8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported) March 4, 2014

PCTEL, Inc.

(Exact name of registrant as specified in its charter)

Delaware	000-27115	77-0364943
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

471 Brighton Drive

Bloomingdale, Illinois 60108

(Address of Principal Executive Offices, including Zip Code)

(630) 372-6800

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12(b))

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

The following information is intended to be furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On March 4, 2014, PCTEL, Inc. issued a press release regarding its financial results for its fourth fiscal quarter and year ended December 31, 2013. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Section 5 – Corporate Governance and Management

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Executive Officer Base Salary

On March 5, 2014, the Board of Directors (the “Board”) of PCTEL, Inc., (the “company” or “PCTEL”), upon the recommendation of the Compensation Committee of the Board, approved the base salary of the Chief Executive Officer of the company. In addition, on March 4, 2014 the Compensation Committee approved the base salaries of the other named executive officers of the company. The Compensation Committee based its recommendations to the Board for the base salary increases on the assessment of the performance, experience and responsibilities of each named executive officer and recommendations provided by the Committee’s independent compensation consultant.

Officer Name	Title	Base Salary Effective April 1, 2014
Martin H. Singer	Chairman of the Board & Chief Executive Officer	$	495,000
John W. Schoen	Senior Vice President & Chief Financial Officer	$	290,000
Jeffrey A. Miller	President, Connected Solutions	$	300,000
David A. Neumann	Vice President & General Manager, RF Solutions	$	251,000
Anthony Kobrinetz	Vice President & COO, Connected Solutions	$	248,000

Adoption of 2014 Short Term Incentive Plan

On March 5, 2014, the Board, upon the recommendation of the Compensation Committee, adopted and approved the company’s Short Term Incentive Plan for 2014 (the “2014 STIP”). The 2014 STIP is designed to provide compensation incentives for the Chief Executive Officer, the other named executive officers and certain other employees of PCTEL based on the achievement of specifically-identified, short-term corporate and business segment goals for 2014.

The material terms of the 2014 STIP include the following:

• All incentives to be paid to participants under the 2014 STIP will be paid in cash.

• The performance criteria under the 2014 STIP are comprised of corporate-level goals for Mr. Singer and Mr. Schoen. Each of the other named executive officers have business segment revenue and non-GAAP goals that will be weighted 60% in addition to the corporate-level goals that will be weighted 40%.

• The corporate goals, Connected Solutions segment’s goals, and RF Solutions segment’s goals are each defined in terms of revenue and non-GAAP earnings per share growth over 2013. Achievement of each of these sets of goals is determined on a sliding scale between 0% and 100%. Scores for goals are aggregated and averaged on a weighted basis in determining the amount of a particular award. The relevant weights of the revenue growth and non-GAAP earnings per share growth goals are 40% and 60% respectively. Non-GAAP earnings per share differs from GAAP earnings by the exclusion of stock-based compensation expense, amortization of intangible assets, restructuring charges, impairment charges, gain/loss on the sale of product lines, non-cash income tax expense and non-cash other income.

For the corporate goals, revenue growth is calculated from 0% to 15.1% over 2013 revenue, where 0% growth corresponds to 0% achievement and 15.1% growth corresponds to 100% achievement. Non-GAAP earnings per share growth is calculated from 0% to 57% over 2013, where 0% growth corresponds to 0% achievement and 57% growth corresponds to 100% achievement.

The Connected Solutions segment’s revenue growth is calculated from 0% to 17.4% over 2013 revenue, where 0% growth corresponds to 0% achievement and 17.4% growth corresponds to 100% achievement. Non-GAAP earnings per share growth is calculated from 0% to 61% over 2013, where 0% growth corresponds to 0% achievement and 61% growth corresponds to 100% achievement.

The RF Solutions segment’s revenue growth is calculated from 0% to 19.8% over 2013 revenue, where 0% growth corresponds to 0% achievement and 19.8% growth corresponds to 100% achievement. Non-GAAP earnings per share growth is calculated from 0% to 20% over 2013, where 0% growth corresponds to 0% achievement and 20% growth corresponds to 100% achievement.

• Each participant in the 2014 STIP is eligible to be awarded a maximum incentive expressed as a percentage of that participant’s annual salary. This percentage is generally higher for the named executive officers and certain key employees of the company.

• It is expected that the determination of achievement under the 2014 STIP will be made by the Compensation Committee during the first quarter of 2015.

Additional information relating to the terms of the 2014 STIP applicable to the Chief Executive Officer and other named executive officers of the company is summarized in the following table:

Name and Title	Maximum Incentive As a Percentage of 2014 Annual Salary
Martin H. Singer		130	%
Chairman of the Board and Chief Executive Officer
John W. Schoen		95	%
Senior Vice President & Chief Financial Officer
Jeffrey A. Miller		110	%
President, Connected Solutions
David A. Neumann		95	%
Vice President & General Manager, RF Solutions
Anthony Kobrinetz		90	%
Vice President & COO, Connected Solutions

Adoption of 2014 Long-Term Incentive Plan

On March 5, 2014, the Board, upon the recommendation of the Compensation Committee, also approved the company’s Long-Term Incentive Plan for 2014 (“2014 LTIP”) which is based upon achievement of four-year revenue goals with a penalty if certain Adjusted EBITDA levels are not maintained. The four-year period is divided into two interim periods (each an “Interim Period”), the first of which will end at December 31, 2015 and the second of which will end at December 31, 2017. The total restricted share awards to the named executive officers of the company for the four-year performance period are summarized in the table below. Half of the restricted share awards indicated in the table below will be earned if the performance goals are achieved for the first Interim Period and the other half will be earned if the goals are achieved for the second Interim Period.

Name and Title	Restricted Shares at Revenue Below Threshold		Restricted Shares at Threshold Revenue		Restricted Shares at Target Revenue
Martin H. Singer		0		14,000		28,000
Chairman of the Board & Chief Executive Officer
John W. Schoen		0		7,000		14,000
Senior Vice President & Chief Financial Officer
Jeffrey A. Miller		0		9,000		18,000
President, Connected Solutions
David A. Neumann		0		11,500		23,000
Vice President & General Manager, RF Solutions
Anthony Kobrinetz		0		7,500		15,000
Vice President & COO, Connected Solutions

• In order to receive restricted shares under the 2014 LTIP at the end of the first Interim Period, the Company must achieve threshold revenue of $114 million (representing 9.3% growth over two years), in which case each named executive officer will receive half of the number of restricted shares indicated in the column above entitled “Restricted Shares at Threshold Revenue.” If the Company achieves or exceeds its target revenue of $127 million at the end of the first Interim Period (representing 21.8% growth over two years), the named executive officers will receive half of the number of restricted shares indicated in the column above entitled “Restricted Shares at Target Revenue.” Either of these awards may be reduced by the Adjusted EBITDA Penalty described below. It is expected that the determination of achievement under the 2014 LTIP for the first Interim Period will be made during the first quarter of 2016 and the equity award, if any, will be paid promptly thereafter.

• In order to receive restricted shares at the end of the second Interim Period, the Company must achieve a threshold revenue of $142 million (representing 36.2% growth over four years) which will result in the named executive officers receiving half of the number of restricted shares indicated in the column above entitled “Restricted Shares at Threshold Revenue.” If the Company achieves its target revenue of $149 million (representing 42.9% growth over four years) for the second Interim Period, the named executive officers will receive half of the number of restricted shares indicated in the column above entitled “Restricted Shares at Target Revenue.” Either of these awards may be reduced by the Adjusted EBITDA Penalty described below. It is expected that the determination of achievement under the 2014 LTIP for the second Interim Period will be made during the first quarter of 2018 and the equity award, if any, will be paid promptly thereafter.

• The award of restricted shares at the end of either the first or second Interim Period, as described above, will be reduced by 25% if the Company’s Adjusted EBITDA as a percentage of the Company’s revenue (“Adjusted EBITDA Percentage”) for the relevant period is less than 8%, and the equity award will be reduced by 10% if the Adjusted EBITDA Percentage for the relevant period is less than 11% but greater than 8% (the “Adjusted EDITDA Penalty”). The term “Adjusted EBITDA” means GAAP operating profit excluding stock compensation expenses, amortization of intangible assets, restructuring charges, impairment charges, gain/loss on sale of product lines, and expenses included in GAAP operating profit to the extent their recovery is recorded below operating profit.

• Revenue generated by entities acquired in the second year of an Interim Period will contribute to achievement of the revenue goal, but the revenue contribution is capped at $5 million regardless of any greater actual revenue generation by such acquired entity in such year. Entities acquired in the first year of an Interim Period will become integrated into the Company by the end of the Interim Period and their revenue contribution will not be separately tracked or capped.

• If the Company’s revenue falls between the threshold and the target revenue, the number of restricted shares received by named executive officers will be interpolated in a linear progression.

• If the Company over-achieves its first or second Interim Period target revenue, the number of restricted shares awarded will be the same as at the target revenue. There is no additional equity award for exceeding the target revenue.

• If the Company fails to achieve the revenue threshold at the end of the first Interim Period, those restricted shares will be foregone and will not be awarded regardless of the Company’s revenue at the end of the second Interim Period.

The restricted stock granted under the 2014 LTIP is issued under the company’s 1997 Stock Plan, as amended. The 1997 Stock Plan permits the incentive awards paid under these Plans to qualify as “performance-based” compensation under Section 162(m) of the Internal Revenue Code.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits.

99.1 Press release, dated March 4, 2014, of PCTEL, Inc. announcing its financial results for its fourth fiscal quarter and year ended December 31, 2013.

SIGNATURE

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

Date: March 10, 2014

	PCTEL, INC.
By:	/s/ John W. Schoen
	John W. Schoen, Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
Exhibit 99.1	Press release, dated March 4, 2014 of PCTEL, Inc. announcing its financial results for its fourth fiscal quarter and year ended December 31, 2013.

EX-99.1

Exhibit 99.1

PCTEL Achieves $26.0 Million in Fourth Quarter Revenue

$104.3 Million in 2013 Revenue; 17 Percent Increase

BLOOMINGDALE, IL. – March 4, 2014 — PCTEL, Inc. (NASDAQ: PCTI), a leader in simplifying wireless and site solutions for private and public networks, announced its 2013 fourth quarter and annual results.

Fourth Quarter and Annual Highlights

• $26.0 million in revenue for the quarter, unchanged from the same period last year. $104.3 million in revenue for the year, an increase of 17 percent over 2012.

• Gross profit margin of 42 percent in the quarter, compared to 38 percent in the same period last year. Gross profit margin of 40 percent for the year, unchanged from 2012.

• GAAP operating margin from continuing operations of two percent for the quarter, compared to operating margin of negative (46) percent for the same period last year. Operating margin for the year of just above breakeven as compared to negative (12) percent in 2012. The fourth quarter of 2012 contained a $12.6 million impairment of goodwill related to its TelWorx acquisition. Without the impairment, 2012 operating margin in the quarter and the year were three percent and two percent, respectively.

• GAAP net income from continuing operations of $453,000 for the quarter, or $0.02 per diluted share, compared to a net loss of $(7.3) million from continuing operations, or $(0.41) per diluted share for the same period last year. $3.3 million net income from continuing operations for the year, or $0.18 per diluted share, as compared to net loss from continuing operations of $(6.7) million or $(0.38) per diluted share in 2012. The goodwill and intangible asset impairment in the fourth quarter 2012 accounted for a net loss of approximately $(0.44) per diluted share in the quarter and year.

• Non-GAAP operating profit and net income are measures the company uses to reflect the results of its core earnings. The Company’s reporting of Non-GAAP net income excludes expenses for restructuring, gain or loss on sale of assets, stock based compensation, amortization and impairment of intangible assets and goodwill related to the Company’s acquisitions, and non-cash related income tax expense.

• Non-GAAP operating margin from continuing operations of 10 percent in the quarter, compared to seven percent in the same period last year. Non-GAAP operating margin for the year was nine percent as compared to eight percent in 2012.

• Non-GAAP net income from continuing operations of $2.1 million or $0.12 per diluted share in the quarter, as compared to $1.5 million or $0.08 per diluted share in the same period last year. Non-GAAP net income from continuing operations of $7.7 million or $0.42 per diluted share for the year, as compared to $6.0 million or $0.34 per diluted share in 2012.

• $57.9 million of cash, short-term investments at December 31, 2013, an increase of approximately $3.0 million from the preceding quarter. This change reflects approximately $4.2 million of cash flow from operations less approximately $1.0 million in capital expenditures.

“Growth in our in-building engineering services and strong scanning receiver sales made strong contributions to our quarter and the year,” said Marty Singer, PCTEL’s Chairman and CEO. “We were pleased with the steady performance of our Connected Solutions business and with the reaction to our new antenna and scanning receiver products at the Mobile World Congress (MWC) and Healthcare Information and Management Systems Society (HIMSS) industry events,” added Singer.

CONFERENCE CALL / WEBCAST

PCTEL’s management team will discuss the Company’s results today at 8:30 AM ET. The call can be accessed by dialing (877) 734-5369 (U.S. / Canada) or (706) 679-6397 (International), conference ID: 83290470. The call will also be webcast at http://investor.pctel.com/events.cfm.

REPLAY: A replay will be available for two weeks after the call on either the website listed above or by calling (855) 859-2056 (U.S./Canada), or International (404) 537-3406, conference ID: 83290470.

About PCTEL

PCTEL, Inc. (NASDAQ: PCTI), develops antenna, scanning receiver, and engineered site solutions and services for public and private networks. PCTEL RF Solutions enables superior utilization of wireless spectrum for cellular and WiFi networks. The RF Solutions services team specializes in the design, testing, and optimization of in-building, small cell, and traditional wireless networks. PCTEL RF Solutions develops and supports specialized network test equipment for LTE FDD, TD-LTE, WCDMA, GSM, CDMA, EV-DO, TD-SCDMA, and WiFi networks. The company’s SeeGull^® scanning receivers and SeeHawk^® visualization tool measure and analyze wireless signals for efficient cellular network planning, deployment, and optimization. Its IBflex™ simplifies in-building wireless network testing and SeeWave™ identifies and locates interference sources that impair network throughput.

PCTEL Connected Solutions™ simplifies network and site deployment for wireless data and communications applications for private network, public safety, and government customers. PCTEL Connected Solutions develops and delivers high-value YAGI, Land Mobile Radio, WiFi, GPS, In-Tunnel, Subway, and broadband antennas (parabolic and flat panel) through its MAXRAD^®, Bluewave™, and Wi-Sys™ product lines. PCTEL also designs specialized towers, enclosures, and specialized kits to deliver custom engineered site solutions. The company’s vertical markets include SCADA, Health Care, Smart Grid, Positive Train Control, Precision Agriculture, Indoor Wireless, Telemetry, Off-loading, and Wireless Backhaul. PCTEL’s products are sold worldwide through direct and indirect channels. For more information, please visit the company’s web sites www.pctel.com, www.antenna.com, or www.rfsolutions.pctel.com.

PCTEL Safe Harbor Statement

This press release contains “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Specifically, the statements regarding the growth of PCTEL’s in-building engineering services and scanning receiver sales, the performance of the Connected Solutions business and the anticipated success of our new antenna and scanning receiver products, are forward-looking statements within the meaning of the safe harbor. These statements are based on management’s current expectations and actual results may differ materially from those projected as a result of certain risks and uncertainties, including the ability to successfully grow the wireless products business and the ability to implement new technologies and obtain protection for the related intellectual property. These and other risks and uncertainties are detailed in PCTEL’s Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof, and PCTEL disclaims any obligation to update or revise the information contained in any forward-looking statement, whether as a result of new information, future events or otherwise.

For further information contact:

John Schoen	Jack Seller
CFO	Public Relations
PCTEL, Inc.	PCTEL, Inc.
(630) 372-6800	(630)372-6800
	Jack.seller@pctel.com

PCTEL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

	December 31,			December 31,
	2013			2012
ASSETS
Cash and cash equivalents	$	21,790		$	17,543
Short-term investment securities		36,105			33,596
Accounts receivable, net of allowance for doubtful accounts of $130 and $222 at December 31, 2013 and December 31, 2012, respectively		18,603			18,586
Inventories, net		14,535			17,573
Deferred tax assets, net		1,629			1,484
Prepaid expenses and other assets		3,166			2,160
Total current assets		95,828			90,942
Property and equipment, net		14,971			14,775
Goodwill		161			161
Intangible assets, net		4,604			7,004
Deferred tax assets, net		11,827			14,034
Other noncurrent assets		41			1,636
Assets of discontinued operations		0			18
TOTAL ASSETS	$	127,432		$	128,570
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	4,440		$	10,557
Accrued liabilities		7,803			5,899
Total current liabilities		12,243			16,456
Contingent consideration		0			1,130
Other long-term liabilities		3,137			2,736
Liabilities of discontinued operations		0			103
		3,137			3,969
Total liabilities		15,380			20,425
Stockholders’ equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 18,566,119 and 18,514,809 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively		19			19
Additional paid-in capital		143,572			140,388
Accumulated deficit		(31,748	)		(32,410	)
Accumulated other comprehensive income		209			148
Total equity		112,052			108,145
TOTAL LIABILITIES AND EQUITY	$	127,432		$	128,570

PCTEL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

	Three Months Ended					Year Ended
	December 31,					December 31,
	2013		2012			2013			2012
REVENUES	$	25,963	$	25,842		$	104,253		$	88,849
COST OF REVENUES		15,120		15,911			62,493			53,029
GROSS PROFIT		10,843		9,931			41,760			35,820
OPERATING EXPENSES:
Research and development		3,102		2,412			11,064			9,290
Sales and marketing		3,134		3,450			12,121			11,343
General and administrative		3,589		2,946			15,623			10,982
Amortization of intangible assets		596		357			2,400			2,359
Impairment of intangible assets		0		12,550			0			12,550
Restructuring charges		2		1			256			157
Total operating expenses		10,423		21,716			41,464			46,681
OPERATING INCOME (LOSS)		420		(11,785	)		296			(10,861	)
Other income, net		600		16			5,378			100
INCOME (LOSS) BEFORE INCOME TAXES		1,020		(11,769	)		5,674			(10,761	)
Expense (benefit) for income taxes		567		(4,519	)		2,332			(4,089	)
NET INCOME (LOSS) FROM CONTINUING OPERATIONS		453		(7,250	)		3,342			(6,672	)
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX BENEFIT		17		(1,073	)		(91	)		(2,587	)
NET INCOME (LOSS)	$	470	($	8,323	)	$	3,251		($	9,259	)
Earnings (Loss) per Share from Continuing Operations:
Basic	$	0.03	($	0.41	)	$	0.19		($	0.38	)
Diluted	$	0.02	($	0.41	)	$	0.18		($	0.38	)
Earnings (Loss) per Share from Discontinued Operations:
Basic	$	0.00	($	0.07	)	($	0.01	)	($	0.15	)
Diluted	$	0.00	($	0.07	)	$	0.00		($	0.15	)
Earnings (Loss) per Share:
Basic	$	0.03	($	0.48	)	$	0.18		($	0.53	)
Diluted	$	0.02	($	0.48	)	$	0.18		($	0.53	)
Weighed Average Shares:
Basic		17,916		17,501			17,797			17,402
Diluted		18,508		17,501			18,184			17,402
Cash dividend per share	$	0.035	$	0.030		$	0.140		$	0.120

PCTEL, INC.

P&L INFORMATION BY SEGMENT—Continuing Operations

(in thousands)

	Three Months Ended December 31, 2013											Year Ended December 31, 2013
	Connected Solutions			RF Solutions		Consolidating			Total			Connected Solutions			RF Solutions		Consolidating			Total
REVENUES	$	17,349		$	8,693	($	79	)	$	25,963		$	74,223		$	30,310	($	280	)	$	104,253
GROSS PROFIT		5,368			5,471		4			10,843			22,720			19,018		22			41,760
OPERATING INCOME (LOSS)	$	1,140		$	2,109	($	2,829	)	$	420		$	6,012		$	7,248	($	12,964	)	$	296
	Three Months Ended December 31, 2012											Year Ended December 31, 2012
	Connected Solutions			RF Solutions		Consolidating			Total			Connected Solutions			RF Solutions		Consolidating			Total
REVENUES	$	19,861		$	6,045	($	64	)	$	25,842		$	67,511		$	21,469	($	131	)	$	88,849
GROSS PROFIT		5,850			4,077		4			9,931			21,037			14,744		39			35,820
OPERATING INCOME (LOSS)	($	10,602	)	$	1,223	($	2,406	)	($	11,785	)	($	6,062	)	$	4,246	($	9,045	)	($	10,861	)

Reconciliation GAAP To non-GAAP Results Of Continuing Operations (unaudited)

(in thousands except per share information)

Reconciliation of GAAP operating income to non-GAAP operating income (a) from Continuing Operations

		Three Months Ended December 31,						Year Ended December 31,
		2013			2012			2013			2012
	Operating Income (Loss)	$	420		($	11,785	)	$	296		($	10,861	)
(a)	Add:
	Amortization of intangible assets		596			357			2,400			2,359
	Impairment of goodwill and intangible assets		0			12,550			0			12,550
	TelWorx restructuring:
	-Restructuring charges		2			1			256			157
	-Cost of Goods Sold		0			0			284			0
	TelWorx investigation:
	-General & Administrative		747			0			2,626			0
	Stock Compensation:
	-Cost of Goods Sold		95			77			390			378
	-Engineering		185			147			689			585
	-Sales & Marketing		140			146			575			543
	-General & Administrative		402			286			1,786			1,479
			2,167			13,564			9,006			18,051
	Non-GAAP Operating Income	$	2,587		$	1,779		$	9,302		$	7,190
	% of revenue		10.0	%		6.9	%		8.9	%		8.1	%
Reconciliation of GAAP net income to non-GAAP net income (b) from Continuing Operations
		Three Months Ended December 31,						Year Ended December 31,
		2013			2012			2013			2012
	Net Income (Loss) from Continuing Operations	$	453		($	7,250	)	$	3,342		($	6,672	)
	Adjustments:
(a)	Non-GAAP adjustment to operating income		2,167			13,564			9,006			18,051
(b)	Other income related to the TelWorx legal settlement		(586	)		0			(5,353	)		0
(b)	Income Taxes		99			(4,842	)		653			(5,401	)
			1,680			8,722			4,306			12,650
	Non-GAAP Net Income from Continuing Operations	$	2,133		$	1,472		$	7,648		$	5,978
	Non-GAAP Earning per Share:
	Basic	$	0.12		$	0.08		$	0.43		$	0.34
	Diluted	$	0.12		$	0.08		$	0.42		$	0.34
	Weighed Average Shares:
	Basic		17,916			17,501			17,797			17,402
	Diluted		18,508			17,501			18,184			17,402

This schedule reconciles the Company’s GAAP operating income and GAAP net income to its non-GAAP operating income and non-GAAP net income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the TelWorx investigation.

(b) These adjustments include the items described in footnote (a) as well as other income for the TelWorx legal settlement and insurance claims related to the TelWorx investigation, and non-cash income tax expense.

Reconciliation GAAP To non-GAAP SEGMENT INFORMATION (unaudited) (a)—Continuing Operations

(in thousands except per share information)

	Three Months Ended December 31, 2013											Year Ended December 31, 2013
	Connected Solutions			RF Solutions		Consolidating			Total			Connected Solutions			RF Solutions		Consolidating			Total
Operating Income (Loss)	$	1,140		$	2,109	($	2,829	)	$	420		$	6,012		$	7,248	($	12,964	)	$	296
Add:
Amortization of intangible assets		392			204		0			596			1,573			827		0			2,400
TelWorx restructuring:
-Restructuring charges		2			0		0			2			256			0		0			256
-Cost of Goods Sold		0			0		0			0			284			0		0			284
TelWorx investigation:
-General & Administrative		0			0		747			747			0			0		2,626			2,626
Stock Compensation:
-Cost of Goods Sold		44			51		0			95			153			237		0			390
-Engineering		78			107		0			185			285			404		0			689
-Sales & Marketing		122			18		0			140			450			125		0			575
-General & Administrative		91			33		278			402			341			109		1,336			1,786
		729			413		1,025			2,167			3,342			1,702		3,962			9,006
Non-GAAP Operating Income (Loss)	$	1,869		$	2,522	($	1,804	)	$	2,587		$	9,354		$	8,950	($	9,002	)	$	9,302
	Three Months Ended December 31, 2012											Year Ended December 31, 2012
	Connected Solutions			RF Solutions		Consolidating			Total			Connected Solutions			RF Solutions		Consolidating			Total
Operating Income (Loss)	($	10,602	)	$	1,223	($	2,406	)	($	11,785	)	($	6,062	)	$	4,246	($	9,045	)	($	10,861	)
Add:
Amortization of intangible assets		139			218		0			357			1,478			881		0			2,359
Impairment of intangible assets		12,550								12,550			12,550								12,550
Restructuring charges		1			0		0			1			157			0		0			157
Stock Compensation:
-Cost of Goods Sold		9			68		0			77			132			246		0			378
-Engineering		57			90		0			147			223			362		0			585
-Sales & Marketing		97			49		0			146			356			187		0			543
-General & Administrative		37			30		219			286			175			120		1,184			1,479
		12,890			455		219			13,564			15,071			1,796		1,184			18,051
Non-GAAP Operating Income (Loss)	$	2,288		$	1,678	($	2,187	)	$	1,779		$	9,009		$	6,042	($	7,861	)	$	7,190

This schedule reconciles the Company’s GAAP operating income by segment to its non-GAAP operating income and non-GAAP net income. The Company believes that presentation of this schedule provides meaningful supplemental information to both management and investors that is indicative of the Company’s core operating results and facilitates comparison of operating results across reporting periods. The Company uses these non-GAAP measures when evaluating its financial results as well as for internal planning and forecasting purposes. These non-GAAP measures should not be viewed as a substitute for the Company’s GAAP results.

(a) These adjustments reflect stock based compensation expense, amortization of intangible assets, restructuring charges, and general and administrative expenses associated with the TelWorx investigation.