8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

February 27, 2015

Date of Report (date of earliest event reported)

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))

Explanatory Note

On February 27, 2015, PCTEL, Inc. acquired substantially all of the assets of, and assumed certain specified liabilities of, Nexgen Wireless, Inc., an Illinois corporation (“Nexgen”), pursuant to an Asset Purchase Agreement dated as of February 27, 2015 among PCTEL, Inc., Nexgen, and the principals of Nexgen as more fully described in the Company’s Current Report filed on Form 8-K on March 5, 2015. This amendment No. 1 on Form 8-K/A amends the Company’s March 5, 2015, Form 8-K to provide financial statements of Nexgen and pro forma financial information related to the acquisition as required by Item 9.01(a) and 9.01(b).

Item 9.01 Financial Statements and Exhibits

(b) Financial Statements of Business Acquired

The financial statements of Nexgen for the years ended December 31, 2014 and 2013 are included as exhibit 99.1 to this Amendment No. 1.

(b) Pro Forma Financial Information

The unaudited pro forma financial statements of PCTEL, Inc. required by this item are included as Exhibit 99.2 to this Amendment No. 1.

(d) Exhibits.

23	Consent of CJG Partners, LLP
99.1	The financial statements of Nexgen for the years ended December 31, 2014 and 2013
99.2	PCTEL, Inc. unaudited pro forma consolidated condensed statement of operations for the year ended December 31, 2014 and the three months ended March 31, 2015

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: May 15, 2015

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

EX-23

Exhibit 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We consent to incorporation by reference in the Registration Statements on Form S-8 (No. 333-122117, No. 333-34910, No. 333-61926, No. 333-82120, No. 333-103233 and No. 333-112621) of PCTEL, Inc., of our report dated February 24, 2015 relating to the consolidated balance sheets of Nexgen Wireless, Inc. as of December 31, 2014 and 2013, and the related statements of income, stockholders’ equity, and cash flows, which appears in this Current Report on Form 8-K/A of PCTEL, Inc.

/s/ CJG Partners LLP

Schaumburg, Illinois

May 15, 2015

EX-99.1

Exhibit 99.1

Certified Public Accountants

Nexgen Wireless, Inc.

Financial Statements and

Independent Auditor’s Report

December 31, 2014 and 2013

Nexgen Wireless, Inc.

Financial Statements

Table of Contents	Page Number
Independent Auditor’s Report		1 - 2
Balance Sheets		3
Statements of Income		4
Statements of Changes in Stockholders’ Equity		5
Statements of Cash Flows		6 - 7
Notes to Financial Statements		8 - 12

	Certified Public Accountants
A	Woodfield Executive Center
	1101 Perimeter Drive. Suite 800
	Schaumburg, IL 60173
P	(847) 517-8222
F	(847) 517-8553
W	www.cjgpartners.com

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Stockholders

of Nexgen Wireless, Inc.

We have audited the accompanying financial statements of Nexgen Wireless, Inc. (an Illinois Corporation), which comprise the balance sheets as of December 31, 2014 and 2013, and the related statements of income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nexgen Wireless, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Certified Public Accountants

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors and Stockholders

of Nexgen Wireless, Inc.

(Continued)

Correction of Error

As discussed in Note 11 to the financial statements, certain errors in the financial statements that were previously reported as of December 31, 2013, were discovered by management of Nexgen Wireless, Inc. during the current year. Accordingly, amounts previously reported have been restated in the 2013 financial statements now presented, and an adjustment has been made to retained earnings as of December 31, 2012, to correct the error. Our opinion covering the period ending December 31, 2013, is not modified with respect to this matter.

cjg partners LLP

Certified Public Accountants

Schaumburg, Illinois

February 24, 2015

Nexgen Wireless, Inc.

Balance Sheets

December 31, 2014 and 2013

			2013
	2014		(Restated)
Assets
Current Assets
Cash	$	2,714,184	$	2,790,058
Accounts receivable, net		6,259,339		1,821,801
Pre-paid expenses		18,083		10,794
Total Current Assets		8,991,606		4,622,653
Property and Equipment, net		181,785		123,404
Total Assets	$	9,173,391	$	4,746,057
Liabilities
Current Liabilities
Accounts payable	$	36,797	$	104,129
Credit card payable		130,933		93,711
Line-of-credit		250,000		—
Accrued expenses		837,693		410,586
Income taxes payable		114,258		73,078
Current portion of long-term debt		19,630		10,339
Total Current Liabilities		1,389,311		691,843
Long-Term Liabilities		64,324		33,073
Total Liabilities		1,453,635		724,916
Stockholders’ Equity
Common stock, no par value; 1,000 shares authorized, 1,000 shares issued and outstanding		1,000		1,000
Retained earnings		7,718,756		4,020,141
Total Stockholders’ Equity		7,719,756		4,021,141
Total Liabilities and Stockholders’ Equity	$	9,173,391	$	4,746,057

The accompanying notes are an integral part of the financial statements.

3

Nexgen Wireless, Inc.

Statements of Income

For the Years Ended December 31, 2014 and 2013

						2013
	2014					(Restated)
Sales	$	23,826,949		100	%	$	15,543,420		100	%
Cost of Sales		13,523,591		56.8			11,100,292		71.4
Gross Profit		10,303,358		43.2			4,443,128		28.6
Operating Expenses		2,762,486		11.6			1,808,209		11.6
Income from Operations		7,540,872		31.6			2,634,919		17.0
Other Income (Expense)
Interest income		115		—			—		—
Interest expense		(3,041	)	—			(940	)	—
Income Before Taxes		7,537,946		31.6			2,633,979		17.0
Income Tax Provision		119,200		0.5			74,100		0.5
Net Income	$	7,418,746		31.1	%	$	2,559,879		16.5	%

The accompanying notes are an integral part of the financial statements.

4

Nexgen Wireless, Inc.

Statements of Changes in Stockholders’ Equity

For the Years Ended December 31, 2014 and 2013

	Common Stock		Additional Paid-in Capital		Retained Earnings			Total
Balance at December 31, 2012 (Restated)	$	1,000	$	—	$	2,084,762		$	2,085,762
Net Income		—		—		2,559,879			2,559,879
Distributions		—		—		(624,500	)		(624,500	)
Balance at December 31, 2013 (Restated)		1,000		—		4,020,141			4,021,141
Net Income		—		—		7,418,746			7,418,746
Distributions		—		—		(3,720,131	)		(3,720,131	)
Balance at December 31, 2014	$	1,000	$	—	$	7,718,756		$	7,719,756

The accompanying notes are an integral part of the financial statements.

5

Nexgen Wireless, Inc.

Statements of Cash Flows

For the Years Ended December 31, 2014 and 2013

				2013
	2014			(Restated)
Cash Flows from Operating Activities:
Cash received from customers	$	19,389,411		$	15,360,920
Cash paid for salaries and suppliers		(15,763,179	)		(12,481,653	)
Interest received		115			—
Rent paid		(87,978	)		(44,607	)
Interest paid		(3,041	)		(940	)
Income taxes paid		(78,020	)		(15,355	)
Donations		—			(1,960	)
Net Cash Provided by Operating Activities		3,457,308			2,816,405
Cash Flows from Investing Activities:
Capital expenditures		(35,910	)		(23,265	)
Net Cash Used for Investing Activities		(35,910	)		(23,265	)
Cash Flows from Financing Activities:
Repayment of long-term debt		(27,141	)		(9,486	)
Net borrowings under line-of-credit agreement		250,000			—
Distributions		(3,720,131	)		(624,500	)
Net Cash Used for Financing Activities		(3,497,272	)		(633,986	)
Net Increase (Decrease) in Cash and Cash Equivalents		(75,874	)		2,159,154
Cash and Cash Equivalents at Beginning of Year		2,790,058			630,904
Cash and Cash Equivalents at End of Year	$	2,714,184		$	2,790,058

The accompanying notes are an integral part of the financial statements.

6

Nexgen Wireless, Inc.

Statements of Cash Flows

For the Years Ended December 31, 2014 and 2013

	2014			2013 (Restated)
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net Income	$	7,418,746		$	2,559,879
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation		35,921			33,441
(Increase) decrease in assets:
Accounts receivable		(4,437,538	)		(182,500	)
Prepaid expenses		(7,289	)		(2,406	)
Increase (decrease) in liabilities:
Accounts payable		(67,332	)		75,501
Credit card payable		37,222			62,462
Accrued expenses		427,107			211,087
Income taxes payable		41,180			58,745
Current portion of long term debt		9,291			195
Total Adjustments		(3,961,438	)		256,525
Net Cash Provided by Operating Activities	$	3,457,308		$	2,816,404
Supplemental schedule of non-cash investing and financing activities:
Debt obligation incurred to purchase automobile	$	58,394		$	—

The accompanying notes are an integral part of the financial statements.

7

Nexgen Wireless, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

1.	Summary of Accounting Policies
	History and Business Activity	The Company (an Illinois Corporation) was formed in 2000 and is primarily engaged in the development and testing of software for the telecommunications industry.
	Revenue Recognition	The Company provides network engineering services and software development. The Company recognizes revenue when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, price is fixed and determinable, and collectability is reasonably assured.
	Property and Equipment	Property and equipment are carried at cost less accumulated depreciation. Additions, major renewals, replacements and betterments are capitalized; maintenance and repairs are charged against income as incurred. Provision for depreciation is generally computed by the straight-line and accelerated methods over the estimated useful lives of the respective assets. Annual depreciation rates range from 7% to 25% for equipment. The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there was no impairment at December 31, 2014 or 2013.
	Cash Equivalents	For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
	Receivables and Credit Policies	Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Customer account balances with invoices dated over 90 days old are considered delinquent. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of the amount that will not be collected. Management individually reviews all accounts receivable balances that exceed 90 days from the invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected.
	Advertising	The Company expenses advertising costs as they are incurred. Advertising expenses for the years ended December 31, 2014 and 2013, were $6,053 and $28,419, respectively.

8

Nexgen Wireless, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

1.	Summary of Accounting Policies (Continued)
	Income Tax Status	The stockholders of the Company elected, under the small business corporation provision of the Internal Revenue Code, to have the Company’s net income or loss reflected in their individual income tax returns. Consequently, no provision for income taxes other than various state corporate level taxes has been provided for. The Company files income tax returns in the U.S. federal jurisdiction and the states of Illinois and California. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for the years before 2011. The Company includes penalties and interest assessed by income tax authorities in operating expenses. The Company did not have penalties and interest expenses for the years ended December 31, 2014 and 2013, respectively.
	Concentration of Credit Risk	Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company grants credit to all customers. The Company performs ongoing credit evaluations of its customers’ financial conditions, and generally, requires no collateral from its customers. The Company maintains its cash at several banks. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation up to $250,000. At December 31, 2014, the Company’s uninsured cash balance was $2,464,184. The Company’s three largest customers accounted for approximately 87% and 90% of its sales for the years ended December 31, 2014 and 2013, respectively.
	Estimates	The preparation of financial statements in conformity with United States of America generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
	Cost of Sales	The Cost of Sales consists of field equipment cost, equipment rental cost, field staff wages, and subcontractor services.
	Subsequent Events	In accordance with ASC 855, the Company evaluated subsequent events through February 24, 2015, the date these financial statements were available to be issued. There were no material subsequent events that required recognition or additional disclosures in these financial statements.
	Reclassifications	Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year financial statements.

9

Nexgen Wireless, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

2. Accounts and Notes Receivable Accounts and notes receivable amounts at December 31, 2014 and 2013 as restated consist of:

	2014		2013 (Restated)
Current Customer Accounts	$	6,259,339	$	1,821,801
Allowance for uncollectible customer accounts		—		—
	$	6,259,339	$	1,821,801

		Approximately 87% of gross accounts receivable at December 31, 2014 and 81% at December 31, 2013 were from the Company’s three largest customers.
3.	Property and Equipment	At December 31, 2014 and 2013 property and equipment are summarized as follows:

	2014			2013
Equipment	$	118,992		$	118,992
Furniture and fixtures		40,163			26,681
Office equipment		16,440			1,515
Vehicles		176,682			110,787
		352,277			257,975
Accumulated depreciation		(170,492	)		(134,571	)
	$	181,785		$	123,404

		Depreciation expense for the years ended December 31, 2014 and 2013 was $35,921 and $33,441, respectively.
4.	Compensated Absences	Employees of the Company are entitled to paid vacation, depending on job classifications, length of service, and other factors. The estimated liability for compensated absences is $113,060 and $ - as of December 31, 2014 and 2013, respectively.
5.	Accrued Expenses	Accrued expenses consist of the following at December 31, 2014 and 2013:

	2014		2013
Salaries, commissions and vacation pay	$	826,535	$	410,586
Other		11,158		—
	$	837,693	$	410,586

6. Line-of-Credit The Company entered into a new, outstanding line-of-credit with a bank in December 2014. The amount of $1,500,000 which is secured by all otherwise unsecured assets. The agreement provides for interest to be paid on any outstanding balances at Libor plus 3% (at December 31, 2014 – 3.45%). The outstanding balances on this line-of-credit were $250,000 at December 31, 2014.

10

Nexgen Wireless, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

6.	Line-of-Credit (Continued)	The Company had an outstanding line-of-credit with a bank in the amount of $1,000,000 which was secured by all otherwise unsecured assets. The agreement provided for interest to be paid on any outstanding balances at the Prime rate less .25%. Outstanding balances on this line-of-credit were partially guaranteed by the principal shareholder. The outstanding balance on this line-of-credit was $ - at December 31, 2013. This facility ended during 2014.
7.	Long-Term Debt	Long-term debt at December 31, 2014 and 2013 consists of the following:

	2014			2013
Note payable – due 12/31/17, payable in monthly installments of $921, including interest of 1.9%, secured by Vehicles.	$	32,068		$	43,412
Note payable – due March 2020, payable in monthly installments of $912, including interest of 3.88%, secured by Vehicles.		51,886			—
		83,954			43,412
Less Current Portion		(19,630	)		(10,339	)
	$	64,324		$	33,073

		Maturities of long-term debt for the five years subsequent to December 31, 2014 are as follows: 2015 - $19,630; 2016 - $20,191; 2017 - $20,617; 2018 - $10,213; 2019 - $13,303.
8.	Leases	The Company leases its principal offices under a non-cancelable lease agreement. Total rent expense for the years ended December 31, 2014 and 2013 were $87,978 and $44,607, respectively. Annual minimum rental commitments under the lease at December 31, 2014 are as follows: 2015 - $89,970; 2016 - $92,678; 2017 - $94,852; 2018 - $65,264.
9.	Employee Profit Sharing Plan	The Company maintains a qualified defined contribution plan which covers substantially all employees, who have completed one year of service as defined in the plan. Under the plan, employees may elect to make pre-tax or Roth contributions to the plan. These contributions may be a fixed dollar amount or a percentage of their salary up to the annual maximum as defined. The Company did not make any discretionary profit sharing contributions for the years ended December 31, 2014 and 2013.
10.	Contingent Liability	The Company was issued demand letters by two former employees alleging the Company owed wages and commissions to them at the time of their termination of employment. The two parties have agreed to the Company owing $262,000, which is included in accrued liabilities at December 31, 2014. Management does not believe any possible additional liability would materially affect the Company’s financial position or results of operations.

11

Nexgen Wireless, Inc.

Notes to Financial Statements

December 31, 2014 and 2013

11. Restatement In 2014, the Company made prior year adjustments causing 2012 retained earnings and the 2013 financial statements to be restated. The prior year adjustments were due to management reviewing their sales cutoff. The following changes were made to the 2012 retained earnings and the 2013 balance sheet and income statement:

	2012 Prior		2012 Adjusted		Change
Retained earnings	$	1,239,852	$	2,084,762	$	844,910
	2013 Prior		2013 Adjusted		Change
Income Statement
Sales	$	16,094,993	$	15,543,420	$	(551,573	)
Balance Sheet
Accounts receivable	$	1,528,464	$	1,821,801	$	293,337
Retained earnings	$	3,726,804	$	4,020,141	$	293,337

12

EX-99.2

Exhibit 99.2

PCTEL, Inc.

UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS

(in thousands, except per share data)

The unaudited condensed consolidated pro forma financial statements include the financial statement information for PCTEL, Inc. (PCTEL) and Nexgen Wireless, Inc. (“Nexgen”).

The unaudited pro forma consolidated financial information has been prepared using the purchase method of accounting in which the total cost of the Nexgen acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. This allocation has been done on a provisional basis and is subject to change pending final determination of the fair values of the assets and assumed liabilities. The adjustments included in the unaudited condensed consolidated pro forma financial statements represent the provisional determination of such adjustments based upon currently available information. Accordingly, the actual fair value of the assets acquired, liabilities assumed and the related adjustments may differ from those reflected in this Current Report on Form 8-K/A.

The unaudited condensed consolidated pro forma statement of operations for the year ended December 31, 2014 combines the condensed consolidated statement of operations of PCTEL for the year ended December 31, 2014 and the audited condensed consolidated statements of operations for Nexgen for the year ended December 31, 2014 as if the merger had occurred on January 1, 2014.

The unaudited condensed consolidated pro forma statement of operations for the three months ended March 31, 2015 combines the condensed consolidated statement of operations of PCTEL for the three months ended March 31, 2015 and the unaudited condensed consolidated statements of operations for Nexgen for the two months ended February 28, 2015 as if the acquisition had occurred on January 1, 2014.

The balance sheet as of March 31, 2015 includes the provisional purchase accounting for Nexgen. See our Quarterly Report on Form 10-Q for the balance sheet and additional information related to the acquisition of substantially all of the assets of, and assumption of certain specified liabilities of Nexgen.

No pro forma effects have been given to any operational or other synergies that may be realized from the Nexgen acquisition. The unaudited pro forma condensed consolidated financial information is based on the estimates and assumptions described in the notes to the unaudited condensed consolidated pro forma financial statements.

The unaudited condensed consolidated pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that might have been achieved had the transaction occurred as of an earlier date, and they are not necessarily indicative of future operating results or financial position. These pro forma amounts do not, therefore, project PCTEL’s financial position or results of operations for any future date or period. The accompanying unaudited condensed consolidated pro forma financial information should be read in conjunction with the historical financial statements and the related notes thereto of PCTEL, which are included in its Annual Report on Form 10-K and its Quarterly Reports on Forms 10-Q, as well as other financial information included elsewhere in this Current Report on Form 8-K/A.

PCTEL, INC.

CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended March 31, 2015

(in thousands, except per share data)

	PCTEL, Inc. (as Reported)			Nexgen		Proforma Adjustments			PCTEL, Inc. (Pro Forma)
REVENUES	$	26,326		$	2,958	$	0		$	29,284
COST OF REVENUES		16,137			1,907		0			18,044
GROSS PROFIT		10,189			1,051		0			11,240
OPERATING EXPENSES:
Research and development		2,738			296		0			3,034
Sales and marketing		3,530			201		0			3,731
General and administrative		3,363			65		(704	) (a), (b)		2,724
Amortization of intangible assets		654			0		484	(c)		1,138
Total operating expenses		10,285			562		(220	)		10,627
OPERATING INCOME (LOSS)		(96	)		489		220			613
Other income (expense), net		44			1		(1	) (d)		44
INCOME (LOSS) BEFORE INCOME TAXES		(52	)		490		219			657
Expense (benefit) for income taxes		(19	)		3		256	(e)		240
NET INCOME (LOSS)		(33	)		487		(38	)		416
Basic Earnings per Share:
Net loss available to common shareholders	$	0.00							$	0.02
Diluted Earnings per Share:
Net loss available to common shareholders	$	0.00							$	0.02
Weighted average shares - Basic		18,312								18,312
Weighted average shares - Diluted		18,312								18,312

* see accompanying footnotes to the pro forma financial statements

PCTEL, INC.

CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS (Unaudited)

Year Ended December 31, 2014

(in thousands, except per share data)

	PCTEL, Inc. (as Reported)		Nexgen			Proforma Adjustments			PCTEL, Inc. (Pro Forma)
REVENUES	$	107,164	$	23,827		$	0		$	130,991
COST OF REVENUES		63,577		13,524			0			77,101
GROSS PROFIT		43,587		10,303			0			53,890
OPERATING EXPENSES:
Research and development		11,736		1,456			0			13,192
Sales and marketing		12,961		987			0			13,948
General and administrative		12,819		320			29	(f)		13,168
Amortization of intangible assets		1,967		0			2,923	(g)		4,890
Total operating expenses		39,483		2,763			2,952			45,198
OPERATING INCOME (LOSS)		4,104		7,540			(2,952	)		8,692
Other income (expense), net		1,666		(2	)		(4	) (h)		1,660
INCOME (LOSS) BEFORE INCOME TAXES		5,770		7,538			(2,956	)		10,352
Expense (benefit) for income taxes		1,158		119			1,560	(i)		2,837
NET INCOME		4,612		7,419			(4,516	)		7,515
Basic Earnings per Share:
Net income (loss) available to common shareholders	$	0.25							$	0.41
Diluted Earnings per Share:
Net income (loss) available to common shareholders	$	0.25							$	0.41
Weighted average shares - Basic		18,159								18,159
Weighted average shares - Diluted		18,389								18,389

* see accompanying footnotes to the pro forma financial statements

PCTEL, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED

(in thousands)

Acquisition of Nexgen Wireless, Inc.

On February 27, 2015, the Company acquired substantially all of the assets of, and assumed certain specified liabilities of, Nexgen Wireless, Inc., an Illinois corporation (“Nexgen”), pursuant to an Asset Purchase Agreement dated as of February 27, 2015 (the “Nexgen APA”) among PCTEL, Inc., Nexgen, and the principals of Nexgen.

The business of Nexgen is based in Schaumburg, Illinois. Nexgen provides Meridian™, a network analysis tool portfolio, and engineering services. Nexgen’s Meridian software product portfolio translates real-time network performance data into engineering actions to optimize operator performance. Meridian, with its modules of Network IQ™, Subscriber IQ™, and Map IQ™, supports crowd-based, cloud-based data analysis to enhance network performance. Nexgen provides performance engineering, specialized staffing, and trend analysis for carriers, infrastructure vendors, and neutral hosts for 2G, 3G, 4G, and LTE networks.

The provisional purchase consideration for Nexgen was $21.5 million, consisting of $18.25 million in cash paid at closing, $2.25 million held in escrow, an estimated $0.9 million excess working capital true up to be paid in cash, and a potential $2.0 million contingency payment that has been provisionally calculated with a fair value of $0.1 million. The contingent payment was dependent on the achievement of revenue-based goals pertaining to the acquired business for the period commencing on March 1, 2015 and ending on April 30, 2016. The cash consideration paid was provided from the Company’s existing cash. The assets acquired consisted primarily of customer relationships, intellectual property (including trade names), working capital (accounts receivable, work in process, accounts payable and accrued liabilities), and fixed assets. The Nexgen Parties are bound by non-competition covenants under the Nexgen APA, which generally expire on February 27, 2019. The Company calculates the fair value of the assets acquired by using a blended analysis of the present value of future discounted cash flows and the market approach of valuation. The intangible assets recorded have a weighted average amortization period of 5.0 years.

The amortization period by asset is as follows:

Intangible Assets	Useful Life
Customer relationships	5 years
Trade names	5 years
Technology	5 years
Backlog	4 months
Non-compete	4 years

The purchase accounting related to the valuation of certain tangible and intangible assets was still in process at March 31, 2015. The purchase accounting is expected to be completed no later than the quarter ended September 30, 2015. The following is the provisional allocation of the purchase price for the assets from Nexgen at the date of the acquisition as of March 31, 2015:

Tangible assets:
Accounts receivable	$	5,437
Prepaid and other assets		49
Deferred cost of sales		24
Fixed assets		43
Total tangible assets		5,553
Intangible assets:
Customer relationships		9,258
Trade names		972
Technology		3,165
Backlog		109
Non-compete		538
Goodwill		2,456
Total intangible assets		16,498
Total assets		22,051
Accounts payable		200
Accrued liabilities		337
Total liabilities		537
Net assets acquired	$	21,514

A reconciliation of the assets acquired with the cash paid at closing is as follows:

Net assets acquired	$	21,514
Due Nexgen - contingent liability		(91	)
Due Nexgen - working capital adjustment		(923	)
Cash paid at closing	$	20,500

Mr. Jigar Thakkar, the primary founder of Nexgen, remains with the acquired business as the Company’s newly-appointed Vice President, Network Analytics, under an employment arrangement that includes non-competition covenants for the duration of his employment with PCTEL, Inc. and for 12 months thereafter (which covenants are in addition to his non-competition covenants under the Nexgen APA described above). The Company assumed Nexgen’s existing lease for Nexgen’s offices in Schaumburg, Illinois and will operate the acquired business from that location.

The Company does not have any material relationship with Mr. Thakkar and the other principals of Nexgen other than in respect of the Nexgen APA, the Nexgen APA Amendment, the transactions provided for therein, and Mr. Thakkar’s post-acquisition role as the Company’s Vice President and Chief Technology Officer, RF Solutions.

Pro Forma Adjustments –Three Months Ended March 31, 2015

(a) To eliminate transactions costs of $711 consisting of investment banking fees, due diligence, and legal fees incurred.

(b) To include additional bank fees of $7 related to lower cash balances.

(c) To record the amortization for the intangible assets acquired from Nexgen.

(d) To record the elimination of interest expense related to expense incurred by Nexgen for its lines of credit and other debt and to record the elimination of interest income related to cash investments used for the purchase of Nexgen.

(e) To record income tax expense related to the Nexgen pretax earnings and related to the pro forma adjustments. Since Nexgen was a pass through entity for tax purposes, the pro forma income tax adjustment for Nexgen represents a true-up to the Company’s statutory rate for federal and state taxes.

Pro Forma Adjustments –Year Ended December 31, 2014

(f) To include additional bank fees of $29 related to lower cash balances.

(g) To record the amortization for the intangible assets acquired from Nexgen.

(h) To record the elimination of interest expense related to expense incurred by Nexgen for its lines of credit and other debt and to record the elimination of interest income related to cash investments used for the purchase of Nexgen.

(i) To record income tax expense related to the Nexgen pretax earnings and related to the pro forma adjustments. Since Nexgen was a pass through entity for tax purposes, the pro forma income tax adjustment for Nexgen represents a true-up to the Company’s statutory rate for federal and state taxes.

Reclassifications

For the purpose of this unaudited pro forma information, certain amounts in Nexgen’s unaudited consolidated statements of income for the year ended December 31, 2014 and for the two months ended February 28, 2015 were reclassified to maintain consistency in presentation with PCTEL’s financial information.