Risk Factors - CMTL

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ITEM 1A. RISK FACTORS

The following describes major risks to our business and should be considered carefully. Any of these factors could significantly and negatively affect our business, prospects, financial condition, or operating results, which could cause the trading prices of our equity securities to decline. The risks described below are not the only risks we may face. Additional risks and uncertainties not presently known to us, or risks that we currently consider immaterial, could also negatively affect us.

Summary of Risk Factors

The following is a summary of the principal risks that could significantly and negatively affect our business, prospects, financial conditions, or operating results. For a more complete discussion of the material risks facing our business, please see below:

Global Risks

•New and ongoing challenges relating to current supply chain constraints and impacts from inflation, including for satellite ground station and troposcatter components, could adversely impact our revenue, gross margins and financial results.

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

•We have significant operations in locations which could be materially and adversely impacted in the event of a terrorist attack and government responses thereto or significant disruptions (including natural disasters) to our business.

•Ongoing instability and conflicts in global markets, including in the Ukraine and Eastern Europe, Israel, Lebanon, the Gaza Strip and 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 Risks

•We may fail to realize all of the anticipated benefits of our 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 strategy 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.

Business Risks

•Our current cash and liquidity projections raise substantial doubt about our ability to continue as a going concern.

•Our business outlook is difficult to forecast and operating results are subject to significant fluctuations and are likely to be volatile.

•Our backlog is subject to customer cancellation or modification and such cancellations or modifications could result in a decline in sales and increased provisions for excess and obsolete inventory.Business RisksOur backlog is subject to customer cancellation or modification and such cancellations could result in a decline in sales and increased provisions for excess and obsolete inventory.

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

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•Contract cost growth on our firm fixed-price contracts exposes us to reduced profitability and the potential loss of future business and other risks.

•Our business is highly dependent on the budgetary decisions of our government customers.

•Our contracts with the U.S. government are subject to unique business, commercial and government audit risks.

•Our dependence on sales to international customers exposes us to unique business, commercial and export compliance audit risks.

•A change in our relationship with our large wireless carrier customers could have a material adverse effect.

•A change by wireless carrier partners in the pricing and other terms by which they offer our products to their end-customers could have a material adverse affect.

•Disputes with our subcontractors or key suppliers or their inability to deliver on a timely basis, could cause delays in our shipments.

•Our estimates regarding future warranty obligations may change based on a variety of factors, impacting future cost of revenue.

Strategic Growth Risks

•We face a number of risks relating to the expected long-term growth of our business.

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