UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~November~~February 3029, ~~2019~~2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _________ to _________

Commission file number: 000-27587

IOTA COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware		22-3586087
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

600 Hamilton Street, Suite 1010 Allentown, PA		18101
(Address of principal executive offices)		(Zip Code)

(855) 743-6478

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

~~Title~~ Indicate by ofcheck ~~each~~mark ~~class~~whether ~~Trading~~the ~~Symbol~~registrant (s1) ~~Name~~has filed all reports required to be filed by Section 13 or 15(d) of ~~each~~the ~~exchange~~Securities Exchange onAct ~~which~~of ~~registered~~1934 ~~None~~during ~~N/A~~the ~~N/A~~preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark whether the registrant ~~(1)~~ has ~~filed~~submitted ~~all reports~~electronically every Interactive Data File required to be ~~filed~~submitted bypursuant ~~Section~~to Rule 13405 ~~or 15(d)~~ of ~~the~~Regulation ~~Securities Exchange~~S-T ~~Act~~(§ 232.405 of ~~1934~~this ~~during~~chapter) during the preceding 12 months (or for such shorter period that the registrant was required to ~~file~~submit such ~~reports),~~ ~~and (2~~files) ~~has been subject to such filing requirements for the past 90 days~~. Yes ☒[ No] No [ X]

Indicate by check mark whether the registrant ~~has~~is ~~submitted~~a ~~electronically every~~large ~~Interactive~~accelerated ~~Data~~filer, an ~~File~~accelerated ~~required~~filer, toa benon-accelerated ~~submitted~~filer, ~~pursuant~~a tosmaller reporting ~~Rule~~company, ~~405~~or ofan ~~Regulation~~emerging ~~S-T~~growth ~~(§ 232~~company.~~405~~ ofSee ~~this~~the ~~chapter)~~definitions ~~during~~of ~~the~~“large ~~preceding~~accelerated 12filer”, ~~months~~“accelerated filer”, ~~(or~~“smaller ~~for~~reporting ~~such~~company”, ~~shorter period that the~~and ~~registrant~~“emerging ~~was~~growth ~~required~~company” toin ~~submit~~Rule ~~such~~12b-2 ~~files).~~of ~~Yes~~the ~~☒ No [~~Exchange ]Act.

~~Indicate by~~Large ~~check mark whether the registrant is a large~~ accelerated filer~~, an~~ ~~accelerated~~[ ~~filer,~~] aAccelerated ~~non-accelerated~~ filer, or[ a] ~~small reporting company or an emerging growth company. See the definitions of “large~~ Non-accelerated filer”, ~~“accelerated filer”,~~[X] aSmaller ~~“smaller~~ reporting company” ~~and~~[X] ~~an “emerging~~Emerging growth company” in[ ~~Rule 12b-2 of the Exchange Act.~~]

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act: [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~Yes ☐ No ☒~~

AsYes ~~of January~~[ ~~20, 2020, there were 253,892,778~~] ~~shares~~No ~~of the registrant’s common stock outstanding.~~[X]

As of April 29, 2021, there were 373,533,863 shares of the registrant’s common stock outstanding.

IOTA COMMUNICATIONS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED ~~NOVEMBER~~FEBRUARY 3029, ~~2019~~2020

TABLE OF CONTENTS

		~~Page~~	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited)		3
ITEM 1.	Financial Statements (unaudited)		3
Condensed Consolidated Balance Sheets as of November 30, 2019 and May 31, 2019		3
	Condensed Consolidated Balance Sheets as of February 29, 2020 and May 31, 2019 (As revised)		3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended November 30, 2019 and 2018		4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended February 29, 2020 and February 28, 2019 (As revised)		4
Condensed Consolidated Statement of Changes in Deficit for the Three and Six Months Ended November 30, 2019		5
	Condensed Consolidated Statement of Changes in Deficit for the Three and Nine Months Ended February 29, 2020 (As revised)		5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended November 30, 2019 and 2018		7
	Condensed Consolidated Statement of Changes in Deficit for the Three and Nine Months Ended February 28, 2019 (As revised)		6
Notes to Condensed Consolidated Financial Statements		8
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended February 29, 2020 and February 28, 2019 (As revised)		7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		56
	Notes to Condensed Consolidated Financial Statements (As revised)		8
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk		74
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (As revised)		74
ITEM 4. Controls and Procedures		74
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		90
PART II. OTHER INFORMATION
ITEM 4.	Controls and Procedures		90
ITEM 1. Legal Proceedings		76
PART II. OTHER INFORMATION			92
ITEM 1A. Risk Factors		77
ITEM 1.	Legal Proceedings		92
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds		77
ITEM 1A.	Risk Factors		94
ITEM 3. Defaults Upon Senior Securities		80
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		94
ITEM 4. Mine Safety Disclosures		80
ITEM 3.	Defaults Upon Senior Securities		98
ITEM 5. Other Information		80
ITEM 4.	Mine Safety Disclosures		98
ITEM 6. Exhibits		81
ITEM 5.	Other Information		98
SIGNATURES		84
ITEM 6.	Exhibits		103
SIGNATURES			108

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	November 30,	May 31,
	February 29, 2020	May 31, 2019 (As revised)
	2019	2019
ASSETS
Current Assets:
Cash	$~~203~~40,~~675~~981	$788,502
Accounts receivable, net of allowances for doubtful accounts of $1,007,036 and $810,132, respectively	534,404	507,345
Accounts receivable, net of allowances for doubtful accounts of $939,474 and $810,132, respectively	68,146	507,345
Contract assets	~~171~~120,~~492~~297	435,788
Other current assets	~~599~~608,~~349~~139	635,746
Total Current Assets	1837,~~508,920~~563	2,367,381
Property and equipment, net of accumulated depreciation of $4,156,990 and $3,759,229, respectively	11,890,089	10,124,763
Property and equipment, net of accumulated depreciation of $4,271,733 and $3,759,229, respectively	7,937,658	10,124,763
ROU Asset	17,926,862	-
Right of use assets	11,112,099	-
Intangible assets, net of accumulated amortization of $18,153 and $90,750, respectively	4,423,720	286,538
Intangible assets, net of accumulated amortization of $248,551 and $90,750, respectively	11,981,037	286,538
Other assets	~~169~~18,~~076~~451	198,946
Total Assets	$3531,~~918~~886,~~667~~808	$12,977,628
LIABILITIES AND DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	6$10,~~712~~112,~~696~~568	18$19,~~563~~499,~~550~~592
Payroll liability	13,~~200~~770,~~249~~582	1,276,333
Service obligations	97,900	331,280
Current portion of lease liabilities	2,120,632	-
Current portion of lease liabilities	1,179,155	-
Service obligations	161,467	331,280
Deferred revenue	303,269	228,893
Contract liabilities	497,736	417,631
Contract liabilities	205,245	188,738
Warranty reserve	106,600	313,881
Warranty reserve	150,000	313,881
Convertible notes payable, net of debt discount of $551,060 and $495,959, respectively	1,766,186	4,450,296
Convertible debentures, net of debt discount of $1,028,192 and $312,902, respectively	905,637	4,450,296
Notes payable – related parties	304,223	-
Contingent liability	3,000,000	-
Notes payable – officers and directors	956,671	173,769
Notes payable - related party	911,459	-
Notes payable, net of debt discount of $1,450,712 and $0, respectively	3,733,098	479,102
Notes payable - officers	-	173,769
Total Current Liabilities	23,529,763	26,941,884
Notes payable, net of debt discount of $730,008 and $0, respectively	4,331,943	479,102
Total Current Liabilities	18,997,553	26,005,842
Deferred rent liability	-	1,975,815
Lease liabilities, net of current portion	1719,~~729~~390,~~382~~471	-
Revenue-based notes, net of financing costs of $765,822 and $914,408	75,409,098	76,489,220
Revenue-based notes, net of financing costs of $30,734 and $914,408, respectively	62,088,603	76,489,220
Long-term notes payable - related party	1,176,596	666,154
Long-term notes payable – related parties	666,154	666,154
Long-term notes payable - officer	-	827,348
Long-term notes payable – officers and directors	-	827,348
Asset retirement obligations	1,737,378	1,771,227
Long-term note payable, net of debt discount of $92,611 and $0, respectively	3,807,389	-
Total Liabilities	115,050,007	107,735,606
Asset retirement obligations	1,602,924	1,771,227
Total Liabilities	111,085,304	108,671,648
Commitments and Contingencies
Deficit:
Convertible preferred stock, $.0001 par value; 5,000,000 shares authorized, no shares issued and outstanding	-	-
Common stock, $.0001 par value; 600,000,000 shares authorized; 247,893,229 and 219,205,439 shares issued and outstanding, respectively	24,790	21,921
Common stock, $.0001 par value; 600,000,000 shares authorized; 278,559,653 and 219,205,439 shares issued and outstanding, respectively	27,856	21,921
Additional paid-in capital	3763,~~486~~284,~~851~~925	2425,~~029~~673,~~008~~796
Accumulated deficit	(~~119~~150,~~964~~746,~~868~~628)	(~~118~~121,~~808~~389,~~907~~737)
Total Iota Communications, Inc. Deficit	(8287,~~453~~433,~~227~~847)	(9495,~~757~~694,~~978~~020)
Non-controlling Interest in Variable Interest Entity	38,~~321~~235,~~887~~351	-
Total Deficit	(79,~~131~~198,~~340~~496)	(9495,~~757~~694,~~978~~020)
Total Liabilities and Deficit	$3531,~~918~~886,~~667~~808	$12,977,628

The accompanying footnotes are anin integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended		For the ~~Six~~Nine Months Ended
	November 30, 2019	November 30, 2018	November 30, 2019	November 30, 2018
	29-Feb-20	28-Feb-19	29-Feb-20	28-Feb-19
Net sales	$257,605	$835,869	$1,015,566	$885,665
		(As revised)		(As revised)
Cost of sales	102,033	730,398	816,916	763,375
Net sales	$690,949	$552,739	$1,596,433	$1,429,647
Gross profit	155,572	105,471	198,650	122,290
Cost of sales	728,673	842,962	1,688,349	1,651,459
Gross loss	(37,724)	(290,223)	(91,916)	(221,812)
Operating expenses:
Network site expenses	1632,~~120,412~~260	1,~~656~~605,~~535~~319	2,~~378~~911,~~103~~307	24,~~827~~433,~~682~~000
Research and development	1,~~144~~138	~~671~~280,~~544~~130	34,~~288~~426	2,~~064~~344,~~234~~364
Selling, general and administrative	~~572~~6,~~318~~021,766	3,~~902~~560,~~845~~087	512,~~147~~774,~~867~~877	912,~~639~~980,~~176~~119
Depreciation and amortization	~~283~~650,~~912~~978	~~299~~414,~~720~~704	~~556~~2,~~829~~273,249	~~554~~969,~~398~~102
Stock based compensation	597,573	10,521,482	1,299,986	10,521,482
Stock-based compensation	(62,273)	6,386,862	671,597	16,908,344
Gain on settlement of past due lease obligations	~~(11,167,962)~~-	-	(11,167,962)	-
Total operating expenses	(8,592,603)	17,052,126	(1,781,889)	25,606,972
(Gain) loss on extinguishment of debt	(256,448)	-	5,601,212	-
Income (loss) from operations	8,748,175	(16,946,655)	1,980,539	(25,484,682)
Impairment of long-lived assets	1,320,509	-	12,093,872	-
Other income (expense):
Total operating expenses	8,307,930	12,247,102	25,162,578	37,634,929
Interest expense, net	(1,897,898)	(172,242)	(3,161,077)	(177,322)
Loss from operations	(8,345,654)	(12,537,325)	(25,254,494)	(37,856,741)
Other income (expense)	(39,384)	(33,172)	(32,867)	(33,172)
Interest expense, net	(1,883,175)	(1,547,005)	(4,725,046)	(1,889,593)
Total other income (expense)	(1,897,898)	(172,242)	(3,161,077)	(177,322)
Loss before provision for income taxes	(10,228,829)	(14,084,330)	(29,979,540)	(39,746,334)
Income (loss) before provision for income taxes	6,850,277	(17,118,897)	(1,180,538)	(25,662,004)
Provision for income taxes	-	-	-	-
Net income/(loss)	6,850,277	(17,118,897)	(1,180,538)	(25,662,004)
Net loss	(10,228,829)	(14,084,330)	(29,979,540)	(39,746,334)
Net loss attributable to non-controlling interest	(24133,~~577~~743)	-	(24622,~~577~~649)	-
Net income/(loss) attributable to Iota Communications, Inc.	$6,874,854	$(17,118,897)	$(1,155,961)	$(25,662,004)
Net loss attributable to Iota Communications, Inc.	$(10,095,086)	$(14,084,330)	$(29,356,891)	$(39,746,334)
Net income/(loss) per common share - basic	$0.03	$(0.11)	$(0.01)	$(0.18)
Net loss per common share – basic and diluted	$(0.04)	$(0.07)	$(0.12)	$(0.24)
Net income/(loss) per common share - diluted	$0.03	$(0.11)	$(0.01)	$(0.18)
Weighted average shares outstanding – basic and diluted	273,869,195	201,848,961	245,588,363	163,991,096
Weighted average shares outstanding - basic	230,721,378	161,245,806	225,778,381	145,372,474
Weighted average shares outstanding - diluted	234,052,033	161,245,806	225,778,381	145,372,474

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN ~~EQUITY~~DEFICIT

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~NOVEMBER~~FEBRUARY 3029, ~~2019~~2020

(Unaudited)

							Total Iota
					Additional		Communications,	Non-
	Preferred Stock		Common Stock		Paid-in	Accumulated	Inc.	Controlling	Total
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit	Interest	Deficit
Balance at June 1, 2019 (As revised)	-	$-	219,205,439	$21,921	$25,673,796	$(121,389,737)	$(95,694,020)	$-	$(95,694,020)

Stock-based compensation – stock options	-	-	-	-	202,782	-	202,782	-	202,782
Stock-based compensation – common stock	-	-	445,000	45	189,506	-	189,551	-	189,551
Common stock issued for the settlement of liabilities	-	-	300,000	30	188,970	-	189,000	-	189,000
Common stock issued for exercise of warrants	-	-	408,736	40	807	-	847	-	847
Common stock issued for inducement and issuances
of convertible note holders	-	-	2,100,000	210	315,385	-	315,595	-	315,595
Common stock issued for services	-	-	1,133,334	113	759,887	-	760,000	-	760,000
Net loss (As revised)	-	-	-	-	-	(7,153,329)	(7,153,329)	-	(7,153,329)

Balance as of August 31, 2019 (As revised)	-	$-	223,592,509	$22,359	$27,331,133	$(128,543,066)	$(101,189,574)	$-	$(101,189,574)

Stock-based compensation – stock options	-	-	-	-	94,937	-	94,937	-	94,937
Warrants issued to investors	-	-	-	-	246,600	-	246,600	-	246,600
Common stock and warrants issued for settlement of
liabilities	-	-	22,043,405	2,204	9,419,729	-	9,421,933	-	9,421,933
Common stock issued for inducement and issuances
of convertible note holders	-	-	1,816,364	182	577,819	-	578,001	-	578,001
Common stock issued for services	-	-	947,499	95	277,027	-	277,122	-	277,122
Common stock and warrants issued in connection
with private placement	-	-	6,919,782	692	2,051,790	-	2,052,482	-	2,052,482
Common stock issued for purchase of Link Labs
assets	-	-	12,146,241	1,215	3,098,785	-	3,100,000	-	3,100,000
Beneficial conversion feature on convertible notes
and warrants	-	-	-	-	879,661	-	879,661	-	879,661
Extinguishment of revenue-based notes	-	-	-	-	3,733,667	-	3,733,667	-	3,733,667
Iota Spectrum Partners, LP limited partnership
interests issued for contributed assets	-	-	-	-	-	-	-	3,430,000	3,430,000
Iota Spectrum Partners, LP limited partnership
interests issued for cash	-	-	-	-	-	-	-	100,000	100,000
Net loss	-	-	-	-	-	(12,108,476)	(12,108,476)	(488,906)	(12,597,382)

Balance as of November 30, 2019 (As revised)	-	$-	267,465,800	$26,747	$47,711,148	$(140,651,542)	$(92,913,647)	$3,041,094	$(89,872,553)

Stock-based compensation – stock options	-	-	-	-	(62,273)	-	(62,273)	-	(62,273)
Common stock and warrants issued for settlement	-	-	-	-	(256,448)	-	(256,448)	-	(256,448)
of liabilities
Common stock issued for exercise of warrants	-	-	447,455	44	4,090	-	4,134	-	4,134
Common stock issued for inducement and issuances
of convertible note holders	-	-	2,113,759	211	407,193	-	407,404	-	407,404
Common stock issued for services	-	-	1,055,000	106	291,655	-	291,761	-	291,761
Common stock and warrants issued in connection
with private placement	-	-	7,477,639	748	2,219,973	-	2,220,721	-	2,220,721
Beneficial conversion feature on convertible notes	-	-	-	-	1,890,151	-	1,890,151	-	1,890,151
and warrants
Extinguishment of revenue-based notes	-	-	-	-	11,079,436	-	11,079,436	-	11,079,436
Iota Spectrum Partners, LP limited partnership
interests issued for contributed assets	-	-	-	-	-	-	-	5,328,000	5,328,000
Net loss	-	-	-	-	-	(10,095,086)	(10,095,086)	(133,743)	(10,228,829)
Balance as of February 29, 2020	-	$-	$278,559,653	$27,856	$63,284,925	$(150,746,628)	$(87,433,847)	$8,235,351	$(79,198,496)

	Preferred Stock		Common Stock		Additional Paid-in	Accumulated	Total Iota Communications, Inc.	Non-Controlling	Total
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit	Interest	Deficit
Balance at June 1, 2019	-	$-	219,205,439	$21,921	$24,029,008	$(118,808,907)	$(94,757,978)	$-	$(94,757,978)
Stock based compensation - stock options	-	-	-	-	202,782	-	202,782	-	202,782
Stock based compensation - common stock	-	-	445,000	45	189,506	-	189,551	-	189,551
Common stock issued for the settlement of liabilities	-	-	300,000	30	188,970	-	189,000	-	189,000
Warrants issued to investors	-	-	-	-	310,081	-	310,081	-	310,081
Common stock issued for exercise of warrants	-	-	408,736	41	807	-	848	-	848
Common stock issued for inducement of convertible debt holders	-	-	2,100,000	210	882,790	-	883,000	-	883,000
Common stock issued for services	-	-	1,133,334	113	759,887	-	760,000	-	760,000
Net loss	-	-	-	-	-	(8,030,815)	(8,030,815)	-	(8,030,815)
Balance as of August 31, 2019	-	$-	223,592,509	$22,360	$26,563,831	$(126,839,722)	$(100,253,531)	$-	$(100,253,531)
Stock based compensation - stock options	-	-	-	-	202,782	-	202,782	-	202,782
Conversion of revenue based notes	-	-	-	-	410,703	-	410,703	3,322,964	3,733,667
Iota Spectrum Partners, LP limited partnership interests issued for cash	-	-	-	-	76,500	-	76,500	23,500	100,000
Common stock issued in connection with private placement, net	-	-	6,919,782	692	2,213,638	-	2,214,330	-	2,214,330
Warrants issued to investors	-	-	-	-	394,791	-	394,791	-	394,791
Common stock issued for settlement of liability	-	-	2,500,000	250	849,750	-	850,000	-	850,000
Common stock issued for purchase of Link Labs assets	-	-	12,146,241	1,214	3,764,121	-	3,765,335	-	3,765,335
Common stock issued for inducement and issuances of convertible debt holders	-	-	2,219,697	222	730,384	-	730,606	-	730,606
Common stock issued for services	-	-	515,000	52	156,448	-	156,500	-	156,500
Beneficial conversion feature on convertible debt and warrant	-	-	-	-	2,123,903	-	2,123,903	-	2,123,903
Net income (loss)	-	-	-	-	-	6,874,854	6,874,854	(24,577)	6,850,277
Balance as of November 30, 2019	-	$-	247,893,229	$24,790	$37,486,851	$(119,964,868)	$(82,453,227)	$3,321,887	$(79,131,340)

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN ~~EQUITY~~DEFICIT

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~NOVEMBER~~FEBRUARY 3028, ~~2018~~2019

(Unaudited)

							Total Iota
					Additional		Communications,	Non-
	Preferred Stock		Common Stock		Paid-in	Accumulated	Inc.	Controlling	Total
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit	Interest	Deficit

Balance at June 1, 2018	-	$-	129,671,679	$12,967	$-	$(62,541,502)	$(62,528,535)	$-	(62,528,535)

Net loss	-	-	-	-	-	(8,543,107)	(8,543,107)	-	(8,543,107)

Balance as of August 31, 2018	-	$-	129,671,679	$12,967	$-	$(71,084,609)	$(71,071,642)	$-	$(71,071,642)

Stock-based compensation – stock options	-	-	-	-	202,782	-	202,782	-	202,782
Common stock issued for inducement and issuances
of convertible note holders	-	-	300,000	30	277,170	-	277,200	-	277,200
Common stock issued for services	-	-	250,000	25	82,475	-	82,500	-	82,500
Advance payments converted to members equity
prior to merger	-	-	7,266,499	727	2,391,714	-	2,392,441	-	2,392,441
Distribution to M2M’s former parent company	-	-	-	-	(5,061,334)	-	(5,061,334)	-	(5,061,334)
Recapitalization under reverse merger on September 1, 2018	-	-	43,434,034	4,343	876,259	-	880,602	-	880,602
Warrants issued in connection with reverse merger	-	-	-	-	3,992,000	-	3,992,000	-	3,992,000
Common stock issued for PPUs in connection with
reverse merger	-	-	15,824,972	1,583	5,965,417	-	5,967,000	-	5,967,000
Beneficial conversion feature on convertible notes
and warrants (As revised)	-	-	-	-	400,000	-	400,000	-	400,000
Net loss (As revised)	-	-	-	-	-	(17,118,897)	(17,118,897)	-	(17,118,897)

Balance as of November 30, 2018 (As revised)	-	$-	196,747,184	$19,675	$9,126,483	$(88,203,506)	$(79,057,348)	$-	$(79,057,348)

Stock-based compensation – stock options	-	-	-	-	202,782	-	202,782	-	202,782
Common stock issued for inducement and issuances
of convertible note holders	-	-	1,400,000	140	619,860	-	620,000	-	620,000
Common stock issued in connection with Tender
Offer (As revised)	-	-	14,708,125	1,471	4,088,498	-	4,089,969	-	4,089,969
Value of MHz-Pops licenses issued in connection
with Tender Offer	-	-	-	-	4,735,846	-	4,735,846	-	4,735,846
Warrants issued in connection with Tender Offer as
Inducement	-	-	-	-	821,348	-	821,348	-	821,348
Warrants issued in connection with Backstop
Agreement	-	-	-	-	256,556	-	256,556	-	256,556
Warrants issued to investors	-	-	-	-	213,281		213,281		213,281
Net loss (As revised)	-	-	-	-	-	(14,084,330)	(14,084,330)	-	(14,084,330)
Balance as of February 28, 2019 (As revised)	-	$-	212,855,309	$21,286	$20,064,654	$(102,287,836)	$(82,201,896)	$-	$(82,201,896)

	Preferred Stock		Common Stock		Additional Paid-in	Accumulated	Total Iota Communications, Inc. Stockholders'	Non-Controlling	Stockholders'
	Shares	Amount	Shares	Amount	Capital	Deficit	Deficit	Interest	(Deficit)
Balance at June 1, 2018	-	$-	129,671,679	$12,967	$-	$(62,541,502)	$(62,528,535)	$-	$(62,528,535)
Net loss	-	-	-	-	-	(8,543,107)	(8,543,107)	-	(8,543,107)
Balance as of August 31, 2018	-	$-	129,671,679	$12,967	$-	$(71,084,609)	$(71,071,642)	$-	$(71,071,642)
Stock based compensation - stock options	-	-	-	-	202,782	-	202,782	-	202,782
Advance payments converted to members equity prior to merger	-	-	7,266,499	727	2,391,714	-	2,392,441	-	2,392,441
Distribution to M2M's former parent company	-	-	-	-	(5,061,334)	-	(5,061,334)	-	(5,061,334)
Recapitalization under reverse merger on September 1, 2018	-	-	43,434,034	4,343	876,259	-	880,602	-	880,602
Warrants issued in connection with reverse merger	-	-	-	-	3,992,000	-	3,992,000	-	3,992,000
Common stock issued for PPUs in connection with reverse merger	-	-	15,906,864	1,591	5,965,409	-	5,967,000	-	5,967,000
Common stock issued for inducement of convertible debt holders	-	-	300,000	30	277,170	-	277,200	-	277,200
Common stock issued for services	-	-	250,000	25	82,475	-	82,500	-	82,500
Beneficial conversion feature on convertible debt and warrants	-	-	-	-	816,667	-	816,667	-	816,667
Net loss	-	-	-	-	-	(17,118,897)	(17,118,897)	-	(17,118,897)
Balance as of November 30, 2018	-	$-	196,829,076	$19,683	$9,543,142	$(88,203,506)	$(78,640,681)	$-	$(78,640,681)

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
	For the Nine Months Ended
	November 30, 2019	November 30, 2018
	February 29, 2020	February 28, 2019
		(As revised)
Cash flows from operating activities:
Net loss	$(129,~~180~~979,~~538~~540)	$(2539,~~662~~746,~~004~~334)
Adjustments to reconcile net loss to net cash used in operating activities:
Provision for doubtful accounts	~~196~~688,~~904~~956	-
Stock based compensation - stock options	405,564	202,782
Loss on disposal of property and equipment	1,093,789	58,495
Stock based compensation - common stock	189,551	-
Impairment of long-lived assets	12,093,872	-
Loss on sale of property and equipment	311,895	36,053
Depreciation and amortization	2,273,249	970,206
Warrants issued in connection with reverse merger	-	3,992,000
Amortization of right of use assets and accretion of lease liabilities, net	363,228	-
Common stock issued for PPU's in connection with reverse merger	-	5,967,000
Provision for warranty claims	(207,281)	40,197
Write off of asset retirement obligation due to tower decommissioning	(69,684)	-
Loss on settlement of liabilities	146,508	-
Gain on settlement of past due lease obligations	(11,167,962)	-
Gain on lease terminations and decommissioning of towers	(1,100,435)	-
Loss on settlement of liabilities	263,326	-
Warrants issued to investors	704,872	-
Loss on extinguishment of debt	5,601,212	-
Depreciation and amortization	556,829	556,802
Gain on lease modifications and decommissioning of towers	(1,359,554)	-
Amortization of debt discount and deferred finance costs	~~917,838~~	~~223,516~~
Issuance of common stock for inducement of convertible debt holders	1,613,606	277,200
and debt inducement expenses	2,825,968	1,539,262
Issuance of common stock for services	916,500	82,500
Accretion of asset retirement obligations	77,199	41,595
Issuance of common stock for the exercise of warrants	848	-
Warrants issued in connection with reverse merger	-	3,992,000
Accretion of asset retirement obligations	26,279	26,401
Common stock issued for PPUs in connection with reverse merger	-	5,967,000
Amortization of financing costs (revenue based notes)	148,586	-
Warrants issued in connection with Tender Offer	-	821,348
Provision for warranty claims	(163,881)	39,122
Warrants issued in connection with Backstop Agreement	-	256,556
Non-cash lease impact	91,733	-
Warrants issued to investors	246,600	213,281
MHz-POPs licenses issued in connection with Tender Offer	-	4,735,846
Common stock issued in connection with Backstop Agreement	-	468,000
Stock-based compensation – stock options	235,446	405,564
Stock-based compensation – common stock	189,551	-
Issuance of common stock for services	1,328,883	82,500
Issuance of common stock for the exercise of warrants	4,981	-
Changes in operating assets and liabilities:
Accounts receivable, net	~~(223~~181,~~963)~~625	(~~280~~314,~~614~~499)
Contract assets	~~301~~315,~~714~~491	~~153~~189,~~155~~505
Other current assets	36,397	(338,723)
Other assets	334,572	(942,662)
Due from related party	-	(42,315)
Accounts payable and accrued expenses	~~454~~2,~~983~~150,233	12,~~770~~720,~~701~~391
Payroll liability	~~(76~~2,~~084)~~494,250	~~709~~1,~~787~~030,536
Lease liability	169,321	-
Contract liabilities	80,105	41,642
Deferred revenue	74,376	(5,746)
Deferred rent	-	198,175
Deferred rent	-	106,492
Service obligations	(169,813)	-
Service obligations	(233,380)	-
Accrued interest on revenue-based notes	138,488	97,584
Contract liabilities	16,507	34,439
Net cash used in operating activities	(9,903,126)	(17,176,127)
Accrued interest on revenue-based notes	97,452	63,952
Net cash used in operating activities	(6,837,664)	(12,087,500)
Cash flows from investing activities:
Purchases of property and equipment	(33122,~~759~~335)	(7689,~~575~~392)
Purchase of note receivable - Solbright	-	(5,038,712)
Security deposit	(29,870)	172,326
Purchase of note receivable – Solbright	-	(5,038,712)
Advances to Solbright	-	(827,700)
Security deposit	29,870	172,326
Cash acquired in merger	-	72,059
Net cash used in investing activities	(3152,~~889~~205)	(5,~~698~~711,~~602~~419)
Cash flows from financing activities:
Proceeds from common stock issuance	2,375,968	-
Proceeds from issuance of revenue-based notes, net	2,407,505	16,206,504
Common stock issuance costs	(161,638)	-
Proceeds from issuance of convertible notes, net	2,256,320	3,516,864
Proceeds from revenue based notes, net	2,407,505	14,452,871
Payments on convertible notes	(583,191)	(765,943)
Proceeds from convertible notes payable, net	1,964,320	2,600,616
Proceeds from issuance of notes payable, net	2,020,000	-
Proceeds from note payable - officer	-	150,000
Payments on notes payable	(15,292)	(50,000)
Proceeds from note payable - related party	140,000	-
Proceeds from issuance of notes payable - officers and directors	140,000	-
Proceeds from issuance of limited partnership interests in Iota Spectrum Partners, LP	100,000	-
Payment on notes payable - officers and directors	(190,735)	-
Payments on convertible notes	(433,197)	(69,300)
Payment on notes payable - related parties	(100,000)	(291,185)
Payments on notes payable	(17,131)	(50,000)
Payment pursuant to Link Labs acquisition	(1,000,000)
Payment on notes payable, related party	(119,101)	(101,933)
Proceeds from issuance of common stock, net of stock issuance costs	4,273,203	4,089,969
Net cash provided by financing activities	6,256,726	16,982,254
Iota Spectrum Partners, LP limited partnership interests issued for cash	100,000	-
Net decrease in cash	(584,827)	(803,848)
Net cash provided by financing activities	9,307,810	22,706,209
Net decrease in cash	(747,521)	(181,337)
Cash - beginning of period	788,502	1,492,784
Cash - end of period	$~~203~~40,~~675~~981	$~~688~~1,~~936~~311,447
Supplemental cash flow information:
Cash paid for:
Interest	$~~343~~704,~~667~~508	$~~223~~243,325
Income taxes	$-	$-
Non-cash investing and financing activities:
Additions to asset retirement costs	$8,774	$26,920
Intangible assets acquired in connection with Link Labs acquisition	$3,300,000	$-
Non-cash distribution to M2M's former parent company	$-	$5,061,334
Software acquired in connection with Link Labs acquisition	$2,800,000	$-
Common stock issued for purchase of Link Labs assets	$3,~~765~~100,~~335~~000	$-
Common stock issued for settlement of accounts payable	$887,692	$-
Debt issued for purchase of Link Lab assets	$2,000,000	$-
Original issue discount in connection with convertible debt issued	$118,830	$-
Right of use assets and lease liabilities recorded upon adoption of ASC 842	$22,140,237	$-
Deferred finance costs in connection with convertible debt issued	$85,680	$-
Deferred rent reclassified to right of use asset upon adoption of ASC 842	$1,975,815	$-
Debt discount in connection with restricted shares issued with convertible debt	$212,815
Right of use assets disposed in connection with lease modifications and decommissioning of towers	$11,522,862	$-
Beneficial conversion feature in connection with issued and Black-Scholes market value of warrants	$2,123,903	$816,667
Lease liabilities extinguished in connection with lease modifications and decommissioning of towers	$12,853,201	$-
Software acquired in connection with Link Labs acquisition	$2,610,000	$-
Right of use assets and lease liabilities recorded in connection with lease modifications	$12,317,300	$-
Intangible assets acquired in connection with Link Labs acquisition	$4,155,335	$-
Right of use assets and lease liabilities recorded under operating leases	$1,388,812	$-
Contingent liabilities incurred in connection with Link Labs asset acquisition	$(3,000,000)	$-
Property and equipment acquired under deferred rent agreement	$928,908	$-
Note payable - related party	$911,459	$-
Conversion of accounts payable to notes payable for Avalton, a related party	$404,222	$-
Fair value of revenue-based notes transferred to Iota Spectrum Partners, LP	$3,733,667	$-
Common stock and warrants issued for settlement of accounts payable	$1,151,018	$-
Right of Use asset recorded upon adoption of ASC 842	$19,867,608	$-
Replacement of convertible notes with non-convertible note payable	$4,600,000	$-
Lease Liability recorded upon adoption of ASC 842	$(21,843,423)	$-
Debt discount in connection with restricted shares issued with convertible notes and notes payable	$960,898	$-
Deferred rent reclassified to ROU asset upon adoption of ASC 842	$1,975,815	$-
Receivable for revenue-based note issued	$413,032	$-
Settlement of Solutions Pool revenue-based notes net of new issuances	$3,430,707	$-
Extinguishment of revenue-based notes	$14,813,103	$-
Additions to asset retirement costs	$42,409	$128,810
Asset retirement obligation, revision of estimate	$220,201	$-
Beneficial conversion feature on convertible notes and warrants	$2,769,812	$400,000
Advance payments converted to equity	$-	$2,392,441
Iota Spectrum Partners, LP limited partnership interests issued for contribution of intangible assets	$8,758,000	$-
Non-cash distribution to M2M’s former parent company	$-	$5,061,334

The accompanying footnotes are in integral part of these unaudited condensed consolidated financial statements.

IOTA COMMUNICATIONS, INC. AND SUBSIDIARIES

(F/K/A SOLBRIGHT GROUP, INC.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Iota Communications, Inc., (f/k/a Solbright Group, Inc.) (the “Parent” or “Iota Communications”), was formed in the State of Delaware on May 7, 1998. Iota Communications conducts business activities principally through its three wholly- owned subsidiaries ~~and one consolidated variable interest entity~~, (i) Iota Networks, LLC (f/k/a M2M Spectrum Networks, LLC (“M2M”)) (“Iota Networks”), an Arizona limited liability company, (ii) Iota Commercial Solutions, LLC (f/k/a SolBright Energy Solutions, LLC) (“ICS” or “Iota Commercial Solutions”), a Delaware limited liability company, and (iii) Iota Spectrum Holdings, LLC, an Arizona limited liability company (“Iota Holdings”), and ~~Iota~~a consolidated variable-interest entity, Iota Spectrum Partners, LP, an Arizona limited partnership (“Iota Partners”), ~~a consolidated variable-interest entity (~~collectively, (the “Company”).

On July 30, 2018, Iota Communications, entered into an Agreement and Plan of Merger and Reorganization (as amended on September 5, 2018, the “Merger Agreement”) with its newly- formed, wholly owned Arizona subsidiary (“Merger Sub”), Iota Networks, and Spectrum Networks Group, LLC, an Arizona limited liability company and the majority member of M2M. Upon closing, Merger Sub merged ~~into~~with and ~~with~~into Iota Networks, with Iota Networks continuing as the surviving entity and a wholly owned subsidiary of Iota Communications (the “Merger”) (See Note 34).

In connection with the Merger, on November 26, 2018, a Certificate of Amendment was filed with the State of Delaware to amend the name of the Company from “Solbright Group, Inc.” to “Iota Communications, Inc.” In addition, as of November 28, 2018, our trading symbol changed from “SBRT” to “IOTC”.

Immediately following the Merger, the Company had 196,279,076 shares of common stock issued and outstanding. The pre-Merger stockholders of the Company retained an aggregate of 43,434,034 shares of common stock of the Company, representing approximately 22.1% ownership of the post-Merger Company. Therefore, upon consummation of the Merger, there was a change in control of the Company, with the former owners of Iota Networks effectively acquiring control of the Company. The Merger ~~was~~has been treated as a recapitalization and ~~reverse~~ reverse acquisition ~~of the Company~~ for financial reporting purposes. Iota ~~Networks~~ Networks is considered the acquirer for accounting purposes, and ~~the~~ ~~Company~~the registrant’s historical financial statements before the Merger have been replaced with the historical financial statements of Iota Networks before the Merger in ~~future~~the filings with the Securities and Exchange Commission (the “SEC”).

The Company is a ~~vertically integrated~~ wireless ~~network~~communication ~~carrier~~ and software-as-a-service (“SaaS”) company dedicated to the Internet of Things (“IoT”). The Company combines long range wireless connectivity with software applications to provide its commercial and industrial customers turn-key services to optimize energy efficiency, sustainability, and operations for their facilities. ~~The~~ ~~Company’s~~The ~~value~~combination ~~proposition~~of ~~is to provide turn-key services to~~ its ~~commercial~~unique ~~customers,~~communications ~~focusing~~capabilities onwith ~~the development of IoT~~its ~~solutions~~analytics ~~around Smart Buildings,~~ and ~~its~~visualization ~~related~~software ~~services including energy management~~platform, ~~asset~~provides ~~tracking, and predictive~~customers ~~maintenance.~~with Invaluable ~~order~~insights to bereduce ~~turn-key,~~costs ~~our~~and ~~business~~increase ~~strategy~~revenue. ~~aims to~~These ~~bundle~~solutions ~~connectivity~~fall ~~with~~in ~~data~~the ~~aggregation~~realm of Smart Buildings and ~~analysis~~Smart ~~into~~Cities anand ~~“as-a-service”~~the ~~offering~~Company’s ~~with~~primary a focus is on ~~Smart~~the ~~Buildings~~office, health care, manufacturing, and ~~Smart~~education ~~Cities~~verticals.

The Company operates its business across four segments: (1) Iota Communications, (2) Iota Networks, (3) Iota Commercial Solutions, and (4) Iota Holdings. Operating activities related to the parent company are classified within Iota Communications.

Iota Communications

The ~~parent~~ parent company’s operations are primarily related to running the operations of the public Company. The Company re-organized its operating segments in September 2018 in ~~conjunction~~connection with the Merger with M2M. The significant expenses included within the parent company are executive and employee salaries, stock-based compensation, professional and service fees, ~~rent,~~ and interest on convertible and other notes payable.

Iota Networks

Iota Networks is the network and application research, development, marketing, and ~~development~~sales segment of the business, where all go-to-market activities ~~related~~are toconducted. Iota Network’s sales and marketing activities focus on the ~~development~~commercialization of applications that leverage connectivity and analytics to reduce costs, optimize operations, and advance sustainability. Data collected from sensors and other advanced end point devices as well as other external data, such as weather patterns and utility pricing, is run through a data analysis engine to yield actionable insights for commercial and industrial customers. With the ~~network~~technological backbone developed in the Iota Networks segment, the Company can focus on the commercialization of such technologies with applications based on data analytics and ~~application~~operations optimization ~~technology~~within ~~are~~the ~~conducted~~IoT value chain.

Iota Commercial Solutions

~~The~~ ICS ~~business~~acts ~~segment~~as isa ~~the~~general ~~sales~~contractor ~~and~~for ~~marketing~~energy ~~segment of our business~~management-related ~~focusing on the commercialization of applications that leverage our connectivity and analytics to reduce costs~~services, ~~optimize~~such ~~operations and advance sustainability. Data collected from sensors and other advanced end point devices~~ as ~~well~~solar asphotovoltaic ~~other~~system ~~external~~installation ~~data, such as weather patterns~~ and ~~utility pricing, is run through a data~~LED ~~analysis~~lighting ~~engine~~retrofits. toThese ~~yield~~services ~~actionable~~are ~~insights~~value-added for ~~our commercial~~ customers~~. Additionally, ICS may act as a general contractor for~~ ~~energy~~and ~~management-related~~allow ~~services,~~them ~~such~~to asexecute ~~solar~~on ~~photovoltaic system~~actions ~~installation~~that ~~and~~result ~~LED~~from ~~lighting retrofits~~analytic insights.

Iota Holdings

Iota Holdings was formed to act as the general partner for Iota Partners. Iota Partners is a variable interest entity of Iota Holdings (~~“Iota~~See ~~Partners”~~Note 16). The purpose of Iota Partners is to own spectrum licenses that Iota Networks uses to operate its ~~network~~networks. ~~Upon~~ ~~approval~~At byFebruary ~~the~~29, ~~FCC~~2020, Iota ~~Networks~~Holdings ~~will contribute the licenses it~~ owns toapproximately ~~Iota~~3% ~~Partners~~of ~~in exchange for General Partnership Units~~the ~~issued~~outstanding topartnership Iota Holdings, then lease back those licenses pursuant to a master lease agreement covering all licenses owned by Iota Partners. Through November 30, 2019, Iota Networks has transferred licenses representing 16,246,612 MHz-POPs, or $3,733,667 in revenue-based notes, to Iota Partners for 4,873,984 LP units. ~~In addition,~~of ~~and through November 30, 2019,~~ Iota ~~Networks transferred licenses representing 1,922,474 MHz-POPs to Iota~~ Partners ~~for 576,742 GP Units. Additionally, three investors purchased a total of 30,000 LP Units for an aggregate total of $100,000. At November 30, 2019, Iota owns 11% of the outstanding LP Units~~ resulting in a non-controlling ~~noncontrolling~~ interest of 8997%.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the ~~Securities~~SEC ~~and Exchange Commission~~ including Form 10-Q and Regulation S-X. The information furnished herein reflects all adjustments (consisting of normal recurring accruals and adjustments) which are, in the opinion of management, necessary to fairly state the operating results for the respective periods. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting ~~principles~~ principles generally accepted in the United States of America (“US GAAP”) have been omitted pursuant to such rules ~~and~~ and regulations. These financial statements and the information included under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the audited financial statements and explanatory notes for the year ended May 31, 2019 as disclosed in our Annual Report on Form 10-K filed on September 13, 2019. The results offor the ~~six~~ nine months ended ~~November~~February 3029, ~~2019~~2020 (unaudited) are not necessarily indicative of the results to be expected for the ~~pending~~ full year ending May 31, 2020.

Liquidity and Going Concern

The Company’s primary need for liquidity is to fund the working capital needs of the business. The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred net losses of ~~approximately~~ $~~120~~150,746,628 ~~million~~from ~~since~~ inception, through February 29, 2020, including a net loss ofattributable ~~approximately~~to $1Iota Communications, Inc.2 ~~million~~of $29,356,891 for the ~~six~~ nine months ended ~~November~~February 3029, ~~2019~~2020. Additionally, the Company had negative working capital of ~~approximately~~ $~~17.5~~22,692,200 ~~million~~ and $~~23.6 million~~24,574,503 (As revised) at ~~November~~February 3029, ~~2019~~2020 and May 31, 2019, respectively, and has negative cash flows from operations of ~~approximately~~ $~~6.8 million~~9,903,126 for the ~~six~~nine months ended ~~November~~February 3029, ~~2019~~ 2020. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management expects to incur additional losses infor the foreseeable future and recognizes the need to raise capital to remain viable. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The Company’s plan, through potential acquisitions and the continued promotion of its services to existing and potential customers, is to generate sufficient revenues to cover its anticipated expenses. The Company believes it can raise additional capital to meet its short-term cash requirements, including an equity raise and debt funding from third parties.

Subsequent to ~~November~~February 3029, ~~2019~~2020, ~~and~~on inMarch ~~connection~~11, ~~with~~2020, the ~~September~~World ~~23,~~Health ~~2019~~Organization ~~private~~declared ~~placement~~the ~~offering,~~outbreak of COVID-19 a pandemic and it continues to impact the ~~Company~~United ~~received~~States ~~cash~~and ~~proceeds~~the rest of ~~$1,620,767,~~ ~~net~~the world. Our business, results of ~~$128~~operations,~~078~~ inand ~~equity~~financial ~~issuance~~condition ~~fees.~~may ~~The~~be ~~cumulative~~materially ~~equity~~adversely ~~raise~~impacted ~~under~~by ~~the~~a ~~September~~public 23health outbreak, ~~2019~~such ~~private~~as ~~placement~~the ~~offering~~COVID-19 ~~through~~pandemic, ~~the~~as ~~date~~it ofinterferes ~~this~~with ~~report~~our isability, $3or the ability of our employees,~~835~~ contractors,~~097~~ suppliers, ~~net~~and ofother ~~$289,926~~business inpartners ~~equity~~to ~~issuance~~perform ~~fees.~~our Inand ~~addition,~~their respective responsibilities and ~~subsequent~~obligations relative to the conduct of our ~~November~~business. ~~30,~~In ~~2019~~addition, ~~there~~the ~~were~~impact ~~48,158,215~~of ~~MHz~~the COVID-~~POPs~~19 ~~transferred~~pandemic toon the ~~Iota~~global ~~Partners,~~financial ~~from~~markets ~~Iota~~may ~~Networks,~~reduce ~~resulting~~our inability ~~the~~to ~~termination~~access ofcapital, ~~$11~~which could negatively impact our business,~~076,435~~ results of ~~revenue-based~~operations, and ~~notes.~~ability ~~The~~to ~~MHz-POPs~~continue ~~transferred represent~~as ~~14,447,465~~a LPgoing ~~Units~~concern. AsThough of the ~~date~~COVID-19 pandemic ofand ~~this~~the ~~report,~~measures ~~the Company~~taken ~~owns~~to 3%reduce ofits ~~the~~transmission, ~~outstanding~~such LPas the ~~Units~~imposition of ~~Iota~~social ~~Partners~~distancing ~~with~~and aorders to work-from-home ~~corresponding~~and ~~non~~shelter-~~controlling~~in-place, ~~interest~~have ofaltered ~~97%.~~our Onbusiness ~~December~~environment ~~20,~~and ~~2019,~~overall ~~the~~working ~~Company~~conditions, ~~entered~~we ~~into~~continue ato ~~secured~~believe ~~non-convertible~~that ~~note~~our ~~with~~talent ~~AIP~~and ~~totaling~~the ~~$1,400,000,~~strength ~~with~~of aour ~~maturity~~technologies ~~date~~will ofallow ~~June~~us ~~20,~~to ~~2020~~successfully weather a rapidly changing marketplace. ~~The principal~~However, onwe ~~the~~are ~~note~~unable ~~bears~~to accurately anpredict ~~interest~~the ~~rate~~full ofimpact ~~LIBOR~~that +COVID-19 ~~10%~~will ~~per~~have on the ~~annum,~~Company ~~which,~~due ~~along~~to ~~with~~numerous ~~required~~uncertainties, ~~monthly~~including ~~principal~~the ~~payments~~severity of ~~$50~~the pandemic,~~000,~~ isthe ~~payable~~duration ~~monthly.~~of Onthe ~~January 16~~outbreak, ~~2020,~~actions ~~the~~that ~~Company~~may be ~~entered~~taken ~~into~~by agovernmental ~~Promissory~~authorities, ~~Note~~and in the ~~principal~~impact ~~amount~~to the business of ~~$320,000~~our customers. The ~~principal~~Company ~~bears~~has ~~interest~~taken atsteps 3%to ~~per~~minimize ~~annum~~the impact ~~and~~of ~~has~~COVID-19 aon ~~maturity date~~its ofbusiness ~~February~~such 29as reduction of third-party spend, ~~2020.~~redeploying Asits anworkforce ~~inducement~~based toon ~~enter~~shifting ~~into~~needs of the business, ~~Note~~limiting travel and unnecessary expenses, and reducing ~~the~~discretionary capital expenditures where possible. The Company will continue ~~issue~~to ~~1,000,000~~evaluate ~~shares~~the nature and extent of the ~~Company’s common~~impact ~~stock~~ to ~~the~~its business, ~~buyer~~consolidated ~~(See~~results ~~Note~~of ~~21)~~operations, and financial condition.

~~Although no~~The ~~assurances~~Company believes it can becontinue ~~given~~to asraise additional capital to meet ~~the~~its ~~Company’s~~ongoing ~~ability~~cash requirements, including through equity raises and debt funding from third parties Subsequent to February 29, ~~deliver~~2020, onand ~~its~~in ~~revenue~~connection orwith ~~capital~~the ~~raise~~September ~~plans~~23, or2019 ~~that~~private placement ~~unforeseen~~offering, the Company received cash proceeds totaling ~~expenses~~$414,930, ~~may~~net ~~arise~~of $15,070 ~~management~~in ~~believes~~equity ~~that~~issuance fees. On April 10, 2020, the ~~revenue~~Company received a $1,000,000 cash deposit from an investor to be subscribed in a future security offering. In ~~generated~~September ~~from~~2020, ~~operations~~the ~~together~~Company ~~with~~commenced ~~potential~~a ~~equity~~new private placement offering for up to $15,000,000 of common stock and ~~debt~~accompanying ~~financing~~warrants or(together ~~other~~a ~~potential~~“Unit”) ~~financing~~at ~~will~~a ~~provide~~purchase ~~the~~price ~~necessary~~of ~~funding~~$0.12 ~~for~~per Unit. As of the date this report was issued, the Company has toreceived ~~continue~~cash asproceeds atotaling ~~going~~$6,647,000 ~~concern~~under this new offering. On May 4, 2020, the Company was granted a loan totaling ~~However~~$763,600, ~~management~~pursuant ~~cannot~~to ~~guarantee~~the ~~any~~Paycheck ~~potential~~Protection ~~equity~~Program or(the “PPP”) ~~debt~~under Division A, Title I of the CARES Act, ~~financing~~which ~~will~~was beenacted ~~available~~on March 27, 2020 and amended on ~~favorable~~June ~~terms~~5, 2020. The ~~Without~~PPP ~~raising additional~~loan ~~capital~~matures on May 4, ~~there~~2025, isand ~~substantial~~bears ~~doubt~~interest ~~about~~at ~~the~~a rate ~~Company’s~~of ~~ability~~1.0% toper ~~continue~~annum. asThe aPPP ~~going~~loan ~~concern~~may ~~through~~be forgiven in part or fully ~~January~~depending ~~21,~~on ~~2021~~the Company meeting certain PPP loan forgiveness guidelines. AsAny ~~such,~~unforgiven ~~management~~portion ~~does~~of ~~not~~the ~~believe~~PPP ~~they~~loan ~~have~~is payable ~~sufficient~~monthly ~~cash~~commencing ~~for~~September 124, 2021 (representing 10 months from the final day of the ~~date~~covered period of ~~this~~loan ~~report~~forgiveness). IfThe PPP ~~adequate~~loan ~~funds~~may ~~are~~be ~~not~~prepaid ~~available~~by onthe ~~acceptable~~Company ~~terms,~~at orany attime ~~all~~prior to maturity with no prepayment penalties. Subsequent to February 29, 2020, and through the ~~Company~~date ~~will~~this ~~need~~report towas ~~curtail~~issued, ~~operations~~the Company has received $2,723,855 orof ~~cease~~net ~~operations~~cash proceeds from the issuance of debt to third ~~completely~~parties.

Although no ~~NOTE~~assurance 2can -be ~~SUMMARY~~given OFas ~~SIGNIFICANT~~to ~~ACCOUNTING~~the ~~POLICIES~~Company’s ability to deliver on its capital raise plans, management believes that potential equity and debt financing will provide the necessary funding for the Company to continue as a going concern. However, management cannot guarantee any potential equity or debt financing will be available on favorable terms, or in the amounts required. Without raising additional capital, there is substantial doubt about the Company’s ability to continue as a going concern through April 30, 2022. As such, management does not believe the Company has sufficient cash for the next 12 months from the date this report was issued. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of Iota Communications, its three wholly owned subsidiaries, Iota Networks, ICS, and Iota Holdings, and Iota Partners, a variable interest entity controlled by the Company. Intercompany accounts and transactions have been eliminated in consolidation.

Reclassifications

The following reclassifications have been made to conform the prior period data to the current ~~presentation:~~period (i) for the fiscal year ended May 31, 2019, $110,451 was reclassed from Other Current Assets to Other Assets on the consolidated balance sheet, (ii) for the three and six months ended November 30, 2018, we renamed “Network related costs” on the consolidated statement of operations to “Network site expenses”, (iii) for the six months ended November 30, 2019, $38,719 was reclassed from Interest income to Interest expense, net, (iv) for the three and six months ended November 30, 2018, $403,508 and $782,523, respectively, was reclassed from Network site expense to Research and development, and (v) for the three and six months ended November 30, 2018, $(33,172) was reclassed from Other income (expense) to Selling, general and administrative.presentations:

Reclassification of $115,737 and $124,494 of net sales and $95,167 and $102,367 of cost of sales to other income and expenses classified within selling, general and administrative expense for the three and nine months ended February 28, 2019, respectively.

Reclassification of $280,130 and $1,062,653 of application server and software expense to research and development expense for the three and nine months ended February 28, 2019, respectively.

Reclassification of $1,441,120 of research and development expense to selling, general and administrative expense for the three and nine months ended February 28, 2019.

Reclassification of $17,386 and $69,708 of selling, general and administrative expense to cost of sales for the three and nine months ended February 28, 2019, respectively.

Reclassification of $125,676 of selling, general and administrative expense to net sales for the three and nine months ended February 28, 2019.

Reclassification of brokers fees and other interest payments totaling $91,329 and $262,645 from selling, general and administrative expense to interest expense, net for the three and nine months ended February 28, 2019, respectively.

Reclassification of interest income of $28 and $38,747 and interest expense of $1,458,729 and $1,674,770 to interest expense, net for the three and nine months ended February 28, 2019, respectively.

Reclassification of other income of $3,025 to interest expense, net for the three months ended February 28, 2019. Reclassification of other expense of $30,147 and interest expense, net of $9,075 to selling, general and administrative expense for the nine months ended February 28, 2019.

Reclassification of $110,451 of other assets from current to non-current at May 31, 2019.

Reclassification of $188,738 from deferred revenue to contract liabilities at May 31, 2019.

Reclassification of the $40,197 change in warranty reserve from the changes in operating assets and liabilities to adjustments to reconcile net loss to net cash used in operating activities category for the nine months ended February 28, 2019.

Reclassification of the $468,000 of common stock issued in connection with backstop agreement from the changes in operating assets and liabilities to adjustments to reconcile net loss to net cash used in operating activities category for the nine months ended February 28, 2019.

Condensed Consolidated Statement of Operations for the 3 months ended February 28, 2019	Previously Reported	Adjustments (See Note 3)	Reclassifications	Ref	As Revised
Net sales	$1,892,208	$(1,098,056)	$(241,413)	A, E	$552,739
Cost of sales	$1,028,134	$(107,391)	$(77,781)	A, D	$842,962
Application server and software	$280,130	$-	$(280,130)	B	$-
Research and development	$1,441,120	$-	$(1,160,990)	B, C	$280,130
Selling, general and administrative	$2,883,924	$(509,996)	$1,186,159	A, C, D, E, F	$3,560,087
Interest income	$28	$-	$(28)	G	$-
Interest expense	$(1,458,729)	$-	$1,458,729	G	$-
Other income (expense)	$3,025	$-	$(3,025)	H	$-
Interest expense, net	$-	$-	$(1,547,005)	F, G, H	$(1,547,005)
Net loss	$(13,603,661)	$(480,669)	$-		$(14,084,330)

Condensed Consolidated Statement of Operations for the 9 months ended February 28, 2019	Previously Reported	Adjustments (See Note 3)	Reclassifications	Ref	As Revised
Net sales	$2,685,252	$(1,005,435)	$(250,170)	A, E	$1,429,647
Cost of sales	$1,759,788	$(75,670)	$(32,659)	A, D	$1,651,459
Application server and software	$1,062,653	$-	$(1,062,653)	B	$-
Research and development	$2,722,831	$-	$(378,467)	B, C	$2,344,364
Selling, general and administrative	$12,489,929	$(509,996)	$1,000,186	A, C, D, E, F, H	$12,980,119
Interest income	$38,747	$-	$(38,747)	G	$-
Interest expense	$(1,674,770)	$-	$1,674,770	G	$-
Other income (expense)	$(30,147)	$-	$30,147	H	$-
Interest expense, net	$-	$-	$(1,889,593)	F, G, H	$(1,889,593)
Net loss	$(39,326,565)	$(419,769)	$-		$(39,746,334)

Condensed Consolidated Statement of Cash Flows for the 9 months ended February 28, 2019	Previously Reported	Adjustments (See Note 3)	Reclassifications	Ref	As Revised
Net loss	$(39,326,565)	$(419,769)	$-		$(39,746,334)
Adjustments to reconcile net loss to net cash used in operating activities	$19,083,653	$-	$508,197	K, L	$19,591,850
Changes in operating assets and liabilities	$2,556,789	$929,765	$(508,197)	K, L	$2,978,357
Net cash used in operating activities	$(17,686,123)	$509,996	$-		$(17,176,127)
Net cash used in investing activities	$(5,711,419)	$-	$-		$(5,711,419)
Net cash provided by financing activities	$23,216,205	$(509,996)	$-		$22,706,209
Net decrease in cash	$(181,337)	$-	$-		$(181,337)
Cash - beginning of period	$1,492,784	$-	$-		$1,492,784
Cash - end of period	$1,311,447	$-	$-		$1,311,447

Condensed Consolidated Balance Sheet as of May 31, 2019	Previously Reported	Adjustments (See Note 3)	Reclassifications	Ref	As Revised
Other current assets	$746,197	$-	$(110,451)	I	$635,746
Other assets	$88,495	$-	$110,451	I	$198,946
Deferred revenue	$188,738	$-	$(188,738)	J	$-
Contract liabilities	$228,893	$-	$188,738	J	$417,631

Use of Estimates

The preparation of financial statements in conformity with USU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity-based transactions, and disclosure of contingent liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of the accompanying unaudited ~~consolidated~~condensed ~~financial~~consolidated financial statements. Significant estimates include revenue recognition, the allowance for doubtful accounts, the useful life of property and equipment and intangible assets, valuation of long-lived assets, assessment for impairment, deferred tax ~~asset~~ assets and related valuation allowance, accounting for variable interest entities, lease accounting, and assumptions used in Black-Scholes-Merton, or (“BSM~~, valuation~~”) ~~methods, such as expected volatility, risk-free interest~~valuation ~~rate, and expected dividend rate~~method.

~~Noncontrolling Interests in Consolidated Financial Statements~~12

~~The~~ ~~Company follows Accounting Standards Codification (“ASC”) Topic 810~~Non-~~10-65,~~controlling ~~Noncontrolling~~ Interests in Consolidated Financial ~~Statements. This statement clarifies that a~~ noncontrolling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the unaudited consolidated financial statements. It also requires consolidated net income (loss) to include the amounts attributable to both the parent and the noncontrolling interest, with disclosure on the face of the consolidated statement of operations of the amounts attributed to the parent and to the noncontrolling interest. In accordance with ASC Topic 810-10-45-21, the losses attributable to the parent and the noncontrolling interest in subsidiary may exceed the parent’s interest in the subsidiary’s equity. The excess and any further losses attributable to the parent and the noncontrolling interest shall be attributable to those interests even if that attribution results in a deficit of noncontrolling interest balance. As of November 30, 2019 and May 31, 2019, the Company reflected a noncontrolling interest of $3,321,887 and $0 in connection with its variable interest entity, Iota Partners, as reflected in the accompanying November 30, 2019 unaudited consolidated balance sheet and May 31, 2019 consolidated balance sheet, respectively.Statements

The Company follows Accounting Standards Codification (“ASC”) Topic 810-10-65, Non-controlling Interests in Consolidated Financial Statements. This statement clarifies that a non-controlling (minority) interest in a subsidiary is an ownership interest in the entity that should be reported as equity in the unaudited condensed consolidated financial statements. It also requires consolidated net income (loss) to include the amounts attributable to both the parent and the non-controlling interest, with disclosure on the face of the consolidated statement of operations of the amounts attributed to the parent and to the non-controlling interest. In accordance with ASC Topic 810-10-45-21, the losses attributable to the parent and the non-controlling interest in subsidiary may exceed the parent’s interest in the subsidiary’s equity. The excess and any further losses attributable to the parent and the non-controlling interest will be attributable to those interests even if that attribution results in a deficit of non-controlling interest balance. As of February 29, 2020, and May 31, 2019, the Company reflected a non-controlling interest of $8,235,351 and $0 in connection with its variable interest entity, Iota Partners (See Note 16), as reflected in the accompanying February 29, 2020 unaudited condensed consolidated balance sheet and May 31, 2019 consolidated balance sheet, respectively.

Variable Interest Entities

The Company follows ASC Topic 810-10-15 guidance with respect to accounting for variable interest entities (“VIEs”). VIEs do not have sufficient equity at risk to finance their activities without additional subordinated financial support from other parties or whose equity investors lack any of the characteristics of a controlling financial interest. A variable interest is an investment or other interest that will absorb portions of a VIE’s expected losses, or receive portions of its expected residual returns, and are contractual, ownership, or pecuniary in nature and change with changes in the fair value of the entity’s net assets. A reporting entity is the primary beneficiary of a VIE and must consolidate it when that party has a variable interest, or combination of variable interests, ~~that~~which provide it with a controlling financial interest. A party is deemed to have a controlling financial interest if it meets both of the power and losses/benefits criteria. The power criterion is the ability to direct the activities of the VIE that most significantly impact its economic performance. The losses/benefits criterion is the obligation to absorb losses from, or right to receive benefits from, the VIE that could potentially be significant to the VIE. The VIE model requires an ongoing reconsideration of whether a reporting entity is the primary beneficiary of the VIE due to changes in facts and circumstances.

~~The~~As of February 29, ~~Company~~2020, ~~currently~~the Company consolidates one VIE, Iota Partners, as(See ofNote ~~November 30, 2019~~16). The Company is the primary beneficiary due to its ability to direct the activities of Iota Partners through its wholly owned subsidiary, Iota Holdings.

Revenue Recognition

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which the Company adopted beginning June 1, 2016. The Company did not record a retrospective adjustment upon adoption, and instead opted to apply the full retrospective method for all customer contracts.

As part of ASC Topic 606, the Company adopted several practical expedients including that the Company has determined that it need not adjust the promised amount of consideration for the effects of a significant financing component since the Company expects, at contract inception, that the period between when the Company transfers a promised service to the customer and when the customer pays for that service will be one year or less.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Amounts received prior to being earned are recognized as ~~deferred revenue~~contract liabilities on the accompanying unaudited condensed consolidated ~~balance~~ balance sheets.

~~For purposes~~Activities ~~of this presentation, activities~~ related to the Company’s wireless ~~network~~communication ~~carrier~~ and application ~~technology~~ technology segment and BrightAI subscriptions are classified under Iota Networks, activities related to ~~the~~ ~~Company’s Energy as a Service “EaaS” subscriptions and~~ solar energy, LED lighting, and HVAC implementation services are classified under ICS, ~~activities~~ activities related to the parent company are classified under Iota Communications, and activities related to the spectrum licenses owned by Iota Partners that Iota Networks uses to operate its networsk ~~networks~~ are classified under Iota Holdings beginning with the formation date of Iota Partners.

Iota Networks

Iota ~~Networks~~ Networks derives revenues in part from FCC license services provided to customers who have already obtained ana FCC spectrum license from other service providers. Additionally, owners of granted, but not yet operational, licenses (termed “FCC ~~Construction~~ Construction Permits” or “Permits”), can pay an upfront fee to Iota Networks to construct the facilities for the customer’s licenses and activate their licenses operationally, thus converting the customer’s ownership of the FCC Construction Permits into a fully- constructed license (“FCC License Authorization”). Once the construction certification is obtained from the FCC, Iota Networks may enter into an agreement with the customer to lease the spectrum. Once perfected in this manner, Iota Networks charges the customer a recurring annual license and equipment administration fee of 10% of the original payment amount. Collectively, these services constitute Iota Networks’ Network Hosting Services. In addition, owners of already perfected licenses can pay an upfront fee ~~and~~plus ~~Iota Networks charges~~ an annual renewal fee of 10% of the upfront application ~~fee~~ fee for maintaining the customer’s license and equipment and allowing the customer access to its license outside of the nationwide network. ~~For the purposes of clarification, these spectrum licenses are not part of the Iota Partners spectrum pool.~~

11 The Company has determined there are three performance obligations related to the Network Hosting Services agreements. The first performance obligation arises from the services related to obtaining FCC license perfection, the second performance obligation arises from maintaining the license in compliance with regulatory affairs, and the third performance obligation arises from the services related to acting as a future sales or lease agent for the customer. Given the nature of the service in the first performance obligation, Iota Networks recognizes revenue from the upfront fees at the point in time that the license is perfected. Iota Networks recognizes the annual fee revenue related to the second performance obligation ratably over the contract term as the services are transferred to and performed for the customer. Pursuant to its Network Hosting Services agreements, Iota Networks also derives revenues from annual renewal fees from its customers for the purpose of covering costs associated with maintaining and operating the customer licenses. Annual renewal fee revenue is recognized ratably over the renewal period as the services are performed. The third performance obligation is for future possible services and is recognized when and if the performance obligation is satisfied.

~~The~~Iota ~~Company~~Networks has ~~determined~~committed ~~there~~to ~~are~~provide ~~three~~future performance obligations ~~related~~ to certain ~~the~~parties, ~~Network~~including ~~Hosting~~employees ~~Services~~and ~~agreements. The~~former ~~first performance~~employees, ~~obligation~~at ~~arises~~no cost. ~~from~~These ~~the~~performance ~~services~~obligations ~~related~~include to both obtaining FCC license perfection; ~~the~~and ~~second performance obligation arises from~~ maintaining the license in ~~compliance~~accordance with ~~regulatory~~ regulatory affairs, ~~and~~thereafter. ~~the~~The ~~third~~estimated ~~performance~~remaining ~~obligation arises from the~~unfulfilled ~~services~~commitment ~~related~~based toupon ~~acting~~standalone asselling aprices ~~future~~totals ~~sales or lease agent for the~~$3,794,310 ~~customer.~~at ~~Given~~February ~~the~~29, ~~nature~~2020 ofincluding ~~the service in the first performance obligation~~$543,807 ~~Iota~~to ~~Networks~~employees ~~recognizes~~and ~~revenue from the upfront fees~~former atemployees ~~the~~and ~~point~~$3,250,503 into ~~time~~other ~~that the license is perfected~~parties. ~~Iota~~ ~~Networks~~During ~~recognizes~~ the ~~annual~~nine ~~fee revenue related to the~~months ~~second~~ended ~~performance~~February ~~obligation~~29, ~~ratably~~2020, ~~over~~ the ~~contract~~Company ~~term~~paid as$180,420 ~~the services~~of ~~are~~FCC ~~transferred to and performed for the~~license ~~customer. Pursuant~~application ~~to its Network Hosting Services agreements, Iota Networks also derives revenues from annual renewal~~ fees ~~from its customers~~ for ~~the~~licenses ~~purpose~~granted ofto ~~covering~~related ~~costs~~parties ~~associated with maintaining~~ and ~~operating~~completed the ~~customer~~license ~~licenses.~~application ~~Annual~~and ~~renewal~~construction ~~fee~~process ~~revenue~~for isthe ~~recognized~~related ~~ratably~~parties ~~over~~at ~~the~~no ~~renewal~~cost. ~~period~~Management asestimates ~~the~~that ~~services are~~the ~~performed.~~incremental ~~The~~direct ~~third~~costs ~~performance~~to ~~obligation~~fulfill isthese ~~for~~performance ~~future possible~~obligations ~~services~~after ~~and~~licenses isare ~~recognized~~acquired ~~when~~ and iffully ~~the~~constructed ~~performance obligation~~are ~~is satisfied~~immaterial.

Iota Networks also derives revenue from subscriptions to its cloud-based data and analytics platform, BrightAI. The platform receives data from energy, environmental, and mechanical sensors and organizes, stores, and analyzes this data to provide insights to drive energy efficiency and create optimization plans for commercial facility managers. BrightAI data and analytics service offerings are sold on a subscription basis with revenue generally recognized ratably over the contract term commencing with the date the data and analytics service is made available to customers. These contracts generally have a single performance obligation which is not separately identifiable from other promises in the contracts and is, therefore, not distinct. For certain customer contracts, the Company may separately charge for equipment and optional installation and other professional services. These additional performance obligations are recognized at the point in time that the equipment is accepted by the customer or services are provided to the customer.

Iota Commercial Solutions

ICS ~~derives~~ derives revenues through ~~both Energy as a Service (“EaaS”) recurring subscriptions and~~ solar energy, LED lighting, and HVAC implementation services. Revenues ~~for EaaS offerings sold on a subscription basis are generally recognized ratably over the contract term commencing with the date the service is made available to customers. Revenues~~ from the sale of hardware ~~products~~ products are generally recognized upon delivery of the hardware product to the customer provided all other revenue recognition criteria are satisfied. Sales of services are recognized as the performance obligations are fulfilled, and the customer takes risk of ownership and assumes the risk of loss. Service revenue is recognized as the service is completed under ASC ~~Topic~~ Topic 606.

Most ICS customer contracts have a single performance obligation which is not separately identifiable from other promises in the contracts and is, therefore is, not distinct. Payment is generally due within 30 to 45 days of invoicing. There is no financing or variable component. ICS serves as the principal in its customer contracts.14

~~ICS~~Most ~~recognizes~~ICS ~~solar panel and LED lighting system design, construction, and installation services revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the~~ customer. ~~ICS has determined that individual~~ contracts athave a single ~~location are generally accounted for as a single~~ performance obligation ~~and~~which is ~~are~~ not ~~segmented between~~separately ~~types~~identifiable offrom ~~services~~other ~~provided~~promises onin ~~these~~the contracts~~. ICS~~ ~~recognizes~~and ~~revenue~~is, ~~on these contracts using the cost to cost percentage of completion method~~therefore, ~~based~~not ~~primarily on contract costs incurred to date compared to total estimated contract costs~~distinct. ~~The percentage~~Payment ~~of completion method (an input method)~~ is ~~the~~generally ~~most accurate~~due ~~depiction~~within ~~of ICS’s performance because it directly~~30 ~~measures~~to ~~the~~45 ~~value~~days of ~~the~~invoicing. ~~services~~There ~~transferred to the customer, and the consideration that~~ is ~~required~~no tofinancing beor ~~paid by the customer based~~variable ~~on the contract~~component.

~~Changes~~ICS torecognizes ~~total~~solar ~~estimated~~panel ~~contract~~and ~~costs~~LED orlighting ~~losses~~system design, construction, ifand ~~any~~installation services revenue over time, as performance obligations are ~~recognized in~~satisfied, due to the ~~period~~continuous transfer inof ~~which~~control ~~they~~to ~~are~~the ~~determined~~customer. asICS ~~assessed~~has atdetermined ~~the~~that ~~contract~~individual ~~level.~~contracts ~~Pre-contract~~at ~~costs~~a single location are ~~expensed~~generally accounted for as ~~incurred~~a ~~unless they~~single performance obligation and are ~~expected~~not tosegmented between betypes ~~recovered~~of ~~from~~services ~~the~~provided ~~client~~on these contracts. ~~Customer~~ICS ~~payments~~recognizes revenue on ~~solar~~these ~~and~~contracts ~~LED~~using ~~lighting~~the ~~system~~cost-to-cost percentage ~~contracts~~of ~~are~~completion ~~typically~~method, based primarily on contract costs ~~billed~~incurred ~~upon~~to ~~the~~date ~~successful~~compared to total estimated contract costs. The percentage of completion method (an input method) is the most accurate depiction of ~~milestones~~ICS’s ~~written~~performance ~~into~~because it directly measures the ~~contract~~value of the services transferred to the customer, and the ~~are~~consideration ~~due~~that ~~within~~is 30required to 45be ~~days~~paid ofby ~~billing,~~the ~~depending~~customer based on the contract.

12 Changes to total estimated contract costs or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the customer. Customer payments on solar and LED lighting system contracts are typically billed upon the successful completion of milestones written into the contract and are due within 30 to 45 days of billing, depending on the contract.

Contract assets represent revenue recognized in excess of amounts billed and include unbilled receivables (typically for cost reimbursable contracts). Contract liabilities represent amounts ~~billed~~paid ~~to clients~~by clients in excess of revenue recognized to date. ICS has recorded a ~~loss~~ loss reserve on contract assets of $0 as of ~~November~~February 3029, ~~2019~~2020 and $71,624 as of May 31, 2019, which is included in contract assets on the unaudited condensed consolidated balance sheets.

The nature of ICS’s solar panel and LED lighting system design, construction, and installation services contracts gives rise to several types of variable consideration, including claims and unpriced change orders. ICS recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. ICS estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the revenue amount. Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in ICS’s performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred. Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable, and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described above for claims accounting have been satisfied.

Change orders are modifications of an original contract. Either ICS or its ~~customer~~ customer may initiate change orders. They may include changes in specifications or design, manner of performance, facilities, equipment, materials, sites, and period of completion of the work. ICS evaluates when a change order is probable based upon its experience in negotiating change orders, the customer’s written approval of such changes, or separate documentation of change order costs that are identifiable. Change orders may take time to be formally documented and terms of such change orders are agreed with the customer before the work is performed. Sometimes circumstances require that work progresses before an agreement is reached with the customer. If ICS is having difficulties in renegotiating the change order, it will stop work, record all costs incurred to date, and determine, on a project by project basis, the appropriate final revenue recognition.

~~ICS~~Factors ~~generally~~considered ~~provides~~in ~~limited~~determining ~~warranties~~whether ~~for~~revenue ~~work~~associated ~~performed~~with ~~under its~~claims ~~solar~~(including change orders in dispute and ~~LED~~unapproved ~~lighting~~change ~~system~~orders ~~contracts.~~in regard ~~The~~to ~~warranty~~both ~~periods~~scope and price) should be recognized include the ~~typically~~following: ~~extend~~(a) ~~for~~the contract or other evidence provides a ~~limited~~legal basis ~~duration~~for ~~following~~the ~~substantial~~claim, (b) additional costs were caused by ~~completion~~circumstances that were unforeseen at the contract date and not the result of deficiencies in ICS’s performance, (c) claim-related costs are identifiable and considered reasonable in view of the work onperformed, aand ~~project~~(d) evidence supporting the claim is objective and verifiable. ~~ICS~~If ~~does~~the ~~not~~requirements ~~charge~~for recognizing ~~customers~~revenue for claims or ~~sell~~unapproved ~~warranties~~change ~~separately,~~orders ~~and~~are ~~as such~~met, revenue is ~~warranties~~recorded ~~are~~only ~~not~~when ~~considered~~the acosts ~~separate~~associated ~~performance~~with ~~obligation.~~the claims or ~~Most~~unapproved ~~warranties~~change ~~are~~orders ~~guaranteed~~have bybeen ~~subcontractors~~incurred. ~~ICS~~Back ~~has~~charges to suppliers or subcontractors are recognized as a ~~warranty~~reduction ~~reserve~~ of ~~approximately~~cost when ~~$150,000~~it asis determined that recovery of ~~November~~ ~~30,~~such ~~2019~~cost is probable, and the ~~approximately~~amounts ~~$314,000~~can asbe ofreliably ~~May~~estimated. ~~31,~~Disputed back charges are ~~2019~~recognized when the same requirements described above for claims accounting have been satisfied.

ICS’s remaining unsatisfied performance obligations as of November 30, 2019 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. ICS had $1,455,771 in remaining unsatisfied performance obligations as of November 30, 2019. ICS expects to satisfy its remaining unsatisfied performance obligations as of November 30, 2019 over the following twelve months. Although the remaining unsatisfied performance obligations reflects business that is considered to be firm; cancellations, deferrals, or scope adjustments may occur. The remaining unsatisfied performance obligations is adjusted to reflect any known project cancellations, revisions to project scope and cost, and project deferrals, as appropriate.15

13 ICS generally provides limited warranties for work performed under its solar and LED lighting system contracts. The warranty periods typically extend for a limited duration following substantial completion of ICS’s work on a project. ICS does not charge customers for or sell warranties separately, and as such, warranties are not considered a separate performance obligation. Most warranties are guaranteed by subcontractors. ICS has recognized a warranty reserve of $106,600 as of February 29, 2020, and $313,881 as of May 31, 2019.

ICS’s remaining unsatisfied performance obligations as of February 29, 2020 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. ICS had approximately $855,528 in remaining unsatisfied performance obligations as of February 29, 2020. ICS expects to satisfy its remaining unsatisfied performance obligations as of February 29, 2020 over the following nine months. Although the remaining unsatisfied performance obligations reflects business that is considered to be firm; cancellations, deferrals, or scope adjustments may occur. The remaining unsatisfied performance obligations is adjusted to reflect any known project cancellations, revisions to project scope and cost, and project deferrals, as appropriate.

Disaggregated Revenues

Revenue consists of the following by service offering for the ~~six~~three months ended ~~November~~February 3029, ~~2019~~2020:

Solar Energy, LED Lighting, and HVAC Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(a)	Total
Solar Energy, LED Lighting, and HVAC
$833,182	$156,506	$25,878	$1,015,566
Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(b)	Total
$585,252	$96,422	$9,275	$690,949

Revenue consists of the following by service offering for the ~~six~~three months ended ~~November~~February 3028, ~~2018~~2019 (As revised):

Solar Energy, LED Lighting, and HVAC Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(a)	Total
Solar Energy, LED Lighting, and HVAC
$775,500	$104,913	$5,252	$885,665
Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(b)	Total
$484,554	$68,185	$-	$552,739

Revenue consists of the following by service offering for the ~~three~~nine months ended ~~November~~February 3029, ~~2019~~2020:

Solar Energy, LED Lighting, and HVAC Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(a)	Total
Solar Energy, LED Lighting, and HVAC
$117,910	$129,067	$10,628	$257,605
Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(b)	Total
$1,419,055	$142,854	$34,524	$1,596,433

Revenue consists of the following by service offering for the ~~three~~nine months ended ~~November~~February 3028, ~~2018~~2019 (As revised):

Solar Energy, LED Lighting, and HVAC Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(a)	Total
Solar Energy, LED Lighting, and HVAC
$772,570	$58,047	$5,252	$835,869
Implementation Service Revenues(a)	Network Hosting Services(b)	Subscription Revenues(b)	Total
$1,248,367	$176,280	$5,000	$1,429,647

(a) ~~Included in Iota Commercial Solutions segment~~

~~(b)~~ Included in Iota Commercial ~~Networks~~Solutions segment

(b)

Included in Iota Networks segment

Cash

The Company considers all highly liquid short-term instruments that are purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents as of ~~November~~February 3029, ~~2019~~2020 and May 31, 2019.

Accounts Receivable

Accounts receivable are reported at realizable value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded. The Company provides for allowances for doubtful receivables based on management’s estimate of uncollectible amounts considering age, collection history, and any other factors considered appropriate. The Company writes off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. As of ~~November~~February 3029, ~~2019~~2020, and May 31, 2019, the Company’s allowance for doubtful accounts was $1939,~~007,036~~474 and $810,132, respectively.

Other receivables are included in other assets on the balance sheet and include amounts due under the various Iota Networks programs including Network Hosting, Spectrum Partners, and Reservation Programs services (See Note 10).

Contract Assets

The Company records capitalized job costs on the balance sheet and expenses the costs upon completion of related jobs based on when revenue is earned. At ~~November~~February 3029, ~~2019~~2020 and May 31, 2019, the Company had $~~171~~120,~~492~~297 and $435,788, respectively, of contract assets.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, generally three to ~~fifteen~~ten years. Expenditures that enhance ~~the~~ the useful lives of the assets are capitalized and depreciated.

All network site setup costs are capitalized as construction-in-progress ("CIP"), as incurred. AsOnce ~~tower~~construction ~~and~~on ~~billboard~~the ~~sites~~tower ~~become~~or ~~operational~~billboard ~~and~~site ~~are~~is ~~placed in service as radios are installed~~completed, the Company transfers site specific CIP to capitalized ~~tower~~network sites and ~~billboard site~~ equipment ~~costs~~ and begins to depreciate those assets on a straight-line basis over ten years. Network ~~equipment~~radios ~~costs for hardware~~ are ~~capitalized, as incurred, and~~ depreciated on a straight-line basis, typically over ~~five~~three to ten years. ~~Furniture,~~ ~~fixtures,~~Computer hardware and ~~equipment~~software costs are capitalized at cost and depreciated on a straight-line basis over ~~useful~~three ~~lives~~to ~~ranging from~~ five ~~to seven~~ years. ~~Software~~Furniture ~~costs~~and ~~are~~fixtures are capitalized at cost and depreciated on a straight-line basis over useful ~~three~~lives toranging from five to seven years.

Maintenance and repairs are charged to expense as incurred. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation will be removed from the accounts and the resulting gain or loss, if any, will be reflected in operations.

Software Development Costs

The Company is developing application platforms that will utilize the spectrum network and other leased network availability, to provide solutions for customers. The Company follows the guidance of ASC Topic 985-20, Costs of ~~software~~Software to be ~~sold~~Sold, ~~leased~~Leased, or ~~marketed~~Marketed, which calls for the expense of costs until technical feasibility is established. Any costs the Company had incurred during planning, designing, coding, and testing activities that are necessary to establish that the product can be produced to meet its design specifications are expensed as incurred. Once technical feasibility of the product has been established, the Company capitalizes the costs until the product is available for general release to customers. The capitalized costs are amortized on a product-by-product basis over the estimated economic life of the product. When conditions indicate a potential impairment, the Company compares the unamortized capitalized costs to the estimated net realizable value, and if the unamortized costs are greater than the expected future revenues, the excess is written down to the net realizable value.

On November 15, 2019, the Company entered into an asset purchase agreement with Link Labs, Inc. to purchase certain assets, including and not limited to, all work product, know-how, work in process, developments, and deliverables related to Iota Link and the Conductor system, as well as certain software, including source code that is used in connection with the development and operation of dedicated network technology using FCC Parts 22, 24, 90 and 101 spectrum for bi-directional wireless data transmission including the Conductor platform modified for provisioning and managing the Iota Link system and related intellectual property (See Note 3).17

AsOn November 15, 2019, the Company entered into an asset purchase agreement with Link Labs, Inc. to purchase certain assets, including and not limited to, all work product, know-how, work in process, developments, and deliverables related to Iota Link and the Conductor system, as well as certain software, including source code that is used in connection with the development and operation of ~~November~~dedicated 30network technology using FCC Parts 22, 24, 90 and 101 ~~2019~~spectrum for bi-directional wireless data transmission including the Conductor platform modified for provisioning and managing the Iota Link system and related intellectual property (See Note 4). As of February 29, 2020, Iota Link and the Conductor system have reached technological feasibility, and as such, appropriate costs have been capitalized.

15 As of February 29, 2020, there were no other software or related products that have reached technical feasibility. For the three and nine months ended February 29, 2020 and February 28, 2019, approximately $1,138 and $4,426 and $280,130 and $1,062,653, respectively, in software development costs have been expensed within research and development costs in the unaudited condensed consolidated statements of operations.

As of November 30, 2019, there were no other software or related products that have reached technical feasibility. For the three and six months ending November 30, 2019 and 2018, approximately $1,144 and $3,288 and $403,509 and $782,524, respectively, in software development costs have been expensed within research and development costs in the statement of operations.

Impairment of Long-Lived Assets and Right of Use Asset

The Company reviews long-lived assets, including definite-lived intangible assets and right of use (“ROU”) lease assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down first, followed by other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. For the six months ending November 30, 2019 and 2018, there were no impairment losses recognized for long-lived assets.

Leases

Leases in which the Company is the lessee include leases of office facilities, office equipment, and tower and billboard space. All of the Company’s leases are classified as operating leases.

The Company is obligated under certain lease agreements for office space and office equipment with lease terms expiring ~~on various~~in ~~dates from 2019 through~~ 2022.

The Company leases tower and billboard space in various geographic locations across the United States, ~~upon~~where ~~and through which~~ its spectrum network is being developed. Generally, these leases are for an initial five- year term with annual lease rate escalations of approximately 3.0%. With limited exceptions, the leases provide anywhere from one to as many as five, 5-year options to extend. Most of these leases require the Company to restore the towers and billboards to their original pre-lease condition, which creates asset retirement obligations (~~see~~See Note 1314).

In accordance with ASC Topic 842, Leases, and upon its adoption by the Company on June 1, 2019, the Company recognized right of use assets and corresponding lease liabilities on its unaudited condensed consolidated balance sheet for its operating lease agreements. The Company elected the package of practical expedients for its operating leases, which permits the Company not to reassess under the new standard the prior conclusions about lease identification, lease classification, and initial direct costs. See Note 1719 - Leases for further discussion, including the impact onof ~~the~~adoption on the Company’s unaudited condensed consolidated financial statements and required lease disclosures.

Intangible Assets

The Company records its intangible assets at cost in accordance with ASC Topic 350, Intangibles – Goodwill and Other. ~~Definite~~ Definite-lived intangible assets are amortized over the estimated life using the straight-line method, which is determined by identifying the period over which the cash flows from the asset are expected to be generated. ~~During~~For the ~~six~~nine months ended ~~November~~February 3029, 2020 and February 28, 2019, the Company had no impairment losses relating to its intangible assets (See Note 67).

Impairment of Long-Lived Assets

The Company reviews long-lived assets, including definite-lived intangible assets, property and equipment, and right of use (“ROU”) assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate to the carrying amount. If the operation is determined to be unable to recover the carrying amount of its assets, then these assets are written down to fair value. Fair value is determined based on discounted cash flows or appraised values, depending on the nature of the assets. For the three and nine months ended February 29, 2020, the Company recognized impairment losses of $1,320,509 and $12,093,872, respectively, related to long-lived assets. For the three and nine months ended February 28, 2019, there were no impairment losses recognized for long-lived assets.

Convertible Instruments

The ~~Company~~ Company evaluates and accounts for conversion options embedded in ~~its~~ its convertible instruments in accordance with accounting standards ~~for~~ “for Accounting for Derivative Instruments and Hedging Activities”, ASC Topic 815.

ASC Topic 815 generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable GAAP with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument”.

16 The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features”, as those professional standards pertain to “Certain Convertible Instruments”. Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Original issue discounts (“OID”) under these arrangements are amortized over the term of the related debt to their earliest date of redemption.

~~The Company~~ASC ~~accounts~~Topic ~~for~~815-40 ~~convertible~~provides ~~instruments (when it has determined~~ that ~~the~~, ~~embedded~~among ~~conversion~~other ~~options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features~~things,” asgenerally ~~those~~if ~~professional standards pertain~~an toevent ~~“Certain~~is ~~Convertible~~not ~~Instruments.”~~within ~~Accordingly,~~ the ~~Company~~ ~~records,~~entity’s ~~when necessary~~control, ~~discounts~~or tocould ~~convertible notes for~~require ~~the~~net ~~intrinsic~~cash ~~value~~settlement, ofthen ~~conversion options embedded in debt instruments based upon~~ the ~~differences~~contract ~~between~~will ~~the~~be ~~fair~~classified ~~value~~as ofan ~~the~~asset ~~underlying~~or ~~common~~a ~~stock at the commitment date of the note transaction and the effective conversion price embedded in the note~~liability. ~~Original issue discounts (“OID”) under these arrangements are amortized over the term of the related debt to their earliest date of redemption.~~

ASC Topic 815-40 provides that, among other things, generally if an event is not within the entity’s control, or could require net cash settlement, then the contract shall be classified as an asset or a liability.

Contingent Liability

On November 15, 2019, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with Link Labs, Inc. Pursuant to the Purchase Agreement, the Company will acquire certain assets from Link Labs (the “Purchased Assets”) in a series of three closings on the Purchase Agreement terms and subject to the conditions set forth therein, for consideration totaling $6,765,335 in cash and stock. Through November 30, 2019, the first of these closings had occurred for consideration totaling $3,765,335. The contingent obligation for the second and third closings, totaling $3,000,000, has been accrued on the Company’s unaudited consolidated balance sheet at November 30, 2019 as a contingent liability (See Note 3).

Asset Retirement Obligations

The Company accounts for asset retirement obligations in accordance with authoritative guidance that requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. An asset retirement obligation is defined as a legal obligation associated with the retirement of tangible long-lived assets in which the timing and/or method of settlement may or may not be conditional on a future event that may or may not be within the control of the Company. When the liability is initially recorded, the Company capitalizes the estimated cost of retiring the asset as part of the carrying amount of the related long-lived asset. The Company estimates the fair value of its asset retirement obligations based on the discounting of expected cash flows using various estimates, assumptions, and judgments regarding certain factors such as the existence of a legal obligation for an asset retirement obligation; estimated amounts and timing of settlements; the credit-adjusted risk-free rate to be used; and inflation rates.

The ~~asset~~ asset retirement obligations of the Company are associated with ~~leases~~ leases for its tower and billboard site locations. For purposes of estimating its asset retirement obligations, the Company assumes ~~all~~ lease extension options will be exercised for the tower and billboard site locations, consistent with terms used for estimating the related lease liability in accordance with ASC Topic 842, consequently resulting in measurement periods of 5 - 3015 years. Accretion associated with asset retirement costs is recognized over the ~~full~~expected term of the respective leases, including reasonably certain extension options.

Deferred Rent

The Company recognizes escalating rent provisions on a straight-line basis over the corresponding lease term. Prior to its adoption of ASC Topic 842, and for leases associated with its tower and billboard site locations, the Company assumed all lease extension options would be exercised resulting in lease terms of 5 – 30 years. For leases associated with office space, the Company assumed the initial lease term, generally 5 years. A deferred rent liability is recognized for the difference between actual scheduled lease payments and the rent expense determined on a straight-line basis. On June 1, 2019, the Company adopted ASC Topic 842 – Leases, and, as such, included all unamortized deferred rent as a component of the ~~ROU~~right of use asset for the Company’s tower, billboard, and long-term office ~~lease~~leases.

Research & Development Costs

In accordance with ASC Topic 730-10-25, research and development costs are charged to expense when incurred. Total research and development costs were $1,~~144~~138 and $34,~~288~~426 and $~~671~~280,~~544~~130 ~~and~~(As revised) and $2,~~064~~344,~~234~~364 (As revised) for the three and ~~six~~nine months ended February ~~November 30~~29, ~~2019~~2020 and ~~2018~~ February 28, 2019, respectively.

License Service Costs

The Company incurs costs related to providing license services to its Spectrum Partners. These costs include frequency coordination fees and FCC filing fees. Per the Company’s accounting policy, these costs are expensed as incurred and totaled $727,~~890~~040 and $1,~~029~~036,~~670~~710 and $~~285~~94,~~840~~710 and $~~405~~499,~~140~~850 for the three and ~~six~~nine months ended ~~November~~February 3029, ~~2019~~2020 and ~~2018~~February 28, 2019, respectively, and are recorded within selling, general, and administrative expenses on the unaudited condensed consolidated statements of operations.

17 Advertising and Marketing Costs

The Company expenses advertising and marketing costs as they are incurred. Advertising and ~~Marketing~~marketing ~~Costs~~costs totaled $132,715 and $402,983 ~~Deferred~~and ~~Finance~~$7,914 (As revised) and $209,137 (As revised) for the ~~Charges~~three and nine months ended February 29, 2020 and February 28, 2019, respectively.

~~The~~ ~~Company~~Deferred ~~expenses~~Finance advertising and marketing costs as they are incurred. Advertising and marketing expenses were $81,570 and $250,268 and $84,77 and $201,223 for the three and six months ended November 30, 2019 and 2018, respectively.Charges

Broker fees associated with the administration of the Spectrum Partners ~~program~~Program are capitalized as deferred financing costs offset against the revenue-based ~~loans~~notes. These financing costs are amortized over the initial five- year term of the Spectrum Partners ~~program~~Program. During ~~Amortization~~the three months ended November 30, 2019, deferred finance charges totaling $518,146 were written off in connection with the extinguishment of ~~previously~~Solutions Pool revenue-based notes (See Note 11) and are included as a component of loss on extinguishment of debt in the unaudited condensed consolidated statements of operations. Amortization of deferred financing costs ~~was~~is recorded in interest expense, net on the unaudited condensed consolidated statements of operations, and totaled $9426,~~671~~095 and $~~148~~365,~~586~~528 and $53,915 and $~~104~~158,~~601~~515 for the three and ~~six~~nine months ended ~~November~~February 3029, ~~2019~~2020 and February ~~2018~~28, ~~respectively~~2019, ~~and~~respectively. ~~are~~The ~~recorded~~amortization inexpense for the ~~selling~~nine months ended February 29, ~~general~~2020 ~~and~~includes ~~administrative~~$190,847 ~~expenses~~of accelerated onamortization resulting from a change in the ~~unaudited~~estimated ~~condensed~~life ~~consolidated~~of ~~statements~~the ofremaining ~~operations~~Spectrum Partners Program revenue-based notes.

Segment Policy

The Company’s reportable segments include Iota Networks, Iota Commercial Solutions, Iota Communications, and Iota Holdings, and are distinguished by types of service, customers, and methods used to provide services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker. The Company evaluates performance based primarily on income (loss) from operations.

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). This fair value measurement framework applies at both initial and subsequent measurement.

The three levels of the fair value hierarchy defined by ASC Topic 820 are as follows:

●

Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities, and listed equities.

●

Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options, and collars.

●

Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.

Fair Value of Financial Instruments

The carrying value of cash, accounts receivable, accounts payable and accrued expenses, and payroll liabilities, approximate their fair values based on the short-term maturity of these instruments. The carrying amount of notes payable and convertible ~~debentures~~notes payable, approximates the estimated fair value for these financial instruments as management believes that such notes constitute substantially all the Company’s debt, and interest payable on the notes approximates the Company’s current incremental borrowing rate. The carrying amount of lease liabilities approximates the estimated fair value for these financial instruments as management believes that such liabilities ~~approximates~~approximate the present value of the lease obligation owed over ~~the~~ the reasonably certain term of the lease.

Net ~~Income (~~Loss) Per Common Share

Net ~~income (~~loss) per share is computed by dividing net ~~income (~~loss) by the weighted average number of shares of common stock outstanding during the year. All ~~vested~~ outstanding options and warrants are considered potential common stock. All outstanding convertible securities are considered common stock at the beginning of the period or at the time of issuance, if later, pursuant to the if-converted method. The dilutive effect, if any, of stock options and warrants are calculated using the treasury stock method. Since the effect of common stock equivalents is anti-dilutive with respect to losses, the convertible securities, options and warrants have also been excluded from the Company’s computation of net loss per common share for the six month period ended November 30, 2019 and the three and six month period ended November 30, 2018. For the three month period ended November 30, 2019, the if-converted method was used for the convertible securities to calculate the dilutive net income per common share.

	Three Months Ended
	November 30, 2019	November 30, 2018
Numerator:
Numerator for basic and diluted earnings (loss) per share:
Net income (loss)	$6,850,277	$(17,118,897)
Net loss attributable to noncontrolling interest	(24,577)	-
Net income (loss) applicable to Iota Communications, Inc.	$6,874,854	$(17,118,897)
Denominator:
Denominator for basic earnings (loss) per share – weighted average shares outstanding	230,721,378	161,245,806
Warrants converted to common stock	961,738	-
Shares issuable on conversion of debt	2,368,917	-
Denominator for diluted earnings (loss) per share – weighted average and assumed conversion	234,052,033	161,245,806
Net income (loss) per share:
Basic net income (loss) per share	$0.03	$(0.11)
Diluted net income (loss) per share	$0.03	$(0.11)

~~The~~Since ~~following~~the ~~table~~effect ~~summarizes~~of common stock equivalents is anti-dilutive with respect to losses, the convertible securities, ~~that~~options, ~~were~~and warrants have been excluded from the ~~diluted~~Company’s computation of net loss per common share ~~calculation~~for ~~because~~ the ~~effect~~three ofand ~~including~~nine month period ended ~~these~~February ~~potential~~29, ~~shares~~2020 ~~was~~and ~~anti-~~February 28, 2019. The following table summarizes the potentially dilutive ~~due~~securities tothat would be included in a diluted per share calculation if the Company’s were in a net ~~loss~~income position ~~even~~since ~~though~~ the exercise price ~~could~~of bethese securities is less than the average market price of the common shares during the period:

	Three Months Ended
	November 30, 2019	November 30, 2018
		February 28,
Convertible notes	-	3,100,000
	February 29, 2020	2019 (As revised)
Stock options	7,812,500	7,112,500
Convertible notes	12,801,696	3,915,562
Warrants	15,015,998	25,620,800
Stock options	-	-
Potentially dilutive securities	22,828,498	35,833,300
Warrants	1,268,578	-
Potentially dilutive securities	14,070,274	3,915,562

	Nine Months Ended
		February 28,
	February 29, 2020	2019 (As revised)

Convertible notes	12,801,696	3,915,562
Stock options	-	-
Warrants	1,869,582	-
Potentially dilutive securities	14,671,278	3,915,562

	Six Months Ended
	November 30, 2019	November 30, 2018
Convertible notes	2,652,381	3,100,000
Stock options	7,812,500	7,112,500
Warrants	23,810,329	25,620,800
Potentially dilutive securities	34,275,210	35,833,300

Excluded from the common stock equivalents presented above due to pricing are 55,373,840 shares and 54,772,837 shares for the three and nine months ended February 29, 2020, respectively, and 22,461,531 shares for the three and nine months ended February 28, 2019.

Stock-based Compensation

The Company applies the provisions of ASC Topic 718, Compensation – Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees, including employee stock options, in the statement of operations.

For stock options issued to employees and members of the board of directors for their services, the Company estimates the grant date fair value of each option using the Black-Scholes option pricing model. The use of the Black-Scholes option pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates, and expected dividend yields of the common stock. For awards subject to service-based vesting conditions, including those with a graded vesting schedule, the ~~company~~Company recognizes stock-based compensation expense equal to the grant date fair value of the stock options on a straight-line basis over the requisite service period, which is generally the vesting term. Forfeitures are recorded as they are incurred as opposed to being estimated at the time of grant and revised.

Pursuant to Accounting Standards Update (“ASU”) 2018-07 Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, the Company accounts for stock options issued to non-employees for their services in accordance with ASC Topic 718. The Company uses valuation methods and assumptions to value the stock options granted to nonemployees that are in line with the process for valuing employee stock options described above.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company utilizes ASC Topic 740, Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the unaudited condensed consolidated financial statements or tax returns. The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the unaudited condensed consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the unaudited condensed consolidated statements of operations.

Recently Adopted Accounting Pronouncements

On February 25, 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842), which the Company adopted as of June 1, 2019. Topic 842 requires recognition of lease rights and obligations as assets and liabilities on the balance sheet.

On June 1, 2019, the Company adopted the new lease standard using the optional transition method. The comparative financial information will not be restated and will continue to be reported under the previous lease standard in effect during those periods. In addition, the new lease standard provides several optional practical expedients in transition. The Company elected the package of practical expedients, and as such, the Company will not reassess whether expired of existing contracts are or contain a lease, will not need to reassess the lease classifications, or reassess the initial direct costs associated with expired or expiring leases. The Company did not elect the use of hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company. The new lease standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. For those leases that qualify, the Company will not recognize right of use assets or lease liabilities, including not recognizing right of use assets or lease liabilities for existing short-term leases of those assets in transition. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (office facilities and office equipment).

~~The~~On ~~new~~June 1, 2019, the Company recognized right of use assets of $17,221,387, net of deferred rent liabilities of $1,975,815, and lease liabilities ~~standard~~of ~~also~~$19,197,202. ~~provides~~During ~~practical~~the ~~expedients~~six ~~for~~month anperiod ended ~~entity’s~~November ~~ongoing~~30, ~~accounting~~2019, the Company identified certain billboard leases that were erroneously not recorded as part of the initial ASC Topic 842 adoption. The Company ~~elected~~recognized ~~the~~additional right of use assets ~~short-term~~and lease ~~recognition~~liabilities ~~exemption~~of $2,943,035 for ~~all~~these leases ~~that qualify~~. After ~~For~~adjustment, ~~those~~the ~~leases~~total ~~that~~impact ~~qualify,~~of the ~~Company~~ASC ~~will~~Topic ~~not~~842 ~~recognize~~adoption ~~ROU~~is a ~~assets~~right orof ~~lease~~use ~~liabilities~~asset of $20,164,422, ~~including~~net ~~not~~of ~~recognizing~~deferred ~~ROU~~rent ~~assets~~liabilities orof $1,975,815, and lease liabilities of $22,140,237. When measuring lease liabilities for ~~existing~~leases ~~short-term~~that were classified as operating leases, ofthe ~~those~~Company ~~assets~~discounted lease payments using its estimated inincremental ~~transition~~borrowing rate, which was 7.2% ~~The~~on June 1, 2019. The Company’s ~~elected~~adoption of the ~~practical~~new ~~expedient~~lease tostandard did not ~~separate~~materially ~~lease~~impact its unaudited condensed consolidated statements of operations and ~~non~~its statements of cash flows. No cumulative effect adjustment was recognized upon adoption as the effect was not material. See Note 19 -~~lease~~ ~~components~~Leases for ~~certain~~further ~~classes~~discussion, including ofthe impact on the Company’s unaudited condensed ~~assets~~consolidated ~~(office~~financial ~~facilities~~statements and ~~office~~required ~~equipment)~~lease disclosures.

On June 1, 2019, the Company recognized ROU assets of $17,221,387, net of deferred rent liabilities of approximately $1,975,000, and lease liabilities of $19,197,202. During the three months ended November 30, 2019, the Company identified certain billboard leases tied to billboard sites not established at June 1, 2019, that were not recorded as part of the initial ASC Topic 842 adoption. The Company recognized additional ROU assets of $2,646,221 and lease liabilities of $2,646,221 during the three months ended November 30, 2019 (See Note 20). When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its estimated incremental borrowing rate at June 1, 2019. The weighted average incremental borrowing rate utilized was 10%. The Company’s adoption of the new lease standard did not materially impact its condensed consolidated statements of operations and its statements of cash flows. No cumulative effect adjustment was recognized upon adoption as the effect was not material. See Note 17 - Leases for further discussion, including the impact on the Company’s condensed consolidated financial statements and required disclosures.

All other newly issued but not yet effective accounting pronouncements have been deemed to be not applicable or immaterial to the Company.

~~NOTE 3 - ACQUISITIONS~~23

NOTE 3 – REVISION OF PRIOR PERIOD IMMATERIAL MISSTATEMENTS

The following immaterial misstatements of prior period financial statements have been identified and corrected by the Company:

The Company identified that revenue recognition as prescribed by ASC Topic 606, Revenue from Contracts with Customers, was not correctly applied for certain of its ICS customer contracts. At November 30, 2018, this error resulted in an understatement of contract assets of $92,621 and accounts payable and accrued expenses of $31,721 and an overstatement of accumulated deficit of $60,900. For the three and six months ended November 30, 2018, this error resulted in an understatement in net sales and cost of sales of $92,621 and $31,721, respectively. At February 28, 2019, this error resulted in an overstatement of contract assets of $963,739 and accounts payable and accrued expenses of $75,670 and an understatement in contract liabilities of $41,696 and accumulated deficit of $929,765. For the three months ended February 28, 2019, this error resulted in an overstatement in net sales of $1,098,056 and cost of sales of $107,391. For the nine months ended February 28, 2019, this error resulted in an overstatement in net sales of $1,005,435 and cost of sales of $75,670.

The Company identified that incorrect inputs were used in the calculation of the beneficial conversion feature associated with the issuance of convertible debt. At November 30, 2018, this error resulted in an understatement of convertible notes payable of $416,667, and an overstatement of common stock of $8 and additional paid in capital of $416,659.

The Company identified that equity issuance fees relating to the December 11, 2018 issuer tender offer were incorrectly expensed instead of being recorded as a reduction of additional paid in capital. At February 28, 2019, May 31, 2019, and August 31, 2019, this error resulted in a $509,996 overstatement of accumulated deficit and additional paid in capital. For the three and nine months ended February 28, 2019 and twelve months ended May 31, 2019, this error resulted in an overstatement of selling, general, and administrative expenses of $509,996.

On June 1, 2019, the Company adopted ASU No. 2016-12, Leases (Topic 842), and recognized right of use assets of $17,331,387, net of deferred rent liabilities of $1,975,815, and lease liabilities of $19,197,202. During the nine months ended February 29, 2020, the Company identified certain billboard leases that were erroneously not recorded as part of the initial ASC Topic 842 adoption. As a result, the Company recognized additional right of use assets and lease liabilities of $2,943,035 during the three months ended August 31, 2019. As of August 31, 2019, the net unamortized balance of these additional right of use assets and lease liabilities was $2,653,090.

The Company identified that errors were made in the accounting for common stock issued as an inducement for the purchase of convertible notes payable. At May 31, 2019, accumulated deficit and additional paid in capital were overstated by $91,000. At August 31, 2019, accumulated deficit and additional paid in capital were overstated by $658,405. At November 30, 2019, accumulated deficit and additional paid in capital were overstated by $91,000. For the three and twelve months ended May 31, 2019, this error resulted in an overstatement of interest expense, net of $91,000. For the three months ended August 31, 2019, this error resulted in an overstatement of interest expense, net of $567,405.

The Company identified that errors were made in the accounting for warrants issued to investors in connection with the issuance of common stock. At May 31, 2019, accumulated deficit and additional paid in capital were overstated by $980,315. At August 31, 2019 and November 30, 2019, accumulated deficit and additional paid in capital were overstated by $1,290,396. For the three and twelve months ended May 31, 2019, this error resulted in an overstatement of stock-based compensation expense of $980,315. For the three months ended August 31, 2019 and six months ended November 30, 2019, this error resulted in an overstatement of stock-based compensation expense of $310,081.

A. The Company identified a stock option grant awarded on April 1, 2019 to the Company’s current Chief Executive Officer, Terrence DeFranco, that had not been recorded. The grant provides Mr. DeFranco with the option to purchase 8,000,000 shares of the Company’s Common Stock under the Company’s 2017 Equity Incentive Plan. The options were immediately vested upon grant and have an exercise price of $0.50 per share. At May 31, 2019, August 31, 2019, and November 30, 2019, accumulated deficit and additional paid in capital were understated by $2,716,103. For the three and twelve months ended May 31, 2019, this error resulted in an understatement of stock-based compensation expense of $2,716,103.

The Company identified certain financing and interest obligations that were not properly and fully recorded at the reasonably estimable amounts incurred. At May 31, 2019, August 31, 2019, and November 30, 2019, accounts payable and accrued expenses and accumulated deficit were understated by $936,042. For the three and twelve months ended May 31, 2019, this error resulted in an understatement of interest expense of $936,042.

1 Corrected within the February 28, 2019 10-Q filing

2 Corrected within the May 31, 2019 10-K filing

3 Corrected within the November 30, 2019 10-Q/A2 filing

4 Corrected within this filing

Condensed Consolidated Balance Sheet as of November 30, 2018	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Contract assets, net	$228,222	$92,621	A	2	$-	$320,843
Accounts payable and accrued expenses	$13,417,821	$31,721	A	2	$-	$13,449,542
Convertible notes payable, net of debt discount	$2,799,166	$(416,667)	B	1	$-	$3,215,833
Common stock	$19,683	$(8)	B	1	$-	$19,675
Additional paid-in capital	$9,543,142	$(416,659)	B	1	$-	$9,126,483
Accumulated deficit	$(88,264,406)	$60,900	A	2	$-	$(88,203,506)

Condensed Consolidated Statement of Operations for the 3 months ended November 30, 2018	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Net sales	$743,248	$92,621	A	2	$(8,756)	$827,113
Cost of sales	$698,677	$31,721	A	2	$37,466	$767,864
Selling, general and administrative	$4,729,458	$-			$(134,073)	$4,595,385
Interest expense	$(172,242)	$-			$172,242	$-
Other income (expense)	$(33,172)	$-			$33,172	$-
Interest expense, net	$-	$-			$(293,265)	$(293,265)
Net loss	$(17,179,797)	$60,900	A	2	$-	$(17,118,897)
Basic and diluted net loss per share	$(0.11)	$-			$-	$(0.11)

Condensed Consolidated Statement of Operations for the 6 months ended November 30, 2018	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Net sales	$793,044	$92,621	A	2	$(8,756)	$876,909
Cost of sales	$731,654	$31,721	A	2	$45,122	$808,497
Selling, general and administrative	$9,606,004	$-			$(185,972)	$9,420,032
Interest income	$38,719	$-			$(38,719)	$-
Interest expense	$(216,041)	$-			$216,041	$-
Other income (expense)	$(33,172)	$-			$33,172	$-
Interest expense, net	$-	$-			$(342,588)	$(342,588)
Net loss	$(25,722,904)	$60,900	A	2	$-	$(25,662,004)
Basic and diluted net loss per share	$(0.18)	$-			$-	$(0.18)

Condensed Consolidated Statement of Cash Flows for the 6 months ended November 30, 2018	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Net loss	$(25,722,904)	$60,900	A	2	$-	$(25,662,004)
Adjustments to reconcile net loss to net cash used in operating activities	$11,364,254	$-			$-	$11,364,254
Changes in operating assets and liabilities	$2,271,150	$(60,900)	A	2	$-	$2,210,250
Net cash used in operating activities	$(12,087,500)	$-			$-	$(12,087,500)
Supplemental cash flow information:
Beneficial conversion feature in connection with convertible debt issued and Black-Scholes market value of warrants	$816,667	$(416,667)	B	1	$-	$400,000

Condensed Consolidated Balance Sheet as of February 28, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Contract assets, net	$1,248,232	$(963,739)	A	2	$-	$284,493
Contract liabilities	$90,010	$41,696	A	2	$-	$131,706
Accounts payable and accrued expenses	$14,473,604	$(75,670)	A	2	$-	$14,397,934
Additional paid-in capital	$20,574,650	$(509,996)	C	3	$-	$20,064,654
Accumulated deficit	$(101,868,067)	$(419,769)	A, C	2, 3	$-	$(102,287,836)

Condensed Consolidated Statement of Operations for the 3 months ended February 28, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications (Note 2)	As Revised
Net sales	$1,892,208	$(1,098,056)	A	2	$(241,413)	$552,739
Cost of sales	$1,028,134	$(107,391)	A	2	$(77,781)	$842,962
Application server and software	$280,130	$-			$(280,130)	$-
Research and development	$1,441,120	$-			$(1,160,990)	$280,130
Selling, general and administrative	$2,883,924	$(509,996)	C	3	$1,186,159	$3,560,087
Interest income	$28	$-			$(28)	$-
Interest expense	$(1,458,729)	$-			$1,458,729	$-
Other income (expense)	$3,025	$-			$(3,025)	$-
Interest expense, net	$-	$-			$(1,547,005)	$(1,547,005)
Net loss	$(13,603,661)	$(480,669)	A, C	2. 3	$-	$(14,084,330)
Basic and diluted net loss per share	$(0.07)	$-			$-	$(0.07)

Condensed Consolidated Statement of Operations for the 9 months ended February 28, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications (Note 2)	As Revised
Net sales	$2,685,252	$(1,005,435)	A	2	$(250,170)	$1,429,647
Cost of sales	$1,759,788	$(75,670)	A	2	$(32,659)	$1,651,459
Application server and software	$1,062,653	$-			$(1,062,653)	$-
Research and development	$2,722,831	$-			$(378,467)	$2,344,364
Selling, general and administrative	$12,489,929	$(509,996)	C	3	$1,000,186	$12,980,119
Interest income	$38,747	$-			$(38,747)	$-
Interest expense	$(1,674,770)	$-			$1,674,770	$-
Other income (expense)	$(30,147)	$-			$30,147	$-
Interest expense, net	$-	$-			$(1,889,593)	$(1,889,593)
Net loss	$(39,326,565)	$(419,769)	A, C	2, 3	$-	$(39,746,334)
Basic and diluted net loss per share	$(0.25)	$0.01			$-	$(0.24)

Condensed Consolidated Statement of Cash Flows for the 9 months ended February 28, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications (Note 2)	As Revised
Net loss	$(39,326,565)	$(419,769)	A, C	2, 3	$-	$(39,746,334)
Adjustments to reconcile net loss to net cash used in operating activities	$19,083,653	$-			$508,197	$19,591,850
Changes in operating assets and liabilities	$2,556,789	$929,765	A	2	$(508,197)	$2,978,357
Net cash used in operating activities	$(17,686,123)	$509,996	C	3	$-	$(17,176,127)
Net cash used in investing activities	$(5,711,419)	$-			$-	$(5,711,419)
Net cash provided by financing activities	$23,216,205	$(509,996)	C	3	$-	$22,706,209
Net decrease in cash	$(181,337)	$-			$-	$(181,337)

Condensed Consolidated Balance Sheet as of May 31, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications (Note 2)	As Revised
Other current assets	$746,197	$-			$(110,451)	$635,746
Other assets	$88,495	$-			$110,451	$198,946
Accounts payable and accrued expenses	$18,563,550	$936,042	H	4	$-	$19,499,592
Deferred revenue	$188,738	$-			$(188,738)	$-
Contract liabilities	$228,893	$-			$188,738	$417,631
Additional paid-in capital	$24,539,004	$1,134,792	C,E,F,G	3, 4	$-	$25,673,796
Accumulated deficit	$(119,318,903)	$(2,070,834)	C,E,F,G,H	3, 4	$-	$(121,389,737)

Condensed Consolidated Statement of Operations for the year ended May 31, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Net sales	$2,305,144	$-			$(134,617)	$2,170,527
Cost of sales	$2,497,218	$-			$(148,409)	$2,348,809
Application server and software	$1,108,076	$-			$(1,108,076)	$-
Research and development	$4,088,991	$-			$(896,704)	$3,192,287
Selling, general and administrative	$16,730,695	$(509,996)	C	3	$1,766,106	$17,986,805
Stock-based compensation	$18,058,910	$1,735,788	F, G	4	$-	$19,794,698
Interest income	$38,747	$-			$(38,747)	$-
Interest expense	$(3,200,278)	$-			$3,200,278	$-
Loss on extinguishment of debt	$(131,408)	$-			$131,408	$-
Other income (expense)	$(27,122)	$-			$27,122	$-
Interest expense, net	$-	$(845,042)	E, H	4	$(3,572,527)	$(4,417,569)
Net loss	$(56,777,401)	$(2,070,834)	C,E,F,G,H	3, 4	$-	$(58,848,235)
Basic and diluted net loss per share	$(0.32)	$(0.01)			$-	$(0.33)

Condensed Consolidated Statement of Cash Flows for the year ended May 31, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Net loss	$(56,777,401)	$(2,070,834)	C,E,F,G,H	3, 4	$-	$(58,848,235)
Adjustments to reconcile net loss to net cash used in operating activities	$28,545,475	$1,134,792	C, E, F, G	3, 4	$-	$29,680,267
Changes in operating assets and liabilities	$8,046,749	$936,042	H		$-	$8,982,791
Net cash used in operating activities	$(20,185,177)	$-			$-	$(20,185,177)

Condensed Consolidated Balance Sheet as of August 31, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Right of use assets	$16,718,780	$2,653,090	D	3	$- $
Accounts payable and accrued expenses	$20,542,924	$936,042	H	4	$-	$21,478,966
Current portion of lease liabilities	$2,595,994	$137,574	D	3	$-	$2,733,568
Lease liabilities, net of current portion	$15,956,589	$2,515,516	D	3	$-	$18,472,105
Additional paid-in capital	$27,073,827	$257,306	C, E, F, G	3, 4	$-	$27,331,133
Accumulated deficit	$(127,344,968)	$(1,198,098)	C,E,F,G,H	3, 4	$-	$(128,543,066)

Condensed Consolidated Statement of Operations for the 3 months ended August 31, 2019	Previously Reported	Adjustments	Ref	Period Corrected	Reclassifications	As Revised
Net sales	$871,774	$-			$-	$871,774
Cost of sales	$823,946	$-			$71,936	$895,882
Application server and software	$2,144	$-			$(2,144)	$-
Research and development	$-	$-			$2,144	$2,144
Stock-based compensation	$702,413	$(310,081)	F	4	$-	$392,332
Selling, general and administrative	$4,582,066	$4,750	E	3	$(125,851)	$4,460,965
Interest expense	$(1,263,179)	$-			$1,263,179	$-
Gain (loss) on settlement of liability	$(98,608)	$-			$98,608	$-
Gain on extinguishment of debt	$2,100	$-			$(2,100)	$-
Other income (expense)	$103,025	$-			$(103,025)	$-
Interest expense, net	$-	$567,405	E	3	$(1,310,577)	$(743,142)
Net loss	$(8,026,065)	$872,736	E, F	3, 4

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