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 ~~27, 2021~~26, 2022 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 ~~August 2, 2021,~~July 22, 2022, was ~~8,896,075.~~9,132,796.

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TESSCO Technologies Incorporated

Index to Form 10-Q

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

TESSCO Technologies Incorporated

Unaudited Consolidated Balance Sheets

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


	June 26,		March 27,
	2022		2022
ASSETS
Current assets:
Cash and cash equivalents	$	3,005,900	$	1,754,000
Trade accounts receivable, net		80,029,700		75,546,300
Product inventory, net		59,785,800		55,945,300
Income taxes receivable		529,900		4,293,400
Prepaid expenses and other current assets		4,449,900		2,961,700
Total current assets		147,801,200		140,500,700

Property and equipment, net		10,658,100		10,835,900
Intangible assets, net		33,447,700		30,595,600
Income taxes receivable, non-current		3,118,600		3,118,600
Lease asset - right of use		8,317,100		8,910,400
Other long-term assets		8,675,000		8,552,100
Total assets	$	212,017,700	$	202,513,300

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	71,089,000	$	65,254,900
Payroll, benefits and taxes		5,471,900		5,230,500
Sales tax liabilities		714,900		1,188,100
Accrued expenses and other current liabilities		1,463,300		1,455,500
Lease liability, current		2,592,500		2,566,300
Current portion of long-term debt		340,900		340,300
Total current liabilities		81,672,500		76,035,600

Deferred tax liabilities, net		145,600		145,600
Revolving line of credit		41,675,000		36,914,600
Non-current lease liability		5,921,900		6,586,200
Long-term debt		6,036,400		6,155,000
Other non-current liabilities		737,400		753,200
Total liabilities		136,188,800		126,590,200

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, 9,176,584 shares issued and 9,132,796 shares outstanding as of June 26, 2022, and 9,013,449 shares issued and 8,994,249 shares outstanding as of March 27, 2022		107,100		105,900
Additional paid-in capital		69,482,900		69,166,100
Treasury stock, at cost, 43,788 shares as of June 26, 2022 and 19,200 shares as of March 27, 2022		(266,300)		(129,200)
Retained earnings		6,505,200		6,780,300
Total shareholders’ equity		75,828,900		75,923,100
Total liabilities and shareholders’ equity	$	212,017,700	$	202,513,300

See accompanying notes to unaudited consolidated financial statements.

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TESSCO Technologies Incorporated

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


	Three Months Ended				Three Months Ended
	June 27, 2021		June 28, 2020		June 26, 2022		June 27, 2021

Revenues	$	104,956,100	$	96,477,600	$	112,161,200	$	104,956,100
Cost of goods sold		85,269,900		80,024,900		89,797,800		85,269,900
Gross profit		19,686,200		16,452,700		22,363,400		19,686,200
Selling, general and administrative expenses		21,646,800		21,532,500		22,611,400		21,646,800
Operating loss		(1,960,600)		(5,079,800)
Operating income (loss)						(248,000)		(1,960,600)
Interest expense, net		213,700		110,700		259,400		213,700
Loss from continuing operations before benefit from income taxes		(2,174,300)		(5,190,500)
Income (loss) from continuing operations before income taxes						(507,400)		(2,174,300)
Provision for (benefit from) income taxes		38,500		(321,800)		10,000		38,500
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
Net income (loss) from continuing operations						(517,400)		(2,212,800)
Income (loss) from discontinued operations, net of taxes						242,300		495,500
Net income (loss)					$	(275,100)	$	(1,717,300)
Basic income (loss) per share
Continuing operations	$	(0.25)	$	(0.56)	$	(0.06)	$	(0.25)
Discontinued operations	$	0.06	$	0.03	$	0.03	$	0.06
Consolidated operations	$	(0.19)	$	(0.54)	$	(0.03)	$	(0.19)
Diluted (loss) income per share
Diluted income (loss) per share
Continuing operations	$	(0.25)	$	(0.56)	$	(0.06)	$	(0.25)
Discontinued operations	$	0.06	$	0.03	$	0.03	$	0.06
Consolidated operations	$	(0.19)	$	(0.54)	$	(0.03)	$	(0.19)
Basic weighted-average common shares outstanding		8,864,704		8,617,803		9,064,481		8,864,704
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	$	—	$	—
Diluted weighted-average common shares outstanding						9,064,481		8,864,704

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		Shares	Amount		Capital		Stock		Earnings		Equity
Balance at March 27, 2022												8,994,249		105,900		69,166,100		(129,200)		6,780,300		75,923,100
Issuance of common stock for 401k match												15,941		200		94,000		—		—		94,200
Treasury stock purchases												(23,623)		—		—		(137,100)		—		(137,100)
Non-cash stock compensation expense												146,229		1,000		222,800		—		—		223,800
Net income (loss)												—		—		—		—		(275,100)		(275,100)
Balance at June 26, 2022												9,132,796		107,100		69,482,900		(266,300)		6,505,200		75,828,900

Balance at March 28, 2021	8,833,833		104,200		67,227,700		(62,800)		9,481,100		76,750,200	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
Issuance of common stock for 401k match												13,782		100		102,700		—		—		102,800
Treasury stock purchases	(3,960)		—		—		(28,900)		—		(28,900)	(3,960)		—		—		(28,900)		—		(28,900)
Non-cash stock compensation expense	39,182		500		254,400		—		—		254,900	39,182		500		254,400		—		—		254,900
Exercise of stock options	1,754		—		10,900		(13,300)		—		(2,400)	1,754		—		10,900		(13,300)		—		(2,400)
Net loss	—		—		—		—		(1,717,300)		(1,717,300)
Net income (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	8,884,591		104,800		67,595,700		(105,000)		7,763,800		75,359,300

Balance at March 29, 2020	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
Treasury stock purchases	(12,781)		—		—		(58,800)		—		(58,800)
Non-cash stock compensation expense	48,685		600		311,300		—		—		311,900
Net loss	—				—		—		(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

See accompanying notes to unaudited consolidated financial statements.

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TESSCO Technologies Incorporated

Unaudited Consolidated Statements of Cash Flows


	Three Months Ended				Three Months Ended
	June 27, 2021		June 28, 2020		June 26, 2022		June 27, 2021

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:
Net income (loss)					$	(275,100)	$	(1,717,300)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		607,700		1,228,000		541,900		607,700
Non-cash stock-based compensation expense		254,900		311,900		222,800		254,900
Deferred income taxes and other		—		758,100
Change in trade accounts receivable		(1,206,200)		9,014,400		(4,483,400)		(1,206,200)
Change in product inventory		(15,803,200)		(516,400)		(3,840,500)		(15,803,200)
Change in prepaid expenses and other current assets		(1,460,200)		(2,677,400)		(1,488,200)		(1,430,000)
Change in income taxes receivable						3,763,500		(30,200)
Change in other assets and other liabilities		(487,700)		(949,400)		(138,700)		(487,700)
Change in trade accounts payable		14,632,900		(704,000)		4,666,900		14,632,900
Change in payroll, benefits and taxes		724,400		1,574,600		241,400		724,400
Change in income and sales tax liabilities		(51,000)		(3,900)
Change in sales tax liabilities						(473,200)		(51,000)
Change in accrued expenses and other current liabilities		(1,326,600)		34,600		58,100		(1,326,600)
Net cash (used in) provided by operating activities		(5,832,300)		3,439,100
Net cash provided by (used in) operating activities						(1,204,500)		(5,832,300)

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)
Capital expenditures						(2,044,700)		(2,173,900)
Net cash provided by (used in) investing activities						(2,044,700)		(2,173,900)

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		—		70,367,900		66,565,500
Repayments to revolving line of credit long term		(57,419,600)		—		(65,607,700)		(57,419,600)
Proceeds from issuance of stock		—		400
Payments of debt issuance costs						(34,700)		—
Payments on long term debt						(87,300)		—
Purchase of treasury stock and repurchase of stock from employees and directors for minimum tax withholdings		(42,200)		(58,800)		(137,100)		(42,200)
Net cash provided by (used in) financing activities		9,103,700		(275,600)		4,501,100		9,103,700

Net increase (decrease) in cash and cash equivalents		1,097,500		(49,100)		1,251,900		1,097,500

CASH AND CASH EQUIVALENTS, beginning of period		1,110,000		50,000		1,754,000		1,110,000

CASH AND CASH EQUIVALENTS, end of period	$	2,207,500	$	900	$	3,005,900	$	2,207,500

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Capital expenditures included in accounts payable					$	5,662,100	$	3,362,900

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 ~~97%~~98% 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 unaudited 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 unaudited 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 ~~28, 2021,~~27, 2022, filed with SEC on ~~June 11, 2021.~~May 26, 2022.

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 unaudited interim 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,~~10, “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

Intangible assets, net on our Consolidated Balance Sheets as of June ~~27, 2021,~~26, 2022, consists of capitalized software for internal use, indefinite-lived intangible assets, and ~~indefinite lived intangible assets.~~an immaterial amount of costs capitalized for software costs to be sold. Capitalized software for internal use, net of accumulated amortization, was ~~$20,490,300~~$32,208,600 and ~~$18,341,100~~$29,463,100 as of June ~~27, 2021~~26, 2022 and March ~~28, 2021,~~27, 2022, respectively. Amortization expense of capitalized software for internal use was ~~$175,500~~$189,500 and ~~$648,500~~$175,500 for the fiscal quarter ended June 26, 2022 and June 27, 2021, respectively. The Company continues to capitalize costs related to an ongoing information technology project, which will be amortized after the project has been completed and ~~June 28, 2020, respectively. Indefinite lived~~placed in-service. This project is expected to be completed during fiscal 2023.

Indefinite-lived intangible assets were $795,400 as of June ~~27, 2021~~26, 2022 and March ~~28, 2021.~~

~~Note 4. Stock-Based Compensation~~

~~The Company’s selling, general and administrative expenses for the fiscal quarter ended June~~ 27, 2021 includes $254,900, of non-cash stock-based compensation expense. The Company’s selling, general and administrative expenses for the fiscal quarter ended June 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 2022:~~

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 and outstanding as of June 27, 2021 are assumed to 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 $0.2 million as of June 27, 2021, and would be expensed through fiscal 2022.

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

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Board of Directors, granted an aggregate of 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 2022, 2023, 2024 and 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 April 29, 2021 the Compensation Committee, with the concurrence of the full Board of Directors, awarded an aggregate of 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 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 2022 fiscal year 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, 2022, generally depending on the length of continued service of the recipient on the Board for fiscal 2022. Dividends accruing in respect of the shares of restricted stock, if any, will accrue but will not be paid until July 1, 2022 and only in respect of those shares for which the risk of forfeiture has then lapsed.

As of June 27, 2021, there was approximately $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:~~ During the first quarter of fiscal 2022, stock options for an aggregate of 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. The value of each option 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.

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

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 27, 2021, there was approximately $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 5.4. Borrowings Under Revolving Credit Facility

On October 29, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, the Company’s primary operating subsidiaries as co-borrowers, the ~~Lenders~~Lender(s) party thereto from time to time, and Wells Fargo Bank, National Association (“Wells”), as Administrative Agent, swingline lender and an issuing bank. Terms used, but not defined, in this and the following ~~ten (10)~~ paragraphs of this Note 4 have the meanings set forth in the Credit Agreement or the related Guaranty and 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. The discussion below is a summary and is qualified in its entirety by the actual terms of the Credit Agreement and related documents, including Amendment Nos. 1, 2, and 3, and references below to the Credit Agreement include such amendments, except where otherwise indicated.

The Credit Agreement provides for a senior secured asset based revolving credit facility of up to ~~$75~~$80 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 issuance of ~~Swing~~Swingline Loans. The applicable Credit Agreement also includes a provision permitting the Company, subject to certain conditions, to increase the aggregate amount of the commitments under the 2020 Revolving Credit Facility to an aggregate commitment amount of up to $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 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

~~Table~~ of ~~Contents~~

~~of $4 million~~an Aged Inventory Cap (currently $2,750,000 and which reduces over time to $2,000,000) and 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)~~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,~~28, 2021 financial statements were delivered, and thereafter (i) if the Fixed Charge Coverage Ratio iswas less than 1.10:1.00, then the LIBOR Rate plus 2.25% or (ii) if the Fixed Charge Coverage Ratio iswas 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,~~28, 2021 financial statements were delivered, and thereafter (i) if the Fixed Charge Coverage Ratio iswas less than 1.10:1.00, then the Base Rate plus 1.25% or (ii) if the Fixed Charge Coverage Ratio iswas greater than or equal to 1.10:1.00, then the Base Rate plus 1.00%. Pursuant to Amendment No. 3, the Base Rate Margin was changed and is now equal to 1.25% through

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December 31, 2022 and at all times thereafter that the Monthly Average Excess Availability for the most recently ended calendar month is less than 40% of the Maximum Revolver Amount, or 1.00%, if, after December 31, 2022, the Monthly Average Excess Availability is equal to or more than 40% of the Maximum Revolver Amount; and the LIBOR Rate Margin (or the Daily One Month LIBOR Rate Margin for LIBOR Rate Loans determined by reference to the Daily One Month LIBOR), is now equal to 2.25% through December 31, 2022 and at all times thereafter that the Monthly Average Excess Availability for the most recently ended calendar month is less than 40% of the Maximum Revolver Amount, or 2.00% if, after December 31, 2022, equal to or more than 40% of the Maximum Revolver Amount. The Credit Agreement ~~contains~~previously contained a LIBOR floor of 0.25% so that if the LIBOR Rate is below 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~~Agreement, but that floor is now equal to ~~borrowings under the secured 2020 Revolving Credit Facility was 2.62%.~~0.00%

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 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~~previously contained 1 financial covenant, a Fixed Charge Coverage Ratio, which isunder the terms of the Credit Agreement as initially established, was 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. The application of this covenant and the Excess Availability requirement have since been modified pursuant to Amendment No. 3 discussed below. 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.

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 certain subsidiaries, the lenders party thereto and Truist Bank ~~(successor by merger to SunTrust Bank),~~ as administrative agent, and may be used for working capital and other general corporate purposes, and as further provided in, and subject to the applicable terms of, the Credit Agreement. As amended as discussed below, the 2020 Revolving Credit Facility currently provides for borrowings of up to $80.0 million. As of June ~~27, 2021,~~26, 2022, borrowings under the ~~secured~~ 2020 Revolving Credit Facility totaled ~~$39.7~~$41.7 million and, therefore, the Company had ~~$35.3~~$38.3 million available for borrowing, ~~as of June~~

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~~27, 2021,~~ subject to the Borrowing Base limitation and compliance with the other applicable terms referenced ~~above.~~here, including the Availability Block discussed below. The 2020 Revolving Credit Facility has no lockbox arrangement associated with it and, therefore the outstanding balance is classified as a long-term liability on the Consolidated Balance Sheet as of June 26, 2022. Accordingly, borrowings from and repayments to the Company’s current line of credit are reflected on a gross basis in the cash flows from financing activities in the Consolidated Statements of Cash Flows.

The Company is required to make certain prepayments under the 2020 Revolving Credit Facility under certain circumstances, including from net cash proceeds from certain asset dispositions in excess of certain thresholds.

The Credit Agreement contains 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 Change of Control and the failure to observe the negative covenants and other covenants contained in the Credit Agreement and the other loan documents.

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Pursuant to a related Guaranty and Security Agreement, by and among the Company, the other borrowers under the Credit Agreement and other operating subsidiaries of the Company (collectively, the “Loan Parties”), and Wells, as Administrative Agent, the Obligations, which include the obligations under the Credit Agreement, are guaranteed by the Loan Parties, and secured by continuing first priority security interests in the Company’s and the other Loan Parties’ (including both borrowers and guarantors) Accounts, Books, Chattel Paper, Deposit Accounts, General Intangibles, Inventory, Negotiable Collateral, Supporting Obligations, and all Money, Cash Equivalents or other assets that come into the possession, custody or control of the Agent or any Lender, and certain related assets, and the proceeds and products of any of the foregoing (the “Collateral”). The security interests in the Collateral are in favor of the Administrative Agent, for the benefit of the Lenders party to the Credit Agreement from time to time and any other holders of the Obligations. The Obligations secured 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.

The 2020 Revolving Credit Facility also restricts our ability to pay dividends and to repurchase our shares. Assuming that no default exists, we may redeem or repurchase up to $2,000,000 of our shares in any twelve consecutive month period in connection with the payment or satisfaction of tax withholding obligations of participants under our equity compensation plans. We may pay dividends or effect redemptions provided that no default exists or will exist after giving effect to the dividend or repurchase, and the average Excess Availability is not less than $20,000,000 during the immediately preceding thirty-day period and after giving effect to the dividend or repurchase on a pro forma basis, and for each day of the thirty-day period not less than $13,280,000. Excess Availability is generally defined as Availability minus the aggregate amount of trade payables aged in excess of historical levels and all book overdrafts in excess of historical practices.

On June 26, 2022, the interest rate applicable to borrowings under the 2020 Revolving Credit Facility was 3.88%. The weighted average interest rate on borrowings under the Company’s Revolving Credit Facility for the first quarter of fiscal year 2023 was 3.25%. 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, 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, and, 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 or the Daily One Month Libor Rate.

Amendment No. 1

Pursuant to Amendment No. 1 to Credit Agreement dated July 12, 2021 (“Amendment No. 1”), between Tessco and Wells, Wells agreed to a 25-basis point reduction in certain otherwise applicable rates and fees over an agreed period, and the Company and Wells agreed to, among others, certain changes related to the LIBOR rate option to simplify day-to-day management of the 2020 Revolving Credit Facility. These terms have since been further amended and, pursuant to Amendment No. 3, the interest rate terms have been superseded, with the methodology for determining the Applicable Margin now as discussed above.

Amendment No. 2

In anticipation of TESSCO Reno Holding, LLC (“Reno Holding”) entering into the Real Estate Note of Reno Holding (the “Note”), as discussed further in Note 5, the Company, TESSCO Inc. and our other operating subsidiaries, and Wells, entered into Amendment No. 2 to Credit Agreement and Consent dated December 29,

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2021 (“Amendment No. 2”). Pursuant to Amendment No. 2, and subject to its terms and conditions, among other things, Wells consented to the Note, without requiring that Reno Holding become a borrower or guarantor under the Credit Agreement.

Amendment No. 3

On January 5, 2022, at the Company’s request, the Company and its operating subsidiaries, and Wells, entered into Amendment No. 3 to Credit Agreement and Amendment No. 1 to Guaranty and Security Agreement (“Amendment No. 3”), subject to the terms and conditions of which Wells agreed to increase the Commitment under the 2020 Revolving Credit Facility from $75 million to $80 million. Among the terms and conditions, the Company agreed to revert to the interest rate margins originally provided for under the terms of the 2020 Revolving Credit Facility (and which had previously been modified pursuant to Amendment No. 1 to Credit Agreement), as well as change to the methodology for determining the Applicable Margin, as discussed above, and agreed to a $10 million Availability Block for a one year period, but was relieved of any Fixed Charge Coverage Ratio testing for the same one year period without regard to the amount of Excess Availability during that period. Following this one-year period, a $15 million Excess Availability requirement will be imposed unless a Fixed Charge Coverage Ratio of 1:1 is achieved. As a result, and assuming the Company is otherwise in compliance with the terms of the 2020 Revolving Credit Agreement, as amended, and has sufficient Borrowing Base assets, the amount available for borrowing under the 2020 Revolving Credit Facility, without having to meet any Fixed Charge Coverage Ratio, is increased from approximately $62.5 million to $70 million for calendar year 2022.

Note 5. Debt

On December 30, 2021, Reno Holding, an indirect wholly owned subsidiary and now owner of the Company’s approximately 115,000 square foot operating facility located in Reno, Nevada (the “Reno Facility”), borrowed an aggregate sum of $6.5 million from Symetra Life Insurance Company (“Symetra”). The indebtedness is evidenced by the Note that provides for monthly payments of $47,858, bears interest at a fixed rate of 3.38% per annum for the first 5 years, is subject to adjustment after 5 years and again after 10 years, and matures in approximately 15 years. The Note and related obligations are secured by a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Deed of Trust”) on the Reno Facility. The net proceeds from this borrowing transaction (the “Symetra Loan”) have since been applied to repayment of a portion of the revolving balance under the Company’s 2020 Revolving Credit Facility. An additional $250,000 is to be advanced under the Symetra Loan after roof and possible related repairs to the Reno Facility are satisfactorily completed. The Symetra Loan is limited recourse to the Reno Facility, with typical exceptions in which case it is recourse to Reno Holding, a special purpose entity formed by the Company to own the Reno Facility and related assets.

The principal maturities of debt outstanding at June 26, 2022, were as follows:


2023	$	266,300
2024		365,700
2025		378,200
2026		391,200
2027		404,600
Thereafter		4,799,000
Total	$	6,605,000

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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~~three-month period ended June ~~27, 2021~~26, 2022 because the Company operated at a loss. The number of diluted weighted-average common shares would have been ~~8,943,722~~9,167,381 for the ~~fiscal quarter~~three months ended June ~~27, 2021,~~26, 2022, if the Company was in a positive earning position. At June ~~27, 2021,~~26, 2022, stock options with respect to ~~1,008,458~~709,500 shares of common stock were outstanding, of which ~~705,958~~594,500 were ~~anti-dilutive.~~anti-dilutive and not included in diluted EPS because the stock options’ exercise price was greater than the average market price of the common shares. There were 0 anti-dilutive ~~PSUs~~performance stock units (“PSUs”) or ~~RSUs~~restricted stock units (RSUs”) outstanding as of June ~~27, 2021.~~26, 2022.

Note 7. Business ~~Segment~~Segments

~~After exiting our Retail business, the Company operates as 1 business segment.~~ The Company ~~will continue to present revenue~~has 2 reportable segments, Carrier and ~~gross profit~~Commercial, which are identified based on the information reviewed by the ~~following customer markets: (1) public carriers, which~~Chief Operating Decision Maker (“CODM”) and are consistent with how the business is managed. Carrier is generally comprised of customers responsible for building and maintaining the infrastructure system and provide airtime service to individual ~~subscribers;~~subscribers and ~~(2) commercial, formerly value-added resellers and integrators, which~~Commercial includes value-added resellers, the government channel and private system operator markets. Ventev®, the Company’s proprietary brand that manufactures products, is included primarily in the Commercial segment.There is a mix of products that the Company sells that are marketed to both segments, as well as certain product classes that primarily serve one segment. As a value-add distributor of products from over 300 manufacturers, the Company sells products across a large number of product groups and industries and, as a result, it is impracticable to provide segment information at the product group level. Inventory typically has a life cycle that tends to be tied to changes in regulation or technology and includes products typically used by business entities or governments.

Segment activity for the first quarter of fiscal years 2023 and 2022 are as follows (in thousands):


	Three Months Ended
		June 26, 2022		June 27, 2021
Revenues
Carrier	$	47,065	$	46,020
Commercial		65,096		58,936
Total revenues	$	112,161	$	104,956

Gross Profit
Carrier	$	6,265	$	5,322
Commercial		16,098		14,364
Total gross profit	$	22,363	$	19,686

The table below presents total assets by reportable segments, which are primarily comprised of accounts

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


	Three Months Ended					June 26, 2022		March 27, 2022
Total Assets
Carrier					$	39,534	$	38,705
Commercial						39,131		36,797
Corporate						133,353		127,012
Total assets					$	212,018	$	202,513
		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

The CODM reviews segment results using Gross profit as the segment measure of profit or loss and the Company does not allocate expenses below Gross profit to the segments.

~~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 Sheets.

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

As of June 27, 2021

Maturities of lease liabilities by fiscal year are as follow:

2022

$
3,164,000

2023

3,018,300

2024

2,725,700

2025

2,609,900

2026

1,987,600

Total

13,505,500

Less: present value discount

(2,636,100)

Present value of lease liabilities

$
10,869,400

Weighted-average discount rate:

3.9%

Weighted-average remaining lease term

4.5 years

Note 9.8. 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 ~~27, 2021~~26, 2022 and June ~~28, 2020,~~27, 2021, the aggregate value of the shares withheld totaled ~~$28,900~~$137,100 and ~~$58,800,~~$28,900, respectively.

Note ~~10.~~9. 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~~quarters ended June 26, 2022 and June 27, 2021, ~~and June 28, 2020, revenue from the Company’s largest customer~~

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no customers accounted for ~~7.2% and 12.9%~~more than 10% of ~~revenue from continuing operations, respectively.~~consolidated revenues in either quarter.

For the fiscal ~~quarter~~quarters ended June 26, 2022 and June 27, 2021, sales of products purchased from the Company’s largest supplier accounted for 31.4% and 33.3% of revenue from continuing ~~operations. For the fiscal quarter ended June 28, 2020, sales of products purchased from the Company’s largest supplier accounted for 26.8% of revenue from continuing operations.~~operations, respectively. No other suppliers accounted for more than 10% of consolidated ~~revenue.~~

revenues in either quarter.

Note ~~11.~~10. Discontinued Operations

At a closing on December 2, 2020, the Company sold most of 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)~~(“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~~ have been included in Income (loss) from discontinued operations, net of taxes, in the Consolidated Statements of Income (Loss) ~~Income~~ for all periods presented.

The accompanying unaudited interim 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 three months ended June ~~27, 2021~~26, 2022 and June ~~28, 2020:~~27, 2021:

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


		Three Months Ended

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	June 26, 2022		June 27, 2021

Revenues	$	164,000	$	1,498,800
Cost of goods sold		—		424,900
Gross profit		164,000		1,073,900
Selling, general and administrative expenses		(73,800)		584,400
Income (loss) from operations		237,800		489,500
Income (loss) from operations before income taxes		237,800		489,500
Provision for (benefit from) income taxes		(4,500)		(6,000)
Net income (loss) attributable to discontinued operations	$	242,300	$	495,500

The financial results reflected above may not fully represent our former Retail segment stand-alone operating net ~~profit,~~income, as the results reported within Income (loss) from discontinued operations, net of 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 each period.

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The following table summarizes the major classes of assets attributable to discontinued operations that are included in the 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 not sold to Voice Comm. Management intends to sell through this inventory in the near term in alignment with the plan to exit the 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 26, 2022 and June 27, 2021 ~~and June 28, 2020~~ was ~~$4.1~~$0.5 million and ~~$1.6~~$4.1 million, respectively.

1514

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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~~included in the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~28, 2021,~~27, 2022, filed with the SEC on ~~June 11, 2021.~~May 26, 2022.

Business Overview and Environment

~~Tessco~~TESSCO architects and delivers innovative product and value chain solutions to support wireless systems. Although we sell products to customers in many countries, approximately ~~97%~~98% of our sales are made to customers in the United States. We have operations and office facilities in Hunt Valley, Maryland, and Reno, ~~Nevada and San Antonio, Texas.~~Nevada.

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~~and exited the ~~sale of mobile device and accessory products. Together, this resulted in our exit from our Retail~~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 Income (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 now operate as two reportable segments: Carrier and Commercial, for which we provide certain ~~information within two key markets: (1) public carriers, which are~~information. Carrier is generally comprised of customers responsible for building and maintaining the infrastructure system and provide airtime service to individual ~~subscribers;~~subscribers and ~~(2) commercial, which~~Commercial includes value-added resellers, the government channel and private system operator markets.

We offer a wide range of products that are classified into three categories: base station infrastructure; network systems; and installation, test, and maintenance. Base station infrastructure products are used to build, repair, and upgrade wireless ~~telecommunications.~~telecommunication networks. 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. In this category, we have also been growing our offering of wireless broadband, 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- and power-measuring devices, replacement parts and components as well as an assortment of tools, hardware and supplies required by service technicians. Inventory typically has a life cycle that tends to be tied to changes in regulation or technology and includes products typically used by business entities or governments.

The wireless communications distribution industry is competitive and fragmented, and is comprised of several national distributors. In addition, many manufacturers sell ~~direct.~~direct to end-user customers. Barriers to entry for distributors are relatively low, and the risk of new competitors entering the 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 these relationships is subject to competitive pressures and ~~challenges.~~challenges and depends upon a number of factors that often differ for each relationship. We believe, however, that our strength in service, the breadth and depth of our product ~~offering,~~offerings, our information technology system, our large customer base, and our purchasing relationships with approximately 300 manufacturers provide us with a significant competitive advantage over new entrants to the market.

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Results of Continuing Operations

First quarter of Fiscal Year ~~2022~~2023 Compared with First quarter of Fiscal Year ~~2021~~2022

Total Revenues. Revenues for the first quarter of fiscal ~~2022~~2023 increased ~~8.8%~~6.9% compared with the first quarter of fiscal ~~2021.~~2022. Revenues in our ~~commercial market (formerly referred to as VAR and Integrator)~~Commercial segment increased ~~3.0%~~10.5%, and revenue in our ~~public carrier market~~Carrier segment increased ~~17.2%~~2.3%. This increase in the ~~public carrier~~Carrier segment was primarily due to increased customer pricing and gaining additional market share. The increase in Commercial segment revenues was ~~due~~primarily attributable to gaining additional market share, a more favorable product mix, and ~~improving macro-economic trends as the impact of the COVID-19 pandemic lessens. The increase in commercial market revenues was also largely driven by the lower impact of COVID-19.~~increased customer pricing.

Cost of Goods Sold. Cost of goods sold for the first quarter of fiscal ~~2022~~2023 increased ~~6.6%~~5.3% compared with the first quarter of fiscal ~~2021.~~2022. Cost of goods sold in our ~~public carrier market~~Commercial segment increased by ~~14.6%,~~9.9% and ~~cost of goods sold~~ in our ~~commercial market~~Carrier segment increased by 0.2%~~, in each case for the first quarter year-over-year. These changes~~. The increase in cost of goods sold in ~~both markets were~~the Commercial segment was largely driven by changes in ~~revenue and customer mix,~~revenues, as discussed ~~above.~~

~~As discussed~~ above, ~~under~~while 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 timeincrease 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~~Carrier segment was primarily attributable to ~~time in the future. Our~~a more favorable 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.~~mix.

Total Gross Profit. Gross profit for the first quarter of fiscal ~~2022~~2023 increased by ~~19.7%~~13.6% compared to the first quarter of fiscal ~~2021.~~2022. This increase was primarily due to increased ~~revenues.~~revenues, a more favorable customer and product mix, and increased freight charged to customers. Overall gross profit margin increased from ~~17.1%~~18.8% in ~~last year’s first quarter to 18.8% for~~ the first quarter of fiscal ~~2022.~~2022 to 19.9% in the first quarter of fiscal 2023. Gross profit margin in our ~~public carrier market~~Carrier segment increased to ~~11.6%~~13.3% from ~~9.5%~~11.6% in the same quarter last year. Gross profit margin in our ~~commercial market~~Commercial segment increased to ~~24.4%~~24.7% in the first quarter of fiscal ~~2022~~2023 from ~~22.2%~~24.4% in the same quarter last year. ~~These~~The gross margin ~~improvements are~~improvement in the Carrier segment is primarily related to changes in customer and product mix. The gross margin increase in the Commercial segment is primarily attributable to product and customer mix, ~~as well as~~including higher sales of our higher margin Ventev^® products. Gross margins in both segments were positively impacted by higher freight charged to customers in response to and to partially offset increased freight costs incurred, which is included in selling, general, and administrative expenses.

Selling, General and Administrative Expenses. Total selling, general and administrative expenses increased by ~~$0.1 million~~4.5% or $964,600 for the first quarter of fiscal ~~2022,~~2023, compared to the first quarter of fiscal ~~2021.~~2022. Selling, general and administrative expenses as a percentage of revenues decreased from ~~22.3% for the first quarter of fiscal 2021, to~~ 20.6% for the first quarter of fiscal ~~2022.~~2022, to 20.2% for the first quarter of fiscal 2023.

The increase in our selling, general and administrative expenses was primarily due to an increase of ~~$1.2~~$0.8 million in ~~freight expense, resulting from higher sales and higher rates due to national supply chain constraints and higher compensation and benefits cost~~corporate support expenses, an increase of ~~$0.7~~$0.6 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~~an increase of $0.4 million in freight out, and an increase of $0.4 million in sales promotion expense. These increases were offset by a $1.2 million decrease in compensation and benefits expense. The corporate support expenses increase is attributable to higher recruiting expense for new talent acquisition, and higher professional services expenses. The increase in information technology expense is a result of higher software maintenance costs related to new software services and higher information technology temporary labor services. The increase in freight out is attributable to higher revenues and increased freight carrier costs as a result of inflationary impacts. The increase in sales promotion is attributable to increased employee travel as a result of COVID-19 restrictions being lifted. The decrease in compensation and benefits expense is primarily attributable to lower employee headcount in the first quarter of fiscal ~~2022 as~~2023 compared to the ~~first quarter of fiscal 2021.~~

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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 expense of $187,800 and $30,400, for the three months ended June 27, 2021 and June 28, 2020, respectively.prior year same quarter.

Interest, Net. Net interest expense increased from ~~$110,700 for the first quarter of fiscal 2021 to~~ $213,700 for the first quarter of fiscal ~~2022. An~~2022 to $259,400 for the first quarter of fiscal 2023. This increase is due to significantly higher interest rates in the first quarter of fiscal 2023 and an increase in the average amount outstanding ~~and higher interest rates~~ under our 2020 Revolving Credit Facility ~~resulted in increased interest expense in~~ during

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the first ~~fiscal~~ quarter of ~~2022.~~fiscal 2023 as compared to the prior year same quarter. In addition, capitalized interest increased from ~~$48,800 from~~$210,500 in the first quarter of fiscal ~~2021~~2022 to ~~$210,500~~$260,900 for the first quarter of fiscal ~~2022.~~2023.

Income Taxes, Net Income and Diluted Earnings per Share. The effective tax rate ~~decreased~~increased from ~~6.2%~~1.8% in the first quarter of fiscal 2022 to 2.0% in the first quarter of fiscal 2023. Net loss of $0.5 million in the first quarter of fiscal 2023 improved significantly from the net loss of $2.2 million in the first quarter of fiscal 2022. Diluted loss per share was $0.06 for the first quarter of fiscal ~~2021~~2023, compared to ~~1.8% for the first quarter~~a loss of ~~fiscal 2022. Net loss decreased 54.6% and diluted loss~~$0.25 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 $0.2 million for the first quarter of fiscal year 2023 compared to $0.5 million for the first quarter of fiscal year ~~2022 compared to $0.2 million for the first quarter of fiscal year 2021.~~2022. See ~~footnote 11,~~Note 10, “Discontinued Operations”, to our unaudited interim Consolidated Financial Statements included as part of this Quarterly Report on Form 10-Q, 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 ~~27, 2021~~26, 2022 and June ~~28, 2020.~~27, 2021.


	Three Months Ended				Three Months Ended
	June 27, 2021		June 28, 2020		June 26, 2022		June 27, 2021
Cash flow (used in) provided by operating activities	$	(5,832,300)	$	3,439,100
Cash flow used in investing activities		(2,173,900)		(3,212,600)
Cash flow provided by (used in) operating activities					$	(1,204,500)	$	(5,832,300)
Cash flow provided by (used in) investing activities						(2,044,700)		(2,173,900)
Cash flow provided by (used in) financing activities		9,103,700		(275,600)		4,501,100		9,103,700
Net increase (decrease) in cash and cash equivalents	$	1,097,500	$	(49,100)	$	1,251,900	$	1,097,500

Net cash used in operating activities was $1.2 million for the first three months of fiscal 2023, compared with net cash used in operating activities of $5.8 million for the first three months of fiscal ~~2022, compared with~~2022. The reduction in net cash ~~provided by~~used in operating activities ~~of $3.4 million for the first three months of~~in fiscal ~~2021. The~~2023 compared to fiscal 2022 ~~outflow~~ was ~~due~~primarily attributable to ~~the net loss, and the increase in inventory, accounts receivable and prepaid expenses, partially offset by~~ an increase in accounts ~~payable.~~ receivable of $4.5 million, increase in inventory of $3.8 million, and increase in prepaid expenses and other current assets of $1.5 million, offset by a decrease in income taxes receivable of $3.8 million and an increase in accounts payable of $4.7 million.

Net cash used in investing activities was ~~$2.2~~$2.0 million for the first three months of fiscal ~~2022,~~2023, compared to ~~$3.2~~net cash provided by investing activities of $2.2 million ~~used~~ in the first three months of fiscal ~~2021. Both years are related~~2022. Fiscal 2023 and fiscal 2022 cash outflow is primarily attributable to ~~capital expenditures, largely comprised of~~the Company’s investments in information technology.

Net cash provided by financing activities was $4.5 million for the first three months of fiscal 2023, compared to net cash provided by financing activities of $9.1 million for the first three months of fiscal 2022. Fiscal 2023 and fiscal 2022 ~~compared~~cash inflow is primarily attributable to ~~net cash used in financing activities~~the Company’s utilization of ~~$0.3 million for~~ the ~~first three months of fiscal 2021. We utilized our asset based secured~~2020 Revolving Credit Facility during the first three months of fiscal 2022, leading to a cash inflow of $9.1 million during this period. During the first three months of fiscal 2021, we utilized our asset based secured Revolving Credit Facility, leading to a cash outflow of $0.2 million during this period.

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On October 29, 2020, we entered into a Credit Agreement (the “Credit Agreement”) among the Company, the Company’s primary operating subsidiaries as co-borrowers, the ~~Lenders~~Lender(s) party thereto from time to time, and Wells Fargo Bank, National Association (“Wells”), as Administrative Agent, swingline lender and an issuing bank, and terminated our previous secured Revolving Credit Facility. Terms used, but not defined, in this paragraph have the meanings set forth in the Credit Agreement or the related Guaranty and Security Agreement, and the description refers to the Credit Agreement as in effect at fiscal quarter ended June 26, 2022 and without regard to subsequent events. The Credit Agreement, as amended, provides for a senior secured asset based

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revolving credit facility of up to ~~$75~~$80 million (the ~~“2020 Revolving~~“Revolving Credit Facility”), which matures ~~in forty-two months,~~ on April 29, 2024. ~~This new facility replaced a previously existing facility.~~ As of June ~~27, 2021,~~26, 2022, borrowings under the secured 2020 Revolving Credit Facility totaled ~~$39.7~~$41.7 million; therefore, we then had ~~$35.3~~$38.3 million available, subject to the Borrowing Base limitations and compliance with the other applicable terms of the Credit Agreement, including the financial and other covenants discussed or referred to in Note 54 to our unaudited interim Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Borrowings under the Credit Agreement accrue interest at the rates ~~and the Company is required to pay a monthly commitment fee,~~ as ~~also~~ discussed in Note 54 to our unaudited interim Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

We believe that our existing cash, payments from customers and availability under 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 years on business opportunities for sales to our ~~public carrier~~Carrier customers led to the recent expansion of our borrowing limits, as now reflected in the ~~2020~~ secured Revolving 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 ~~27, 2021,~~26, 2022, we do not have any material capital expenditure commitments.

On December 30, 2021, TESSCO Reno Holding LLC (“Reno Holding”), an indirect wholly owned subsidiary and now owner of the Company‘s approximately 115,000 square foot operating facility located in Reno, Nevada (the “Reno Facility”), borrowed an aggregate sum of $6.5 million from Symetra Life Insurance Company. The indebtedness is evidenced by a Real Estate Note (“Note”) of Reno Holding that provides for monthly payments of $47,858, bears interest at a fixed rate of 3.38% per annum for the first 5 years, is subject to adjustment after 5 years and again after 10 years, and matures in approximately 15 years. See Note 5 to our unaudited interim Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional discussion related to the Note.

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 unaudited interim Consolidated Financial ~~Statements.~~Statements included as part of this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our unaudited interim 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 ~~28, 2021,~~27, 2022, filed with the SEC on ~~June 11, 2021.~~May 26, 2022.

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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 materially and adversely affect our business and operating results. Without limiting the risks that we describe in our periodic reports and 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 suppliers, ~~and affinity partners~~ which are typically terminable by either party upon several months or otherwise relatively short notice; loss of significant customers, suppliers or other relationships, ~~including affinity relationships;~~or reduction of customer business or product availability; loss of customers or ~~reduction in customers’ business~~suppliers 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'~~, suppliers and affinity partners' businesses; increasingly~~ or suppliers' business; negative or adverse economic conditions, including those adversely affecting consumer confidence or consumer or business spending or otherwise adversely ~~affecting~~impacting our suppliers or customers, including their access to capital or liquidity, or our ~~customers’~~customers' demand for, or ability to fund or pay for, the purchase of our products and services; our dependence on a relatively small number of suppliers, which could hamper our ability to maintain appropriate inventory levels and meet customer demand; changes in customer and product mix that 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 or~~system; our inability to maintain or upgrade our technology or ~~telecommunications~~telecommunication systems without undue cost, incident or delay; system security ~~and~~or data protection 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 toof 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 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 suppliers and customers; our inability to access capital and obtain or retain 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

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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,~~control; changes in political and regulatory conditions, including tax and ~~trade;~~trade policies; and the possibility that, for unforeseen or other 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~~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, 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~~ Thereare ~~filed against us from time to time~~no material pending legal proceedings in ~~the ordinary course of business. We do not believe that any lawsuits~~which we or ~~claims currently pending against the Company, individually~~our subsidiaries is a party or in which any of our or their property is 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.~~subject.

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

None.

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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*10.1		~~Amendment No. 1 to Credit~~Letter Agreement dated ~~as of July 12, 2021, among TESSCO~~May 30, 2022, by and between Tessco Technologies Incorporated and Lakeview Investment Group & Trading Company, LLC (incorporated by reference to Exhibit 10.1 to the ~~additional borrowers party thereto,~~Company’s Current Report on Form 8-K filed with the ~~Lenders party thereto,~~United States Securities and ~~Wells Fargo Bank, National Association, as Administrative Agent for each member of the Lender Group and the Bank Product Providers.~~Exchange Commission on June 1, 2022).
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 ~~27, 2021~~26, 2022 formatted in Inline XBRL: (i) Consolidated Statement of Income for the three months ended June ~~27, 2021~~26, 2022 and June ~~28, 2020;~~27, 2021; (ii) Consolidated Balance Sheet at June 2726, 2022 and March ~~28, 2021;~~27, 2022; (iii) Consolidated Statement of Cash Flows for the three months ended June ~~27, 2021~~26, 2022 and June ~~28, 2020;~~27, 2021; and (iv) Notes to Unaudited 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 5, 2021~~July 28, 2022
	By:	/s/ Aric M. Spitulnik
		Aric Spitulnik
		Chief Financial Officer
		(principal financial and accounting officer)

2523


Part I	FINANCIAL INFORMATION		Page

	Item 1.	Financial Statements.	3

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1615

	Item 4.	Controls and Procedures.	2220

Part II	OTHER INFORMATION

	Item 1.	Legal Proceedings.	2220

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2320

	Item 3.	Defaults Upon Senior Securities.	2321

	Item 4.	Mine Safety Disclosures.	2321

	Item 5.	Other Information.	2321

	Item 6.	Exhibits.	2422

	Signature		2523


	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


	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


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

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