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 June 30, 2013 |
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)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (see the definitions of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company x |
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 August 9, 2013: 23,933,231
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART 1 – FINANCIAL INFORMATION
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2013 | December 31, 2012 | |||||||
(unaudited) | ||||||||
- ASSETS - | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 12,406,485 | $ | 12,969,513 | ||||
Accounts receivable - net of allowance for doubtful accounts of $53,387 and $57,333 for 2013 and 2012, respectively | 5,363,072 | 5,676,015 | ||||||
Inventories | 9,338,357 | 8,289,635 | ||||||
Deferred income taxes - current | 1,324,946 | 1,127,553 | ||||||
Prepaid expenses and other current assets | 578,704 | 588,726 | ||||||
Asset held for sale | 3,179,002 | 3,179,002 | ||||||
TOTAL CURRENT ASSETS | 32,190,566 | 31,830,444 | ||||||
PROPERTY, PLANT AND EQUIPMENT - NET | 1,284,086 | 1,266,692 | ||||||
OTHER ASSETS: | ||||||||
Goodwill | 1,351,392 | 1,351,392 | ||||||
Deferred income taxes - non-current | 6,317,727 | 6,084,042 | ||||||
Other assets | 695,548 | 697,054 | ||||||
TOTAL OTHER ASSETS | 8,364,667 | 8,132,488 | ||||||
TOTAL ASSETS | $ | 41,839,319 | $ | 41,229,624 | ||||
- LIABILITIES AND SHAREHOLDERS’ EQUITY - | ||||||||
CURRENT LIABILITIES: | ||||||||
Accounts payable | $ | 1,237,560 | $ | 1,258,426 | ||||
Accrued expenses and other current liabilities | 758,365 | 1,426,788 | ||||||
Mortgage payable | 2,590,231 | 2,629,215 | ||||||
TOTAL CURRENT LIABILITIES | 4,586,156 | 5,314,429 | ||||||
LONG TERM LIABILITIES | — | — | ||||||
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, 29,132,557 and 29,012,557 shares issued, 23,933,231 and 23,987,972 shares outstanding, respectively | 291,326 | 290,126 | ||||||
Additional paid-in-capital | 38,388,854 | 38,226,921 | ||||||
Retained earnings | 8,262,005 | 6,857,820 | ||||||
Treasury stock at cost, 5,199,326 and 5,024,585 shares, respectively | (9,689,022 | ) | (9,459,672 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 37,253,163 | 35,915,195 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 41,839,319 | $ | 41,229,624 |
See accompanying notes
3 |
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
NET SALES | $ | 8,704,886 | $ | 7,092,046 | $ | 15,501,875 | $ | 13,993,865 | ||||||||
COST OF SALES | 4,624,558 | 3,502,208 | 8,101,184 | 7,048,962 | ||||||||||||
GROSS PROFIT | 4,080,328 | 3,589,838 | 7,400,691 | 6,944,903 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Research and development | 627,181 | 619,803 | 1,239,304 | 1,219,269 | ||||||||||||
Sales and marketing | 1,319,164 | 1,159,798 | 2,341,324 | 2,232,414 | ||||||||||||
General and administrative | 1,416,734 | 1,201,027 | 2,858,407 | 2,332,795 | ||||||||||||
TOTAL OPERATING EXPENSES | 3,363,079 | 2,980,628 | 6,439,035 | 5,784,478 | ||||||||||||
OPERATING INCOME | 717,249 | 609,210 | 961,656 | 1,160,425 | ||||||||||||
OTHER (INCOME) EXPENSE | ||||||||||||||||
Interest expense - net | 48,981 | 50,506 | 98,333 | 101,447 | ||||||||||||
Other (income) - net | (249,531 | ) | (72,204 | ) | (313,590 | ) | (132,042 | ) | ||||||||
TOTAL OTHER (INCOME) EXPENSE | (200,550 | ) | (21,698 | ) | (215,257 | ) | (30,595 | ) | ||||||||
NET INCOME BEFORE INCOME TAXES | 917,799 | 630,908 | 1,176,913 | 1,191,020 | ||||||||||||
(BENEFIT) FROM INCOME TAXES | (140,160 | ) | (24,541 | ) | (227,272 | ) | (120,293 | ) | ||||||||
NET INCOME | $ | 1,057,959 | $ | 655,449 | $ | 1,404,185 | $ | 1,311,313 | ||||||||
INCOME PER COMMON SHARE: | ||||||||||||||||
BASIC | $ | 0.04 | $ | 0.03 | $ | 0.06 | $ | 0.05 | ||||||||
DILUTED | $ | 0.04 | $ | 0.03 | $ | 0.06 | $ | 0.05 |
See accompanying notes
4 |
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income | $ | 1,404,185 | $ | 1,311,313 | ||||
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | ||||||||
Depreciation and amortization | 168,200 | 169,501 | ||||||
Stock compensation expense | 163,133 | 127,565 | ||||||
Realized gain on sale of non-marketable security | (161,500 | ) | — | |||||
Deferred income taxes | (431,078 | ) | (320,000 | ) | ||||
Allowance for doubtful accounts | (3,946 | ) | (65,144 | ) | ||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 316,889 | 215,061 | ||||||
Inventories | (1,048,722 | ) | (1,041,033 | ) | ||||
Prepaid expenses and other assets | 10,528 | (28,396 | ) | |||||
Accounts payable, accrued expenses and other current liabilities | (689,289 | ) | 552,784 | |||||
Net cash provided by (used for) operating activities | (271,600 | ) | 921,651 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Capital expenditures | (185,594 | ) | (218,408 | ) | ||||
Proceeds from sale of non-marketable security | 162,500 | — | ||||||
Net cash (used for) investing activities | (23,094 | ) | (218,408 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Payments of mortgage note | (38,984 | ) | (36,155 | ) | ||||
Repurchase of treasury stock - 174,741 and 291,920 shares, respectively | (229,350 | ) | (345,646 | ) | ||||
Net cash (used for) financing activities | (268,334 | ) | (381,801 | ) | ||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (563,028 | ) | 321,442 | |||||
Cash and cash equivalents, at beginning of period | 12,969,513 | 12,089,782 | ||||||
CASH AND CASH EQUIVALENTS, AT END OF PERIOD | $ | 12,406,485 | $ | 12,411,224 | ||||
SUPPLEMENTAL INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Taxes | $ | 230,236 | $ | 120,146 | ||||
Interest | $ | 98,783 | $ | 101,613 |
See accompanying notes
5 |
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(unaudited)
Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Total Shareholders’ Equity | ||||||||||||||||
Balances at December 31, 2012 | $ | 290,126 | $ | 38,226,921 | $ | 6,857,820 | $ | (9,459,672 | ) | $ | 35,915,195 | |||||||||
Net income | — | — | 1,404,185 | — | 1,404,185 | |||||||||||||||
Stock issued under equity compensation plan | 1,200 | (1,200 | ) | — | — | — | ||||||||||||||
Stock compensation expense | — | 163,133 | — | — | 163,133 | |||||||||||||||
Repurchase of treasury stock | — | — | — | (229,350 | ) | (229,350 | ) | |||||||||||||
Balances at June 30, 2013 | $ | 291,326 | $ | 38,388,854 | $ | 8,262,005 | $ | (9,689,022 | ) | $ | 37,253,163 |
See accompanying notes
6 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
The condensed consolidated balance sheets as of June 30, 2013, the condensed consolidated statements of operations for the three and six-month periods ended June 30, 2013 and 2012, the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2013 and 2012, and the condensed consolidated statement of shareholders’ equity for the six-month period ended June 30, 2013 have been prepared by the Company without audit. The condensed consolidated financial statements include the accounts of Wireless Telecom Group, Inc., which operates one of its product lines under the trade name Noisecom, Inc. (“Noisecom”), and its wholly-owned subsidiaries Boonton Electronics Corporation (“Boonton”), Microlab/FXR (“Microlab”), WTG Foreign Sales Corporation and NC Mahwah, Inc., collectively the “Company”. All intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the accompanying condensed consolidated financial statements referred to above contain all necessary adjustments, consisting of normal accruals and recurring entries, which are necessary to present fairly 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 financial statements included in its annual report on Form 10-K for the year ended December 31, 2012. 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 condensed or omitted from this report.
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including inventory valuation, accounts receivable valuation, valuation of deferred tax assets and estimated fair values of stock options) and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates.
The results of operations for the three and six-month periods ended June 30, 2013 and 2012 are not necessarily indicative of the results to be expected for the full year.
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.
The Company maintains significant cash investments primarily with two financial institutions, which at times may exceed federally insured limits. The Company performs periodic evaluations of the relative credit rating of these institutions as part of its investment strategy.
Concentrations of credit risk with respect to accounts receivable are limited due to the Company’s large customer base. At June 30, 2013 and December 31, 2012, primarily all of the Company’s receivables pertain to the telecommunications industry.
The carrying amounts of cash and cash equivalents, trade receivables, other current assets and accounts payable approximate fair value due to the short-term nature of these instruments. Additionally, at June 30, 2013, the fair value of the fixed rate mortgage payable (which was repaid on August 1, 2013 – see Note 10) approximates its carrying value.
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of bank and money market accounts.
Management has evaluated subsequent events for disclosure and/or recognition in the condensed consolidated financial statements through the date the financial statements were available to be issued.
Certain prior period information has been reclassified to conform to the current period’s reporting presentation.
7 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS
In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income (“AOCI”) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. ASU 2013-02 was effective for the Company beginning January 1, 2013. The adoption of this ASU did not have a material impact on its condensed consolidated financial statements
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.
NOTE 3 – INCOME TAXES
The Company records deferred taxes in accordance with ASC 740, “Accounting for Income Taxes”. This ASC 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 asset 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 future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards. The Company has recorded a valuation allowance due to the uncertainty related to the realization of certain deferred tax assets existing at June 30, 2013. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. Management believes that it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation allowances as of June 30, 2013.
The deferred income tax assets and (liabilities) are summarized as follows:
June
30, 2013 | December
31, 2012 | |||||||
Net deferred tax asset: | ||||||||
Uniform capitalization of inventory costs for tax purposes | $ | 251,737 | $ | 221,155 | ||||
Reserves on inventories | 523,749 | 499,001 | ||||||
Allowance for doubtful accounts | 21,355 | 22,933 | ||||||
Accruals | 105,000 | 195,149 | ||||||
Tax effect of goodwill | (378,543 | ) | (321,636 | ) | ||||
Book depreciation over tax | (104,578 | ) | (49,618 | ) | ||||
Net operating loss carryforward | 15,920,952 | 16,556,713 | ||||||
16,339,672 | 17,123,697 | |||||||
Valuation allowance for deferred tax assets | (8,696,999 | ) | (9,912,102 | ) | ||||
$ | 7,642,673 | $ | 7,211,595 |
The Company analyzes its deferred tax asset on a quarterly basis and adjusts the deferred tax asset valuation allowance based on its rolling five-year projection of estimated taxable income, taking into consideration any limitations that may exist on its use of its net operating loss carryforwards.
8 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 – INCOME TAXES (Continued)
Under ASC 740, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.
The Company has analyzed its filing positions in all of the Federal and state jurisdictions where it is required to file income tax returns. As of June 30, 2013 and December 31, 2012, the Company has identified its Federal tax return and its state tax return in New Jersey as “major” tax jurisdictions, as defined, in which it is required to file income tax returns. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition or disclosure in its condensed consolidated financial statements.
The State of New Jersey is in the process of conducting a field examination of the Company’s tax returns for the years 2009 through 2012. The Company expects the examination to be completed in late 2013.
NOTE 4 - INCOME PER COMMON SHARE
Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are calculated by using the weighted average number of shares of common stock outstanding and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Weighted average common shares outstanding | 23,852,754 | 24,304,667 | 23,863,193 | 24,367,831 | ||||||||||||
Potentially dilutive stock options | 580,478 | 358,889 | 494,425 | 360,792 | ||||||||||||
Weighted average common shares outstanding, assuming dilution | 24,433,232 | 24,663,556 | 24,357,618 | 24,728,623 |
Common stock options are included in the diluted earnings per share calculation when the various option exercise prices are less than their relative average market price during the periods presented in this quarterly report. The weighted average number of options not included in diluted earnings per share, because the effects are anti-dilutive, was 1,561,523 and 1,927,873 for the three-months ended June 30, 2013 and 2012, respectively. For the six-months ended June 30, 2013 and 2012, the weighted average number of options not included in diluted earnings per share was 1,649,453 and 1,956,923, respectively.
NOTE 5 – INVENTORIES
Inventory carrying value is net of inventory reserves of $683,866 and $621,996 at June 30, 2013 and December 31, 2012, respectively.
Inventories consist of: | June 30, 2013 | December 31, 2012 | ||||||
Raw materials | $ | 5,319,139 | $ | 5,186,555 | ||||
Work-in-process | 1,204,817 | 390,188 | ||||||
Finished goods | 2,814,401 | 2,712,892 | ||||||
$ | 9,338,357 | $ | 8,289,635 |
9 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 6 - GOODWILL
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill is not amortized but rather is reviewed for impairment at least annually, or more frequently if a triggering event occurs. Management first makes a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test described below. If, based on the qualitative assessment, the estimated fair value is well in excess of its carrying amount, management will not perform any quantitative assessment. If, however, the conclusion is that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management then performs a two-step goodwill impairment test. Under the first step, the fair value of the reporting unit is compared with its carrying value, and, if an indication of goodwill impairment exists for the reporting unit, the Company must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill as determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation.
The residual fair value after this allocation is the implied fair value of the reporting unit’s goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed.
The Company’s goodwill balance of $1,351,392 at June 30, 2013 and December 31, 2012 relates to one of the Company’s reporting units, Microlab. Management’s qualitative assessment performed in the fourth quarter of 2012 did not indicate any impairment of Microlab’s goodwill as its fair value is estimated to be well in excess of its carrying value.
NOTE 7 - ACCOUNTING FOR STOCK BASED COMPENSATION
The Company follows the provisions of ASC 718, “Share-Based Payment.” The Company’s results for the three and six-month periods ended June 30, 2013 include share-based compensation expense totaling $72,233 and $163,133, respectively. Results for the three and six-month periods ended June 30, 2012 include share-based compensation expense of $57,032 and $127,565, respectively. Such amounts have been included in the Condensed Consolidated Statements of Operations within operating expenses.
On June 13, 2012, our shareholders approved the Company’s 2012 Incentive Compensation Plan (the “2012 Plan”). The 2012 Plan replaced the Company’s Amended and Restated 2000 Stock Option Plan, as amended (the “Prior Plan”), under which no additional grants will be made. Under the 2012 Plan, the total number of shares of the Company’s common stock reserved and available for issuance under the 2012 Plan at any time is 2,000,000 shares, plus any shares subject to awards that have been issued under the Prior Plan that expire, are cancelled or are terminated after June 13, 2012 without having been exercised in full and would have become available for subsequent grants under the Prior Plan. As of June 30, 2013, there were 1,741,304 shares available for issuance under the 2012 Plan. The 2012 Plan provides for the grant of Restricted Stock Awards, Incentive Stock Options and Non-Qualified 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.
All service-based options granted have ten-year terms and, from the date of grant, vest annually and become fully exercisable after a maximum of five years. Performance-based options granted have ten-year terms and vest and become fully exercisable when determinable performance targets are achieved. Performance targets are agreed to, and approved by, the Company’s board of directors.
Under the Company’s 2012 Plan, options may be granted to purchase shares of the Company’s common stock exercisable at prices generally equal to or above the fair market value on the date of the grant.
10 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - ACCOUNTING FOR STOCK BASED COMPENSATION (Continued)
The following table summarizes the restricted common stock awards granted to certain officers and directors of the Company during the six-months ended June 30, 2012 under the Company’s approved stock compensation plan:
Number of Shares | Price per | |||||||||||
Individuals | Granted | Granted Share | Vesting Date | |||||||||
Chief Executive Officer | 50,000 | $ | 1.15 | June 13, 2012 | (vested upon grant) | |||||||
26,957 | $ | 1.15 | March 20, 2013 | |||||||||
V.P. of Sales and Marketing | 21,739 | $ | 1.15 | March 20, 2013 | ||||||||
Board of Directors | 80,000 | $ | 1.15 | June 13, 2012 | (vested upon grant) | |||||||
80,000 | $ | 1.15 | June 13, 2013 | |||||||||
258,696 |
Management evaluated the fair value of the replacement awards and determined that no additional compensation cost was required to be recorded.
During the six-months ended June 30, 2013, the Company granted 120,000 shares of restricted common stock to certain directors of the Company under its approved stock compensation plan. The shares were granted at a price of $1.51 per share and will fully vest on the date of the Company’s next annual shareholders meeting to be held in June of 2014, or a vesting period of approximately one year. The total compensation expense to be recognized over the vesting period is $181,200.
The Company repurchased 13,479 shares of restricted common stock from its Chief Executive Officer and 10,870 shares of restricted common stock from its V.P. of Sales and Marketing for $36,279, or $1.49 per share, During the six-months ended June 30, 2012, the Company repurchased 23,334 shares of restricted common stock from its Chief Executive Officer for $26,834, or $1.15 per share. In accordance with the terms of the 2012 Plan, the Compensation Committee of the Board of Directors authorized the Company to repurchase, upon vesting of the restricted stock, that certain number of shares necessary to allow such grantees to satisfy their personal tax liability associated with the vesting of such shares.
A summary of the status of the Company’s non-vested restricted common stock, as granted under the Company’s approved stock compensation plan, as of June 30, 2013, and changes during the six-months ended June 30, 2013 are presented below:
Weighted Average | ||||||||
Grant Date | ||||||||
Non-vested Shares | Number of Shares | Fair Value | ||||||
Non-vested at January 1, 2013 | 128,696 | $ | 1.15 | |||||
Granted | 120,000 | $ | 1.51 | |||||
Vested | (128,696 | ) | $ | 1.15 | ||||
Non-vested at June 30, 2013 | 120,000 | $ | 1.51 |
As of June 30, 2013, the unearned compensation related to Company granted restricted common stock is $181,200 which will be amortized on a straight-line basis through the date of the Company’s next annual shareholders meeting to be held in 2014, the vesting date.
11 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - ACCOUNTING FOR STOCK BASED COMPENSATION (Continued)
A summary of performance-based stock option activity, and related information for the six-months ended June 30, 2013 follows:
Weighted Average | ||||||||
Options | Exercise Price | |||||||
Outstanding, January 1, 2013 | 1,300,000 | $ | 0.93 | |||||
Granted | — | — | ||||||
Exercised | — | — | ||||||
Forfeited | — | — | ||||||
Canceled/Expired | — | — | ||||||
Outstanding, June 30, 2013 | 1,300,000 | $ | 0.93 | |||||
Options exercisable: | ||||||||
June 30, 2013 | — | — |
The aggregate intrinsic value of performance-based stock options outstanding as of June 30, 2013 and December 31, 2012 was $679,750 and $416,150, respectively. The aggregate intrinsic value of performance-based stock options exercisable as of June 30, 2013 was $0.
A summary of service-based stock option activity, and related information for the six-months ended June 30, 2013 follows:
Weighted Average | ||||||||
Options | Exercise Price | |||||||
Outstanding, January 1, 2013 | 862,000 | $ | 2.61 | |||||
Granted | — | — | ||||||
Exercised | — | — | ||||||
Forfeited | — | — | ||||||
Canceled/Expired | (20,000 | ) | $ | 1.95 | ||||
Outstanding, June 30, 2013 | 842,000 | $ | 2.63 | |||||
Options exercisable: | ||||||||
June 30, 2013 | 842,000 | $ | 2.63 |
The Company’s service-based stock options are fully amortized. The Company began amortizing its performance-based options at the end of 2011. For each of the three-months ended June 30, 2013 and 2012, the Company recorded compensation expense in the amount of $49,233. For each of the six-months ended June 30, 2013 and 2012, the Company recorded compensation expense in the amount of $98,465. The remaining balance, or unamortized amount, of $492,328 is expected to be expensed on a straight-line basis through December 31, 2015, the implicit service period. If management determines in future periods the achievement of performance conditions are probable to occur sooner than expected, the Company will accelerate the expensing of any unamortized balance as of that determination date.
The following summarizes the components of share-based compensation expense by equity type for the three and six-months ended June 30:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Performance-Based Stock Options | $ | 49,233 | $ | 49,233 | $ | 98,465 | $ | 98,465 | ||||||||
Restricted Common Stock | 23,000 | 7,800 | 64,668 | 29,100 | ||||||||||||
Total Share-Based Compensation Expense | $ | 72,233 | $ | 57,033 | $ | 163,133 | $ | 127,565 |
Stock-based compensation for the three and six-months ended 2013 and 2012 is included in general and administrative expenses in the accompanying condensed consolidated statement of operations.
12 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 8 – SEGMENT INFORMATION
The Company, in accordance with ASC 280, “Disclosures about Segments of an Enterprise and Related Information”, has disclosed the following segment information:
The operating businesses of the Company are segregated into two reportable segments, test and measurement and network solutions. The test and measurement segment is comprised primarily of the Company’s operations and the operations of its subsidiary, Boonton. The network solutions segment is comprised primarily of the operations of the Company’s subsidiary, Microlab.
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).
Financial information by reportable segment for the three and six-months ended June 30, 2013 and 2012:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales by segment: | ||||||||||||||||
Test and measurement | $ | 2,750,733 | $ | 3,886,482 | $ | 5,753,896 | $ | 7,447,515 | ||||||||
Network solutions | 5,954,153 | 3,205,564 | 9,747,979 | 6,546,350 | ||||||||||||
Total consolidated net sales and net sales of reportable segments | $ | 8,704,886 | $ | 7,092,046 | $ | 15,501,875 | $ | 13,993,865 | ||||||||
Segment income: | ||||||||||||||||
Test and measurement | $ | 151,991 | $ | 772,795 | $ | 535,172 | $ | 1,147,909 | ||||||||
Network solutions | 1,525,206 | 653,255 | 2,312,022 | 1,559,414 | ||||||||||||
Income from reportable segments | 1,677,197 | 1,426,050 | 2,847,194 | 2,707,323 | ||||||||||||
Other unallocated amounts: | ||||||||||||||||
Corporate expenses | (959,948 | ) | (816,840 | ) | (1,885,538 | ) | (1,546,898 | ) | ||||||||
Interest and other income - net | 200,550 | 21,698 | 215,257 | 30,595 | ||||||||||||
Consolidated income before income tax (benefit) | $ | 917,799 | $ | 630,908 | $ | 1,176,913 | $ | 1,191,020 | ||||||||
Depreciation and amortization by segment: | ||||||||||||||||
Test and measurement | $ | 59,010 | $ | 69,106 | $ | 112,776 | $ | 136,865 | ||||||||
Network solutions | 28,244 | 17,930 | 55,424 | 32,636 | ||||||||||||
Total depreciation and amortization for reportable segments | $ | 87,254 | $ | 87,036 | $ | 168,200 | $ | 169,501 | ||||||||
Capital expenditures by segment: | ||||||||||||||||
Test and measurement | $ | 104,414 | $ | 72,089 | $ | 133,379 | $ | 141,810 | ||||||||
Network solutions | 22,060 | 56,287 | 52,215 | 76,598 | ||||||||||||
Total consolidated capital expenditures by reportable segment | $ | 126,474 | $ | 128,376 | $ | 185,594 | $ | 218,408 |
13 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 8 – SEGMENT INFORMATION (Continued)
Financial information by reportable segment as of June 30, 2013 and December 31, 2012:
2013 | 2012 | |||||||
Total assets by segment: | ||||||||
Test and measurement | $ | 11,672,775 | $ | 12,104,700 | ||||
Network solutions | 10,011,682 | 8,864,541 | ||||||
Total assets for reportable segments | 21,684,457 | 20,969,241 | ||||||
Corporate assets, principally cash and cash equivalents and deferred and current taxes | 20,154,862 | 20,260,383 | ||||||
Total consolidated assets | $ | 41,839,319 | $ | 41,229,624 |
Net consolidated sales by region were as follows:
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
Sales by region | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Americas | $ | 7,195,063 | $ | 5,406,258 | $ | 12,503,811 | $ | 10,421,835 | ||||||||
Europe, Middle East, Africa (EMEA) | 1,030,444 | 957,527 | 2,003,209 | 2,135,909 | ||||||||||||
Asia Pacific (APAC) | 479,379 | 728,261 | 994,855 | 1,436,121 | ||||||||||||
Total Sales | $ | 8,704,886 | $ | 7,092,046 | $ | 15,501,875 | $ | 13,993,865 |
Net sales are attributable to a geographic area based on the destination of the product shipment. The majority of shipments in the Americas are to customers located within the United States. For the three-months ended June 30, 2013 and 2012, sales in the United States amounted to $6,783,504 and $4,922,750, respectively. For the six-months ended June 30, 2013 and 2012, sales in the United States amounted to $11,650,350 and $9,622,652, respectively. For the three and six-months ended June 30, 2013 and 2012, shipments to the EMEA region were not significantly concentrated in one country. Shipments to the APAC region were largely concentrated in China. For the three-months ended June 30, 2013 and 2012, sales in China amounted to $204,047 and $460,049, respectively. For the six-months ended June 30, 2013 and 2012, sales in China amounted to $450,506 and $846,480, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Warranties:
The Company typically provides one-year warranties on all of its products covering both parts and labor. The Company, at its option, repairs or replaces products that are defective during the warranty period if the proper preventive maintenance procedures have been followed by its customers. Historically, warranty expense within the Company has been minimal.
Leases:
The Company has a building lease agreement with its current landlord to remain at its principal corporate headquarters in Hanover Township, Parsippany, New Jersey through September 30, 2014. The current minimum monthly base rent payment is approximately $29,000.
14 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)
Environmental Contingencies:
Following an investigation by the New Jersey Department of Environmental Protection (NJDEP) in 1982, of the waste disposal practices at a certain site formerly leased by Boonton, the Company put a ground water management plan into effect as approved by the NJDEP. Costs associated with this site are charged directly to income as incurred. The owner of this site has previously notified the Company that if the NJDEP investigation proves to have interfered with a sale of the property, the owner may seek to hold the Company liable for any resulting damages. Since May 1983, the owner has been on notice of this problem and has failed to institute any legal proceedings with respect thereto. While this does not bar the owner from instituting a suit, it is the opinion of the Company’s legal counsel that it is unlikely that the owner would prevail on any claim.
The Company is diligently pursuing efforts to satisfy the requirements of the original plan and receive a new determination from the NJDEP. Overall data from testing performed in March 2013 indicates the continuation of a decreasing concentration trend at the site. The overall decrease supports the absence of a continuing source impacting ground water. The Company believes that its current practice and plan of groundwater testing will continue until an official notification from NJDEP is obtained and the Company is released from further obligations. While management anticipates that the expenditures in connection with this site will not be substantial in future years, the Company could be subject to significant future liabilities and may incur significant future expenditures if further contaminants from Boonton’s testing are identified and the NJDEP requires additional remediation activities.
Management is unable to estimate future remediation costs, if any, at this time. The Company will continue to be liable under the plan, in all future years, until such time as the NJDEP releases it from all obligations applicable thereto.
Line of Credit:
The Company maintains a line of credit with its investment bank. The credit facility provides borrowing availability of up to 100% of the Company’s money market account balance and 99% of the Company’s short-term investment securities (U.S. Treasury bills) and, under the terms and conditions of the loan agreement, the facility is fully secured by our money fund account and short-term investment holdings held with the bank. Advances under the facility will bear interest at a variable rate equal to the London InterBank Offered Rate (“LIBOR”) in effect at time of borrowing. Additionally, under the terms and conditions of the loan agreement, there is no annual fee and any amount outstanding under the loan facility may be paid at any time in whole or in part without penalty. As of June 30, 2013, the Company had no borrowings outstanding under the facility and approximately $4,500,000 of borrowing availability. The Company has no current plans to borrow from this credit facility as it believes its present cash balances will adequately meet near-term working capital requirements.
Risks and Uncertainties:
Proprietary information and know-how are important to the Company’s commercial success. There can be no assurance that others will not either develop independently the same or similar information or obtain and use proprietary information of the Company. Certain key employees have signed confidentiality and non-compete agreements regarding the Company’s proprietary information.
The Company believes that its products do not infringe the proprietary rights of third parties. There can be no assurance, however, that third parties will not assert infringement claims in the future.
15 |
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 10 - ASSET HELD FOR SALE
On July 26, 2012, the Company received notice that its lessee exercised its purchase option under an operating lease with the Company, dated November 17, 2000, to purchase the property owned by the Company and located in Mahwah, New Jersey (the “Mahwah Building”). The purchase price is $3,500,000 of which $350,000 was deposited by the buyer and was held in escrow until the closing date. The Mahwah Building is included in Assets Held for Sale in the accompanying condensed consolidated balance sheets at its carrying value of $3,179,002.
On August 1, 2013, the Company closed on the sale of the Mahwah Building and repaid the existing mortgage payable on the building with the proceeds of the sale. As part of the terms of the sale, the Company was required to place $350,000 in escrow until certain conditions are met, as determined by the State of New Jersey. The terms of the mortgage required monthly payments of $23,750 applied to both principal and interest at the annual rate of 7.45%.
Included in the Company’s condensed consolidated statement of operations, recorded as non-operating income and expense, are certain income and expenses directly related to the Mahwah Building. For each of the three-months ended June 30, 2013 and 2012, the Company’s results of operations included rental income of $96,498. For each of the six-months ended June 30, 2013 and 2012, the Company’s results of operations included rental income of $192,995. For the three-months ended June 30, 2013 and 2012, the Company’s results of operations included mortgage interest expense of $49,208 and $50,636, respectively, and building depreciation expense of $22,232 for the three-months ended June 30, 2012. For the six-months ended June 30, 2013 and 2012, the Company’s results of operations included mortgage interest expense of $98,783 and $101,613, respectively, and building depreciation expense of $44,464 for the six-months ended June 30, 2012.
16 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Wireless Telecom Group, Inc., and its operating subsidiaries, (collectively, the “Company”), develop, manufacture and market a wide variety of electronic noise sources, electronic testing and measuring instruments including power meters, voltmeters and modulation meters and high-power passive microwave components for wireless products. The Company’s products have historically been primarily used to test the performance and capability of cellular/PCS and satellite communication systems and to measure the power of RF and microwave systems. Other applications include radio, radar, wireless local area network (WLAN) and digital television.
The operating businesses of the Company are segregated into two reportable segments: (1) test and measurement and (2) network solutions. The test and measurement segment is comprised primarily of the Company’s operations and the operations of its subsidiary, Boonton. The network solutions segment is comprised primarily of the operations of the Company’s subsidiary, Microlab. Additional financial information on the Company’s reportable segments as of June 30, 2013 and December 31, 2012, as well as for the three and six-months ended June 30, 2013 and 2012 is included in Note 8 to the Company’s condensed consolidated financial statements.
The financial information presented herein includes:
(i) Condensed Consolidated Balance Sheets as of June 30, 2013 (unaudited) and as of December 31, 2012 (ii) Condensed Consolidated Statements of Operations for the three and six-month periods ended June 30, 2013 (unaudited) and 2012 (unaudited) (iii) Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2013 (unaudited) and 2012 (unaudited) and (iv) Condensed Consolidated Statement of Shareholders’ Equity for the six-month period ended June 30, 2013 (unaudited).
FORWARD LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, without limitation, 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 may be identified by, among other things, the use of forward-looking terminology such as “believes,” “expects,” “intends,” “plans,” “may,” “will,” “should,” “anticipates” or “continues” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that 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 property rights, the effects of adoption of newly announced accounting standards, the effects of economic conditions and trade, legal and other economic risks, 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 from time to time in the Company’s filings with the Securities and Exchange Commission, the Company’s press releases and in oral statements made by or with the approval of authorized personnel. You should also consider carefully the statements under other sections of this Report and our Annual Report on Form 10-K for the year ended December 31, 2012, which address additional risks that could cause our actual results to differ from those set forth in any forward-looking statements. The Company’s forward-looking statements speak only as of the date of this Report. The Company undertakes no obligation to publically update or review any forward-looking statements whether as a result of new information, future developments or otherwise.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of the financial condition and results of operations are based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and judgments 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 amount of revenues and expenses for each period.
17 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
On a regular basis, management evaluates its assumptions, judgments and estimates. Management believes that there have been no material changes to the items that the Company disclosed as its significant accounting policies and estimates under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s December 31, 2012 Form 10-K.
The following represents a summary of the Company’s critical accounting policies, defined as those policies that the Company believes are: (a) the most important to the portrayal of its financial condition and results of operations, and (b) that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
Share-Based Compensation
The Company follows the provisions of Accounting Standards Codification (ASC) 718, “Share-Based Payment”. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. For any performance-based or service-based options granted, the Company takes into consideration guidance under ASC 718 and SEC Staff Accounting Bulletin No. 107 (SAB 107) when reviewing and updating assumptions. The expected option life is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted are expected to be outstanding. The expected volatility is based upon historical volatility of our shares using weekly price observations over an observation period of three years. The risk-free rate is based on the U.S. Treasury yield curve rate in effect at the time of grant for periods similar to the expected option life. The estimated forfeiture rate included in the option valuation is based on our past history of forfeitures. Due to the limited amount of forfeitures in the past, the Company’s estimated forfeiture rate has been zero.
Management estimates are necessary in determining compensation expense for stock options with performance-based vesting criteria. Compensation expense for this type of stock-based award is recognized over the period from the date the performance conditions are determined to be probable of occurring through the date the applicable conditions are expected to be met. If the performance conditions are not considered probable of being achieved, no expense is recognized until such time as the performance conditions are considered probable of being met, if ever. Management evaluates whether performance conditions are probable of occurring on a quarterly basis.
Revenue Recognition
Revenue from product shipments, including shipping and handling fees, is recognized once delivery has occurred provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectability is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Sales to international distributors are recognized in the same manner. If title does not pass until the product reaches the customer’s delivery site, then recognition of revenue is deferred until that time. There are no formal sales incentives offered to any of the Company’s customers. Volume discounts may be offered from time to time to customers purchasing large quantities on a per transaction basis. There are no material special post shipment obligations or acceptance provisions that exist with any sales arrangements.
Valuation of Inventory
Raw material inventories are stated at the lower of cost (first-in, first-out method) or market. Finished goods and work-in-process are valued at average cost of production, which includes material, labor and manufacturing expenses.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. A key consideration in estimating the allowance for doubtful accounts has been, and will continue to be, its customers’ payment history and aging of its accounts receivable balance. If the financial condition of any of its customers were to decline, additional allowances might be required.
18 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Income Taxes
The Company records deferred taxes in accordance with ASC 740, “Accounting for Income Taxes”. This ASC 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 asset, a majority of which has been generated by a history of net operating losses and determines the necessity for a valuation allowance. The Company evaluates which portion, if any, will more likely than not be realized by offsetting future taxable income, taking into consideration any limitations that may exist on its use of its net operating loss carry-forwards.
Uncertain Tax Positions
Under ASC 740, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.
The Company has analyzed its filing positions in all of the Federal and state jurisdictions where it is required to file income tax returns. As of June 30, 2013 and December 31, 2012, the Company has identified its Federal tax return and its state tax return in New Jersey as “major” tax jurisdictions, as defined, in which it is required to file income tax returns. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition or disclosure in its condensed consolidated financial statements.
Based on a review of tax positions for all open years and contingencies as set out in the Company’s notes to the condensed consolidated financial statements, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740 during the periods ended June 30, 2013 and 2012, and the Company does not anticipate that it is reasonably possible that any material increase or decrease in its unrecognized tax benefits will occur within twelve months.
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our interim condensed 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 consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2012.
For the six-months ended June 30, 2013 as compared to the corresponding period of the previous year, net consolidated sales increased to approximately $15,502,000 from approximately $13,994,000, an increase of approximately $1,508,000 or 10.8%. For the three-months ended June 30, 2013 as compared to the corresponding period of the previous year, net consolidated sales increased to approximately $8,705,000 from approximately $7,092,000, an increase of approximately $1,613,000 or 22.7%. These increases were primarily the result of strengthening demand for the Company’s network solutions products, particularly for use in distributed antenna systems (“DAS”). The Company continues to experience strong order activity in its network solutions segment due to commercial infrastructure development in support of the ongoing expansion and upgrades to DAS.
Net sales of the Company’s network solutions products for the six-months ended June 30, 2013 were approximately $9,748,000 as compared to approximately $6,546,000 for the six-months ended June 30, 2012, an increase of approximately $3,202,000 or 48.9%. Net sales of the Company’s network solutions products for the three-months ended June 30, 2013 were approximately $5,954,000 as compared to approximately $3,206,000 for the three-months ended June 30, 2012, an increase of approximately $2,748,000 or 85.7%. Net sales of network solutions products accounted for approximately 63% and 47% of net consolidated sales for the six-months periods ended June 30, 2013 and 2012, respectively.
19 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Net sales of network solutions products accounted for approximately 68% and 45% of net consolidated sales for the three-month periods ended June 30, 2013 and 2012, respectively. The increase in sales for the three and six-months ended June 30, 2013 for our network solutions segment was primarily due to the Company’s ongoing participation in DAS deployments through supply of its passive microwave components.
Net sales of the Company’s test and measurement products for the six-months ended June 30, 2013 were approximately $5,754,000 as compared to approximately $7,448,000 for the six-months ended June 30, 2012, a decrease of approximately $1,694,000 or 22.7%. Net sales of the Company’s test and measurement products for the three-months ended June 30, 2013 were approximately $2,751,000 as compared to approximately $3,886,000 for the three-months ended June 30, 2012, a decrease of approximately $1,135,000 or 29.2%. Net sales of test and measurement products accounted for approximately 37% and 53% of net consolidated sales for the six-months periods ended June 30, 2013 and 2012, respectively. Net sales of test and measurement products accounted for approximately 32% and 55% of net consolidated sales for the three-months ended June 30, 2013 and 2012, respectively. The decrease in sales for our test and measurement segment was primarily due to decreased volume in peak power meter orders as a result of the Company’s completion of a large government contract in 2012.
Gross profit on net consolidated sales for the six-months ended June 30, 2013 was approximately $7,401,000 or 47.7% as compared to approximately $6,945,000 or 49.6% of net consolidated sales for the six-months ended June 30, 2012. Gross profit on net consolidated sales for the three-months ended June 30, 2013 was approximately $4,080,000 or 46.9% as compared to approximately $3,590,000 or 50.6% of net consolidated sales for the three-months ended June 30, 2012.
Gross profit margins are lower for the three and six-months ended June 30, 2013 as compared to the same periods of the previous year primarily due to mix of product sold, increases in certain costs directly attributable to increased revenue volumes, such as freight and factory supplies, of approximately $102,000 and approximately $147,000 for the three and six-months ended June 30, 2013, respectively, and an increase in inventory reserves of approximately $28,000 and approximately $62,000 during the three and six-months ended June 30, 2013, respectively. Inventory is reduced by a reserve for items determined by management to be slow moving or obsolete which is determined by analyzing historical inventory usage and estimating future use of such items. Management evaluates the adequacy of the reserve on a quarterly basis.
The Company’s products consist of several models with varying degrees of capabilities which can be customized to meet particular customer requirements. They may be incorporated directly into the electronic equipment concerned or may be stand alone components or devices that are connected to, or used in conjunction with, such equipment from an external site, in the factory or in the field. Prices of products range from approximately $100 to $100,000 per unit, with most sales occurring between approximately $2,000 and $35,000 per unit. The Company can experience variations in gross profit based upon the mix of these products sold as well as variations due to revenue volume and economies of scale. The Company will continue to rigidly monitor costs associated with material acquisition, manufacturing and production.
Consolidated operating expenses for the six-months ended June 30, 2013 were approximately $6,439,000 or 42% of net consolidated sales as compared to approximately $5,785,000 or 41% of net consolidated sales for the six-months ended June 30, 2012. Consolidated operating expenses were higher for the six-months ended June 30, 2013 due to an increase in consolidated general and administrative expenses of approximately $525,000, an increase in consolidated sales and marketing expenses of approximately $109,000 and an increase in consolidated research and development expenses of approximately $20,000. Consolidated operating expenses for the three-months ended June 30, 2013 were approximately $3,363,000 or 39% of net consolidated sales as compared to approximately $2,981,000 or 42% of net consolidated sales for the three-months ended June 30, 2012. Consolidated operating expenses were higher for the three-months ended June 30, 2013 due to an increase in consolidated general and administrative expenses of approximately $216,000, an increase in consolidated sales and marketing expenses of approximately $159,000 and an increase in consolidated research and development expenses of approximately $7,000.
The increase in consolidated general and administrative expenses for the six-months ended June 30, 2013 was primarily due to an increase in corporate legal and consulting fees of approximately $387,000 in connection with the Company’s pursuit of strategic opportunities and an increase in non-cash stock based compensation charges of approximately $36,000 due to the amortization of outstanding restricted common stock. For the six-months ended June 30, 2013, consolidated research and development expenses increased primarily due to an increase in salaries in our network solutions segment of approximately $139,000, partially offset by a decrease in salaries in our test and measurement segment of approximately $88,000. The Company hired new engineering personnel in May 2012 and March 2013 in support of its growing network solutions segment.
20 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Consolidated sales and marketing expenses increased for the six-months ended June 30, 2013 primarily due to higher non-employee sales commissions in our network solutions segment of approximately $218,000 and higher salaries expense of approximately $80,000 due to the hiring of sales and marketing personnel in support of our network solution segment, partially offset by lower non-employee sales commissions in our test and measurement segment of approximately $151,000.
Interest expense, net of interest income derived from the Company’s cash investment account, was relatively unchanged for the three and six-months ended June 30, 2013, as compared to the corresponding periods of the previous year. Substantially all of the Company’s cash is invested in money market funds.
Other income, net of other non-operating expense, increased by approximately $178,000 and $182,000 for the three and six-months ended June 30, 2013, respectively, as compared to the corresponding periods of the previous year. The increase in other income was primarily due to the recording of a realized gain of approximately $162,000 on the sale of an investment security during the three-months ended June 30, 2013. Other income was partially offset by non-operating expense incurred during the six-months ended June 30, 2013 for services relating to the ground water testing being performed at the former site of the Company’s subsidiary, Boonton. The Company has been testing the ground water at this site since 1982 in accordance with New Jersey state regulations. The Company is diligently pursuing efforts to satisfy the requirements of the original remediation plan, in effect since 1982, and receive a new determination from the NJDEP. Management continues to be encouraged by recent test results which support improvements in ground water conditions over time. Overall data from testing in March of 2013 indicates the continuation of a decreasing concentration trend at the site. The overall decrease supports the absence of a continuing source impacting ground water.
The Company believes that its current practice and plan of groundwater testing will continue until an official notification from NJDEP is obtained and the Company is released from further obligations. While management anticipates that the expenditures in connection with this site will not be substantial in future years, the Company could be subject to significant future liabilities and may incur significant future expenditures if any additional contamination is identified and the NJDEP requires additional remediation.
For the six-months ended June 30, 2013 and 2012, the Company realized a tax benefit of approximately $227,000 and $120,000, respectively. For the three-months ended June 30, 2013 and 2012, the Company realized a tax benefit of approximately $140,000 and $25,000, respectively. For all periods, the tax benefit was primarily due to a decrease in the Company’s deferred tax asset valuation allowance, partially offset by a provision for state income taxes. The Company analyzes its deferred tax asset on a quarterly basis and adjusts the deferred tax asset valuation allowance based on its rolling five year projection of estimated taxable income.
For the six-months ended June 30, 2013, the Company realized net income of approximately $1,404,000 or $0.06 income per share on a basic and diluted basis, as compared to net income of approximately $1,311,000 or $0.05 income per share on a basic and diluted basis for the corresponding period of the previous year, an increase of approximately $93,000 or $0.01 per diluted share. For the three-months ended June 30, 2013, the Company realized net income of approximately $1,058,000 or $0.04 income per share on a basic and diluted basis, as compared to net income of approximately $655,000 or $0.03 income per share on a basic and diluted basis for the corresponding period of the previous year, an increase of approximately $403,000, or $0.01 per diluted share. The increases were primarily due to the analysis discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company’s working capital has increased by approximately $1,088,000 to approximately $27,604,000 at June 30, 2013, from approximately $26,516,000 at December 31, 2012. At June 30, 2013, the Company had a current ratio of 7.0 to 1, and a ratio of debt to tangible net worth of .13 to 1. At December 31, 2012, the Company had a current ratio of 6.0 to 1, and ratio of debt to tangible net worth of .15 to 1.
The Company had cash and cash equivalents of approximately $12,406,000 at June 30, 2013, compared to approximately $12,970,000 at December 31, 2012. During the six-months ended June 30, 2013, the Company repurchased 174,741 shares of its outstanding common stock at a cost of approximately $229,000. The Company believes its current level of cash and cash equivalents is sufficient to fund the current operating, investing and financing activities.
21 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
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 substantially reduced.
The Company used cash for operating activities of approximately $272,000 for the six-month period ending June 30, 2013. The primary use of this cash was due to an increase in inventory and a decrease in accounts payable, accrued expenses and other current liabilities, partially offset by a decrease in accounts receivable, a decrease in prepaid expenses and other assets and net income from operations.
The Company realized cash from operating activities of approximately $922,000 for the six-month period ending June 30, 2012. The primary source of this cash was due to net income from operations for the six-month period, as well as, an increase in accounts payable, accrued expenses and other current liabilities, and a decrease in accounts receivable, partially offset by an increase in inventory and an increase in prepaid expenses and other assets.
The Company has historically been able to turn over its accounts receivable approximately every two months. This average collection period has been sufficient to provide the working capital and liquidity necessary to operate the Company.
The Company’s inventory has increased by approximately $1,048,000 to approximately $9,338,000 at June 30, 2013, from approximately $8,290,000 at December 31, 2012. The Company has increased its inventory levels in order to meet strong demand for the Company’s network solutions products, as evidenced by its increasing sales order backlog.
On July 26, 2012, the Company received notice that its lessee exercised its purchase option under an operating lease with the Company, dated November 17, 2000, to purchase the property owned by the Company and located in Mahwah, New Jersey (the “Mahwah Building”). The purchase price is $3,500,000 of which $350,000 was deposited by the buyer and was held in escrow until the closing date. The Mahwah Building is included in Assets Held for Sale in the accompanying condensed consolidated balance sheets at its carrying value of $3,179,002
On August 1, 2013, the Company closed on the sale of the Mahwah Building. Additionally, the Company repaid the existing mortgage payable on the building with the proceeds of the sale. As part of the terms of the sale, the Company was required to place $350,000 in escrow until certain conditions are met, as determined by the State of New Jersey. The terms of the mortgage required monthly payments of $23,750 applied to both principal and interest at the annual rate of 7.45%.
Net cash used for investing activities for the six-months ended June 30, 2013 and 2012 was approximately $23,000 and approximately $218,000, respectively. For the six-months ended June 30, 2013, the use of these funds was for capital expenditures offset by proceeds from the sale of a non-marketable security. For the six-months ended June 30, 2012, the use of these funds was for capital expenditures.
Cash used for financing activities for the six-months ended June 30, 2013 and 2012 was approximately $268,000 and $382,000, respectively. The use of these funds was for the acquisition of treasury stock and periodic payments on a mortgage note.
The Company maintains a line of credit with its investment bank. The credit facility provides borrowing availability of up to 100% of the Company’s money market account balance and 99% of the Company’s short-term investment securities (U.S. Treasury bills) and, under the terms and conditions of the loan agreement, the facility is fully secured by our money fund account and short-term investment holdings held with the bank. Advances under the facility will bear interest at a variable rate equal to the London InterBank Offered Rate (“LIBOR”) in effect at time of borrowing. Additionally, there is no annual fee and any amount outstanding under the loan facility may be paid at any time in whole or in part without penalty. As of June 30, 2013, the Company had no borrowings outstanding under the facility and approximately $4,500,000 of borrowing availability.
22 |
ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company actively pursues strategic opportunities including potential acquisitions, mergers, divestitures or other activities which may require the Company to use part or all of its cash reserves, enter into credit arrangements or issue shares of its common stock. Such activities may affect the Company’s liquidity in future periods.
On August 1, 2013, the Company was awarded a contact with the Federal Aviation Administration to supply RF Peak Power Meters in support of the Common Route Surveillance Radar (“CARSR”) installations. The total order value of the product to be sold under the contract is approximately $1,100,000 and a considerable portion of the order is expected to be realized over fiscal years 2013 and 2014.
The Company believes that its financial resources from working capital are adequate to meet its current needs. However, should current global economic conditions deteriorate, additional working capital funding may be required which may be difficult to obtain due to restrictive credit markets.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly impact its business or its results of operations nor does it believe that its business is seasonal.
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 Act of 1934, as amended. Our disclosure controls and procedures are designed to provide reasonable assurance 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, relating to Wireless Telecom Group, Inc., including our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared. 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 Controls over Financial Reporting
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Securities Act of 1934, as amended, there was no change identified in our internal control over financial reporting that occurred as of the end of the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
23 |
None.
Not applicable.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On May 14, 2013, the Company repurchased 13,479 shares of restricted common stock from its Chief Executive Officer and 10,870 shares of restricted common stock from its V.P of Sales and Marketing for $36,279, or $1.49 per share. In accordance with the terms of the 2012 Plan, the Compensation Committee of the Board of Directors authorized the Company to repurchase, upon vesting of the restricted stock, that certain number of shares necessary to allow such grantees to satisfy their personal tax liability associated with the vesting of such shares.
The Company has not repurchased shares under its stock repurchase program during the quarter ended June 30, 2013. The maximum number of shares that may yet be repurchased under the plan is 1,222,098.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
Exhibit No. | Description | |
10.1 | Severance Agreement, dated June 14, 2013, between Wireless Telecom Group, Inc. and Robert Censullo | |
31.1 | Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer) | |
31.2 | Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer) | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer) | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer) | |
101 | The following financial statements from Wireless Telecom Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed on August 14, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated statements of cash flows, (iv) condensed consolidated statement of shareholders’ equity, and (v) the notes to interim condensed consolidated financial statements. (1) |
(1) | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
24 |
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. | ||
(Registrant) | ||
Date: August 14, 2013 | /S/ Paul Genova | |
Paul Genova | ||
Chief Executive Officer | ||
Date: August 14, 2013 | /S/ Robert Censullo | |
Robert Censullo | ||
Chief Financial Officer |
25 |
Exhibit No. | Description | |
10.1 | Severance Agreement, dated June 14, 2013, between Wireless Telecom Group, Inc. and Robert Censullo | |
31.1 | Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer) | |
31.2 | Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer) | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer) | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer) | |
101 | The following financial statements from Wireless Telecom Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed on August 14, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations, (iii) condensed consolidated statements of cash flows, (iv) condensed consolidated statement of shareholders’ equity, and (v) the notes to interim condensed consolidated financial statements. (1) |
(1) | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
26 |
Exhibit 10.1
Wireless Telecom GroupINC
25 Eastmans Road Parsippany, NJ 07054 Tel. (973) 386-9696 Fax (973) 386-9191 |
June 14, 2013
Robert Censullo
25 Eastmans Road
Parsippany, NJ 07054
Dear Mr. Censullo:
We are pleased to offer certain benefits and payments, in the event your employment with Wireless Telecom Group, Inc. (including any successor, the “Company”) is terminated within ten years of the date hereof either (i) by the Company, other than for Cause (as defined below), or (ii) by you, for Good Reason (as defined below) (each such termination is hereinafter referred to as a “Qualifying Event”), in each case within eighteen (18) months of a Change in Control (as such term is currently defined in the Company’s 2012 Incentive Compensation Plan).
This letter agreement (this “Agreement”) confirms our mutual agreement and understanding with respect to the following:
1. Severance. Upon a Qualifying Event, you will be entitled to receive Severance (as defined below) and Continuation of Benefits (as defined below) for the Severance Period (as defined below) in lieu of any payments otherwise payable to you under the Company’s standard severance policy. You will not be entitled to such Severance or Continuation of Benefits if the Company terminates your employment for Cause, if you terminate your employment voluntarily without Good Reason, or if your employment is terminated due to death or permanent disability.
2. Mitigation and Offset. If you engage in Subsequent Employment (as defined below) during the Severance Period and receive benefits from a subsequent employer (other than the Company) during the Severance Period, your Continuation of Benefits will be terminated (on a benefit by benefit basis). You agree to provide the Company with prompt written notice of any Subsequent Employment and benefits received by you during, or in respect of, the Severance Period.
3. Change in Control. The parties agree that it is the intent of the parties, and the parties hereby agree, that this Agreement shall survive and be binding on any successor or assignee of the Company following any change in control of the Company, sale of all or substantially all of the business or assets of the Company or similar corporate event.
4. Definitions.
For purposes of this Agreement, the following terms shall have the meanings set forth below:
(i) “Annual Cash Bonus” for a calendar year shall mean the amount, in the good faith determination of the Board of Directors (or Compensation Committee of the Board of Directors), you have earned as of the date of your termination under the bonus component of the Company’s officer bonus incentive plan in effect at that time.
(ii) “Cause” shall mean the occurrence of any one or more of the following: (i) fraud, embezzlement and /or misappropriation of the Company’s funds; (ii) gross or willful misconduct by you in the performance of your duties; (iii) a material violation of the Company’s Code of Conduct; or (iv) a conviction by, or entry or a plea of guilty or nolo contendre in, a court of competent jurisdiction for any crime which constitutes a felony or act of moral turpitude in the jurisdiction involved.
(iii) “Continuation of Benefits” shall mean the continuation of all benefits (to the extent permissible under the terms and conditions of each applicable employee benefit program and applicable law) in which you participate as of the date of the Qualifying Event for the term of the Severance Period, provided that you continue to pay the Company the employee contributions you were paying immediately prior to a Qualifying Event.
(iv) “Good Reason” shall mean (a) the assignment to you of duties materially and adversely inconsistent with your duties or responsibilities with the Company, (b) a reduction in your salary or a material reduction in bonus opportunities, or (c) relocation of your principal place of employment to a place more than thirty (30) miles from its current location, in each case without your written consent.
(v) “Release Effective Date” shall mean the eighth day following the date that the Release (as defined below) is executed, provided that such Release has not been revoked; provided that if the 45 day period following the date of the Qualifying Event begins in one calendar year and ends in the next calendar year, the Release Effective Date may not be earlier than January 1 of the later calendar year.
(vi) “Severance” shall mean a lump sum cash severance payment in an amount equal to 50% of your annual base compensation then in effect, plus an amount equal to the Annual Cash Bonus, paid on the Release Effective Date.
(vii) “Severance Period” shall mean the period commencing on the date of the Qualifying Event and ending on the six (6) month anniversary of the date of your Qualifying Event.
(viii) “Subsequent Employment” shall mean any employment or provision of services whether as owner, principal, agent, partner, director, officer, independent contractor, consultant, or employee for any entity, corporation, partnership or individual, including, without limitation, self-employment.
5. No Employment Rights. This Agreement sets forth the terms of certain financial assurances that will apply upon a Qualifying Event and does not constitute, and should not be considered as, a contract of employment for any duration. Accordingly, this Agreement will not affect your ability or the ability of the Company (subject to the terms of any other agreement(s) that may exist) to terminate your services at any time and for any reason.
6. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and its successors. Except as otherwise specifically provided herein, neither party shall assign or transfer this Agreement nor any rights hereunder without the consent of the other party, and any attempted or purported assignment without such consent shall be void; provided, however, that any assignment or transfer pursuant to a merger or consolidation, or the sale or liquidation of all or substantially all of the business and assets of the Company shall be valid, so long as the assignee or transferee (a) is the successor to all or substantially all of the business and assets of the Company and (b) assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. Your consent shall not be required for any such transaction.
7. Effectiveness. This Agreement shall be effective as of June 14, 2013.
8. Governing Law. This Agreement shall be governed by the laws of the State of New Jersey, without regard to the conflicts of law provisions thereof.
9. Entire Agreement. This Agreement constitutes the complete agreement and understanding between us relating to severance and the continuation of benefits following a Qualifying Event, supersedes all prior or contemporaneous negotiations and agreements, whether oral or written, with respect to such subject matter, and may not be modified or amended except in writing signed by the parties. Additionally, this Agreement is intended to supplement (and not supersede) any employment or other agreement relating to your compensation, your employment status or the termination of your employment that you may have with the Company, including, without limitation, any agreement relating to payment or amounts (other than Severance and Continuation of Benefits) upon termination of your employment.
10. General Release. As a condition of receiving the Severance and Continuation of Benefits described herein, you will be required to sign a separation agreement and general release in a form acceptable to the Company (the “Release”), which must be executed and returned to the Company within 45 days following the date of the Qualifying Event and is not revoked during the seven day period following its execution. Such Release shall, among other things, discharge the Company from any and all obligations to make any further payments to you, whether by way of salary, bonus or other compensation or remuneration of any kind.
11. Section 409A. Notwithstanding anything herein to the contrary, this Agreement is intended to be interpreted and applied so that the payment of the benefits set forth herein shall either be exempt from the requirements of Section 409A of the Code (“Section 409A”) or shall comply with the requirements of such provision. Notwithstanding any provision of this Agreement to the contrary, if you are a “specified employee” within the meaning of Section 409A, any payments or arrangements due upon a termination of your employment under any arrangement that constitute a “nonqualified deferral of compensation” within the meaning of Section 409A and which do not otherwise qualify under the exemptions under Treas. Regs. Section 1.409A-1 (including without limitation, the short-term deferral exemption or the permitted payments under Treas. Regs. Section 1.409A-1(b)(9)(iii)(A)), shall be delayed and paid or provided on the earlier of (i) the date which is six months after your “separation from service” (as such term is defined in Section 409A and the regulations and other published guidance thereunder) for any reason other than death, and (ii) the date of your death.
After the date of any Qualifying Event, you shall have no duties or responsibilities that are inconsistent with having a “separation from service” within the meaning of Section 409A as of the date of the Qualifying Event and, notwithstanding anything in the Agreement to the contrary, distributions upon termination of employment of nonqualified deferred compensation may only be made upon a “separation from service” as determined under Section 409A and such date shall be the date of the Qualifying Event for purposes of this Agreement. Each payment under this Agreement or otherwise shall be treated as a separate payment for purposes of Section 409A. In no event may you, directly or indirectly, designate the calendar year of any payment to be made under this Agreement which constitutes a “nonqualified deferral of compensation” within the meaning of Section 409A and to the extent an amount is payable within a time period, the time during which such amount is paid shall be in the discretion of the Company.
If you agree with the terms and provisions of this Agreement, please sign and date both copies of this Agreement in the place indicated. Keep one copy for your files and return the other copy to the Company.
Very truly yours, | |||
WIRELESS TELECOM GROUP, INC. | |||
By: | /s/ Paul Genova | ||
Name: Paul Genova | |||
Title: Chief Executive Officer |
ACCEPTED AND AGREED TO:
/s/ Robert Censullo | June 14, 2013 | ||
Robert Censullo | Date |
Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul Genova, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wireless Telecom Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Date: August 14, 2013
/s/ Paul Genova | ||
Paul Genova | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Censullo, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wireless Telecom Group, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f), for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Date: August 14, 2013
/s/ Robert Censullo | ||
Robert Censullo | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Wireless Telecom Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Paul Genova, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Periodic Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Paul Genova | ||
Paul Genova | ||
Chief Executive Officer | ||
August 14, 2013 |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Wireless Telecom Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Robert Censullo, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Periodic Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
/s/ Robert Censullo | ||
Robert Censullo | ||
Chief Financial Officer | ||
August 14, 2013 |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.
ASSET HELD FOR SALE
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Asset Held For Sale Disclosure [Abstract] | |
Asset Held For Sale Disclosure [Text Block] | NOTE 10 - ASSET HELD FOR SALE On July 26, 2012, the Company received notice that its lessee exercised its purchase option under an operating lease with the Company, dated November 17, 2000, to purchase the property owned by the Company and located in Mahwah, New Jersey (the “Mahwah Building”). The purchase price is $3,500,000 of which $350,000 was deposited by the buyer and was held in escrow until the closing date. The Mahwah Building is included in Assets Held for Sale in the accompanying condensed consolidated balance sheets at its carrying value of $3,179,002. On August 1, 2013, the Company closed on the sale of the Mahwah Building and repaid the existing mortgage payable on the building with the proceeds of the sale. As part of the terms of the sale, the Company was required to place $350,000 in escrow until certain conditions are met, as determined by the State of New Jersey. The terms of the mortgage required monthly payments of $23,750 applied to both principal and interest at the annual rate of 7.45%. Included in the Company’s condensed consolidated statement of operations, recorded as non-operating income and expense, are certain income and expenses directly related to the Mahwah Building. For each of the three-months ended June 30, 2013 and 2012, the Company’s results of operations included rental income of $96,498. For each of the six-months ended June 30, 2013 and 2012, the Company’s results of operations included rental income of $192,995. For the three-months ended June 30, 2013 and 2012, the Company’s results of operations included mortgage interest expense of $49,208 and $50,636, respectively, and building depreciation expense of $22,232 for the three-months ended June 30, 2012. For the six-months ended June 30, 2013 and 2012, the Company’s results of operations included mortgage interest expense of $98,783 and $101,613, respectively, and building depreciation expense of $44,464 for the six-months ended June 30, 2012. |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
NET SALES | $ 8,704,886 | $ 7,092,046 | $ 15,501,875 | $ 13,993,865 |
COST OF SALES | 4,624,558 | 3,502,208 | 8,101,184 | 7,048,962 |
GROSS PROFIT | 4,080,328 | 3,589,838 | 7,400,691 | 6,944,903 |
OPERATING EXPENSES | ||||
Research and development | 627,181 | 619,803 | 1,239,304 | 1,219,269 |
Sales and marketing | 1,319,164 | 1,159,798 | 2,341,324 | 2,232,414 |
General and administrative | 1,416,734 | 1,201,027 | 2,858,407 | 2,332,795 |
TOTAL OPERATING EXPENSES | 3,363,079 | 2,980,628 | 6,439,035 | 5,784,478 |
OPERATING INCOME | 717,249 | 609,210 | 961,656 | 1,160,425 |
OTHER (INCOME) EXPENSE | ||||
Interest expense - net | 48,981 | 50,506 | 98,333 | 101,447 |
Other (income) - net | (249,531) | (72,204) | (313,590) | (132,042) |
TOTAL OTHER (INCOME) EXPENSE | (200,550) | (21,698) | (215,257) | (30,595) |
NET INCOME BEFORE INCOME TAXES | 917,799 | 630,908 | 1,176,913 | 1,191,020 |
(BENEFIT) FROM INCOME TAXES | (140,160) | (24,541) | (227,272) | (120,293) |
NET INCOME | $ 1,057,959 | $ 655,449 | $ 1,404,185 | $ 1,311,313 |
INCOME PER COMMON SHARE: | ||||
BASIC (in Dollars per share) | $ 0.04 | $ 0.03 | $ 0.06 | $ 0.05 |
DILUTED (in Dollars per share) | $ 0.04 | $ 0.03 | $ 0.06 | $ 0.05 |
INCOME TAXES
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Text Block] | NOTE 3 – INCOME TAXES The Company records deferred taxes in accordance with ASC 740, “Accounting for Income Taxes”. This ASC 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 asset 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 future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses and tax credit carryforwards. The Company has recorded a valuation allowance due to the uncertainty related to the realization of certain deferred tax assets existing at June 30, 2013. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. Management believes that it is more likely than not that the Company will realize the benefits of its deferred tax assets, net of valuation allowances as of June 30, 2013. The deferred income tax assets and (liabilities) are summarized as follows:
The Company analyzes its deferred tax asset on a quarterly basis and adjusts the deferred tax asset valuation allowance based on its rolling five-year projection of estimated taxable income, taking into consideration any limitations that may exist on its use of its net operating loss carryforwards. Under ASC 740, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position. The Company has analyzed its filing positions in all of the Federal and state jurisdictions where it is required to file income tax returns. As of June 30, 2013 and December 31, 2012, the Company has identified its Federal tax return and its state tax return in New Jersey as “major” tax jurisdictions, as defined, in which it is required to file income tax returns. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition or disclosure in its condensed consolidated financial statements. The State of New Jersey is in the process of conducting a field examination of the Company’s tax returns for the years 2009 through 2012. The Company expects the examination to be completed in late 2013. |
INCOME TAXES (Details)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Income Tax Disclosure [Abstract] | |
Rolling Period Consider for Projection Estimated Income | 5 years |
Percentage Of Largest Benefit To Tax Benefits Recognized | 50.00% |
Income Tax Examination Period Under Examination | 2009 through 2012 |
INCOME TAXES (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | The deferred income tax assets and (liabilities) are summarized
as follows:
|
SEGMENT INFORMATION (Details) - Schedule of financial information by reportable segment excluding assets (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Net sales by segment: | ||||
Net sales by segment | $ 8,704,886 | $ 7,092,046 | $ 15,501,875 | $ 13,993,865 |
Segment income: | ||||
Segment income | 1,677,197 | 1,426,050 | 2,847,194 | 2,707,323 |
Other unallocated amounts: | ||||
Corporate expenses | (959,948) | (816,840) | (1,885,538) | (1,546,898) |
Interest and other income - net | 200,550 | 21,698 | 215,257 | 30,595 |
Consolidated income before income tax (benefit) | 917,799 | 630,908 | 1,176,913 | 1,191,020 |
Depreciation and amortization by segment: | ||||
Other unallocated amounts | 87,254 | 87,036 | 168,200 | 169,501 |
Capital expenditures by segment: | ||||
Capital expenditures by segment | 185,594 | 218,408 | ||
Test and Measurement [Member]
|
||||
Net sales by segment: | ||||
Net sales by segment | 2,750,733 | 3,886,482 | 5,753,896 | 7,447,515 |
Segment income: | ||||
Segment income | 151,991 | 772,795 | 535,172 | 1,147,909 |
Depreciation and amortization by segment: | ||||
Other unallocated amounts | 59,010 | 69,106 | 112,776 | 136,865 |
Capital expenditures by segment: | ||||
Capital expenditures by segment | 104,414 | 72,089 | 133,379 | 141,810 |
Network Solutions [Member]
|
||||
Net sales by segment: | ||||
Net sales by segment | 5,954,153 | 3,205,564 | 9,747,979 | 6,546,350 |
Segment income: | ||||
Segment income | 1,525,206 | 653,255 | 2,312,022 | 1,559,414 |
Depreciation and amortization by segment: | ||||
Other unallocated amounts | 28,244 | 17,930 | 55,424 | 32,636 |
Capital expenditures by segment: | ||||
Capital expenditures by segment | 22,060 | 56,287 | 52,215 | 76,598 |
Continuing Operations Only [Member]
|
||||
Capital expenditures by segment: | ||||
Capital expenditures by segment | $ 126,474 | $ 128,376 | $ 185,594 | $ 218,408 |
INCOME PER COMMON SHARE (Details) - Schedule of Weighted Average Number of Shares
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Schedule of Weighted Average Number of Shares [Abstract] | ||||
Weighted average common shares outstanding | 23,852,754 | 24,304,667 | 23,863,193 | 24,367,831 |
Potentially dilutive stock options | 580,478 | 358,889 | 494,425 | 360,792 |
Weighted average common shares outstanding, assuming dilution | 24,433,232 | 24,663,556 | 24,357,618 | 24,728,623 |
INCOME PER COMMON SHARE (Details)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Earnings Per Share [Abstract] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 1,561,523 | 1,927,873 | 1,649,453 | 1,956,923 |
ACCOUNTING FOR STOCK BASED COMPENSATION (Details) - Schedule of performance-based stock option activity, and related information (Performance Based Stock Options [Member], USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Performance Based Stock Options [Member]
|
||
ACCOUNTING FOR STOCK BASED COMPENSATION (Details) - Schedule of performance-based stock option activity, and related information [Line Items] | ||
Outstanding, January 1, 2013 | 1,300,000 | 1,300,000 |
Outstanding, January 1, 2013 (in Dollars per share) | $ 0.93 | $ 0.93 |
Outstanding, June 30, 2013 | 1,300,000 | 1,300,000 |
Outstanding, June 30, 2013 (in Dollars per share) | $ 0.93 | $ 0.93 |
SEGMENT INFORMATION (Details) - Schedule of Net Consolidated Sales by Region (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
SEGMENT INFORMATION (Details) - Schedule of Net Consolidated Sales by Region [Line Items] | ||||
Revenues | $ 8,704,886 | $ 7,092,046 | $ 15,501,875 | $ 13,993,865 |
Americas [Member]
|
||||
SEGMENT INFORMATION (Details) - Schedule of Net Consolidated Sales by Region [Line Items] | ||||
Revenues | 7,195,063 | 5,406,258 | 12,503,811 | 10,421,835 |
Europe, Middle East, Africa [Member]
|
||||
SEGMENT INFORMATION (Details) - Schedule of Net Consolidated Sales by Region [Line Items] | ||||
Revenues | 1,030,444 | 957,527 | 2,003,209 | 2,135,909 |
Asia Pacific [Member]
|
||||
SEGMENT INFORMATION (Details) - Schedule of Net Consolidated Sales by Region [Line Items] | ||||
Revenues | $ 479,379 | $ 728,261 | $ 994,855 | $ 1,436,121 |
INCOME TAXES (Details) - Schedule of Deferred Tax Assets and Liabilities (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Net deferred tax asset: | ||
Uniform capitalization of inventory costs for tax purposes | $ 251,737 | $ 221,155 |
Reserves on inventories | 523,749 | 499,001 |
Allowance for doubtful accounts | 21,355 | 22,933 |
Accruals | 105,000 | 195,149 |
Tax effect of goodwill | (378,543) | (321,636) |
Book depreciation over tax | (104,578) | (49,618) |
Net operating loss carryforward | 15,920,952 | 16,556,713 |
16,339,672 | 17,123,697 | |
Valuation allowance for deferred tax assets | (8,696,999) | (9,912,102) |
$ 7,642,673 | $ 7,211,595 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Parentheticals)
|
6 Months Ended | |
---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Treasury stock repurchase (in Shares) | 174,741 | 291,920 |
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES The condensed consolidated balance sheets as of June 30, 2013, the condensed consolidated statements of operations for the three and six-month periods ended June 30, 2013 and 2012, the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2013 and 2012, and the condensed consolidated statement of shareholders’ equity for the six-month period ended June 30, 2013 have been prepared by the Company without audit. The condensed consolidated financial statements include the accounts of Wireless Telecom Group, Inc., which operates one of its product lines under the trade name Noisecom, Inc. (“Noisecom”), and its wholly-owned subsidiaries Boonton Electronics Corporation (“Boonton”), Microlab/FXR (“Microlab”), WTG Foreign Sales Corporation and NC Mahwah, Inc., collectively the “Company”. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the accompanying condensed consolidated financial statements referred to above contain all necessary adjustments, consisting of normal accruals and recurring entries, which are necessary to present fairly 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 financial statements included in its annual report on Form 10-K for the year ended December 31, 2012. 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 condensed or omitted from this report. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including inventory valuation, accounts receivable valuation, valuation of deferred tax assets and estimated fair values of stock options) and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and six-month periods ended June 30, 2013 and 2012 are not necessarily indicative of the results to be expected for the full year. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains significant cash investments primarily with two financial institutions, which at times may exceed federally insured limits. The Company performs periodic evaluations of the relative credit rating of these institutions as part of its investment strategy. Concentrations of credit risk with respect to accounts receivable are limited due to the Company’s large customer base. At June 30, 2013 and December 31, 2012, primarily all of the Company’s receivables pertain to the telecommunications industry. The carrying amounts of cash and cash equivalents, trade receivables, other current assets and accounts payable approximate fair value due to the short-term nature of these instruments. Additionally, at June 30, 2013, the fair value of the fixed rate mortgage payable (which was repaid on August 1, 2013 – see Note 10) approximates its carrying value. The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of bank and money market accounts. Management has evaluated subsequent events for disclosure and/or recognition in the condensed consolidated financial statements through the date the financial statements were available to be issued. Certain prior period information has been reclassified to conform to the current period’s reporting presentation. |
INCOME PER COMMON SHARE
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Text Block] | NOTE 4 - INCOME PER COMMON SHARE Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share are calculated by using the weighted average number of shares of common stock outstanding and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method.
Common stock options are included in the diluted earnings per share calculation when the various option exercise prices are less than their relative average market price during the periods presented in this quarterly report. The weighted average number of options not included in diluted earnings per share, because the effects are anti-dilutive, was 1,561,523 and 1,927,873 for the three-months ended June 30, 2013 and 2012, respectively. For the six-months ended June 30, 2013 and 2012, the weighted average number of options not included in diluted earnings per share was 1,649,453 and 1,956,923, respectively. |
RECENT ACCOUNTING PRONOUNCEMENTS
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Accounting Changes and Error Corrections [Abstract] | |
Accounting Changes and Error Corrections [Text Block] | NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS In February 2013, the FASB issued ASU No. 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” Under ASU 2013-02, an entity is required to provide information about the amounts reclassified out of Accumulated Other Comprehensive Income (“AOCI”) by component. In addition, an entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of AOCI by the respective line items of net income, but only if the amount reclassified is required to be reclassified in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional details about those amounts. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income in the financial statements. ASU 2013-02 was effective for the Company beginning January 1, 2013. The adoption of this ASU did not have a material impact on its condensed consolidated financial statements Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements. |
COMMITMENTS AND CONTINGENCIES (Details) (USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Commitments and Contingencies Disclosure [Abstract] | |
Warranties Period of Product | 1 year |
Minimum Monthly Rent Payment | $ 29,000 |
Line of Credit Availability Equal to Percent of Money Market Account | 100.00% |
Line of Credit Availability Equal to Percent of Short-term Investment | 99.00% |
Annual fee under line of credit agreement | 0 |
Line of Credit Facility, Amount Outstanding | 0 |
Line of Credit Facility, Maximum Borrowing Capacity | $ 4,500,000 |
INVENTORIES (Details) (USD $)
|
Jun. 30, 2013
|
Dec. 31, 2012
|
---|---|---|
Inventory Disclosure [Abstract] | ||
Inventory Valuation Reserves | $ 683,866 | $ 621,996 |
SEGMENT INFORMATION (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
SEGMENT INFORMATION (Details) [Line Items] | ||||
Number of Reportable Segments | 2 | |||
United States [Member]
|
||||
SEGMENT INFORMATION (Details) [Line Items] | ||||
Revenue, Net | $ 6,783,504 | $ 4,922,750 | $ 11,650,350 | $ 9,622,652 |
China [Member]
|
||||
SEGMENT INFORMATION (Details) [Line Items] | ||||
Revenue, Net | $ 204,047 | $ 460,049 | $ 450,506 | $ 846,480 |