UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20649

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)

Filed by the Registrant
Filed by a Party other than the Registrant 

Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
   Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to § 240.14a-12

ADDvantage Technologies Group, Inc.
________________________________________________________
(Name of Registrant As Specified In Its Charter)
______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
No fee required.

Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1)
Title to each class of securities to which transaction applies:
 
2)
Aggregate number of securities to which transaction applies:
 
3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act
              Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined):
 
4)
Proposed maximum aggregate value of transaction: $10,314,141.00
 
5)
Total fee paid: $1,250.07
 

Fee paid previously with preliminary materials.

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
               the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration
               statement number, or the Form or Schedule and the date of its filing.

1)  Amount Previously Paid: 

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3)  Filing Party: 

4)  Date Filed: 

ADDvantage Technologies Group, Inc.
1221 East Houston
Broken Arrow, Oklahoma 74012

April 17, 2019
To Our Stockholders:
We cordially invite you to attend a special meeting of the stockholders of ADDvantage Technologies Group, Inc., which we refer to as ADDvantage or the Company, which will be held at the Renaissance Tulsa Hotel & Convention Center, 6808 S. 107th E. Ave., Tulsa, Oklahoma  74133, on Wednesday, May 29, 2019 at 9:00 a.m., local time.
At the special meeting, you will be asked to consider and vote upon a proposal to authorize the proposed sale of ADDvantage’s cable business.  This sale, if approved, will conclude a year-long plus effort by our Board of Directors to raise capital through the sale of real estate and of our cable business and to invest that capital into our telecommunications and wireless services businesses with the goal of generating a higher return on investment for our stockholders.
We propose to sell our cable business to Leveling 8 Inc, which we refer to as Leveling 8 or buyer, pursuant to the terms of the Stock Purchase Agreement, dated as of December 26, 2018, as amended as of March 15, 2019, which we refer to as the Stock Purchase Agreement. Specifically, under the Stock Purchase Agreement, we have agreed to sell to Leveling 8 all of the outstanding shares, and limited liability company membership interests, as applicable, of Tulsat, LLC, which we refer to as Tulsat, NCS Industries, Inc., which we refer to as NCS, Addvantage Technologies Group of Missouri, Inc., which we refer to as ComTech, Addvantage Technologies Group of Texas, Inc., which we refer to as Tulsat-Texas, and Tulsat-Atlanta, L.L.C., which we refer to as Tulsat-Atlanta and collectively with Tulsat, NCS, ComTech, and Tulsat-Texas, we refer to collectively as the Cable Companies.  We refer to this proposed sale pursuant to the terms of the Stock Purchase Agreement as the Sale Transaction.
Subject to certain post-closing adjustments, the purchase price that Leveling 8 will pay in the Sale Transaction is $10,314,141, with $3,939,141 payable in cash at closing and $6,375,000 million in a promissory note bearing interest at 6% per annum, payable over five years and personally guaranteed by David E. Chymiak who we refer to as D. Chymiak. An affiliate of D. Chymiak has paid us $5 million for the purchase of our Broken Arrow, Oklahoma facility in November of 2018, and $1.35 million for the purchase of our Sedalia, Missouri facility in March of 2019.  (The $1.35 million paid for the Sedalia, Missouri property is a credit to the purchase price and down payment amounts stated above). Leveling 8 is 100% beneficially owned by D. Chymiak, who is the Chief Technology Officer and a member of the Board of Directors of ADDvantage (until recently the Chairman of ADDvantage’s Board). D. Chymiak beneficially owns approximately 26% of the outstanding common stock of ADDvantage.  In addition, D. Chymiak was one of the original founders of Tulsat in 1985.
For many years, our Board of Directors has sought to diversify from our original core cable business based on the general decline in the cable TV business, the specific decline of our own cable business and the relatively low return on capital investment generated by our cable business.  In 2010, we conducted a market check and found little buyer interest in our cable business.  We then pursued and acquired businesses in the telecommunications and wireless services businesses.  Now, upon completion of the Sale Transaction, I believe we will be well-positioned to grow our telecommunication businesses which are conducted through our wholly-owned subsidiaries, Nave Communications Company (“Nave”), engaged in the business of selling telecommunications equipment and located in Jessup, Maryland and Triton Datacom (“Triton”) engaged in the business of providing new and refurbished networking products, including IP desktop phones, and located in Miami, Florida, and our recently acquired Fulton Technologies, engaged in the wireless services business and located in Dallas, Texas. Following the closing, the Company will continue to be an
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Oklahoma corporation publicly traded on the NASDAQ Global Market. Importantly, the completion of the proposed Sale Transaction will not affect your share ownership of ADDvantage common stock.
Our Board of Directors established an independent committee of our Board of Directors, referred to herein as the “strategic direction committee”, to negotiate and approve or disapprove the Sale Transaction on behalf of the Board of Directors.  The strategic direction committee acting on behalf of and with the approval of the Board of Directors has (i) determined that the Stock Purchase Agreement and the Sale Transaction are expedient and in the best interests of ADDvantage and its stockholders, (ii) approved the Stock Purchase Agreement and the Sale Transaction, and (iii) directed that the Sale Transaction be submitted for consideration by the stockholders at the special meeting. The Board of Directors (D. Chymiak abstaining) has concurred with the approval by the strategic direction committee with respect to the Sale Transaction and, together with the strategic direction committee, recommends that stockholders vote “FOR” the Sale Transaction.
The enclosed proxy statement additionally requests stockholder approval of a grant of authority to our Board of Directors to postpone the special meeting for up to 10 business days in order to solicit additional proxies for the purpose of securing stockholder approval of the Sale Transaction, provided that our Board of Directors determines in good faith that such a postponement or adjournment is necessary or advisable to obtain approval of the Sale Transaction, or to allow additional time for the filing and/or mailing of any supplemental or amended disclosure which our Board of Directors has determined, after consultation with outside counsel, is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the stockholders prior to the special meeting. Our Board of Directors recommends that stockholders vote “FOR” this additional proposal.
We encourage you to read the enclosed proxy statement and the annexes and exhibits to the proxy statement carefully in their entirety.
Your vote is very important. The Sale Transaction cannot be completed unless holders of a majority of the (i) outstanding shares of common stock of ADDvantage vote in favor of the approval of the Sale Transaction and (ii) outstanding shares of common stock (excluding shares owned by D. Chymiak and his affiliates) vote in favor of the approval of the Sale Transaction. Accordingly, if you fail to vote in favor of the Sale Transaction, the effect will be the same as a vote against the Sale Transaction.
While stockholders may exercise their right to vote their shares in person, we recognize that many stockholders may not be able to attend the special meeting. Accordingly, we have enclosed a proxy that will enable you to vote your shares on the matters to be considered at the special meeting even if you are unable to attend. If you desire to vote in accordance with the Board of Directors’ recommendation, you need only sign, date and return the proxy in the enclosed postage-paid envelope to record your vote. Otherwise, please mark the proxy to indicate your vote; date and sign the proxy; and return it in the enclosed postage-paid envelope. You also may vote your shares by proxy using a toll-free telephone number or the Internet.  We have provided instructions on the proxy card for using these convenient services.
Voting by proxy will not prevent you from voting your shares in person if you subsequently choose to attend the special meeting. You may also access the proxy materials on the Internet at www.proxyvote.com.  Thank you for your continued support.
Very truly yours,
/s/ Joseph E. Hart
Joseph E. Hart
Chief Executive Officer and President
p.s. If you have any questions or need assistance voting your shares, please call Saratoga Proxy Consulting LLC at (212) 257-1311 (collect) or (888) 368-0379 (toll free) or by email at info@saratogaproxy.com.
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The attached proxy statement is dated April 17, 2019 and is intended to be first mailed on or about April 24, 2019 to ADDvantage stockholders of record as of the close of business on April 10, 2019.
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ADDvantage Technologies Group, Inc.
1221 East Houston
Broken Arrow, Oklahoma 74012

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 29 , 2019

Date: May 29 , 2019

Time: 9:00 A.M.

Place:  Renaissance Tulsa Hotel & Convention Center, 6808 S. 107th E. Ave., Tulsa, Oklahoma 74133

ITEMS OF BUSINESS:

1.
To consider and vote on a proposal (the “Sale Proposal”) to authorize the sale to Leveling 8 Inc (“Leveling 8” or “buyer”), pursuant to the terms and subject to the conditions set forth in the Stock Purchase Agreement (the “Stock Purchase Agreement”), dated as of December 26, 2018, as amended as of March 15, 2019, between ADDvantage Technologies, Inc. (“ADDvantage,” “we,” or “us”) and Leveling 8, of all of the outstanding shares, and limited liability company membership interests (collectively the “Shares”), as applicable, of Tulsat, LLC, an Oklahoma limited liability company, NCS Industries, Inc., a Pennsylvania corporation, Addvantage Technologies Group of Missouri, Inc., a Missouri corporation, Addvantage Technologies Group of Texas, Inc., a Texas corporation, and Tulsat-Atlanta, L.L.C., an Oklahoma limited liability company (each a “Cable Company” and collectively the “Cable Companies”), each a wholly-owned subsidiary of ADDvantage;

2.
To consider and vote on a proposal (the “Adjournment Proposal”) to authorize the Board of Directors of ADDvantage (the “Board”) to postpone or adjourn the special meeting (i) for up to 10 business days to solicit additional proxies for the purpose of obtaining stockholder approval of the Sale Proposal, if the Board determines in good faith such postponement or adjournment is necessary or advisable to obtain stockholder approval or (ii) to allow reasonable additional time for the filing and/or mailing of any supplemental or amended disclosure which the Board has determined, after consultation with outside legal counsel, is necessary under applicable law and for such supplemental or amended disclosure to be disseminated and reviewed by the stockholders prior to the special meeting; and

3.
To act upon other business as may properly come before the special meeting (provided ADDvantage does not know, at a reasonable time before the special meeting, that such matters are to be presented at the meeting) or any adjournment or postponement thereof.

The holders of record of our common stock, par value $0.01 per share (“common stock”), at the close of business on April 10, 2019, are entitled to notice of and to vote at the special meeting or at any adjournment or postponement thereof. All stockholders of record are cordially invited to attend the special meeting in person. A list of our stockholders will be available at our headquarters located at 1221 East Houston, Broken Arrow, Oklahoma  74012, during ordinary business hours for ten days prior to the special meeting.

Your vote is important, regardless of the number of shares of common stock you own. The approval of the Sale Proposal by the affirmative vote of holders of a majority of the (i) outstanding shares of common stock and (ii) outstanding shares of common stock not owned by David Chymiak (“D. Chymiak”) or his affiliates) are conditions to the consummation of the Sale Transaction contemplated by the Stock Purchase Agreement. The proposal to adjourn the special meeting, if
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necessary or appropriate, to solicit additional proxies or to amend or supplement the proxy statement requires the affirmative vote of holders of a majority of the voting power present and entitled to vote. Even if you plan to attend the special meeting in person, we request that you complete, sign, date and return the enclosed proxy and thus ensure that your shares will be represented at the special meeting if you are unable to attend.

You also may vote your shares by proxy using a toll-free telephone number or the Internet. We have provided instructions on the proxy card for using these convenient services.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the approval of the Sale Proposal and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies or to amend or supplement the proxy statement. If you fail to vote, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote against the approval of the Sale Proposal, but will not affect the vote regarding the adjournment of the special meeting.

Your proxy may be revoked at any time before the vote at the special meeting by following the procedures outlined in the accompanying proxy statement. If you are a stockholder of record and do attend the special meeting and wish to vote in person, you may revoke your proxy and vote in person.




By Order of the Board of Directors,

/s/ Scott Francis

                                                         Scott Francis, Vice President, Chief Accounting Officer and Secretary
                        April 17, 2019

Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Stockholders to be Held on May 29 , 2019

We have elected to provide access to our proxy materials both by sending you this full set of proxy materials, including a proxy card, and by notifying you of the availability of our proxy materials on the Internet. The proxy materials are available at www.proxyvote.com.
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ADDVANTAGE TECHNOLOGIES GROUP, INC.
PROXY STATEMENT




TABLE OF CONTENTS
Page
QUESTIONS AND ANSWER ABOUT THE SALE PROPOSAL AND SPECIAL MEETING
SUMMARY TERM SHEET
SPECIAL FACTORS
Background of the Sale Transaction
Purposes and Reasons for the Sale; Position of the Company as to Fairness of the Sale; Recommendation of the Strategic Direction Committee and of our Board of Directors
Fairness Opinion
Appraisals and Other Reports
Plans for ADDvantage after the Sale Transaction
Certain Effects of the Sale
Interests of the Company’s Directors and Executive Officers in the Sale Transaction
United States Federal Income Tax Consequences of the Sale Transactions
Regulatory Approvals
Anticipated Accounting Treatment of the Sale Transactions
No Appraisal Rights
Financial Information
Notes to the Unaudited Pro Forma Condensed Combined Financial Statements
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
THE SPECIAL MEETING
Time, Place and Purpose of the Special Meeting
Record Date and Quorum
Required Vote
Voting; Proxies; Revocation
Abstentions
Adjournments and Postponements
Solicitation of Proxies
THE STOCK PURCHASE AGREEMENT AND RELATED AGREEMENTS
Parties to the Stock Purchase Agreement
Closing; Structure; Effects
Transition Services Agreement
Transfer of Stock
No Appraisal Rights
Purchase Price, Promissory Note, Guaranty and Collateral
Representations and Warranties
Conduct of Our Business Pending the Sale Transaction
Stockholders Meeting
No Solicitation of Transactions
Agreement to Take Further Action and to Use Reasonable Efforts
Resignations
Non-Competition; Non-Solicitation; and Standstill
Company Due Diligence
Other Covenants and Agreements
Conditions to the Sale Transaction
Indemnification
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Termination
Estimated Fees and Expenses
Reimbursement of Expenses
Amendment
Company Actions
Provisions for Unaffiliated Stockholders
IMPORTANT INFORMATION REGARDING ADDVANTAGE AND ITS DIRECTORS AND EXECUTIVE OFFICERS
Information Regarding ADDvantage
Information Regarding the Directors and Executive Officers of ADDvantage
Historical Selected Financial Information
Dividend Policy
IMPORTANT INFORMATION REGARDING LEVELING 8 AND DAVID E. CHYMIAK
Information Regarding Leveling 8
Information Regarding David E. Chymiak
IMPORTANT INFORMATION REGARDING THE CABLE COMPANIES
Information Regarding the Cable Companies
Historical Selected Financial Information
OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS WITH RESPECT TO COMMON STOCK
Ownership of Common Stock by Certain Beneficial Owners, Directors and Executive Officers
Transactions in Common Stock by ADDvantage, Leveling 8 and their Respective Directors and Executive Officers
RISK FACTORS
MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS
SUBMISSION OF STOCKHOLDER PROPOSALS
WHERE YOU CAN FIND ADDITIONAL INFORMATION

ANNEX A – CABLE SEGMENT FINANCIALS
ANNEX B – FAIRNESS OPINION
ANNEX C – STOCK PURCHASE AGREEMENT INCLUDING FIRST AMENDMENT
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QUESTIONS AND ANSWER ABOUT THE SALE PROPOSAL AND THE SPECIAL MEETING

The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed sale of our cable business (the “Sale Proposal”) as contemplated by the Stock Purchase Agreement, as amended, between ourselves as seller and Leveling 8 as buyer. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.

Q: What is the transaction contemplated by the Sale Proposal?

 A: The proposed transaction (the “Sale Transaction”) is the sale of stock and equity interests in our operating companies in the cable segment pursuant to the Stock Purchase Agreement. If the stockholders approve the Sale Proposal, the Company will no longer operate the cable segment following the closing of the Sale Transaction.

Q: Why did the strategic direction committee determine that the Sale Transaction was expedient and in the best interests of the Company and its stockholders?

A: The Board of Directors formed a committee of independent directors, referred to as the strategic direction committee, to consider, negotiate and approve or disapprove the Sale Transaction.  The strategic direction committee consulted with senior management of the Company (excluding D. Chymiak) as well as our outside legal counsel, retained appraisal firms to evaluate the Company’s real estate and the firm of ValueScope, Inc., to evaluate the fairness to the Company of the purchase price under the Stock Purchase Agreement and considered many factors, including the decline over time of our cable business and of the cable TV business in general, the large working capital requirement of the cable business relative to the return generated and the limited market for the cable business. The strategic direction committee also reviewed a significant amount of information and considered numerous factors, including the price to be paid by Leveling 8 in the Sale Transaction, the strategic and financial benefits of the Sale Transaction, the extensive review process that led to the Sale Transaction, the need for additional capital to grow the Company’s non-cable businesses, and that the Company’s stockholders will continue to own stock in the Company after the Sale Transaction and will thereby be able to participate in the potential future earnings and growth generated by ADDvantage.

Q: What proceeds has and will the Company receive from the sale of our cable business assets?

A: In November, 2018, we received $5 million in cash proceeds from the sale of our Broken Arrow, Oklahoma facility, and upon completion of the Sale Transaction contemplated by the Stock Purchase Agreement we will receive a purchase price of $10,314,141, subject to possible adjustment for changes in working capital and in the book value of our equipment, of which $3,939,141 will be paid at the closing of the Sale Transaction and the balance of the purchase price ($6,375,000) will be paid under the buyer’s secured promissory note, bearing interest at 6% per annum and payable over five years.  The note will be guaranteed by the owner of the buyer, D. Chymiak, who has been the Chief Technology Officer of the Company and a director of the Company for many years and has overseen the Company’s cable business.  If the Sale Transaction is completed, D. Chymiak will continue to be the largest single stockholder of the Company with current ownership of approximately 26% of the outstanding common stock and will likely remain on the Company’s Board of Directors.  The Company has recently entered into agreements to sell its Sedalia, Missouri and Warminster, Pennsylvania properties to an affiliate of D. Chymiak, and any amounts we receive from those sales will be deducted from the purchase price and the down payment under the Stock Purchase Agreement.  On March 28, 2019, the agreement for the sale of the Sedalia, Missouri property was closed with the Company receiving a cash purchase price of $1,350,000, which will be deducted from the purchase price and down payment under the Stock Purchase Agreement.


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Q: How will the proceeds of the Sale Transaction be used?

A: The Company intends to use the proceeds of the Sale Transaction to support its telecommunication businesses and its recently acquired wireless services business, to meet ongoing cash needs, and to further grow the Company.

 Q:    Will the stockholders receive any proceeds of the Sale Transaction?

 A: No. Stockholders will not receive any direct proceeds of the Sale Transaction.

 Q: Where and when is the special meeting?

 A: The special meeting will take place on May 29 , 2019, starting at 9:00 a.m. local time at Renaissance Tulsa Hotel & Convention Center, 6808 S. 107th E. Ave., Tulsa, Oklahoma  74133 .

 Q:    What matters will be voted on at the special meeting?

 A: You will be asked to consider and vote on the following proposals:

  the Sale Proposal, which is a proposal to approve the Sale Transaction as contemplated by the Stock Purchase Agreement;

  the Adjournment Proposal, which is a proposal to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the Sale Proposal or to allow for the amending or supplementing of the proxy statement; and

  to act upon other business that may properly come before the special meeting or any adjournment or postponement thereof (provided the Company does not know, at a reasonable time before the special meeting, that such matters are to be presented at the meeting).

Q: Who can vote at the Special Meeting?

A: Stockholders of record as of the record date of April 10, 2019.

 Q: What vote of our stockholders is required to approve the Sale Transaction?

 A: For the Company to complete the Sale Transaction, under Oklahoma law, stockholders holding at least a majority in voting power of common stock outstanding at the close of business on the record date must vote “FOR” the approval of the Sale Proposal. In addition, it is a condition to the consummation of the Sale Transaction that stockholders holding at least a majority in voting power of common stock outstanding at the close of business on the record date and not owned by D. Chymiak or his affiliates must vote “FOR” the approval of the Sale Proposal. A failure to vote your shares of common stock or an abstention from voting will have the same effect as a vote against the Sale Proposal.

As of the record date, there are 10,361 , 292 shares of common stock outstanding. D. Chymiak is the largest single stockholder of the Company. D. Chymiak and his affiliates own directly or indirectly 2,664,805 shares of common stock. Accordingly, in addition to D. Chymiak’s shares, a total of 2,515,842 shares of common stock, or approximately 24% of the outstanding shares of common stock, must vote in favor of the Sale Proposal to obtain the requisite approval of a majority of the outstanding stock of the Company. The directors and current executive officers of the Company (other than D. Chymiak), all of whom have expressed their intent to vote in favor of the Sale Proposal because they view the Sale Transaction as a favorable opportunity for the Company, may be deemed to own directly or indirectly an additional 302,899 shares of common stock. Except in their capacities as members of the Board of Directors of the Company, as applicable, no officer or director of the Company has made any recommendation either in support of or
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opposed to the Sale Transaction.

Excluding shares held by D. Chymiak and his affiliates leaves approximately 74% of the common stock, or 7,696,487 shares.  A majority of these shares, the so-called “majority of the minority”, must also approve the Sale Proposal.  The executive officers and directors of the Company have indicated their intention to vote in favor of the Sale Proposal.  Ken Chymiak, brother of D. Chymiak and a former officer and director of the Company and co-founder of Tulsat, is the owner of approximately 1,984,367 shares of common stock, or 19% of the outstanding common stock.  D. Chymiak has represented to the Company that Ken Chymiak does not own any interest of any kind in the buyer or have any contractual relationship of any kind with the buyer, and for that reason Ken Chymiak’s shares are considered part of the “minority”.  Assuming Mr. Ken Chymiak votes his shares in favor of the Sale Transaction, an additional 1,863,877 shares, or 18% of the outstanding shares, must vote in favor of the Sale Proposal in order to obtain the requisite approval of a majority of the minority.

Q: What vote of our stockholders is required to approve the proposal to adjourn the special meeting, if necessary, to solicit additional proxies or to allow for the amending or supplementing of the proxy statement?

 A: The proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies or to allow for the amending or supplementing of the proxy statement requires the affirmative vote of the holders of a majority of the voting power of common stock present or represented by proxy at the special meeting.

 Q: How does the Company’s Board of Directors recommend that I vote?

 A: Our Board of Directors (other than D. Chymiak who has abstained), acting upon the unanimous approval of the Sale Transaction by the strategic direction committee, unanimously concurs with the decision of the strategic direction committee that our stockholders vote “FOR” the approval of the Sale Proposal as contemplated by the Stock Purchase Agreement and “FOR” the adjournment proposal. You should read “Special Factors—Purposes and Reasons for the Sale; Position of the Company as to Fairness of the Sale; Recommendation of the Strategic direction committee and of our Board of Directors” for a discussion of the factors that our strategic direction committee considered in deciding to approve the Stock Purchase Agreement and the Sale Transaction. See also “Special Factors—Interests of the Company’s Directors and Executive Officers in the Sale Transaction”.

 Q: What effects will the Sale Transaction have on ADDvantage?

 A: ADDvantage will no longer own any interest in the Cable Companies and will no longer operate the cable segment.  ADDvantage will receive the proceeds of the Sale Transaction and will continue to operate the telecommunications and wireless segments.  See “Special Factors—Plans for ADDvantage after the Sale Transaction.”

Q: What happens if the Sale Transaction is not consummated?

A: If the Sale Proposal is not approved by the Company’s stockholders or if the Sale Transaction is not consummated for any other reason, the Company will continue to operate the cable segment as well as its telecommunication and wireless segments. Each party would bear its own costs and expenses.  See “The Stock Purchase Agreement— Reimbursement of Expenses”.

Q: Are there any risks to the Sale Transaction?

A: Yes.  A discussion of certain possible risks is set forth under “Special Factors—Risk Factors”.

Q: What do I need to do now?


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A: We urge you to read this proxy statement carefully, including its annexes and the documents referred to as incorporated by reference in this proxy statement, and to consider how the Sale Transaction would affect you. If you are a stockholder of record, you can ensure that your shares are voted at the special meeting by submitting your proxy via:

 telephone, using the toll-free number listed on each proxy card;

  the Internet, at the address provided on each proxy card; or

  mail, by completing, signing, dating and mailing each proxy card and returning it in the envelope provided.

If you hold your shares in “street name” through a broker, bank or other nominee you should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as voting against the Sale Transaction.

 Q:    Can I revoke my vote?

 A: Yes, you can revoke your vote at any time before your proxy is voted at the special meeting. If you are a stockholder of record, you may revoke your proxy by notifying the Company’s Corporate Secretary in writing at ADDvantage Technologies Group, Inc., 1221 East Houston, Broken Arrow, Oklahoma  74012, or by submitting a new proxy by telephone, the Internet or mail, in each case, dated after the date of the proxy being revoked. In addition, your proxy may be revoked by attending the special meeting and voting in person (simply attending the special meeting will not cause your proxy to be revoked). Please note that if you hold your shares in “street name” and you have instructed a broker, bank or other nominee to vote your shares, the above-described options for revoking your vote do not apply, and instead you must follow the instructions received from your broker, bank or other nominee to revoke your vote.

Q: What does it mean if I get more than one proxy card or voting instruction card?

 A: If your shares are registered differently or are held in more than one account, you will receive more than one proxy or voting instruction card. Please complete and return all of the proxy cards or voting instruction cards you receive (or submit each of your proxies by telephone or the Internet, if available to you) to ensure that all of your shares are voted.

 Q: Who will count the votes?

A: A representative of Broadridge Financial Solutions, Inc. will count the votes.  The Company’s stock transfer agent, Continental Stock Transfer & Trust, will act as an inspector of election.

 Q: Who can help answer my other questions?

 A: If you have more questions about the Stock Purchase Agreement or the Sale Transaction, or require assistance in submitting your proxy or voting your shares or need additional copies of the proxy statement or the enclosed proxy card, please contact Saratoga Proxy Consulting LLC, our proxy solicitor, at (888) 368-0379 (toll free) or (212) 257-1311 (collect) or by email at info@saratogaproxy.com.   If your broker, bank or other nominee holds your shares, you should also call your broker, bank or other nominee for additional information.



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SUMMARY TERM SHEET

This Summary Term Sheet discusses the material information contained in this proxy statement, including with respect to the Stock Purchase Agreement, as defined below, and the Sale Transaction. We encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement, as this Summary Term Sheet may not contain all of the information that may be important to you. The items in this Summary Term Sheet include page references directing you to a more complete description of that topic in this proxy statement.

The Parties to the Stock Purchase Agreement

ADDvantage Technologies Group, Inc.
1221 East Houston
Broken Arrow, Oklahoma  74012
Tel: 918-251-9121

ADDvantage Technologies Group, Inc., referred to herein as “ADDvantage”, the “Company”, “we”, “our” or “us”, is an Oklahoma corporation. ADDvantage (through our subsidiaries) distributes and services a comprehensive line of electronics and hardware for the cable television and telecommunications industries.  ADDvantage also provides equipment repair services to cable operators.  In addition, ADDvantage offers telecommunications customers decommissioning services for surplus and obsolete equipment, which, in turn is processed through our recycling services. ADDvantage also provides wireless infrastructure services for wireless carriers, contractors supporting the wireless carriers and equipment manufacturers. See “Important Information Regarding ADDvantage and its Directors and Executive Officers—Information Regarding ADDvantage” beginning on page 64.

Additional information about ADDvantage is contained in its public filings, which are incorporated by reference hereto. See “Where You Can Find Additional Information” beginning on page 77.

Leveling 8 Inc
21553 E. Apache Street
Catoosa, Oklahoma 74105
Tel:

Leveling 8, Inc., referred to herein as “Leveling 8”, is an Oklahoma corporation.  Leveling 8 was recently formed by D. Chymiak for the purpose of acquiring ADDvantage’s cable business and assets in the Sale Transaction. It is wholly-owned and managed by D. Chymiak.  See “Important Information regarding Leveling 8 and David E. Chymiak” on page 68.

The Sale Proposal

You will be asked to consider and vote upon the Sale Proposal to approve the Sale Transaction contemplated by that certain Stock Purchase Agreement, dated as of December 26, 2018, as amended as of March 15, 2019, by and among ADDvantage and Leveling 8, which, as it may be further amended from time to time, is referred to herein as the “Stock Purchase Agreement”. The Stock Purchase Agreement provides that Leveling 8 will purchase of all of the outstanding shares of common stock or limited liability company membership interests (collectively the “Shares”), as applicable, of Tulsat, LLC, an Oklahoma limited liability company (“Tulsat”), NCS Industries, Inc., a Pennsylvania corporation (“NCS”), Addvantage Technologies Group of Missouri, Inc., a Missouri corporation (“ComTech”), Addvantage Technologies Group of Texas, Inc., a Texas corporation (“Tulsat-Texas”), and Tulsat-Atlanta, L.L.C., an Oklahoma limited liability company (“Tulsat-Atlanta”) (each a “Cable Company” and collectively the “Cable Companies”).  See “The Stock Purchase Agreement and Related Agreements” beginning on page 53.
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The Cable Companies

ADDvantage has owned and operated its cable business segment through several operating subsidiaries since 1999.  The Shares of the Cable Companies are proposed to be sold to Leveling 8 under the Stock Purchase Agreement.  See “Important Information Regarding the Cable Companies” beginning on page 69.

The following is a brief description of each of the Cable Companies:

Tulsat is a provider of new, surplus and re-manufactured cable television equipment and also repairs cable television equipment for various cable companies.  It is located in Broken Arrow, Oklahoma.

NCS is a provider of new, surplus and re-manufactured cable television equipment and also repairs cable television equipment for various cable companies.  It is located in Warminster, Pennsylvania.

ComTech is a provider of new, surplus and re-manufactured cable television equipment and also repairs cable television equipment for various cable companies.  It is located in Sedalia, Missouri.

Tulsat-Texas repairs cable television equipment for various cable companies.  It is located in New Boston, Texas.

Tulsat-Atlanta repairs cable television equipment for various cable companies.  It is located in Johns Creek, Georgia.


The Stock Purchase Agreement and Related Agreements (Page 53)

The Company has entered into a Stock Purchase Agreement with Leveling 8.  Upon satisfaction of the terms and subject to the conditions set forth in the Stock Purchase Agreement, Leveling 8 will purchase and acquire the Shares of the Cable Companies and will thereby acquire ownership of ADDvantage’s cable segment for a purchase price of $10,314,141 (subject to post-closing adjustments) with $3,939,141 payable at closing and the balance payable under a promissory note, the terms of which are discussed below. This is the “Sale Transaction”.  Following the Sale Transaction, ADDvantage will continue to own and operate its telecommunication and wireless segments.  The Company has recently entered into agreements to sell its Sedalia, Missouri and Warminster, Pennsylvania facilities to an affiliate of D. Chymiak, and any amounts received by the Company from those sales will be credited to the purchase price and down payment under the Stock Purchase Agreement.  On March 28, 2019, the agreement for the sale of the Sedalia, Missouri property was closed with the Company receiving a cash purchase price of $1,350,000, which will be credited to the purchase price and down payment under the Stock Purchase Agreement.

D. Chymiak, the owner of the buyer, will personally guarantee the performance by buyer of its obligations to the Company under the Stock Purchase Agreement, buyer’s promissory note and buyer’s other agreements with the Company.

Other agreements to be executed in connection with the closing of the Sale Transaction include the following:

Buyer’s Promissory Note.  The Promissory Note requires Leveling 8 to pay the Company $6,375,000 plus interest at 6% per annum over the course of five years in unequal payments of principal and interest every six months.  The Promissory Note requires payments equal to a total of $2,800,000 (principal and interest) over the first two years, payments equal to a total of $2,350,000 (principal and interest) over the next two and one-half years and a tenth and final payment of $2,500,000 (principal and interest).


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Transition Services Agreement.  The Company is required to provide certain administrative services to the buyer for up to 90 days after the closing.  The Company will be reimbursed its actual cost for such services.

Collateral Agreements.  D. Chymiak and affiliates of D. Chymiak will secure payment of the promissory note by granting the Company mortgages and security interests in real property located in Broken Arrow, Oklahoma, Sedalia, Missouri, Warminster, Pennsylvania and Johns Creek, Georgia, in shares of common stock in the Company and in a securities account. The real estate mortgages will be subordinate to the security interest in the same collateral granted to buyer’s senior lender.

Conditions to the Sale Transaction (Page 59)

Each party’s obligation to complete the Sale Transaction is subject to a non-waivable condition that the Sale Transaction as contemplated by the Stock Purchase Agreement must have been approved by the affirmative vote of holders of a majority of the (i) outstanding shares of common stock of the Company and (ii) outstanding shares of common stock not owned by D. Chymiak and his affiliates. There are certain other customary conditions to each’s party’s obligation to complete the Sale Transaction.

The obligation of the Company to complete the Sale Transaction is subject to the satisfaction or waiver of certain customary conditions and in addition is subject to the condition that the Company must be satisfied that the financial condition of Leveling 8 and D. Chymiak, as a guarantor, is adequate to support Leveling 8’s obligations under the Stock Purchase Agreement and under the Promissory Note associated with the Stock Purchase Agreement.

The obligation of Leveling 8 to complete the Sale Transaction is subject to the satisfaction or waiver of certain customary conditions, and in addition is subject to the condition that it shall have obtained financing to fund the down payment for the Sale Transaction.

When the Sale Transaction will be Completed (Page 53)

We anticipate completing the Sale Transaction within a few days of obtaining the required stockholder approvals of the Sale Transaction and the satisfaction of the other closing conditions.

Purposes and Reasons for the Sale; Position of the Company as to Fairness of the Sale; Recommendation of the Strategic Direction Committee and of our Board of Directors

Our Board of Directors formed a strategic direction committee, referred to herein as the “strategic direction committee”, comprised initially of the four independent directors on the Company’s Board of Directors, including James C. McGill, David W. Sparkman, Thomas J. Franz and Joseph E. Hart, for the purpose of investigating, evaluating and negotiating and approving or disapproving the proposal by D. Chymiak, to purchase and acquire ownership of the Cable Companies.  During the course of negotiations, Mr. Hart became the President and Chief Executive Officer of the Company and resigned his position on the strategic direction committee.  On December 20, 2018, the strategic direction committee unanimously (i) determined that the Stock Purchase Agreement and the Sale Transaction were advisable, fair to and in the best interests of the stockholders of ADDvantage, and (ii) approved the submission of the Sale Transaction as contemplated by the Stock Purchase Agreement to the stockholders of the Company for their approval.  The entire Board of Directors (D. Chymiak abstaining) likewise concurred in the approval by the strategic direction committee of the Stock Purchase Agreement and the Sale Transaction and has submitted the Sale Transaction as contemplated by the Stock Purchase Agreement to the stockholders of the Company for their approval. The strategic direction committee and the entire Board of Directors (other than the abstaining director) recommend that you vote “FOR” the proposal to approve the Sale Proposal.  See “Special Factors—Background” beginning on page 19.

In evaluating the fairness and advisability of the Sale Transaction as contemplated by the Stock Purchase Agreement, the strategic direction committee considered information with respect to the 
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Company’s financial condition, results of operations, businesses, competitive position and business strategy, on both a historical and prospective basis, as well as current industry, economic and market conditions and trends.  The factors considered by strategic direction committee are set forth in detail under “Special Factors—Purposes and Reasons for the Sale; Position of the Company as to Fairness of the Sale; Recommendation of the Strategic direction committee and of our Board of Directors” beginning on page 24.  The Company’s Board of Directors (D. Chymiak abstaining) assessed the additional factor of the fairness of the process undertaken by the strategic direction committee and its advisors in connection with evaluating the proposed Sale Transaction, as described above in the section titled “Special Factors—Background of the Sale Transaction” beginning on page 19.

Fairness Opinion (Page 27)

ValueScope, Inc. rendered its oral opinion, which was subsequently confirmed in writing, dated as of March 21, 2019, to the strategic direction committee and the Board of Directors that, as of the opinion date and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its written opinion, the purchase price to be paid to the Company for the Cable Companies pursuant to the Stock Purchase Agreement is fair.

The full text of ValueScope’s written opinion dated March 21, 2019, together with a detailed report regarding its financial analysis and the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. ValueScope’s opinion was provided for the use and benefit of the strategic direction committee of the Company’s Board of Directors in its evaluation of the Sale Transaction. ValueScope did not act as a financial advisor to the Company in connection with the Sale Transaction.  ValueScope’s opinion is limited solely to the fairness, from a financial point of view, of the consideration to be received by the Company in the Sale Transaction and does not address the Company’s underlying business decision to effect the Sale Transaction or the relative merits of the Sale Transaction as compared to any alternative business strategies or transactions that might be available with respect to the Company. ValueScope’s opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote or act with respect to the Sale Transaction or any other matter.

Plans for ADDvantage after the Sale Transaction (Page 35)

If the Sale Transaction is approved by stockholders and completed, ADDvantage will cease to operate its cable business segment and will continue to operate its telecommunications and wireless services business segments. In 2018, management of the Company implemented both cost reduction and expansion plans for its telecommunications businesses, Nave and Triton.  In January of 2019, the Company entered the wireless services business through its acquisition of Fulton Technologies.  See “Special Factors—Plans for ADDvantage after the Sale Transaction” beginning on page 35 for an additional discussion as to ADDvantage’s plans for the Company after the Sale Transaction.

Certain Effects of the Sale (Page 37)

If the conditions to the closing of the Sale Transaction are either satisfied or, to the extent permitted, waived, ADDvantage will sell its interest in the Cable Companies to Leveling 8, and Leveling 8 will become the sole owner of the Cable Companies. ADDvantage will cease to own any interest in the Cable Companies.

Interests of the Company’s Directors and Executive Officers in the Sale Transaction (Page 37)

    You should be aware that D. Chymiak, until recently, served as the Chairman of the Company’s Board of Directors, is still a member of the Board of Directors and the Company’s Chief Technology Officer, and is the owner of the buyer under the Stock Purchase Agreement.  In addition, Mr. Chymiak was one of the founders of Tulsat and has for many years overseen the operations of the Cable Companies.  As the owner of the buyer, D. Chymiak’s interest in the Sale Transaction is adverse to the interest of the Company and its stockholders.  After conclusion of the Sale Transaction, D. Chymiak would cease to be Chief Technology 
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Officer or an employee of ADDvantage but would continue to own approximately 26% of the Company’s outstanding stock and would likely remain on the ADDvantage Board of Directors. See “Special Factors— Interests of the Company’s Directors and Executive Officers in the Sale Transaction” beginning on page 37. The Board of Directors were aware of D. Chymiak’s interests as discussed above and established the strategic direction committee of independent directors in order to ensure that the process of negotiating with D. Chymiak for the sale of the Cable Companies would be fair and in the best interests of all the Company’s stockholders.

United States Federal Income Tax Consequences of the Sale Transaction (Page 38)

The Sale Transaction will generally be taxable to ADDvantage for U.S. federal income tax purposes but not to its stockholders.

Regulatory Approvals (Page 39)

The Company is unaware of any federal or state regulatory requirements that must be complied with or necessary approvals in connection with the Sale Transaction.

Anticipated Accounting Treatment of the Sale Transaction (page 39)

The Sale Transaction will be accounted for as a “sale of a business” as that term is used under generally accepted accounting principles in the United States for financial accounting purposes.

No Appraisal Rights (Page 39)

Neither Oklahoma law nor ADDvantage’s certificate of incorporation provides ADDvantage stockholders with appraisal or dissenters’ rights in connection with the Sale Transaction.

No Solicitation of Transactions (Page 58)

Pursuant to the Stock Purchase Agreement, neither the Company nor its officers, directors and representatives may encourage, solicit, initiate, facilitate or continue inquiries that constitute, or could reasonably be expected to lead to, any “acquisition proposal”, execute or enter into any contract with respect to an acquisition proposal or engage in, continue or otherwise participate in any discussions or negotiations regarding, or provide or furnish any information to any person regarding an acquisition proposal.

We may, however, prior to the approval of the Sale Proposal by our stockholders at the Special Meeting, in response to a written acquisition proposal, participate in discussions regarding such acquisition proposal so long as the proposal was not initiated, sought, solicited, knowingly encouraged or facilitated and if our Board of Directors have determined in good faith that the acquisition proposal is or could reasonably be expected to result in a “superior proposal”.

The Company may withdraw, modify or amend the Board of Directors’ recommendation (an “Adverse Recommendation Change”) if: (i) the Company notifies Leveling 8 in writing at least two days prior to the recommendation change and such notification includes the terms and conditions of the superior proposal, the person or group making the proposal and copies of all documents related to the superior proposal and (ii) the Company’s Board of Directors determine that the failure to make the Adverse Recommendation Change would be inconsistent with its fiduciary duties.

Notwithstanding these restrictions, prior to the approval of the Sale Proposal by our stockholders, our board of directors may, to the extent it determines in good faith, that failure to take such action would be inconsistent with its fiduciary duties, in response to an “intervening event”, make an Adverse Recommendation Change, but only if: (i) the reasons for making the Adverse Recommendation Change are independent from any pending acquisition proposal; (ii) the Company provides Leveling 8 written notice that the Board of Directors are making an Adverse Recommendation Change and the material facts constituting
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the basis for the change; and (iii) Company waits to make the Adverse Recommendation Change until the second day after receipt by Leveling 8 of the notice of the Adverse Recommendation Change.
 
Termination (Page 61)

The Company and Leveling 8 may terminate the Stock Purchase Agreement by mutual written consent at any time before the completion of the Sale Transaction. In addition, a party may terminate the Stock Purchase Agreement if:

 • there is an uncured breach of a representation, warranty, covenant or agreement on the part of the other party;

 such party’s conditions for completion of the Sale Transaction have not been satisfied or waived by June 30, 2019, (unless such party has caused the failure to timely complete the Sale Transaction);

  an action has been commenced against one of the parties or a Cable Company challenging the Sale Transaction; or

  any law or permanent governmental order makes completion of the Sale Transaction illegal.

In addition, the Company may terminate the Stock Purchase Agreement if the Company is not satisfied that Leveling 8 or D. Chymiak, as guarantor, are in a financial position that is adequate to support Leveling 8’s obligations under the Stock Purchase Agreement, including the promissory note or if the Company enters into a definitive agreement with a third party providing for a superior proposal.

In addition, Leveling 8 may terminate the Stock Purchase Agreement if Leveling 8 has been unable to obtain a binding and irrevocable commitment for financing the full amount of the cash down payment due at closing.

Reimbursement of Expenses (Page 62)

Each party to the Stock Purchase Agreement is generally required to pay and bear the fees and expenses that it incurs in connection with the transaction.  A party breaching its obligations under the Stock Purchase Agreement would be potentially responsible to the non-breaching party for the non-breaching party’s transaction expenses subject to the requirements of applicable law.
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SPECIAL FACTORS

Background of the Sale Transaction

Tulsat, LLC (f/k/a Tulsat, Inc.) was formed in 1985 by D. Chymiak and Ken Chymiak.  In 1999, Tulsat was merged with and into ADDvantage (f/k/a ADDvantage Media Group, Inc.), and D. Chymiak and Ken Chymiak became the largest stockholders of ADDvantage.

After the merger, the Company’s business model was to purchase excess hardware used by cable installation contractors and resell the equipment to other contractors. This strategy proved successful initially; however, this business model began to suffer over time due to a reduction in cable installations across the country and consolidation of the various cable operators. After seeing two years of revenue decline, in 2010, the Board of Directors of ADDvantage retained an investment banking firm to test the market for a possible sale of the cable business. Although there were initially a few interested parties, these prospects lost interest upon discovering ADDvantage’s large amount of slow-moving inventory and its reliance on D. Chymiak.

After the failed disposition attempt, ADDvantage’s Board of Directors enacted a strategy in 2012 to grow the company, both organically and through acquisitions.

Part of this strategy was to execute a change in executive leadership at the Company in order to focus on the growth strategy.  On April 2, 2012, the Company appointed David Humphrey as President and Chief Executive Officer. The initial focus of this growth strategy was to explore opportunities within the cable television industry; however, over the succeeding two years, the Board of Directors determined that given the continued decline of the cable segment the Company should pursue acquisitions outside of the cable television market but still within the broader telecommunications industry.  Therefore, in 2013 the Board of Directors engaged an investment banking firm to help identify and ultimately close a strategic acquisition within the broader telecommunications industry space.  As a result of the acquisition strategy, the Company purchased Nave Communications Company (“Nave”) in February, 2014, Triton Datacom (“Triton”) in October, 2016 and Fulton Technologies (“Fulton”) in January, 2019.  Together, Nave and Triton make up ADDvantage’s “Telco” segment and Fulton makes up the company’s “Wireless” segment.

The goal of the growth strategy was not only to grow via acquisitions, but also to grow the cable segment organically; however, from 2012 to present, in spite of various strategies enacted, the cable segment continued to decline in top-line revenue. Although the cable segment still maintained positive cash flows during this period through various cost-cutting measures and reduction of the inventory position, the cable segment suffered an operating loss before taxes for the first time in fiscal year 2017.  In December 2017, James C. McGill (“McGill”), an 11 year member of ADDvantage’s Board of Directors, approached the other outside directors of ADDvantage with concerns regarding the continued decline of the cable segment. The outside directors decided to meet in February to discuss the future of the cable segment.

D. Chymiak, the Chief Technology Officer and until recently, Chairman of the Board of Directors, beneficially owns 26% of the Company’s common stock and has been the largest stockholder of the Company and a member of its Board of Directors since 1999.  In early January 2018, McGill approached D. Chymiak, the Company’s Chief Technology Officer and Chairman of the Board of Directors, and told D. Chymiak that the Company needed to raise capital in order to continue the strategic plan of diversifying and growing its business. McGill stated that other board members were considering selling off assets of the cable segment, including real property, and leasing them back. D. Chymiak told McGill that he would consider purchasing the assets of the cable segment. Shortly thereafter, McGill consulted Hall, Estill, Hardwick, Gable, Golden & Nelson, PC (“Hall Estill”), ADDvantage’s legal counsel, regarding the legal ramifications of engaging in a sales transaction, including the desirability of including safeguards to ensure the procedural fairness of a transaction with D. Chymiak.
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On February 7, 2018, the independent directors of the Company met to discuss their concerns for the future of the cable segment of ADDvantage and possible actions the Company could take. McGill informed the directors at this meeting that D. Chymiak had expressed interest in purchasing the cable segment. The directors agreed that pursuing a sale with D. Chymiak would likely be the Company’s best option in light of the declining cable television market, the eroding financial and operating results of the Company’s cable segment, the Company’s failed attempts at disposing of the cable segment in the past and D. Chymiak’s unique knowledge of the cable segment. The directors decided to discuss the possibility of the sale with Company management (but excluding D. Chymiak) in order to obtain the information necessary to evaluate the attractiveness of the sale. In the spring of 2018, the Company’s CEO contacted the broker previously retained by the Company for past transactions, including the failed attempt to sell the cable business in 2010, to see if he believed that there was third party interest in buying the Company’s cable business.  After making certain informal inquiries, the broker responded that he believed there would be little third party interest in purchasing the cable segment.

Thereafter, McGill and D. Chymiak informally met on several occasions to discuss the terms of a possible sale and procedural requirements. At McGill and D. Chymiak’s first meeting in February, 2018, D. Chymiak suggested a purchase price based generally on the appraised and book value of the Cable Companies’ assets. McGill agreed that this was likely a reasonable methodology and the two proceeded to discuss the specifics regarding the procedure of the sale in their subsequent meetings. In early May of 2018, D. Chymiak told McGill that he was willing to move forward in their discussions regarding the sale of the Cable Companies.  On May 8, 2018, the independent directors of the Company met to discuss the potential transaction. At this meeting, McGill updated the directors on his meetings with D. Chymiak. The directors authorized McGill to continue meeting with D. Chymiak to discuss a possible sale.

McGill and D. Chymiak met on May 14, 2018 to discuss the procedural requirements necessary for the sale of subsidiaries of a public company. On May 17, McGill met with D. Chymiak to discuss the terms of the sale. On May 30, McGill and D. Chymiak met again to discuss the terms of the sale. At this meeting, D. Chymiak expressed his desire to purchase the stock and/or membership interest of Tulsat, LLC, NCS Industries, Inc., Addvantage Technologies Group of Missouri, Inc. (ComTech), Addvantage Technologies Group of Texas, Inc. (Tulsat-Texas), and Tulsat-Atlanta, L.L.C., which collectively make up the cable segment of ADDvantage, and stated that he wanted the deal to move forward as quickly as possible.

On two separate occasions, in June, 2017, and in September, 2017, the Company’s declining operating results caused it to fail to meet certain financial covenants in its credit agreement with its secured lender, Bank of Oklahoma, N.A. (“BOK”).  BOK waived these breaches, preventing a default, but, when the Company again failed to comply with its financial covenant at March 31, 2018, BOK refused to waive the breach, declared a default and advised the Company that its credit facility would not be renewed. On May 31, 2018, the Company entered into a Forbearance Agreement with BOK relating to the Company’s default under the Company’s Amended and Restated Credit and Term Loan Agreement (“Loan Agreement”). Under the Forbearance Agreement, BOK agreed to forbear from calling the loan and exercising its rights and remedies under the Loan Agreement through October 31, 2018.

In early June of 2018, McGill and D. Chymiak met several times to discuss the terms of the potential sale. McGill and D. Chymiak contemplated a purchase price of approximately $20 million, subject to adjustments to reflect changes in the book value of inventory or appraised value of the real estate owned by the Cable Companies. McGill and D. Chymiak discussed a transition period during which the Company would provide back office support to D. Chymiak after the closing of the Sale Transaction.

On June 7, 2018, the Board of Directors of the Company met to discuss the strategic options of the Company. D. Chymiak did not attend this meeting. The directors present unanimously agreed that the Company should continue to pursue a possible sale of the cable segment to D. Chymiak.  The directors believed that the capital raised by the sale of the cable segment could generate capital needed to expand the telecommunications segment of the Company and further diversify the Company’s business model. McGill then invited the Company’s legal counsel to advise the directors of the Company regarding legal and procedural matters related to a possible sale of the cable segment to D. Chymiak. The Company’s counsel discussed with the directors the role of a special committee in considering a proposal such as the sale to D.
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Chymiak and various related matters, including matters of fiduciary duty, independence, process, and the role of legal and financial advisors. After discussing these matters with the Company’s counsel, the directors present unanimously adopted resolutions creating a strategic direction committee to be comprised solely of independent directors for the purpose of negotiating and approving or disapproving the sale of ADDvantage’s cable segment to D. Chymiak and considering strategic options for the Company. The resolutions further authorized the strategic direction committee to retain legal counsel, financial advisors and such other agents as the strategic direction committee deemed necessary or desirable in connection with its consideration of the sale to D. Chymiak. The members of the committee were James McGill, Joseph E. Hart, Thomas J. Franz and David W. Sparkman.

After adjournment of the June 7 board meeting, the strategic direction committee met to discuss developing a comprehensive strategy for the Company going forward and appointed McGill chairman of the committee. The directors agreed that the discussion should include consideration of improvement to the existing telecommunications segment and expanding into the services industry. On June 11, 2018, McGill and D. Chymiak met to discuss a possible timeline of the Sale Transaction and terms regarding the sale.

On June 18, 2018, the strategic direction committee met to discuss the most recent negotiations between McGill and D. Chymiak. Scott Francis, the Company’s then Chief Financial Officer, was present and circulated a spreadsheet outlining the components of the purchase price and payment terms. The terms contemplated the purchase of the stock or membership interests, as applicable, of each of the Cable Companies for a $20 million purchase price, with approximately $8 million payable at closing and the remainder payable under a 5-year promissory note by an acquisition company established by D. Chymiak. D. Chymiak would personally guarantee the note and grant ADDvantage a second mortgage on the real property that was subject to the sale. McGill informed the directors that D. Chymiak intended to keep his shares in the Company, but would resign from his position as Chief Technology Officer. The members of the strategic direction committee authorized McGill to continue negotiating the terms of the sale with D. Chymiak. At this meeting, the strategic direction committee resolved that in light of David Humphrey’s upcoming resignation as Chief Executive Officer, as part of the strategic plan for the Company, the strategic direction committee unanimously resolved to appoint director Joseph E. Hart (“Hart”) as interim CEO. Hart informed the committee that his strategic plan for the Company included development of a wireless infrastructure service business and identified a possible acquisition target.

On July 3, 2018, David Humphrey resigned as CEO and ADDvantage appointed Hart as interim CEO. Thereafter, Hart resigned as a member of the strategic direction committee. On July 19, D. Chymiak and McGill signed a term sheet reflecting the then status of their discussions and circulated it to the members of the strategic direction committee, Company counsel and the Company’s senior executive management (other than D. Chymiak). After discussions with this group an amended non-binding term sheet was executed by McGill and D. Chymiak on July 30, 2018.  The amended term sheet directed ADDvantage to engage their legal counsel to prepare a stock purchase agreement for the sale of the cable segment to D. Chymiak for a purchase price estimated at $18.7 million, with approximately $7.9 million payable at closing, and the remainder financed through a 5-year promissory note personally guaranteed by D. Chymiak.  The Company instructed its legal counsel to draft a Stock Purchase Agreement which reflected the amended term sheet.

On August 6, 2018, the Company’s counsel delivered an initial draft of the Stock Purchase Agreement to the strategic direction committee. On August 8, the strategic direction committee met to discuss the initial draft of the Stock Purchase Agreement and McGill updated the committee on the status of negotiations with D. Chymiak. The committee made minor changes to the Stock Purchase Agreement, but the substantive terms remained the same.  On August 28, the strategic direction committee met to review and approve the form of the Stock Purchase Agreement. At the August 28 meeting, the strategic direction committee also approved Hart’s role as permanent Chief Executive Officer of the Company subject to the parties’ agreement as to the compensation and other terms of Hart’s employment and appointed McGill as Chairman of the Board of Directors, replacing D. Chymiak. The strategic direction committee delivered the Stock Purchase Agreement and the personal guarantee under the promissory note to D. Chymiak on August 31.
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At its August 28, 2018 board meeting, the board members discussed a possible sale and leaseback of the Company’s Broken Arrow, Oklahoma facility with D. Chymiak as the buyer.  The sale would generate approximately $5 million of cash for the Company at a critical time in light of the Company’s inability to find a replacement lender for BOK and the looming October 31, 2018, due date under the BOK Forbearance Agreement.  The sale would be separate and distinct from the proposed sale of the Cable Companies and therefore would not require stockholder approval.  The Broken Arrow property was to be included in the proposed cable sale and therefore the cash purchase price in any sale of the Broken Arrow property would have to be deducted from the total purchase price and from the closing payment due under the cable sale.  At the August 28, the Board authorized management to move forward in discussions with D. Chymiak regarding this possible transaction.

On September 4, 2018, D. Chymiak delivered a revised offer to McGill, which proposed a reduction in the initial payment of the purchase price from $7.9 million to $5.9 million and a corresponding $2 million increase in the final payment of the promissory note.  D. Chymiak also delivered to McGill his personal financial statement to assist the strategic direction committee in their due diligence review of his financial position and ability to perform his guarantee.

The strategic direction committee had a telephone meeting on September 6, 2018, to discuss the collateral to secure payment under the promissory note and the guarantee, as well as the reduction proposed by D. Chymiak in the down payment. On September 10, 2018, McGill informed D. Chymiak that the strategic direction committee would not approve a reduction in the down payment but would consider a reduction in the installment payments under the promissory for the first four years with the aggregate reduction added to the final payment under the promissory note. On September 11, 2018, D. Chymiak informed McGill that he agreed to these terms and McGill agreed to revise the Stock Purchase Agreement to provide for the revision of the payment terms under the promissory note and to submit the revised draft of the Stock Purchase Agreement to the strategic direction committee.  On September 20, 2018, counsel for D. Chymiak returned to the Company proposed revisions to the Stock Purchase Agreement and exhibits.

On September 25, 2018, counsel for D. Chymiak advised the Company that D. Chymiak was willing to discuss his purchase of the Company’s Broken Arrow, Oklahoma property for a cash purchase price of approximately $5.1 million.  On October 9, 2018, the Company and D. Chymiak entered into an agreement for the sale and purchase of the Broken Arrow facility for a cash purchase price of $5.0 Million (reduced from the previous $5.1 million price due to the purchaser’s assumption of certain agreed necessary repairs to the structure of the building) payable in full at closing. The agreement also required the buyer to lease the Broken Arrow property back to Tulsat, LLC under a ten-year lease calling for rental payments of $37,500 per month ($450,000 annually) over the term of the lease.  The lease would be guaranteed by the Company, but the buyer and its lender would agree to release the Company from the guarantee upon the sale of the Cable Companies to D. Chymiak.  On October 31, 2018, D. Chymiak advanced to the Company one million dollars of the closing down payment, which the Company used to pay down the debt owed to BOK.  On November 27, 2018, the Company’s board of directors approved by unanimous written consent in lieu of a meeting an increase in the rental payments under the ten-year lease of the Broken Arrow property from $37,500 per month ($450,000 annually) to $44,000 ($528,000) as required by the lender to the buyer.  On November 29, 2018, the Broken Arrow property was sold to David Chymiak, LLC, and Tulsat entered into a lease of the property on the terms approved by the Board on November 27, 2018.  Proceeds of the sale were used, in part, to pay off the balance of the BOK Loan Agreement.  The Broken Arrow sale resulted in an agreed reduction of the purchase price and down payment for the Sale Transaction equal to the purchase price paid for the Broken Arrow property.

 On or about September 5, 2018, ADDvantage initiated discussions with representatives from ValueScope, Inc., referred to herein as “ValueScope”, about rendering a fairness opinion in connection with a potential transaction, and on September 13, 2018, ADDvantage entered into an engagement agreement with ValueScope under which it would render to the strategic direction committee its opinion regarding the fairness of the Sale Transaction. Following its engagement, ValueScope commenced due diligence with respect to ADDvantage and its subsidiaries.
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On September 28, 2018, a meeting of the strategic direction committee was held via conference telephone.  Martin D. Hanan and Jason Wainwright, representatives of ValueScope addressed the directors.  They noted that drafts of their fairness opinion had been circulated to the directors in advance of the meeting.  Mr. Hanan discussed with the committee members the direct and indirect valuation tests and the various methodologies used by ValueScope in determining fair value.  He stated that the proposed purchase price, as set forth in the draft stock purchase agreement furnished to ValueScope, exceeded the value of the cable business as determined under each of the valuation methodologies employed by ValueScope, and that accordingly Value Scope had concluded that, subject to the various assumptions and limitations set forth in its draft opinion, the stated purchase price was fair to the Company and all of its stockholders.  After Mr. Hanan’s presentation, the directors posed questions of Mr. Hanan regarding the draft fairness opinion and his firm’s analysis.  The directors also discussed the status of negotiations with D. Chymiak for the purchase and sale of the cable business.

On November 29, 2018, counsel for the Company returned to D. Chymiak’s attorney the Company’s proposed revised stock purchase agreement.  On December 11, 2018, D. Chymiak’s attorney returned to the Company’s counsel proposed revisions to the stock purchase agreement.  On December 17, 2018, the Company, D. Chymiak and their respective attorneys had a conference call to negotiate the terms of the stock purchase agreement.  After that conference call, counsel for D. Chymiak returned to the Company a proposed revised version of the stock purchase agreement, and on December 20, 2018 returned to the Company proposed revisions to the D. Chymiak guarantee.

On December 20, 2018, the strategic direction committee met.  Mr. McGill discussed the status of negotiations for the sale of the cable business to D. Chymiak.  Scott Francis reported to the committee members that the terms being discussed were a total purchase price of $10,275,000, which reflected the aforesaid reduction for the purchase price for the sale of the Broken Arrow property, and also reflected reductions for reduced 2018 fiscal year operating results of the cable business, and a further inventory write down. Of the purchase price, $3,900,000 was payable in cash at the closing and the remaining $6,375,000 was included in a promissory note, payable over five years.  Martin Hanan of ValueScope reported that their analysis valued the cable segment at $9,400,000 so the revised purchase price exceeded the value of the cable segment.  Jason Wainwright of ValueScope reported that the business decline suffered by the Company’s cable segment since June 30, 2018, had resulted in a reduction in the valuation of the cable segment.  Directors Franz and Sparkman questioned the ValueScope representatives and management extensively regarding valuation and the reasons for the decline in the valuation of the cable segment.  The committee approved the terms of the Stock Purchase Agreement subject to getting the buyer’s agreement to the economic terms of the transaction as discussed at the meeting. After the meeting, counsel to the Company advised counsel to D. Chymiak of the economic terms that the committee would accept, and on December 21, 2018, counsel to the Company delivered revised drafts of the stock purchase agreement to counsel for D. Chymiak reflecting the terms approved by the committee.  On December 26, 2018, the Company and D. Chymiak executed the stock purchase agreement.

On March 11, 2019, the committee approved an amendment to the Stock Purchase Agreement.  The amendment, as executed by the parties on March 18, 2019, and dated as of March 15, 2019, acknowledged that an affiliate of D. Chymiak had agreed to purchase the Company’s Sedalia, Missouri and Warminster, Pennsylvania properties for purchase prices equal to their appraised values of $ 1,350,000 and $725,000, respectively.  Like the Broken Arrow, Oklahoma facility sale in 2018, the Sedalia and Warminster sale agreements are structured as sale/leasebacks under which the purchaser pays the appraised value of the property, and the purchaser and seller enter into a ten year lease of the property.  The Sedalia and Warminster sale agreements, executed by the parties on March 22, 2019, require a cash payment equal to 80% of the purchase price at closing and the delivery of the purchaser’s 6.25% promissory note for the balance of the purchase price which is payable on the earlier of (i) the closing of the Sale Transaction or (ii) six months from the closing of the property sale.  Payment of the promissory note is guaranteed by D. Chymiak and The David E. Chymiak Trust.  Since the Sedalia, Missouri and Warminster, Pennsylvania properties are part of the cable business, the amendment provides that amounts paid to the Company for their purchase prior to the closing of the Sale Transaction will reduce the purchase price and down payment under the Stock Purchase Agreement.  On March 28, 2019, the agreement for the sale of the Sedalia, Missouri property was closed with the Company receiving a cash purchase price of $1,350,000, which will be deducted from the purchase
 
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price and down payment under the Stock Purchase Agreement.   In addition, the amendment reflects the parties’ agreement as to the form of the collateral agreements that would secure payment of buyer’s promissory note, the terms and conditions upon which certain collateral would be released by the Company and a clarification of the permitted amount of senior debt against the Company’s real estate collateral.  ValueScope finalized and delivered its fairness opinion dated as of March 21, 2019, after reviewing the terms of the amendment.

Purposes and Reasons for the Sale; Position of the Company as to Fairness of the Sale; Recommendation of the Strategic Direction Committee and of our Board of Directors

The strategic direction committee acting on behalf of and as authorized by the Company’s Board of Directors believes, based on their consideration of the factors relating to the substantive and procedural fairness described below, that the Sale Transaction as contemplated by the Stock Purchase Agreement is fair to, and in the best interests of, all of the Company’s stockholders and specifically to the stockholders unaffiliated with the buyer. The Company’s purpose and reasons for undertaking the Sale Transaction at this time are to enable stockholders to realize the value of the cable business by selling it pursuant to the terms of the Stock Purchase Agreement.

In the course of reaching its determination, the strategic direction committee considered information with respect to the Cable Companies’ financial condition, results of operations, competitive position and business strategy, on both a historical and prospective basis, as well as current industry, economic and market conditions and trends. The strategic direction committee also considered the following factors as being generally positive or favorable, each of which the strategic direction committee believed supported its determination and recommendations:

 the then-current and historical values of the Cable Companies;

  the continuing decline of our cable business and of the cable television industry overall;

 the Company’s need for additional growth capital;

 the continued decline of top line and bottom line results of the cable business in spite of efforts of the Company to grow the business;

 the large amount of inventory required to operate the cable business relative to the return generated from the inventory investment;

 the consolidation of cable operators and original equipment manufacturers which limited the Company’s ability to grow its cable business;

 changes in cable television technology which negatively impacted the cable segment’s ability to sell its legacy product lines;

 the consideration to be paid by Leveling 8 for the cable assets and business;

  the terms of the Stock Purchase Agreement, including:

  the requirement that the Sale Transaction must be approved by the holders of a majority of the outstanding common stock of the Company not owned by D. Chymiak and his affiliates;

 the limited representations and warranties given by the Company;

 the inclusion of provisions that permit the Company’s Board of Directors, under specified circumstances, to change or withdraw its recommendation with respect to the Stock Purchase Agreement and the Sale Transaction and respond to unsolicited proposals to acquire the Cable Companies to
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the extent the Company’s Board of Directors believes in good faith that failure to do so would be inconsistent with its fiduciary duties; and

  the other terms and conditions of the Stock Purchase Agreement, as discussed in the section entitled “The Stock Purchase Agreement”, which the strategic direction committee, after consulting with its legal counsel, considered to be reasonable and consistent with precedents it deemed relevant.


In addition to the foregoing factors which the strategic direction committee considered as being generally positive or favorable in making its determination and recommendations in favor of the Sale Transaction, the strategic direction committee also considered that its determination and recommendations were supported by its belief that there were limited strategic alternatives for enhancing value for the Company’s stockholders, and that the market to sell the Cable Companies was limited, both in terms of interested buyers and time. This belief was primarily based on the Company’s failed attempt to sell the Company in 2010. Although the Company had several interested parties, all potential purchasers lost interest upon their review of the Company’s business model. The board and management concluded that potential purchasers were swayed from the possible purchase of the cable segment principally because of their concerns regarding the Company’s large inventory position and the dominant role played by D. Chymiak in the cable segment’s business. The strategic direction committee believes these potentials concerns have only been exacerbated over time and that the market to purchase the cable segment of the Company is more limited today than it was in 2010.  This view was confirmed by the Company’s broker who, in the spring of 2018, reported that his informal inquiries suggested that there would be little third party interest in purchasing the Company’s cable business.

The strategic direction committee also considered a number of factors that are discussed below relating to the procedural safeguards that it believes were and are present to ensure the fairness of the Sale Transaction. The strategic direction committee believes these factors support its determinations and recommendations and provide assurance of the procedural fairness of the Sale Transaction to the Company’s stockholders:

 the broad authority granted to the strategic direction committee by the Company’s Board of Directors to negotiate the terms of the definitive agreement with D. Chymiak or to determine not to pursue any agreement with D. Chymiak;

  the strategic direction committee consists solely of independent and disinterested directors. The members of the strategic direction committee (i) are not employees of the Company or any of its subsidiaries, (ii) are not affiliated with D. Chymiak, Leveling 8 or their affiliates, and (iii) have no financial interest in the Sale Transaction that is different from that of the Company’s unaffiliated stockholders, other than as discussed in the section entitled “Special Factors—Interests of the Company’s Directors and Executive Officers in the Sale Transaction”;

  the strategic direction committee held several meetings and met regularly to discuss and evaluate D. Chymiak’s proposal, and was advised by independent legal advisors, and each member of the strategic direction committee was actively engaged in the process on a regular basis;

  the recognition by the strategic direction committee that it had no obligation to approve the Sale Transaction or any other transaction;

 the Sale Transaction must be approved by the affirmative vote of (i) the holders of at least a majority of all outstanding shares of common stock, and (ii) the holders of at least a majority of all outstanding common stock of the Company not owned by D. Chymiak and his affiliates, as discussed in the section entitled “The Special Meeting—Required Vote”; and

 the opinion of ValueScope that the purchase price to be paid for the cable segment was fair.
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In the course of reaching its determinations, the strategic direction committee also considered the following risks and other factors concerning the Stock Purchase Agreement and the Sale Transaction as being generally negative or unfavorable:

  the fact that the Company will have no ongoing equity participation in the Cable Companies following the Sale Transaction, and that the Company will cease to participate in the Cable Companies’ future earnings or growth, if any, and will not participate in any potential future sale of the Cable Companies to a third party or any potential recapitalization which could include a greater dividend to stockholders;

  the possibility that Leveling 8 could realize significant returns on its equity investment in the Cable Companies following the Sale Transaction;

  the possibility that Leveling 8 could sell some or all of the Cable Companies following the Sale Transaction to one or more purchasers at a valuation higher than that being paid in the Sale Transaction;

  the risk that, while the Sale Transaction is expected to be completed, there can be no assurance that all conditions to the parties’ obligations to complete the Sale Transaction will be satisfied, and as a result, it is possible that the Sale Transaction may not be completed even if the requisite stockholder approvals are obtained;

  the risks and costs to the Company if the Sale Transaction does not close, including the potential effect of the diversion of management and employee attention from the Company’s business and the substantial expenses which the Company will have incurred; and

 the risk of a default by Leveling 8 in the payment of its promissory note, which represents over half of the purchase price.

While the strategic direction committee considered potentially positive and negative factors, it concluded that, overall, the potentially positive factors outweighed the potentially negative factors, and at a meeting held on December 20, 2018, the strategic direction committee unanimously:

  determined that the Stock Purchase Agreement and the Sale Transaction as contemplated by the Stock Purchase Agreement are fair to, advisable, and in the best interests of the Company and the Company’s stockholders; and

  approved resolutions recommending to the Company’s stockholders that they approve the Sale Transaction as contemplated by the Stock Purchase Agreement.

The committee likewise unanimously approved the changes to the Stock Purchase Agreement set forth in the amendment of March 15, 2019.

In addition, the Company’s Board of Directors believes that the Stock Purchase Agreement and the Sale Transaction are both substantively and procedurally fair to the Company and the Company’s stockholders.  In reaching these determinations, our Board of directors considered and adopted:

 the strategic direction committee’s analysis, conclusions, and unanimous determination that the Stock Purchase Agreement and the Sale Transaction as contemplated by the Stock Purchase Agreement were fair to, advisable and in the best interests of the Company and the Company’s stockholders; and

  the strategic direction committee’s unanimous recommendation that the stockholders vote for the approval of the Sale Transaction.

In making these determinations, the Company’s Board of Directors also considered a number of
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factors, including the following:

  the strategic direction committee consists solely of independent and disinterested directors. The members of the strategic direction committee (i) are not employees of the Company or any of its subsidiaries, (ii) are not affiliated with D. Chymiak, Leveling 8 or their affiliates, and (iii) have no financial interest in the Sale Transaction that is different from that of the Company’s unaffiliated stockholders, other than as discussed in the section entitled “Special Factors—Interests of the Company’s Directors and Executive Officers in the Sale Transaction”; and

  the process undertaken by the strategic direction committee and its advisors in connection with evaluating the Sale Transaction, as described above in the section entitled “Special Factors—Background of the Sale Transaction”.

The foregoing discussion of the information and factors considered by the strategic direction committee and by the Company’s Board of Directors is not intended to be exhaustive, but includes the material factors considered by the strategic direction committee and the Company’s Board of Directors, respectively, including the substantive and procedural factors considered by the strategic direction committee and the Company’s Board of Directors discussed above. In view of the wide variety of factors considered by the strategic direction committee and by the Company’s Board of Directors in evaluating the Stock Purchase Agreement and the Sale Transaction, neither the strategic direction committee nor the Company’s Board of Directors found it practicable, or attempted, to quantify, rank or otherwise assign relative weights to the foregoing factors in reaching their respective conclusions. In addition, individual members of the strategic direction committee and of the Company’s Board of Directors may have given different weights to different factors and may have viewed some factors more positively or negatively than others.

Other than as described in this proxy statement, the Company’s Board of Directors is not aware of any offer by any other person during the prior two years for the purchase of the Cable Companies or the Company’s cable business.

Fairness Opinion
At the meeting of the strategic direction committee of the Company’s Board of Directors held on December 20, 2018, ValueScope, Inc. “ValueScope” delivered an oral opinion, which was confirmed by delivery of a written opinion, dated as of March 21, 2019, and addressed to the strategic direction committee of the Board of Directors, to the effect that, as of the date of the opinion and based upon and subject to the conditions and limitations set forth in the opinion, the consideration to be received by the Company in the Sale Transaction was fair from a financial point of view, to the Company.
The full text of ValueScope’s written opinion dated as of March 21, 2019, together with a detailed report regarding its financial analysis and the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. ValueScope’s opinion was provided for the use and benefit of the strategic direction committee of the Company’s Board of Directors in its evaluation of the Sale Transaction. ValueScope did not act as a financial advisor to the Company in connection with the Sale Transaction.  ValueScope’s opinion is limited solely to the fairness, from a financial point of view, of the consideration to be received by the Company in the Sale Transaction and does not address the Company’s underlying business decision to effect the Sale Transaction or the relative merits of the Sale Transaction as compared to any alternative business strategies or transactions that might be available with respect to the Company. ValueScope’s opinion does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote or act with respect to the Sale Transaction or any other matter.
In arriving at its opinion, ValueScope, analyzed, among other things:
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·
A review of the execution version of the Stock Purchase Agreement by and among Leveling 8, Inc. and ADDvantage Technologies Group, Inc. dated December 26, 2018, and the amendment to the Stock Purchase Agreement dated March 15, 2019.
·
A review of the Company’s publicly available financial statements for the fiscal years ended September 30, 2015 through September 30, 2018 and the trailing twelve-month period ended November 30, 2018.
·
A review of information relating to the Company’s industry and similar companies.
·
Discussions with management regarding the historical and projected operating performance of the Company.
·
Discussions with management regarding the Company’s industry with respect to guideline companies and transactions.
·
A review of the Company’s recent trading activity on the NASDAQ Global Market exchange.
·
A review of pricing data of comparable guideline companies and industry transactions existing as of the Valuation Date.
In connection with ValueScope’s review, with the Company’s consent, ValueScope relied on the information supplied to, discussed with or reviewed by it for purposes of its opinion being complete and accurate in all material respects. ValueScope did not independently verify any of the information and relied upon its completeness and accuracy in all material aspects.  ValueScope relied upon certain asset appraisals given to it by the Company and did not independently verify such appraisals.
ValueScope developed certain projections in connection with its valuation analysis for the cable segment, the Company pre-transaction and the Company post-transaction.  These projections were based on a combination of available industry data, historical financial performance and discussions with Company management.  Industry data consisted of IBISWorld Industry Reports on Cable Providers in the U.S, Electronic Part & Equipment Wholesaling in the U.S, Wireless Telecommunications Carriers in the U.S. and cable TV subscriptions.  The historical financial performance used in developing the projections came from Company income statements by segment for the fiscal years ended September 30, 2015, through 2018 and the trailing twelve months ended November 30, 2018.  Projections were created for a valuation date of June 30, 2018, and were updated to November 30, 2018.  Company management reviewed the projections that ValueScope developed.
The following is a summary of the material financial analyses presented by ValueScope in connection with its opinion to the strategic direction committee of the Board of Directors of the Company. This summary is qualified in its entirety by ValueScope’s fairness opinion and related report attached to this proxy statement at Annex B, and stockholders are urged to review the fairness opinion and related report in its entirety.
Some information in the summaries of ValueScope’s financial analyses discussed herein and in ValueScope’s fairness opinion and related report attached to this proxy statement as Annex B is presented in tabular format. Tables should be read in conjunction with the accompanying text and are not complete in themselves. Considering the data described below without considering the full description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of ValueScope’s analyses.
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Financial Analyses of the Company
Historical Financial Review of the Cable Segment
ValueScope reviewed the historical financial information for the Company’s cable segment for the fiscal years ended September 30, 2015 through September 30, 2018 and the trailing twelve-month period (“TTM”) ended November 30, 2018, which we refer to as the “Review Period”. Cable’s total revenue declined each year of the Review Period, from $25.4 million at the end of fiscal year 2015 to $19.1 million for the TTM ended November 30, 2018.  This is due to the decline in Cable TV subscribers, which is expected to continue according to the aforementioned IBIS World Industry report.

ValueScope made certain adjustments to cable’s general and administrative expenses in order to reflect cable as a standalone business.  (See Schedule A.4 to Appendix C of Annex B.)  After making these adjustments, ValueScope estimated that the cable segment’s EBITDA decreased from $3.4 million at the end of fiscal year 2015 to negative $0.4 million for the TTM ended November 30, 2018.  The cable segments adjusted historical EBITDA and EBITDA margins are presented in the following chart.
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Historical Financial Review of the Company
The Company’s total revenue increased from $43.7 million at the end of fiscal year 2015 to $46.8 million for the TTM ended November 30, 2018.  This increase in revenue was driven by growth in the Telco segment.  The Telco segment’s revenue increased from $18.8 million in 2015 to $27.8 million for the TTM ended November 30, 2018, while the Cable segment’s revenue declined from $25.4 million to $19.1 million. Historical revenue by segment is presented in the following chart.
Valuation Methodology
Three conceptually distinct methodologies can be applied to determine the fair market value of a business or asset:  (a) the income approach, (b) the market approach, and (c) the cost approach.  Each of these generally accepted valuation methodologies are considered in the appraisal process and are more or less relevant given the nature of the business and the observable data used to apply the method.
ValueScope used the income and market approaches to determine the value of the cable segment (See Appendix C to Annex B), the pre-Sale Transaction or “pre-transaction” value of the Company (See Appendix D to Annex B) and the post-Sale Transaction or “post-transaction” value of the Company (See
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Appendix E to Annex B).  In addition to the income and market approaches, ValueScope used the cost approach to derive an indication of value for the cable segment.
Income Approach – Discounted Cash Flow Model
The projected revenue and expenses in the discounted cash flow (DCF) model were based on discussions with management and industry projections and certain assumptions regarding future nominal and real revenue growth rates
Market Approach – Guideline Public Company Method
The market approach analysis included an examination of ten guideline companies identified by management and pricing measures and industry transactions observable in the public and private markets.  ValueScope determined a conclusion of value based on a review of the pricing multiples of the guideline companies.  Based on its analysis, ValueScope applied the enterprise value (EV) to EBITDA multiples and EV/Sales multiples to the average EBITDA of the cable segment or the Company, as applicable, over the Review Period to arrive at an enterprise value.  ValueScope then added cash and subtracted debt to arrive at the implied equity value on a minority, marketable basis.  A control premium of 34.3% was then applied to determine total equity value, on a controlling basis.
Market Approach – Merger & Acquisition Method
ValueScope identified thirty comparable transactions from two proprietary databases, reviewed the EV/Sales and EV/EBITDA multiples and determined appropriate multiples for the Company and the cable segment, based on size and profitability of the Company. After adjusting for cash and debt, these multiples were applied to determine equity value.
Cost Approach – Adjusted Balance Sheet Method (cable segment valuation only)
The cable segment’s assets were generally valued at book value as of November 30, 2018, subject to adjustments to book value for accounts receivable (downward), inventory (downward) and real estate (upward).
Market Approach – Pre-Transaction Market Capitalization (pre-transaction Company valuation only)
ValueScope utilized the Company’s recent pre-Transaction trading history and share prices in arriving at a pre-transaction equity value.  ValueScope applied a 34.3% control premium to the total market capitalization as of November 30, 2018, to obtain a controlling, marketable interest equity value.
Summary Valuation Table
The following table summarizes the valuations determined by ValueScope under the methodologies described above.  This table should be reviewed in conjunction with the more detailed discussion of valuation set forth in Annex B to this proxy statement.

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SUMMARY VALUATION (Dollar figures in Thousands)
Cable Segment Value (Appendix C to Annex B)
Valuation Method
Indicated Value
Reference
Income Approach
    Discounted Cash Flow Method
 
$9,404
 
Schedule B.8
Market Approach
    Guideline Public Company Method
    Merger and Acquisition Method
 
$7,482
$6,467
 
Schedule C.2
Schedule D.3
Cost Approach
   Adjusted Balance Sheet Method
 
$9,917
 
Schedule E
Concluding Value
$8,300
Schedule G
     
Pre-Transaction Company Value (Appendix D to Annex B)
Income Approach
    Discounted Cash Flow Method
 
$20,850
 
Schedule B.8
Market Approach
    Guideline Public Company Method
    Market Price Method
    Merger and Acquisition Method
 
$20,522
$18,412
$20,429
 
Schedule C.2
Schedule D
Schedule E.3
Concluding Value
$20,100
Schedule G
Post-Transaction Company Value (Appendix E to Annex B)
Income Approach
    Discounted Cash Flow Method
 
$12,587
 
Schedule B.8
Market Approach
    Guideline Public Company Method
    Merger and Acquisition Method
 
$14,942
$11,724
 
Schedule C.2
Schedule D.3
Equity Value – Excluding Transaction Consideration
$12,200
Schedule F
    Plus:  Cash Consideration
    Plus:  Promissory Note
$3,939
$6,375
 
Concluding Value
$22,514
 

Miscellaneous
This summary of the analyses is not a complete description of ValueScope’s opinion or the analyses underlying, and factors considered in connection with, ValueScope’s opinion. The preparation of a fairness opinion is a complex analytical process and is not necessarily susceptible to partial analysis or summary description.  Selecting portions of the analyses or summary set forth above, without consulting and considering the analyses as a whole, could create an incomplete view of the opinion. ValueScope made its determination on the basis of its experience and professional judgment.
Founded in 2001, ValueScope is a team of highly credentialed valuation and financial consultants with broad experience ranging from corporate M&A to former corporate executives and academicians.  Team members hold advanced degrees in finance and economics and include CPA’s, CFA charterholders, Accredited Senior Appraisers, and Certified Valuation Analysts.  ValueScope performs more than 300 engagements annually for more than 250 clients.  Appraisers on the ADDvantage fairness opinion included Martin Hanan and Jason Wainwright.  Martin Hanan is the president and founder of ValueScope.  He has an MBA from Loyola University of Chicago and a B.S. in electrical engineering from the University of Illinois.  Mr. Hanan is a CFA charterholder and has more than 30 years of valuation experience.  Jason Wainwright is a senior manager at ValueScope and has been with ValueScope since 2014.  He has an M.S. in quantitative finance from the University of Texas at Arlington and a BBA in finance from Texas Wesleyan University.  Additionally, Mr. Wainwright is a CFA charterholder.
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The strategic direction committee of the Board of Directors selected ValueScope as an advisor in connection with the Sale Transaction because ValueScope has substantial experience in similar transactions. As compensation for its services, ValueScope was paid $85,000. ValueScope is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, strategic transactions, corporate restructurings, and valuations for corporate and other purposes.  There is no prior work or other relationship between ValueScope and ADDvantage or between ValueScope and D. Chymiak.

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Appraisals and Other Reports

Appraisals of certain real properties owned by the Cable Companies or mortgaged to the Company to secure payment of the Promissory Note were also obtained.  Such appraisals are summarized as follows:

Broken Arrow, Oklahoma
 Owner:  Sold by the Company to David Chymiak LLC in November, 2018 (Mortgaged)
Appraiser:  CBRE, P. Scott Ryan, MAI
Experience:  Director at CBRE, Inc.  Over 29 years of experience in real estate appraisal and consulting.
Licensing: State Certified General Appraiser Oklahoma – No. 13054CGA.  (Also licensed in Kansas, Missouri and Louisiana.)
Appraised Value:  $5,000,000 as of August 17, 2018
Appraisal Fees:  $3,250

Johns Creek, Georgia
Owner: The David E. Chymiak Trust (Mortgaged)
Appraiser: Buckhead Advisory Group Ltd.  J. Michael Smith, MAI, SRA
Experience:  President of Buckhead Advisory Group from 1997 – present.
Licensing: Certified Real Estate Appraiser in the State of Georgia, Certification CG 000226
Appraised Value: $3,050,000 as of April 17, 2018
Appraisal Fees:  $2,400

Sedalia, Missouri1
Owner: ComTech (Mortgaged)
Appraiser:  CBRE, Chris Williams, MAI
Experience:  Director at CBRE, Inc. 19 Years of experience in real estate appraisal and consulting.
Licensing:  State of Oklahoma, No. 12867CGA.  (Also licensed in Kansas, Missouri, Texas and Arkansas.)
Appraised Value:  $1,350,000 as of August 9, 2018
Appraisal Fees:  $3,250

Warminster, Pennsylvania2
Owner:  NCS (Mortgaged)
Appraiser:  CBRE, Timothy P. Golden Jr., MAI
Experience:  2011 – Present: CBRE, Inc. (Vice President)
Licensing:  Pennsylvania Certified General Real Estate Appraiser - #GA003644.  (Also licensed in New Jersey and Delaware.)
And
Appraiser:  CBRE, John J. Lynch, MAI
Experience:  2003 – Present: CBRE, Inc. (Managing Director)
Licensing:  Pennsylvania Certified General Real Estate Appraiser - #GA-000485-L.  (Also licensed in New Jersey.)
Appraised Value:  $725,000 as of August 17, 2018
Appraisal Fees: 3,500



1 ComTech has sold this facility to an affiliate of D. Chymiak for a cash purchase price of $1,350,000.  The sale closed on March 28, 2019. The purchase price paid by the purchaser will be credited to the purchase price and down payment due under the Stock Purchase Agreement.
2 NCS has agreed to sell this facility to an affiliate of D. Chymiak for a purchase price of $725,000.  Any cash amounts paid by the purchaser on or before the closing of the Sale Transaction will reduce the purchase price and down payment under the Stock Purchase Agreement.
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ADDvantage chose the appraisers after interviewing them, and ADDvantage paid for the appraisals other than the Johns Creek, Georgia Property, which was for the benefit of the senior lender on the property, and was paid for by the owner of the property, an affiliate of D. Chymiak.
Plans for ADDvantage after the Sale Transaction

ADDvantage has been a reseller of used or refurbished network and customer premise equipment to the cable TV and telecommunications industries. We have provided some limited customer services primarily in the cable segment but nothing in the telco area.

The cable TV industry has been experiencing subscriber churn to other providers and shrinkage from the “cut the cord” movement gradually over the last decade. The transition to new optical-based technologies has also had an impact on the sale of analog equipment in our inventory leading to a gradual but steady decline on our cable TV sales and service.

Telco Segment Overview

The expansion into the telecommunications equipment resale business with the acquisition of Nave in 2014 and Triton in 2016 has provided growth to offset the decline in cable. However, growth at both companies has been disappointing and margins have been flat. Nave’s operating expenses were high prior to FY2019, and Triton has been stifled by lack of space to grow the business and add additional product lines and new markets. Both businesses have been East Coast-centric due to their locations, limiting geographic growth and extending delivery intervals in a time-sensitive business of supplying spare or repaired critical network parts.

We believe that the telecommunications equipment resale business can be profitable and have implemented both cost reduction and expansion plans at Nave and Triton.   We have decided to diversify our business and expand into the network and equipment services segments as they have low barriers and costs of entry and present a major opportunity for growth and geographic expansion. We have chosen to begin with wireless services with the recent acquisition of Fulton Technologies. We also believe that growth and geographic expansion in services will lead to increased opportunities in our Telco equipment segment.

Nave Communications (“Nave”)

Nave has been in business for 20 years, located in suburban Baltimore, MD. ADDvantage bought Nave from its founder and management team in 2014 and had made little change to the way it conducted business until this past August.

Nave has a diverse and tenured customer base and sells products from top OEM’s such as Cisco, Ciena, Lucent, Adtran, Fujitsu, Siemens, Nokia, Juniper etc. It also has a growing brokerage business focusing on supplying the wholesale market with in-demand products we have in our inventory.  Nave also has a long-standing internal recycling and scrapping capability in a R2 Certified Facility.

After an intense operational analysis of the business last July, it was determined that Nave has been too East Coast focused due to its location, which can cause delivery interval disadvantages and presents challenges selling to markets in the Western half of the United States. Nave’s facility in Baltimore was in a good location but was 90,000 square feet and the overall costs of the building and internal operating costs impeded margins.

Due to the historical inventory purchasing strategy of buying in bulk-lots with mixed product types of varying quality, the inventory was poorly organized. The same product could be stored in multiple places, causing excessive costs to fill customer orders. Sales orders were constrained due to inventory inefficiencies and the inability to guarantee product reliability via in-house pre-testing facilities. This lack of pre-testing capability also led to an increase in product returns over the last few years due to a lack of ability to test and repair products. All the above contributed to an overhead structure that was expensive, slow, unreliable and reduced profitability and customer satisfaction.
35


Nave needed a new strategy to enhance both revenue and profitability. In August 2018, we relocated the entire Nave inventory to Palco Telecom in Huntsville, AL a world-class 3rd party logistics provider allowing us to reorganize and update our inventory records and product status. We moved more than 90,000 units in inventory from Baltimore to Huntsville over a two-week period and received, inspected and sorted all the inventory at Palco, reducing our storage requirements from 85,000 square feet to approximately 15,000 square feet during the process. We also implemented staff reductions with the warehouse and shipping staff in Baltimore reducing our operating costs by almost 70%. The last remaining action item is to exit the 10-year lease at the Jessup, MD facility which has 4.5 years remaining. This would further reduce our operating expenses by over $800,000/annually.

Now that the inventory is at Palco, we have developed the ability to pre-test over 15,000 SKU’s when needed before shipping to our customers, thereby reducing product returns and increasing customer satisfaction.  We also have a complete and accurate database of all product inventory with the ability to pick and ship orders in minutes rather than hours or days. The more central location also expands our 24-hour ship time territory to an additional 14 states. Finally, Palco gives us the ability to repair a high percentage of our own products but also to sell repair as a service to a multitude of network providers who need the ability to repair critical network components no longer serviced by the original OEM’s.

Our goal is to turn Nave into a strong contributor to the Addvantage portfolio, bringing strong annual growth in revenue and significant improvement to net profit.

Triton Datacom (“Triton”)

Triton Datacom was acquired in 2016 and is located in suburban Miami, FL. Triton has a strong and experienced leadership team with over 20 years of refurbished telecom equipment experience and a great company culture and work ethic.

Triton has been a high-quality PBX phone supplier for over 15 years and is very well respected in the refurbished PBX space.  They have low turnover and a very dedicated staff which has led to a high-quality product and efficient processes. There is a capable management team that provides clear direction to their staff and allows for an excellent working environment.

Triton has strong supplier and vendor relationships allowing excellent inventory control and an abundant access to products. They have excellent attention to detail on their refurbishing and repair processes and their output is in high demand from end-users in the enterprise office product space.

As a result of an internal operations review last July, the decision was made to move out of their existing 9,000 square foot location in Miami up the road a few miles to Pembroke Park, FL in a new 21,000 square foot facility that will allow Triton to expand its refurbishment operations and new equipment sales. We are also increasing our focus on the brokerage business, carrier sales, internet sales, and expanding our sales and marketing capabilities to match up to our investment in production capability. We expect significant topline increases beginning shortly after the move in June and are positioning Triton for significant multiyear growth in both top and bottom-line contribution.

Fulton Technologies (“Fulton”)

Fulton Technologies is a wireless services company that installs, upgrades and integrates new and existing technologies on wireless cell sites and small cells throughout the Midwest and Southwest regions of the US.  Fulton has been in business for over 30 years and was acquired by Addvantage on January 4, 2019.

The purchase of Fulton represents a growth opportunity that can be targeted to certain geographic markets or service-types in a space with almost limitless growth potential given the exponential growth in demand for data and video capacity over the world’s wireless networks.  Fulton brings vast experience in the services business, broad industry client contacts and a known pool of talented, experienced resources and management to execute its business.
36


The acquisition of Fulton provides ADDvantage a platform for expansion both geographically and by service-type immediately via multiyear master service agreements with all the major wireless carriers, OEM’s, tower owners and major integrators. These service types can be network design, real estate permissions, engineering, construction, installation and maintenance services under a strong umbrella of construction and project management expertise. The ability and experience in building an organization around these skillsets is paramount to the successful integration of Fulton.  Fulton has a strong reputation and has developed trust throughout the industry with its clients. Fulton has a team of excellent managers to build an organization that can meet deadlines, deliver quality service and increase profitability.

About half of the capex spent in the wireless industry goes to purchase network equipment and technology while the other half goes to the services needed to deploy the equipment into the network. With the massive amount of capex spending required to complete 4G and begin the deployment of the coming 5G technology and services,  Fulton is well positioned to grow its services footprint and revenue streams. Adding services to its portfolio allows ADDvantage to diversify its business and soften its dependency on just Nave and Triton post-sale of the cable segment.

Fulton primarily deploys new technologies and frequencies at tower and rooftop cell sites spread over wide geographic areas or states in the Midwest and Southwest regions. It also excels at the deployment of temporary towers for special events like the Indy 500, Lollapalooza, the Chicago World Series and even for storms or emergency situations. Fulton built many of the small cells used in downtown Minneapolis for the 2018 Superbowl. Fulton is well known for solving complex technical challenges and building the most difficult specialty cell sites for its carrier customers.

Deploying new technologies often includes decommissioning and removing outdated technologies. Fulton has a team that is good at both these additional opportunities.  Front-end services such as design and permissions not only are profitable on their own, but also offer an early view into the construction programs for the following construction year. ADDvantage will focus initially on wireless network services and will pursue the Southwest and Midwest markets via multiyear master service Agreements (MSA’s) with AT&T Mobility, Verizon, Sprint, TMO, Nokia, Ericsson and other turf vendors like Mastec, Black & Veatch, SAC, Nexius and others.

Certain Effects of the Sale

If the conditions to the closing of the Sale Transaction are either satisfied or, to the extent permitted, waived, ADDvantage will sell its interest in the Cable Companies to Leveling 8 and Leveling 8 will become the sole owner of each of the Cable Companies. ADDvantage will cease to own any of the Shares in the Cable Companies. ADDvantage will continue to operate the telecommunications and wireless businesses as they are currently operated and its corporate existence under Oklahoma law will continue unaffected.

If the Sale Transaction is completed, the entire equity in the Cable Companies will be owned by Leveling 8, and ADDvantage will have no interest in the Cable Companies’ net book value or net earnings. Leveling 8 will be the sole beneficiary of the future net earnings and growth, if any, of the cable business.  Similarly, Leveling 8 will also bear the risks of ongoing operations including the risks of any decrease in the value after the Sale Transaction.  The Cable Companies will lease the Broken Arrow, Oklahoma, and the Sedalia, Missouri facilities from an affiliate of D. Chymiak, and ADDvantage will be released from its guarantee of such leases.  In like manner, if the Warminster, Pennsylvania sale agreement is closed before the closing of the Sale Transaction, a Cable Company will lease that property from an affiliate of D. Chymiak, and ADDvantage will be released from its guarantee of such lease.

D. Chymiak’s stock ownership in the Company will remain unchanged as a result of the Sale Transaction.  D. Chymiak will withdraw from his position as Chief Technology Officer but will likely remain a director of the Company.

ADDvantage’s common stock is currently registered under the Exchange Act and is quoted on NASDAQ Global Market under the symbol “AEY”. This will remain unchanged.

Interests of the Company’s Directors and Executive Officers in the Sale Transaction
37


When considering the recommendation of the Company’s Board of Directors, you should be aware that the members of our Board of Directors and our executive officers have interests in the Sale Transaction other than their interests as stockholders generally, including those described below. These interests may be different from, or in conflict with, your interests as a stockholder of the Company. The members of our Board of Directors and strategic direction committee were aware of these additional interests, and considered them, when they approved the Stock Purchase Agreement and the Sale Transaction.

D. Chymiak’s Interests

If the Sale Transaction is completed, Leveling 8 will beneficially own 100% of the Cable Companies. Leveling 8 is wholly owned by D. Chymiak, a director and executive officer of the Company. For a description of D. Chymiak’s continuing interest in the Company, see “Special Factors—Certain Effects of the Sale”.

Compensation of the Strategic Direction Committee

In consideration of the additional time and effort required for their service on the strategic direction committee, each member of the strategic direction committee is being paid a per-meeting fee of $375. To date, there have been eight strategic direction committee meetings. In addition, the members of the strategic direction committee will also be reimbursed for their reasonable out of pocket travel and other expenses in connection with their service on the strategic direction committee. The strategic direction committee, at the invitation of the Board of Directors, approved such fees after discussion with their legal advisors.

James C. McGill, as Chairman of the Board, is paid $150,000 per year ($75,000 in cash and $75,000 in restricted stock, vesting at 20% per year over 5 years) pursuant to the terms of a letter agreement dated October 8, 2018.  McGill does not receive any additional compensation for his participation on the strategic direction committee.

Other than their receipt of strategic direction committee compensation (as described above) and compensation for serving on the Company’s Board of Directors, neither of which is contingent upon the consummation of the Sale Transaction or the strategic direction committee’s or Board of Directors’ recommendation of the Sale Transaction, none of the members of the strategic direction committee has a financial interest in the Sale Transaction or any of transactions contemplated thereby and none of them is related to or affiliated with Leveling 8. The Company’s Board of Directors did not place any limitations on the authority of the strategic direction committee regarding its investigation and evaluation of the proposed transaction.

United States Federal Income Tax Consequences of the Sale Transaction

The following discussion is a summary of certain U.S. federal income tax consequences of the Sale Transaction. This discussion is based on current provisions of the Code, applicable U.S. Department of the Treasury regulations promulgated thereunder, judicial opinions, and published positions of the Internal Revenue Service, all as in effect as of the date of this document. Such authorities are subject to change or differing interpretations at any time, possibly with retroactive effect, and any such change or interpretation could affect the accuracy of the statements in this proxy statement. This discussion does not address any U.S. federal tax considerations other than those relating to income tax (e.g., estate and gift taxes), nor does it address any state, local, or foreign tax considerations or any tax reporting requirements.

The Sale Transaction will not result in any immediate U.S. federal income tax consequences to ADDvantage stockholders.

The parties have agreed to make a 338(h)(10) election with the IRS regarding the taxing of the Sale Transaction.  If this election is upheld, then the Sale Transaction, though structured as a sales of Shares in the Cable Companies, will be taxed as if it were a sale of the assets of the Cable Companies.
38


The Sale Transaction will generally be taxable to ADDvantage for U.S. federal income tax purposes, and it is expected that ADDvantage will recognize a net loss for U.S. federal income tax purposes as a result of the Sale Transaction.

Regulatory Approvals

The Company is unaware of any federal or state regulatory requirements that must be complied with or necessary approvals in connection with the Sale Transaction other than compliance with regulations of the Securities and Exchange Commission.

Anticipated Accounting Treatment of the Sale Transaction

The Sale Transaction will be accounted for as a “sale of a business” as that term is used under generally accepted accounting principles in the United States for financial accounting purposes.

No Appraisal Rights

Neither Oklahoma law nor ADDvantage’s certificate of incorporation provides ADDvantage stockholders with appraisal or dissenters’ rights in connection with the Sale Transaction.

Financial Information

Historical Financial Statements

Unaudited financial statements for the cable segment for the fiscal years ended September 30, 2017 and September 30, 2018, and for the quarter ended December 31, 2018, are attached to this proxy statement at Annex A.  The Company’s annual reports on form 10-K for the years ended September 30, 2017 and September 30, 2018, and the Company quarterly report on form 10-Q for the quarter ended December 31, 2018 are incorporated into this proxy statement by reference, including within such reports the annual audited financial statements of the Company for the years ended September 30, 2017 and September 30, 2018 and the unaudited financial statements of the Company for the quarter ended December 31, 2018.

Unaudited Pro Forma Condensed Combined Financial Information

ADDvantage has prepared unaudited pro forma condensed combined financial statements to assist readers in understanding the nature and effects of the sale of the Cable Television (“Cable TV”) reporting segment.  The unaudited pro forma condensed combined statements of operations for the three months ended December 31, 2018, and for the fiscal years ended September 30, 2018, and 2017 have been prepared with the assumption that the Cable TV segment sale was completed as of October 1, 2016.  The unaudited pro forma condensed combined balance sheet as of December 31, 2018 has been prepared with the assumption that the sale was completed as of the balance sheet date.
The unaudited pro forma condensed combined statements of operations and condensed combined balance sheet are provided for informational purposes only and do not purport to be indicative of the Company’s results of operations or financial position which would actually have been obtained had such transactions been completed as of the date or for the periods presented, or of the results of operations that may be obtained in the future.  The unaudited pro forma condensed combined financial statements do not include any adjustments regarding liabilities incurred or cost savings achieved resulting from the sale of the Cable TV reporting segment, as management is in the process of assessing what, if any, future actions are necessary.
The unaudited pro forma condensed combined financial information has been prepared by the Company based upon assumptions deemed appropriate by the Company's management.  An explanation of certain assumptions is set forth under the notes to unaudited pro forma condensed combined financial statements.
39

The unaudited pro forma condensed combined financial information should be read in conjunction with the historical audited consolidated financial statements and related notes of ADDvantage, the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in ADDvantage’s Annual Report on Form 10-K for the fiscal year ended September 30, 2018, filed with the SEC on December 28, 2018, and the unaudited consolidated condensed financial statements Quarterly Report on Form 10-Q for the quarter ended December 31, 2018, filed with the SEC on February 12, 2019.

40


ADDVANTAGE TECHNOLOGIES GROUP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)


(In thousands, except per share amounts)
 
Three Months Ended December 31, 2018
 
       
   
ADDvantage
   
Sale of
Cable TV (Note 4(a))
   
Pro forma
Adjustments
   
Note 4
   
Pro forma
 
                               
Sales
 
$
11,272
   
$
(4,462
)
 
$
         
$
6,810
 
Cost of sales
   
8,431
     
(3,344
)
   
           
5,087
 
Gross profit
   
2,841
     
(1,118
)
   
           
1,723
 
Operating, selling, general and administrative expenses
   
3,796
     
(1,439
)
   
           
2,357
 
Loss from operations
   
(955
)
   
321
     
           
(634
)
Interest income (expense)
   
(25
)
   
2
     
76
     
c
)
   
53
 
Loss before income taxes
   
(980
)
   
323
     
76
             
(581
)
Provision (benefit) for income taxes
   
59
     
(678
)
   
21
     
d
)
   
(598
)
                                         
Net income (loss)
 
$
(1,039
)
 
$
1,001
   
$
55
           
$
17
 
                                         
Income (loss) per share:
                                       
Basic
 
$
(0.10
)
                         
$
0.00
 
Diluted
 
$
(0.10
)
                         
$
0.00
 
                                         
Shares used in per share calculation:
                                       
Basic
   
10,361,292
                             
10,361,292
 
Diluted
   
10,361,292
                             
10,361,292
 





See the accompanying notes which are an integral part of these unaudited pro forma condensed combined financial statements.
41














ADDVANTAGE TECHNOLOGIES GROUP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)


(In thousands, except per share amounts)
 
Year Ended September 30, 2018
 
       
   
ADDvantage
   
Sale of
Cable TV (Note 4(a))
   
Pro forma
Adjustments
   
Note 4
   
Pro forma
 
                               
Sales
 
$
47,414
   
$
(19,941
)
 
$
         
$
27,473
 
Cost of sales
   
36,191
     
(16,135
)
   
           
20,056
 
Gross profit
   
11,223
     
(3,806
)
   
           
7,417
 
Operating, selling, general and administrative expenses
   
14,325
     
(5,230
)
   
           
9,095
 
Restructuring charge
   
941
   
     
           
941
 
Goodwill impairment charge
   
1,150
     
(1,150
)
   
           
 
Loss from operations
   
(5,193
)
   
2,574
     
           
(2,619
)
Other income (expense):
                                     
Loss from equity method investee
   
(259
)
   
     
           
(259
)
Interest income (expense)
   
(232
)
   
22
     
436
     
c
)
   
226
 
Total other income (expense), net
   
(491
)
   
22
     
436
             
(33
)
                                         
Income (loss) before income taxes
   
(5,684
)
   
2,596
     
436
             
(2,652
)
Provision (benefit) for income taxes
   
1,636
     
(119
)
   
122
     
d
)
   
1,639
 
Net income (loss)
 
$
(7,320
)
 
$
2,715
   
$
314
           
$
(4,291
)
                                         
Loss per share:
                                       
Basic
 
$
(0.71
)
                         
$
(0.42
)
Diluted
 
$
(0.71
)
                         
$
(0.42
)
                                         
Shares used in per share calculation:
                                       
Basic
   
10,272,749
                             
10,272,749
 
Diluted
   
10,272,749
                             
10,272,749
 









See the accompanying notes which are an integral part of these unaudited pro forma condensed combined financial statements.
42







ADDVANTAGE TECHNOLOGIES GROUP, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)


(In thousands, except per share amounts)
 
Year Ended September 30, 2017
       
             
   
ADDvantage
   
Sale of
Cable TV (Note 4(a))
   
Pro forma
Adjustments
   
Note 4
   
Pro forma
 
                               
Sales
 
$
48,714
   
$
(22,806
)
 
$
         
$
25,908
 
Cost of sales
   
33,903
     
(15,068
)
   
           
18,835
 
Gross profit
   
14,811
     
(7,738
)
   
           
7,073
 
Operating, selling, general and administrative expenses
   
14,665
     
(5,904
)
   
353
     
b
)
   
9,114
 
Income (loss) from operations
   
146
     
(1,834
)
   
(353
)
           
(2,041
)
Interest income (expense)
   
(390
)
   
20
     
378
     
c
)
   
8
 
Loss before income taxes
   
(244
)
   
(1,814
)
    25
             
(2,033
)
Provision (benefit) for income taxes
   
(146
)
   
(684
)
   
10
     
e
)
   
(820
)
Net income (loss)
 
$
(98
)
 
$
(1,130
)
 
$
15
           
$
(1,213
)
                                         
Loss per share:
                                       
Basic
 
$
(0.01
)
                         
$
(0.12
)
Diluted
 
$
(0.01
)
                         
$
(0.12
)
                                         
Shares used in per share calculation:
                                       
Basic
   
10,201,825
                             
10,201,825
 
Diluted
   
10,201,825
                             
10,201,825
 




See the accompanying notes which are an integral part of these unaudited pro forma condensed combined financial statements.
43



ADDVANTAGE TECHNOLOGIES GROUP, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(UNAUDITED)

(In thousands)
 
December 31, 2018
       
             
   
ADDvantage
   
Assets and liabilities of
Cable TV (Note 4 (f)(g))
   
Pro forma
Adjustments
   
Note 4
   
Pro forma
 
Assets
                             
Current assets:
                             
Cash and cash equivalents
 
$
2,779
   
$
   
$
3,639
     
h
)
 
$
6,418
 
Accounts receivable, net
   
5,011
     
(1,979
)
   
             
3,032
 
Income tax receivable
   
116
     
1,390
     
             
1,506
 
Inventories, net
   
18,572
     
(10,875
)
   
             
7,697
 
 Prepaid expenses
   
388
     
(54
)
   
             
334
 
 Note receivable due from buyer – current portion
   
     
     
1,033
     
i
)
   
1,033
 
Total current assets
   
26,866
     
(11,518
)
   
4,672
             
20,020
 
                                         
Property and equipment, net
   
1,968
     
(1,497
)
   
             
471
 
Investments in and loans to equity method investee
   
12
     
     
             
12
 
Note receivable due from buyer, less current portion
   
     
     
5,342
     
j
)
   
5,342
 
Intangibles, net of accumulated amortization
   
6,578
     
     
             
6,578
 
Goodwill
   
4,820
     
     
             
4,820
 
Other assets
   
683
     
(9
)
   
             
674
 
                                         
Total assets
 
$
40,927
   
$
(13,024
)
 
$
10,014
           
$
37,917
 

Liabilities and Shareholders’ Equity
                             
Current liabilities:
                             
Accounts payable
 
$
3,876
   
$
(1,195
)
 
$
         
$
2,681
 
Accrued expenses
   
1,277
     
(426
)
   
           
851
 
Deferred gain – current portion
   
138
     
(138
)
   
     

 
 
Other current liabilities
   
644
     
     
             
644
 
Total current liabilities
   
5,935
     
(1,759
)
   
             
4,176
 
                                         
   Deferred gain
   
1,234
     
(1,234
)
   
           
 
   Other liabilities
   
166
   
     
             
166
 
Total liabilities
   
7,335
     
(2,993
)
   
             
4,342
 

Shareholders’ equity:
                             
Common stock
   
109
   
     
           
109
 
Paid in capital
   
(4,496
)
   
     
           
(4,496
)
Retained earnings
   
38,979
     
(10,031
)
   
10,014
     
k
)
   
38,962
 
Total shareholders’ equity before treasury stock
   
34,592
     
(10,031
)
   
10,014
             
34,575
 
Less: Treasury stock, at cost
   
(1,000
)
   
     
             
(1,000
)
Total shareholders’ equity
   
33,592
     
(10,031
)
   
10,014
             
33,575
 
                                         
Total liabilities and shareholders’ equity
 
$
40,927
   
$
(13,024
)
 
$
10,014
           
$
37,917
 

See the accompanying notes which are an integral part of these unaudited pro forma condensed combined financial statements.
44


NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 - Basis of Pro Forma Presentation

The unaudited pro forma condensed combined financial statements of operations and balance sheet and have been prepared by ADDvantage pursuant to the rules and regulations of the Securities and Exchange Commission for the purposes of inclusion in the Company’s Form DEF14A prepared and filed in connection with the sale of the Cable TV reporting segment.

Certain information and certain disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or omitted pursuant to such rules and regulations.  However, the Company believes that the disclosures provided herein are adequate to make the information presented not misleading.

The unaudited pro forma condensed combined financial statements of operations for the three months ended December 31, 2018 and for the fiscal years ended September 30, 2018, and 2017 have been prepared to give effect to the completed sale of the Cable TV reporting segment on October 1, 2016.  The unaudited pro forma condensed combined balance sheet as of December 31, 2018 gives effect to the sale as if it had occurred on December 31, 2018.  The unaudited pro forma condensed combined statements of operations and balance sheet are derived from the unaudited historical financial statements of ADDvantage and the Cable TV reportable segment.

The unaudited pro forma condensed combined financial statements are provided for informational purposes only and do not purport to be indicative of the Company’s financial position or results of operations which would actually have been obtained had such transactions been completed as of the date or for the periods presented, or of the financial position or results of operations that may be obtained in the future.

Note 2 – Description of Transaction

On December 26, 2018, the Company entered into a Stock Purchase Agreement, as amended as of March 15, 2019 (“Stock Purchase Agreement”) with a company owned by David E. Chymiak (“buyer”) to sell the Cable TV reporting segment, for $10.3 million.  The Stock Purchase Agreement as amended is attached to this Proxy Statement at Annex C.  The $10.3 million purchase price will be paid for by $3.9 million in cash due at closing and the $6.4 million balance due under buyer’s five year promissory note bearing interest at 6% per annum and payable in unequal semi-annual principal and interest payments.  The purchase price is subject to customary post-closing adjustments for working capital and other balance sheet items and is also subject to reduction for amounts paid to the Company in connection with the sale of its Sedalia, Missouri or Warminster, Pennsylvania properties.

Following the closing of the Cable TV segment sale, the Company will continue to operate its telecommunications segment which sells new and used telecommunications networking equipment, including both central office and customer premise equipment, to its customer base of telecommunication providers, enterprise customers and resellers.  It also provides wireless services consisting of the installation and upgrade of technology at cell sites and the construction of new small cells for 5G.

Note 3 – Note Receivable

In connection with the sale of the Cable TV reporting segment, the Company issued a credit to the buyer through accepting buyer’s promissory note for $6.4 million.  The $6.4 million term loan will be due five years subsequent to the closing of the Agreement, with unequal semi-annual principal and interest payments and a balloon payment.  The interest rate will be a fixed rate of 6%. Principal payments over the five years of the term note are as follows:
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(in thousands)
 
Year 1
 
$
1,033
 
Year 2
   
1,096
 
Year 3
   
695
 
Year 4
   
738
 
Year 5
   
2,813
 
   
$
6,375
 


Note 4 - Pro Forma Adjustments

Pro forma adjustments are made to reflect the estimated sales price and to adjust amounts related to the Cable TV segment’s net assets and liabilities.  The amounts being eliminated represent the revenues, cost of revenues, operating costs and other expenses that are attributable to the sale of the Cable TV segment.  The Company has maintained separate accounting records for the Cable TV segment.

The specific pro forma adjustments included in the unaudited pro forma condensed combined statements of operations and balance sheet are as follows:


a)
The amounts being eliminated represent the sales, cost of sales, and operating and other expenses that are attributable to the Cable TV segment.


b)
To record estimated operating expenses for legal expenses related to the sale of $218,000, ValueScope fees of $85,000, stock transfer agent/proxy solicitation fees of $30,000 and tax analysis costs of $20,000.


c)
To record an increase in interest income for the three months ended December 31, 2018, years ended and for the September 30, 2018 and 2017 of $0.1 million, $0.4 million and $0.3 million, respectively, in connection with the $6.4 million term loan entered into by the buyer (see Note 3 – Note Receivable) and a decrease in interest expense of $0.1 million assuming the $3.6 million cash received was used to pay outstanding borrowings under the Amended and Revolving Credit and Term Loan Agreement.


d)
To record the tax effect of an assumed statutory income tax rate of 28% on all adjustments.


e)
To record the tax effect of an assumed statutory income tax rate of 38% on all adjustments.


f)
To record the sale of the Cable TV segment.  The amounts include the assets and liabilities that historically have been reported as part of the Company's Cable TV segment as well as assets and liabilities primarily related to the Company's Cable TV segment that are being transferred in the sale that historically have been reported as part of the Company's unallocated corporate division.


g)
The net book value of the Cable TV segment is $10.0 million which is comprised of the Cable TV segment assets to be sold of $13.0 million net of liabilities to be assumed of $3.0 million.


h)
To record the net cash proceeds received from the sale:

Sales price of Cable TV segment
 
$
10,314,141
 
Note receivable
   
6,375,000
 
Cash proceeds before transaction costs
   
3,939,141
 
Less:  estimated transaction costs
   
300,000
 
Net cash proceeds
 
$
3,639,141
 



i)
To record the note receivable due from buyer – current portion of $1.4 million (See Note 3).

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j)
To record the note receivable due from buyer, less current portion of $5.0 million (See Note 3).


k)
To record the sales price at closing, net of estimated transaction costs.


Note 5 - Pro Forma Earnings Per Share

The pro forma basic and diluted earnings per share is based on the weighted average number of shares of ADDvantage’s stock outstanding during the period.  No shares of ADDvantage’s stock were issued as consideration in the sale of the Cable TV reporting segment.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION

This proxy statement, and the documents incorporated by reference in this proxy statement, include “forward-looking statements” that reflect our current views as to future events and financial performance with respect to our operations, the expected completion and timing of the Sale Transaction and other information relating to the Sale Transaction. These statements can be identified by the fact that they do not relate strictly to historical or current facts. There are forward-looking statements throughout this proxy statement, including, among others, under the headings “Summary Term Sheet”, “Questions and Answers About the Special Meeting”, “Special Meeting”, “Special Factors”, and “Important Information Regarding ADDvantage and its Directors and Executive Officers”, and in statements containing the words “aim”, “anticipate”, “are confident”, “estimate”, “expect”, “will be”, “will continue”, “will likely result”, “project”, “intend”, “plan”, “believe” and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. You should be aware that forward-looking statements involve known and unknown risks and uncertainties. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the actual results or developments we anticipate will be realized, or even if realized, that they will have the expected effects on the business or operations of the Company. These forward-looking statements speak only as of the date on which the statements were made and we undertake no obligation to update or revise any forward-looking statements made in this proxy statement or elsewhere as a result of new information, future events or otherwise, except as required by law. In addition to other factors and matters contained in or incorporated by reference in this document, we believe the following factors could cause actual results to differ materially from those discussed in the forward-looking statements:

  the occurrence of any event, change or other circumstance that could give rise to the termination of the Stock Purchase Agreement;

  the outcome of any legal proceedings that have been or may be instituted against the Company and others relating to the Stock Purchase Agreement;

  the inability to complete the Sale Transaction due to the failure to obtain stockholder approval (including the approval of holders of a majority of the outstanding shares of common stock not owned by D. Chymiak)) or the failure to satisfy other conditions to consummation of the Sale Transaction;

  the failure of the Sale Transaction to close for any other reason;

  the risk that the pendency of the Sale Transaction will disrupt current plans and operations and cause potential difficulties in employee retention;

  the fact that directors and officers of ADDvantage have interests in the Sale Transaction that are different from, or in addition to, the interests of ADDvantage stockholders generally in recommending that ADDvantage stockholders vote to approve the Stock Purchase Agreement;

 the effect of the announcement of the Sale Transaction on our client and customer relationships, operating results and business generally;

  the amount of the costs, fees, expenses and charges related to the Sale Transaction;

and other risks detailed in this proxy statement or in our filings with the SEC, including our most recent filings on Forms 10-Q and 10-K. See “ Risk Factors” and “Where You Can Find Additional Information”. Many of the factors that will determine our future results are beyond our ability to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. We cannot guarantee any future results, levels of activity, performance or achievements.
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THE SPECIAL MEETING

Time, Place and Purpose of the Special Meeting

This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by our Board of Directors for use at the special meeting to be held on Wednesday, May 29, 2019, starting at 9:00 a.m. local time at Renaissance Tulsa Hotel & Convention Center, 6808 S. 107th E. Ave., Tulsa, Oklahoma, 74133, or at any adjournment or postponement thereof.

The purpose of the special meeting is for our stockholders to consider and vote upon the approval of the Sale Transaction. Our stockholders must approve the Sale Transaction as contemplated by the Stock Purchase Agreement for the Sale Transaction to occur. If our stockholders fail to approve the Sale Transaction, the Sale Transaction will not occur. A copy of the Stock Purchase Agreement is attached to this proxy statement as Annex C. This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about April 24, 2019 .

Record Date and Quorum

The holders of record of common stock as of the close of business on April 10, 2019 the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. On the record date, 10,361,292 shares of common stock were outstanding.

The presence at the special meeting, in person or by proxy, of the holders of a majority of shares of common stock outstanding on the record date will constitute a quorum, permitting the Company to conduct its business at the special meeting. Any shares of common stock held in treasury by the Company or by any of our subsidiaries are not considered to be outstanding for purposes of determining a quorum. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment or postponement of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established. Proxies received but marked as abstentions and broker non-votes, if any, will be included in the calculation of the number of shares considered to be present at the special meeting.

Required Vote

For the Company to complete the Sale Transaction, under Oklahoma law, stockholders holding at least a majority in voting power of the common stock outstanding at the close of business on the record date must vote “FOR” the approval of the Sale Transaction. In addition, it is a condition to the consummation of the Sale Transaction that stockholders holding at least a majority in voting power of common stock outstanding at the close of business on the record date and not owned by D. Chymiak or his affiliates must vote “FOR” the approval of the Sale Transaction. A failure to vote your shares of common stock or an abstention from voting will have the same effect as a vote against the Sale Transaction.

As of the record date, there were 10,361,292 shares of common stock outstanding, of which D. Chymiak may be deemed to own directly or indirectly 2,664,805 shares of common stock.  Accordingly, in addition to D. Chymiak’s shares, a total of 2,515,842 shares of common stock, or approximately 24% of the outstanding shares of common stock, must vote in favor of the Sale Proposal to obtain the requisite approval of a majority of the outstanding stock of the Company.  The directors and current executive officers of the Company (other than D. Chymiak), all of whom have expressed their intent to vote in favor of the Sale Proposal because they view the Sale Transaction as a favorable opportunity for the Company, may be deemed to own directly or indirectly an additional 302,899 shares of common stock.  Except in their capacities as members of the board of directors of the Company, as applicable, no officer or director of the Company has made any recommendation either in support of or opposed to the Sale Transaction.

Excluding shares held by D. Chymiak and his affiliates leaves approximately 74% of the common stock, or 7,696,487 shares.  A majority of these shares, the so-called “majority of the minority”, must also
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approve the Sale Proposal.  The executive officers and directors of the Company have indicated their intention to vote in favor of the Sale Proposal.  Ken Chymiak, brother of D. Chymiak and a former officer and director of the Company and co-founder of Tulsat, is the owner of 1,984,367 shares of common stock, or approximately 19% of the outstanding common stock.  D. Chymiak has represented to the Company that Ken Chymiak does not own any interest of any kind in the buyer or have any contractual relationship of any kind with the buyer, and for that reason Ken Chymiak’s shares are considered part of the “minority”.  Assuming Mr. Ken Chymiak votes his shares in favor of the Sale Transaction, an additional 1,863,877 shares, or approximately 18% of the outstanding shares must vote in favor the Sale Proposal in order to obtain the requisite approval of a majority of the minority.

Voting; Proxies; Revocation

Attendance

All holders of shares of common stock as of the close of business on April 10, 2019, the record date for voting at the special meeting, including stockholders of record and beneficial owners of common stock registered in the “street name” of a bank, broker or other nominee, are invited to attend the special meeting. If you are a stockholder of record, please be prepared to provide proper identification, such as a driver’s license. If you hold your shares in “street name”, you will need to provide proof of ownership, such as a recent account statement or letter from your bank, broker or other nominee, along with proper identification.

Voting in Person

Stockholders of record will be able to vote in person at the special meeting. If you are not a stockholder of record, but instead hold your shares in “street name” through a bank, broker or other nominee, you must provide a proxy executed in your favor from your bank, broker or other nominee in order to be able to vote in person at the special meeting.

Voting by Proxy

To ensure that your shares are represented at the special meeting, we recommend that you vote promptly by proxy, even if you plan to attend the special meeting in person.

If you are a stockholder of record, you may vote by proxy using one of the methods described below.

Vote by Telephone or via the Internet. This proxy statement is accompanied by a proxy card with instructions for voting. You may vote by telephone by calling the toll-free number or via the Internet by accessing the Internet address as specified on the enclosed proxy card. Your shares will be voted as you direct in the same manner as if you had completed, signed, dated and returned your proxy card, as described below.

Vote by Proxy Card. If you complete, sign, date and return the enclosed proxy card by mail so that it is received before the special meeting, your shares will be voted in the manner directed by you on your proxy card.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the approval of the Sale Transaction and the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies or to amend or supplement the proxy statement. If you fail to return your proxy card, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting (unless you are a record holder as of the record date and attend the special meeting in person) and will have the same effect as a vote against the approval of the Sale Transaction, but will not affect the vote regarding the adjournment of the special meeting.

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the special meeting and voting in person with a “legal proxy” from your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or
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telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the special meeting and vote in person with a “legal proxy” from your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to adopt the Sale Transaction, but will not have any effect on the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Sale Transaction at the time of the special meeting or to amend or supplement the proxy statement.

Revocation of Proxies

Your proxy is revocable. If you are a stockholder of record, you may revoke your proxy at any time before the vote is taken at the special meeting by:

  submitting a new proxy with a later date, by using the telephone or Internet voting procedures described above, or by completing, signing, dating and returning a new proxy card by mail to the Company;

  attending the special meeting and voting in person; or

 sending written notice of revocation to the Company’s Corporate Secretary in writing at ADDvantage Technologies Group, Inc., 1221 East Houston, Broken Arrow, Oklahoma 74012.

Attending the special meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card to the Company or by sending a written notice of revocation to the Company, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by the Company before the day of the special meeting.

If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee in order to revoke your proxy or submit new voting instructions.

Abstentions

Abstentions will be included in the calculation of the number of shares of common stock represented at the special meeting for purposes of determining whether a quorum has been achieved. Abstaining from voting will have the same effect as a vote “AGAINST” the proposal to approve the Sale Transaction.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. In the event that there is present, in person or by proxy, sufficient favorable voting power to secure the vote of the stockholders of the Company necessary to approve the Stock Purchase Agreement, the Company does not anticipate that we will adjourn or postpone the special meeting unless the Company is advised by counsel that failure to do so could reasonably be expected to result in a violation of U.S. federal securities laws. Any signed proxies received by the Company in which no voting instructions are provided on such matter will be voted in favor of an adjournment in these circumstances. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow the Company’s stockholders who have already sent in their proxies to revoke them at any time prior to their use at the special meeting, as adjourned or postponed.

Solicitation of Proxies

The accompanying proxy is solicited by and on behalf of our Board of Directors, and the entire cost will be paid by us.  In addition to sending you these materials, some of our employees may contact you
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by telephone, by mail or in person.  None of these employees will receive any extra compensation for doing this, but they may be reimbursed for their out of pocket expenses incurred while assisting us in soliciting your proxy.  We have also retained the proxy solicitation firm of Saratoga Proxy Consulting LLC, and you may be contacted by employees or agents of that firm, which is being compensated for its services.
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THE STOCK PURCHASE AGREEMENT AND RELATED AGREEMENTS

The following is a summary of the material provisions of the Stock Purchase Agreement, a copy of which is attached to this proxy statement as Annex C and which we incorporate by reference into this proxy statement. The Stock Purchase Agreement was amended as of March 15, 2019, and a copy of such amendment is also a part of Annex C. References to the Stock Purchase Agreement are intended to incorporate the provisions of such amendment. This summary may not contain all of the information about the Stock Purchase Agreement or the Sale Transaction that is important to you. We encourage you to read carefully the Stock Purchase Agreement in its entirety, as the rights and obligations of the parties are governed by the express terms of the Stock Purchase Agreement and not by this summary or any other information contained in this proxy statement.

Parties to the Stock Purchase Agreement

The parties to the Stock Purchase Agreement are ADDvantage and Leveling 8, Inc.  D. Chymiak is not a party to the Stock Purchase Agreement but he has individually guaranteed Leveling 8’s performance of its obligations under the Stock Purchase Agreement.

For information regarding ADDvantage, see “Important Information Regarding ADDvantage and its Directors and Executive Officers – Information Regarding ADDvantage”.

Closing; Structure; Effects

The “closing” of the Sale Transaction will occur at the time that we transfer our interests in the Cable Companies to Leveling 8 on the closing date of the Sale Transaction.  The closing will occur no later than the third business day after satisfaction or waiver of the conditions to the Sale Transaction set forth in the Stock Purchase Agreement (other than those conditions which, by their nature, are to be satisfied by actions taken at the closing) or on such other date as the parties may agree, as described below in “Conditions to the Sale Transaction”.

As of the closing of the Sale Transaction, the Company will no longer own the Cable Companies and ownership to the Cable Companies will be fully vested in Leveling 8. The Company will continue to exist under Oklahoma law and operate the telecommunications business segment and the Company’s stock will continue to be traded on the NASDAQ Global Market.

Transition Services Agreement

Attached to this proxy statement at Exhibit F to Annex C is a form of Transition Services Agreement pursuant to which the Company will provide certain accounting and administrative services to Leveling 8 for a period of up to 90 days after the closing.  The Company will receive reimbursement of its actual costs as compensation for the services it provides under the Transition Services Agreement.

Transfer of Stock

At the closing of the Sale Transaction, the Company will endorse stock certificates (or other appropriate indicia of ownership) to Leveling 8 evidencing title to the shares of stock or membership interests, as applicable, of the Cable Companies.

No Appraisal Rights

Neither Oklahoma law nor ADDvantage’s certificate of incorporation provides ADDvantage stockholders with appraisal or dissenters’ rights in connection with the Sale Transaction.

Purchase Price, Promissory Note, Guaranty and Collateral
53


Purchase Price

The purchase price for the cable business as set forth in the Stock Purchase Agreement is $10,314,141.  This amount is subject to adjustment after closing to the extent that the sum of the Company’s working capital at closing (exclusive of cash which is retained by the Company) plus book value at closing of machinery and equipment is greater or less than a target amount of $11,044,041.  If the target amount is exceeded, then Leveling 8 will owe such excess to the Company.  If the sum of closing working capital (excluding cash) plus closing book value of machinery and equipment is less than the target amount, the Company will owe that amount to Leveling 8.  In addition, the purchase price and the down payment under the Stock Purchase Agreement will be reduced by the $1,350,000 cash amount paid to the Company for the Sedalia, Missouri property on March 28, 2019, and if the Company closes the sale of its Warminster, Pennsylvania property before the Closing of the Sale Transaction, then the purchase price and the down payment under the Stock Purchase Agreement will likewise be reduced by the cash amount paid to the Company for the Warminster property.

Down Payment and Promissory Note

Leveling 8 will make a wire transfer of the down payment of $3,939,141 of the purchase price at the closing (subject to the possible adjustments stated above) and will deliver to the Company at closing its promissory note for the balance of the purchase price ($6,375,000).  The form of promissory note is attached as Exhibit B to the Stock Purchase Agreement.  The promissory note accrues interest at the rate of 6% per annum, is payable in ten unequal installments of principal and interest payable every six months and will have a maturity date of five years after the closing.

The ten installments of principal and interest payable under the promissory note are not equal.  The total payments over the first two years are $2,800,000 (principal and interest), the total payments over the next 2.5 years are $2,350,000 (principal and interest) and the tenth and final payment is $2,500,000 (principal and interest).  The promissory note is subject to acceleration upon the occurrence of several customary events, such as the death of a guarantor, but the promissory note provides that it may not be accelerated upon the death of D. Chymiak if the outstanding unpaid principal balance of the note is $4,000,000 or less on the date of Mr. Chymiak’s death or within 90 days thereafter and there has been no default in the timely payment of any amounts due under the note from the date of issuance until 90 days after Mr. Chymiak’s death.

Guaranty and Covenant Agreement

Payment of the promissory note will be personally guaranteed by D. Chymiak and the D. Chymiak Trust, which we collectively refer to as the “Guarantor”, pursuant to the terms of a Guaranty and Covenant Agreement which is attached as Exhibit A to the Stock Purchase Agreement.  Under the terms of the Guaranty and Covenant Agreement, the Guarantor:

 will deliver certain reports to the Company and allow the Company to inspect the books, records and properties of the Guarantor, Leveling 8 and the Cable Companies;
 will not permit the senior secured debt on all the properties on which the Company also has a lien to exceed $5,420,000 in total, and payments on the senior debt will reduce the permitted amount of senior debt
 will not take any action which has the effect of causing the Guarantor to own less than 60% of Leveling 8 or to cause Leveling 8 to own less than 100% of the Cable Companies;
 will not dividend or distribute funds or other property to any equity holder in Leveling 8, other than the payment of reasonable compensation; and
 will not liquidate, sell, pledge or otherwise transfer or convey any of the Guarantor’s investments in real estate or equities.

The Company, if requested, may consent to a waiver of any of the above covenants, and such consent may not be unreasonably withheld, conditioned or delayed.

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   Based solely on confidential information provided to the strategic direction committee by D. Chymiak, the strategic direction committee believes that Mr. Chymiak’s personal net worth adjusted to include the anticipated amount of senior debt that Mr. Chymiak will incur in connection with the Sale Transaction will exceed the principal amount of the promissory note.

Collateral

D. Chymiak and his affiliates, including the Cable Companies, will mortgage and pledge certain assets to the Company to secure payment of the promissory note.  These pledged assets include:

 D. Chymiak’s interest in a securities account, having a value as of closing of $1,500,000;

 D. Chymiak’s stock in ADDvantage.  Mr. Chymiak’s ADDvantage stock has a value of $3,454,000 as of March 12, 2019.

 real estate in Broken Arrow, Oklahoma, Sedalia, Missouri, Johns Creek, Georgia, and Warminster, Pennsylvania.  These mortgages will be subordinate to mortgages in favor of D. Chymiak’s principal lender.  As stated above, D. Chymiak has agreed that the maximum amount of senior debt that can be placed against these properties is $5,420,000.

Under the terms of the Stock Purchase Agreement as amended, items of collateral may be released from the Company’s lien as agreed “Release Amounts” (as set forth in Schedule 2.06 to the Stock Purchase Agreement) are credited at buyer’s request to specific items of collateral in accordance with the following:

 all unscheduled prepayments of principal under the promissory note may be credited to items of collateral designated by buyer;

 payments of principal in accordance with the payment schedule attached to the promissory note may be credited to items of real property collateral designated by buyer; and

 in any event, the securities account in which the Company has a security interest may not be released as collateral until after the shares of ADDvantage common stock have been released.


Representations and Warranties

The Stock Purchase Agreement contains representations and warranties made by the Company to Leveling 8, and representations and warranties made by Leveling 8 to the Company, and may be subject to important limitations and qualifications agreed to by the parties in connection with negotiating the terms of the Stock Purchase Agreement. In addition, certain representations and warranties were made as of a specified date or may have been used for the purpose of allocating risk among the parties rather than establishing matters of fact. For the foregoing reasons, you should not rely on the representations and warranties contained in the Stock Purchase Agreement as statements of factual information. Our representations and warranties relate to, among other things:

 our and the Cable Companies’ due organization, valid existence, good standing and qualification to do business;

 capitalization of the Cable Companies;

 our corporate power and authority to enter into the Stock Purchase Agreement and, subject to the approval of the Sale Transaction by the required vote of our stockholders, to consummate the transactions contemplated by the Stock Purchase Agreement;

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  the absence of violations of, or conflicts with, governing documents, applicable law or certain agreements as a result of entering into the Stock Purchase Agreement and consummating the Sale Transaction and the other transactions contemplated by the Stock Purchase Agreement except that ADDvantage must obtain the consent of its lender, Valley National Bank, and must notify certain counterparties;

 that the strategic direction committee has approved the terms of the Stock Purchase Agreement and the Sale Transaction, determined that the Sale Transaction is advisable, fair to and in the best interest of the Company’s stockholders other than D. Chymiak and resolved to recommend that our stockholders vote for the approval of the Sale Transaction;

  the required consents and approvals of governmental entities in connection with the Sale Transaction and the other transactions contemplated by the Stock Purchase Agreement;

  absence of actual or threatened legal actions challenging the Sale Transaction;

  absence of undisclosed brokers’ fees;

 that the taxes owed by the Cable Companies have been paid;

 that ADDvantage is not owed any money by the Cable Companies; and

 that the Company’s benefit plans comply with law.

The Stock Purchase Agreement also contains various representations and warranties made by Leveling 8.  The representations and warranties relate to, among other things:

 its organization, valid existence and good standing;

 its corporate or other power and authority to enter into the Stock Purchase Agreement and to consummate the Sale Transaction and any other transactions contemplated by the Stock Purchase Agreement;

  the absence of violations of, or conflicts with, governing documents, applicable law or certain agreements as a result of entering into the Stock Purchase Agreement and consummating the Sale Transaction and the other transactions contemplated by the Stock Purchase Agreement;

  the required consents and approvals of governmental entities in connection with the Sale Transaction and the other transactions contemplated by the Stock Purchase Agreement;

 the purpose for acquiring the Cable Companies;

 that D. Chymiak is the sole owner and director and the president of Leveling 8;

  that it will have access to sufficient funds to finance the Sale Transaction and other amounts payable pursuant to the Stock Purchase Agreement, including all fees and expenses incurred in connection with the transactions contemplated thereby;

  the absence of actual or threatened legal actions challenging the Sale Transaction; and

 that Leveling 8 is a “C Corporation” and will maintain such status at least through the making of a 338(h)(10) election under the Internal Revenue Code.

Conduct of Our Business Pending the Sale Transaction

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Under the Stock Purchase Agreement, subject to certain exceptions, between December 26, 2018, and the closing of the Sale Transaction, we and the Cable Companies are required to:

  conduct operations in all material respects in the ordinary course of business consistent with past practice; and

 use our reasonable best efforts to preserve our business organizations intact and maintain existing relations and goodwill with governmental entities, customers, suppliers, licensors, licensees, distributors, creditors, lessors, employees and business associates and keep available the services of our present employees and agents.

Provided, however, around the date of the closing of the Sale Transaction, each of the Cable Companies will pay to Company, as the sole stockholder of each of the Cable Companies, a dividend equal to all of the available cash of each of the Cable Companies.

Stockholders Meeting

The Stock Purchase Agreement requires us, as promptly as practicable, to call and hold a special meeting of our stockholders for the purpose of obtaining the vote of our stockholders necessary to approve the Sale Transaction. Except in certain circumstances described below in “No Solicitation of Transactions”, we are required to use our reasonable best efforts to take all action necessary to satisfy the condition regarding the approval of the Sale Transaction by our stockholders described below in “Conditions to the Sale Transaction”.

No Solicitation of Transactions

Pursuant to the Stock Purchase Agreement, neither the Company nor its officers, directors and representatives will:

  encourage, solicit, initiate, facilitate or continue inquiries that constitutes, or could reasonably be expected to lead to, any “acquisition proposal”;

  execute or enter into any contract with respect to an acquisition proposal; or

  engage in, continue or otherwise participate in any discussions or negotiations regarding, or provide or furnish any information to any person regarding an acquisition proposal.

An “acquisition proposal” is defined in the Stock Purchase Agreement to mean any proposal or offer relating to:

  a merger, consolidation, liquidation, recapitalization, share exchange or other business combination transaction involving the Company or a Cable Company;

  the issuance or acquisition of shares of capital stock or other equity securities of the Company or a Cable Company; or

  the sale, lease, exchange or other disposition of any significant portion of the Company's or a Cable Company’s properties or assets.

We may, prior to the approval of the Sale Transaction by our stockholders at the special meeting, in response to a written acquisition proposal, participate in discussions regarding such acquisition proposal so long as proposal was not initiated, sought, solicited, knowingly encouraged or facilitated and if our Board of Directors has determined in good faith that the acquisition proposal is or could reasonably be expected to result in a “superior proposal”.

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    The Company may withdraw, modify or amend the Board of Directors’ recommendation (an “Adverse Recommendation Change”) if: (i) Company notifies Leveling 8 in writing at least two days prior to the recommendation change and such notification includes the terms and conditions of the superior proposal, the person or group making the proposal and copies of all documents related to the superior proposal and (ii) the Company’s Board of Directors determine that the failure to make the Adverse Recommendation Change would be inconsistent with its fiduciary duties.

Notwithstanding these restrictions, prior to the approval of the Sale Transaction by our stockholders, our Board of Directors may, to the extent it determines in good faith, that failure to take such action would be inconsistent with its fiduciary duties, in response to an “intervening event”, make an Adverse Recommendation Change, but only if: (i) the reasons for making the Adverse Recommendation Change are independent from any pending acquisition proposal; (ii) Company provides Leveling 8 written notice that the Board of Directors are making an Adverse Recommendation Change and the material facts constituting the basis for the change; and (iii) Company waits to make the Adverse Recommendation Change until the second day after receipt by Leveling 8 of the notice of the Adverse Recommendation Change.

A “superior proposal” is defined in the Stock Purchase Agreement to mean an acquisition proposal that Company’s Board of Directors have determined is superior to the Sale Transaction related to the Stock Purchase Agreement.

An “intervening event” means a material event, change, development, effect, occurrence or state of facts (other than with respect to the receipt of any acquisition proposal) that was not known to our Board of Directors or the strategic direction committee on the date of the Stock Purchase Agreement, and becomes known to our Board of Directors or the strategic direction committee before the approval of the Sale Transaction by our stockholders.

Agreement to Take Further Action and to Use Reasonable Efforts

Each of the parties to the Stock Purchase Agreement is required to use its commercially reasonable efforts to take all actions necessary, proper or advisable to ensure that the conditions to the Sale Transaction are satisfied and that the Sale Transaction is consummated as promptly as practicable. In particular, the parties are required to use reasonable best efforts to obtain necessary governmental consents and approvals and make necessary filings. We are also required to cooperate to obtain necessary or advisable consents, approvals or waivers from third parties.

Resignations

All officers and directors of each of the Cable Companies are required to resign prior to the closing of the Sale Transaction.

Non-Competition; Non-Solicitation; and Standstill

For a period of three years following the closing of the Sale Transaction, the Company may not participate in the repair, service, sale or distribution of cable television equipment and electronics in Oklahoma, Missouri, Pennsylvania, Texas or Georgia or have any interest in any entity who engages in such conduct unless such entity is traded on a national securities exchange and Company’s investment is limited to 5% or less ownership of any such entity.  The parties acknowledge some overlap between the current cable television business-related products sold by the Cable Companies and certain products sold and serviced by Nave and Triton and accordingly, agree that the Company may on occasion engage in conduct prohibited under this provision so long as the conduct is not, in buyer’s reasonable opinion, materially adverse to buyer’s ownership and operation of the Cable Companies.

For a period of three years following the closing of the Sale Transaction, the Company may not solicit any employee of any of the Cable Companies or encourage any employee to leave their employment with a Cable Company, however Company may hire an employee of any of the Cable Companies if the
58

employee was terminated by Leveling 8 or the Cable Company or after the expiration of 180 days if the employee terminated their employment with a Cable Company.

For a period of three years following the closing of the Sale Transaction, Leveling 8 and D. Chymiak may not:

 acquire any equity securities of the Company from any person;

 make or solicit any proxies to vote or otherwise solicit other stockholders of the Company for the approval of any stockholder proposal with respect to Company, except in their capacity as a director of the Company;

 form, join, or in any way participate in, or encourage the formation of, a group with respect to any shares of stock of the Company;

 deposit any shares of stock of the Company into a voting trust or subject any shares of stock to any voting agreement;

 alone or with others, seek or propose to support any effort to influence or control the management, Board of Directors, business, policies, or actions of the Company;

 sell or transfer any shares of stock of the Company to any person without the approval of the Company’s Board of Directors; or

 request any director, officer, employee or agent of the Company to amend or modify these requirements under the Stock Purchase Agreement.

Company Due Diligence

Prior to the closing of the Sale Transaction, the Company is required to perform adequate due diligence of Leveling 8’s and D. Chymiak’s financial position and their ability to make payments under the promissory note issued in connected with the Stock Purchase Agreement and Leveling 8 is required to give the Company access to its books and records so the Company determine Leveling 8’s financial position.

Other Covenants and Agreements

The Stock Purchase Agreement contains additional agreements among the Company and Leveling 8 relating to, among other things:

  giving Leveling 8 access to our officers, personnel, offices, properties, books, records and documents;

  notices of certain events;

  the filing of this proxy statement with the SEC, and cooperation in preparing this proxy statement and in responding to any comments received from the SEC on those documents;

  coordination of press releases and other public statements about the Sale Transaction and the Stock Purchase Agreement; and

 Company’s indemnification of Leveling 8 for all taxes related to the Cable Company’s business prior to the closing of the Sale Transaction and for Leveling 8’s indemnification of Company for all taxes related to the Cable Company’s business subsequent to the closing of the Sale Transaction.

Conditions to the Sale Transaction

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Each party’s obligation to complete the Sale Transaction is subject to the satisfaction of the following conditions, none of which may be waived:

  Stockholder Approval.  The Sale Transaction must have been approved by the affirmative vote of holders of a majority of the (i) outstanding shares of common stock and (ii) outstanding shares of common stock excluding shares owned by D. Chymiak or his affiliates;

  Regulatory Approval. Each party shall have received all necessary consents, authorizations, orders and approvals, if any, from the necessary governmental entity, and no such consent, authorization, order or approval shall have been revoked; and

  No Injunctions or Restraints.  No law or order shall have been enacted, issued, promulgated or entered by a governmental entity that restrains, enjoins or otherwise prohibits consummation of the Sale Transaction or the other transactions contemplated by the Stock Purchase Agreement.

The obligation of the Company to complete the Sale Transaction is subject to the satisfaction or waiver of the following conditions, any of which may be waived:

  Representations and Warranties. The representations and warranties of Leveling 8 in the Stock Purchase Agreement must be true and correct both when made and as of the closing date of the Sale Transaction;

     Performance of Covenants. Leveling 8 must have performed in all material respects all obligations that it is required to perform under the Stock Purchase Agreement prior to the closing date of the Sale Transaction;

 Adverse Action. No adverse action shall have been commenced against Leveling 8, the Company or any of the Cable Companies, which would prevent the Sale Transaction;

 Due Diligence. Company must be satisfied that the financial position of Leveling 8 and of D. Chymiak, as a guarantor, is adequate to support Leveling 8’s obligations under the Stock Purchase Agreement and the secured promissory note associated with the Stock Purchase Agreement; and

  Officer’s Certificate. Leveling 8 must deliver to us at closing an officer’s certificate with respect to the satisfaction of the conditions relating to their representations, warranties, covenants and agreements.

The obligations of Leveling 8 to complete the Sale Transaction are subject to the satisfaction or waiver of the following conditions, any of which may be waived:

  Representations and Warranties. Our representations and warranties in the Stock Purchase Agreement must be true and correct both when made and as of the closing date of the Sale Transaction;

  Performance of Covenants. We must have performed in all material respects all obligations that we are required to perform under the Stock Purchase Agreement prior to the closing date of the Sale Transaction;

 Officer’s Certificate. We must deliver to Leveling 8 at closing an officer’s certificate with respect to the satisfaction of the conditions relating to our representations, warranties, covenants and agreements;

 Adverse Action. No adverse action shall have been commenced against Leveling 8, us or any of the Cable Companies, which would prevent the Sale Transaction; and

 Financing. Leveling 8 shall have obtained financing of the down payment for the Sale Transaction.

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Indemnification

We will indemnify Leveling 8:

 for a period of three years from the closing, for our breach of any representation or warranty made by us;

 indefinitely, for our breach of any covenant, agreement or obligation of us under the Stock Purchase Agreement; or

 indefinitely, for any pre-closing liabilities of the Cable Companies which are not (i) related to day-to-day operation of the cable business under the direction of D. Chymiak, including warranty claims (ii) shown on the books and records of the Company or are not an account payable or accrued expense or (iii) known by buyer or D. Chymiak.

Leveling 8 will indemnify us:

 for a period of three years from the closing, for its breach of any representation or warranty made by it;

 indefinitely, for its breach of any covenant, agreement or obligation of it under the Stock Purchase Agreement; or

 indefinitely, for any post-closing liabilities of the Cable Companies, including liabilities to employees for benefits payable after closing.

Termination

The Company and Leveling 8 may terminate the Stock Purchase Agreement by mutual written consent at any time before the completion of the Sale Transaction. In addition, the Company may terminate the Stock Purchase Agreement if:

 • there is a breach of any representation, warranty, covenant or agreement on the part of Leveling 8 at a time when the Company is not in material breach and when Leveling 8’s breach is incapable of being cured, or is not cured, within 10 days following receipt of written notice of such breach;

 the Sale Transaction has not been completed by June 30, 2019, except that this right will not be available to the Company if the Company’s failure to fulfill any obligation under the Stock Purchase Agreement is the cause of the failure to timely complete the Sale Transaction;

  any action has been commenced against Leveling 8, Company or a Cable Company challenging the Sale Transaction;

 Company is not satisfied that Leveling 8 or D. Chymiak, as guarantor, are in a financial position that is adequate to support Leveling 8’s obligations under the Stock Purchase Agreement;

 Company enters into a definitive agreement with a third party providing for a superior proposal; or

  any law makes the Sale Transaction illegal or any government entity enters a final, non-appealable order injunction, order, decree, judgment or ruling, permanently enjoining or otherwise prohibiting the Sale Transaction.

Leveling 8 may terminate the Stock Purchase Agreement if:

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  there is a breach of any representation, warranty, covenant or agreement on the part of the Company at a time when Leveling 8 is not in material breach and the Company’s breach is incapable of being cured, or is not cured, within 10 days following receipt of written notice of such breach;

 the Sale Transaction has not been completed by June 30, 2019, except that this right will not be available to Leveling 8 if Leveling 8’s failure to fulfill any obligation under the Stock Purchase Agreement is the cause of the failure to timely complete the Sale Transaction;

 any action has been commenced against Leveling 8, Company or a Cable Company challenging the Sale Transaction; or

 any law makes the Sale Transaction illegal or any government entity enters a final, non-appealable order injunction, order, decree, judgment or ruling, permanently enjoining or otherwise prohibiting the Sale Transaction.

 Leveling 8 has been unable to obtain a binding and revocable commitment for financing the full amount of the cash down payment due at closing.

Estimated Fees and Expenses

The estimated fees and expenses incurred or expected to be incurred by the Company in connection with the Sale Transaction are as follows:

Category of Fee/Expense
 
Estimated Amount
 
Legal
 
$
218,000
 
Tax Analysis/Accounting
   
20,000
 
Fairness Opinion
   
85,000
 
Proxy Solicitation/Vote Counting
   
30,000
 
Total (estimated)
 
$
353,000
 

In addition, it is expected that Leveling 8 will incur approximately $45,000 of financing costs, legal fees and other advisory fees related to the Sale Transaction.


Reimbursement of Expenses

Each party is generally required to pay its own fees and expenses related to the Sale Transaction; provided, that, a party breaching its obligations under the Stock Purchase Agreement could be potentially liable to the non-breaching party under applicable law for the non-breaching party’s fees and expenses.
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Amendment

The Stock Purchase Agreement may be amended by a written agreement signed by the Company and Leveling 8 at any time prior to the completion of the Sale Transaction, whether or not our stockholders have approved the Stock Purchase Agreement. However, no amendment that requires further approval of our stockholders will be made without obtaining that approval. No amendment or waiver of any provision of the Stock Purchase Agreement may be made on behalf of the Company without first obtaining the approval of the strategic direction committee. The Stock Purchase Agreement was amended as of March 15, 2019, and a copy of such amendment is a part of Annex C to this proxy statement.

Company Actions

No decision or determination shall be made, or action taken, by the Company with respect to the Stock Purchase Agreement without first obtaining the approval of the strategic direction committee.

Provisions for Unaffiliated Stockholders

No provision has been made (i) to grant the Company’s unaffiliated stockholders access to the corporate files of ADDvantage, any other party to the Sale Transaction or any of their respective affiliates, or (ii) to obtain counsel or appraisal services at the expense of the Company, any other such party or affiliate.
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IMPORTANT INFORMATION REGARDING ADDVANTAGE AND ITS
DIRECTORS AND EXECUTIVE OFFICERS

Information Regarding ADDvantage
 
ADDvantage (through its subsidiaries) distributes and services a comprehensive line of electronics and hardware for the cable television and telecommunications industries.  ADDvantage also provides equipment repair services to cable operators.  In addition, ADDvantage offers its telecommunications customers decommissioning services for surplus and obsolete equipment, which it in turn processes through our recycling services. In addition to offering a broad range of new products, ADDvantage sells surplus-new and refurbished equipment that it purchases in the market as a result of cable or telecommunications operator system upgrades or an overstock in their warehouses.  ADDvantage recently purchased the business and assets of Fulton Technologies, a provider of services in the wireless industry.  ADDvantage’s principal office is located at 1221 E. Houston, Broken Arrow, Oklahoma 74012.
 
If the Stock Purchase Agreement and the Sale Transaction are approved by the ADDvantage stockholders at the special meeting and the Sale Transaction is completed as contemplated, ADDvantage will cease operating the cable business but will continue operating the telecommunications and wireless services businesses.
 
Information Regarding the Directors and Executive Officers of ADDvantage
 
Our Board of Directors presently consists of five members. The following persons are the executive officers and directors of ADDvantage as of the date of this proxy statement. Each executive officer will serve until a successor is elected by the Board of Directors or until the earlier of his or her resignation or removal. None of these persons have been convicted in a criminal proceeding during the past five years (excluding traffic violations or similar misdemeanors), and none of these persons has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws or a finding of any violation of federal or state securities laws. All of the directors and executive officers of ADDvantage are citizens of the United States and can be reached c/o ADDvantage Technologies Group, Inc., 1221 E. Houston, Broken Arrow, Oklahoma 74012.

David E. Chymiak Director since 1999

David E. Chymiak, 73, has served as our Company’s Chief Technology Officer since he was appointed on April 2, 2012.  Mr. Chymiak served as our Company’s Chairman of the Board from August 12, 2014 to October 7, 2018 and from 1999 until April 2, 2012.  Since 1985, Mr. Chymiak has overseen the operations of our Cable Television segment.  Mr. Chymiak brings extensive experience with the various technologies and products within the cable television industry to our Board of Directors with respect to industry matters.  Mr. Chymiak also brings to the Board of Directors business leadership and corporate strategy.

Joseph E. Hart      Director since August 2015

Joseph E Hart, 68, was appointed as our President and Chief Executive Officer in October 2018.  Mr. Hart served in this capacity on an interim basis beginning in July 2018.  Prior to joining the Company, from November 2015 to March of 2018, Mr. Hart was the CEO of Aero Communications, Inc., which is a company that performs installation, maintenance, and network design and construction for the telecommunications industry.  From 2006 – 2014, Mr. Hart served as the Executive Vice President of Network Infrastructure Services and Operations for Goodman Networks, Inc., a provider of end-to-end network infrastructure, professional services and field deployment to the wireless telecommunications and satellite television industry.  For the previous 20 years, Mr. Hart served in various executive leadership positions for various telecommunication and wireless companies.  Mr. Hart holds a master’s of science degree in systems management from the University of Southern California and bachelor of business administration degree from
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Baldwin-Wallace College.  Mr. Hart’s extensive management experience in operations and corporate strategy in the telecommunications industry allows him to provide significant input to our Board of Directors.

Thomas J. Franz Director since August 2007

Thomas J. Franz, 60, is currently head of TJ Franz & Associates, a firm specializing in profitability and contract CFO consulting for small and medium sized businesses, which he founded in 2003. For the 10 years prior, he served as Chief Financial Officer for several businesses and served in a Chief Operating Officer role as well.  From 1983 to 1993 Mr. Franz held several public accounting roles for clients in the banking, government, venture capital, not for profit and financial services industries.  Mr. Franz is a certified public accountant with a bachelor of business administration degree from Oklahoma State University where he also received a master’s degree in accounting.  Mr. Franz’s background in business leadership, corporate strategy and financial and operating expertise allows him to provide significant input to our Board of Directors.

James C. McGill     Director since August 2007

James C. McGill, 75, was appointed as our Company’s Non-Executive Chairman of the Board on October 7, 2018.  Mr. McGill is currently the President of McGill Resources, which is a venture capital investment company, and has served in that capacity since 1987.  In 2015, Mr. McGill formed and owns Ediche, LLC, an importer of women’s clothing from South America to the United States.  He also served in various executive leadership and board of director positions of MacroSolve, Inc., which was a high technology company focused on wireless data collection, from 2002 – 2013.  In addition, he is a board member of numerous organizations in the Tulsa, Oklahoma area, and over the last 40 years he has served on numerous public company boards and has served as chief executive officer of several corporations.  Mr. McGill served on the MacroSolve audit committee for two years and on The IT Group, Inc. audit committee for 12 years as a member and eight years as its chairman. During his career, Mr. McGill has received 25 U.S. and foreign patents in the field of pollution control and has extensive experience in helping to develop early-stage and emerging companies.  Mr. McGill is a registered professional engineer with a bachelor of science degree in chemical engineering from The University of Tulsa where he graduated Cum Laude.  He is a member of the University’s College of Engineering and Applied Sciences Hall of Fame and was named a Distinguished Alumni in 2005.  In 2013, he was named to the Collins College Business Hall of Fame.  Mr. McGill has extensive experience in managing companies in a variety of industries, and his business leadership, corporate strategy background and operating expertise strengthen the Board of Directors.

David W. Sparkman              Director since December 2015

David W. Sparkman, 61, is currently Chief Financial Officer of Capital Bank Holdings, Inc., and has served in this capacity since December, 2017. For the year prior, he was the President of the financial consulting firm, Ulysses Enterprises, in which he also served in 2009-2010.  Prior to the sale of the companies in October 2016, he was the Chief Financial Officer for a group of oil field service companies:  Acid Specialists, LLC; Frac Specialists, LLC; and Cement Specialists, LLC , which filed for bankruptcy in May, 2015 as a result of the general downturn in the oil and gas sector.   Mr. Sparkman served in that capacity beginning in September 2014, and prior to joining this group full-time in this capacity, he provided accounting and financial consulting services to these companies starting in April 2014.  From 2010 to 2011, Mr. Sparkman was the CFO for Great White Energy Services until this company was acquired by Archer Well Company in 2011, and then served as the North America Director of Finance for Archer Well Company until 2013.  Mr. Sparkman also spent 12 years with Dollar Thrifty Automotive Group serving in various accounting and finance-related senior management positions.  Mr. Sparkman is a certified public accountant (inactive) and holds a bachelor of business administration degree in accounting from the University of Arkansas where he graduated Cum Laude.  Mr. Sparkman’s background in business leadership, corporate strategy and financial and operating expertise allows him to provide significant input to our Board of Directors.

Donald E. Kinison              Executive Officer since May 2017

Donald E. Kinison, 42, started in May 2017 as our Vice President, Sales.  In December 2018, Mr. Kinison was promoted to President of the Telco segment.  Mr. Kinison has over 20 years of sales experience in the telecommunication, software and cloud industries.  Prior to joining ADDvantage, Mr. Kinison was the Senior Vice President of Commercial and Enterprise Services for Impact Telecom LLC, a provider of a full range of telecommunication services for carriers, businesses and homes from 2014 to 2017.  From 2012 to 2014, Mr. Kinison was the Senior
65

Vice President of Sales for Associated Network Partners, Inc., a provider of various telecommunications services for carriers.  From 2003 to 2012, Mr. Kinison held various senior management positions, including the Vice President and General Manager of Cbeyond, Inc., a telecommunications and information technology company.

Colby J. Empey               Executive Officer since March, 2019

Colby Empey, 45, started on March 1, 2019 as our President of the Wireless Segment. Prior to joining the Company, from 2017 to 2019, Mr. Empey served as Chief Operations Officer at Fulton Technologies, Inc.  Before he worked at Fulton Technologies Inc., Mr. Empey was Director of Business Development at Paragon Facilities Group where he was responsible for expanding its services specifically in the southwest region with an initial focus on Texas.  From 2015 – 2016 he served as Vice President of Business Development at Xcell Inc., a telecommunications services business, where he oversaw approximately 115 employees generating $22M in revenue in 2015, with $8M coming from new customers.  From 2008 – 2015, Mr. Empey served as Vice President of Operations for the Southwest at Goodman Networks where his responsibilities included negotiating contracts with new vendors to handle site acquisition and engineering, building the first trial market for testing and analyzing LTE performance and commercially launching 3 of the first 5 LTE markets.


Kevin Brown                Executive Officer since March, 2019

On March 1, 2019, the Company appointed Kevin Brown, 43, as Chief Financial Officer. Since 2011, Mr. Brown has served as a Partner at 4M Investments ("4M"), a family office private investment firm. In this role he oversaw the performance and financial management of 4M's portfolio companies, including leading its telecom infrastructure efforts and evaluating tower, fiber, DAS and small cell opportunities. He has also served in several executive positions within 4M Investments' portfolio companies, including Global CFO, and ultimately the CEO, of Intercomp Global Services (2011-2014). Prior to 4M Investments, Mr. Brown worked at M7 Aerospace LP, serving in varying levels of seniority, including as its CFO and ultimately as its CEO. From 1998-2004, he worked in Strategy and Corporate Development at Crown Castle International, one of the largest telecom infrastructure businesses in the world.


Scott A. Francis              Executive Officer since September, 2008

Scott A. Francis, 51, has been our Vice President since September 15, 2008, our corporate secretary since August 6, 2009, and our Chief Accounting Officer since March, 2019.  From September 15, 2008 through March, 2019, Mr. Francis served as our Chief Financial Officer.  Mr. Francis has over 25 years of finance and management experience.  Prior to joining ADDvantage, he served as a controller of accounting at Vanguard Car Rental USA, Inc. from June 2004 until September 2008.  Prior to that, he served as manager of financial reporting for WilTel Communications, Inc. from 1997 through May 2004.  Mr. Francis is a certified public accountant with a bachelor of business administration degree in accounting from Oklahoma State University.

Historical Selected Financial Information

Set forth below is certain historical selected financial information related to ADDvantage.  The historical selected financial data of ADDvantage as of and for the three months ended December 31, 2018 have been derived from ADDvantage’s historical unaudited interim consolidated condensed financial statements.  The historical selected financial data as of and for the years ended September 30, 2018 and September 30, 2017 have been derived from ADDvantage’s historical audited consolidated financial statements.  This information is only a summary and should be read in conjunction with the Quarterly Report on Form 10-Q for the three months ended December 31, 2018 and 2017, and with the Annual Report on Form 10-K for the fiscal years ended September 30, 2018 and September 30, 2017, each of which is incorporated by reference into this proxy statement.  More comprehensive financial information is included in such reports,
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including management’s discussion and analysis of financial condition and results of operations, and the following summary is qualified in its entirety by reference to such reports and all of the financial information and notes contained therein.  For additional information, see “Where You Can Find Additional Information”.

                                                                                                            
    Three Months Ended December 31,
    Fiscal Year Ended September 30,   
 
   
2018
   
2018
   
2017
 
                   
Sales
 
$
11,272
   
$
47,414
   
$
48,714
 
                         
Income (loss) from operations
 
$
(955
)
 
$
(5,193
)
 
$
146
 
                         
Loss from continuing operations
 
$
(1,039
)
 
$
(7,320
)
 
$
(98
)
                         
Continuing operations loss per share
                       
Basic
 
$
(0.10
)
 
$
(0.71
)
 
$
(0.01
)
Diluted
 
$
(0.10
)
 
$
(0.71
)
 
$
(0.01
)
                         
Total assets
 
$
40,927
   
$
44,395
   
$
54,848
 
                         
Long-term obligations inclusive of current maturities
  $
      $
 2,594     $
 6,284  




Dividend policy

We have never declared or paid a cash dividend on our common stock.  It has been the policy of our Board of Directors to use all available funds to finance the development and growth of our business.  The payment of cash dividends in the future will be dependent upon our earnings, financial requirements and other factors deemed relevant by our Board of Directors.
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IMPORTANT INFORMATION REGARDING LEVELING 8
AND DAVID E. CHYMIAK

Information Regarding Leveling 8
 
Leveling 8 is an Oklahoma corporation located at 21553 E. Apache Street, Catoosa, Oklahoma  74015.  The capital stock of Leveling 8 is 100% owned by D. Chymiak, and he is its sole officer and director.

Leveling 8 is a newly-formed corporation with nominal assets.  It was formed for the purpose of acquiring the Cable Companies in the Sale Transaction and will not be funded until immediately before closing of the Sale Transaction.
 
During the last five years, neither Leveling 8 nor D. Chymiak, its sole stockholder, director and officer, has been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining Leveling 8 or D. Chymiak from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws.

Information Regarding David E. Chymiak

David E. Chymiak is the sole owner and manager of Leveling 8. For additional information regarding D. Chymiak, see “Important Information Regarding ADDvantage and its Directors and Executive Officers” above.
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IMPORTANT INFORMATION REGARDING THE CABLE COMPANIES

Information Regarding the Cable Companies

ADDvantage has conducted its cable business segment since 1999 through several operating companies, the principal of which is Tulsat, LLC.  The outstanding stock and membership interests of each of the companies, referred to in this proxy statement as the “Cable Companies”, is to be transferred and sold to Leveling 8 in the Sale Transaction.  The following is a brief description of each of the Cable Companies:

Tulsat is a provider of new, surplus and re-manufactured cable television equipment and also repairs cable television equipment for various cable companies.  It is located in Broken Arrow, Oklahoma.

NCS is a provider of new, surplus and re-manufactured cable television equipment and also repairs cable television equipment for various cable companies.  It is located in Warminster, Pennsylvania.

ComTech is a provider of new, surplus and re-manufactured cable television equipment and also repairs cable television equipment for various cable companies.  It is located in Sedalia, Missouri.

Tulsat-Texas repairs cable television equipment for various cable companies.  It is located in New Boston, Texas.

Tulsat-Atlanta repairs cable television equipment for various cable companies.  It is located in Johns Creek, Georgia.

Historical Selected Financial Information

Set forth below is certain historical selected financial information relating to ADDvantage’s cable segment.  The historical selected financial data as of and for the quarter ended December 31, 2018, and for the years ended September 30, 2017 and September 30, 2018, has been derived from the unaudited historical financial statements for the cable segment for the same periods which are attached to this proxy statement at Annex A.

   
As of December 31,
   
Years Ended September 30,
 
   
2018
   
2018
   
2017
 
Balance Sheet Data (in thousands)
                 
     Total assets
   
17,960
     
18,451
     
24,690
 
     Long-term notes payable
                     598  
     Long-term deferred gain
   
1,234
     
     
 
     Total liabilities
   
2,986
     
3,173
     
2,998
 
     Net assets
   
14,975
     
15,277
     
21,692
 
     Paid in capital
   
2,277
     
2,277
     
3,548
 

   
As of December 31,
   
Years Ended September 30,
 
   
2018
   
2018
   
2017
 
Statement of Operations Data (in thousands)
                 
     Revenue
   
4,462
     
19,941
     
22,806