~~ADDVANTAGE TECHNOLOGIES GROUP, INC.~~

~~CONSOLIDATED CONDENSED BALANCE SHEETS~~ADDvantage Technologies Group, Inc.

~~(UNAUDITED)~~Consolidated Statements of Operations

(in thousands, except share and per share amounts)

June 30,
2020

September 30,
2019

Liabilities and Shareholders’ Equity
Current liabilities:

Accounts payable
$
4,786,788

$
4,730,537

Accrued expenses
1,415,792

1,617,911

Deferred revenue
241,452

97,478

Bank line of credit
2,800,000
‒

Note payable – current
2,580,652
‒

Operating lease obligations – current
1,224,630
‒

Financing lease obligations – current
328,151
‒

Other current liabilities ‒

757,867

Total current liabilities

13,377,465

7,203,793

Note payable
2,171,680
‒

Operating lease obligations
3,809,803
‒

Financing lease obligations
855,052
‒

Other liabilities
15,000

177,951

Total liabilities

20,229,000

7,381,744

Shareholders’ equity:

Common stock, $.01 par value; 30,000,000 shares authorized; 11,294,839 and 10,861,950 shares issued, respectively;
11,294,839 and 10,361,292 shares outstanding, respectively

112,950

108,620

Paid in capital
(2,592,034
)

(4,377,103
)
Retained earnings
18,359,674

34,715,097

Total shareholders’ equity before treasury stock
15,880,590

30,446,614

Less: Treasury stock, 0 and 500,658 shares, respectively, at cost ‒

(1,000,014
)
Total shareholders’ equity

15,880,590

29,446,600

Total liabilities and shareholders’ equity

$
36,109,590

$
36,828,344

(Unaudited)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Sales	$	17,017	$	12,022	$	42,433	$	37,943
Cost of sales	12,748		7,851		31,354		30,619
Gross profit	4,269		4,171		11,079		7,324
Operating expenses	2,508		1,998		6,733		6,276
Selling, general and administrative expenses	3,561		2,421		10,532		8,097
Impairment of right of use asset	0		660		0		660
Impairment of intangibles including goodwill	0		0		0		8,714
Depreciation and amortization expense	314		242		899		1,197
Gain on disposal of assets	(13)		(8)		(23)		(36)
Loss from operations	(2,101)		(1,142)		(7,062)		(17,584)
Other income (expense):
Interest income	34		83		115		259
Income from equity method investment	0		0		0		41
Other expense, net	(34)		(37)		(61)		(123)
Interest expense	(46)		(101)		(156)		(184)
Total other income (expense), net	(46)		(55)		(102)		(7)

Loss before income taxes	(2,147)		(1,197)		(7,164)		(17,591)
Benefit for income taxes	(23)		(1,220)		(23)		(1,236)




Net income (loss)	$	(2,124)	$	23	$	(7,141)	$	(16,355)

Income (loss) per share:
Basic	$	(0.17)	$	0	$	(0.58)	$	(1.49)


Diluted	$	(0.17)	$	0	$	(0.58)	$	(1.49)




Shares used in per share calculation:
Basic	12,495,438		11,079,580		12,352,960		10,955,235
Diluted	12,495,438		11,216,688		12,352,960		10,955,235

See notes to unaudited consolidated ~~condensed~~ financial statements.

~~ADDVANTAGE TECHNOLOGIES GROUP, INC.~~

Table of Contents

~~CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS~~ADDvantage Technologies Group, Inc.

~~(UNAUDITED)~~Consolidated Statements of Changes in Shareholders' Equity

(in thousands, except share amounts)

Three Months Ended June 30, Nine Months Ended June 30,
2020
2019
2020
2019

Sales

$
12,021,820

$
17,559,315

$
37,943,303

$
37,259,352

Cost of sales

7,851,241

12,971,910

30,619,379

27,472,042

Gross profit

4,170,579

4,587,405

7,323,924

9,787,310

Operating expenses

1,998,184

1,611,751

6,276,442

3,943,026

Selling, general and administrative expenses
2,420,629

2,846,168

8,095,815

7,385,008

Impairment of right of use asset
660,242
‒

660,242
‒

Impairment of intangibles including goodwill ‒
‒

8,714,306
‒

Depreciation and amortization expense
241,501

382,565

1,196,860

1,069,653

Loss from operations

(1,149,977
)

(253,079
)

(17,619,741
)

(2,610,377
)
Other income (expense):

Interest income
83,544
‒

258,847
‒

Income from equity method investment ‒

20,005

40,500

75,005

Other income (expense)
(29,454
)

158,739

(86,588
)

118,319

Interest expense
(101,327
)

(25,860
)

(184,005
)

(68,612
)
Total other income (expense), net

(47,237
)

152,884

28,754

124,712

Loss before income taxes

(1,197,214
)

(100,195
)

(17,590,987
)

(2,485,665
)
Benefit for income taxes

(1,220,564
)

(42,000
)

(1,235,564
)

(13,000
)
Income (loss) from continuing operations

23,350

(58,195
)

(16,355,423
)

(2,472,665
)

Loss from discontinued operations, net of tax ‒

(1,426,970
)
‒

(1,267,344
)

Net income (loss)

$
23,350

$
(1,485,165
)

$
(16,355,423
)

$
(3,740,009
)

Income (loss) per share:

Basic
Continuing operations
$
0.00

$
(0.00
)

$
(1.49
)

$
(0.24
)
Discontinued operations ‒

(0.14
)
‒

(0.12
)
Net income (loss)
$
0.00

$
(0.14
)

$
(1.49
)

$
(0.36
)
Diluted
Continuing operations
$
0.00

$
(0.00
)

$
(1.49
)

$
(0.24
)
Discontinued operations ‒

(0.14
)
‒

(0.12
)
Net income (loss)
$
0.00

$
(0.14
)

$
(1.49
)

$
(0.36
)
Shares used in per share calculation:

Basic
11,079,580

10,361,292

10,955,235

10,361,292

Diluted
11,216,688

10,361,292

10,955,235

10,361,292

(Unaudited)


	Common Stock			Paid-in Capital		Retained Earnings		Treasury Stock
	Shares	Amount								Total
Balance, September 30, 2020	11,822,009	$	118	$	(2,567)	$	17,382	$	0	$	14,933
Net loss	—	—		—		(1,953)		—		(1,953)
Issuance of common shares	238,194	3		876		—		—		879
Restricted stock issuance	306,390	3		(3)		—		—		0
Stock based compensation expense	—	—		315		—		—		315
Balance, December 31, 2020	12,366,593	$	124	$	(1,379)	$	15,429	$	0	$	14,174

Net loss	—	—		—		(3,064)		—		(3,064)
Issuance of common shares	7,779	—		21		—		—		21
Restricted stock issuance, net of forfeitures	(10,000)	(1)		—		—		—		(1)
Stock option exercise	49,000	—		89		—		—		89
Stock based compensation expense	—	—		246		—		—		246
Balance, March 31, 2021	12,413,372	$	124	$	(1,023)	$	12,364	$	0	$	11,466

Net loss	—	—		—		(2,124)		—		(2,124)
Restricted stock issuance	98,000	1		(1)		—		—		0
Stock based compensation expense	—	—		279		—		—		279
Balance, June 30, 2021	12,511,372	$	125	$	(745)	$	10,240	$	0	$	9,620


	Common Stock			Paid-in Capital		Retained Earnings		Treasury Stock
	Shares	Amount								Total
Balance, September 30, 2019	10,861,950	$	109	$	(4,377)	$	34,715	$	(1,000)	$	29,447

Net loss	—	—		—		(1,718)		—		(1,718)

Stock based compensation expense	—	—		14		—		—		14
Balance, December 31, 2019	10,861,950	$	109	$	(4,363)	$	32,997	$	(1,000)	$	27,743

Net loss	—	—		—		(14,661)		—		(14,661)
Restricted stock issuance	—	—		377		—		—		377
Stock option exercise	110,000	1		172		—		—		173
Stock based compensation expense	—	—		92		—		—		92
Balance, March 31, 2020	10,971,950	$	109	$	(3,722)	$	18,336	$	(1,000)	$	13,724

Net income	—	—		—		23		—		23
Utilization of treasury shares	(500,658)	(5)		(995)		—		1,000		0
Issuance of shares	573,199	6		2,103		—		—		2,109
Restricted stock issuance	237,014	2		13		—		—		15
Stock option exercise	13,334	—		24		—		—		24
Stock based compensation expense	—	—		(15)		—		—		(15)
Balance, June 30, 2020	11,294,839	$	113	$	(2,592)	$	18,360	$	—	$	15,881

Due to rounding, numbers presented may not foot to the totals provided.

See notes to unaudited consolidated ~~condensed~~ financial statements.

~~ADDVANTAGE TECHNOLOGIES GROUP, INC.~~

Table of Contents

~~CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY~~ADDvantage Technologies Group, Inc.

~~(UNAUDITED)~~Consolidated Statements of Cash Flows

Common Stock Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
Balance, September 30, 2019

10,861,950

$
108,620

$
(4,377,103
)

$
34,715,097

$
(1,000,014
)

$
29,446,600

Net loss

–

–

–

(1,717,692
)

–

(1,717,692
)
Share based compensation expense

–

–

13,890

–

–

13,890

Balance, December 31, 2019

10,861,950

$
108,620

$
(4,363,213
)

$
32,997,405

$
(1,000,014
)

$
27,742,798

Net loss

–

–

–

(14,661,081
)

–

(14,661,081
)
Restricted stock issuance

–

–

475,618

–

–

475,618

Stock option exercise

110,000

1,100

171,833

–

–

172,933

Share based compensation expense

–

–

(6,364
)

–

–

(6,364
)

Balance, March 31, 2020

10,971,950

$
109,720

$
(3,722,126
)

$
18,336,324

$
(1,000,014
)

$
13,723,904

Net income

–

–

–

23,350

–

23,350

Utilization of treasury shares

(500,658
)

(5,006
)

(995,008
)

–

1,000,014

–

Issuance of shares

573,199

5,732

2,103,125

–

–

2,108,857

Restricted stock issuance

237,014

2,370

12,630

–

–

15,000

Stock option exercise

13,334

134

24,001

–

–

24,135

Share based compensation expense

–

–

(14,656
)

–

–

(14,656
)

Balance, June 30, 2020

11,294,839

$
112,950

$
(2,592,034
)

$
18,359,674

$
–

$
15,880,590

(in thousands)

(Unaudited)


	Nine Months Ended June 30,
	2021		2020
Operating Activities:
Net loss	$	(7,141)	$	(16,355)


Adjustments to reconcile net loss from operations to net cash used in operating activities:
Depreciation	661		590
Amortization	239		607
Change in right-of-use assets and liabilities, net	(161)		0
Impairment of right of use asset	0		660
Impairment of intangibles including goodwill	0		8,714
Provision for excess and obsolete inventories	115		2,125
Stock based compensation expense	840		167
Gain from disposal of property and equipment	(23)		(36)
Gain from equity method investment	0		(41)

Changes in assets and liabilities:
Accounts receivable	(4,379)		1,662
Unbilled revenue	(274)		2,014
Income tax receivable\payable	1,255		(14)
Inventories	(150)		(464)
Prepaid expenses and other assets	(269)		97
Accounts payable	3,012		56
Accrued expenses and other liabilities	456		(135)
Deferred revenue	31		144
Net cash used in operating activities	(5,788)		(1,429)



Investing Activities:
Proceeds from promissory note receivable	1,910		2,025

Loan repayment from equity method investee	0		40
Purchases of property and equipment	(185)		(471)
Disposals of property and equipment	43		78
Net cash provided by investing activities	1,768		1,672



Financing Activities:
Change in bank line of credit	0		2,800
Proceeds from note payable	0		6,374
Guaranteed payments for acquisition of business	0		(667)
Payments on financing lease obligations	(359)		(277)
Payments on notes payable	(1,249)		(1,622)
Proceeds from sale of common stock	900		1,829
Proceeds from stock options exercised	89		197


Net cash provided by (used in) financing activities	(619)		8,634

Net (decrease) increase in cash, cash equivalents and restricted cash	(4,639)		8,877
Cash, cash equivalents and restricted cash at beginning of period	8,373		1,594
Cash, cash equivalents and restricted cash at end of period	$	3,734	$	10,471

See notes to unaudited consolidated ~~condensed financial statements.~~

Common Stock Paid-in Retained Treasury
Shares Amount Capital Earnings Stock Total
Balance, September 30, 2018

10,806,803

$
108,068

$
(4,598,343
)

$
40,017,540

$
(1,000,014
)

$
34,527,251

Net loss

–

–

–

(1,038,981
)

–

(1,038,981
)
Restricted stock issuance

55,147

552

74,448

–

–

75,000

Share based compensation expense

–

–

28,070

–

–

28,070

Balance, December 31, 2018

10,861,950

$
108,620

$
(4,495,825
)

$
38,978,559

$
(1,000,014
)

$
33,591,340

Net loss

–

–

–

(1,215,863
)

–

(1,215,863
)
Share based compensation expense

–

–

33,019

–

–

33,019

Balance, March 31, 2019

10,861,950

$
108,620

$
(4,462,806
)

$
37,762,696

$
(1,000,014
)

$
32,408,496

Net loss

–

–

–

(1,485,165
)

–

(1,485,165
)
Share based compensation expense

–

–

42,852

–

–

42,852

Balance, June 30, 2019

10,861,950

$
108,620

$
(4,419,954
)

$
36,277,531

$
(1,000,014
)

$
30,966,183

~~See notes to unaudited consolidated condensed~~ financial statements.

~~ADDVANTAGE TECHNOLOGIES GROUP, INC.~~

~~CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS~~

~~(UNAUDITED)~~

Nine Months Ended June 30,
2020
2019

Operating Activities
Net loss

$
(16,355,423
)

$
(3,740,009
)
Net loss from discontinued operations
‒

(1,267,344
)
Net loss from continuing operations

(16,355,423
)

(2,472,665
)
Adjustments to reconcile net loss from continuing operations to net cash
used in operating activities:

Depreciation
589,866

257,128

Amortization
606,994

812,525

Impairment of right of use asset
660,242
‒

Impairment of intangibles including goodwill
8,714,306
‒

Provision for excess and obsolete inventories
2,125,000

77,889

Share based compensation expense
167,405

152,691

Gain from disposal of property and equipment
(36,286
)

(250,877
)
Gain from equity method investment

(40,500
)

(75,005
)
Deferred income taxes
(1,220,564
)
‒

Changes in assets and liabilities:

Accounts receivable

1,661,823

(2,074,342
)
Unbilled revenue

2,013,531

(1,793,065
)
Income tax receivable\payable
(13,565
)

4,476

Inventories
(463,917
)

(1,799,042
)
Prepaid expenses and other assets
97,118

(395,726
)
Accounts payable
56,251

2,306,092

Accrued expenses and other liabilities
(135,416
)

455,426

Deferred revenue
143,974
‒

Net cash used in operating activities – continuing operations

(1,429,161
)

(4,794,495
)
Net cash provided by operating activities – discontinued operations
‒

1,179,876

Net cash used in operating activities

(1,429,161
)

(3,614,619
)

Investing Activities
Proceeds from promissory note receivable
2,025,000
‒

Acquisition of net operating assets of a business ‒

(1,264,058
)
Loan repayment from equity method investee
40,500

124,005

Purchases of property and equipment
(471,226
)

(457,225
)
Disposals of property and equipment

77,505

452,244

Net cash provided by (used in) investing activities – continuing operations

1,671,779

(1,145,034
)
Net cash provided by investing activities – discontinued operations
‒

7,075,000

Net cash provided by investing activities

1,671,779

5,929,966

Financing Activities
Change in bank line of credit

2,800,000
‒

Proceeds from note payable

6,373,929
‒

Guaranteed payments for acquisition of business

(667,000
)

(667,000
)
Payments on financing lease obligations

(277,061
)
‒

Payments on notes payable

(1,621,597
)

(1,246,279
)
Proceeds from sale of common stock

1,828,852
‒

Proceeds from stock options exercised

197,068
‒

Net cash provided by (used in) financing activities – continuing operations

8,634,191

(1,913,279
)
Net cash used in financing activities – discontinued operations

(597,906
)
Net cash provided by (used in) financing activities

8,634,191

(2,511,185
)

Net increase (decrease) in cash and cash equivalents and restricted cash

8,876,809

(195,838
)
Cash and cash equivalents and restricted cash at beginning of period

1,594,052

3,129,280

Cash and cash equivalents and restricted cash at end of period

$
10,470,861

$
2,933,442

Supplemental cash flow information:

Cash paid for interest
$
244,995

$
109,106

Cash paid for income taxes
$
‒

$
‒

Non-cash financing activities:

Proceeds from sale of common stock receivable
$
280,005

$
‒

~~See notes to unaudited consolidated condensed financial statements.~~

Table of Contents

~~ADDVANTAGE TECHNOLOGIES GROUP, INC.~~ADDvantage Technologies Group, Inc.

~~NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS~~Notes to Unaudited Consolidated Financial Statements

Note 1 - Basis of Presentation and Accounting Policies

Basis of presentation

The ~~unaudited~~ consolidated ~~condensed~~ financial statements include the accounts of ADDvantage Technologies Group, Inc. and its subsidiaries, all of which are wholly owned (collectively, the “Company” ~~or “we”~~). Intercompany balances and transactions have been eliminated in consolidation. The Company’s reportable segments are Wireless Infrastructure Services (“Wireless”) and Telecommunications (“Telco”).

The accompanying unaudited consolidated ~~condensed~~ financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. However, the information furnished reflects all adjustments, which are, in the opinion of management, necessary in order to make the unaudited consolidated ~~condensed~~ financial statements not misleading.

The Company’s business is subject to ~~certain~~ seasonal variations due to weather in the geographic areas ~~that~~where services are performed, ~~and to a certain extent due to~~as well as calendar events and national holidays. Therefore, the results of operations for the nine months ended June 30, ~~2020~~2021 and ~~2019,~~2020, are not necessarily indicative of the results to be expected for the full fiscal year. ~~It is suggested that these~~These unaudited consolidated ~~condensed~~ financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019.~~

2020.

Reclassification

The Company changed its presentation of cost of sales and operating, selling, general and administrative expenses on the unaudited consolidated condensed statements of operations. During fiscal year 2020, the Company reviewed its financial reporting of expenses in connection with its current operating segments in order to enhance the usefulness of the presentation of the Company’s expenses. Based on that review, the Company reclassified certain expenses into operating expenses for presentation purposes. Operating expenses include the indirect costs associated with operating our businesses. Indirect costs are costs that are not directly attributable to projects or products, which would include indirect personnel costs, facility costs, vehicles, insurance, communication, and business taxes, among other less significant cost categories. These costs were previously recorded in either costs of sales or operating, selling, general and administrative expenses in prior periods. Additionally, the Company reclassified depreciation and amortization from operating, selling, general and administrative expenses into its own financial statement line item in the unaudited consolidated condensed statements of operations. Selling, general and administrative expenses include overhead costs, which primarily consist of personnel costs, insurance, professional services, and communication, among other less significant cost categories. TheCertain prior period ~~has~~amounts have been reclassified to conform ~~with the~~to current ~~period’s presentation of costs of sales, operating expenses, selling, general and administrative expenses, and depreciation and amortization.~~year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

Recently Issued Accounting Standards

In June 2016, the ~~FASB~~Financial Accounting Standards Board (FASB) issued ~~ASU~~Accounting Standards Update (ASU) 2016-13: “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments.” This ASU requires entities to measure all expected credit losses for most financial assets held at the reporting date based on an expected loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. ~~Entities~~Upon adoption, entities will ~~now~~ use forward-looking information to better form their credit loss estimates. This ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. ~~ASU 2016-13 is~~On November 15, 2019, the FASB delayed the effective date of the standard for ~~annual periods~~companies that qualify under smaller reporting company reporting rules. As amended, the effective date of ASC Topic 326 was delayed until fiscal years beginning after December 15, ~~2019, including interim periods within those fiscal periods.~~2022 for SEC filers that are eligible to be smaller reporting companies under the Securities and Exchange Commission definition. We are currently in the process of evaluating this new standard ~~update.~~update, however we do not anticipate the adoption will have a material impact on our results.

Note 2 – Revenue Recognition

The Company’s principal sales are from Wireless services, sales of Telco equipment and Telco recycled ~~equipment. Sales are~~equipment, primarily ~~to customers~~ in the United States. ~~International sales are made by the Telco segment~~Sales to ~~a customer in Asia for its recycling program and, to a substantially lesser extent, other~~ international ~~regions for equipment sales that utilize the same technology, which~~customers totaled approximately ~~$0.7~~$1.6 million and ~~$0.6~~$0.7 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively and ~~$1.5~~$2.9 million and ~~$1.6~~$1.5 million for the nine ~~months~~month period ended June 30, 2021 and 2020, ~~and 2019,~~ respectively.

The Company’s customers include wireless carriers, wireless equipment providers, multiple system operators, resellers and direct sales to end-user customers. Sales to three customers which individually accounted for 10% or greater of the ~~Company’s largest customer~~Company's revenue totaled 39% and sales to two customers comprised approximately ~~14%~~24% of consolidated revenues for the nine months ended June 30, ~~2020.~~2021 and 2020, respectively.

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Our sales by type were as ~~follows:~~follows, in thousands:

	Three Months Ended June 30,						Nine Months Ended June 30,
	2020			2019			2020			2019				Three Months Ended June 30,				Nine Months Ended June 30,
														2021		2020		2021		2020
Wireless services sales	$	5,123,176		$	8,733,444		$	16,592,907		$	12,951,368		Wireless services sales	$	4,136	$	5,123	$	13,716	$	16,593
Equipment sales:													Equipment sales:
Telco		6,147,676			7,989,318			19,912,137			22,876,047		Telco	12,826		6,148		28,289		19,912
Intersegment		(23,033	)		(5,305	)		(23,033	)		(49,452	)	Intersegment	0		(23)		0		(23)
Telco repair sales		33,236			31,142			49,438			36,542		Telco repair sales	1		33		14		49
Telco recycle sales		740,765			810,716			1,411,854			1,444,847		Telco recycle sales	55		741		414		1,412
Total sales	$	12,021,820		$	17,559,315		$	37,943,303		$	37,259,352		Total sales	$	17,017	$	12,022	$	42,433	$	37,943

The timing of revenue recognition from the wireless segment results in contract assets and contract liabilities. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company sometimes receives advances or deposits from customers before revenue is recognized, resulting in contract liabilities. Contract assets and contract liabilities are included in ~~Unbilled~~unbilled revenue and ~~Deferred~~deferred revenue, respectively, in the consolidated ~~condensed~~ balance sheets. At June 30, ~~2020~~2021 and September 30, ~~2019,~~2020, contract assets were ~~$0.7~~$0.9 million and ~~$2.7~~$0.6 million, respectively, and contract liabilities were ~~$0.2~~$0.1 million and $0.1 million, respectively. The Company recognized ~~the entire~~ $0.1 million of contract revenue during the nine months ended June 30, ~~2020~~2021 related to contract liabilities recorded in ~~Deferred~~deferred revenue at September 30, ~~2019.~~2020.

For the three months ended June 30, 2020, the Company recognized $0.5 million of revenue in its Wireless segment associated with adjustments to constrained variable consideration from change orders related to several projects for which the costs had been recognized in prior quarters.

Note 3 – Accounts Receivable Agreements

The Company’s Wireless segment has entered into various agreements, including one agreement with recourse, to sell certain receivables to unrelated third-party financial institutions. For the agreement with recourse, the Company is responsible for collecting payments on the sold receivables from its customers. Under this agreement, the third-party financial institution advances the Company 90% of the sold receivables and establishes a reserve of 10% of the sold receivables until the Company collects the sold receivables. As the Company collects the sold receivables, the third-party financial institution will remit the remaining 10% to the Company. At June 30, ~~2020,~~2021, the third-party financial institution has a reserve ~~against the sold receivables~~ of $0.1 million, which is reflected as restricted ~~cash.~~cash, against the sold receivables of $0.9 million. For the receivables sold under the agreement with recourse, the agreement addresses events and conditions which may obligate the Company to immediately repay the institution the outstanding purchase price of the receivables sold. The total amount of receivables uncollected by the institution was ~~$0.5~~$0.9 million at June 30, ~~2020~~2021 for which there is a limit of $4.0 million. Although the sale of receivables is with recourse, the Company did not record a recourse obligation at June 30, ~~2020~~2021 as the Company concluded that the sold receivables are collectible. The other agreements without recourse are under programs offered by certain customers in the Wireless segment.

For the nine months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the Company received proceeds from the sold receivables under all of the various agreements of ~~$15.9~~$12.9 million and ~~$9.9~~$15.9 million, respectively, and included the proceeds in net cash used in operating activities in the Consolidated ~~Condensed~~ Statements of Cash Flows. The fees associated with selling these receivables ranged from ~~1.0%~~0.7% to ~~1.8%~~2.4% of the gross receivables sold for the nine months ended June 30, ~~2020~~2021 and ~~2019.~~2020. The Company recorded costs of $0.1 million and $0.2 million for the three and nine months ended June 30, 2021, respectively, and $0.1 million and $0.3 million for the three and nine months ended June 30, 2020, respectively, ~~and $0.1 million and $0.2 million for the three and nine months ended June 30, 2019,~~ in other expense in the ~~Consolidated Condensed Statements~~consolidated statements of ~~Operations.~~operations.

The Company accounts for these transactions in accordance with ASC 860, “Transfers and Servicing” (“ASC 860”). ASC 860 allows for the ownership transfer of accounts receivable to qualify for sale treatment when the appropriate criteria is met, which permits the Company to present the balances sold under the program to be excluded from accounts receivable, net on the consolidated condensed balance sheets. Receivables are considered sold when they are transferred beyond the reach of the Company and its creditors, the purchaser has the right to pledge or exchange the receivables and the Company has surrendered control over the transferred receivables.

Note 4 – Promissory Note Receivable

~~The~~During 2019, the Company completed a sale of its former Cable TV reporting segment ~~on June 30, 2019. In the first quarter of 2020,~~to Leveling 8, ~~Inc. (“Leveling 8”) paid~~an entity owned by a member of our board and significant shareholder, David Chymiak. Part of the ~~Company~~consideration for the ~~first installment of $0.7 million, including~~sale was a promissory note bearing interest of $0.1 million, under the promissory note as part of the sale of the Cable TV segment to Leveling 8. In the third quarter of 2020, Leveling 8 made another payment of $1.7 million ($1.4 million related to principal), which will lower the $2.5 million balloon payment due upon the maturity of the note as $0.7 million of this payment was a prepayment against the promissory note. David6% received from Mr. Chymiak. Mr. Chymiak ~~a director and substantial shareholder of the Company,~~ personally guaranteed the promissory note due to the Company and pledged certain assets ~~(directly and indirectly owned)~~ to secure the payment of the promissory note, including substantially all of ~~David~~Mr. Chymiak’s Company common stock. During the nine months ended June 30, 2021, the Company received principal payments totaling $1.9 million, of which approximately $1.4 million was a prepayment. At June 30, 2021, there was $1.9 million outstanding on the promissory note. The remaining promissory note is due in a final payment on June 29, 2024.

On March 10, 2020, the Company entered into a loan agreement with its primary financial lender for $3.5 million to monetize a portion of this promissory note ~~(see~~receivable. See Note ~~8).~~

~~The remaining~~7 - Debt for disclosures related to the Company's promissory note ~~will be paid in semi-annual installments over five years including interest~~payable.

Table of ~~6% as follows at June 30, 2020:~~Contents

Fiscal year 2021

$
1,400,000

Fiscal year 2022

940,000

Fiscal year 2023

940,000

Fiscal year 2024

1,725,754

Total proceeds

5,005,754

Less: interest to be paid

(655,754
)
Promissory note principal balance

$
4,350,000

Note 5 – Inventories

Inventories, which are all within the Telco segment, at June 30, ~~2020~~2021 and September 30, ~~2019~~2020 are as ~~follows:~~

June 30,
2020

September 30,
2019

New equipment
$
1,174,899

$
1,496,145

Refurbished and used equipment
8,189,591

7,404,428

Allowance for excess and obsolete inventory
(3,400,000
)

(1,275,000
)

Total inventories, net
$
5,964,490

$
7,625,573

follows, in thousands:


	June 30, 2021		September 30, 2020
New equipment	$	1,261	$	1,311
Refurbished and used equipment	7,518		7,319
Allowance for excess and obsolete inventory	(3,168)		(3,054)
Total inventories, net	$	5,611	$	5,576

New equipment includes products purchased from manufacturers plus ~~“surplus-new”,~~“surplus-new,” which are unused products purchased from other distributors or multiple system operators. Refurbished and used equipment ~~includes~~include factory refurbished, Company refurbished and used products.

The Telco segment identified certain inventory that more than likely will not be sold or that the cost will not be recovered when it is processed through its recycling program and recorded a $2.1 million expense in cost of sales to increase the allowance for excess and obsolete inventory during the nine months ended June 30, 2020. Therefore, the Company has a $3.4 million and a $1.3 million allowance at June 30, 2020 and September 30, 2019, respectively.

Note 6 – Intangible Assets

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company ~~conducts its long-lived asset impairment analyses in accordance with ASC 360-10-15, “Impairment or Disposal of Long-Lived Assets.” ASC 360-10-15 requires the Company to group~~groups assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted future cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.

As of March 31, 2020, the Company determined that changes in the economy related to the COVID-19 pandemic and the continued losses experienced in the Telco segment may cause the carrying amounts of its intangible assets to exceed their fair values. The Company performed an assessment of its intangible assets and determined that the carrying value of its customer relationships were in fact impaired based on valuation appraisals performed by the Company using a multi-period excess earnings model. Therefore, the Company recorded a $3.9 million impairment charge in the Telco segment as of March 31, 2020. As of June 30, 2020, no further indicators of potential impairment were present.

Intangible assets with their associated accumulated amortization and impairment at June 30,~~, 2020~~ 2021 and September 30, ~~2019~~2020 are as ~~follows:~~follows, in thousands:


	June 30, 2021
Intangible assets:	Gross		Accumulated Amortization		Impairment		Net
Customer relationships – 10 years	$	8,396	$	(4,141)	$	(3,894)	$	361
Trade name – 10 years	2,122		(1,297)		0		825

Total intangible assets	$	10,518	$	(5,438)	$	(3,894)	$	1,186


	September 30, 2020
Intangible assets:	Gross		Accumulated Amortization		Impairment		Net
Customer relationships – 10 years	$	8,396	$	(4,021)	$	(3,894)	$	481
Trade name – 10 years	2,122		(1,178)		0		944
Non-compete agreements – 3 years	374		(374)		0		0
Total intangible assets	$	10,892	$	(5,573)	$	(3,894)	$	1,425

June 30, 2020

Gross

Accumulated
Amortization

Impairment

Net

Intangible assets:

Customer relationships – 10 years
$
8,396,000

$
(3,991,306
)

$
(3,894,121
)

$
510,573

Trade name – 10 years
2,119,000

(1,124,800
)
‒

994,200

Non-compete agreements – 3 years
374,000

(374,000
)
‒
‒

Total intangible assets

$
10,889,000

$
(5,490,106
)

$
(3,894,121
)

$
1,504,773

September 30, 2019

Gross

Accumulated
Amortization

Net

Intangible assets:

Customer relationships – 10 years
$
8,396,000

$
(3,547,389
)

$
4,848,611

Trade name – 10 years
2,119,000

(966,280
)

1,152,720

Non-compete agreements – 3 years
374,000

(372,333
)

1,667

Total intangible assets

$
10,889,000

$
(4,886,002
)

$
6,002,998

Note 7 – ~~Goodwill~~

The Company tests goodwill at least annually for impairment. The Company tests more frequently if indicators are present or changes in circumstances suggest that impairment may exist. These indicators include, among others,

declines in sales, earnings or cash flows, or the development of a material adverse change in the business climate. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. The reporting units for the Company are its two operating segments.

As of March 31, 2020, indicators were present, which indicated that the Company should test for impairment of goodwill. These indicators included reduced revenues in the current fiscal year and the overall impact of the business climate as a result of the COVID-19 pandemic. While the Company is deemed an essential service during the COVID-19 pandemic and has remained in operation, it has seen a reduced revenue stream in the current year. Therefore, the Company performed a goodwill impairment analysis as of March 31, 2020. This analysis forecasted the debt free cash flows of the segment, on a discounted basis, to estimate the fair value of the segment compared to the carrying value of the segment. For the Telco segment, the carrying value exceeded the estimated fair value of the segment by more than the carrying amount of goodwill recorded in the segment. Therefore, the Company fully impaired the goodwill balance in the Telco segment and recorded an impairment charge of $4.8 million as of March 31, 2020.

~~Note 8 – Notes Payable and Line of Credit~~

Debt

Loan Agreement

On March 10, 2020, the Company entered into a loan agreement with its primary financial lender for $3.5 million, bearing interest at 6% per annum. The loan iswas payable in ~~seven~~7 semi-annual installments of principal and interest with the first payment occurring June 30, 2020, and the final payment due June 30, 2023. Payment of the loan may be accelerated in the event of a default. The principal and interest payments correlate to the payment schedule for the promissory note with Leveling 8 (see Note 4).2020. In connection with the ~~$1.7~~$1.5 million payment ~~made~~received in the ~~third~~first fiscal quarter of ~~2020 by Leveling 8 under~~2021 from the promissory note receivable, the Company ~~paid down $1.6~~fully repaid the remaining $1.2 million of principal outstanding under this ~~loan, for which $1.0 million was a prepayment against the~~ loan. As a result, the balance under this loan is now $1.9 million and the final payment will be June 30, 2022. The loan is secured by substantially all of the assets of the Company, including, without limitation, the promissory note that the Company received in connection with the sale of its cable segment in 2019 to Leveling 8, Inc. (see Note 4).

Credit Agreement

The Company has a $4.0 million revolving line of credit agreement with its primary financial lender, which matures on December 17, ~~2020.~~2021. The line of credit requires quarterly interest payments based on the prevailing Wall Street Journal Prime Rate, floating (3.25% at June 30, ~~2020)~~2021), with the addition of a 4% floor rate and ~~the interest rate is reset monthly.~~a fixed charge coverage ratio of 1.25 to be tested quarterly beginning June 30, 2021. At June 30, ~~2020,~~2021, there was $2.8 million

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outstanding under the line of credit. Future borrowings under the line of credit are limited to the lesser of $4.0 million or the sum of 80% of eligible accounts receivable and ~~25%~~60% of eligible Telco segment inventory. Under these limitations, the Company’s total line of credit borrowing capacity was ~~$3.1~~$4.0 million at June 30, ~~2020.~~

2021.

Loan Covenant with Primary Financial Lender

~~Both the March 10, 2020 loan agreement and line of~~The credit agreement ~~provide~~provides that the Company maintain a fixed charge coverage ratio (net cash flow to total fixed charge) of not less than 1.25 to 1.0 ~~measured annually.~~to be tested quarterly beginning June 30, 2021. The Company ~~believes that it is probable that it will~~was not be in compliance with this covenant asat June 30, 2021. The Company notified its primary financial lender of the ~~measurement date~~covenant violation, and on August 4, 2021, the primary financial lender granted a waiver of the covenant violation under the credit agreement. Although the covenant violation was waived at June 30, 2021, the Company believes it may again be out of compliance with this covenant at September 30, ~~2020. The noncompliance~~2021. If the Company is not in compliance with ~~this~~the covenant at September 30, 2021, it would result in an event of default, which if not cured or waived, could result in the lender accelerating the maturity of the Company’s indebtedness or preventing access to additional funds under the line of credit agreement, or requiring prepayment of outstanding indebtedness under the loan agreement or the line of credit agreement.

Paycheck Protection Program Loan

On April 14, 2020, the Company ~~received a SBA Payroll Protection Program (“PPP”~~entered into an unsecured loan in the amount of $2.9 million ("PPP Loan") ~~loan~~with its primary lender pursuant to the Paycheck Protection Program ~~under~~("PPP") which is sponsored by the Small Business Administration (“SBA”), and is part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), ~~with its primary lender for $2.9 million.~~as amended by the Paycheck Protection Program Flexibility Act of 2020 (“Flexibility Act”). The PPP ~~loan~~provides for loans to qualifying businesses, the proceeds of which may be used for payroll costs, rent, utilities, mortgage interest, and interest on other pre-existing indebtedness (the “Permissible Expenses”). The PPP Loan, and accrued interest, may be forgiven partially or in full, if certain conditions are met, which includes if funds were expended for Permissible Expenses.

The PPP Loan matures on April 14, 2022, bears interest at 1% per annum, with monthly payments of principal and interest in the amount of $164,045 commencing on ~~November 10,~~the date on which the amount of loan forgiveness is determined by the SBA. On August 28, 2020, we submitted our application to our lender, requesting PPP Loan forgiveness of $2.9 million. Our lender reviewed our application for forgiveness and ~~matures~~forwarded to the SBA on ~~April 10, 2022. The Paycheck Protection Program provides that~~September 27, 2020 for approval. In the absence of an approval or denial of our application for forgiveness from the SBA, per the Flexibility Act, the date for commencement of loan payments has not yet occurred, and we have made no loan payments.

While we believe we have met the eligibility requirements for the PPP Loan, and believe we have used the loan ~~may be partially~~proceeds for Permissible Expenses, we can provide no assurances that we will receive full or ~~fully forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company intends to use the proceeds from the PPP loan for~~

~~qualifying expenses and to apply for forgiveness in accordance with the terms in the CARES Act. While the Company plans to apply for~~partial forgiveness of the PPP ~~loan in accordance with~~Loan. Accordingly, we have recorded the ~~requirements and limitations under the CARES Act, the PPP Flexibility Act and SBA regulations and requirements, no assurance can be given that all or any portion~~full amount of the PPP ~~loan will be forgiven.~~

Loan as debt, which is included in current and long-term debt, on our consolidated balance sheet at June 30, 2021.

Fair Value of Debt

The carrying value of the Company’s variable-rate line of credit approximates its fair value since the interest rate fluctuates periodically based on a floating interest rate. The carrying value of the Company’s term debt approximates fair value.

Note 98 – Equity Distribution Agreement and Sale of Common Stock

On April 24, 2020, the Company entered into an Equity Distribution Agreement ~~(the “Sales Agreement”)~~ with Northland Securities, Inc., as agent (“Northland”), pursuant to which the Company may offer and sell, from time to time, through Northland, shares of the Company’s common stock, par value ~~$0.01~~0.01 per share, ~~(the “Common Stock”),~~ having an aggregate offering price of up to $13,850,000 ~~(the “Shares”~~("Shares").

The offer and sale of the Shares will be made pursuant to a shelf registration statement on Form S-3 and the related prospectus filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 3, 2020, as amended on March 23, 2020, and declared effective by the SEC on April 1, 2020.

Pursuant to the Sales Agreement, Northland may sell the Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933 (the “Securities Act”), including sales made by means of ordinary brokers’ transactions, including on The Nasdaq Global Market, at market prices or as otherwise agreed with Northland. Northland will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the Shares from time to time, based upon instructions from the Company, including any price or size limits or other customary parameters or conditions the Company may impose. The ~~sales agreement~~Sales Agreement may be terminated without prior notice at any time prior to the fulfillment ~~of the Sales Agreement~~ if additional sales are deemed not warranted.

The Company will pay Northland a commission rate equal to an aggregate of 3.0% of the aggregate gross proceeds from each sale of Shares and have agreed to provide Northland with customary indemnification and contribution rights. The Company will also reimburse Northland for certain specified expenses in connection with entering into the Sales Agreement. The Sales Agreement contains customary representations and warranties and conditions to the placements of the Shares pursuant thereto.

During the ~~three~~nine months ended June 30, ~~2020, 573,199~~2021, 245,973 shares were sold by Northland on behalf of the Company with gross proceeds of ~~$2.2~~$0.9 million, and net proceeds after commissions and fees of ~~$2.1~~$0.9 million. Of the 573,199 shares sold, 80,043 shares were sold by June 30, 2020, but were settled in July 2020, resulting in a receivable of $0.3 million net of commissions and fees, which is reflected in Other current assets.

~~Note 10 – Income Taxes~~

As a result of the CARES Act, the Company can carryback net operating losses generated in 2018 through 2020 for a period of five years. As a result, the Company’s effective tax rate included an income tax benefit recognized during the nine months ended June 30, 2020 related to tax losses generated during the fiscal year up to the amount that the Company estimates is realizable based upon taxable income in the carryback periods. Therefore, as of June 30, 2020, the Company recorded $1.2 million of deferred tax assets and recorded a benefit for income taxes. The

~~Company continues to provide a valuation allowance of $9.4 million for all deferred taxes where the Company believes it is more likely than not that those deferred taxes will not be realized.~~

Note 119 – Earnings Per Share

Basic earnings per share are based on the sum of the average number of common shares outstanding and issuable, restricted and deferred shares. Diluted earnings per share include any dilutive effect of stock options and restricted stock. In computing the diluted weighted average shares, the average share price for the period is used in determining the number of shares assumed to be reacquired under the treasury stock method from the exercise of options.

Basic and diluted earnings per share for the three and nine months ended June 30, 2021 and 2020 ~~and 2019 are:~~are (in thousands, except per share amounts):

Three Months Ended
June 30,

Nine Months Ended
June 30,

2020
2019
2020
2019

Income (loss) from continuing operations
$
23,350

$
(58,195
)

$
(16,355,423
)

$
(2,472,665
)
Discontinued operations, net of tax ‒

(1,426,970
)
‒

(1,267,344
)
Net income (loss) attributable to
common shareholders

$
23,350

$
(1,485,165
)

$
(16,355,423
)

$
(3,740,009
)

Basic weighted average shares
11,079,580

10,361,292

10,955,235

10,361,292

Effect of dilutive securities:
Stock options
137,108
‒
‒
‒

Diluted weighted average shares
11,216,688

10,361,292

10,955,235

10,361,292

Earnings (loss) per common share:
Basic:
Continuing operations
$
0.00

$
(0.00
)

$
(1.49
)

$
(0.24
)
Discontinued operations ‒

(0.14
)
‒

(0.12
)
Net income (loss)
$
0.00

$
(0.14
)

$
(1.49
)

$
(0.36
)
Diluted:
Continuing operations
$
0.00

$
(0.00
)

$
(1.49
)

$
(0.24
)
Discontinued operations ‒

(0.14
)
‒

(0.12
)
Net income (loss)
$
0.00

$
(0.14
)

$
(1.49
)

$
(0.36
)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020


Net income (loss) attributable to common shareholders	$	(2,124)	$	23	(7,141)		(16,355)

Basic weighted average shares	12,495,438		11,079,580		12,352,960		10,955,235
Effect of dilutive securities:	—		—		—		—
Stock options	0		137,108		0		0
Diluted weighted average shares	12,495,438		11,216,688		12,352,960		10,955,235

Income (loss) per common share:
Basic	$	(0.17)	$	0	$	(0.58)	$	(1.49)
Diluted	$	(0.17)	$	0	$	(0.58)	$	(1.49)

The table below includes information related to stock options that were outstanding at the end of each respective three and ~~nine-month periods~~nine month period ended June 30, but have been excluded from the computation of weighted-average stock options for dilutive securities because their effect would be anti-dilutive. The stock options were anti-dilutive either due to the Company incurring a net loss for the periods presented or the exercise price exceeded the average market price per share of our common stock for the three and nine months ended June 30, ~~2020~~2021 and ~~2019.~~2020.


	Three Months Ended June 30,				Nine Months Ended June 30,					Three Months Ended June 30,				Nine Months Ended June 30,
	2020		2019		2020		2019			2021		2020		2021		2020
Stock options excluded		150,000		770,000		480,000		770,000	Stock options excluded	50,000		150,000		50,000		480,000
Weighted average exercise price of
stock options	$	2.96	$	1.73	$	1.89	$	1.73

Weighted average exercise price of stock options									Weighted average exercise price of stock options	$	1.28	$	2.96	$	1.28	$	1.89
Average market price of common stock	$	2.41	$	1.38	$	2.48	$	1.37	Average market price of common stock	$	2.35	$	2.41	$	2.61	$	2.48

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Note 10 – Supplemental Cash Flow Information


(in thousands)	Nine Months Ended June 30,
	2021		2020

Supplemental cash flow information:
Cash paid for interest	$	106	$	144

Supplemental noncash investing and financing activities:
Assets acquired under financing leases	$	832	$	454

Note 1211 – Stock-Based Compensation

Plan Information

The 2015 Incentive Stock Plan (the “Plan”) provides for awards of stock options and restricted stock to officers, directors, key employees and consultants. ~~Under the Plan, option prices will be set by the Compensation Committee and may not be less than the fair market value of the stock on the grant date.~~

~~In March 2020, at the Company’s annual meeting of shareholders, the shareholders authorized an additional 1,000,000 shares of common stock be added to the Plan.~~ At June 30, ~~2020,~~2021, 2,100,415 shares of common stock were reserved for stock award grants under the Plan. Of these reserved shares, ~~936,806~~396,246 shares were available for future grants.

Stock Options

All share-based payments to employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair value over the requisite service period. Compensation expense for share-based awards is included in the operating expenses and selling, general and administrative expenses sections of the Company’s consolidated condensed statements of operations.

Stock options are valued at the date of the award, which does not precede the approval date, and compensation cost is recognized on a straight-line basis over the vesting period. Stock options granted to employees generally become exercisable over a three, four or five-year period from the date of grant and generally expire ten years after the date of grant. Stock options granted to the Board of Directors generally become exercisable on the date of grant and generally expire ten years after the grant.

A summary of the status of the Company's stock options at June 30, ~~2020~~2021 and changes during the nine months ~~then~~ ended June 30, 2021 is presented below:


	Wtd. Avg. Ex. Price		Shares	Aggregate Intrinsic Value (in thousands)
Outstanding at September 30, 2020	$	1.55	100,000	$	37

Exercised	1.81		(49,000)	49

Forfeited	1.81		(1,000)	—
Outstanding at June 30, 2021	$	1.28	50,000	$	69

Exercisable at June 30, 2021	$	1.28	34,334	$	44

Shares

Wtd. Avg.
Ex. Price
Aggregate Intrinsic Value
Outstanding at September 30, 2019
770,000

$
1.73

$
352,700

Granted ‒
‒
‒

Exercised
(123,334
)

$
1.20

$
304,568

Expired
–

–

–

Forfeited
(166,666
)

$
1.35

$
347,999

Outstanding at June 30, 2020
480,000

$
1.89

$
742,800

Exercisable at June 30, 2020
376,667

$
1.99

$
546,101

Restricted stock awards

~~No nonqualified stock options were granted for~~A summary of the Company's non-vested restricted share awards (RSA) at June 30, 2021 and changes during the nine months ended June 30, ~~2020.~~ 2021 is presented in the following table (in thousands, except shares):


	Shares	Fair Value
Non-vested at September 30, 2020	475,024	$	1,058
Granted	444,390	965
Vested	(228,358)	(455)
Forfeited	(50,000)	(125)
Non-vested at June 30, 2021	641,056	$	1,443

During the three month period ended June 30, 2021 and 2020, expenses (income) related to share-based arrangements including restricted stock and stock option awards, were $0.3 million and $(15) thousand, respectively.

During the nine month period ended June 30, 2021 and 2020, compensation expenses related to share-based arrangements including restricted stock and stock option awards, were $0.8 million and $0.1 million respectively.

The Company ~~estimates~~did not recognize a tax benefit for compensation expense recognized during the ~~fair value~~three and nine month period ended June 30, 2021 and 2020.

Table of the options granted using the Black-Scholes option valuation model. The Company estimates the expected term of options granted based on the historical grants and exercises of the Company’s options. The Company estimates the volatility of its common stock at the date of the grant based on both the historical volatility as well as the implied volatility on its common stock. The Company bases the risk-free rate that is used in the Black-Scholes option valuation model on the implied yield in effect at the time of the option grant on U.S. Treasury zero-coupon issues with equivalent expected term. The Company has never paid cash dividends on its common stock and does not anticipate paying cash dividends in the foreseeable future. Consequently, the Company uses an expected dividend yield of zero in the Black-Scholes option valuation model. The Company amortizes the resulting fair value of the options ratably over the vesting period of the awards. The Company recognizes forfeitures as they occur.

Contents

~~Compensation~~At June 30, 2021, unrecognized compensation expense related to ~~unvested stock options recorded for the nine months ended June 30, 2020 is as follows:~~

Nine Months
Ended
June 30, 2020

Fiscal year 2017 grant
$
(5,652
)
Fiscal year 2019 grants
$
(1,476
)

~~The Company records~~non-vested stock-based compensation ~~expense over the vesting term of the related options. At June 30, 2020, compensation costs related to these unvested stock options~~awards not yet recognized in the consolidated ~~condensed~~ statements of operations was ~~$7,202.~~$0.8 million. That cost is expected to be recognized over a period of 2.9 years.

~~Restricted Stock~~Note 12 – Leases

Our Wireless segment has an operating lease for a building in Fridley, Minnesota for Fulton Technologies, Inc. As a result of ~~the shareholders authorizing the additional shares being added to the Plan~~closing down and vacating Fulton Technologies, Inc.’s Minnesota office in March 2020, the Company granted restricted stock awards to its eligible board members for both the prior fiscal year and current fiscal year awards due to eligible board members. The shares granted totaled 237,014, which were valued at market value on the date of grant. The shares have varying vesting periods ranging from immediate to three years. The unamortized portion of the restricted stock is includedMay 2019, a third-party telecom company began subleasing this building in ~~prepaid expenses on the Company’s consolidated condensed balance sheets.~~June 2019.

The Company granted restricted stock in October 2018 to its Chairman of the Board of Directors totaling 55,147 shares, which were valued at market value on the date of grant. The shares will vest 20% per year with the first installment vesting on the first anniversary of the grant date. The unamortized portion of the restricted stock is included in prepaid expenses on the Company’s consolidated condensed balance sheets.

~~Note 13 – Leases~~

Effective October 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), utilizing the modified-retrospective transition approach. which is intended to improve financial reporting about leasing transactions. The standard requires the recognition of right-of-use assets and lease liabilities on the consolidated balance sheet and disclosure of key information about leasing arrangements. The Company elected to use the transition option that allows the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the year of adoption. The adoption of ASC 842 did not result in any adjustments to retained earnings.

In accordance with ASC 842, the Company has made accounting policy elections (1) to not apply the new standard to lessee arrangements with a term of twelve months or less and (2) to combine lease and non-lease components. The non-lease components are not material and do not result in significant timing differences in the recognition of lease expense. As a result of adopting ASC 842, the Company recognized net operating lease right-of-use assets of $4.7 million and operating lease liabilities of $4.7 million on the effective date. In addition, as a result of adopting ASC 842, the Company recognized net financing lease assets of $0.6 million and financing lease liabilities of $0.6 million on the effective date that were previously accounted for as operating leases.

The Company categorizes leases at their inception as either operating or finance leases. The Company has operating and financing leases in place for various office and warehouse properties, vehicles and certain wireless services equipment. The leases have remaining lease terms of one year to [ten] years, some of which include the option to extend the lease terms. Operating leases are included in right-of-use operating lease assets, operating lease liabilities - current, and operating lease liabilities in the consolidated condensed balance sheets. Finance leases are included in net property and equipment, financing lease liabilities – current, and financing lease liabilities in the consolidated condensed balance sheets.

Leased assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses a discount rate that approximates the rate of interest for a collateralized loan over a similar term as the discount

rate for present value of lease payments when the rate implicit in the contract is not readily determinable. Leases that have a term of twelve months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are not included in the consolidated condensed balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date the Company has the right to control the property.

~~The Company~~Our Telco segment has an operating lease for a building in Jessup, Maryland for Nave Communications. As a result of moving Nave’s operations to Palco Telecom, a third-party logistics provider in Huntsville, Alabama, in fiscal year ~~2019,~~2020, Nave completely vacated the building in May 2020 and ~~was subleasing~~has subleased part of the building during certain periods of fiscal year ~~2020. As~~2021.

Rental payments received related to these subleases were recorded as a reduction to rent expense in our consolidated statements of operations for the three and six month periods ending June 30, 2020, the Company determined that the right of use asset associated with this lease may exceed its fair value. The Company performed an assessment of this right of use asset in accordance with ASC 360-10-152021 and determined that the carrying value was impaired based on a valuation appraisal performed by the Company using a forecasted debt free cash flow model. Therefore, Company recorded a $0.7 million impairment charge in the Telco segment as of June 30, 2020.

~~The components of lease expense were~~ Rental payments received from subleased right-of-use assets is as follows:

Three Months ended June 30, 2020 Nine Months ended June 30, 2020

Operating lease cost:
Operating lease cost
$
296,677

$
943,834

Impairment of right of use asset
660,242

660,242

Operating lease cost
$
956,919

$
1,604,076

Finance lease cost:
Amortization of right-of-use assets
$
71,925

$
198,289

Interest on lease liabilities
18,220

43,182

Total finance lease cost
$
90,145

$
241,471


(in thousands)	Three Months Ended June 30,				Nine Months Ended June 30,
	2021		2020		2021		2020
Subleased rental receipts:
Wireless	$	46	$	46	$	137	$	136
Telco	0		100		115		301
Total subleased rental receipts	$	46	$	146	$	252	$	437

~~Supplemental cash flow information related to leases are as follows for the nine months ended:~~

June 30, 2020

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
768,784

Operating cash flows from finance leases

$
43,182

Financing cash flows from finance leases
$
277,061

Right-of-use assets obtained in exchange for lease obligations:
Operating leases
$
1,076,700

Finance leases
$
718,058

~~Supplemental balance sheet information related to leases are as follows:~~

June 30, 2020

Operating leases
Operating lease right-of-use assets
$
4,158,786

Operating lease obligations - current

$
1,224,630

Operating lease obligations

3,809,803

Total operating lease liabilities
$
5,034,433

Finance leases
Property and equipment, gross
$
1,462,865

Accumulated depreciation
(210,253
)
Property and equipment, net
$
1,252,612

Financing lease obligations - current
$
328,151

Financing lease obligations
855,052

Total finance lease liabilities
$
1,183,203

Weighted Average Remaining Lease Term
Operating leases 3.94 years
Finance leases 3.98 years
Weighted Average Discount Rate
Operating leases
5.00
%
Finance leases
4.96
%

~~Maturities of lease liabilities are as follows for the years ending September 30:~~

Operating
Leases

Finance
Leases

2020
$
355,239

$
140,761

2021
1,440,544

314,093

2022
1,468,081

295,617

2023
1,369,882

281,636

2024
802,026

227,541

Thereafter
150,478

44,334

Total lease payments
5,586,250

1,303,982

Less imputed interest
555,817

120,779

Total
$
5,034,433

$
1,183,203

Note 1413 – Segment Reporting

The Company is reporting its financial performance based on its external reporting segments: Wireless Infrastructure Services and Telecommunications. These reportable segments are described below.

Wireless Infrastructure Services (“Wireless”)

The Wireless segment provides turn-key wireless infrastructure services for the four major U.S. wireless carriers, communication tower companies, national integrators, and original equipment manufacturers that support these wireless carriers. These services primarily consist of the installation and upgrade of technology on cell sites and the construction of new small cells for 5G.

Telecommunications (“Telco”)

The Company’s Telco segment sells new and refurbished telecommunications networking equipment, including both central office and customer premise equipment, to its customer base of telecommunications providers, enterprise customers and resellers located primarily in North America. This segment also offers its customers repair and testing services for telecommunications networking equipment. In addition, this segment offers its customers decommissioning services for surplus and obsolete equipment, which it in turn processes through its recycling program.

The Company evaluates performance and allocates its resources based on operating income. The accounting policies of its reportable segments are the same as those described in the summary of significant accounting policies. Segment assets consist primarily of cash and cash equivalents, accounts receivable, ~~inventory,~~inventories, property and equipment, goodwill and intangible assets.

Three Months Ended
Nine Months Ended

June 30, 2020
June 30, 2019
June 30, 2020
June 30, 2019

Sales
Wireless

$
5,123,175

$
8,733,444

$
16,592,907

$
12,951,368

Telco

6,898,645

8,825,871

21,350,396

24,307,984

Total sales
$
12,021,820

$
17,559,315

$
37,943,303

$
37,259,352

Gross profit
Wireless

$
2,251,153

$
2,235,406

$
4,298,915

$
3,524,164

Telco

1,919,426

2,351,999

3,025,009

6,263,146

Total gross profit
$
4,170,579

$
4,587,405

$
7,323,924

$
9,787,310

Loss from operations
Wireless

$
(253,416
)

$
(454,672
)

$
(4,136,645
)

$
(1,568,255
)
Telco

(896,561
)

201,593

(13,483,096
)

(1,042,122
)
Total loss from operations
$
(1,149,977
)

$
(253,079
)

$
(17,619,741
)

$
(2,610,377
)

June 30, 2020
September 30, 2019

Segment assets
Wireless

$
5,082,120

$
5,515,793

Telco

12,274,168

22,619,565

Non-allocated

18,753,302

8,692,986

Total assets
$
36,109,590

$
36,828,344

The Company changed the allocation of corporate general and administrative expenses between our reportable business segments. At September 30, 2020, the Company did not allocate the corporate general and administrative expenses to the reportable segments and listed those expenses separate from the operating results of those reportable segments. During fiscal 2021, the Company reviewed its reportable segments and its corporate general and administrative expenses and allocation methodology, which resulted in the Company allocating its corporate general and administrative expenses to the reportable segments. The prior period allocations have been adjusted to reflect the Company's current allocation methodology.

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	Three Months Ended						Nine Months Ended
(in thousands)	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Sales
Wireless	$	4,136		$	5,123		$	13,716		$	16,593
Telco	12,881			6,899			28,717			21,350
Total sales	$	17,017		$	12,022		$	42,433		$	37,943
Gross profit
Wireless	$	1,233		$	2,251		$	4,370		$	4,299
Telco	3,036			1,920			6,710			3,025
Total gross profit (loss)	$	4,269		$	4,171		$	11,079		$	7,324

Wireless	30		%	44		%	32		%	26		%
Telco	24		%	28		%	23		%	14		%
Total gross profit margin (loss)	25		%	35		%	26		%	19		%

Gain (loss) from operations
Wireless	$	(2,117)		$	(75)		$	(4,759)		$	(3,310)
Telco	16			(1,067)			(2,303)			(14,274)
Total gain (loss) from operations	$	(2,101)		$	(1,142)		$	(7,062)		$	(17,584)


(in thousands)	June 30, 2021		September 30, 2020
Segment assets
Wireless	$	5,645	$	5,324
Telco	16,689		12,298
Non-allocated	6,664		14,881
Total assets	$	28,998	$	32,503

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Special Note on Forward-Looking Statements

Certain statements in Management's Discussion and Analysis (“MD&A”), other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements generally are identified by the words “estimates,” “projects,” “believes,” “plans,” “intends,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. These statements are subject to a number of risks, uncertainties and developments beyond our control or foresight, including changes in the trends of the wireless infrastructure services industry, changes in the trends of the telecommunications industry, changes in our supplier agreements, technological developments, changes in the general economic environment, the potential impact of the novel strain of coronavirus (“COVID-19”) pandemic, the growth or formation of competitors, changes in governmental regulation or taxation, the potential forgiveness of any portion of the PPP Loan, changes in our personnel and other such factors. Our actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in the forward-looking statements. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Overview

The following MD&A is intended to help the reader understand the results of operations, financial condition, and cash flows of the Company. MD&A is provided as a supplement to, and should be read in conjunction with the information presented elsewhere in this quarterly report on Form 10-Q and with the information presented in our annual report on Form 10-K for the year ended September 30, ~~2019,~~2020, which includes our audited consolidated financial statements and the accompanying notes to the consolidated financial statements.

The Company reports its financial performance based on two external reporting segments: Wireless and Telecommunications. These reportable segments are described below.

Wireless Infrastructure Services (“Wireless”)

The Company’s Wireless segment provides turn-key wireless infrastructure services for the four major U.S. wireless carriers, communication tower companies, national integrators, and original equipment manufacturers that support these wireless carriers. These services primarily consist of the installation and upgrade of technology on cell sites and the construction of new small cells for 5G.

Telecommunications (“Telco”)

Recent Business Developments

~~Management Changes~~

Subsequent to June 30, 2020, we announced several management changes. First, Jarrod Watson was appointed as the Chief Financial Officer of the Company. Mr. Watson is filling the vacancy from the former chief financial officer who resigned earlier this fiscal year. Mr. Watson comes to our Company with more than 20 years of corporate

financial leadership, including multiple Fortune 500 organizations. Reginald Jaramillo was promoted to President of our Telco segment, replacing Don Kinison who recently left the Company. Mr. Jaramillo has 15 years of experience in the telecommunications industry working for companies such as Cox Communications, Time Warner Cable and Suddenlink Communications. Finally, Jimmy Taylor was named the President of the Wireless segment, where he had been serving in that capacity on an interim basis since February 2020.

COVID-19

On March 11, 2020, the World Health Organization declared the current outbreak of COVID-19 to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” or “shelter-in-place” orders in markets where we operate. Despite these “stay-at-home” or “shelter-in-place”

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orders, we are classified as an essential business due to the services and products we provide to the telecommunications industry. Therefore, we continue to operate in the markets we serve ~~but most~~while these orders were in place. Most of our back-office and administrative personnel ~~were working~~worked from home ~~through June 30, 2020~~ while these orders were in ~~place.~~place, these personnel began working in the office as restrictions were relaxed or lifted. Although we can continue to operate our businesses, our revenues have slowed, especially in our Wireless segment, due to the carriers slowing down various wireless tower projects. We have not experienced a material disruption in our supply chain to ~~date; however, we expect COVID-19 could materially negatively affect~~date.

With the ~~supply chain, customer demand for our telecommunications products or further delay wireless carriers’ infrastructure build plans in the coming months as a result~~partial reopening of the ~~disruption~~economy the economic effects of the pandemic and ~~uncertainty it is causing. There is considerable uncertainty regarding~~resulting societal changes remain unpredictable. Although we experienced increased revenues this quarter compared to recent quarters since the ~~extent to which COVID-19 will continue to spread~~pandemic began last year, there are a number of uncertainties that could impact our future results of operations, including the efficacy and widespread distribution of a vaccine, the return of major outdoor events during the summer and fall months, and the ~~extent and duration of governmental and other measures implemented to try to slow the spread~~impact of COVID-19 ~~such as large-scale travel bans~~on the operating results and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our subcontractors, suppliers and other business counterparties to experience operational delays.

~~In response to COVID-19, we have taken a variety of measures to ensure the availability~~capital budgets of our critical infrastructure, promote the health and safety of our employees, and support the communities in which we operate. These measures include providing support for our customers as reflected in the FCC's "Keep Americans Connected" pledge, requiring work-from-home arrangements for a large portion of our workforce and imposing travel restrictions for our employees where practicable, canceling physical participation in meetings, events and conferences, and other modifications to our business practices. We will continue to actively monitor the situation and may take further actions as may be required by governmental authorities or that we determine are in the best interests of our employees, customers, business partners and stockholders.customers.

While we continue to assess the COVID-19 situation, the extent to which the COVID-19 pandemic may impact our business, operating results, financial condition, or liquidity in the future will depend on future developments, including the duration of the outbreak, travel restrictions, business and workforce disruptions, and the effectiveness of actions taken to contain and treat the virus.

Results of Operations

Comparison of Results of Operations for the Three Months Ended June 30, ~~2020~~2021 and June 30, ~~2019~~

2020

Consolidated

Consolidated ~~sales decreased $5.5~~revenues increased $5.0 million, or ~~32%~~42%, to $17.0 million for the three months ended June 30, 2021 from $12.0 million for the three months ended June 30, ~~2020 from $17.6~~2020. The increase in sales was due to increased sales in the Telco segment of $6.0 million partially offset by a decrease in Wireless segment sales of $1.0 million.

Consolidated gross profit increased $0.1 million for the three months ended June 30, ~~2019. The decrease in sales was due~~2021 to ~~declines in sales in the Wireless and Telco segments of $3.6~~$4.3 million ~~and $1.9 million, respectively.~~

~~Consolidated gross profit decreased $0.4 million~~compared to $4.2 ~~million for the three months ended June 30, 2020 from $4.6~~ million for the same period last year. The ~~decrease~~increases in gross profit ~~was~~were due ~~primarily~~ to an increase in the Telco segment ~~as the~~of $1.1 million, and a Wireless segment ~~was essentially flat compared to the same period last year.~~

decrease of $1.0 million.

facilities, vehicles, insurance, communication, and business ~~taxes, among other less significant cost categories.~~taxes. Operating expenses increased ~~$0.4~~$0.5 million, or ~~24%~~26%, to ~~$2.0~~$2.5 million for the three months ended June 30, ~~2020~~2021 from ~~$1.6~~$2.0 million for the same period last year. The increase in operating expenses ~~was~~were due to an increase in the Wireless segment of $0.6 million, partially offset by a decrease in the Telco ~~segment.~~

segment of $0.1 million.

Consolidated selling, general and administrative ("SG&A") expenses include overhead, ~~costs,~~ which ~~primarily~~ consist of personnel, ~~costs,~~ insurance, professional services, communication, and ~~communication, among~~ other ~~less significant~~ cost categories. ~~Selling, general and administrative expenses decreased $0.4~~SG&A expense increased $1.1 million, or ~~15%~~47%, to ~~$2.4~~$3.6 million for the three months ended June 30, ~~2020~~2021 from ~~$2.8~~$2.4 million for the same period last year. ~~The decrease in expenses was due to~~General and administrative costs accounted for $0.4 million of the ~~Wireless segment and Telco segment~~increase, while selling costs accounted for $0.7 million of ~~$0.2 million and $0.2 million, respectively.~~

the increase.

Impairment of right of use assets for the three months ended June 30, 2020 was $0.7 million related to ~~the impairment of a right of use~~impairing an asset associated with a building lease in the Telco segment.

Depreciation and amortization expenses ~~decreased~~increased $0.1 million, or ~~25%~~30%, to $0.3 million for the three months ended June 30, ~~2020~~2021, from ~~$0.4~~$0.2 million for the same period last year. ~~The decrease was due primarily to a decrease in expenses to the Telco segment of $0.2 million, partially offset by an increase in expenses from the Wireless segment of $0.1 million.~~

Interest income primarily consists of interest earned on the promissory note ~~from the sale of the cable business in June 2019.~~receivable. Interest income ~~was $0.1 million for the three months ended June 30, 2020 and zero for the same period last year.~~

~~Income from equity method investment, which consists of activity related~~decreased to ~~our investment in YKTG Solutions, for the three months ended June 30, 2020 was zero and $20~~$34 thousand for the three months ended June 30, ~~2019. The income for the three months ended June 30, 2019 consisted primarily of payments received under a loan to the former YKTG Solutions partners.~~

~~Other income and expense for the three months ended June 30, 2020 was essentially zero as~~2021 compared to ~~income of $0.2 million~~$83 thousand for the same period last ~~year. The income for~~year, as the ~~three months ended June 30, 2019 is primarily related to a gain on sales of assets of $0.3 million, partially offset by our factoring arrangements with our Wireless segment.~~

note receivable principal has decreased.

Interest expense for the three months ended June 30, ~~2020~~2021 was ~~$0.1 million~~$46 thousand as compared to ~~$26~~$101 thousand for the same period last year. The expense ~~for the three months ended June 30, 2020~~ was ~~primarily~~ related to interest expense on the revolving bank line of credit and the loan with our primary financial lender. ~~The expense for the three months ended June 30, 2019~~

Income tax benefit was ~~primarily related to interest expense from our revolving bank line of credit and from our deferred guaranteed payments related to the Triton Miami, Inc. acquisition.~~

~~The benefit for income taxes was $1.2 million for the three months ended June 30, 2020 compared to a benefit for income taxes of $42~~$23 thousand for the three months ended June 30, ~~2019.~~2021 and $1.2 million for the same period in 2020. Our effective tax rate during the three months ended June 30, 2021 was approximately 0% because increases in our valuation allowance offset against our deferred tax assets. As a result of the CARES Act, the Company can carryback net operating losses generated in 2018 through 2020 for a period of five years. As a result, the Company’s effective tax rate included an income tax benefit of $1.2 million recognized during the three months

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ended June 30, 2020 related to tax losses generated during the fiscal year up to the amount that the Company estimates is realizable based upon taxable income in the carryback periods.

Segment Results

Wireless

Revenues for the Wireless segment decreased ~~$3.6~~$1.0 million to ~~$5.1~~$4.1 million for the three months ended June 30, ~~2020~~2021 from ~~$8.7~~$5.1 million for the same period of last year. Revenues ~~for the three months ended June 30, 2020~~ continued to be negatively impacted due to both delays in infrastructure spending from the major U.S. carriers and circumstances related to the COVID-19 pandemic. However, we believe that the 5G rollout will gain momentum in the calendar year and that there is substantial ~~and growing pent-up~~constrained demand for 5G-related work on existing towers, new raw-land builds, and small cell networks. In addition, we have made and are continuing to make the necessary operational ~~changes~~adjustments in order to be well positioned to secure ~~an increased share of the~~ 5G construction services ~~work and to improve our operating cost efficiency and gross profit.~~

work.

Gross profit was ~~$2.2~~$1.3 million, or ~~44%~~30% for the three months ended June 30, ~~2020 and $2.2~~2021 compared to $2.3 million, or ~~26%~~44%, ~~for the three months ended June 30, 2019. Gross profit was essentially flat for three months ended June 30, 2020 as compared to the same period of last year despite decreased revenues~~ for the three months ended June 30, 2020. The ~~significant improvement~~decrease in the gross profit percentage was driven by ~~several factors including~~a higher gross profit percentage for the three months ended June 30, 2020 due primarily to recognition of change order revenues where expenses had been incurred in prior quarters, operational improvements, and a higher mix of specialty service work. Management believes margins will continue to show improvement over prior quarters, but will be lower, on a percentage basis, than the three months ended June 30, 2020 due to $0.5 million of change order revenue recognized in the current quarter, where expenses were incurred in prior quarters.

Operating expenses ~~were $1.2 million for both the three months ended June 30, 2020 and the three months ended June 30, 2019.~~

~~Selling, general and administrative expenses decreased $0.2~~increased $0.6 million to ~~$1.1~~$1.8 million for the three months ended June 30, ~~2020~~2021 from ~~$1.3~~$1.2 million for the same period last year. This increase is primarily attributable to increased personnel costs as we prepare for the rollout of 5G-related work and increased rent expense.

Selling, general and administrative expenses increased $0.4 million to $1.4 million for the three months ended June 30, ~~2019. This decrease was due primarily to decreased payroll-related expenses~~2021 from $1.0 million for the three months ended June 30, ~~2020 compared to the prior year~~2020. This increase was due to ~~cost controlling initiatives including headcount reductions for the three months ended June 30, 2020.~~

increased sales-related personnel costs. The corporate overhead allocation increased $0.2 million mainly as a result of increased employee stock-based compensation expenses and executive severance costs.

Depreciation and amortization expense ~~increased $0.1 million to~~was $0.2 million for the three months ended June 30, ~~2020 from~~2021 compared to $0.1 million for the the same period last year.

Telco

~~Sales~~Revenues for the Telco segment ~~decreased $1.9~~increased $6.0 million to ~~$6.9~~$12.9 million for the three months ended June 30, ~~2020~~2021 from ~~$8.8~~$6.9 million for the same period last year. The ~~decrease~~increase in revenues were related to increased sales ~~for the Telco segment~~of used and refurbished equipment.

Gross profit was ~~due primarily to a decrease in equipment sales due to Triton Datacom of $2.2~~$3.0 million partially offset by an increase at Nave Communications of $0.3 million. The decrease in revenue at Triton Datacom was significantly impacted by the COVID-19 pandemic as many of its customers were closed duringfor the three months ended June 30, ~~2020.~~

~~Gross profit was~~2021 and $1.9 million for the three months ended June 30, ~~2020 and $2.3~~2020. The increase in gross profit was due primarily increased revenues for the three months ended June 30, 2021.

Operating expenses decreased $0.1 million to $0.7 million for the three months ended June 30, ~~2019. The decreased gross profit was due primarily~~2021 compared to ~~decreased revenues for~~$0.8 million the three months ended June 30, 2020.

~~Operating~~Selling, general and administrative expenses increased ~~$0.4~~$0.8 million to ~~$0.8~~$2.2 million for the three months ended June 30, ~~2020~~2021 from $0.4 million for the three months ended June 30, 2019. This increase was due primarily to increased personnel costs and operating charges from Palco Telecom, our third-party logistics provider in Huntsville, Alabama.

~~Selling, general and administrative expenses decreased $0.4 million to $1.3 million for the three months ended June 30, 2020 from $1.7~~$1.4 million for the same period last year. This ~~decrease~~increase was due primarily to ~~decreased personnel~~increased sales commissions. In addition, the corporate allocation increased $0.2 million, which primarily related to increased employee stock-based compensation expenses and executive severance costs.

Impairment of right of use assets for the three months ended June 30, 2020 was $0.7 million related to the impairment of a right of use asset associated with a building lease in the Telco segment.

Depreciation and amortization expense ~~decreased $0.2 million to~~was $0.1 million for the three months ended June 30, ~~2020 from $0.3 million for the same period last year. This decrease was due primarily to decreased amortization expense resulting from the impairment~~2021 and 2020.

Table of ~~intangibles taken in the three months ended March 31, 2020.~~Contents

Comparison of Results of Operations for the Nine Months Ended June 30, ~~2020~~2021 and June 30, ~~2019~~2020

Consolidated

Consolidated ~~sales~~revenues increased ~~$0.6~~$4.5 million, or 2%12%, to $42.4 million for the nine months ended June 30, 2021 from $37.9 million for the nine months ended June 30, ~~2020 from $37.3~~2020. The increase in revenue was primarily in the Telco segment, which increased $7.4 million, partially offset by a decrease of $2.9 million in the Wireless segment.

Consolidated gross profit increased $3.8 million, or 51%, to $11.1 million for the nine months ended June 30, ~~2019. The increase in sales was primarily in the Wireless segment, which increased $3.6 million, largely offset by a decrease in sales~~2021 from ~~the Telco segment of $3.0 million.~~

~~Consolidated gross profit decreased $2.5 million, or 25%, to~~ $7.3 ~~million for the nine months ended June 30, 2020 from $9.8~~ million for the same period last year. The ~~decrease~~increase in gross profit was due to an increase in the Telco segment of ~~$3.3~~$3.7 million, ~~partially offset by~~as well as an increase in the Wireless segment of ~~$0.8~~$0.1 million.

Consolidated operating expenses include indirect costs associated with operating our ~~business. Indirect costs are costs that are not directly attributable to projects or products, which would include~~business such as indirect personnel costs, ~~facility costs,~~facilities, vehicles, insurance, communication, and business taxes, among other ~~less significant cost categories.~~costs. Operating expenses increased ~~$2.4~~$0.4 million, or ~~59%~~7%, to ~~$6.3~~$6.7 million for the nine months ended June 30, ~~2020~~2021 from ~~$3.9~~$6.3 million for the same period last year. ~~The increase in operating expenses was due to an increase in the Wireless segment and Telco segment of $1.8 million and $0.6 million, respectively.~~

Consolidated selling, general and administrative expenses include overhead costs, which primarily consist of personnel, ~~costs,~~ insurance, professional services, and communication, among other ~~less significant cost categories.~~costs. Selling, general and administrative expenses increased ~~$0.7~~$2.4 million, or ~~10%~~30%, to ~~$8.1~~$10.5 million for the nine months ended June 30, ~~2020~~2021 from ~~$7.4~~$8.1 million for the same period last year. ~~This was due to an~~General and administrative costs accounted for $1.2 million of the increase, ~~in the Wireless segment of~~while selling costs accounted for $1.3 million ~~partially offset by a decrease in~~of the ~~Telco segment of $0.6 million, respectively.~~

~~Impairment of right of use assets~~increase. Non-cash stock-based compensation expense accounted for ~~the nine months ended June 30, 2020 was~~ $0.7 million ~~related to~~of the ~~impairment of a right of use asset associated with a building lease in the Telco segment.~~increased general and administrative costs.

~~Impairment of intangibles including goodwill for the nine months ended June 30, 2020 was $8.7 million related to the write-off of goodwill and certain intangibles in the Telco segment.~~

Depreciation and amortization expenses ~~increased $0.1~~decreased $0.3 million, or ~~16%~~25%, to ~~$1.2~~$0.9 million for the nine months ended June 30, ~~2020~~2021 from ~~$1.1~~$1.2 million for the same period last year. The ~~increase~~decrease was due primarily to ~~increased depreciation~~decreased amortization expense resulting from the impairment of intangible assets in the ~~Wireless segment of $0.3 million, partially offset by a decrease in the Telco segment of $0.1 million.~~nine months ended June 30, 2020.

Interest income primarily consists of interest earned on the promissory note from the sale of the cable business in June 2019. Interest income was $0.1 million for nine months ended June 30, 2021 and $0.3 million for the nine months ended June 30, ~~2020 and zero for the same period last year.~~2020.

Income from equity method investment, which consists of activity related to our investment in YKTG Solutions, for the nine months ended June 30, 2020 was $41 thousand and $75 thousand for the nine months ended June 30, 2019. The income consisted primarily of payments received under a loan to the former YKTG Solutions partners.

Other ~~income and~~ expense for the nine months ended June 30, ~~2020~~2021 was ~~an $86~~$61 thousand ~~expense~~ as compared to ~~income of $118 thousand~~$0.1 million for the same period last year. The expense for the both the nine months ended June 30, 2021 and June 30, 2020 ~~was~~is primarily related to our factoring arrangements with our Wireless segment, partially offset by a gain on sales of assets of $36 thousand. The income for the nine months ended June 30, 2019 was primarily related to a gain on sales of assets of $0.3 million, partially offset by our factoring arrangements within our Wireless segment.

Interest expense for the nine months ended June 30, ~~2020~~2021 was ~~$0.2~~$0.1 million as compared to ~~$69 thousand~~$0.2 million for the same period last year. ~~The~~Interest expense for the nine months ended June 30, ~~2020~~2021 was ~~primarily~~ related to ~~our~~the revolving bank line of credit and the loan with our primary financial lender.

The ~~expense~~provision for income taxes was $23 thousand for the nine months ended June 30, ~~2019 was primarily related~~2021 compared to ~~interest expense from our outstanding term loans that were extinguished in November 2018.~~

~~The~~a benefit ~~for income taxes was~~of $1.2 million for the nine months ended June 30, ~~2020 compared to a benefit of $13 thousand for~~2020. Our effective tax rates during the nine months ended June 30, ~~2019.~~2021 was approximately 0% because of increases in our valuation allowance against our deferred tax assets. As a result of the CARES Act, the Company can carryback net operating losses generated in 2018 through 2020 for a period of five years. As a result, the Company’s effective tax rate included an income tax benefit of $1.2 million recognized during the nine months ended June 30, 2020 related to tax losses generated during the fiscal year up to the amount that the Company estimates is realizable based upon taxable income in the carryback periods.

Segment Results

Wireless

Revenues for the Wireless segment were ~~$16.6~~$13.7 million for the nine months ended June 30, ~~2020~~2021 and ~~$13.0~~$16.6 million for the same period last year. The ~~increase~~decrease in revenue was ~~primarily from~~due to a full nine months of COVID-19 related slow-down in activity included in the ~~acquisition of Fulton Technologies, Inc. and its affiliate (“Fulton”) in January 2019.~~current year results.

Gross profit was ~~$4.3~~$4.4 million, or ~~26%~~32% for the nine months ended June 30, ~~2020~~2021 and ~~$3.5~~$4.3 million, or ~~27%~~26%, for the nine months ended June 30, ~~2019. This~~2020. The increase in the gross profit percentage is due primarily to the ~~timing~~impact of ~~the acquisition~~

Table of ~~Fulton~~Contents

structural operational changes and more effective customer sales change order processes in ~~January 2019, partially offset by increased expenses of repositioning our Southern workforce to the North~~place during the ~~nine months ended June 30, 2020.~~current fiscal year.

Operating expenses increased ~~$1.8~~$0.3 million to ~~$4.1~~$4.4 million for the nine months ended June 30, ~~2020~~2021 from ~~$2.4~~$4.1 million for the same period last year, ~~due~~mainly as a result of lower vehicle and equipment costs as a result of decreased revenues. This increase is primarily attributable to increased personnel costs as we prepare for the ~~timing~~rollout of ~~the acquisition of Fulton in January 2019.~~5G-related work and increased rent expense.

Selling, general and administrative expenses increased $1.3 million to ~~$3.8~~$4.3 million for the nine months ended June 30, ~~2020~~2021 from ~~$2.5 million for the nine months ended June 30, 2019 due primarily to the timing of the acquisition of Fulton in January 2019.~~

~~Depreciation and amortization expense was $0.5 million and $0.2 million for the nine months ended June 30, 2020 and June 30, 2019, respectively.~~

~~Telco~~

Sales for the Telco segment decreased $3.0 million to $21.3 million for the nine months ended June 30, 2020 from $24.3 million for the same period last year. The decrease in sales for the Telco segment was due to a decrease in equipment sales at both Triton Datacom and Nave Communications of $1.8 million and $1.2 million, respectively.

~~Gross profit was~~ $3.0 million for the nine months ended June 30, 2020, mainly as a result of personnel costs. In addition, the corporate allocation increased $0.7 million, which primarily related to increased employee stock-based compensation expenses and ~~6.3~~executive severance costs.

Depreciation and amortization expense was consistent at $0.5 million for both the nine months ended June 30, 2021 and 2020.

Telco

Revenues for the Telco segment increased $7.4 million to $28.7 million for the nine months ended June 30, ~~2019.~~2021 from $21.4 million for the same period last year. The increase was mainly related to sales of used and refurbished equipment.

Gross profit was $6.7 million for the nine months ended June 30, 2021 compared to $3.0 million for nine months ended June 30, 2020. Gross profit for the nine months ended June 30, ~~2020 was impacted by an increase in~~2021 rebounded after taking a charge of $2.1 million for inventory obsolescence expense of $2.1 million and an increase in lower of cost or net realizable value expense of $0.2 million. The decrease in gross margin percentage was due primarily to the impact of these inventory adjustments in the ~~nine months ended June 30, 2020.~~same period last year.

Operating expenses increased ~~$0.6~~$1.2 million to ~~$2.1~~$2.3 million for the nine months ended June 30, ~~2020~~2021 from ~~$1.5~~$2.1 million for the same period last year. This increase was due primarily to ~~additional facility~~increased costs ~~as a result of moving into Triton’s new facility in the first fiscal quarter of 2020~~from our third-party logistics provider due to revenue increases and ~~additional personnel costs.~~severance costs for certain employees resulting from cost reduction activities.

Selling, general and administrative expenses ~~decreased $0.6~~increased $1.2 million to ~~$4.2~~$6.3 million for the nine months ended June 30, ~~2020~~2021 from ~~$4.8~~$5.1 million for the same period last year. This ~~decrease~~increase was due to increased selling expenses of $0.8 million, partially offset by decreased general and administrative expenses of $0.2 million. In addition, the corporate allocation increased $0.6 million, which primarily related to ~~decreased personnel~~increased employee stock-based compensation expenses and executive severance costs.

~~Impairment of right of use assets for the nine months ended June 30, 2020 was $0.7 million related to the impairment of a right of use asset associated with a building lease in the Telco segment.~~

~~Impairment of intangibles including goodwill for the nine months ended June 30, 2020 was $8.7 million related to the write-off of goodwill and certain intangibles in the Telco segment.~~

Depreciation and amortization expense decreased ~~$0.2~~$0.3 million to ~~$0.7~~$0.4 million from ~~$0.9~~$0.7 million for the nine months ended June 30, 2021 and 2020, ~~and 2019, respectively. This decrease was due primarily to decreased amortization expense~~respectively, resulting from ~~the impairment~~significant impairments of ~~intangibles taken~~intangible assets in the ~~three months ended March 31,~~second quarter of 2020.

Non-GAAP Financial Measure

Adjusted EBITDA is a supplemental, non-GAAP financial measure. EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA as presented also excludes impairment charges for operating lease ~~right of use~~right-of-use assets and intangible assets including goodwill, ~~stock~~stock-based compensation expense, other income, other expense, interest income and income from equity method investment. Adjusted EBITDA is presented below because this metric is used by the financial community as a method of measuring our financial performance and of evaluating the market value of companies considered to be in similar businesses. Since Adjusted EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance. Adjusted EBITDA, as calculated below, may not be comparable to similarly titled measures employed by other companies. In addition, Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs.

Table of Contents

AThe following table provides a reconciliation by segment of loss from operations to Adjusted EBITDA for the three and nine ~~months~~month periods ended June 30, ~~follows:~~2021 and June 30, 2020, in thousands:


	Three Months Ended June 30, 2021						Three Months Ended June 30, 2020
	Wireless		Telco		Total		Wireless		Telco		Total
Loss from operations	$	(2,117)	$	16	$	(2,101)	$	(75)	$	(1,067)	$	(1,142)
Impairment of right of use asset	—		—		—		—		660		660

Depreciation and amortization expense	185		129		314		145		97		242
Stock based compensation expense	136		143		279		24		37		61
Adjusted EBITDA	$	(1,796)	$	288	$	(1,508)	$	94	$	(273)	$	(179)

	Nine Months Ended June 30, 2021						Nine Months Ended June 30, 2020
	Wireless		Telco		Total		Wireless		Telco		Total
Loss from operations	$	(4,759)	$	(2,303)	$	(7,062)	$	(3,310)	$	(14,274)	$	(17,584)
Impairment of right of use asset	—		—		—		—		660		660
Impairment of intangibles including goodwill	—		—		—		—		8,714		8,714
Depreciation and amortization expense	513		387		899		460		737		1,197
Stock based compensation expense	383		457		840		56		111		167
Adjusted EBITDA	$	(3,863)	$	(1,459)	$	(5,323)	$	(2,794)	$	(4,052)	$	(6,846)

Due to rounding, numbers presented may not foot to the totals provided.

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019

Wireless
Telco
Total
Wireless
Telco
Total

Income (loss) from
operations

$
(253,416
)

$
(896,561
)

$
(1,149,977
)

$
(454,672
)

$
201,593

$
(253,079
)
Impairment of right of use asset ‒

660,242

660,242
‒
‒
‒

Impairment of intangibles including goodwill
‒
‒
‒
‒
‒
‒

Depreciation and amortization expense
143,245

98,256

241,501

81,607

300,958

382,565

Stock compensation expense
25,577

35,769

61,346

12,166

34,436

46,602

Adjusted EBITDA
$
(84,594
)

$
(102,294
)

$
(186,888
)

$
(360,899
)

$
536,987

$
176,088

Nine Months Ended June 30, 2020 Nine Months Ended June 30, 2019
Wireless
Telco
Total
Wireless
Telco
Total

Loss from operations

$
(4,136,645
)

$
(13,483,096
)

$
(17,619,741
)

$
(1,568,255
)

$
(1,042,122
)

$
(2,610,377
)
Impairment of right of use asset ‒

660,242

660,242
‒
‒
‒

Impairment of intangibles including goodwill ‒

8,714,306

8,714,306
‒
‒
‒

Depreciation and amortization expense
461,672

735,188

1,196,860

172,240

897,413

1,069,653

Stock compensation expense
64,344

103,061

167,405

31,628

121,063

152,691

Adjusted EBITDA (a)
$
(3,610,629
)

$
(3,270,299
)

$
(6,880,928
)

$
(1,364,387
)

$
(23,646
)

$
(1,388,033
)

~~(a)~~

~~The Telco segment includes inventory-related non-cash adjustments of $2.3 million for the nine months ended June 30, 2020.~~

Critical Accounting Policies

~~Note 1 to~~Our unaudited consolidated financial statements are impacted by the ~~Consolidated Financial Statements in Form 10-K for fiscal 2019 includes a~~accounting policies used and the estimates and assumptions made by management during their preparation. A complete summary of ~~the~~our significant accounting policies ~~or methods used~~is included in ~~the preparation~~Note 1- Basis of Presentation and Accounting Policies in our ~~Consolidated Financial Statements. Some of those significant accounting policies or methods require us to make estimates and assumptions that affect the amounts~~

~~reported by us. We believe the following items require the most significant judgments and often involve complex estimates.~~

Form 10-K.

General

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts 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 reporting period. We base our estimates and judgments on historical experience, current market conditions, and various other factors we believe to be reasonable, ~~under the circumstances, the results of~~ which form the basis for making judgments about the carrying values of ~~assets and liabilities that are not readily apparent from other sources.~~certain assets. Actual results could differ from these estimates under different assumptions or conditions. The most significant estimates and assumptions are discussed below.

Inventory Valuation

For our Telco segment, our position in the telecommunications industry requires us to carry ~~relatively~~ large inventory quantities relative to annual sales, but it also allows us to realize high ~~overall~~ gross profit margins on our sales. We market our products primarily to telecommunication providers, ~~telecommunication~~ resellers, and other users of telecommunication equipment who are seeking products for which manufacturers have discontinued production or cannot ship new equipment on a same-day basis, as well as providing used products as an alternative to new products from the manufacturer. Carrying these large inventory quantities represents our largest ~~risk.~~

~~We are required to make judgments as to future demand requirements from~~risk for our customers. We regularly review the value of our inventory in detail with consideration given to rapidly changing technology which can significantly affect future customer demand. For individual inventory items, we may carry inventory quantities that are excessive relative to market potential, or we may not be able to recover our acquisition costs for sales that we do make. In order to address the risks associated with our investment in inventory, we review inventory quantities on hand and reduce the carrying value when the loss of usefulness of an item or other factors, such as obsolete and excess inventories, indicate that cost will not be recovered when an item is sold.

Telco segment.

Our inventories are all carried in the Telco segment and consist of new and used electronic components for the telecommunications industry. Inventory is stated at the lower of cost or net realizable value, with cost determined using the weighted-average method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. At June 30, ~~2020,~~2021, we had total inventory, before the reserve for excess and obsolete inventories, of ~~$9.3~~$8.8 million, consisting of ~~$1.2~~$1.3 million in new products and ~~$8.1~~$7.5 million in used or refurbished products.

We regularly review the value of our inventory in detail with consideration given to rapidly changing technology which can significantly affect future customer demand. For individual inventory items, we may carry inventory

Table of Contents

quantities that are excessive relative to market potential, or we may not be able to recover our acquisition costs. In order to address the risks associated with our investment in inventory, we review inventory quantities on hand and reduce the carrying value for obsolete and excess inventories, when our analysis indicates that cost will not be recovered when an item is sold.

We identified certain inventory that more than likely will not be sold or that the cost will not be recovered when it is processed through ~~its~~our recycling program. Therefore, we have an obsolete and excess inventory reserve of ~~$3.4~~$3.2 million at June 30, ~~2020.~~2021. If actual market conditions differ from those projected by management, this could have a material impact on our gross margin and inventory balances based on additional write-downs to net realizable value or a benefit from inventories previously written down.

Inbound freight charges are included in cost of sales. Purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other inventory expenditures are included in operating ~~expenses, since the amounts involved are not considered a material component of cost of sales.~~

~~Accounts Receivable Valuation~~

Management judgments and estimates are made in connection with establishing the allowance for doubtful accounts. Specifically, we analyze the aging of accounts receivable balances, historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in our customer payment terms. Significant changes in customer concentration or payment terms, deterioration of customer creditworthiness, or weakening in economic trends could have a significant impact on the collectability of receivables and our operating results. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an

additional provision to the allowance for doubtful accounts may be required. The reserve for bad debts was $0.3 million at June 30, 2020 and $0.2 million at September 30, 2019. At June 30, 2020, accounts receivable, net of allowance for doubtful accounts, was $3.2 million.

expenses.

Intangibles

Intangible assets that have finite useful lives are amortized on a straight-line basis over their estimated useful lives ranging from 3 years to 10 years. Intangible assets are also tested for impairment when events and circumstances indicate that the carrying value may not be recoverable. Due to our continued operating losses and the uncertainties surrounding the COVID-19 pandemic on the overall economy and the resulting impact on our Company, we determined that there were indicators for us to test our intangible assets for impairment at March 31, 2020. It was determined that we needed to perform a specific fair value assessment for each of the intangible assets at both Nave and Triton as their individual undiscounted forecasted cash flows did not exceed their respective carrying values. We then performed a fair value assessment of each of the intangible assets and compared them to the individual carrying value amounts at March 31, 2020. As a result of this assessment, we recorded an impairment charge of $3.9 million related to the customer relationship intangibles in the Telco segment as of March 31, 2020. As of June 30, ~~2020,~~2021, there were no ~~further indicators of impairment.~~

~~Goodwill~~

Goodwill represents the excess of purchase price of acquisitions over the acquisition date fair value of the net identifiable tangible and intangible assets acquired. Goodwill is not amortized and is tested at least annually for impairment. We perform our annual analysis during the fourth quarter of each fiscal year and in any other period in which indicators of impairment warrant additional analysis. Goodwill is evaluated for impairment by first comparing our estimate of the fair value of each reporting unit, with the reporting unit’s carrying value, including goodwill. Our reporting units for purposes of the goodwill impairment calculation are the Wireless segment, Nave and Triton.present.

Management utilizes a discounted cash flow analysis to determine the estimated fair value of each reporting unit. Significant judgments and assumptions including the discount rate, anticipated revenue growth rate, gross margins and operating expenses are inherent in these fair value estimates. As a result, actual results may differ from the estimates utilized in our discounted cash flow analysis. The use of alternate judgments and/or assumptions could result in the recognition of different levels of impairment charges in the financial statements.

Due to our continued operating losses and the uncertainties surrounding the COVID-19 pandemic on the overall economy and the resulting impact on our Company, we determined that there were indicators to warrant us to test goodwill for impairment at March 31, 2020. We calculated a fair value using the income approach of both Nave and Triton to determine if the fair value exceeded their respective carrying values. For both Nave and Triton, the fair value for each was less than their respective carrying values after considering the intangible asset impairment. Therefore, we recorded an impairment charge of $4.8 million in the Telco segment as of March 31, 2020, which fully impaired goodwill for the Telco segment. Although we do not anticipate a future impairment charge, certain events could occur that might adversely affect the reported value of the remaining goodwill in the Wireless segment. Such events could include, but are not limited to, economic or competitive conditions, a significant change in technology, the economic condition of the customers and industries we serve, and a material negative change in the relationships with one or more of our significant customers or equipment suppliers. If our judgments and assumptions change as a result of the occurrence of any of these events or other events that we do not currently anticipate, our expectations as to future results and our estimate of the implied fair value of the Wireless segment also may change.

Liquidity and Capital Resources

Cash Flows Used in Operating Activities

In fiscal year 2020, we have financed our operations primarily through financing activities by utilizing our line of credit, entering into an additional $3.5 million term loan from our primary financial lender, and receiving a $2.9 million SBA Payroll Protection Program (“PPP”) loan. During the nine months ended June 30, ~~2020, we~~2021, cash used ~~$1.4 million of cash flows for operations. The cash~~in operations was $5.8 million. Cash flows from operations ~~was~~were negatively impacted by a net loss of ~~$16.4~~

$7.1 million and net cash used by working capital of $0.3 million, which was partially offset by non-cash adjustments of ~~$13.0 million and net cash provided by working capital of $2.0 million to reconcile net loss to net cash used in operating activities.~~

$1.7 million.

Cash Flows ~~Used for~~Provided by Investing Activities

During the nine months ended June 30, ~~2020,~~2021, cash provided by investing activities was ~~$1.7~~$1.8 million ~~consisting~~which primarily consisted of ~~$2.0~~$1.9 million of payments received under the promissory note related to the sale of the cable business in fiscal year 2019, partially offset by $0.5 million of purchases of property and equipment. Of the $2.0 million of payments received under the promissory note, $0.7 million was a prepayment.

receivable.

Cash Flows Used ~~for~~in Financing Activities

During the nine months ended June 30, ~~2020,~~2021, cash ~~provided by~~used in financing activities was ~~$8.6~~$0.6 million, of which ~~primarily~~$1.2 million related to ~~net borrowings~~repayment of ~~$2.8~~our promissory note payable and $0.4 million related to payments under our ~~revolving credit agreement, proceeds,~~financing lease arrangements, partially offset by net ~~of principal payments, from our note payable of $1.9 million, proceeds from the receipt of the PPP loan of $2.9 million, and~~ proceeds from the sale of our common stock utilizing our shelf registration of ~~$1.8~~$0.9 million. ~~These were partially offset by the final guaranteed payment of $0.7 million to the Triton Miami, Inc. partners and payments under our financing lease arrangements of $0.3 million.~~

In March 2020, we entered into a loan agreement with our primary financial lender for $3.5 million, bearing interest at 6% per annum. The ~~loan is payable in seven semi-annual installments of principal and interest with the first payment occurring on June 30, 2020, and the final payment due June 30, 2023. The~~ principal and interest payments correlate to ~~the~~our promissory note receivable with Leveling 8. We ~~effectively~~ monetized $3.5 million of the $5.8 million remaining balance of the promissory note ~~resulting from the sale of our cable businesses in 2019 to Leveling 8 to assist us with working capital needs.~~ receivable. In connection with ~~a $1.7~~the $1.8 million ~~payment made~~in payments received in the ~~third~~first quarter of ~~2020 by Leveling 8 under the promissory note,~~2021, we paid down ~~$1.6 million of~~the remaining outstanding principal under this ~~loan, for which $1.0 million was a prepayment against the~~ loan. ~~As a result, the balance under this loan is now $1.9 million and the final payment will be June 30, 2022.~~

~~Our credit agreement contains~~The Company has a $4.0 million revolving line of credit agreement with its primary financial lender, which matures on December 17, ~~2020.~~2021. The ~~revolving~~ line of credit requires quarterly interest payments based on the prevailing Wall Street Journal Prime Rate, floating (3.25% at June 30, ~~2020)~~2021), ~~and~~with the ~~interest~~addition of a 4% floor rate ~~is reset monthly. The credit agreement provides that the Company maintain~~and a fixed charge coverage ratio ~~(net cash flow to total fixed charges)~~ of ~~not less than~~ 1.25 to ~~1.0.~~be tested quarterly beginning June 30, 2021. At June 30, 2021, there was $2.8 million outstanding under the line of credit. Future borrowings under the ~~revolving~~ line of credit are limited to the lesser of $4.0 million or the sum of 80% of eligible accounts receivable and ~~25%~~60% of eligible Telco segment inventory. Under these limitations, ~~our~~the Company’s total ~~available revolving~~ line of credit borrowing ~~base~~capacity was ~~$3.1~~$4.0 million at June 30, ~~2020.~~2021.

~~We believe~~The line of credit agreement provides that ~~it is probable that we will not be in compliance with our~~the Company maintain a fixed charge coverage ratio ~~loan~~(net cash flow to total fixed charge) of not less than 1.25 to 1.0 to be tested quarterly beginning June 30, 2021. The Company was not in compliance with this covenant ~~with our~~at June 30, 2021. The Company notified its primary financial lender as of ~~September 30, 2020. We would therefore need to seek~~the covenant violation, and on August 4, 2021, the primary financial lender granted a waiver of the covenant violation

Table of Contents

under the credit agreement. Although the covenant violation was waived at June 30, 2021, the Company believes it may again be out of compliance with this covenant ~~violation. We have been~~at September 30, 2021. If the Company is not in ~~preliminary discussions~~compliance with ~~our primary financial lender, and we expect them to grant us a waiver for this~~the covenant ~~violation. However,~~at September 30, 2021, it would result in an event of default, which if ~~our primary financial lender does~~ not ~~grant the waiver, this~~cured or waived, could result in ~~our~~the lender accelerating the maturity of ~~our~~the Company’s indebtedness or preventing access to additional funds under ~~our~~the line of credit agreement, or requiring prepayment of ~~our~~ outstanding indebtedness under ~~our March 10, 2020~~the loan agreement or the line of credit agreement.

On April 14, 2020, ~~we received a~~ the Company entered into an unsecured loan in the amount of $2.9 million ("PPP ~~loan~~Loan") with our primary ~~lender for $2.9 million, bearing~~lender. The PPP Loan matures on April 14, 2022, bears interest at 1% per annum, with monthly payments of principal and interest in the amount of $164,045 commencing on ~~November 10,~~the date on which the amount of loan forgiveness is determined. On August 28, 2020, we submitted our application to our lender, requesting PPP Loan forgiveness of $2.9 million. Our lender reviewed our application and forwarded to the SBA for approval on September 27, 2020. ~~The loan matures on April 10, 2022. We plan to use~~As of the ~~proceeds~~filing of this Report, we have not received an approval or denial of our application for forgiveness from the ~~PPP loan for payroll-related expenses, rent, and utility expenses in accordance with~~SBA; per the ~~guidelines for the loan. We plan to apply for forgiveness of the PPP loan in accordance with the requirements and limitations under the CARES~~Flexibility Act, the ~~PPP Flexibility Act and SBA regulations and requirements, and although no assurance can be given that all or any portion~~date for commencement of ~~the PPP~~ loan ~~will be forgiven, we believe that most of this loan will be forgiven.~~

~~Of the $6.4 million in proceeds received from the March 2020 loan and the PPP loan, we believe that most of the~~

payments ~~for these loans will~~has not ~~have to be repaid using funds generated from our operations. The March 2020 loan will be paid by payments received from our promissory note with Leveling 8,~~yet occurred, and we ~~anticipate that most~~have made no loan payments. The Company deferred $0.8 million of loan payments during the ~~PPP loan will be forgiven.~~six months ended June 30, 2021.

~~In the third quarter of 2020, we utilized~~We continue to take actions to preserve and improve our recently filed shelf registration statement to raise additional cash by selling common shares utilizing an at the market offering under our equity distribution agreement with Northland Securities, Inc. (“Northland”). Under this program, we sold 573,199 shares for net proceeds of $2.1 million.

liquidity. We believe that our cash and cash equivalents and restricted cash of ~~$10.5~~$3.7 million at June 30, ~~2020~~2021 and our existing revolving bank line of credit will provide sufficient liquidity and capital resources to cover our operating losses and our additional working capital and debt payment needs. However, we will ~~likely~~ need to seek aan additional waiver ~~for~~from our ~~probable~~primary financial lender if we are not in compliance with our covenant ~~violation~~ under our loan ~~agreements with~~agreement again next quarter. Further, as discussed above, we received the PPP Loan in April 2020, which provided funding necessary to offset the immediate and anticipated impacts of COVID-19, and we are awaiting the final determination from the SBA on our ~~primary financial lender.~~forgiveness application. In addition, there is still ~~significant~~ uncertainty surrounding the timing of the overall recovery of the economy and the timing of wireless infrastructure service opportunities for the upgrade to 5G. Therefore, depending on the timing of these factors and our primary financial lender granting us a waiver of ~~the probable~~any future covenant ~~violation,~~violations, there is still risk that we may not have sufficient cash and cash equivalents available for us to sustain our operations at our current level. If that were to occur, we would need to seek additional funding and further utilize our shelf registration that we have available to us in order to enhance our cash position and assist in our working capital needs.

In the nine months ended June 30, 2021, we utilized our recently filed shelf registration statement to raise additional cash by selling common shares utilizing an at the market offering under our equity distribution agreement with Northland Securities, Inc. (“Northland”). Under this program, we sold 245,973 shares for net proceeds of $0.9 million.

Item 4. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure the information we are required to disclose in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based on their evaluation as of June 30, ~~2020,~~2021, our Chief Executive Officer and interim Chief Financial Officer concluded that our disclosure controls and procedures are effective to accomplish their objectives and to ensure the information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and interim Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.

Table of Contents

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Securities and Use of Proceeds.

During the nine months ended June 30, 2021, the Company sold 245,973 shares of common stock under its registration statement on Form S-3 effective as of April 1, 2020 (333-236859). Gross proceeds from such sales during the quarter were $0.9 million and net proceeds were $0.9 million after the payment of approximately $31,313 in commissions to Northland Securities, Inc., the underwriter of the offering. Total gross proceeds to the Company from sales under such registration statement since its effective date are $3.1 million and total net proceeds to the Company are $3.0 million after the payment of $0.1 million in commissions to Northland. All sales have been made pursuant to the Prospectus Supplement filed with the Commission on April 24, 2020, under which the Company may sell up to $13,850,000 in common stock. All net proceeds to the Company from such sales have been used in accordance with the “Use of Proceeds” section of such Prospectus Supplement.

Item 6. Exhibits.


Exhibit No.			Description



31.1			Certification of Chief Executive Officer under Section 302 of the Sarbanes Oxley Act of 2002.

31.2			Certification of interim Chief Financial Officer under Section 302 of the Sarbanes Oxley Act of 2002.

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2			Certification of interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS			XBRL Instance Document.

101.SCH			XBRL Taxonomy Extension Schema.

101.CAL			XBRL Taxonomy Extension Calculation Linkbase.

101.DEF			XBRL Taxonomy Extension Definition Linkbase.

101.LAB			XBRL Taxonomy Extension Label Linkbase.

101.PRE			XBRL Taxonomy Extension Presentation Linkbase.

~~Exhibit No.~~

~~Description~~

~~10.1~~

~~Financial Institution Business Loan Agreement dated April 14, 2020~~

~~31.1~~

~~Certification~~

Table of ~~Chief Executive Officer under Section 302 of the Sarbanes Oxley Act of 2002.~~

~~31.2~~

~~Certification of Chief Financial Officer under Section 302 of the Sarbanes Oxley Act of 2002.~~

~~32.1~~

~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~

~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~

~~XBRL Instance Document.~~

~~101.SCH~~

~~XBRL Taxonomy Extension Schema.~~

~~101.CAL~~

~~XBRL Taxonomy Extension Calculation Linkbase.~~

~~101.DEF~~

~~XBRL Taxonomy Extension Definition Linkbase.~~

~~101.LAB~~

~~XBRL Taxonomy Extension Label Linkbase.~~

~~101.PRE~~

~~XBRL Taxonomy Extension Presentation Linkbase.~~

Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ADDVANTAGE TECHNOLOGIES GROUP, INC. (Registrant)
Date: August 13, 2021
			/s/ Joseph E. Hart
			Joseph E. Hart,
			President and Chief Executive Officer
			(Principal Executive Officer)

Date: August 13, 2021
			/s/ Michael G. Ramke
			Michael G. Ramke
			Interim Chief Financial Officer
			(Principal Financial Officer)

~~ADDVANTAGE TECHNOLOGIES GROUP, INC.~~

(~~Registrant)~~

~~Date: August 11, 2020~~

~~/s/ Joseph E. Hart~~

~~Joseph E. Hart,~~

~~President and Chief Executive Officer~~

~~(Principal Executive Officer)~~

~~Date: August 11, 2020~~ \

~~/s/ Jarrod M. Watson~~

~~Jarrod M. Watson,~~

~~Chief Financial Officer~~

~~(Principal Financial Officer)~~

~~Exhibit Index~~

~~The following documents are included as exhibits to this Form 10-Q:~~

~~Exhibit No.~~	~~Description~~

~~10.1~~	~~Financial Institution Business Loan Agreement dated April 14, 2020~~

~~31.1~~	~~Certification of Chief Executive Officer under Section 302 of the Sarbanes Oxley Act of 2002.~~

~~31.2~~	~~Certification of Chief Financial Officer under Section 302 of the Sarbanes Oxley Act of 2002.~~

~~32.1~~	~~Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~32.2~~	~~Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.INS~~	~~XBRL Instance Document.~~

~~101.SCH~~	~~XBRL Taxonomy Extension Schema.~~

~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase.~~

~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase.~~

~~101.LAB~~	~~XBRL Taxonomy Extension Label Linkbase.~~

~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase.~~

~~OKLAHOMA~~	~~73‑1351610~~
Oklahoma		73-1351610
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


1430 Bradley Lane, Suite 196
Carrollton, Texas 75007
(Address of principal executive office)
(918) 251-9121
(Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.			Yes ⌧ SNo □£

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).			Yes ⌧ SNo □£

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ~~□Accelerated~~£ Accelerated filer □£ Non-accelerated filer ⌧ SSmaller reporting company ⌧ ☒Emerging growth company □☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			□

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).			Yes □☐ No ⌧☒


		PART I. FINANCIAL INFORMATION
	~~Page~~
~~Item 1.~~		~~Financial Statements.~~	Page
Item 1.		Financial Statements.

		Consolidated ~~Condensed~~ Balance Sheets (unaudited)	23
		June 30, ~~2020~~2021 and September 30, ~~2019~~2020

		Consolidated ~~Condensed~~ Statements of Operations (unaudited)	4
		Three and Nine Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

		Consolidated ~~Condensed~~ Statements of Changes in Shareholders’ Equity ~~(unaudited~~)(unaudited)	5
		Three and Nine Months ~~ended~~Ended June 30, ~~2020~~2021 and ~~2019~~2020

		Consolidated ~~Condensed~~ Statements of Cash Flows ~~(unaudited~~)(unaudited)	76
		Nine Months Ended June 30, ~~2020~~2021 and ~~2019~~2020

		Notes to Unaudited Consolidated ~~Condensed~~ Financial Statements	87

Item 2.		Management's Discussion and Analysis of Financial Condition and Results of Operations.	2015

Item 4.		Controls and ~~Procedures~~.Procedures.	3022

		PART II. OTHER INFORMATION

Item 6.2.		~~Exhibits.~~Unregistered Sales of Equity Securities and Use of Proceeds.	3123

Item 6.		~~SIGNATURES~~Exhibits	23

		SIGNATURES


	June 30, 2020			September 30, 2019				June 30, 2021		September 30, 2020
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	10,365,744		$	1,242,143		Cash and cash equivalents	$	3,598	$	8,265
Restricted cash		105,117			351,909		Restricted cash	136		108
Accounts receivable, net of allowance for doubtful accounts of $250,000 and $150,000, respectively		3,164,893			4,826,716
Accounts receivable, net of allowances of $250, respectively							Accounts receivable, net of allowances of $250, respectively	8,347		3,968
Unbilled revenue		677,702			2,691,232		Unbilled revenue	863		590
Promissory note – current		1,400,000			1,400,000		Promissory note – current	0		1,400
Income tax receivable		34,915			21,350		Income tax receivable	0		1,283
Inventories, net of allowance for excess and obsolete inventory of $3,400,000 and $1,275,000, respectively		5,964,490			7,625,573
Prepaid expenses		1,013,645			543,762
Other assets		289,300			262,462
Inventories, net of allowances of $3,168 and $3,054, respectively							Inventories, net of allowances of $3,168 and $3,054, respectively	5,611		5,576
Prepaid expenses and other assets							Prepaid expenses and other assets	1,163		884

Total current assets		23,015,806			18,965,147		Total current assets	19,718		22,074

Property and equipment, at cost:
Machinery and equipment		3,503,199			2,475,545		Machinery and equipment	4,417		3,500
Leasehold improvements		846,783			190,984		Leasehold improvements	795		720
Total property and equipment, at cost		4,349,982			2,666,529
Property and equipment, at cost							Property and equipment, at cost	5,212		4,220
Less: Accumulated depreciation		(1,326,477	)		(835,424	)	Less: Accumulated depreciation	(2,242)		(1,586)
Net property and equipment		3,023,505			1,831,105		Net property and equipment	2,970		2,634

Right-of-use operating lease assets		4,158,786			‒
Promissory note – noncurrent		2,950,000			4,975,000
Right-of-use lease assets							Right-of-use lease assets	2,991		3,758
Promissory note – non current							Promissory note – non current	1,865		2,375
Intangibles, net of accumulated amortization		1,504,773			6,002,998		Intangibles, net of accumulated amortization	1,186		1,425
Goodwill		57,554			4,877,739		Goodwill	58		58
Deferred income taxes		1,220,564			‒		Deferred income taxes	28		0
Other assets		178,602			176,355		Other assets	182		179

Total assets	$	36,109,590		$	36,828,344		Total assets	$	28,998	$	32,503

⌧
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

□
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


~~Shares outstanding of the issuer's $.01 par value common stock as of July 31, 2020 were 11,788,940.~~


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	6,484	$	3,472
Accrued expenses	1,809		1,319
Deferred revenue	144		113
Bank line of credit	2,800		2,800
Note payable, current	1,927		1,709
Right-of-use lease obligations – current	1,220		1,275
Financing lease obligations – current	440		285
Other current liabilities	15		41
Total current liabilities	14,839		11,014
Financing lease obligations - long-term	1,108		791
Right-of-use lease obligations - long-term	2,436		3,310
Note payable, less current portion	988		2,440
Other liabilities	7		15
Total liabilities	19,378		17,570
Shareholders’ equity:
Common stock, $0.01 par value; 30,000,000 shares authorized; 12,511,372 shares issued and outstanding, and 11,822,009 shares issued and outstanding, respectively	125		118
Paid in capital	(745)		(2,567)
Retained earnings	10,240		17,382


Total shareholders’ equity	9,620		14,933
Total liabilities and shareholders’ equity	$	28,998	$	32,503



	Common Stock						Paid-in			Retained			Treasury
	Shares			Amount			Capital			Earnings			Stock			Total
Balance, September 30, 2019		10,861,950		$	108,620		$	(4,377,103	)	$	34,715,097		$	(1,000,014	)	$	29,446,600

Net loss		–			–			–			(1,717,692	)		–			(1,717,692	)
Share based compensation expense		–			–			13,890			–			–			13,890

Balance, December 31, 2019		10,861,950		$	108,620		$	(4,363,213	)	$	32,997,405		$	(1,000,014	)	$	27,742,798

Net loss		–			–			–			(14,661,081	)		–			(14,661,081	)
Restricted stock issuance		–			–			475,618			–			–			475,618
Stock option exercise		110,000			1,100			171,833			–			–			172,933
Share based compensation expense		–			–			(6,364	)		–			–			(6,364	)

Balance, March 31, 2020		10,971,950		$	109,720		$	(3,722,126	)	$	18,336,324		$	(1,000,014	)	$	13,723,904

Net income		–			–			–			23,350			–			23,350
Utilization of treasury shares		(500,658	)		(5,006	)		(995,008	)		–			1,000,014			–
Issuance of shares		573,199			5,732			2,103,125			–			–			2,108,857
Restricted stock issuance		237,014			2,370			12,630			–			–			15,000
Stock option exercise		13,334			134			24,001			–			–			24,135
Share based compensation expense		–			–			(14,656	)		–			–			(14,656	)

Balance, June 30, 2020		11,294,839		$	112,950		$	(2,592,034	)	$	18,359,674		$	–		$	15,880,590

Fiscal year 2021	$	1,400,000
Fiscal year 2022		940,000
Fiscal year 2023		940,000
Fiscal year 2024		1,725,754
Total proceeds		5,005,754
Less: interest to be paid		(655,754	)
Promissory note principal balance	$	4,350,000

	September 30, 2019
	Gross		Accumulated Amortization			Net
Intangible assets:
Customer relationships – 10 years	$	8,396,000	$	(3,547,389	)	$	4,848,611
Trade name – 10 years		2,119,000		(966,280	)		1,152,720
Non-compete agreements – 3 years		374,000		(372,333	)		1,667

Total intangible assets	$	10,889,000	$	(4,886,002	)	$	6,002,998

	Shares			Wtd. Avg. Ex. Price		Aggregate Intrinsic Value
Outstanding at September 30, 2019		770,000		$	1.73	$	352,700
Granted		‒			‒		‒
Exercised		(123,334	)	$	1.20	$	304,568
Expired		–			–		–
Forfeited		(166,666	)	$	1.35	$	347,999
Outstanding at June 30, 2020		480,000		$	1.89	$	742,800

Exercisable at June 30, 2020		376,667		$	1.99	$	546,101

	Nine Months Ended June 30, 2020
Fiscal year 2017 grant	$	(5,652	)
Fiscal year 2019 grants	$	(1,476	)

	Three Months ended June 30, 2020		Nine Months ended June 30, 2020

Operating lease cost:
Operating lease cost	$	296,677	$	943,834
Impairment of right of use asset		660,242		660,242
Operating lease cost	$	956,919	$	1,604,076

Finance lease cost:
Amortization of right-of-use assets	$	71,925	$	198,289
Interest on lease liabilities		18,220		43,182
Total finance lease cost	$	90,145	$	241,471

	June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	768,784
Operating cash flows from finance leases	$	43,182
Financing cash flows from finance leases	$	277,061

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	1,076,700
Finance leases	$	718,058

	June 30, 2020
Operating leases
Operating lease right-of-use assets	$	4,158,786

Operating lease obligations - current	$	1,224,630
Operating lease obligations		3,809,803
Total operating lease liabilities	$	5,034,433

Finance leases
Property and equipment, gross	$	1,462,865
Accumulated depreciation		(210,253	)
Property and equipment, net	$	1,252,612

Financing lease obligations - current	$	328,151
Financing lease obligations		855,052
Total finance lease liabilities	$	1,183,203

Weighted Average Remaining Lease Term
Operating leases	3.94 years
Finance leases	3.98 years
Weighted Average Discount Rate
Operating leases		5.00	%
Finance leases		4.96	%

	Operating Leases		Finance Leases
2020	$	355,239	$	140,761
2021		1,440,544		314,093
2022		1,468,081		295,617
2023		1,369,882		281,636
2024		802,026		227,541
Thereafter		150,478		44,334
Total lease payments		5,586,250		1,303,982
Less imputed interest		555,817		120,779
Total	$	5,034,433	$	1,183,203

	Three Months Ended June 30, 2020									Three Months Ended June 30, 2019
	Wireless			Telco			Total			Wireless			Telco		Total
Income (loss) from operations	$	(253,416	)	$	(896,561	)	$	(1,149,977	)	$	(454,672	)	$	201,593	$	(253,079	)
Impairment of right of use asset		‒			660,242			660,242			‒			‒		‒
Impairment of intangibles including goodwill		‒			‒			‒			‒			‒		‒
Depreciation and amortization expense		143,245			98,256			241,501			81,607			300,958		382,565
Stock compensation expense		25,577			35,769			61,346			12,166			34,436		46,602
Adjusted EBITDA	$	(84,594	)	$	(102,294	)	$	(186,888	)	$	(360,899	)	$	536,987	$	176,088

	Nine Months Ended June 30, 2020									Nine Months Ended June 30, 2019
	Wireless			Telco			Total			Wireless			Telco			Total
Loss from operations	$	(4,136,645	)	$	(13,483,096	)	$	(17,619,741	)	$	(1,568,255	)	$	(1,042,122	)	$	(2,610,377	)
Impairment of right of use asset		‒			660,242			660,242			‒			‒			‒
Impairment of intangibles including goodwill		‒			8,714,306			8,714,306			‒			‒			‒
Depreciation and amortization expense		461,672			735,188			1,196,860			172,240			897,413			1,069,653
Stock compensation expense		64,344			103,061			167,405			31,628			121,063			152,691
Adjusted EBITDA (a)	$	(3,610,629	)	$	(3,270,299	)	$	(6,880,928	)	$	(1,364,387	)	$	(23,646	)	$	(1,388,033	)