Note

– Acquisition

Purchase of Net Assets of Fulton Technologies, Inc. and Mill City Communications, Inc.

December 27, 2018,

the Company entered into a purchase agreement to acquire substantially all of the net assets of Fulton Technologies, Inc. and Mill City Communications, Ins. (collectively “Fulton”). Fulton provides turn-key wireless infrastructure services for the

four

major U.S. wireless carriers, communication tower companies, national integrators, and original equipment manufacturers. These services primarily consist of the installation and upgrade of technology on cell sites and the construction of new small cells for

5G.

This agreement closed on

January 4, 2019.

This acquisition is part of the overall growth strategy that will further diversify the Company into the broader telecommunications industry by providing wireless infrastructure services to the wireless telecommunications market.

The purchase price for the net assets of Fulton was

$1.3

million. The purchase price was allocated to the major categories of assets and liabilities based on their estimated fair values as of

January 4, 2019,

the effective date of the acquisition. Any remaining amount was recorded as goodwill.

The following summarizes the final purchase price allocation of the fair value of the assets acquired and the liabilities assumed at

January 4, 2019:

Assets acquired:	(in thousands)
Accounts receivable	$	828
Unbilled revenue		438
Prepaid expenses		341
Property and equipment		1,201
Intangible assets		244
Other assets		35
Goodwill		57
Total assets acquired		3,144

Liabilities assumed:
Accounts payable		1,250
Accrued expenses		455
Capital lease obligation		175
Total liabilities assumed		1,880
Net purchase price	$	1,264

The acquired intangible asset of approximately

$0.2

million consists of customer relationships.

The unaudited financial information in the table below summarizes the combined results of operations of ADDvantage Technologies Group and Fulton for the years ended

September 30, 2019

and

September 30, 2018,

on a pro forma basis, as though the companies had been combined as of

October 1, 2017.

The pro forma earnings for the years ended

September 30, 2019

and

September 30, 2018

were adjusted to include intangible amortization expense of

thousand and

$24

thousand, respectively. The

$0.2

million of acquisition-related expenses were excluded from the year ended

September 30, 2019

and included in the year ending

September 30, 2018

as if the acquisition occurred at

October 1, 2017.

The pro forma net loss amounts exclude gains from the disposal of assets as well as interest expense and extinguishment of debt related to assets and debt

not

acquired or assumed from Fulton. The unaudited pro forma financial information does

not

purport to be indicative of the Company’s combined results of operations which would actually have been obtained had the acquisition taken place on

October 1, 2017

nor should it be taken as indicative of future consolidated results of operations.

	(Unaudited)
	Years Ended September 30,
	2019	2018
	(in thousands)
Total net sales	$58,955	$41,809
Loss from continuing operations	$(4,461)	$(5,997)
Net loss	$(5,728)	$(6,474)