UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June ~~28, 2020~~27, 2021 or

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

	For the transition period from to

Commission File Number: 001-33938

TESSCO Technologies Incorporated

(Exact name of registrant as specified in its charter)


Delaware	52-0729657
(State or other jurisdiction of incorporation or organization)	(I.R.S Employer Identification No.)


11126 McCormick Road, Hunt Valley, Maryland	21031
(Address of principal executive offices)	(Zip Code)

(410) 229-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	TESS	Nasdaq Global Market

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☑☐
Non-accelerated filer ☐☑	Smaller 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 ☑

The number of shares of the registrant’s Common Stock, $0.01 par value per share, outstanding as of ~~July 31, 2020,~~August 2, 2021, was ~~8,712,771.~~8,896,075.

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TESSCO Technologies Incorporated

Index to Form 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

TESSCO Technologies Incorporated

Consolidated Balance Sheets

June 28,

March 29,

2020

2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$
900

$
50,000

Trade accounts receivable, net

73,854,000

82,868,400

Product inventory, net

69,664,400

69,148,000

Prepaid expenses and other current assets

14,384,900

11,707,500

Total current assets

157,904,200

163,773,900

Property and equipment, net

13,252,300

13,433,700

Intangible assets, net

13,969,600

11,157,400

Deferred tax assets

2,274,400

3,032,500

Lease asset - right of use

13,282,600

13,949,800

Other long-term assets

4,271,600

3,361,400

Total assets

$
204,954,700

$
208,708,700

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Trade accounts payable

$
75,431,400

$
75,512,600

Payroll, benefits and taxes

5,832,900

4,258,300

Income and sales tax liabilities

446,900

450,800

Accrued expenses and other current liabilities

4,107,900

4,244,400

Revolving line of credit

25,346,700

25,563,900

Lease liability, current

2,600,200

2,579,200

Total current liabilities

113,766,000

112,609,200

Non-current lease liability

10,831,700

11,481,100

Other non-current liabilities

899,900

915,700

Total liabilities

125,497,600

125,006,000

Shareholders’ equity:

Preferred stock, $0.01 par value per share, 500,000 shares authorized and 0 shares issued and outstanding

—

—

Common stock, $0.01 par value per share, 15,000,000 shares authorized, 14,426,729 shares issued and 8,637,129 shares outstanding as of June 28, 2020, and 14,354,368 shares issued and 8,577,549 shares outstanding as of March 29, 2020

102,200

101,400

Additional paid-in capital

65,762,300

65,318,500

Treasury stock, at cost, 5,789,600 shares as of June 28, 2020 and 5,776,819 shares as of March 29, 2020

(58,555,000)

(58,496,200)

Retained earnings

72,147,600

76,779,000

Total shareholders’ equity

79,457,100

83,702,700

Total liabilities and shareholders’ equity

$
204,954,700

$
208,708,700


	June 27,		March 28,
	2021		2021
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,207,500	$	1,110,000
Trade accounts receivable, net		71,251,900		70,045,700
Product inventory, net		69,017,500		53,060,000
Income taxes receivable		10,462,700		10,432,500
Prepaid expenses and other current assets		5,410,900		3,980,900
Current portion of assets held for sale		1,042,600		1,196,900
Total current assets		159,393,100		139,826,000

Property and equipment, net		12,245,300		12,571,600
Intangible assets, net		21,285,700		19,136,500
Lease asset - right of use		10,634,500		11,285,800
Other long-term assets		6,722,500		6,258,000
Total assets	$	210,281,100	$	189,077,900

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	74,297,900	$	59,415,600
Payroll, benefits and taxes		7,004,200		6,279,800
Income and sales tax liabilities		752,900		803,900
Accrued expenses and other current liabilities		1,448,300		2,912,300
Lease liability, current		2,547,600		2,573,500
Total current liabilities		86,050,900		71,985,100

Deferred tax liabilities, net		26,500		26,500
Revolving line of credit		39,729,100		30,583,200
Non-current lease liability		8,321,800		8,923,500
Other non-current liabilities		793,500		809,400
Total liabilities		134,921,800		112,327,700

Shareholders’ equity:
Preferred stock, $0.01 par value per share, 500,000 shares authorized and 0 shares issued and outstanding		—		—
Common stock, $0.01 par value per share, 15,000,000 shares authorized, 8,899,547 shares issued and 8,884,591 shares outstanding as of June 27, 2021, and 8,844,083 shares issued and 8,833,833 shares outstanding as of March 28, 2021		104,800		104,200
Additional paid-in capital		67,595,700		67,227,700
Treasury stock, at cost, 14,956 shares as of June 27, 2021 and 10,250 shares as of March 28, 2021		(105,000)		(62,800)
Retained earnings		7,763,800		9,481,100
Total shareholders’ equity		75,359,300		76,750,200
Total liabilities and shareholders’ equity	$	210,281,100	$	189,077,900

See accompanying notes to unaudited consolidated financial statements.

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TESSCO Technologies Incorporated

Unaudited Consolidated Statements of ~~Loss~~(Loss) Income

Three Months Ended

June 28, 2020

June 30, 2019

Revenues

$
119,813,500

$
130,729,300

Cost of goods sold

100,987,800

105,465,800

Gross profit

18,825,700

25,263,500

Selling, general and administrative expenses

23,734,400

28,096,500

Restructuring charge

—

488,000

Loss from operations

(4,908,700)

(3,321,000)

Interest expense, net

110,700

208,700

Loss before benefit from income taxes

(5,019,400)

(3,529,700)

Benefit from income taxes

(388,000)

(1,036,900)

Net loss

$
(4,631,400)

$
(2,492,800)

Basic loss per share

$
(0.54)

$
(0.29)

Diluted loss per share

$
(0.54)

$
(0.29)

Basic weighted-average common shares outstanding

8,617,803

8,494,168

Effect of dilutive options and other equity instruments

—

—

Diluted weighted-average common shares outstanding

8,617,803

8,494,168

Cash dividends declared per common share

$
—

$
0.20


	Three Months Ended
	June 27, 2021		June 28, 2020

Revenues	$	104,956,100	$	96,477,600
Cost of goods sold		85,269,900		80,024,900
Gross profit		19,686,200		16,452,700
Selling, general and administrative expenses		21,646,800		21,532,500
Operating loss		(1,960,600)		(5,079,800)
Interest expense, net		213,700		110,700
Loss from continuing operations before benefit from income taxes		(2,174,300)		(5,190,500)
Provision for (benefit from) income taxes		38,500		(321,800)
Net loss from continuing operations		(2,212,800)		(4,868,700)
Income from discontinued operations, net of taxes		495,500		237,300
Net loss	$	(1,717,300)	$	(4,631,400)
Basic (loss) income per share
Continuing operations	$	(0.25)	$	(0.56)
Discontinued operations	$	0.06	$	0.03
Consolidated operations	$	(0.19)	$	(0.54)
Diluted (loss) income per share
Continuing operations	$	(0.25)	$	(0.56)
Discontinued operations	$	0.06	$	0.03
Consolidated operations	$	(0.19)	$	(0.54)
Basic weighted-average common shares outstanding		8,864,704		8,617,803
Effect of dilutive options and other equity instruments		—		—
Basic and diluted weighted-average common shares outstanding		8,864,704		8,617,803
Cash dividends declared per common share	$	—	$	—

See accompanying notes to unaudited consolidated financial statements.

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TESSCO Technologies Incorporated

Unaudited Consolidated Statements of Changes in Shareholders’ Equity


	Common Stock			Additional						Total		Common Stock			Additional						Total
				Paid-in		Treasury		Retained		Shareholders’					Paid-in		Treasury		Retained		Shareholders’
												Shares	Amount		Capital		Stock		Earnings		Equity
Balance at March 28, 2021												8,833,833		104,200		67,227,700		(62,800)		9,481,100		76,750,200
Proceeds from issuance of stock												13,782		100		102,700		—		—		102,800
Treasury stock purchases												(3,960)		—		—		(28,900)		—		(28,900)
Non-cash stock compensation expense												39,182		500		254,400		—		—		254,900
Exercise of stock options												1,754		—		10,900		(13,300)		—		(2,400)
Net loss												—		—		—		—		(1,717,300)		(1,717,300)
Balance at June 27, 2021												8,884,591		104,800		67,595,700		(105,000)		7,763,800		75,359,300
	Shares	Amount		Capital		Stock		Earnings		Equity
Balance at March 29, 2020	8,577,549		101,400		65,318,500		(58,496,200)		76,779,000		83,702,700	8,577,549		101,400		65,318,500		(58,496,200)		76,779,000		83,702,700
Proceeds from issuance of stock	23,676		200		132,500		—		—		132,700	23,676		200		132,500		—		—		132,700
Treasury stock purchases	(12,781)		—		—		(58,800)		—		(58,800)	(12,781)		—		—		(58,800)		—		(58,800)
Non-cash stock compensation expense	48,685		600		311,300		—		—		311,900	48,685		600		311,300		—		—		311,900
Cash dividends paid	—		—		—		—		—		—
Net loss	—		—		—		—		(4,631,400)		(4,631,400)	—				—		—		(4,631,400)		(4,631,400)
Balance at June 28, 2020	8,637,129	$	102,200	$	65,762,300	$	(58,555,000)	$	72,147,600	$	79,457,100	8,637,129		102,200		65,762,300		(58,555,000)		72,147,600		79,457,100

Balance at March 31, 2019	8,468,529		99,800		62,666,400		(57,614,100)		103,635,100		108,787,200
Proceeds from issuance of stock	9,250		100		143,100		—		—		143,200
Treasury stock purchases	(10,488)		—		—		(189,100)		—		(189,100)
Non-cash stock compensation expense	41,256		400		338,500		—		—		338,900
Cash dividends paid	—		—		—		—		(1,702,600)		(1,702,600)
Net loss	—		—		—		—		(2,492,800)		(2,492,800)
Balance at June 30, 2019	8,508,547	$	100,300	$	63,148,000	$	(57,803,200)	$	99,439,700	$	104,884,800

See accompanying notes to unaudited consolidated financial statements.

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TESSCO Technologies Incorporated

Unaudited Consolidated Statements of Cash Flows

Three Months Ended

June 28, 2020

June 30, 2019


CASH FLOWS FROM OPERATING ACTIVITIES:







Net loss

$
(4,631,400)

$
(2,492,800)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

1,228,000

960,800

Non-cash stock-based compensation expense

311,900

338,900

Deferred income taxes and other

758,100

1,087,100

Change in trade accounts receivable

9,014,400

12,711,800

Change in product inventory

(516,400)

(29,562,300)

Change in prepaid expenses and other current assets

(2,677,400)

(1,992,800)

Change in other assets and other liabilities

(949,400)

—

Change in trade accounts payable

(704,000)

17,709,600

Change in payroll, benefits and taxes

1,574,600

(543,200)

Change in income and sales tax liabilities

(3,900)

(497,400)

Change in accrued expenses and other current liabilities

34,600

294,400

Net cash provided by (used in) operating activities

3,439,100

(1,985,900)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of property and equipment

(238,900)

(449,300)

Purchases of internal use software

(2,973,700)

(1,421,000)

Net cash used in investing activities

(3,212,600)

(1,870,300)

CASH FLOWS FROM FINANCING ACTIVITIES

Net (repayments) borrowings from revolving line of credit

(217,200)

5,737,100

Cash dividends paid

—

(1,702,600)

Purchases of treasury stock and repurchases of stock from employees

(58,800)

(189,100)

Other financing activities

400

(2,300)

Net cash (used in) provided by financing activities

(275,600)

3,843,100

Net decrease in cash and cash equivalents

(49,100)

(13,100)

CASH AND CASH EQUIVALENTS, beginning of period

50,000

30,300

CASH AND CASH EQUIVALENTS, end of period

$
900

$
17,200


	Three Months Ended
	June 27, 2021		June 28, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(1,717,300)	$	(4,631,400)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		607,700		1,228,000
Non-cash stock-based compensation expense		254,900		311,900
Deferred income taxes and other		—		758,100
Change in trade accounts receivable		(1,206,200)		9,014,400
Change in product inventory		(15,803,200)		(516,400)
Change in prepaid expenses and other current assets		(1,460,200)		(2,677,400)
Change in other assets and other liabilities		(487,700)		(949,400)
Change in trade accounts payable		14,632,900		(704,000)
Change in payroll, benefits and taxes		724,400		1,574,600
Change in income and sales tax liabilities		(51,000)		(3,900)
Change in accrued expenses and other current liabilities		(1,326,600)		34,600
Net cash (used in) provided by operating activities		(5,832,300)		3,439,100

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment		(84,300)		(238,900)
Purchases of internal use software licenses eligible for capitalization		(2,089,600)		(2,973,700)
Net cash used in investing activities		(2,173,900)		(3,212,600)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) from revolving line of credit short term		—		(217,200)
Borrowings from revolving line of credit long term		66,565,500		—
Repayments to revolving line of credit long term		(57,419,600)		—
Proceeds from issuance of stock		—		400
Purchase of treasury stock and repurchase of stock from employees and directors for minimum tax withholdings		(42,200)		(58,800)
Net cash provided by (used in) financing activities		9,103,700		(275,600)

Net increase (decrease) in cash and cash equivalents		1,097,500		(49,100)

CASH AND CASH EQUIVALENTS, beginning of period		1,110,000		50,000

CASH AND CASH EQUIVALENTS, end of period	$	2,207,500	$	900

See accompanying notes to unaudited consolidated financial statements.

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TESSCO Technologies Incorporated

Notes to Unaudited Consolidated Financial Statements

Note 1. Description of Business and Basis of Presentation

TESSCO Technologies Incorporated, a Delaware corporation (TESSCO, we, or the Company), architects and delivers innovative product and value chain solutions to support wireless systems. The Company provides marketing and sales services, knowledge and supply chain management, product-solution delivery and control systems utilizing extensive internet and information technology. Approximately ~~96%~~97% of the Company’s sales are made to customers in the United States. The Company takes orders in several ways, including phone, fax, online and through electronic data interchange. Almost all of the Company’s sales are made in United States Dollars.

In management’s opinion, the accompanying interim Consolidated Financial Statements of the Company include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the Company’s financial position for the interim periods presented. These statements are presented in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain information and footnote disclosures normally included in the Company’s annual financial statements have been omitted from these statements, as permitted under the applicable rules and regulations. The results of operations presented in the accompanying interim Consolidated Financial Statements are not necessarily representative of operations for an entire year. The information included in this Form 10-Q should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~29, 2020,~~28, 2021, filed with SEC on June ~~5, 2020.~~11, 2021.

On October 28, 2020, the Company entered into a definitive Inventory Purchase Agreement (the “Agreement”) which, at a closing held on December 2, 2020, resulted in the Company’s exit from its retail business through the sale to Voice Comm, LLC, a Delaware limited liability company (“Voice Comm”), of most of the Company’s retail inventory, the Ventev brand as it relates to mobile device accessory products, and certain other retail-related assets. The accompanying Consolidated Financial Statements for all periods presented reflect the results of the Retail segment as a discontinued operation. As a result, certain amounts have been reclassified on the balance sheet and statement of (loss) income to conform with current period presentation. See Note 11, “Discontinued Operations”, for further information.

Note 2. Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted:

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. This ASU is effective for periods beginning after December 15, 2022. The Company is currently evaluating the impact the adoption of this new standard will have on its Consolidated Financial Statements and will adopt the standard on the first day of the Company’s 2024 fiscal year.

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Recently issued accounting pronouncements adopted:

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, and the methodology for calculating income taxes in an interim period. This ASU is effective for periods beginning after December 15, 2020. The Company adopted this standard on the first day of the 2022 fiscal year on a prospective basis. The standard did not have a material impact on the financial statements.

Note 3. Intangible Assets

~~Intangibles,~~Intangible assets, net on our Consolidated Balance ~~Sheet~~Sheets as of June ~~28, 2020,~~27, 2021, consists of capitalized ~~internally development computer~~ software for internal use and an indefinite lived intangible assets. Capitalized ~~internally developed computer~~ software for internal use, net of accumulated amortization, was ~~$13,174,200~~$20,490,300 and $18,341,100 as of June 27, 2021 and March 28, ~~2020.~~2021, respectively. Amortization

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expense of capitalized ~~internally developed computer~~ software for internal use was $175,500 and $648,500 ~~as of~~for the fiscal quarter ended June 27, 2021 and June 28, ~~2020.~~2020, respectively. Indefinite lived intangible assets were $795,400 as of June 27, 2021 and March 28, ~~2020.~~2021.

Note 4. Stock-Based Compensation

The Company’s selling, general and administrative expenses for the fiscal quarter ended June ~~28, 2020~~27, 2021 includes ~~$311,900~~$254,900, of non-cash stock-based compensation expense. The Company’s selling, general and administrative expenses for the fiscal quarter ended June ~~30, 2019 includes $338,900~~28, 2020 included $311,900, of non-cash stock-based compensation expense. Non-cash stock-based compensation expense is primarily related to our Performance Stock Units (PSUs), Restricted Stock Units (RSUs), Restricted Stock, and Stock Options, granted or outstanding under the Company’s Third Amended and Restated Stock and Incentive Plan (the “1994 Plan”) and 2019 Stock and Incentive Plan (the “2019 Plan” and together with the 1994 Plan, the “Plans”), the latter of which was approved at the Annual Meeting of Shareholders held on July 25, 2019. No additional awards may be granted under the 1994 Plan, although awards outstanding under the 1994 Plan remain outstanding and governed by its terms.

Performance Stock Units: The following table summarizes the activity under the Company’s PSU program under the Plans, for the first three months of fiscal ~~2021:~~2022:

Three Months

Weighted

Ended

Average Fair

June 28,

Value at Grant

2020

Date (per unit)

Unvested shares available for issue under outstanding PSUs, beginning of period

68,355

$
15.00

PSUs Vested

(19,191)

14.17

PSUs Forfeited/Cancelled

(33,116)

15.69

Unvested shares available for issue under outstanding PSUs, end of period

16,048

$
14.57

The PSUs cancelled during the first quarter of fiscal 2021 primarily related to the fiscal 2020 grant of PSUs, which had a one-year measurement period (fiscal 2020). The PSUs were cancelled because the applicable fiscal 2020 performance targets were not attained. Per the provisions of the 2019 Plan, the shares related to these forfeited and cancelled PSUs were added back to the 2019 Plan and became available for future issuance under the 2019 Plan.


	Three Months	Weighted
	Ended	Average Fair
	June 27,	Value at Grant
	2021	Date (per unit)
Unvested shares available for issue under outstanding PSUs, beginning of period	13,552	$	14.57
PSUs Granted	96,603		7.32
PSUs Vested	(7,930)		13.89
PSUs Forfeited/Cancelled	(2,186)		13.79
Unvested shares available for issue under outstanding PSUs, end of period	100,039	$	10.44

If all unvested PSUs earned ~~thus far~~and outstanding as of June 27, 2021 are assumed to ~~vest~~have then vested (and the underlying shares issued) in accordance with terms of the applicable award agreement, total unrecognized compensation costs on these PSUs would be less than ~~$0.1~~$0.2 million as of June ~~28, 2020,~~27, 2021, and would be expensed through fiscal 2022.

Restricted Stock Units: On ~~May 15, 2020,~~April 29, 2021 the Compensation Committee, with the concurrence of the full

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Board of Directors, granted an aggregate of ~~21,000~~12,000 RSUs under the 2019 Plan to non-employee directors of the Company. These awards provide for the issuance of shares of the Company’s common stock in accordance with a vesting schedule that generally provides for the vesting of 25% of the award on or about each of May 15 of ~~2021,~~ 2022, 2023, 2024 and ~~2024,~~2025, provided that the participant remains associated with the Company (or meets other criteria as prescribed in the applicable agreement) on each such date.

Additionally, on May 25, 2021, the Compensation Committee, with the concurrence of the full Board of Directors, granted an aggregate of 24,761 RSUs under the 2019 Plan to non-employee directors of the Company. The RSUs were issued in lieu of cash payments for fiscal 2022 Board and Committee meetings. These awards provide for the issuance of shares of the Company’s common stock on May 25, 2022, provided that the participant remains associated with the Company (or meets other criteria as prescribed in the applicable agreement) on each such date.

Restricted Stock: On ~~May 15, 2020,~~April 29, 2021 the Compensation Committee, with the concurrence of the full Board of Directors, awarded an aggregate of ~~65,821~~22,252 shares of the Company’s common stock as restricted stock under the 2019 Plan to certain non-employee directors of the Company in lieu of their annual cash retainer for fiscal ~~2021.~~2022. The value of the restricted shares at the time of issue to each director was determined by the Compensation Committee to approximate the cash amount of the ~~2021~~2022 fiscal year ~~board~~Board retainer per director. These shares of restricted stock were issued subject to a risk of forfeiture that will lapse in whole or in part on July 1, ~~2021,~~

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2022, generally depending on the length of continued service of the recipient on the Board for fiscal ~~2021.~~2022. Dividends accruing in respect of the shares of restricted stock, if any, will accrue but will not be paid until July 1, ~~2021~~2022 and only in respect of those shares for which the risk of forfeiture has then lapsed.

As of June ~~28, 2020,~~27, 2021, there was approximately ~~$0.7~~$0.4 million of total unrecognized compensation cost related to all outstanding RSUs and restricted stock, assuming all shares are earned. Unrecognized compensation costs are expected to be recognized ratably over a weighted average period of approximately three years.

PSUs and RSUs are expensed based on the grant date fair value, calculated as the closing price of TESSCO common stock as reported by Nasdaq on the date of grant minus the present value of dividends expected to be paid on the common stock before the award vests, because dividends or dividend-equivalent amounts do not accrue and are not paid on unvested PSUs and RSUs.

The Company accounts for forfeitures as they occur rather than estimate expected forfeitures. To the extent that forfeitures occur, stock-based compensation related to the restricted awards may be different from the Company’s expectations.

Stock Options: ~~On April 30, 2020 and May 15, 2020,~~During the first quarter of fiscal 2022, stock options for an aggregate of ~~160,000~~177,500 shares of common stock were granted under the 2019 Plan. These stock options have exercise prices equal to the market price of the Company’s common stock on the grant date, and the terms thereof provide for 25% vesting after one year and then 1/36 per month over the following three years, subject, however, to acceleration or termination upon the occurrence of certain events, as described in the applicable award agreement.

The grant date value of the Company’s stock options is determined using the Black-Scholes-Merton pricing model, based upon facts and assumptions existing at the date of grant.

In addition, on May 15, 2020, performance-based stock options for an aggregate of 65,000 shares of common stock were granted under the 2019 Plan to certain officers of the Company. These stock options also have exercise prices equal to the market price of the Company’s stock on the grant date, and the terms thereof also provide for 25% vesting after one year and then ~~1/36~~ ~~per month over the following three years, but these stock options also impose 2 shorter term performance-based milestones, with the satisfaction of each milestone an additional condition to vesting of~~ ~~one~~-~~half~~ ~~of the options. The grant date value of the Company’s stock options is determined using the Black-Scholes-Merton pricing model, based upon facts and assumptions existing at the date of grant.~~

The value of each option ~~at the date of grant~~ is amortized as compensation expense over the service period. This occurs without regard to subsequent changes in stock price, volatility, or interest rates over time, provided the option remains outstanding.

~~The following tables summarize the pertinent information for outstanding options.~~

Three Months

Weighted

Ended

Average Fair

June 28,

Value at Grant

2020

Date (per unit)

Unvested options, beginning of period

465,374

$
2.38

Options Granted

225,000

2.00

Options Forfeited/Cancelled

(26,042)

1.85

Options Vested

(44,500)

3.28

Unvested options, end of period

619,833

2.20

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June 28, 2020
Grant Fiscal Year

Options Granted

Option Exercise Price

Options Outstanding

Options Exercisable
2021

225,000

$
4.52

225,000

-
2020

405,000

$
13.54

368,000

26,542
2019

66,500

$
16.31

44,000

21,874
2018

230,000

$
15.12

110,000

82,916
2017

410,000

$
12.57

273,958

269,794
2016

100,000

$
22.42

40,000

40,000
Total

1,060,958

441,126

The following tables summarize the pertinent information for outstanding options.

Grant Fiscal Year

Expected Stock Price Volatility

Risk-Free Interest Rate

Expected Dividend Yield

Average Expected Term

Resulting Black Scholes Value
2021

46.68
%

1.16
%

0.00
%

4.0

$
2.00
2020

35.88
%

2.00
%

5.82
%

4.0

$
2.53
2019

35.59
%

3.11
%

4.99
%

4.0

$
3.38


	Three Months	Weighted
	Ended	Average Fair
	June 27,	Value at Grant
	2021	Date (per unit)
Unvested options, beginning of period	383,670	$	1.47
Options Granted	177,500		3.69
Options Forfeited/Cancelled	(59,167)		2.58
Options Vested	(53,641)		2.11
Unvested options, end of period	448,362		2.76


				June 27, 2021
Grant Fiscal Year	Options Granted		Option Exercise Price	Options Outstanding	Options Exercisable
2022	177,500	$	3.69	177,500	-
2021	240,000	$	4.70	120,000	28,438
2020	405,000	$	13.54	319,000	147,158
2019	66,500	$	16.31	28,000	20,542
2018	230,000	$	15.12	60,000	60,000
2017	410,000	$	12.57	263,958	263,958
2016	100,000	$	22.42	40,000	40,000
Total				1,008,458	560,095


Grant Fiscal Year	Expected Stock Price Volatility		Risk-Free Interest Rate		Expected Dividend Yield		Average Expected Term	Resulting Black Scholes Value
2022	50.96	%	2.19	%	0.00	%	4.0	$	3.69
2021	46.82	%	1.17	%	0.00	%	4.0	$	2.05
2020	35.88	%	2.00	%	5.82	%	4.0	$	2.53

As of June ~~28, 2020,~~27, 2021, there was approximately ~~$1.3~~$1.2 million of total unrecognized compensation costs related to these options, assuming all shares are earned. These unrecognized compensation costs are expected to be recognized ratably over a period of approximately three years.

Note 5. Borrowings Under Revolving Credit Facility

On October ~~19, 2017,~~29, 2020, the Company ~~and its~~entered into a Credit Agreement (the “Credit Agreement”) among the Company, the Company’s primary operating subsidiaries as co-borrowers, ~~and SunTrust Bank, as Administrative Agent and Lender,~~the Lenders party thereto, and Wells Fargo Bank, National Association ~~as a Lender, entered into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”~~(“Wells”), ~~which amended~~as Administrative Agent, swingline lender and ~~restated the terms of a previously established secured Revolving Credit Facility with the same lenders, and which resulted in, among other modifications,~~ an ~~increase in the Company’s borrowing limit to up to $75 million, from the previous borrowing limit of up to $35 million. Capitalized terms~~issuing bank. Terms used, but not ~~otherwise~~ defined, in this and the following ~~three~~ten (10) paragraphs have the meanings ~~ascribed to each~~set forth in the ~~Amended~~Credit Agreement or the related Guaranty and ~~Restated Credit~~Security Agreement. This new facility replaced a previously existing credit facility among the Company and certain subsidiaries, the lenders party thereto (which included Wells) and Truist Bank (successor by merger to SunTrust Bank), as administrative agent.

~~In addition to increasing the Company’s borrowing limit, and among other modifications, the Amended and Restated~~The Credit Agreement ~~extended~~provides for a senior secured asset based revolving credit facility of up to $75 million (the “2020 Revolving Credit Facility”), which matures on April 29, 2024. The 2020 Revolving Credit Facility includes a $5.0 million letter of credit sublimit and provides for the ~~maturity date~~issuance of Swing Loans. The applicable Credit Agreement also includes a provision permitting the Company, subject to certain conditions, to increase the aggregate amount of the ~~secured~~commitments under the 2020 Revolving Credit Facility to ~~October 19, 2021. The Amended and Restated Credit Agreement also set forth financial covenants, including a fixed charge coverage ratio~~an aggregate commitment amount of up to ~~be maintained at any time during which the borrowing availability, as~~$125 million with optional additional commitments from then existing Lenders or new commitments from additional lenders, although no Lender is obligated to increase its commitment. Availability is determined in accordance with the ~~Amended~~Borrowing Base, which is generally 85% of Eligible Accounts minus the Dilution Reserve, plus a calculated value of Eligible Inventory aged less than 181 days plus the lesser

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of $4 million and ~~Restated~~a calculated value of Inventory aged more than 180 days minus a calculated Reserve, as further detailed and set forth in the Credit Agreement.

Borrowings initially accrue (or accrued) interest from the applicable borrowing date: (A) if a LIBOR Rate Loan, at a per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin of 2.25% until the March 31, 2021 financial statements were delivered and thereafter (i) if the Fixed Charge Coverage Ratio is less than 1.10:1.00, then the LIBOR Rate plus 2.25% or (ii) if the Fixed Charge Coverage Ratio is greater than or equal to 1.10:1.00, then the LIBOR Rate plus 2.00%; (B) if a Base Rate Loan, at a per annum rate equal to the Base Rate plus the Base Rate Margin of 1.25% per annum until the March 31, 2021 financial statements were delivered and thereafter (i) if the Fixed Charge Coverage Ratio is less than 1.10:1.00, then the Base Rate 1.25% or (ii) if the Fixed Charge Coverage Ratio is greater than or equal to 1.10:1.00, then the Base Rate plus 1.00%. The Credit Agreement ~~falls~~contains a LIBOR floor of 0.25% so that if the LIBOR Rate is below ~~$10 million,~~0.25%, then the LIBOR Rate will be deemed to be equal to 0.25% for purposes of the Credit Agreement. On June 27, 2021, the interest rate applicable to borrowings under the secured 2020 Revolving Credit Facility was 2.62%.

The Company is required to pay a monthly Unused Line Fee on the average daily unused portion of the 2020 Revolving Credit Facility, at a per annum rate equal to 0.25%.

Notwithstanding the above, pursuant to Amendment No. 1 to Credit Agreement dated July 12, 2021 (the “Amendment”), between Tessco and Wells, Wells agreed to a 25 basis point reduction in certain otherwise applicable rates and fees over a agreed period, as ~~well~~set forth in the Amendment. The Amendment also included certain changes related to the transition away from the use of LIBOR as a rate option, and is expected to simplify day-to-day management of the 2020 Revolving Credit Facility. It is anticipated that, so long as no event of default occurs, the interest rate applicable to borrowings under the 2020 Revolving Credit Facility will be lower than it otherwise would have been, going forward, until the end of the agreed period. This description is qualified in its entirety by the actual terms of the Amendment, a copy of which is attached as Exhibit 10.1 to this Quarterly Report on Form 10-Q.

Following an Event of Default, the Lenders’ may at their option increase the applicable per annum rate to a rate equal to 2 percentage points above the otherwise applicable rate and, with certain events of default such increase is automatic. In addition, at the written election of the Agent or the Required Lenders at any time while an Event of Default exists, the Company will no longer have the option to request that revolving loans be based on the LIBOR Rate.

The Credit Agreement contains 1 financial covenant, a Fixed Charge Coverage Ratio, which is tested only if Excess Availability (generally, borrowing availability less the aggregate of trade payables and book overdrafts, each in excess of historical amounts) is less than the greater of (a) 16.7% of the maximum amount of the Credit Facility (at closing, $12,525,000) and (b) $12,500,000. In addition, the Credit Agreement contains provisions that could limit our ability to engage in specified transactions or activities, including (but not limited to) investments and acquisitions, sales of assets, payment of dividends, issuance of additional debt and other matters. ~~The Amended~~

Borrowings under the 2020 Revolving Credit Facility were initially used to pay all indebtedness outstanding under the previously existing credit facility among the Company and ~~Restated Credit Agreement provides~~certain subsidiaries, the lenders party thereto and Truist Bank (successor by merger to SunTrust Bank), as administrative agent, and may be used for ~~a $5.0 million sublimit for the issuance of standby letters of credit, a $12.5 million sublimit for swingline loans~~working capital and ~~an accordion feature which,~~other general corporate purposes, and as further provided in, and subject to ~~certain conditions, could increase~~ the ~~aggregate amount~~applicable terms of, the ~~commitments to up to $125 million, with~~Credit Agreement. As of June 27, 2021, borrowings under the optional commitments being provided by existing Lenders or new lenders reasonably acceptable to the Administrative Agent. No Lender is obligated to increase its commitment. Availability is determined in accordance with a Borrowing Base, which has been expanded to include not only Eligible Receivables but also Eligible Inventory and is generally: (A) the sum of (i) 85% of Eligible Receivables; (ii) the Inventory Formula Amount for all Eligible Inventory which is aged less than 181 days; and (iii) the lesser of (x) $4secured 2020 Revolving Credit Facility totaled $39.7 million and, ~~(y)~~therefore, the ~~Inventory Formula Amount~~Company had $35.3 million available for ~~all Eligible Inventory which is aged at least 181 days; minus (B) Reserves.~~borrowing as of June

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~~Borrowings under the Amended and Restated Credit Agreement initially accrue interest from the applicable borrowing date at an Applicable Rate equal~~27, 2021, subject to the ~~Eurodollar Rate plus~~Borrowing Base limitation and compliance with the Applicable Margin. The Eurodollar Rate is the rate per annum obtained by dividing (i) LIBOR by (ii) a percentage equal to 1.00 minus the Eurodollar Reserve Percentage. When the Applicable Rate is the Eurodollar Rate plus the Applicable Margin, the Applicable Margin is 1.50% if Average Availability is greater than or equal to $15 million, and 1.75% otherwise. On June 28, 2020, the interest rateother applicable to borrowings under the secured Revolving Credit Facility was 1.68%. Under certain circumstances, the Applicable Rate is subject to change at the Lenders’ option from the Eurodollar Rate plus the Applicable Margin to the Base Rate plus the Applicable Margin. Following an Event of Default, in addition to changing the Applicable Rate to the Base Rate plus the Applicable Margin, the Lenders’ may at their option set the Applicable Margin at 0.50% if the Base Rate applies or 1.75% if the Eurodollar Rate applies, and increase the Applicable Rate by an additional 200 basis points. The Applicable Rate adjusts on the first Business Day of each calendar month. terms referenced above.

The Company is required to ~~pay a monthly Commitment Fee on~~make certain prepayments under the ~~average daily unused portion of the secured~~2020 Revolving Credit Facility ~~provided for pursuant to the Amended and Restated~~under certain circumstances, including from net cash proceeds from certain asset dispositions in excess of certain thresholds.

The Credit Agreement atcontains representations, warranties and affirmative covenants. The Credit Agreement also contains negative covenants and restrictions on, among other things: (i) Indebtedness, (ii) liens, (iii) fundamental changes, (iv) disposition of assets, (v) restricted payments (including certain restrictions on redemptions and dividends), (vi) investments and (vii) transactions with affiliates. The Credit Agreement also contains events of default, such as payment defaults, cross-defaults to other material indebtedness, misrepresentations, bankruptcy and insolvency, the occurrence of a ~~per annum rate equal~~Change of Control and the failure to ~~0.25%.~~

~~In connection with~~observe the ~~entering into of~~negative covenants and other covenants contained in the ~~Amended and Restated~~ Credit Agreement and the other loan documents.

Pursuant to a related Guaranty and Security Agreement, by and among the Company, the other ~~Company affiliate~~ borrowers under the ~~Amended and Restated~~ Credit Agreement and other operating subsidiaries of the Company ~~referred to collectively as~~(collectively, the ~~Loan Parties, executed~~“Loan Parties”), and ~~delivered to SunTrust Bank,~~Wells, as Administrative Agent, ~~a Reaffirmation Agreement, pursuant to~~the Obligations, which include the obligations ofunder the ~~Loan Parties under a Guaranty and Security~~Credit Agreement, ~~previously delivered by them in connection with the secured Revolving Credit Facility as previously existing (including the previously existing guaranty~~are guaranteed by the Loan Parties, ~~not otherwise Borrowers~~ and secured by continuing first priority security interests in the ~~previously existing grant by the Company~~Company’s and the other Loan ~~Parties~~Parties’ (including both borrowers and guarantors) Accounts, Books, Chattel Paper, Deposit Accounts, General Intangibles, Inventory, Negotiable Collateral, Supporting Obligations, Money, Cash Equivalents or other assets that come into the possession, custody or control of ~~a continuing first priority~~the Agent or any Lender, and related assets, and the proceeds and products of any of the foregoing (the “Collateral”). The security ~~interest~~interests in ~~inventory, accounts receivable and deposit accounts, and on all documents, instruments, general intangibles, letter~~the Collateral are in favor of ~~credit rights, and all proceeds) were ratified and confirmed as respects~~ the ~~Obligations arising~~Administrative Agent, for the benefit of the Lenders party to the Credit Agreement from time to time ~~under~~and any other holders of the Obligations. The Obligations secured ~~Revolving Credit Facility provided for under the Amended and Restated Credit Agreement, and as respects~~also include certain other obligations of the Loan Parties to the Lenders and their affiliates arising from time to time, relating to swaps, hedges and cash management and other bank products.

Borrowings may be used for working capital and other general corporate purposes, as further provided in, and subject to the applicable terms of, the Amended and Restated Credit Agreement. As of June 28, 2020, borrowings under the secured Revolving Credit Facility totaled $25.3 million and, therefore, the Company had $49.7 million available for borrowing as of June 28, 2020, subject to the Borrowing Base limitation and compliance with the other applicable terms of the Amended and Restated Credit Agreement, including the covenants referenced above. The line of credit has a lockbox arrangement associated with it and therefore the outstanding balance is classified as a current liability on our balance sheet. As of March 29,2020, borrowings under the secured Revolving Credit Facility totaled $25.6 million and, therefore, the Company had $49.4 million available on its revolving line of credit facility as of March 29, 2020, again subject to the Borrowing Base limitation and compliance with the other applicable terms of the Amended and Restated Credit Agreement, including the covenants referenced above.

Note 6. Earnings Per Share

The Company presents the computation of earnings per share (“EPS”) on a basic and diluted basis. Basic EPS is computed by dividing net income by the weighted average number of shares outstanding during the reported period. Diluted EPS is computed similarly to basic EPS, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential additional common shares that were dilutive had been issued. Common shares are excluded from the calculation if they are determined to be anti-dilutive. Diluted EPS was equal to basic EPS for the fiscal quarter ended June ~~28, 2020~~

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27, 2021 because the Company operated at a loss. The number of diluted weighted-average common shares would have been ~~8,686,214~~8,943,722 for the fiscal quarter ended June ~~28, 2020,~~27, 2021, if the Company was atin a positive earning position. At June ~~28, 2020,~~27, 2021, stock options with respect to ~~1,060,958~~1,008,458 shares of common stock were outstanding, of which ~~855,958~~705,958 were anti-dilutive. There were 0 anti-dilutive PSUs or RSUs outstanding as of June ~~28, 2020.~~27, 2021.

Note 7. Business ~~Segments~~Segment

After exiting our Retail business, the Company operates as 1 business segment. The Company ~~evaluates its business within 2 segments: commercial~~will continue to present revenue and ~~retail. The commercial segment consists of~~gross profit by the following customer markets: (1) public carriers, ~~that~~which are generally responsible for building and maintaining the infrastructure system and provide airtime service to individual subscribers; and (2) commercial, formerly value-added resellers and integrators, which includes value-added resellers, the government channel and private system operator markets.

~~The retail segment consists of the retail market which includes retailers, independent dealer agents and carriers.~~

~~To provide investors with better visibility, the Company also discloses revenue and gross profit by its 4 product categories:~~

●

Base Station Infrastructure - Base station infrastructure products are used to build, repair and upgrade wireless telecommunications systems. Products include base station antennas, cable and transmission lines, small towers, lightning protection devices, connectors, power systems, miscellaneous hardware, and mobile antennas. Base station infrastructure service offerings include connector installation, custom jumper assembly, site kitting and logistics integration.

●

Network Systems - Network systems products are used to build and upgrade computing and internet networks. Products include fixed and mobile broadband equipment, distributed antenna systems (DAS), wireless networking, filtering systems, two-way radios and security and surveillance products. This product category also includes training classes, technical support and engineering design services.

●

Installation, Test and Maintenance - Installation, test and maintenance products are used to install, tune, maintain and repair wireless communications equipment. Products include sophisticated analysis equipment and various frequency, voltage- and power-measuring devices, as well as an assortment of tools, hardware, GPS, safety and replacement and component parts and supplies required by service technicians.

●

Mobile Device Accessories - Mobile device accessories include cellular phone and data device accessories such as replacement batteries, cases, speakers, mobile amplifiers, power supplies, headsets, mounts, car antennas, music accessories and data and memory cards. Retail merchandising displays, promotional programs, customized order fulfillment services and affinity-marketing programs, including private label internet sites, complement our mobile devices and accessory product offering.

The Company evaluates revenue, gross profit, and income before provision for income taxes at the segment level. Certain cost of sales and other applicable expenses have been allocated to each segment based on a percentage of revenues and/or gross profit, where appropriate.

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Market activity for the first quarter of fiscal years 2022 and 2021 are as follows (in thousands):


	Three Months Ended
		June 27, 2021		June 28, 2020
Revenues
Public carrier	$	46,020	$	39,255
Commercial		58,936		57,223
Total revenues	$	104,956	$	96,478

Gross Profit
Public carrier	$	5,322	$	3,728
Commercial		14,364		12,725
Total gross profit	$	19,686	$	16,453

~~Segment activity for the first quarter of fiscal years 2021 and 2020 are as follows (in thousands):~~

Three Months Ended

June 28, 2020

June 30, 2019

Commercial

Retail

Commercial

Retail

Segment

Segment

Total

Segment

Segment

Total

Revenues








Public carrier

$
39,255

$
—

$
39,255

$
33,486

$
—

$
33,486

Value-added resellers and integrators

57,223

—

57,223

65,194

—

65,194

Retail

—

23,336

23,336

—

32,049

32,049

Total revenues

$
96,478

$
23,336

$
119,814

$
98,680

$
32,049

$
130,729

Gross Profit

Public carrier

$
3,728

$
—

$
3,728

$
4,253

$
—

$
4,253

Value-added resellers and integrators

12,725

—

12,725

15,969

—

15,969

Retail

—

2,373

2,373

—

5,042

5,042

Total gross profit

$
16,453

$
2,373

$
18,826

$
20,222

$
5,042

$
25,264

Directly allocable expenses

7,462

1,832

9,294

9,570

3,015

12,585

Segment net profit contribution

$
8,991

$
541

9,532

$
10,652

$
2,027

12,679

Corporate support expenses

14,551

16,209

Income before provision for income taxes

$
(5,019)

$
(3,530)

~~Supplemental revenue and gross profit information by product category for the first quarter of fiscal years 2021 and 2020 are as follows (in thousands):~~

Three Months Ended

June 28, 2020

June 30, 2019

Revenues

Base station infrastructure

$
68,855

$
69,069

Network systems

19,400

22,552

Installation, test and maintenance

5,462

6,025

Mobile device accessories

26,097

33,083

Total revenues

$
119,814

$
130,729

Gross Profit

Base station infrastructure

$
11,418

$
14,521

Network systems

2,133

3,927

Installation, test and maintenance

766

1,084

Mobile device accessories

4,509

5,732

Total gross profit

$
18,826

$
25,264

Note 8. Leases

The Company leases certain office spaces and equipment. Leases with an initial term of twelve months or less are not recorded on the balance sheet. The Company’s leases include rental payments adjusted for inflation. The right-of-use lease asset and lease liability are recorded on our Consolidated Balance ~~Sheet.~~Sheets.

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Quantitative information regarding the Company’s leases is as follows:


		Three Months Ended
		June 28, 2020
Operating lease expense	$	871,900

		As of June 28, 2020		As of June 27, 2021
Maturities of lease liabilities by fiscal year are as follow:
2021	$	2,364,100
2022		3,164,000	$	3,164,000
2023		3,018,300		3,018,300
2024		2,725,700		2,725,700
2025		2,609,900		2,609,900
Thereafter		1,987,600
2026				1,987,600
Total		15,869,600		13,505,500
Less: present value discount		(2,437,700)		(2,636,100)
Present value of lease liabilities	$	13,431,900	$	10,869,400

Weighted-average discount rate:		3.8%		3.9%
Weighted-average remaining lease term		5.1 years		4.5 years

Note 9. Shares Withheld

The Company withholds shares of common stock from its employees and directors at their request, equal to the minimum federal and state tax withholdings or proceeds due to the Company related to vested PSUs, stock option exercises and vested RSUs. For the three months ended June ~~28, 2020~~27, 2021 and June ~~30, 2019,~~28, 2020, the aggregate value of the shares withheld totaled ~~$58,800~~$28,900 and ~~$189,100,~~$58,800, respectively.

Note 10. Concentration of Risk

The Company’s future results could be negatively impacted by the loss of certain customer and/or vendor relationships.

For the fiscal quarter ended June 27, 2021 and June 28, 2020, revenue from the Company’s largest customer

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accounted for ~~10.4%~~7.2% and 12.9% of ~~consolidated revenue.~~ revenue from continuing operations, respectively.

For the fiscal quarter ended June ~~30, 2019, no customer~~27, 2021, sales of products purchased from the Company’s largest supplier accounted for ~~more than 10%~~33.3% of ~~total consolidated revenues.~~

revenue from continuing operations. For the fiscal quarter ended June 28, 2020, sales of products purchased from the Company’s largest supplier accounted for ~~21.6%~~26.8% of ~~consolidated revenue. For the fiscal quarter ended June 30, 2019, sales of products purchased~~revenue from ~~the Company’s largest supplier accounted for 21.5% of consolidated revenue.~~continuing operations. No other suppliers accounted for more than 10% of consolidated revenue.

Note 11. ~~Subsequent Event~~Discontinued Operations

~~On July~~At a closing on December 2, 2020, the ~~Board~~Company sold most of ~~Directors adopted resolutions providing~~its retail inventory, the Ventev brand as it relates to mobile device accessory products, and certain other retail-related assets to Voice Comm, LLC (Voice Comm). Cash proceeds of $9.5 million were received at closing, which occurred during the third quarter of fiscal 2021. As part of the sale agreement, the Company is entitled to royalty payments of up to $3.0 million in the aggregate on the sale of Ventev branded products by Voice Comm over a four-year period after the closing. Additionally, future customer returns to the Company may be resold to Voice Comm over a two-year period after the closing.

As a result of the disposal described above, the operating results of the former Retail segment has been included in Income (loss) from discontinued operations, net of taxes, in the Consolidated Statements of (Loss) Income for all periods presented.

The accompanying Consolidated Financial Statements for all periods presented reflect the results of the Retail segment as a discontinued operation. The following table presents the financial results of the Retail segment for the ~~retirement~~three months ended June 27, 2021 and June 28, 2020:


	Three Months Ended
	June 27, 2021		June 28, 2020

Revenues	$	1,498,800	$	23,335,900
Cost of goods sold		424,900		20,962,900
Gross profit		1,073,900		2,373,000
Selling, general and administrative expenses		584,400		2,201,900
Goodwill impairment		—		—
Income from operations		489,500		171,100
Gain on disposal		—		—
Income before benefit from income taxes		489,500		171,100
Benefit from income taxes		(6,000)		(66,200)
Net income attributable to discontinued operations	$	495,500	$	237,300

The financial results reflected above may not fully represent our former Retail segment stand-alone operating net profit, as the results reported within Income (loss) from discontinued operations, net of ~~the Company’s then accumulated treasury stock,~~taxes, include only certain costs that are directly attributable to this former segment and exclude certain corporate overhead and operational costs that may have been previously allocated for ~~a corresponding reduction in capital. Immediately prior to the retirement, the Company held 5,789,600 shares of issued but not outstanding common stock as treasury stock, at a cost of~~each period.

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~~$58,555,000. Upon retirement,~~The following table summarizes the ~~cost~~major classes of assets attributable to discontinued operations that are included in the ~~treasury stock~~Current portion of assets held for sale in the Company’s Consolidated Balance Sheets as of June 27, 2021 and March 28, 2021:


	June 27,		March 28,
	2021		2021

ASSETS
Product inventory, net	$	1,042,600	$	1,196,900
Current portion of assets held for sale	$	1,042,600	$	1,196,900

The product inventory remaining at June 27, 2021 represents Retail inventory that was ~~netted against retained earnings, and~~not sold to Voice Comm. Management intends to sell through this inventory in the number of authorized and unissued shares of common stock correspondingly increased by 5,789,600 shares. The total number of authorized shares of common stock remains unchanged at 15,000,000. The impact of these resolutions will be reflected within the consolidated financial statements beginningnear term in alignment with the ~~second quarter of fiscal 2021. There has been 0 change~~plan to exit the ~~total stockholders’ equity as a result of such resolutions.~~Retail business.

In our Consolidated Statements of Cash Flows, the cash flows from discontinued operations are not separately classified. Cash provided by operating activities from discontinued operations for the three months ended June 27, 2021 and June 28, 2020 was $4.1 million and $1.6 million, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This commentary should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations from the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~29, 2020,~~28, 2021, filed with the SEC on June ~~5, 2020.~~11, 2021.

Business Overview and Environment

~~TESSCO~~Tessco architects and delivers innovative product and value chain solutions to support wireless ~~broadband~~ systems. Although we sell products to customers in many countries, approximately ~~96%~~97% of our sales are made to customers in the United States. We have operations and office facilities in Hunt Valley, Maryland, Reno, Nevada and San Antonio, Texas.

~~The Company evaluates its~~On December 2, 2020, we sold most of our Retail inventory and certain other retail-related assets to Voice Comm. In connection with this sale, we assigned or licensed certain Ventev®- related intellectual property to Voice Comm, including our Ventev® trademark for their use in connection with the sale of mobile device and accessory products. Together, this resulted in our exit from our Retail business. Cash proceeds of $9.5 million were received at the time of sale. As part of the sale agreement, we are entitled to royalty payments, up to $3.0 million in the aggregate, on the sale of Ventev® branded products by Voice Comm over a four-year period after closing. Additionally, some customer returns we receive may be resold to Voice Comm over a two-year period after closing. As a result of the disposal, the operating results of our former Retail segment have been included in Income (loss) from discontinued operations, net of taxes in the Consolidated Statements of (Loss) Income for all periods presented. We retain the Ventev® tradename for non-mobile device accessory products.

As a result of this sale and our exit from the Retail business during the third quarter of fiscal 2021, we now operate as one business segment.

We provide certain information within two ~~segments: commercial and retail. The commercial segment consists of the following customer~~key markets: (1) public carriers, ~~that~~which are generally responsible for building and maintaining the infrastructure system and provide airtime service to individual subscribers; and (2) ~~value-added resellers and integrators,~~commercial, which includes value-added resellers, the government channel and private system operator markets. ~~The retail segment consists of the retail market which includes retailers, independent dealer agents and carriers.~~

We offer a wide range of products that are classified into ~~four product~~three categories: base station infrastructure; network systems; and installation, test and ~~maintenance; and mobile device accessories.~~maintenance. Base station infrastructure products are used to build, repair and upgrade wireless ~~telecommunication systems.~~telecommunications. Sales of traditional base station infrastructure products, such as base station radios, cable and transmission lines and antennas are in part dependent on capital spending in the wireless communications industry. Network systems products are used to build and upgrade computing and internet networks. WeIn this category, we have also been growing our offering of wireless broadband, ~~distributed antennas systems (DAS),~~ network equipment, security and surveillance products, which are not as dependent on the overall capital spending of the industry. Installation, test and maintenance products are used to install, tune, and maintain wireless communications equipment. This category is made up of sophisticated analysis equipment and various ~~frequency, voltage~~frequency-, voltage- and power-measuring devices, replacement parts and components as well as an assortment of tools, hardware and supplies required by service technicians. ~~Mobile device accessories products include cellular phone and data device accessories.~~

Our ongoing ability to earn revenues and gross profits from customers and suppliers looking to us for product and supply chain solutions depends upon a number of factors. The terms, and accordingly the factors, applicable to each relationship often differ. Among these factors are the strength of the customer’s or supplier’s business, the supply and demand for the product or service, including price stability, changing customer or supplier requirements, and our ability to support the customer or supplier and to continually demonstrate that we can improve the way they do business. In addition, the agreements or arrangements on which our customer and supplier relationships are based are typically of limited duration, typically do not include any obligation in respect of any specific product purchase or sale and are terminable by either party upon several months or otherwise relatively short notice. Because of the nature of our business, we have been affected from time to time in the past by the loss and changes in the business habits of significant customers and suppliers, and expect that we will again be so affected from time to time in the future. Our customer and supplier relationships could also be affected by wireless carrier consolidation or the overall global economic environment, or other events beyond our control, including the COVID-19 pandemic.

The wireless communications distribution industry is competitive and fragmented, and is comprised of several national distributors. In addition, many manufacturers sell direct. Barriers to entry for distributors are relatively

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low, ~~particularly in the mobile devices and accessories market,~~ and the risk of new competitors entering the ~~marketplace~~market is high. Consolidation of larger wireless carriers has and will most likely continue to impact our current and potential customer base. In addition, the agreements or arrangements with our customers or suppliers looking to us for product and supply chain solutions are typically of limited duration and are terminable by either party upon several months or otherwise short notice. Our ability

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to maintain ~~customer and supplier~~these relationships is subject to competitive pressures and challenges. We believe, however, that our strength in service, the breadth and depth of our product offering, our information technology system, ~~industry experience and knowledge, and~~ our large customer base and our purchasing relationships with approximately ~~350~~300 manufacturers provide us with a significant competitive advantage over new entrants to the ~~marketplace.~~market.

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Results of Continuing Operations

First quarter of Fiscal Year ~~2021~~2022 Compared with First quarter of Fiscal Year ~~2020~~2021

Total Revenues. Revenues for the first quarter of fiscal ~~2021 decreased 8.3%~~2022 increased 8.8% compared with the first quarter of fiscal ~~2020. Revenue~~2021. Revenues in ~~the~~our commercial ~~segment decreased by 2.2%. Revenues~~market (formerly referred to as VAR and Integrator) increased 3.0%, and revenue in our public carrier market increased by 17.2%~~, partially offset by a 12.2% decline in revenues~~. This increase in the ~~value-added resellers~~public carrier market was due to gaining additional market share and ~~integrators market. Revenues~~improving macro-economic trends as the impact of the COVID-19 pandemic lessens. The increase in ~~our retail segment decreased by 27.2%. The decline in~~commercial market revenues ~~in the retail segment and VAR and Integrators market were~~was also largely driven by ~~a combination of continued overall softness in these markets, and~~ the lower impact of COVID-19 in the first quarter of fiscal year 2021, which affected both of our business segments. We expect the challenges we have been facing in our retail segment to continue for the foreseeable future and are focused on measures to manage the decline of this segment. We also expect the challenges we have been facing in our commercial segment to continue, but to a much lesser extent, and we are focused on growth and expansion of this segment .COVID-19.

Cost of Goods Sold. Cost of goods sold for the first quarter of fiscal ~~2021 decreased 4.2%~~2022 increased 6.6% compared with the first quarter of fiscal ~~2020. In the commercial segment, cost of goods sold increased by 2.0%.~~2021. Cost of goods sold in our public carrier market increased by ~~21.5%~~14.6%, ~~partially offset by a 9.6% decrease in~~and cost of goods sold in our ~~value-added resellers and integrators market. Cost of goods sold~~commercial market increased by 0.2%, in ~~our retail segment decreased by 22.4%.~~each case for the first quarter year-over-year. These changes in cost of goods sold in both ~~segments~~markets were largely driven by changes in revenue and customer mix, as discussed above.

As discussed above under the heading “Business Overview and Environment,” our ongoing ability to earn revenues and gross profits from customers and suppliers depends upon a number of factors that often differ for each relationship. Agreements or arrangements on which these relationships are based typically do not include any obligation in respect of any specific product purchase or sale, are of limited duration, and are terminable by either party upon relatively short notice. We have been affected from time to time in the past by the loss and changes in the business habits of significant customers and suppliers, and expect that we will again be so affected from time to time in the future. Our customer and supplier relationships could also be affected by wireless carrier consolidation or the overall global economic environment, or other events beyond our control, including the COVID-19 pandemic.

Total Gross Profit. Gross profit for the first quarter of fiscal ~~2021 decreased~~2022 increased by ~~25.5%~~19.7% compared to the first quarter of fiscal ~~2020.~~2021. This ~~decrease~~increase was primarily due to ~~lower sales volume and a change~~increased revenues. Overall gross profit margin increased from 17.1% in ~~customer mix favoring~~last year’s first quarter to 18.8% for the ~~lower margin public carrier market. Within our commercial segment, gross~~first quarter of fiscal 2022. Gross profit margin in our public carrier market ~~decreased~~increased to 11.6% from ~~12.7% to~~ 9.5%. in the same quarter last year. Gross profit margin in our ~~value-added resellers and integrators~~commercial market ~~decreased from 24.5%~~increased to 22.2%. We experienced margin compression within our public carrier market primarily due to a change in customer mix, with increased sales going to larger customers with lower margins. Within our retail segment, gross profit margin decreased from 15.7% to 10.1%24.4% in the first quarter of fiscal ~~2021, compared~~2022 from 22.2% in the same quarter last year. These gross margin improvements are primarily related to ~~2020, primarily due to~~changes in customer and product mix, as ~~smaller,~~well as higher ~~margin~~freight charged to customers

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~~experienced impacts related~~ to ~~COVID-19. As a result of these drivers on gross profit, overall gross profit margin decreased to 15.7%~~offset increased freight costs included in ~~the first quarter of fiscal 2021, compared to 19.3% in the first quarter of fiscal 2020.~~selling, general, and administrative expenses.

Selling, General ~~Administrative~~ and ~~Restructuring~~Administrative Expenses. Total selling, general and administrative expenses ~~decreased~~increased by ~~$4.4~~$0.1 million for the first quarter of fiscal ~~2021,~~2022, compared to the first quarter of fiscal ~~2020.~~2021. Selling, general and administrative expenses as a percentage of revenues decreased from ~~21.4%~~22.3% for the first quarter of fiscal ~~2020,~~2021, to ~~19.8%~~20.6% for the first quarter of fiscal ~~2021.~~2022.

The ~~decrease~~increase in our selling, general and administrative expenses was primarily due to ~~a decrease~~an increase of ~~$2.2 million in compensation and benefit expense, $1.0 million in sales promotion expense, and $0.7~~$1.2 million in freight expense, resulting from higher sales and higher rates due to national supply chain constraints and higher compensation and benefits cost of $0.7 million, primarily related to higher sales commissions and increased health insurance costs. These increases were partially offset by a $1.4 million decrease in information technology expenses during the first quarter of fiscal ~~2021~~2022 as compared to the first quarter of fiscal ~~2020. These decreases were largely due to the decline in overall revenues and in cost reduction initiatives undertaken in the first quarter, primarily associated with the retail segment.~~2021.

~~The Company also incurred a $0.5 million restructuring charge related to severance expense for the first quarter~~Table of ~~fiscal 2020.~~Contents

We continually evaluate the credit worthiness of our existing customer receivable portfolio and provide an appropriate reserve based on this evaluation. We also evaluate the credit worthiness of prospective and current customers and make decisions regarding extension of credit terms to such customers based on this evaluation. We had bad debt ~~recovery, net of~~ expense of ~~$13,700~~$187,800 and ~~bad debt expense of $135,400~~$30,400, for the three months ended June ~~28, 2020~~27, 2021 and June ~~30, 2019,~~28, 2020, respectively.

Interest, Net. Net interest expense ~~decreased~~increased from ~~$208,700 for the first quarter of fiscal 2020 to~~ $110,700 for the first quarter of fiscal ~~2021. Decrease~~2021 to $213,700 for the first quarter of fiscal 2022. An increase in the average amount outstanding and higher interest rates ~~have resulted in decreased interest expense~~ under our ~~secured~~2020 Revolving Credit Facility ~~(discussed~~resulted in ~~Note 4~~increased interest expense in the first fiscal quarter of 2022. In addition, capitalized interest increased from $48,800 from the first quarter of fiscal 2021 to ~~our Consolidated Financial Statements, included in this Quarterly Report on Form 10-Q).~~$210,500 for the first quarter of fiscal 2022.

Income Taxes, Net Income and Diluted Earnings per Share. The effective tax rate decreased from 29.4% for the first quarter of fiscal 2020 to 7.7% for the first quarter of fiscal 2021. The decrease in the effective tax rate resulted from several discrete items including changes associated with state adjustments related to the CARES Act. We expect the tax rate to be higher for the rest of the fiscal year. Net income decreased 85.8% and diluted earnings per share decreased 86.2%6.2% for the first quarter of fiscal 2021 to 1.8% for the first quarter of fiscal 2022. Net loss decreased 54.6% and diluted loss per share decreased from $(0.56) to ($0.25) for the first quarter of fiscal 2022, compared to the corresponding prior-year quarter.

Discontinued Operations. Net income from discontinued operations was $0.5 million for the first quarter of fiscal year 2022 compared to $0.2 million for the first quarter of fiscal year 2021. See footnote 11, “Discontinued Operations”, for further discussion.

Liquidity and Capital Resources

The following table summarizes our cash flows provided by or used in operating, investing and financing activities for the three months ended June ~~28, 2020~~27, 2021 and June ~~30, 2019.~~28, 2020.


	Three Months Ended				Three Months Ended
	June 28, 2020		June 30, 2019		June 27, 2021		June 28, 2020
Cash flow provided by (used in) operating activities	$	1,444,600	$	(1,985,900)
Cash flow (used in) provided by operating activities					$	(5,832,300)	$	3,439,100
Cash flow used in investing activities		(1,218,100)		(1,870,300)		(2,173,900)		(3,212,600)
Cash flow (used in) provided by financing activities		(275,600)		3,843,100
Net decrease in cash and cash equivalents	$	(49,100)	$	(13,100)
Cash flow provided by (used in) financing activities						9,103,700		(275,600)
Net increase (decrease) in cash and cash equivalents					$	1,097,500	$	(49,100)

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Net cash ~~provided by~~used in operating activities was ~~$1.4~~$5.8 million for the first three months of fiscal ~~2021,~~2022, compared with net cash ~~used in~~provided by operating activities of ~~$2.0~~$3.4 million for the first three months of fiscal ~~2020. This~~2021. The fiscal ~~2020 inflow~~2022 outflow was due to ~~a decrease in accounts receivable, partially offset by~~ the net loss, and ~~a decrease~~the increase in ~~trade~~inventory, accounts receivable and prepaid expenses, partially offset by an increase in accounts payable.

Net cash used in investing activities was ~~$1.2~~$2.2 million for the first three months of fiscal ~~2021,~~2022, compared to ~~$1.9~~$3.2 million used in the first three months of fiscal ~~2020. Cash used in both periods was due~~2021. Both years are related to capital expenditures, largely comprised of investments in information technology.

Net cash provided by financing activities was $9.1 million for the first three months of fiscal 2022, compared to net cash used in financing activities ~~was~~of $0.3 million for the first three months of fiscal ~~2021, compared to net cash provided by financing activities of $3.8 million for the first three months of fiscal 2020.~~2021. We ~~repaid~~utilized our asset based secured Revolving Credit Facility during the first three months of fiscal ~~2021,~~2022, leading to a cash ~~outflow~~inflow of ~~$0.2~~$9.1 million during this period. During the first three months of fiscal ~~2020,~~2021, we utilized our asset based secured Revolving Credit Facility, leading to a cash ~~inflow~~outflow of ~~$5.7~~$0.2 million during this period. This inflow was partially offset by a cash outflow of $1.7 million during the first three months of fiscal 2020 due to cash dividends paid to shareholders. No cash dividend was paid during the first three months of fiscal 2021.

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On October ~~19, 2017,~~29, 2020, we entered into a Credit Agreement (the “Credit Agreement”) among the Company, ~~and its~~the Company’s primary operating subsidiaries as co-borrowers, ~~entered into an Amended and Restated Credit Agreement with SunTrust Bank, as Administrative Agent,~~the Lenders party thereto, and Wells Fargo Bank, National Association ~~as a lender (the “Amended and Restated Credit Agreement”~~(“Wells”), ~~which amended~~as Administrative Agent, swingline lender and ~~restated the terms of a previously established~~an issuing bank, and terminated our previous secured Revolving Credit ~~Facility and which resulted in, among other modifications, an increase in the Company’s borrowing limit to~~Facility. The Credit Agreement provides for a senior secured asset based revolving credit facility of up to $75 million ~~from the previous borrowing limit of up to $35 million. In addition to increasing the borrowing limit, and among other modifications, the Amended and Restated~~(the “2020 Revolving Credit ~~Agreement extended the applicable maturity date to October 19, 2021.~~Facility”), which matures in forty-two months, on April 29, 2024. This new facility replaced a previously existing facility. As of June ~~28, 2020,~~27, 2021, borrowings under the secured 2020 Revolving Credit Facility totaled ~~$25.3~~$39.7 million; therefore, we then had ~~$49.7~~$35.3 million available, subject to the Borrowing Base limitations and compliance with the other applicable terms of the ~~Amended and Restated~~ Credit Agreement, including the financial and other covenants discussed in Note 45 to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Borrowings under the ~~Amended and Restated~~ Credit Agreement accrue interest at the rates, and the Company is required to pay a monthly commitment fee, as also discussed in Note 45 to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

In connection with the entering into of the Amended and Restated Credit Agreement, the Company and the other Company affiliate borrowers under the Amended and Restated Credit Agreement, and other subsidiaries, referred to collectively as the Loan Parties, executed and delivered to SunTrust Bank, as Administrative Agent, a Reaffirmation Agreement, pursuant to which the obligations of the Loan Parties under the Guaranty and Security Agreement previously delivered by the Loan Parties in connection with the secured Revolving Credit Facility as previously existing (including the previously existing guaranty by the Loan Parties not otherwise Borrowers and the previously existing grant by the Company and the other Loan Parties of a continuing first priority security interest in inventory, accounts receivable and deposit accounts, and on all documents, instruments, general intangibles, letter of credit rights, and all proceeds) were ratified and confirmed as respects the Obligations arising from time to time under the secured Revolving Credit Facility provided for pursuant to the Amended and Restated Credit Agreement.

We believe that our existing cash, payments from customers and availability under ~~our~~the secured 2020 Revolving Credit Facility will be sufficient to support our operations for at least the next twelve months. To minimize interest expense, our policy is to apply excess available cash to reduce the balance outstanding from time to time on our secured Revolving Credit Facility. Our increased focus over the past several ~~quarters~~years on business opportunities for sales to our public carrier customers led to the recent expansion of our borrowing limits, as now reflected in the 2020 secured Revolving

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Credit Facility, and has at times resulted in increased borrowings and dependence on that facility. We expect this trend to continue, although at present we have no plans for any further expansion of the current facility. If we were to undertake an acquisition or other major capital purchases that require funds in excess of existing sources of liquidity, we would look to sources of funding from additional credit facilities, debt and/or equity issuances. As of June ~~28, 2020,~~27, 2021, we do not have any material capital expenditure commitments.

In addition, our liquidity could be negatively impacted by decreasing revenues and profits resulting from a decrease in demand for our products or a reduction in capital expenditures by our customers, or by the weakened financial conditions of our customers or suppliers, in each case as a result of a downturn in the global economy, among other factors.

Recent Accounting Pronouncements

A description of recently issued and adopted accounting pronouncements is contained in Note 2 to our Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our unaudited Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

For a detailed discussion on our critical accounting policies, please refer to our Annual Report on Form 10-K for the fiscal year ended March ~~29, 2020,~~28, 2021, filed with the SEC on June ~~5, 2020.~~11, 2021.

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Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements.

Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain forward-looking statements. These forward-looking statements may generally be identified by the use of the words “may,” “will,” “expects,” “anticipates,” “believes,” “estimates,” “intends,” “projects,” “plans,” “should,” “would,” “could,” and similar expressions, but the absence of these words or phrases does not necessarily mean that a statement is not forward looking. Forward looking statements involve a number of known and unknown risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Our actual results may differ materially from those described in or contemplated by any such forward-looking statement for a variety of reasons, including those risks identified in our most recent Annual Report on Form 10-K, this Quarterly Report on Form 10-Q, and other periodic reports filed with the SEC, under the heading “Risk Factors” and otherwise. Consequently, the reader is cautioned to consider all forward-looking statements in light of the risks to which they are subject.

We are not able to identify or control all circumstances that could occur in the future that may adversely affect our business and operating results. Without limiting the risks that we describe in our periodic reports and

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elsewhere, among the risks that could lead to a materially adverse impact on our business or operating results are the following: the impact and results of any new or continued activism activities by Robert B. Barnhill, Jr. and/or other activist investors; termination or non-renewal of limited duration agreements or arrangements with our ~~vendors~~suppliers and affinity partners ~~that~~which are typically terminable by either party upon several months or otherwise relatively short notice; loss of significant customers, suppliers or relationships, including affinity relationships; loss of customers or reduction in customers’ business either directly or indirectly as a result of consolidation among large wireless service carriers and others within the wireless communications industry; any deterioration in the strength of our customers', ~~vendors'~~suppliers and affinity partners' ~~business;~~businesses; increasingly negative or ~~prolonged~~ adverse economic conditions, including those adversely affecting consumer confidence or consumer or business spending, or otherwise adversely affecting our ~~vendors~~suppliers or customers, including their access to capital or liquidity or our customers’ demand for, or ability to fund or pay for the purchase, our products and services; our dependence on a relatively small number of suppliers, ~~and vendors,~~ which could hamper our ability to maintain appropriate inventory levels and meet customer demand; changes in customer and product mix that ~~affects~~affect gross margin; effect of “conflict minerals” regulations on the supply and cost of certain of our products; failure of our information technology system or distribution ~~system;~~system or our inability to maintain or upgrade our technology or telecommunications systems without undue cost, incident or delay; system security orand data protection ~~breaches;~~breaches and exposure to cyber-attacks, and the cost associated with ongoing efforts to maintain cyber-security measures and to meet applicable compliance standards; damage or destruction to our distribution or other facilities; prolonged or otherwise unusual quality or performance control problems; technology changes in the wireless communications industry, or technological failures, which could lead to significant inventory obsolescence or devaluation and/or our inability to offer key products that our customers demand; third-party freight carrier interruption; increased competition from competitors, including ~~from~~ manufacturers or national and regional distributors of the products we sell and the absence of significant barriers to entry which could result in pricing and other pressures on profitability and market share; our relative bargaining power and inability to negotiate favorable terms with our ~~vendors~~suppliers and customers; our inability to access capital and obtain financing as and when needed; transitional and other risks associated with acquisitions of companies that we may undertake in an effort to expand our business or with dispositions of lines of business; claims against us for breach of the intellectual property rights of third parties; product liability claims; our inability to protect certain

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intellectual property, including systems and technologies on which we rely; our inability to hire or retain for any reason our key professionals, management and staff; health epidemics or pandemics or other outbreaks or events, or national or world events or disasters beyond our control, ~~which includes continuing restrictions resulting from the COVID-19 pandemic, actions taken~~changes in ~~response to the COVID-19 pandemic,~~political and ~~any localized impact of the COVID-19 pandemic, which adversely affect our personnel or operations or our ability to fulfill orders, complete implementations, or recognize revenue;~~regulatory conditions, including tax and trade; and the possibility that, for unforeseen reasons, we may be delayed in entering into or performing, or may fail to enter into or perform, anticipated contracts or may otherwise be delayed in realizing or fail to realize anticipated revenues or anticipated savings.

Available Information

Our internet website address is: www.tessco.com. We make available free of charge through our website, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act as soon as reasonably practicable after such documents are electronically filed with, or furnished to, the Securities and Exchange Commission. Also available on our Website is our Code of Business Conduct and Ethics.

Item 4. Controls and Procedures.

The Company’s management, with the participation of the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the period covered by this quarterly report. Controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of these controls and procedures required by Rules 13a-15(b) or 15d-15(b) of the Exchange Act, the Company’s management, including the CEO and CFO, have concluded that, as of the end of the period covered by this quarterly report,

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the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. During the period covered by this quarterly report, there have been no changes to the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Lawsuits and claims are filed against us from time to time in the ordinary course of business. We do not believe that any lawsuits or claims currently pending against the Company, individually or in the aggregate, are material, or will have a material adverse effect on our financial condition or results of operations. In addition, from time to time, we are also subject to review from federal and state taxing authorities in order to validate the amounts of income, sales and/or use taxes which have been claimed and remitted. Currently, our Florida sales tax returns for the period February 1, 2018 through July 31, 2018 and our California sales tax returns for the period January 1, 2018 through December 31, 2018 are under examination by applicable taxing authorities.

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As we are routinely audited by state taxing authorities, we have estimated exposure and established reserves for our estimated sales tax audit liability.

~~Item 1A. Risk Factors~~.

Our business involves a high degree of risk. In addition to the other information included in this Quarterly Report on Form 10-Q, you should consider the risk factors previously disclosed in Part I “Item 1.A Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 29, 2020. Information that we have disclosed or will disclose from time to time in our public filings (including this Quarterly Report on Form 10-Q and other periodic reports filed under the Exchange Act) may provide additional data or information relative to our previously disclosed risk factors. We are not able to identify or control all circumstances that could occur in the future that may adversely affect our business and operating results. Additional risks and uncertainties that management is not aware of or focused on, or that management currently deems immaterial may also adversely affect our business, financial position and results of operations. There have been no material changes in any of the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 29, 2020.

However, the COVID-19 pandemic continues to evolve internationally, nationally and locally, and we remain sensitive to the ongoing and changing risks that it presents, both known and unknown. As discussed in our most recent Annual Report on Form 10-K, we face risks related to health epidemics and other outbreaks and events beyond our control, and our business and results of operations have been, and may continue to be, adversely affected on account of the impact of the COVID-19 pandemic. These risks include continuing COVID-19 related restrictions on our activities, other actions taken or required to be taken by us in response to the COVID-19 pandemic, and any localized impact of the COVID-19 pandemic, any, some or all of which could adversely affect our personnel or operations or our ability to fulfill orders, complete implementations, and recognize revenue. The COVID-19 pandemic also implicates workplace safety issues and concerns, and associated risks.

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Thus far, we have not suffered a widespread outbreak of COVID-19 among our employees or at our facilities, but the risk of future outbreaks persists, and our ongoing business operations and our financial results could be adversely affected should an outbreak occur among our personnel or at one of our facilities.

In addition, we have previously including among our Risk Factors a discussion of the concentration of our stock ownership among a select group, including Robert B. Barnhill Jr. who holds approximately 18% of our outstanding common stock. In March 2020, Mr. Barnhill filed an amendment to Schedule 13-D with the SEC, indicating among other things his intention to consider and possibly pursue various actions with respect to his investment in the Company, including a strategic transaction in which he alone or with others might acquire all of our outstanding common stock not already held by him. Subsequently, Mr. Barnhill filed another amendment to Schedule 13-D in which he announced his intention to vote against the re-election of four of our incumbent directors at our 2020 Annual Meeting of Stockholders, and then following the Annual Meeting another amendment to Schedule 13-D indicating an intention to pursue an agenda focused on board transition. In addition, another significant stockholder has filed a Schedule 13-D and amendments indicating, among other things, that it may engage in discussions with our Board and/or members of our management team concerning, without limitation, potential business combinations and strategic alternatives, our business, operations, capital structure, governance, management, strategy and other matters.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

(a)Exhibits:



10.1*		Amendment No. 1 to Credit Agreement, dated as of July 12, 2021, among TESSCO Technologies Incorporated, the additional borrowers party thereto, the Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent for each member of the Lender Group and the Bank Product Providers.
31.1.1*		Certification of Chief Executive Officer required by Rule 13a–14(a) or 15d–14(a) of the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2.1*		Certification of Chief Financial Officer required by Rule 13a–14(a) or 15d–14(a) of the Securities Exchange Act of 1934, as amended pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1.1*		Certification of periodic report by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2.1*		Certification of periodic report by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1*		The following financial information from TESSCO Technologies, Incorporated’s Quarterly Report on Form 10-Q for the quarter ended June ~~28, 2020~~27, 2021 formatted in Inline XBRL: (i) Consolidated Statement of Income for the three months ended June ~~28, 2020~~27, 2021 and June ~~30, 2019;~~28, 2020; (ii) Consolidated Balance Sheet at June 2827 and March ~~29, 2020;~~28, 2021; (iii) Consolidated Statement of Cash Flows for the three months ended June ~~28, 2020~~27, 2021 and June ~~30, 2019;~~28, 2020; and (iv) Notes to Consolidated Financial Statements.
104.1*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)

*Filed herewith

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Signature

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.


		TESSCO Technologies Incorporated


Date: August ~~6, 2020~~5, 2021
	By:	/s/ Aric M. Spitulnik
		Aric Spitulnik
		Chief Financial Officer
		(principal financial and accounting officer)


Part I	FINANCIAL INFORMATION		Page

	Item 1.	Financial Statements.	3

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16

	Item 4.	Controls and Procedures.	2122

Part II	OTHER INFORMATION

	Item 1.	Legal Proceedings.	22

	~~Item 1A.~~	~~Risk Factors.~~	22

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	23

	Item 3.	Defaults Upon Senior Securities.	23

	Item 4.	Mine Safety Disclosures.	23

	Item 5.	Other Information.	23

	Item 6.	Exhibits.	24

	Signature		25


	June 28,		March 29,
	2020		2020
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	900	$	50,000
Trade accounts receivable, net		73,854,000		82,868,400
Product inventory, net		69,664,400		69,148,000
Prepaid expenses and other current assets		14,384,900		11,707,500
Total current assets		157,904,200		163,773,900

Property and equipment, net		13,252,300		13,433,700
Intangible assets, net		13,969,600		11,157,400
Deferred tax assets		2,274,400		3,032,500
Lease asset - right of use		13,282,600		13,949,800
Other long-term assets		4,271,600		3,361,400
Total assets	$	204,954,700	$	208,708,700

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	75,431,400	$	75,512,600
Payroll, benefits and taxes		5,832,900		4,258,300
Income and sales tax liabilities		446,900		450,800
Accrued expenses and other current liabilities		4,107,900		4,244,400
Revolving line of credit		25,346,700		25,563,900
Lease liability, current		2,600,200		2,579,200
Total current liabilities		113,766,000		112,609,200

Non-current lease liability		10,831,700		11,481,100
Other non-current liabilities		899,900		915,700
Total liabilities		125,497,600		125,006,000

Shareholders’ equity:
Preferred stock, $0.01 par value per share, 500,000 shares authorized and 0 shares issued and outstanding		—		—
Common stock, $0.01 par value per share, 15,000,000 shares authorized, 14,426,729 shares issued and 8,637,129 shares outstanding as of June 28, 2020, and 14,354,368 shares issued and 8,577,549 shares outstanding as of March 29, 2020		102,200		101,400
Additional paid-in capital		65,762,300		65,318,500
Treasury stock, at cost, 5,789,600 shares as of June 28, 2020 and 5,776,819 shares as of March 29, 2020		(58,555,000)		(58,496,200)
Retained earnings		72,147,600		76,779,000
Total shareholders’ equity		79,457,100		83,702,700
Total liabilities and shareholders’ equity	$	204,954,700	$	208,708,700