COMTECH TELECOMMUNICATIONS CORP /DE/
S-2, 2000-01-14
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT
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<PAGE>



    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 2000
                                                     REGISTRATION NO. 333-
________________________________________________________________________________
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-2

                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------

                        COMTECH TELECOMMUNICATIONS CORP.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------

<TABLE>
<S>                                                   <C>
                      DELAWARE                                             11-2139466
   (STATE OR OTHER JURISDICTION OF INCORPORATION)            (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
</TABLE>

                                105 BAYLIS ROAD
                            MELVILLE, NEW YORK 11747
                                 (516) 777-8900
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------

                                 FRED KORNBERG
          CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
                        COMTECH TELECOMMUNICATIONS CORP.
                                105 BAYLIS ROAD
                            MELVILLE, NEW YORK 11747
                           TELEPHONE: (516) 777-8900
                              FAX: (516) 777-8877
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------

                          COPIES OF COMMUNICATIONS TO:

<TABLE>
<C>                                                   <S>
               ROBERT A. CANTONE, ESQ.                                THOMAS A. LITZ, ESQ.
                 PROSKAUER ROSE LLP                                    THOMPSON COBURN LLP
                    1585 BROADWAY                               ONE MERCANTILE CENTER, 34TH FLOOR
              NEW YORK, NEW YORK 10036                              ST. LOUIS, MISSOURI 63101
              TELEPHONE: (212) 969-3000                             TELEPHONE: (314) 552-6000
                 FAX: (212) 969-2900                                   FAX: (314) 552-7000
</TABLE>

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

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

     If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box. [ ]

     If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______
     If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______
     If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
                            ------------------------

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
                                                  AMOUNT TO BE      PROPOSED MAXIMUM          PROPOSED MAXIMUM         AMOUNT OF
TITLE OF EACH CLASS OF SECURITY TO BE REGISTERED   REGISTERED   OFFERING PRICE PER SHARE  AGGREGATE OFFERING PRICE  REGISTRATION FEE

<S>                                               <C>           <C>                       <C>                       <C>
Common Stock, par value $.10 per share.           2,645,000(1)         $15.50(2)               $40,997,500(2)        $10,823.36(2)
</TABLE>

(1) Includes 345,000 shares subject to an over-allotment option granted to the
    underwriters. Also includes 2,645,000 preferred stock purchase rights
    attached to each share of common stock pursuant to the Rights Agreement,
    dated as of December 15, 1998, between the Registrant and American Stock
    Transfer and Trust Company, which, prior to the occurrence of certain events
    will not be evidenced separately from the common stock.

(2) Estimated solely for purposes of calculating the registration fee, pursuant
    to Rule 457(c) under the Securities Act of 1933, and based upon the average
    of the reported high and low prices of the common stock as reported by the
    Nasdaq National Market on January 12, 2000.
                            ------------------------

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

________________________________________________________________________________







<PAGE>



THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS (SUBJECT TO COMPLETION)
Issued January 14, 2000

                                2,300,000 SHARES
                                     [LOGO]

                                  COMMON STOCK
                            ------------------------

     Comtech Telecommunications Corp. is selling 2,300,000 shares of common
stock. Our common stock is traded on the Nasdaq National Market under the symbol
CMTL. On January 12, 2000, the closing sale price of our common stock was $15.50
per share.

                 INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
                    SEE 'RISK FACTORS' BEGINNING ON PAGE 5.

<TABLE>
<CAPTION>
                                                                PER SHARE         TOTAL
                                                              -------------   -------------
<S>                                                           <C>             <C>
Public offering price.......................................  $               $
Underwriting discounts......................................  $               $
Proceeds, before expenses, to Comtech.......................  $               $
</TABLE>

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

     Comtech has granted an option to the underwriters to purchase a maximum
345,000 shares of common stock from Comtech within 30 days following the date of
this prospectus to cover over-allotments.

     The underwriters are severally underwriting the shares of common stock
being offered. The underwriters expect to deliver the shares to purchasers in
New York, New York on             , 2000.

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

<TABLE>
<S>                                                  <C>
ABN AMRO ROTHSCHILD                                                 STIFEL, NICOLAUS & COMPANY
A DIVISION OF ABN AMRO INCORPORATED                                        INCORPORATED
</TABLE>

                          HCFP/BRENNER SECURITIES, LLC

               The date of this Prospectus is             , 2000










<PAGE>



     [The inside front cover of the prospectus contains a diagram outlining the
operations of our Mobile Data Communications Services Segment and its
applications. The diagram shows an arrow labeled 'Customer Access,' which points
to a box labeled 'Customer Support Segment.' This box is connected by a line
labeled 'Internet, Microwave or Satellite' to a box labeled 'Network Management
Segment.' This box is connected by a line to a drawing of an earth based
station, which is labeled 'COMTECH Gateway Earth Station.' A jagged line
connects this drawing to a drawing of a space based satellite, which is labeled
'Commercial L-Band/S-Band Space Segment.' Four lines, each with an arrow on each
end, emanate from this drawing. Each line points to one of four following
diagrams: a train engine (labeled 'Rail Car GPS'); a ship (labeled 'Marine
Navigation'); a truck, with a cut out of our transceiver, a lap top computer
and a cellular telephone (labeled 'Truck Tracking'); and an aircraft (labeled
'Search & Rescue Communications').]

     Comtech's Mobile Data Communications Services business segment offers a
Web-enabled, satellite-based mobile data communications system that can provide
secure, near real-time two-way messaging links between mobile platforms, such as
land vehicles, rail and aircraft, or remotely placed fixed site sensors and user
headquarters through our Germantown, Maryland satellite earth station gateway.

     Services range from simple asset location tracking, to messaging, e-mail,
broadcasting of information, security alerts and remote meter, gauge and other
sensor monitoring.








<PAGE>


                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Prospectus Summary..........................................    1
Risk Factors................................................    5
Use of Proceeds.............................................   14
Price Range of Common Stock.................................   14
Dividend Policy.............................................   14
Capitalization..............................................   15
Selected Consolidated Financial Data........................   16
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................   17
Business....................................................   25
Management..................................................   37
Certain Transactions........................................   39
Beneficial Ownership of Securities..........................   39
Description of Capital Stock................................   41
Underwriting................................................   45
Legal Matters...............................................   46
Experts.....................................................   46
Where You Can Find More Information.........................   46
Index to Consolidated Financial Statements..................  F-1
</TABLE>

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

                    CAUTION ABOUT FORWARD-LOOKING STATEMENTS

     Certain statements in the 'Risk Factors' section and elsewhere in this
prospectus constitute 'forward-looking statements' within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These forward-looking statements include:

      Statements of goals, intentions and expectations;

      Estimates of risks and of future costs and benefits;

      Statements as to Year 2000 compliance; and

      Statements of the ability to achieve financial and other goals.

     These forward-looking statements are subject to significant uncertainties
because they are based upon or are affected by:

      Management's estimates and projections of U.S. and international economic
      and business conditions;

      Statements by suppliers of data processing equipment and services,
      government agencies and other third parties as to Year 2000 compliance and
      costs;

      Future laws and regulations; and

      A variety of other matters, including those described under 'Risk
      Factors.'

     Because of these uncertainties, the actual future results may be materially
different from the results indicated by these forward-looking statements. In
addition, our past results of operations do not necessarily indicate our future
results.
                                      ------------------------

     Unless the context otherwise indicates, the terms 'Comtech,' 'we,' 'us'
and 'our' mean Comtech Telecommunications Corp., Comtech's subsidiaries and
Comtech's predecessor corporation. All share and per share information has been
adjusted to reflect the 3-for-2 stock split in the form of a stock dividend that
occurred in July 1999.

     Our principal executive offices are located at 105 Baylis Road, Melville,
New York 11747. The headquarters' telephone number is (516) 777-8900.

     At our annual meeting held December 14, 1999, the stockholders approved an
increase in the number of shares of common stock authorized from 15,000,000 to
30,000,000. They also approved the 2000 Stock Incentive Plan whereby an
additional 500,000 shares are reserved for issuance under such plan.

     Except as otherwise noted, all information in this prospectus assumes no
exercise of the underwriters' over-allotment option.








<PAGE>


                               PROSPECTUS SUMMARY

     This summary highlights information contained in other parts of this
prospectus. It is not complete and may not contain all of the information that
you should consider before deciding to invest in shares of our common stock. The
other information is important, so you should read the entire prospectus
carefully.

                                    COMTECH

     We design, develop, produce and market sophisticated wireless
telecommunications transmission components and systems and solid state,
high-power broadband amplifiers for commercial and government purposes. Our
products are used in point-to-point and point-to-multi-point telecommunications
transmission and reception applications such as satellite communications,
over-the-horizon microwave systems, cellular telephone systems and cable and
broadcast television. Our broadband amplifier products are also used in cellular
and PCS instrumentation testing and certain defense systems. We meet the high
performance requirements of our telecommunications customers by drawing upon
proprietary expertise in microwave transmission and amplification technologies
developed over more than 30 years of operations.

     The demand for mobile data communications services and products has
increased dramatically in recent years for both commercial and government
applications. This demand has been driven by advances in digital technology
coupled with the need to better locate, manage, monitor and communicate with
mobile and fixed assets. Recognizing the potential of this market, we acquired
the assets of Mobile Datacom Corporation in 1998, forming a new subsidiary,
Comtech Mobile Datacom Corporation, a development-stage company. Through this
subsidiary, we have continued to develop and are marketing a Web-enabled,
satellite-based data communications system for land mobile, remote sensing,
utility, aviation and maritime markets.

     We believe that our mobile data communications system offers significant
operational and cost advantages over competitive systems. Largely as a result of
these advantages, the U.S. Army awarded us a contract in June 1999, to provide a
global system for its Logistics Command for use in tracking its mobile assets
and communicating by message in near real-time with these units from fixed and
mobile command centers. The contract, which is subject to government funding and
deployment decisions based upon, among other things, additional field testing,
provides for the purchase of up to $418.2 million in mobile terminal units and
global data communications services over an eight-year period. In September
1999, we completed a validation test involving communicating between mobile
terminals in Germany and Texas over two satellite links, with the respective
ground stations interconnected via the Internet. An operational and
technological evaluation is scheduled to take place in March 2000. Due to the
increased visibility our system has achieved as a result of this contract,
other agencies of the Department of Defense, as well as a variety of other
government agencies, have shown an increased interest in the potential use
of our system.

     While we anticipate receiving our first significant order from the U.S.
Army in the second half of fiscal 2000, we have not yet received significant
orders from the U.S. Army or any other government agency under this contract,
which can be terminated at any time, and we cannot assure you that we will
receive any such orders.

     We conduct our business through three decentralized but complementary
product and service segments: mobile data communications services,
telecommunications transmission and RF microwave amplifiers.

    MOBILE DATA COMMUNICATIONS SERVICES -- secure, near real-time two-way
    messaging between mobile platforms, such as land vehicles, rail and
    aircraft, or remotely placed fixed site sensors and user headquarters
    through our Germantown, Maryland satellite earth station gateway. The
    network will employ leased satellite capacity to communicate between the
    mobile platforms and user headquarters -- via satellite, terrestrial and
    Internet links. Depending upon the end user's needs, our services can be
    configured to provide a wide range of data applications,

                                       1







<PAGE>


    ranging from simple position tracking to messaging, e-mail, broadcasting of
    information and meter, gauge and other sensor monitoring.

    TELECOMMUNICATIONS TRANSMISSION -- modems, frequency up converters and down
    converters, solid state, high-power amplifiers, very small aperture terminal
    (VSAT) transceivers and antennas for satellite ground station applications,
    and adaptive modems and microwave radios for over-the-horizon microwave
    communications systems. Primary markets include satellite systems
    integrators and communications services providers, defense contractors and
    oil companies. Customers include Globecom Systems, Inc., Hughes Network
    Systems, IDB Worldcom Inc., DirecTV, ATT Alascom, Northrop Grumman, BP Amoco
    and Exxon.

    RF MICROWAVE AMPLIFIERS -- solid state, high-power broadband amplifier
    products in the microwave and radio frequency (RF) spectrums for a wide
    range of applications, including cellular and wireless instrumentation
    testing, and jamming and identification friend or foe (IFF) and other
    defense systems. Target markets are communications service providers,
    cellular and PCS telephony system manufacturers and defense contractors.
    Customers include Motorola Inc., Ericsson Inc., Nokia Telecommunications,
    Inc., Lucent Technologies Inc., Litton Systems Inc., Raytheon Systems
    Company, Lockheed Martin Corp. and the U.S. government.

BUSINESS STRATEGIES

     We manage our business with the following principal corporate strategies:

           Operate on a decentralized basis to maximize responsiveness to
           customers.

           Continue product innovation through investment in research and
           development.

           Capitalize on synergies among our business segments to secure larger
           contracts.

           Pursue acquisitions and investments in complementary businesses,
           technologies, products and services.

     Specific operating strategies for our business segments include:

        MOBILE DATA COMMUNICATIONS SERVICES.

           Capture the opportunities available to supply the Logistics Command
           under the U.S. Army contract.

           Pursue identified opportunities to offer our products and services to
           other government agencies.

           Penetrate the emerging markets for commercial applications,
           particularly in the land mobile and remote sensing markets.

        TELECOMMUNICATIONS TRANSMISSION PRODUCTS.

           Continue broadening our line of satellite ground station products to
           better serve our customers as a full-line supplier of video, as well
           as data and voice, products.

           Enhance our existing products to serve rapidly developing markets
           requiring higher speed and greater bandwidth, such as emerging
           applications for wireless Internet access.

           Maintain our market leadership in over-the-horizon microwave
           technologies by broadening applications and increasing product
           performance.

                                       2







<PAGE>


        RF MICROWAVE AMPLIFIERS.

           Continue to incorporate the latest advances in solid state device
           electronics.

           Maintain our technical leadership in this product sector to encourage
           system integrators and end users to outsource their requirements
           rather than pursue this specialized field in-house.

           Expand our product line to include PCS base station amplifiers.

           Combine high-power amplifiers and solid state switches for advanced
           communications jamming applications.

     The demand for telecommunications is increasing worldwide as emerging
economies seek to modernize their infrastructure and as increasingly
information-intensive markets introduce new telecommunications services. The
telecommunications industry has expanded rapidly during the past decade due to
both technological advances and deregulation. Advances in technology have
lowered per-unit communications costs, increased product reliability and
encouraged a proliferation of new and enhanced communications products and
services.

     We believe that the global expansion of telecommunications, particularly in
developing countries in Asia, South America, the Middle East and Eastern Europe,
represents a key opportunity for the continued growth of our telecommunications
business. Sales for use by international customers (including sales to prime
contractors' international customers) represented approximately 57.3%, 46.5%,
60.1% and 85.5% of our net sales in fiscal years 1997, 1998, 1999 and the three
months ended October 31, 1999, respectively.

                                  THE OFFERING

     The following information is based on 4,492,493 common shares outstanding
at December 31, 1999. This number does not include 1,381,578 shares reserved for
issuance under our equity incentive plans. Under these plans, options for
848,768 shares with a weighted average exercise price of $3.87 per share are
outstanding, of which options for 347,338 shares currently are exercisable. In
addition, we have outstanding warrants to purchase 150,000 shares with an
exercise price of $6.57 per share.

<TABLE>
<S>                                                    <C>
Common stock offered by Comtech......................  2,300,000 shares
Common stock to be outstanding after the offering....  6,792,493 shares
Use of proceeds......................................  We intend to use the net proceeds of
                                                       this offering principally for the
                                                       development and expansion of our mobile
                                                       data communications services business. A
                                                       portion of the proceeds will be used for
                                                       other corporate purposes, including
                                                       potential acquisitions and investments
                                                       in complementary businesses,
                                                       technologies, products or services.
Risk Factors.........................................  For a discussion of certain risks you
                                                       should consider before investing in the
                                                       shares, see 'Risk Factors' beginning on
                                                       page 5.
Nasdaq National Market symbol........................  CMTL
</TABLE>

                                       3







<PAGE>


                      SUMMARY CONSOLIDATED FINANCIAL DATA
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED
                                                    OCTOBER 31,                      YEAR ENDED JULY 31,
                                                --------------------   -----------------------------------------------
                                                 1999         1998      1999      1998      1997      1996      1995
                                                 ----         ----      ----      ----      ----      ----      ----
<S>                                             <C>          <C>       <C>       <C>       <C>       <C>       <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:

Net sales.....................................  $11,747      $ 8,735   $37,886   $30,114   $24,746   $20,916   $16,455

Operating income (loss).......................      865          609     2,827     1,452       638       341    (1,335)

Income (loss) from continuing operations
  before income taxes.........................      860          578     2,727     1,284       538        99    (1,485)

Provision (benefit) for income taxes..........      325           45    (3,754)(1)     180      54        27        17

Loss on discontinued operations, net of
  applicable income tax benefits..............    --            (139)   (1,216)    --        --        --        --
                                                -------      -------   -------   -------   -------   -------   -------

Net income (loss).............................  $   535      $   394   $ 5,265   $ 1,104   $   484   $    72   $(1,502)
                                                -------      -------   -------   -------   -------   -------   -------
                                                -------      -------   -------   -------   -------   -------   -------

Basic income (loss) per share:

    Income (loss) from continuing
      operations..............................  $  0.12      $  0.14   $  1.56   $  0.28   $  0.13   $  0.02   $ (0.39)

    Loss from discontinued operations.........    --           (0.04)    (0.29)    --        --        --        --
                                                -------      -------   -------   -------   -------   -------   -------

    Basic income (loss).......................  $  0.12      $  0.10   $  1.27   $  0.28   $  0.13   $  0.02   $ (0.39)
                                                -------      -------   -------   -------   -------   -------   -------
                                                -------      -------   -------   -------   -------   -------   -------

Diluted income (loss) per share:

    Income (loss) from continuing
      operations..............................  $  0.11      $  0.12   $  1.42   $  0.27   $  0.12   $  0.02   $ (0.39)

    Loss from discontinued operations.........    --           (0.03)    (0.27)    --        --        --        --
                                                -------      -------   -------   -------   -------   -------   -------

    Diluted income (loss).....................  $  0.11      $  0.09   $  1.15   $  0.27   $  0.12   $  0.02   $ (0.39)
                                                -------      -------   -------   -------   -------   -------   -------
                                                -------      -------   -------   -------   -------   -------   -------

Weighted average number of common shares
  outstanding -- basic computation............    4,399        3,926     4,143     3,902     3,873     3,887     3,885

Weighted average number of common and common
  equivalent shares outstanding assuming
  dilution -- diluted computation.............    5,082        4,271     4,573     4,166     3,906     3,992     3,885

OTHER OPERATING DATA:

Backlog at period-end.........................  $36,178(2)   $10,651   $38,637(2) $15,452  $14,724   $ 9,700   $10,242

New orders....................................    9,288        3,934    61,071    30,842    29,770    20,374    21,694

Research and development -- internal and
  customer funded.............................      776          521     3,801     1,675     1,459     1,257     1,418
</TABLE>

<TABLE>
<CAPTION>
                                                                  OCTOBER 31, 1999
                                                              ------------------------
                                                              ACTUAL    AS ADJUSTED(3)
                                                              ------    --------------
<S>                                                           <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:

Working capital.............................................  $11,316      $43,971

Total assets................................................   29,915       62,570

Long-term debt, less current installments...................      825          825

Stockholders' equity........................................   19,019       51,674
</TABLE>

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

(1) In accordance with applicable accounting principles, during fiscal 1999 we
    reduced our previous valuation reserve for deferred tax assets since we
    believe that it is more likely than not that we will generate sufficient
    taxable income to utilize our deferred tax assets.

(2) Includes $100 and $400 at July 31, 1999 and October 31, 1999, respectively,
    of funded backlog relating to the U.S. Army contract, which was awarded in
    June 1999.

(3) Gives effect to common stock to be offered by us in this offering and the
    estimated net proceeds as described under 'Use of Proceeds.'

                                       4








<PAGE>


                                  RISK FACTORS

     You should carefully consider the risks described below before deciding to
invest in our common stock. These risks could materially and adversely affect
our business, financial condition and results of future operations. If that were
to happen, the trading price of our common stock could decline, and you could
lose all or part of your investment.

     The risks described below are not the only ones we face. Our business
operations could also be impaired by additional risks and uncertainties that are
not presently known to us, or that we currently consider immaterial.

ALL OF OUR BUSINESSES ARE SUBJECT TO RAPID TECHNOLOGICAL CHANGE; WE MUST KEEP
PACE WITH CHANGES TO COMPETE SUCCESSFULLY.

     We are engaged in businesses characterized by rapid technological change,
evolving industry standards, frequent new product announcements and
enhancements, and changing customer demands. The introduction of products and
services embodying new technologies and the emergence of new industry standards
could render our products and services obsolete or non-competitive. The
technology used in our products and services evolves rapidly, and our business
position depends, in large part, on the continuous refinement of our scientific
and engineering expertise and the development, either through internal research
and development or acquisitions, of new or enhanced products and technologies.
We may not have the economic or technological resources to be successful in such
efforts and we may not be able to identify and respond to technological
improvements made by our competitors in a timely or cost-effective fashion. A
significant technological breakthrough by others, including smaller competitors
or new firms, could have a material adverse impact on our business.

OUR MOBILE DATA COMMUNICATIONS SERVICES BUSINESS IS SUBJECT TO RISK.

     Our mobile data communications services business is a development-stage
business which has a limited operating history and it has not yet generated any
material sales. It is subject to all of the risks inherent in the operation of a
new business enterprise. Moreover, our business experience has been in producing
products, not in providing services. We may not be able to implement and operate
our mobile data communications services business successfully. In addition to
the other risk factors described in this section, the risk factors applicable to
our mobile data communications services business include the following:

      Although the U.S. Army contract obligates us to provide up to 56,000
      mobile terminals and worldwide satellite services over an eight-year
      period as and when ordered by the U.S. Army and at the fixed prices and
      other terms set forth in this contract, the U.S. Army is not obligated to
      purchase any terminals or services under this contract and may terminate
      this contract at its convenience. Sales under the U.S. Army contract will
      be subject to unpredictable funding and deployment decisions and
      contingencies, including, among other things, additional field testing.
      We currently anticipate receiving our first production order under this
      contract during the second half of fiscal 2000, but we cannot assure you
      that any orders will be received.

      Certain components that we need have a purchasing lead time of four months
      or longer, and the U.S. Army contract requires us to provide mobile
      terminals within 30 days after we receive an order. As a result of these
      supply and manufacturing lead times, we anticipate spending approximately
      $4.2 million for mobile terminal parts and assembly and supporting
      infrastructures before we receive a significant order from the U.S. Army.

      Our success in commercial markets will depend on, among other things, our
      ability to access the best distribution channels, the development of
      applications which create real value for the customer and our ability to
      attract and retain qualified personnel. Delays in delivering terminals
      could also adversely affect our ability to obtain and retain commercial
      customers.

      In general, as we seek to grow our mobile data communications services
      business, we anticipate that we will need to maintain a substantial
      inventory in order to provide terminals

                                       5







<PAGE>


      to our customers on a timely basis. If forecasted orders are not received,
      we might be left with large inventories of slow moving or unusable parts
      or terminals. This could result in an adverse effect on our business,
      results of operations, liquidity and financial position.

      We will lease the satellite capacity necessary to operate our system from
      third party satellite networks. We do not currently have long-term leases
      with any satellite network, but we are in negotiations with two satellite
      network operators for long-term satellite coverage in North America,
      Central America and the northern rim of South America, and expect to sign
      a lease for such coverage when we receive material production orders from
      the U.S. Army. Although we cannot assure you that the lease that we
      ultimately enter into will be on the following terms, we expect that any
      lease will have a duration of four to five years and provide for total
      lease payments of $4.0 million to $5.0 million over the lease term, with
      the early monthly fee payments being less than later payments, in
      recognition of our need to sign up customers and generate revenue. We
      expect that any lease would require us to pay a penalty of up to 12 months
      of fees if we terminate the lease before the end of its term. While
      several vendors have announced plans for new satellite systems, only one
      provider, INMARSAT, presently offers the global coverage that will be
      required under the U.S. Army contract. We cannot assure you that we will
      be able to obtain sufficient satellite capacity or geographical coverage
      from any vendor to operate our mobile data communications services system
      on acceptable terms or on a timely basis.

      There are several existing competitors in the mobile data communications
      market that have established systems with sizable customer bases and much
      greater financial resources than us. The largest of these competitors is
      QUALCOMM Incorporated, which reported that, as of September 30, 1999, it
      had sold more than 300,000 mobile terminals and provided messaging and
      maintenance services to more than 850 transportation companies in the
      United States. Orbcomm Global, L.P. has deployed a low earth orbit
      satellite system for remote data communications services, including
      tracking and messaging. Orbcomm's system has generated considerable
      commercial interest. Existing competitors, including terrestrial service
      providers such as PCS vendors, are also aggressively pricing their
      products and services and may continue to do so in the future. Competitors
      continue to offer new value added products and services, which we may be
      unable to match on a timely or cost-effective basis. Increased competition
      may impact margins throughout the industry. We anticipate that new
      competitors will enter the mobile data communications market in the
      future.

      We are currently operating our system under a temporary license from the
      Federal Communications Commission ('FCC'). Although we expect to be able
      to obtain a permanent license for commercial operations on a timely basis,
      we can give you no assurance that we will be able to do so.

      The satellite system we are currently using, the Canadian based TMI
      Communications' system, was authorized by the FCC in November 1999 to
      provide mobile communications services to authorized users in the United
      States. A competitor of TMI has filed notice of intent to challenge the
      FCC's action in Federal court. We believe the challenge will be rejected
      by the Court, but can give you no assurance as to the outcome. The FCC's
      authorization also imposed certain technical limitations on mobile
      terminal operations which will require us, as well as other data
      service providers, to seek waivers to avoid the need for substantial
      changes to its existing system. Based on FCC decisions on related matters
      involving a U.S. company (the same company challenging the FCC's action
      with respect to TMI), we expect that the FCC will grant waivers permitting
      mobile data services to be offered without requiring extensive system
      changes. However, we can give you no assurance that the FCC will grant
      such waivers, or do so on a timely basis.

      All satellite communications are subject to the risk that a satellite or
      ground station failure or a natural disaster may interrupt service.
      Interruptions in service could have a material adverse effect on our
      results of operations. With respect to U.S. satellite service, satellite
      network providers have arranged to provide back-up satellite and ground
      station service for each other in the event of catastrophic failure. We
      expect to establish a redundant gateway

                                       6







<PAGE>


      communications center located distant from our main Germantown facility
      during fiscal 2000 as our business develops at an estimated cost of
      $250,000.

      Our mobile terminals will be manufactured by subcontractors, the first of
      which is SCI Systems, Inc. of Huntsville, Alabama, a large electronics
      contract manufacturer. While we have successfully produced limited
      quantities of terminals, we have not yet produced significant quantities
      of terminals or complete assemblies (which include computers and palm top
      input/output devices for user-customized applications) and we cannot
      assure you that we will be able to obtain them on a timely or
      cost-effective basis.

      We believe that we own or have licensed all intellectual property rights
      necessary for the operation of our mobile data communications services
      business as currently contemplated. If our terminals or services are found
      to infringe on protected technology, we could be required to redesign our
      terminals, license the protected technology, and/or pay damages or other
      compensation to the infringed party. If we are unable to license protected
      technology used in our terminals or if we were required to redesign our
      terminals, we could be prohibited from making and selling our terminals or
      providing mobile data communications services.

DUE TO MANY FACTORS, INCLUDING THE AMOUNT OF BUSINESS REPRESENTED BY LARGE
CONTRACTS, OUR OPERATING RESULTS ARE DIFFICULT TO FORECAST AND MAY BE VOLATILE.

     We have experienced, and will experience in the future, significant
fluctuations in sales and operating results from quarter to quarter. One reason
for this is that a significant portion of our business -- primarily the
over-the-horizon microwave systems and other products of our telecommunications
transmission business segment and a portion of our RF microwave amplifier
business segment -- is derived from a limited number of relatively large
customer contracts, the timing of which cannot be predicted. For example, sales
to one customer represented 58.2% of our total net sales in the three months
ended October 31, 1999. While we generally recognize income under contracts when
the products are shipped, income is recognized on the percentage-of-completion
method when the performance of a contract will extend beyond a 12-month period.
Our net sales and operating results also may vary significantly from period to
period because of the following factors: product mix sold; fluctuating market
demand; price competition; new product introductions by our competitors;
fluctuations in foreign currency exchange rates; unexpected changes in delivery
of components or subsystems; political instability; regulatory developments; and
general economic conditions. Accordingly, you should not rely on
period-to-period comparisons as indications of our future performance because
these comparisons may not be meaningful.

OUR DEPENDENCE ON INTERNATIONAL SALES MAY ADVERSELY AFFECT US.

     Sales for use by international customers (including sales to prime
contractors' international customers) represented approximately 57.3%, 46.5%,
60.1% and 85.5% of our total net sales for the fiscal years ended July 31, 1997,
1998 and 1999 and the three months ended October 31, 1999, respectively.
Approximately 92.1% and 84.1% of our backlog at July 31, 1999 and October 31,
1999 consisted of orders for use by foreign customers. We expect that
international sales will continue to be a substantial portion of our total
sales. These sales expose us to certain risks, including barriers to trade,
fluctuations in foreign currency exchange rates (which may make our products
less price competitive), political and economic instability, availability of
suitable export financing, tariff regulations, and other U.S. and foreign
regulations that may apply to the export of our products, as well as the
potential impact of Year 2000 computer problems on developing economies and the
generally greater difficulties of doing business abroad. We attempt to reduce
the risk of doing business in foreign countries by seeking subcontracts with
large system suppliers, contracts denominated in U.S. dollars, advance payments
and irrevocable letters of credit in our favor.

     Foreign defense contracts generally contain provisions relating to
termination at the convenience of the government. In addition, certain of our
products and systems may require

                                       7







<PAGE>


licenses from U.S. government agencies for export from the United States, and
some of our products are not permitted to be exported. We cannot be sure of our
ability to gain any licenses that may be required to export our products, and
failure to receive required licenses could materially reduce our ability to sell
our products outside the United States.

OUR DEPENDENCE ON COMPONENT AVAILABILITY, SUBCONTRACTOR AVAILABILITY AND
PERFORMANCE AND KEY SUPPLIERS MAY ADVERSELY AFFECT US.

     We do not generally maintain a substantial inventory of components and
subsystems. We obtain certain components and subsystems from a single source or
a limited number of sources, but believe that most components and subsystems are
available from alternative suppliers and subcontractors. A significant
interruption in the delivery of such items, however, could have a material
adverse effect on our business and results of operations.

OUR BACKLOG IS SUBJECT TO CUSTOMER CANCELLATION OR MODIFICATION.

     We currently have a backlog of orders, mostly under contracts that the
customer may modify or terminate. We cannot assure you that our backlog will
result in net sales.

OUR SALES TO THE U.S. GOVERNMENT ARE SUBJECT TO FUNDING AND OTHER RISKS.

     We sell our products and services to agencies of the U.S. government or to
contractors or subcontractors under contracts with U.S. agencies. These sales
accounted for approximately, 17.0%, 19.5%, 15.6% and 3.7% of our total net sales
in fiscal 1997, 1998 and 1999 and the three months ended October 31, 1999,
respectively. As a result of our contract with the U.S. Army, we expect sales to
agencies of the U.S. government to increase significantly in the future. As is
customary for government sales, these sales are subject to various risks. These
risks include the ability of the U.S. government to:

      change government policy which could reduce our business;

      terminate existing contracts for its convenience; and

      audit our contract-related costs and fees, including allocated indirect
      costs.

     A reduction in government agency budgets could cause us to experience
declining net sales, increased pressure on operating margins and, in certain
cases, net losses. The loss or significant cutback of a large program in which
we participate could also materially adversely affect our future results of
operations.

     All of our U.S. government contracts can be terminated by the U.S.
government for its convenience. Termination for convenience provisions provide
only for our recovery of costs incurred or committed, settlement expenses and
profit on work completed prior to termination. In addition to the right of the
U.S. government to terminate, U.S. government contracts are conditioned upon the
continuing approval by Congress of the necessary spending. Congress usually
appropriates funds for a given program on a fiscal-year basis even though
contract performance may take more than one year. Consequently, at the beginning
of a major program, the contract is usually not fully funded, and additional
monies are normally committed to the contract only if, as and when
appropriations are made by Congress for future fiscal years.

     The U.S. government may review our costs and performance on their
contracts, as well as our accounting and general business practices. Based on
the results of such audits, the U.S. government may adjust our contract-related
costs and fees, including allocated indirect costs. In addition, under U.S.
government purchasing regulations, some of our costs, including certain
financing costs, goodwill, portions of research and development costs, and
certain marketing expenses, may not be reimbursable under U.S. government
contracts.

     We obtain U.S. government contracts through a competitive bidding process.
We cannot assure you that we will continue to win competitively awarded
contracts or that awarded contracts will generate sufficient net sales to result
in profitability.

                                       8







<PAGE>


ACQUISITIONS AND STRATEGIC INVESTMENTS MAY DIVERT OUR RESOURCES AND MANAGEMENT
ATTENTION; RESULTS MAY FALL SHORT OF EXPECTATIONS.

     We intend to continue pursuing selected acquisitions of and investments in
businesses, technologies and product lines as a key component of our growth
strategy. Any future acquisition or investment may result in the use of
significant amounts of cash, potentially dilutive issuances of equity
securities, incurrence of debt and amortization expenses related to goodwill and
other intangible assets. Acquisitions involve numerous risks, including:

      difficulties in the integration and assimilation of the operations,
      technologies, products and personnel of an acquired business;

      diversion of management's attention from other business concerns; and

      potential loss of key employees or customers of any acquired business.

OUR FIXED PRICE CONTRACTS SUBJECT US TO RISK.

     Almost all of our products and services are sold under fixed price
contracts. This means that we bear the risk if unanticipated technological,
manufacturing, supply or other problems or price increases delay or increase the
cost of performance.

OUR MANAGEMENT HAS BROAD DISCRETION IN USE OF PROCEEDS OF THIS OFFERING.

     Our management may spend the proceeds from this offering in ways with which
our stockholders may not agree. We intend to use the net proceeds from the
offering primarily to continue the development and expansion of our mobile data
communications services business, including working capital, inventory build-up,
ongoing research and development, capital expenditures, additional personnel and
to build and/or acquire sales and marketing capability. We will use a portion of
the net proceeds of this offering for other corporate purposes, including
acquiring or investing in complementary businesses, technologies, services or
products, although we do not currently have any agreement, understanding or
commitment with respect to any material acquisition or investment.

OUR STOCKHOLDER RIGHTS PLAN, CERTIFICATE OF INCORPORATION AND DELAWARE LAW COULD
ADVERSELY AFFECT THE PERFORMANCE OF OUR STOCK.

     Our certificate of incorporation includes provisions that stagger
directors' terms of office and require the approval of holders of at least 80%
of our voting stock as a condition to a merger or certain other business
transactions with, or proposed by, a holder of 10% or more of our voting stock
(including the approval of the holders of at least 66 2/3% of our voting stock
not held by such stockholder). This approval is not required in cases where
certain of our directors approve the transaction or where certain minimum price
criteria and other procedural requirements are met. Our certificate of
incorporation also requires the approvals of holders of at least 66 2/3% of our
voting stock to amend or change the provisions mentioned relating to the
classified board or the business transactions approval. Finally, our certificate
of incorporation provides that any action required or permitted to be taken by
our stockholders must be effected at a duly called annual or special meeting
rather than by any consent in writing.

     The classified board, business transactions approval and other charter
provisions and provisions of Delaware law (the state in which we are
incorporated) may discourage certain types of transactions involving an actual
or potential change in our control. These provisions may also discourage certain
types of transactions in which our stockholders might otherwise receive a
premium for their shares over then current market prices and may limit our
stockholders' ability to approve transactions that they may deem to be in their
best interests.

     Further, we have distributed a dividend of one preferred stock purchase
right for each outstanding share of our common stock. Each newly issued share of
our common stock (including shares sold in this offering) will also be granted a
right. These rights would cause substantial dilution to the ownership of a
person or group that attempts to acquire us on terms not approved

                                       9







<PAGE>


by our Board of Directors and may have the effect of deterring hostile takeover
attempts. In addition, our Board of Directors has the authority to fix the
rights and preferences of and issue shares of preferred stock without
stockholder approval. This right may have the effect of delaying or preventing a
change in control of Comtech without action by our stockholders.

OUR MARKETS ARE HIGHLY COMPETITIVE.

     The markets for our products are highly competitive. We cannot assure you
that we will be able to successfully compete or that our competitors will not
develop new technologies and products that are more commercially effective than
our own. We expect the Department of Defense's increased use of commercial
off-the-shelf products and components in military equipment will encourage new
competitors to enter the market. Also, although the implementation of advanced
telecommunications services is in its early stages in many developing countries,
we believe competition may intensify as businesses and foreign governments
realize the market potential of telecommunications services. Many of our
competitors have financial, technical, marketing, sales and distribution
resources greater than ours.

THE LOSS OF KEY TECHNICAL OR MANAGEMENT PERSONNEL COULD ADVERSELY AFFECT OUR
BUSINESS.

     Our success depends on the continued contributions of key technical
management personnel, including the key management at each of our subsidiaries.
Many of our key personnel, particularly the key engineers of our subsidiaries,
would be difficult to replace, and are not subject to employment or
noncompetition agreements. The development of our mobile data communications
services business is particularly dependent upon Joel R. Alper, the President of
our Comtech Mobile Datacom Corp. subsidiary. The success of our Comtech Systems,
Inc. subsidiary is particularly dependent upon Richard L. Burt, its President.
Our growth and future success will depend in large part upon our ability to
attract and retain highly qualified engineering, sales and marketing personnel.
Competition for such personnel from other companies, academic institutions,
government entities and other organizations is intense. Although we believe that
we have been successful to date in recruiting and retaining key personnel, we
may not be successful in attracting and retaining the personnel we will need to
continue to grow and operate profitably. Also, the management skills that have
been appropriate for us in the past may not continue to be appropriate if we
continue to grow and diversify.

     Our success also depends to a significant extent upon our President and
Chief Executive Officer, Fred Kornberg. The loss of the services of Mr. Kornberg
could have a material adverse effect on us. We have entered into an employment
contract with Mr. Kornberg. We have also purchased key man insurance in the
amount of $1.0 million on each of Fred Kornberg, Joel R. Alper and Richard L.
Burt.

THE POTENTIAL LOSS OF TAX CARRYFORWARDS MAY ADVERSELY AFFECT OUR FINANCIAL
RESULTS.

     As a result of this offering, our ability to use our net operating loss
carryforwards, approximately $9.4 million for U.S. Federal income tax purposes
as of October 31, 1999, to offset U.S. Federal taxable income in the current and
future fiscal years might be materially limited. The sale of common stock in
this offering will increase the likelihood that future changes in stock
ownership (including changes resulting from the exercise of outstanding options
and warrants or future acquisitions) might limit our ability to use our net
operating loss carryforwards.

OUR FISCAL 1999 RESULTS WERE SIGNIFICANTLY IMPACTED BY THE REVERSAL OF NOL AND
OTHER DEFERRED TAX ASSET RESERVES.

     Approximately $4.6 million of the $6.5 million income from continuing
operations that we reported in fiscal 1999 was the result of the reversals of
valuation reserves that had been taken in prior years against our net operating
loss carryforwards and other deferred tax assets. The net income from such
reversals was recognized in full in the second and fourth quarters of fiscal
1999, and these non-recurring events may adversely affect comparisons between
our financial results for

                                       10







<PAGE>


such period and future fiscal quarters and years. We do not currently believe,
however, that any potential limitation on our ability to use our net operating
loss carryforwards as a result of changes in stock ownership would require us to
establish valuation reserves against our deferred tax assets. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.'

OUR OUTSTANDING AND FUTURE OPTIONS AND WARRANTS MAY DILUTE THE PERCENTAGE OF
OWNERSHIP INTEREST OF OUR STOCKHOLDERS AND MAY ADVERSELY AFFECT THE TERMS UPON
WHICH WE OBTAIN CAPITAL.

     As of December 31, 1999, options to purchase an aggregate of 848,768 shares
of our stock at a weighted average price of $3.87 per share were outstanding, of
which options for 347,338 shares were exercisable. These options were granted to
key employees under our equity incentive plans as part of our long-term
incentive compensation strategy to attract, retain and incentivize highly
qualified employees. A total of approximately 1,381,578 shares of our stock are
reserved for issuance under our equity incentive plans, including the shares
subject to these outstanding options. In addition, there are outstanding
warrants to purchase an aggregate of 150,000 shares of our stock at an exercise
price of $6.57 per share.

     These options and warrants constitute opportunities to profit from a rise
in the market price of our securities without assuming the risk of ownership,
with a resulting dilution in the interest of other security holders. As long as
these options and warrants remain unexercised, the terms under which we could
obtain capital may be adversely affected. Moreover, the holders of these options
and warrants would be expected to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital by a new offering of our
securities on terms more favorable than those provided by such options and
warrants.

SALES OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK AFTER THIS OFFERING COULD
DECREASE OUR STOCK PRICE AND OUR ABILITY TO RAISE CAPITAL.

     Sales of a large number of shares of our common stock (including shares
issuable upon the exercise of the stock options and warrants described in the
preceding risk factor) by current holders of our common stock, stock options,
and warrants, or the perception that such sales might occur, could decrease the
market price of our common stock and our ability to raise capital. As of
December 31, 1999, our directors and executive officers owned, in the aggregate,
494,785 outstanding shares and options to purchase an additional 261,888 shares
that were either currently exercisable or would become exercisable within
60 days.

     Our executive officers and directors have agreed to a 180-day 'lock-up'
with respect to the shares of common stock and any other Comtech securities that
they beneficially own or have the right to acquire upon exercise of options. We
have agreed with the underwriters to a 180-day 'lock-up' with respect to
previously unissued or treasury shares. This means that, with certain
exceptions, during the 'lock-up' periods, Comtech and these officers and
directors may not offer, sell, pledge or otherwise dispose of our common stock
without the prior written consent of ABN AMRO Incorporated.

PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED; WE ARE SUBJECT TO THE RISK
OF THIRD PARTY CLAIMS OF INFRINGEMENT.

     Our businesses rely in large part upon our proprietary scientific and
engineering 'know-how' and production techniques. Historically, patents have not
been an important part of our protection of our intellectual property rights. We
rely upon the laws of unfair competition, restrictions in licensing agreements
and confidentiality agreements to protect our intellectual property. We limit
access to and distribution of our proprietary information. These efforts allow
us to rely upon the knowledge and experience of our management and technical
personnel to market our existing products and to develop new products. The
departure of any of our key management and technical personnel, the breach of
their confidentiality and non-disclosure obligations to us or the failure to
achieve our intellectual property objectives may have a material adverse effect
on our business, financial condition and results of operations.

                                       11







<PAGE>


     Our ability to compete successfully and achieve future revenue growth will
depend, in part, on our ability to protect our proprietary technology and
operate without infringing upon the rights of others. We may fail to do so. In
addition, the laws of certain countries in which our products are or may be sold
may not protect our products and intellectual property rights to the same extent
as the laws of the United States.

OUR OPERATIONS ARE SUBJECT TO ENVIRONMENTAL REGULATION.

     We are subject to a variety of local, state and federal governmental
regulations relating to the storage, discharge, handling, emission, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture our products, particularly in the fabrication of fiberglass antennas
by our Comtech Antenna Systems, Inc. subsidiary. We believe that we are
currently in compliance in all material respects with such regulations and that
we have obtained all necessary environmental permits to conduct our business.
Nevertheless, the failure to comply with current or future regulations could
result in the imposition of substantial fines, suspension of production,
alteration of our manufacturing processes or cessation of operations that could
materially adversely affect our business, financial condition and results of
operations.

OUR BUSINESS MAY BE HARMED BY YEAR 2000 ISSUES.

     We believe that our mission critical systems and products are Year 2000
compliant and, to date, we have not experienced any problems associated with our
products, systems or non-compliance by third parties whose systems or operations
could impact us. However, we may be adversely affected in the future. Specific
factors leading to this uncertainty include failure to identify any problems
associated with our products or our internal systems, or non-compliance by third
parties whose systems and operations impact us, and other similar uncertainties.
A worst case scenario might include one or more of our products, internal
systems, suppliers or customers being non-compliant. An event such as this could
result in a material disruption to our operations. Specifically, we could
experience problems associated with producing and delivering our products or
services or failures of software applications, computer networks, manufacturing
equipment and telephone communication systems. Supply chain and product
non-compliance could result in our failure to perform on contracts, delayed
delivery of products to customers and inadequate customer service. Customer
non-compliance could result in delayed payments for products and services and
build up of inventories. Should a worst case scenario occur, it could, depending
on its duration, have a material impact on our business, results of operations,
liquidity and financial condition.

     Certain experts who have studied the issue have published reports
indicating that the Year 2000 problem could be substantially more severe in
developing economies than in the United States. A significant amount of our
sales are for customers in developing countries. Accordingly, the Year 2000
problem could have a disproportionate effect on our business compared to other
companies with less international sales.

OUR STOCK PRICE IS VOLATILE.

     The stock market in general, and the stock prices of technology-based
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of any specific public companies. The
market price of our common stock has fluctuated significantly in the past and is
likely to fluctuate significantly in the future as well. Factors that may have
significant impact on the market price of our stock include:

      future announcements concerning us or our competitors;

      receipt or non-receipt of substantial orders for products and services;

      results of technological innovations;

      new commercial products;

      changes in recommendations of securities analysts;

                                       12







<PAGE>


      government regulations;

      proprietary rights or product or patent litigation;

      changes in market conditions generally, particularly in the market for
      small cap stocks; and

      limited public float.

     Shortfalls in our revenues or earnings in any given period relative to the
levels expected by securities analysts could immediately, significantly and
adversely affect the trading price of our common stock.

WE HAVE NEVER DECLARED OR PAID DIVIDENDS.

     We have never declared or paid a cash dividend and do not intend to declare
any cash dividends on our common stock in the foreseeable future.

                                       13







<PAGE>


                                USE OF PROCEEDS

     The net proceeds to us from the sale of the 2,300,000 shares of common
stock being sold in this offering are estimated to be approximately $32.7
million ($37.6 million if the underwriters' over-allotment option is exercised
in full). Our estimate is based on an assumed public offering price of $15.50
per share (the closing sales price of our stock on the Nasdaq Stock Market on
January 12, 2000), and reflects the deduction of the underwriters' discount and
estimated offering expenses.

     We intend to use the net proceeds primarily to continue the development and
expansion of our mobile data communications services business, including working
capital, inventory build-up, ongoing research and development, capital
expenditures, additional personnel and to build and/or acquire sales and
marketing capability. We intend to use a portion of the net proceeds of this
offering for other corporate purposes, including acquiring and investing in
complementary businesses, technologies, services or products, although we do not
currently have any agreement, understanding or commitment with respect to any
material acquisition or investment.

     As of the date of this prospectus, we cannot specify with certainty the
particular uses for the net proceeds to be received from this offering.
Accordingly, our management will have broad discretion in the application of the
net proceeds. Pending use, the net proceeds will be primarily invested in
short-term, investment grade, interest-bearing securities.

                          PRICE RANGE OF COMMON STOCK

     The following table shows for the periods indicated the high and low sales
prices of our common stock as reported by the Nasdaq National Market. Such
prices do not include retail markups, markdowns, or commissions.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED                                              HIGH     LOW
- -----------------                                              ----     ---
<S>                                                           <C>      <C>
July 31, 1998:
     First Quarter..........................................  $ 3.42   $ 2.17
     Second Quarter.........................................    3.75     2.79
     Third Quarter..........................................    6.83     2.85
     Fourth Quarter.........................................    7.50     3.96
July 31, 1999:
     First Quarter..........................................    6.50     3.33
     Second Quarter.........................................    6.50     4.33
     Third Quarter..........................................    5.92     3.83
     Fourth Quarter.........................................   18.67     5.25
July 31, 2000:
     First Quarter..........................................   14.56     8.00
     Second Quarter (through January 12, 2000)..............   29.50    14.13
</TABLE>

     Our common stock is listed on the Nasdaq National Market under the symbol
'CMTL.' The closing sales price of our common stock on January 12, 2000 was
$15.50 per share.

                                DIVIDEND POLICY

     We have never paid cash dividends on our common stock and we intend to
continue this policy for the foreseeable future. We expect to use earnings to
finance the development and expansion of our business. Our Board of Directors
reviews our dividend policy periodically. The payment of dividends in the future
will depend upon our earnings, capital requirements, financial condition and
other factors considered relevant by our Board of Directors.

                                       14







<PAGE>


                                 CAPITALIZATION

     The following table sets forth our actual capitalization as of October 31,
1999 and as adjusted to reflect the sale of 2,300,000 shares of common stock
offered by us in this offering and the application of the estimated net proceeds
as described under 'Use of Proceeds.' This table should be read in conjunction
with 'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' our Consolidated Financial Statements and related notes included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                                 OCTOBER 31, 1999
                                                              ----------------------
                                                                               AS
                                                              ACTUAL        ADJUSTED
                                                              ------        --------
                                                                  (IN THOUSANDS)
<S>                                                           <C>           <C>
Long-term debt, less current installments...................  $   825       $   825
Stockholders' equity:                                         -------       -------
     Preferred stock, par value $.10 per share; authorized
       and unissued -- 2,000,000............................       --            --
     Common stock, par value $.10 per share; authorized
       15,000,000 shares; 4,496,741 shares issued
       and 6,796,741 shares issued as
       adjusted(1)..........................................      450           680
     Additional paid-in capital.............................   23,866        56,291
     Accumulated deficit....................................   (4,211)       (4,211)
                                                              -------       -------
                                                               20,105        52,760
     Less: treasury stock (82,500 shares)...................     (184)         (184)
          Deferred compensation.............................     (902)         (902)
                                                              -------       -------
       Total stockholders' equity...........................   19,019        51,674
                                                              -------       -------
          Total capitalization..............................  $19,844       $52,499
                                                              -------       -------
                                                              -------       -------
</TABLE>

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

(1) Does not include an aggregate 1,381,578 shares reserved for issuance under
    our equity incentive plans as of December 31, 1999 (848,768 of which shares
    are subject to outstanding options with a weighted average exercise price of
    $3.87 per share, of which options for 347,338 shares are exercisable), and
    150,000 shares subject to outstanding warrants with an exercise price of
    $6.57 per share.

                                       15







<PAGE>


                      SELECTED CONSOLIDATED FINANCIAL DATA

     The following table shows selected consolidated financial data for Comtech.
You should read it in conjunction with the financial information and other
information provided in this prospectus. Detailed financial information is
included in audited consolidated balance sheets as of July 31, 1999 and 1998 and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended July 31, 1999 and the
unaudited consolidated interim balance sheet as of October 31, 1999 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the three-month periods ended October 31, 1999 and 1998 (page F-1).
<TABLE>
<CAPTION>
                                                               THREE MONTHS
                                                                  ENDED
                                                               OCTOBER 31,                     YEAR ENDED JULY 31,
                                                            ------------------   ------------------------------------------------
                                                             1999       1998      1999       1998      1997      1996      1995
                                                             ----       ----      ----       ----      ----      ----      ----
<S>                                                         <C>        <C>       <C>        <C>       <C>       <C>       <C>
                                                                          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net sales.............................................      $11,747    $ 8,735   $37,886    $30,114   $24,746   $20,916   $16,455
Cost of sales.........................................        8,406      6,008    26,405     21,330    17,670    14,819    12,096
                                                            -------    -------   -------    -------   -------   -------   -------
Gross profit..........................................        3,341      2,727    11,481      8,784     7,076     6,097     4,359
Expenses:
    Selling, general and administrative...............        1,946      1,640     6,632      6,013     5,415     5,015     4,658
    Research and development..........................          530        478     2,022      1,319     1,023       741     1,036
                                                            -------    -------   -------    -------   -------   -------   -------
                                                              2,476      2,118     8,654      7,332     6,438     5,756     5,694
                                                            -------    -------   -------    -------   -------   -------   -------
Operating income (loss)...............................          865        609     2,827      1,452       638       341    (1,335)
Other expenses (income):
    Interest expense..................................           37         52       204        234       284       302       341
    Interest income...................................          (32)       (19)      (65)       (36)      (33)      (60)     (171)
    Other income......................................        --            (2)      (39)       (30)     (151)    --          (20)
                                                            -------    -------   -------    -------   -------   -------   -------
Income (loss) from continuing operations before income
  taxes...............................................          860        578     2,727      1,284       538        99    (1,485)
Provision (benefit) for income taxes..................          325         45    (3,754)(1)     180       54        27        17
                                                            -------    -------   -------    -------   -------   -------   -------
Income (loss) from continuing operations..............          535        533     6,481      1,104       484        72    (1,502)
Discontinued operations:
    Loss from operations of discontinued business (net
      of applicable income tax benefit of $320 for
      fiscal 1999)....................................        --          (139)     (622)     --        --        --        --
    Loss on disposal of discontinued business,
      including provision of $430 for operating losses
      during phase-out period (net of income tax
      benefit of $306)................................        --         --         (594)     --        --        --        --
                                                            -------    -------   -------    -------   -------   -------   -------
Net income (loss).....................................      $   535    $   394   $ 5,265    $ 1,104   $   484   $    72   $(1,502)
                                                            -------    -------   -------    -------   -------   -------   -------
                                                            -------    -------   -------    -------   -------   -------   -------
Basic income (loss) per share:
    Income (loss) from continuing operations..........      $  0.12    $  0.14   $  1.56    $  0.28   $  0.13   $  0.02   $ (0.39)
    Loss from discontinued operations.................        --         (0.04)    (0.29)     --        --        --        --
                                                            -------    -------   -------    -------   -------   -------   -------
    Basic income (loss)...............................      $  0.12    $  0.10   $  1.27    $  0.28   $  0.13   $  0.02   $ (0.39)
                                                            -------    -------   -------    -------   -------   -------   -------
                                                            -------    -------   -------    -------   -------   -------   -------
Diluted income (loss) per share:
    Income (loss) from continuing operations..........      $  0.11    $  0.12   $  1.42    $  0.27   $  0.12   $  0.02   $ (0.39)
    Loss from discontinued operations.................        --         (0.03)    (0.27)     --        --        --        --
                                                            -------    -------   -------    -------   -------   -------   -------
    Diluted income (loss).............................      $  0.11    $  0.09   $  1.15    $  0.27   $  0.12   $  0.02   $ (0.39)
                                                            -------    -------   -------    -------   -------   -------   -------
                                                            -------    -------   -------    -------   -------   -------   -------
Weighted average number of common shares
  outstanding -- basic computation....................        4,399      3,926     4,143      3,902     3,873     3,887     3,885
Potential dilutive common shares......................          683        345       430        264        33       105     --
Weighted average number of common and common                -------    -------   -------    -------   -------   -------   -------
    equivalent shares outstanding assuming dilution --
    diluted computation...............................        5,082      4,271     4,573      4,166     3,906     3,992     3,885

OTHER CONSOLIDATED OPERATING DATA:
Backlog at period-end.................................      $36,178(2) $10,651   $38,637(2) $15,452   $14,724   $ 9,700   $10,242
New orders............................................        9,288      3,934    61,071     30,842    29,770    20,374    21,494
Research and development -- internal and customer
  funded..............................................          776        521     3,801      1,675     1,459     1,257     1,418
</TABLE>

<TABLE>
<CAPTION>
                                                                                              JULY 31,
                                                             OCTOBER 31,   -----------------------------------------------
                                                                1999        1999      1998      1997      1996      1995
                                                                ----        ----      ----      ----      ----      ----
                                                                                    (IN THOUSANDS)
<S>                                                          <C>           <C>       <C>       <C>       <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets...............................................    $29,915     $29,847   $19,710   $17,960   $16,629   $16,783
Working capital............................................     11,316      10,192     8,917     7,930     7,797     7,681
Long-term debt, less current installments..................        825         959     1,445     1,310     1,875     2,277
Stockholders' equity.......................................     19,019      18,357    12,093    10,878    10,301    10,081
</TABLE>

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

(1) In accordance with applicable accounting principles, we reduced our previous
    valuation reserve for deferred tax assets since we believe that it is more
    likely than not that we will generate sufficient taxable income to utilize
    these deferred tax assets.

(2) Includes $100 and $400 at July 31, 1999 and October 31, 1999, respectively,
    of funded backlog relating to the U.S. Army contract, which was awarded in
    June 1999.

                                       16








<PAGE>


                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

     We design, develop, produce and market sophisticated wireless
telecommunications transmission components and systems and solid state,
high-power broadband amplifiers for commercial and government purposes. Our
products are used in point-to-point and point-to-multipoint telecommunications
transmission and reception applications such as satellite communications,
over-the-horizon microwave systems, cellular telephone systems and cable and
broadcast television. Our broadband amplifier products are also used in cellular
and PCS instrumentation testing and certain defense systems.

     Our business consists of three segments: mobile data communications
services, a development-stage business; telecommunications transmission; and RF
microwave amplifiers. We began reporting financial results on a segment basis in
fiscal 1999. While currently not material, our sales of mobile data
communications services are expected to increase substantially if, when and as
orders are received under our contract with the U.S. Army and we penetrate other
government and commercial markets for these services.

     Our sales are made to domestic and international customers, both commercial
and governmental. International sales (including sales to prime contractors'
international customers) are expected to increase in the foreseeable future due
to the growing worldwide demand for wireless and satellite telecommunications
and our expanded line of product offerings to meet these demands.

     A substantial portion of our sales is derived from a limited number of
relatively large customer contracts, the timing of which cannot be predicted.
Quarterly sales and operating results may be significantly affected by one or
more of such contracts. For example, sales to one customer in the quarter ended
October 31, 1999 accounted for 58.2% of total net sales and sales to two
different customers in the quarter ended October 31, 1998 amounted to 29.6% of
total net sales. Accordingly, we experience significant fluctuations in sales
and operating results from quarter to quarter and, because our backlog is
comprised in large part of a small number of large contracts, we expect such
fluctuations to continue in the future.

     Sales consist of stand-alone products and systems. For the past five years
we have endeavored to achieve greater product sales as a percentage of total
sales, because product sales generally have higher gross profit margins than
systems sales. In the future, as our installed base of mobile data
communications terminals is established, we expect an increasing amount of our
sales will be attributable to the recurring revenue component of our mobile data
communications services segment.

     We generally recognize income under contracts only when the products are
shipped. However, when the performance of a contract will extend beyond a
12-month period, income is recognized on the percentage-of-completion method.

     Our gross profit is affected by a variety of factors, including the mix of
products, systems and equipment sold, production efficiency and price
competition.

     Selling, general and administrative expenses consist primarily of salaries
and benefits for marketing, sales and administrative employees, advertising and
trade show costs, professional fees and amortization of deferred compensation.
Deferred compensation consists of restricted stock awards granted to certain
operating management personnel. Under these grants, the employees purchased
shares of our common stock at prices representing a discount to the then market
value. The shares vest ten years after issuance, subject to earlier vesting upon
achievement of certain operating unit performance goals.

     Our research and development expenses relate to both existing product
enhancement and new product development. A portion of our research and
development efforts is related to specific contracts and is recoverable under
those contracts because they are funded by the customers. Such

                                       17







<PAGE>


customer-funded expenditures are not included in research and development
expenses for financial reporting purposes but are reflected in cost of sales.

     As of the end of fiscal 1998, we had a 100% valuation allowance against our
gross deferred tax assets. During fiscal 1999, based on our assessment of the
recoverability of the deferred tax assets, we concluded that a full valuation
allowance was no longer necessary given our estimates of future earnings and the
expected timing of temporary difference reversals. Accordingly, we reduced the
valuation allowance to $777,000 and recorded a corresponding one-time $4.6
million benefit for income taxes in fiscal 1999.

     In the first quarter of fiscal 1999, we acquired the assets and assumed
certain liabilities of two businesses through newly formed, wholly-owned
subsidiaries: Comtech Mobile Datacom Corp., our mobile data communications
services business; and Comtech Wireless, Inc., our wireless local loop business.
Both acquisitions were accounted for using the purchase method of accounting.
The goodwill resulting from the purchase of the mobile data communications
services business (i.e., the excess of the purchase price over the fair value of
the net assets acquired and liabilities assumed) is being amortized over a
20-year period. In June 1999, the U.S. Army awarded Comtech Mobile Datacom Corp.
a contract which, subject to government funding and deployment decisions,
provides for the purchase of up to $418.2 million in mobile terminal units and
global data communications services over an eight-year period. Although sales
will be dependent upon annual government funding and deployment decisions, we
anticipate sales under this contract in the second half of fiscal 2000. Sales by
our mobile data communications services segment in fiscal 1999 and the three
months ended October 31, 1999 were approximately $318,000 and $145,000,
respectively.

     Comtech Wireless, Inc. designs and manufactures wireless local loop systems
for the rural and remote telephony market. Due to disappointing results and
uncertain prospects, effective July 31, 1999, we adopted a plan to liquidate
Comtech Wireless, Inc. by January 31, 2000. The results of operations for the
segment have been shown as a discontinued operation in the consolidated
financial statements. Comtech Wireless, Inc. did not have any sales in fiscal
1999 and in the three months ended October 31, 1999.

RESULTS OF OPERATIONS

     The following table sets forth, for the periods indicated, certain income
and expense items expressed as a percentage of our net sales:

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED
                                             OCTOBER 31,                  YEAR ENDED JULY 31,
                                          ------------------        -------------------------------
                                          1999         1998         1999         1998         1997
                                          -----        -----        -----        -----        -----
<S>                                       <C>          <C>          <C>          <C>          <C>
Net sales...............................  100.0%       100.0%       100.0%       100.0%       100.0%
Gross margin............................   28.4         31.2         30.3         29.2         28.6
Selling, general and administrative
  expenses..............................   16.6         18.8         17.5         20.0         21.9
Research and development expenses.......    4.5          5.5          5.3          4.4          4.1
Operating income from continuing
  operations............................    7.4          7.0          7.5          4.8          2.6
Interest expense, net...................    0.0          0.4          0.4          0.7          1.0
Income before income taxes..............    7.3          6.6          7.2          4.3          2.2
Net income..............................    4.6          4.5         13.9          3.7          2.0
</TABLE>

     The following table sets forth the percentage change in certain of our
income and expense items from fiscal 1997 to 1998, 1998 to 1999 and the three
months ended October 31, 1998 to the three months ended October 31, 1999,
respectively:

                                       18







<PAGE>



<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED
                                                     OCTOBER 31,           YEAR ENDED JULY 31,
                                                  ------------------     -----------------------
                                                       % CHANGE          % CHANGE      % CHANGE
                                                      FROM 1998          FROM 1998     FROM 1997
                                                       TO 1999            TO 1999       TO 1998
                                                      ---------          ---------     ---------
<S>                                               <C>                    <C>           <C>
Net sales.......................................         34.5%              25.8%         21.7%
Gross profit....................................         22.5               30.7          24.1
Selling, general and administrative expenses....         18.7               10.3          11.0
Research and development expenses...............         10.9               53.3          28.9
Operating income from continuing operations.....         42.0               94.7         127.6
Interest expense, net...........................        (84.8)             (29.8)        (21.1)
Income before income taxes......................         48.8              112.4         138.7
Net income......................................         35.8              376.9         128.1
</TABLE>

COMPARISON OF THREE MONTHS ENDED OCTOBER 31, 1999 AND OCTOBER 31, 1998

     NET SALES Consolidated net sales were $11.7 million and $8.7 million for
the three months ended October 31, 1999 and 1998, respectively, representing an
increase of $3.0 million or 34.5%. This increase was primarily due to increased
sales by our telecommunications transmission segment of over-the-horizon
microwave equipment principally to one customer, a major U.S. prime contractor,
partly offset by lower sales at our RF microwave amplifier segment.
International sales increased by approximately $6.0 million or 148.7%,
representing 85.5% and 46.2% of total net sales for the three months ended
October 31, 1999 and 1998, respectively. Domestic sales decreased by $1.5
million or 53.4%, representing 10.8% and 31.2% of total net sales for the three
months ended October 31, 1999 and 1998, respectively. U.S. government sales
decreased by $1.5 million or 78.2%, representing 3.7% and 22.5% of total net
sales for the three months ended October 31, 1999 and 1998, respectively.

     GROSS PROFIT Gross profit was $3.3 million and $2.7 million for three
months ended October 31, 1999 and 1998, respectively, representing an increase
of $614,000 or 22.5%. This increase was due primarily to the increase in sales
volume. Gross margin as a percentage of net sales, was 28.4% and 31.1% in the
three months ended October 31, 1999 and 1998, respectively. The lower gross
margin in the 1999 period was due primarily to the changes in the product mix
compared to the prior year period.

     SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative
expenses were $1.9 million and $1.6 million for the three months ended October
31, 1999 and 1998, respectively, representing an increase of $306,000 or 18.7%.
This increase was due primarily to the additional expenses required to support
the increased sales volume, including additional personnel, sales commissions,
deferred compensation and other administrative expenses. As a percentage of
sales, these expenses were 16.6% and 18.8% in the three months ended
October 31, 1999 and 1998, respectively. In addition, the increased expenditures
reflected those required by our mobile data communications services segment.

     RESEARCH AND DEVELOPMENT Research and development expenses were $530,000
and $478,000 for the three months ended October 31, 1999 and 1998, respectively,
representing an increase of $52,000 or 10.9%. This increase was due to
continuing development of new products and technologies and general product
enhancement. Whenever possible, we seek customer funding for research and
development to adapt our products to specialized customer requirements. During
the three months ended October 31, 1999 and 1998, customers reimbursed us
$246,000 and $43,000, respectively, which amounts are not reflected in the
reported research and development expenses.

     OPERATING INCOME As a result of the foregoing factors, we had operating
income from continuing operations of $865,000 in the three months ended October
31, 1999, compared to $609,000 in the prior year period, representing an
increase of $256,000 or 42.0%.

     INTEREST EXPENSE Interest expense was $37,000 and $52,000 for the three
months ended October 31, 1999 and 1998, respectively, representing a decrease of
$15,000 or 28.8%. Interest expense for both periods was substantially due to
interest associated with our capital lease obligations.

                                       19







<PAGE>


     INTEREST INCOME Interest income was $32,000 and $19,000 for the three
months ended October 31, 1999 and 1998, respectively, representing an increase
of $13,000 or 68.4%. This increase was due primarily to the increase in the
amount of cash available to invest during this period. Interest income was
primarily derived from the cash on hand in excess of working capital
requirements that is invested in highly liquid, short-term money-market funds
and commercial paper.

     PROVISION FOR INCOME TAXES The provision for income taxes was $325,000 and
$45,000 for the three months ended October 31, 1999 and 1998, respectively. The
income tax provision for the three-month period of 1999 reflects an approximate
38% tax rate while the provision for the three-month period of 1998 reflects an
effective tax rate of approximately 8%. In the three months ended October 31,
1998, the Company utilized available Federal net operating loss carryforwards to
offset taxable income which were not previously recorded as a deferred tax
asset. The deferred tax assets associated with such carryforwards were
recognized by July 31, 1999.

COMPARISON OF FISCAL 1999 AND 1998

     NET SALES Consolidated net sales were $37.9 million and $30.1 million
for fiscal 1999 and 1998, respectively, representing an increase of $7.8
million or 25.8%. This increase was due primarily to increased sales by our
telecommunications transmission segment of over-the-horizon microwave equipment,
principally to one customer, a major U.S. prime contractor. Total sales to this
customer during fiscal 1999 were approximately $10.2 million, representing 27.0%
of the total net sales. The total order received from this customer in fiscal
1999 was approximately $43.6 million and the contract balance of approximately
$33.3 million at July 31, 1999 is expected to be recognized as revenue in fiscal
2000 and 2001. There were no other customers for which total sales in fiscal
1999 represented 10.0% or more of net sales. In fiscal 1998, sales to a
different customer represented 12.2% of total net sales. Included in the
telecommunications transmission segment are sales of our satellite equipment
products, which increased in fiscal 1999 by approximately 65.8%, due to
additional product offerings. Sales from our RF microwave amplifier segment
declined by approximately 14.9% compared to fiscal 1998, due to the timing of
receipt of follow on orders. International sales increased by approximately
$8.8 million, or 62.7%, representing 60.1% and 46.5% of total net sales for
fiscal 1999 and 1998, respectively. Domestic sales decreased by $1.0 million, or
9.9%, representing 24.3% and 34.0% of total net sales for fiscal 1999 and 1998,
respectively. U.S. government sales increased by $20,000 or 0.3%, representing
15.6% and 19.5% of total net sales for fiscal 1999 and 1998, respectively.

     GROSS PROFIT Gross profit was $11.5 million and $8.8 million for fiscal
1999 and 1998, respectively, representing an increase of $2.7 million or 30.7%.
The increase was due primarily to the increase in sales volume in fiscal 1999
compared to fiscal 1998. Gross profit as a percentage of net sales was 30.3% and
29.2% in fiscal 1999 and 1998, respectively, due primarily to increased sales of
products coupled with lower per unit costs.

     SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative
expenses were $6.6 million and $6.0 million in the fiscal 1999 and 1998,
respectively, representing an increase of $619,000 or 10.3%. This was due
primarily to higher sales commissions, marketing personnel expenses, deferred
compensation and other administrative expenses. As a percentage of net sales,
these expenses were 17.5% and 20.0% in fiscal 1999 and 1998, respectively.
Although increased expenses were required to support the higher sales volume in
fiscal 1999 compared to fiscal 1998, these expenses increased at a lower rate
than the increase in sales. In addition, the increased expenditures reflect
those required by our mobile data communications services segment, which was
acquired in fiscal 1999.

     RESEARCH AND DEVELOPMENT Research and development expenses were $2.0
million and $1.3 million in fiscal 1999 and 1998, respectively, representing an
increase of $703,000 or 53.3%. We are continually enhancing and developing new
products and technologies. In fiscal 1999, the research and development expenses
were primarily for developing additional satellite product offerings and
redesigning components of over-the-horizon microwave products. Whenever
possible, we seek customer funding for research and development to adapt our
products to specialized customer

                                       20







<PAGE>


requirements. During fiscal 1999 and 1998, we were reimbursed $1.8 million and
$356,000, respectively. These amounts are not reflected in the reported research
and development expenses.

     OPERATING INCOME As a result of the foregoing factors, we had operating
income from continuing operations of $2.8 million and $1.5 million in fiscal
1999 and 1998, respectively, representing an increase of $1.4 million or 94.7%.

     INTEREST EXPENSE Interest expense was $204,000 and $234,000 for fiscal 1999
and 1998, respectively, representing a decrease of $30,000 or 12.8%. Interest
expense in both years was due primarily to interest associated with our capital
lease obligations.

     INTEREST INCOME Interest income was $65,000 and $36,000 for fiscal 1999 and
1998, respectively, representing an increase of $29,000 or 80.6%. The increase
was due primarily to the increase in the amount of cash available to invest in
fiscal 1999 as compared to fiscal 1998. Interest income was primarily derived
from the cash on hand in excess of working capital requirements that is invested
in highly liquid, short-term money-market funds consisting primarily of direct
obligations of the U.S. government.

     INCOME TAXES The benefit for income taxes applicable to continuing
operations in fiscal 1999 was $3.8 million compared to the provision for income
taxes of $180,000 in fiscal 1998. Due to our net operating loss carryforwards
and other temporary differences between recognition of income for financial
reporting and income tax purposes, we had deferred tax assets of $5.4 million
and $5.3 million at the end of fiscal 1999 and 1998, respectively. As of July
31, 1998, we had assessed a 100% valuation allowance against this deferred
tax asset. During fiscal 1999, we concluded that a full valuation allowance
was no longer necessary given our estimates of future earnings based on
substantial new contracts entered into and the expected timing of temporary
difference reversals. Accordingly, we reduced the valuation allowance to
$777,000 during fiscal 1999. The effect of this change resulted in a tax
benefit in fiscal 1999 of $4.6 million, which was partially offset by the
provision for the current year's income tax expense.

     DISCONTINUED OPERATIONS We adopted a plan, effective as of July 31, 1999,
to liquidate our wireless local loop business. The loss from operations, net of
a tax benefit, for fiscal 1999, was $622,000. The loss on the disposition of the
segment, net of tax benefit, was $594,000, which includes a provision of
$430,000 for operating losses expected to be incurred during the phase-out
period. The liquidation is expected to be completed by January 31, 2000.

COMPARISON OF FISCAL 1998 AND 1997

     NET SALES Consolidated net sales were $30.1 million and $24.7 million in
fiscal 1998 and 1997, respectively, representing an increase of $5.4 million or
21.7%. This increase was due primarily to increased domestic and U.S. government
sales of high power amplifiers and increased international sales of
over-the-horizon microwave equipment, partially offset by decreased
international sales of satellite communications products. International sales
decreased by approximately $184,000, or 1.3%, representing 46.5% and 57.3% of
total net sales for fiscal 1998 and 1997, respectively. Domestic sales increased
by $3.9 million, or 60.9%, representing 34.0% and 25.7% of total net sales. U.S.
government sales increased by $1.7 million, or 39.9%, representing 19.5% and
17.0% of total net sales in fiscal 1998 and 1997, respectively. Sales to one
customer in fiscal 1998 and sales to a different customer in fiscal 1997
represented 12.2% and 10.2%, respectively, of total net sales for such years.

     GROSS PROFIT Gross profit was $8.8 million and $7.1 million in fiscal 1998
and 1997, respectively, representing an increase of $1.7 million. The primary
reason for this increase was a net increase in sales volume in fiscal 1998.
Gross profit, as a percentage of net sales, was relatively unchanged.

     SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative
expenses were $6.0 million and $5.4 million in fiscal 1998 and 1997,
respectively, representing an increase of $598,000 or 11.0%. This increase was
due primarily to the increased expenses required to support the higher level of
sales in fiscal 1998, including higher bid and proposal expenses, sales
commissions,

                                       21







<PAGE>


marketing personnel expenses and other administrative expenses. As a percentage
of sales, however, these expenses decreased to 20.0% in fiscal 1998, from 21.9%
in fiscal 1997.

     RESEARCH AND DEVELOPMENT Research and development expenses were $1.3
million and $1.0 million in fiscal 1998 and 1997, respectively, representing an
increase of $296,000 or 28.9%. Research and development expenses as a percentage
of net sales were 4.4% and 4.1%, respectively. This increase was primarily due
to increased expenses for general product improvements and for the development
of a CSAT terminal and VSAT modem and a complement of additional product
offerings to the 'fly-away' and 'quick deployment' antenna product lines.
Whenever possible, we seek customer funding for research and development to
adapt our products to specialized customer requirements. During fiscal 1998
and 1997, we were reimbursed $356,000 and $436,000, respectively, which amounts
are not reflected in the reported research and development expenses.

     OPERATING INCOME As a result of the foregoing factors, we reported
operating income of $1.5 million in fiscal 1998 compared to operating income of
$638,000 in fiscal 1997, representing an increase of $814,000 or 127.6%.

     INTEREST EXPENSE Interest expense was $234,000 and $284,000 in fiscal 1998
and 1997, respectively. Interest expense in both years was due primarily to
interest associated with our capital lease obligations.

     INTEREST INCOME Interest income for fiscal 1998 and 1997 was $36,000 and
$33,000, respectively. This increase was due primarily to the increase in the
amount of cash available to invest in fiscal 1998. Interest income in fiscal
1997 included approximately $14,000 that was received from a customer for
extended payment terms.

     OTHER INCOME We reported other income of $30,000 and $151,000 in fiscal
1998 and 1997, respectively. Other income in fiscal 1998 was due primarily to
the gain on a foreign currency exchange rate and to the sale of scrap materials.
In fiscal 1997, the primary components were the result of a gain on the sale of
a storage facility, the sale of fully depreciated equipment and a finder's fee
we earned, offset by the write-off of other miscellaneous items.

     INCOME TAXES The provision for income taxes was $180,000 and $54,000 in
fiscal 1998 and 1997, respectively. This was comprised of $45,000 and $20,000
for Federal income tax and $135,000 and $34,000 for state income taxes in fiscal
1998 and 1997, respectively. Net operating loss carryforwards were available to
offset corporate Federal income tax and we were generally subject only to the
alternative minimum tax. We believed our tax benefits were subject to a 100%
valuation allowance as of July 31, 1998 and 1997 due to earnings fluctuations
inherent in our operations and recent operating losses.

LIQUIDITY AND CAPITAL RESOURCES

     Our cash and cash equivalents position increased by $3.2 million from $2.7
million at July 31, 1998 to $5.9 million at July 31, 1999. Restricted cash of
$22,000, which was securing standby letters of credit at July 31, 1998, was no
longer required at the end of fiscal 1999. In fiscal 1999, operating activities
provided net cash of $4.9 million, investing activities used net cash of $1.2
million and financing activities used net cash of $598,000. During fiscal 1999,
we acquired the assets and assumed certain liabilities of two businesses: a
mobile data communications services business and a wireless local loop business.
The total consideration for these acquisitions of approximately $978,000 was
financed by a cash payment of $200,000, a non-recourse note of $250,000, and the
issuance of restricted stock and warrants. As of July 31, 1999, one of these
acquisitions, the wireless local loop business, was classified as a discontinued
operation and certain adjustments were made and expenses accrued, as a result of
this decision.

     For the three-month period ended October 31, 1999, our cash and cash
equivalent position decreased by $4.5 million from $5.9 million at July 31, 1999
to $1.4 million at October 31, 1999. Operating activities used $4.2 million,
investing activities used $210,000 and financing activities used $105,000.

                                       22







<PAGE>


     Accounts receivable decreased by $1.0 million from July 31, 1998 to
July 31, 1999 due primarily to the timing of shipments and subsequent
collections. The allowance for doubtful accounts decreased by $25,000. Accounts
receivable increased by $4.4 million from July 31, 1999 to October 31, 1999,
due primarily to the timing of shipments, the subsequent collections of the
related receivables, and an increase of approximately $2.1 million in unbilled
receivables. The allowance for doubtful accounts of $145,000 remained the same
at October 31, 1999 as at the end of fiscal year 1999. We review our allowance
for doubtful accounts periodically and believe it adequately reflects the
collectibility of our receivables based on past experience and our credit
standards. Generally, foreign customers are required to secure payment by an
irrevocable letter of credit before an order is accepted.

     Inventory increased by $1.7 million from July 31, 1998 to July 31, 1999 due
primarily to the higher backlog of orders. Inventory increased by $287,000 from
July 31, 1999 to October 31, 1999, primarily due to the higher levels of
inventory required by our mobile data communications services segment. We
generally operate on a job-order cost basis, that is, costs are incurred as
work-in-process inventory for specific contracts or jobs. Accordingly, inventory
levels will vary as a function of our order backlog. Some of our product lines
require a more rapid delivery response to customers' requirements and require us
to provide for a level of 'off-the-shelf' equipment inventory availability. The
only other general inventory that we maintain is for basic components which are
common to many of our products. Inventory reserves increased by $341,000 from
July 31, 1998 to July 31, 1999 and decreased by $25,000 from July 31, 1999 to
October 31, 1999. Inventory reserves are reviewed on an ongoing basis and
adjustments are made as needed.

     Net intangible assets at July 31, 1999 and October 31, 1999 of $1.6 million
represent goodwill as a result of our acquisition of a mobile data
communications services business and entry into that segment. The amortization
period for this asset is 20 years.

     Accounts payable increased by $372,000 from July 31, 1998 to July 31, 1999,
due primarily to the timing of the purchases and to the higher volume of
inventory purchased due to the increased level of sales and backlog. Accounts
payable increased by $1.4 million from July 31, 1999 to October 31, 1999
primarily due to an increase in inventory purchases.

     Accrued expenses and other current liabilities increased by $2.4 million
from July 31,1998 to July 31, 1999. This was due primarily to the increase in
customer advances and deposits and, to a lesser extent, to accrued wages and
benefits. Accrued expenses and other current liabilities decreased by $2.1
million from July 31, 1999 to October 31, 1999, primarily due to decreases in
customer advances and deposits partly offset by increases in accrued
commissions. Whenever possible, we require advance payments, deposits or
'milestone' payments on long-term contracts in order to provide working capital
while the contract is in process. Accrued wages and benefits are primarily a
function of the number of employees. At October 31, 1999, we had 278 employees
compared to 268 employees at July 31, 1999 and 216 employees at July 31,
1998.

     During fiscal 1999, we made leasehold improvements and purchases of
machinery and equipment of $1.1 million of which $136,000 was financed by
capital leases. Purchases of property plant and equipment were $210,000 for the
three-month period ended October 31, 1999.

     All of our long-term debt consists of capital lease obligations. Principal
payments on long-term debt of $821,000 and $173,000, respectively, were made
during fiscal 1999 and the first quarter of fiscal 2000, respectively,
resulting in long-term debt, including the current portion, of $1.6 million
and $1.4 million, respectively.

     We have a $12.0 million secured credit facility from Republic National Bank
of New York. The line of credit, to be used for working capital requirements, is
for a term of one year and bears interest at 90-day LIBOR plus 1.50% (7.75% at
October 31, 1999). During fiscal 1999, we drew advances in the aggregate of
$850,000 which were totally repaid by July 31, 1999. There were no borrowings
during the three months ended October 31, 1999. The credit facility expires
December 31, 2000. We have renewed and received increases in this line
of credit annually since 1996.

                                       23







<PAGE>


     We believe that our working capital position, available credit facilities
and the net proceeds to us from the sale of shares of our common stock in this
offering will be sufficient to meet our cash requirements for at least the next
year.

YEAR 2000 COMPLIANCE

     Management has initiated a company-wide program and has developed a formal
plan of implementation to prepare for the Year 2000. This includes taking
actions designed to ensure that our information technology systems, products and
infrastructure are Year 2000 compliant and that our customers, suppliers and
service providers have taken similar action. With respect to Year 2000 internal
issues, we have evaluated our IT systems, products, equipment and other
facilities systems, and management believes that all are Year 2000 compliant.
With respect to our external Year 2000 issues, we have surveyed our customers,
suppliers and service providers primarily through written correspondence.
Despite the efforts to survey customers, suppliers and service providers,
management cannot be certain as to the actual Year 2000 readiness of these third
parties. To the extent any of our suppliers or service providers are not Year
2000 ready, we believe that we will be able to obtain other suppliers or service
providers without a significant interruption to our business. Based upon
responses to our inquiries of third parties and our experience since
December 31, 1999, we currently believe we do not have a need for a contingency
plan. Certain experts who have studied the issue have published reports
indicating that the Year 2000 problem could be substantially more severe in
developing economies than in the United States. A significant amount of our
sales are for customers in developing countries. Accordingly, the Year 2000
problem could have a disproportionate effect on our business compared to other
companies with less international sales.

     To date, the costs related to our compliance with the Year 2000 issue have
not had a material adverse effect on our consolidated financial position,
results of operations or cash flows.

                                       24








<PAGE>


                                    BUSINESS

     We design, develop, produce and market sophisticated wireless
telecommunications transmission components and systems and solid state,
high-power broadband amplifiers for commercial and government purposes. Our
products are used in point-to-point and point-to-multi-point telecommunications
transmission and reception applications such as satellite communications,
over-the-horizon microwave systems, cellular telephone systems and cable and
broadcast television. Our broadband amplifier products are also used in cellular
and PCS instrumentation testing and certain defense systems. We have expanded
our business to offer satellite mobile data communications services. This
business recently won a contract from the U.S. Army which, subject to government
funding and deployment decisions, provides for the purchase of up to $418.2
million in mobile terminal units and global message communications services over
an eight-year period. We believe our mobile data communications products and
services will afford the company important competitive advantages as we endeavor
to expand this business with other government agencies and into commercial
markets.

TELECOMMUNICATIONS INDUSTRY TRENDS

     The demand for telecommunications is increasing worldwide as emerging
economies seek to modernize their infrastructure and as increasingly
information-intensive markets introduce new telecommunications services. The
telecommunications industry has expanded rapidly over the last decade and is
forecasted to continue to expand due to the following major factors:

     Deregulation and Privatization. Many developing countries that had
previously not committed significant resources to or placed a high priority on
developing and upgrading their communications systems are now doing so,
primarily through deregulation and privatization. A significant number of these
countries do not have the resources, or have large geographic areas or terrain
that make it difficult, to install extensive land-based networks on a
cost-effective basis. This provides an opportunity for satellite and other
wireless communications services systems to meet the requirement for
communications services in these countries.

     Growing Demand for Data Communications Services. Factors contributing to
the growing demand for communications services include worldwide economic
development and the increasing globalization of commerce. Businesses have a
growing need for higher bandwidth services to communicate with their customers
and employees around the world and are increasingly reliant upon Internet and
multimedia applications. We expect demand for these kinds of higher bandwidth
services to grow in both developed and developing countries.

     Increasing Cost-Effectiveness. The relative cost-effectiveness of satellite
and other wireless telecommunications services is a major factor driving the
growth in areas with rapidly developing telecommunications infrastructures.
These developing infrastructures often cover large geographic areas, where
population concentrations that are separated by significant distances require a
technology whose cost and speed of implementation is relatively insensitive to
distance.

     Technological Advances. Technological advances continue to increase the
capacity of telecommunications networks and reduce the overall cost of the
systems and the services they deliver. This increases the number of potential
end users for the services and expands the available market. We believe that
recent technological developments, such as bandwidth on demand and signal
processing methods, will continue to stimulate the demand.

                                       25







<PAGE>


PRODUCTS AND SERVICES

     Our operations consist of three business segments: mobile data
communications services, telecommunications transmission and RF microwave
amplifiers, which offer the following products and services:

<TABLE>
<CAPTION>
                                                                   REPRESENTATIVE
          SEGMENT                PRODUCTS AND SERVICES               CUSTOMERS                    APPLICATIONS
          -------                ---------------------               ---------                    ------------
<S>                           <C>                           <C>                           <C>
Mobile data communications    Mobile data terminals and     U.S. Army and, potentially,   Satellite-based mobile data
services                      communications services       Department of Defense, other  communications services (see
                                                            governmental agencies,        table on page 28 for
                                                            transportation companies      specific applications)

Telecommunications            Up and down frequency         Satellite systems             Voice, fax, data, video
transmission                  converters                    integrators, service          broadcast, Internet trunking
                                                            providers, television         over satellite
                                                            broadcasters and defense
                                                            contractors such as Globecom
                                                            Systems, Inc., Hughes
                                                            Network Systems, IDB
                                                            Worldcom Inc., DirecTV, ATT
                                                            Alascom

                              Modems, including turbo       Satellite systems             Voice, data, and fax
                              codec                         integrators and service       communications over
                                                            providers such as Data        satellite, Internet
                                                            Marine Systems Ltd., Telesat  trunking, on demand
                                                            Canada, PanAmSat Corp., NSN   telephony, video
                                                            Network Systems, Inc.         conferencing

                              CSAT transceivers             Satellite systems             Voice, data, fax,
                                                            integrators service           telemedicine, Internet
                                                            providers and telcos, such    networks over satellite
                                                            as Singapore
                                                            Telecommunications, Ltd,
                                                            Lanka Internet Services,
                                                            Ltd, Louisiana Networks,
                                                            Inc.

                              Over-the-horizon microwave    Defense industry, oil         Data, fax, telephony for
                              products                      companies such as Northrup    offshore oil platforms and
                                                            Grumman, Esso Production      defense communications
                                                            Malaysia Inc., BP Amoco PLC   applications

                              Offsat antenna systems        Broadcast networks such as    'C' band uplink
                                                            National Public Radio,        applications, teleport
                                                            Worldcom                      applications, radio networks
                                                                                          and private networks

                              Simulsat multibeam antenna    Cable TV companies such as    Receive up to 35 satellites
                              systems                       Time Warner Communications,   simultaneously; broadcast
                                                            Inc., Cox Communications,     TV, cable TV and teleport
                                                            Inc., GTE Government          applications
                                                            Systems Corp.

                              Mobile satellite antenna      Transportable satellite       Quick response satellite
                              systems                       system service providers      communications (disaster
                              1.8 and 2.4 meter fly-away    such as Impsat                recovery)
                              quick deployables             Communicacoes, Ldta
                              trailer mounted systems       (Brazil), U.S. State
                                                            Department, U.S. Department
                                                            of Defense

RF microwave amplifiers       Linear amplifiers             Cellular infrastructure       Testing of cellular and PCS
                                                            system manufacturers such as  products
                                                            Motorola Inc., Ericsson
                                                            Inc., Nokia
                                                            Telecommunications Inc.,
                                                            Lucent Technologies Inc.

                              Pulse amplifiers              Major systems integrators     IFF (identification friend
                                                            such as Litton Systems Inc.,  or foe), radar (tracking,
                                                            Raytheon Systems Company,     weather)
                                                            Lockheed Martin Corp. and
                                                            U.S. government agencies

                              Special linear amplifiers     Condor Systems, Inc.          Pre-detonation of electronic
                                                                                          munitions proximity fuses

                              Special linear amplifiers     Domestic and foreign system   Communications jammers --
                                                            suppliers such as Thomson     interrupt communications
                                                            CSF Communications, Rockwell  links, including cellular,
                                                            Collins, Inc. and foreign     GSM and PCS services
                                                            ministries of defense
</TABLE>

                                       26







<PAGE>


MOBILE DATA COMMUNICATIONS SERVICES BUSINESS SEGMENT

     The demand for mobile data communications services and products has
increased dramatically in recent years for both government and commercial
applications. This demand has been driven by advances in digital technology
coupled with the need to better locate, track, manage, monitor and communicate
with mobile and fixed assets. The transmission of information may be done
over various systems, i.e. terrestrial, cellular or satellite, depending on
the most cost-effective approach to meet the application's requirements.
Recently published third-party studies predict in excess of a ten-fold increase
in terminals for satellite-based data services in the period from 1999 to 2004.

     Recognizing the potential of this marketplace, in 1998 we acquired the
assets of Mobile Datacom Corporation to form Comtech Mobile Datacom Corporation.
Mobile Datacom Corporation was formed in 1993 with COMSAT Corporation's
assistance to commercialize mobile data communications systems in the United
States and abroad. The technology base for these systems was originally
developed by engineers and scientists of Geostar Corporation in the 1980s. Joel
R. Alper, a former senior executive for COMSAT and later founder of Mobile
Datacom Corporation, serves as President and Chief Executive Officer of Comtech
Mobile Datacom Corporation.

     We have continued to develop and are marketing a Web-enabled,
satellite-based mobile data communications system for the land mobile, remote
sensing, utility, aviation and maritime markets. Applications include asset
location and tracking, two-way mobile messaging, e-mail and automated reading of
sensors, including meters and gauges. Through our satellite earth station
gateway in Germantown, Maryland, we can route signals to and from mobile or
fixed remote terminals via leased satellite capacity. Customers can access their
data through an Internet or terrestrial connection to their headquarters' Web
sites.

     We believe that our system offers the following significant advantages over
competitive systems:

      Messages or position location reports can be sent automatically at preset
      intervals, or if by an operator, upon command by the user;

      Messages are delivered typically in less than ten seconds, via satellite
      and Internet, between user headquarters and remote/mobile terminals, as
      well as from remote/mobile to remote/mobile terminal, anywhere in the
      world within the coverage of the satellites employed;

      The system is designed for messages up to 100 characters in length, and
      can accommodate greater content by sending multiple messages which are
      combined at the receiving end into a single, coherent message;

      Message content is highly secure by virtue of the proprietary encryption
      techniques and the inherent characteristics of the CDMA technology
      employed;

      The system has the flexibility to operate over a variety of satellite
      systems, including those in geostationary orbit (GEO's), as well as those
      in low earth orbit (LEO's); and

      Changes from one satellite system to another can be accomplished without
      the need to modify the mobile terminals, assuring the users that should
      demands increase or should a particular satellite system experience
      problems of a technical or financial nature, a switch to another system is
      feasible without the need to replace assets.

     While the service is satellite-based, we do not own satellites. Worldwide
coverage is available today, and multiple system coverage is available in many
regions as well. Satellite capacity will be leased for our data communications
services, which represents a significant advantage in consideration of the
increasingly competitive environment for sale or lease of satellite capacity. As
a result, we believe that our data services costs will be among the lowest in
the industry, and ongoing product development efforts will enable us to
maintain this competitive advantage.

     Primarily on the basis of these competitive advantages and our pricing
structure, in June 1999 the U.S. Army selected us to provide a system to be
deployed on a global basis by its Logistics Command for use in tracking its
mobile assets and communicating by message in near real-time with these units
from fixed and mobile command centers. The contract allows for purchases of up
to $418.2 million of equipment and services over an eight-year period, and is
open to other U.S. government agencies to procure their tracking and messaging
requirements.

                                       27







<PAGE>


     Although the U.S. Army contract obligates us to provide up to 56,000 mobile
terminals and worldwide satellite services over an eight-year period as and when
ordered by the U.S. Army and at the fixed prices and other terms set forth in
this contract, the U.S. Army is not obligated to purchase any terminals or
services under this contract and may terminate this contract at its convenience.
Orders under this contract will be subject to unpredictable funding and
deployment decisions based upon, among other things, additional field testing.
We currently anticipate receiving our first production order during the second
half of fiscal 2000, but we cannot assure you that any orders will be received.

     In September 1999, we completed a validation test involving communicating
between mobile terminals in Germany and Texas over two satellite links, with the
respective ground stations interconnected via the Internet. Due to the increased
visibility the system has achieved as a result of this contract, other agencies
of the Department of Defense, as well as a variety of other government agencies
with an interest in secure data communications and personal communications, have
shown increased interest in the potential use of our system. U.S. companies
under contract or bidding for large systems contracts requiring wireless data
communications as one element of the system have approached us, and there are
prospects for multi-agency adoption of this system as a standard for low data
rate wireless messaging. Under joint funding by the Departments of Defense and
Energy, we are proceeding to develop our technology to reduce size and cost, as
well as power demand. That development of a second generation mobile device
would further strengthen our position in the rapidly growing mobile data
communications services market.

     While the U.S. Army and other government agency business is expected to
become a major source of our growth in the near term, we intend to expand our
customer base for mobile data communications services and products into
commercial markets. It is important to note that the system, which will be used
by the U.S. Army, is immediately available as a commercial system.

     Commercial markets for satellite-based mobile data communications services
include land mobile applications, remote sensing, utility, maritime and aviation
applications. Gartner Group forecasts more than 5,000,000 commercial terminals
for these services in 2004, an increase from fewer than 400,000 in 1998.
QUALCOMM Incorporated is the leading supplier of commercial mobile data
communications services to the transportation industry with approximately
300,000 mobile terminals reported in use as of September 30, 1999. Orbcomm
Global, L.P. has deployed a LEO satellite system for remote data communications
services including tracking and messaging. Orbcomm's system has generated
considerable commercial interest.

     Specific applications within each commercial market include the following:

<TABLE>
<CAPTION>
     LAND MOBILE        REMOTE SENSING         UTILITY           MARITIME           AVIATION
     -----------        --------------         -------           --------           --------
<S>                    <C>                <C>                <C>                <C>
Truck fleet            Custody transfer   Meter reading      Fleet monitoring   Search and rescue
 monitoring             metering          Near real-time     Vessel tracking    Flight watch
Cargo tracking         Gas compressor      utility account    systems           Flight log
Trailer monitoring      monitoring        access for         Weather            Ground watch
Least cost routing     Gas pipeline        customer service   information       Flight support
Dispatching             monitoring        Wireless network   Fuel flow            - weather
Engine monitoring      Flow computer      management         monitoring           - flight plans
                       data collection                       Search and rescue    - checklists
                       Valve control                         Remote monitoring    - approaches
                       Oil storage tank                      Two-way messaging/ Aero-mail
                        monitoring                            EDI               Aviation
                       Remote burglar                                            information
                        alarm
</TABLE>

     We believe the performance and price features of our system will make it an
extremely attractive choice for users in commercial markets. Our success will
depend on our ability to access the best distribution channels and develop
applications which create real value for the customer. As a result of our prior
activities and relationships, we will focus first on the land mobile and

                                       28







<PAGE>


remote sensing markets. We anticipate having terminals in beta test with several
commercial customers in these markets by the end of fiscal 2000.

     Our ability to achieve significant results in commercial markets will also
depend on, among other things, our ability to attract people and to establish
relationships with value added resellers. Comtech is already engaged in
identifying and hiring marketing staff with knowledge of targeted market
sectors. We have begun to identify resellers in our market segments of immediate
interest, and have plans to work with them in the months ahead.

     The availability of products is another critical element to success.
Comtech has selected SCI Systems, Inc. of Huntsville, Alabama to be its
subcontractor for terminals. SCI Systems is one of the world's largest
contract manufacturers of electronics for computers and communications. SCI
has worked closely with us for several years, and is now beginning to
manufacture mobile terminals and computers for the U.S. Army contract. We have
placed an order with SCI for the manufacture of 100 mobile terminals, and parts
have been purchased for another 500 terminals. Because certain components that
we need currently require a lead time of four months or longer, and the U.S.
Army contract requires us to provide mobile terminals and services within 30
days after we receive an order, we anticipate spending approximately $4.2
million in the second half of fiscal 2000 for parts and assembly and supporting
infrastructure in advance of receiving our initial order from the U.S. Army.

     To provide engineering support, we have an arrangement with Anteon
Corporation, a large engineering firm with significant experience in military
logistics, whose offices are in Fairfax, Virginia. In addition, under one of our
technology development contracts, we engaged the Canadian firm of Vistar
Telecommunications Inc. to contribute aspects of their technology to our mobile
terminal design. As a result, we license certain aspects of the design
technology used in some of our mobile terminals under a non-exclusive license
agreement with Vistar. The license has an initial term expiring in 2005, subject
to renewal at our option for up to four additional years. Under this license, we
are obligated to pay Vistar a royalty for each mobile terminal that we sell
utilizing their technology. Vistar offers a similar but more limited mobile data
communications service. The material operating system protocols and software and
our gateway technology were developed by us and are not subject to the Vistar
license.

     We will lease satellite capacity for our mobile data communications system.
We are in negotiations with two satellite network operators for long-term
satellite coverage in North America, Central America and the northern rim of
South America, and expect to sign a lease for such coverage when we receive the
initial production order from the U.S. Army. Although we cannot assure you that
the lease that we ultimately enter into will be on these terms, we expect that
any such lease will have a term of four to five years and provide for total
lease payments of $4.0 million to $5.0 million over the lease term, with the
early monthly fee payments being less than later payments, in recognition of
our need to sign up customers and generate revenue. We expect that any such
lease would require us to pay a penalty of up to 12 months of fees if we
terminate the lease before the end of its term. There are other satellite
coverage alternatives today for much of the world, and we expect that new
satellite launches will increase those alternatives in the next 12 months.
As our system is capable of operating over a broad range of geostationary and
low earth orbit satellite systems, and as new systems of either type are
launched, we will seek, subject to then existing contractual obligations, the
most attractive terms. We cannot assure you that we will be able to obtain
sufficient satellite capacity on reasonable terms or on a timely basis.

     We are currently operating our system under a temporary license from the
FCC. Although we expect that we will be able to obtain a permanent license for
commercial operations on a timely basis, we cannot assure you that we will be
able to do so.

     Our Germantown, Maryland gateway communications center is modular and is
easily expandable as the number of subscribers increases. We currently expect to
establish a redundant gateway communications center at another location during
fiscal 2000 as our business develops, at an estimated cost of $250,000.

                                       29







<PAGE>


TELECOMMUNICATIONS TRANSMISSION BUSINESS SEGMENT

     In making procurement decisions, customers for telecommunications equipment
must weigh the relative costs and advantages of the six presently available
transmission technologies: copper cable, fiber optic cable, high frequency radio
systems, wireless microwave systems, over-the-horizon microwave systems and
satellite systems. Rarely is a complete communications network or system based
solely on one of these technologies. Transmission can be routed through a
combination of technologies, each employed where most cost-effective. Our
products are used in satellite, over-the-horizon microwave, terrestrial
line-of-sight microwave and other wireless applications.

      COPPER CABLE, the traditional transmission medium most familiar to
      consumers, is being replaced and supplemented by the other media,
      particularly for high-volume and long distance transmissions where it has
      substantial capacity, cost and reliability limitations.

      FIBER OPTIC CABLE is best suited to high-volume, point-to-point, short- or
      long-distance links where its advantages -- capacity, quality and
      security -- justify the long lead time and high cost to equip and install
      a network.

      HIGH FREQUENCY (HF) RADIO SYSTEMS employ long wavelengths which are
      propagated beyond line-of-sight distances either by surface waves
      traveling along the earth's perimeter or by skywave reflection of the
      transmitted waves off different layers of the ionosphere.

      WIRELESS AND LINE-OF-SIGHT MICROWAVE COMMUNICATIONS SYSTEMS, generally
      used for point-to-point communications, employ signals with extremely
      short wavelengths which travel only in line-of-sight paths over relatively
      short distances, generally under 30 miles, can be quickly and easily
      installed, require relatively low initial capital investment and can be
      upgraded and expanded over time.

      OVER-THE-HORIZON MICROWAVE COMMUNICATIONS SYSTEMS transmit signals over
      distances from 30 to 600 miles by reflection of the transmitted signals
      off the troposphere, an atmospheric layer located approximately seven
      miles above the earth's surface. Such systems offer a high level of
      reliability and security.

      SATELLITE COMMUNICATIONS SYSTEMS have grown and diversified in response to
      demand for efficient and accurate long distance voice and video
      communications and digital information exchange. In a satellite
      communications system, information is relayed to and from microwave
      transmitting and receiving stations on the ground by means of LEO, medium
      earth orbit (MEO), or GEO satellites, which are generally placed in an
      orbit from 600 to 22,300 miles above the earth's equator. Satellite
      communications systems are particularly useful where long-range, high
      capacity and high quality point-to-point or point-to-multipoint
      communication is desirable. As few as three GEO satellites can provide
      global communications coverage. These systems, which use microwave
      technology, are well suited for rapid introduction of service in remote
      areas or where communications alternatives are unavailable, such as
      mobile, shipboard or defense applications.

     Our Comtech Communications Corp. subsidiary located in Tempe, Arizona,
designs and manufactures equipment used in commercial and defense satellite
communications applications. The equipment includes modems, frequency up
converters and down converters, solid state power amplifiers and satellite VSAT
transceivers, which combine our frequency converters and solid state, high-power
amplifier technology. These products comprise a broad range of receiving and
transmitting equipment offering a variety of state-of-the-art technical
capabilities with respect to performance, complexity and value. Comtech
Communications Corp. recently introduced a turbo codec modem product line. This
forward error correction solution offers significantly improved power and
bandwidth performance over traditional systems.

     Our Comtech Antenna Systems, Inc. subsidiary, located in St. Cloud,
Florida, designs, manufactures, and markets a wide variety of fiberglass and
aluminum antennas for over-the-horizon microwave and satellite communications
applications, including distributed network programming, cable and broadcast
television and radio as well as other forms of information and entertainment
distribution. Comtech Antenna Systems, Inc. designs antennas for specific types
of telecommunications systems and, typically, sells standardized products to
independent distributors,

                                       30







<PAGE>


prime contractors and end user customers. Comtech Antenna Systems, Inc.'s
antenna product line includes fixed and mobile antenna systems and specialized
multi-beam satellite antenna systems that are capable of receiving signals
simultaneously from many independent satellites located up to 60 degrees apart.

     Our Comtech Systems, Inc. subsidiary, located in Orlando, Florida has a
product line consisting primarily of equipment for over-the-horizon microwave
systems and networks. It has a turnkey capability that ranges from system and
network planning through equipment and system training and operation and
maintenance programs. It also supplies telecommunication systems by combining
its products with equipment manufactured by our other operating units and third
parties. Comtech Systems, Inc. markets its products and services to oil and gas
companies and other commercial users, foreign defense commands and system prime
contractors. We believe that Comtech Systems, Inc.'s products, which employ
adaptive modem digital transmission technology, offer high-speed data benefits
over the traditional analog over-the-horizon microwave products offered by its
sole competitor.

RF MICROWAVE AMPLIFIER BUSINESS SEGMENT

     Amplifiers reproduce signals with greater power, current or voltage
amplitude. Indispensable in the world of signal processing, amplifiers can be as
tiny as a microchip for a hearing aid or as massive as a multi-story building
for transmitting radio signals to submerged submarines or to outer space.

     In telecommunications, solid state high-power amplifiers are used to
amplify signals for radiation from transmitting antennas in satellite or other
wireless telecommunications systems. They are also used to amplify signals in
defense and airport radar and electronic jamming systems. In the laboratory,
solid state, high-power amplifiers are used to test the performance of high
power microwave and wireless electronic system components used in cellular and
PCS networks.

     Solid state high-power amplifiers are also used in electromagnetic
compatibility and susceptibility testing. The proliferation of electronic
systems in products such as automobiles, computers, wireless telephones, radios,
televisions, medical equipment, sound amplifiers, aircraft and other products
has led to increasingly serious problems with electromagnetic interference.
Manufacturers, therefore, test these electronic systems for electromagnetic
compatibility and susceptibility using solid state, high-power RF microwave
amplifiers such as those we manufacture. For example, such testing may be used
to determine whether the various electronic systems in a commercial aircraft are
likely to be affected by the use of laptop computers, wireless telephones or
video games by passengers in flight.

     We believe our Comtech PST Corp. subsidiary, located in Melville, New York,
is one of a small number of companies designing, developing, manufacturing and
marketing solid state high-power large signal amplifiers in the microwave and RF
spectrums. Our products amplify energy for applications, including wireless and
satellite telecommunications, instrumentation and defense systems. Comtech PST
Corp. sells its products to domestic and foreign commercial users, government
agencies and prime contractors. We believe it is an innovative supplier of these
amplifiers and related power processing equipment.

BUSINESS STRATEGIES

     We manage our business with the following principal corporate strategies:

      Operate on a decentralized basis to maximize responsiveness to customers.

      Continue product innovation through investment in research and
      development.

      Capitalize on synergies among our business segments to secure larger
      contracts.

      Pursue acquisitions and investments in complementary businesses,
      technologies, products and services.

                                       31







<PAGE>


     In addition, we have developed various specific strategies within our
business segments to capitalize on the growth opportunities we have identified.
These strategies include:

     Mobile data communications services. We believe our systems and products
offer advantages useful to our target market, including broad geographic
coverage, near real-time data delivery and greater functionality than other
providers. As the scale of our mobile data communications services business
increases, we expect to offer customers cost-effective communications solutions
and achieve further growth by:

      Managing the roll out of the U.S. Army system to capitalize on the
      contract's opportunities and to provide a referenceable customer
      relationship that validates the effectiveness of our systems and products
      and generates substantial renewals.

      Continuing to pursue identified opportunities to sell these systems and
      products to other agencies of the U.S. government, including the Air Force
      and Departments of Defense and Energy.

      Focusing on development of new and emerging commercial applications for
      our mobile data communications systems primarily by working with value
      added resellers and early adopter end users. The first two applications we
      will target are in the land mobile and remote sensing markets. We
      anticipate having terminals in beta test with several customers in these
      markets by the end of fiscal 2000.

     Telecommunications transmission. We attribute our historical success in
this area to designing, manufacturing and marketing high quality products. We
believe that we can continue to grow our telecommunications transmission
business by:

      Further expanding our product line to meet a wider range of our customers'
      needs for high quality components and sub-systems, with particular focus
      on operators of satellite ground systems.

      Enhancing our existing product line to serve rapidly developing markets.
      For example, we are developing modems, transceivers and other products to
      meet the growing need for higher speeds and greater bandwidth resulting
      from new and emerging Internet applications.

      We will endeavor to maintain our market leadership in over-the-horizon
      microwave technologies and to broaden applications and improve product
      performance to facilitate the functionality of our products for users
      where unfriendly terrain or other constraints make other forms of
      communication impractical.

     RF microwave amplifiers. We will seek to increase our share of this market
by:

      Continuously enhancing our amplifier product line to incorporate advances
      in solid state device electronics.

      Continuing efforts to encourage original equipment manufacturers and users
      to outsource their requirements based upon the technical leadership of our
      products.

      Expand our products to include a line of PCS base station amplifiers.

      Combine high-power amplifiers and solid state switches for advanced
      communications jamming applications.

SALES, MARKETING AND CUSTOMER SUPPORT

     Our international sales (including sales to prime contractors'
international customers) from all three business segments represented
approximately 57.3%, 46.5%, 60.1% and 85.5% of total net sales in the fiscal
1997, 1998 and 1999 and the three months ended October 31, 1999, respectively.
We expect our international sales to continue to increase due to the global
expansion of telecommunications and microwave instrumentation and we expect that
international sales will remain a substantial portion of our total sales for the
foreseeable future.

                                       32







<PAGE>


     Domestic commercial sales represented approximately 25.7%, 34.0%, 24.3% and
10.8% of our total net sales in fiscal 1997, 1998 and 1999 and the three months
ended October 31, 1999, respectively. The balance of our sales are to U.S.
government departments or agencies.

     Sales to one customer in fiscal 1997 and to two different customers in
fiscal 1998 and 1999 represented 27.0%, 12.2% and 10.2% of our total net
sales, respectively. Sales to one customer, a major U.S. aerospace prime
contractor, represented 58.2% of our total net sales for the three months
ended October 31, 1999. We have experienced and will continue to experience the
effect of a limited number of customers on our net sales because most of our
sales are derived from a relatively small number of large customer contracts.

     Each of our operating units conducts its own sales and marketing efforts.
In some instances, our operating units may bundle other units' products. Sales
and marketing strategies vary with particular markets served and include direct
sales through sales, marketing and engineering personnel, sales through
independent representatives, value added resellers or a combination of the
foregoing. Our operating units enter into sales distribution agreements for
certain products with distributors. Unlike sales representatives, who merely
find customers on a commission basis, some of our distributors purchase products
from us for resale. We intend to continue to expand domestic and international
marketing efforts through independent sales representatives, distributors
and value added resellers.

     Our management technical and marketing personnel establish and maintain
relationships with customers. Our strategy includes a commitment to provide
ongoing customer support for our systems and equipment. This support involves
providing direct access to engineering staff or trained technical
representatives to resolve technical or operational problems.

BACKLOG

     Our backlog as of July 31, 1998 and 1999 and the three months ended October
31, 1999 was approximately $15.4 million, $38.6 million and $36.2 million,
respectively. We expect that a substantial majority of our backlog as of July
31, 1999 and October 31, 1999 will be recognized as sales during fiscal 2000. We
received payments in respect of progress billings and advance payments
aggregating approximately $3.1 million and $1.2 million as of July 31, 1999 and
the three months ended October 31, 1999, respectively, in connection with orders
included in the backlog at these dates. At July 31, 1999 and October 31, 1999,
respectively, approximately 2.7% and 4.8% of that backlog consisted of U.S.
government contracts, subcontracts and government funded programs, approximately
92.1% and 84.1% consisted of orders for use by foreign customers (including
sales to prime contractors' international customers) and approximately 5.2% and
11.1% consisted of orders for use by domestic commercial customers. Our backlog
at July 31, 1999 and October 31, 1999 included funded orders of $100,000 and
$400,000, respectively, under the U.S. Army contract with Comtech Mobile Datacom
Corp.

     Our backlog consists solely of orders believed to be firm. In the case of
contracts with departments or agencies of the U.S. government, orders are only
included in backlog to the extent funding has been obtained for such orders. All
of the contracts in our backlog are subject to cancellation at the convenience
of the customer or for default in the event that we are unable to perform the
contract.

     Variations in backlog from time to time are attributable in part to the
timing of our preparation and submission of contract proposals, the timing of
contract awards and the delivery schedules on specific contracts. As a result,
we believe our backlog at any point in the fiscal year is not necessarily
indicative of the total sales anticipated for any particular future period. Our
Comtech Antenna Systems, Inc. and Comtech Communications Corp. businesses
operate under short lead times and usually generate sales out of inventory, as
is the case for a significant portion of our RF microwave amplifier business.

                                       33







<PAGE>


MANUFACTURING AND SERVICE

     Our manufacturing operations consist principally of the assembly and
testing of electronic products we design and build from purchased fabricated
parts, printed circuits and electronic components and, in the case of antennas,
the casting of fiberglass antennas. We employ formal quality management programs
and other training programs, including International Standards Organization's
(ISO 9000) quality procedure registration programs. Our Comtech PST Corp. and
Comtech Systems, Inc. operating units have been qualified for ISO 9001 and we
are in the process of qualifying our other operating units.

     Our ability to deliver products to customers on a timely basis is dependent
in part upon the availability and timely delivery by subcontractors and
suppliers of the components and subsystems that we use in manufacturing our
products. Electronic components and raw materials used in our products are
generally obtained from independent suppliers. Some components are standard
items and are available from a number of suppliers. Others are manufactured to
our specifications by subcontractors. We obtain certain components and
subsystems from a single source or a limited number of sources. We believe that
most components and equipment are available from existing or alternative
suppliers and subcontractors. A significant interruption in the delivery of such
items could have a material adverse effect on our business and results of
operations.

     See 'Business -- Mobile Data Communications Services Business Segment' for
a further description of manufacturing operations in that segment.

RESEARCH AND DEVELOPMENT

     The technology used in our products is subject to rapid development and
frequent change. Our business position is in large part contingent upon the
continuous refinement of our scientific and engineering expertise and the
development, either through internal research and development or acquisitions,
of new or enhanced products and technologies.

     A majority of our sales in fiscal 1999 and the three months ended October
31, 1999 were of products developed by us within the past five years, including,
for example, linear amplifiers sold to cellular and PCS telephony system
manufacturers for testing their systems' amplifiers and turbo codec modems sold
to satellite systems integrators and service providers for use in high
performance voice, data, video and fax transmission.

     We reported research and development expenses of $1.0 million, $1.3
million, $2.0 million and $530,000 in fiscal 1997, 1998 and 1999 and the three
months ended October 31, 1999, respectively, representing 4.1%, 4.4%, 5.3%
and 4.5% of total net sales, respectively, for these periods. A portion of our
research and development efforts relates to the adaptation of our basic
technology to specialized customer requirements and is recoverable under such
contracts, and such expenditures are not included in our research and
development expenses for financial reporting purposes. During fiscal 1997, 1998
and 1999 and the three months ended October 31, 1999, we were reimbursed by
customers for such activities in the amounts of $436,000, $356,000, $1.8
million and $246,000, respectively. Accordingly, our aggregate research and
development expenditures (internal and customer funded) were 5.9%, 5.6%, 10.0%
and 6.6% of total net sales in fiscal 1997, 1998, 1999 and the three months
ended October 31, 1999, respectively.

PATENTS AND LICENSES

     Although we own or hold licenses for a number of patents, patents and
licenses have been of substantially less significance in our business than our
scientific and engineering know-how, production techniques, the timely
application of our technology and the design development and marketing
capabilities of our personnel. We rely on the laws of unfair competition,
restrictions in licensing agreements and confidentiality agreements to protect
such knowledge and techniques.

                                       34







<PAGE>


COMPETITION

     Our businesses are highly competitive and characterized by rapid
technological change. In addition, the number of potential customers for our
products is limited. Our growth and financial condition depend on, among other
things, our ability to keep pace with such changes and developments and to
respond to the sophisticated requirements of an increasing variety of electronic
equipment users. Many of our competitors are substantially larger, have
significantly greater financial, marketing, research and development,
technological and operating resources and broader product lines than we do. A
significant technological breakthrough by others, including smaller competitors
or new companies, could have a material adverse effect on our business. In
addition, certain of our customers have technological capabilities in our
product areas and could choose to replace our products with their own.

     In the market for mobile data communications services, there are several
much larger competitors with existing systems. The largest of these competitors
is QUALCOMM Incorporated, which reported that, as of September 30, 1999, it had
sold more than 300,000 mobile units and provided messaging and maintenance
services to more than 850 transportation companies in the United States.
Orbcomm has deployed a LEO satellite system for remote data communications
services, including tracking and messaging. Existing competitors are
aggressively pricing their products and services and may continue to do so in
the future. We anticipate that new competitors will enter that market in the
future. Competitors continue to offer new value added products and services,
which we may be unable to match on a timely or cost-effective basis. Increased
competition may impact margins throughout the industry.

     We believe that competition in all of our markets is based primarily on
product performance, reputation, delivery times, customer support and price. Due
to our decentralized organizational structure and proprietary know-how, we
believe we have the ability to develop, produce and to deliver equipment on a
cost-effective basis faster than many of our competitors.

KEY PERSONNEL/EMPLOYEES

     We believe our success is dependent upon the continued contributions of our
key management personnel, including the key management at each of our operating
units, and depends to a significant extent upon Fred Kornberg, our Chairman,
Chief Executive Officer and President. Many of our key personnel, particularly
the key engineers, would be difficult to replace, and are not subject to
employment or non-competition agreements. The development of our mobile data
communications services business is particularly dependent upon Joel R. Alper,
the President of Comtech Mobile Datacom Corp. The success of our subsidiary
Comtech Systems, Inc., is particularly dependent upon Richard L. Burt, its
President. Our growth and future success will depend in large part upon our
ability to attract and retain highly qualified engineering, sales and marketing
personnel. Competition for such personnel from other companies, academic
institutions, government entities and other organizations is intense. Although
we believe we have been successful to date in recruiting and retaining key
personnel, we may not be successful in attracting and retaining the personnel we
require in order to continue to grow and operate profitably. The management
skills that have been appropriate for our business in the past may not continue
to be appropriate if our business continues to grow and diversify.

     At October 31, 1999, we had 278 employees, 130 of whom were engaged in
production and production support, 91 in research and development and other
engineering support and 57 in marketing and administrative functions. None of
the employees are represented by a labor union. We believe that our employee
relations are good.

COMPLIANCE WITH FEDERAL, STATE AND LOCAL ENVIRONMENT PROTECTION LAWS

     We are subject to a variety of local, state and federal governmental
regulations relating to the storage, discharge, handling, emission, generation,
manufacture and disposal of toxic or other hazardous substances used to
manufacture our products, particularly in connection with the fabrication of
fiberglass antennas by Comtech Antenna Systems, Inc. We believe that we are

                                       35







<PAGE>


currently in compliance in all material respects with such regulations and that
we have obtained all necessary environmental permits to conduct our business. To
date, compliance with federal, state or local environment protection laws has
not had a material effect on our capital expenditures, earnings or competitive
position, and we do not expect that such compliance will have a material effect
in the future.

PROPERTIES

     Our corporate offices are located in a portion of the 46,000-square foot
facility on two acres of land in Melville, New York which also houses Comtech
PST.

     We lease the facility in Melville, New York from a partnership controlled
by our Chairman, Chief Executive Officer and President. The lease, as amended,
provides for our exclusive use of the premises as they now exist for an initial
term of ten years through December 2001. We have the option to extend the term
of the lease for an additional ten-year period and a right of first refusal in
the event of a sale of the facility. The base annual rental under the lease is
subject to adjustments. We believe that the terms of this lease are not less
advantageous to us than those that would have been available to us from an
unrelated party.

     We lease the 32,000-square foot facility on eight acres of land used by
Comtech Antenna Systems, Inc. in St. Cloud, Florida from a Florida land trust
controlled by our Senior Vice President and Chief Financial Officer. The lease
provides for our exclusive use of the premises as they now exist for a term
expiring September 2003. We have an option to extend the term of the lease for
an additional five-year period. The base annual rental under the lease is
subject to adjustments. We believe that the terms of this lease are not less
advantageous to us than those that would have been available to us from an
unrelated party.

     In December 1999, we leased a 72,500-square foot facility for Comtech
Systems, Inc. in Orlando, Florida from an unrelated third party. The lease
provides for the exclusive use of the premises as they now exist through April
2002. The base annual rental is subject to adjustments.

     We lease a 20,000-square foot building in Tempe, Arizona for our Comtech
Communications Corp. operating unit from an unrelated third party. The lease
provides for the exclusive use of the premises as they now exist for a term of
three years through April 2001.

     We lease 7,100-square feet of space located in Germantown, Maryland that is
used by Comtech Mobile Datacom Corp. from an unrelated third party. This lease
provides for the exclusive use of the premises as they now exist through August
2004.

LEGAL PROCEEDINGS

     We are subject to certain legal actions which arise out of the normal
course of business. These actions have not had a material effect on our
consolidated financial position or results of operations.

                                       36










<PAGE>


                                   MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY PERSONNEL

     The following table sets forth information regarding our directors,
executive officers, and other key personnel.

<TABLE>
<CAPTION>
NAME                                              AGE                        POSITION
- ----                                              ---                        --------
<S>                                               <C>      <C>
Fred Kornberg...................................  63       Chairman of the Board, Chief Executive
                                                           Officer and President
J. Preston Windus, Jr...........................  56       Senior Vice President and Chief Financial
                                                           Officer; President of Comtech PST Corp.
Richard L. Burt.................................  58       Senior Vice President; President of Comtech
                                                           Systems, Inc.
Robert L. McCollum..............................  51       Vice President; President of Comtech
                                                           Communications Corp.
Gail Segui......................................  53       Secretary and Treasurer
Thomas Christy..................................  50       President of Comtech Antenna Systems, Inc.
Joel R. Alper...................................  61       President of Comtech Mobile Datacom Corp.
George Bugliarello..............................  72       Director
Richard L. Goldberg.............................  63       Director
Gerard R. Nocita................................  63       Director
John B. Payne...................................  64       Director
Sol S. Weiner...................................  80       Director
</TABLE>

     Mr. Kornberg has been Chief Executive Officer and President of Comtech
since 1976. Prior to that, he was the Executive Vice President of Comtech from
1971 to 1976 and the General Manager of the telecommunications transmission
segment. He is also a senior member of the Institute of Electrical and
Electronics Engineers and the Armed Forces Communications and Electronics
Association.

     Mr. Windus has been a Senior Vice President of Comtech since 1998. He has
served as Chief Financial Officer of Comtech since 1993. From 1993 to 1998, he
also served as a Vice President of Comtech. He became President of Comtech PST
Corp. in 1995. Mr. Windus was President of Fairchild Data Corp., a satellite
modem manufacturer, from 1989 to 1993. He was affiliated with Comtech from 1972
to 1989.

     Mr. Burt has been President of Comtech Systems, Inc. since 1989 and before
that had been a Vice President of Comtech Systems, Inc. since its founding in
1984. He became a Senior Vice President of Comtech in 1998 and had been a Vice
President since 1992. Mr. Burt first joined Comtech in 1979 as Director of
Marketing.

     Mr. McCollum was appointed a Vice President of Comtech in August 1996. He
founded Comtech Communications Corp. in 1994 and has been its President since
its formation.

     Ms. Segui has been the Secretary and Treasurer of Comtech since 1998 and
the Corporate Controller of Comtech since 1990. She joined Comtech in 1989 as
Accounting Manager. Prior to joining Comtech, Ms. Segui served as Accounting
Manager of Photronics, Inc. from 1984 to 1987.

     Mr. Christy has been President of Comtech Antenna Systems, Inc. since 1999.
Prior to that, he was Director of Marketing from 1983 to 1989 and was Vice
President of Marketing from 1989 to 1999.

     Mr. Alper has been the President of Comtech Mobile Datacom Corp. since
June 1998. He has more than 40 years of technical and general management
experience in the fields of satellites and telecommunications. From 1993 until
1998, Mr. Alper was the President and Chief Executive Officer of Mobile
Datacom Corporation, Comtech Mobile Datacom Corp.'s predecessor. From 1981
to 1993, Mr. Alper was a member of COMSAT Corp.'s senior management team,
including President of COMSAT Corp.'s World Systems division from

                                       37







<PAGE>


1983 to 1987. In his COMSAT Corp. capacity, he was Chairman of the Board of the
International Telecommunications Satellite Organization (INTELSAT) from 1985 to
1986. Prior to that, Mr. Alper served as the European regional director for TRW
Systems for 12 years.

     Dr. Bugliarello has been a director of Comtech since 1977. He has also been
Chancellor of the Polytechnic University since 1994 and was President of the
University from 1973 to 1994. He is also a director of KeySpan Energy, The Lord
Corporation and Symbol Technologies Inc.

     Mr. Goldberg has been a director of Comtech since 1983. He has also been a
partner since 1990 in the law firm of Proskauer Rose LLP, which renders legal
services to Comtech and has served as Comtech's counsel in connection with this
offering. Prior to 1990, Mr. Goldberg was a partner since 1966 of the firm
Botein Hays & Sklar. He is also a director of Schein Pharmaceutical, Inc.

     Mr. Nocita has been a director of Comtech since 1993. He is a private
investor. He was Treasurer of the Incorporated Village of Patchogue, New York
from 1993 to 1996. He was affiliated with Comtech from our inception in 1967
until 1993.

     Dr. Payne has been a director of Comtech since 1993. He has also been the
President and Chief Executive Officer of Nucomm, Inc. since 1990. Nucomm, Inc.
produces products for satellite news gathering services. From 1973 through 1990,
he was President and Chief Executive Officer of Communications Technologies,
Inc.

     Mr. Weiner has been a director of Comtech since 1980. He is President of
Sol S. Weiner Investments, Inc. Mr. Weiner was Managing Director of Stenhouse,
Weiner, Sherman, Ltd., commodity pool managers, from 1982 to 1994. He is also a
director of Universal Automotive Industries, Inc.

     Our Board of Directors is divided into three classes, with each class
having two members. Members of the Board are elected for three-year terms, with
the term of office of one class expiring at each Annual Meeting of our
stockholders. Dr. Bugliarello and Mr. Goldberg are in the class whose term of
office expires in 2000, and Mr. Kornberg and Mr. Weiner are in the class whose
term expires in 2001. Mr. Nocita and Dr. Payne are in the class whose term of
office expires in 2002.

     The Board of Directors has Audit, Executive Compensation, Executive and
Nominating Committees. The Audit Committee, whose members are Dr. Payne, Mr.
Nocita, and Mr. Weiner, recommends the engagement of independent auditors to the
Board, directs investigations into matters relating to audit functions, reviews
the plans and results of audits with our independent auditors, reviews our
internal accounting controls and approves services to be performed by our
independent auditors. The Executive Compensation Committee, whose members are
Mr. Nocita, Dr. Bugliarello and Mr. Weiner, considers and authorizes
remuneration arrangements for senior management and grants options under, and
administers, our stock option plans. The Executive Committee, whose members are
Mr. Goldberg, Mr. Kornberg and Mr. Nocita, has the authority to take all actions
that the Board of Directors may take, subject to certain restrictions imposed by
law. The Nominating Committee, whose members are Mr. Goldberg, Dr. Bugliarello,
and Dr. Payne, identifies and evaluates candidates for election as members of
the Board of Directors and reports its findings to the full Board.

     The terms of office of each of our executive officers run until the next
annual meeting of the Board of Directors or until his successor is elected and
qualified.

     We employ Mr. Kornberg pursuant to an agreement which was amended and
restated in January 1998. The agreement provides, among other things, for his
employment until 2003, provided, however, that the employment period shall be
automatically extended for successive two-year periods unless terminated by
either party upon six months' prior notice. The agreement also provides for
basic compensation of $295,000 per annum. In addition, Mr. Kornberg may be paid
additional amounts, if any, as our Board or Directors may from time to time
determine and incentive compensation, not to exceed his basic compensation,
equal to 3.5% of our pre-tax income. Fifty percent of any such incentive
compensation is payable to Mr. Kornberg in the November following the fiscal
year to which such compensation relates, the balance is payable on

                                       38







<PAGE>


the first anniversary of the initial 50% payment. If Mr. Kornberg voluntarily
terminates his employment, other than after a Change in Control (as defined in
his employment agreement), or if we terminate his employment due to disability
or for cause, he will forfeit his right to receive accrued but unpaid incentive
compensation. If we undergo a Change in Control, Mr. Kornberg is entitled to
terminate his employment and receive a lump sum payment (subject to possible
adjustments to avoid the characterization of the payment as excess parachute
payments and the consequent imposition of taxes under Section 280G of the
Internal Revenue Code of 1986) equal to the sum of (1) his then basic
compensation for the balance of the employment period or three times his basic
compensation, whichever is greater, (2) accrued but unpaid incentive
compensation with respect to prior fiscal years and (3) if he so elects, the
market value less the applicable exercise price, of any stock option then held
by him. The aggregate of (1), (2) and (3), as of December 31, 1999, would
have been approximately $3.2 million. Mr. Kornberg would also be entitled to
receive benefits under our benefit plans, or substantially equal benefits, for
the remainder of the employment period.

                              CERTAIN TRANSACTIONS

     We lease facilities in Melville, New York from a partnership controlled by
our Chairman and Chief Executive Officer. The lease, as amended, provides for
our exclusive use of the premises as they now exist for an initial term of ten
years ending December 2001. We have the option to extend the term of the lease
for an additional ten-year period, and a right of first refusal in the event of
a sale of the facility. The annual rental under the lease, $448,000 in fiscal
1999, is subject to adjustments.

     We lease our St. Cloud, Florida facility from a Florida land trust
controlled by J. Preston Windus, Jr., our Senior Vice President and Chief
Financial Officer. The annual rental under the lease, $207,000 in fiscal 1999,
is subject to adjustments.

     We believe these leases are on terms not less favorable than those that may
be obtained by unrelated third parties.

                       BENEFICIAL OWNERSHIP OF SECURITIES

     The following table shows the common stock owned by our directors and
executive officers and by persons known by us to beneficially own, individually,
or as a group, more than 5% of our outstanding common stock as of December 31,
1999. Except as indicated below, each person has sole voting and dispositive
power with respect to these shares and each person's business address is our
executive offices.

     This information has been prepared based on the Securities and Exchange
Commission's 'beneficial ownership' rules. Under these rules a person is deemed
to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or to direct the voting of a security,
or investment power, which includes the power to dispose or to direct the
disposition of a security. More than one person may be deemed to be a beneficial
owner of the same securities. A person is deemed to be a beneficial owner of any
security that the person has the right to acquire within 60 days. The shares of
common stock issuable upon exercise of options exercisable within 60 days from
December 31, 1999 are assumed to be outstanding for the purpose of determining
the percentage of shares beneficially owned by that person. The Commission's
rules sometimes cause the total percentage ownership disclosed to be more than
the sum of the individual ownership percentages.

                                       39







<PAGE>



<TABLE>
<CAPTION>
                                                                                    PERCENT OF CLASS
                                                                                   -------------------
                                                                                    BEFORE     AFTER
NAME OF BENEFICIAL OWNER                               SHARES BENEFICIALLY OWNED   OFFERING   OFFERING
- ------------------------                               -------------------------   --------   --------
<S>                                                    <C>                         <C>        <C>
Fred Kornberg(1)(3) .................................           360,000              7.8       5.2
  (Chairman, Chief Executive Officer and President)
Gary Gelman(2).......................................           242,302              5.4       3.6
George Bugliarello(3) ...............................            29,100              *         *
  (Director)
Richard L. Burt(3) ..................................            85,146              1.9       1.2
  (Senior Vice President; President of
  Comtech Systems, Inc.)
Richard L. Goldberg(3) ..............................            26,677              *         *
  (Director)
Robert L. Mc Collum .................................            73,500              1.6       1.1
  (Vice President; President of Comtech
  Communications Corp.)
Gerard R. Nocita ....................................                 0              *         *
  (Director)
John B. Payne(3) ....................................            41,550              *         *
  (Director)
Gail Segui(3) .......................................            10,950              *         *
  (Secretary and Treasurer)
Sol S. Weiner(3) ....................................            46,500              1.0       *
  (Director)
J. Preston Windus, Jr.(3) ...........................            83,250              1.8       1.2
  (Senior Vice President and Chief Financial Officer;
  President of Comtech PST Corp.)
All directors and executive officers as a group
  (10 persons)(3) ...................................           756,673             15.9      10.7
</TABLE>

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

*  Less than 1%.

(1) Includes 112,500 shares subject to currently exercisable stock options. Does
    not include 3,000 shares held in a family limited partnership in which Mr.
    Kornberg is a general partner and has a 1% ownership interest, as to which
    shares he disclaims beneficial ownership.

(2) The information presented in the table for Mr. Gelman is based upon
    Amendment No. 3 to the Statement on Schedule 13D filed by Mr. Gelman dated
    July 19, 1999. Mr. Gelman's address is c/o American Claims Evaluation, Inc.,
    One Jericho Plaza, Jericho, New York 11753.

(3) Includes the following shares of common stock with respect to which such
    persons have the right to acquire beneficial ownership within 60 days from
    such date: Mr. Kornberg 112,500 shares; Mr. Weiner 3,000 shares; Mr.
    Goldberg 4,500 shares; Dr. Bugliarello 7,500 shares; Dr. Payne 10,500
    shares; Mr. Burt 58,500 shares; Ms. Segui 7,200 shares; Mr. Windus 57,450
    shares and all directors and officers as a group 261,688 shares. These
    respective shares were deemed to be outstanding for purposes of calculating
    the respective percentages owned.

                                       40







<PAGE>


                          DESCRIPTION OF CAPITAL STOCK

OVERVIEW

     Our authorized capital stock consists of 30,000,000 shares of common stock,
par value $.10, and 2,000,000 shares of preferred stock, par value $.10. As of
December 31, 1999, there were 4,492,493 shares of common stock and no shares of
preferred stock outstanding. As of such date, there were approximately 770
holders of record of our common stock.

COMMON STOCK

     Each holder of our common stock is entitled to one vote per share on all
matters submitted to a vote of stockholders, including the election of
directors. The common stock does not have cumulative voting rights, which means
that (subject to the rights of the holders of preferred stock, if any) the
holders of a majority of the shares voting for election of directors can elect
all members of our Board of Directors. Subject to the preferential rights of the
holders of shares of preferred stock, if any, the holders of common stock are
entitled to share ratably in such dividends, if any, as may be declared and paid
by our Board of Directors out of funds legally available therefor. See 'Dividend
Policy.' Upon our liquidation or dissolution, the holders of our common stock
will be entitled to share ratably in the assets legally available for
distribution to shareholders after payment of liabilities and subject to the
prior rights of any holders of preferred stock then outstanding. Holders of our
common stock have no conversion, sinking fund, redemption, preemptive or
subscription rights. The shares of common stock presently issued and outstanding
are, and the common stock to be issued in connection with the offering, when
issued and paid for, will be, fully paid and nonassessable. The rights,
preferences, and privileges of holders of common stock are subject to the rights
of the holders of shares of any series of preferred stock which we may issue in
the future.

PREFERRED STOCK

     Our Board of Directors is authorized, subject to any limitations prescribed
by law, from time to time to issue up to an aggregate of 2,000,000 shares of
preferred stock in one or more classes or series, each of such class or series
to have such preferences, voting powers, qualifications and special or relative
rights or privileges as shall be determined by the Board of Directors in a
resolution or resolutions providing for the issue of such class or series of
preferred stock. Thus, any class or series may, if so determined by our Board of
Directors, have full voting rights with our common stock or superior or limited
voting rights, to be convertible into common stock or any other security that we
may be authorized to issue, and have such other preferences, relative rights and
limitations as our Board of Directors shall determine. As a result, any class or
series of our preferred stock could have rights which would adversely affect the
voting power of the common stock or which could delay, defer or prevent a change
in control of Comtech. The shares of any class or series of preferred stock need
not be identical. Currently, 200,000 shares of preferred stock have been
designated Series A junior participating preferred stock pursuant to our rights
plan described below. As of the date of this prospectus, we have no plan to
issue any shares of preferred stock.

RIGHTS PLAN

     On December 15, 1998, we entered into a Rights Agreement with American
Stock Transfer and Trust Company, as Rights Agent. Under the Rights Agreement,
our Board of Directors declared a dividend distribution of one Series A junior
participating preferred stock purchase right for each outstanding share of
common stock. The Board also authorized and directed the issuance of one Right
with respect to each share of common stock issued thereafter. The Rights have
certain anti-takeover effects.

     The Rights are attached to all certificates representing outstanding shares
of common stock, and no separate Right Certificates will be distributed. The
Rights will separate from the shares of common stock upon the earliest to occur
of (1) a person or entity or group of affiliated or associated persons having
acquired beneficial ownership of 15% or more of the outstanding shares

                                       41







<PAGE>


of our common stock (except pursuant to a Permitted Offer, as hereinafter
defined); or (2) 10 business days (or such later date as our Board of Directors
may determine) following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result in
a Person or Group becoming an Acquiring Person (as hereinafter defined) (the
earliest of such dates being called the 'Distribution Date'). A Person or Group
whose acquisition of shares of our common stock causes a Distribution Date
pursuant to clause (1) above is an 'Acquiring Person.' The date that a Person or
Group becomes an Acquiring Person is the 'Shares Acquisition Date.'

     A Person who acquires shares of common stock pursuant to a tender or
exchange offer which is for all outstanding shares of common stock at a price
and on terms which our Board of Directors determines (prior to our acquisition)
to be adequate and in the best interests of us and our stockholders (other than
such Person, its affiliates and associates) (a 'Permitted Offer') will not be
deemed to be an Acquiring Person and such Person's ownership will not constitute
a Distribution Date.

     The Rights are not exercisable until the Distribution Date, and will expire
at the close of business on December 15, 2008, unless earlier redeemed by us.

     In the event that any person becomes an Acquiring Person, each holder of
Rights (other than Rights that have become null and void as described below)
will thereafter have the right (the 'Flip-In Right') to receive, upon exercise
of such Rights, the number of shares of common stock (or, in certain
circumstances, other securities of the Company) having a value (immediately
prior to such triggering event) equal to two times the aggregate exercise price
of such Rights. For example, if a Person became an Acquiring Person at a time
when the current per share market price of our common stock is $10 and the
Purchase Price was $60, each holder of a Right (other than a Right which has
become null and void as described herein) would have the right to receive twelve
shares of common stock upon exercise of the Right and payment of the Purchase
Price of $60.

     Our Board of Directors, at its option, may exchange each Right (other than
those that have become null and void as described below) for one share of common
stock in lieu of the Flip-In Right, provided no Person is the beneficial owner
of 50% or more of the shares of common stock at the time of such exchange.
Notwithstanding the foregoing, following the occurrence of the event described
above, all Rights that are or (under certain circumstances specified in the
Rights Agreement) were beneficially owned by any Acquiring Person or any
affiliate or associate thereof or certain transferees thereof will be null and
void.

     In the event that, at any time following the Shares Acquisition Date, (1)
we are acquired in a merger or other business combination transaction in which
the holders of all of the outstanding shares of common stock immediately prior
to the consummation of the transaction are not the holders of all of the
surviving corporation's voting power, or (2) more than 50% of our assets or
earning power is sold or transferred, then each holder of Rights (except Rights
which previously have been voided as set forth above) shall thereafter have the
right (the 'Flip-Over Right') to receive, upon exercise of such Rights, shares
of common stock of the acquiring company (or in certain circumstances, its
parent) having a value equal to two times the aggregate exercise price of the
Rights. The Flip-Over Right shall not apply to any transaction described in
clause (1) if such transaction is with a Person or Persons (or a wholly owned
subsidiary of any such Person or Persons) that acquired shares of common stock
pursuant to a Permitted Offer and the price and form of consideration offered in
such transaction is the same as that paid to all holders of common stock whose
shares were purchased pursuant to the Permitted Offer. The holder of a Right
will continue to have the Flip-Over Right whether or not such holder exercises
or surrenders the Flip-In Right.

     At any time prior to the earlier to occur of (1) a person becoming an
Acquiring Person or (2) the expiration of the Rights, we may redeem the Rights
in whole, but not in part, at a price of $.01 per Right (the 'Redemption
Price'), which redemption shall be effective at such time, on such basis and
with such conditions as the Board of Directors may establish in its sole
discretion. We may, at our option, pay the Redemption Price in common stock.

                                       42







<PAGE>


     All of the provisions of the Rights Agreement may be amended by the Board
of Directors prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Board in order to cure
any ambiguity, defect or inconsistency, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or, subject to certain limitations, to shorten or lengthen
any time period under the Rights Agreement.

OUR BOARD OF DIRECTORS

     Our Board of Directors is divided into three classes, with each class
holding office for staggered three-year terms. The classification of directors
may have the effect of making it more difficult for our stockholders to change
the composition of the Board of Directors in a relatively short period of time.
In addition, the classified board provision could have the effect of
discouraging a third party from attempting to gain control of us, even though
such an attempt might be beneficial to us and our stockholders. Accordingly, the
classified board provision, if effective, could delay, defer or prevent a change
in control of our company.

FAIR PRICE PROVISION

     Our certificate of incorporation contains a Fair Price Provision (the 'Fair
Price Provision') which requires that mergers, certain other business
combinations and similar transactions ('Business Combinations') involving us and
the beneficial owner of more than 10% of our voting shares (an 'Interested
Stockholder') be approved by the vote of 80% or more of the outstanding voting
shares (including a vote of at least 66 2/3% of the shares not held by the
Interested Stockholder) unless the transaction is either approved by at least a
two-thirds majority of the members of our Board of Directors who are
unaffiliated with the Interested Stockholder and were directors before the
Interested Stockholder became such ('Disinterested Directors'), or unless
certain minimum price, form of consideration and procedural requirements are
met. The Fair Price Provision does not, however, preclude our Board of Directors
in exercising its business judgment from either opposing or approving a takeover
proposal, whether or not such a proposal satisfies the minimum price, form of
consideration and procedural requirements. In addition, the Fair Price Provision
renders more difficult the consummation of a Business Combination by a person
acquiring a substantial interest in our stock, regardless of whether any such
transaction was desired by the holders of a majority (but less than 80%) of the
outstanding shares. Another effect of the Fair Price Provision is to vest in one
stockholder, or a group of stockholders controlling 20% or more of our voting
stock, a veto power or its practical equivalent over certain transactions,
unless the transactions were approved by the Disinterested Directors or
the minimum price and other provisions were met, even though holders of a
majority of our common stock may believe such transactions to be desirable and
beneficial.

CERTAIN PROVISIONS OF DELAWARE LAW

     We are subject to the provisions of Section 203 of the Delaware General
Corporation Law ('GCL'), an anti-takeover law. In general, this statute
prohibits a publicly-held Delaware corporation from engaging in a 'business
combination' with an 'interested stockholder' for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A 'business combination' includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, for purposes of Section 203 of the GCL, an 'interested
stockholder' is a person who, together with affiliates, owns, or within three
years did own, 15% or more of the corporation's voting stock.

LIABILITY OF DIRECTORS AND OFFICERS

     As permitted under Delaware law, our Certificate of Incorporation contains
a provision that eliminates the personal liability of the directors to us and
our stockholders for monetary damages

                                       43







<PAGE>


for breaches of fiduciary duties as directors, except that such provision does
not apply to any breach that involves

      a breach of a director's duty of loyalty to our company,

      any act or omission not in good faith or which involves intentional
      misconduct or a knowing violation of law,

      a transaction from which the director derives an improper personal
      benefit, or

      the payment of dividends or the approval of stock repurchases or
      redemptions that are unlawful under the GCL.

     Our By-laws provide that we shall indemnify (a) any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of our company) by reason
of the fact that he is or was one or our directors, officers or employees, or is
or was serving at our request as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to our best interests, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful, and (b) any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by us or in our name to procure a judgment in its favor by reason of the
fact that he is or was one or our directors, officers or employees, or is or was
serving at our request as a director, officer or employee of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to our
best interests and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable for negligence or misconduct in the performance of his duty to us
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
issuer pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable.

SHARES AVAILABLE FOR FUTURE SALE -- WARRANTS AND OPTIONS

     As of December 31, 1999, there were outstanding options to purchase an
aggregate of 848,768 shares of our stock at a weighted average price of $3.87
per share, of which options for 347,338 shares were exercisable. The options
were granted to key employees under our equity incentive plans as part of our
long-term incentive compensation strategy to attract, retain and incentivize
highly qualified employees. Approximately 1,381,578 shares are reserved for
issuance pursuant to stock option plans, including the shares subject to the
outstanding options. In addition, there are outstanding warrants to purchase an
aggregate of 150,000 shares of our stock at an exercise price of $6.57 per
share.

TRANSFER AGENT

     The transfer agent for our common stock is American Stock Transfer and
Trust Company, 40 Wall Street, New York, New York 10005, telephone number (718)
921-8208.

                                       44







<PAGE>


                                  UNDERWRITING

     We have entered into an underwriting agreement with the underwriters named
below. ABN AMRO Incorporated, Stifel, Nicolaus & Company, Incorporated and
HCFP/Brenner Securities, LLC are acting as representatives (the
'Representatives') for the underwriters.

     The underwriting agreement provides for each underwriter to purchase the
number of shares of common stock shown opposite its name below, subject to the
terms and conditions of the underwriting agreement. The underwriters'
obligations are several, which means that each underwriter is required to
purchase the specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares.

<TABLE>
<CAPTION>
                                                              NUMBER OF
                        UNDERWRITER                             SHARES
                        -----------                             ------
<S>                                                           <C>
ABN AMRO Incorporated.......................................
Stifel, Nicolaus & Company, Incorporated....................
HCFP/Brenner Securities, LLC................................
                                                              ----------
     Total..................................................   2,300,000
                                                              ----------
                                                              ----------
</TABLE>

     This is a firm commitment underwriting, which means that the underwriters
have agreed to purchase all of the shares offered by this prospectus if they
purchase any shares (other than those covered by the over-allotment option
described below). The underwriting agreement provides that if an underwriter
defaults in its commitment to purchase shares, the commitments of non-
defaulting underwriters may be increased or the underwriting agreement may be
terminated, depending on the circumstances.

     The Representatives have advised us that the underwriters purpose to offer
the shares directly to the public at the public offering price that appears on
the cover page of this prospectus. In addition, the underwriters may offer some
of the shares to selected securities dealers at the public offering price less a
concession of $         per share. The underwriters may also allow, and these
dealers may reallow, a concession not in excess of $         per share to other
dealers. After the shares are released for sale to the public, the underwriters
may change the offering price and other selling terms at various times.

     We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of 345,000 additional shares from
us to cover over-allotments. If the underwriters exercise all or part of this
option, they will purchase shares covered by the option at the initial public
offering price that appears on the cover page of this prospectus, less the
underwriting discount. The underwriters have severally agreed that, to the
extent the over-allotment option is exercised, they will each purchase a number
of additional shares proportionate to each underwriter's initial commitment
reflected in the foregoing table.

     The following table shows the underwriting fees to be paid to the
underwriters by us in connection with this offering. The fees to be paid by us
are shown assuming both no exercise and full exercise of the underwriters'
over-allotment option.

<TABLE>
<CAPTION>
                                                       NO EXERCISE   FULL EXERCISE
                                                       -----------   -------------
<S>                                                    <C>           <C>
Per Share............................................   $              $
Total................................................   $              $
</TABLE>

     We will pay the offering expenses, estimated to be approximately $500,000,
which include a non-accountable expense allowance of $60,000 paid to the
Representatives.

     Our executive officers and directors have agreed to a 180-day 'lock-up'
with respect to the shares of common stock and any other Comtech securities that
they beneficially own or have the right to acquire upon exercise of options. We
have agreed to a 180-day 'lock-up' with respect to previously unissued or
treasury shares. This means that, with certain exceptions, during the 'lock-up'
periods, Comtech and these officers and directors may not offer, sell, pledge or
otherwise dispose of our common stock without the prior written consent of ABN
AMRO Incorporated.

                                       45







<PAGE>


     The rules of the Securities and Exchange Commission may limit the ability
of the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities under the rules:

      Stabilizing transactions -- The underwriters may make bids or purchases
      for the purpose of pegging, fixing or maintaining the price of shares, so
      long as stabilizing bids do not exceed a specified maximum and may
      discontinue these bids or purchases at any time.

      Over-allotment and syndicate covering transactions -- The underwriters may
      create a short position in the shares by selling more shares than are
      shown on the cover page of this prospectus. If a short position is created
      in connection with the offering, the representatives may engage in
      syndicate covering transactions by purchasing shares in the open market.
      The representatives may also elect to reduce any short position by
      exercising all or part of the over-allotment option.

     We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, and to contribute to
payments the underwriters may be required to make to satisfy any such
liabilities.

     One of the Representatives, HCFP/Brenner Securities, LLC, was first
registered as a broker-dealer in January 1999 and, as of the date of this
prospectus, has participated in few public offerings. Prospective purchasers of
shares of common stock offered hereby should consider this limited experience in
evaluating the offering.

                                 LEGAL MATTERS

     The validity of the shares of common stock offered hereby will be passed
upon for us by Proskauer Rose LLP, New York, New York. Certain legal matters
will be passed upon for the underwriters by Thompson Coburn LLP, St. Louis,
Missouri. Richard L. Goldberg, a director of Comtech, is also a partner in
Proskauer Rose LLP.

                                    EXPERTS

     Our consolidated financial statements as of July 31, 1999 and 1998 and for
each of the years in the three-year period ended July 31, 1999 have been
included in this prospectus and elsewhere in the registration statement, in
reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, upon the authority of said firm as experts in
accounting and auditing.

                      WHERE YOU CAN FIND MORE INFORMATION

     We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You can inspect and
copy these reports, proxy statements and other information at the public
reference facilities of the Securities and Exchange Commission, in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, Suite
1300, New York, New York 10048; and Suite 1400, Citicorp Center, 500 W. Madison
Street, Chicago, Illinois 60661-2511. You can also obtain copies of these
materials from the public reference section of the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the public reference rooms. The Securities and Exchange
Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission (http://www.sec.gov).

     We have filed a registration statement and related exhibits with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The registration statement contains additional information about us and our
common stock. You may inspect the registration statement and exhibits without
charge at the office of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and you may obtain copies from the
Securities and Exchange Commission at prescribed rates.

                                       46







<PAGE>


     The Securities and Exchange Commission allows us to 'incorporate by
reference' the information we file with it, which means that we can disclose
important information to you by referring to those documents. The information
incorporated by reference is an important part of this prospectus, and
information that we file later with the Securities and Exchange Commission will
automatically update and supersede this information. We incorporate by reference
the following documents we filed with the Securities and Exchange Commission
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended (the
'Exchange Act'):

      Annual Report on Form 10-K for the year ended July 31, 1999; and

      Quarterly Report on Form 10-Q for three months ended October 31, 1999.

     You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:

              Comtech Telecommunications Corp.
              105 Baylis Road
              Melville, New York 11747
              Telephone: (516) 777-8900
              Attention: Ms. Gail Segui

                                       47








<PAGE>


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Consolidated Financial Statements:

     Independent Auditors' Report...........................   F-2

     Balance Sheets at July 31, 1999 and 1998...............   F-3

     Statements of Operations for each of the years in the
      three-year period ended July 31, 1999.................   F-4

     Statements of Stockholders' Equity for each of the
      years in the three-year period ended July 31, 1999....   F-5

     Statements of Cash Flows for each of the years in the
      three-year period ended July 31, 1999.................   F-6

     Notes to Consolidated Financial Statements.............   F-7

Unaudited Consolidated Interim Financial Statements:

     Unaudited Consolidated Balance Sheet as of October 31,
      1999..................................................  F-20

     Unaudited Consolidated Statements of Operations for
      each of the three-month periods ended October 31, 1999
      and 1998..............................................  F-21

     Unaudited Consolidated Statements of Cash Flows for
      each of the three-month periods ended October 31, 1999
      and 1998..............................................  F-22

     Notes to Unaudited Consolidated Interim Financial
      Statements............................................  F-23
</TABLE>

                                      F-1







<PAGE>


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
COMTECH TELECOMMUNICATIONS CORP.:

We have audited the consolidated financial statements of Comtech
Telecommunications Corp. and subsidiaries as listed in the accompanying index.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Comtech
Telecommunications Corp. and subsidiaries as of July 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended July 31, 1999 in conformity with generally accepted
accounting principles.

                                          /s/ KPMG LLP


Melville, New York
September 24, 1999

                                      F-2







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                             JULY 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                 1999           1998
                                                                 ----           ----
<S>                                                           <C>           <C>
                           ASSETS
Current assets:
     Cash and cash equivalents..............................  $ 5,896,000   $  2,724,000
     Restricted cash........................................      --              22,000
     Accounts receivable, less allowance for doubtful
      accounts of $145,000 in 1999 and $170,000 in 1998.....    5,152,000      5,932,000
     Inventories, net.......................................    7,879,000      6,135,000
     Prepaid expenses and other current assets..............      138,000        276,000
     Deferred tax asset -- current..........................    1,658,000        --
                                                              -----------   ------------
          Total current assets..............................   20,723,000     15,089,000
Property, plant and equipment, net..........................    4,310,000      4,314,000
Intangible assets, net of amortization of $78,000...........    1,623,000        --
Other assets................................................      274,000        307,000
Deferred tax asset -- non current...........................    2,917,000        --
                                                              -----------   ------------
                                                              $29,847,000   $ 19,710,000
                                                              -----------   ------------
                                                              -----------   ------------
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Current installments of long-term debt (including
      payable to related party of $316,000 in 1999 and
      $309,000 in 1998).....................................  $   605,000   $    804,000
     Accounts payable.......................................    3,763,000      2,588,000
     Accrued expenses and other current liabilities.........    6,026,000      2,780,000
     Net liabilities of discontinued operation..............      137,000        --
                                                              -----------   ------------
          Total current liabilities.........................   10,531,000      6,172,000
Long-term debt, less current installments (including payable
  to related party of $501,000 in 1999 and $817,000 in
  1998).....................................................      959,000      1,445,000
                                                              -----------   ------------
          Total liabilities.................................   11,490,000      7,617,000
                                                              -----------   ------------
Stockholders' equity:
     Preferred stock, par value $.10 per share; shares
      authorized and unissued 2,000,000.....................      --             --
     Common stock, par value $.10 per share; authorized
      15,000,000 shares; issued, 4,471,368 shares in 1999
      and 4,008,006 shares in 1998..........................      447,000        401,000
     Additional paid-in capital.............................   23,801,000     22,055,000
     Accumulated deficit....................................   (4,746,000)   (10,011,000)
                                                              -----------   ------------
                                                               19,502,000     12,445,000
Less:
     Treasury stock (82,500 shares in 1999 and 1998)........     (184,000)      (184,000)
     Deferred compensation..................................     (961,000)      (168,000)
                                                              -----------   ------------
                                                               18,357,000     12,093,000
                                                              -----------   ------------
Commitments and contingencies
                                                              $29,847,000   $ 19,710,000
                                                              -----------   ------------
                                                              -----------   ------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-3







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    YEARS ENDED JULY 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                           1999          1998          1997
                                                           ----          ----          ----
<S>                                                     <C>           <C>           <C>
Net sales.............................................  $37,886,000   $30,114,000   $24,746,000
                                                        -----------   -----------   -----------
Costs and expenses:
     Cost of sales....................................   26,405,000    21,330,000    17,670,000
     Selling, general and administrative..............    6,632,000     6,013,000     5,415,000
     Research and development.........................    2,022,000     1,319,000     1,023,000
                                                        -----------   -----------   -----------
                                                         35,059,000    28,662,000    24,108,000
                                                        -----------   -----------   -----------
Operating income from continuing operations...........    2,827,000     1,452,000       638,000
Other expenses (income):
     Interest expense.................................      204,000       234,000       284,000
     Interest income..................................      (65,000)      (36,000)      (33,000)
     Other............................................      (39,000)      (30,000)     (151,000)
                                                        -----------   -----------   -----------
Income from continuing operations before income
  taxes...............................................    2,727,000     1,284,000       538,000
Provision (benefit) for income taxes..................   (3,754,000)      180,000        54,000
                                                        -----------   -----------   -----------
Income from continuing operations.....................    6,481,000     1,104,000       484,000
Discontinued operations (Note 13):
     Loss from operations of discontinued segment (net
       of applicable income tax benefit of
       $320,000)......................................     (622,000)      --            --
     Loss on disposal of segment, including provision
       of $430,000 for operating losses during
       phase-out period (net of applicable income tax
       benefit of $306,000)...........................     (594,000)      --            --
                                                        -----------   -----------   -----------
Net income............................................  $ 5,265,000   $ 1,104,000   $   484,000
                                                        -----------   -----------   -----------
                                                        -----------   -----------   -----------
Basic income (loss) per share:
     Income from continuing operations................  $      1.56   $      0.28   $      0.13
     Loss from discontinued operations................        (0.29)      --            --
                                                        -----------   -----------   -----------
     Basic income.....................................  $      1.27   $      0.28   $      0.13
                                                        -----------   -----------   -----------
                                                        -----------   -----------   -----------
Diluted income (loss) per share:
     Income from continuing operations................  $      1.42   $      0.27   $      0.12
     Loss from discontinued operations................        (0.27)      --            --
                                                        -----------   -----------   -----------
     Diluted income...................................  $      1.15   $      0.27   $      0.12
                                                        -----------   -----------   -----------
                                                        -----------   -----------   -----------
Weighted average number of common shares
  outstanding -- basic computation....................    4,143,000     3,902,000     3,873,000
Potential dilutive common shares......................      430,000       264,000        33,000
                                                        -----------   -----------   -----------
Weighted average number of common and common
  equivalent shares outstanding assuming dilution --
  diluted computation.................................    4,573,000     4,166,000     3,906,000
                                                        -----------   -----------   -----------
                                                        -----------   -----------   -----------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    YEARS ENDED JULY 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                            COMMON STOCK       ADDITIONAL                     TREASURY STOCK
                        --------------------     PAID-IN     ACCUMULATED    ------------------     DEFERRED     STOCKHOLDERS'
                         SHARES      AMOUNT      CAPITAL       DEFICIT      SHARES    AMOUNT     COMPENSATION       EQUITY
                         ------      ------      -------       -------      ------    ------     ------------       ------
<S>                     <C>         <C>        <C>           <C>            <C>      <C>         <C>            <C>
Balance July 31,
  1996................  3,911,016   $391,000   $22,105,000   $(11,599,000)  22,500   $(180,000)  $  (416,000)    $10,301,000

Amortization of
  deferred
  compensation........     --          --          --             --          --        --            43,000          43,000

Forfeiture of unvested
  restricted shares
  issued pursuant to
  employee stock award
  agreement...........     --          --         (211,000)       --          --        --           158,000         (53,000)

Purchase of treasury
  shares..............                                                      60,000      (4,000)      --               (4,000)

Stock options
  exercised...........     64,590      7,000       100,000        --          --        --           --              107,000

Net income............     --          --          --             484,000     --                     --              484,000
                        ---------   --------   -----------   ------------   ------   ---------   -----------     -----------

Balance July 31,
  1997................  3,975,606    398,000    21,994,000    (11,115,000)  82,500    (184,000)     (215,000)     10,878,000

Amortization of
  deferred
  compensation........     --          --          --             --          --        --            47,000          47,000

Stock options
  exercised...........     32,400      3,000        61,000        --          --        --           --               64,000

Net income............     --          --          --           1,104,000     --        --                         1,104,000
                        ---------   --------   -----------   ------------   ------   ---------   -----------     -----------

Balance July 31,
  1998................  4,008,006    401,000    22,055,000    (10,011,000)  82,500    (184,000)     (168,000)     12,093,000

Amortization of
  deferred
  compensation........     --          --          --             --          --        --           248,000         248,000

Stock issued in
  acquisition of
  Mobile Datacom......    150,000     15,000       513,000        --          --        --           --              528,000

Restricted shares
  issued pursuant to
  employment stock
  award agreement.....    225,000     22,000     1,034,000        --          --        --        (1,041,000)         15,000

Stock options
  exercised...........     88,362      9,000       199,000        --          --        --           --              208,000

Net income............     --          --                       5,265,000     --        --           --            5,265,000
                        ---------   --------   -----------   ------------   ------   ---------   -----------     -----------

Balance July 31,
  1999................  4,471,368   $447,000   $23,801,000   $ (4,746,000)  82,500   $(184,000)  $  (961,000)    $18,357,000
                        ---------   --------   -----------   ------------   ------   ---------   -----------     -----------
                        ---------   --------   -----------   ------------   ------   ---------   -----------     -----------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED JULY 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                            1999          1998          1997
                                                            ----          ----          ----
<S>                                                      <C>           <C>           <C>
Cash flows from operating activities:
     Net income........................................  $ 5,265,000   $ 1,104,000   $   484,000
     Adjustments to reconcile net income to net cash
       provided by operating activities:
          Loss from discontinued operations............    1,216,000       --            --
          Gain on sale of property.....................      --            --            (72,000)
          Depreciation and amortization................    1,510,000     1,206,000     1,055,000
          Increase (decrease) in bad debt allowance....      (25,000)       68,000        74,000
          Provision (reduction of) inventory
            reserves...................................      341,000      (127,000)      466,000
          Deferred income tax provision (benefit)......   (4,575,000)      --            --
          Changes in assets and liabilities, net of
            effects of acquisitions:
               Restricted cash securing letter of
                 credit obligations....................       22,000        68,000       130,000
               Accounts receivable.....................    1,006,000      (449,000)   (2,158,000)
               Inventories.............................   (1,724,000)      548,000      (495,000)
               Prepaid expenses and other current
                 assets................................      138,000       (45,000)      (35,000)
               Other assets............................        9,000        (3,000)      (48,000)
               Accounts payable........................      372,000      (277,000)      828,000
               Accrued expenses and other current
                 liabilities...........................    2,376,000       479,000       527,000
                                                         -----------   -----------   -----------
                    Net cash provided by continuing
                      operations.......................    5,931,000     2,572,000       756,000
                    Net cash used by discontinued
                      operations.......................     (988,000)      --            --
                                                         -----------   -----------   -----------
                    Net cash provided by operating
                      activities.......................    4,943,000     2,572,000       756,000
                                                         -----------   -----------   -----------
Cash flows from investing activities:
     Purchases of property, plant and equipment........   (1,000,000)     (312,000)     (903,000)
     Sale of property, plant and equipment.............      --            --            127,000
     Payment for business acquisitions net of cash
       received........................................     (173,000)      --            --
                                                         -----------   -----------   -----------
                    Net cash used in investing
                      activities.......................   (1,173,000)     (312,000)     (776,000)
                                                         -----------   -----------   -----------
Cash flows from financing activities:
     Borrowings under line of credit facility..........      850,000     1,900,000     1,150,000
     Repayments of borrowings under line of credit
       facility........................................     (850,000)   (1,900,000)   (1,150,000)
     Principal payments on long-term debt..............     (821,000)     (874,000)     (649,000)
     Proceeds from issuance of common stock:
          Purchase of treasury stock...................      --            --             (4,000)
          Stock options................................      208,000        64,000       107,000
          Restricted stock.............................       15,000       --            --
                                                         -----------   -----------   -----------
                    Net cash used in financing
                      activities.......................     (598,000)     (810,000)     (546,000)
                                                         -----------   -----------   -----------
Net increase (decrease) in cash and cash equivalents...    3,172,000     1,450,000      (566,000)
Cash and cash equivalents at beginning of period.......    2,724,000     1,274,000     1,840,000
                                                         -----------   -----------   -----------
Cash and cash equivalents at end of period.............  $ 5,896,000   $ 2,724,000   $ 1,274,000
                                                         -----------   -----------   -----------
                                                         -----------   -----------   -----------
Supplemental cash flow disclosure
     Cash paid during the period for:
          Interest.....................................  $   204,000   $   234,000   $   284,000
          Income taxes.................................      169,000        22,000        38,000
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6








<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JULY 31, 1999 AND 1998

(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

(a) PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of
Comtech Telecommunications Corp. and its subsidiaries (the Company), all of
which are wholly-owned. All significant intercompany balances and transactions
have been eliminated in consolidation.

(b) NATURE OF BUSINESS

     We design, develop, produce and market sophisticated components and systems
that are used by telecommunications and defense systems and service providers in
a broad range of applications.

     The Company's business is highly competitive and characterized by rapid
technological change. In addition, the number of potential customers for the
Company's products is limited. The Company's growth and financial position
depends, among other things, on its ability to keep pace with such changes and
developments and to respond to the sophisticated requirements of an increasing
variety of electronic equipment users. Many of the Company's competitors are
substantially larger, have significantly greater financial, marketing and
operating resources and broader product lines than does the Company. A
significant technological breakthrough by others, including smaller competitors
or new companies, could have a material adverse effect on the Company's
business. In addition, certain of the Company's customers have technological
capabilities in the Company's product areas and could choose to replace the
Company's products with their own.

     International sales expose the Company to certain risks, including barriers
to trade, fluctuations in foreign currency exchange rates (which may make the
Company's products less price competitive), political and economic instability,
availability of suitable export financing, export license requirements, tariff
regulations, and other United States and foreign regulations that may apply to
the export of the Company's products, as well as the generally greater
difficulties of doing business abroad. The Company attempts to reduce the risk
of doing business in foreign countries by seeking contracts denominated in U.S.
dollars, advance payments and irrevocable letters of credit in its favor.

(c) REVENUE RECOGNITION

     Revenues on long-term, fixed price contracts are generally recorded based
on the relationship of total costs incurred to date to total projected final
costs or, alternatively, as deliveries are made. Revenues under cost
reimbursement contracts are recorded as costs are incurred.

     Revenues on other contract orders are recognized under the units of
delivery method. Under this method, revenues are recorded as units are delivered
with the related cost of sales recognized on each shipment based upon a
percentage of estimated final contract costs. Contract costs include material,
direct labor, manufacturing overhead and other direct costs. Retainages and
estimated earnings in excess of amounts billed on certain multi-year programs
are reported as unbilled receivables.

     Revenues not associated with long-term contracts are generally recognized
when the earnings process is complete, generally upon shipment or customer
acceptance.

     Provision for anticipated losses on uncompleted contracts is made in the
period in which such losses are determined.

                                      F-7







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

(d) CASH AND CASH EQUIVALENTS

     Cash equivalents consist of highly liquid direct obligations of the U.S.
government with a maturity at acquisition of three months or less. Cash
equivalents of July 31, 1999 and 1998 amounted to $2,258,000 and $1,991,000.
These investments are carried at cost plus accrued interest, which approximates
market. The Company had $22,000 of restricted cash securing letter of credit
obligations with a financial institution at July 31, 1998.

(e) STATEMENT OF CASH FLOWS

     The Company acquired equipment financed by capital leases in the amounts of
$136,000, $1,207,000 and $48,000 in 1999, 1998 and 1997, respectively.

(f) INVENTORIES

     Work-in-process inventory reflects all accumulated production costs, which
are comprised of direct production costs and overhead, reduced by amounts
attributable to units delivered. These inventories are reduced to their
estimated net realizable value by a charge to cost of sales in the period such
excess costs are determined.

     Raw materials and components and work-in-process inventory are stated at
the lower of cost or market, computed on the first-in, first-out (FIFO) method.

(g) LONG-LIVED ASSETS

     The Company's plant and equipment, which are recorded at cost, are
depreciated or amortized over their estimated useful lives (building and
improvements -- 40 years, equipment -- three to eight years) under the
straight-line method. Capitalized values of properties under leases are
amortized over the life of the lease or the estimated life of the asset,
whichever is less. Intangible assets, consisting of goodwill resulting from
acquisitions, is being amortized over 20 years. The Company reviews its
long-lived assets for impairment whenever events or circumstances indicate that
the carrying amount of an asset may not be recoverable. If the sum of the
expected cash flows, undiscounted and without interest, is less than the
carrying amount of the asset, an impairment loss is recognized as the amount by
which the carrying amount of the asset exceeds its fair value.

(h) OTHER ASSETS

     Included in other assets at July 31, 1999 and 1998 is approximately
$350,000 less accumulated amortization, which relates to an intellectual
property rights agreement being amortized over the eight-year term of the
agreement. At July 31, 1999 and 1998, accumulated amortization related to this
purchased technology was approximately $232,000 and $190,000, respectively. The
Company assesses the recoverability of the intangible asset by determining
whether the amortization of purchased technology over its remaining life can be
recovered through undiscounted future operating cash flows from product sales
utilizing the technology.

(i) RESEARCH AND DEVELOPMENT COSTS

     The Company charges research and development costs to operations as
incurred, except in those cases in which such costs are reimbursable under
customer-funded contracts. In fiscal 1999, 1998 and 1997, the Company was
reimbursed by customers for such activities in the amount of $1,779,000,
$356,000 and $436,000, respectively.

                                      F-8







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

(j) INCOME TAXES

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(k) EARNINGS PER SHARE

     The Company calculates earnings per share (EPS) in accordance with the
Statement of Financial Accounting Standards (SFAS) No. 128, 'Earnings per
Share'. Basic EPS are computed based on the weighted average number of shares
outstanding. Diluted EPS reflects the maximum dilution from potential common
stock issuable pursuant to the exercise of stock options and warrants, if
dilutive, outstanding during each period. All share and per share amounts have
been restated to reflect a three-for-two stock split effective July 30, 1999
(Note 9(e)).

(l) FINANCIAL INSTRUMENTS

     Management of the Company believes that the book value of its monetary
assets and liabilities approximates fair value as a result of the short-term
nature of such assets and liabilities. Management further believes that the fair
market value of long-term debt relating to capital leases does not differ
materially from its carrying value.

(m) USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results may differ from those estimates.

(n) ACCOUNTING FOR STOCK-BASED COMPENSATION

     The Company records compensation expense for employee stock options only if
the current market price of the underlying stock exceeds the exercise price on
the date of the grant. The Company has elected not to implement the fair value
based accounting method for employee stock options of SFAS No. 123, 'Accounting
for Stock-Based Compensation', but has elected to disclose the pro forma net
income per share for employee stock option grants made beginning in fiscal 1996
as if such method had been used to account for stock-based compensation cost as
described in SFAS No. 123.

(o) REPORTING COMPREHENSIVE INCOME

     The Company has adopted SFAS No. 130, 'Reporting Comprehensive Income',
which requires companies to report all changes in equity during a period, except
those resulting from investment by owners and distribution to owners, for the
period in which they are recognized. Comprehensive income is the total of net
income and all other nonowner changes in equity (or other

                                      F-9







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

comprehensive income) such as unrealized gains/losses on securities classified
as available-for-sale, foreign currency translation adjustments and minimum
pension liability adjustments.

     Comprehensive and other comprehensive income must be reported on the face
of annual financial statements or in the case of interim reporting, the footnote
approach may be utilized. The Company's operations did not give rise to items
includible in comprehensive income which were not already included in net
income. Accordingly, the Company's comprehensive income is the same as its net
income for all periods presented.

(2) ACCOUNTS RECEIVABLE

     Accounts receivable consist of the following at July 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                                 ----         ----
<S>                                                           <C>          <C>
Accounts receivable from commercial customers...............  $3,924,000   $4,302,000
Unbilled receivables (including retainages) on contracts-in-
  progress..................................................   1,154,000    1,531,000
Amounts receivable from the United States government and its
  agencies..................................................     219,000      269,000
                                                              ----------   ----------
                                                               5,297,000    6,102,000
Less allowance for doubtful accounts........................     145,000      170,000
                                                              ----------   ----------
     Accounts receivable, net...............................  $5,152,000   $5,932,000
                                                              ----------   ----------
                                                              ----------   ----------
</TABLE>

In the opinion of management, substantially all of the unbilled balances will be
billed and collected during fiscal 2000.

(3) INVENTORIES

     Inventories consist of the following at July 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                                 ----         ----
<S>                                                           <C>          <C>
Raw materials and components................................  $3,553,000   $3,365,000
Work-in-process.............................................   5,798,000    4,932,000
                                                              ----------   ----------
                                                               9,351,000    8,297,000

Less:
     Progress payments......................................     302,000    1,333,000
     Reserve for anticipated losses on contracts and
       inventory reserves...................................   1,170,000      829,000
                                                              ----------   ----------
          Inventories, net..................................  $7,879,000   $6,135,000
                                                              ----------   ----------
                                                              ----------   ----------
</TABLE>

                                      F-10







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

(4) PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consists of the following at July 31, 1999
and 1998:

<TABLE>
<CAPTION>
                                                                1999          1998
                                                                ----          ----
<S>                                                          <C>           <C>
Equipment..................................................  $ 9,574,000   $ 8,918,000
Leasehold improvements.....................................      427,000       352,000
Facilities financed by capital lease.......................    3,365,000     3,365,000
Equipment financed by capital lease........................    4,219,000     3,802,000
                                                             -----------   -----------
                                                              17,585,000    16,437,000
Less accumulated depreciation and amortization.............   13,275,000    12,123,000
                                                             -----------   -----------
                                                             $ 4,310,000   $ 4,314,000
                                                             -----------   -----------
                                                             -----------   -----------
</TABLE>

     Depreciation and amortization expense on property, plant and equipment
amounted to approximately $1,152,000, $1,103,000 and $994,000 for the years
ended July 31, 1999, 1998 and 1997, respectively.

(5) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     Accrued expenses and other current liabilities consist of the following at
July 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                                 ----         ----
<S>                                                           <C>          <C>
Customer advances and deposits..............................  $2,798,000   $  652,000
Accrued wages and benefits..................................   1,603,000    1,068,000
Accrued commissions.........................................     915,000      452,000
Other.......................................................     710,000      608,000
                                                              ----------   ----------
                                                              $6,026,000   $2,780,000
                                                              ----------   ----------
                                                              ----------   ----------
</TABLE>

(6) SHORT-TERM BORROWINGS

     In December 1998, the Company obtained an $8,000,000 secured credit
facility from Republic National Bank of New York. The line of credit which is to
be used for working capital requirements, is for a term of one year and bears
interest on borrowings at 90-day LIBOR plus 1.50%. There were no borrowings
outstanding at July 31, 1999.

(7) LONG-TERM DEBT

     Long-term debt consists of the following at July 31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                                 ----         ----
<S>                                                           <C>          <C>
Obligations under capital leases............................  $1,564,000   $2,249,000
Less current installments...................................     605,000      804,000
                                                              ----------   ----------
                                                              $  959,000   $1,445,000
                                                              ----------   ----------
                                                              ----------   ----------
</TABLE>

     The obligations under capital leases relate to the Melville, New York
facilities, as well as certain equipment, the net carrying value of which was
$2,087,000 and $2,517,000 at July 31, 1999 and 1998, respectively.

                                      F-11







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

     Future minimum lease payments under capital leases as of July 31, 1999 are:

<TABLE>
<CAPTION>
YEARS ENDING JULY 31,
<S>                                                                  <C>
               2000......................................            $  725,000
               2001......................................               563,000
               2002......................................               315,000
               2003......................................               137,000
               2004......................................                51,000
                                                                     ----------
     Total minimum lease payments........................             1,791,000
     Less amounts representing interest (at rates varying
       from 6.8% to 10.8%)...............................               227,000
                                                                     ----------
                                                                      1,564,000
     Less current installments...........................               605,000
                                                                     ----------
     Obligations under capital leases, net of current
       installments......................................            $  959,000
                                                                     ----------
                                                                     ----------
</TABLE>

     In December 1991, the Company and a partnership controlled by the Company's
Chairman, Chief Executive Officer and President entered into an agreement in
which the Company leases from the partnership its corporate headquarters and
Melville production facility. The lease is for a ten-year period and provides
for annual rentals of approximately $448,000 for fiscal 1999, subject to annual
adjustments equal to the lesser of 5% or the change in the Consumer Price Index.
For financial reporting purposes, the Company has capitalized this lease at
inception in the amount of $2,450,000, net of deferred interest of $1,345,000.
The outstanding balance at July 31, 1999 and 1998 approximated $817,000 and
$1,105,000, respectively.

(8) INCOME TAXES

     The provision (benefit) for income taxes on continuing operations included
in the accompanying consolidated statements of operations consists of the
following:

<TABLE>
<CAPTION>
                                                             YEAR ENDED JULY 31,
                                                       --------------------------------
                                                          1999         1998      1997
                                                          ----         ----      ----
<S>                                                    <C>           <C>        <C>
Federal-current......................................  $    60,000   $ 45,000   $20,000
Federal-deferred.....................................   (3,949,000)     --        --
State and local-current..............................      135,000    135,000    34,000
                                                       -----------   --------   -------
                                                       $(3,754,000)  $180,000   $54,000
                                                       -----------   --------   -------
                                                       -----------   --------   -------
</TABLE>

     The provision (benefit) for income taxes on income from continuing
operations was ($3,754,000), $180,000 and $54,000 for fiscal 1999, 1998 and
1997, respectively, and differed from the amounts computed by applying the U.S.
Federal income tax rate of 34% as a result of the following:

                                      F-12







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                   YEAR ENDED JULY 31,
                           -------------------------------------------------------------------
                                   1999                     1998                    1997
                           --------------------       -----------------       ----------------
                             AMOUNT       RATE         AMOUNT     RATE         AMOUNT    RATE
                             ------       ----         ------     ----         ------    ----
<S>                        <C>           <C>          <C>         <C>         <C>        <C>
Computed 'expected' tax
  expense................  $   927,000     34.0%      $ 437,000    34.0%      $183,000    34.0%
Increase (reduction) in
  income taxes resulting
  from:
     Change in the
       beginning of the
       year valuation
       allowance for
       deferred tax
       assets............   (4,544,000)  (166.6)        (93,000)   (7.2)       264,000    49.6
     Utilization of tax
       benefit
       carryforward......     (223,000)    (8.2)       (299,000)  (23.3)      (430,000)  (79.9)
     State and local
       income tax, net of
       Federal benefit...       86,000      3.2         135,000    10.5         34,000     6.3
     Other...............      --          --            --        --            3,000    --
                           -----------   ------       ---------   -----       --------   -----
Effective tax rate.......  $(3,754,000)  (137.6)%     $ 180,000    14.0%      $ 54,000    10.0%
                           -----------   ------       ---------   -----       --------   -----
                           -----------   ------       ---------   -----       --------   -----
</TABLE>

     As of July 31, 1999, the Company has net operating loss carryforwards of
approximately $10,260,000 for income tax purposes of which $4,843,000 expires in
2004, $1,473,000 expires in 2005, $415,000 expires in 2009 and $3,529,000
expires in 2010 through 2012.

     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at July 31, 1999 and 1998
are presented below.

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                                 ----         ----
<S>                                                           <C>          <C>
Deferred tax assets:
     Allowance for doubtful accounts receivable.............  $   60,000   $   60,000
     Inventory reserve......................................     646,000      496,000
     Plant and equipment, principally due to capitalized
      leases and differences in depreciation................     (16,000)      27,000
     Compensated absences, principally due to accrual for
      financial reporting purposes..........................     395,000      331,000
     Deferred compensation..................................     250,000      154,000
     Net operating loss carryforwards.......................   3,490,000    3,726,000
     Investment tax credit carryforwards....................     440,000      440,000
     Alternative minimum tax credit carryforwards...........      87,000       87,000
                                                              ----------   ----------
          Total gross deferred tax assets...................   5,352,000    5,321,000
     Less valuation allowance...............................    (777,000)  (5,321,000)
                                                              ----------   ----------
          Net deferred tax assets...........................  $4,575,000   $   --
                                                              ----------   ----------
                                                              ----------   ----------
</TABLE>

     The Company provides for income taxes under the provisions of SFAS No. 109,
'Accounting for Income Taxes.' SFAS 109 requires an asset and liability based
approach in accounting for income taxes. In assessing the realizability of
deferred tax assets and liabilities, management considers whether it is more
likely than not that some portion or all of them will not be realized. At July
31, 1998 the Company had a 100% valuation allowance against these gross deferred
tax assets. During fiscal 1999, the Company concluded that a full valuation
allowance was no longer necessary given its estimates of future earnings, which
include substantial long-term contracts entered into in the first and fourth
quarters of fiscal 1999 and the expected timing of temporary difference
reversals. Accordingly, the Company reduced the valuation allowance to $777,000
during

                                      F-13







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

fiscal 1999 and recorded deferred tax assets of $4,575,000 of which $3,155,000
was recorded in the fourth quarter. The Company must generate approximately
$13,500,000 of taxable income to fully utilize its deferred tax assets.
Management believes it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the net deferred
tax assets.

(9) STOCKHOLDERS' EQUITY

(a) OPTIONS AND WARRANT PLANS AND AGREEMENTS

     The Company has several option and warrant plans and agreements as follows:

     1982 Incentive Stock Option Plan -- The 1982 Incentive Stock Option and
Appreciation Plan provided for the granting to key employees and officers of
incentive stock options to purchase up to 240,000 shares of the Company's common
stock through September 29, 1992 at prices not less than the fair market value
of such shares on the date the option is granted. The plan expired on September
29, 1992. Options granted to purchase an aggregate of 16,350 shares remain
outstanding.

     1993 Incentive Stock Option Plan -- The 1993 Incentive Stock Option Plan,
as amended, provides for the granting to key employees and officers of incentive
and non-qualified stock options to purchase up to 1,042,500 shares of the
Company's common stock at prices generally not less than the fair market value
at the date of grant with the exception of anyone who, prior to the grant, owns
more than 10% of the voting power, the exercise price cannot be less than 110%
of the fair market value. In addition, it provides formula grants to
non-employee members of the Board of Directors. The term of the options may be
no more than ten years. However, for incentive stock options granted to any
employee who, prior to the granting of the option, owns stock representing more
than 10% of the voting power, the option term maybe no more than five years. The
plan expires in 2002, unless terminated earlier by the Board of Directors under
conditions specified in the plan. As of July 31, 1999, the Company had granted
incentive stock options representing the right to purchase an aggregate of
1,029,015 shares at prices ranging between $1.50 -- $7.50 per share, of which
69,600 options were canceled and 888,045 are outstanding at July 31, 1999. To
date, options for 71,370 shares have been exercised.

     Warrant Issued Pursuant to Acquisition of CMDC -- As part of the asset
purchase agreement for the acquisition of Mobile Datacom Corp. (see Note 12),
which was incorporated into the Company as a wholly-owned subsidiary, Comtech
Mobile Datacom Corp., the Company issued warrants to the owners and creditors to
purchase 150,000 shares of the Company's common stock at an exercise price of
$6.57. The warrants, which contain transferability restrictions, are exercisable
for a period of five years commencing September 24, 1998, and shares purchased
through the exercise of these warrants contain voting restrictions. Due to the
transferability and voting restrictions and other conditions, no value was
ascribed to these warrants for purposes of determining the cost of the
acquisition.

(b) OPTION ACTIVITY

     The following table sets forth summarized information concerning the
Company's stock options:

                                      F-14







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                                              WEIGHTED
                                                                          AVERAGE EXERCISE
                                                       NUMBER OF SHARES        PRICE
                                                       ----------------        -----
<S>                                                    <C>                <C>
Outstanding at July 31, 1996.........................      363,870             $2.42
Granted..............................................       43,500              2.16
Expired/canceled.....................................      (21,810)             2.85
Exercised............................................      (64,590)             1.65
Outstanding at July 31, 1997.........................      320,970              2.55
Granted..............................................      583,125              2.99
Expired/canceled.....................................      (13,500)             2.13
Exercised............................................      (32,400)             2.00
Outstanding at July 31, 1998.........................      858,195              2.65
Granted..............................................      140,250              6.08
Expired/canceled.....................................       (5,688)             5.90
Exercised............................................      (88,362)             2.43
Outstanding at July 31, 1999.........................      904,395              3.40

Options exercisable at July 31, 1999.................      367,437              2.93
Options available for grant at July 31, 1999.........       83,085               --
</TABLE>

     The options outstanding as of July 31, 1999 are summarized in ranges as
follows:

<TABLE>
<CAPTION>
     RANGE OF        WEIGHTED AVERAGE   NUMBER OF OPTIONS   WEIGHTED AVERAGE
  EXERCISE PRICES     EXERCISE PRICE       OUTSTANDING       REMAINING LIFE
  ---------------     --------------       -----------       --------------
<S>                  <C>                <C>                 <C>
   $1.50 - 2.50           $2.08              123,870            6 years
    2.51 - 4.99            3.09              663,525            8 years
    5.00 - 7.50            6.55              117,000            7 years
</TABLE>

(c) STOCK-BASED COMPENSATION PLANS

     The Company has two stock option plans, the 1982 Incentive Stock Option and
Appreciation Plan and the 1993 Incentive Stock Option Plan. The Company accounts
for these plans under APB Opinion No. 25, under which no compensation cost has
been recognized. Had compensation cost for these plans been determined
consistent with SFAS Statement No. 123, the Company's net income and income per
share would have been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                          1999         1998        1997
                                                          ----         ----        ----
<S>                            <C>           <C>       <C>          <C>          <C>
Net income...................  As reported             $5,255,000   $1,104,000   $484,000
                               Pro forma                4,836,000      817,000    475,000
Net income per share.........  As reported   Basic          $1.27        $0.28      $0.13
                                             Diluted         1.15         0.27       0.12
                               Pro forma     Basic           1.17         0.21       0.12
                                             Diluted         1.06         0.19       0.12
</TABLE>

     The full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net income and net income per
share amounts presented above because compensation cost is reflected over the
option's vesting period and compensation cost for options granted prior to
August 1, 1995 was not considered.

     The per share weighted average fair value of stock options granted during
1999 and 1998 was $3.19 and $2.30, respectively, on the date of grant using the
Black Scholes option pricing model with the following weighted average
assumptions:

     1999 -- expected dividend yield of 0%, risk-free interest rate of 5.86%,
expected volatility of 69.5% and an expected option life of 10 years.

                                      F-15







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

     1998 -- expected dividend yield of 0%, risk-free interest rate of 6%,
expected volatility of 63.32% and an expected option life of 10 years.

     1997 -- expected dividend yield of 0%, risk-free interest rate of 6%,
expected volatility of 64.49% and an expected option life of 10 years.

(d) RESTRICTED COMMON STOCK

     In February 1994, a total of 180,000 (after effect of three-for-two stock
split -- see Note 9(e)) restricted shares of the Company's common stock were
granted by the Board of Directors to the principal officers of one of the
Company's operating units, Comtech Communications Corp. ('CCC'), 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 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 Company's common stock were
granted by the Board of Directors to the principal officers and employees of the
Company's 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 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.

(e) 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

                                      F-16







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

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.

<TABLE>
<CAPTION>
                                                            MOBILE DATA
                       TELECOMMUNICATIONS   RF MICROWAVE   COMMUNICATIONS   CORPORATE
                          TRANSMISSION       AMPLIFIERS       SERVICES      AND OTHERS   ELIMINATIONS    TOTAL
                          ------------       ----------       --------      ----------   ------------    -----
                                                       (IN THOUSANDS)
<S>                    <C>                  <C>            <C>              <C>          <C>            <C>
    FISCAL 1999
    -----------
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
</TABLE>

<TABLE>
<CAPTION>
     FISCAL 1998
     -----------
<S>                    <C>                  <C>            <C>              <C>          <C>            <C>
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
</TABLE>

<TABLE>
<CAPTION>
     FISCAL 1997
     -----------
<S>                    <C>                  <C>            <C>              <C>          <C>            <C>
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
Expenditures for
  long-lived
  assets.............           440               511         --               --                           951
Total assets.........         8,116             9,346         --              12,502       (12,004)      17,960
</TABLE>

     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

                                      F-17







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

from the RF Microwave Amplifier business segment in 1998. During fiscal 1999,
1998 and 1997, approximately 15.6%, 19.5% and 17.0%, respectively, of the
Company's net sales resulted from contracts with the United States government
and its agencies. Export sales comprised 60.1%, 46.5% and 57.3% 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:

<TABLE>
<S>                                                           <C>
2000........................................................  $  355,000
2001........................................................     355,000
2002........................................................     193,000
2003........................................................     196,000
                                                              ----------
                                                              $1,099,000
                                                              ----------
                                                              ----------
</TABLE>

     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.

(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

                                      F-18







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
                             JULY 31, 1999 AND 1998

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:

<TABLE>
<CAPTION>
                                                              JULY 31, 1999
                                                              -------------
<S>                                                           <C>
Inventory...................................................    $ 293,000
Provision for operating losses during phase out period......     (430,000)
                                                                ---------
                                                                $(137,000)
                                                                ---------
                                                                ---------
</TABLE>

     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 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-19







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              OCTOBER 31, 1999   JULY 31, 1999
                                                              ----------------   -------------
                                                                (UNAUDITED)
<S>                                                           <C>                <C>
                           ASSETS
Current assets:
     Cash and cash equivalents..............................    $ 1,397,000       $ 5,896,000
     Accounts receivable, less allowance for doubtful
       accounts of $145,000 at October 31, 1999 and July 31,
       1999.................................................      9,577,000         5,152,000
     Inventories, net.......................................      8,166,000         7,879,000
     Prepaid expenses and other current assets..............        328,000           138,000
     Deferred tax asset -- current..........................      1,391,000         1,658,000
     Net assets of discontinued operations..................         80,000           --
                                                                -----------       -----------
Total current assets........................................     20,939,000        20,723,000
Property, plant and equipment, net..........................      4,202,000         4,310,000
Intangible assets, net of amortization......................      1,599,000         1,623,000
Other assets................................................        258,000           274,000
Deferred tax asset -- non current...........................      2,917,000         2,917,000
                                                                -----------       -----------
                                                                $29,915,000       $29,847,000
                                                                -----------       -----------
                                                                -----------       -----------
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Current installments of long-term debt (including
       payable to related party of $323,000 at October 31,
       1999 and $316,000 at July 31, 1999)..................    $   566,000       $   605,000
     Accounts payable.......................................      5,166,000         3,763,000
     Accrued expenses and other current liabilities.........      3,891,000         6,026,000
     Net liabilities of discontinued operations.............       --                 137,000
                                                                -----------       -----------
          Total current liabilities.........................      9,623,000        10,531,000
     Long-term debt, less current installments (including
       payable to related party of $418,000 at October 31,
       1999 and $501,000 at July 31, 1999)..................        825,000           959,000
     Other long-term liabilities............................        448,000           --
                                                                -----------       -----------
          Total liabilities.................................     10,896,000        11,490,000
                                                                -----------       -----------
Stockholders' equity:
     Preferred stock, par value $.10 per share; shares
       authorized and unissued 2,000,000....................       --                 --
     Common stock, par value $.10 per share; authorized
       15,000,000 shares; issued 4,496,741 shares at October
       31, 1999 and 4,471,368 shares at July 31, 1999.......        450,000           447,000
     Additional paid-in capital.............................     23,866,000        23,801,000
     Accumulated deficit....................................     (4,211,000)       (4,746,000)
                                                                -----------       -----------
                                                                 20,105,000        19,502,000
Less:
     Treasury stock (82,500 shares at October 31, 1999 and
       July 31, 1999).......................................       (184,000)         (184,000)
     Deferred compensation expense..........................       (902,000)         (961,000)
                                                                -----------       -----------
                                                                 19,019,000        18,357,000
                                                                -----------       -----------
Commitments and contingencies
                                                                $29,915,000       $29,847,000
                                                                -----------       -----------
                                                                -----------       -----------
</TABLE>

          See accompanying notes to consolidated financial statements

                                      F-20







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                                                                       OCTOBER 31,
                                                                       (UNAUDITED)
                                                              -----------------------------
                                                                 1999              1998
                                                                 ----              ----
<S>                                                           <C>               <C>
Net sales...................................................  $11,747,000       $ 8,735,000
                                                              -----------       -----------
Operating costs and expenses:
     Cost of sales..........................................    8,406,000         6,008,000
     Selling, general and administrative....................    1,946,000         1,640,000
     Research and development...............................      530,000           478,000
                                                              -----------       -----------
          Total operating costs and expenses................   10,882,000         8,126,000
                                                              -----------       -----------
Operating income from continuing operations.................      865,000           609,000
Other (expense) income:
     Interest expense.......................................      (37,000)          (52,000)
     Interest income........................................       32,000            19,000
     Other income...........................................      --                  2,000
                                                              -----------       -----------
Income from continuing operations before provision for
  income taxes..............................................      860,000           578,000
Provision for income taxes..................................      325,000            45,000
                                                              -----------       -----------
Income from continuing operations...........................      535,000           533,000
Loss from operations of discontinued segment................      --               (139,000)
                                                              -----------       -----------
Net income..................................................  $   535,000       $   394,000
                                                              -----------       -----------
                                                              -----------       -----------
Basic income (loss) per share:
     Income from continuing operations......................  $      0.12       $      0.14
     Loss from operations of discontinued segment...........      --                  (0.04)
                                                              -----------       -----------
     Basic income per share.................................  $      0.12       $      0.10
                                                              -----------       -----------
                                                              -----------       -----------
Diluted income (loss) per share:
     Income from continuing operations......................  $      0.11       $      0.12
     Loss from operations of discontinued segment...........      --                  (0.03)
                                                              -----------       -----------
     Diluted income per share...............................  $      0.11       $      0.09
                                                              -----------       -----------
                                                              -----------       -----------
Weighted average number of common shares outstanding --basic
  computation...............................................    4,399,000         3,926,000
Potential dilutive common shares............................      683,000           345,000
                                                              -----------       -----------
Weighted average number of common and common equivalent
  shares outstanding assuming dilution -- diluted
  computation...............................................    5,082,000         4,271,000
                                                              -----------       -----------
                                                              -----------       -----------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-21







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED
                                                                       OCTOBER 31,
                                                                       (UNAUDITED)
                                                              -----------------------------
                                                                 1999              1998
                                                                 ----              ----
<S>                                                           <C>               <C>
Cash flows from operating activities:
Net income..................................................  $   535,000       $   394,000
Adjustments to reconcile net income to net cash (used in)
  provided by operating activities:
     Loss from discontinued operations......................      --                139,000
     Depreciation and amortization..........................      418,000           353,000
     Deferred income tax provision..........................      267,000           --
     Changes in assets and liabilities, net of effects of
       acquisitions:
       Accounts receivable..................................   (4,425,000)          556,000
       Inventories..........................................     (287,000)          (36,000)
       Prepaid expenses and other current assets............     (190,000)          (74,000)
       Other assets.........................................       (1,000)            8,000
       Accounts payable.....................................    1,403,000           (72,000)
       Accrued expenses and other current liabilities.......   (2,134,000)         (278,000)
       Other liabilities....................................      448,000           --
                                                              -----------       -----------
          Net cash (used in) provided by continuing
            operations......................................   (3,966,000)          990,000
          Net cash used in discontinued operations..........     (218,000)         (139,000)
                                                              -----------       -----------
          Net cash (used in) provided by operating
            activities......................................   (4,184,000)          851,000
                                                              -----------       -----------
Cash flows from investing activities:
Purchase of property, plant and equipment...................     (210,000)         (265,000)
Payment for business acquisitions net of cash acquired......      --               (173,000)
                                                              -----------       -----------
          Net cash used in investing activities.............     (210,000)         (438,000)
                                                              -----------       -----------
Cash flows from financing activities:
Principal payments on long-term debt........................     (173,000)         (212,000)
Exercise of stock options...................................       68,000             2,000
                                                              -----------       -----------
          Net cash used in financing activities.............     (105,000)         (210,000)
                                                              -----------       -----------
Net increase (decrease) in cash and cash equivalents........   (4,499,000)          203,000
Cash and cash equivalents at beginning of period............    5,896,000         2,746,000
                                                              -----------       -----------
Cash and cash equivalents at end of period..................  $ 1,397,000       $ 2,949,000
                                                              -----------       -----------
                                                              -----------       -----------
Supplemental cash flow disclosure
Cash paid during the period for:
     Interest...............................................  $    37,000       $    52,000
     Income taxes...........................................      104,000           133,000
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-22







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL

     The accompanying consolidated financial statements as of October 31, 1999
and for the three months ended October 31, 1999 and 1998 are unaudited. In the
opinion of management, the information furnished reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited interim periods. The results of
operations for the three months ended October 31, 1999 are not necessarily
indicative of the results of operations to be expected for the full year.

     These financial statements should be read in conjunction with the audited
consolidated financial statements of the Company for the fiscal year ended July
31, 1999 and the notes thereto contained in the Company's Annual Report on Form
10-K, filed with the Securities and Exchange Commission on October 29, 1999.

(2) RECLASSIFICATIONS

     Certain balances in the prior fiscal quarter have been reclassified to
conform to the current fiscal quarter and fiscal year-end presentation.

(3) COMPREHENSIVE INCOME

     The Company's operations did not give rise to items includible in
comprehensive income which were not already included in net income. Accordingly,
the Company's comprehensive income is the same as its net income for all periods
presented.

(4) ACCOUNTS RECEIVABLE

     Accounts receivable consist of the following:

<TABLE>
<CAPTION>
                                                              OCTOBER 31,    JULY 31,
                                                                 1999          1999
                                                              -----------   ----------
<S>                                                           <C>           <C>
Accounts receivable from commercial customers...............  $5,833,000    $3,924,000
Unbilled receivables (including retainages) on contracts-in-
  progress..................................................   3,273,000     1,154,000
Amounts receivable from the United States government and its
  agencies..................................................     616,000       219,000
                                                              ----------    ----------
                                                               9,722,000     5,297,000
Less allowance for doubtful accounts........................     145,000       145,000
                                                              ----------    ----------
     Accounts receivable, net...............................  $9,577,000    $5,152,000
                                                              ----------    ----------
                                                              ----------    ----------
</TABLE>

(5) INVENTORIES

     Inventories consist of the following:

<TABLE>
<CAPTION>
                                                              OCTOBER 31,    JULY 31,
                                                                 1999          1999
                                                              -----------   ----------
<S>                                                           <C>           <C>
Raw materials and components................................  $4,495,000    $3,553,000
Work-in-process.............................................   5,794,000     5,798,000
                                                              ----------    ----------
                                                              10,289,000     9,351,000
                                                              ----------    ----------
Less:
     Progress payments......................................     978,000       302,000
     Inventory reserves.....................................   1,145,000     1,170,000
                                                              ----------    ----------
          Inventories -- net................................  $8,166,000    $7,879,000
                                                              ----------    ----------
                                                              ----------    ----------
</TABLE>

                                      F-23







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

     Accrued expenses and other current liabilities consist of the following:

<TABLE>
<CAPTION>
                                                              OCTOBER 31,    JULY 31,
                                                                 1999          1999
                                                              -----------   ----------
<S>                                                           <C>           <C>
Customer advances and deposits..............................  $  184,000    $2,798,000
Accrued wages and benefits..................................   1,782,000     1,603,000
Accrued commissions.........................................   1,585,000       915,000
Other.......................................................     253,000       710,000
                                                              ----------    ----------
                                                              $3,804,000    $6,026,000
                                                              ----------    ----------
                                                              ----------    ----------
</TABLE>

(7) LONG-TERM DEBT

     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                              OCTOBER 31,    JULY 31,
                                                                 1999          1999
                                                              -----------   ----------
<S>                                                           <C>           <C>
Obligations under capital leases............................  $1,391,000    $1,564,000
Less current installments...................................     566,000       605,000
                                                              ----------    ----------
                                                              $  825,000    $  959,000
                                                              ----------    ----------
                                                              ----------    ----------
</TABLE>

(8) INCOME TAXES

     Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

(9) EARNINGS PER SHARE

     The Company calculates earning per share ('EPS') in accordance with the
Statement of Financial Accounting Standards ('SFAS') No. 128, 'Earnings per
Share.' Basic EPS are computed based on the weighted average number of shares
outstanding. Diluted EPS reflects the maximum dilution from potential common
stock issuable pursuant to the exercise of stock options and warrants, if
dilutive, outstanding during each period. All share and per share amounts have
been restated to reflect a three-for-two stock split effective July 30, 1999.

(10) SEGMENT AND PRINCIPAL CUSTOMER INFORMATION

     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

                                      F-24







<PAGE>


               COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

<TABLE>
<CAPTION>
                                                            MOBILE DATA     CORPORATE
                       TELECOMMUNICATIONS   RF MICROWAVE   COMMUNICATIONS      AND
                          TRANSMISSION       AMPLIFIERS       SERVICES       OTHERS     ELIMINATIONS    TOTAL
                          ------------       ----------       --------       ------     ------------    -----
                                                           (IN THOUSANDS)
<S>                    <C>                  <C>            <C>              <C>         <C>            <C>
 THREE MONTHS ENDED
  OCTOBER 31, 1999
- ---------------------

Net sales............       $ 9,453            $2,149          $  145        $   --                    $11,747
Operating income
  (loss).............         1,471               (60)            (81)         (465)                       865
Interest income......            --                --                            32                         32
Interest expense.....             8                28               1            --                         37
Depreciation and
  amortization.......           154               185              79            --                        418
Expenditures for
  long-lived assets..            93                54              57             6                        210
Total assets.........        12,405             8,255           3,333         9,972        (4,050)      29,915
</TABLE>

<TABLE>
<CAPTION>
 THREE MONTHS ENDED
  OCTOBER 31, 1998
  ----------------
<S>                    <C>                  <C>            <C>              <C>         <C>            <C>
Net sales............         4,643             4,066              26            --                      8,735
Operating income
  (loss).............           479               594             (56)         (408)                       609
Interest income......            --                --              --            19                         19
Interest expense.....            10                42              --            --                         52
Depreciation and
  amortization.......           121               201              --            31                        353
Expenditures for
  long-lived assets..           127               125              --            --                        252
Total assets.........         8,809             7,771           2,466         7,069        (4,027)      22,088
</TABLE>

                                      F-25








<PAGE>



     [The inside back cover of this prospectus contains a diagram outlining the
transmission modes of our Telecommunications Transmission Segment. The diagram
has drawings of a fax machine, personal computer, telephone, television and
cellular phone. Each drawing is connected by a line to a box labeled 'Local and
Internet Switching.' Five lines connect this box to the following drawings
showing transmission modes: two earth based stations transmitting to each other
via a space based satellite (labeled 'Satellites'); cable connections (labeled
'Cable'); transmission wires (labeled 'Wire'); two earth based stations
transmitting directly to each other (labeled 'Line of Sight'); and two earth
based stations transmitting to each other over the horizon (labeled
'Troposcatter'). Each drawing is connected to a box labeled 'Local and Internet
Switching' which is in turn connected by lines to diagrams of a fax machine,
personal computer, telephone television and cellular phone.]

     The overall telecommunications market can be divided into three broad
categories: end user or subscriber on-premises equipment; local network and
switching; and long distance transmission of voice, data, facsimile and video.
Comtech's Telecommunications Transmission business segment provides
sophisticated products and systems for information transmission in satellite,
over-the-horizon microwave and line-of-site telecommunications systems.







<PAGE>


________________________________________________________________________________

                                     [Logo]

                            ------------------------
                                   PROSPECTUS
                            ------------------------

                               ABN AMRO ROTHSCHILD
                       A DIVISION OF ABN AMRO INCORPORATED

                           STIFEL, NICOLAUS & COMPANY
                                  INCORPORATED

                          HCFP/BRENNER SECURITIES, LLC

________________________________________________________________________________










<PAGE>


                                    PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The expenses, other than underwriters' discounts and commissions, in
connection with the issuance and distribution of the securities being registered
under the prospectus are as follows (all amounts other than Securities and
Exchange Commission, NASD, and Nasdaq National Market fees are estimated).

<TABLE>
<S>                                                           <C>
Securities and Exchange Commission registration fee.........  $ 10,824
NASD registration fee.......................................     4,600
Nasdaq National Market additional listing fee...............    17,500
Blue Sky fees and expenses..................................     5,000
Transfer agent's fees and expenses..........................     3,500
Underwriters' expense allowance.............................    60,000
Printing and engraving costs................................    85,000
Accounting fees and expenses................................    50,000
Legal fees and expenses (other than Blue Sky fees and
  expenses).................................................   250,000
Miscellaneous...............................................    13,576
                                                              --------
     Total..................................................  $500,000
                                                              --------
                                                              --------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     You can find this information in the prospectus under the caption
'Description of Capital Stock -- Liability of Directors and Officers,' which is
incorporated herein by reference.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT                                                             INCORPORATED BY
  NO.                     DESCRIPTION                                 REFERENCE TO
- -------                   -----------                                 ------------
<S>       <C>                                                      <C>
   1   -- Form of Underwriting Agreement between the
            Registrant; ABN AMRO Incorporated, Stifel, Nicolaus &
            Company, Incorporated, and HCFP/Brenner Securities,
            LLC as Representatives of the Underwriters

   3(a)-- Certificate of Incorporation of the Registrant.........  Exhibit 3(a) to the
                                                                     Registrant's fiscal 1987
                                                                     Form 10-K

   3(b)-- Amendment to the Certificate of Incorporation
            effecting the five-to-one reverse stock split........  Exhibit 3(b) to the
                                                                     Registrant's fiscal 1991
                                                                     Form 10-K

   3(c)-- Amended and Restated By-Laws of the Registrant.........  Exhibit 3(c) to the
                                                                     Registrant's fiscal 1987
                                                                     Form 10-K

   3(d)-- Amendment to the Certificate of Incorporation
            increasing authorized shares to 12 million...........  Exhibit 3(d) to the
                                                                     Registrant's fiscal 1994
                                                                     Form 10-K

   3(e)-- Amendment to the Certificate of Incorporation
            increasing the authorized shares to 15 million.......  Exhibit 3(e) to Registrant's
                                                                     fiscal 1998 Form 10-K
</TABLE>

                                      II-1







<PAGE>



<TABLE>
<CAPTION>
EXHIBIT                                                                  INCORPORATED BY
  NO.                           DESCRIPTION                                REFERENCE TO
  ---                           -----------                                ------------
<S>       <C>                                                      <C>
   3(f)-- Form of Certificate of Designation of the Series A
            Junior Participating Preferred Stock.................  Exhibit A to Exhibit 4.1
                                                                     to the Registrant's
                                                                     Form 8-A/A dated
                                                                     December 23, 1998

   3(g)-- Amendment to Certificate of Incorporation increasing
            the authorized shares to 32 million

   4   -- Rights Agreement dated as of December 15, 1998
            between the Registrant and American Stock Transfer
            and Trust Company, as Rights Agent...................  Exhibit 4.1 to the
                                                                     Registrant's Form 8-A/A
                                                                     dated December 23, 1998

   5   -- Legal Opinion of Proskauer Rose LLP*

  10(a)-- Amended and Restated Employment Agreement dated
            January 14, 1998 between the Registrant and Fred
            Kornberg.............................................  Exhibit 10(a) to the
                                                                     Registrant's fiscal 1992
                                                                     Form 10-K

  10(b)-- 1982 Incentive Stock Option and Appreciation Plan...  Exhibit A to the
                                                                   Registrant's Proxy Statement
                                                                   dated October 29, 1982

  10(c)-- Lease and amendment thereto on the Melville
            Facility.............................................  Exhibit 10(k) to the
                                                                     Registrant's fiscal 1992
                                                                     Form 10-K

  10(d)-- Amended and Restated 1993 Incentive Stock Option
            Plan.................................................  Appendix A to the
                                                                     Registrant's Proxy
                                                                     Statement dated
                                                                     November 3, 1997

  10(e)-- Time Accelerated Restricted Stock Purchase
            Agreements between Registrant and Principals of
            Comtech Communications Corp. operating unit..........  Exhibit 10(j) to the
                                                                     Registrant's fiscal 1994
                                                                     Form 10-K

  10(f)-- Time Accelerated Restricted Stock Purchase
            Agreements between Registrant and Principals of
            Comtech Mobile Datacom Corp. operating unit..........  Exhibit 10(f) to the
                                                                     Registrant's fiscal 1999
                                                                     Form 10-K

  10(g)-- Movement Tracking System Contract between Comtech
            Mobile Datacom Corp. and U.S. Army's CECOM
            Acquisition Center dated June 24, 1999 (certain
            portions of this agreement have been omitted and
            filed separately with the Securities and Exchange
            Commission pursuant to a request for confidential
            treatment)...........................................  Exhibit 10(g) to the
                                                                     Registrant's fiscal 1999
                                                                     Form 10-K

  10(h)-- License Agreement between Vistar Telecommunications
            Inc. and Comtech Mobile Datacom Corp. dated August
            31, 1999 (certain portions of this agreement have
            been omitted and filed separately with the Securities
            and Exchange Commission pursuant to a request for
            confidential treatment)..............................  Exhibit 10(h) to the
                                                                     Registrant's fiscal 1999
                                                                     Form 10-K

  10(i)-- 2000 Stock Incentive Plan*
</TABLE>

                                      II-2







<PAGE>



<TABLE>
<CAPTION>
EXHIBIT                                                                  INCORPORATED BY
  NO.                           DESCRIPTION                                REFERENCE TO
  ---                           -----------                                ------------
<S>       <C>                                                      <C>
  22   -- Subsidiaries........................................  Exhibit 21 to the
                                                                   Registrant's fiscal 1999
                                                                   Form 10-K

  23(a)-- Consent of KPMG LLP

  23(b)-- Consent of Proskauer Rose LLP (contained in Exhibit
            5)

  24   -- Power of Attorney (contained in the signature pages
            to this registration statement)

  27   -- Financial Data Schedule.............................  Exhibit 27 to the
                                                                   Registrant's fiscal 1999
                                                                   Form 10-K
</TABLE>

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

* To be filed by amendment.

ITEM 17. UNDERTAKINGS.

     The undersigned Registrant hereby undertakes that:

          A. For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this Registration Statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     Registration Statement as of the time it was declared effective.

          B. For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

          C. Insofar as indemnification for liabilities arising under the
     Securities Act of 1933 may be permitted to directors, officers and
     controlling persons of the Registrant pursuant to the foregoing provisions,
     or otherwise, the Registrant has been advised that in the opinion of the
     Securities and Exchange Commission such indemnification is against public
     policy as expressed in the Act and is, therefore, unenforceable.

          D. In the event that a claim for indemnification against such
     liabilities (other than the payment by the Registrant of expenses incurred
     or paid by the director, officer or controlling person of the Registrant in
     the successful defense of any action, suit or proceeding) is asserted by
     such director, officer or controlling person in connection with the
     securities being registered, the Registrant will, unless in the opinion of
     its counsel the matter has been settled by controlling precedent, submit to
     a court of appropriate jurisdiction the question whether such
     indemnification by it is against public policy as expressed in the Act and
     will be governed by the final adjudication of such issue.

                                      II-3









<PAGE>


                                   SIGNATURES

     In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City and State of New York, on the 14th day of January, 2000.

                                          COMTECH TELECOMMUNICATIONS CORP.

                                          By:       /s/ FRED KORNBERG
                                             --------------------------------
                                                       FRED KORNBERG
                                                CHAIRMAN OF THE BOARD, CHIEF
                                                    EXECUTIVE OFFICER,
                                                   PRESIDENT AND DIRECTOR

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities and on the respective dates set forth opposite their
names. Each person whose signature appears below hereby authorizes Fred Kornberg
and J. Preston Windus, Jr., and each of them, with full power of substitution,
to execute in the name and on behalf of such person any amendment or any
post-effective amendment to this Registration Statement and to file the same,
with exhibits thereto, and other documents in connection therewith, making such
changes in this Registration Statement as the Registrant deems appropriate, and
appoints Fred Kornberg and J. Preston Windus, Jr., and each of them, with full
power of substitution, attorneys-in-fact to sign any amendment and any
post-effective amendment to this Registration Statement and to file the same,
with exhibits thereto, and other documents in connection therewith.

<TABLE>
<CAPTION>
               SIGNATURE                                CAPACITY                        DATE
               ---------                                --------                        ----
<C>                                      <S>                                      <C>
           /S/ FRED KORNBERG             Chairman of the Board,                   January 14, 2000
- ---------------------------------------    Chief Executive Officer,
            (FRED KORNBERG)                President and Director
                                           (Principal Executive Officer)

      /S/ J. PRESTON WINDUS, JR.         Senior Vice President and Chief          January 14, 2000
- ---------------------------------------    Financial Officer
       (J. PRESTON WINDUS, JR.)            (Principal Financial and Accounting
                                           Officer)

         /S/ GERARD R. NOCITA            Director                                 January 14, 2000
- ---------------------------------------
          (GERARD R. NOCITA)

        /S/ GEORGE BUGLIARELLO           Director                                 January 14, 2000
- ---------------------------------------
         (GEORGE BUGLIARELLO)

        /S/ RICHARD L. GOLDBERG          Director                                 January 14, 2000
- ---------------------------------------
         (RICHARD L. GOLDBERG)

           /S/ SOL S. WEINER             Director                                 January 14, 2000
- ---------------------------------------
            (SOL S. WEINER)

           /S/ JOHN B. PAYNE             Director                                 January 14, 2000
- ---------------------------------------
            (JOHN B. PAYNE)
</TABLE>

                                      II-4







<PAGE>





                                2,300,000 SHARES*

                        COMTECH TELECOMMUNICATIONS CORP.

                                  COMMON STOCK

                             UNDERWRITING AGREEMENT

                                             ,2000

ABN AMRO Incorporated
Stifel, Nicolaus & Company, Incorporated
HCFP/Brenner Securities, LLC
As Representatives of the
  several Underwriters named
  in Schedule I hereto
c/o ABN AMRO Incorporated
208 South LaSalle Street
Chicago, Illinois 60604

Ladies and Gentlemen:

        Pursuant to the terms of this Underwriting Agreement (this "Agreement"),
Comtech Telecommunications Corp., a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions set forth herein, to issue and
sell an aggregate of 2,300,000 shares of Common Stock, par value $.10 per share
(which includes the Rights, defined below) (the "Common Stock"), of the Company
to the several underwriters named in Schedule I hereto (collectively, the
"Underwriters"). The Common Stock includes detachable preferred stock purchase
rights (the "Rights") attached to each share of Common Stock pursuant to the
Rights Agreement (the "Rights Agreement"), dated as of December 15, 1998,
between the Company and American Stock Transfer and Trust Company. As used
herein, the term Common Stock includes the Rights. The Company has agreed to
sell to the several Underwriters, upon the terms and conditions set forth in
Section 2 hereof, up to an additional 345,000 shares of Common Stock. The
aggregate of 2,300,000 shares of Common Stock to be sold by the Company are


- --------
  * Plus an option to purchase up to Additional Shares to cover over-allotments.










<PAGE>




herein called the "Firm Shares" and the aggregate of 345,000 additional shares
of Common Stock to be sold by the Company are herein called the "Additional
Shares." The Firm Shares and the Additional Shares are hereinafter collectively
referred to as the "Shares." ABN AMRO Incorporated, Stifel, Nicolaus & Company,
Incorporated and HCFP/Brenner Securities, LLC are acting individually and as
representatives of the several Underwriters and in such capacity are hereinafter
referred to as the "Representatives."

        Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company and the Representatives shall enter into an agreement
substantially in the form of Exhibit A hereto (the "Pricing Agreement"). The
Pricing Agreement may take the form of an exchange of any standard form of
written telecommunication between the Company and the Representatives and shall
specify such applicable information as is indicated in Exhibit A hereto. The
offering of the Shares will be governed by this Agreement, as supplemented by
the Pricing Agreement. From and after the date of the execution and delivery of
the Pricing Agreement, this Agreement shall be deemed to incorporate the Pricing
Agreement.

        The Company is advised by the Representatives that the Underwriters have
agreed to make a public offering of their respective portions of the Shares as
soon after the Registration Statement has become effective and the Pricing
Agreement has been executed as in the judgment of the Representatives is
advisable and to first offer the Shares upon the terms set forth in the
Prospectus.

        The Company, the Representatives and the other Underwriters hereby agree
to the following matters with respect to the purchase and sale of the Shares:

        SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Underwriter that:

        (a) The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Act"), a registration statement on
Form S-2 (File No. 333- ), including a preliminary prospectus, relating to the
Shares and certain amendments thereto. The Company will next file with the
Commission one of the following: (A) prior to effectiveness of such registration
statement, a further amendment thereto, including the form of final prospectus,
(B) a final prospectus in accordance with Rules 430A and 424(b) under the Act or
(C) a term sheet (the "Term Sheet") as described in and in accordance with Rules
434 and 424(b) under the Act. As filed, the final prospectus, if one is used, or
the Term Sheet and the latest Preliminary Prospectus, if a final prospectus is
not used, shall include all Rule 430A Information (as defined below). There have
been or will promptly be delivered to you three signed copies of such
registration statement and each amendment together with three copies of all
documents incorporated by reference therein, three copies of each exhibit filed
therewith, and conformed copies of such registration statement and each
amendment (but without exhibits) and of the related preliminary prospectus or
prospectuses and final forms of prospectus or Term Sheet, if a Term Sheet is
used, for each of the Underwriters. The term "Registration Statement" as used in
this Agreement shall


                                      -2-










<PAGE>




mean such registration statement at the time such registration statement becomes
effective and, in the event any amendment thereto becomes effective prior to the
Closing Date (as hereinafter defined), shall also mean such registration
statement as so amended; provided, however, that such term shall also include
all Rule 430A Information deemed to be included in such registration statement
at the time such registration statement becomes effective as provided by Rule
430A and, if a Term Sheet is used, shall also include all information deemed to
be included in such registration statement at the time such registration
statement becomes effective as provided by Rule 434; provided, further, that if
the Company files a registration statement under the Act to register a portion
of the Shares and relies on Rule 462(b) for such registration statement to
become effective upon filing with the Commission (the "Rule 462 Registration
Statement"), then any reference to "Registration Statement" herein shall be
deemed to be to both the registration statement referred to above (No. 333- )
and the Rule 462 Registration Statement, as each such registration statement may
be amended pursuant to the Act. The term "Preliminary Prospectus" as used in
this Agreement shall mean any preliminary prospectus relating to the Shares
filed with the Commission under the Act and the rules and regulations
thereunder, including any preliminary prospectus included in the Registration
Statement at the time it becomes effective that omits Rule 430A Information. The
term "Prospectus" as used in this Agreement shall mean: (X) the prospectus
relating to the Shares in the form in which it is first filed with the
Commission pursuant to Rule 424(b) under the Act; (Y) if a Term Sheet is not
used and no filing pursuant to Rule 424(b) under the Act is required, the form
of final prospectus included in the Registration Statement at the time the
Registration Statement becomes effective; or (Z) if a Term Sheet is used in lieu
of a prospectus, the Term Sheet in the form in which it is first filed with the
Commission pursuant to Rule 424(b) under the Act, together with the latest
Preliminary Prospectus included in the Registration Statement at the time it
becomes effective (such Term Sheet and Preliminary Prospectus are sometimes
collectively referred to herein as the "Rule 434 Prospectus"). The term "Rule
430A Information" as used in this Agreement shall mean information with respect
to the Shares and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A under the
Act. The Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder are hereinafter collectively referred
to as the "Exchange Act." Any reference herein to any Preliminary Prospectus or
the Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Form S-2 under the Act
("Incorporated Documents"), as of the date of such Preliminary Prospectus or
Prospectus, as the case may be. The Incorporated Documents, when they were filed
with the Commission, conformed in all material respects to the requirements of
the Exchange Act and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.

        (b) The Commission has not issued any order preventing or suspending the
use of any Preliminary Prospectus, and each Preliminary Prospectus complied in
all material respects when so filed with the requirements of the Act (except to
the extent that, in conformity with the Act, such Preliminary Prospectus is
subject to completion).

        (c) The Registration Statement in the form in which it becomes effective
and also in such form as it may be when the Pricing Agreement is executed or any
post-effective


                                      -3-










<PAGE>




amendment to the Registration Statement shall become effective, and the
Prospectus when and in the form last filed with the Commission as part of the
Registration Statement prior to effectiveness or, if applicable, first filed
pursuant to Rule 424(b) under the Act, and when any supplement or amendment
thereto is filed with the Commission, each will comply in all material respects
with the requirements of the Act, will not at any such time contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. This representation
and warranty does not apply to statements in or omissions from the Registration
Statement or the Prospectus (or any supplement or amendment thereto) made in
reliance upon and in conformity with information relating to any Underwriter
furnished to the Company in writing by or on behalf of such Underwriter through
the Representatives specifically for use in the Registration Statement.

        (d) There is no contract or other document of a character required to be
described in the Registration Statement or Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed as
required.

        (e) The accountants who have expressed their opinions with respect to
certain of the financial statements of the Company included or incorporated by
reference in the Registration Statement and the Prospectus, are independent
public accountants as required by the Act.

        (f) The consolidated financial statements, together with the notes
thereto, of the Company included or incorporated by reference in the
Registration Statement and the Prospectus comply in all material respects with
the Act and present fairly the consolidated financial position of the Company as
of the dates indicated, and the consolidated results of operations, cash flows
and changes in financial position of the Company for the periods specified. Such
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the entire period
involved except to the extent disclosed therein.

        (g) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and Prospectus.
The Company is duly qualified to do business as a foreign corporation and in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the conduct of its business requires such qualification, except in
any such case in which the failure to so qualify or be in good standing would
not have a material adverse effect upon the business of the Company and its
subsidiaries, taken as a whole; and no proceeding of which the Company has
knowledge has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and authority or
qualification.

        (h) Each of the Company's subsidiaries has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with


                                      -4-










<PAGE>



full corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and Prospectus.
Each of the Company's subsidiaries is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the ownership or
leasing of its properties or the conduct of its business requires such
qualification, except in any such case in which the failure to so qualify or be
in good standing would not have a material adverse effect on the business of the
Company and its subsidiaries, taken as a whole. Each of the Company's
subsidiaries has all authorizations, approvals, orders, certificates and permits
of and from all state, federal and other regulatory officials and bodies
necessary to own its properties and to conduct its business as described in the
Registration Statement and Prospectus, except where the failure to have any such
authorization, approval, order, certificate or permit would not have a material
adverse effect on the business affairs, business prospects, properties,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. Except for the capital stock of the subsidiaries
and except as otherwise described in the Prospectus, the Company does not own
any capital stock of, or other securities evidencing an equity interest in, any
corporation, partnership or other entity. All of the issued and outstanding
shares of capital stock of the Company's subsidiaries have been duly and validly
authorized and issued, are fully paid and non-assessable, and except as
described in the Prospectus, are owned by the Company, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any nature.
Except as described in the Prospectus, there are no outstanding subscriptions,
rights, warrants or options to acquire, or instruments convertible into or
exchangeable for, any shares of capital stock of any of the Company's
subsidiaries.

        (i) The Company has an authorized and outstanding capitalization as set
forth in the Prospectus and the Shares conform to the description thereof
contained in the Prospectus. All of the issued and outstanding shares of Common
Stock have been duly authorized, validly issued and are fully paid and
non-assessable and free of preemptive or other similar rights and there are no
options, agreements, contracts or other rights in existence to acquire from the
Company any shares of Common Stock except as set forth in the Prospectus.

        (j) The Shares to be sold by the Company pursuant to this Agreement and
the Pricing Agreement have been duly authorized and, when issued and paid for in
accordance with this Agreement and the Pricing Agreement, will be validly
issued, fully paid and non-assessable and entitled to the rights set forth in
the Company's Certificate of Incorporation and the Rights Agreement; the holders
of the Shares will not be subject to personal liability by reason of being such
holders; there are no holders of securities of the Company having rights,
contractual or otherwise, to registration thereof or preemptive rights to
purchase Common Stock; all corporate actions required to be taken for the
authorization, issue and sale of the Shares have been validly and sufficiently
taken; and upon delivery of and payment for such Shares hereunder, the
Underwriters will acquire valid and marketable title thereto, free and clear of
any security interest, claim, lien, encumbrance or adverse interest of any
nature.

        (k) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, except as otherwise stated or
contemplated therein, there has not been (A) any material adverse change in the
condition (financial or otherwise), earnings, affairs,


                                      -5-










<PAGE>




business or prospects of the Company and its subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business, (B) any material
transaction entered into, or any material liability or obligation incurred, by
the Company or its subsidiaries other than in the ordinary course of business,
(C) any change in the capital stock, or material increase in the short term debt
or long-term debt of the Company or its subsidiaries, or (D) any dividend or
distribution of any kind declared, paid or made by the Company or its
subsidiaries on its capital stock.

        (l) The Company and each of its subsidiaries have good and marketable
title to all properties and assets reflected as owned in the financial
statements hereinabove described or described in the Prospectus as owned by
them, free and clear of all liens, charges, encumbrances or restrictions of any
kind, except such as are referred to in such financial statements or the
Prospectus or which are not material to the business of the Company and its
subsidiaries, taken as a whole; all of the leases and subleases material to the
business of the Company and its subsidiaries, taken as a whole or under which
the Company or its subsidiaries holds properties are in full force and effect;
and neither the Company nor any of its subsidiaries has received any notice of
any material claim of any sort which has been asserted by anyone adverse to the
rights of the Company or any subsidiary as owner or as lessee or sublessee under
any of the leases or subleases mentioned above, or affecting or questioning the
rights of the Company or such subsidiary to the continued possession of the
leased or subleased premises under any such lease or sublease.

        (m) Neither the Company nor any of its subsidiaries is in default in the
observance of any provision of its respective Certificate of Incorporation or
by-laws, or in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by which it
or any of its properties may be bound, the effect of which could be materially
adverse to the condition (financial or otherwise), earnings, affairs, business
or prospects of the Company and its subsidiaries, taken as a whole.

        (n) The execution and delivery of this Agreement and the Pricing
Agreement, the issuance and delivery of the Shares, the consummation of the
transactions contemplated herein and in the Registration Statement and
compliance with the terms of this Agreement and the Pricing Agreement have been
duly authorized by all necessary corporate action and will not result in any
violation of the Certificate of Incorporation or by-laws of the Company or any
of its subsidiaries, and will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge, encumbrance or restriction of any
kind upon any property or assets of the Company or any of its subsidiaries under
any contract, indenture, mortgage, loan agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries, or any of their
respective properties, is bound, or any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties. No
approval, authorization or consent of any court, regulatory body, administrative
agency or other


                                      -6-










<PAGE>





governmental body having jurisdiction over the Company or any of its
subsidiaries is required in connection with the sale of the Shares to the
Underwriters, except such as may be required under the Act, state securities or
Blue Sky laws or from the clearance of the offering with the National
Association of Securities Dealers, Inc. (the "NASD").

        (o) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, or any arbitrator or
arbitration panel, now pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries which could result
in any material adverse change to the condition (financial or otherwise),
earnings, affairs, business or prospects of the Company and its subsidiaries,
taken as whole; and there is no decree, judgment or order of any kind in
existence against or restraining the Company or any of its subsidiaries, or any
of their respective officers, employees or directors, from taking any actions of
any kind in connection with the business of the Company or any such subsidiary.

        (p) The Company and each of its subsidiaries own or possess or have
obtained all material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease or own, as the case may
be, and to operate their properties and to carry on their businesses as
presently conducted, and neither the Company nor any such subsidiary has
received any notice of proceedings related to revocation or modification of any
such licenses, permits, consents, orders, approvals or authorizations which
singly or in the aggregate, if the subject of an unfavorable ruling or finding,
would be materially adverse to the condition (financial or otherwise), earnings,
affairs, business or prospects of the Company and its subsidiaries, taken as a
whole.

        (q) The conduct of the business of the Company and each of its
subsidiaries is in compliance with all applicable federal, state and local laws
and regulations that regulate or are concerned in any way with the business of
the Company or such subsidiaries, where the effect of the failure to comply
would be materially adverse to the condition (financial or otherwise), earnings,
affairs, business or prospects of the Company and its subsidiaries, taken as a
whole.

        (r) The Company, together with its subsidiaries, owns or possesses, or
can acquire on reasonable terms, all right, title and interest in or to, or has
duly licensed from third parties, all patents, trademarks, service marks,
copyrights, trade names, trade secrets and other proprietary rights ("Trade
Rights") necessary to conduct the business now or proposed to be conducted by
it, and neither the Company nor any of its subsidiaries has received any notice
of, and has no knowledge of, infringement of or conflict with asserted rights of
others with respect to any such Trade Rights which, singly or in the aggregate,
if the subject of any unfavorable decision, ruling or finding, would be
materially adverse to the condition (financial or otherwise), earnings, affairs,
business or prospects of the Company and its subsidiaries, taken as a whole.

        (s) The Company has filed all tax returns required to be filed and has
paid all taxes which were payable pursuant to said returns or any assessments
with respect thereto, other than any tax returns which the Company is contesting
in good faith or which are not material to the Company and there is no tax
deficiency that has been, or to the knowledge of the Company


                                      -7-










<PAGE>




might be, asserted against the Company or any of its properties or assets that
would or could be expected to have a material adverse affect upon the condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole.

        (t) This Agreement has been duly executed and delivered by the Company.

        (u) A registration statement relating to the Common Stock has been
declared effective by the Commission pursuant to the Exchange Act and the Common
Stock is duly registered thereunder. The Shares have been authorized for trading
on the Nasdaq National Market, subject to notice of issuance or sale, as the
case may be.

        (v) The Company is not, and does not intend to conduct its business in a
manner in which it would become, an "investment company" as defined in Section
3(a) of the Investment Company Act of 1940, as amended (the "Investment Company
Act").

        (w) All offers and sales of the Company's capital stock prior to the
date hereof were at all relevant times exempt from the registration requirements
of the Act and were duly registered with, or the subject of an available
exemption from, the registration requirements of the applicable state securities
or Blue Sky laws.

        (x) The Company has not taken and will not take, directly or indirectly,
any action designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company.

        (y) Except as disclosed in the Registration Statement and the
Prospectus, no transaction has occurred between or among the Company or any of
its subsidiaries, on the one hand, and any of their officers or directors or any
affiliate or affiliates of any such officer or director, on the other hand, that
is required to be so disclosed, including, but not limited to, any outstanding
loans, advances or guaranties of indebtedness by the Company or its subsidiaries
to or for the benefit of any affiliates of the Company or its subsidiaries, or
any of the officers or directors of the Company or its subsidiaries, or any
family member of any of them.

        (z) The Company has not, directly or indirectly, at any time (A) made
any contributions to any candidate for foreign political office, or if made,
failed to disclose fully any such contribution made in violation of law, or (B)
made any payment to any state, federal or foreign governmental officer or
official, or other person charged with similar public or quasi public duties,
other than payments or contributions required or allowed by applicable law. The
Company's internal accounting controls and procedures are sufficient to cause
the Company to comply in all material respects with the Foreign Corrupt
Practices Act of 1977, as amended.

        (aa) The Company and each of its subsidiaries (a) are in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (b) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective


                                      -8-










<PAGE>




businesses and (c) are in compliance with all terms and conditions of any such
permit, license or approval, except where such noncompliance with Environmental
Laws, failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits, licenses or
approvals would not, singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries, taken as a whole.

        (bb) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business, operations
and properties of the Company and its subsidiaries, in the course of which if
identifies and evaluates associated costs and liabilities (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws of any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review, the Company has
reasonably concluded that such associated costs and liabilities would not,
singly or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.

        SECTION 2.    AGREEMENT TO SELL AND PURCHASE.

        (a) Subject to such adjustments to eliminate any fractional share sales
or purchases as the Representatives in their discretion may make, (i) the
Company hereby agrees to issue and sell to the Underwriters the Firm Shares, and
(ii) on the basis of the representations, warranties and agreements of the
Company herein contained and subject to the terms and conditions set forth
herein, each Underwriter agrees, severally and not jointly, to purchase from the
Company, at the purchase price per Share set forth in the Pricing Agreement (the
"Purchase Price per Share"), the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such number of Firm Shares as
such Underwriter shall be obligated to purchase pursuant to the provisions of
Section 9 hereof).

        (b) The Company agrees to sell to the Underwriters and, on the basis of
the representations, warranties and agreements of the Company set forth herein
and subject to the terms and conditions set forth herein, the Underwriters shall
have the right to purchase, severally and not jointly, from the Company up to
345,000 Additional Shares, at the Purchase Price per Share upon delivery to the
Company of the notice hereinafter referred to. Such Additional Shares may be
purchased solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. If any Additional Shares are to be
purchased, each Underwriter, severally and not jointly, agrees to purchase from
the Company the number of Additional Shares (subject to such adjustments to
eliminate fractional Shares as the Representatives may determine) which bears
the same proportion to the total number of Additional Shares to be purchased
from the Company as the number of Firm Shares set forth opposite such
Underwriter's name in Schedule I (or such number of Firm Shares increased
pursuant to the terms set forth in Section 9 hereof) bears to the total number
of Firm Shares.

        SECTION 3.    DELIVERY OF THE SHARES AND PAYMENT THEREFOR.


                                      -9-










<PAGE>




        (a) Delivery to the Underwriters of the Firm Shares shall be made
against payment therefor at 9:00 a.m., Chicago, Illinois time, on the third full
business day following the date of the Pricing Agreement (the "Closing Date") at
the offices of ABN AMRO Incorporated, 208 South LaSalle Street, Chicago,
Illinois 60604. The place of the closing and the Closing Date may be varied by
agreement among the Representatives and the Company.

        (b) Delivery to the Underwriters of any Additional Shares to be
purchased by the several Underwriters shall be made in Chicago, Illinois against
payment therefor at the offices of ABN AMRO Incorporated, 208 South LaSalle
Street, Chicago, Illinois 60604, at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date, but shall in no event be
earlier than the Closing Date nor earlier than three nor later than ten business
days after the giving of the notice hereinafter referred to, as shall be
specified in written notice from the Representatives to the Company of the
determination to purchase a number, specified in said notice, of Additional
Shares. Said notice may be given at any time within 30 days after the date of
the execution of the Pricing Agreement. The place of the closing and the Option
Closing Date may be varied by agreement among the Representatives and the
Company.

        (c) If the Representatives and the Company have elected to enter into
the Pricing Agreement after the Registration Statement is effective, the
Purchase Price per Share to be paid by the several Underwriters for the Shares
shall be an amount equal to the initial public offering price, less an amount to
be determined by agreement between the Representatives and the Company. The
initial public offering price per Share of the Shares shall be a fixed price to
be determined by agreement between the Representatives and the Company. The
initial public offering price and the Purchase Price per Share, when so
determined, shall be set forth in the Pricing Agreement. If such prices have not
been agreed upon and the Pricing Agreement has not been executed and delivered
by all parties thereto by the close of business on the fourth business day
following the date of this Agreement, this Agreement shall terminate forthwith,
without liability of any party to any other party, unless otherwise agreed to by
the Company and the Representatives and except as otherwise provided in Section
5 hereof. If the Representatives and the Company have elected to enter into the
Pricing Agreement prior to the Registration Statement becoming effective, the
initial public offering price and the Purchase Price per Share to be paid by the
several Underwriters for the Shares having each been determined and set forth in
the Pricing Agreement, the Company agrees to file an amendment to the
Registration Statement and the Prospectus before the Registration Statement
becomes effective.

        (d) Certificates for the Firm Shares and for the Additional Shares shall
be registered in such names and in such denominations as the Representatives
shall request upon at least 48 hours prior notice to the Company preceding the
Closing Date or the Option Closing Date, as the case may be. Such certificates
shall be made available to the Representatives at the office of The Depository
Trust Company, New York, New York, for inspection and packaging not later than
at least 24 hours prior to the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and the Additional
Shares shall be delivered to the Representatives on the Closing Date or the
Option Closing Date, as the case may be, with any transfer taxes thereon duly
paid by the Company or the Selling Stockholders, as the case may be for the
respective accounts of the several Underwriters, against payment of the purchase
price


                                      -10-










<PAGE>




therefor by wire or other immediately available funds. It is understood by the
Company that each of the Underwriters has authorized the Representatives, for
its account, to accept delivery of, receipt for and make payment of the purchase
price for, the Shares it has agreed to purchase.

        SECTION 4.  AGREEMENTS OF THE COMPANY. The Company covenants and agrees
with the several Underwriters that:

        (a) The Company will endeavor to cause the Registration Statement to
become effective and will advise the Representatives promptly and, if requested
by the Representatives, will confirm such advice in writing, (i) when the
Registration Statement has become effective and when any post-effective
amendment to it becomes effective, and of the filing of any final prospectus or
supplement or amendment to the Prospectus, (ii) of any request by the Commission
for amendments or supplements to the Registration Statement or Prospectus or any
Preliminary Prospectus or for additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares for
offering or sale in any jurisdiction, or the initiation or contemplation of any
proceeding for such purposes, and (iv) within the period of time referred to in
paragraph (f) below, of the happening of any event which makes any statement
made in the Registration Statement or Prospectus (as then amended or
supplemented) untrue in any material respect or which requires the making of any
additions to or changes in the Registration Statement or Prospectus (as then
amended or. supplemented) in order to make the statements therein not misleading
or the necessity to amend or supplement the Prospectus to comply with the Act or
any other law. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will
make every reasonable effort to obtain the withdrawal of such order at the
earliest possible moment. If the Company elects to rely on Rule 434 of the Act,
the Company will prepare a Term Sheet that complies with the requirements of
Rule 434 of the Act and will provide the Representatives with copies of the form
of Rule 434 Prospectus in such numbers as you may reasonably request and file or
transmit for filing with the Commission the form of Prospectus complying with
Rule 434(c)(2) of the Act in accordance with Rule 424(b) of the Act by the close
of business in Chicago on the business day immediately succeeding the date
hereof. If the Company elects not to rely on Rule 434, the Company will provide
you with copies of the form of Prospectus in such numbers as you may reasonably
request and file or transmit for filing with the Commission such Prospectus in
accordance with Rule 424(b) of the Act, by the close of business in Chicago on
the business day immediately succeeding the date hereof.

        (b) If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A
under the Act, then promptly following the execution of the Pricing Agreement,
the Company will prepare and file with the Commission, in accordance with Rule
430A and Rule 424(b) under the Act, copies of an amended Prospectus, or, if
required by Rule 430A, a post-effective amendment to the Registration Statement
(including an amended Prospectus) containing all information so omitted.

        (c) Neither the Company nor any of its subsidiaries will, prior to the
earlier of the Option Closing Date or termination or expiration of the related
option, incur any liability or


                                      -11-










<PAGE>





obligation, direct or contingent, or enter into any material transaction, other
than in the ordinary course of business, except as contemplated in the
Prospectus.

        (d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which the
Representatives shall not previously have been advised or to which the
Representatives shall promptly after being so advised reasonably object in
writing.

        (e) Prior to the effective date of the Registration Statement, the
Company has delivered or will deliver to each of the Underwriters, without
charge, copies of each form of Preliminary Prospectus in such quantities as they
have reasonably requested or may hereafter reasonably request. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the effective date of the
Registration Statement, of each Preliminary Prospectus so furnished by the
Company.

        (f) On the effective date of the Registration Statement and thereafter
from time to time during such period as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to be
delivered in connection with offers or sales of the Shares by an Underwriter or
a dealer, the Company will deliver to each Underwriter and dealer, without
charge, as many copies of the Registration Statement, the Prospectus and each
Preliminary Prospectus and the Incorporated Documents (and of any amendment or
supplement to such documents) as they may reasonably request. During such
period, if any event occurs which in the judgment of the Company, or in the
opinion of counsel for the Underwriters, should be set forth in the Prospectus
in order to ensure that no part of the Prospectus includes an untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances at the time the
Prospectus is delivered to a purchaser, not misleading, the Company will
forthwith prepare, submit to the Representatives, file with the Commission and
deliver, without charge to the several Underwriters and dealers (whose names and
addresses will be furnished by the Representatives to the Company) to whom
shares have been sold by the Underwriters or to other dealers any amendments or
supplements to the Prospectus so that the statements in the Prospectus, as so
amended or supplemented, will comply with the standards set forth in this
sentence. The Company consents to the use of such Prospectus (and of any
amendments or supplements thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions described in the
preliminary Blue Sky memorandum in which the Shares are lawfully offered by the
several Underwriters and by all dealers to whom Shares may be sold, both in
connection with the offering or sale of the Shares and for such period of time
thereafter as the Prospectus is required by law to be delivered in connection
therewith. In case any Underwriter is required to deliver a Prospectus (and any
amendment or supplement thereto) more than nine months after the first date upon
which the Shares are offered to the public, the Company will, upon request, but
at the expense of such Underwriter, promptly prepare and furnish such
Underwriter with reasonable quantities of a Prospectus complying with Section
10(a)(3) of the Act.


                                      -12-










<PAGE>





        (g) The Company will cooperate with the Representatives and counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offer and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as the Representatives may
designate, will continue such registrations or qualifications in effect so long
as reasonably required for the distribution of the Shares and will file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided that in no event shall
the Company be obligated (i) to qualify to do business in any jurisdiction where
it is not now so qualified, (ii) to file any general consent to service of
process, or (iii) take any action that would subject it to income taxation in
any jurisdiction where it is not so qualified.

        (h) For a period of five years after the date of the Pricing Agreement:

        (i) the Company will furnish to the Representatives (A) as soon as
    available, a copy of each report of the Company of general interest mailed
    to any class of its security holders (B) copies of all annual reports and
    current reports filed with the Commission on Forms 10-K, 10-Q and 8-K and
    any amendment thereto or such other similar forms as may be designated by
    the Commission and (C) from time to time, such other information concerning
    the Company as the Representatives may reasonably request;

        (ii) if at any time during such five year period, the Company shall
    cease filing with the Commission the annual reports and current reports on
    Forms 10-K, 10-Q and 8-K or other similar forms referred to in clause (i)
    above, the Company will forward to its stockholders generally and the
    Representatives and upon request to each of the other Underwriters (A) as
    soon as practicable after the end of each fiscal year, copies of a balance
    sheet and statements of income and retained earnings of the Company as of
    the end of and for such fiscal year, certified by independent public
    accountants, and (B) as soon as practicable after the end of each quarterly
    fiscal period, except for the last quarterly fiscal period in each fiscal
    year, a summary statement (which need not be certified) of income and
    retained earnings of the Company for such period, which shall also be made
    publicly available; and

        (iii) the Company will furnish to the Representatives and to the NASD,
    and by issuance of a press release, on the date of declaration, notice of
    all dividends, including the amount and medium of payment, the record date
    (which shall be not less than ten days subsequent to the declaration date)
    and the payment date (which shall be not less than ten days subsequent to
    the record date).

        (i) The Company will make generally available to its security holders an
earnings statement of the Company, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including Rule 158).


                                      -13-










<PAGE>




        (j) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than by notice given by the Representatives'
termination of this Agreement pursuant to Section 10 hereof), or if this
Agreement shall be terminated by the several Underwriters because of any failure
or refusal on the part of the Company to comply with the terms or fulfill any of
the conditions of this Agreement, the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including reasonable fees and
expenses of counsel for the Underwriters) reasonably incurred by them in
connection herewith but without any further obligation of the Company for lost
profits or otherwise. If this Agreement is terminated pursuant to Section 10
hereof, the several Underwriters shall themselves bear any such out-of-pocket
expenses incurred by them.

        (k) The Company agrees and will enter into an agreement not to sell,
contract to sell or otherwise dispose of any Common Stock or rights to purchase
Common Stock for a period of 180 days after the date of the Pricing Agreement
without the prior written consent of the Representatives. The Company will also
obtain similar agreements from each of its executive officers and directors.

        (l) The Company will apply the net proceeds from the sale of the shares
to be sold by it under this Agreement and the Pricing Agreement for the purposes
set forth in the Prospectus under the caption "Use of Proceeds."

        (m) The Company will use its best efforts, subject to notice of
issuance, to cause the Shares to be approved for quotation on the NASDAQ Stock
Market.

        SECTION 5. PAYMENT OF EXPENSES. The Company will pay, or reimburse if
paid by the Representatives, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and expenses incident
to the performance by it of its obligations under this Agreement and the Pricing
Agreement, including, without limiting the generality of the foregoing, (a)
preparation, printing, filing and distribution (including postage, air freight
charges and charges for counting and packaging) of the original registration
statement, the Registration Statement, each Preliminary Prospectus, the
Prospectus (including any all Incorporated Documents, exhibits and financial
statements and any Term Sheet delivered by the Company pursuant to Rule 434 of
the Act), each amendment and/or supplement to any of the foregoing, and this
Agreement, the Pricing Agreement, the Agreement Among Underwriters, Selected
Dealers Agreement, Powers of Attorney and Underwriters' Powers of Attorney and
Questionnaires, (b) furnishing to the several Underwriters and dealers copies of
the foregoing materials (provided, however, that any such copies furnished by
the Company more than nine months after the first date upon which the Shares are
offered to the public shall be at the expense of the several Underwriters or
dealers so requesting as provided in Section 4(f) above), (c) the registrations
or qualifications referred to in Section 4(g) above (including filing fees and
fees and disbursements of counsel in connection therewith) and expenses of
printing and delivering to the several Underwriters copies of the preliminary
and final Blue Sky memoranda, (d) the review of the terms of the public offering
of the Shares by the NASD (including the filing fees paid to the NASD in
connection therewith) and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith, (e) the performance by the Company of
its other


                                      -14-










<PAGE>





obligations under this Agreement, including the fees of the Company's counsel
and accountants, (f) the issuance of the Shares and the preparation and printing
of the stock certificates representing the Shares, including any stamp taxes
payable in connection with the original issuance of the Shares, (g) furnishing
to the several Underwriters copies of all reports and information required by
Section 4(h) above, including reasonable costs of shipping and mailing, and (h)
the designation of the Common Stock as a Nasdaq National Market security.

        SECTION 6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:

        (a) That the Registration Statement shall have become effective not
later than 1:00 p.m., Chicago time, on the first full business day after the
date of this Agreement, or at such later date and time as shall be consented to
in writing by the Representatives, and, if the Representatives and the Company
have elected to rely upon Rule 430A, the price of the Shares and any
price-related or other information previously omitted from the effective
Registration Statement pursuant to such Rule 430A shall have been transmitted to
the Commission for filing pursuant to Rule 424(b) within the prescribed time
period, and, if the Representatives and the Company have elected to rely upon a
Term Sheet, such Term Sheet shall have been transmitted to the Commission for
filing pursuant to Rule 434 and Rule 424(b) within the prescribed time period,
and on or prior to the Closing Date, the Company shall have provided evidence
satisfactory to the Representatives of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for the purpose shall have been instituted or shall be
pending or, to the knowledge of the Company, shall be contemplated by the
Commission and there shall not have come to the attention of the Representatives
any facts that would cause them to believe that the Prospectus, at the time it
was required to be delivered to purchasers of the Shares, contained any untrue
statement of material fact or omitted to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
there were made, not misleading.

        (b) That subsequent to the effective date of the Registration Statement,
(i) there shall not have occurred any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Company or its subsidiaries not contemplated by the Prospectus, which, in
the Representatives' opinion, as Representatives of the several Underwriters,
would materially adversely affect the market for the Shares or make it
impracticable or inadvisable to proceed with the offering or the delivery of the
Shares, as contemplated herein and in the Prospectus, or to attempt to enforce
contracts for the purchase of Shares, and (ii) the business and operations of
the Company shall not have been adversely affected by strike, fire, flood,
accident or other calamity (whether or not insured).

        (c) The Representatives shall have received from Proskauer Rose LLP,
counsel for the Company, a favorable opinion dated the Closing Date and
satisfactory to the Representatives and the Underwriters' counsel to the effect
that:


                                      -15-










<PAGE>




        (i) The Company has been duly incorporated and is validly existing as a
    corporation in good standing under the laws of the State of Delaware, with
    full corporate power and authority to own, lease and operate its properties
    and conduct its business as described in the Registration Statement. The
    Company is duly qualified to do business as a foreign corporation and in
    good standing in each jurisdiction where the ownership or leasing of its
    properties or the conduct of its business requires such qualification,
    except in any such case where the failure to so qualify or be in good
    standing would not have a material adverse effect on the condition
    (financial or otherwise) or results of operations of the Company and its
    subsidiaries, taken as a whole.

        (ii) Each subsidiary has been duly incorporated and is validly existing
    as a corporation in good standing under the laws of its state of
    incorporation with full corporate power and authority to own, lease and
    operate its properties and conduct its business as described in the
    Registration Statement. Each subsidiary is duly qualified to do business as
    a foreign corporation and in good standing in each jurisdiction where the
    ownership or leasing of its properties or the conduct of its business
    requires such qualification, except in any such case where the failure to so
    qualify or be in good standing would not have a material adverse effect on
    the condition (financial or otherwise) or results of operations of the
    Company and its subsidiaries, taken as a whole.

        (iii) All of the issued and outstanding capital stock of the
    subsidiaries of the Company has been duly authorized and validly issued and
    is fully paid and non-assessable, and except as disclosed in the
    Registration Statement, the Company owns directly or indirectly 100 percent
    of the outstanding capital stock of each subsidiary and, to the best
    knowledge of such counsel, such stock is owned free and clear of any
    security interests, claims, liens, encumbrances or adverse interests of any
    nature.

        (iv) The issued and outstanding capital stock of the Company has been
    duly authorized and validly issued and is fully paid and non-assessable and
    free of preemptive rights.

        (v) The authorized capitalization of the Company consists entirely of
    32,000,000 shares of Common Stock, of which 4,492,493 were issued and
    outstanding on the date of the Prospectus and 2,000,000 shares of Preferred
    Stock, of which none were issued and outstanding on the date of the
    Prospectus and all of which conforms to the description thereof in the
    Registration Statement and the Prospectus.

        (vi) The certificates for the Shares to be delivered hereunder are in
    due and proper form, and when duly countersigned by the Company's transfer
    agent and delivered to the Representatives against payment of the agreed
    consideration therefor in accordance with the provisions of this Agreement
    and the Pricing Agreement, the Shares represented thereby will be duly
    authorized and validly issued, fully paid and nonassessable, entitled to the
    rights set forth in the Company's Certificate of Incorporation and the
    Rights Agreement and free of


                                      -16-











<PAGE>




    preemptive rights and, to the knowledge of such counsel, will be free of any
    security interest, claim, lien, encumbrance or adverse interest of any
    nature, or rights of first refusal in favor of, stockholders with respect to
    any of the Shares or the issuance or sale thereof, pursuant to the
    Certificate of Incorporation or by-laws of the Company and, to such
    counsel's knowledge, there are no contractual preemptive rights, rights of
    first refusal, rights of co-sale or other similar rights which exist with
    respect to any of the Shares or the issuance and sale thereof, and the
    Shares to be sold hereunder have been duly and validly authorized and
    qualified for inclusion on The Nasdaq National Market, subject to notice of
    issuance.

        (vii) This Agreement and the Pricing Agreement have been duly and
    validly authorized, executed and delivered by the Company and are legal,
    valid and binding obligations of the Company, enforceable in accordance with
    their terms, except as enforceability may be limited by bankruptcy,
    insolvency, reorganization, moratorium or other similar laws affecting
    creditors' rights generally and by general principles of equity, and except
    that such counsel need express no opinion as to those provisions relating to
    indemnities for liabilities under the Act.

        (viii) No authorization, approval, order or consent of any governmental
    authority or agency is required for the valid issuance and sale of the
    Shares, except such as may be required under the Act or state securities
    laws as to which such counsel need express no opinion.

        (ix) The execution, delivery and performance of this Agreement and the
    Pricing Agreement by the Company, the issue and sale of the Shares, and the
    consummation of the transactions contemplated hereby and thereby will not
    conflict with or result in a breach of any of the provisions of, or
    constitute a default under (A) the Company's Certificate of Incorporation or
    by-laws or any agreement, franchise, license, indenture, mortgage, deed of
    trust or other instrument or agreement known to such counsel to which the
    Company or any of its subsidiaries is a party or by which Company or any of
    its subsidiaries is bound or to which any of their respective properties is
    subject or (B) so far as known to such counsel, any statute, order, rule or
    regulation applicable to the Company or any of its subsidiaries of any court
    or other governmental authority or body having jurisdiction over the Company
    or any of its subsidiaries or any of its properties.

        (x) All documents incorporated by reference in the Prospectus, when they
    were filed with the Commission, complied as to form in all material respects
    with the requirements of the Exchange Act; and such counsel has no reason to
    believe that any of such documents, when they were so filed, contained an
    untrue statement of a material fact or omitted to state a material fact
    necessary in order to make the statements therein, in the light of the
    circumstances under which they were made when such documents were so filed,
    not misleading; such counsel need express no opinion as to the financial
    statements or other financial or statistical data contained in any such
    document.

        (xi) The Registration Statement has become effective under the Act, and,
    to the knowledge of such counsel, no stop order suspending the effectiveness
    of the Registration


                                      -17-










<PAGE>




    Statement has been issued and no proceedings for that purpose have been
    instituted or are pending or contemplated under the Act.

        (xii) The Registration Statement (including the information deemed to be
    part of the Registration Statement at the time of effectiveness pursuant to
    Rule 430A(b), if applicable) as amended or supplemented (except for the
    financial statements and notes thereto, the financial statement schedules
    and other statistical or financial data included therein as to which such
    counsel need express no opinion) and the Prospectus and any supplements or
    amendments thereto (except for the financial statements and notes thereto,
    the financial statement schedules and other statistical or financial data
    included therein, as to which such counsel need express no opinion) comply
    as to form in all material respects with the requirements of the Act and the
    rules of the Commission thereunder and nothing has come to the attention of
    such counsel that would cause such counsel to believe that the Registration
    Statement (including the information deemed to be part of the Registration
    Statement at the time of effectiveness pursuant to Rule 430A(b), if
    applicable) as amended or supplemented (except for the financial statements
    and notes thereto, the financial statement schedules and other statistical
    or financial data included therein as to which such counsel need express no
    opinion) at the time it became effective, at the time the Pricing Agreement
    was executed and at the Closing Date, contained any untrue statement of a
    material fact or omitted or omits to state any material fact required to be
    stated therein or necessary to make the statements therein not misleading,
    or that, as of its date, the Prospectus or any amendment or supplement
    thereto (except for the financial statements and notes thereto, the
    financial statement schedules and other statistical or financial data
    included therein as to which such counsel need express no opinion) included
    or includes any untrue statement of a material fact or omitted or omits to
    state any material fact necessary to make the statements therein, in light
    of the circumstances under which they were made, not misleading. The Rule
    434 Prospectus conforms to the requirements of Rule 434 of the Act.

        (xiii) The statements in the Prospectus in the sections captioned
    "Description of Capital Stock," "Business - Mobile Data Communications
    Services Business Segment," and "Certain Transactions" in each case insofar
    as such statements reflect a summary of the material legal matters or the
    documents referred to therein, fairly and accurately present the information
    called for by the Act and the applicable rules and regulations promulgated
    thereunder.

        (xiv) To the knowledge of such counsel there are no statutes or
    regulations, provisions of the General Corporation Law of the State of
    Delaware or any pending or threatened litigation or governmental proceedings
    against the Company required to be described in the Prospectus which are not
    so described, nor of any contracts or documents of a character required to
    be described in or filed as a part of the Registration Statement which are
    not described or filed as required.

        (xv) To such counsel's knowledge, except as disclosed in the Prospectus
    and as have been duly waived, no person has the right, contractual or
    otherwise, to cause the Company to register pursuant to the Act any shares
    of capital stock of the Company, upon the


                                      -18-










<PAGE>




    issuance and sale of the Shares to be sold by the Company to the
    Underwriters pursuant to this Agreement.

        (xvi) Neither the Company nor any of its subsidiaries is an "investment
    company" or a person "controlled by" an "investment company" within the
    meaning of the Investment Company Act.

        (xvii) To such counsel's knowledge, all offers and sales of the
    Company's and each of its subsidiaries capital stock prior to the date
    hereof were at all relevant times exempt from the registration requirements
    of the Act and were duly registered or the subject of an available exemption
    from the registration requirements of the applicable state securities or
    blue sky laws.

        In rendering such opinion, such counsel may state that they are relying
upon the certificate of the officers of the Company and the transfer agent for
the Common Stock, as to the number of shares of Common Stock at any time or
times outstanding, and that insofar as their opinion under clause (xii) above
relates to the accuracy and completeness of the Prospectus and Registration
Statement, it is based upon a general review with the Company's representatives
and independent accountants of the information contained therein, without
independent verification by such counsel of the accuracy or completeness of such
information. Such counsel may also rely upon the opinions of other competent
counsel and, as to factual matters, on certificates of officers of the Company
and of state officials, in which case their opinion is to state that they are so
doing and copies of such opinions or certificates are to be attached to the
opinion unless such opinions or certificates (or, in the case of certificates,
the information therein) have been furnished to the Representatives otherwise.

        (d) That the Representatives shall have received on the Closing Date a
favorable opinion dated the Closing Date from Thompson Coburn LLP, counsel for
the Underwriters, as to such matters as the Representatives may reasonably
require.

        (e) That the Representatives shall have received letters addressed to
the Representatives and dated the date hereof and the Closing Date from KPMG
LLP, independent public accountants for the Company, to the effect set forth in
Schedule II. There shall not have been any change or decrease specified in the
letters referred to in this subparagraph which makes it impractical or
inadvisable in the judgment of the Representatives to proceed with the public
offering or purchase of the Shares as contemplated hereby.

        (f) That (i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short or long-term debt of the Company from that set forth or
contemplated in the Registration Statement; (iii) there shall not have been,
since the respective dates as to which information is given in the Registration
Statement and the Prospectus, except as may otherwise be set forth or
contemplated in the Registration Statement and the Prospectus,


                                      -19-










<PAGE>




any material adverse change in the financial condition or results of operations
of the Company; (iv) the Company shall not have incurred any material
liabilities or obligations, direct or contingent (whether or not in the ordinary
course of business), other than those reflected in the Registration Statement;
and (v) all of the representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date hereof and the
Closing Date as if made on and as of each such date, and the Representatives
shall have received a certificate, dated the Closing Date and signed by the
chief executive officer and the principal financial officer (or such other
officers as are acceptable to the Representatives) to the effect set forth in
this Section 6(f) and in Section 6(g) hereof.

        (g) That the Company shall not have failed at or prior to the Closing
Date to have performed or complied in all material respects with any of the
agreements herein contained and required to be performed or complied with by it
at or prior to the Closing Date.

        (h) Within 24 hours after the Registration Statement becomes effective,
or within such longer period as to which the Representatives shall have
consented, the Shares shall have been qualified for sale or exempted from such
qualification under the securities laws of such jurisdictions as the
Representatives shall have designated prior to the time of execution of the
Pricing Agreement and such qualification or exemption shall continue in effect
to and including the Closing Date.

        The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Option Closing
Date of the conditions set forth in paragraphs (a) through (h); except that the
opinions called for in paragraphs (c) and (d) shall be revised to reflect the
sale of Additional Shares and shall be dated the Option Closing Date, if
different from the Closing Date.

        SECTION 7. INDEMNIFICATION AND CONTRIBUTION.

        (a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of the
Act or the Exchange Act from and against any and all losses, claims, damages or
liabilities, joint or several, whatsoever (including any investigation, legal or
other expenses incurred in connection with, and any amount paid in settlement
of, any action, suit or proceeding or any claim asserted) to which such
Underwriter, or such controlling person may become subject, arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus or the Registration Statement or the
Prospectus or in any amendment or supplement thereto or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred, except insofar as such
losses, claims, damages or liabilities anise out of or are based upon any such
untrue statement or omission or allegation thereof which has been made therein
or omitted therefrom in reliance upon and in conformity with information
relating to such Underwriter furnished in writing to the Company by or on behalf
of any


                                      -20-











<PAGE>





Underwriter through the Representatives expressly for use therein; provided,
however, that the indemnification contained in this paragraph with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or
of any person controlling such Underwriter) with respect to any action or claim
arising from the sale of the Shares by such Underwriter brought by any person
who purchased Shares from such Underwriter if (i) a copy of the Prospectus (as
amended or supplemented if any amendments or supplements thereto shall have been
furnished to the Underwriter prior to the written confirmation of the sale
involved) shall not have been given or sent to such person by or on behalf of
the Underwriter with or prior to the written confirmation of the sale involved
and (ii) the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (as amended or
supplemented if amended or supplemented as aforesaid).

        (b) If any action or claim shall be brought against any Underwriter or
any person controlling such Underwriter, in respect of which indemnity may be
sought against the Company, such Underwriter shall promptly notify the Company
in writing, and the Company shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses. Any Underwriter or
any such person controlling such Underwriter shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person and shall be reimbursed as they are
incurred unless (i) the Company has agreed in writing to pay such fees and
expenses, (ii) the Company has failed to assume the defense and employ counsel,
or (iii) the named parties to any such action (including any impleaded party)
included such Underwriter or controlling person and the Company and such
Underwriter or controlling person shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Company and which may also result in a
conflict of interest (in which case if such Underwriter or controlling person
notifies the Company, the Company shall not have the right to assume the defense
of such action on behalf of such Underwriter or controlling person, it being
understood, however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising put of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated in writing by the Representatives). The Company shall not be liable
for any settlement or any such action effected without the written consent of
the Company, but if settled with the written consent of the Company, or if there
shall be a final judgment for the plaintiff in any such action and the time for
filing all appeals has expired, the Company agrees to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement or judgment.

        (c) Each Underwriter will severally indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and any
person controlling the Company within the meaning of the Act or the Exchange Act
to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with respect to information relating to such Underwriter
furnished in writing to the Company by or on behalf of such Underwriter through
the Representatives expressly for use in the Registration Statement, the
Prospectus or


                                      -21-










<PAGE>





any Preliminary Prospectus. If any action or claim shall be brought or asserted
against the Company, any of its directors, any such officer, or any such
controlling person based on the Registration Statement, the Prospectus or any
Preliminary Prospectus and in respect of which indemnity may be sought against
any Underwriter, such Underwriter shall have the rights and duties given to the
Company pursuant to Section 7(b) hereof (except that if the Company shall have
assumed the defense thereof, such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Company, its directors, any such officer, and any such
controlling person shall have the rights and duties given to the Underwriters by
Section 7(b) hereof.

        (d) (i) If the indemnification provided for in this Section 7 is
unavailable as a matter of law to any indemnified party under this Section 7 in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by damages,
liabilities or expenses (A) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Underwriters from the offering
of the Shares or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (A) above but also the relative
fault of the Company and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The respective
relative benefits received by the Company and the Underwriters shall be deemed
to be in the same proportion in the case of the Company, as the total price paid
to the Company for the Shares by the Underwriters (net of underwriting discount
but before deducting expenses), and in the case of the Underwriters as the
underwriting discount received by them bears to the total of such amounts paid
to the Company and received by the Underwriters as underwriting discount, in
each case as contemplated by the Prospectus. The relative fault of the Company
and the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities and expenses referred to in
this Section shall be deemed to include, subject to the limitations set forth in
this Section, any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim.

        (ii) The Company and the Underwriters agree that the determination of
contribution pursuant to this Section based on pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph would not be
just and equitable (even if the several Underwriters were treated as one entity
for such purpose). Notwithstanding the provisions of this Section, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public exceeds the amount of any damages which such Underwriter has
otherwise been required to pay by


                                      -22-










<PAGE>





reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section are several in proportion to
their respective underwriting commitments and not joint.

        (e) The indemnity and contribution agreements contained in this Section
and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company or its directors or officers, (or any
person controlling the Company), (ii) acceptance of any Shares and payment
therefor hereunder and (iii) any termination of this Agreement. A successor or
assign of an Underwriter, the Company or its directors or officers, and their
legal and personal representatives (or of any person controlling an Underwriter,
or the Company) shall be entitled to the benefits of the indemnity, contribution
and reimbursement agreements contained in this Section.

        SECTION 8. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective immediately as to Sections 5, 7, 10 and 11 and as to all other
provisions at 10:00 A.M., Chicago Time, on the day following the date upon which
the Pricing Agreement is executed and delivered, unless such a day is a
Saturday, Sunday or holiday (and in that event this Agreement shall become
effective at such hour on the business day next succeeding such Saturday, Sunday
or holiday); but this Agreement shall nevertheless become effective at such
earlier time after the Pricing Agreement is executed and delivered as you may
determine on and by notice to the Company or by release of any Shares for sale
to the public. For the purposes of this Section, the Shares shall be deemed to
have been so released upon the release for publication of any newspaper
advertisement relating to the Shares or upon the release by you of telegrams (i)
advising Underwriters that the Shares are released for public offering, or (ii)
offering the Shares for sale to securities dealers, whichever may occur first.

        SECTION 9. DEFAULT OF UNDERWRITERS. If any one or more of the
Underwriters shall fail or refuse to purchase Firm Shares which it or they have
agreed to purchase under this Agreement and the Pricing Agreement and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of Firm Shares, each non-defaulting Underwriter shall be
obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I bears to the aggregate number of Firm
Shares set forth opposite the names of all non-defaulting Underwriters or in
such other proportion as the Representatives may specify in accordance with the
Agreement Among Underwriters to purchase the Firm Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase. If any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Firm Shares and arrangements
satisfactory to the Representatives and the Company for the purchase of such
Firm Shares are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either


                                      -23-










<PAGE>




the Representatives or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and the Prospectus or any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
such default of any such Underwriter under this Agreement. Any notice under this
Section 9 may be made by telecopy or telephone but shall be subsequently
confirmed by letter.

        SECTION 10. TERMINATION OF AGREEMENT. This Agreement and the Pricing
Agreement shall be subject to termination by notice given by you to the Company,
if (a) after the execution and delivery of this Agreement and the Pricing
Agreement and prior to the Closing Date (and with respect to the Additional
Shares, the Option Closing Date) (i) trading generally shall have been suspended
or materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
or in Chicago shall have been declared by either Federal, New York or Illinois
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses (a)(1) through (iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
Notice of such cancellation shall be given to the Company by telecopy or
telephone but shall be subsequently confirmed by letter.

        SECTION 11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the sale to the
Underwriters of the Shares on the Closing Date is not consummated because any
condition to the Underwriters' obligations hereunder is not satisfied or because
of any refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, unless such failure to
satisfy such condition or to comply with any provision hereof is due to the
default or omission of any Underwriter, the Company agrees to reimburse you and
the other Underwriters upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been reasonably
incurred by you and them in connection with the proposed purchase and the sale
of the Shares. Any such termination shall be without liability of any party to
any other party except that the provisions of this Section, Section 5 and
Section 7 shall at all times be effective and shall apply.

        SECTION 12. NOTICES. Except as otherwise provided in Sections 9 and 10
hereof, notice given pursuant to any of the provisions of this Agreement shall
be in writing and shall be delivered (a) if to the Company, at the office of the
Company at 105 Baylis Road, Melville, New York 11747, Attention: Fred Kornberg
with a copy to Proskauer Rose LLP, 1585 Broadway, New York, New York 10036,
Attention: Robert A. Cantone, Esq., or (b) if to the Representatives, at the
offices of ABN AMRO Incorporated, 208 South LaSalle Street, 4th Floor, Chicago,
Illinois 60604, Attention: Corporate Finance Department, with a copy to Thompson
Coburn LLP, One Mercantile Center, St. Louis, Missouri 63101, Attention: Thomas
A. Litz,


                                      -24-










<PAGE>



Esq. or in any case to such other address as the person to be notified may have
requested in writing.

        SECTION 13. SUCCESSORS. The Agreement and the Pricing Agreement are made
solely for the benefit of the several Underwriters, the Company, their directors
and officers and other controlling persons referred to in Section 7 hereof, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement or the Pricing Agreement.
The term "successors and assigns" as used in this Agreement shall not include a
purchaser from any of the several Underwriters of any of the Shares in his
status as such purchaser.

        SECTION 14. REPRESENTATION OF UNDERWRITERS. The Representatives will act
for the several Underwriters in connection with the purchase, offering and sale
of the Shares, and any action taken by the Representatives will be binding upon
all the Underwriters.

        SECTION 15. PARTIAL UNENFORCEABILITY. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.

        SECTION 16. APPLICABLE LAW. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the State of
Illinois.

        SECTION 17. COUNTERPARTS. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.

                                      * * *

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]


                                      -25-










<PAGE>




        Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.


                               Very truly yours,

                               Comtech Telecommunications Corp.

                               By:
                                  ----------------------------------------------
                                   Name: Fred Kornberg
                                   Title: Chairman of the Board, Chief Executive
                                          Officer and President


Accepted and delivered as of
the date first written above.

ABN AMRO Incorporated
STIFEL, NICOLAUS & COMPANY, INCORPORATED
HCFP/BRENNER SECURITIES, LLC

Acting as Representatives of
the Several Underwriters named
in Schedule I hereto.


By:  ABN AMRO Incorporated


By:
   ---------------------------------------









<PAGE>





                        COMTECH TELECOMMUNICATIONS CORP.

                                   SCHEDULE I

                                  UNDERWRITERS


<TABLE>
<CAPTION>
                                                                            NUMBER OF
NAME                                                                       FIRM SHARES
- ----                                                                       -----------
<S>                                                                      <C>
ABN AMRO Incorporated..................................................

Stifel, Nicolaus & Company, Incorporated...............................

HCFP/Brenner Securities, LLC...........................................
                                                                            ---------
        TOTAL..........................................................     2,300,000
                                                                            =========
</TABLE>










<PAGE>




                        COMTECH TELECOMMUNICATIONS CORP.

                                   SCHEDULE II

                           COMFORT LETTER OF KPMG LLP

        (1)   They are independent public accountants with respect to the
Company and its subsidiaries within the meaning of the Act.

        (2)   In their opinion the consolidated financial statements of the
Company and its subsidiaries included or incorporated by reference in the
Registration Statement and the consolidated financial statements of the Company
from which the information presented under the caption "Selected Consolidated
Financial Data" has been derived which are stated therein to have been examined
by them comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act.

        (3)   On the basis of specified procedures (but not an examination in
accordance with generally accepted auditing standards), including inquiries of
certain officers of the Company and its subsidiaries responsible for financial
and accounting matters as to transactions and events subsequent to July 31,
1999, a reading of minutes of meetings of the stockholders and directors of the
Company and its subsidiaries since July 31, 1999, a reading of the latest
available interim unaudited consolidated financial statements of the Company and
its subsidiaries (with an indication of the date thereof) and other procedures
as specified in such letter, nothing came to their attention which caused them
to believe that (i) the unaudited consolidated financial statements of the
Company and its subsidiaries included or incorporated by reference in the
Registration Statement do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the Exchange Act or that
such unaudited financial statements are not fairly presented in accordance with
generally accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Registration Statement, and (ii) at a specified date not more than five days
prior to the date thereof in the case of the first letter and not more than two
business days prior to the date thereof in the case of the second and third
letters, there was any change in the capital stock or long-term debt or
short-term debt (other than normal payments) of the Company and its subsidiaries
on a consolidated basis or any decrease in consolidated net current assets or
consolidated stockholders' equity as compared with amounts shown on the latest
unaudited balance sheet of the Company included in the Registration Statement or
for the period from the date of such balance sheet to a date not more than five
days prior to the day thereof in the case of the first letter and not more than
two business days prior to the date thereof in the case of the second and third
letters, there were any decreases, as compared with the corresponding period of
the prior year, in consolidated net sales, consolidated income before income
taxes or in the total or per share amounts of consolidated net income except, in
all instances, for changes or decreases which the Prospectus discloses have
occurred or may occur or which are set forth in such letter.










<PAGE>






        (4)    They have carried out specified procedures, which have been
agreed to by the Representatives, with respect to certain information in the
Prospectus specified by the Representatives, and on the basis of such
procedures, they have found such information to be in agreement with the general
accounting records of the Company and its subsidiaries.










<PAGE>




                                    Exhibit A

                                2,300,000 SHARES

                        COMTECH TELECOMMUNICATIONS CORP.

                                  COMMON STOCK

                                PRICING AGREEMENT

                                                                          , 2000

ABN AMRO Incorporated
Stifel, Nicolaus & Company, Incorporated
HCFP/Brenner Securities, LLC
Individually and as Representatives of the
  Several Underwriters Named in Schedule I
  to the Underwriting Agreement
c/o ABN AMRO Incorporated
208 South LaSalle Street
4th Floor
Chicago, Illinois 60604

Ladies and Gentlemen:

        Reference is made to the Underwriting Agreement, dated      , 2000 (the
"Underwriting Agreement"), relating to the purchase by the several Underwriters
named in Schedule I thereto (collectively, the "Underwriters"), for whom you are
acting individually and as representatives (the "Representatives"), of the above
referenced Common Stock (the "Shares") of Comtech Telecommunications Corp. (the
"Company").

        Pursuant to Section 3 of the Underwriting Agreement, the Company agrees
with each of the Underwriters as follows:

        1. The initial public offering price per share of the Shares determined
as provided in said Section 3 shall be $        .

        2. The purchase price per share of the Shares to be paid by the several
Underwriters shall be $           , being an amount equal to the initial public
offering price set forth above, less $       per Share.










<PAGE>




        If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Underwriters and the Company in accordance with its terms.



                             Very truly yours,



                             Comtech Telecommunications Corp.



                             By:
                                ----------------------------------------------
                                Name: Fred Kornberg
                                Title: Chairman of the Board, Chief Executive
                                       Officer and President



Confirmed and Accepted, as of the date
first above written for themselves and
as Representatives of the other Underwriters
named in the Underwriting Agreement:

ABN AMRO INCORPORATED
STIFEL, NICOLAUS & COMPANY, INCORPORATED
HCFP/BRENNER SECURITIES, LLC

Acting as Representatives of the Several
  Underwriters named in Schedule I to
  the Underwriting Agreement



BY:  ABN AMRO INCORPORATED



BY:
   --------------------------------------





<PAGE>



                        COMTECH TELECOMMUNICATIONS CORP.

                            CERTIFICATE OF AMENDMENT
                                       TO
                        THE CERTIFICATE OF INCORPORATION

It is hereby certified that:

     1. The name of the corporation is Comtech Telecommunications Corp. (the
"Corporation").

     2. The certificate of incorporation of the Corporation is hereby amended by
deleting paragraph (a) of Article FOURTH thereof and replacing in lieu and
instead thereof a new paragraph (a) of Article FOURTH, to read as follows:

          "FOURTH: (a) the aggregate number of shares which the Corporation
          shall have authority to issue is Thirty Two Million (32,000,000)
          shares, of which Thirty Million (30,000,000) shares shall be Common
          Stock, par value ten cents ($.10) ("Common Stock"), and Two Million
          (2,000,000) shares shall be Preferred Stock, par value ten cents
          ($.10) ("Preferred Stock")."

     3. The Board of Directors of the Corporation unanimously adopted a
resolution proposing and declaring the advisability of the foregoing amendment
to the certificate of incorporation, and recommended the adoption of such
amendment by the stockholders of the Corporation.

     4. The stockholders of the Corporation, at an annual meeting of
stockholders held on December 14, 1999, approved the foregoing amendment to the
certificate of incorporation of the Corporation.

     5. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.













<PAGE>




     IN WITNESS WHEREOF, Comtech Telecommunications Corp. has caused this
Certificate of Amendment to be executed in its corporate name by its President
and attested by its Secretary this 17th day of December, 1999.

                                      COMTECH TELECOMMUNICATIONS CORP.

                                      By: /s/ FRED KORNBERG
                                          -------------------------------------
                                          FRED KORNBERG,
                                          Chairman, Chief Executive Officer and
                                          President

Attest:

/s/ GAIL SEGUI
- ---------------------------
GAIL SEGUI,
Secretary







<PAGE>





The Board of Directors
Comtech Telecommunications Corp.:


We consent to the use of our report dated September 24, 1999 included herein
and to the reference to our firm under the heading "Experts" in the prospectus.


                                                 /s/ KPMG LLP


Melville, New York
January 14, 2000








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