's decision to

account for the disposal of CWI as a discontinued operation.

Accordingly, costs and expenses, assets and liabilities, and cash

flows associated with CWI have been excluded from the respective

captions in the accompanying consolidated balance sheet, statements

of operations and statements of cash flows. Components of amounts

included in the net liabilities of discontinued operations in the

accompanying consolidated balance sheet are as follows:
July 31, 1999

-------------
Inventory $ 293,000

Provision for operating losses during phase-out period (430,000)
----------

$ (137,000)

==========
The Company expects to liquidate the operations of CWI by January 31,

2000 and has estimated a loss of $470,000 on disposal of CWI's

assets and $430,000 for operating losses through January 31, 2000.

CWI had no revenue in fiscal 1999 and expenses of $942,000.
(14) Stockholder Rights Plan
On December 15, 1998, the Company's Board of Directors approved the

adoption of a stockholder rights plan in which one stock purchase

right ("Right") was distributed as a dividend on each outstanding

share of the Company's common stock to stockholders of record at the

close of business on January 4, 1999. Under the plan, the Rights

will be exercisable only if triggered by a person or group's

acquisition of 15% or more of the Company's common stock. If

triggered, each Right, other than Rights held by the acquiring

person or group, would entitle its holder to purchase a specified

number of the Company's common shares for 50% of

F-19
their market value at that time. Unless a 15% acquisition has

occurred, the Rights may be redeemed by the Company at any time

prior to the termination date of the plan.
This Right to purchase common stock at a discount will not be

triggered by a person's or group's acquisition of 15% or more of the

common stock pursuant to a tender or exchange offer which is for all

outstanding shares at a price and on terms that Comtech's Board of

Directors determines (prior to acquisition) to be adequate and in

the best interest of the Company and its stockholders. The Rights

will expire on December 15, 2008.

F-20
Schedule II
COMTECH TELECOMMUNICATIONS CORP.

AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years ended July 31, 1999, 1998 and 1997

Column A Column B Column C Column D Column E

-------- -------- -------- -------- --------

Additions

---------

(1) (2)

Charged to

Balance at Charged to other Transfers Balance at

beginning cost and accounts - (deductions) end of

Description of period expenses describe describe period

----------- --------- -------- -------- -------- ------
Allowance for doubtful accounts -

accounts receivable:

Year ended July 31,:

1999 $ 170,000 -- -- (25,000)(D) 145,000

1998 102,000 96,000 (C) -- (28,000)(D) 170,000

1997 28,000 85,000 (C) -- (11,000)(D) 102,000
Inventory reserves:

Year ended July 31,:

1999 $ 829,000 341,000 (A) -- -- 1,170,000

1998 956,000 -- -- (127,000)(B) 829,000

1997 490,000 466,000 (A) -- -- 956,000
(A) Increase in reserves for contract and other adjustments.

(B) Reduction of excess reserves for contract and other adjustments.

(C) Increase in allowance for doubtful accounts.

(D) Write-off of uncollectible receivables.

S-1



TIME ACCELERATED RESTRICTED STOCK PURCHASE AGREEMENT
AGREEMENT dated September 24, 1998 between Comtech Telecommunications

Corp., a Delaware corporation ("Comtech"), and Ronald Johnson ("Employee").
WHEREAS, Employee is employed by Comtech's wholly-owned subsidiary,

Comtech Mobile Datacom Corporation ("CMDC"), and Comtech and Employee desire to

(a) provide additional incentives to Employee in connection with Employee's

responsibilities for the management and growth of the business of CMDC, and (b)

more closely align Employee's interests with the interests of stockholders of

Comtech, through, in relation to both objectives, the sale and issuance to

Employee of restricted shares of Common Stock of Comtech.
NOW, THEREFORE, Comtech and Employee agree as follows:
1. Definitions
(a) "Comtech" means Comtech Telecommunications Corp., a Delaware

corporation.
(b) "Escrow Agent" means the Escrow Agent as defined in the Escrow

Agreement in the form annexed hereto as Exhibit A.
(c) "Cumulative CMDC Pre-Tax Profits" means CMDC's aggregate income

before income taxes minus CMDC's aggregate losses in the period from inception

of operations of CMDC to the end of the relevant fiscal year. Determinations of

such amounts shall be made in accordance with generally accepted accounting
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