UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, ~~2014~~2015

oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10799

ADDVANTAGE TECHNOLOGIES GROUP, INC.

(Exact name of registrant as specified in its charter)

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

1221 E. Houston, Broken Arrow, Oklahoma	74012
(Address of principal executive offices)	(Zip code)

Registrant’s telephone number: (918) 251-9121

Securities registered under Section 12(b) of the Act:

Title of each class	Name of exchange on which registered
Common Stock, $.01 par value	NASDAQ Global Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.	Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.	Yes o No x

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 x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).	Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.	x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 o Accelerated filer o Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).	Yes o No x
The aggregate market value of the outstanding shares of common stock, par value $.01 per share, held by non-affiliates computed by reference to the closing price of the registrant’s common stock as of March 31, ~~2014~~2015 was ~~$17,110,819.~~$12,198,302.
The number of shares of the registrant’s outstanding common stock, $.01 par value per share, was ~~10,041,206~~10,063,563 as of November 30, ~~2014.~~2015.
Documents Incorporated by Reference

The identified sections of definitive Proxy Statement to be filed as Schedule 14A pursuant to Regulation 14A in connection with the Registrant’s ~~2015~~2016 annual meeting of shareholders are incorporated by reference into Part III of this Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K.

ADDVANTAGE TECHNOLOGIES GROUP, INC.

YEAR ENDED SEPTEMBER 30, ~~2014~~2015

INDEX

		Page
	PART I


Item 1.	Business.	3
Item 2.	Properties.	78
Item 3.	Legal Proceedings.	8


	PART II

Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	9
Item 6.	Selected Financial Data.	10
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	10

Item 8.	Financial Statements and Supplementary Data.	19
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	4340
Item 9A.	Controls and Procedures.	4340
Item 9B.	Other Information.	4441
	PART III

Item 10.	Directors, Executive Officers and Corporate Governance.	4441
Item 11.	Executive Compensation.	4441
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	4441
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	4441
Item 14.	Principal Accounting Fees and Services.	4441

	PART IV

Item 15.	Exhibits, Financial Statement Schedules.	4542

	SIGNATURES

PART I

Item 1. Business.

Forward-Looking Statements

Certain matters discussed in this report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including statements which relate to, among other things, expectations of the business environment in which ADDvantage Technologies Group, Inc. (the “Company”, “We” or “ADDvantage”) operates, projections of future performance, perceived opportunities in the market and statements regarding our goals and objectives and other similar matters. The words “estimates”, “projects”, “intends”, “expects”, “anticipates”, “believes”, “plans”, “goals”, “strategy”, “likely”, “may”, “should” and similar expressions often identify forward-looking statements. These forward-looking statements are found at various places throughout this report and the documents incorporated into it by reference. These and other statements, which are not historical facts, are hereby identified as “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These statements are subject to a number of risks, uncertainties and developments beyond our control or foresight, including changes in the cable television and telecommunications industry, changes in customer and supplier relationships, technological developments, changes in the economic environment generally, the growth or formation of competitors, changes in governmental regulation or taxation, changes in our personnel, our ability to identify, complete and integrate acquisitions on favorable terms and other such factors. Our actual results, performance or achievements may differ significantly from the results, performance or achievements expressed or implied in the forward-looking statements. We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Background

The Company was incorporated under the laws of Oklahoma in September 1989 as “ADDvantage Media Group, Inc.”. In December 1999, its name was changed to ADDvantage Technologies Group, Inc. Our headquarters are located in Broken Arrow, Oklahoma.

We (through our subsidiaries) distribute and service a comprehensive line of electronics and hardware for the cable television (“~~CATV”~~Cable TV”) and telecommunications industries. ~~In addition, we~~We also provide equipment repair services to cable operators. In addition, we offer our telecommunications customers decommissioning services for surplus and obsolete equipment, which we in turn process through our recycling services.

Several of our subsidiaries, through their ~~long~~long-standing relationships with the original equipment manufacturers (“OEMs”) and specialty repair facilities, have established themselves as value-added resellers (“VARs”). ADDvantage has a reseller agreement with Arris Solutions to sell cable television equipment in the United States. We are also one of only three distributors of Arris broadband products. We are a distributor of Cisco video products as a Cisco Premier Partner, which also allows us to sell Cisco’s IT related products. In addition, we are designated as an authorized third party Cisco repair center for select video products. Our subsidiaries also sell products from other OEMs including Alpha, Blonder-Tongue, RL Drake, Corning-Gilbert, Promax, Quintech, Standard and Triveni Digital.

In addition to offering a broad range of new products, we also sell surplus-new and refurbished equipment that we purchase in the market as a result of cable or telecommunications operator system upgrades or an overstock in their warehouses. We maintain one of the industry's largest inventories of new and ~~refurbished~~used equipment, which allows us to expedite delivery of products to our customers. We continue to upgrade our new product offerings to stay in the forefront of the communications broadband technology revolution.

Most of our subsidiaries operate technical service centers that service/repair most brands of ~~CATV~~Cable TV equipment.

Website Access to Reports

Our public website is addvantagetechnologies.com. We make available free of charge through the “Investor Relations” section of our website our annual reports to stockholders, annual reports 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(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we

electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). Any material we file with or furnish to the SEC is also maintained on the SEC website (sec.gov).

The information contained on our website, or available by hyperlink from our website, is not incorporated into this Form 10-K or other documents we file with, or furnish to, the SEC. We intend to use our website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included on our website in the “Investor Relations” section. Accordingly, investors should monitor such portions of our website, in addition to following our press releases, SEC filings and public conference calls and webcasts.

Operating Segments

~~During the second quarter of fiscal year 2014, the~~The Company changed its organizational structure with the acquisition of Nave Communications Company. As a result of this acquisition, information that the Company’s management team regularly reviews for purposes of allocating resources and assessing performance changed. Therefore, beginning in fiscal year 2014, the Company is reportingreports its financial performance based on ~~its new~~two reporting segments: Cable Television (“Cable TV”) and Telecommunications (“Telco”).

The Cable TV segment sells new, surplus and ~~re-manufactured~~refurbished cable television equipment to cable television operators (called multiple system operators or “MSOs”) or other resellers that sell to these customers throughout North America, Central America, South America and, to a substantially lesser extent, other international regions that utilize the same technology. In addition, this segment also repairs cable television equipment for various ~~cable~~Cable TV companies.

The Telco segment provides quality used telecommunication networking equipment to its world-wide customer base of telecommunications providers and resellers by utilizing its inventory from a broad range of manufacturers as well as other supply channels. In addition, this segment offers its customers decommissioning services for surplus and obsolete equipment, which it in turn processes through its recycling services.

~~Purchase of Nave Communications Company~~

On February 28, 2014, the Company acquired all of the outstanding common stock of Nave Communications Company (“Nave Communications”), a provider of quality used telecommunication networking equipment. The purchase price for Nave Communications included approximately $9.6 million in cash payments, as well as $3.0 million in deferred payments over the next three years. In addition, the Company will make future earn-out payments equal to 70% of Nave Communications’ annual EBITDA in excess of an EBITDA target of $2 million per year over the next three years, which is estimated to be between $0.7 million and $1.0 million annually. The acquisition was funded through a combination of cash on hand and a $5.0 million term loan under our revolving credit and term loan agreement.

Products and Services

Cable TV ~~segment~~Segment

We offer our customers a wide range of new, surplus-new and refurbished products across the leading OEM suppliers in the industry that are used in connection with video, telephone and internet data signals.

Headend Products – Headend products are used by a system operator for signal acquisition, processing and manipulation for further transmission. Among the products we offer in this category are satellite receivers (digital and analog), integrated receiver/decoders, demodulators, modulators, antennas and antenna mounts, amplifiers, equalizers and processors. The headend of a television signal distribution system is the “brain” of the system; the central location where the multi-channel signal is initially received, converted and allocated to specific channels for distribution. In some cases, where the signal is transmitted in encrypted form or digitized and compressed, the receiver will also be required to decode the signal.

Fiber Products – Fiber products are used to transmit the output of cable system headend to multiple locations using fiber-optic cable. In this category, we currently offer products including optical transmitters, fiber-optic cable, receivers, couplers, splitters and compatible accessories. These products convert radio frequencies to light

frequencies and launch them on optical fiber. At each receiver site, an optical receiver is used to convert the signals back to RF VHF frequencies for distribution to subscribers.

Access and Transport Products – Access and transport products are used to permit signals to travel from the headend to their ultimate destination in a home, apartment, hotel room, office or other terminal location along a distribution network of ~~fiber optic~~fiber-optic or coaxial cable. Among the products we offer in this category are transmitters, receivers, line extenders, broadband amplifiers, directional taps and splitters.

Customer Premise Equipment (“CPE”) – CPE includes digital converters and modems that are boxes placed inside the home that receive, record and transmit video, data and telephony signals. They are the primary interface equipment between the cable operator and the consumer.

Test Equipment – Test equipment is used in the set-up, signal testing and maintenance of electronic equipment and the overall support of the cable television plant. Test equipment is vital in maintaining the proper function and efficiency of this electronic equipment, which helps to provide high quality video, telephone and high speed data to the end user.

Hardware Equipment – We also inventory and sell to our customers other hardware such as connector and cable products.

We also offer repair services for most brands of cable equipment at our seven service centers.

Telco Segment

We offer our customers a wide range of used telecommunication equipment across most major manufacturers consisting primarily of component parts to expand capacity, provide spares or replace non-working components.

Central Office Equipment – Central office equipment includes optical, switching, and data equipment on a customer’s communication network. Optical equipment products aggregate and transport internet traffic, switching equipment products originate, terminate and route voice traffic, and data equipment products transport internet and voice over internet protocol (“VOIP”) traffic via routers.

Customer Premise Equipment – CPE includes integrated access devices, channel banks and routers that are placed inside the customer site that will receive the communication signal from the communication services provider.

In addition, we offer our customers decommissioning services for surplus and obsolete equipment, which we then process through our Responsible Recycling (“R2”)-certified recycling program.

Revenues by Geographic Area

Our revenues by geographic areas were as follows:

	2014		2013		2012		2015		2014		2013
United States
Cable TV	$	25,738,706	$	27,541,137	$	28,244,199	$	23,975,197	$	25,738,706	$	27,541,137
Telco(a)		6,533,458		−		−		16,031,293		6,533,458		−
Canada, Central America, Asia, Europe, Mexico, South America and Other
Cable TV		1,465,514		1,136,214		1,432,979		1,418,488		1,465,514		1,136,214
Telco(a)		2,151,014		−		−		2,308,642		2,151,014		−
	$	35,888,692	$	28,677,351	$	29,677,178	$	43,733,620	$	35,888,692	$	28,677,351

(a) The Telco segment revenues for fiscal year 2014 are from February 28, 2014 through September 30, 2014.

Revenues attributed to geographic areas are based on the location of the customer. All of our long-lived assets are located within the United States.

In ~~2014,~~2015, Cable TV segment sales of new products represented ~~67%~~68% of Cable TV segment revenues and refurbished product sales represented 19%. Repair and other services contributed the remaining ~~14%~~13% of Cable TV segment revenues. Telco segment sales of refurbished products represented ~~86%~~93% of Telco segment revenues. Recycle sales and other services contributed the remaining ~~14%~~7% of Telco segment revenues.

We market and sell our products to franchise and private MSOs, telecommunication companies, system contractors and other resellers. Our sales and marketing are predominantly performed by our experienced internal sales and customer service staff as well as our outside sales representatives located in various geographic areas. The majority of our sales activity is generated through personal relationships developed by our sales personnel and executives, referrals from manufacturers we represent, trade shows and advertising in trade journals.

We maintain a wide breadth of inventory of new and used products and many times can offer our customers same day shipments. We carry one of the most diverse inventories of any cable television or telecommunication product reseller in the country, and we also have access to additional inventory via our various supply channels. We believe our investment in on-hand inventory, our product supply channels, our network of regional repair centers and our experienced sales and customer service team create a competitive advantage for us.

In fiscal year ~~2014,~~2015, the Cable TV segment purchased approximately ~~32%~~18% of its total inventory purchases directly from Arris Solutions and approximately ~~14%~~26% of its total inventory purchases either directly from Cisco or indirectly through Cisco’s primary stocking distributor. In addition to purchasing inventory from OEMs, this segment also purchases used or surplus-new inventory from MSOs, who have upgraded or are in the process of upgrading their systems, and from other resellers in this business.

In fiscal year ~~2014,~~2015, the Telco segment purchased approximately ~~13%~~11% of its total inventory purchases from ~~Windstream.~~Westworld Telecom. This segment of our business primarily purchases its used inventory from telecommunication companies that have excess equipment on hand or have upgraded their systems or from other resellers in this segment.

In the Cable TV segment, many of the products that we sell are installed outdoors and can be damaged by storms and power surges. Consequently, we can experience increased demand on certain product offerings during the months between late spring and early fall when severe weather tends to be more prominent than at other times during the year.

In the Telco segment, we do not anticipate that quarterly operating results will generally be impacted by seasonal fluctuations.

The overall telecommunications equipment industry is highly competitive. We compete with numerous resellers in the marketplace and ~~recent~~ declines in the economy have reduced the amount of capital expenditures in our industry, which heightens the competition. In addition, especially for the Cable TV segment, we sell current production products in competition with the ~~original equipment manufacturers.~~OEMs.

We believe we have differentiated ourselves from the OEMs, other resellers and repair operations in the marketplace in the following ways: 1) we sell both new and refurbished CATV equipment as well as repair what we sell, while most of our competition does not offer all of these services; 2) we stock both new and refurbished inventory; 3) we stock a wide breadth of inventory, which many of our competitors do not due to working capital constraints; 4) we can reconfigure new and refurbished equipment to meet the different needs of our customers; 5) we can meet our customers’ timing needs for product due to our inventory on hand; and 6) we have experienced sales support staff that have the technical know-how to assist our customers regarding solutions for various products and configurations.

·	we sell both new and refurbished Cable TV equipment as well as repair what we sell, while most of our competition does not offer all of these services;

·	we stock both new and refurbished inventory;

·	we stock a wide breadth of inventory, which many of our competitors do not due to working capital constraints;

·	we can reconfigure new and refurbished equipment to meet the different needs of our customers;

·	we can meet our customers’ timing needs for product due to our inventory on hand; and

·	we have experienced sales support staff that have the technical know-how to assist our customers regarding solutions for various products and configurations.

In terms of sales and inventory on hand or available via our supply channels, we believe we are one of the largest resellers in this industry, providing both sales and service of new and refurbished ~~CATV~~Cable TV equipment.

We also compete with our OEM suppliers as they can sell directly to our customers. Our OEM suppliers have a competitive advantage over us as they can sell products at lower prices than we offer. As a result, we are often considered a secondary supplier by large MSOs and telephone companies when they are making large equipment

purchases or upgrades. However, for smaller orders or items that are needed to be delivered quickly, we often hold an advantage over our OEM suppliers as we carry most inventory in stock and can have it delivered in a shorter time frame than the OEM.

For the Telco segment, we believe our differentiation from other resellers in the marketplace is primarily the following: 1) we stock a broad range of used inventory, which allows us to meet our customers’ timing needs, 2) we have experienced sales support staff that have strong relationships with our customers and technical knowledge of the products we offer, 3) we have the following quality certifications: TL9000 (telecommunications quality certification), ISO 14001 (environmental management certification and OHSAS18000 (occupational safety and health management certification), and will soon be R2 certified (EPA responsible recycling practices for electronics) as well, and 4) we provide multiple services for our customers including de-installation of products, storage and managing spares inventory, logistics, recycling and e-services.

·	we stock a broad range of used inventory, which allows us to meet our customers’ timing needs;

·	we have experienced sales support staff that have strong relationships with our customers and technical knowledge of the products we offer;

·	we have the following quality certifications: TL9000 (telecommunications quality certification), ISO 14001 (environmental management certification), OHSAS18000 (occupational safety and health management certification), and R2 (EPA responsible recycling practices for electronics); and

·	we provide multiple services for our customers including deinstallation and decommission of products, storage and management of spares inventory and recycling.

Working Capital Practices

Working capital practices in ~~the industry~~our business center on inventory and accounts receivable. We choose to carry a relatively large volume of inventory due to our on-hand, ~~demand~~on-demand business model. We ~~have~~ typically ~~utilized~~utilize excess cash flows to reinvest in inventory to maintain or expand our product offerings. The greatest need for working capital occurs when we make bulk purchases of surplus-new and used inventory, or when our OEM suppliers offer additional discounts on large purchases. In ~~2014,~~2015, we increased our ~~overall~~ inventory ~~level $4.8~~$1.4 million (before excess and obsolescence reserves) due primarily to ~~taking advantage of~~increasing our Telco segment inventory $2.4 million due in large part to purchasing previously consigned inventory, partially offset by a decreased inventory position in our Cable TV ~~supplier incentives and the inventory acquired in the Nave Communications acquisition. In 2013,~~segment. Currently, we ~~reduced~~are not anticipating increasing our inventory ~~generating $1.1 million of cash flows due~~levels any further, but are instead working to ~~the continued~~ decrease ~~in plant expansions and bandwidth upgrades in the cable television industry.~~our inventory position. Our working capital requirements are generally met by cash ~~flow~~flows from operations and a bank line of credit, which currently permits borrowings up to $7.0 million. We expect to have sufficient funds available from our cash on hand, future excess cash flows and the bank line of credit to meet our working capital needs for the foreseeable future.

Significant Customers

We sold our equipment and services to approximately ~~1,350 accounts~~1,300 customers in fiscal year ~~2014.~~2015. We are not dependent on one or a few customers to support our business on an on-going basis. Sales to our largest customer accounted for approximately 6%9% of our consolidated sales in fiscal year ~~2014,~~2015, while our sales to our largest five customers were ~~21%~~26% of our consolidated sales in fiscal year ~~2014, all~~2015, three of which were in the Cable TV segment and two were in the Telco segment.

At September 30, ~~2014,~~2015, we had ~~159~~156 employees, including ~~154~~152 full-time employees. Management considers its relationships with its employees to be excellent. Our employees are not unionized, and we are not subject to any collective bargaining agreements.

Item 2. Properties.

Each subsidiary owns or leases property for office, warehouse and service center facilities.

Broken Arrow, Oklahoma – We own a facility in a suburb of Tulsa consisting of our headquarters, additional offices, warehouse and service center of approximately 100,000 square feet on ten

acres, with an investment of $3.3 million, financed by a loan of $2.8 million, due in monthly payments through 2021 at an interest rate of LIBOR plus 1.4%. In 2007, we also constructed a 62,500

square foot warehouse facility on the rear of our existing property in Broken Arrow, OK, with an investment of $1.6 million, financed with cash flows from operations.

·	Deshler, Nebraska – We own a facility near Lincoln consisting of land and an office, warehouse and service center of approximately 8,000 square feet.

Warminster, Pennsylvania – We own a facility in a suburb of Philadelphia consisting of an office, warehouse and service center of approximately 12,000 square feet, with an investment of $0.6

million. We also lease property of approximately 2,000 square feet, with monthly rental payments of ~~$1,390~~$1,425 through December 31, ~~2014.~~2015. We also rent on a month-to-month basis another

property of approximately 2,000 square feet, with monthly rental payments of $1,325.

Sedalia, Missouri – We own a facility near Kansas City consisting of land and an office, warehouse and service center of approximately 24,300 square feet. In 2007, we also constructed an

18,000 square foot warehouse facility on the back of our existing property in Sedalia, MO, with an investment of $0.4 million.

·	Suwanee, Georgia – We rent on a month-to-month basis a facility in a suburb of Atlanta consisting of an office and service center of approximately 5,000 square feet, with monthly rental payments of ~~$3,360.~~$3,060.

Phoenix, Arizona – We lease a facility in Phoenix, Arizona consisting of an office, service center and warehouse of approximately 6,300 square feet, with monthly rental payments of $3,565,

$3,690, and $3,815 plus common area operating expenses of approximately $1,500 through May 31, 2016, 2017 and 2018, respectively.

Jessup, Maryland – We lease a facility in a suburb of Baltimore consisting of an office, warehouse, and service center of approximately 88,000 square feet, with monthly rental payments of ~~$40,000~~

$41,000 increasing each year by 2.5% through November 30, 2023.

We believe that our current facilities are adequate to meet our needs.

Item 3. Legal Proceedings.

From time to time in the ordinary course of business, we have become a party to various types of legal proceedings. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.

Item 5.

Market for ~~Registrants~~Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The table sets forth the high and low sales prices on the NASDAQ Global Market under the symbol “AEY” for the quarterly periods indicated.

At November 30, ~~2014,~~2015, we had approximately 70 shareholders of record and, based on information received from brokers, there were approximately ~~2,200~~2,000 beneficial owners of our common stock.

We have never declared or paid a cash dividend on our common stock. It has been the policy of our Board of Directors to use all available funds to finance the development and growth of our business. The payment of cash dividends in the future will be dependent upon our earnings and financial requirements and other factors deemed relevant by our Board of Directors.

Securities authorized for issuance under equity compensation plans

The information in the following table is as of September 30, ~~2014:~~2015:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	560,000	$2.96	40,415	535,000	$2.88	539,883
Equity compensation plans not approved by security holders	0	0	0	0	0	0
Total	560,000	$2.96	40,415	535,000	$2.88	539,883

Item 6. Selected Financial Data.

SELECTED CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Fiscal Year Ended September 30,

	2015		2014		2013		2012		2011

Sales	$	43,734	$	35,889	$	28,677	$	29,677	$	36,145

Income from operations	$	2,576	$	1,097	$	2,896	$	2,619	$	4,754

Income from continuing operations	$	1,498	$	659	$	1,772	$	939	$	2,431

Continuing operations earnings per share
Basic	$	0.15	$	0.07	$	0.18	$	0.09	$	0.24
Diluted	$	0.15	$	0.07	$	0.18	$	0.09	$	0.24

Total assets	$	51,973	$	53,406	$	43,116	$	42,033	$	52,888

Long-term obligations inclusive of current maturities	$	5,240	$	6,086	$	1,503	$	1,687	$	12,058

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated historical financial statements and the notes to those statements that appear elsewhere in this report. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors.

General

~~During fiscal year 2014, the~~The Company changed its organizational structure with the acquisition of Nave Communications. As a result of this acquisition, information that the Company’s management team regularly reviews for purposes of allocating resources and assessing performance changed. Therefore, beginning in fiscal year 2014, the Company is reportingreports its financial performance based on ~~its new~~two external reporting segments: Cable Television and Telecommunications. These reportable segments are described below.

Cable Television (“("Cable ~~TV”~~TV")

The Company’s Cable TV segment sells new, surplus and ~~re-manufactured~~refurbished cable television equipment to cable MSOs throughout North America, Central America and South America. Our Cable TV segment is a Premier Partner for Cisco’s products, which allows them to sell both video-related and IT-related products in the United States and a leading distributor of Arris broadband products. The Cable Television segment also distributes products from other OEMs including Alpha, Blonder-Tongue, RL Drake, Corning-Gilbert, Promax, Quintech, Standard and Triveni Digital. In addition, we also operate technical service centers that offer repair services for our cable MSO customers on most products that we sell.

Telecommunications (“Telco”)

The Company’s Telco segment sells used telecommunications networking equipment from a wide range of manufacturers. We have an extensive stock on hand in order to serve our telecommunications customers. We primarily resell our inventory in North America, but we have a worldwide customer base, which we are actively trying to expand, especially in the European market. In addition, this segment offers its customers decommissioning services for surplus and obsolete equipment, which it then processes through its recycling services.

Recent Business Developments

~~Acquisition of Nave Communications Company~~

On February 28, 2014, the Company acquired all of the outstanding common stock of Nave Communications, a provider of quality used telecommunication networking equipment. The purchase price for Nave Communications included approximately $9.6 million in cash payments, as well as $3.0 million in deferred payments over the next three years. In addition, the Company will make future earn-out payments equal to 70% of Nave Communications’ annual EBITDA in excess of an EBITDA target of $2 million per year over the next three years, which is estimated to be between $0.7 million and $1.0 million annually.

~~Sale of Adams Global Communications~~

On January 31, 2014, the Company executed an agreement to sell the majority of the net assets and operations of Adams Global Communications (“AGC”) to Adams Cable Equipment, a supplier of customer premise equipment (“CPE”) and other products for the cable television industry, for approximately $2 million in cash, which yielded an after tax loss of $0.6 million. As part of the sales agreement, ADDvantage retained their existing relationship with Arris Solutions, as well as non-CPE inventory consisting primarily of headend and access and transport equipment. In addition, ADDvantage retained the AGC facility, which was actively marketed for sale. As part of the agreement, the Company also agreed to not compete in the used CPE market for three years. AGC’s net assets that were disposed of consisted of approximately $2.5 million of current assets, $0.5 million of noncurrent assets and $0.1 million of current liabilities, which yielded a loss on the sale, net of tax, of approximately $0.6 million.

~~Assets Held for Sale~~

As a result of the sale of the net assets of AGC discussed above, the Company retained the AGC facility and engaged a real estate broker to sell the facility. On June 30, 2014, the Company sold the AGC facility for $1.5 million with net settlement proceeds of $1.4 million. The sale resulted in a pretax loss of $0.1 million.

Business Strategy

In fiscal year ~~2014,~~2015, we continued to execute on our growth strategy of organic growth and acquisitions. Our Cable TV segment has experienced top-line revenue declines since 2008 due to decreased plant expansions and bandwidth equipment upgrades as a result of lower new housing developments and an overall lower cable television subscriber base. In addition, in the last quarter of fiscal year 2015, we observed a general weakness in the industry, which further negatively impacted our sales, and we anticipate that this revenue decline will continue into fiscal year 2016. For the Cable TV segment, our growth strategy is primarily focused on organic growth in order to gain market share in a shrinking capital equipment expenditure market. We ~~believe we can~~seek to increase this business segment primarily along three major fronts: 1) expand product offerings among existing OEM vendors, 2) add additional vendors to our product offering mix and 3) expand our sales force. In

Our Telco segment was formed when we acquired Nave Communications in February 2014. Our Telco segment continued to increase its top-line revenue performance in fiscal year ~~2014, we did increase our product offerings with our OEM vendors and increased our supply of~~2015. We have expanded the inventory ~~on hand~~base in fiscal year 2015 in order to better serve our telecommunication’s customers. ~~In addition, we~~We believe that this segment will continue to ~~expand~~grow both top-line revenue and operating income by expanding sales to new and existing telecommunication end-user customers. This growth will be driven by increasing our sales force and utilizing our on-hand inventory supply and extensive supplier network to support our overall sales efforts. In addition, in ~~order~~fiscal year 2015, the Telco segment also received its R2 certification, which will allow them to ~~gain additional market share in the Cable TV segment. Also,~~grow their recycling efforts as ~~discussed above, we divested AGC from this segment as it was not performing to our expectations and it did not fit our core distribution strategy in this segment.~~well.

~~We believe that the current state of the industry may provide opportunities for expansion of~~In addition to organically growing our ~~business through acquisitions. We~~existing businesses, we are seeking additional acquisition opportunities that will enable us to expand the scope of our business within the broader telecommunications industry. We believe that the current state of the industry provides opportunities for expansion of our business through acquisitions. In fiscal ~~year 2013,~~2015, we engaged an investment ~~banking firm~~banker to help us identify ~~and ultimately close~~ a strategic acquisition. On February 28, 2014, the Company acquired all of the outstanding common stock of Nave Communications, a telecommunications distributor of used telecommunication networking equipment and a recycler of surplus and obsolete telecommunications equipment. This acquisition, along with its retained management team, has diversified the Company’s business outside of the cable television

~~industry and will also allow the Company to capitalize on growth opportunities in both the cable television and telecommunication industries.~~

~~After completing the integration of Nave Communications into our business, we~~We will continue to evaluate companies in the telecommunications market and are optimistic that we will identify and execute ~~another~~a strategic acquisition. It should be noted, however, that the identification and completion of acquisitions on terms favorable to the Company and the successful integration of acquired businesses into our existing business are matters posing some risk to any company and about which we can give no assurance.

Results of Operations

Year Ended September 30, 2015, compared to Year Ended September 30, 2014 (all references are to fiscal years)

Consolidated

Consolidated sales increased $7.8 million, or 22%, to $43.7 million for 2015 from $35.9 million for 2014. The increase in sales was due to an increase in the Telco segment of $9.6 million primarily resulting from the Nave Communications acquisition in February 2014, partially offset by a decrease in the Cable TV segment of $1.8 million.

Consolidated gross profit increased $3.7 million, or 32%, to $15.3 million for 2015 from $11.6 million for 2014. The increase in gross profit was due to an increase in the Telco segment of $3.5 million as a result of the Nave Communications acquisition, and an increase in the Cable TV segment of $0.2 million.

~~Results~~Operating, selling, general and administrative expenses include all personnel costs, which include fringe benefits, insurance and business taxes, as well as occupancy, communication and professional services, among other less significant cost categories. Operating, selling, general and administrative expenses increased $2.2 million, or 21%, to $12.7 million for 2015 compared to $10.5 million for 2014. This increase was primarily due to increased expenses of ~~Operations~~the Telco segment of $2.7 million, which was a result of the Nave Communications acquisition, offset by a decrease in Cable TV segment expenses of $0.5 million.

Interest expense increased $0.1 million to $0.3 million for 2015 from $0.2 million for the same period last year. The increase was due primarily to interest expense incurred on the $5.0 million term loan entered into in connection with the Nave Communications acquisition.

The provision for income taxes from continuing operations increased by $0.6 million to $0.8 million, or an effective rate of 34%, for 2015 from $0.2 million, or an effective rate of 25%, for the same period last year. The 2014 provision for income taxes includes an adjustment to the federal tax provision for an additional deduction for state income taxes with an impact of approximately $40 thousand.

Segment results

Cable TV

Sales for the Cable TV segment decreased $1.8 million, or 7%, to $25.4 million for the year ended September 30, 2015 from $27.2 million for the same period last year. The decrease in sales was primarily due to a decrease of $1.0 million, $0.4 million and $0.4 million in new equipment sales, refurbished equipment sales, and repair service revenues, respectively.

In spite of lower sales, gross profit increased $0.2 million, or 3%, to $8.0 million for the year ended September 30, 2015 from $7.8 million for the same period last year. Gross margin was 32% for 2015 and 29% for 2014. The increase in gross margin was primarily due to higher gross margins on refurbished equipment sales.

Operating, selling, general and administrative expenses decreased $0.5 million, or 7%, to $5.8 million for the year ended September 30, 2015 from $6.3 million for the same period last year. The decrease was due primarily to lower allocations of corporate overhead to this segment of $0.3 million and lower payroll-related costs of $0.2 million.

Telco

Sales for the Telco segment increased $10.1 million, or 116%, to $18.8 million for the year ended September 30, 2015 from $8.7 million for the same period last year primarily as a result of the acquisition of Nave Communications. The increase in sales resulted from an increase in used equipment sales of $10.0 million and recycling revenue of $0.1 million.

Gross profit increased $3.5 million, or 90%, to $7.3 million for the year ended September 30, 2015 from $3.8 million for the same period last year. Gross margin was 39% for 2015 and 44% for 2014. The decrease in the gross margin was primarily due to lower margins on recycling revenue as a result of lower commodity prices.

Operating, selling, general and administrative expenses increased $2.7 million, or 63%, to $6.9 million for the year ended September 30, 2015 from $4.2 million for the same period last year. The increase in expenses was primarily to the acquisition of Nave Communications. In addition, these expenses included $0.7 million and $0.4 million for 2015 and 2014, respectively, for earn-out payments related to the Nave Communications acquisition. In March 2015, we made our first of three earn-out payments for $0.7 million, which was equal to 70% of Nave Communications’ annual adjusted EBITDA in excess of $2.0 million for the twelve month period ending February 28, 2015. We will make earn-out payments in March 2016 and 2017, which we estimate will be between $0.8 million and $1.5 million each. Also, in 2014, these expenses included $0.6 million of direct costs in connection with the acquisition of Nave Communications, which are not expected to recur.

Discontinued Operations

Loss from discontinued operations, net of tax, was zero for the year ended September 30, 2015 compared to $36 thousand for the same period last year. This activity included the operations of AGC prior to the sale on January 31, 2014.

Loss on sale of discontinued operations, net of tax, was $0.6 million for the year ended September 30, 2014. This loss consisted of a pretax loss of $0.9 million from the sale of the net assets of AGC on January 31, 2014 for $2 million in cash and a pretax loss of $0.1 million from the sale of the AGC facility on June 30, 2014 for $1.5 million in cash.

Non-GAAP Financial Measure

financial community as a method of measuring our financial performance and of evaluating the market value of companies considered to be in similar businesses. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance. EBITDA, as calculated below, may not be comparable to similarly titled measures employed by other companies. In addition, EBITDA is not necessarily a measure of our ability to fund our cash needs.

A reconciliation by segment of operating income (loss) to EBITDA follows:

	Year Ended September 30, 2015						Year Ended September 30, 2014
	Cable TV		Telco		Total		Cable TV		Telco			Total

Operating income (loss)	$	2,210,414	$	365,796	$	2,576,210	$	1,492,100	$	(395,001	)	$	1,097,099
Depreciation		296,876		111,827		408,703		293,353		66,926			360,279
Amortization		−		825,805		825,805		−		481,722			481,722
EBITDA (a)	$	2,507,290	$	1,303,428	$	3,810,718	$	1,785,453	$	153,647		$	1,939,100

(a)	The Telco segment for the year ended September 30, 2014 includes acquisition-related costs of $0.6 million related to the acquisition of Nave Communications.

Year Ended September 30, 2014, compared to Year Ended September 30, 2013 ~~(all references are to fiscal years)~~

Consolidated

Consolidated sales increased $7.2 million, or 25%, to $35.9 million for 2014 from $28.7 million for 2013. The increase in net sales was a result of the addition of the Telco segment of $8.7 million as a result of the Nave Communications acquisition, partially offset by a decrease in the Cable TV segment of $1.5 million.

Consolidated gross profit increased $2.9 million, or 33%, to $11.6 million for 2014 from $8.7 million for 2013. The increase in gross profit was due primarily to the addition of the Telco segment of $3.8 million as a result of the Nave Communications acquisition, partially offset by a decrease in the Cable TV segment of $0.9 million.

Operating, selling, general and administrative expenses include all personnel costs, which include fringe benefits, insurance and business taxes, as well as occupancy, communication and professional services, among other less significant cost categories. Operating, selling, general and administrative expenses increased $4.7 million, or 81%, to $10.5 million for 2014 compared to $5.8 million for 2013. This increase was primarily due to increased expenses of the Cable TV segment of $0.5 million and the Telco segment of $4.2 million, which was a result of the Nave Communications acquisition.

Interest expense increased $0.2 million to $0.2 million for 2014 from $26,000 for the same period last year. The increase was due primarily to interest expense incurred on the $5.0 million term loan entered into in connection with the Nave Communications acquisition.

The provision for income taxes from continuing operations decreased by $0.9 million to $0.2 million, or an effective rate of 25.0%, for 2014 from $1.1 million, or an effective rate of 38.3%, for the same period last year. The 2014 provision for income taxes includes an adjustment to the federal tax provision for an additional deduction for state income taxes with an impact of approximately $40 thousand.

Segment results

~~Segment results~~Cable TV

~~Cable TV~~

~~Net sales~~Sales for the Cable TV segment decreased $1.5 million, or 5%, to $27.2 million for the year ended September 30, 2014 from $28.7 million for the same period last year. ~~New~~The decrease in sales was primarily due to a decrease of $0.7 million, $0.6 million and $0.2 million in new equipment sales, ~~decreased $0.7 million, or 4%, to $18.2 million for 2014 from $18.9 million for 2013. Net~~ refurbished equipment sales, ~~decreased $0.6 million, or 9%, to $5.2 million for 2014 from $5.8 million for the same period last year. Net~~and repair service revenues, decreased $0.2 million, or 6%, to $3.8 million for 2014 from $4.0 million for the same period last year. The decrease in equipment sales was due primarily to the continued decrease in plant expansions and bandwidth upgrades in the cable television industry and the absence of equipment sales as a result of Hurricane Sandy in fiscal year 2013, partially offset by supplying a major MSO equipment for certain projects. In addition, repair service revenue decreased $0.2 million.respectively.

Gross profit decreased $0.9 million, or 11%, to $7.8 million for the year ended September 30, 2014 from $8.7 million for the same period last year. The decrease in gross profit was primarily due to lower ~~net~~ sales. Gross margin was 29% for ~~the year ended September 30,~~ 2014 and 30% for ~~the year ended September 30,~~ 2013.

Operating, selling, general and administrative expenses increased $0.5 million, or 8%, to $6.3 million for the year ended September 30, 2014 from $5.8 million for the same period last year. The increase was due primarily to increased

personnel costs as a result of expanding our sales force ~~as discussed~~ in ~~our “Business Strategy” section above.~~2014.

Telco

~~Net sales~~Sales for the Telco segment were $8.7 million for the year ended September 30, 2014 and zero for the same period last year as a result of the acquisition of Nave Communications. ~~Net sales~~Sales for the Telco segment consisted of $7.5 million of used equipment sales and $1.2 million of recycling revenue. Gross margin was ~~42%~~44% for the year ended September 30, 2014.

Operating, selling, general and administrative expenses were $4.2 million for the year ended September 30, 2014. These expenses included $0.6 million of direct costs in connection with the acquisition of Nave Communications.

Discontinued Operations

Loss from discontinued operations, net of tax, was $36 thousand for the year ended September 30, 2014 compared to $100 thousand for the same period last year. This activity included the operations of AGC prior to the sale on January 31, 2014.

Non-GAAP Financial Measure

EBITDA is a supplemental, non-GAAP financial measure. EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization. EBITDA is presented below because this metric is used by the financial community as a method of measuring our financial performance and of evaluating the market value of companies considered to be in similar businesses. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance. EBITDA, as calculated below, may not be comparable to similarly titled measures employed by other companies. In addition, EBITDA is not necessarily a measure of our ability to fund our cash needs.

A reconciliation by segment of operating income (loss) to EBITDA follows:

	Year Ended September 30, 2014							Year Ended September 30, 2013						Year Ended September 30, 2014							Year Ended September 30, 2013
	Cable TV		Telco			Total		Cable TV		Telco		Total		Cable TV		Telco			Total		Cable TV		Telco		Total

Operating income (loss)	$	1,492,100	$	(395,001	)	$	1,097,099	$	2,896,254	$	−	$	2,896,254	$	1,492,100	$	(395,001	)	$	1,097,099	$	2,896,254	$	−	$	2,896,254
Depreciation		306,538		53,741			360,279		276,356		−		276,356		293,353		66,926			360,279		276,356		−		276,356
Amortization		−		481,722			481,722		−		−		−		−		481,722			481,722		−		−		−
EBITDA (a)	$	1,798,638	$	140,462		$	1,939,100	$	3,172,610	$	−	$	3,172,610	$	1,785,453	$	153,647		$	1,939,100	$	3,172,610	$	−	$	3,172,610

(a)	The Telco segment for the year ended September 30, 2014 includes acquisition-related costs of $0.6 million related to the acquisition of Nave Communications.

~~Year Ended September 30, 2013, compared to Year Ended September 30, 2012~~

~~For this discussion, consolidated results and segment results are the same as the Telco segment did not have activity until the Nave Communications acquisition in 2014.~~

~~Consolidated~~

Consolidated sales decreased $1.0 million, or 3%, to $28.7 million for 2013 from $29.7 million for 2012. New equipment sales decreased $0.7 million, or 4%, to $18.9 million for 2013 from $19.6 million for 2012. Net refurbished sales increased $0.1 million, or 1%, to $5.8 million for 2013 from $5.7 million for the same period last

year. The net decrease in equipment sales was primarily due to the continued decrease in plant expansions and bandwidth upgrades in the cable television industry, partially offset by increased equipment sales as a result of Hurricane Sandy. Net repair service revenues decreased $0.3 million, or 7%, to $4.0 million for 2013 from $4.3 million for the same period last year.

Gross profit increased $0.1 million, or 2%, to $8.7 million for 2013 from $8.6 million for 2012. The increase in gross profit was primarily due to the mix of equipment sales as refurbished equipment generates a higher profit margin than new equipment, largely offset by lower overall net sales and an increase in the provision for excess of excess and obsolete inventory of $0.6 million. Gross profit margins were 30% for 2013 and 29% for 2012.

Operating, selling, general and administrative expenses include all personnel costs, which include fringe benefits, insurance and business taxes, as well as occupancy, communication and professional services, among other less significant cost categories. Operating, selling, general and administrative expenses decreased $0.1 million to $5.8 million for September 30, 2013 from $5.9 million for the same period last year.

Interest expense decreased $1.1 million to $26,000 for 2013 from $1.1 million for the same period last year. The decrease was due primarily to lower interest expense as a result of the March 2012 payoff of the outstanding amount of $9.4 million under the second term loan under the Amended and Restated Revolving Credit and Term Loan Agreement and a $0.8 million payment made in order to terminate the associated interest rate swap agreement. The interest rate swap agreement termination payment was recorded as interest expense in 2012.

The provision for income taxes from continuing operations increased by $0.5 million to $1.1 million, or an effective rate of 38.3%, for 2013 from $0.6 million, or an effective rate of 37.6%, for the same period last year.

~~Discontinued Operations~~

Gain (loss) from discontinued operations, net of tax, was a loss of $0.1 million for the year ended September 30, 2013 compared to a gain of $0.3 million for the same period last year. This activity included the operations of Adams Global Communications prior to the sale on January 31, 2014.

~~Non-GAAP Financial Measure~~

~~A reconciliation by segment of operating income to EBITDA follows:~~

Year Ended September 30, 2013 Year Ended September 30, 2012

Cable TV

Telco

Total

Cable TV

Telco

Total

Operating income $ 2,896,254 $ − $ 2,896,254 $ 2,619,134 $ − $ 2,619,134
Depreciation 276,356 − 276,356 300,961 − 300,961
Amortization − − − − − −
EBITDA $ 3,172,610 $ − $ 3,172,610 $ 2,920,095 $ − $ 2,920,095

Liquidity and Capital Resources

Cash Flows ~~Used in~~Provided by Operating Activities

We generally finance our operations primarily through cash flows provided by operations, and we also have available to us a bank line of credit of $7.0 million. During ~~2014,~~2015, we ~~used $1.7~~generated $2.8 million of cash ~~flow~~flows from operations. The cash ~~flow~~flows from

operations was favorably impacted by a $2.1 million reduction in accounts receivable. Our accounts receivable decreased from 2014 due primarily to decreased sales during the fourth quarter of 2015 as compared to the fourth quarter of 2014. The cash flows from operations was unfavorably impacted by ~~$2.2~~$1.4 million from a net increase in inventory due primarily to purchases of ~~new inventory with certain manufacturer incentives and purchases of refurbished~~used telecommunications ~~inventory~~equipment and by ~~$2.4~~$1.1 million from a net ~~increase~~decrease in accounts ~~receivable~~payable. The decrease in accounts payable was due primarily to the timing of inventory purchases.

During 2015, we increased ~~sales in~~ the last month of 2014 compared to 2013. In addition, the cash flow from operations was favorably impacted by $0.8 million from a net increase in accrued expenses primarily resulting from a $0.4 million accrual related to the first earn-out ~~payment~~liability related to the Nave Communications ~~acquisition. We will make future~~acquisition by $0.7 million, for which the outstanding portion of this liability is included in accrued expenses. The earn-out ~~payments over the next three years~~is equal to 70% of Nave ~~Communications’ annual~~Communications adjusted EBITDA earnings in excess of $2.0 million ~~per year (“~~for the twelve month period beginning March 1 each year. In March 2015, we paid $0.7 million for the first of three annual Nave ~~Earn-out”), which we~~Earn-out payments. We estimate the remaining two annual payments will be between ~~$0.7~~$0.8 million and ~~$1.0~~$1.5 million ~~annually.~~each.

Cash Flows Used in Investing Activities

During ~~2014,~~2015, cash used in investing activities was ~~$6.3~~$1.2 million. ~~This use~~In March 2015, we paid $1.0 million for the first of cash was primarily due to the acquisition of Nave Communications in the amount of approximately $9.6 million, net of cash acquired. We also recorded an accrual at present value for deferred consideration of $2.7 million relatedthree annual installment payments to the Nave Communications ~~acquisition,~~owners for deferred consideration resulting from the Nave Communications acquisition. The deferred consideration, which ~~consists~~consisted of $3.0 million to be paid in equal annual installments over the three years, ~~to the Nave Communications owners. The acquisition~~ is ~~discussed~~recorded at its present value of $1.8 million at September 30, 2015. During 2015, cash used in ~~Note 2 of the Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.~~

~~During 2014, the sale of the net assets of Adams Global Communications for $2.0 and the sale of the AGC facility for $1.5 with net settlement proceeds of $1.4 million provided cash flows from~~ investing activities ~~for discontinued operations of $3.4 million. The disposition is discussed in Note 3 of the Notes~~was $0.2 million related to ~~the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.~~

~~Cash Flows Provided by Financing Activities~~capital expenditures.

Cash Flows Used in Financing Activities

During ~~2014,~~2015, cash ~~provided by~~used in financing activities was ~~$4.5 million primarily due to cash borrowings of $5.0 million, partially offset by note payable payments of $0.5~~$0.8 million. Cash borrowings were due to a new term loan of $5.0 million under our Amended and Restated Revolving Credit and Term Loan Agreement (“Credit and Term Loan Agreement”). This term loan was used to assist in the funding of the acquisition of Nave Communications.

~~During 2014, we~~We made principal payments ~~totaling $0.5~~of $0.8 million on our two term loans under our Credit and Term Loan ~~Agreement. The first term loan has a balance of $1.3 million at September 30, 2014.~~Agreement with our primary lender. The first term loan requires monthly payments of $15,334 plus accrued interest through November 2021. Our second term loan ~~entered into in connection with the acquisition of Nave Communications,~~ is a five year term loan with a seven year amortization payment schedule with monthly principal and interest payments of $68,505 through March 2019.

At September 30, ~~2014,~~2015, there was not a balance outstanding under ~~the~~our line of credit. The lesser of $7.0 million or the total of 80% of the qualified accounts receivable plus 50% of qualified inventory is available to us under the revolving credit facility ($7.0 million at September 30, ~~2014)~~2015). Any ~~outstanding balance on~~future borrowings under the revolving credit facility ~~would be~~are due ~~on maturity which is November 28, 2014.~~at maturity.

Subsequent to September 30, ~~2014,~~2015, the Company signed the ~~Fifth~~Sixth Amendment to the Amended and Restated Revolving Credit and Term Loan Agreement with its primary financial lender dated November ~~28, 2014.~~27, 2015. This amendment extended the Line of Credit maturity to ~~November 27, 2015.~~March 31, 2017. The Line of Credit remains at $7.0 million, and the interest rate remains at the prevailing 30-day LIBOR rate plus 2.75%.

We ~~expect~~believe that our cash and cash equivalents of ~~$5.3~~$6.1 million at September 30, ~~2014,~~2015, cash ~~flow~~flows from operations and our existing line of credit to provide sufficient liquidity and capital resources to meet our working capital and debt payment needs.

Critical Accounting Policies and Estimates

Note 1 to the Consolidated Financial Statements in this Form 10-K for fiscal year ~~2014~~2015 includes a summary of the significant accounting policies or methods used in the preparation of our Consolidated Financial Statements. Some of those significant accounting policies or methods require us to make estimates and assumptions that affect the amounts reported by us. We believe the following items require the most significant judgments and often involve complex estimates.

~~General~~

General

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience, current market conditions, and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. The most significant estimates and assumptions relate to the carrying value of our inventory and, to a lesser extent, the adequacy of our allowance for doubtful accounts.

Inventory Valuation

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

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

Our inventories consist of new and used electronic components for the cable television industry. Inventory is stated at the lower of cost or market, with cost determined using the weighted-average method. At September 30, ~~2014,~~2015, we had total inventory, before the reserve for excess and obsolete inventory, of ~~$24.9~~$26.4 million, consisting of ~~$16.9~~$16.3 million in new products and ~~$8.0~~$10.1 million in used or refurbished products.

For the Cable TV segment, our reserve at September 30, ~~2014~~2015 for excess and obsolete inventory was ~~$2.2~~$2.8 million, which reflects an increase of ~~approximately~~ $0.6 ~~million and a write down of the carrying value of certain inventory items by approximately $0.2 million to reflect deterioration in the market demand of that inventory.~~million. If actual market conditions are less favorable than those projected by management, and our estimates prove to be inaccurate, we could be required to increase our inventory reserve and our gross margins could be materially adversely affected.

For the Telco segment, we do not maintain an inventory reserve as we recycle any surplus and obsolete equipment on hand through our recycling program when it is identified.

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

Accounts Receivable Valuation

Management judgments and estimates are made in connection with establishing the allowance for doubtful accounts. Specifically, we analyze the aging of accounts receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms. Significant changes in customer concentration or payment terms, deterioration of customer credit-worthiness, or weakening in economic trends could have a significant impact on the collectability of receivables and our operating results. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, an additional provision to the allowance for doubtful accounts may be required. The reserve for bad debts was $0.3 million at September 30, 2015 and $0.2 million at September 30, ~~2014 and $0.3 million at September 30, 2013.~~2014. At September 30, ~~2014,~~2015, accounts receivable, net of allowance for doubtful accounts, was ~~$6.4~~$4.3 million.

~~Goodwill~~

Goodwill

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

Management utilizes a discounted cash flow analysis to determine the estimated fair value of each reporting unit. Significant judgments and assumptions including the discount rate and anticipated revenue growth rate, gross margins and operating expenses are inherent in these fair value estimates, which are based on historical operating results. As a result, actual results may differ from the estimates utilized in our discounted cash flow analysis. The use of alternate judgments and/or assumptions could result in the recognition of different levels of impairment charges in the financial statements. If the carrying value of one of the reporting unit exceeds its fair value, a computation of the implied fair value of goodwill would then be compared to its related carrying value. If the carrying value of the reporting unit’s goodwill exceeds the implied fair value of goodwill, an impairment loss would be recognized in the amount of the excess. If an impairment charge is incurred, it would negatively impact our results of operations and financial position.

We performed our annual impairment test for both reporting units in the fourth quarter of 2015 and determined that the fair value of our reporting units significantly exceeded their carrying values. Therefore, no impairment existed as of September 30, 2015.

We did not record a goodwill impairment for either of our two reporting units in the three year period ended September 30, ~~2014.~~2015. Although we do not anticipate a future impairment charge, certain events could occur that might adversely affect the reported value of goodwill. Such events could include, but are not limited to, economic or competitive conditions, a significant change in technology, the economic condition of the customers and industries we serve, a significant decline in the real estate markets we operate in, and a material negative change in the relationships with one or more of our significant customers or equipment suppliers. If our judgments and assumptions change as a result of the occurrence of any of these events or other events that we do not currently anticipate, our expectations as to future results and our estimate of the implied value of each reporting unit also may change.

We performed our annual impairment test for both reporting units in the fourth quarter to determine whether an impairment existed and to determine the amount of headroom at September 30, 2014. Headroom is defined as the percentage difference between the carrying value of the goodwill and its fair value. At September 30, 2014, headroom for the Cable TV and Telco reporting units were 147% and 199%, respectively.Intangibles

~~Intangibles~~

~~As a result of the Nave Communications acquisition, we have intangible assets with finite useful lives.~~ Intangible assets that have finite useful lives are amortized on a straight-line basis over their estimated useful lives ranging from 3 years to 10 years.

Recently Issued Accounting Standards

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08: “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360)”. This new guidance defines a discontinued operation as a disposal of a component or a group of components of an entity that represents a strategic shift in operations that has a major effect on the Company’s operations and financial results. This guidance will require additional disclosures for discontinued operations as well as new disclosures for individually significant disposal transactions that do not qualify for discontinued operations reporting. The guidance is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014. Management does not anticipate that the adoption of ASU No. 2014-08 to have a significant impact on the Company’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09: “Revenue from Contracts with Customers (Topic 606)”. This guidance was issued to clarify the principles for recognizing revenue and develop a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”). ~~The guidance is effective for~~In addition, in August 2015, the ~~fiscal years~~FASB issued ASU No. 2015-14: “Revenue from Contracts with Customers (Topic 606). This update was issued to defer

~~and interim~~the effective date of ASU No. 2014-09 by one year. Therefore, the effective date of ASU No. 2014-09 is for annual reporting periods ~~within those years~~ beginning after December 15, ~~2016.~~2017. Management is evaluating the impact that ASU No. 2014-09 will have on the Company’s consolidated financial statements.

In July 2015, the FASB issued ASU No. 2015-11: “Inventory (Topic 330) – Simplifying the Measurement of Inventory.” This guidance was issued to simplify the measurement of inventory. The amendments in this Update require an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this Update are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years with earlier application permitted. Management has decided to early adopt ASU 2015-11.

In November 2015, the FASB issued ASU No. 2015-17: “Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes.” This guidance was issued to simplify the presentation of deferred income taxes. The amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The effective date of ASU No. 2015-17 is for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Management is evaluating the impact that ASU No. 2015-17 will have on the Company’s consolidated financial statements.

Off-Balance Sheet Arrangements

None.

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements	Page

Report of Independent Registered Public Accounting Firm	20

Consolidated Balance Sheets, September 30, ~~2014~~2015 and ~~2013~~2014	21

Consolidated Statements of Operations, ~~and Comprehensive Income (Loss),~~ Years ended
~~ended~~ September 30, 2015, 2014 ~~2013~~ and ~~2012~~2013	23

Consolidated Statements of Changes in Shareholders’ Equity, Years ended
September 30, 2015, 2014 ~~2013~~ and ~~2012~~2013	24

Consolidated Statements of Cash Flows, Years ended
September 30, 2015, 2014 ~~2013~~ and ~~2012~~2013	25

Notes to Consolidated Financial Statements	26

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

ADDvantage Technologies Group, Inc.

We have audited the accompanying consolidated balance sheets of ADDvantage Technologies Group, Inc. and subsidiaries as of September 30, ~~2014~~2015 and ~~2013,~~2014, and the related consolidated statements of operations, ~~and comprehensive income (loss),~~ shareholders’ equity and cash flows for each of the three years in the period ended September 30, ~~2014.~~2015. Our audits of the consolidated financial statements also included the financial statement schedules of ADDvantage Technologies Group, Inc., listed in Item 15(a). These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ADDvantage Technologies Group, Inc. and subsidiaries as of September 30, ~~2014~~2015 and ~~2013,~~2014, and the results of their operations and their cash flows for each of the three years in the period ended September 30, ~~2014,~~2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ HOGANTAYLOR LLP

December ~~9, 2014~~15, 2015

Tulsa, Oklahoma

ADDVANTAGE TECHNOLOGIES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	September 30,						September 30,
	2014			2013			2015			2014
Assets
Current assets:
Cash and cash equivalents	$	5,286,097		$	8,476,725		$	6,110,986		$	5,286,097
Accounts receivable, net of allowance for doubtful accounts of $200,000 and $300,000, respectively		6,393,580			2,390,979
Income tax refund receivable		220,104			258,790
Accounts receivable, net of allowance for doubtful accounts of $250,000 and $200,000, respectively								4,286,377			6,393,580
Income tax receivable								−			220,104
Inventories, net of allowance for excess and obsolete
inventory of $2,156,628 and $1,600,000, respectively		22,780,523			18,011,706
inventory of $2,756,628 and $2,156,628, respectively								23,600,996			22,780,523
Prepaid expenses		174,873			106,509			153,454			174,873
Deferred income taxes		1,416,000			1,066,000			1,776,000			1,416,000
Current assets of discontinued operations held for sale		−			3,267,917
Total current assets		36,271,177			33,578,626			35,927,813			36,271,177

Property and equipment, at cost:
Land and buildings		7,208,679			7,208,679			7,218,678			7,208,679
Machinery and equipment		3,244,153			2,991,412			3,415,164			3,244,153
Leasehold improvements		206,393			9,633			151,957			206,393
Total property and equipment, at cost		10,659,225			10,209,724			10,785,799			10,659,225
Less accumulated depreciation		(4,191,516	)		(3,831,238	)
Less: Accumulated depreciation								(4,584,796	)		(4,191,516	)
Net property and equipment		6,467,709			6,378,486			6,201,003			6,467,709

Intangibles, net of accumulated amortization		6,625,278			−			5,799,473			6,625,278
Goodwill		3,910,089			1,150,060			3,910,089			3,910,089
Other assets		131,428			11,428			134,678			131,428
Assets of discontinued operations held for sale		−			1,997,520

Total assets	$	53,405,681		$	43,116,120		$	51,973,056		$	53,405,681

See notes to ~~audited~~ consolidated financial statements.

ADDVANTAGE TECHNOLOGIES GROUP, INC.

CONSOLIDATED BALANCE SHEETS

Notes payable – current portion

Other current liabilities

Current liabilities of discontinued operations held for sale

Common stock, $.01 par value; 30,000,000 shares authorized;

10,541,864 and 10,499,138 shares issued, respectively;

10,041,206 and 9,998,480 shares outstanding, respectively

Common stock, $.01 par value; 30,000,000 shares authorized;

10,564,221 and 10,541,864 shares issued, respectively;

10,063,563 and 10,041,206 shares outstanding, respectively

Total shareholders’ equity before treasury stock

Less: Treasury stock, 500,658 shares, at cost

See notes to ~~audited~~ consolidated financial statements.

ADDVANTAGE TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

~~AND COMPREHENSIVE INCOME (LOSS)~~

Continuing operations

Discontinued operations

Continuing operations

Discontinued operations

See notes to ~~audited~~ consolidated financial statements.

ADDVANTAGE TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

Years ended September 30, 2015, 2014 ~~2013~~ and ~~2012~~2013

See notes to ~~audited~~ consolidated financial statements.

ADDVANTAGE TECHNOLOGIES GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years ended September 30,
	2015			2014			2013
Operating Activities
Net income (loss)	$	1,497,900		$	(6,857	)	$	1,669,716
Net loss from discontinued operations		−			(666,046	)		(102,207	)
Net income from continuing operations		1,497,900			659,189			1,771,923
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation		408,703			360,279			276,356
Amortization		825,805			481,722			−
Allowance for doubtful accounts		50,000			−			−
Provision for excess and obsolete inventories		600,000			601,351			600,000
(Gain) loss on disposal of property and equipment		30,652			−			(5,950	)
Deferred income tax benefit		(341,000	)		(276,000	)		(15,000	)
Share based compensation expense		239,613			212,436			167,041
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable		2,057,203			(2,351,459	)		195,733
Income tax receivable\payable		342,596			38,686			137,547
Inventories		(1,420,473	)		(2,188,205	)		1,066,800
Prepaid expenses		(17,359	)		(14,753	)		2,045
Other assets		(3,250	)		−			2,350
Accounts payable		(1,096,279	)		(78,670	)		8,844
Accrued expenses		(330,544	)		838,479			(84,847	)
Net cash provided by (used in) operating activities − continuing operations		2,843,567			(1,716,945	)		4,122,842
Net cash provided by (used in) operating activities − discontinued operations		−			280,462			(16,365	)
Net cash provided by (used in) operating activities		2,843,567			(1,436,483	)		4,106,477

Investing Activities
Acquisition of net operating assets, net of cash acquired		−			(9,630,647	)		–
Guaranteed payments for acquisition of business		(1,000,000	)		−			−
Purchases of land and buildings		(56,074	)		−			−
Purchases of property and equipment		(116,575	)		(43,977	)		(211,223	)
Proceeds from disposal of property and equipment		−			−			12,350
Net cash used in investing activities – continuing operations		(1,172,649	)		(9,674,624	)		(198,873	)
Net cash provided by investing activities − discontinued operations		−			3,413,001			−
Net cash used in investing activities		(1,172,649	)		(6,261,623	)		(198,873	)

Financing Activities
Proceeds on notes payable		−			5,000,000			−
Payments on notes payable		(846,029	)		(492,522	)		(184,008	)
Purchase of treasury stock		−			−			(479,914	)
Proceeds from stock options exercised		−			−			3,300
Net cash provided by (used in) financing activities		(846,029	)		4,507,478			(660,622	)

Net increase (decrease) in cash and cash equivalents		824,889			(3,190,628	)		3,246,982
Cash and cash equivalents at beginning of year		5,286,097			8,476,725			5,229,743
Cash and cash equivalents at end of year	$	6,110,986		$	5,286,097		$	8,476,725

Supplemental cash flow information:
Cash paid for interest	$	245,051		$	126,659		$	26,137
Cash paid for income taxes	$	944,000		$	62,000		$	971,000

Supplemental noncash investing activities:
Deferred guaranteed payments for acquisition of business	$	−		$	(2,744,338	)	$	−

Years ended September 30,
2014 2013 2012
Operating Activities
Net income (loss) $ (6,857 ) $ 1,669,716 $ 1,250,492
Net income (loss) from discontinued operations (666,046 ) (102,207 ) 311,212
Net income from continuing operations 659,189 1,771,923 939,280
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:

Depreciation
360,279 276,356 300,961
Amortization
481,722 − −
Provision for excess and obsolete inventories
601,351 600,000 580,587
(Gain) loss on disposal of property and equipment
− (5,950 ) 114,071
Deferred income tax provision (benefit)
(276,000 ) (15,000 ) 234,000
Share based compensation expense
212,436 167,041 201,404
Cash provided (used) by changes in operating assets
and liabilities:

Accounts receivable
(2,351,459 ) 195,733 1,199,368
Income tax refund receivable
38,686 137,547 (46,592 )
Inventories
(2,188,205 ) 1,066,800 3,280,568
Prepaid expenses
(14,753 ) 2,045 (76,300 )
Other assets
− 2,350 123
Accounts payable
(78,670 ) 8,844 (815,732 )
Accrued expenses
838,479 (84,847 ) (218,649 )
Net cash provided by (used in) operating activities −
continuing operations
(1,716,945 ) 4,122,842 5,693,089
Net cash provided by (used in) operating activities −
discontinued operations
280,462 (16,365 ) (709,949 )
Net cash provided by (used in) operating activities (1,436,483 ) 4,106,477 4,983,140

Investing Activities
Acquisition of net operating assets, net of cash acquired
(9,630,647 ) – −
Purchases of property and equipment
(43,977 ) (211,223 ) (10,069 )
Proceeds from disposal of property and equipment
− 12,350 −
Net cash used in investing activities – continuing operations (9,674,624 ) (198,873 ) (10,069 )
Net cash provided by (used in) investing activities −
discontinued operations
3,413,001 − (197,858 )
Net cash used in investing activities (6,261,623 ) (198,873 ) (207,927 )

Financing Activities
Proceeds on notes payable
5,000,000 − −
Payments on notes payable
(492,522 ) (184,008 ) (10,371,508 )
Purchase of treasury stock
− (479,914 ) (113,821 )
Proceeds from stock options exercised
− 3,300 1,620
Net cash provided by (used in) financing activities 4,507,478 (660,622 ) (10,483,709 )

Net increase (decrease) in cash and cash equivalents (3,190,628 ) 3,246,982 (5,708,496 )
Cash and cash equivalents at beginning of year 8,476,725 5,229,743 10,938,239
Cash and cash equivalents at end of year $ 5,286,097 $ 8,476,725 $ 5,229,743

Supplemental cash flow information:
Cash paid for interest
$ 126,659 $ 26,137 $ 1,164,522
Cash paid for income taxes
$ 62,000 $ 971,000 $ 622,210

Supplemental noncash investing activities:
Deferred guaranteed payments for acquisition of business
$ (2,744,338 ) $ − $ −

See notes to ~~audited~~ consolidated financial statements.

ADDVANTAGE TECHNOLOGIES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Summary of Significant Accounting Policies

Organization and basis of presentation

The consolidated financial statements include the accounts of ADDvantage Technologies Group, Inc. and its subsidiaries, all of which are wholly owned (collectively, the “Company”). Intercompany balances and transactions have been eliminated in consolidation. The Company’s reportable segments are Cable Television (“Cable TV”) and Telecommunications (“Telco”).

Cash and cash equivalents

Cash and cash equivalents includes demand and time deposits, money market funds and other marketable securities with maturities of three months or less when acquired.

Trade receivables are carried at original invoice amount less an estimate made for doubtful accounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Trade receivables are written off against the allowance when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received. The Company generally does not charge interest on past due accounts.

Inventories consist of new and used electronic components for the Cable ~~Television~~TV segment and used telecommunications networking equipment for the Telco segment. Inventory is stated at the lower of cost ~~or market with market defined principally as~~and net realizable value. Cost is determined using the weighted-average method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. For the Cable Television segment, the Company records an inventory reserve provision to reflect inventory at its estimated net realizable value based on a review of inventory quantities on hand, historical sales volumes and technology changes. These reserves are to provide for items that are potentially slow-moving, excess or obsolete. For the Telco segment, the Company does not maintain an inventory reserve as this segment will recycle any surplus and obsolete equipment on hand through its recycling program when it is identified.

Property and equipment

Property and equipment consists of software, office equipment, warehouse and service equipment, and buildings with estimated useful lives generally of 3 years, 5 years, 10 years and 40 years, respectively. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of the useful lives or the remainder of the lease agreement. Gains or losses from the ordinary sale or retirement of property and equipment are recorded in other income (expense). Repairs and maintenance costs are generally expensed as incurred, whereas major improvements are capitalized. Depreciation expense was $0.4 million, ~~$0.3~~$0.4 million and $0.3 million for the years ended September 30, 2015, 2014 and 2013, ~~and 2012,~~ respectively.

Goodwill represents the excess of the purchase price of acquisitions over the acquisition date fair value of the net identifiable tangible and intangible assets acquired. In accordance with current accounting guidance, goodwill is not amortized and is tested at least annually for impairment at the reporting unit level. The Company performs this annual analysis in the fourth quarter of each fiscal year and in any other period in which indicators of impairment warrant additional analysis.

The goodwill analysis is a two-step process. Goodwill is first evaluated for impairment by comparing management’s estimate of the fair value of the reporting unit with the reporting unit’s carrying value, including

goodwill. If the carrying value of the reporting unit exceeds its fair value, a computation of the implied fair value of goodwill would then be compared to its related carrying value. If the carrying value of the reporting unit’s goodwill

exceeds the implied fair value of goodwill, an impairment loss would be recognized in the amount of the excess. Management utilizes a discounted cash flow analysis, referred to as an income approach, to determine the estimated fair value of its reporting units. Judgments and assumptions are inherent in our estimate of future cash flows used to determine the estimate of the reporting unit’s fair value. The use of alternate judgments and/or assumptions could result in the recognition of different levels of impairment charges in the consolidated financial statements. At September 30, 2015 and 2014, ~~and 2013,~~ the estimated fair value of our reporting unit exceeded its carrying value, so goodwill was not impaired.

Intangible assets that have finite useful lives are amortized on a straight-line basis over their estimated useful lives ranging from 3 years to 10 years.

The Company provides for income taxes in accordance with the liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax ~~bases~~basis and tax carryforward amounts. Management provides a valuation allowance against deferred tax assets for amounts which are not considered “more likely than not” to be realized.

The Company recognizes revenue for product sales when title transfers, the risks and rewards of ownership have been transferred to the customer, the fee is fixed and determinable and the collection of the related receivable is probable, which is generally at the time of shipment. The stated shipping terms are generally FOB shipping point per the Company's sales agreements with its customers. Accruals are established for expected returns based on historical activity. Revenue for repair services is recognized when the repair is completed and the product is shipped back to the customer. Revenue for recycle services is recognized when title transfers, the risks and rewards of ownership have been transferred to the customer, the fee is fixed and determinable and the collection of the related receivable is probable, which is generally upon acceptance of the shipment at the recycler’s location.

Amounts billed to customers for shipping and handling represent revenues earned and are included in sales income in the accompanying consolidated statements of ~~operations and comprehensive income (loss).~~operations. Actual costs for shipping and handling of these sales are included in cost of sales.

Advertising costs are expensed as incurred. Advertising expense was $0.1 million, ~~for the year ended September 30, 2014~~$0.1 million and $0.2 million for ~~each of~~ the years ended September 30, 2015, 2014 and 2013, ~~and 2012.~~respectively.

Management estimates

Any significant, unanticipated changes in product demand, technological developments or continued economic trends affecting the cable or telecommunications industries could have a significant impact on the value of the Company's inventory and operating results.

Concentrations of credit risk

The Company holds cash with one major financial institution, which at times exceeds FDIC insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk.

Other financial instruments that potentially subject the Company to concentration of credit risk consist principally of trade receivables. Concentrations of credit risk with respect to trade receivables are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade credit risk. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs in-depth credit evaluations for all new customers but does not require collateral to support customer receivables. The Company had no customer in 2015, 2014 ~~2013~~ or ~~2012~~2013 that contributed in excess of 10% of the total net sales. The Company’s sales to foreign (non-U.S. ~~based customers)~~based) customers were approximately $3.7 million, $3.6 million ~~$1.1 million~~ and ~~$1.4~~$1.1 million for the years ended September 30, 2015, 2014 ~~2013~~ and ~~2012,~~2013, respectively. In ~~2014,~~2015, the Cable TV segment purchased approximately ~~14%~~26% of its inventory either directly from Cisco or indirectly through their primary stocking distributor and approximately ~~32%~~18% of its inventory from Arris Solutions, Inc. The concentration of suppliers of the Company’s inventory subjects the Company to risk. The Telco segment purchased approximately ~~13%~~11% of its total inventory purchases from ~~Windstream.~~Westworld Telecom.

Employee stock-based awards

Share-based payments to employees, including grants of employee stock options, are recognized in the consolidated financial statements based on their grant date fair value over the requisite service period. The Company determines the fair value of the options issued, using the Black-Scholes valuation model, and amortizes the calculated value over the vesting term of the stock options. Compensation expense for stock-based awards is included in the operating, selling, general and administrative expense section of the consolidated statements of ~~operations and comprehensive income (loss).~~operations.

Basic earnings per share is computed by dividing the earnings available to common shareholders by the weighted average number of common shares outstanding for the year. Dilutive earnings per share include any dilutive effect of stock options and restricted stock.

Fair value of financial instruments

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their short maturities.

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a consistent framework for measuring fair value and establishes a fair value hierarchy based on the observability of inputs used to measure fair value. The three levels of the fair value hierarchy are as follows:

·	Level 1 – Quoted prices for identical assets in active markets or liabilities that we have the ability to access. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 – Inputs are other than quoted prices in active markets included in Level 1 that are either directly or indirectly observable. These inputs are either directly observable in the marketplace or indirectly observable through corroboration with market data for substantially the full contractual term of the asset or liability being measured.

·	Level 3 – Inputs that are not observable for which there is little, if any, market activity for the asset or liability being measured. These inputs reflect management’s best estimate of the assumptions market participants would use in determining fair value.

Recently Issued Accounting Standards

is effective for all disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014. Management does not anticipate that the adoption of ASU No. 2014-08 to have a significant impact on the Company’s consolidated financial statements.

U.S. GAAP and International Financial Reporting Standards (“IFRS”). ~~The guidance~~In addition, in August 2015, the FASB issued ASU No. 2015-14: “Revenue from Contracts with Customers (Topic 606). This update was issued to defer the effective date of ASU No. 2014-09 by one year. Therefore, the effective date of ASU No. 2014-09 is ~~effective~~ for ~~the fiscal years and interim~~annual reporting periods ~~within those years~~ beginning after December 15, ~~2016.~~2017. Management is evaluating the impact that ASU No. 2014-09 will have on the Company’s consolidated financial statements.

Note 2 – ~~Acquisition~~

As part of the Company’s growth strategy, the Company is pursuing an acquisition strategy to expand into the broader telecommunications industry. On February 28, 2014, the Company acquired all of the outstanding common stock of Nave Communications, a telecommunications distributor of used telecommunication networking equipment and a recycler of surplus and obsolete telecommunications equipment. This acquisition, along with its retained management team, will diversify the Company’s business outside of the cable television industry and will also allow the Company to capitalize on growth opportunities in both the cable television and telecommunication industries.Inventories

~~The purchase price for Nave Communications includes the following:~~

Cash payments, net of cash received $ 9,630,647
Deferred guaranteed payments (a) 2,744,338
Net purchase price $ 12,374,985

~~(a)~~

This amount represents the present value of $3.0 million in deferred payments, which will be paid in equal annual installments over the next three years. Over the three year period, the Company will ratably record interest expense with the offset being the deferred payment liability. As of September 30, 2014, the deferred guaranteed payments balance is $1.0 million in other current liabilities and $1.8 million in other long-term liabilities.

Under the acquisition method of accounting, the total purchase price is allocated to Nave Communications’ net tangible and intangible assets acquired and liabilities assumed based on their fair values as of February 28, 2014, the effective date of the acquisition. Any remaining amount is recorded as goodwill.

~~The following summarizes the final purchase price allocation of the fair value of the assets acquired and the liabilities assumed at February 28, 2014:~~

Assets acquired: (in thousands)
Cash and cash equivalents
$ 113
Accounts receivable
1,651
Inventories
2,503
Property and equipment
406
Other non-current assets
120
Intangible assets
7,107
Goodwill
2,760
Total assets acquired 14,660

Liabilities assumed:
Accounts payable
1,821
Accrued expenses
275
Capital lease obligation – current portion
21
Capital lease obligation
55
Total liabilities assumed 2,172
Net assets acquired 12,488
Less cash acquired 113
Net purchase price $ 12,375

~~The acquired intangible assets of approximately $7.1 million consist primarily of customer relationships, technology, trade name, and non-compete agreements with the former owners.~~

The Company will also make payments over the next three years equal to 70% of Nave Communications’ annual EBITDA in excess of $2.0 million per year (“Nave Earn-out”). The Company will recognize the expense ratably over the three year period as compensation expense.

The unaudited financial information in the table below summarizes the combined results of operations of ADDvantage Technologies Group and Nave Communications for the year ended September 30, 2014 and September 30, 2013, on a pro forma basis, as though the companies had been combined as of October 1, 2012. The pro forma earnings for the year ended September 30, 2014 and September 30, 2013 were adjusted to include intangible amortization expense of $0.8 million. Incremental interest expense of $0.2 million was included in the year ended September 30, 2014 and September 30, 2013, as if the $5.0 million term loan used to help fund the acquisition had been entered into on October 1, 2012. The $0.6 million of acquisition-related expenses were excluded from the year ended September 30, 2014 and included in the year ended September 30, 2013 as if the acquisition occurred at October 1, 2012. The unaudited pro forma financial information is provided for informational purposes only and does not purport to be indicative of the Company’s combined results of operations which would actually have been obtained had the acquisition taken place on October 1, 2012 nor should it be taken as indicative of our future consolidated results of operations.

Years Ended September 30,
2014 2013

(in thousands, except
per share amounts)

Sales $ 41,983 $ 41,701
Income from continuing operations $ 1,275 $ 1,881
Net income $ 609 $ 1,779
Earnings per share:
Basic:

Continuing operations
$ 0.13 $ 0.19
Net income
$ 0.06 $ 0.18
Diluted:

Continuing operations
$ 0.13 $ 0.19
Net income
$ 0.06 $ 0.18

~~Note 3 – Discontinued Operations and Assets Held for Sale~~

On January 31, 2014, the Company entered into an agreement to sell the majority of the net assets and operations of Adams Global Communications, LLC (“AGC”) to Adams Cable Equipment, a supplier of customer premise equipment (“CPE”) and other products for the cable television industry, for $2 million in cash, which yielded an after tax loss of $0.6 million. As part of the sales agreement, ADDvantage retained their existing relationship with Arris Solutions, as well as non-CPE inventory consisting primarily of headend and access and transport equipment. In addition, ADDvantage retained the AGC facility. As part of the agreement, the Company also agreed to not compete in the used CPE market for three years. The Company elected to pursue this opportunity to sell AGC as management determined that AGC did not fit within the Company’s primary cable television equipment distribution business of selling new and used headend and access and transport equipment, and AGC was not performing to the Company’s expectations.

~~The calculation of the pretax loss on the sale of AGC is as follows:~~

Cash proceeds $ 2,000,000

Assets sold:
Accounts receivable
454,269
Inventories
2,044,135
Prepaid expenses
12,054
Property and equipment
60,586
Goodwill
410,123
Other
10,805
2,991,972
Liabilities transferred:
Accounts payable
77,675
Accrued expenses
6,075
83,750
Net assets sold 2,908,222

Pretax loss on the sale of AGC $ 908,222

~~Assets and liabilities included within discontinued operations held for sale in the Company’s Consolidated Balance Sheet at September 30, 2013, are as follows:~~

September 30,
2013

Assets:
Cash and cash equivalents
$ (110,068 )
Accounts receivable, net
629,874
Income tax receivable
13,590
Inventories
2,718,747
Prepaid expenses
15,774
Current assets of discontinued operations held for sale $ 3,267,917

Property and equipment, at cost:
Land and building
$ 1,585,594
Machinery and equipment
134,010
Less accumulated depreciation (132,207 )
Net property and equipment
1,587,397
Goodwill
410,123
Non-current assets of discontinued operations held for sale $ 1,997,520

Liabilities:
Accounts payable
$ 170,375
Accrued expenses
56,382
Current liabilities of discontinued operations held for sale $ 226,757

The Company retained the AGC facility following the disposition and actively marketed the facility with a real estate broker. Therefore, the Company had classified this facility as “Assets held for sale” on the Consolidated Balance Sheets, net of accumulated depreciation. On June 30, 2014, the Company sold the AGC facility for $1.5 million with net settlement proceeds of $1.4 million. The sale resulted in a pretax loss of $0.1 million.

Income (loss) from discontinued operations, net of tax and the loss on sale of discontinued operations, net of tax, of AGC which are presented in total as discontinued operations, net of tax in the Company’s Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended September 30, 2014, 2013 and 2012 are as follows:

2014 2013 2012
Sales $ 972,935 $ 4,680,241 $ 5,539,225

Income (loss) before provision (benefit) for income taxes (57,211 ) (164,207 ) 511,212
Income tax provision (benefit) (21,000 ) (62,000 ) 200,000
Income (loss) from discontinued operations, net of tax (36,211 ) (102,207 ) 311,212

Loss on sale of discontinued operations (993,835 ) − −
Income tax benefit (364,000 ) − −
Loss on sale of discontinued operations,
net of tax
(629,835 ) − −
Discontinued operations, net of tax $ (666,046 ) $ (102,207 ) $ 311,212

~~Note 4 – Inventories~~

Inventories at September 30, ~~2014~~2015 and ~~2013~~2014 are as follows:

New inventory includes products purchased from the manufacturers plus “surplus-new”, which are unused products purchased from other distributors or multiple system operators. Refurbished inventory includes factory refurbished, Company refurbished and used products. Generally, the Company does not refurbish its used inventory until there is a sale of that product or to keep a certain quantity on hand.

The Company regularly reviews the Cable ~~Television~~TV segment inventory quantities on hand, and an adjustment to cost is recognized when the loss of usefulness of an item or other factors, such as obsolete and excess inventories, indicate that cost will not be recovered when an item is sold. The Company recorded charges in the Cable ~~Television~~TV segment to allow for obsolete inventory, which increased the cost of sales during the fiscal years ended September 30, 2015, 2014 ~~2013~~ and ~~2012,~~2013, by approximately $0.6 million, respectively. For the Telco segment, any obsolete and excess telecommunications inventory is processed through its recycling program when it is identified.

Note 53 – Intangible Assets

~~As a result of the Nave Communications acquisition, the Company now has intangible~~Intangible assets with finite useful lives ~~based on the purchase price allocation (see Note 2).~~ and their associated accumulated amortization amounts at September 30, 2015 are as follows:

	Gross		Accumulated Amortization			Net
Intangible assets:
Customer relationships – 10 years	$	4,257,000	$	(674,023	)	$	3,582,977
Technology – 7 years		1,303,000		(294,725	)		1,008,275
Trade name – 10 years		1,293,000		(204,724	)		1,088,276
Non-compete agreements – 3 years		254,000		(134,055	)		119,945

Total intangible assets	$	7,107,000	$	(1,307,527	)	$	5,799,473

The intangible assets with their associated accumulated amortization amounts at September 30, 2014 are as follows:

	Gross		Accumulated Amortization			Net
Intangible assets:
Customer relationships – 10 years	$	4,257,000	$	(248,325	)	$	4,008,675
Technology – 7 years		1,303,000		(108,583	)		1,194,417
Trade name – 10 years		1,293,000		(75,425	)		1,217,575
Non-compete agreements – 3 years		254,000		(49,389	)		204,611

Total intangible assets	$	7,107,000	$	(481,722	)	$	6,625,278

Amortization expense was $0.8 million and $0.5 million for the years ended September 30, 2015 and 2014, respectively. There was no amortization expense for the year ended September 30, 2013.

The estimated aggregate amortization expense for each of the next five fiscal years is as follows:

2015 $ 825,810
2016 825,810
2017 776,421
2018 741,143
2019 741,143
Thereafter 2,714,951

Total $ 6,625,278

2016	$	825,810
2017		776,421
2018		741,143
2019		741,143
2020		741,143
Thereafter		1,973,813

Total	$	5,799,473

Note 64 – Income Taxes

The provision (benefit) for income taxes for the years ended September 30, 2015, 2014 ~~2013~~ and ~~2012~~2013 consists of:

	2014			2013			2012		2015			2014			2013
Continuing operations:
Current	$	496,000		$	1,113,351		$	332,000	$	1,114,000		$	496,000		$	1,113,351
Deferred		(276,000	)		(15,000	)		234,000		(341,000	)		(276,000	)		(15,000	)
		220,000			1,098,351			566,000		773,000			220,000			1,098,351
Discontinued operations - current		(385,000	)		(62,000	)		200,000
Discontinued operations – current										−			(385,000	)		(62,000	)
Total provision (benefit) for income taxes	$	(165,000	)	$	1,036,351		$	766,000	$	773,000		$	(165,000	)	$	1,036,351

The following table summarizes the differences between the U.S. federal statutory rate and the Company’s effective tax rate for continuing operations financial statement purposes for the years ended September 30, 2015, 2014 ~~2013~~ and ~~2012:~~2013:

The tax credits and other exclusions rate for fiscal year ~~2014~~2015 includes, among other things, the impact of deferred taxes resulting from intangible and goodwill basis ~~differences resulting from the acquisition of Nave Communications.~~differences.

The tax effects of temporary differences related to deferred taxes at September 30, ~~2014~~2015 and ~~2013~~2014 consist of the following:

Net operating loss carryforwards

Employee costs accruals

Financial basis in excess of tax basis of certain assets

The above net deferred tax asset is presented in the Company’s consolidated balance sheets at September 30, ~~2014~~2015 and ~~2013~~2014 as follows:

Utilization of the Company’s net operating loss carryforward, totaling approximately ~~$0.8~~$0.6 million at September 30, ~~2014,~~2015, to reduce future taxable income is limited to an annual deductible amount of approximately $0.3 million. The net operating loss carryforward expires in varying amounts in 2019 and 2020.

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. The Company has concluded, based on its historical earnings and projected future earnings, that it will be able to realize the full effect of the deferred tax assets and no valuation allowance is needed.

Based upon a review of its income tax positions, the Company believes that its positions would be sustained upon an examination by the Internal Revenue Service and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded. Generally, the Company is no longer subject to examinations by the U.S. federal, state or local tax authorities for tax years before ~~2011.~~2012.

Note 75 – Accrued Expenses

Accrued expenses at September 30, ~~2014~~2015 and ~~2013~~2014 are as follows:

Note 86 – Line of Credit and Notes Payable

The Company has an Amended and Restated Revolving Credit and Term Loan Agreement (“Credit and Term Loan Agreement”). At September 30, ~~2014,~~2015, the Company has two term loans outstanding under the Credit and Term Loan Agreement. One outstanding term loan has an outstanding balance of ~~$1.3~~$1.1 million at September 30, ~~2014~~2015 and is due on November ~~20,~~30, 2021, with monthly principal payments of $15,334 plus accrued interest. The interest rate is the prevailing 30-day LIBOR rate plus 1.4% ~~(1.56%~~(1.60% at September 30, ~~2014)~~2015) and is reset monthly. This term loan is collateralized by inventory, accounts receivable, equipment and fixtures and general intangibles.

The second outstanding term loan was entered into as a result of the acquisition of Nave Communications for $5.0 million. This term loan has an outstanding balance of ~~$4.7~~$4.0 million at September 30, ~~2014~~2015 and is due March 4, 2019, with monthly principal and interest payments of $68,505, with the balance due at maturity. It is a five year term loan with a seven year amortization payment schedule with a fixed interest rate of 4.07%. This term loan is

collateralized by inventory, accounts receivable, equipment and fixtures and general intangibles.

Capital Lease Obligations

The Company has two capital lease obligations related to machinery and equipment totaling ~~$64~~$43 thousand at September 30, ~~2014~~2015 with monthly principal and interest payments of $2,069. The capital lease obligations are due on June 20, 2017 and September 20, 2017.

The aggregate minimum maturities of notes payable for each of the next five years are as follows:

2016	$	873,752
2017		899,870
2018		908,945
2019		2,143,417
2020		184,008
Thereafter		229,890

Total	$	5,239,882

2015 $ 845,845
2016 874,388
2017 899,234
2018 908,945
2019 2,143,600
Thereafter 413,899

Total $ 6,085,911

The Company has a $7.0 million Revolving Line of Credit (“Line of Credit”) under the Credit and Term Loan Agreement with its primary financial lender. At September 30, ~~2014,~~2015, the Company had no amount outstanding under the Line of Credit. The Line of Credit requires quarterly interest payments based on the prevailing 30-day LIBOR rate plus 2.75% (2.91% at September 30, ~~2014)~~2015), and the interest rate is reset monthly. Any future borrowings under the Line of Credit are due on November ~~28, 2014.~~27, 2015. Future borrowings under the Line of Credit are limited to the lesser of $7.0 million or the net balance of 80% of qualified accounts receivable plus 50% of qualified inventory. Under these limitations, the Company’s total Line of Credit borrowing base was $7.0 million at September 30, ~~2014.~~2015. Among other financial covenants, the Line of Credit agreement provides that the Company must maintain a fixed charge ratio of coverage (EBITDA to total fixed charges) of not less than 1.25 to 1.0, determined quarterly. The Line of Credit is collateralized by inventory, accounts receivable, equipment and fixtures and general intangibles.

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

The Company has determined the fair value of its fixed-rate term loan utilizing the Level 2 hierarchy as the fair value can be estimated from broker quotes corroborated by other market data. These broker quotes are based on observable market interest rates at which loans with similar terms and maturities could currently be executed. The Company then estimated the fair value of the fixed-rate term loan using cash flows discounted at the current market interest rate obtained. The fair value of the Company’s second term loan was approximately ~~$4.7~~$4.0 million as of September 30, ~~2014.~~2015.

Note 97 – Stock-Based Compensation and Preferred Stock

~~The 1998~~At the annual meeting of shareholders in March 2015, the shareholders approved the 2015 Incentive Stock Plan ~~as amended,~~ (the “Plan”). The Plan provides for awards of stock options and restricted stock to officers, directors, key employees and consultants. The Plan provides ~~that upon any issuance of~~an additional 500,000 shares of common stock byavailable for issuance in addition to those stock awards that were outstanding under the ~~Company, other than pursuant to the Plan, the number of shares covered by the Plan will increase to an amount equal to 10% of the then outstanding shares of common stock.~~previous incentive stock plan. Under the Plan, option prices

will be set by the ~~Board of Directors~~Compensation Committee and may not be ~~greater than, equal to, or~~ less than the fair market value of the stock on the grant date.

At September 30, ~~2014, 1,024,656~~2015, 1,100,415 shares of common stock were reserved for ~~the exercise of, or lapse of restrictions on,~~ stock ~~awards~~award grants under the Plan. Of these reserved shares, ~~40,415~~539,883 shares were available for future grants.

Share-based payments to employees, including grants of employee stock options, are recognized in the consolidated financial statements based on their grant date fair value over the requisite service period. Compensation expense for stock-based awards is included in the operating, selling, general and administrative expense section of the consolidated statements of ~~operations and comprehensive income (loss).~~operations.

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

A summary of the status of the Company's stock options at September 30, ~~2014~~2015 and changes during the year then ended is presented below:

Year Ended September 30, 2015			High	Low

First Quarter			$2.70	$2.24
Second Quarter			$2.49	$2.18
Third Quarter			$2.49	$2.27
Fourth Quarter			$2.40	$2.20

Year Ended September 30, 2014	High	Low	High	Low

First Quarter	$3.28	$2.41	$3.28	$2.41
Second Quarter	$3.42	$2.55	$3.42	$2.55
Third Quarter	$3.55	$2.55	$3.55	$2.55
Fourth Quarter	$2.80	$2.25	$2.80	$2.25

Year Ended September 30, 2013	High	Low

First Quarter	$2.20	$1.87
Second Quarter	$2.40	$2.00
Third Quarter	$2.40	$2.19
Fourth Quarter	$2.92	$2.24

	September 30,						September 30,
	2014			2013			2015			2014
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	2,880,761		$	1,138,494		$	1,784,482		$	2,880,761
Accrued expenses		1,809,878			878,474			1,358,681			1,809,878
Income tax payable								122,492			−
Notes payable – current portion		845,845			184,008			873,752			845,845
Other current liabilities		983,269			−			982,094			983,269
Current liabilities of discontinued operations held for sale		−			226,757
Total current liabilities		6,519,753			2,427,733			5,121,501			6,519,753

Notes payable, less current portion		5,240,066			1,318,604			4,366,130			5,240,066
Deferred income taxes		267,000			193,000			286,000			267,000
Other liabilities		1,942,889			−			1,064,717			1,942,889
Total liabilities								10,838,348			13,969,708

Shareholders’ equity:
Common stock, $.01 par value; 30,000,000 shares authorized; 10,541,864 and 10,499,138 shares issued, respectively; 10,041,206 and 9,998,480 shares outstanding, respectively		105,419			104,991
Common stock, $.01 par value; 30,000,000 shares authorized; 10,564,221 and 10,541,864 shares issued, respectively; 10,063,563 and 10,041,206 shares outstanding, respectively								105,642			105,419
Paid in capital		(5,312,881	)		(5,578,500	)		(5,112,269	)		(5,312,881	)
Retained earnings		45,643,449			45,650,306			47,141,349			45,643,449
Total shareholders’ equity before treasury stock		40,435,987			40,176,797			42,134,722			40,435,987

Less: Treasury stock, 500,658 shares, at cost		(1,000,014	)		(1,000,014	)		(1,000,014	)		(1,000,014	)
Total shareholders’ equity		39,435,973			39,176,783			41,134,708			39,435,973

Total liabilities and shareholders’ equity	$	53,405,681		$	43,116,120		$	51,973,056		$	53,405,681

	2014			2013			2015			2014
New:
Cable TV	$	16,949,713		$	15,679,789		$	16,255,487		$	16,949,713
Refurbished:
Cable TV		3,982,140			3,931,917			3,676,132			3,982,140
Telco		4,005,298			−			6,426,005			4,005,298
Allowance for excess and obsolete inventory		(2,156,628	)		(1,600,000	)		(2,756,628	)		(2,156,628	)

	$	22,780,523		$	18,011,706		$	23,600,996		$	22,780,523

	2014			2013			2012			2015			2014			2013
Statutory tax rate		34.0	%		34.0	%		34.0	%		34.0	%		34.0	%		34.0	%
State income taxes, net of U.S. federal tax benefit		5.7	%		4.3	%		4.0	%		2.1	%		5.7	%		4.3	%
Net operating loss		(10.2	%)		(3.1	%)		(6.0	%)		(4.0	%)		(10.2	%)		(3.1	%)
Return to accrual adjustment											(3.0	%)		1.0	%		(2.4	%)
Additional state tax deduction for federal taxes		(5.6	%)		−			−			−			(5.6	%)		−
Charges without tax benefit		3.9	%		1.1	%		1.9	%		1.6	%		3.9	%		1.1	%
Tax credits and other exclusions		(2.8	%)		2.0	%		3.7	%		3.3	%		(3.8	%)		4.4	%

Company’s effective tax rate		25.0	%		38.3	%		37.6	%		34.0	%		25.0	%		38.3	%

	2014		2013			2015		2014
Deferred tax assets:
Net operating loss carryforwards	$	335,000	$	414,000		$	236,000	$	335,000
Accounts receivable		77,000		116,000			96,000		77,000
Inventory		1,066,000		842,000			1,319,000		1,066,000
Intangibles		79,000		−			215,000		79,000
Employee costs accruals		141,000		122,000
Accrued expenses							266,000		141,000
Stock options		163,000		114,000			212,000		163,000
Other, net		16,000		(4,000	)
Other							28,000		16,000
		1,877,000		1,604,000			2,372,000		1,877,000

Deferred tax liabilities:
Financial basis in excess of tax basis of certain assets		728,000		731,000			832,000		728,000
Other							50,000		−

Net deferred tax asset	$	1,149,000	$	873,000		$	1,490,000	$	1,149,000

	Year Ended September 30, 2013						Year Ended September 30, 2012
	Cable TV		Telco		Total		Cable TV		Telco		Total

Operating income	$	2,896,254	$	−	$	2,896,254	$	2,619,134	$	−	$	2,619,134
Depreciation		276,356		−		276,356		300,961		−		300,961
Amortization		−		−		−		−		−		−
EBITDA	$	3,172,610	$	−	$	3,172,610	$	2,920,095	$	−	$	2,920,095

											Accumulated
											Other
	Common Stock				Paid-in			Retained			Comprehensive			Treasury						Common Stock				Paid-in			Retained			Treasury
	Shares		Amount		Capital			Earnings			Income (Loss)			Stock			Total
Balance, September 30, 2011		10,431,354	$	104,314	$	(5,884,521	)	$	42,730,098		$	(587,258	)	$	(406,279	)	$	35,956,354

Net income		–		–		–			1,250,492			–			–			1,250,492
Restricted stock issuance		31,969		320		69,680			–			–			–			70,000
Stock options exercised		2,000		20		1,600			–			–			–			1,620
Net unrealized gain on interest swap		–		–		–			–			587,258			–			587,258
Share based compensation expense		–		–		64,738			–			–			–			64,738
Purchase of common stock		–		–		–			–			–			(113,821	)		(113,821	)
																				Shares		Amount		Capital			Earnings			Stock			Total
Balance, September 30, 2012		10,465,323	$	104,653	$	(5,748,503	)	$	43,980,590		$	–		$	(520,100	)	$	37,816,640			10,465,323	$	104,653	$	(5,748,503	)	$	43,980,590		$	(520,100	)	$	37,816,640

Net income		–		–		–			1,669,716			–			–			1,669,716			–		–		–			1,669,716			–			1,669,716
Restricted stock issuance		31,815		318		69,682			–			–			–			70,000			31,815		318		69,682			–			–			70,000
Stock options exercised		2,000		20		3,280			–			–			–			3,300			2,000		20		3,280			–			–			3,300
Share based compensation expense		–		–		97,041			–			–			–			97,041			–		–		97,041			–			–			97,041
Purchase of common stock		–		–		–			–			–			(479,914	)		(479,914	)		–		–		–			–			(479,914	)		(479,914	)

Balance, September 30, 2013		10,499,138	$	104,991	$	(5,578,500	)	$	45,650,306		$	–		$	(1,000,014	)	$	39,176,783			10,499,138	$	104,991	$	(5,578,500	)	$	45,650,306		$	(1,000,014	)	$	39,176,783

Net loss		–		–		–			(6,857	)		–			–			(6,857	)		–		–		–			(6,857	)		–			(6,857	)
Restricted stock issuance		42,726		428		135,572			–			–			–			136,000			42,726		428		135,572			–			–			136,000
Share based compensation expense		–		–		130,047			–			–			–			130,047			–		–		130,047			–			–			130,047

Balance, September 30, 2014		10,541,864	$	105,419	$	(5,312,881	)	$	45,643,449		$	–		$	(1,000,014	)	$	39,435,973			10,541,864	$	105,419	$	(5,312,881	)	$	45,643,449		$	(1,000,014	)	$	39,435,973

Net income																					–		–		–			1,497,900			–			1,497,900
Restricted stock issuance																					22,357		223		58,944			–			–			59,167
Share based compensation expense																					–		–		141,668			–			–			141,668

Balance, September 30, 2015																					10,564,221	$	105,642	$	(5,112,269	)	$	47,141,349		$	(1,000,014	)	$	41,134,708


Cash payments, net of cash received	$	9,630,647
Deferred guaranteed payments (a)		2,744,338
Net purchase price	$	12,374,985

Assets acquired:	(in thousands)
Cash and cash equivalents	$	113
Accounts receivable		1,651
Inventories		2,503
Property and equipment		406
Other non-current assets		120
Intangible assets		7,107
Goodwill		2,760
Total assets acquired		14,660

Liabilities assumed:
Accounts payable		1,821
Accrued expenses		275
Capital lease obligation – current portion		21
Capital lease obligation		55
Total liabilities assumed		2,172
Net assets acquired		12,488
Less cash acquired		113
Net purchase price	$	12,375

Cash proceeds	$	2,000,000

Assets sold:
Accounts receivable		454,269
Inventories		2,044,135
Prepaid expenses		12,054
Property and equipment		60,586
Goodwill		410,123
Other		10,805
		2,991,972
Liabilities transferred:
Accounts payable		77,675
Accrued expenses		6,075
		83,750
Net assets sold		2,908,222

Pretax loss on the sale of AGC	$	908,222

	September 30, 2013
Assets:
Cash and cash equivalents	$	(110,068	)
Accounts receivable, net		629,874
Income tax receivable		13,590
Inventories		2,718,747
Prepaid expenses		15,774
Current assets of discontinued operations held for sale	$	3,267,917

Property and equipment, at cost:
Land and building	$	1,585,594
Machinery and equipment		134,010
Less accumulated depreciation		(132,207	)
Net property and equipment		1,587,397
Goodwill		410,123
Non-current assets of discontinued operations held for sale	$	1,997,520

Liabilities:
Accounts payable	$	170,375
Accrued expenses		56,382
Current liabilities of discontinued operations held for sale	$	226,757

	Options			Weighted Average Exercise Price		Aggregate Intrinsic Value		Options			Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at September 30, 2013		363,000		$	2.83
Outstanding at September 30, 2014									560,000		$	2.96
Granted		200,000		$	3.21				−		$	–
Exercised		−		$	–	$	0		−		$	–	$	0
Expired		(3,000	)	$	4.40				(15,000	)	$	4.62
Forfeited		−		$	−				(10,000	)	$	4.62
Outstanding at September 30, 2014		560,000		$	2.96	$	0
Exercisable at September 30, 2014		160,000		$	3.28	$	0
Outstanding at September 30, 2015									535,000		$	2.88	$	0
Exercisable at September 30, 2015									301,667		$	2.88	$	0

		Exercisable	Remaining		Exercisable	Remaining
	Stock Options		Contractual	Stock Options		Contractual
Exercise Price	Outstanding		Life	Outstanding		Life
$3.210	200,000	−	9.5 years	200,000	66,667	8.5 years
$2.450	250,000	50,000	7.5 years	250,000	150,000	6.5 years
$3.001	65,000		3.9 years	65,000		2.9 years
$3.450	15,000		2.4 years	10,000		1.4 years
$5.780	15,000		1.4 years	10,000		0.4 years
$4.620	15,000		0.4 years
	560,000	160,000		535,000	301,667

2015	$	494,170
2016		502,250
2017		514,806
2018		527,676
2019		540,868
Thereafter		2,402,023

Total	$	4,981,793

2016	$	568,126
2017		576,408
2018		568,744
2019		540,868
2020		554,390
Thereafter		1,847,632

Total	$	4,656,168

	Fiscal Years Ended							Fiscal Years Ended
	September 30, 2014			September 30, 2013		September 30, 2012		September 30, 2015			September 30, 2014			September 30, 2013
Sales
Cable TV	$	27,206,743		$	28,677,351	$	29,677,178	$	25,396,779		$	27,206,743		$	28,677,351
Telco		8,710,267			−		−		18,835,116			8,710,267			−
Intersegment		(28,318	)		−		−		(498,275	)		(28,318	)		−
Total sales	$	35,888,692		$	28,677,351	$	29,677,178	$	43,733,620		$	35,888,692		$	28,677,351

Gross profit
Cable TV	$	7,770,723		$	8,709,317	$	8,557,928	$	8,025,651		$	7,770,723		$	8,709,317
Telco		3,834,733			−		−		7,273,238			3,834,733			−
Total gross profit	$	11,605,456		$	8,709,317	$	8,557,928	$	15,298,889		$	11,605,456		$	8,709,317

Operating income (loss)
Cable TV	$	1,492,100		$	2,896,254	$	2,619,134	$	2,210,414		$	1,492,100		$	2,896,254
Telco		(395,001	)		−		−		365,796			(395,001	)		−
Total operating income (loss)	$	1,097,099		$	2,896,254	$	2,619,134	$	2,576,210		$	1,097,099		$	2,896,254

Segment assets
Cable TV	$	29,241,335		$	27,582,573	$	29,625,943	$	26,494,430		$	29,241,335		$	27,582,573
Telco		17,781,114			−		−		17,094,713			17,781,114			−
Non-allocated (A)		6,383,232			15,533,547		12,406,983		8,383,913			6,383,232			15,533,547
Total assets	$	53,405,681		$	43,116,120	$	42,032,926	$	51,973,056		$	53,405,681		$	43,116,120

	First Quarter		Second Quarter			Third Quarter		Fourth Quarter		First Quarter		Second Quarter			Third Quarter		Fourth Quarter
Fiscal year ended 2015
Sales										$	10,837,158	$	11,366,539		$	11,902,391	$	9,627,532
Gross profit										$	3,831,803	$	4,243,512		$	4,144,607	$	3,078,967
Income from continuing operations										$	415,923	$	234,255		$	637,134	$	210,588
Basic earnings from continuing operations per common share										$	0.04	$	0.02		$	0.06	$	0.02
Diluted earnings from continuing operations per common share										$	0.04	$	0.02		$	0.06	$	0.02
Fiscal year ended 2014
Sales	$	6,119,733	$	8,313,815		$	9,323,158	$	12,131,986	$	6,119,733	$	8,313,815		$	9,323,158	$	12,131,986
Gross profit	$	1,863,227	$	2,231,167		$	3,220,055	$	4,291,007	$	1,863,227	$	2,231,167		$	3,220,055	$	4,291,007
Income (loss) from continuing operations	$	139,369	$	(243,264	)	$	143,726	$	619,358	$	139,369	$	(243,264	)	$	143,726	$	619,358
Basic earnings (loss) from continuing operations per common share	$	0.01	$	(0.02	)	$	0.01	$	0.06	$	0.01	$	(0.02	)	$	0.01	$	0.06
Diluted earnings (loss) from continuing operations per common share	$	0.01	$	(0.02	)	$	0.01	$	0.06	$	0.01	$	(0.02	)	$	0.01	$	0.06
Fiscal year ended 2013
Sales	$	7,899,497	$	6,764,102		$	6,372,108	$	7,641,644	$	7,899,497	$	6,764,102		$	6,372,108	$	7,641,644
Gross profit	$	2,618,724	$	1,866,352		$	1,851,855	$	2,372,386	$	2,618,724	$	1,866,352		$	1,851,855	$	2,372,386
Income from continuing operations	$	660,291	$	292,994		$	269,984	$	548,654	$	660,291	$	292,994		$	269,984	$	548,654
Basic earnings from continuing operations per common share	$	0.07	$	0.03		$	0.03	$	0.05	$	0.07	$	0.03		$	0.03	$	0.05
Diluted earnings from continuing operations per common share	$	0.07	$	0.03		$	0.03	$	0.05	$	0.07	$	0.03		$	0.03	$	0.05
Fiscal year ended 2012
Sales	$	7,727,233	$	7,891,316		$	6,461,710	$	7,596,919
Gross profit	$	2,283,982	$	2,141,147		$	2,063,219	$	2,069,580
Income (loss) from continuing operations	$	387,391	$	(127,570	)	$	348,083	$	331,376
Basic earnings (loss) from continuing operations per common share	$	0.04	$	(0.01	)	$	0.03	$	0.03
Diluted earnings (loss) from continuing operations per common share	$	0.04	$	(0.01	)	$	0.03	$	0.03

	Balance at		Charged to							Balance at		Balance at		Charged to							Balance at
	Beginning		Costs and							End		Beginning		Costs and							End
												of Year		Expenses		Write offs			Recoveries		of Year
Year Ended September 30, 2015
Allowance for Doubtful Accounts												$	200,000		44,514		−			5,486	$	250,000
Allowance for Excess and Obsolete Inventory												$	2,156,628		600,000		−			−	$	2,756,628
	of Year		Expenses		Write offs			Recoveries		of Year
Year Ended September 30, 2014
Allowance for Doubtful Accounts	$	300,000		–		(103,403	)		3,403	$	200,000	$	300,000		–		(103,403	)		3,403	$	200,000
Allowance for Excess and Obsolete Inventory	$	1,600,000		601,351		(208,056	)		163,333	$	2,156,628	$	1,600,000		601,351		(208,056	)		163,333	$	2,156,628

Year Ended September 30, 2013
Allowance for Doubtful Accounts	$	300,000		–		(5,692	)		5,692	$	300,000	$	300,000		–		(5,692	)		5,692	$	300,000
Allowance for Excess and Obsolete Inventory	$	1,000,000		1,044,913		(294,913	)		–	$	1,750,000	$	1,000,000		600,000		–			–	$	1,600,000

Year Ended September 30, 2012
Allowance for Doubtful Accounts	$	300,000		–		(2,404	)		2,404	$	300,000
Allowance for Excess and Obsolete Inventory	$	1,556,000		580,587		(1,136,587	)		–	$	1,000,000