ex99-1.htm

EX-99 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm

Exhibit 99.1

Towerstream Reports Third Quarter 2014 Results

MIDDLETOWN, R.I., November 10, 2014 – Towerstream Corporation (NASDAQ: TWER) (the “Company”), a leading 4G and Small Cell Rooftop Tower company, announced results for the third quarter ended September 30, 2014.

Third Quarter Operating Highlights

HetNets Tower Corporation Subsidiary

●

Revenues increased to $0.8 million in the third quarter 2014 compared to $0.5 million in the third quarter 2013.

●

Expanded Wi-Fi locations for large cable company customer by approximately 20% over the twelve months ended September 30, 2014.

Towerstream Corporation

●

Total customer average revenue per user (“ARPU”) totaled $769 during the third quarter 2014 as compared to $760 for the second quarter 2014 and $747 for the third quarter 2013.

●

ARPU of new customers totaled $651 during the third quarter 2014 as compared to $626 for the second quarter 2014 and $648 for the third quarter 2013.

●

Customer churn for the third quarter 2014 was 1.69% compared to 1.71% for the second quarter 2014 and the third quarter 2013.

●

New Cogent-like offering of 100 Mbps for $699 continues to gain traction with 22 customer installations and 17 buildings lit.

●

Completed a $35 million debt financing in October 2014.

Management Comments

"We are seeing increased activity in the densification of networks in major urban markets where our robust fixed wireless backhaul network provides us with a unique advantage over competing solutions" stated Jeff Thompson, President and Chief Executive Officer. "Carriers are now physically evaluating our rooftop locations for potential initial deployments and we believe the FCC’s newly issued new order, designed to streamline the regulatory process, will accelerate the deployment of small cell infrastructure."

"Our recently completed debt financing provides us with the capital needed to support the strategic growth objectives for our fixed wireless and shared wireless businesses" stated Joseph Hernon, Chief Financial Officer. "We have expanded the number of buildings powered with our 100 megabyte offering and are visiting potential locations for a second sales center designed to re-ignite growth in our fixed wireless segment."

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Selected Financial Data and Key Operating Metrics

(All dollars are in thousands except ARPU)

	(Unaudited)
	Three months ended
	9/30/2014			6/30/2014			9/30/2013

Revenues	$	8,302		$	8,265		$	8,401

Gross margin
Consolidated		25	%		26	%		35	%
Fixed wireless		65	%		65	%		68	%
Capital expenditures
Fixed wireless	$	1,154		$	1,403		$	1,243
Shared wireless infrastructure		590			490			681
Corporate		22			205			200
Churn rate (1)		1.69	%		1.71	%		1.71	%
ARPU (1)	$	769		$	760		$	747
ARPU of new customers (1)		651			626			648
Cash and cash equivalents		11,891			17,289			32,794

(1)

See Non-GAAP Measures below for the definitions of Churn, ARPU and ARPU of new customers.

Consolidated Statement of Operations (Unaudited)

(All dollars are in thousands except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013

Revenues	$	8,302		$	8,401		$	24,946		$	24,912

Operating Expenses
Cost of revenues		6,211			5,445			18,169			15,592
Depreciation and amortization		3,318			3,846			10,295			11,653
Customer support		1,244			1,221			3,563			3,800
Sales and marketing		1,353			1,369			4,174			4,333
General and administrative		2,382			2,600			7,726			8,374
Total Operating Expenses		14,508			14,481			43,927			43,752
Operating Loss		(6,206	)		(6,080	)		(18,981	)		(18,840	)
Other Income/(Expense)
Gain on business acquisition		-			-			-			1,004
Interest expense, net		(44	)		(60	)		(166	)		(154	)
Other income (expense), net		(4	)		(3	)		(11	)		(11	)
Total Other Income/(Expense)		(48	)		(63	)		(177	)		839
Net Loss	$	(6,254	)	$	(6,143	)	$	(19,158	)	$	(18,001	)

Net loss per common share – basic and diluted	$	(0.09	)	$	(0.09	)	$	(0.29	)	$	(0.28	)
Weighted average common shares outstanding – basic and diluted		66,644			66,402			66,521			64,764

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Statement of Operations - Segment Basis (Unaudited)

	Three Months Ended September 30, 2014
	Fixed Wireless		Shared Wireless Infrastructure			Corporate			Eliminations			Total

Revenues	$	7,554	$	794		$	-		$	(46	)	$	8,302

Operating Expenses
Cost of revenues		2,632		3,610			15			(46	)		6,211
Depreciation and amortization		1,981		1,014			323			-			3,318
Customer support		342		147			755			-			1,244
Sales and marketing		1,239		38			76			-			1,353
General and administrative		64		163			2,155			-			2,382
Total Operating Expenses		6,258		4,972			3,324			(46	)		14,508

Operating Income (Loss)	$	1,296	$	(4,178	)	$	(3,324	)	$	-		$	(6,206	)
Non-cash expenses (a)		2,096		1,084			501			-			3,681
Adjusted EBITDA (b)		3,392		(3,094	)		(2,823	)		-			(2,525	)
Less: Capital expenditures		1,154		590			22			-			1,766
Net Cash Flow (b)	$	2,238	$	(3,684	)	$	(2,845	)	$	-		$	(4,291	)

	Three Months Ended September 30, 2013
	Fixed Wireless		Shared Wireless Infrastructure			Corporate			Eliminations			Total

Revenues	$	7,910	$	536		$	-		$	(45	)	$	8,401

Operating Expenses
Cost of revenues		2,510		2,957			23			(45	)		5,445
Depreciation and amortization		2,755		857			234			-			3,846
Customer support		339		209			673			-			1,221
Sales and marketing		1,206		81			82			-			1,369
General and administrative		126		152			2,322			-			2,600
Total Operating Expenses		6,936		4,256			3,334			(45	)		14,481

Operating Income (Loss)	$	974	$	(3,720	)	$	(3,334	)	$	-		$	(6,080	)
Non-cash expenses (a)		2,836		862			506			-			4,204
Adjusted EBITDA (b)		3,810		(2,858	)		(2,828	)		-			(1,876	)
Less: Capital expenditures		1,243		681			200			-			2,124
Net Cash Flow (b)	$	2,567	$	(3,539	)	$	(3,028	)	$	-		$	(4,000	)

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	Nine Months Ended September 30, 2014
	Fixed Wireless		Shared Wireless Infrastructure			Corporate			Eliminations			Total

Revenues	$	22,811	$	2,273		$	-		$	(138	)	$	24,946

Operating Expenses
Cost of revenues		7,751		10,512			44			(138	)		18,169
Depreciation and amortization		6,599		2,933			763			-			10,295
Customer support		879		502			2,182			-			3,563
Sales and marketing		3,754		178			242			-			4,174
General and administrative		374		467			6,885			-			7,726
Total Operating Expenses		19,357		14,592			10,116			(138	)		43,927

Operating Income (Loss)	$	3,454	$	(12,319	)	$	(10,116	)	$	-		$	(18,981	)
Non-recurring expenses, primarily acquisition related		-		-			91			-			91
Non-cash expenses (a)		6,896		3,136			1,478			-			11,510
Adjusted EBITDA (b)		10,350		(9,183	)		(8,547	)		-			(7,380	)
Less: Capital expenditures		4,044		2,018			339			-			6,401
Net Cash Flow (b)	$	6,306	$	(11,201	)	$	(8,886	)	$	-		$	(13,781	)

	Nine Months Ended September 30, 2013
	Fixed Wireless		Shared Wireless Infrastructure			Corporate			Eliminations			Total

Revenues	$	24,158	$	891		$	-		$	(137	)	$	24,912

Operating Expenses
Cost of revenues		7,229		8,405			95			(137	)		15,592
Depreciation and amortization		8,411		2,633			609			-			11,653
Customer support		901		588			2,311			-			3,800
Sales and marketing		3,825		239			269			-			4,333
General and administrative		444		486			7,444			-			8,374
Total Operating Expenses		20,810		12,351			10,728			(137	)		43,752

Operating Income (Loss)	$	3,348	$	(11,460	)	$	(10,728	)	$	-		$	(18,840	)
Non-recurring expenses, primarily acquisition related		-		-			113			-			113
Non-cash expenses (a)		8,689		2,641			1,549			-			12,879
Adjusted EBITDA (b)		12,037		(8,819	)		(9,066	)		-			(5,848	)
Less: Capital expenditures		3,359		1,049			350			-			4,758
Net Cash Flow (b)	$	8,678	$	(9,868	)	$	(9,416	)	$	-		$	(10,606	)

(a) Includes depreciation and amortization, stock-based compensation, deferred rent expense, loss on property and equipment, and loss on nonmonetary transactions.

(b) See Non-GAAP Measures below for a definition and reconciliation of (i) Adjusted EBITDA to Net Loss and (ii) Net Cash Flow to Net Cash Used in Operating Activities.

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Effective January 1, 2013, the Company has two reportable segments. The Fixed Wireless segment provides fixed wireless broadband services to commercial customers and delivers access over a wireless network transmitting over both regulated and unregulated radio spectrum. The Shared Wireless Infrastructure segment offers a range of rental options on street level rooftops related to (i) the installation of customer owned Small Cells, (ii) Wi-Fi access and the offloading of mobile data, and (iii) backhaul, power and other related telecommunications.

The Corporate group includes corporate overhead and centralized activities which support our overall operations. Corporate overhead includes administrative personnel, including executive management, and other support functions such as information technology and facilities. Centralized operations include network operations, customer care, and the management of network assets. Corporate costs are not allocated to the segments because such costs are managed on a centralized basis. Management also believes that not allocating these centralized costs provides a better reflection of the direct operating performance of each segment.

Summary Condensed Balance Sheet

(All dollars are in thousands)

	(Unaudited) September 30, 2014			(Audited) December 31, 2013
Assets
Current Assets
Cash and cash equivalents	$	11,891		$	28,182
Other		2,478			1,537
Total Current Assets		14,369			29,719

Property and equipment, net		35,382			38,485

Other assets		5,724			6,713

Total Assets		55,475			74,917

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued expenses		2,833			3,774
Deferred revenues and other		2,094			2,247
Total Current Liabilities		4,927			6,021

Long-Term Liabilities		2,845			2,802
Total Liabilities		7,772			8,823

Stockholders’ Equity
Common stock		67			66
Additional paid-in-capital		154,939			154,172
Accumulated deficit		(107,303	)		(88,144	)
Total Stockholders’ Equity		47,703			66,094
Total Liabilities and Stockholders’ Equity	$	55,475		$	74,917

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Summary Condensed Statement of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2014			2013

Cash Flows from Operating Activities
Net loss	$	(19,158	)	$	(18,001	)
Non-cash adjustments:
Depreciation & amortization		10,295			11,653
Stock-based compensation		740			939
Gain on business acquisition		-			(1,004	)
Other		463			65
Changes in operating assets and liabilities		(2,381	)		(2,018	)
Net Cash Used in Operating Activities		(10,041	)		(8,366	)

Cash Flows From Investing Activities
Acquisitions of property and equipment		(5,982	)		(3,897	)
Acquisition of a business, net of cash acquired		-			(223	)
Lease incentive payment from landlord		380			-
Other		(78	)		(148	)
Net Cash Used in Investing Activities		(5,680	)		(4,268	)

Cash Flows From Financing Activities
Payments on capital leases		(596	)		(571	)
Proceeds from stock issuances		30			348
Net proceeds from sale of common stock		-			30,499
Other		(4	)		-
Net Cash (Used in) Provided by Financing Activities		(570	)		30,276

Net (Decrease) Increase In Cash and Cash Equivalents		(16,291	)		17,642
Cash and cash equivalents – beginning		28,182			15,152
Cash and cash equivalents – ending	$	11,891		$	32,794

Fixed Wireless Segment Market data for the three months ended September 30, 2014

(All dollars are in thousands)

Market	Revenues		Cost of Revenues		Gross Margin			Operating Costs		Adjusted Market EBITDA
Los Angeles	$	2,017	$	544	$	1,473	73%	$	514	$	959
New York		1,949		724		1,225	63%		348		877
Boston		1,364		398		966	71%		202		764
Chicago		722		299		423	59%		112		311
Las-Vegas-Reno		338		126		212	63%		1		211
Miami		358		117		241	67%		50		191
Houston		178		71		107	60%		10		97
Dallas-Fort Worth		156		96		60	38%		20		40
San Francisco		270		125		145	54%		105		40
Seattle		74		45		29	39%		(3)		32
Providence-Newport		57		54		3	5%		2		1
Philadelphia		25		33		(8)	-%		4		(12)
Total	$	7,508	$	2,632	$	4,876	65%	$	1,365	$	3,511

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Fixed Wireless Segment Market data for the three months ended September 30, 2013

(All dollars are in thousands)

Market	Revenues		Cost of Revenues		Gross Margin				Operating Costs		Adjusted Market EBITDA
Boston	$	1,633	$	362		$	1,271	78%	$	196	$	1,075
Los Angeles		2,021		549			1,472	73%		419		1,053
New York		1,915		636			1,279	67%		294		985
Chicago		780		284			496	64%		136		360
Miami		383		120			263	69%		132		131
San Francisco		312		128			184	59%		80		104
Las Vegas-Reno		251		127			124	49%		52		72
Houston		154		66			88	57%		23		65
Providence-Newport		115		50			65	57%		11		54
Dallas-Fort Worth		174		101			73	42%		65		8
Seattle		83		48			35	42%		28		7
Nashville		5		15			(10)	-%		2		(12)
Philadelphia		39		24			15	38%		31		(16)
Total	$	7,865	$	2,510		$	5,355	68%	$	1,469	$	3,886

Fixed Wireless Segment Market data for the nine months ended September 30, 2014

(All dollars are in thousands)

Market	Revenues		Cost of Revenues		Gross Margin			Operating Costs		Adjusted Market EBITDA
Los Angeles	$	6,053	$	1,678	$	4,375	72%	$	1,451	$	2,924
New York		5,815		2,045		3,770	65%		964		2,806
Boston		4,347		1,195		3,152	73%		589		2,563
Chicago		2,182		886		1,296	59%		381		915
Miami		1,107		338		769	69%		224		545
Las-Vegas-Reno		819		370		449	55%		100		349
Houston		524		194		330	63%		66		264
San Francisco		831		377		454	55%		254		200
Dallas-Fort Worth		483		290		193	40%		115		78
Seattle		214		140		74	35%		14		60
Providence-Newport		201		152		49	24%		5		44
Philadelphia		95		72		23	24%		25		(2)
Nashville		2		13		(11)	-%		2		(13)
Total	$	22,673	$	7,750	$	14,923	66%	$	4,190	$	10,733

Fixed Wireless Segment Market data for the nine months ended September 30, 2013

(All dollars are in thousands)

Market	Revenues		Cost of Revenues		Gross Margin			Operating Costs		Adjusted Market EBITDA
Los Angeles	$	6,138	$	1,562	$	4,576	75%	$	1,211	$	3,365
Boston		4,931		1,048		3,883	79%		657		3,226
New York		5,741		1,869		3,872	67%		1,002		2,870
Chicago		2,513		856		1,657	66%		362		1,295
Miami		1,152		324		828	72%		303		525
Las Vegas-Reno		913		400		513	56%		150		363
San Francisco		934		342		592	63%		283		309
Houston		387		144		243	63%		66		177
Providence-Newport		356		149		207	58%		48		159
Seattle		314		141		173	55%		90		83
Dallas-Fort Worth		507		290		217	43%		206		11
Philadelphia		119		61		58	49%		69		(11)
Nashville		16		43		(27)	-%		9		(36)
Total	$	24,021	$	7,229	$	16,792	70%	$	4,456	$	12,336

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Operating Outlook and Guidance

●

Revenues for the fourth quarter 2014 are expected to range between $7.4 million to $7.7 million for the Fixed Wireless segment.

●

Revenues for the fourth quarter 2014 are expected to range between $0.8 million to $1.0 million for the Shared Wireless Infrastructure segment.

●

Adjusted EBITDA, on a segment basis, for the fourth quarter 2014 is expected to range between profitability of $3.1 million to $3.4 million for the Fixed Wireless segment.

Non-GAAP Measures and Reconciliations to GAAP Measures

We use certain Non-GAAP measures to monitor the Company's business performance and that of our segments. These Non-GAAP measures are not recognized under generally accepted accounting principles ("GAAP"). Accordingly, investors are cautioned about using or relying on these measures as alternatives to recognized GAAP measures. Our methods of calculating these measures may not be comparable to similar measures presented by other companies.

A definition of the Non-GAAP measures that we employ, and how we use them to monitor business performance, are as follows:

“Adjusted EBITDA” represents net income (loss) before interest, income taxes, depreciation and amortization expenses, excluding, when applicable, stock-based compensation, deferred rent expense, other non-operating income or expenses, as well as gain or loss on (i) disposal of property and equipment, (ii) nonmonetary transactions, and (iii) business acquisitions.

“Adjusted Market EBITDA” also excludes corporate overhead expenses and other centralized costs. We believe that Adjusted Market EBITDA trends are insightful indicators of our markets’ relative performance, and whether our markets are able to produce sufficient market cash flow to fund working capital and capital expenditure needs.

“ARPU” refers to the monthly average revenue per user, or customer, being generated from those customers under contract at the end of each indicated period. We calculate ARPU by dividing our monthly recurring revenue (“MRR”) at the end of a period by the number of customers generating that MRR.

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“ARPU of new customers” is calculated in the same manner but only includes new customers who entered into contracts during the indicated period.

“Churn” and “Churn rate” refer to the percent of revenue lost on a monthly basis from customers disconnecting from our network or reducing the amount of their bandwidth.

“Corporate” includes corporate overhead and centralized activities which support our overall operations.

“EBITDA” represents net income (loss) before interest, income taxes, depreciation and amortization.

“Market Cash Flow” represents the amount of cash generated in a market after deducting a market’s direct operating expenses from that market’s revenues. Market Cash Flow does not include (i) centralized costs which support all markets collectively or (ii) any network related capital expenditures incurred in a market.

“Net Cash Flows” represents Adjusted EBITDA less capital expenditures.

"Shared Wireless Infrastructure, Net" represents the net operating results for that business segment.

A reconciliation of non-GAAP measures to GAAP financial measures is as follows (amounts in thousands):

I. Adjusted Market EBITDA to Net Loss, Fixed Wireless Segment

		For the three months ended September 30,
		2014		2013
Adjusted Market EBITDA	$	3,511	$	3,886
Fixed wireless, non-market specific
Other expenses		(280)		(202)
Depreciation and amortization		(1,981)		(2,755)
Shared wireless infrastructure, net		(4,132)		(3,675)
Corporate		(3,324)		(3,334)
Other income (expense)		(48)		(63)
Net loss	$	(6,254)	$	(6,143)

		For the nine months ended September 30,
		2014		2013
Adjusted Market EBITDA	$	10,733	$	12,336
Fixed wireless, non-market specific
Other expenses		(818)		(714)
Depreciation and amortization		(6,599)		(8,411)
Shared wireless infrastructure, net		(12,181)		(11,323)
Corporate		(10,116)		(10,728)
Other income (expense)		(177)		839
Net loss	$	(19,158)	$	(18,001)

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II. Adjusted EBITDA to Net Loss

		For the three months ended September 30,
		2014		2013
Adjusted EBITDA	$	(2,525)	$	(1,876)
Depreciation and amortization		(3,318)		(3,846)
Stock-based compensation		(185)		(272)
Loss on property and equipment		-		(23)
Loss on non-monetary transactions		(68)		(63)
Deferred rent		(110)		-
Operating Income (Loss)	$	(6,206)	$	(6,080)
Interest expense, net		(44)		(60)
Other income (expense), net		(4)		(3)
Net loss	$	(6,254)	$	(6,143)

		For the nine months ended September 30,
		2014		2013
Adjusted EBITDA	$	(7,380)	$	(5,848)
Depreciation and amortization		(10,295)		(11,653)
Stock-based compensation		(740)		(939)
Loss on property and equipment		-		(82)
Loss on non-monetary transactions		(203)		(205)
Deferred rent		(272)		-
Non-recurring expenses		(91)		(113)
Operating Income (Loss)	$	(18,981)	$	(18,840)
Interest expense, net		(166)		(154)
Gain on business acquisition		-		1,004
Other income (expense), net		(11)		(11)
Net loss	$	(19,158)	$	(18,001)

III. Net Cash Flow to Net Cash Used in Operating Activities

	For the three months ended September 30,
		2014		2013
Net cash flow	$	(4,291)	$	(4,000)
Capital expenditures		1,766		2,124
Changes in operating assets and liabilities, net		(737)		383
Other, net		(41)		(145)
Net cash used in operating activities	$	(3,303)	$	(1,638)

		For the nine months ended September 30,
		2014		2013
Net cash flow	$	(13,781)	$	(10,606)
Capital expenditures		6,401		4,758
Non-recurring expenses		(91)		(113)
Changes in operating assets and liabilities, net		(2,381)		(2,018)
Other, net		(189)		(387)
Net cash used in operating activities	$	(10,041)	$	(8,366)

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Conference Call and Webcast

A conference call led by President and Chief Executive Officer, Jeff Thompson, and Chief Financial Officer, Joseph Hernon, will be held on November 10, 2014 at 5:00 p.m. ET to review our financial results and provide an update on current business developments. Interested parties may participate in the conference by dialing 877-755-7423 or 678-894-3069 (for international callers). A telephonic replay of the conference may be accessed approximately two hours after the call through November 17, 2014 at 11:59 p.m. ET by dialing 855-859-2056 or 404-537-3406 (for international callers) using pass code 23980446.

The call will also be webcast and can be accessed in a listen-only mode on the Company’s website at http://ir.towerstream.com/events.cfm.

About Towerstream Corporation

Towerstream (NASDAQ: TWER) is a leading 4G and Small Cell Rooftop Tower company. The company owns, operates, and leases Wi-Fi and Small Cell rooftop tower locations to cellular phone operators, tower, Internet and cable companies and hosts a variety of customers on its network. Towerstream was originally founded in 2000 to deliver fixed-wireless high-speed Internet access to businesses and to date offers broadband services in 12 urban markets including New York City, Boston, Los Angeles, Chicago, Philadelphia, the San Francisco Bay area, Miami, Seattle, Dallas-Fort Worth, Houston, Las Vegas-Reno, and the greater Providence area. For more information on Towerstream services, please visit www.towerstream.com and/or follow us @Towerstream.

The Towerstream Corporation logo is available at: http://www.globenewswire.com/newsroom/prs/?pkgid=6570

About HetNets Tower Corporation

HetNets Tower Corporation (“HetNets”) was formed in January 2013 as a wholly owned subsidiary of Towerstream Corporation (NASDAQ:TWER), and offers a neutral host, shared wireless infrastructure solution, either independently or as a turnkey service. Its wireless communications infrastructure is available to wireless carriers, cable and Internet companies in major urban markets where the explosion in mobile data is creating significant demand for additional capacity and coverage. HetNets offers a carrier-class Wi-Fi network for Internet access and the offloading of mobile data. Its street level rooftop locations are ideal for the installation of customer owned small cells including DAS, Metro and Pico cells. Other solutions provided by HetNets include backhaul, power, and related small cell requirements. More information is available at http://www.hetnets.com.

Safe Harbor

Certain statements contained in this press release are “forward-looking statements” within the meaning of applicable federal securities laws, including, without limitation, anything relating or referring to future financial results and plans for future business development activities, and are thus prospective. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified based on current expectations. Such risks and uncertainties include, without limitation, the risks and uncertainties set forth from time to time in reports filed by the Company with the Securities and Exchange Commission, including, without limitation, risk related to our ability to deploy and expand small cell rooftop tower locations in the New York City and other key markets. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Consequently, future events and actual results could differ materially from those set forth in, contemplated by, or underlying the forward-looking statements contained herein. The Company undertakes no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise.

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INVESTOR CONTACT:

Monica Gould

The Blueshirt Group

212-871-3927

monica@blueshirtgroup.com

MEDIA CONTACT:

Todd Barrish

Indicate Media
917-861-0089

todd@indicatemedia.com

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