Company Quick10K Filing
Wireless Telecom Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 22 $33
10-Q 2019-11-14 Quarter: 2019-09-30
10-Q 2019-08-13 Quarter: 2019-06-30
10-Q 2019-05-08 Quarter: 2019-03-31
10-K 2019-03-12 Annual: 2018-12-31
10-Q 2018-11-08 Quarter: 2018-09-30
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-09 Quarter: 2018-03-31
10-K 2018-03-12 Annual: 2017-12-31
10-Q 2017-11-09 Quarter: 2017-09-30
10-Q 2017-08-09 Quarter: 2017-06-30
10-Q 2017-05-15 Quarter: 2017-03-31
10-K 2017-03-20 Annual: 2016-12-31
10-Q 2016-11-03 Quarter: 2016-09-30
10-Q 2016-08-04 Quarter: 2016-06-30
10-Q 2016-05-16 Quarter: 2016-03-31
10-K 2016-03-29 Annual: 2015-12-31
10-Q 2015-11-16 Quarter: 2015-09-30
10-Q 2015-08-12 Quarter: 2015-06-30
10-Q 2015-05-13 Quarter: 2015-03-31
10-K 2015-03-31 Annual: 2014-12-31
10-Q 2014-11-13 Quarter: 2014-09-30
10-Q 2014-08-14 Quarter: 2014-06-30
10-Q 2014-05-15 Quarter: 2014-03-31
10-K 2014-03-31 Annual: 2013-12-31
10-Q 2013-11-14 Quarter: 2013-09-30
10-Q 2013-08-14 Quarter: 2013-06-30
10-Q 2013-05-15 Quarter: 2013-03-31
10-K 2013-04-01 Annual: 2012-12-31
10-Q 2012-11-14 Quarter: 2012-09-30
10-Q 2012-08-13 Quarter: 2012-06-30
10-Q 2012-05-15 Quarter: 2012-03-31
10-Q 2011-11-14 Quarter: 2011-09-30
10-Q 2011-08-15 Quarter: 2011-06-30
10-Q 2011-05-16 Quarter: 2011-03-31
10-K 2011-03-30 Annual: 2010-12-31
10-Q 2010-11-15 Quarter: 2010-09-30
10-Q 2010-08-12 Quarter: 2010-06-30
10-Q 2010-05-17 Quarter: 2010-03-31
10-K 2010-04-15 Annual: 2009-12-31
8-K 2020-02-07 Enter Agreement, M&A, Off-BS Arrangement, Sale of Shares, Other Events, Exhibits
8-K 2020-01-31 Enter Agreement, Exhibits
8-K 2019-12-10 Regulation FD, Exhibits
8-K 2019-11-14 Earnings, Exhibits
8-K 2019-11-13 Regulation FD, Exhibits
8-K 2019-11-13 Enter Agreement, Exhibits
8-K 2019-11-08 Enter Agreement, Exhibits
8-K 2019-08-13 Earnings, Exhibits
8-K 2019-06-27 Officers, Exhibits
8-K 2019-05-30
8-K 2019-05-22 Regulation FD, Exhibits
8-K 2019-05-15 Regulation FD, Exhibits
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-03-12 Earnings, Exhibits
8-K 2019-03-12 Regulation FD, Exhibits
8-K 2019-03-06 Officers
8-K 2019-02-27 Enter Agreement
8-K 2018-11-20 Regulation FD, Exhibits
8-K 2018-08-27 Other Events
8-K 2018-06-05 Shareholder Vote
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-03-12 Earnings, Exhibits
WTT 2019-09-30
Part I - Financial Information
Item 1. Financial Statements
Note 1 - Summary of Significant Accounting Principles and Policies
Note 2 - Accounting Pronouncements
Note 3 - Leases
Note 4 - Revenue
Note 5 - Acquisition of Commagility
Note 6 - Income Taxes
Note 7 - Earnings (Loss) per Share
Note 8 - Inventories
Note 9 - Debt
Note 10 - Accounting for Stock Based Compensation
Note 12 - Segment Information
Note 13 - Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Wireless Telecom Group Earnings 2019-09-30

WTT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
IEC 65 109 80 147 20 12 17 93 13% 5.5 11%
INTT 58 61 17 71 35 -0 5 50 49% 10.7 -1%
PPSI 50 79 65 88 14 -3 0 53 16% 127.4 -3%
DAIO 36 30 7 26 16 1 3 21 61% 8.0 4%
WTT 33 46 14 53 24 -0 3 32 45% 11.8 -1%
SGMA 17 156 97 293 28 0 7 57 9% 8.3 0%
TIK 13 9 9 14 7 1 1 12 48% 8.6 14%
MICT 9 2 3 4 -0 -7 -6 9 -3% -1.5 -364%
ELTK 5 18 17 0 0 0 0 5 0%
AEHR 0 21 6 21 8 -5 -5 -5 36% 1.2 -25%

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

 

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

 

For the quarterly period ended September 30, 2019

 

OR

 

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

 

For the transition period from _____ to _____

 

Commission file number: 1-11916

 

WIRELESS TELECOM GROUP, INC.

(Exact name of Registrant as specified in its charter)

 

New Jersey   22-2582295
(State or other jurisdiction   (I.R.S. Employer
of incorporation or organization)   Identification No.)
     
25 Eastmans Road, Parsippany, New Jersey   07054
(Address of principal executive offices)   (Zip Code)

 

(973) 386-9696

(Registrant’s telephone number, including area code)

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Stock   WTT   NYSE American

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] Smaller reporting company [X]
    Emerging growth company [  ]

 

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

[  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

Number of shares of Common Stock outstanding as of October 22, 2019: 21,300,252

 

 

 

 
 

 

WIRELESS TELECOM GROUP, INC.

Form 10-Q

Table of Contents

 

 

 2 
 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares and par value)

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

   September 30 2019   December 31 2018 
   (Unaudited)     
CURRENT ASSETS          
Cash & Cash Equivalents  $2,735   $5,015 
Accounts Receivable - net of reserves of $64 and $44, respectively   8,023    8,638 
Inventories - net of reserves of $998 and $1,910, respectively   8,309    6,884 
Prepaid Expenses and Other Current Assets   890    1,689 
           
TOTAL CURRENT ASSETS   19,957    22,226 
           
PROPERTY PLANT AND EQUIPMENT - NET   2,260    2,578 
           
OTHER ASSETS          
Goodwill   9,482    9,778 
Acquired Intangible Assets, net   2,325    3,206 
Deferred Income Taxes   5,901    5,592 
Right Of Use Assets   1,548    - 
Other   621    787 
           
TOTAL OTHER ASSETS   19,877    19,363 
           
TOTAL ASSETS  $42,094   $44,167 
           
CURRENT LIABILITIES          
Short Term Debt  $2,977   $2,016 
Accounts Payable   2,634    3,252 
Short Term Leases   441    - 
Accrued Expenses and Other Current Liabilities   2,804    6,083 
Deferred Revenue   110    103 
           
TOTAL CURRENT LIABILITIES   8,966    11,454 
           
LONG TERM LIABILITIES          
Long Term Leases   1,124    - 
Other Long Term Liabilities   83    115 
Deferred Tax Liability   594    616 
TOTAL LONG TERM LIABILITIES   1,801    731 
           
COMMITMENTS AND CONTINGENCIES          
           
SHAREHOLDERS’ EQUITY          
Preferred Stock, $.01 par value, 2,000,000 shares authorized, none issued   -    - 
Common Stock, $.01 par value, 75,000,000 shares authorized, 34,488,252 and 34,393,252 shares issued, 21,300,252 and 21,205,251 shares outstanding   345    344 
Additional Paid in Capital   49,038    48,479 
Retained Earnings   6,907    7,556 
Treasury Stock at Cost, 13,188,000 shares   (24,509)   (24,509)
Accumulated Other Comprehensive Income/(Loss)   (454)   112 
TOTAL SHAREHOLDERS’ EQUITY   31,327    31,982 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $42,094   $44,167 

 

See accompanying Notes to Consolidated Financial Statements.

 

 3 
 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(UNAUDITED)

(In thousands, except per share amounts)

 

   For the Three Months Ended   For the Nine Months Ended 
   September 30   September 30 
   2019   2018   2019   2018 
NET REVENUES  $10,812   $14,019   $37,353   $40,697 
                     
COST OF REVENUES   5,987    7,555    20,668    21,794 
                     
GROSS PROFIT   4,825    6,464    16,685    18,903 
                     
Operating Expenses                    
Research and Development   1,343    1,191    4,556    3,660 
Sales and Marketing   1,753    1,795    5,718    5,639 
General and Administrative   2,407    2,559    7,341    7,870 
Loss on Change in Fair Value of Contingent Consideration   -    -    -    213 
Total Operating Expenses   5,503    5,545    17,615    17,382 
                     
Operating Income/(Loss)   (678)   919    (930)   1,521 
                     
Other Income/(Expense)   108    (60)   273    (73)
Interest Expense   (60)   (115)   (248)   (349)
                     
Income/(Loss) Before Taxes   (630)   744    (905)   1,099 
                     
Tax Provision/(Benefit)   (169)   186    (256)   347 
                     
Net Income/(Loss)  $(461)  $558   $(649)  $752 
                     
Other Comprehensive Income/(Loss):                    
Foreign Currency Translation Adjustments   (491)   (217)   (566)   (601)
Comprehensive Income/(Loss)  $(952)  $341   $(1,215)  $151 
                     
Earnings/(Loss) Per Share:                    
Basic  $(0.02)  $0.03   $(0.03)  $0.04 
Diluted  $(0.02)  $0.03   $(0.03)  $0.03 
                     
Weighted Average Shares Outstanding:                    
Basic   20,866    20,972    20,854    20,820 
Diluted   20,866    21,555    20,854    21,582 

 

In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive.

 

See accompanying Notes to Consolidated Financial Statements.

 

 4 
 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

   For the Nine Months 
   Ended September 30 
   2019   2018 
CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES          
Net Income/(Loss)  $(649)  $752 
Adjustments to reconcile net income/(loss) to net cash provided/(used) by operating activities:          
Depreciation and Amortization   1,671    1,773 
Amortization of Debt Issuance Fees   47    59 
Share-based Compensation Expense   560    505 
Deferred Rent   (18)   9 
Deferred Income Taxes   (309)   34 
Provision for Doubtful Accounts   20    23 
Inventory Reserves   139    204 
Changes in Assets and Liabilities:          
Accounts Receivable   520    (2,552)
Inventories   (1,627)   (1,154)
Prepaid Expenses and Other Assets   993    (99)
Accounts Payable   (567)   (487)
Payment of Contingent Consideration   (772)   - 
Accrued Expenses and Other Current Liabilities   (1,635)   2,284 
Net Cash Provided/(Used) by Operating Activities   (1,627)   1,351 
           
CASH FLOWS USED BY INVESTING ACTIVITIES          
Capital Expenditures   (339)   (633)
Acquisition of Business   (426)   (805)
Net Cash Used by Investing Activities   (765)   (1,438)
           
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES          
Revolver Borrowings   27,408    29,046 
Revolver Repayments   (26,333)   (27,681)
Term Loan Repayments   (114)   (114)
Payment of Contingent Consideration   (782)   - 
Proceeds from Exercise of Stock Options   -    288 
Net Cash Provided by Financing Activities   179    1,539 
           
Effect of Exchange Rate Changes on Cash and Cash Equivalents   (67)   (136)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS   (2,280)   1,316 
           
Cash and Cash Equivalents, at Beginning of Period   5,015    2,458 
           
CASH AND CASH EQUIVALENTS, AT END OF PERIOD  $2,735   $3,774 
           
SUPPLEMENTAL INFORMATION:          
Cash Paid During the Period for Interest  $143   $128 
Cash Paid During the Period for Income Taxes  $69   $33 

 

See accompanying Notes to Consolidated Financial Statements.

 

 5 
 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share amounts)

 

   Common
Stock Issued
   Common
Stock
Amount
   Additional Paid
In Capital
   Retained
Earnings
   Treasury
Stock
   Accumulated
Other
Comprehensive
Income/(Loss)
   Total
Shareholders’
Equity
 
Balances at December 31, 2017   33,868,252   $339   $47,494   $7,176   $(20,910)  $1,004   $35,103 
                                    
Adoption of Accounting Standard   -    -    -    345    -    -    345 
                                    
Adjusted Opening Equity   33,868,252   $339   $47,494   $7,521   $(20,910)  $1,004   $35,448 
                                    
Net Income/(Loss)   -    -    -    374    -    -    374 
Issuance of Shares in Connection with
Stock Options Exercised
   300,000    3    285    -    -    -    288 
Forfeiture of Shares Issued in Connection with CommAgility Acquisition   -    -    -    -    (3,599)   -    (3,599)
Share-based Compensation Expense   -    -    188    -    -    -    188 
Cumulative Translation Adjustment   -    -    -    -    -    579    579 
Balances at March 31, 2018   34,168,252   $342   $47,967   $7,895   $(24,509)  $1,583   $33,278 
                                    
Net Income/(Loss)   -    -    -    (180)   -    -    (180)
Share-based Compensation Expense   -    -    160    -    -    -    160 
Cumulative Translation Adjustment   -    -    -    -    -    (962)   (962)
Balances at June 30, 2018   34,168,252   $342   $48,127   $7,715   $(24,509)  $621   $32,296 
                                    
Net Income/(Loss)   -    -    -    558    -    -    558 
Issuance of Restricted Stock   75,000    1    (1)   -    -    -    - 
Share-based Compensation Expense   -    -    157    -    -    -    157 
Cumulative Translation Adjustment   -    -    -    -    -    (218)   (218)
Balances at September 30, 2018   34,243,252   $343   $48,283   $8,273   $(24,509)  $403   $32,793 

 

   Common
Stock Issued
   Common
Stock
Amount
   Additional Paid
In Capital
   Retained
Earnings
   Treasury
Stock
   Accumulated
Other
Comprehensive
Income/(Loss)
   Total
Shareholders’
Equity
 
Balances at December 31, 2018   34,393,252   $344   $48,479   $7,556   $(24,509)  $112   $31,982 
                                    
Net Income/(Loss)   -    -    -    (344)   -    -    (344)
Issuance of Restricted Stock   95,000    1    (1)   -    -    -    - 
Share-based Compensation Expense   -    -    209    -    -    -    209 
Cumulative Translation Adjustment   -    -    -    -    -    305    305 
Balances at March 31, 2019   34,488,252   $345   $48,687   $7,212   $(24,509)  $417   $32,152 
                                    
Net Income/(Loss)   -    -    -    156    -    -    156 
Share-based Compensation Expense   -    -    191    -    -    -    191 
Cumulative Translation Adjustment   -    -    -    -    -    (380)   (380)
Balances at June 30, 2019   34,488,252   $345   $48,878   $7,368   $(24,509)  $37   $32,119 
                                    
Net Income/(Loss)   -    -    -    (461)   -    -    (461)
Share-based Compensation Expense   -    -    160    -    -    -    160 
Cumulative Translation Adjustment   -    -    -    -    -    (491)   (491)
Balances at September 30, 2019   34,488,252   $345   $49,038   $6,907   $(24,509)  $(454)  $31,327 

 

See accompanying Notes to Consolidated Financial Statements.

 

 6 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 - Summary of Significant Accounting Principles and Policies

 

Basis of Presentation and Preparation

 

Wireless Telecom Group, Inc., a New Jersey corporation, together with its subsidiaries (“we”, “us”, “our” or the “Company”), is a global designer and manufacturer of advanced radio frequency (“RF”) and microwave components, modules, systems and instruments and currently markets its products and services worldwide under the Boonton, Microlab, Noisecom and CommAgility brands. Serving the wireless, telecommunication, satellite, military, aerospace, and semiconductor industries, Wireless Telecom Group products enable innovation across a wide range of traditional and emerging wireless technologies. With a unique set of high-performance products including peak power meters, signal analyzers, signal processing modules, long-term evolution (“LTE”) physical layer (“PHY”) and stack software, power splitters and combiners, global positioning system (“GPS”) splitters and repeaters, public safety monitors, noise sources, and programmable noise generators, Wireless Telecom Group supports the development, testing, and deployment of wireless technologies around the globe.

 

The consolidated balance sheet as of September 30, 2019, the consolidated statements of operations and comprehensive income/(loss) for the three and nine months ended September 30, 2019 and 2018, the consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018 and the consolidated statement of shareholders’ equity for the three and nine months ended September 30, 2019 and 2018 have been prepared by the Company without audit. The consolidated financial statements include the accounts of Wireless Telecom Group, Inc., doing business as and operating under the trade name, Noisecom, and its wholly owned subsidiaries including Boonton Electronics Corporation (“Boonton”), Microlab/FXR LLC (“Microlab”), Wireless Telecommunications Ltd. and CommAgility Limited (“CommAgility”). All intercompany transactions and balances have been eliminated in consolidation.

 

The Company presents its operations in three reportable segments: (1) Network Solutions, (2) Test and Measurement and (3) Embedded Solutions. The Network Solutions segment is comprised of the operations of Microlab. The Test and Measurement segment is comprised of the operations of Boonton and Noisecom. The Embedded Solutions segment is comprised of the operations of CommAgility.

 

It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements, and the notes thereto, included in the Company’s latest annual report (Form 10-K).

 

The Company’s fiscal periods are based on the calendar year. Except as otherwise specified, references to “third quarter(s)” or “three months” indicate the Company’s fiscal periods ending September 30, 2019 and September 30, 2018, and references to “year-end” indicate the fiscal year ended December 31, 2018.

 

Consolidated Financial Statements

 

In the opinion of management, the accompanying consolidated financial statements referred to above contain all necessary adjustments, consisting of normal accruals and recurring entries, which are necessary to fairly present the Company’s results for the interim periods being presented.

 

The accounting policies followed by the Company are set forth in Note 1 to the Company’s consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2018. Specific reference is made to that report since certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been reduced for interim periods in accordance with SEC rules.

 

The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019.

 

 7 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Reclassification

 

Certain prior period amounts have been reclassified to conform with the current period presentation.

 

Concentration Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The majority of the Company’s cash balance is held outside of the United States.

 

Credit evaluations are performed on customers requiring credit over a certain amount. Credit risk is mitigated to a lesser extent through collateral such as letters of credit, bank guarantees or payment terms like cash in advance.

 

For the three and nine months ended September 30, 2019, one customer accounted for approximately 19% and 29% of the Company’s consolidated revenues, respectively. For the three and nine months ended September 30, 2018, one customer accounted for approximately 23% and 21% of the Company’s consolidated revenues, respectively. At September 30, 2019 and December 31, 2018, one customer accounted for 18% and 32% of consolidated gross accounts receivable, respectively.

 

Subsequent Events

 

Management has evaluated subsequent events and determined that there were no subsequent events or transactions requiring recognition or disclosure in the consolidated financial statements, and the notes thereto, through the date the financial statements were issued.

 

NOTE 2 – Accounting Pronouncements

 

Recently Adopted Accounting Standards

 

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which created new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.

 

The Company adopted the requirements of the new standard effective January 1, 2019 using the modified retrospective transition method, which applies the provisions of the standard at the effective date without adjustment to the comparative periods presented. The Company adopted the following practical expedients and elected the following accounting policies related to this standard:

 

  Carry forward of historical lease classifications and accounting treatment;
  Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of 12 months or less; and
  The option to not separate lease and non-lease components for certain equipment lease categories such as office printers and copiers.

 

Adoption of this standard resulted in the recognition of operating lease right-of-use assets and corresponding lease liabilities of $1.9 million on the consolidated balance sheet as of January 1, 2019. The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 3.

 

 8 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

On June 20, 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to nonemployees. This ASU expands the scope of ASC Topic 718, Compensation - Stock Compensation, which currently only includes share-based payments issued to employees, to also include share-based payments issued to nonemployees for goods and services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. ASU 2018-07 supersedes ASC Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees. The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. The Company adopted this standard on January 1, 2019 and it did not have a material impact on our financial statements.

 

Except for the change in accounting policies for leases as a result of adopting Topic 842, there have been no other changes to our significant accounting policies as described in the 2018 Form 10-K that had a material impact on our consolidated financial statements and related notes.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). ASU 2016-13 changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured as amortized cost. This pronouncement is effective for small reporting companies for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022. The Company plans to adopt the standard effective January 1, 2023. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). ASU 2018-13 eliminates, modifies and adds disclosure requirements for fair value measurements. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements.

 

NOTE 3 – Leases

 

The Company’s lease agreements consist of building leases for its operating locations and office equipment leases for printers and copiers with lease terms that range from less than 12 months to 8 years. At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Company’s leases for office equipment such as printers and copiers contain lease and non-lease components (i.e. maintenance). The Company accounts for lease and non-lease components of office equipment as a single lease component.

 

All of the Company’s leases are operating leases and are presented as right of use lease asset, short term lease liability and long term lease liability on the consolidated balance sheet as of September 30, 2019. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental borrowing rate. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

 

Lease expense is recognized on a straight-line basis over the lease term and is included in cost of revenues and general and administrative expenses on the consolidated statement of operations and comprehensive income/(loss).

 

An initial right-of-use asset of $1.9 million was recognized as a non-cash asset addition with the adoption of the new lease accounting standard. Subsequent to adoption of the new standard there were no new right-of-use assets recognized during the nine months ended September 30, 2019. Cash paid for amounts included in the present value of operating lease liabilities was $0.4 million during the nine months ended September 30, 2019 and is included in operating cash flows.

 

Operating lease costs were $0.2 million and $0.6 million during the three and nine months ended September 2019, respectively.

 

 9 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

The following table presents information about the amount and timing of cash flows arising from the Company’s operating leases as of September 30, 2019.

 

(in thousands)  September 30, 2019 
Maturity of Lease Liabilities     
2019 (remaining)  $128 
2020   511 
2021   474 
2022   488 
2023   123 
Thereafter   - 
Total Undiscounted operating lease payments   1,724 
Less: imputed interest   (159)
Present Value of operating lease liabilities  $1,565 
      
Other information     
Weighted-average remaining lease term for operating leases   41 
Weighted-average discount rate for operating leases   5.74%

 

NOTE 4 – Revenue

 

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company’s performance obligations are satisfied either over time or at a point in time. Revenue from performance obligations that transferred at a point in time accounted for approximately 99% of the Company’s total revenue for the three and nine months ended September 30, 2019. Revenue from performance obligations that transferred at a point in time accounted for approximately 95% of the Company’s total revenue for both the three and nine months ended September 30, 2018.

 

Nature of Products and Services

 

Hardware

 

The Company generally has one performance obligation in its arrangements involving the sales of radio frequency solutions in the Network Solutions segment, digital signal processing hardware in the Embedded Solutions segment and noise generators and components and power meter and analyzers in the Test and Measurement segment. When the terms of a contract include the transfer of multiple products, each distinct product is identified as a separate performance obligation. Generally, satisfaction occurs when control of the promised goods is transferred to the customer in exchange for consideration in an amount for which we expect to be entitled. Generally, control is transferred when legal title of the asset moves from the Company to the customer. We sell our products to a customer based on a purchase order, and the shipping terms per each individual order are primarily used to satisfy the single performance obligation. However, in order to determine control has transferred to the customer, the Company also considers:

 

  when the Company has a present right to payment for the asset
  when the Company has transferred physical possession of the asset to the customer
  when the customer has the significant risks and rewards of ownership of the asset
  when the customer has accepted the asset

 

 10 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Software

 

Arrangements involving licenses of software in the Embedded Solutions segment may involve multiple performance obligations, most notably subsequent releases of the software. The Company has concluded that each software release in a multiple deliverable arrangement in the Embedded Solutions segment is a distinct performance obligation and, accordingly, transaction price is allocated to each release when the customer obtains control of the software.

 

Performance obligations that are not distinct at contract inception are combined. Specifically, with the Company’s sales of software, contracts that include customization may result in the combination of the customization services with the license as one distinct performance obligation and recognized over time. The duration of these performance obligations are typically one year or less.  

 

Services

 

Arrangements involving calibration and repair services in the Company’s Test and Measurement segment are generally considered a single performance obligation and are recognized as the services are rendered.

 

Shipping and Handling

 

Shipping and handling activities performed after the customer obtains control are accounted for as fulfillment activities and recognized as cost of revenues.

 

Significant Judgments

 

For the Company’s more complex software and services arrangements significant judgment is required in determining whether licenses and services are distinct performance obligations that should be accounted for separately, or are not distinct, and thus accounted for together. Further, in cases where we determine that performance obligations should be accounted for separately, judgment is required to determine the standalone selling price for each distinct performance obligation.

 

Certain of the Company’s shipments include a limited return right. In those cases the Company recognizes revenue net of expected returns.

 

Contract Balances

 

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in contract assets or contract liabilities (deferred revenue) on the Company’s consolidated balance sheet. The Company records a contract asset when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. Contract assets are recorded in prepaid expenses and other current assets. There were no contract assets as of September 30, 2019 and $0.3 million as of December 31, 2018. Deferred revenue is $0.1 million as of September 30, 2019 and December 31, 2018.

 

Disaggregated Revenue

 

We disaggregate our revenue from contracts with customers by product family and geographic location for each of our segments as we believe it best depicts how the nature, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the tables below (in thousands).

 

 11 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

   Three Months Ended September 30, 2019   Nine Months Ended September 30, 2019 
   Network
Solutions
   Test &
Measurement
   Embedded
Solutions
   Total   Network
Solutions
   Test &
Measurement
   Embedded
Solutions
   Total 
Net Revenues by Revenue Type                                        
Passive RF Components  $5,185   $-   $-   $5,185   $16,518   $-   $-   $16,518 
Noise Generators and Components   -    1,337    -    1,337    -    4,362    -    4,362 
Power Meters and Analyzers   -    1,323    -    1,323    -    3,946    -    3,946 
Signal Processing Hardware   -    -    2,506    2,506    -    -    11,154    11,154 
Software Licenses   -    -    5    5    -    -    11    11 
Services   -    336    120    456    -    911    451    1,362 
Total Net Revenue  $5,185   $2,996   $2,631   $10,812   $16,518   $9,219   $11,616   $37,353 
                                         
Net Revenues by Geographic Areas                                        
Americas  $4,429   $2,153   $595   $7,177   $14,485   $6,220   $918   $21,623 
EMEA   699    474    2,011    3,184    1,872    1,579    10,652    14,103 
APAC   57    369    25    451    161    1,420    46    1,627 
Total Net Revenue  $5,185   $2,996   $2,631   $  10,812   $16,518   $9,219   $11,616   $  37,353 

 

   Three Months Ended September 30, 2018   Nine Months Ended September 30, 2018 
   Network
Solutions
   Test &
Measurement
   Embedded
Solutions
   Total   Network
Solutions
   Test &
Measurement
   Embedded
Solutions
   Total 
Net Revenues by Revenue Type                                        
Passive RF Components  $6,034   $-   $-   $6,034   $17,181   $-   $-   $17,181 
Noise Generators and Components   -    1,549    -    1,549    -    4,636    -    4,636 
Power Meters and Analyzers   -    1,795    -    1,795    -    5,349    -    5,349 
Signal Processing Hardware   -    -    3,357    3,357    -    -    9,818    9,818 
Software Licenses   -    -    192    192    -    -    703    703 
Services   -    339    753    1,092    -    995    2,015    3,010 
Total Net Revenue  $6,034   $3,683   $4,302   $14,019   $17,181   $10,980   $12,536   $40,697 
                                         
Net Revenues by Geographic Areas                                        
Americas  $5,232   $2,949   $795   $8,976   $14,369   $7,706   $2,980   $25,055 
EMEA   612    305    3,269    4,186    2,044    1,268    9,119    12,431 
APAC   190    429    238    857    768    2,006    437    3,211 
Total Net Revenue  $6,034   $3,683   $4,302   $  14,019   $17,181   $10,980   $12,536   $  40,697 

 

 12 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 5 – Acquisition of CommAgility

 

On February 17, 2017, Wireless Telecommunications, Ltd. (the “Acquisition Subsidiary”), a company incorporated in England and Wales which is a wholly owned subsidiary of Wireless Telecom Group, Inc., completed the acquisition of all the issued shares in CommAgility from CommAgility’s founders. The Acquisition was completed pursuant to the terms of a Share Purchase Agreement, dated February 17, 2017, and entered into by and among the Company, the Acquisition Subsidiary and the founders. The Company paid $11.3 million in cash on acquisition date and issued 3,487,528 shares of newly issued Company common stock (“Consideration Shares”) with an acquisition date fair value of $6.0 million. In addition to the acquisition date cash purchase price, the sellers were paid an additional $2.5 million in the form of deferred purchase price installments beginning in March 2017 through January 2019 and were paid an additional purchase price adjustment based on working capital and cash levels of $1.4 million. Lastly, the sellers earned $1.5 million in contingent consideration as a result of meeting certain financial targets for the year ended December 31, 2018. The contingent consideration was paid in March 2019. Approximately $0.7 million of the contingent consideration payment is classified as cash used by operating activities in the consolidated statement of cash flows for the nine months ended September 2019 and approximately $0.8 million is classified as cash used for financing activities in the consolidated statement of cash flows for the nine months ended September 2019 in accordance with ASU 2016-15 Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). Under ASU 2016-15 the portion of the cash payment up to the acquisition date fair value of the contingent consideration liability (including measurement period adjustments) is classified as a financing outflow, and the amounts paid in excess of the acquisition date fair value of that liability will be classified as operating outflows.

 

Pursuant to the Share Purchase Agreement, 2,092,516 of the Consideration Shares were subject to forfeiture and return to the Company if (a) 2017 Adjusted EBITDA, as defined, generated by CommAgility was less than £2.4 million; or (b) 2018 Adjusted EBITDA, as defined, generated by CommAgility was less than £2.4 million (in each case as determined by an audit of CommAgility conducted by the accountants of the Acquisition Subsidiary in accordance with the terms of the Share Purchase Agreement). In March 2018 all consideration shares, which are valued at $3.6 million, were forfeited as the 2017 EBITDA threshold was not achieved. The forfeited shares are recorded as treasury stock in the consolidated statement of shareholders’ equity as of September 30, 2019 and December 31, 2018.

 

The total purchase price for the CommAgility acquisition, including the final contingent consideration payment, is $14.6 million which is net of cash acquired. There are no further purchase price obligations under the Stock Purchase Agreement as of September 30, 2019.

 

NOTE 6 – Income Taxes

 

The Company records deferred taxes in accordance with ASC 740, “Accounting for Income Taxes.” ASC 740 requires recognition of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of its deferred tax assets and determines the necessity for a valuation allowance.

 

Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.

 

As of September 30, 2019 the Company’s net deferred tax asset of $5.3 million is net of a valuation allowance of $6.7 million which is associated with the Company’s foreign net operating loss carryforward from an inactive foreign entity, state net operating loss carryforward and a state research and development credit.

 

The effective rate of income tax benefit of 28.3% for the nine months ended September 30, 2019 was higher than the statutory rates in the United States and United Kingdom primarily due to the impact of research and development deductions in the UK.

 

The effective rate of income tax provision of 31.5% for the nine months ended September 30, 2018 was higher than the statutory rates in the United States and United Kingdom primarily due to the impact of global intangible low-taxed income or “GILTI” related to our controlled foreign corporation offset by research and development deductions in the UK and non-qualified stock option deductions in the U.S. Due to the Company’s federal and state net operating loss carryforwards the impact of GILTI did not result in a cash tax charge.

 

NOTE 7 – Earnings (Loss) Per Share

 

Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period and, when dilutive, potential shares from stock options using the treasury stock method, unvested restricted shares and the weighted-average number of restricted stock units outstanding for the period. Shares from stock options are included in the diluted earnings per share calculation only when options exercise prices are lower than the average market value of the common shares for the period presented. In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive. In accordance with ASC 260, “Earnings Per Share”, the following table reconciles basic shares outstanding to fully diluted shares outstanding.

 

 13 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

   For the Three Months   For the Nine Months 
   Ended September 30,   Ended September 30, 
   2019   2018   2019   2018 
                 
Weighted average common shares outstanding   20,865,751    20,972,092    20,854,244    20,819,773 
Potentially dilutive equity awards   655,351    582,913    654,239    762,585 
Weighted average common shares outstanding, assuming dilution   21,521,102    21,555,005    21,508,483    21,582,358 

 

For the three and nine months ended September 30, 2019 the weighted-average number of options to purchase common stock not included in diluted loss per share because the effects are anti-dilutive or the performance condition was not met was 1,445,000 and 1,275,000, respectively.

 

NOTE 8 – Inventories

 

Inventory carrying value is net of inventory reserves of $1.0 million and $1.9 million at September 30, 2019 and December 31, 2018, respectively.

 

Inventories consist of (in thousands):

 

   September 30,   December 31, 
   2019   2018 
Raw materials  $4,586   $3,248 
Work-in-process   439    557 
Finished goods   3,284    3,079 
   $8,309   $6,884 

 

NOTE 9 – Debt

 

Debt consists of the following (in thousands):

 

   September 30, 2019 
Revolver at LIBOR Plus Margin  $2,597 
Term Loan at LIBOR Plus Margin   380 
Total Debt   2,977 
Debt Maturing within one year   (2,977)
Non-current portion of long term debt  $- 

 

In connection with the acquisition of CommAgility, the Company entered into a Credit Agreement with Bank of America, N.A. (the “Lender”) on February 16, 2017 (the “Credit Facility”), which provided for a term loan in the aggregate principal amount of $0.8 million (the “Term Loan”) and an asset based revolving loan (the “Revolver”), which is subject to a Borrowing Base Calculation (as defined in the Credit Facility), of up to a maximum availability of $9.0 million (“Revolver Commitment Amount”). The borrowing base is calculated as 85% of eligible accounts receivable and inventory, as defined, subject to certain caps and limits. The borrowing base is calculated on a monthly basis. The proceeds of the term loan and revolver were used to finance the acquisition of CommAgility.

 

 14 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

In connection with the issuance of the Credit Facility, the Company paid lender and legal fees of $0.2 million which were primarily related to the Revolver and are capitalized and presented as other current and non-current assets in the consolidated balance sheets. These costs are recognized as additional interest expense over the term of the related debt instrument using the straight line method which approximates the effective interest method.

 

The Company must repay the Term Loan in installments of $38,000 per quarter due on the first day of each fiscal quarter beginning April 1, 2017 and continuing until the term loan maturity date, on which the remaining balance is due in a final installment. The Term Loan and Revolver were both scheduled to mature on November 16, 2019. On February 26, 2019, the Company entered into Amendment No. 3 to the Credit Facility which extends the termination date of the Revolver from November 16, 2019 to March 31, 2020.

 

The Term and Revolver Loans bear interest at the LIBOR rate plus a margin. The margin on the outstanding balance of the Company’s Term Loans and Revolver Loans were fixed at 3.50% and 3.00% per annum, respectively, through September 30, 2017. Thereafter, the margins were subject to increase or decrease by Lender on the first day of each of the Borrowers’ fiscal quarters based upon the Fixed Charge Coverage Ratio (as defined in the Credit Facility) as of the most recently ended fiscal quarter falling into one of three levels. If the Company’s Fixed Charge Coverage Ratio is greater than or equal to 1.25 to 1.00, a margin of 3.25% and 2.75%, respectively, is added to LIBOR rate for the term loan and revolver with a step up to 3.50% and 3.00%, respectively, if the ratio is greater than or equal 1.00 to 1.00 but less than 1.25 to 1.00 and another step up to 3.75% and 3.25%, respectively, if the ratio is less than 1.00 to 1.00. The Company is also required to pay a commitment fee on the unused commitments under the Revolver at a rate equal to 0.50% per annum and early termination fee of (a) 2% of the Revolver Commitment Amount and Term Loan if termination occurs before the first anniversary of the Credit Facility or (b) 1% of the Revolver Commitment Amount and Term Loan if termination occurs after the first anniversary of the Credit Facility but before the second anniversary of the Credit Facility. The Company’s interest rate plus margin as of September 30, 2019 on the Credit Facility was 4.88% and 5.38% for the Revolver and Term Loan, respectively. The Company’s interest rate plus margin as of December 31, 2018 on the Credit Facility was 5.38% and 5.88% for the Revolver and Term Loan, respectively.

 

The Credit Facility is secured by liens on substantially all of the Company’s and its domestic subsidiaries’ assets including a pledge of 66 1/3% of the equity interests in the Company’s Foreign Subsidiaries (as defined in the Credit Facility). The Credit Facility contains customary affirmative and negative covenants for a transaction of this type, including, among others, the provision of annual, quarterly and monthly financial statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters, restrictions on incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, entering into affiliate transactions and asset sales. Events of default under the Credit Facility include but are not limited to: failure to pay obligations when due, breach or failure of any covenant, insolvency or bankruptcy, materially misleading representations or warranties, occurrence of a Change in Control (as defined in the Credit Facility) or occurrence of conditions that have a Material Adverse Effect (as defined in the Credit Facility).

 

As of September 30, 2019, and the date hereof, the Company is in compliance with the covenants of the Credit Facility.

 

NOTE 10 - Accounting for Stock Based Compensation

 

The Company’s results for the three and nine month period ended September 30, 2019 includes $0.2 million and $0.6 million, respectively, related to stock based compensation expense. Such amounts have been included in the consolidated statement of operations and comprehensive income/(loss) within general and administrative expenses in operating expenses. The Company accounts for forfeitures when they occur.

 

Incentive Compensation Plan

 

In 2012, the Company’s Board of Directors and shareholders approved the 2012 Incentive Compensation Plan (the “Initial 2012 Plan”), which provides for the grant of equity, including restricted stock awards, restricted stock units, non-qualified stock options and incentive stock options in compliance with the Internal Revenue Code of 1986, as amended, to employees, officers, directors, consultants and advisors of the Company who are expected to contribute to the Company’s future growth and success. When originally approved, the Initial 2012 Plan provided for the grant of awards relating to 2 million shares of common stock, plus those shares subject to awards previously issued under the Company’s 2000 Stock Option Plan that expire, are canceled or are terminated after adoption of the Initial 2012 Plan without having been exercised in full and would have been available for subsequent grants under the 2000 Stock Option Plan. In June 2014, the Company’s shareholders approved the Amended and Restated 2012 Incentive Compensation Plan (the “2012 Plan”) allowing for an additional 1.6 million shares of the Company’s common stock to be available for future grants under the 2012 Plan. The 2012 Plan provides that if awards are forfeited, expire or otherwise terminate without issuance of the shares underlying the awards, or if the award does not result in issuance of all or part of the shares underlying the award, the unissued shares are again available for awards under the 2012 Plan. As a result of certain award forfeitures and cancellations, as of September 30, 2019, there are approximately 1.5 million shares available for issuance under the 2012 Plan.

 

 15 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

All service-based (time vesting) options granted have ten-year terms from the date of grant and typically vest annually and become fully exercisable after a maximum of five years. However, vesting conditions are determined on a grant by grant basis. Performance-based options granted have ten-year terms and vest and become fully exercisable when determinable performance targets are achieved. Performance targets are approved by the Company’s compensation committee of the Board of Directors. Under the 2012 Plan, options may be granted to purchase shares of the Company’s common stock exercisable only at prices equal to or above the fair market value on the date of the grant.

 

Restricted Common Stock Awards

 

On January 11, 2019 the Company granted 95,000 restricted stock awards to employees under the 2012 Plan. The awards vest in equal annual installments over a three year period or upon a change in control, as defined in the 2012 Plan, as long as the grantee continues to provide service to the Company until the applicable vesting date. The grant date fair value of the restricted stock awards was $1.56 per share.

 

Service-Based Stock Option Awards

 

On January 11, 2019 the Company granted 15,000 incentive stock options. The stock options vest in equal annual installments over a three year period or upon a change in control, as defined in the 2012 Plan, as long as the grantee continues to provide service to the Company until the applicable vesting date. The following table presents the assumptions used to estimate the fair value of the stock option award granted in the first quarter of 2019 under the Black Scholes model:

 

   Number of
Options
   Option Term
(in years)
   Exercise Price   Risk Free Interest Rate   Expected Volatility   Fair Value at Grant Date   Expected Dividend Yield 
January 11, 2019 - Service   15,000      3   $1.56    2.52%   49.80%  $0.56   $0.00 

 

Restricted Stock Units

 

On May 30, 2019 the Company granted 25,000 Restricted Stock Units (“RSU”) to each of our five independent board members under the 2012 Plan. On July 8, 2019 the Company granted 22,917 RSU’s to our newly appointed board member. Each RSU represents the Company’s obligation to issue one share of the Company’s common stock subject to the RSU award agreement and 2012 Plan. The grant date fair value of the RSU’s issued on May 30, 2019 was $1.55 per share and the grant date fair value of the RSU’s issued on July 8, 2019 was $1.58 per share. The RSU’s vest on the day before the first anniversary of the grant date or, if earlier, the effective date of a separation of service due to death or disability, provided the board member has rendered continuous service to the Company as a member of the board of directors from grant date to vesting date. Once vested the RSU will be settled by delivery of shares to the board member no later than 30 days following: 1) the third anniversary of the grant date, 2) separation from service following, or coincident with, a vesting date, or 3) a change in control.

 

Outstanding Stock Options and Unvested Restricted Awards

 

As of September 30, 2019 there were 1,950,000 service based stock options outstanding and 305,000 performance based stock options outstanding. The range of exercise prices of outstanding stock options is $0.78 to $1.92. The number of potentially dilutive common shares from stock options (options with exercise prices that are lower than the average market value of common shares for the nine months ended September 30, 2019) is 148,343 and have an average exercise price of 1.35 per share.

 

 16 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Additionally, as of September 30, 2019, there were 300,561 unvested restricted shares, 147,917 unvested restricted stock units and 125,000 vested restricted stock units outstanding.

 

NOTE 12 – SEGMENT INFORMATION

 

The operating businesses of the Company are segregated into three reportable segments: (1) Network Solutions, (2) Test and Measurement and (3) Embedded Solutions.

 

Network Solutions

 

The Network Solutions segment is comprised primarily of the operations of the Company’s subsidiary, Microlab. Network Solutions designs and manufactures a wide selection of RF passive components and integrated subsystems for signal conditioning and distribution in the wireless infrastructure markets, particularly for small cell deployments, distributed antenna systems (“DAS”), the in-building wireless solutions industry and radio base-station market. Network Solutions also offers active solution sets to assist in network timing for tunnels and in-building wireless signaling. Network Solutions customers include telecommunications service providers, systems integrators, neutral host operators and distributors.

 

Test and Measurement

 

The Test and Measurement segment is comprised primarily of the Company’s operations of the Noisecom product line and the operations of its subsidiary, Boonton. Noisecom designs and produces noise generation equipment and instruments, calibrated noise sources, noise modules and diodes. Noise components and instruments are used as a method to provide wide band signals for sophisticated telecommunication and defense applications, and as a stable reference standard for instruments and systems, including radar and satellite communications. Boonton products are also used to test terrestrial and satellite communications, radar and telemetry. Certain power meter products are designed for measuring signals based on wideband modulation formats, allowing a variety of measurements to be made, including maximum power, peak power, average power and minimum power. Customers of the Test and Measurement segment include large defense contractors and the U.S. and foreign governments.

 

Embedded Solutions

 

The Embedded Solutions segment is comprised of the operations of CommAgility. Embedded Solutions supplies signal processing technology for network validation systems supporting LTE and emerging 5G networks. Additionally, this segment licenses, implements and configures LTE PHY layer and stack software for private LTE networks supporting satellite communications, the military and aerospace industries. Customers include wireless communication test equipment companies, defense subcontractors and global technology and services companies.

 

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The Company allocates resources and evaluates the performance of segments based on income or loss from operations, excluding interest, corporate expenses and other income (expenses).

 

 17 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

Financial information by reportable segment for the respective periods is set forth below (in thousands):

 

   For the Three Months   For the Nine Months 
   Ended September 30,   Ended September 30, 
   2019   2018   2019   2018 
Net sales by segment:                    
Network Solutions  $5,185   $6,034   $16,518   $17,181 
Test and Measurement   2,996    3,683    9,219    10,980 
Embedded Solutions   2,631    4,302    11,616    12,536 
Total consolidated net sales of reportable segments   10,812    14,019    37,353    40,697 
                     
Segment income (loss):                    
Network Solutions   594    1,229    2,141    2,799 
Test and Measurement   361    590    973    1,515 
Embedded Solutions   (284)   565    (287)   1,448 
Income (loss) from reportable segments   671    2,384    2,827    5,762 
                     
Other unallocated amounts:                    
Corporate expenses   (1,349)   (1,465)   (3,757)   (4,242)
Other (expenses) income - net   48    (175)   25    (421)
Consolidated income/(loss) before Income tax provision/(benefit)  $(630)  $744   $(905)  $1,099 
                     
Depreciation and amortization by segment:                    
Network Solutions  $91   $115   $305   $424 
Test and Measurement   84    115    447    412 
Embedded Solutions   299    307    919    937 
Total depreciation and amortization for reportable segments   474    537    1,671    1,773 
                     
Capital expenditures by segment:                    
Network Solutions   12    28    75    311 
Test and Measurement   32    2    125    131 
Embedded Solutions   35    19    139    191 
Total consolidated capital expenditures by reportable segment  $79   $49   $339   $633 

 

   September 30,
2019
   December 31,
2018
 
Total assets by segment:          
Network Solutions  $10,193   $10,088 
Test and Measurement   7,364    5,943 
Embedded Solutions   15,191    16,804 
Total assets for reportable segments   32,748    32,835 
           
Corporate assets, principally cash and cash equivalents and deferred income taxes   9,346    11,332 
Total consolidated assets  $42,094   $44,167 

 

 18 
 

 

WIRELESS TELECOM GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

Legal Proceeding

 

As previously disclosed, on June 5, 2019 Harris Corporation (“Harris”) filed a request for arbitration before the American Arbitration Association in accordance with the terms of an executed purchase order, statement of work and software license agreement (collectively referred to as “Agreements”) with CommAgility entered into in 2014. Harris claims that CommAgility breached the Agreements and infringed Harris’ copyrighted Work Product by offering for sale, marketing, and promoting techniques, capabilities, products and services that incorporate Work Product, as defined in the Agreements, owned by Harris. Harris claims that CommAgility has caused Harris significant monetary damages, the sum of which cannot be determined until such time as discovery has been conducted, but is estimated by Harris to be less than $250,000. Harris is also seeking an injunction against CommAgility’s use of the Work Product which includes rights to certain technology used for air-to-ground communications. The Company believes the claims are without merit and intends to defend all of the claims vigorously. The Company has not accrued any amounts in respect of this matter and cannot estimate the possible loss, if any, that the Company may incur with respect to it.

 

The ultimate outcome of this matter is unknown but, in the opinion of management, we do not believe this proceeding will have a material adverse effect upon our financial condition, cash flows or future results of operations. The Company expects a portion of the legal expenses and monetary damages, if any, to be covered by our professional indemnity insurance policy.

 

There have been no other material changes in our commitments and contingencies and risks and uncertainties as of September 30, 2019 from that previously disclosed in our annual report on Form 10-K for the year ended December 31, 2018.

 

 19 
 

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion of our financial condition and results of operations should be read in conjunction with our interim consolidated financial statements and the notes to those statements included in Part I, Item I of this Quarterly Report on Form 10-Q and in conjunction with the audited consolidated financial statements contained in our annual report on Form 10-K for the year ended December 31, 2018.

 

INTRODUCTION

 

Key customers are currently experiencing project timing differences from those we anticipated for the quarter. As a result, fewer large projects, a downturn in government orders in the quarter and lower sales by CommAgility to one of our largest customers combined to reduce top line revenues in the quarter as compared to the year ago period. This impacted gross profit and resulted in a loss for the quarter compared to net income in the third quarter of last year. Our expenses related to sales and marketing as well as general and administrative costs decreased as a result of the lower revenue generation, but we invested more in research and development during the quarter as compared to the year ago period as we deployed personnel in the Embedded Solutions segment on the 5G NR product roadmap and other related initiatives. We have taken immediate steps in the third quarter to implement a restructuring in our Network Solutions and Test and Measurement segments to address the current situation, and we expect revenues over the next few quarters to rebound as the anticipated projects come online and we advance our initiatives in the Embedded Solutions segment.

 

RESULTS OF OPERATIONS

 

Three Months Ended September 30, 2019 Compared with Three Months Ended September 30, 2018

 

Net Revenues (in thousands)

 

   Three months ended September 30 
   Revenue   % of Revenue   Change 
   2019   2018   2019   2018   Amount   Pct. 
Network Solutions  $5,185   $6,034    48.0%   43.0%  $(849)   -14.1%
Test and Measurement   2,996    3,683    27.7%   26.3%   (687)   -18.7%
Embedded Solutions   2,631    4,302    24.3%   30.7%   (1,671)   -38.8%
Total Net Revenues  $10,812   $14,019    100.0%   100.0%  $(3,207)   -22.9%

 

Net consolidated revenue decreased $3.2 million or 22.9% from the prior year period due primarily to lower Embedded Solutions sales of digital signal processing hardware to our largest customer as well as lower software license and services revenues due to fewer projects. Network Solutions revenue was lower due to fewer large projects as compared to the prior year. Test and Measurement revenue was down as a result of fewer government orders and a large 2018 project that did not repeat in the current year.

 

Gross Profit (in thousands)

 

   Three months ended September 30 
   Gross Profit   Gross Profit %   Change 
   2019   2018   2019   2018   Amount   Pct. 
Network Solutions  $2,104   $2,640    40.6%   43.8%  $(536)   -20.3%
Test and Measurement   1,497    1,850    50.0%   50.2%   (353)   -19.1%
Embedded Solutions   1,224    1,974    46.5%   45.9%   (750)   -38.0%
Total Gross Profit  $4,825   $6,464    44.6%   46.1%  $(1,639)   -25.4%

 

Consolidated gross profit margin for the third quarter 2019 of 44.6% is comparable to the prior year period gross profit margin of 46.1%. Network Solutions gross profit margin decreased due to lower absorption of fixed labor and overhead charges and as a consequence of the competitive pricing environment impacting the entire industry. Embedded Solution gross profit margin increased due to a more favorable mix of hardware sales as compared to the prior year. Test and Measurement gross profit margin was flat.

 

 20 
 

 

Operating Expenses (in thousands)

 

   Three months ended September 30 
   Operating Expenses   % of Revenue   Change 
   2019   2018   2019   2018   Amount   Pct. 
Research and Development  $1,343   $1,191    12.4%   8.5%  $152    12.8%
Sales and Marketing   1,753    1,795    16.2%   12.8%   (42)   -2.3%
General and Administrative   2,407    2,559    22.3%   18.3%   (152)   -5.9%
Total Operating Expenses  $5,503   $5,545    50.9%   39.6%  $(42)   -0.8%

 

Research and development expenses increased $0.2 million, reflecting Embedded Solutions headcount deployment on product roadmap initiatives, specifically the 5G NR product roadmap. This was offset by reduced third party spend and, to a lesser extent, headcount savings resulting from a restructuring action at the Network Solutions and Test and Measurement segments.

 

Sales and marketing expenses decreased due to the lower external commission expense, which was partially offset by higher headcount expenses.

 

General and administrative expenses decreased due primarily to reduced bonus expense and a favorable foreign exchange impact.

 

Other Income/(Expense)

 

Other income increased $0.2 million due to an increase in foreign exchange gains recognized on monetary assets and liabilities denominated in currencies other than our functional currencies as compared to losses in the prior year period.

 

Interest Expense

 

Consolidated interest expense decreased $55,000 primarily related to accretion expense recorded in 2018 related to the CommAgility contingent consideration liability.

 

Taxes

 

The Company recorded an income tax benefit for the third quarter 2019 of $0.2 million as compared to tax provision of $0.2 million in the prior year period. The decrease is due to a change in the Company’s annual effective tax rate and the recognition of a loss before taxes in the current year period as compared to income before taxes in the prior year period.

 

Net Income/Loss

 

Net Loss for the third quarter 2019 was $0.5 million or loss per share of $.02 as compared to net income of $0.6 million or earnings per share of $.03 in the prior year period. The decrease in net income year over year was primarily attributable to lower gross profit driven by lower sales, which was only marginally offset by foreign exchange gains, lower interest expense and, to a lesser extent, lower operating expenses.

 

 21 
 

 

Nine Months Ended September 30, 2019 Compared with Nine Months Ended September 30, 2018

 

Net Revenues (in thousands)

 

   Nine months ended September 30 
   Revenue   % of Revenue   Change 
   2019   2018   2019   2018   Amount   Pct. 
Network Solutions  $16,518   $17,181    44.2%   42.2%  $(663)   -3.9%
Test and Measurement   9,219    10,980    24.7%   27.0%   (1,761)   -16.0%
Embedded Solutions   11,616    12,536    31.1%   30.8%   (920)   -7.3%
Total Net Revenues  $37,353   $40,697    100.0%   100.0%  $(3,344)   -8.2%

 

Net consolidated revenue decreased 8.2% from the prior year period due primarily to lower Test and Measurement revenue resulting from fewer government orders and large projects. Embedded Solutions revenue also decreased primarily as a result of lower software and services sales as compared to the prior year period. Network Solutions revenue decreased due to fewer large project sales.

 

Gross Profit (in thousands)

 

   Nine months ended September 30 
   Gross Profit   Gross Profit %   Change 
   2019   2018   2019   2018   Amount   Pct. 
Network Solutions  $6,893   $7,552    41.7%   44.0%  $(659)   -8.7%
Test and Measurement   4,843    5,509    52.5%   50.2%   (666)   -12.1%
Embedded Solutions   4,949    5,842    42.6%   46.6%   (893)   -15.3%
Total Gross Profit  $16,685   $18,903    44.7%   46.4%  $(2,218)   -11.7%

 

Consolidated gross profit margin for the nine months ended September 30, 2019 of 44.7% is lower than the prior year period of 46.4% due to higher margin software and services revenue in the Embedded Solutions segment in 2018 and a higher percentage of lower margin hardware revenue in 2019. Additionally, Network Solutions gross profit margin declined from the prior year period due primarily to the competitive pricing environment in the industry, which was somewhat offset by labor and overhead savings in the current period. The improved gross profit margin at the Test and Measurement segment resulted from more favorable product mix and labor and overhead savings compared to the prior year.

 

Operating Expenses (in thousands)

 

   Nine months ended September 30 
   Operating Expenses   % of Revenue   Change 
   2019   2018   2019   2018   Amount   Pct. 
Research and Development  $4,556   $3,660    12.2%   9.0%  $896    24.5%
Sales and Marketing   5,718    5,639    15.3%   13.9%   79    1.4%
General and Administrative   7,341    7,870    19.7%   19.3%   (529)   -6.7%
Loss on Change in Fair Value
of Contingent Consideration
   -    213    0.0%   0.5%   (213)   -100.0%
Total Operating Expenses  $17,615   $17,382    47.2%   42.7%  $233    1.3%

 

Research and development expenses increased $0.9 million due primarily to Embedded Solutions headcount deployment on product roadmap initiatives, specifically the 5G NR product roadmap. This was partially offset by reduced third party spend at the Network Solutions and Test and Measurement segments and favorable foreign exchange impact.

 

Sales and marketing expenses increased $0.1 million due to increased headcount expenses and demonstration asset impairment charges for assets that are no longer in use, partially offset by lower marketing expenses and lower external commission expenses.

 

 22 
 

 

General and administrative expenses decreased $0.5 million as a result of reduced bonus expense, reduced legal expenses and favorable foreign exchange impact, which was partially offset by severance charges related to the third quarter restructuring actions.

 

A loss on change in the fair value of contingent consideration of $0.2 million was recorded in the prior year period due to a change in the estimated fair value of the CommAgility contingent consideration liability recorded in the nine month period ended September 30, 2018. The CommAgility contingent consideration liability was paid in the first quarter of 2019. There are no additional purchase price payments related to the CommAgility acquisition.

 

Other Income/(Expense)

 

Other income increased $0.3 million due to an increase in foreign exchange gains recognized on monetary assets and liabilities denominated in currencies other than our functional currencies as compared to losses in the prior year period.

 

Interest Expense

 

Consolidated interest expense decreased $0.1 million primarily related to accretion expense recorded in 2018 related to the CommAgility contingent consideration liability.

 

Taxes

 

For the nine months ended September 30, 2019 the Company recorded a tax benefit of $0.3 million as compared to a tax provision of $0.3 million in the prior year period due to a loss before income taxes in the current year period as compared to net income before taxes in the prior year period. The effective tax rate decreased from 31.5% in the prior year period to 28.3% in the current year period due to differences in estimates of taxable income year over year.

 

Net Income/Loss

 

For the nine months ended September 30, 2019 the Company recorded a net loss of $0.6 million or loss per share of $.03 as compared to net income of $0.8 million or earnings per basic share of $.04 and earnings per diluted share of $.03 in the prior year period due primarily to lower consolidated gross profit margins, higher consolidated operating expenses, which were only partially offset by higher income from foreign exchange gains and lower interest expense.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As described in Note 9 to the consolidated financial statements, on February 26, 2019 the Company entered into Amendment No. 3 to the Credit Facility which extends the termination date of the Revolver from November 16, 2019 to March 31, 2020. We believe we can further extend the existing Credit Facility beyond March 31, 2020 on terms similar or more favorable to our current agreement. We expect borrowings available to us under our Credit Facility, our existing cash balance and cash generated by operations to be our primary sources of short-term liquidity. We believe these sources in combination with an extension of our existing Credit Facility beyond March 31, 2020 will be sufficient to meet our liquidity needs for at least the next twelve months.

 

Our ability to meet our cash requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

 

The Company expects to realize tax benefits in future periods due to the available net operating loss carryforwards resulting from the disposition of a former wholly owned subsidiary in 2010. Accordingly, future taxable income is expected to be offset by the utilization of operating loss carryforwards and, as a result, will increase the Company’s liquidity as cash needed to pay federal income taxes will be reduced.

 

As of September 30, 2019, substantially all of our cash and cash equivalents are held outside the United States. The asset based revolver under our Credit Facility is secured by the Company’s U.S. assets. Income taxes have been provided on foreign earnings such that there would be no significant income tax expense to repatriate the portion of this cash that is not required to meet operational needs of our international subsidiary.

 

 23 
 

 

Operating Activities

 

Cash used by operating activities was $1.6 million for the nine months ended September 30, 2019 which compares to cash provided by operating activities of $1.4 million in the prior year period. The decrease was due to a net loss in the nine months ended September 30, 2019 as well as investments in inventory to meet lead times and payments of accrued expenses. Included in cash used by operating activities, in accordance with ASU 2016-15, is $0.8 million of the CommAgility contingent consideration payment.

 

Investing Activities

 

Cash used by investing activities was $0.8 million for the nine months ended September 30, 2019 which was lower than the prior year period of $1.4 million due to lower capital expenditures and deferred purchase price payments for the CommAgility acquisition.

 

Financing Activities

 

Cash provided by financing activities was $0.2 million for the nine months ended September 30, 2019 as compared to $1.5 million for the prior year period. The decrease from the prior year is primarily due to the payment of the CommAgility contingent consideration, of which $0.8 million is included in cash provided by financing activities, and lower borrowings under the revolver as compared to the prior year.

 

Overall, cash and cash equivalents decreased $2.3 million during the nine months ended September 30, 2019 for the reasons noted above.

 

The Company may pursue strategic opportunities, including potential acquisitions, mergers, divestitures or other activities, which may require significant use of the Company’s capital resources. The Company may incur costs as a result of such activities and such activities may affect the Company’s liquidity in future periods. In order to fund such activities, the Company may need to incur additional debt or issue additional securities if market conditions are favorable. However, there can be no certainty that such funding will be available in needed quantities on terms favorable to the Company or at all.

 

On August 27, 2018 the Company filed a shelf registration statement on Form S-3 which was declared effective on September 17, 2018. The Form S-3 will permit the Company to issue and sell, from time to time, up to $40 million in aggregate value of shares of its common stock through one or more methods of distribution, subject to applicable SEC limits on the value of securities that the Company, as a smaller reporting company, may sell during an applicable period, market conditions, and the Company’s capital desires and needs. The Company has no current plans to offer any common stock under the shelf registration statement.

 

The terms of any offering of the Company’s common stock, and the intended use of the net proceeds resulting therefrom, will be established at the times of the offerings and will be described in prospectus supplements filed with the SEC at the times of the offerings. The shelf registration statement is intended to provide financial flexibility to access capital in a competitive and expeditious manner when market conditions are appropriate.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements.

 

Effects of Inflation and Changing Prices

 

The Company does not anticipate that inflation or other expected changes in prices will significantly impact its business.

 

Critical Accounting Policies

 

There have been no changes in our critical accounting policies or significant accounting estimates as disclosed in our 2018 Form 10-K, except for adoption of Topic 842 which is described in Note 2.

 

 24 
 

 

Forward Looking Statements

 

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, without limitation, some of the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements about adoption of Topic 326 not having a material impact on our consolidated financial statements; revenues over the next few quarters rebounding as anticipated projects come online and initiatives in the Embedded Solutions segment are advanced; our ability to extend the existing Credit Facility beyond March 31, 2020 at terms similar or more favorable to our current agreement; borrowings available to us, our existing cash balance and cash generated by operations to be our sources of short-term liquidity; our belief that these sources will be sufficient to meet our liquidity needs for at least the next 12 months; our expectation that legal expenses and any claims associated with the Harris arbitration will be covered under our professional indemnity insurance policy; realizing tax benefits in future periods due to available net operating loss carryforwards; the Company’s future taxable income being expected to be offset by the utilization of net operating loss carryforwards and, as a result, increasing the Company’s liquidity as cash needed to pay federal income taxes will be substantially reduced. These statements involve risks and uncertainties. These statements are based on the Company’s current expectations of future events and are subject to a number of risks and uncertainties that may cause the Company’s actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the ability of our management to successfully implement our business plan and strategy, product demand and development of competitive technologies in our market sector, the impact of competitive products and pricing, the loss of any significant customers, our abilities to protect our intellectual property rights, the effects of economic conditions and trade, legal and other economic risks, our ability to manage risks related to our information technology and cyber security, among others. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. These risks and uncertainties are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 and elsewhere in this Quarterly Report on Form 10-Q. The Company’s forward-looking statements speak only as of the date of this Quarterly Report. The Company undertakes no obligation to publicly update or review any forward-looking statements whether as a result of new information, future developments or otherwise.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

ITEM 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Our disclosure controls and procedures are designed to ensure that the information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that the information relating to Wireless Telecom Group, Inc., including our consolidated subsidiaries, is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the period covered by this report, our disclosure controls and procedures are effective.

 

(b) Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as described in our 2018 Annual Report on Form 10-K.

 

 25 
 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

No material changes in the quarter.

 

Item 1A. Risk Factors

 

There have been no material changes to our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

Item 6. Exhibits

 

Exhibit    
Number   Exhibit Description
     
3.1   Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K/A filed with the SEC on April 22, 2005, Commission File No. 1-11916)
     
3.2   Amended and Restated By-laws (incorporated herein by reference to Exhibit 3.1 to Wireless Telecom Group, Inc.’s Current Report on Form 8-K, filed on July 1, 2017, Commission File No. 011-11916)
     
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101**   The following financial information from Wireless Telecom Group, Inc.’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019, filed on November 14, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income/(Loss), (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Shareholders’ Equity, and (v) the Notes to the Consolidated Financial Statements.
     
101.INS**   XBRL INSTANCE DOCUMENT
     
101.SCH**   XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
     
101.CAL**   XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
     
101.DEF**   XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
     
101.LAB**   XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
     
101.PRE**   XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

 

** Furnished herewith.

 

 26 
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  WIRELESS TELECOM GROUP, INC.
     
Dated: November 14, 2019    
  By: /s/ Timothy Whelan
    Timothy Whelan
    Chief Executive Officer
     
Dated: November 14, 2019    
  By: /s/ Michael Kandell
    Michael Kandell
    Chief Financial Officer

 

 27 
 

 

EXHIBIT INDEX

 

Exhibits    
Number No.   Exhibit Description
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101**   The following financial information from Wireless Telecom Group, Inc.’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019, filed on November 14, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income/(Loss), (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Shareholders’ Equity, and (v) the Notes to the Consolidated Financial Statements.
     
101.INS**   XBRL INSTANCE DOCUMENT
     
101.SCH**   XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
     
101.CAL**   XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
     
101.DEF**   XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
     
101.LAB**   XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
     
101.PRE**   XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

 

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