Company Quick10K Filing
Westell Technologies
Price1.46 EPS-1
Shares16 P/E-1
MCap23 P/FCF-8
Net Debt-22 EBIT-15
TEV1 TEV/EBIT-0
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-12-31 Filed 2021-02-12
10-Q 2020-09-30 Filed 2020-11-06
10-Q 2020-06-30 Filed 2020-08-14
10-K 2020-03-31 Filed 2020-06-18
10-Q 2019-12-31 Filed 2020-02-07
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-09
10-K 2019-03-31 Filed 2019-05-31
10-Q 2018-12-31 Filed 2019-02-08
10-Q 2018-09-30 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-08-03
10-K 2018-03-31 Filed 2018-05-25
10-Q 2017-12-31 Filed 2018-02-09
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-11
10-K 2017-03-31 Filed 2017-05-26
10-Q 2016-12-31 Filed 2017-02-10
10-Q 2016-09-30 Filed 2016-11-04
10-Q 2016-06-30 Filed 2016-08-12
10-K 2016-03-31 Filed 2016-05-24
10-Q 2015-12-31 Filed 2016-02-05
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-07-31
10-K 2015-03-31 Filed 2015-05-22
10-Q 2014-12-31 Filed 2015-02-06
10-Q 2014-09-30 Filed 2014-10-31
10-Q 2014-06-30 Filed 2014-08-01
10-K 2014-03-31 Filed 2014-05-23
10-Q 2013-12-31 Filed 2014-02-04
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-02
10-K 2013-03-31 Filed 2013-05-24
10-Q 2012-12-31 Filed 2013-02-05
10-Q 2012-09-30 Filed 2012-11-06
10-Q 2012-06-30 Filed 2012-08-07
10-K 2012-03-31 Filed 2012-05-25
10-Q 2011-09-30 Filed 2011-10-28
10-Q 2011-06-30 Filed 2011-07-29
10-K 2011-03-31 Filed 2011-06-02
10-Q 2010-12-31 Filed 2011-01-24
10-Q 2010-09-30 Filed 2010-10-22
10-Q 2010-06-30 Filed 2010-07-23
10-K 2010-03-31 Filed 2010-05-27
10-Q 2009-12-31 Filed 2010-02-05
8-K 2020-11-02
8-K 2020-09-29
8-K 2020-08-14
8-K 2020-07-28
8-K 2020-07-06
8-K 2020-06-17
8-K 2020-04-14
8-K 2020-03-27
8-K 2020-02-05
8-K 2019-11-26
8-K 2019-11-13
8-K 2019-10-18
8-K 2019-09-17
8-K 2019-08-24
8-K 2019-08-18
8-K 2019-08-08
8-K 2019-08-07
8-K 2019-06-18
8-K 2019-05-29
8-K 2019-02-06
8-K 2018-10-31
8-K 2018-09-11
8-K 2018-07-30
8-K 2018-05-23
8-K 2018-05-06
8-K 2018-03-31
8-K 2018-02-07

WSTL 10Q Quarterly Report

Note 1. Basis of Presentation
Note 2. Leases
Note 3. Revenue Recognition and Deferred Revenue
Note 4. Long - Term Debt and Note Payable To Bank
Note 5. Interim Segment Information
Note 6. Inventories
Note 7. Stock - Based Compensation
Note 8. Product Warranties
Note 9. Variable Interest Entity and Guarantee
Note 10. Income Taxes
Note 11. Commitments and Contingencies
Note 12. Fair Value Measurements
Note 13. Share Repurchases
Note 14. Intangible Assets
Note 15. Accrued Expenses
Note 16. Land, Property, and Equipment
Note 17. Restructuring Charges
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risks.
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.1 wstl-ex101x20201231.htm
EX-31.1 wstl-ex311x20201231.htm
EX-31.2 wstl-ex312x20201231.htm
EX-32.1 wstl-ex321x20201231.htm

Westell Technologies Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
185148111743702012201420172020
Assets, Equity
452811-6-23-402012201420172020
Rev, G Profit, Net Income
154-7-18-29-402012201420172020
Ops, Inv, Fin

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2020
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to    
Commission File Number 0-27266
Westell Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware  36-3154957
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
750 North Commons Drive, Aurora, IL
 60504
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (630898-2500
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
NoneN/AN/A
Indicate by check or mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ¨  Accelerated Filer ¨
Non-Accelerated Filer x  Smaller Reporting Company x
Emerging Growth Company¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of January 29, 2021:
Class A Common Stock, $0.01 Par Value – 7,521,271 shares Class B Common Stock, $0.01 Par Value – 3,484,287 shares


Table of Contents
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-Q INDEX
Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained herein that are not historical facts or that contain the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “plan,” “should,” or derivatives thereof and other words of similar meaning are forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed in or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, the product demand and market acceptance risks, customer spending patterns, need for financing and capital, economic weakness in the United States (“U.S.”) economy and telecommunications market, the effect of international economic conditions and trade, legal, social and economic risks (such as import, licensing and trade restrictions), the impact of competitive products or technologies, competitive pricing pressures, customer product selection decisions, product cost increases, component supply shortages, new product development, excess and obsolete inventory, commercialization and technological delays or difficulties (including delays or difficulties in developing, producing, testing and selling new products and technologies), the ability to successfully consolidate and rationalize operations, the ability to successfully identify, acquire and integrate acquisitions, effects of the Company’s accounting policies, retention of key personnel, the effects and consequences of the COVID-19 pandemic or other pandemics, and other risks more fully described in the Company's Form 10-K for the fiscal year ended March 31, 2020, under Item 1A - Risk Factors. The Company undertakes no obligation to publicly update these forward-looking statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or otherwise.

Trademarks
The following terms used in this filing are our trademarks: ClearLink®, EdgeLinkTM, Kentrox®, Optima Management System®, UDIT®, WESTELL TECHNOLOGIES®, and Westell®. All other trademarks appearing in this filing are the property of their holders.

2

Table of Contents


WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(unaudited)
December 31,
2020
March 31,
2020
Assets
Current assets:
Cash and cash equivalents$14,756 $20,869 
Accounts receivable (net of allowance of $100 at December 31, 2020, and March 31, 2020)
4,923 4,047 
Inventories5,742 6,807 
Prepaid expenses and other current assets961 1,298 
Total current assets26,382 33,021 
Land, property and equipment, gross7,694 7,987 
Less accumulated depreciation and amortization(6,736)(6,911)
Land, property and equipment, net958 1,076 
Intangible assets, net1,933 2,728 
Right-of-use assets on operating leases, net2,573 628 
Other non-current assets79 73 
Total assets$31,925 $37,526 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$1,379 $1,065 
Accrued expenses3,220 3,136 
Deferred revenue1,089 1,099 
Note Payable, SBA PPP loan - current1,138  
Total current liabilities6,826 5,300 
Note Payable, SBA PPP loan - non-current510  
Deferred revenue non-current129 221 
Lease liabilities non-current2,023 250 
Other non-current liabilities293 94 
Total liabilities9,781 5,865 
Commitments and contingencies (Note 11)
Stockholders’ equity:
Class A common stock, par $0.01, Authorized – 109,000,000 shares
    Outstanding – 7,521,271 and 12,224,450 shares at December 31, 2020, and March 31, 2020, respectively
75 122 
Class B common stock, par $0.01, Authorized – 25,000,000 shares
    Issued and outstanding – 3,484,287 shares at December 31, 2020, and March 31, 2020
35 35 
Preferred stock, par $0.01, Authorized – 1,000,000 shares
    Issued and outstanding – none
  
Additional paid-in capital420,037 419,630 
Treasury stock at cost – 10,169,753 and 5,215,453 shares at December 31, 2020, and March 31, 2020, respectively
(44,559)(37,326)
Accumulated deficit(353,444)(350,800)
Total stockholders’ equity22,144 31,661 
Total liabilities and stockholders’ equity$31,925 $37,526 



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
3

Table of Contents
WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three months ended December 31,Nine months ended December 31,
 2020201920202019
Revenue$7,649 $7,159 $23,319 $23,730 
Cost of revenue5,443 4,379 15,480 16,125 
Gross profit2,206 2,780 7,839 7,605 
Operating expenses
Research and development1,006 1,222 2,865 4,227 
Sales and marketing1,200 1,556 4,024 6,147 
General and administrative863 1,093 3,175 3,706 
Intangible amortization226 308 677 924 
Restructuring 234  234 
          Total operating expenses3,295 4,413 10,741 15,238 
Operating profit (loss)(1,089)(1,633)(2,902)(7,633)
Other income, net178 109 223 398 
Income (loss) before income taxes(911)(1,524)(2,679)(7,235)
Income tax benefit (expense)(23)(20)35 (27)
Net income (loss) (1)
$(934)$(1,544)$(2,644)$(7,262)
Net income (loss) per share:
Basic$(0.09)$(0.10)$(0.19)$(0.47)
Diluted net income (loss) per share:
Diluted$(0.09)$(0.10)$(0.19)$(0.47)
Weighted-average number of common shares outstanding:
Basic10,984 15,575 14,125 15,514 
Effect of dilutive securities: restricted stock, restricted stock units, performance stock units and stock options (2)
    
Diluted10,984 15,575 14,125 15,514 
_______

(1) Net income (loss) and comprehensive income (loss) are the same for the periods reported.
(2) The Company had 0.7 million shares and 0.8 million shares, represented by common stock equivalents for the three and nine months ended December 31, 2020, and 1.0 million shares and 0.9 million shares for the three and nine months ended December 31, 2019, respectively, which were not included in the computation of average dilutive shares outstanding because they were anti-dilutive. In periods with a net loss from continuing operations, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
 (Unaudited)
Common
Stock
Class A
Common
Stock
Class B
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Deficit
Total
Stockholders’
Equity
Balance, March 31, 2020$122 $35 $419,630 $(37,326)$(350,800)$31,661 
Net income (loss)— — — — (825)(825)
Common stock issued2 — (2)— —  
Purchase of treasury stock(1)— — (41)— (42)
Stock-based compensation— — 162 — — 162 
Balance, June 30, 2020123 35 419,790 (37,367)(351,625)30,956 
Net income (loss)— — — — (885)(885)
Common stock issued1 — (1)— —  
Purchase of treasury stock— — — (11)— (11)
Stock-based compensation— — 148 — — 148 
Balance, September 30, 2020124 35 419,937 (37,378)(352,510)30,208 
Net income (loss)— — — — (934)(934)
Common stock issued— —  — —  
Purchase of treasury stock(49)— — (7,181)— (7,230)
Stock-based compensation— — 100 — — 100 
Balance, December 31, 2020$75 $35 $420,037 $(44,559)$(353,444)$22,144 
Common
Stock
Class A
Common
Stock
Class B
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Deficit
Total
Stockholders’
Equity
Balance, March 31, 2019$119 $35 $418,859 $(37,135)$(340,698)$41,180 
Net income (loss)— — — — (2,157)(2,157)
Common stock issued3 — (3)— —  
Purchase of treasury stock(1)— — (172)— (173)
Stock-based compensation— — 244 — — 244 
Balance, June 30, 2019121 35 419,100 (37,307)(342,855)39,094 
Net income (loss)— — — — (3,561)(3,561)
Common stock issued1 —  — — 1 
Purchase of treasury stock — — (16)— (16)
Stock-based compensation— — 201 — — 201 
Balance, September 30, 2019122 35 419,301 (37,323)(346,416)35,719 
Net income (loss)— — — — (1,544)(1,544)
Common stock issued — — — —  
Purchase of treasury stock— — — (2)— (2)
Stock-based compensation— — 152 — — 152 
Balance, December 31, 2019$122 $35 $419,453 $(37,325)$(347,960)$34,325 


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 Nine months ended December 31,
 20202019
Cash flows from operating activities:
Net income (loss)$(2,644)$(7,262)
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization986 1,426 
Stock-based compensation410 597 
Loss (gain) on sale of fixed assets (11)
Restructuring 234 
Exchange rate loss (gain)(18)(2)
Changes in assets and liabilities:
Accounts receivable(858)1,934 
Inventories1,065 2,179 
Prepaid expenses and other current assets337 3 
Other assets(1,951)(575)
Deferred revenue(102)(79)
Accounts payable and accrued expenses2,381 332 
Net cash provided by (used in) operating activities(394)(1,224)
Cash flows from investing activities:
Proceeds from sale of fixed assets 11 
Purchase of product licensing rights (1,950)
Purchases of property and equipment(73)(113)
Net cash provided by (used in) investing activities(73)(2,052)
Cash flows from financing activities:
Proceeds from note payable to bank, SBA PPP loan1,637  
Purchases of treasury stock(7,283)(191)
Net cash provided by (used in) financing activities(5,646)(191)
Net increase (decrease) in cash and cash equivalents(6,113)(3,467)
Cash and cash equivalents, beginning of period20,869 25,457 
Cash and cash equivalents, end of period$14,756 $21,990 




The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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WESTELL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1. Basis of Presentation
Reverse/Forward Stock Split
On September 29, 2020, the Company filed amendments to the Company’s amended and restated certificate of incorporation to effect a 1-for-1,000 reverse stock split of the Company’s Class A and Class B Common Stock, followed immediately by an 1,000-for-1 forward stock split (the “Transaction”). The stockholders approved the Transaction at the Annual Meeting of Stockholders held on September 29, 2020. The effective date of the Transaction was October 1, 2020. As a result of the Transaction, the Company paid $7.2 million to repurchase approximately 4.9 million shares of the Class A Common Stock at a purchase price of $1.48 per share.
On October 9, 2020, in conjunction with the process of terminating the Company’s public company reporting obligations and delisting the Company’s Class A Common Stock from the NASDAQ Capital Market, the Company filed a Form 25 with the SEC. On October 21, 2020, the Financial Industry Regulatory Authority (“FINRA”) notified the Company that the Class A Common Stock may be quoted and traded in the market for unlisted securities (the "over-the-counter-market or "OTC").
Information concerning the Transaction is set forth in the definitive proxy statement for the Company's 2020 Annual Meeting of Stockholders, which was filed with the SEC on Schedule 14A on August 11, 2020. Stockholders are urged to read the definitive proxy statement carefully.
Description of Business
Westell Technologies, Inc. (the Company) is a holding company. Its wholly owned subsidiary, Westell, Inc., designs and distributes telecommunications products, which are sold primarily to major telephone companies.
COVID-19 Impact
In March 2020, the World Health Organization declared the spread of a new strain of coronavirus (“COVID-19”) a pandemic. This outbreak continues to spread throughout the U.S. and around the world. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and work force participation, while creating significant disruption and volatility of financial markets. The COVID-19 pandemic has impacted and may continue to impact the Company’s sales, supply chain availability and sourcing costs, our workforce and operations, as well as that for our customers, contract manufacturers and other supply chain partners.
Basis of Presentation and Reporting
The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. The Condensed Consolidated Financial Statements have been prepared using generally accepted accounting principles (GAAP) in the United States for interim financial reporting, and is consistent with the instructions of Form 10-Q and Article 10 of Regulation S-X and, accordingly, they do not include all of the information and footnotes required in the annual consolidated financial statements and accompanying footnotes. The Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2020. All intercompany accounts and transactions have been eliminated in consolidation.
In the opinion of management, the unaudited interim financial statements included herein reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the Company’s condensed consolidated financial position and the results of operations, comprehensive income (loss) and cash flows at December 31, 2020, and for all periods presented. The results of operations for the periods presented are not necessarily indicative of the results that may be expected for fiscal year 2021.
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Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and that affect revenue and expenses during the periods reported. Estimates are used when accounting for the allowance for uncollectible accounts receivable, net realizable value of inventory, product warranty accrued, relative selling prices, stock-based compensation, intangible assets fair value, depreciation, income taxes, right-of-use lease assets and related lease liabilities, and contingencies, among other things. Actual results could differ from those estimates.
Recently Adopted Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes
(“ASU 2019-12”). The amendments in ASU 2019-12 seek to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application and simplify GAAP in other areas of Topic 740. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company early adopted ASU 2019-12 effective April 1, 2020, with no immediate impact to the Company’s Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“ASU 2018-13”). This update modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. Certain disclosure requirements established in Topic 820 have been removed, some have been modified and new disclosure requirements were added. This new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted 2018-13 effective April 1, 2020, with no immediate impact to the Company’s Condensed Consolidated Financial Statements and related disclosures.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (“ASU 2018-15”). The main objective of ASU 2018-15 is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this update require that a customer in a hosting arrangement that is a service contract follow the guidance in Subtopic 350-40 to determine which implementation costs should be capitalized as an asset and which costs should be expensed and states that any capitalized implementation costs should be expensed over the term of the hosting arrangement. This new standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-15 effective April 1, 2020, with no immediate impact to the Company’s Condensed Consolidated Financial Statements.
In November 2018, the FASB issued ASU 2018-18 Collaborative Arrangements (Topic 808) (“ASU 2018-18”). The update provides guidance on the interaction between Revenue Recognition (Topic 606) and Collaborative Arrangements (Topic 808) by aligning the unit of account guidance between the two topics and clarifying whether certain transactions between collaborative participants should be accounted for as revenue under Topic 606. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU 2018-18 effective April 1, 2020, with no immediate impact to the Company's Condensed Consolidated Financial Statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”). ASU 2016-13 will replace the current incurred loss approach with a new expected credit loss impairment model for trade receivables, loans, and other financial instruments. Under the new model, the estimate of expected credit losses will be based on historical experience, current conditions and reasonable and supportable forecasts. For the Company, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of ASU 2016-13 on the Company's Condensed Consolidated Financial Statements.
Note 2. Leases
The Company accounts for leases under ASC 842. Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets. The Company also made the accounting policy election to account for each separate lease component and non-lease component associated with that lease component as a single lease component, thus causing all fixed payments to be capitalized. The Company determines lease terms based on whether or not it is reasonably certain to exercise the lease extensions. The Company determines at inception whether an arrangement is a lease.
Right-of-use (“ROU”) assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the lease commencement date based on the net present value of remaining fixed lease payments over the lease
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term. Lease terms used to calculate the present value of the lease payments include any options to extend, renew, or terminate the lease, when it is reasonably certain that these options will be exercised. ROU assets also include any advance lease payments made and exclude any lease incentives. As the implicit interest rate for our leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Lease expense is recognized on a straight-line basis over the lease term. The Company has lease arrangements with non-lease components that are not in-substance fixed and considered variable, which were not included in the carrying balances of the ROU asset and lease liability. The Company does not have any finance leases. No leases require residual value guarantees.
The Company reviews the impairment ROU assets consistent with the approach applied to other long-lived assets. ROU assets are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows, an impairment loss is recorded for the excess of the asset’s carrying amount over its fair value.
The Company's operating leases primarily include building leases for the corporate headquarters in Aurora, IL, an engineering and service center in Dublin, OH, and office space in Manchester, NH.

Future minimum lease payments as of December 31, 2020, consisted of the following (in thousands):
Fiscal YearOperating Leases
2021 (1)
$97 
2022587 
2023587 
2024593 
2025604 
Thereafter276 
Total lease payments2,744 
Less: imputed interest(281)
Total operating lease liabilities$2,463 
_______
(1) Represents the future minimum operating lease payments expected to be made over the remaining balance of the fiscal year.
As of December 31, 2020, the weighted-average remaining lease term was 4.8 years and the weighted-average discount rate was 4.5%.
During the first quarter of fiscal year 2021, the Company executed a lease extension for the Manchester, New Hampshire facility with the lease term extended to August 31, 2022 with an option to further extend the lease for one additional term of two years (the “NH extension”). The Company also executed a lease extension for the Aurora, IL facility in the quarter ended June 30, 2020 that extended the lease to November 30, 2025 with an option to extend the lease for one additional term of five years (the “IL extension”). The IL extension required a deposit, which is expected to be applied to the final two lease payments and is included in the calculation of the total lease liability. Prior to the extension, additional rent payments covering the Company’s portion of operating expenses and taxes were fixed and included in the lease liability balance. The amendment to extend the lease changed these fixed additional rent payments to variable payments with adjustments made based on actual operating expenses and taxes and, as such, would no longer be included in the lease liability balances beginning October 1, 2020.
During the second quarter of fiscal year 2020, as a cost savings effort, the Company executed a new 63 month lease for the Dublin, OH design service center rather than executing the two year option to extend the existing lease as previously assumed. The new lease commenced on December 1, 2019 and has a reduced footprint which is more suitable to our current operation. The new lease includes a renewal option to extend the initial lease term for an additional three years. The lease also includes a termination option effective the last day of the 39th month of the lease term. The cost to terminate under this option would be approximately $70,000. At this time, the Company does not expect to terminate the lease at the end of the 39th month of the lease term and so the cost to terminate is not included in the ROU asset and lease liability balance.
Our building leases include variable lease payments that are not included in the lease liability balances as they are based on the expenses which can vary during the term of each lease. At this time, the Company is not reasonably certain to exercise any of the options for further lease extensions so they are not included in the ROU asset and lease liability balance.
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Lease expenses are included in Cost of revenue, Sales and marketing, Research and development, and General and administrative in the Company's Condensed Consolidated Statements of Operations. The components of lease expense are as follows:
Three months ended December 31,Nine months ended December 31
(in thousands)2020201920202019
Operating lease expense$150 $202 $448 $610 
Variable lease expense (1)
64 25 103 88 
Total lease expense (2)
$214 $227 $551 $698 
_______
(1) Variable lease expense is related to our leased real estate and primarily includes labor and operational costs as well as taxes and insurance.
(2) Short-term lease expense is immaterial.
For the three and nine months ended December 31, 2020, cash paid for operating leases included in the measurement of lease liabilities was $0.2 million and $0.6 million, respectively, compared to $0.1 million and $0.5 million for the three and nine months ended December 31, 2019, respectively. The increase in cash paid for operating leases in the nine months ended December 31, 2020 is primarily due to the deposit from the IL extension. All of these payments are presented in Operating activities cash flows on the Condensed Consolidated Statements of Cash Flows. In addition, the Company obtained approximately $2.4 million of ROU assets in exchange for related operating lease liabilities during the nine months ending December 31, 2020.

The following table summarizes the classification of ROU assets and lease liabilities as of December 31, 2020 and March 31, 2020:
(in thousands)December 31, 2020March 31, 2020Balance Sheet Classification
Assets:
ROU assets$2,573 $628 Right-of-use assets on operating leases, net
Liabilities:
  Current operating lease liability440 339 Accrued expenses
  Non-current operating lease liabilities2,023 250 Lease liabilities non-current
Total lease liabilities$2,463 $589 
Note 3. Revenue Recognition and Deferred Revenue
The Company records revenue based on a five-step model in accordance with ASC Topic 606, Revenue From Contracts With Customers (“ASC 606"). The Company's revenue is derived from the sale of products, software, and services identified in contracts. A contract exists when both parties have an approved agreement that creates enforceable rights and obligations, identifies performance obligations and payment terms and has commercial substance. The Company records revenue from these contracts when control of the products or services transfer to the customer. The amount of revenue to be recognized is based upon the consideration, including the impact of any variable consideration, that the Company expects to be entitled to receive in exchange for these products and services.

Disaggregation of revenue
The following table disaggregates our revenue by major source:
(in thousands)Three months ended December 31,Nine months ended December 31,
 2020201920202019
Revenue:
    Products$6,227 $5,842 $19,386 $19,974 
    Software15 92 179 272 
    Services1,407 1,225 3,754 3,484 
Total revenue$7,649 $7,159 $23,319 $23,730 

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Deferred Revenue
The following is the expected future revenue recognition timing of deferred revenue as of December 31, 2020:
(in thousands)< 1 year1-2 years> 2 years
Deferred Revenue$1,089 $90 $39 

During the nine months ended December 31, 2020, and December 31, 2019, the Company recognized $1.0 million and $1.1 million, respectively, of revenue related to contract liabilities at the beginning of the periods.
The Company allows certain customers to return unused product under specified terms and conditions.  The Company estimates product returns based on historical sales and return trends and records a corresponding refund liability.  The refund liability is included within Accrued expenses on the accompanying Condensed Consolidated Balance Sheets.  Additionally, the Company records an asset based on historical experience for the amount of product we expect to return to inventory as a result of the return, which is recorded in Prepaid and other current assets in the Condensed Consolidated Balance Sheets.  The gross product return asset was $0.1 million at both December 31, 2020, and March 31, 2020. The product returns liability was $0.2 million at both December 31, 2020 and March 31, 2020.
Note 4. Long-term Debt and Note Payable to Bank
The Company has a Paycheck Protection Program loan (“PPP Loan”) implemented by the United States Small Business Administration (“SBA”). On April 14, 2020, the Company obtained an unsecured PPP Loan through JPMorgan Chase Bank, N.A. (“JPM”) in the amount of $1,637,522.  The loan was made through the SBA as part of the Paycheck Protection Program under the 2020 Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).  The interest rate is fixed at 0.98% per year.  Under the CARES Act, all or a portion of this loan may be forgiven if certain requirements are met.  The Company believes that it has used 100% of the PPP Loan proceeds to fund allowable expenses permitted by the PPP loan, but no assurance can be given that the Company will obtain forgiveness of the PPP Loan, in whole or in part. The Company applied for loan forgiveness with JPM on December 21, 2020, and is awaiting a determination from the SBA. If all or a portion of a loan is ultimately forgiven, the Company plans to record income from the extinguishment of its loan obligation when it is legally released from the PPP Loan in accordance with ASC 405-20-40-1. Based on original terms of the loan, if the loan is not forgiven, the Company will pay principal and interest payments of approximately $92,000 every month, beginning seven months from the effective date of the PPP Loan, but not before the SBA forgiveness determination.  The Company can repay the PPP Loan without any prepayment penalty.  All remaining principal and accrued interest is due and payable 2 years from the effective date of the PPP Loan.  The current portion and non-current portions of the PPP Loan is $1,138,000 and $510,000 respectively, based on the original terms of the loan. The Company had no other debt as of December 31, 2020 or March 31, 2020. On January 22, 2021, the Company applied for a second draw PPP loan (the “PPP2”) pursuant to the Consolidated Appropriations Act, 2021 (the “CAA”) that was signed into law in December 2020, but the Company can provide no assurance that the Company will obtain the PPP2.
Note 5. Interim Segment Information
Segment information is presented in accordance with a “management approach", which designates the internal reporting used by the chief operating decision-maker (“CODM") for making decisions and assessing performance as the source of the Company's reportable segments. Westell’s Chief Executive Officer is the CODM. The CODM defines segment profit as gross profit less research and development expenses. The accounting policies of the segments are the same as those for Westell Technologies, Inc. described in the summary of significant accounting policies included in the Company's Annual Report on Form 10-K for year ended March 31, 2020, and as updated in this filing.
The Company’s three reportable segments are as follows:
In-Building Wireless (IBW") Segment
The IBW segment solutions enable cellular and public safety coverage in stadiums, arenas, malls, buildings, and other indoor areas not served well or at all by the existing "macro" outdoor wireless network. For cellular service, solutions include distributed antenna system (“DAS") conditioners and digital repeaters. For the public safety market, solutions include Class A repeaters, Class B repeaters, and battery backup units. IBW also offers ancillary products that consist of passive system components and antennas for both the cellular service and public safety markets.
Intelligent Site Management (ISM") Segment
ISM segment solutions include a suite of remote units, which provide machine-to-machine (“M2M") communications that enable operators to remotely monitor, manage, and control physical site infrastructure and support systems. Remote units can
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be and often are combined with the Company's Optima management software system. ISM also offers support services (i.e., maintenance agreements) and deployment services (i.e., installation).
Communications Network Solutions (CNS") Segment
CNS segment solutions include a broad range of hardened network infrastructure offerings suitable for both indoor and outdoor use.  The offerings consist of integrated cabinets, power distribution products, copper and fiber network connectivity panels, and T1 network interface units (“NIUs").

Segment information for the three and nine months ended December 31, 2020, and 2019, is set forth below: 
Three months ended December 31, 2020
(in thousands)IBWISMCNSTotal
Revenue$1,648 $2,677 $3,324 $7,649 
Cost of revenue1,564 

1,242 2,637 5,443 
Gross profit84 1,435 687 2,206 
Gross margin5.1 %53.6 %20.7 %28.8 %
Research and development404 409 193 1,006 
Segment profit$(320)$1,026 $494 1,200 
Operating expenses:
Sales and marketing1,200 
General and administrative863 
Intangible amortization226 
Operating profit (loss)(1,089)
Other income, net178 
Income tax benefit (expense)(23)
Net income (loss)$(934)
Three months ended December 31, 2019
(in thousands)IBWISMCNSTotal
Revenue$2,466 $2,456 $2,237 $7,159 
Cost of revenue1,657 991 1,731 4,379 
Gross profit809 1,465 506 2,780 
Gross margin32.8 %59.6 %22.6 %38.8 %
Research and development470 505 247 1,222 
Segment profit (loss)$339 $960 $259 1,558 
Operating expenses:
Sales and marketing1,556 
General and administrative1,093 
Intangible amortization308 
Restructuring234 
Operating profit (loss)(1,633)
Other income, net109 
Income tax benefit (expense)(20)
Net income (loss)$(1,544)
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 Nine months ended December 31, 2020
(in thousands)IBWISMCNSTotal
Revenue$7,618 $6,632 $9,069 $23,319 
Cost of revenue5,300 

3,017 7,163 15,480 
Gross profit2,318 3,615 1,906 7,839 
Gross margin30.4 %54.5 %21.0 %33.6 %
Research and development1,068 1,195 602 2,865 
Segment profit$1,250 $2,420 $1,304 4,974 
Operating expenses:
Sales and marketing4,024 
General and administrative3,175 
Intangible amortization677 
Operating profit (loss)(2,902)
Other income, net223 
Income tax benefit (expense)35 
Net income (loss)$(2,644)
Nine months ended December 31, 2019
(in thousands)IBWISMCNSTotal
Revenue$8,007 $8,197 $7,526 $23,730 
Cost of revenue5,813 4,111 6,201 16,125 
Gross profit2,194 4,086 1,325 7,605 
Gross margin27.4 %

49.8 %17.6 %32.0 %
Research and development1,272 1,825 1,130 4,227 
Segment profit (loss)$922 $2,261 $195 3,378