UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended ~~September~~June 30, ~~2019~~2020

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

For the transition period from to

Commission file number: 001-36827

Anterix Inc.

(Exact name of registrant as specified in its charter)



Delaware	33-0745043
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

3 Garret Mountain Plaza Suite 401 Woodland Park, New Jersey	07424
(Address of principal executive offices)	(Zip Code)

(973) 771-0300

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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



Title of each class	Trading symbol	Name of ~~Each Exchange~~each exchange on which registered
Common Stock, $0.0001 par value	ATEX	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☒☐
Non-accelerated filer	☐☒	Smaller reporting company	☒
Emerging growth company	☒☐

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

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

At ~~November 1, 2019, 17,126,398~~July 31, 2020, 17,296,295 shares of the registrant’s common stock were outstanding.

Table of Contents

Anterix Inc.

FORM 10-Q

For the quarterly period ended ~~September~~June 30, ~~2019~~2020

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	4
	Consolidated Balance Sheets as of ~~September~~June 30, ~~2019~~2020 (Unaudited) and March 31, 2019 (Audited)	4
	Unaudited Consolidated Statements of Operations for the three ~~and six~~ months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018~~2019	5
	Unaudited Consolidated Statement of Stockholders’ Equity for the three ~~and six~~ months ended ~~September~~June 30, ~~2019~~2020	6
	Unaudited Consolidated Statement of Stockholders’ Equity for the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019	7
	Unaudited Consolidated Statements of Cash Flows for ~~six~~the three months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018~~2019	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3028
Item 4.	Controls and Procedures	3129
PART II. OTHER INFORMATION		3230
Item 1.	Legal Proceedings	3230
Item 1A.	Risk Factors	3230
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3230
Item 3.	Defaults Upon Senior Securities	3230
Item 4.	Mine Safety Disclosures	3230
Item 5.	Other Information	3230
Item 6.	Exhibits	3331
SIGNATURES		3432

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Form 10-Q”) includes statements of our expectations, intentions, plans, and beliefs that constitute “forward-looking statements.” These forward-looking statements are principally, but not solely, contained in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements include, but are not limited to, statements about our strategies, plans, objectives, expectations, intentions, expenditures and assumptions and other statements contained herein that are not historical facts. Our forward-looking statements are generally, but not always, accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “potential,” “should,” “will,” “may,” “plan,” “goal,” “can,” “could,” “continuing,” “ongoing,” “intend” or other words that convey the uncertainty of future events or outcomes. We have based these forward-looking statements on our current expectations and projections about future events and financial, market and business trends. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. Many of these risks, uncertainties and other factors are beyond our ability to control, influence, or predict. The most significant of these risks, uncertainties and other factors are described in “Item 1A—Risk Factors” in Part II of this Form 10-Q ~~in our Quarterly Report on Form 10-Q for the period ended June 30, 2019 filed with the Securities and Exchange Commission (the “SEC”) on August 8, 2019~~ and in our Annual Report on Form 10-K for the year ended March 31, ~~2019~~2020 filed with the SEC on May ~~20, 2019.~~28, 2020. As a result, investors are urged not to place undue reliance on any forward-looking statements. These forward-looking statements reflect our views and assumptions only as of the date such forward-looking statements were made. Except to the limited extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Table of Contents

PARTPART I. FINANCIAL INFORMATION

Item 1: ~~Consolidated~~Consolidated Financial Statements

Anterix Inc.

Consolidated Balance Sheets

(dollars in thousands, except share data)


		September 30,
		2019		March 31, 2019			June 30, 2020		March 31, 2020
		(Unaudited)		(Audited)			(Unaudited)			(Audited)
ASSETS	ASSETS					ASSETS
Current Assets
Cash and cash equivalents		$	157,494	$	76,722		$	124,766	$	137,453
Accounts receivable, net of allowance for doubtful accounts of $20 and $77, respectively			136		444
Accounts receivable, net of allowance for doubtful accounts of $10 and $12, respectively								25		61
Prepaid expenses and other current assets			650		1,180			1,597		4,638
Total current assets			158,280		78,346			126,388		142,152
Property and equipment, net			8,649		9,830			5,867		7,000
Right of use assets, net			7,217		—			6,090		6,500
Intangible assets			107,745		107,548			115,839		111,526
Capitalized patent costs, net			177		184
Equity method investment			29		—			35		39
Other assets			804		845			166		180
Total assets		$	282,901	$	196,753		$	254,385	$	267,397
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	��	$	3,641	$	5,106		$	3,988	$	5,649
Due to related parties								106		110
Restructuring reserve			1,755		2,758			341		636
Due to related parties			114		183
Operating lease liabilities			1,687		—			1,611		1,695
Deferred revenue			763		792			729		733
Total current liabilities			7,960		8,839			6,775		8,823
Noncurrent liabilities
Operating lease liabilities			7,844		—			6,668		7,051
Deferred revenue			3,097		3,466			2,551		2,733
Deferred income tax			1,148		685			3,095		3,084
Other liabilities			370		2,999			849		640
Total liabilities			20,419		15,989			19,938		22,331
Commitments and contingencies
Stockholders' equity
Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized and no shares outstanding at September 30, 2019 and March 31, 2019			—		—
Common stock, $0.0001 par value per share, 100,000,000 shares authorized and 17,125,938 shares issued and outstanding at September 30, 2019 and 14,739,145 shares issued and outstanding at March 31, 2019			2		1
Preferred stock, $0.0001 par value per share, 10,000,000 shares authorized and no shares outstanding at June 30, 2020 and March 31, 2020								—		—
Common stock, $0.0001 par value per share, 100,000,000 shares authorized and 17,289,027 shares issued and outstanding at June 30, 2020 and 17,184,712 shares issued and outstanding at March 31, 2020								2		2
Additional paid-in capital			447,845		349,227			455,489		450,978
Accumulated deficit			(185,365)		(168,464)			(221,044)		(205,914)
Total stockholders' equity			262,482		180,764			234,447		245,066
Total liabilities and stockholders' equity		$	282,901	$	196,753		$	254,385	$	267,397


	Three months ended September 30,				Six months ended September 30,				Three months ended June 30,
	2019		2018		2019		2018		2020		2019
Operating revenues
Service revenue	$	241	$	1,295	$	512	$	2,642	$	74	$	271
Spectrum revenue		182		182		364		364		182		182
Other revenue		—		347		—		688
Total operating revenues		423		1,824		876		3,694		256		453
Operating expenses
Direct cost of revenue (exclusive of depreciation and amortization)		699		1,139		1,617		2,625		548		918
General and administrative		4,557		4,635		9,405		9,093		5,738		4,848
Sales and support		759		864		1,973		2,487		661		1,214
Product development		555		568		1,236		1,199		692		680
Depreciation and amortization		636		716		1,277		1,445		1,208		642
Stock compensation expense (exclusive of restructuring related costs)		1,412		1,904		2,989		2,960
Stock compensation expense										1,955		1,577
Restructuring costs		50		4,147		160		8,122		13		110
Impairment of long-lived assets		—		—		—		531		29		—
Total operating expenses		8,668		13,973		18,657		28,462		10,844		9,989
Loss from disposal of intangible assets										(4,678)		—
Loss from operations		(8,245)		(12,149)		(17,781)		(24,768)		(15,266)		(9,536)
Interest income		634		370		988		686		41		354
Other income (expenses)		52		(1)		152		—
Income on equity method investment		15		—		15		—
Other income										110		100
Loss on equity method investment										(4)		—
Loss before income taxes		(7,544)		(11,780)		(16,626)		(24,082)		(15,119)		(9,082)
Income tax expense		171		—		463		—		11		292
Net loss	$	(7,715)	$	(11,780)	$	(17,089)	$	(24,082)	$	(15,130)	$	(9,374)
Net loss per common share basic and diluted	$	(0.46)	$	(0.81)	$	(1.09)	$	(1.66)	$	(0.88)	$	(0.63)
Weighted-average common shares used to compute basic and diluted net loss per share		16,634,154		14,521,148		15,702,673		14,501,463		17,207,532		14,763,379

Number of Shares

Preferred
stock
series AA

Common
stock

Preferred
stock
series AA

Common
stock

Additional
paid-in
capital

Accumulated
deficit

Total
Balance at June 30, 2019
—

14,840,113

$
—

$
1

$
352,193

$
(177,650)

$
174,544
Issuance of stock during July 2019 follow-on offering, net of closing costs
—

2,222,223

—

1

94,243

—

94,244
Equity based compensation*
—

55,844

—

—

1,412

—

1,412
Stock option exercises
—

15,000

—

—

301

—

301
Shares withheld for taxes
—

(7,242)

—

—

(304)

—

(304)
Net loss
—

—

—

—

—

(7,715)

(7,715)
Balance at September 30, 2019
—

17,125,938

$
—

$
2

$
447,845

$
(185,365)

$
262,482

Balance at March 31, 2019
—

14,739,145

$
—

$
1

$
349,227

$
(168,464)

$
180,764
Cumulative effect of change in accounting principle
—

—

—

—

(188)

188

—
Balance at April 1, 2019
—

14,739,145

—

1

349,039

(168,276)

180,764
Issuance of stock during July 2019 follow-on offering, net of closing costs
—

2,222,223

—

1

94,243

—

94,244
Equity based compensation*
—

80,697

—

—

2,989

—

2,989
Stock option exercises
—

94,323

—

—

2,020

—

2,020
Shares withheld for taxes
—

(10,450)

—

—

(446)

—

(446)
Net loss
—

—

—

—

—

(17,089)

(17,089)
Balance at September 30, 2019
—

17,125,938

$
—

$
2

$
447,845

$
(185,365)

$
262,482


				��
	Number of Shares

	Common stock	Common stock		Additional paid-in capital		Accumulated deficit		Total
Balance at March 31, 2020	17,184,712	$	2	$	450,978	$	(205,914)	$	245,066
Equity based compensation*	38,465		—		1,955		—		1,955
Equity payment of prior year accrued employee related expenses	19,733		—		1,537		—		1,537
Stock option exercises	46,117		—		1,019		—		1,019
Net loss	—		—		—		(15,130)		(15,130)
Balance at June 30, 2020	17,289,027	$	2	$	455,489	$	(221,044)	$	234,447


	Number of Shares												Number of Shares
	Preferred stock series AA	Common stock	Preferred stock series AA		Common stock		Additional paid-in capital		Accumulated deficit		Total
Balance at June 30, 2018	—	14,509,557	$	—	$	1	$	339,479	$	(138,773)	$	200,707
													Common stock	Common stock		Additional paid-in capital		Accumulated deficit		Total
Balance at March 31, 2019													14,739,145		1	$	349,227	$	(168,464)	$	180,764
Cumulative effect of change in accounting principle													—		—		(188)		188		—
Balance at April 1, 2019													14,739,145		1		349,039		(168,276)		180,764
Equity based compensation*	—	23,898		—		—		3,657		—		3,657	24,853		—		1,577		—		1,577
Stock option exercises	—	40,662		—		—		821		—		821	79,323		—		1,719		—		1,719
Shares withheld for taxes	—	(850)		—		—		(27)		—		(27)	(3,208)		—		(142)		—		(142)
Net loss	—	—		—		—		—		(11,780)		(11,780)	—		—		—		(9,374)		(9,374)
Balance at September 30, 2018	—	14,573,267	$	—	$	1	$	343,930	$	(150,553)	$	193,378
Balance at June 30, 2019													14,840,113	$	1	$	352,193	$	(177,650)	$	174,544



Balance at March 31, 2018 (As Restated)	—	14,487,650	$	—	$	1	$	335,767	$	(127,239)	$	208,529
Cumulative effect of change in accounting principle	—	—		—		—		—		768		768
Balance at April 1, 2018	—	14,487,650		—		1		335,767		(126,471)		209,297
Equity based compensation*	—	50,068		—		—		7,477		—		7,477
Stock option exercises	—	40,849		—		—		825		—		825
Shares withheld for taxes	—	(5,300)		—		—		(139)		—		(139)
Net loss	—	—		—		—		—		(24,082)		(24,082)
Balance at September 30, 2018	—	14,573,267	$	—	$	1	$	343,930	$	(150,553)	$	193,378


	Six months ended September 30,				Three months ended June 30,
	2019		2018		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(17,089)	$	(24,082)	$	(15,130)	$	(9,374)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation and amortization		1,277		1,445		1,208		642
Non-cash compensation expense attributable to stock awards		2,989		7,477		1,955		1,577
Deferred income taxes		463		—		11		292
Bad debt expense		49		161		—		87
Loss on disposal of assets		74		14
Loss from disposal of intangible assets						4,678		—
(Gain) loss on disposal of long-lived assets						(1)		1
Impairment of long-lived assets		—		531		29		—
Equity method investment		(15)		—
Loss on equity method investment						4		—
Changes in operating assets and liabilities
Accounts receivable		381		(204)		36		182
Inventory		—		173
Prepaid expenses and other assets		546		173		3,055		(7)
Right of use assets		698		—		411		347
Accounts payable and accrued expenses		(1,247)		(741)		(124)		(1,372)
Due to related parties						(4)		(73)
Restructuring reserve		(1,537)		3,192		(295)		(803)
Due to related parties		(69)		(171)
Operating lease liabilities		(661)		—		(467)		(324)
Deferred revenue		(397)		(406)		(187)		(199)
Other liabilities		(5)		225		209		(6)
Net cash used by operating activities		(14,543)		(12,213)		(4,612)		(9,030)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of intangible assets		(202)		(936)		(8,991)		—
Purchases of equipment		(301)		(211)		(103)		(247)
Net cash used by investing activities		(503)		(1,147)		(9,094)		(247)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from July 2019 follow-on offering		94,244		—
Proceeds from stock option exercises		2,020		825		1,019		1,719
Payments of withholding tax on net issuance of restricted stock		(446)		(139)		—		(142)
Net cash provided by financing activities		95,818		686		1,019		1,577
Net change in cash and cash equivalents		80,772		(12,674)		(12,687)		(7,700)
CASH AND CASH EQUIVALENTS
Beginning of the year		76,722		98,318
End of the year	$	157,494	$	85,644
Beginning of the period						137,453		76,722
End of the period					$	124,766	$	69,022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Taxes paid	$	21	$	5	$	—	$	1
Non-cash investing activity:
Contribution of capital equipment to LLC	$	14	$	—

See accompanying notes to consolidated financial statements.

Non-cash financing activities:
Equity payment of prior year accrued employee related expenses					$	1,537	$	—

Anterix Inc. (formerly known as pdvWireless, Inc., the “Company”) is a wireless communications company focused on ~~empowering the modernization of~~commercializing its spectrum assets to enable its targeted utility and critical infrastructure customers to deploy private broadband networks, technologies and enterprise business communications by enabling broadband connectivity. The Company’s foundational spectrum provides the ability to transform its customers’ operations to meet new business complexities while achieving higher levels of performance and safety.solutions. The Company is the largest holder of licensed spectrum in the 900 MHz band ~~(896-901/~~(896-901/935-940 MHz) with nationwide coverage throughout the contiguous United States, Hawaii, Alaska and Puerto Rico. On average, the Company holds approximately 60% of the channels in the 900 MHz band in the top 20 metropolitan market areas in the United States. The Company is currently pursuing a regulatory proceeding atMay 13, 2020, the Federal Communications Commission ~~(the “FCC”~~(“FCC”) ~~that seeks~~approved a Report and Order to modernize and realign the 900 MHz band to increase its usability and capacity by allowing it to be utilized for the deployment of broadband networks, technologies and ~~solutions.~~solutions (the “Report and Order”). The Company is now engaged in qualifying for and securing broadband licenses from the FCC, with a focus on pursuing licenses in those counties in which it believes it has near-term commercial opportunities. At the same time, the Company’s sales and marketing organization is pursuing opportunities to lease the broadband licenses it secures to its targeted utility and critical infrastructure customers.

The Company was originally incorporated in California in 1997 and reincorporated in Delaware in 2014. In November 2015, the Company changed its name from Pacific DataVision, Inc. to pdvWireless, Inc. On August 6, 2019, the Company changed its name from pdvWireless, Inc. to Anterix Inc. The Company maintains offices in Woodland Park, New Jersey and McLean, Virginia.

Historically, the Company generated revenue principally from its pdvConnect and TeamConnect businesses. pdvConnect is a mobile communication and workforce management solution. The Company historically marketed pdvConnect primarily through two Tier 1 carriers in the United States. In Fiscal 2016, it began offering a commercial push-to-talk (“PTT”) service, which was marketed as TeamConnect, in seven major metropolitan areas throughout the United States, including Atlanta, Baltimore/Washington, Chicago, Dallas, Houston, New York and Philadelphia. It primarily offered the TeamConnect service to customers indirectly through third-party sales representatives who were primarily selected from Motorola’s nationwide dealer network.

In June 2018, the Company announced its plan to restructure its ~~business~~operations to align and focus its business priorities on its broadband spectrum ~~initiatives aimed at modernizing and realigning~~initiatives. Consistent with this restructuring plan, the ~~900 MHz band to increase~~Company transferred its ~~usability and capacity, including for the future deployment of broadband and other advanced technologies and services. In~~TeamConnect business in December 2018 to A BEEP LLC (“A BEEP”) and Goosetown Enterprises, Inc (“Goosetown”), with the ~~Company’s board~~Company continuing to provide customer care, billing and collection services through April 1, 2019. On December 31, 2018, the Company entered into a memorandum of ~~directors approved~~understanding (“MOU”) with the ~~transfer~~principals of Goosetown. Under the terms of the ~~Company’s~~MOU, the Company assigned the intellectual property rights to its TeamConnect ~~business~~ and ~~support for~~pdvConnect related applications to TeamConnect LLC (the “LLC”). The LLC assumed customer care services related to the pdvConnect service, with the Company providing transition services to the LLC through April 1, 2019. On April 1, 2020, the Company transferred its pdvConnect ~~business.~~customers to the LLC and the LLC agreed to pay the Company a certain portion of the recurring revenues from these customers.

In July 2019, the Company completed a registered follow-on offering in which it sold 2,222,223 shares of its common stock at a purchase price to the public of $45.00 per share. Net proceeds were approximately $94.2 million after deducting $5.5 million in underwriting discounts and commissions, and $0.3 million in offering expenses.

On June 25, 2020, the Company issued a press release announcing an effective date of July 1, 2020 for its executive leadership succession plan (the “Succession Plan”), which followed the achievement of the FCC Report and Order.

The unaudited consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“USU.S. GAAP”) for interim financial information. Pursuant to the rules and

regulations of the U.S. Securities and Exchange Commission (the “SEC”), certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with USU.S. GAAP have been condensed or omitted.

Because certain information and footnote disclosures have been condensed or omitted, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2019,~~2020, as filed on May ~~20, 2019~~28, 2020 with the SEC. In the Company’s opinion all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. The Company believes that the disclosures made in the unaudited consolidated interim financial statements are adequate to make the information not misleading. The results of operations for the interim periods presented are not necessarily indicative of the results for the year. The Company is also required to make certain estimates with regard to the valuation of awards and forfeiture rates for its share-based award programs. New estimates in the period relate to determining the Company’s estimated incremental borrowing rate in recognizing right of use assets and operating lease liabilities. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the financial statements in the applicable period. Accordingly, actual results could materially differ from those estimates.

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, including PDV Spectrum Holding Company, LLC formed in April 2014. All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain prior year amounts have been reclassified to conform to the presentation of the corresponding amounts in the financial statements for the three ~~and six~~ months ended ~~September~~June 30, ~~2019.~~2020. These reclassifications had no effect on previously reported net loss or net loss per common share basic and diluted.

All highly liquid investments with maturities of three months or less at the time of purchase are considered cash equivalents. Cash equivalents are stated at cost, which approximates the quoted market value and include amounts held in money market funds.

Intangible assets are wireless licenses that will be used to provide the Company with the exclusive right to utilize designated radio frequency spectrum to provide wireless communication services. On May 13, 2020, the FCC approved the Report and Order to modernize and realign the 900 MHz band to increase its usability and capacity by allowing it to be utilized for the deployment of broadband networks, technologies and solutions. The Company is now engaged in qualifying for and securing broadband licenses from the FCC, with a focus on pursuing licenses in those counties in which it believes it has near-term commercial opportunities. While licenses are issued for only a fixed time, generally ten years, such licenses are subject to renewal by the FCC. License renewals have occurred routinely and at nominal cost in the past. There are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the Company’s wireless licenses. As a result, the Company has determined that the wireless licenses should be treated as an indefinite-lived intangible asset. The Company will evaluate the useful life determination for its wireless licenses each year to determine whether events and circumstances continue to support their treatment as an indefinite useful life asset.

The licenses are tested for impairment annually on an aggregate basis, as the Company will be utilizing the wireless licenses on an integrated basis as part of developing broadband. In the year ended March 31, 2020, (“Fiscal ~~2019,~~2020”), the Company performed a step ~~one quantitative~~zero qualitative approach to test indefinite-lived intangible assets for impairment ~~test~~by first assessing qualitative factors to determine ifwhether it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is ~~greater than carrying value. Estimated fair value~~impaired as a basis for determining whether it is ~~determined using a market-based approach~~necessary to perform quantitative impairment testing.. There are no triggering events indicating impairment in the ~~six~~three months ended ~~September~~June 30, ~~2019.~~2020.

See Note 4 “Intangible Assets” for a discussion of the Company’s loss from the disposal of intangible assets incurred during the quarter ended June 30, 2020.

The Company evaluates long-lived assets, including right of use assets, other than intangible assets with indefinite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Asset groups are determined at the lowest level for which identifiable cash flows are largely independent of cash flows of other groups of assets and liabilities. When the carrying amount of the asset groups are not recoverable and exceeds its fair value, an impairment loss is recognized equal to the excess of the asset group’s carrying value over the estimated fair value.

~~The Company’s 19.5% investment in TeamConnect LLC (“LLC”) for which~~ During the three months ended June 30, 2020, the Company ~~is not~~recorded a $29,000 non-cash impairment charge for long-lived assets consisting of $29,000 for network site costs to reduce the ~~primary beneficiary and does not influence or control~~carrying values to zero. There was no impairment charge for the activities that most significantly impact the LLC’s economic performance, are not consolidated and are accounted for under the equity method of accounting. Under the equity method of accounting, the LLC’s accounts are not reflected within the Company’s consolidated balance sheets and statements of operations. The Company's share of the earnings of the LLC is reported as income (loss) on equity method investment in the Company’s consolidated statements of operations. The Company’s carrying value in an equity method investment is reported as equity method investment on the Company’s consolidated balance sheets.

If the Company’s carrying value in an equity method is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guarantees obligations of the LLC or commits additional funding. When the LLC subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

Leases in which the Company is the lessee are comprised of corporate office space and tower space. Substantially all of the leases are classified as operating leases. The Company is obligated under certain lease agreements for office space with lease terms expiring on various dates from October 14, 2025 throughthree months ending June 30, ~~2027, which includes a ten-year lease extension for its corporate headquarters. The Company entered into multiple lease agreements for tower space related to its spectrum holdings.~~

~~In accordance with Financial Accounting Standards Board, (“FASB”) Accounting Standards Update (“ASU”) 2016-02~~ ~~Leases~~ (“ASC 842”), the Company recognized right of use (“ROU”) assets and corresponding lease liabilities on its Consolidated Balance Sheet for its operating lease agreements. The Company elected the package of practical expedients for its long-term operating leases, which permits the Company not to reassess under the new standard the prior conclusions about lease identification, lease classification and initial direct costs. See Note 9 – Leases for further discussion, including ~~the impact on the Company’s consolidated financial statements and required disclosures.~~2019.

The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities as well as from net operating loss and tax credit carryforwards. The effect on deferred tax assets and liabilities from a change in income tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is established when it is estimated that it is more likely than not that the tax benefit of a deferred tax asset will not be realized.

Revenues are recognized when a contract with a customer exists and control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services and the identified performance obligation has been satisfied.

~~A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in Accounting Standards Update 2014-09,~~ ~~Revenue from Contracts with Customers,~~ ~~(“ASC 606”)~~. A contract’s transaction price is allocated to each distinct performance obligation and is recognized as revenue when, or as, the performance obligation is satisfied, which typically occurs when the services are rendered. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company’s contracts with customers may include multiple performance obligations. For such arrangements, the Company allocates revenue to each performance obligation based on its relative standalone selling price. It generally determines standalone selling prices based on the prices charged to customers under contracts involving only the relevant performance obligation. Judgment may be used to determine the standalone selling prices for items that are not sold separately, including services provided at no additional charge. Most of the Company’s performance obligations are satisfied over time as services are provided.

The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of those costs to be longer than one year. The Company has determined that certain sales commissions meet the requirements to be capitalized and have been recorded as an asset upon the Company’s adoption of ASC 606. As a result of the customers being assigned to A BEEP and Goosetown (see Note 3 below), the Company’s capitalized sales commissions were impaired on April 1, 2019.

The Company accounts for stock options in accordance with US GAAP, which requires the measurement and recognition of compensation expense, based on the estimated fair value of awards granted to consultants, employees and directors. The Company estimates the fair value of share-based awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense in the Company’s statements of operations over the requisite service periods. In the event the participant’s employment by or engagement with (as a director or otherwise) the Company terminates before exercise of the options granted, the stock options granted to the participant shall immediately expire and all rights to purchase shares thereunder shall immediately cease and expire and be of no further force or effect, other than applicable exercise rights for vested shares that may extend past the termination date as provided for in the participant’s applicable option award agreement. Additionally, the Compensation Committee adopted an Executive Severance Plan (the “Severance Plan”) in February 2015, which was amended in February 2019, and the Company subsequently entered into Severance Plan Participation Agreements with its executive officers and certain key employees. In addition to providing participants with severance payments, the Severance Plan provides for accelerated vesting and extends the exercise period for outstanding equity awards if the Company terminates a participant’s service for reasons other than cause, death or disability or the participant terminates his or her service for good reason, whether before or after a change of control (each of such terms as defined in the Severance Plan).

To calculate option-based compensation, the Company uses the Black-Scholes option-pricing model. The Company’s determination of fair value of option-based awards on the date of grant using the Black-Scholes model is affected by assumptions regarding a number of subjective variables.

The fair value of restricted stock, restricted stock units and performance units are measured based upon the quoted closing market price for the stock on the date of grant. The compensation cost for the restricted stock and restricted stock units is recognized on a straight-line basis over the vesting period. The compensation cost for the performance units is recognized when the performance criteria are expected to be complete.

~~No tax benefits have been attributed to the share-based compensation expense because the Company maintains a full valuation allowance for all net deferred tax assets.~~

The Company recognizes the effect of tax positions only when they are more likely than not to be sustained. Management has determined that the Company had no uncertain tax positions that would require financial statement recognition or disclosure. The Company is no longer subject to U.S. federal, state or local income tax examinations for periods prior to 2016. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. For purposes of the diluted net loss per share calculation, preferred stock, stock options, restricted stock and warrants are considered to be potentially dilutive securities. Because the Company has reported a net loss for the three months ended June 30, 2020 and ~~six months ended September 30,~~ 2019, ~~and 2018,~~ respectively, diluted net loss per common share is the same as basic net loss per common share for those periods.

Common stock equivalents resulting from potentially dilutive securities approximated ~~1,409,000~~1,586,000 and ~~1,179,000~~1,395,000 at ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and have not been included in the dilutive weighted average shares of common stock outstanding, as their effects are anti-dilutive.

In June 2016, the FASB issued ASC 326, Financial Instruments - Credit Losses and has subsequently modified several areas of the standard in order to provide additional clarity and improvements. The new standard requires entities to use a Current Expected Credit Loss impairment model based on expected losses rather than incurred losses. Under this model, an entity would recognize an impairment allowance equal to its current estimate of all contractual cash flows that the entity does not expect to collect from financial assets measured at amortized cost within the scope of the standard. The entity's estimate would consider relevant information about past events, current conditions and reasonable and supportable forecasts, which will result in recognition of lifetime expected credit losses. As a smaller reporting company, the standard will be effective for the Company's fiscal year beginning April 2023, including interim reporting periods within that fiscal year, although early adoption is permitted. The Company is evaluating the potential impact that ASC 326 and subsequent modifications may have on its consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

~~In February 2016, the FASB issued ASC 842~~, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. Originally, entities were required to adopt ASU 2016-02 using a modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings. The FASB subsequently issued ASU 2018-10 and ASU 2018-11 in July 2018, which provide clarifications and improvements to ASU 2016-02 (collectively, the “new lease standard”). ASU 2018-11 also provides the optional transition method which allows companies to apply the new lease standard at the adoption date instead of at the earliest comparative period presented and continue to apply the provisions of the previous lease standard in its annual disclosures for the comparative periods. The new lease standard requires lessees to present a ROU asset and a corresponding lease liability on the balance sheet. Lessor accounting is substantially unchanged compared to the current accounting guidance. Additional footnote disclosures related to leases will also be required.

On April 1, 2019, the Company adopted the new lease standard using the optional transition method. The comparative financial information will not be restated and will continue to be reported under the previous lease standard in effect during those periods. In addition, the new lease standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company will not reassess whether expired or existing contracts are or contain a lease; will not need to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. The Company did not elect the use of hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company.

The new lease standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU assets or lease liabilities, including not recognizing ROU assets or lease liabilities for existing short-term leases of those assets in transition. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (office buildings).

On April 1, 2019, the Company recognized ROU assets of $7.1 million and lease liabilities of approximately $9.4 million, derecognized deferred rent liabilities of approximately $2.3 million and did not record an adjustment to accumulated deficit. When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at April 1, 2019. The weighted average incremental borrowing rate applied was 13%. The Company’s adoption of the new lease standard did not impact its consolidated statements of operations and its statements of cash flows. No cumulative effect adjustment was recognized as the amount was not material. See Note 9 – Leases for further discussion, including ~~the impact on the Company’s consolidated financial statements and required disclosures.~~

~~In June 2018, the FASB issued ASU No. 2018-07,~~ ~~Compensation – Stock Compensation (Topic 718) – Improvements to Nonemployee Share-based Payment Accounting~~. ASU 2018-07 addresses several aspects of the accounting for nonemployee share-based payment transactions, including share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for the Company’s fiscal year 2020 beginning April 1, 2019. As a result of adopting the ASU on April 1, 2019, the Company reduced its accumulated deficit by $188,000. See Note 11 – ~~Stock Acquisition Rights, Stock Options and Warrants~~ ~~for further discussion, including~~ ~~the impact on the Company’s consolidated financial statements and required disclosures.~~

On April 1, 2018, the Company adopted ASC 606 using the modified retrospective method and recognized the cumulative effect of initially applying the guidance as an adjustment to the opening balance of retained deficit. The Company applied the new revenue standard to new and existing contracts that were not complete as of the date of initial application. As a result of applying this standard using the modified retrospective method, the Company has presented financial results and applied its accounting policies for the period beginning April 1, 2018 under ASC 606, while prior period results and accounting policies have not been adjusted and are reflected under legacy GAAP pursuant to Accounting Standard Codification 605.

In December 2018, the Company’s board of directors (the “Board”) approved the transfer of its TeamConnect business and support for its pdvConnect business to help reduce operating costs and to allow ~~the management team and~~ the Company to focus on its FCC initiatives and future broadband opportunities. Specifically, the Company entered into: (i) a Customer Acquisition and Resale Agreement with A BEEP ~~LLC (“A BEEP”)~~ on January 2, 2019, (ii) a Customer Acquisition, Resale and Licensing Agreement with Goosetown ~~Enterprises, Inc. (“Goosetown”)~~ on January 2, 2019 and (iii) ~~a memorandum of understanding (“MOU”)~~an MOU with the principals of Goosetown on December 31, 2018. Under the A BEEP and Goosetown Agreements, the Company agreed to: (i) transfer its TeamConnect customers located in the Atlanta, Chicago, Dallas, Houston and Phoenix metropolitan markets to A BEEP, (ii) transfer its TeamConnect customers located in the Baltimore/Washington DC, Philadelphia and New York metropolitan markets to Goosetown, (iii) provide A BEEP and Goosetown with access to ~~the TeamConnect Metro and Campus~~MotoTRBO Systems ~~(the, “MotoTRBO Systems ”)~~ and (iv) grant A BEEP and Goosetown the right to resell access to the MotoTRBO Systems pursuant to separate Mobile Virtual Network Operation arrangements for a two-year period. The Company also granted Goosetown a license to sell the business applications the Company developed for its TeamConnect service. On March 31, 2019, the agreements were amended to formally set the transition date for the businesses as April 1, 2019 and to clarify the responsibilities between the parties.

Under these agreements, A BEEP and Goosetown agreed to provide customer care, billing and collection services for their respective acquired customers. The Company continued to provide these services through April 1, 2019 to help facilitate the transitioning of the acquired customers. Additionally, the Company is required to maintain and pay all site lease, backhaul and utility costs required to operate the MotoTRBO Systems for a two-year period. As part of the Company’s efforts to clear the 900 MHz spectrum for broadband use, A BEEP and Goosetown are required to migrate the acquired customers off the MotoTRBO Systems over the two-year period. In consideration for the customers and rights the Company transferred, A BEEP and Goosetown are required to pay a certain portion of the recurring revenues they receive from the acquired customers ranging from 100% to 20% during the terms of the agreements. Additionally, A BEEP is required to pay the Company a portion of recurring revenue from customers who utilize A BEEP’s push-to-talk Diga-talk Plus application service ranging from 35% to 15% for a period of two years. For a period of two years, Goosetown is required to pay the Company 20% of recurring revenues from the TeamConnect applications it ~~licensed~~licensed.

Under the terms of the MOU that the Company entered into with the principals of Goosetown on December 31, 2018, the Company assigned the intellectual property rights to its TeamConnect and pdvConnect related applications to the LLC. The LLC also assumed customer care services related to the pdvConnect service, with the Company providing transition services to

the LLC through April 1, 2019. On April 1, 2020, the Company transferred its pdvConnect customers to the LLC, and the LLC agreed to pay the Company a certain portion of the recurring revenues from these customers.

In accordance with ASC 606, when the customer purchased or received a discounted handset in connection with entering into a contract for service, the Company allocated revenue between the handset and the service based on the relative standalone selling price. Revenue was recognized when the performance obligation which includes providing the services or transferring control of promised handsets, which are distinct to a ~~period of two years.~~customer, had been satisfied. Revenue was recognized in an amount that reflects the consideration the Company expects to be entitled to for those performance obligations.

Service Revenue. The Company has historically derived its service revenue from a fixed monthly recurring unit price per user, with 30-day payment terms, for ~~the~~its pdvConnect, TeamConnect and Diga-talk service offerings.

pdvConnect is a proprietary cloud-based mobile resource management solution which has historically been sold as a separate software-as-a-service offering for dispatch-centric business customers who utilize Tier 1 cellular networks, and to a lesser extent, who utilize land mobile radio networks not operated by the Company. pdvConnect was historically sold directly by the Company or through two Tier 1 domestic carriers. The service is contracted and billed on a month-to-month basis, and the Company satisfies its performance obligation over time as the services are delivered. On April 1, 2020, these customers were transferred to the LLC. The LLC agreed to pay the Company a certain portion of the recurring revenues through the term of the agreement.

TeamConnect combines pdvConnect with push-to-talk (“PTT”) mobile communication services involving digital network architecture and mobile devices. The contract period for the TeamConnect service varies from a month-to-month basis to 24 months. The customer is billed at the beginning of each month of the contract term. The Company recognizes revenue as it satisfies its performance obligation over time as the services are delivered. On April 1, 2019, these customers were transitioned to A BEEP and Goosetown. A BEEP and Goosetown agreed to pay the Company a certain portion of the recurring revenues during the term of the agreements. While the customer remains on the Company’s MotoTRBO Systems, the portion of recurring revenues paid by A BEEP and Goosetown is recorded as revenue.

~~Diga-talk~~ is a mobile communications offering that was being resold by the Company for the three and six months ended September 30, 2018. The service was contracted and billed on a month-to-month basis. The determination was made that the Company was the principal in this reseller arrangement since the customer viewed the Company as fulfilling the performance obligations and therefore, recorded revenue on a gross basis over time upon delivery of the services. On April 1, 2019, these customers were transferred to A BEEP and the Company no longer has revenue for this offering.

Spectrum Revenue.In September 2014, Motorola paid the Company an upfront, fully-paid fee of $7.5 million in order to use a portion of the Company’s wireless spectrum licenses. The payment of the fee is accounted for as deferred revenue on the Company’s consolidated balance sheets and is recognized ratably as the service is provided over the contractual term of approximately ten years. The revenue recognized for the three ~~and six~~ months ended ~~September~~June 30, 2020 and 2019 ~~and 2018 were~~was approximately $182,000 ~~and $364,000, respectively.~~each period.

~~Other Revenue.~~ The Company historically derived other revenue primarily from either the sale of radios and accessories for TeamConnect and Diga-talk as well as the rental of radios for TeamConnect based on 30-day payment terms. The Company recognized radio and accessory revenue when a customer takes possession of the device. As of April 1, 2019 and the transition of customers to A BEEP and Goosetown, the Company no longer sells radios and accessories nor rents radios for TeamConnect.

Contract Assets.Contract assets ~~includes~~include the portion of the Company’s future service invoices which ~~has~~have been allocated to the discounted price of the radios and amortized as a reduction against service revenue over the contract period.

The Company also ~~recognized~~recognizes a contract asset for the incremental costs of obtaining a contract with a customer. These costs include commissions for ~~sales people~~salespeople and commissions paid to third-party dealers. These costs are amortized ratably using the portfolio approach over the estimated customer contract period. The Company reviews the contract asset on a periodic basis to determine if an impairment exists. If it is determined that there ~~was~~is an impairment, the contract asset will be expensed. Under the previous accounting standard, the Company expensed commissions as incurred.

As a result of ~~the~~transferring customers ~~being transferred~~ to A BEEP and Goosetown, all contract and contract acquisition costs were impaired. The Company increased direct cost of revenue amounting to ~~$178,000 for the six months ended September 30, 2019,~~$178,000 and sales and support expense amounting to $258,000 for the ~~six~~three months ended ~~September~~June 30, 2019.

~~The following table presents the activity for the Company’s contract assets (in thousands):~~

Contract liabilities. Contract liabilities primarily relate to advance consideration received from customers for spectrum services, for which revenue is recognized over time, as the services are performed. These contract liabilities are recorded as deferred revenue on the balance sheet. The related liability as of March 31, ~~2019~~2020 of ~~$4.2~~$3.5 million has been reduced by revenue recognized in the ~~six~~three months ended ~~September~~June 30, ~~2019~~2020 of ~~$0.4~~$0.2 million leaving a remaining liability of ~~$3.8~~$3.3 million as of ~~September~~June 30, ~~2019.~~2020.

~~Property and equipment consists of the following at September 30, 2019 and March 31, 2019 (in thousands):~~

Estimated

September 30,

March 31,

useful life

2019

2019
Network sites and equipment

5-10 years

$
15,864

$
15,954
Furniture and fixture and other equipment

2-5 years

282

1,026
Computer equipment

5-7 years

83

140
Computer software

1-7 years

509

28
Leasehold improvements

Shorter of the lease term or 10 years

232

351

16,970

17,499
Less accumulated depreciation

8,340

7,952

8,630

9,547
Construction in process

19

283
Property and equipment, net

$
8,649

$
9,830

Depreciation expense for the three months ended September 30, 2019 and 2018 amounted to $0.6 million and $0.7 million, respectively. The depreciation expense for the six months ended September 30, 2019 and 2018 amounted to $1.3 million and $1.4 million, respectively. During the six months ended September 30, 2018, the Company recorded a $0.5 million non-cash charge for long-lived asset impairment of its radio assets to reduce the carrying value to the estimated recoverable amount. There was no impairment charge for the three and six months ended September 30, 2019. Computer software includes software developed or obtained for internal use during the application development stage with an estimated useful life of 5 to 7 years. Leasehold improvements include certain allowances for tenant improvements related to the expansion of the Company’s corporate headquarters. As of September 30, 2019, construction in progress primarily relates to various computer equipment that were not in service. As of March 31, 2019, construction in progress primarily relates to various software and web projects being developed internally. ~~On September 30, 2019,~~ the Company transferred network, computer and other equipment with a net book value of $72,000 used to support the pdvConnect application services in exchange for a 19.5% ownership interest to the LLC.

Wireless licenses are considered indefinite-lived intangible assets. Indefinite-lived intangible assets are not subject to amortization but instead are tested for impairment annually, or more frequently if an event indicates that the asset might be impaired. There were no impairment charges related to the Company’s indefinite-lived intangible assets during the three ~~and six~~ months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.

During the ~~quarter~~three months ended ~~September~~June 30, ~~2019,~~2020, the Company entered into ~~an agreement~~agreements with aseveral third ~~party~~parties in multiple U.S. markets to acquire wireless licenses for cash consideration of ~~$0.2~~$9.0 million, ~~upon~~after receiving FCC approval.

The nation’s railroads, particularly the major freight lines, operate on six narrowband 900 MHz channels licensed to their trade association, the Association of American Railroads (“AAR”). Three of these narrowband channels are located in the 900 MHz broadband segment created by the FCC in the Report and Order. As a result, in order to qualify for broadband licenses under the Report and Order, the Company will be required to provide spectrum for the relocation of the AAR channels to narrowband channels outside the 900 MHz broadband segment.

In January 2020, the Company entered into an agreement with the AAR in which it agreed to cancel licenses in the 900 MHz band to enable the AAR to relocate its operations, including operations utilizing the three channels located in the 900 MHz broadband segment (the “AAR Agreement”). The FCC referenced the AAR agreement in the Report and Order, and required the Company to cancel its licenses and return them to the FCC in accordance with the AAR Agreement. The Report and Order provides that the FCC will make the channels associated with these licenses available to the AAR to enable the AAR to relocate their current operations. The Report and Order also provides that the FCC will credit the Company for its cancelled licenses for purposes of determining the Company’s eligibility to secure broadband licenses and the calculation of any anti-windfall payments.

In accordance with the Report and Order, the Company cancelled its licenses in the three months ended June 30, 2020. Because the Company did not receive any licenses nor monetary reimbursement in exchange for the cancellation, but only credit for purposes of determining its future eligibility and payment obligations for broadband licenses under the Report and Order, the Company recorded a $4.7 million loss from disposal of the intangible assets in the Consolidated Statements of Operations for the three months ended June 30, 2020.

Intangible assets consist of the following at ~~September~~June 30 ~~2019~~, 2020 and March 31, ~~2019~~2020 (in thousands):

In connection with the transfer of its TeamConnect business and support for its pdvConnect business, the Company entered into a memorandum of understanding (“MOU”) with the principals of Goosetown on December 31, 2018. Under the MOU, the Company agreed to assign the intellectual property rights to its pdvConnect application to the LLC, a new entity formed by the principals of Goosetown, in exchange for a 19.5% ownership interest in the LLC, effective April 30, 2019. The Goosetown principals have agreed to fund the future operations of the LLC, subject to certain limitations. The LLC has assumed the Company’s software support and maintenance obligations under the Goosetown and A BEEP Agreements. The LLC has also assumed customer care services related to the Company’s pdvConnect application. The Company provided transition services to the LLC through April 1, 2019 to facilitate an orderly transition of the customer care services.

~~As of September 30, 2019,~~On April 1, 2020, the Company transferred ~~network, computer and other equipment with a net book value of $72,000, and recorded an investment in~~its pdvConnect customers to the LLC, ~~amounting~~and the LLC agreed to ~~$14,000 and loss on disposal of assets amounting to $58,000 relating to~~pay the ~~transfer~~Company a certain portion of the ~~assets as of such date. The Company anticipates that it will complete the transfer of the intellectual property rights to the LCC during the third quarter of fiscal 2020.~~recurring revenues from these customers.

During the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, the change in the carrying value of the investment in the LLC is summarized as follows (in thousands):

As of March 31, 2019, the Company owed $5,000 to a consultant firm who is an affiliate of a significant holder of the Company. No such services were provided and owed to the consulting firm for the three and six months ending September 30, 2019 and 2018, respectively.

The Company purchased $2,000 and $1,000 of equipment from Motorola for the three months ended September 30, 2019 and 2018, respectively. The Company paid $11,000 and $10,000 for services from Motorola for the six months ended September 30, 2019 and 2018, respectively. ~~The Motorola revenue recognized for the three and six months ended September 30, 2019 and 2018 were approximately $182,000 and $364,000, respectively.~~ ~~As of September 30, 2019 and March 31, 2019, the Company owed $84,000 and $60,000 to Motorola, respectively.~~

Under the terms of the MOU, the Company is obligated to pay the LLC a monthly service fee for a 24-month period ending on January 7, 2021 for its assumption of the Company’s support obligations under the A BEEP and Goosetown agreements. The Company is also obligated to pay the LLC a certain portion of the billed revenue received by the Company from pdvConnect customers for a 48-month period. For the three ~~and six~~ months ended ~~September~~June 30, 2020 and 2019, the Company incurred ~~$250,000~~$176,000 and ~~$514,000~~

$264,000 under the MOU, respectively. As of ~~September~~June 30, ~~2019~~2020 and March 31, ~~2019,~~2020, the Company owed ~~$30,000~~$1,000 and ~~$118,000~~$12,000 to the LLC, respectively.

8.The Company did not purchase any equipment from Motorola for the three months ended June 30, 2020. The Company purchased $9,000 of equipment from Motorola for the three months ended June 30, 2019. The Motorola revenue recognized for the three months ended June 30, 2020 and, 2019 were approximately $182,000 each quarter. As of June 30, 2020 and March 31, 2020, the Company owed $105,000 and $98,000 to Motorola, respectively.

On May 5, 2020, the Company entered into a consulting agreement with Rachelle B. Chong under which Ms. Chong will serve as a Senior Advisor to the Company’s management team effective May 15, 2020. In connection with the consulting agreement, Ms. Chong submitted her resignation from the Company’s Board of Directors and as a member of the Board’s Nominating and Corporate Governance Committee. During the three months ended June 30, 2020, the Company incurred $24,000 in consulting fees to Ms. Chong. As of June 30, 2020, the Company did not owe Ms. Chong fees for consulting services.

During the ~~six~~three months ended ~~September~~June 30, 2018, the Company reviewed assets designated for its TeamConnect business. As a result of the Company’s transfer of the TeamConnect business, it determined that the carrying value of radios and related accessories were not fully recoverable. As a result,2020, the Company recorded a $29,000 non-cash ~~asset~~ impairment charge for long-lived assets consisting of ~~$0.5 million in the six months ending September 30, 2018~~$29,000 for network site costs to reduce the carrying ~~value of these assets~~values to zero. There was no impairment charge for the ~~six~~three months ending ~~September~~June 30, 2019.

April 2018 and June 2018 restructuring activities.In April 2018, the Company announced a shift in its focus and resources in order to pursue its regulatory initiatives at the FCC and prepare for the future deployment of broadband and other advanced technologies and services. In light of this shift in focus, the Company’s ~~board of directors~~Board also approved a chief executive officer transition plan, under which, John Pescatore, the Company’s chief executive officer and president, transitioned to the position of vice chairman and Morgan O’Brien, the Company’s then-current vice chairman, assumed the position as the new chief executive officer. In connection with the transition, the Company and Mr. Pescatore entered into a Continued Service, Consulting and Transition Agreement and a separate Consulting Agreement (the “CEO Transition Agreements”) and the Company also entered into additional consulting and transition agreements with several other key employees.

On June 1, 2018, the Company’s ~~board of directors~~Board approved an initial plan to restructure its business aimed at reducing the operating costs of its TeamConnect and pdvConnect businesses and better aligning and focusing its business priorities on its spectrum initiatives. As part of the restructuring plan, the Company eliminated approximately 20 positions, or 20% of its workforce, primarily from its TeamConnect and pdvConnect businesses. In August 2018, the Company continued with its restructuring efforts and eliminated approximately seven additional positions.

For the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, total accrued restructuring charges for the April 2018 and June 2018 restructuring activities were as follows (in thousands):

December 2018 cost reductions.On December 31, 2018, the Company’s board of directors approved the following cost reduction actions: (i) the elimination of approximately 20 positions, or 30% of the Company’s workforce and (ii) the closure of its office in San Diego, California (collectively, the “December 2018 Cost-Reduction Actions”). For the three ~~and six~~ months ended ~~September~~June 30, 2020 and 2019, the Company recorded an additional restructuring charge relating to the December 2018 Cost-Reduction Actions amounting to ~~$28,000~~$14,000 and ~~$172,000,~~$144,000, respectively, related to employee severance and benefit costs. For the ~~six~~three months ended ~~September~~June 30, 2019, the Company reduced the facility exit costs accrual for ~~our~~its San Diego, California office by approximately $28,000. ~~An additional $91,000 of restructuring charges will be incurred approximately through the third quarter of fiscal 2021 related to employee retention costs.~~ The Company completed the cost reduction and restructuring actions in July 31, 2019 and the related cash payments for severance costs was completed by the end of August 31, 2019.

For the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, total December 2018 cost reduction charges were as follows (in thousands):

A lease is defined as a contract that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. On April 1, 2019, the Company adopted ASC 842 and it primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee.

Substantially all of the leases in which the Company is the lessee are comprised of corporate office space and tower space. The Company is obligated under certain lease agreements for office space with lease terms expiring on various dates from October 14, ~~2025~~2024 through June 30, 2027, which includes a ten-year lease extension for its corporate headquarters. The Company entered into multiple lease agreements for tower space related to its TeamConnect business. The lease expiration dates range from ~~April 16,~~July 31, 2020 to June 30, 2026.

Substantially all of the Company’s leases are classified as operating leases, and as such, were previously not recognized on the Company’s Consolidated Balance Sheet. With the adoption of Topic 842, operating lease agreements are required to be recognized on the Consolidated Balance Sheet as ~~ROU~~Right of Use (“ROU”) assets and corresponding lease liabilities.

On April 1, 2019, the Company recognized ROU assets of $7.1 million and lease liabilities of approximately $9.4 million, and derecognized deferred rent liabilities of approximately $2.3 million. The Company elected not to recognize ROU assets and lease liabilities arising from short-term office leases, leases with initial terms of twelve months or less (deemed immaterial) on the Consolidated Balance Sheets.

ROU assets include any prepaid lease payments and exclude any lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise that option.

Weighted-average remaining lease ~~liabilities~~term and discount rate for ~~leases that were classified as~~the Company’s operating leases the Company discounted lease payments using its estimated incremental borrowing rate at April 1, 2019. The weighted average incremental borrowing rate applied was 13%. As of September 30, 2019, the Company’s leases had a remaining weighted average term of 5.35 years. are as follows:

Rent expense amounted to approximately $0.7 million ~~and $1.3 million~~ for the three ~~and six~~ months ended ~~September~~June 30, ~~2019, respectively. Total rent~~2020, of which approximately $0.4 million was classified as cost of revenue and the remainder of approximately $0.3 million was classified in operating expenses in the Consolidated Statements of Operations. Rent expense amounted to approximately $0.6 million ~~and $1.3 million~~ for the three months June 30, 2019, of which approximately $0.4 million, was classified as cost of revenue and ~~six~~the remainder of approximately $0.2 million was classified in operating expenses in the Consolidated Statements of Operations.

In June 2020, the Company terminated an operating tower space lease early resulting in a non-cash reductions in ROU assets by $19,000, operating lease liabilities by $20,000 and gain in disposal of long-lived asset by $1,000.

The following table presents net lease cost for the three months ended ~~September~~June 30, ~~2018, respectively.~~2020 and 2019 (in thousands):

The following table presents supplemental cash flow and non-cash activity information for the three months ended June 30, 2020 and 2019 (in thousands):

The following table presents ~~net lease cost~~supplemental balance sheet information as of June 30, 2020 and March 31, 2020 (in thousands):

~~The following table presents other supplemental lease information (in thousands):~~

Future minimum payments under non-cancelable leases for office and tower spaces (exclusive of real estate tax, utilities, maintenance and other costs borne by the Company), for the remaining terms of the leases following the ~~six~~three months ended ~~September~~June 30, ~~2019~~2020 are as follows (in thousands):

On ~~December 22, 2017,~~March 27, 2020, the Coronavirus Aid Relief and Economic Security (“CARES”) Act was signed into law. The Act contains several new ~~federal~~or changed income tax provisions, ~~under~~including but not limited to the following: increased limitation threshold for determining deductible interest expense, class life changes to qualified improvements (in general, from 39 years to 15 years) and the ability to carry back net operating losses (“NOLs”) incurred from tax years 2018 through 2020 up to the five preceding tax years. Most of these provisions are either not applicable or have no material effect on the Company. However, the CARES Act changed the language of when NOLs converted from a 20-year life to an indefinite life. From the Tax Cuts and Jobs Act of 2017 (“TCJA”) were signed into law. The TCJA includes numerous changes to existing corporate income tax laws. These changes include, among others, a permanent reduction in the federal corporate income tax rate from the highest marginal rate of 35% to a fixed rate of 21%, effective as of January 1, 2018, and a provision that federal net operating losses (“NOLs”) incurredrule, NOLs in tax ~~years~~periods ending after December 31, 2017 ~~may be~~had an indefinite life. Under the new CARES Act, NOLs generated in periods beginning after December 31, 2017 are carried forward indefinitely. ~~As a result,~~This dating change effectively disqualified the ~~Company may now consider~~Company's March 31, 2018 NOL as an indefinite lived ~~assets~~asset and source of taxable income to offset the ~~associated~~Company's deferred tax liability stemming from indefinite-lived intangibles. The Company's NOLs generated after March 31, 2018, may continue to be used as an indefinite-lived asset to offset the deferred tax liability, but limited to 80% of future taxable income (or the balance of the deferred tax liability as ~~a source of future taxable income when assessing the potential to realize future tax deductions from indefinite carryforwards of NOLs and interest expense.~~

As of March 31, ~~2018,~~2020). The total impact of this date change from the ~~Company had~~CARES Act increased the Company's net federal ~~and~~deferred tax liability from approximately $0.2 million to $1.6 million as of March 31, 2020. The state ~~NOL carryforwards~~deferred tax liability of approximately ~~$125.7~~$1.4 million ~~and $51.3 million, respectively, expiring in various amounts from 2019 through 2037, to offset future taxable income. Per the TCJA, federal and TCJA-adhering state NOLs~~as of ~~approximately $34.1 million and $4.4 million, respectively, generated in fiscal year ended~~ March 31, ~~2018 can be carried forward indefinitely and are not subject to~~2020 is unchanged.

For the ~~80% of taxable income NOL deduction limitation. As of~~year ended March 31, 2019, the Company had federal and state NOL carryforwards of approximately $164.0 million and $74.0 million, respectively, expiring in various amounts from 2020 through ~~2037,~~2038, to offset future taxable income. Federal and state NOLs generated during the March 31, 2019 period of approximately ~~$72.6~~$38.5 million and ~~$10.3~~$6.0 million, respectively, can be carried forward indefinitely but ~~a portion of federal and state NOLs of approximately $38.5 million and $6.0 million, respectively, is~~ limited to 80% of future taxable income when used. For the ~~six months~~year ended ~~September 30, 2019,~~March 31, 2020, the Company incurred federal and state operating losses of approximately ~~$19.4~~$48.1 million and ~~$11.5~~$38.8 million, respectively, to offset future taxable income, of which ~~$22.4~~the entire $48.1 million federal NOL and $9.2 million of state NOLs can be carried forward indefinitely, but can only offset 80% of taxable income when used.

For the three months ended June 30, 2020, the Company incurred federal and state net operating losses of approximately $14.9 million and $12.0 million, respectively, to offset future taxable income, of which $19.0 million can be carried forward indefinitely, but can only offset 80% of taxable income when used.

The Company used a discrete effective tax rate method to calculate taxes for the ~~three- and six-month~~three months ended ~~September~~June 30, ~~2019.~~2020. The Company determined that applying an estimate of the annual effective tax rate would not provide a reasonable estimate as small changes in estimated “ordinary” loss would result in significant changes in the estimated annual effective tax rate. Accordingly, forfor the ~~six~~three months ending ~~September~~June 30, ~~2019,~~2020, the Company recorded a total deferred tax expense of ~~$463,000~~$11,000 due to the inability to use some portion of federal and state NOL carryforwards against the deferred tax liability created by ~~the~~ amortization of indefinite-lived intangibles.

The Company established the 2014 Stock Plan (the “2014 Stock Plan”) to attract, retain and reward individuals who contribute to the achievement of the Company’s goals and objectives. This 2014 Stock Plan superseded previous stock plans although under such previous plans, ~~23,550~~19,358 stock option shares were outstanding and vested as of ~~September~~June 30, ~~2019.~~2020.

The Company’s ~~board of directors~~Board has reserved ~~3,805,223~~4,147,985 shares of common stock for issuance under its 2014 Stock Plan as of ~~September~~June 30, ~~2019,~~2020, of which ~~821,333~~890,473 shares are available for future issuance. The number of shares ~~will continue to automatically~~may increase, based on Board approval, each January 1 through January 1, 2024 by an amount equal to the lesser of (i) 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or (ii) a lesser amount determined by the ~~board of directors.~~Board. Effective January 1, ~~2019,~~2020, the ~~board of directors~~Board elected to increase the shares authorized under the 2014 Stock Plan by ~~293,528~~342,762 shares, which represented 2% of the of the Company’s common stock issued and outstanding as of December 31, ~~2018.~~2019.

A summary of non-vested restricted stock activity for the ~~six~~three months ended ~~September~~June 30, ~~2019~~2020 is as follows:

The Company recognizes compensation expense for restricted stock on a straight-line basis over the explicit vesting period. Vested restricted stock units are settled and issuable upon the earlier of the date the employee ceases to be an employee of the Company or a date certain in the future. Stock compensation expense related to restricted stock was approximately ~~$1.0~~$1.7 million and ~~$2.0~~$1.0 million for the three ~~and six~~ months ended ~~September~~June 30, 2020 and 2019, respectively. ~~Stock compensation expense related to restricted stock was approximately $1.4 million and $2.6 million for the three and six months ended September 30, 2018, respectively.~~

~~Stock compensation expense for restricted stock is accounted for in general and administrative expense in the Company’s Consolidated Statement of Operations.~~ At ~~September~~June 30, ~~2019,~~2020, there was ~~$10.5~~$17.1 million of unvested compensation expense for restricted stock, which is expected to be recognized over a weighted average period of ~~3.12~~2.8 years.

A summary of the performance stock unit activity for the three ~~and six~~ months ended ~~September~~June 30, ~~2019,~~2020 is as follows:

On February 28, 2020, the Company ~~did not award any~~awarded 95,538 performance-based restricted stock units. The performance ~~stock units under the 2014 Stock Plan. Outstanding performance stock units represent the number of shares~~goals are:

(A) Target Goal: 50% of the ~~Company’s common stock that the recipient would receive~~shares vest upon ~~the Company’s attainment of the applicable performance goals. The units will vest in full upon attainment, prior to January 13,~~(i) achievement by December 31, 2020 of ~~(A)~~ a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and ~~(B)~~(ii) the lack of objection by the ~~Company's board of directors~~Company’s Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final ~~Order. These awards do not forfeit.~~Order; and

(B) Stretch Goal: The remaining 50% of the performance ~~stock unit activity~~shares vest and settle upon the occurrence of all three of the following conditions: (i) the Company enters into one or more long-term agreement(s) with critical infrastructure or enterprise business(es) to enable such business(es) to utilize the Company’s spectrum for broadband connectivity; (ii) the ~~six months ended September~~combined total contract dollars payable to the Company over the initial term(s) of such agreement(s) equals or exceeds a certain amount as specified by the Board; and (iii) the agreement(s) is/are binding on such business(es) and is/are either not contingent on prior Board approval(s) or such approval(s) has/have been received. If all of these conditions have not been achieved by December 30, ~~2019 is as follows:~~

~~For the three and six months ended September 30, 2019~~ ~~and 2018, there was no stock compensation expense recognized for~~2020, the performance ~~units. At September 30, 2019, there was approximately $2.6 million of unvested compensation expense related to the outstanding performance stock units.~~

~~A summary of stock option activity for the six months ended~~ ~~September~~ ~~30, 2019 is as follows:~~

~~There were no options granted for the three and six months ended September 30, 2019.~~

~~A summary of the performance stock options as of September 30, 2019 is as follows:~~

Additionally, on February 28, 2020, the Company awarded 43,446 performance-based restricted stock units. The performance ~~options~~goal related to these units is: 100% of the shares will vest ~~in full immediately~~ upon ~~attainment of the performance goals. Performance is based upon the Company’s~~(i) achievement ~~prior to January 13,~~by December 31, 2020 of ~~(A)~~ a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and ~~(B)~~(ii) the lack of objection by the ~~Company's~~Company’s Board ~~of Directors~~ to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order.

On June 24, 2020, the Company awarded up to 60,098 performance-based restricted units to the newly appointed President and Chief Executive Officer as part of the Succession Plan, (the “CEO Performance Units”). The performance-based restricted units will vest based on the Company’s achievement of revenue metric over a four-year measurement period from the grant date, with 30,049 units vesting if the target revenue metric is achieved and up to 60,098 vesting if the maximum revenue metric is achieved.

For the three months ended June 30, 2020, the Company recorded stock compensation expense amounting to approximately $7,000 for the CEO Performance Units. For the three months ended June 30, 2019, there was no stock compensation expense recognized for the performance-based restricted stock units. As of June 30, 2020, there was approximately $8.0 million of unvested compensation expense related to the outstanding performance-based restricted stock units.

A summary of stock option activity for the three months ended June 30, 2020 is as follows:

On June 24, 2020, the Company awarded a stock option to purchase 60,558 shares of common stock to its newly appointed President and Chief Executive Officer as part of the Succession Plan. The award has a contractual life of 10 years. 25% of the option shares will vest on July 1, 2021with the remaining shares vesting in three equal annual installments, based on the President and Chief Executive Officer’s continuous service to the Company through the applicable vesting dates.

The Black-Scholes option model requires weighted average assumptions to be used for the calculation of the Company’s stock compensation expense. The assumptions used during the three months ended June 30, 2020 were: the expected life of the award was 6.07 years; the risk free interest rate was 0.43%; the expected volatility rate was 53.41%; the expected dividend yield was 0.0%; and the expected forfeiture rate was 0%.

Stock compensation expense related to the amortization of the fair value of stock options ~~(other than the performance stock options)~~ issued was approximately ~~$0.4 million and $1.0~~$0.2 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2019.~~2020. For the three ~~and six~~ months ended ~~September~~June 30, ~~2018, the comparable~~2019, stock compensation expense was approximately $2.1 million and $4.8 million, respectively, which included $1.1 million of expense related to the consulting and transition agreements and $2.1 million of expense related to the modification of option grants held by the Company’s former chief executive officer and president. The stock compensation expense is included in general and administrative expense in the accompanying Consolidated Statement of Operations.$0.6 million.

As of ~~September~~June 30, ~~2019,~~2020, there was approximately ~~$3.1~~$2.0 million of unrecognized compensation ~~cost~~expense related to non-vested stock options granted under the Company’s stock option plans ~~of which $2.0 million pertains to the non-performance based stock options~~ which is expected to be recognized over a weighted-average period of ~~2.2~~1.9 years.

On February 28, 2020, the Company awarded 67,562 performance-based stock options. The performance goals are:

(A) Target Goal: 50% of the shares vest upon (i) achievement by December 31, 2020 of a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (ii) the lack of objection by the Company’s Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order and

(B) Stretch Goal: The remaining 50% of the performance shares vest and settle upon the occurrence of all three of the following conditions: (i) the Company enters into one or more long-term agreement(s) with critical infrastructure or enterprise business(es) to enable such business(es) to utilize the Company’s spectrum for broadband connectivity; (ii) the combined total contract dollars payable to the Company over the initial term(s) of such agreement(s) equals or exceeds a certain amount as specified by the Board; and (iii) the agreement(s) is/are binding on such business(es) and is/are either not contingent on prior Board of Director approval(s) or such approval(s) has/have been received. If all of these conditions have not been achieved by December 30, 2020, the performance shares will expire unvested.

Additionally, the Company awarded 14,635 performance-based stock options on February 28, 2020. The performance goal is: 100% of the shares will vest upon (i) achievement by December 31, 2020 of a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (ii) the lack of objection by the Company’s Board to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the Final Order.

For the three months ended June 30, 2020, there was no stock compensation expense recognized for the 82,197 performance-based stock options. As of June 30, 2020, there was approximately $1.4 million of unvested compensation expense relating to the outstanding performance-based stock options.

On September 15, 2014, Motorola invested $10.0 million to purchase 500,000 Class B Units of the Company’s subsidiary, PDV Spectrum Holding Company, LLC (at a price equal to $20.00 per unit). The Company owns 100% of the Class A Units in this subsidiary. Motorola has the right at any time to convert its 500,000 Class B Units into 500,000 shares of the Company’s common stock. The Company also has the right to force Motorola’s conversion of these Class B Units into shares of its common stock at its election. Motorola is not entitled to any assets, profits or distributions from the operations of the subsidiary. In addition, Motorola’s conversion ratio from Class B Units to shares of the Company’s common stock is fixed on a one-for-one basis, and is not dependent on the performance or valuation of either the Company or the subsidiary. The Class B Units have no redemption or call provisions and can only be converted into shares of the Company’s common stock. Management has determined that this investment does not meet the criteria for temporary equity or non-controlling interest due to the limited rights that Motorola has as a holder of Class B Units, and accordingly has presented this investment as part of its permanent equity within Additional Paid-in Capital in the accompanying consolidated financial statements.

From time to time, the Company may be involved in litigation that arises from the ordinary operations of the business, such as contractual or employment disputes or other general actions. The Company is not involved in any material legal proceedings at this time.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic and COVID-19 continues to cause significant disruptions throughout the United States. The ultimate extent of the impact of COVID-19 on the financial performance of the Company and its ability to secure broadband licenses pursuant to the terms of the 900 MHz Report and Order and to commercialize any broadband licenses it secures, will depend on future developments, including the duration and spread of COVID-19, the laws, orders and restrictions imposed by federal, state and local governmental agencies, and the overall economy, all of which are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company's operating results may be materially and adversely affected. The Company is actively managing the business to maintain its cash flow and believes that it has adequate liquidity through at least the next twelve months.

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable.

The Company places its cash and temporary cash investments with financial institutions for which credit loss is not anticipated.

As of ~~September~~June 30, ~~2019,~~2020, the Company sells its pdvConnect product and extends credit predominately to ~~two~~one third-party ~~carriers.~~carrier. The Company maintains allowances for doubtful accounts based on factors surrounding the write-off history, historical trends, and other information.

For the three ~~and six~~ months ended ~~September~~June 30, 2020, the Company had one reseller that accounted for approximately 14% of total operating revenues. For the three months ended June 30, 2019, the Company had two Tier 1 domestic ~~carriers~~carrier that accounted for approximately ~~23% and 25%~~89% of operating ~~revenues, respectively. For the three and six months ended September~~revenues.

As of June 30, ~~2018,~~2020, the Company had one domestic carrier that accounted for approximately ~~28% and 31%~~73% of ~~operating revenues, respectively.~~

~~As of September 30, 2019, the Company had two domestic carriers that accounted for approximately 67% of~~total accounts receivable. As of March 31, ~~2019,~~2020, the Company had one domestic carrier and one reseller that accounted for approximately ~~31%~~71% of total accounts ~~receivable.~~

Consistent with the Company’s transfer of support for the pdvConnect business to TeamConnect LLC (the “LLC”), the Company received notice from one of the Tier 1 carrier partners who markets pdvConnect that the Tier 1 carrier partner had signed a contract directly with the LLC to continue marketing pdvConnect and that it would be terminating its contract with the Company, effective as of October 31, 2019. As a result, revenue from sales of pdvConnect by this Tier 1 carrier will transfer to the LLC effective November 1, 2019. The Company has a 19.5% equity investment in the LLC. As disclosed in the Form 10-Q for the quarter ended June 30, 2018, the Company had previously announced that the largest customer of the pdvConnect service planned to terminate its use of the service, which termination ultimately occurred in October 2019. As a result of the loss of this significant customer, the Company’s implementation of the restructuring plan, and the related measures taken to reduce the operating costs of the Company’s TeamConnect and pdvConnect businesses, principally in the sales and marketing areas, the operating revenues from these businesses have exhibited a decline since the quarter ended September 30, 2018 and are expected to continue to exhibit a decline for the next several quarters.receivable.

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

This discussion and analysis of the financial condition and results of operations of Anterix Inc. (“Anterix,” the “Company”, “we”, “us”, or “our”) should be read in conjunction with our financial statements and notes thereto included in this Quarterly Report on Form 10-Q (the “Form 10-Q”) and the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended March 31, ~~2019,~~2020, filed with the SEC on May ~~20, 2019~~28, 2020 (the “Annual Report”). In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors including, but not limited to, those identified or referenced in “Item 1A—Risk Factors” in Part II of this Form 10-Q. As a result, investors are urged not to place undue reliance on any forward-looking statements. Except to the limited extent required by applicable law, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q.

We are a wireless communications company focused on ~~empowering the modernization of~~commercializing our spectrum assets to enable our targeted utility and critical infrastructure customers to deploy private broadband networks, technologies and enterprise businesses communications by enabling broadband connectivity. Our foundational spectrum provides the ability to transform our customers operations to meet new business complexities while achieving higher levels of performance and safety.solutions. We are the largest holder of licensed spectrum in the 900 MHz band (896-901/935-940 MHz) with nationwide coverage throughout the contiguous United States, Hawaii, Alaska and Puerto Rico. On ~~average, we hold approximately 60% of channels in the 900 MHz band in the top 20 metropolitan market areas in the United States. We are currently pursuing a regulatory proceeding at~~May 13, 2020, the Federal Communications Commission (“FCC”) ~~that seeks~~approved a Report and Order to modernize and realign the 900 MHz band to increase its usability and capacity by allowing it to be utilized for the deployment of broadband networks, technologies and ~~solutions. Our goal~~solutions (the “Report and Order”). We are now engaged in qualifying for and securing broadband licenses from the FCC, with a focus on pursuing licenses in those counties in which we believe we have near-term commercial opportunities. At the same time, our sales and marketing organization is pursuing opportunities to ~~become~~lease the ~~leading provider of~~ broadband ~~spectrum assets~~licenses we secure to our targeted utility and critical infrastructure customers.

In the Report and ~~enterprise customers. We maintain offices in Woodland Park, New Jersey~~Order, the FCC reconfigured the 900 MHz band to create a 6 MHz broadband segment (240 channels) and ~~McLean, Virginia.~~

~~Our FCC Initiatives~~two narrowband segments, consisting of a 3 MHz narrowband segment (120 channels) and a 1 MHz narrowband segment (39 channels).

The Role of the County. Under the Report and Order, the FCC established the “county” as the base unit of measure in determining whether a broadband applicant is eligible to secure a broadband license. There are 3,223 counties in the United States, including Puerto Rico.

Broadband License Eligibility Requirements. The Report and Order establishes three eligibility requirements to obtain broadband licenses in a county, which we refer to herein as (i) the “50% Licensed Spectrum Test,” (ii) the “90% Broadband Segment Test” and (iii) the “240 Channel Requirement.”

1.50% Licensed Spectrum Test. To be eligible for a broadband license in a particular county, we must demonstrate that we hold more than 50% of the outstanding licensed channels in the county. Because the 50% Licensed Spectrum Test is based on licensed channels, any channels that are not licensed by the FCC are not included in the denominator when determining whether we have satisfied this test. The denominator is determined by the number of channels licensed by all licensees with sites in the county and within 20 miles of the county boundary. In some situations, a single channel is licensed by more than one entity, and therefore could be counted more than once. The FCC has licensed less than 399 channels in all but the most populous counties. As of the date of this filing, we satisfy the 50% Licensed Spectrum Test in more than 3,100 counties of the 3,223 counties in the United States and its territories.

2.90% Broadband Segment Test. The second test, the 90% Broadband Segment Test, addresses the balance between a voluntary market process to clear any Covered Incumbent (i.e., holders of licenses in the broadband segment) and the mandatory relocation process established by the FCC in the Report and Order (which applies to all Covered Incumbents, except for those Covered Incumbents operating “Complex Systems” as described below). This test requires we hold or have agreements with Covered Incumbents for 90% of the licensed channels in the broadband segment in a particular county and within 70 miles of the county’s boundaries. The broadband segment in the 900 MHz band has a total of 241 channels. The 90% Broadband Segment Test is calculated using outstanding licensed channels, which means that if the FCC has licensed 241 channels, we will be required to have control of or agreements covering 217 channels within the broadband segment. In many counties in the United States, the FCC has licensed fewer than 241 channels in the broadband segment and these unlicensed channels are not included in the denominator when determining whether we have satisfied this 90% Broadband Segment Test.

Before filing for a broadband license, we must satisfy the 90% Broadband Segment Test by utilizing our channel holdings and negotiating with Covered Incumbents on a purely voluntary basis for any additional channels we require to satisfy this test. Only after

we satisfy the 90% Broadband Segment Test will the FCC issue a broadband license to us and commence the “Mandatory Retuning” period. During this period, any Covered Incumbents that remain in the broadband segment (other than Complex Systems) are required to negotiate with us in good faith to clear the broadband segment, subject to intervention by the FCC if the parties cannot reach an agreement.

3.240 Channel Requirement. The Report and Order requires the broadband applicant to surrender 6 MHz of spectrum (or 240 channels) in a county to receive the broadband license. If we do not have sufficient channels in the county to return 240 channels to the FCC, we will make an “Anti-Windfall Payment” to the U.S. Treasury to secure the broadband license. The Anti-Windfall Payment for these channels will be based on prices paid in the applicable county in the 600 MHz auction conducted by the FCC.

Treatment of Complex Systems. The Report and Order exempts “Complex Systems” from the mandatory retuning process—even if we meet the 90% Broadband Segment Test. The FCC defines a Complex System as a radio system that has at least 45 integrated sites. The FCC exempted Complex Systems from the mandatory retuning requirements because retuning these systems would potentially be more disruptive to the operators than retuning the smaller systems operated by other incumbents. Of the small number of systems that qualify for this 45-site exemption, based on our calculation, all but one system belongs to utilities that we have identified as our target customers.

The Association of American Railroads. The nation’s railroads, particularly the major freight lines, operate on six narrowband 900 MHz channels licensed to their trade association, the Association of American Railroads (“AAR”). Three of these narrowband channels are located in the 900 MHz broadband segment created by the FCC in the Report and Order. As a result, in order to qualify for broadband licenses under the Report and Order, we are required to provide spectrum for the relocation of the AAR channels to narrowband channels outside the 900 MHz broadband segment.

In January 2020, we entered into an agreement with the AAR in which it agreed to cancel licenses in the 900 MHz band to enable the AAR to relocate its operations, including operations utilizing the three channels located in the 900 MHz broadband segment (the “AAR Agreement”). The FCC referenced the AAR agreement in the Report and Order and required us to cancel our licenses and return them to the FCC in accordance with the AAR Agreement. The Report and Order provides that the FCC will make the channels associated with these licenses available to the AAR to enable the AAR to relocate their current operations. The Report and Order also provides that the FCC will credit us for our cancelled licenses for purposes of determining our eligibility and the calculation of our requirement to pay any anti-windfall payments to secure broadband licenses.

In accordance with the Report and Order, we cancelled our licenses and recorded a loss on the disposal of intangible assets, in the three months ended June 30, 2020.

As a broadband applicant, we can satisfy the three eligibility tests discussed above by including our existing licensed channels and by acquiring or retuning additional channels when necessary through (i) spectrum purchases, (ii) spectrum relocations and/or (iii) Anti-Windfall Payments, or any combination thereof.

1.Channel Acquisition. In 2015, we began acquiring targeted additional channels in various markets in anticipation of the Report and Order. We will continue to employ spectrum acquisition as a tool for those situations where an incumbent desires to exit the 900 MHz band. We may selectively acquire channels outside the 900 MHz broadband segment and use them to swap for channels within the broadband segment. For purposes of broadband license eligibility, any potential acquisitions we negotiate will be included as part of our broadband application, but the acquisition does not need to be consummated at the time we submit our license application.

2.Retuning Costs. Retuning is the exercise of exchanging, also referred to as swapping, broadband segment channels held by Covered Incumbents and moving them to channels outside of the 900 MHz broadband segment. A retune or swap adds to the number of channels we hold for computational purposes in the 90% Broadband Segment Test. We began retuning or swapping channels with Covered Incumbents in 2015 in anticipation of the Report and Order. We have continued retuning channels with Covered Incumbents since that time.

3.Anti-Windfall Payments. To obtain a 6 MHz broadband license, we must surrender up to 240 licensed channels in the county. As this band has been underutilized historically, most counties in the United States do not have 240 channels licensed. To make up the difference, we will pay for the difference in spectrum held by the Company and the 6 MHz it will be receiving as the broadband licensee by making an Anti-Windfall Payment. As noted above, the FCC will use as a reference the spectrum price based on the average price paid in the FCC’s 600 MHz auction in a given county.

Importantly, the markets where the FCC has channels in inventory and where we may need to make Anti-Windfall Payments to effectively return 240 channels to the FCC are generally in smaller urban, suburban and rural markets. Our spectrum position is greatest in the largest, most populated and therefore most expensive markets, with a few exceptions. Although we will need to make Anti-Windfall Payments to secure broadband licenses in some counties, the cost for the channels, on average, will be lower than the nationwide average amount paid in the FCC’s 600 MHz auction.

When combining our ~~most valuable asset.~~estimated clearing and spectrum acquisition costs with our anticipated Anti-Windfall Payments to the U.S. Treasury, we anticipate the combined total costs of securing broadband licenses from the FCC will to range from $130 to $160 million, the significant majority of which we intend to spend by the end of fiscal year 2024. We will deploy this capital at our determined pace based on several key ongoing factors, including customer demand, market opportunity and offsetting income from spectrum leases.

We acquired our 900 MHz spectrum and certain related equipment from Sprint in September 2014 for $100 million. While ~~our current licensed~~the spectrum we initially purchased can support narrowband and wideband wireless services, the most significant business opportunities we ~~have~~ identified ~~require~~requires contiguous spectrum that allows for greater bandwidth than allowed by the current configuration of our spectrum. As a result, since purchasing our ~~first priority is to continue to pursue our~~900 MHz spectrum in 2014, we pursued initiatives at the FCC seeking to modernize and realign a portion of the 900 MHz band to increase its usability and capacity by allowing it to accommodate the deployment of broadband networks, technologies and solutions. Specifically, in November 2014, we and the Enterprise Wireless Alliance (“EWA”) submitted a Joint Petition for Rulemaking to the FCC to propose a realignment of a portion of the 900 MHz band to create a 6 MHz broadband authorization, while retaining 4 MHz for continued narrowband operations. Comments on the proposed rules were filed in June 2015 and reply comments in July 2015.

In August 2017, the FCC issued a Notice of Inquiry (“NOI”) announcing that it had commenced a proceeding to examine whether it would be in the public interest to change the existing rules governing the 900 MHz band to increase access to spectrum, improve spectrum efficiency and expand flexibility for a variety of potential uses and applications, including broadband and other advanced technologies and services. We and EWA filed a joint response to the FCC’s NOI in October 2017 and reply comments in November 2017.

On March 14, 2019, the FCC unanimously adopted a Notice of Proposed Rulemaking ~~(“NPRM”~~(the “NPRM”) ~~in WT Docket No. 17-200 (the “900 MHz Proceeding”)~~. ~~Comments on~~that endorsed the ~~NPRM were filed on May 31, 2019 and reply comments were filed on July 2, 2019.~~

~~The NPRM endorsed our~~Company’s objective of creating a broadband opportunity in the 900 MHz band for critical infrastructure and other enterprise users. The NPRM generally proposes our recommended band plan concept and technical rules. Importantly, the proposed technical rules include our recommended equipment specifications that would enable the use of available, globally standardized broadband LTE networks, technologies and solutions.

In the NPRM, the FCC has proposed three criteria for an applicant to secure a broadband license in a particular county within the United States: (i) the applicant must hold all 20 blocks of geographic Specialized Mobile Radio (“SMR”) licenses in the county; (ii) the applicant must reach agreement to relocate all incumbents in the broadband segment in a 1:1 voluntary channel exchange or demonstrate that the incumbents will be protected from interference; and (iii) the applicant must agree to return to the FCC all rights to geographic and site-based spectrum in the county in exchange for the broadband license.

The FCC requested comments from incumbents and other interested parties on a number of important topics in the NPRM that will have a material impact on our ability to qualify for, and the related time and costs of obtaining, broadband licenses. As noted above, the broadband applicant must hold all 20 blocks of geographic SMR licenses in the county. In certain areas, some of the SMR spectrum is being held in inventory by the FCC. In the NPRM, the FCC requested comments from interested parties, including us, on how a broadband applicant could acquire the FCC’s inventory of geographic SMR allocated spectrum. Specifically, in considering whether to make its inventory of geographic SMR spectrum available to the broadband applicant, the FCC has asked whether it should do so only if the applicant meets a threshold number of its own geographic SMR licenses. The FCC also questions how to mitigate a windfall that might thereby be attributed to the broadband applicant by the FCC’s action. We have recommended that broadband applicants be able to include geographic SMR spectrum held in inventory by the FCC for purposes of eligibility, provided that they hold all licensed geographic SMR spectrum. We addressed the windfall question by identifying a number of ~~recent instances when~~important topics that would impact the timing and costs of obtaining a broadband license. The Company filed comments to the NPRM in June 2019 and reply comments in July 2019.

On May 13, 2020, the FCC ~~has authorized rule changes that improved certain licensees’ spectrum positions based on an FCC finding that doing so addressed~~approved a ~~significant public interest consideration.~~

~~The NPRM also proposes a market-driven, voluntary exchange process for clearing the broadband spectrum. An applicant seeking a broadband license for a particular county will need~~Report and Order to demonstrate that it has entered into agreements with incumbents or that it can protect their narrowband operations from interference. All incumbents must be accounted for before the broadband applicant can file an application with the FCC. As the FCC recognized in the NPRM, this requirement, without some mechanism for preventing

~~holdouts, could allow a single incumbent with a license for a single channel to thwart the FCC’s objective of creating a 900 MHz broadband opportunity in any county.~~

In the NPRM, the FCC has requested comments on different approaches to address the holdout situation. One approach is based on a “success threshold” whereby once the broadband applicant has reached voluntary agreements with incumbents holding a prescribed percentage of channels in the broadband segment, remaining incumbents would become subject to mandatory relocations. In thismodernize and other approaches set forth in the NPRM, the broadband applicant would be responsible for providing comparable facilities and paying the reasonable costs of relocation. The NPRM proposes to exempt from mandatory relocation “complex systems,” with 65 or more integrated sites. There are only a small number of complex systems in the country in the broadband segment proposed by the FCC, and all of them are operated by utilities or other critical infrastructure entities. We have endorsed the proposed “success threshold” as the most efficient way to address holdouts and have reaffirmed our commitment that any system that is mandatorily retuned is entitled to comparable facilities and cost reimbursement. We also have supported the proposal that complex systems, as defined in the NPRM, be exempt from mandatory relocation.

~~The Association of American Railroads (“AAR”) holds a nationwide geographic license for six non-contiguous Private Land Mobile Systems for Business Users (“B/ILT”) channels in~~realign the 900 MHz band ~~three of which are located within the FCC’s proposed broadband segment. The spectrum is used~~to increase its usability and capacity by freight railroads for Advanced Train Control System (“ATCS”) operations. We have recognized from the outset the importance of reaching agreement with the railroads about their relocation, and have worked with them throughout the FCC process. We and the AAR are in agreement about the optimal solution. However, this proposed solution will require an exemption from the relocation rules proposed by the FCC in the NPRM. We are continuingallowing it to ~~coordinate our activities at the FCC with the AAR in support of securing the required exemption from the FCC~~ ~~and have urged the FCC to recognize AAR’s unique 900 MHz spectrum position with an appropriate solution that is consistent with the future wireless requirements of the railroad industry.~~

~~The NPRM also sought comment on several different auction approaches for counties where the broadband segment cannot~~ be ~~cleared of incumbents, including overlay auctions that, again, would trigger mandatory relocation rights~~utilized for the auction winner with the obligation of providing comparable facilities and paying reasonable relocation costs. We believe the challenge of any proposed approach is achieving the appropriate balance between protecting incumbents’ rights to a minimally disruptive relocation process, and not preventing the deployment of ~~broadband technologies on a timely and cost-effective basis.~~ While auctions are one mechanism for addressing holdouts, they can involve lengthy delays that slow delivery of modernized capabilities. We have advised the FCC that a success threshold approach would allow broadband deployment on a more expedited schedule.

While the NPRM proposes a 6 MHz broadband segment, it also sought comment on a realignment of the entire 900 MHz band to create a 10 MHz broadband channel, citing suggestions from Southern California Edison and Duke Energy that this larger channel would better address their broadband needs.

A number of other parties filed Comments and Reply Comments as well. The number of utilities expressing an immediate need for private broadband networks has increased steadily through the course of the proceeding and the number of parties opposing realignment to create a 900 MHz band broadband option has diminished, but some incumbents continue to disagree with the NPRM proposal. Most are incumbents with systems that would be exempt from the possibility of mandatory retuning under the proposed complex system definition.

Now that the formal comment period has closed, the FCC’s next step could be the issuance of a final report and order (“Report and Order”), a request for additional information, a decision to close the proceeding without further action, or some other action. There is no assurance if or when the FCC will issue a Report and Order. Further, the terms of any Report and Order may differ materially from the terms of the NPRM. Please read “Risk Factors” for a discussion of material risks related to the NPRM and FCC process.

Complementing our regulatory initiatives, we are engaged in a number of business activities to build demand for and to begin commercializing our spectrum assets among our targeted critical infrastructure and enterprise customers. We are identifying customers who are likely to place value on deploying and operating private broadband networks, technologies and solutions utilizing our spectrum assets. As part of this exercise, we identified and evaluated potential use cases in the electric utilities industry, especially those companies that are investigating ways to fulfill their existing and future network and communications needs.

We are also evaluating the appropriate business model for commercializing our spectrum assets, assuming our FCC initiatives are successful. Based on our analysis, and discussions with potential customers, we intend to lease our spectrum to customers for 20 year or longer terms. We intend for our customers to bear the costs of deploying and operating their private broadband networks, technologies and solutions. We believe that our licensed spectrum assets in the 900 MHz band present an attractive potential cost-savings opportunity for our initial target customers when compared to other solutions that utilize medium band spectrum. We will be responsible for the costs of securing the broadband licenses from the FCC, including the costs of acquiring sufficient spectrum to support broadband use and retuning incumbents to clear the spectrum. The timing and costs of our spectrum acquisition and retuning

activities will be based on the terms of the Report and Order, if any, the FCC adopts in the 900 MHz Proceeding and these costs could be significant. We are also exploring opportunities to offer our customers value-added engineering and commercial services.

Our business strategy is to continue to simultaneously pursue our FCC and business initiatives. Our FCC initiatives are focused on obtaining a Report and Order from the FCC that supports broadband services in the 900 MHz band. Our business initiatives are focused on supporting both (i) our FCC initiatives, including the timely issuance of a favorable Report and Order, and (ii) our efforts to be ready to obtain broadband licenses from the FCC and to commercialize our spectrum assets assuming the FCC issues a favorable Report and Order. Our efforts include:

~~We refer to “retuning” as the process of relocating incumbents in the counties where we plan to obtain broadband licenses. Retuning involves:~~

In order to relocate incumbents to alternative narrowband channels, we will need to make acquisitions of additional 900 MHz spectrum outside of the broadband segment in certain counties. We also will need to acquire spectrum assets in certain counties to satisfy the broadband license eligibility criteria proposed by the FCC in the NPRM.

Our FCC and business initiatives, including our retuning efforts, will continue to involve extensive management efforts and significant costs and expenses for the foreseeable future. We do not expect to have significant revenue and expect to incur significant operating losses until such time as we are able to obtain broadband licenses and commercialize our spectrum assets based on a Report and Order issued by the FCC, if we are able to at all. Our current estimates regarding our operating costs, including the timing and costs of our retuning process, are based on the terms of the NPRM and our assumptions regarding the terms of the Report and Order to be issued by the FCC, if at all. The accuracy of these assumptions and the timing of our regulatory initiatives with the FCC, our retuning efforts and the commercialization of our spectrum assets are subject to significant uncertainties and may cause our quarterly and annual results to be unpredictable for the foreseeable future. In addition, the adoption by the FCC of a Report and Order may be significantly delayed, may contain materially different and adverse terms than the NPRM, or may never occur and we may never be able to commercialize our spectrum assets.

Historically, we generated ~~our~~ revenue principally from our pdvConnect and TeamConnect businesses. We historically marketed pdvConnect, is a mobile communication and workforce management solution, ~~that we historically marketed~~primarily through two Tier 1 carriers in the United States. In Fiscal 2016, we began offering a commercial push-to-talk (“PTT”) service, which we marketed as TeamConnect, in seven major metropolitan areas throughout the United States, including Atlanta, Baltimore/Washington, Chicago, Dallas, Houston, New York and Philadelphia. We primarily offered ~~our~~the TeamConnect service to customers indirectly through third-party sales representatives who were primarily selected from Motorola’s nationwide dealer network.

In June 2018, we announced our plan to restructure ~~the business~~our operations to align and focus our business priorities on our ~~FCC~~ spectrum ~~initiatives aimed at modernizing and realigning the 900 MHz band. In December 2018, our board of directors approved the transfer of~~initiatives. Consistent with this restructuring plan, we transferred our TeamConnect business and support ofobligations for our pdvConnect ~~business.~~business in December 2018. Specifically, we entered into: (i) a Customer Acquisition and Resale Agreement with A BEEP LLC (“A BEEP”) on January 2, 2019, (ii) a Customer Acquisition, Resale and Licensing Agreement with Goosetown Enterprises, Inc. (“Goosetown”) on January 2, 2019 and (iii) a memorandum of understanding (“MOU”) with the

principals of Goosetown on December 31, 2018. ~~On March 31, 2019, the agreements were amended to define the transition date as April 1, 2019 and to clarify the responsibilities between the parties.~~

Under the A BEEP and Goosetown Agreements, we agreed to: (i) transfer our TeamConnect customers located in the Atlanta, Chicago, Dallas, Houston and Phoenix metropolitan markets to A BEEP, (ii) transfer our TeamConnect customers located in the Baltimore/Washington DC, Philadelphia and New York metropolitan markets to Goosetown, (iii) provide A BEEP and Goosetown with access to our TeamConnect Metro and Campus Systems (the “MotoTRBO ~~Systems ”)~~Systems”) and (iv) grant A BEEP and Goosetown the right to resell access to our MotoTRBO Systems pursuant to separate Mobile Virtual Network Operation arrangements for a two-year period. We also granted Goosetown a license to sell the business applications we developed for our TeamConnect service.

We retained a number of significant obligations under our A BEEP and Goosetown ~~agreed~~agreements related to the TeamConnect and pdvConnect businesses. To help ensure the transitioning of the TeamConnect customers, we continued to provide customer care, billing and collection services ~~for their respective acquired customers. We initially continued to provide these services~~ through April 1, ~~2019 to help facilitate the transitioning of the acquired customers. Additionally, we~~2019. We are required to ~~maintain and~~ pay all site lease, backhaul and utility costs required to operate the MotoTRBO Systems for a two (2)-year period ending on January 2, 2021. By the end of this two-year ~~period. As part of our efforts to clear the 900 MHz spectrum for broadband use,~~period, A BEEP and Goosetown are required to migrate ~~the acquired~~their respective customers off of the MotoTRBO ~~Systems over the two-year period. In consideration for the customers and rights we transferred, A BEEP and Goosetown~~Systems. We are required to ~~pay us a certain portion of the recurring revenues they receive from the acquired customers ranging from 100% to 20% during the terms of the agreements. Additionally, A BEEP is required~~continue to pay ~~us a portion of recurring revenue from customers who utilize A BEEP’s push-to-talk Diga-Talk Plus application service ranging from 35% to 15%~~the cell tower leases for a period of two years. Goosetown is required to pay us 20% of recurring revenues from the TeamConnect applications we licensed for a period of two years. As part of our obligations, we will continue operating the TeamConnect networks inwe deployed for the ~~markets in which customers are being transferred~~balance of the lease terms. We also retained customer billing and ~~trunked facilities in other markets in which we hold FCC licenses.~~collection responsibility for the pdvConnect business.

Under the terms of the MOU, we ~~agreed to assign~~assigned the intellectual property rights to our TeamConnect and pdvConnect related applications ~~and assets to support the pdvConnect application~~ to TeamConnect LLC (the ~~“ LLC”~~“LLC”), a new entity formed by the principals of Goosetown, in exchange for a 19.5% ownership interest in the ~~LLC.~~LLC, effective April 30, 2019. The Goosetown ~~principals~~Principals have agreed to fund the future operations of the LLC, subject to certain limitations. The LLC ~~has~~ assumed our software support and maintenance obligations under the ~~Goosetown~~A BEEP and ~~A BEEP~~Goosetown Agreements. The LLC ~~has~~ also assumed customer care services related to ~~our~~the pdvConnect ~~application.~~service. We provided transition services to the LLC through April 1, 2019 to facilitate an orderly transition of the customer care services. As of September 30, 2019, we transferred network, computer and other equipment with a net book value of $72,000, and recorded an investment in the LLC amounting to $14,000 and loss on disposal of assets amounting to $58,000 relating to the transfer of the assets as of such date. We anticipate that we will complete the transfer of the intellectual property rights to the LCC during the third quarter of fiscal 2020.2019. We are also obligated to pay the LLC a monthly ~~services~~service fee for a 24-month period ending on January 7, 2021 for its assumption of our support obligations under the ~~Goosetown~~A BEEP and ~~A BEEP~~Goosetown Agreements. We are ~~also~~ obligated to pay the LLC a certain portion of the billed revenue we received ~~by us~~ from pdvConnect customers for a 48-month period. On April 1, 2020, we transferred the pdvConnect customers to the LLC, and the LLC agreed to provide us a portion of the billed revenue they receive from these customers.

Comparison of the three ~~and six~~ months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019

The following table sets forth our results of operations for the three ~~and six~~ months ended ~~September~~June 30, 2020 (“Fiscal 2021”) and 2019 ~~and 2018.~~(“Fiscal 2020”). The period-to-period comparison of financial results is not necessarily indicative of the financial results we will achieve in future periods.


	Three months ended September 30,				Aggregate Change			Six months ended September 30,				Aggregate Change			Three months ended June 30,				Aggregate Change
(in thousands)	2019		2018			Amount	%	2019		2018			Amount	%	2020		2019		2020 from 2019
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
Service revenue	$	241	$	1,295	$	(1,054)	-81%	$	512	$	2,642	$	(2,130)	-81%	$	74	$	271	$	(197)	-73%
Spectrum lease revenue		182		182		—	0%		364		364		—	0%		182		182		—	0%
Other revenue		—		347		(347)	-100%		—		688		(688)	-100%
Total operating revenues	$	423	$	1,824	$	(1,401)	-77%	$	876	$	3,694	$	(2,818)	-76%	$	256	$	453	$	(197)	-43%

Overall operating revenues decreased by ~~$1.4~~$0.2 million, or ~~77%~~43%, to ~~$423,000 for the three months ended September 30, 2019 from $1.8~~$0.3 million for the three months ended ~~September~~June 30, ~~2018. For the six months ended September 30, 2019, operating revenue decreased by $2.8 million, or 76%, to $876,000~~2020 from ~~$3.7~~$0.5 million for the ~~six~~three months ended ~~September~~June 30, ~~2018.~~2019. The decrease in the three ~~and six month periods are~~months is primarily attributable to the transfer of ~~our TeamConnect~~pdvConnect customers to ~~A BEEP and Goosetown as part of our December 2018 restructuring efforts as discussed in Note 3 above, as well as~~ the ~~loss of a customer in our pdvConnect business.~~LLC.


	Three months ended September 30,				Aggregate Change			Six months ended September 30,				Aggregate Change			Three months ended June 30,				Aggregate Change
(in thousands)	2019		2018			Amount	%	2019		2018			Amount	%	2020		2019		2020 from 2019
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)
Direct cost of revenue (exclusive of depreciation and amortization)	$	699	$	1,139	$	(440)	-39%	$	1,617	$	2,625	$	(1,008)	-38%	$	548	$	918	$	(370)	-40%
General and administrative		4,557		4,635		(78)	-2%		9,405		9,093		312	3%		5,738		4,848		890	18%
Sales and support		759		864		(105)	-12%		1,973		2,487		(514)	-21%		661		1,214		(553)	-46%
Product development		555		568		(13)	-2%		1,236		1,199		37	3%		692		680		12	2%
Depreciation and amortization		636		716		(80)	-11%		1,277		1,445		(168)	-12%		1,208		642		566	88%
Stock compensation expense (exclusive of restructuring related costs)		1,412		1,904		(492)	-26%		2,989		2,960		29	1%
Stock compensation expense																1,955		1,577		378	24%
Restructuring costs		50		4,147		(4,097)	-99%		160		8,122		(7,962)	-98%		13		110		(97)	-88%
Impairment of long-lived assets		—		—		—	0%		—		531		(531)	-100%		29		—		29	100%
Total operating expenses	$	8,668	$	13,973	$	(5,305)	-38%	$	18,657	$	28,462	$	(9,805)	-34%	$	10,844	$	9,989	$	855	9%

Direct cost of revenue. Direct cost of revenue decreased by $0.4 million, or ~~39%~~40%, to ~~$0.7~~$0.5 million for the three months ended ~~September~~June 30, ~~2019~~2020 from ~~$1.1~~$0.9 million for the three months ended ~~September~~June 30, ~~2018. For the six months ended September 30, 2019, direct cost of revenue decreased by $1.0~~2019. The $0.4 million ~~or 38%, to $1.6 million from $2.6 million for the six months ended September 30, 2018. The~~ decrease in the three ~~and six~~ months ended ~~September~~June 30, ~~2019 are attributable to lower~~2020 resulted from a $0.2 million impairment of contract costs related to ~~radio sales as~~the TeamConnect customers transferred to A Beep and Goosetown that we incurred in Fiscal 2020, and a ~~result of~~$0.2 million decrease in the support services related to the transfer of ~~our~~the TeamConnect ~~customers to A BEEP and Goosetown as part of our December 2018 restructuring efforts as discussed in Note 3 above.~~customers.

General and administrative expenses. General and administrative expenses ~~for the three months ended September 30, 2019 decreased~~increased by ~~$0.1~~$0.9 million, or 2%18%, to $4.5 million from $4.6 million for three months ended September 30, 2018. For the six months ended September 30, 2019, general and administrative expenses increased by $0.3 million, or 3%, to $9.4 million from $9.1 million for the six months ended September 30, 2018. The decrease of $0.1$5.7 million for the three months ended ~~September~~June 30, ~~2019~~2020 from $4.8 million for three months ended June 30, 2019. The increase of $0.9 million resulted mainly from ~~lower employee related costs. The $0.3~~a $0.6 million increase in ~~the six months ended September 30, 2019 resulted primarily from professional services,~~headcount and related costs and $0.3 million ~~for costs related~~higher consulting charges to assist with the monthly service fee for the transfer of our TeamConnect customers, partially offset by $0.5 million lower employee related costs due to lower headcount resulting from the restructuring activities in Fiscal 2019.

Sales and support expenses. Sales and support expenses decreased by ~~$0.1~~$0.6 million, or ~~12%~~46%, to ~~$0.8~~$0.7 million for the three months ended ~~September~~June 30, ~~2019~~2020 from ~~$0.9~~$1.2 million for three months ended ~~September~~June 30, ~~2018. For the six months ended September 30, 2019, sales and support expenses decreased by $0.5~~2019. The $0.6 million ~~or 21%, to $2.0~~decrease principally resulted from a $0.3 million from $2.5 million for the six months ended September 30, 2018. The decrease in the three and six months ended September 30, 2019 was attributable to the impact of the reduction in workforce that occurred in Fiscal 2019 resulting in lower headcount and related costs in the first six months of Fiscal 2020 partially offset by the impairment of contract costs incurred in Fiscal 2020 related to the TeamConnect customers ~~transferred~~transferring to A BEEP and Goosetown. In addition, a $0.2 million decrease for rebranding efforts in Fiscal 2020 that did not incur in Fiscal 2021.

Product development expenses. Product development expenses remained relatively flat for the three ~~and six~~ months ended ~~September~~June 30, ~~2019~~2020 as compared to the three ~~and six~~ months ended ~~September~~June 30, ~~2018.~~ 2019.

Depreciation and amortization. Depreciation and amortization ~~for the three months ended September 30, 2019 decreased~~increased by ~~$0.1~~$0.6 million, or ~~11%~~88% to ~~$0.6 million from $0.7~~$1.2 million for the three months ended ~~September~~June 30, ~~2018. For the six months ended September 30, 2019, depreciation and amortization decreased by $0.1 million, or~~ ~~12%, to $1.3 million~~2020 from ~~$1.4~~$0.6 million for the ~~six~~three months ended ~~September~~June 30, ~~2018.~~2019. The ~~decreases~~increase was due the change in ~~the three and six months ended September 30, 2019 are attributable to lower~~useful life for our network sites during Fiscal 2020 that resulted in higher depreciation ~~for radio rentals as a result of the transfer of our TeamConnect customers to A BEEP and Goosetown as part of our December 2018 restructuring efforts.~~

~~Stock compensation expense (exclusive of restructuring related costs).~~ ~~Stock compensation~~ expense for the three months ended ~~September~~June 30, ~~2019 decreased~~2020.

Stock compensation expense. Stock compensation expense increased by ~~$0.5~~$0.4 million, or ~~26%~~24%, to ~~$1.4 million from $1.9~~$2.0 million for the three months ended ~~September~~June 30, ~~2018. The decrease in~~2020 from $1.6 million for the three months ended ~~September~~June 30, ~~2019~~2019. The increase is attributable to ~~lower number~~higher valuation of ~~shares and~~equity grants awarded due to increase in stock price during the ~~value~~first quarter of ~~stock granted in the quarter. Stock compensation expense remained relatively flat for the six months ended September 30, 2019 as compared to the six months ended September 30, 2018.~~Fiscal 2021.

As discussed in Note 11, we have outstanding performance stock units and stock options. The units and options will vest in full upon attainment, prior to January 13, 2020, of (A) a Final Order from the FCC providing for the creation and allocation of licenses for spectrum in the 900 MHz band consisting of paired blocks of contiguous spectrum, each containing at least 3 MHz of contiguous spectrum, authorized for broadband wireless communications uses and (B) the lack of objection by the Company's board of directors to the terms and conditions (including, but not limited to, the rebanding, clearing and relocation procedures, license assignment and award mechanisms, and technical and operational rules) set forth or referenced in the Final Order. These awards do not forfeit. The unvested stock compensation expense for these performance awards was $4.6 million as of September 30, 2019 of which $2.6 million is related to the performance stock units and $2.0 million is related to the performance stock options.

Restructuring costs. Restructuring costs ~~of $50,000 and $160,000 were incurred in~~decreased by $97,000, or 88%, to $13,000 for the three ~~and six~~ months ended ~~September~~June 30, ~~2019~~2020 from $0.1 million for the three months ended June 30, 2019. The decrease was mainly ~~for~~due to the reduction of employee severance and benefit costs relating to the December 2018 cost reduction and restructuring actions related to the transfer of the TeamConnect business to A BEEP and Goosetown and the ~~support for our~~transfer of the pdvConnect business to ~~A BEEP, Goosetown and~~ the LLC.

For the three months and six months ended September 30, 2018, $4.1 million and $8.1 million of the restructuring costs were incurred, respectively, as a result of the April and June 2018 announcements of a restructuring plan to shift our focus and resources to pursue the regulatory initiatives at the FCC and prepare for the future deployment of broadband and other advanced technologies and services.

Impairment of long-lived assets. The impairment for the ~~six~~three months ended ~~September~~June 30, ~~2018~~2020 resulted from the ~~carrying value of our TeamConnect radios not being fully recoverable due to the realigning of our business to focus on our spectrum initiatives.~~$29,000 non-cash impairment charge for long-lived assets for network sites. There was no impairment charge for the three ~~and six~~ months ended ~~September~~June 30, 2019.

In the three months ended June 30, 2020, we cancelled licenses in the 900 MHz band in accordance with the Report and Order and our agreement with the AAR. Because we did not receive any licenses nor monetary reimbursement in exchange for the cancellation, but only credit for purposes of determining our future eligibility and payment requirements for broadband licenses under the Report and Order, we recorded a $4.7 million loss from disposal of the intangible assets in the Consolidated Statements of Operations for the three months ended June 30, 2020.

Interest income ~~increased~~decreased by ~~71% and 44%~~88% for the three ~~and six~~ months ended ~~September~~June 30, ~~2019, respectively,~~2020, as compared to the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019 due to the ~~return~~lower cash balances due to payments for spectrum acquisitions.

Other income remained relatively flat for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.

The loss on investment for the ~~net proceeds from~~three months ended June 30, 2020 is due to the ~~July 2019 follow-on offering.~~ 19.5% ownership interest in TeamConnect LLC.

~~For the three and six months ended September 30, 2019, other income represents payments received in consideration for the customers and rights transferred to A BEEP and Goosetown.~~

~~The increase in income on investment for the three and six months ended September 30, 2019 is due to the~~ ~~19.5% ownership interest in TeamConnect LLC.~~

On March 27, 2020, the Coronavirus Aid Relief and Economic Security (“CARES”) Act was signed into law. The new CARES Act modified Section 172(b)(1)(A) of the Internal Revenue Code to state that net operating loss (“NOL”) arising in a taxable year beginning before January 1, 2018, is carried forward 20 years provided that a carryback claim is not effected. From this adjusted provision, our March 31, 2018 NOL carryforward changed from an indefinite life to a 20-year life. We used a discrete effective tax rate method to calculate taxes for the three months ended June 30, 2020. We determined that applying an estimate of the annual effective tax rate would not provide a reasonable estimate as small changes in estimated “ordinary” loss would result in significant changes in the estimated annual effective tax rate. Accordingly, for the three months ending June 30, 2020, we recorded a total deferred tax expense of $11,000 due to the inability to use some portion of federal and state NOL carryforwards against the deferred tax liability created by amortization of indefinite-lived intangibles.

A non-cash ~~deferred~~state income expense of ~~$0.2 million and $0.5~~$0.3 million was recorded for the three ~~and six~~ months ended ~~September~~June 30, ~~2019, respectively.~~2019. The state income tax expense ~~portion~~ resulted from our determination that most of our state operating loss carryforwards revealed that most of them are not indefinite. As a result, we recorded approximately ~~$119,000 and $411,000~~$0.3 million of ~~state~~ deferred tax expense and an additional ~~related state~~ deferred tax liability reflecting our inability to use the state NOL carryforward against the indefinite-lived intangible for the three and six months ended September 30, 2019, respectively. A non-cash federal deferred income tax expense and liability of $52,000 was recorded for the three and six months ended September 30, 2019, respectively.

For the three and six months ended September 30, 2018, there was no income tax expense recorded as a result of the U.S. Tax Cuts and Jobs Act, (the “TCJA”), passed on December 22, 2017. The TCJA provided that federal net operating losses generated in tax years ending after December 31, 2017 are indefinite lived deferred tax assets and can be fully offset by our deferred tax liability related to our indefinite lived intangible assets.intangible.

At ~~September~~June 30, ~~2019,~~2020, we had cash and cash equivalents of ~~$157.5~~$124.8 million.

Our accounts receivable are heavily concentrated in ~~two~~one domestic carrier ~~partners.~~partner. As of ~~September~~June 30, ~~2019,~~2020, our net accounts receivable balance was approximately ~~$136,000,~~$25,000, of which approximately ~~$91,000,~~$18,000, or approximately ~~67%~~73%, was owed by ~~these two~~this one domestic carrier ~~partners.~~partner.

Net cash used by operating activities. Net cash used in operating activities was ~~$14.5~~$4.6 million for the three months ended ~~September~~June 30, ~~2019,~~2020, as compared to ~~$12.2~~$9.0 million for the ~~six~~three months ended ~~September~~June 30, ~~2018.~~2019. The majority of net cash used by operating activities during the ~~six~~three months ended ~~September~~June 30, ~~2019~~2020 resulted from our net loss of ~~$17.1~~$15.1 million partially offset by non-cash stock-based compensation of $2.0 million, loss from disposal of intangible assets of $4.7 million and adecrease in prepaid expenses and other assets by $3.1 million. The majority of net cash used by operating activities during the three months ended June 30, 2019 resulted from the net loss of $9.4 million and decrease in accounts payable and accrued expenses by ~~$1.2~~$1.4 million, partially offset by non-cash stock-based compensation of ~~$3.0~~$1.6 million. ~~The majority of~~

net cash used by operating activities during the six months ended September 30, 2018 resulted from our net loss of $24.1 million, partially offset by non-cash stock-based compensation of $7.5 million.

Net cash used by investing activities. Net cash used in investing activities was approximately ~~$0.5~~$9.1 million for the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020 as compared to ~~$1.1~~$0.2 million used for the ~~six~~three months ended ~~September~~June 30, ~~2018.~~2019. The net cash used by investing activities during the ~~six~~three months ended ~~September~~June 30, ~~2019~~2020 resulted from ~~the~~wireless license acquisitions amounting to $9.0 million and purchase of equipment amounting to ~~$0.3 million and $0.2 million from wireless license acquisitions.~~$0.1 million. The net cash used by investing activities during the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019 resulted from ~~$0.9 million from wireless license acquisitions and $0.2 million from the purchase of equipment.~~construction costs related to internally developed software.

Net cash provided by financing activities. For the ~~six~~three months ended ~~September~~June 30, 2020 and 2019, net cash provided by financing activities was ~~$95.8~~$1.0 million ~~primarily from the $94.2~~and $1.6 million, ~~net proceeds from the July 2019 follow-on offering and $2.0 million~~respectively, primarily from the proceeds from stock option exercises. ~~For the six months ended September 30, 2018, net cash provided by financing activities was $0.7 million which was principally due to $0.8 million~~

We are now engaged in ~~cash received~~qualifying for and securing broadband licenses from the ~~proceeds from stock option exercises.~~

~~Net proceeds from July 2019 follow-on offering.~~ ~~In July 2019, the Company completed a registered follow-on offering in which it sold 2,222,223 shares of common stock at a purchase price~~FCC pursuant to the ~~public of $45.00 per share. Net proceeds were approximately $94.2 million after deducting $5.5 million in underwriting discounts~~Report and ~~commissions,~~Order. At the same time, our sales and ~~$0.3 million in offering expenses.~~

~~In January 2019,~~marketing department are pursuing opportunities to lease the broadband licenses we ~~announced that we had entered into agreements~~secure to ~~transfer~~ our ~~TeamConnect~~targeted utility and pdvConnect businesses. Specifically, the Company entered into a (i) Customer Acquisition and Resale Agreement with A BEEP LLC (“A BEEP”) on January 2, 2019, (ii) a Customer Acquisition, Resale and Licensing Agreement with Goosetown Enterprises, Inc. (“Goosetown”) on January 2, 2019 and (iii) a memorandum of understanding with the principals of Goosetown on December 31, 2018. We will continue operating our push-to-talk networks in the markets in which customers are being transferred and trunked facilities in other markets in which we hold FCC licenses. Under the terms of the MOU, we are obligated to pay the LLC a monthly service fee for a 24-month period ending on January 7, 2021 for its assumption our support obligations under the A BEEP and Goosetown agreements. We are also obligated to pay the LLC a certain portion of the billed revenue received by the Company from pdvConnect customers for a 48-month period.

~~We believe our cash and cash equivalents on hand will be sufficient to meet our financial obligations through at least the next 12 months.~~ critical infrastructure customers. Our future capital requirements will depend on many factors, including: the timeline and ~~results~~costs to acquire broadband licenses pursuant to the Report and Order, including the costs to acquire additional spectrum, the costs related to

retuning, or swapping spectrum held by, Covered Incumbents and the costs of paying Anti-Windfall payments to the U.S. Treasury; costs related to the commercializing of our spectrum ~~assets~~assets; and our ability to sign customer ~~contracts;~~contracts and generate revenues from the license or transfer of any broadband licenses we secure; the terms and conditions of any customer contracts, including the timing of payments; the costs ~~to retune~~associated with expanding our ~~spectrum~~business development, sales and ~~relocate incumbents to qualify for broadband licenses; the costs of any additional spectrum we elect to purchase;~~marketing organization, the costs and ongoing obligations related to our former TeamConnect and pdvConnect businesses; the revenues we generate from royalties we may receive from our agreements we entered into with the buyers of our TeamConnect and our pdvConnect businesses; and our ability to control our operating expenses.

On April 3, 2020, we filed a shelf registration statement (the “Shelf Registration Statement”) on Form S-3 with the SEC that was declared effective by the SEC on April 20, 2020, which permits us to offer up to $150 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination, including in units from time to time. Our Shelf Registration Statement is intended to provide us with additional flexibility to access capital markets for general corporate purposes, which may include working capital, capital expenditures, repayment of debt, other corporate expenses and acquisitions of complementary products, technologies, or businesses.

We entered into an Amended and Restated Controlled Equity Offering Sales Agreement and an Amended and Restated Sales Agreement (collectively, the “Sales Agreements”) with Cantor Fitzgerald & Co. and B. Riley FBR, Inc., respectively (collectively, the “Agents”), and on April 3, 2020, registered the sale of up to an aggregate of $50,000,000 in shares of our common stock in at the market sales transactions pursuant to the Sales Agreements under the Shelf Registration Statement. Through the date of this filing, we have not sold any shares of our common stock in at the market transactions or any securities under the Shelf Registration Statement.

We believe our cash and cash equivalents on hand will be sufficient to meet our financial obligations through at least the next 12 months. As noted above, our future capital requirements will depend on a number of factors, including among others, the costs and timing of securing broadband licenses, including our spectrum retuning activities, spectrum acquisitions and the Anti-Windfall payments to the U.S. Treasury, and our operating activities and any revenues we generate through our commercialization activities. When combining our estimated clearing and spectrum acquisition costs with our anticipated Anti-Windfall payments to the U.S. Treasury to effectively acquire additional spectrum from the FCC’s inventory in markets where we need it, we anticipate the combined total costs to range from $130 to $160 million, the significant majority of which we intend to spend over through the end of fiscal year 2024. We will deploy this capital at our determined pace based on several key ongoing factors, including customer demand, market opportunity, and offsetting income from spectrum leases. As we cannot predict the duration or scope of the COVID-19 pandemic and its impact on our targeted customers, the potential negative financial impact to our results of operations and financial condition cannot be reasonably estimated. We are actively managing the business to maintain our cash flow and believe that we currently have adequate liquidity. To implement our business plans and initiatives, however, we may need to raise additional capital. We cannot predict with certainty the exact amount or timing for any future capital raises. See “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q for a reference to the risks and uncertainties that could cause our costs to be more than we currently anticipate and/or our revenue and operating results to be lower than we currently anticipate. If required, we intend to raise additional capital through debt or equity financings, including pursuant to our Shelf Registration Statement, or through some other financing arrangement. However, we cannot be sure that additional financing will be available if and when needed, or that, if available, we can obtain financing on terms favorable to our stockholders and to us. Any failure to obtain financing when required will have a material adverse effect on our business, operating results, financial condition and liquidity.

As of ~~September~~June 30, ~~2019~~2020 and March 31, ~~2019,~~2020, we did not have and do not have any relationships with unconsolidated entities or financial partnerships that were established for the purpose of facilitating off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Our financial instruments consist of cash, cash equivalents, trade accounts receivable and accounts payable. We consider investments in highly liquid instruments purchased with original maturities of 90 days or less to be cash equivalents. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the highly liquid instruments in our portfolio, a 10% change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operations.

Our operations are based in the United States and, accordingly, all of our transactions are denominated in U.S. dollars. We are currently not exposed to market risk from changes in foreign currency.

Our management, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this ~~Quarterly Report on Form 10-Q.~~report. Based on that evaluation, our management, including our President and Chief Executive Officer and our Chief Financial Officer, has concluded that our disclosure controls and procedures were effective as of the end of such period.

In connection with the evaluation required by Exchange Act Rule 13a-15(d), our management, including our President and Chief Executive Officer and our Chief Financial Officer, concluded that ~~our disclosure controls and procedures were not effective as of September 30, 2019 because of a material weakness~~no changes in our internal control over financial reporting occurred during the period covered by this report that ~~remains in the process of being remediated as discussed below.~~

~~As we previously disclosed, subsequent~~have materially affected, or are reasonably likely to filing our Form 10-K for year ended March 31, 2018 with the SEC on June 5, 2018, an error was discovered related to our interpretation and application of the effective dates of changes in the accounting treatment of our net operating losses in accordance with the new tax laws instituted by the Tax Cuts and Jobs Act of 2017, which was signed into law on December 22, 2017 (the “TCJA”). As a result of this error, we filed a Form 10-Q/A for the quarterly period ended December 31, 2017 and a Form 10-K/A for the year ended March 31, 2018 with the SEC on August 10, 2018 to amend and restate our financial statements for those periods.

In our Form 10-K/A, our management, including our Chief Executive Officer and our Chief Financial Officer, determined that this error in interpretation and application of the new tax laws instituted by the TCJA, which was not detected timely by management, was the result of an inadequate design of controls pertaining to our review and analysis of changing tax legislation. As a result, they determined that this deficiency represented a material weakness in our internal control over financial reporting. They also concluded that we did not maintain effective disclosure controls and procedures as of March 31, 2018 due to this material weakness inmaterially affect, our internal control over financial reporting.

A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis. A material weakness will not be deemed to be remediated until management has implemented the remedial policies and procedures and there has been sufficient time to test the new controls to determine that the material weakness has been remediated.

To remediate the material weakness related to new tax laws, our management: (i) implemented new controls designed to evaluate the appropriateness of our income tax policies and procedures, (ii) put into place additional training programs focused on new tax legislation and (iii) implemented policies and procedures regarding the review and evaluation of tax guidelines published by the major accounting firms.

In evaluating our disclosure controls and procedures for the quarter ended September 30, 2019, our management, including our Chief Executive Officer and our Chief Financial Officer, believe that we have put in place the proper policies, procedures and controls to remediate the material weakness, which will be tested during our annual internal control assessment for the fiscal year ended March 31, 2020.

Our management, including our President and Chief Executive Officer and our Chief Financial Officer, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

In evaluating us and our common stock, we urge you to carefully consider the risks (including those disclosed below) and other information in this Quarterly Report on Form 10-Q as well as the risk factors disclosed in our Annual Report on Form 10-K for the year ended March 31, ~~2019,~~2020, filed with the Securities and Exchange Commission (the “SEC”) on May ~~20, 2019~~28, 2020 (the ~~“Form 10-K”) and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 8, 2019 (the “First Quarter Form 10-Q”~~“Annual Report”). There have been no material changes from the risk factors as previously disclosed in our ~~Form 10-K, as amended and supplemented by our First Quarter Form 10-Q.~~Annual Report. Any of the risks discussed in this Quarterly Report on Form 10-Q and in our ~~Form 10-K or in our First Quarter Form 10-Q,~~Annual Report, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.

On May 18, 2015, we completed a public offering of our common stock in which we raised net proceeds of approximately $64.8 million. We registered the shares of common stock issued in the offering on a Registration Statement on Form S-1 (File No. 333-203681), which the SEC declared effective on May 12, 2015. Through ~~September~~June 30, ~~2019~~2020, we have used ~~approximately $38.9~~the entire $64.8 million of the net proceeds from this offering. We did not complete any transaction in which we paid any of these proceeds, directly or indirectly, to our directors or officers, to any person owning 10% or more of any class of our equity securities, to any associate of any of the foregoing, or to any of our affiliates. There has been no material change in the expected uses of the net proceeds from the offering as described in our Registration Statement.

On August 4, 2020, we entered into Amendment 2 (“Amendment 2”) to the IP Assignment, Software Support, and Development Services Agreement, dated as of January 7, 2019, as previously amended, by and between us and TeamConnect, LLC (the “LLC”). Under Amendment 2, we agreed to the transfer of our pdvConnect customers to the LLC, effective as of April 1, 2020. In exchange for the customer transfer, the LLC agreed to pay us a certain portion of the recurring revenues from these customers. The foregoing summary of Amendment 2 is not complete, and is qualified in its entirety by reference to the full text thereof, a copy of which is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q, and incorporated herein by reference.

(1)Incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-201156), filed with the SEC on December 19, 2014.

(2)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on November 5, 2015.

(3)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on August 6, 2019.

(4)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on June 27, 2017.

(5)Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No. 001-36827), filed with the SEC on May 8, 2020.

*The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

# Certain confidential portions of this exhibit were omitted by means of marking such portions with an asterisk because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

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


	~~Contract Assets~~
~~Balance as of April 1, 2018~~	$	~~768~~
~~Additions~~		~~284~~
~~Amortization~~		~~(558)~~
~~Impairment~~		~~(58)~~
~~Balance at March 31, 2019~~		~~436~~
~~Impairment~~		~~(436)~~
~~Balance at September 30, 2019~~	$	—


	Wireless Licenses
Balance at March 31, ~~2019~~2020	$	~~107,548~~111,526
Acquisitions		~~202~~8,991
~~Reclassed to property and equipment~~Cancellations		~~(5)~~(4,678)
Balance at ~~September~~June 30, ~~2019~~2020	$	~~107,745~~115,839


	Equity Method Investment
Equity method investment carrying value at March 31, ~~2019~~2020	$	—
~~Contribution~~		1439
Share of net ~~income~~loss from LLC		15 (4)
Equity method investment carrying value at ~~September~~June 30, ~~2019~~2020	$	2935


	Restructuring Activities
Balance at March 31, ~~2019~~2020	$	~~2,655~~565
Cash payments		~~(1,036)~~(309)
Balance at ~~September~~June 30, ~~2019~~2020 (classified as current liabilities - restructuring reserve)	$	~~1,619~~256


	Restructuring Activities
Balance at March 31, ~~2019~~2020	$	~~679~~71
Severance costs		~~172~~
~~Facility exit~~		~~(28)~~14
Cash payments		~~(645)~~ —
Balance at ~~September~~June 30, ~~2019~~		~~178~~
~~Less amount classified~~2020 (classified as current liabilities - restructuring ~~reserve~~		~~136~~
~~Noncurrent liabilities - included in other liabilities~~reserve)	$	4285



	Estimated	September 30,		March 31,
	useful life	2019		2019
Network sites and equipment	5-10 years	$	15,864	$	15,954
Furniture and fixture and other equipment	2-5 years		282		1,026
Computer equipment	5-7 years		83		140
Computer software	1-7 years		509		28
Leasehold improvements	Shorter of the lease term or 10 years		232		351
			16,970		17,499
Less accumulated depreciation			8,340		7,952
			8,630		9,547
Construction in process			19		283
Property and equipment, net		$	8,649	$	9,830


	Three Months Ended		Six Months Ended
	September 30, 2019		September 30, 2019
Lease cost
Operating lease cost (cost resulting from lease payments)	$	666	$	1,290
Short term lease cost		10		32
Sublease income		(5)		(9)
Net lease cost	$	671	$	1,313


	June 30, 2020		March 31, 2020
Non-current assets - right of use assets, net	$	6,090	$	6,500
Current liabilities - operating lease liabilities	$	1,611	$	1,695
Non-current liabilities - operating lease liabilities	$	6,668	$	7,051


	~~Six Months Ended~~
	~~September 30, 2019~~
~~Operating lease - operating cash flows (fixed payments)~~	$	~~1,321~~
~~Operating lease - operating cash flows (liability reduction)~~	$	~~661~~
~~Right of use assets obtained in exchange for new operating lease liabilities~~	$	~~7,915~~
~~Non-current assets - right of use assets, net~~	$	~~7,217~~
~~Current liabilities - operating lease liabilities~~	$	~~1,687~~
~~Non-current liabilities - operating lease liabilities~~	$	~~7,844~~


		Operating		Operating
Fiscal Year		Leases		Leases
2020 (excluding the six months ended September 30, 2019)	$	1,398
2021		2,670
2021 (excluding the three months ended June 30, 2020)			$	1,977
2022		2,265		2,292
2023		2,098		2,126
2024		1,893		1,920
After 2024		3,054
2025				1,532
After 2025				1,373
Total future minimum lease payments		13,378		11,220
Amount representing interest		(3,847)		(2,941)
Present value of net future minimum lease payments	$	9,531	$	8,279



		Weighted			Weighted
		Average			Average
	Restricted	Grant Day		Restricted	Grant Day
	Stock	Fair Value		Stock	Fair Value
Non-vested restricted stock outstanding at March 31, 2019	279,212	$	28.71
Non-vested restricted stock outstanding at March 31, 2020				352,194	$	37.41
Granted	165,315		42.28	205,981		49.86
Forfeited	(2,163)		(22.85)	—		—
Vested	(86,274)		(28.41)	(53,957)		42.13
Non-vested restricted stock outstanding at September 30, 2019	356,090	$	35.12
Non-vested restricted stock outstanding at June 30, 2020				504,218	$	41.99



		Weighted
		Average
	Performance	Grant Day
	Stock	Fair Value
Performance stock outstanding at March 31, 2020	138,984	$	46.85
Granted	30,049		49.92
Forfeited	—		—
Vested	—		—
Performance stock outstanding at June 30, 2020	169,033	$	47.10



	Options	Weighted Average Exercise Price
Options outstanding at March 31, 2019	1,923,634	$	23.64
Options granted	—		—
Options exercised	(89,323)		(21.49)
Options forfeited/expired	(9,875)		(48.14)
Options outstanding at September 30, 2019	1,824,436	$	23.61



	Performance Options	Weighted Average Exercise Price
Performance Options outstanding at March 31, 2019	179,945	$	25.83
Performance Options granted	—		—
Performance Options exercised	—		—
Performance Options forfeited/expired	—		—
Performance Options outstanding at September 30, 2019	179,945	$	25.83



	Options	Weighted Average Exercise Price
Options outstanding at March 31, 2020	1,807,466	$	23.93
Options granted	60,558		49.92
Options exercised	(58,704)		(29.39)
Options forfeited/expired	—		—
Options outstanding at June 30, 2020	1,809,320	$	24.63




Exhibit No.	Description of Exhibit
3.1(1)	Amended and Restated Certificate of Incorporation of Anterix Inc. (the “Company”).
3.2(2)	Certificate of Amendment No. 1 to Amended and Restated Certificate of Incorporation of the Company.
3.3(3)	Certificate of Amendment No. 2 to Amended and Restated Certificate of Incorporation of the Company.
4(4)	Amended and Restated Bylaws of the Company.
4.1(5)	Amendment No. 1 to the Amended and Restated ByLaws of the Company.
4.2(1)	Form of Common Stock Certificate of the Company.
10.1#	Amendment 2, dated August 4, 2020, to the IP Assignment, Software Support, and Development Services Agreement, dated as of January 7, 2019, by and between us and TeamConnect, LLC.
31.1	Certification of Principal Executive Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..
31.2	Certification of Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated pursuant to the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document



			Anterix Inc.

Date:	~~November~~August 6, ~~2019~~2020	/s/ ~~Morgan E. O’Brien~~Robert H. Schwartz
		~~Morgan E. O’Brien~~Robert H. Schwartz
		President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November~~August 6, ~~2019~~2020	/s/ Timothy A. Gray
		Timothy A. Gray
		Chief Financial Officer (Principal Financial and Principal Accounting Officer)