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 December 31, ~~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 January 31, ~~2020, 17,166,282~~2021, 17,586,356 shares of the registrant’s common stock were outstanding.

Table of Contents

Anterix Inc.

FORM 10-Q

For the quarterly period ended December 31, ~~2019~~2020

TABLE OF CONTENTS



PART I. FINANCIAL INFORMATION		4
Item 1.	Consolidated Financial Statements	4
	Consolidated Balance Sheets as of December 31, ~~2019~~2020 (Unaudited) and March 31, 2019 (Audited)	4
	Unaudited Consolidated Statements of Operations for the three and nine months ended December 31, ~~2019~~2020 and December 31, ~~2018~~2019	5
	Unaudited Consolidated Statement of Stockholders’ Equity for the three and nine months ended December 31, 2020	6
	Unaudited Consolidated Statement of Stockholders’ Equity for the three and nine months ended December 31, 2019	6
7	~~Unaudited Consolidated Statement of Stockholders’ Equity for the three and nine months ended December 31, 2018~~	7
	Unaudited Consolidated Statements of Cash Flows for the nine months ended December 31, ~~, 2019~~2020 and December 31, ~~2018~~2019	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32 33
Item 4.	Controls and Procedures	33
PART II. OTHER INFORMATION		34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
SIGNATURES		36

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

PART I. FINANCIAL INFORMATION

Item 1: ~~Consolidated~~Consolidated Financial Statements

Anterix Inc.

Consolidated Balance Sheets

(dollars in thousands, except share data)


		December 31,
		2019		March 31, 2019			December 31, 2020		March 31, 2020
		(Unaudited)		(Audited)			(Unaudited)			(Audited)
ASSETS	ASSETS					ASSETS
Current Assets
Cash and cash equivalents		$	150,243	$	76,722		$	108,486	$	137,453
Accounts receivable, net of allowance for doubtful accounts of $15 and $77, respectively			83		444
Accounts receivable, net of allowance for doubtful accounts of $8 and $12, respectively								19		61
Prepaid expenses and other current assets			2,011		1,180			4,527		4,638
Total current assets			152,337		78,346			113,032		142,152
Property and equipment, net			8,088		9,830			3,752		7,000
Right of use assets, net			6,841		—			5,404		6,500
Intangible assets			108,335		107,548			118,066		111,526
Capitalized patent costs, net			—		184
Equity method investment			40		—			16		39
Other assets			188		845			845		180
Total assets		$	275,829	$	196,753		$	241,115	$	267,397
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses		$	4,478	$	5,106		$	7,347	$	5,649
Due to related parties								121		110
Restructuring reserve			1,179		2,758			36		636
Due to related parties			106		183
Operating lease liabilities			1,706		—			1,529		1,695
Deferred revenue			747		792			729		733
Total current liabilities			8,216		8,839			9,762		8,823
Noncurrent liabilities
Operating lease liabilities			7,442		—			5,928		7,051
Deferred revenue			2,915		3,466			2,186		2,733
Deferred income tax			1,279		685			3,395		3,084
Other liabilities			723		2,999			677		640
Total liabilities			20,575		15,989			21,948		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 December 31, 2019 and March 31, 2019			—		—
Common stock, $0.0001 par value per share, 100,000,000 shares authorized and 17,146,680 shares issued and outstanding at December 31, 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 December 31, 2020 and March 31, 2020								—		—
Common stock, $0.0001 par value per share, 100,000,000 shares authorized and 17,584,332 shares issued and outstanding at December 31, 2020 and 17,184,712 shares issued and outstanding at March 31, 2020								2		2
Additional paid-in capital			449,428		349,227			468,578		450,978
Accumulated deficit			(194,176)		(168,464)			(249,413)		(205,914)
Total stockholders' equity			255,254		180,764			219,167		245,066
Total liabilities and stockholders' equity		$	275,829	$	196,753		$	241,115	$	267,397


	Three months ended December 31,				Nine months ended December 31,				Three months ended December 31,				Nine months ended December 31,
	2019		2018		2019		2018		2020		2019		2020		2019
Operating revenues
Service revenue	$	178	$	1,155	$	690	$	3,798	$	53	$	178	$	193	$	690
Spectrum revenue		183		183		547		547		183		183		547		547
Other revenue		—		164		—		854
Total operating revenues		361		1,502		1,237		5,199		236		361		740		1,237
Operating expenses
Direct cost of revenue (exclusive of depreciation and amortization)		631		974		2,248		3,599		543		631		1,606		2,248
General and administrative		4,740		5,216		14,145		14,310		6,300		4,740		17,620		14,145
Sales and support		949		620		2,922		3,110		612		949		1,904		2,922
Product development		610		647		1,846		1,846		1,098		610		2,595		1,846
Depreciation and amortization		1,135		695		2,412		2,140		1,020		1,135		3,418		2,412
Stock compensation expense (exclusive of restructuring related costs)		1,404		1,459		4,393		4,419
Stock compensation expense										2,672		1,404		13,245		4,393
Restructuring costs		35		418		195		8,540		44		35		65		195
Impairment of long-lived assets		33		200		33		730		11		33		40		33
Total operating expenses		9,537		10,229		28,194		38,694		12,300		9,537		40,493		28,194
(Gain)/loss from disposal of intangible assets, net										—		140		3,849		140
(Gain)/loss from disposal of long-lived assets, net										—		—		(6)		62
Loss from operations		(9,176)		(8,727)		(26,957)		(33,495)		(12,064)		(9,316)		(43,596)		(27,159)
Interest income		517		393		1,505		1,079		27		517		99		1,505
Other income (expenses)		2		(16)		154		(16)
Loss on equity method investment		(23)		—		(8)		—
Other income										110		142		332		356
(Loss)/income on equity method investment										(7)		(23)		(23)		(8)
Loss before income taxes		(8,680)		(8,350)		(25,306)		(32,432)		(11,934)		(8,680)		(43,188)		(25,306)
Income tax expense		131		—		594		—		155		131		311		594
Net loss	$	(8,811)	$	(8,350)	$	(25,900)	$	(32,432)	$	(12,089)	$	(8,811)	$	(43,499)	$	(25,900)
Net loss per common share basic and diluted	$	(0.52)	$	(0.57)	$	(1.60)	$	(2.23)	$	(0.69)	$	(0.52)	$	(2.51)	$	(1.60)
Weighted-average common shares used to compute basic and diluted net loss per share		17,093,133		14,614,793		16,167,845		14,539,377		17,492,539		17,093,133		17,350,671		16,167,845



	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 September 30, 2019	—	17,125,938	$	—	$	2	$	447,845	$	(185,365)	$	262,482
													Common stock	Common stock		Additional paid-in capital		Accumulated deficit		Total
Balance at September 30, 2020													17,487,201	$	2	$	464,620	$	(237,324)	$	227,298
Equity based compensation*	—	13,259		—		—		1,404		—		1,404	22,907		—		2,672		—		2,672
Equity payment of prior year accrued employee related expenses													4,199		—		—		—		—
Stock option exercises	—	8,000		—		—		200		—		200	70,025		—		1,286		—		1,286
Shares withheld for taxes	—	(517)		—		—		(21)		—		(21)	—		—		—		—		—
Net loss	—	—		—		—		—		(8,811)		(8,811)	—		—		—		(12,089)		(12,089)
Balance at December 31, 2019	—	17,146,680	$	—	$	2	$	449,428	$	(194,176)	$	255,254
Balance at December 31, 2020													17,584,332	$	2	$	468,578	$	(249,413)	$	219,167



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
Balance at March 31, 2020													17,184,712	$	2	$	450,978	$	(205,914)	$	245,066
Equity based compensation*	—	93,956		—		—		4,393		—		4,393	229,347		—		13,245		—		13,245
Equity payment of prior year accrued employee related expenses													28,131		—		1,537		—		1,537
Stock option exercises	—	102,323		—		—		2,220		—		2,220	142,142		—		2,818		—		2,818
Shares withheld for taxes	—	(10,967)		—		—		(467)		—		(467)	—		—		—		—		—
Net loss	—	—		—		—		—		(25,900)		(25,900)	—		—		—		(43,499)		(43,499)
Balance at December 31, 2019	—	17,146,680	$	—	$	2	$	449,428	$	(194,176)	$	255,254
Balance at December 31, 2020													17,584,332	$	2	$	468,578	$	(249,413)	$	219,167


	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 September 30, 2018	—	14,573,267	$	—	$	1	$	343,930	$	(150,553)	$	193,378
													Common stock	Common stock		Additional paid-in capital		Accumulated deficit		Total
Balance at September 30, 2019													17,125,938	$	2	$	447,845	$	(185,365)	$	262,482
Equity based compensation*	—	18,014		—		—		1,459		—		1,459	13,259		—		1,404		—		1,404
Stock option exercises	—	85,127		—		—		1,739		—		1,739	8,000		—		200		—		200
Shares withheld for taxes	—	—		—		—		—		—		—	(517)		—		(21)		—		(21)
Net loss	—	—		—		—		—		(8,350)		(8,350)	—		—		—		(8,811)		(8,811)
Balance at December 31, 2018	—	14,676,408	$	—	$	1	$	347,128	$	(158,903)	$	188,226
Balance at December 31, 2019													17,146,680	$	2	$	449,428	$	(194,176)	$	255,254



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
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*	—	68,082		—		—		8,936		—		8,936	93,956		—		4,393		—		4,393
Stock option exercises	—	125,976		—		—		2,564		—		2,564	102,323		—		2,220		—		2,220
Shares withheld for taxes	—	(5,300)		—		—		(139)		—		(139)	(10,967)		—		(467)		—		(467)
Net loss	—	—		—		—		—		(32,432)		(32,432)	—		—		—		(25,900)		(25,900)
Balance at December 31, 2018	—	14,676,408	$	—	$	1	$	347,128	$	(158,903)	$	188,226
Balance at December 31, 2019													17,146,680	$	2	$	449,428	$	(194,176)	$	255,254


	Nine months ended December 31,				Nine months ended December 31,
	2019		2018		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(25,900)	$	(32,432)	$	(43,499)	$	(25,900)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation and amortization		2,412		2,140		3,418		2,412
Non-cash compensation expense attributable to stock awards		4,393		8,936		13,245		4,393
Deferred income taxes		594		—		311		594
Bad debt expense		45		280		—		45
Loss on disposal of assets		75		31
Net loss from disposal of intangible assets						3,849		—
(Gain)/loss on disposal of long-lived assets, net						(6)		75
Loss on disposal of capitalized patent costs		140		—		—		140
Impairment of long-lived assets		33		730		40		33
Equity method investment		8		—
Loss/(income) on equity method investment						23		8
Changes in operating assets and liabilities
Accounts receivable		439		72		42		439
Inventory		—		173
Prepaid expenses and other assets		(176)		(530)		(639)		640
Right of use assets		1,063		—		1,102		1,063
Accounts payable and accrued expenses		(511)		354		3,838		(511)
Due to related parties						11		(77)
Restructuring reserve		(2,098)		3,305		(600)		(2,098)
Due to related parties		(77)		347
Operating lease liabilities		(1,044)		—		(1,289)		(1,044)
Deferred revenue		(595)		(611)		(551)		(595)
Other liabilities		(72)		245		36		(72)
Net cash used by operating activities		(21,271)		(16,960)		(20,669)		(20,455)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of intangible assets		(792)		(937)
Purchases of intangible assets, including refundable deposits						(10,882)		(1,608)
Purchases of equipment		(413)		(497)		(234)		(413)
Net cash used by investing activities		(1,205)		(1,434)		(11,116)		(2,021)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from July 2019 follow-on offering		94,244		—		—		94,244
Proceeds from stock option exercises		2,220		2,564		2,818		2,220
Payments of withholding tax on net issuance of restricted stock		(467)		(139)		—		(467)
Net cash provided by financing activities		95,997		2,425		2,818		95,997
Net change in cash and cash equivalents		73,521		(15,969)		(28,967)		73,521
CASH AND CASH EQUIVALENTS
Beginning of the year		76,722		98,318
End of the year	$	150,243	$	82,349
Beginning of the period						137,453		76,722
End of the period					$	108,486	$	150,243
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Taxes paid	$	25	$	12	$	36	$	25
Non-cash investing activity:
Capitalized change in estimated asset retirement obligations	$	503	$	—	$	—	$	503
Contribution of patent to TeamConnect LLC	$	34	$	—
Barter transaction					$	—	$	34
Contribution of capital equipment to TeamConnect LLC	$	14	$	—	$	—	$	14

See accompanying notes to consolidated financial statements.

Network equipment provided for wireless licenses					$	23	$	—
Non-cash financing activities:
Equity payment of prior year accrued employee related expenses					$	1,537	$	—

Anterix Inc. ~~(formerly known as pdvWireless, Inc., the~~(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 Report and Order was published in the Federal Register on July 16, 2020 and became effective on August 17, 2020. 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.

In December 2020, the Company entered into its first long-term 900 MHz broadband spectrum lease agreements (the “Lease Agreements”) covering Ameren Corporation’s (“Ameren”) service territories. The Lease Agreements will enable Ameren to deploy a private LTE network in its service territories in Missouri and Illinois covering approximately 7.5 million people. Each Lease Agreement is for a term of up to 40 years, consisting of an initial term of 30 years, with an option to extend for an additional 10-year term for an additional payment. The scheduled prepayments for the 30-year initial terms of the Lease Agreements total approximately $48 million dollars. Full prepayment for the 30-year initial terms is due by 2026, with approximately 50% of the total prepayments due June 2021. The timing of these payments is subject to the Company’s timely clearing of spectrum and delivery of broadband spectrum licenses. The Company is proactively clearing incumbents from the 900 MHz broadband segments in Ameren’s service territories and expects to begin delivering the broadband spectrum licenses by county in June 2021. The Company expects to recognize revenue from the Lease Agreements commencing in fiscal year 2022. Revenue will be recognized as spectrum is delivered based on straight-line amortization over the initial 30-year terms of the Lease Agreements. The Lease Agreements are subject to customary approval terms and conditions, including the approval by both companies’ boards of directors and the Company’s ability to secure broadband licenses from the FCC.

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~~fiscal year 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. ItThe TeamConnect service was primarily offered ~~the TeamConnect service~~ to customers indirectly through third-party sales representatives who were ~~primarily~~largely 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.

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 transfer our pdvConnect customers to the LLC, effective as of April 1, 2020, except for one Tier 1 domestic carrier. In exchange for the customer transfer, the LLC agreed to pay us a certain portion of the recurring revenues from these customers.

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 nine months ended December 31, ~~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.

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the applicable lease term. The carrying amount at the balance sheet date of long-lived assets under construction in process includes assets purchased, constructed or being developed internally that are not yet in service. Depreciation commences when the assets are placed in service. Depreciation rates for assets are updated periodically to account for changes, if any, in the estimated useful lives of the assets, lease terms, management’s strategic objectives, estimated residual values or obsolescence. Changes in estimates will result in adjustments to depreciation expense prospectively.

An asset retirement obligation is evaluated and recorded as appropriate on assets for which the Company has a legal obligation to retire. The Company records a liability for an asset retirement obligation and the associated asset retirement cost at the time the underlying asset is acquired and put into service. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time and changes, if any, in the estimated future cash flows underlying the obligation. ~~Over time, the liability is accreted to its present value and the capitalized cost is depreciated over the estimated useful life of the asset.~~

The Company enters into long-term leasing arrangements primarily for tower site locations. The Company constructs assets at these locations and, in accordance with the terms of many of these agreements, the Company is obligated to restore the premises to their original condition at the conclusion of the agreements, generally at the demand of the other party to these agreements. The Company recognizes the fair value of a liability for an asset retirement obligation and capitalizes that cost as part of the cost basis of the related asset, depreciating it over the useful life of the related asset. ~~Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability is recognized in the Consolidated Statement of Operations.~~

~~As of December 31, 2019, the Company revised its asset retirement obligations accrual to $0.8 million based on estimated future cash flows.~~

~~Changes in the liability for the asset retirement obligations for December 31, 2019 and March 31, 2019 are summarized below (in thousands):~~

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 Report and Order was published in the Federal Register on July 16, 2020 and became effective on August 17, 2020. 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

~~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 three and nine months ended December 31, ~~2019.~~2020.

~~Costs to acquire~~See Note 4 “Intangible Assets” for a ~~patent on certain aspects~~discussion of the Company’s ~~technology have been capitalized. These amounts are amortized, subject to periodic evaluation for impairment, over statutory lives following award~~(gain)/loss from the disposal of intangible assets incurred during the ~~patent. Gross patent costs are approximately $572,000 at March 31, 2019 and the associated accumulated amortization amounted to approximately $388,000. As of December 31, 2019,~~ ~~the Company completed the transfer of the intellectual property rights with a net book value of $174,000 in exchange for a 19.5% ownership interest to TeamConnect LLC (“LLC”).~~ ~~Amortization expense was approximately $10,000 for the nine months~~period ended December 31, ~~2019 and December 31, 2018, respectively.~~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. During the three and nine months ended December 31, 2020, the Company recorded a $11,000 and $40,000, respectively, a non-cash impairment charge for long-lived assets consisting of network site costs to reduce the carrying values to zero. During the nine months ended December 31, 2019, the Company recorded a $33,000 non-cash impairment charge for long-lived assets consisting of $22,000 for property and equipment and $11,000 for a right of use asset to reduce the carrying values to zero. During the nine months ended December 31, 2018, the Company recorded a $0.7 million non-cash charge for long-lived asset impairment of its radio assets to reduce the carrying value to the estimated recoverable amount.

The Company’s 19.5% investment in LLC for which the Company is not the primary beneficiary and does not influence or control 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 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 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.~~

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~~ and nine months ended December 31, ~~2019~~2020 and ~~2018,~~2019, 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 ~~1,396,000~~1,402,000 and ~~1,386,000~~1,396,000 at December 31, ~~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 ~~January~~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. As of March 31, 2019, deferred rent liabilities were reported under accounts payable and accrued expenses – other amounting to $0.2 million and non-current other liabilities amounting to $2.1 million. 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 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.

Long-Term Lease of 900 MHz Broadband Spectrum. In December 2020, the Company entered into its first long-term 900 MHz broadband spectrum lease agreements (the “Lease Agreements”) covering Ameren Corporation’s (“Ameren”) service territories. The Lease Agreements will enable Ameren to deploy a private LTE network in its service territories in Missouri and Illinois covering approximately 7.5 million people. Each Lease Agreement is for a ~~period~~term of ~~two years.~~ up to 40 years, consisting of an initial term of 30 years, with an option to extend for an additional 10-year term for an additional payment. The scheduled prepayments for the 30-year initial terms of the Lease Agreements total approximately $48 million dollars. Full prepayment for the 30-year initial terms is due by 2026, with approximately 50% of the total prepayments due by June 2021. The timing of these payments is subject to the Company’s clearing of spectrum and delivery of broadband spectrum licenses. The Company is proactively clearing incumbents from the 900 MHz broadband segments in Ameren’s service territories and expects to begin delivering the broadband spectrum licenses by county in June 2021. The Lease Agreements are subject to customary approval terms and conditions, including the approval by both companies’ boards of directors and the Company’s ability to secure broadband licenses from the FCC.

Assuming the conditions to the Lease Agreements are satisfied, the Company expects to recognize revenue from the Lease Agreements commencing in fiscal year 2022. The payments of prepaid fees will be accounted for as deferred revenue on the Company’s consolidated balance sheets and will be recognized ratably as the Company delivers broadband spectrum by county over the contractual term of approximately 30-years.

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~~TeamConnect 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, except for one Tier 1 domestic carrier. The LLC agreed to pay the Company a certain portion of the recurring revenues from the transferred customers 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~~Spectrum Revenue. is a mobile communications offering that was being resold by the Company for the three and nine months ended December 31, 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 nine months ended December 31, ~~2019~~2020 and ~~2018~~2019 were approximately $183,000 and $547,000, ~~respectively.~~

~~Other Revenue.~~ ~~The Company historically derived other revenue primarily from either the sale of radios and accessories~~respectively 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.each period.

Contract Assets.Contract assets includes the portion of the Company’s future service invoices which has 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 and commissions paid to third-party dealers.~~commissions. These costs ~~are~~will be amortized ratably using the portfolio approach over the estimated customer contract period. The Company ~~reviews~~will review 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,~~

As of December 31, 2020, the Company ~~expensed commissions as incurred.~~ incurred commission costs required to obtain the Ameren lease agreements amounting to approximately $126,000 which will be amortized over the contractual term of approximately 30-years.

Historically, these costs include commissions for salespeople and commissions paid to third-party dealers. As a result of ~~the~~transferring customers ~~being transferred~~ to A BEEP and Goosetown, all contract and contract acquisition costs were ~~impaired.~~impaired for the nine months ended December 31, 2019. The Company increased direct cost of revenue amounting to ~~$178,000 for the nine months ended December 31, 2019,~~$178,000 and sales and support expense amounting to $258,000 for the nine months ended December 31, 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 nine months ended December 31, ~~2019~~2020 of $0.6 million leaving a remaining liability of ~~$3.6~~$2.9 million as of December 31, ~~2019.~~2020.

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

Estimated

December 31,

March 31,

useful life

2019

2019
Network sites and equipment

5-10 years

$
16,187

$
15,954
Furniture and fixture and other equipment

2-5 years

291

1,026
Computer equipment

5-7 years

143

140
Computer software

1-7 years

480

28
Leasehold improvements

Shorter of the lease term or 10 years

234

351

17,335

17,499
Less accumulated depreciation

9,333

7,952

8,002

9,547
Construction in process

86

283
Property and equipment, net

$
8,088

$
9,830

Depreciation expense for the three months ended December 31, 2019 and 2018 amounted to $1.1 million and $0.7 million, respectively. The depreciation expense for the nine months ended December 31, 2019 and 2018 amounted to $2.4 million and $2.1 million, respectively. During the three months ended December 31, 2019, the Company adjusted the estimated asset retirement obligations and useful life for its network sites, resulting in additional non-cash capitalized costs in network sites amounting to $0.5 million and depreciation expense of $0.5 million for the three and nine months ended December 31, 2019.

During the nine months ended December 31, 2018, the Company recorded a $0.7 million non-cash charge for long-lived asset impairment of its radio assets to reduce the carrying value to the estimated recoverable amount. ~~During the three and nine months ended December 31, 2019, the Company recorded a $22,000 non-cash impairment charge for network sites and equipment to reduce the carrying values to zero.~~

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.

~~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 nine months ended December 31,~~, 2019~~ 2020 and ~~2018.~~2019.

During the nine months ended December 31,~~, 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 ~~$0.8~~$11.6 million 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.

In August 2020, the Company closed an agreement with a third party for the exchange of 900 MHz licenses plus approximately $0.3 million for the reprogramming of their equipment. Since the licenses the Company acquired in the exchange were included in the licenses returned to the FCC in accordance with the AAR Agreement above, the $0.3 million for equipment reprogramming was recorded as additional loss from disposal of the intangible assets in the Consolidated Statements of Operations for the nine months ended December 31, 2020.

In September 2020, the Company closed an agreement with a third party for the exchange of 900 MHz licenses. Under the agreement, the Company received spectrum licenses at their estimated fair value of approximately $0.2 million and a payment of $1.2 million in cash to clear the channels received from incumbents. In January 2018, the Company received $0.6 million as a refundable deposit when the agreement was executed in Fiscal 2018 and the Company is entitled to receive the remaining $0.6 million upon receipt of FCC ~~approval.~~

Intangible assets consist of the following at December 31, ~~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 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. As of December 31, 2019, the Company also completed the transfer of the intellectual property rights with a net book value of $174,000its pdvConnect customers to the LLC, and ~~recorded an investment in~~ the LLC ~~amounting~~agreed to ~~$34,000 and loss on disposal of capitalized patent costs amounting to $140,000 relating to~~pay the ~~transfer~~Company a certain portion of the ~~intellectual property.~~

During the nine months ended December 31, 2020, ~~2019,~~ 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 nine months ending December 31, 2019. During the three and nine months ended December 31, 2018, the Company incurred $136,000 in consulting fees to a consultant firm who is an affiliate of a significant shareholder of the Company.

The Company purchased $11,000 of equipment from Motorola for the nine months ended December 31, 2019. The Company did not purchase any equipment for the three months ended December 31, 2019. The Company purchased $0.2 million and $0.4 million of equipment from Motorola for the three and nine months ended December 31, 2018, respectively. ~~The Motorola revenue recognized for the three and nine months ended~~ ~~December 31, 2019 and 2018 were approximately $183,000 and $547,000, respectively.~~ ~~As of December 31, 2019 and March 31, 2019, the Company owed $90,000 and $60,000 to Motorola, respectively.~~

Under the terms of the MOU, the Company iswas 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 nine months ended December 31, 2020, the Company incurred payments of $176,000 and $529,000 under the MOU, respectively. For the three and nine months ended December 31, 2019, the Company incurred payments of $215,000 and $729,000 under the MOU, respectively. As of December 31, ~~2019~~2020 and March 31, ~~2019,~~2020, the Company owed ~~$16,000~~$1,000 and ~~$118,000~~$12,000 to the LLC, respectively.

The Company did not purchase any equipment from Motorola for the three and nine months ended December 31, 2020. The Company purchased $11,000 of equipment from Motorola for the nine months ended December 31, 2019. The Motorola revenue recognized for the three and nine months ended December 31, 2020 and, 2019 were approximately $183,000 and $547,000, respectively for each period. As of December 31, 2020 and March 31, 2020, the Company owed $120,000 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 and nine months ended December 31, 2020, the Company incurred $36,000 and $96,000, respectively, in consulting fees to Ms. Chong. As of December 31, 2020, the Company did not have any outstanding liabilities to Ms. Chong.

On June 25, 2020, as part of its Executive Succession Plan, the Company announced that Brian D. McAuley had submitted his resignation as Executive Chairman of the Board, effective on July 1, 2020. On August 27, 2020, the Company entered into a consulting agreement with Mr. McAuley under which Mr. McAuley will serve as a Senior Advisor to the Company’s management team and provide strategic, corporate governance and Board advisory services. The Consulting Agreement provides that Mr. McAuley will receive cash compensation of $40,000 per year. Pursuant to the existing terms of his outstanding equity awards, Mr. McAuley will continue to vest in his outstanding equity awards as he continues to provide services to the Company pursuant to the Consulting Agreement. The Consulting Agreement is effective as of September 2, 2020 and terminates by its terms on September 1, 2021, unless terminated earlier by either party or extended upon the mutual agreement of the parties at least thirty (30) days before the end of the term. The Consulting Agreement contains standard confidentiality, indemnification and intellectual property assignment provisions in favor of the Company. The Consulting Agreement also contains a waiver by Mr. McAuley to any severance benefits that he might be entitled to receive under the Company’s Executive Severance Plan in connection with his resignation and the Executive Succession Plan. In consideration for this wavier, in the event the Company terminates the Consulting Agreement without cause, Mr. McAuley dies or becomes disabled during the term of the Consulting Agreement, or the Company elects not to extend the term of the Consulting Agreement through September 1, 2023, then the vesting of all outstanding time-based equity awards held by Mr. McAuley shall accelerate on the date his consulting services end such that he will be deemed to have vested in a total of 18,761 shares of Common Stock for his services under the Consulting Agreement. In addition, Mr. McAuley’s performance-based equity awards shall remain outstanding (and shall not terminate) and he shall continue to be eligible to obtain vested option shares and vested restricted stock units under his outstanding performance-based equity awards if the “Vesting Conditions” set forth in the performance-based equity awards are satisfied.

During ~~the nine months ended~~ ~~December 31~~, 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, the Company recorded a non-cash asset impairment charge of $~~0.2 million and $0.7 million in~~ the three and nine months ~~ending~~ended December 31, ~~2018,~~2020, the Company recorded a $11,000 and $40,000 non-cash impairment charge for long-lived assets, respectively, consisting for network site costs to reduce the carrying ~~value of these assets~~values to ~~zero~~. zero.

During the three and nine months ended December 31, 2019, the Company recorded a $33,000 non-cash impairment charge for

long-lived assets consisting of $22,000 for property and equipment and $11,000 for a right of use asset to reduce the carrying

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 nine months ended December 31, 2020, ~~2019,~~ 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 nine months ended December 31, 2020, the Company recorded restructuring charges relating to the December 2018 Cost-Reduction Actions in the amounts of $45,000 and $42,000, respectively, related to employee severance and benefit costs. For the three and nine months ended December 31, 2019, the Company recorded an additional restructuring charge relating to the December 2018 Cost-Reduction Actions amounting to $34,000 and $206,000, respectively, related to employee severance and benefit costs. For the nine months ended December 31, 2019, the Company reduced the facility exit costs accrual for our San Diego, California office by approximately $28,000. ~~An additional $57,000 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. Final payment of approximately $36,000 is expected to be made by January 31, 2021.

For the nine months ended December 31, ~~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~~31, 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, 2020~~January 31, 2021 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. As of March 31, 2019, deferred rent liabilities were reported under accounts payable and accrued expenses – other amounting to $0.2 million and non-current other liabilities amounting to $2.1 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.

~~During~~Weighted-average remaining lease term and discount rate for the three and nine months ended December 31, 2019, the Company recorded a $11,000 non-cash charge impairment for an ROU asset to reduce the carrying value to zero. The lease relating to the ROU asset impaired will expire on June 2020.Company’s operating leases are as follows:

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%. As of December 31, 2019, the Company’s leases had a remaining weighted average term of 5.19 years.

Rent expense amounted to approximately $0.7 million for the three months ended December 31, 2020 and December 31, 2019, 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, respectively. Rent expense amounted to approximately $2.0 million for the ~~three and~~ nine months ended December 31,, 2020 and December 31, 2019, ~~respectively. Total rent expense amounted to~~of which approximately ~~$0.6~~$1.2 million was classified as cost of revenue and ~~$2.0~~the remainder of approximately $0.8 million ~~for~~was classified in operating expenses in the ~~three~~Consolidated Statements of Operations, respectively.

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 ~~nine months ended~~ ~~December 31, 2018 respectively.~~ gain in disposal of long-lived asset by $1,000.

The following table presents net lease cost for the three and nine months ended December 31, 2020 and 2019 (in thousands):


	Three Months Ended		Nine Months Ended		Three months ended December 31,				Nine months ended December 31,
	December 31, 2019		December 31, 2019		2020		2019		2020		2019
Lease cost
Operating lease cost (cost resulting from lease payments)	$	662	$	1,952	$	619	$	662	$	1,890	$	1,952
Short term lease cost		10		42		50		10		93		42
Sublease income		(4)		(13)		—		(4)		(6)		(13)
Net lease cost	$	668	$	1,981	$	669	$	668	$	1,977	$	1,981

The following table presents ~~other~~ supplemental ~~lease~~cash flow and non-cash activity information for the nine months ended December 31, 2020 and 2019 (in thousands):

Nine months ended December 31,

2020

2019
Operating cash flow information:

Operating lease - operating cash flows (fixed payments)

$
2,096

$
2,012
Operating lease - operating cash flows (liability reduction)

$
1,289

$
1,044
Non-cash activity:

Right of use assets obtained in exchange for new operating lease liabilities

$
77

$
7,904

The following table presents supplemental balance sheet information as of December 31, 2020 and March 31, 2020 (in thousands):

~~Nine Months Ended~~

~~December 31, 2019~~

~~Operating lease - operating cash flows (fixed payments)~~

~~2,012~~

~~Operating lease - operating cash flows (liability reduction)~~

~~1,044~~

~~Right of use assets obtained in exchange for new operating lease liabilities~~

~~7,904~~

~~Non-current assets - right of use assets, net~~

~~6,841~~

~~Current liabilities - operating lease liabilities~~

~~1,706~~

~~Non-current liabilities - operating lease liabilities~~

~~7,442~~

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 nine months ended December 31, 2020~~, 2019~~ are as follows (in thousands):


		Operating		Operating
Fiscal Year		Leases		Leases
2020 (excluding the nine months ended December 31, 2019)	$	710
2021		2,670
2021 (excluding the nine months ended December 31, 2020)			$	637
2022		2,265		2,297
2023		2,098		2,132
2024		1,893		1,930
After 2024		3,061
2025				1,524
After 2025				1,373
Total future minimum lease payments		12,697		9,893
Amount representing interest		(3,549)		(2,436)
Present value of net future minimum lease payments	$	9,148	$	7,457

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 CARES Act increased the Company's net federal deferred tax liability from approximately $0.2 million to $1.6 million as of March 31, 2020. The state deferred tax liability of approximately $1.4 million as of March 31, 2020 is unchanged.

For the year ended March 31, 2020, the Company had federal and state NOL carryforwards of approximately ~~$125.7~~$211.9 million and ~~$51.3~~$112.7 million, respectively, expiring in various amounts from 2019 through 2037, to offset future taxable income. Per the TCJA, federal and TCJA-adhering state NOLs 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 the 80% of taxable income NOL deduction limitation. As of March 31, 2019, the Company hadrespectively. Of these federal and state ~~NOL carryforwards of~~NOLs, approximately ~~$164.0~~$125.3 million and ~~$74.0~~$92.6 million, respectively, are expiring in various amounts from 2020 through ~~2037,~~2040, to offset future taxable income. ~~Federal and state NOLs of approximately $72.6 million and $10.3 million, respectively, can be carried forward indefinitely but a portion of~~The remaining federal and state NOLs of approximately ~~$38.5~~$86.6 million and ~~$6.0~~$20.1 million, respectively, ~~is limited to~~have an indefinite life and the federal NOLs may only offset 80% of ~~future~~ taxable income when used. For the nine months ended December 31, ~~2019,~~2020, the Company incurred federal and state net operating losses of approximately ~~$28.6~~$33.5 million and ~~$17.0~~$27.0 million, respectively, to offset future taxable income, of which ~~$33.0~~$42.8 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-~~three and ~~nine-month~~nine months ended December 31, ~~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 three and nine months ~~ending~~ended December 31, ~~2019,~~2020, the Company recorded a total deferred tax expense of ~~$594,000~~$155,000 and $311,000, respectively, 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 stock option shares were outstanding and vested as of December 31, 2019.~~plans.

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 December 31, ~~2019,~~2020, of which ~~801,273~~833,413 shares are available for future issuance. The number of shares ~~will continue to automatically~~may increase, upon Board approval, each January 1through 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, ~~2020,~~2021, the ~~board of directors~~Board elected to increase the shares authorized under the 2014 Stock Plan by ~~342,762~~879,216 shares, which represented 2%5% of the of the Company’s common stock issued and outstanding as of December 31, ~~2019.~~2020.

A summary of non-vested restricted stock activity for the nine months ended December 31, 2020~~, 2019~~ is as follows:



		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	$	37.93
Granted	175,068		42.10	286,155		47.10
Forfeited	(2,163)		(22.85)	(7,350)		36.75
Vested	(99,533)		(28.51)	(165,494)		40.15
Non-vested restricted stock outstanding at December 31, 2019	352,584	$	35.45
Non-vested restricted stock outstanding at December 31, 2020				465,505	$	42.80

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 $2.3 million and $7.2 million for the three and nine months ended December 31, 2020, respectively, which included $0.8 million of expense related to the Type III modification of restricted stock units held by the Company’s former Chairman of the Board upon his transition to a consultant to the Company that is probable of vesting under the modified condition. Stock compensation expense related to restricted stock was approximately $1.1 million and $3.1 million for the three and nine months ended December 31,, 2019, respectively. ~~Stock compensation expense related to restricted stock was approximately $0.7 million and $3.4 million for the three and nine months ended~~ ~~December 31~~, 2018, respectively, which included $1.4 million of expense related to the modification of restricted stock held by the Company’s former chief executive officer and president and several other key employees which were accounted for in restructuring costs.

~~Stock compensation expense for restricted stock is accounted for in general and administrative expense in the Company’s Consolidated Statement of Operations.~~ At December 31, ~~2019,~~2020, there was ~~$9.8~~$14.4 million of unvested compensation expense for restricted stock, which is expected to be recognized over a weighted average period of ~~2.95 years.~~2.5 years.

~~During~~A summary of the ~~three and~~performance stock unit activity for the nine months ended December 31, ~~2019, the Company awarded 11,307 performance stock units under the 2014 Stock Plan.~~ 2020 is as follows:

Outstanding performance stock units ~~represent~~included in the ~~number of shares of~~table above are shown at target. Share payout can range from 0% to 200% CEO Performance Units based on the ~~Company’s common~~Cumulative Spectrum Proceeds Monetized (“CSPM”) metric.

On February 28, 2020, the Company awarded 95,538 performance-based restricted stock ~~that the recipient would receive upon the Company’s attainment of the applicable performance goals.~~units. The performance goals are: ~~prior to January 13,~~

(A) Target Goal: 50% of the shares vest upon (i) achievement by December 31, 2020 ~~(A) issuance~~ 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 ~~(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

~~A summary~~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 ~~nine months ended~~ 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. As of December 31,~~, 2019 is as follows:~~

~~For~~ 2020, not all of these conditions had been achieved by December 30, 2020, and therefore, the ~~three and nine months ended December 31, 2019~~ ~~and 2018, there was no stock compensation expense recognized for~~applicable 50% of the performance ~~units. At December 31, 2019, there was approximately $3.0 million of unvested compensation expense related to the outstanding performance stock units.~~shares expired unvested.

~~A summary of~~Additionally, on February 28, 2020, the Company awarded 43,446 performance-based restricted stock ~~option activity for the nine months ended~~ ~~December 31, 2019 is as follows:~~

~~There were no options granted for the three and nine months ended~~ ~~December 31, 2019.~~

~~A summary~~units. The performance goal related to these units is: 100% of the ~~performance stock options as of~~ ~~December 31, 2019 is as follows:~~

~~The performance options~~shares will vest ~~in full immediately~~ upon ~~attainment of the performance goals. The performance goals are: prior to January 13,~~(i) achievement by December 31, 2020 ~~(A) issuance~~ 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 ~~(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. The goal was achieved when the Report and Order was effective in August 2020.

On September 30, 2020, the Company recorded stock compensation expense amounting to approximately $4.3 million based on the achievement of the Target Goal or approximately 91,216 shares under the performance-based restricted stock units, upon the Report and Order becoming effective in August 2020. For the three and nine months ended December 31, 2020, there was no stock compensation expense recognized for the Stretch Goal under the performance-based restricted stock units as the 47,768 performance-based restricted stock units expired as unvested.

On December 31, 2020, the Compensation Committee awarded performance-based restricted units to the President and Chief Executive Officer as part of the Succession Plan, (the “CEO Performance Units”). The performance-based restricted units will vest based on Cumulative Spectrum Proceeds Monetized (“CSPM”) metric over a four-year measurement period commencing on June 24, 2020, with 30,049 units vesting if the target CSPM metric is achieved and up to 60,098 vesting if the maximum CSPM metric is achieved. In connection with awarding the CEO Performance Units, the Compensation Committee rescinded the previously reported June 2020 award for up to 60,098 performance-based restricted units.

For the three and nine months ended December 31, 2020, the Company recorded $1,000 and reversed approximately net $65,000 of stock compensation expense relating to the CEO Performance Units, respectively. As of December 31, 2020, there was approximately $1.1 million of unvested compensation expense for the outstanding performance-based restricted stock units related to the December 31, 2020 CEO Performance Units.

A summary of stock option activity for the nine months ended December 31, 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, 2021 with 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.

On October 22, 2020, the Company awarded a Senior Executive Officer a stock option to purchase 62,500 shares of common stock. The award has a contractual life of 10 years. 25% of the option shares will vest on November 15, 2021 with the remaining shares vesting in three equal annual installments, based on 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 nine months ended December 31, 2020 were: the expected life of the award was 6.07 years; the risk-free interest rate were 0.43% to 0.51%; the expected volatility rate were 53.41% to 52.43%; the expected dividend yield was 0.0%; and the expected forfeiture rate were 0% to 2%.

Stock compensation expense related to the amortization of the fair value of stock options ~~(other than~~ issued was approximately $0.4 million and $0.9 million for the ~~performance~~three and nine months ended December 31, 2020. For the three and nine months ended December 31, 2019, stock ~~options) issued~~compensation expense was approximately $0.3 million and $1.3 million, ~~for the three and nine months ended~~respectively.

As of December 31, 2020, there was ~~, 2019. For the three and nine months ended~~ ~~December 31, 2018, the comparable stock compensation expense was~~ approximately ~~$0.7 million and $5.6 million, respectively, which included $1.1~~$2.2 million of unrecognized compensation expense related to non-vested stock options granted under the ~~consulting~~Company’s stock option plans which is expected to be recognized over a weighted-average period of 1.5 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 ~~transition agreements~~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 ~~$2.1 million~~(ii) the lack of ~~expense related to the modification of option grants held~~objection by the Company’s ~~former chief executive officer~~Board to the terms and ~~president. The stock compensation expense is included in general~~conditions (including, but not limited to, the rebanding, clearing and ~~administrative expense~~relocation procedures, license assignment and award mechanisms and technical and operational rules) set forth or referenced in the ~~accompanying Consolidated Statement of Operations.~~Final Order and

~~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~~(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 ~~acquiring goods~~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 ~~services~~(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. As of December 30, 2020, not all of these conditions had been achieved, and therefore, the 33,780 performance-based stock option shares expired 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 ~~nonemployees. ASU 2018-07 is effective~~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 ~~fiscal year~~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. The goal was achieved when the Report and Order was effective in August 2020.

For the nine months ended December 31, 2020, ~~beginning April 1, 2019. As a result of adopting the ASU on April 1, 2019,~~ the Company ~~reduced its accumulated deficit by $174,000~~recognized $0.8 million based on the achievement of the Target Goal under the performance-based stock options, upon the Report and Order becoming effective in August 2020. As of December 31, 2020, there were no unvested compensation expense relating to the outstanding performance-based stock options.

~~As of~~ ~~December 31~~, 2019, there was approximately $2.8 million of unrecognized compensation cost 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 years.

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, the impact of COVID-19 on the Company’s targeted utility and critical infrastructure customers, 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 December 31, 2020, ~~2019,~~ the Company sells its pdvConnect product and extends credit predominately to one ~~third-party~~Tier 1 domestic 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 nine months ended December 31,, 2020, the Company had one Tier 1 domestic carrier and one reseller that accounted for approximately 20% and 21% of total operating revenues, respectively. For the three and nine months ended December 31, 2019, the Company had one domestic carrier and one reseller that accounted for approximately 23% of ~~total~~ operating revenues, respectively. ~~For the three and nine months ended~~ ~~December 31, 2018, the Company had one domestic carrier that accounted for approximately 21% and 28% of operating revenues, respectively.~~

As of December 31,~~, 2019,~~ 2020, the Company had one Tier 1 domestic carrier and one reseller that accounted for approximately 89% of total accounts receivable. As of March 31, 2020, the Company had one domestic carrier and one reseller that accounted for approximately ~~87%~~71% of total accounts receivable~~receivable. As of March 31, 2019, the Company had one domestic carrier that accounted for approximately 31% of accounts 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”). The Report and Order was published in the Federal Register on July 16, 2020 and became effective on August 17, 2020. 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~~broadband licenses we secure to our targeted utility and critical infrastructure customers.

In December 2020, the Company entered into its first long-term 900 MHz broadband spectrum lease agreements (the “Lease Agreements”) covering Ameren Corporation’s (“Ameren”) service territories. The Lease Agreements will enable Ameren to deploy a private LTE network in its service territories in Missouri and Illinois covering approximately 7.5 million people. Each Lease Agreement is for a term of up to 40 years, consisting of an initial term of 30 years, with an option to extend for an additional 10-year term for an additional payment. The scheduled prepayments for the 30-year initial terms of the Lease Agreements total approximately $48 million dollars. Full prepayment for the 30-year initial terms is due by 2026, with approximately 50% of the total prepayments due by June 2021. The timing of these payments is subject to the Company’s timely clearing of spectrum and delivery of broadband spectrum ~~assets~~licenses. The Company is proactively clearing incumbents from the 900 MHz broadband segments in Ameren’s service territories and expects to ~~critical infrastructure~~begin delivering the broadband spectrum licenses by county in June 2021. The Company expects to recognize revenue from the Lease Agreements commencing in fiscal year 2022. Revenue will be recognized as spectrum is delivered based on straight-line amortization over the initial 30-year terms of the Lease Agreements. The Lease Agreements are subject to customary approval terms and ~~enterprise customers. We maintain offices in Woodland Park, New Jersey~~conditions, including the approval by both companies’ boards of directors and ~~McLean, Virginia.~~ the Company’s ability to secure broadband licenses from the FCC.

In the Report and Order, the FCC ~~Initiatives~~reconfigured the 900 MHz band to create a 6 MHz broadband segment (240 channels) and 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 the Broadband applicant meets 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 nine months ended December 31, 2020.

As a broadband applicant, we can satisfy the three eligibility requirements 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 of 900MHz channels 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, the broadband applicant 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. When the broadband applicant does not surrender 240 channels, they will pay for the difference between the spectrum held 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 each 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 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 nine 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~~was published in the ~~900 MHz Proceeding~~Federal Register on July 16, 2020 and ~~these costs could be significant. We are also exploring opportunities to offer our customers value-added engineering and commercial services.~~became effective on August 17, 2020.

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~~

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.

~~Under these agreements,~~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 which ended 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. As of December 31, 2019, the Company also completed the transfer of the intellectual property rights with a net book value of $174,000 to the LLC and recorded an investment in the LLC amounting to $34,000 and loss on disposal of intangible asset amounting to $140,000 relating to the transfer of the intellectual property.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 nine months ended December 31, ~~2019~~2020 and ~~2018~~2019

The following table sets forth our results of operations for the three and nine months ended December 31, 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
December 31,

Aggregate Change

Nine months ended
December 31,

Aggregate Change
(in thousands)

2019

2018

Amount

%

2019

2018

Amount

%

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Service revenue

$
178

$
1,155

$
(977)

-85%

$
690

$
3,798

$
(3,108)

-82%
Spectrum lease revenue

183

183

—

0%

547

547

—

0%
Other revenue

—

164

(164)

-100%

—

854

(854)

-100%
Total operating revenues

$
361

$
1,502

$
(1,141)

-76%

$
1,237

$
5,199

$
(3,962)

-76%


	Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change
(in thousands)	2020		2019		2020 from 2019			2020		2019		2020 from 2019
	(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
Service revenue	$	53	$	178	$	(125)	-70%	$	193	$	690	$	(497)	-72%
Spectrum lease revenue		183		183		—	0%		547		547		—	0%
Total operating revenues	$	236	$	361	$	(125)	-35%	$	740	$	1,237	$	(497)	-40%

Overall operating revenues decreased by ~~$1.1~~$0.1 million, or ~~76%~~35%, to $0.2 million for the three months ended December 31, 2020 from $0.4 million for the three months ended December 31, ~~2019 from $1.5 million for the three months ended December 31, 2018.~~2019. For the nine months ended December 31, ~~2019,~~2020, operating revenue decreased by ~~$4.0~~$0.5 million, or ~~76%~~40%, to ~~$1.2~~$0.7 million from ~~$5.2~~$1.2 million for the nine months ended December 31, ~~2018.~~2019. The decrease in the three and nine month periods ~~were~~are 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 customers in our pdvConnect business.~~LLC.

Three months ended
December 31,

Aggregate Change

Nine months ended
December 31,

Aggregate Change

(in thousands)

2019

2018

Amount

%

2019

2018

Amount

%

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Direct cost of revenue (exclusive of depreciation and amortization)

$
631

$
974

$
(343)

-35%

$
2,248

$
3,599

$
(1,351)

-38%

General and administrative

4,740

5,216

(476)

-9%

14,145

14,310

(165)

-1%

Sales and support

949

620

329

53%

2,922

3,110

(188)

-6%

Product development

610

647

(37)

-6%

1,846

1,846

—

0%

Depreciation and amortization

1,135

695

440

63%

2,412

2,140

272

13%

Stock compensation expense (exclusive of restructuring related costs)

1,404

1,459

(55)

-4%

4,393

4,419

(26)

-1%

Restructuring costs

35

418

(383)

-92%

195

8,540

(8,345)

-98%

Impairment of long-lived assets

33

200

(167)

-84%

33

730

(697)

-95%

Total operating expenses

$
9,537

$
10,229

$
(692)

-7%

$
28,194

$
38,694

$
(10,500)

-27%


	Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change
(in thousands)	2020		2019		2020 from 2019			2020		2019		2020 from 2019
	(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
Direct cost of revenue (exclusive of depreciation and amortization)	$	543	$	631	$	(88)	-14%	$	1,606	$	2,248	$	(642)	-29%
General and administrative		6,300		4,740		1,560	33%		17,620		14,145		3,475	25%
Sales and support		612		949		(337)	-36%		1,904		2,922		(1,018)	-35%
Product development		1,098		610		488	80%		2,595		1,846		749	41%
Depreciation and amortization		1,020		1,135		(115)	-10%		3,418		2,412		1,006	42%
Stock compensation expense		2,672		1,404		1,268	90%		13,245		4,393		8,852	202%
Restructuring costs		44		35		9	26%		65		195		(130)	-67%
Impairment of long-lived assets		11		33		(22)	-67%		40		33		7	21%
Total operating expenses	$	12,300	$	9,537	$	2,763	29%	$	40,493	$	28,194	$	12,299	44%

Direct cost of revenue. Direct cost of revenue decreased by ~~$0.3~~$0.1 million, or ~~35%~~14%, to $0.5 million for the three months ended December 31, 2020 from $0.6 million for the three months ended December 31, ~~2019 from $0.9 million for the three months ended December 31, 2018.~~2019. For the nine months ended December 31, ~~2019,~~2020, direct cost of revenue decreased by ~~$1.4~~$0.6 million, or ~~38%~~29%, to ~~$2.2~~$1.6 million from ~~$3.6~~$2.2 million for the nine months ended December 31, ~~2018.~~2019. The ~~decrease~~decreases in the three and nine months ended December 31, ~~2019 were attributable to~~2020 primarily resulted from lower support costs related to ~~radio sales as a result of~~ the transfer of ~~our~~pdvConnect customers to the LLC. In addition, in the nine months period ended December 31, 2019, we recorded a $0.2 million impairment of contract costs related to the TeamConnect customers transferred to A BEEP and Goosetown ~~as part of our December 2018 restructuring efforts as discussed~~that we incurred in ~~Note 3 above.~~ Fiscal 2020.

General and administrative expenses. General and administrative expenses increased by $1.6 million, or 33%, to $6.3 million for the three months ended December 31, ~~2019 decreased by $0.5 million, or 9%, to~~2020 from $4.7 million ~~from $5.2 million~~ for the three months ended December 31, ~~2018.~~2019. The increase for the three months period was primarily due to higher compensation costs due to increased headcount as well as a realignment of the business development team from sales and support to general and administrative. For the nine months ended December 31, ~~2019,~~2020, general and administrative expenses ~~decreased~~increased by ~~$0.2~~$3.5 million, or 1%25%, to ~~$14.1~~$17.6 million from ~~$14.3~~$14.1 million for the nine months ended December 31, ~~2018.~~2019. The ~~decrease~~increase of ~~$0.5~~$3.5 million ~~for the three months ended December 31, 2019 resulted mainly from lower professional services. The $0.2 million decrease~~ for the nine months ended December 31, ~~2019~~2020 resulted ~~primarily~~mainly from $2.4 million higher employee related costs due to increased headcount as well as the realignment of the business development team and $1.1 million higher consulting and professional services charges related to our strategic spectrum initiatives. These increases were partially offset by a $0.3 million decrease in employee related travel and meeting costs due to the pandemic.

$0.1 million lower professional services and $0.6 million lower employee related costs due to lower headcount resulting from the restructuring activities in Fiscal 2019, partially offset by $0.5 million increase in costs related to the monthly service fee for the transfer of our TeamConnect customers.

Sales and support expenses. Sales and support expenses ~~increased~~decreased by $0.3 million, or ~~53%~~36%, to ~~$0.9~~$0.6 million for the three months ended December 31, ~~2019~~2020 from ~~$0.6~~$0.9 million for three months ended December 31, ~~2018.~~2019. For the three months ended December 31, 2020, the decrease resulted from the realignment of the business development team from Sales and support to General and administrative. For the nine months ended December 31, ~~2019,~~2020, sales and support expenses decreased by ~~$0.2~~$1.0 million, or 6%35%, to ~~$2.9~~$1.9 million from ~~$3.1~~$2.9 million for the nine months ended December 31, ~~2018. The increase in the three months ended December 31, 2019 was due to higher salaries and consulting costs due to the realignment of the business.~~2019. The decrease in the nine months ended ~~December 31, 2019 was attributable~~primarily resulted from $0.7 million related to the ~~impact~~realignment of the ~~reduction in workforce that occurred~~business development team from Sales and support to General and administrative, $0.1 million lower employee related travel and meeting costs due to the pandemic a $0.2 million decrease for rebranding efforts in Fiscal ~~2019 resulting~~2020 that did not occur in ~~lower headcount~~Fiscal 2021 and ~~related costs, partially offset by the~~a $0.3 million impairment of contract costs incurred in Fiscal 2020 related to the TeamConnect customers transferred to A BEEP and ~~Goosetown.~~Goosetown, partially offset by $0.3 million increase in headcount and employee related costs resulting from building the sales team

Product development expenses. Product development expenses ~~remained relatively flat~~increased by $0.5 million, or 80%, to $1.1 million for the three months ended December 31, 2020 from $0.6 million for three months ended December 31, 2019. The increase in the three months ended December 31, 2020 mainly resulted from $0.2 million higher consulting charges and $0.3 million higher technology and equipment related charges to assist with the development of future product offerings. For the nine months ended December 31, ~~2019 as compared~~2020, product development expenses increased by $0.7 million, or 41%, to $2.6 million from $1.8 million for the ~~three and~~ nine months ended December 31, ~~2018.~~2019. The increase in the nine months ended December 31, 2020 is primarily attributable to $0.5 million higher consulting charges, $0.3 million higher technology and equipment related charges to assist with the development of future product offerings, offset by $0.2 million lower employee related travel and meeting costs due to the pandemic.

Depreciation and amortization. Depreciation and amortization remained relatively flat for the three months ended December 31, ~~2019~~2020 as compared to the three months ended December 31, 2019. For the nine months ended December 31, 2020, depreciation and amortization increased by ~~$0.4~~$1.0 million, or ~~63%~~42%, to ~~$1.1~~$3.4 million from ~~$0.7~~$2.4 million for the nine months ended December 31, 2019. The increase for the nine months resulted from the change in the useful life of our network sites during the last two quarters of Fiscal 2020 that resulted in higher depreciation expense for the nine months ended December 31, 2020.

Stock compensation expense. Stock compensation expense increased by $1.3 million, or 90%, to $2.7 million for the three months ended December 31, ~~2018.~~2020 from $1.4 million for the three months ended December 31, 2019. For the nine months ended December 31, ~~2019, depreciation~~2020, stock and ~~amortization~~compensation expense increased by ~~$0.3~~$8.9 million, or ~~13%~~202%, to ~~$2.4~~$13.2 million from ~~$2.1~~$4.4 million for the nine months ended December 31, ~~2018. During~~2019. The increase of $1.3 million in the three months ended December 31, ~~2019,~~2020 was attributable to the ~~Company adjusted~~higher valuation of grants awarded in Fiscal 2021. The increase in the ~~estimated non-cash capitalized asset retirement obligations and useful life for its network sites, resulting in additional depreciation expense of $0.5 million for the three and~~ nine months ended December 31, ~~2019.~~

~~Stock~~2020 was attributable to $5.1 million in stock compensation expense ~~(exclusive~~recognized upon the achievement of ~~restructuring related costs).~~ ~~Stock compensation expense exclusive of restructuring related costs for~~ the ~~three and nine months ended December 31, 2019 remained relatively flat as compared to~~Target Goal under the ~~three and nine months ended December 31, 2018.~~

~~As discussed in Note 11, we have outstanding performance~~performance-based restricted stock units and performance-based stock options, ~~that the recipient would receive~~ upon the ~~Company’s attainment~~Report and Order becoming effective in August 2020 (see Note 10), $0.8 million relating to the Type III modification to the restricted stock units held by the former Chairman of the ~~applicable performance goals, which are: prior~~Board upon his transition to ~~January 13, 2020 (A) issuance 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 (B) the lack of objection by the Company's board of directorsconsultant to the ~~terms~~Company 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 $5.0 million as of December 31, 2019, of whichapproximately $3.0 million ~~is related~~due to ~~the performance stock units and $2.0 million is related to the performance stock options.~~ higher valuation of grants awarded in Fiscal 2021.

Restructuring costs. Restructuring costs ~~of $35,000 and $195,000 were incurred in~~remained relatively flat for the three ~~and~~months ended December 31, 2020 compared to the three months ended December 31, 2019. Restructuring costs decreased by $130,000, or 67%, to $65,000 for the nine months ended December 31, ~~2019~~2020 from $195,000 for the nine months ended December 31, 2019. The decrease in the nine months ended December 31, 2020 was mainly ~~for employee severance and benefit costs relating~~due to the completion of the December 2018 cost reduction and restructuring actions ~~related to~~associated with 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.~~LLC in Fiscal 2020.

For the three months ended December 31, 2018, $0.4 million of restructuring costs was recorded for the cash payments under the consulting and transition agreements for other key employees. For the nine months ended December 31, 2018, $8.5 million of the restructuring costs were incurred, as a result of the April, June and December 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 three and nine months ended December 31, ~~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.~~$11,000 and $40,000 non-cash impairment charge for long-lived assets for network sites, respectively. For the three and nine months ended December 31, 2019, the $33,000 non-cash impairment charge for long-lived assets consisted of $22,000 for property and equipment and $11,000 for a right of use asset to reduce the carrying values to zero.


	Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change			Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change
(in thousands)	2019		2018			Amount	%	2019		2018			Amount	%	2020		2019		2020 from 2019			2020		2019		2020 from 2019
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
Interest income	$	517	$	393	$	124	32%	$	1,505	$	1,079	$	426	39%
(Gain)/loss from disposal of intangible assets, net															$	—	$	140	$	(140)	-100%	$	3,849	$	140	$	3,709	2649%

For the nine months ended December 31, 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 $5.0 million loss from disposal of the intangible assets in the Consolidated Statements of Operations for the nine months ended December 31, 2020.

In September 2020, we closed an agreement with a third party for the exchange of 900 MHz licenses. Under the agreement, we received spectrum licenses at their estimated fair value of approximately $0.2 million and a payment of $1.2 million in cash, of which we previously received $0.6 million as a refundable deposit when the agreement was executed in Fiscal 2018 and we are entitled to receive the remaining $0.6 million upon receipt of FCC approval and closing of the agreement in September 2020. Under the agreement, we transferred spectrum licenses with a book value of approximately $0.3 million to the third party. We recognized a $1.1 million gain from disposal of intangible assets in the Consolidated Statement of Operations when the deal closed in September 2020.

For the nine months ended December 31, 2019, we recorded a loss on disposal of capitalized patent costs amounting to $140,000 relating to the transfer of the intellectual property to the LLC.

For the nine months ended December 31, 2020, we incurred approximately $6,000 in a gain on disposal of right of use assets relating to early termination of operating leases.

For the nine months ended December 31, 2019, we disposed network, computer and other equipment relating to our pdvConnect application services resulting in a $62,000 loss on disposal on long-lived assets.

Interest income ~~increased~~decreased by ~~32%~~95% and ~~39%~~93% for the three and nine months ended December 31, ~~2019, respectively,~~2020, as compared to the three and nine months ended December 31, ~~2018~~2019 due ~~to the return on the net proceeds from the July 2019 follow-on offering.~~a lower cash balance driven by payments for our spectrum initiatives, along with lower effective money market rates.


	Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change			Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change
(in thousands)	2019		2018			Amount	%	2019		2018			Amount	%	2020		2019		2020 from 2019			2020		2019		2020 from 2019
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
Other income (expenses)	$	2	$	(16)	$	18	-113%	$	154	$	(16)	$	170	100%
Other income															$	110	$	142	$	(32)	-23%	$	332	$	356	$	(24)	-7%

~~For~~Other income remained relatively flat for the three and nine months ended December 31, ~~2019, other income represents payments received in consideration for~~2020 as compared to the ~~customers~~three and ~~rights transferred to A BEEP and Goosetown.~~ nine months ended December 31, 2019.


	Three months ended December 31,				Aggregate Change			Nine months ended December 31,					Aggregate Change			Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change
(in thousands)	2019		2018			Amount	%	2019		2018				Amount	%	2020		2019		2020 from 2019			2020		2019		2020 from 2019
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)	��				(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
Loss on equity method investment	$	(23)	$	—	$	(23)	-100%	$	(8)	$	—		$	(8)	-100%
(Loss)/income on equity method investment																$	(7)	$	(23)	$	16	-70%	$	(23)	$	(8)	$	(15)	188%

The Company reported loss on investment for the three and nine months ended December 31, 2020 amounting to ($7,000) and ($23,000), respectively, compared to loss on investment for the three and nine months ended December 31, 2019 ~~is due~~amounting to ($23,000) and ($8,000), respectively, relating to the 19.5% ownership interest in TeamConnect LLC.


	Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change			Three months ended December 31,				Aggregate Change			Nine months ended December 31,				Aggregate Change
(in thousands)	2019		2018			Amount	%	2019		2018			Amount	%	2020		2019		2020 from 2019			2020		2019		2020 from 2019
		(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)				(Unaudited)		(Unaudited)					(Unaudited)		(Unaudited)
Income tax expense	$	131	$	—	$	131	100%	$	594	$	—	$	594	100%	$	155	$	131	$	24	18%	$	311	$	594	$	(283)	-48%

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 and nine months ended December 31, 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 and nine months ended December 31, 2020, we recorded a total deferred tax expense of $0.1 million and $0.3 million, respectively, 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 income tax expense of $0.1 million and $0.6 million was recorded for the three and nine months ended December 31, 2019, respectively. The state income tax expense portion resulted from our determination that most of our state operating loss carryforwards are not indefinite. As a result, we recorded approximately $56,000 and $467,000 of state deferred tax expense and additional related state deferred tax liability reflecting our inability to use the state NOL carryforward against the indefinite-lived intangible for the three and nine months ended December 31, 2019, respectively. A non-cash federal deferred income tax expense and liability of $75,000 and $127,000 were recorded for the three and nine months ended December 31, 2019, respectively.

For the three and nine months ended December 31, 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.

At December 31, ~~2019,~~2020, we had cash and cash equivalents of ~~$150.2~~$108.5 million.

Our accounts receivable are heavily concentrated in one Tier 1 domestic carrier ~~partner and one reseller.~~partner. As of December 31, ~~2019,~~2020, our net accounts receivable balance was approximately ~~$83,000,~~$19,000, of which ~~approximately $72,000,~~$17,000, or approximately ~~87%~~89%, was owed by ~~these~~this one Tier 1 domestic ~~carrier partner and one reseller.~~carrier.


	Nine months ended December 31,				Nine months ended December 31,
(in thousands)	2019		2018		2020		2019
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Net cash used by operating activities	$	(21,271)	$	(16,960)	$	(20,669)	$	(20,455)
Net cash used by investing activities	$	(1,205)	$	(1,434)	$	(11,116)	$	(2,021)
Net cash provided by financing activities	$	95,997	$	2,425	$	2,818	$	95,997

Net cash used by operating activities. Net cash used in operating activities was ~~$21.3 million for the three months ended December 31, 2019, as compared to $17.0~~$20.7 million for the nine months ended December 31, ~~2018.~~ 2020, as compared to $20.5 million for the nine months ended December 31, 2019. The majority of net cash used by operating activities during the nine months ended December 31, 2020 resulted from our net loss of $43.5 million partially offset by non-cash stock-based compensation of $13.2 million, net loss from disposal of intangible assets of $3.8 million and depreciation of $3.4 million. The majority of net cash used by operating activities during the nine months ended December 31, 2019 resulted from our net loss of $25.9 million offset by non-cash stock-based compensation of $4.4 million.The majority of net cash used by operating activities during the nine months ended December 31, 2018 resulted from the net loss of $32.4 million, partially offset by non-cash stock-based compensation of $8.9 million.

Net cash used by investing activities. Net cash used in investing activities was approximately ~~$1.2~~$11.1 million for the nine months ended December 31, ~~2019,~~2020 as compared to ~~$1.4~~$2.0 million used for the nine months ended December 31, ~~2018.~~2019. The net cash used by investing activities during the nine months ended December 31, 2020 resulted from wireless license acquisitions net of change in refundable deposits amounting to $10.9 million and purchase of equipment amounting to $0.2 million. The net cash used during the

nine months ended December 31, 2019 resulted from wireless license acquisitions including refundable deposits amounting to ~~$0.8~~$1.6 million and purchase of equipment amounting to $0.4 million. ~~The net cash used during the nine months ended December~~

Net cash provided by financing activities. For the nine months ended December 31, 2020 net cash provided by financing activities was $2.8 million primarily resulting from the proceeds from stock option exercises. For the nine months ended December 31, 2019, net cash provided by financing activities was $96.0 million primarily from the $94.2 million net proceeds from the July 2019 follow-on offering and $2.2 million from the proceeds from stock option exercises. For the nine months ended December 31, 2018, net cash provided by financing activities was $2.4 million which was principally due to $2.6 million in cash received from the proceeds from stock option exercises.

~~Net proceeds~~We are now engaged in qualifying for and securing broadband licenses from ~~July 2019 follow-on offering.~~ ~~In July 2019, we completed a registered follow-on offering in which it sold 2,222,223 shares of common stock at a purchase price~~the 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 ~~our FCC initiatives; activities~~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 December 31, ~~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 December 31, 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 inmaterially affect, 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 in 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 December 31, 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”~~“Annual Report”) ~~and our Quarterly Report on Form 10-Q~~. Except for the ~~quarter ended June 30, 2019, filed with~~additional risk factor below related to the ~~SEC on August 8, 2019~~lease agreements (the ~~“First Quarter Form 10-Q”~~“Lease Agreements”)~~. There~~ the Company entered into covering Ameren Corporation’s (“Ameren’s”) service territories, 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.

The Company’s Lease Agreements covering Ameren’s service territories are subject to contingencies, including approval by Ameren’s Board of Directors, and obligations by the Company, including the delivery of cleared spectrum and broadband licenses in Ameren’s service territories, and as a result, there is no assurance that the Company will receive payments from Ameren in the amounts and on the timeline expected by the Company, or at all.

In December 2020, the Company announced that it had entered into long-term Lease Agreements for 900 MHz broadband spectrum licenses covering Ameren’s service territories in Missouri and Illinois. The Lease Agreements are subject to contingencies, including the approval of the Lease Agreements by Ameren’s Board of Directors. In addition, the Company is required to clear incumbents from the 900 MHz segment in Ameren’s service territories and apply for and obtain broadband licenses from the Federal Communications Commission (the “FCC”) in these service territories. There is no assurance that Ameren’s Board of Directors will approve the Lease Agreements. Further, there is no assurance that the Company will be able to clear incumbents from Ameren’s service territories and obtain broadband licenses from the FCC on the timeline required under the Lease Agreements, or at all. Ameren’s obligations under the Lease Agreements, including its payment obligations and the timing of any payments to the Company, are contingent on the Company delivering cleared spectrum and broadband spectrum licenses on a timely basis and for a required portion of Ameren’s service territories. As a result, there is no assurance that the Company will receive payments from Ameren in the amounts and on the timeline expected by the Company, or at all. Moreover, Ameren may not elect to exercise its option for the additional 10-year terms under the Lease Agreements, which will reduce the overall value of the Lease Agreements to the Company. Further, the Company’s costs to clear incumbents and qualify for broadband licenses in Ameren’s service territories may be significantly more than currently anticipated by the Company, which will increase the Company’s operating expenses and reduce the net value of the Lease Agreements to the Company.

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 December 31, 2019 we have used approximately $46.1 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. None~~There has been no material change in the expected uses of the net proceeds from the offering as described in our Registration Statement.~~.

(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.

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.


	~~Asset Retirement Obligations~~
~~Balance at March 31, 2019~~	$	~~328~~
~~Revision of estimate~~		~~503~~
~~Accretion expense~~		—
~~Balance at December 31, 2019~~		~~831~~
~~Less amount classified as current – included in accounts payable and accrued expenses~~		~~164~~
~~Noncurrent liabilities - included in other liabilities~~	$	~~667~~


	Contract Assets
Balance at March 31, ~~2019~~2020	$	~~436~~ —
Additions		126
Amortization		—
Impairment		~~(436)~~ —
Balance at December 31, ~~2019~~2020		126
Less amount classified as current assets - included in prepaid expenses and other current assets		(4)
Noncurrent assets - included in other assets	$	— 122


	Wireless Licenses
Balance at March 31, ~~2019~~2020	$	~~107,548~~111,526
Acquisitions		~~792~~11,589
~~Reclassed to property and equipment~~Exchanges - licenses received		~~(5)~~196
Exchanges - licenses surrendered		(262)
Cancellations		(4,983)
Balance at December 31, ~~2019~~2020	$	~~108,335~~118,066


	Equity Method Investment
Equity method investment carrying value at March 31, ~~2019~~2020	$	—
~~Contribution~~		4839
Share of net loss from LLC		~~(8)~~(23)
Equity method investment carrying value at December 31, ~~2019~~2020	$	4016


	Restructuring Activities
Balance at March 31, ~~2019~~2020	$	~~2,655~~565
Cash payments		~~(1,577)~~(565)
Balance at December 31, ~~2019 (classified as current liabilities - restructuring reserve)~~2020	$	~~1,078~~ —



	Estimated	December 31,		March 31,
	useful life	2019		2019
Network sites and equipment	5-10 years	$	16,187	$	15,954
Furniture and fixture and other equipment	2-5 years		291		1,026
Computer equipment	5-7 years		143		140
Computer software	1-7 years		480		28
Leasehold improvements	Shorter of the lease term or 10 years		234		351
			17,335		17,499
Less accumulated depreciation			9,333		7,952
			8,002		9,547
Construction in process			86		283
Property and equipment, net		$	8,088	$	9,830


	Restructuring Activities
Balance at March 31, ~~2019~~2020	$	~~679~~71
Severance costs		~~206~~
~~Facility exit~~		~~(28)~~42
Cash payments		~~(699)~~(77)
Balance at December 31, ~~2019~~		~~158~~
~~Less amount classified as current liabilities - restructuring reserve~~		~~101~~
~~Noncurrent liabilities - included in other liabilities~~2020	$	5736


	December 31, 2020		March 31, 2020
Non-current assets - right of use assets, net	$	5,404	$	6,500
Current liabilities - operating lease liabilities	$	1,529	$	1,695
Non-current liabilities - operating lease liabilities	$	5,928	$	7,051



		Weighted
		Average
	Performance	Grant Day
	Stock	Fair Value
Performance stock outstanding at March 31, 2020	138,984	$	46.85
Granted	60,098		43.76
Forfeited/cancelled	(77,817)		48.04
Vested	(91,216)		46.85
Performance stock outstanding at December 31, 2020	30,049	$	37.60



	Options	Weighted Average Exercise Price
Options outstanding at March 31, 2019	1,923,634	$	23.64
Options granted	—		—
Options exercised	(97,323)		(21.78)
Options forfeited/expired	(10,875)		(48.23)
Options outstanding at December 31, 2019	1,815,436	$	23.54



	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 December 31, 2019	179,945	$	25.83



	Options	Weighted Average Exercise Price
Options outstanding at March 31, 2020	1,807,466	$	23.93
Options granted	123,058		42.04
Options exercised	(154,729)		(22.78)
Options forfeited/expired	(2,500)		(20.00)
Options outstanding at December 31, 2020	1,773,295	$	25.30




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.
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.
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:	February ~~4, 2020~~8, 2021		/s/ ~~Morgan E. O’Brien~~Robert H. Schwartz
		~~Morgan E. O’Brien~~Robert H. Schwartz
		President and Chief Executive Officer (Principal Executive Officer)

Date:	February ~~4, 2020~~8, 2021		/s/ Timothy A. Gray
		Timothy A. Gray
		Chief Financial Officer (Principal Financial and Principal Accounting Officer)