2013 ANNUAL REPORT
Message from the CEO
Dear Shareholders,
For our fiscal 2013, Wireless Telecom Group, Inc. delivered excellent
financial performance with strong revenue and earnings results as we
increased consolidated revenue 14.2% and improved our earnings
18.8% over the previous year. For the third consecutive year, we have
achieved a significant increase in our overall market capitalization and
have steadily made improvements to our balance sheet and our free
cash flow.
The Company continues to achieve strong revenue and income growth
in the Network Solutions segment. Revenues increased by 54%, driven
by our strong position in the North American DAS market and we
continue to gain traction globally. Network Solutions Segment income
increased by 59% to $5.6 million. The primary driver of our growth is
the implementation of LTE and DAS to satisfy increasing users’ demand
for bandwidth that outpaces existing supply. We believe our Network
Solutions segment is well positioned to take advantage of this market
growth.
Our Test and Measurement segment showed softness in 2013 in large
part due to the US government sequester, which had a negative effect
on order flow during the year. However, we are encouraged by cus-
tomer interest in our new Boonton USB Peak Power Meter scheduled
for release in 2014.
Our two business segments allow us to participate in broader, more di-
verse markets. These include RF and microwave instrumentation mar-
kets for our long term government, military, commercial and aerospace
blue chip customers. Our two segments also position us to address
the commercial markets in the high growth broadband infrastructure
build-out as the capacity and coverage demands for 4G and LTE tech-
nologies continue to grow significantly over the next few years.
We are continually committed to providing value to our Sharehold-
ers through improved financial performance in revenue, earnings and
increased cash flow and continue to look for opportunities to utilize
our capital to enhance long-term shareholder value. In April 2014, the
Company repurchased 4.8 million shares of its common stock, repre-
senting approximately 20% of its total shares outstanding, from its larg-
est shareholder, for an aggregate price of $9.6 million, or $2.00 per
share. As a result of the Company’s purchase and such additional trans-
actions, this shareholder no longer holds any securities in the Company.
We believe the stock repurchase represents an attractive use of our
capital and reflects our long standing commitment to improvement in
shareholder value.
A key component to our strength is our corporate culture where our
customers come first. We believe that our high levels of customer sat-
isfaction and continued loyalty are directly attributable to our focus on
details, quality and addressing the needs of our customers.
We continue to capitalize on the strength of our employees. Their dedi-
cation, commitment and teamwork have fostered continuous progress
in our business. We thank them for their enthusiasm and support. We
appreciate the opportunity to improve the overall value of the Com-
pany for our Shareholders and look forward to repeating our successful
efforts in the coming year. I encourage you to read this year’s annual re-
port and proxy statement and to attend our annual shareholder meet-
ing on June 11, 2014.
Thank you for your confidence and support.
Best Regards,
Paul Genova
Chief Executive Officer
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Eastmans Road,
Parsippany, New Jersey 07054
(Address of principal executive offices) (Zip Code)
(Registrant’s Telephone Number, Including Area Code)
(973) 386-9696
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $.01 per share
Name of each exchange
on which registered__
NYSE MKT
Securities registered pursuant to Section 12(g) of the Act:
none
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ]
No [X]
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from
their obligations under those Sections.
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filed. See
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]
Do not check if a smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
reference to the closing price as reported by NYSE MKT on June 30, 2013: $24,596,787
The aggregate market value of the registrants’ Common Stock, $.01 par value, held by non-affiliates and computed by
24,033,231
Number of shares of Wireless Telecom Group, Inc. Common Stock, $.01 par value, outstanding as of March 19, 2014:
Portions of the Registrant’s Proxy Statement for the 2014 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual
Report on Form 10-K. Such Proxy Statement will be filed within 120 days of the end of the fiscal year covered by this Annual report on Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
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Item 1. Business
PART I
Wireless Telecom Group, Inc., a New Jersey corporation (“we”, “us” or the “Company”), designs and
manufactures radio frequency (“RF”) and microwave-based products for wireless and advanced communications
industries and currently markets its products and services worldwide under the Boonton, Microlab and Noisecom®
brands. Our complementary suite of high performance instruments and components includes peak power meters,
signal analyzers, RF passive components and integrated subsystems, noise modules and precision noise generators.
The Company serves both commercial and government markets with workflow-oriented, built-for-purpose
solutions in distributed antenna systems (“DAS”), cellular/mobile, WiFi, WiMAX, private mobile radio, satellite,
cable, radar, avionics, medical, and computing applications. The consolidated financial statements include the
accounts of Wireless Telecom Group, Inc., doing business as, and operating under the trade name, Noise Com,
Inc., and its wholly-owned subsidiaries Boonton Electronics Corporation, Microlab/FXR, WTG Foreign Sales
Corporation and NC Mahwah, Inc. The corporate website address is www.wtcom.com.
The Company presents its operations in two reportable segments: (1) network solutions and (2) test and
measurement. The network solutions segment is comprised primarily of the operations of Microlab. The test and
measurement segment is comprised primarily of the operations of Boonton and Noisecom.
Sales by reportable segment for the years ended December 31, 2013 and 2012 were as follows:
Network solutions
Test and measurement
2013
$22,031,549
11,793,524
$33,825,073
2012
$14,334,095
15,260,449
$29,594,544
Additional financial information on the Company’s reportable segments for each of the last two years is
included in the Company’s Notes to the consolidated financial statements (see Note 7, “Segment and Related
Information”) included in Item 8 herein.
Market
Since the Company’s incorporation in the State of New Jersey in 1985, it has been primarily engaged in
supplying noise source products and electronic testing and measurement instruments and passive components to
various customers. Approximately 86% and 76% of the Company’s consolidated sales in fiscal 2013 and 2012,
respectively, were derived from commercial customers. The remaining consolidated sales (approximately 14% and
24%, respectively) were comprised of sales made to the United States government (particularly the armed forces)
and prime defense contractors.
Products
The Company, through its Microlab subsidiary, designs and manufactures a wide selection of RF passive
components and integrated subsystems for signal conditioning and distribution in the wireless infrastructure
markets, particularly for DAS, the in-building wireless solutions industry, radio base-station market and medical
equipment sector. Microlab's passive RF components share unique capabilities in the area of broadband frequency
coverage, minimal loss and low Passive Intermodulation (“PIM”).
Microlab product offerings include: neutral host DAS and co-siting combiner solutions, hybrid couplers
and hybrid matrices, cross band couplers, attenuators, RF terminations, RF power splitter and diplexers, as well as
RF combiners and broadband combiner boxes for in-building DAS deployments.
The Company, through its Boonton subsidiary, designs and produces electronic test and measurement
equipment including power meters, voltmeters, capacitance meters, audio and modulation meters, portable passive
intermodulation test equipment for field-based testing of cellular transmission signals and accessory products.
3
These products measure the power of RF and microwave systems used by the military and in commercial sectors
like telecommunications.
Boonton products are also used to test terrestrial and satellite communications, radar and telemetry. Certain
power meter products are designed for measuring signals based on wideband modulation formats, allowing a
variety of measurements to be made, including maximum power, peak power, average power and minimum power.
The Company’s noise components and instruments (noise source products) are used as a method to provide
wide band signals for sophisticated telecommunication and defense applications, and as a stable reference standard
for instruments and systems, including radar and satellite communications. Furthermore, noise sources can
simulate challenging signaling conditions in data and RF transmission systems. Examples are jitter testing for high
speed data lines used in modern computer architecture and signal to noise measurements to optimize wireless
receivers and transmitters. Additionally, noise sources are used for jamming RF signals, and blocking or disturbing
enemy radar and other communications, as well as insulating and protecting friendly communications.
Noise sources also are used in radar systems as part of built-in test equipment to continuously monitor the
radar receiver and in satellite communications where the use of back-up receivers are becoming more common as
the demand for communication availability and reliability is increasing. This test assures that the back-up receiver
is always functional and ready.
The Company also offers a line of broadband test sources serving the Cable Television and Cable Modem
industry, including measurement solutions for CATV equipment, Data-Over-Cable (“DOCSIS”) and Digital TV.
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 operating 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 $2,000 and $35,000 per unit.
The Company’s products have extended useful lives and the Company provides recalibration services for
its instrument products to ensure their accuracy, for a fee, to its domestic and international customers, and also
calibrates test equipment manufactured by others. Such services accounted for approximately 4% of consolidated
sales for each of the years 2013 and 2012.
Marketing and Sales
As of March 28, 2014, the Company’s in-house marketing and sales force consisted of twenty-three
individuals. The Company promotes the sale of its products to customers and manufacturers’ representatives
through its web-site, product literature, publication of articles, presentations at technical conferences, direct
mailings, trade advertisements and trade show exhibitions.
The Company’s products are sold globally through its in-house sales people and by over one hundred
manufacturers’ representatives and distributors (the Company’s channel partners). Generally, our channel partners
do not stock inventories of the Company’s products. Channel partners accounted for 75% and 74% of the
Company’s consolidated sales for the years ended December 31, 2013 and 2012, respectively. For the years ended
December 31, 2013 and 2012, no channel partner accounted for more than 10% of total consolidated sales. The
Company does not believe that the loss of any single channel partner would have a material adverse affect on its
business.
The Company’s relationship with its channel partners is usually governed by written contracts that either
run for one-year renewable periods terminable by either party on 60 days prior notice or have indefinite lives
terminable by either party on 60 days prior notice. The contracts generally provide for territorial and product
representation. The Company continually reviews and assesses the performance of its channel partners and makes
changes from time to time based on such assessments.
4
Management believes that its products offer state-of-the-art performance combined with outstanding
customer and technical support. The Company has always placed great emphasis on designing its products to be
user-friendly.
Customers
The Company currently sells the majority of its products to various commercial users in the
communications industry. Other sales are made to large defense contractors, which incorporate the Company’s
products into their products for sale to the U.S. and foreign governments, multi-national concerns and Fortune 500
companies.
For each of the years 2013 and 2012, one customer accounted for 11% of total consolidated sales. The
Company’s largest customers vary from year to year. Accordingly, while the complete loss of any large customer
or substantial reduction of sales to such customers could have a material adverse affect on the Company, the
Company has experienced shifts in sales patterns with such large companies in the past without any material
adverse affect. There can be no assurance, however, that the Company will not experience future shifts in sales
patterns not having a material adverse affect on its business.
Regional consolidated sales from operations for fiscal 2013 were made to customers in the Americas
($26,760,912 or 79% of total consolidated sales), Europe, Middle East and Africa ($4,434,037 or 13% of total
consolidated sales) and Asia Pacific ($2,630,124 or 8% of total consolidated sales).
Research and Development
The Company currently maintains an engineering staff (twenty-one individuals as of March 28, 2014)
whose duties include the improvement of existing products, modification of products to meet customer needs and
the engineering, research and development of new products and applications. Expenses for research and
development involve engineering for improvements and development of new products for commercial markets.
Such expenditures for operations include the cost of engineering services and engineering support personnel and
were approximately $2,645,000 and $2,524,000 for the years ended December 31, 2013 and 2012, respectively.
Competition
The Company competes against many companies, which utilize similar technology to that of the Company,
some of which are larger and have substantially greater resources and expertise in financial, technical and
marketing areas than the Company. Some of these companies include Agilent Technologies, Inc., Rhode &
Schwartz GmbH & Co. KG, Anritsu Corporation, Kathrein, Commscope, Westell Technologies, Inc. and Aeroflex
Holding Corp. The Company competes by having a niche in several product areas where it capitalizes on its
expertise in manufacturing products with unique specifications.
The Company designs its products with special attention to making them user-friendly, and constantly re-
evaluates its products for the purpose of enhancing and improving them. The Company believes that these efforts,
along with its willingness to adapt its products to the particular needs of its customers and its intensive efforts in
customer and technical support, are factors that add to the competitiveness of its products.
Backlog
The Company’s consolidated backlog of firm orders shippable in the next twelve months was
approximately $3,200,000 at December 31, 2013, compared to approximately $2,200,000 at December 31, 2012.
It is anticipated that the majority of the backlog orders at December 31, 2013 will be filled during the current year.
The stated backlog is not necessarily indicative of Company sales for any future period nor is a backlog any
assurance that the Company will realize a profit from the orders.
5
Inventory, Supplies and Manufacturing
The Company purchases components, devices and subassemblies from a wide variety of sources. The
Company’s inventory policy stresses maintaining substantial raw materials in order to lessen its dependency on
third party suppliers and to improve its capacity to facilitate production. However, shortages or delays of supplies
may, in the future, have a material adverse impact on the Company’s operations. For the years ended 2013 and
2012, no third-party supplier accounted for more than 11% and 8% of the Company’s total consolidated inventory
purchases, respectively.
The Company is not party to any formal written contract regarding the deliveries of its supplies and
components. It generally purchases such items pursuant to written purchase orders of both the individual and
blanket variety. Blanket purchase orders usually cover the purchase of a larger amount of items at fixed prices for
delivery and payment on specific dates.
The Company primarily produces its products by final and some intermediate assembly, calibration and
testing. Testing of products is generally accomplished at the end of the manufacturing process and is performed in-
house as are all quality control processes. The Company utilizes modern equipment for the design, engineering,
manufacture, assembly and testing of its products.
Warranty and Service
The Company typically provides one-year warranties on its instrument 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. Repairs that are necessitated by
misuse of such products or are required outside the warranty period are not covered by the Company’s warranty.
In cases of defective products, the customer typically returns them to a Company facility. The Company’s
service personnel replace or repair the defective items and ship them back to the customer. Generally, all servicing
is done at the Company’s plants, and the Company charges its customers a fee for those service items that are not
covered by warranty. The Company’s Noisecom and Microlab/FXR divisions typically don’t offer their customers
any formal written service contracts. However, the Company’s Boonton division does offer its customers’ formal
written service contracts for a fee.
Product Liability Coverage
The testing of electronic communications equipment and the accurate transmission of information entail a
risk of product liability by customers and others. Claims may be asserted against the Company by end-users of any
of the Company’s products.
The Company maintains product liability insurance coverage and no claims have been asserted for product
liability due to a defective or malfunctioning device. However, it is possible that the Company may be subject to
such claims in the future and corresponding litigation should one or more of its products fail to perform or meet
certain minimum specifications.
Intellectual Property
Proprietary information and know-how are important to the Company’s commercial success. The
trademarks “Boonton” and “Noise Com” are registered in the United States Patent and Trademark Office. 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-
competition 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.
6
REGULATION
Environmental Protection
The Company’s operations are subject to various federal, state, local, and foreign environmental laws,
ordinances and regulations that limit discharges into the environment, establish standards for the handling,
generation, use, emission, release, discharge, treatment, storage and disposal of, or exposure to, hazardous
materials, substances and waste, and require cleanup of contaminated soil and groundwater.
The New Jersey Department of Environmental Protection (the “NJDEP”) conducted an investigation in
1982 concerning disposal at a facility previously leased by the Company’s Boonton operations. The focus of the
investigation involved certain materials formerly used by Boonton’s manufacturing operations at that site and the
possible effect of such disposal on the aquifer underlying the property. The disposal practices and the use of the
materials in question were discontinued in 1978. The Company has cooperated with the NJDEP investigation and
has been diligently pursuing the matter in an attempt to resolve it in accordance with applicable NJDEP operating
procedures. The above referenced activities were conducted by Boonton prior to the acquisition of that entity in
2000.
In 1982, the Company and the NJDEP agreed upon a plan to correct ground water contamination at the
site, located in the township of Parsippany-Troy Hills, pursuant to which wells have been installed by the
Company. The plan contemplates that the wells will be operated and that soil and water samples will be taken and
analyzed until such time that contamination levels are satisfactory to the NJDEP. 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 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.
Expenditures incurred by the Company during the year ended December 31, 2013 in connection with the
site amounted to approximately $51,000. 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.
At this time, the Company believes that it is in material compliance with all environmental laws, does not
anticipate any material expenditure to meet current or pending environmental requirements, and generally believes
that its processes and products do not present any unusual environmental concerns. Besides the matter referred to
above with the NJDEP, the Company is unaware of any existing, pending or threatened contingent liability that
may have a material adverse affect on its ongoing business operations.
Workplace Safety
The Company’s operations are also governed by laws and regulations relating to workplace safety and
worker health. The Company believes it is in material compliance with these laws and regulations and does not
believe that future compliance with such laws and regulations will have a material adverse affect on its results of
operations or financial condition. The Company also believes that it is in material compliance with all applicable
labor regulations.
7
ITAR and Export Controls
The Company is subject to International Traffic in Arms Regulation, or ITAR. ITAR requires export
licenses from the U.S. Department of State for products shipped outside the U.S. that have military or strategic
applications.
The Company is also subject to the Export Administration Regulations, or EAR. The EAR regulates the
export of certain "dual use" items and technologies and, in some instances, requires a license from the U.S.
Department of Commerce.
Government Contracting Regulations
Because the Company has contracts with the federal government and its agencies, it is subject to audit
from time to time of our compliance with government regulations by various agencies, including the Defense
Contract Audit Agency, or DCAA. The DCAA reviews the adequacy of, and a contractor's compliance with, its
internal control systems and policies, including the contractor's purchasing, property, estimating, compensation and
management information systems. The DCAA has the right to perform audits on our incurred costs on all contracts
on a yearly basis.
Other governmental agencies, including the Defense Securities Service and the Defense Logistics Agency,
may also, from time to time, conduct inquiries or investigations regarding a broad range of our activities.
The Company’s principal products or services do not require any governmental approval, except for the
requirement that it obtain export licenses for certain of its products.
Employees
As of March 28, 2014, the Company had 115 full-time employees, including its officers, 60 of whom are
engaged in manufacturing and repair services, 11 in administration and financial control, 21 in engineering and
research and development, and 23 in marketing and sales.
The Company considers its relationship with its employees to be satisfactory.
The design and manufacture of the Company’s products require substantial technical capabilities in many
disparate disciplines, from mechanics and computer science to electronics and mathematics. While the Company
believes that the capability and experience of its technical employees compares favorably with other similar
manufacturers, there can be no assurance that it can retain existing employees or attract and hire the highly capable
technical employees it may need in the future on terms deemed favorable to the Company.
Investor Information
The Company is subject to the informational requirements of the Securities Exchange Act of 1934
(“Exchange Act”). Therefore, it files periodic reports, proxy statements and other information with the Securities
and Exchange Commission (“SEC”). Such reports, proxy statements and other information may be read and copied
by visiting the Public Reference Room of the SEC at 100 F Street N.E., Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition,
the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding issuers that file electronically.
You can access financial and other information at the Company’s Investor Relations website. The address
is www.wtcom.com. The Company makes available, free of charge, copies of its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material
electronically or otherwise furnishing it to the SEC.
8
Item 1A. Risk Factors
Our industry is highly competitive and if we are not able to successfully compete, we could lose market
share and our revenues could decline.
We operate in industries characterized by aggressive competition, rapid technological change, evolving
technology standards and short product life cycles. Current and prospective customers for our products evaluate
our capabilities against the merits of our direct competitors. We compete primarily on the basis of technology and
performance. For certain products, we also compete on price. Many of our competitors utilize similar technologies
to ours and have substantially greater resources and expertise in financial, technical and marketing areas than we
have. Our competitors may introduce products that are competitively priced, have increased performance or
functionality or incorporate technological advances that we have not yet developed or implemented.
To remain competitive, we must continue to develop, market and sell new and enhanced products at
competitive prices, which will require significant research and development expenditures. If we do not develop
new and enhanced products or if we are not able to invest adequately in our research and development activities,
our business, financial condition and results of operations could be negatively impacted.
Unless we keep pace with changing technologies, we could lose existing customers and fail to win new
customers.
Our future success will depend upon our ability to develop and introduce a variety of new products and
services and enhancements to these new products and services in order to address the changing needs of the
marketplace. We may not be able to accurately predict which technologies customers will support. If we do not
introduce new products, services and enhancements in a timely manner, if we fail to choose correctly among
technical alternatives or if we fail to offer innovative products and services at competitive prices, customers may
forego purchases of our products and services and purchase those of our competitors. We must make long-term
investments and commit significant resources before knowing whether our predictions will eventually result in
products that the market will accept. We must accurately forecast volumes, mix of products and configurations that
meet customer requirements, and we may not succeed. If we do not succeed, we may be left with inventories of
obsolete products or we may not have enough of some products available to meet customer demand, which could
lead to reduced sales and higher expenses.
Ongoing recessionary economic conditions have adversely affected and may further adversely affect our
business, results of operations, and financial condition.
General recessionary economic conditions have negatively impacted our business in the past and could
further impact our business in the future if economic recovery is slow to occur. In addition to the potentially
negative impact on our revenues, unstable economic conditions could also have a number of additional effects on
our business, including insolvency of key suppliers or manufacturers resulting in product delays, inability of
customers to obtain credit to finance purchases of our products, customer insolvencies, increased product returns,
increased pricing pressures, restructuring expenses and associated diversion of management’s attention, excess
inventory and increased difficulty in our accurately forecasting product demand and planning future business
activities. If macro-economic concerns were to worsen, credit markets could begin to tighten once again. In turn,
our customers could experience heightened financial difficulties and, as a result, could modify, delay or cancel
plans to purchase our products or services, which could cause our sales to decline, or become unable to make
payment to us for amounts due and owing. If the economy or markets into which we sell our products are slow to
recover, our business, financial condition and results of operations could be materially and adversely affected.
The cyclicality of our end user markets could harm our financial results.
Many of the end markets we serve, including but not limited to the commercial wireless market, have
historically been cyclical and have experienced periodic downturns. The factors leading to and the severity and
length of a downturn are very difficult to predict and there can be no assurance that we will appropriately
anticipate changes in the underlying end markets we serve or that any increased levels of business activity will
9
continue as a trend into the future. If we fail to anticipate changes in the end markets we serve, our business, results
of operations and financial condition could be materially adversely affected.
Dependence on contract manufacturing and outsourcing other portions of our supply chain may adversely
affect our ability to bring products to market and damage our reputation.
As part of our efforts to streamline operations and to cut costs, we outsource aspects of our manufacturing
processes and other functions and continue to evaluate additional outsourcing. If our contract manufacturers or
other outsourcers fail to perform their obligations in a timely manner or at satisfactory quality levels, our ability to
bring products to market and our reputation could suffer. For example, during a market upturn, our contract
manufacturers may be unable to meet our demand requirements, which may preclude us from fulfilling our
customers' orders on a timely basis. The ability of these manufacturers to perform is largely outside of our control.
Additionally, changing or replacing our contract manufacturers or other outsourcers could cause disruptions or
delays.
If our products do not perform as promised, we could experience increased costs, lower margins and harm
to our reputation.
The failure of our products to perform as promised could result in increased costs, lower margins and harm
to our reputation. We may not be able to anticipate all of the possible performance or reliability problems that
could arise with our existing or new products, which could result in significant product liability or warranty claims.
In addition, any defects found in our products could result in a loss of sales or market share, failure to achieve
market acceptance, injury to our reputation, indemnification claims, litigation, increased insurance costs and
increased service costs, any of which could discourage customers from purchasing our products and materially
harm our business.
The testing of electronic communications equipment and the accurate transmission of information entail a
risk of product liability claims being asserted by customers and third parties.
Claims may be asserted against us by end-users of any of our products for liability due to a defective or
malfunctioning device made by us, and we may be subject to corresponding litigation should one or more of our
products fail to perform or meet certain minimum requirements. Such a claim and corresponding litigation could
result in substantial costs, diversion of resources and management attention, termination of customer contracts and
harm to our reputation.
If we fail to adequately manage our resources, it could have a severe negative impact on our financial results
or stock price.
We could be subject to fluctuations in technology spending by existing and potential customers.
Accordingly, we will have to actively manage expenses in a rapidly changing economic environment. This could
require reducing costs during economic downturns and selectively growing in periods of economic expansion. If
we do not properly manage our resources in response to these conditions, our results of operations could be
negatively impacted.
We are subject to various governmental regulations, compliance with which may cause us to incur
significant expenses, and if we fail to maintain satisfactory compliance with certain regulations, we may be
forced to recall products and cease their distribution, and we could be subject to civil or criminal penalties.
Our businesses are subject to various significant international, federal, state and local regulations,
including but not limited to health and safety, packaging, product content, labor and import/export regulations.
These regulations are complex, change frequently and have tended to become more stringent over time. We may be
required to incur significant expenses to comply with these regulations or to remedy violations of these regulations.
10
Any failure by us to comply with applicable government regulations could also result in cessation of our operations
or portions of our operations, product recalls or impositions of fines and restrictions on our ability to carry on or
expand our operations.
We are subject to laws and regulations governing government contracts, and failure to address these laws
and regulations or comply with such government contracts could harm our business by leading to a
reduction in revenue associated with these customers.
We have agreements relating to the sale of our products to government entities and, as a result, we are
subject to various statutes and regulations that apply to companies doing business with the U.S. government. The
laws governing government contracts differ from the laws governing private contracts. For example, many
government contracts contain pricing terms and conditions that are not applicable to private contracts. We are also
subject to investigation for compliance with the regulations governing government contracts. A failure to comply
with these regulations might result in suspension of these contracts, or administrative penalties.
Shortages or delays of supplies for component parts may adversely affect our operating results until
alternate sources can be developed.
Our operations are dependent on the ability of suppliers to deliver quality components, devices and
subassemblies in time to meet critical manufacturing and distribution schedules. If we experience any constrained
supply of any such component parts, such constraints, if persistent, may adversely affect operating results until
alternate sourcing can be developed. There may be an increased risk of supplier constraints in periods where we are
increasing production volume to meet customer demands. Volatility in the prices of these component parts, an
inability to secure enough components at reasonable prices to build new products in a timely manner in the
quantities and configurations demanded or, conversely, a temporary oversupply of these parts, could adversely
affect our future operating results.
We could be subject to significant costs related to environmental contamination from past operations, and
environmental contamination caused by ongoing operations could subject us to substantial liabilities in the
future.
The Company’s operations are subject to various federal, state, local, and foreign environmental laws,
ordinances and regulations that limit discharges into the environment, establish standards for the handling,
generation, use, emission, release, discharge, treatment, storage and disposal of, or exposure to, hazardous
materials, substances and waste, and require cleanup of contaminated soil and groundwater.
The New Jersey Department of Environmental Protection (the “NJDEP”) conducted an investigation in
1982 concerning disposal at a facility previously leased by the Company’s Boonton operations. The focus of the
investigation involved certain materials formerly used by Boonton’s manufacturing operations at that site and the
possible effect of such disposal on the aquifer underlying the property. The disposal practices and the use of the
materials in question were discontinued in 1978. The Company has cooperated with the NJDEP investigation and
has been diligently pursuing the matter in an attempt to resolve it in accordance with applicable NJDEP operating
procedures. The above referenced activities were conducted by Boonton prior to the acquisition of that entity in
2000.
In 1982, the Company and the NJDEP agreed upon a plan to correct ground water contamination at the
site, located in the township of Parsippany-Troy Hills, pursuant to which wells have been installed by the
Company. The plan contemplates that the wells will be operated and that soil and water samples will be taken and
analyzed until such time that contamination levels are satisfactory to the NJDEP. 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 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.
11
Expenditures incurred by the Company during the year ended December 31, 2013 in connection with the
site amounted to approximately $51,000. 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.
At this time, the Company believes that it is in material compliance with all environmental laws, does not
anticipate any material expenditure to meet current or pending environmental requirements, and generally believes
that its processes and products do not present any unusual environmental concerns. Besides the matter referred to
above with the NJDEP, the Company is unaware of any existing, pending or threatened contingent liability that
may have a material adverse affect on its ongoing business operations.
Certain of our products and international sales may be subject to ITAR, EAR, Foreign Corrupt Practices
Act and other U.S. and foreign government laws, regulations, policies and practices, which may adversely
affect our business, results of operations and financial condition.
Our international sales, for which we also use foreign representatives and consultants, are subject to U.S.
laws, regulations and policies, including the ITAR and the Foreign Corrupt Practices Act and other export laws and
regulations, as well as foreign government laws, regulations and procurement policies and practices which may
differ from the U.S. Government regulations in this regard. The ITAR requires export licenses from the U.S.
Department of State for products shipped outside the U.S. that have military or strategic applications.
Compliance with the directives of the U.S. Department of State may result in substantial legal and other
expenses and the diversion of management time. In the event that a determination is made that we or any entity we
have acquired has violated the ITAR with respect to any matters, we may be subject to substantial monetary
penalties that we are unable to quantify at this time, and/or suspension or revocation of our export privileges and
criminal sanctions, which may have a material adverse effect on our business, results of operations and financial
condition.
We are also subject to the EAR. The EAR regulates the export of certain “dual use” items and technologies
and, in some instances, requires a license from the U.S. Department of Commerce. We can give no assurance that
under either the ITAR or the EAR we will continue to be successful in obtaining the necessary licenses and
authorizations or that certain sales will not be prevented or delayed.
We are also subject to, and must comply with, the U. S. Foreign Corrupt Practices Act, or the FCPA, and
similar world-wide anti-corruption laws, including the U.K. Bribery Act of 2010. These acts generally prohibit
both us and our third party intermediaries from making improper payments to foreign officials for the purpose of
acquiring or retaining business or otherwise obtaining favorable treatment. We are required as well to maintain
adequate record-keeping and internal accounting practices to fully and accurately reflect our transactions. We have
formulated and implemented strict diligence, training and reporting programs and practices that mandate and are
intended to ensure compliance with these anti-corruption laws. We operate in many parts of the world that have
experienced government corruption to some degree, however, and, in certain circumstances, the FCPA and our
programs and policies may conflict with local customs and practices. If we or our any of our local intermediaries
have failed to comply with the requirements of the FCPA, governmental authorities in the United States could seek
to impose severe criminal and civil penalties. The assertion of violations of the FCPA or other anti-corruption laws
could disrupt our business and, if proven, have a material adverse effect on our results of operations and financial
condition.
The loss of key personnel could adversely affect our ability to remain competitive.
We believe that the continued service of our executive officers will be important to our future growth and
competitiveness. However, other than the severance agreements we entered into with Mr. Genova, Chief Executive
Officer, Mr. Debold, Vice President of Global Sales and Marketing, and Mr. Censullo, Chief Financial Officer, we
currently do not have any employment agreements with any of our executive officers. Although we have severance
agreements with Messrs. Genova, Debold and Censullo, we cannot provide assurance that any named executive
12
officer, or any of our other executive officers, will remain employed by us. Moreover, the design and manufacture
of our products require substantial technical capabilities in many disparate disciplines, from engineering,
mechanics and computer science to electronics and mathematics. We believe that the continued employment of key
members of our technical and sales staffs will be important to us but, as with our executive officers, we cannot
assure you that they will remain employed by us.
Third parties could claim that we are infringing on their intellectual property rights which could result in
substantial costs, diversion of significant managerial resources and significant harm to our reputation.
The industries in which our company operates are characterized by the existence of a large number of
patents and frequent litigation based on allegations of patent infringement. From time to time, third parties may
assert patent, copyright, trademark and other intellectual property rights to technologies in various jurisdictions that
are important to our business. A successful claim of infringement against us could result in our being required to
pay significant damages, enter into costly license agreements, or stop the sale of certain products, which could
adversely affect our net sales, gross margins and expenses and harm our future prospects.
We use specialized technologies and know-how to design, develop and manufacture our products. Our
inability to protect our intellectual property could hurt our competitive position, harm our reputation and
adversely affect our results of operations.
We believe that our intellectual property, including its methodologies, is critical to our success and
competitive position. We rely on a combination of U.S. and foreign patent, copyright, trademark and trade secret
laws, as well as confidentiality agreements to establish and protect our proprietary rights. If we are unable to
protect our intellectual property against unauthorized use by third parties, our reputation among existing and
potential customers could be damaged and our competitive position adversely affected.
Attempts may be made to copy aspects of our products or to obtain and use information that we regard as
proprietary. Accordingly, we may not be able to prevent misappropriation of our technology or deter others from
developing similar technology. Our strategies to deter misappropriation could be undermined if:
the proprietary nature or protection of our methodologies is not recognized in the United States or
•
foreign countries;
third parties misappropriate our proprietary methodologies and such misappropriation is not
•
detected; and
competitors create applications similar to ours but which do not technically infringe on our legally
•
protected rights.
If these risks materialize, we could be required to spend significant amounts to defend our rights and divert
critical managerial resources. In addition, our proprietary methodologies may decline in value or our rights to them
may become unenforceable. If any of the foregoing were to occur, our business could be materially adversely
affected.
Our business and operations could suffer in the event of security breaches.
Attempts by others to gain unauthorized access to information technology systems are becoming more
sophisticated and are sometimes successful. These attempts, which might be related to industrial or other
espionage, include covertly introducing malware to our computers and networks and impersonating authorized
users, among others. We seek to detect and investigate all security incidents and to prevent their recurrence, but in
some cases, we might be unaware of an incident or its magnitude and effects. The theft, unauthorized use or
publication of our intellectual property and/or confidential business information could harm our competitive
position, reduce the value of our investment in research and development and other strategic initiatives or
otherwise adversely affect our business. To the extent that any security breach results in inappropriate disclosure of
13
our customers' or licensees' confidential information, we may incur liability as a result. In addition, we may be
required to devote additional resources to the security of our information technology systems.
We rely on our information technology systems to manage numerous aspects of our business and a
disruption of these systems could adversely affect our business.
Our information technology, or IT, systems are an integral part of our business. We depend on our IT
systems for scheduling, sales order entry, purchasing, materials management, accounting, and production
functions. Our IT systems also allow us to ship products to our customers on a timely basis, maintain cost-effective
operations and provide a high level of customer service. Some of our systems are not fully redundant, and our
disaster recovery planning does not account for all eventualities. A serious disruption to our IT systems could
significantly limit our ability to manage and operate our business efficiently, which in turn could have a material
adverse effect on our business, results of operations and financial condition.
The success of our ability to grow sales and develop relationships in Europe and Asia may be limited by
risks related to conducting business in European and Asian markets.
Part of our strategy is to increase sales and build our relationships in European and Asian markets. Risks
inherent in marketing, selling and developing relationships in European and Asian markets include those associated
with:
•
economic conditions in European and Asian markets, including the impact of recessions in
European and Asian economies and fluctuations in the relative values of the U.S. dollar, the Euro and
Asian currencies;
•
taxes and fees imposed by European and Asian governments that may increase the cost of
products and services;
•
•
•
greater difficulty in accounts receivable collection and longer collection periods;
seasonal reductions in business activities in some parts of the world;
laws and regulations imposed by individual countries and by the European Union, particularly
with respect to intellectual property, license requirements and environmental requirements; and
•
political and economic instability, terrorism and war.
In addition, European and Asian intellectual property laws are different than and may not protect our
proprietary rights to the same extent as do U.S. intellectual property laws, and we will have to ensure that our
intellectual property is adequately protected in foreign jurisdictions and in the United States. If we do not
adequately protect our intellectual property rights, competitors could use our proprietary technologies in non-
protected jurisdictions and put us at a competitive disadvantage.
Environmental and other disasters, such as flooding, large earthquakes, hurricanes, volcanic eruptions or
nuclear or other disasters, or a combination thereof, may negatively impact our business.
Although we manufacture our products in New Jersey, we both source and ship our products globally.
Environmental and other disasters may cause disruption to our supply chain or impede our ability to ship product
to certain regions of the world. However, there can be no assurance that environmental and/or other such natural
disasters will not have an adverse impact on our business in the future.
We are exposed to risks associated with acquisitions, investments and divestitures.
We have made, and may in the future make, acquisitions of, or significant investments in, businesses with
complementary products, services and/or technologies. Acquisitions and investments involve numerous risks,
including, but not limited to:
•
difficulties and increased costs in connection with integration of the personnel, operations, technologies
and products of acquired businesses;
14
•
diversion of management’s attention from other operational matters;
•
the potential loss of key employees of acquired businesses;
•
lack of synergy, or the inability to realize expected synergies, resulting from the acquisition;
•
failure to commercialize purchased technology; and
•
the impairment of acquired intangible assets and goodwill that could result in significant charges to
operating results in future periods.
The integration of acquisitions may make the completion and integration of subsequent acquisitions more
difficult. However, if we fail to identify and complete these transactions, we may be required to expend resources
to internally develop products and technology or may be at a competitive disadvantage or may be adversely
affected by negative market perceptions, which may have a material adverse effect on our business, results of
operations and financial condition.
We may be required to finance future acquisitions and investments through a combination of borrowings,
proceeds from equity or debt offerings and the use of cash, cash equivalents and short term investments.
With respect to divestitures, we may divest businesses that do not meet our strategic objectives, or do not
meet our growth or profitability targets and may not be able to complete proposed divestitures on terms
commercially favorable to us.
Mergers, acquisitions and investments are inherently risky and the inability to effectively manage these
risks could materially and adversely affect our business, financial condition and results of operations.
Investcorp Technology Ventures, L.P. owns a substantial amount of our Common Stock.
Investcorp Technology Ventures, L.P., beneficially owns approximately 27% of the outstanding shares of
our common stock as of March 28, 2014. Such stockholder has significant influence over the outcome of all
matters submitted to stockholders for approval, including the election of directors. Consequently, this stockholder
exercises substantial influence over all major decisions, including major corporate actions such as mergers and
other business combinations or transactions which could result in or prevent a change of control of the Company.
Accordingly, other stockholders’ abilities to influence us through voting their shares may be limited or the market
price of our shares may be adversely affected.
Our stock price is volatile and the trading volume in our common stock is less than that of other larger
companies in the wireless and advanced communications industries.
The market price of our Common Stock has experienced significant volatility and may continue to be
subject to rapid swings in the future. From January 1, 2012 to March 19, 2014, the trading prices of our stock have
ranged from $1.01 to $3.78 per share. There are several factors which could affect the price of our Common Stock,
including some of which are announcements of technological innovations for new commercial products by us or
our competitors, developments concerning propriety rights, new or revised governmental regulation or general
conditions in the market for our products, and the entrance of additional competitors into our markets.
15
Although our Common Stock is listed for trading on the NYSE MKT, the trading volume in our Common
Stock is less than that of other, larger companies in the wireless and advanced communications industries.
Traditionally, the trading volume of our Common Stock has been limited. For example, for the 30 trading days
ending on February 28, 2014, the average daily trading volume was approximately 187,000 shares per day and
ranged from between approximately 30,000 shares per day and approximately 495,000 shares per day. A public
trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the
marketplace of willing buyers and sellers of our Common Stock at any given time. Because of our limited trading
volume, holders of our Common Stock may not be able to sell quickly any significant number of such shares, and
any attempted sales of a large number of our shares will likely have a material adverse impact on the price of our
Common Stock.
If securities or industry analysts do not publish research or reports about our business or if they issue an
adverse or misleading opinion regarding our stock, our stock price and trading volume could decline
The trading market for our Common Stock will be influenced by the research and reports that industry or
securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or
misleading opinion regarding us, our business model, products or stock performance, our stock price would likely
decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could
lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Moreover, the unpredictability of our financial results likely reduces the certainty, and therefore reliability, of the
forecasts by securities or industry analysts of our future financial results, adding to the potential volatility of our
stock price.
The inability to maintain adequate levels of liquidity may have an adverse affect on the working capital of
the Company.
The Company believes that its financial resources from working capital provided by operations are
adequate to meet its current needs. However, should current global economic conditions deteriorate, additional
working capital financing may be required which may be difficult to obtain due to restrictive credit markets.
New Jersey corporate law may delay or prevent a transaction that stockholders would view as favorable.
We are subject to the New Jersey Shareholders' Protection Act, which could delay or prevent a change of
control of us.
The Company is subject to compliance with the policies & procedures of the NYSE MKT with respect to
continued listing on the stock exchange.
In considering whether a security warrants continued trading and/or listing on the NYSE MKT Exchange,
many factors are taken into account, such as the degree of investor interest in the company, its prospects for
growth, the reputation of its management, the degree of commercial acceptance of its products, and whether its
securities have suitable characteristics for auction market trading. Thus, any developments which substantially
reduce the size of a company, the nature and scope of its operations, the value or amount of its securities available
for the market, or the number of holders of its securities, may occasion a review of continued listing by the
Exchange. Moreover, events such as the sale, destruction, loss or abandonment of a substantial portion of its
business, the inability to continue its business, steps towards liquidation, or repurchase or redemption of its
securities, may also give rise to such a review.
16
We incur significant costs as a result of operating as a public company, and our management devotes
substantial time to compliance initiatives.
We have incurred and will continue to incur significant legal, accounting and other expenses as a public
company, including costs resulting from public company reporting obligations under the Exchange Act and
regulations regarding corporate governance practices. The listing requirements of the NYSE MKT require that we
satisfy certain corporate governance requirements relating to director independence, distributing annual and interim
reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct.
Our management and other personnel will need to devote a substantial amount of time to all of these requirements.
Moreover, the reporting requirements, rules and regulations will increase our legal and financial compliance costs
and will make some activities more time-consuming and costly. These reporting requirements, rules and
regulations, coupled with the increase in potential litigation exposure associated with being a public company,
could make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board
committees or to serve as executive officers.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The Company leases a 45,700 square foot facility located in Hanover Township, Parsippany, New Jersey,
which is currently being used as its principal corporate headquarters and manufacturing plant. On February 25,
2014, the Company entered into an agreement to extend the building lease term for an additional six months
through March 31, 2015. The lease term can be renewed at the Company’s option for one five-year period at fair
market value to be determined at term expiration. The current minimum monthly base rent payment remains at
approximately $29,000.
The Company owned a 44,000 square foot facility located in Mahwah, New Jersey (the “Mahwah
Building”) which was leased to an unrelated third party. On July 26, 2012, the tenant exercised its exclusive option
to purchase the Mahwah Building and, on August 1, 2013, the Company closed on the sale.
Item 3. Legal Proceedings
Reference is made to the discussion in Item 1 above regarding an investigation by the NJDEP concerning
certain discontinued practices of the Company and their effect on the soil and ground water at a certain facility
formerly occupied by the Company. No administrative or judicial proceedings have been commenced in
connection with such investigation. The owner of the Parsippany-Troy Hills facility has previously notified the
Company, that if the investigation proves to interfere with the sale of the property, it 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 above referenced activity was conducted by Boonton prior to the acquisition of that entity in 2000. There are
no other material legal proceedings known to the Company.
Item 4. Mine Safety Disclosures
Not applicable.
17
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
The Common Stock of the Company has traded on the American Stock Exchange or the New York Stock
Exchange under the name Wireless Telecom Group, Inc. (Symbol: WTT) since September 12, 1994. The following
table sets forth the high and low sales prices of the Company’s Common Stock for the periods indicated as reported
on the NYSE MKT.
2013 Fiscal Year
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
2012 Fiscal Year
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$1.56
$2.08
$2.05
$2.50
$1.29
$1.30
$1.34
$1.28
Low
$1.20
$1.41
$1.42
$1.75
$1.12
$1.01
$1.18
$1.14
On March 19, 2014, the closing price of the common stock of the Company as reported was $2.68. On
March 19, 2014, the Company had 442 stockholders of record. These stockholders of record do not include non-
registered stockholders whose shares are held in “nominee” or “street name”.
The Company did not declare quarterly dividends for the past five years. Future cash dividends, if any,
will be at the discretion of the Company’s board of directors and will depend upon, among other things, the
Company’s future operations and earnings, capital requirements, general financial condition, contractual and
financing restrictions and such other factors as the Company’s board of directors may deem relevant.
Issuer Purchases of Equity Securities
During the quarter ended December 31, 2013, the Company did not repurchase any shares under its stock
repurchase program. The maximum number of shares remaining eligible for repurchase under the plan is
1,222,098.
Equity Compensation Plan Information
Set forth below is certain aggregated information with respect to (i) equity compensation plans that have
been previously approved by the Company’s stockholders and (ii) plans not approved by stockholders.
18
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
equity compensation
plan (excluding
securities reflected in
the previous columns)
3,037,000
-
3,037,000
$1.64
-
$1.64
746,304
-
746,304
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Item 6. Selected Financial Data
Not applicable.
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Introduction
Wireless Telecom Group, Inc., and its operating subsidiaries, (collectively, “we”, “us” or 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 Company discloses its operations in two reportable segments: (1) network solutions and (2) test and
measurement. The network solutions segment is comprised primarily of the operations of Microlab. The test and
measurement segment is comprised primarily of the operations of Boonton and Noisecom. Additional financial
information on the Company’s reportable segments for each of the last two years is included in Note 7 to the Company’s
consolidated financial statements included in Item 8 herein.
The financial information presented herein includes: (i) Consolidated Balance Sheets as of December 31, 2013
and 2012 (ii) Consolidated Statements of Operations for the years ended December 31, 2013 and 2012 (iii) Consolidated
Statement of Changes in Shareholders’ Equity for the years ended December 31, 2013 and 2012; and (iv) Consolidated
Statements of Cash Flows for the years ended December 31, 2013 and 2012.
Forward-Looking Statements
The statements contained in this Annual Report on Form 10-K 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
of 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 continued ability to maintain positive cash flow from results of
operations, continued evaluation of goodwill for impairment and the Company’s development and production of
competitive technologies in our market sector, 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
19
Securities and Exchange Commission, the Company’s press releases and in oral statements made by or with the
approval of authorized personnel. The Company assumes no obligation to update any forward-looking statements as a
result of new information or future events or developments.
Critical Accounting Policies
Estimates and assumptions
Management’s discussion and analysis of the financial condition and results of operations are based upon the
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 amount 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. 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 our 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. Estimates and assumptions are made by management
to assess the overall likelihood that an accounting estimate or assumption may require adjustment. Management
assumptions have been reasonably accurate in the past, and future estimates or assumptions are likely to be calculated
on the same basis.
Stock-based compensation
The Company follows the provisions of Accounting Standards Codification (ASC) 718, “Share-Based Payment”
which requires that compensation expense be recognized based on the fair value of the stock awards less estimated
forfeitures. The fair value of the stock awards is equal to the fair value of the Company’s stock on the date of grant. The fair
value of options at the date of grant was estimated using the Black-Scholes option pricing model. When options are
granted, the Company takes into consideration guidance under ASC 718 and SEC Staff Accounting Bulletin No. 107
(SAB 107) when determining 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 that approximates the expected life of the options. 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 revenue recognition 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 special post shipment obligations or
acceptance provisions that exist with any sales arrangements.
20
Inventories
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.
Allowances 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, our customer’s payment history and aging of its accounts receivable balance.
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. 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 carryforwards.
Uncertain tax position
Under ASC 740, the Company must recognize and disclose the tax benefit from an uncertain position only if it
is more-likely-than-not that 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 December 31, 2013 and 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 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
consolidated financial statements, no reserves for uncertain income tax positions have been recorded pursuant to ASC
740 during the years ended December 31, 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.
Valuation of 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. 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
goodwill. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed.
21
The Company’s goodwill balance of $1,351,392 at December 31, 2013 and 2012 relates to one of the
Company’s reporting units, Microlab. Management’s qualitative assessment performed in the fourth quarters of 2013
and 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.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of
undiscounted cash flows resulting from the use of the assets and its eventual disposition. Measurement of an impairment
loss for long-lived assets that management expects to hold for sale is based on the fair value of the assets. Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.
Results of Operations
Year Ended December 31, 2013 Compared to 2012
Net consolidated sales for the year ended December 31, 2013 were $33,825,073 as compared to $29,594,544
for the year ended December 31, 2012, an increase of $4,230,529 or 14.3%. This increase was primarily the result of
strong demand throughout 2013 for the Company’s network solutions products, particularly for use in DAS. In 2013,
the Company experienced strong order activity in its network solutions segment due to commercial infrastructure
development in support of ongoing DAS deployments and upgrades.
Net sales of the Company’s network solutions products for the year ended December 31, 2013 were
$22,031,549 as compared to $14,334,095 for the year ended December 31, 2012, an increase of $7,697,454 or 53.7%.
Net sales of network solutions products accounted for 65.1% and 48.4% of net consolidated sales for the years ended
December 31, 2013 and 2012, respectively. The increase in sales during 2013 was primarily due to the Company’s
growing participation in the DAS market through supply of its passive microwave components.
Net sales of the Company’s test and measurement products for the year ended December 31, 2013 were
$11,793,524 as compared to $15,260,449 for the year ended December 31, 2012, a decrease of $3,466,925 or 22.7%.
Net sales of test and measurement products accounted for 34.9% and 51.6% of net consolidated sales for the years
ended December 31, 2013 and 2012, respectively. The decrease in sales for 2013 was primarily due to lower order
volume during 2013 as a result of the Company’s completion of a large government contract in 2012 as well as
decreased order flow from prime defense contractors due to sequestration.
The Company’s gross profit on consolidated net sales for the year ended December 31, 2013 was $16,128,350
or 47.7% as compared to $14,776,797 or 49.9% as reported in the previous year. Gross profit percentage was lower in
2013 compared to 2012 primarily due to a shift in segment revenue contribution and mix of product sold. The
Company’s test and measurement segment typically provides for higher gross margins then the network solutions
segment. Therefore, the decline in test and measurement sales, as a percentage of consolidated sales, resulted in a
decrease in overall consolidated gross margins. Further compounding the effects of segment product mix on gross
profit, test and measurement gross margins were lower in 2013 due to reduced test and measurement sales volumes as
described in the preceding paragraph. As a result, overall blended gross profit margins declined by approximately 2%
for 2013 as compared to 2012.
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.
22
Operating expenses for the year ended December 31, 2013 were $13,932,587 or 41.0% of consolidated net
sales as compared to $12,019,179 or 40.6% of consolidated net sales for the year ended December 31, 2012. For the
year ended December 31, 2013 as compared to the prior year, operating expenses increased by $1,913,408 or 15.9%.
Operating expenses are higher in 2013 due to an increase in general and administrative expenses of $1,462,445, an
increase in sales and marketing expenses of $254,923 and an increase in research and development expenses of
$121,040. The increase in general and administrative expense is primarily due to an increase in corporate legal and
consulting fees of $728,558 incurred in connection with the Company’s ongoing strategic review, an increase in non-
cash stock-based compensation charges of $436,698 due to the acceleration of amortization related to performance-
based stock options and amortization of restricted common stock, and an increase in bad debt expense of $166,542.
Since the second quarter of 2012, the Company has been conducting a strategic review including capital allocation
strategies which has required considerable involvement from the Company’s outside legal counsel and consulting firms.
Although the Company’s strategic review is ongoing, management expects professional fees to decrease significantly
going forward. Research and development expenses were higher in 2013 primarily due an increase in salaries in our
network solutions segment of $275,672, partially offset by a decrease in salaries in our test and measurement segment of
$110,854. Sales and marketing expenses were higher in 2013 primarily due to higher non-employee sales commissions
in our network solutions segment of $426,309 and higher salaries expense of $392,159 due to the hiring of sales and
marketing personnel in support of our network solutions segment, partially offset by lower non-employee sales
commissions and lower salaries in our test and measurement segment in the amount of $268,347 and $229,591,
respectively.
Interest expense, net of interest income derived from the Company’s cash investment account, decreased by
$86,998 for the year ended December 31, 2013 as compared to the previous year. The decrease in interest expense is
due to the repayment of the mortgage loan in August 2013 associated with the sale of the Mahwah Building.
Substantially all of the Company’s cash is invested in money market funds.
Other income, net of other non-operating expense, increased by $260,360 for the year ended December 31,
2013 as compared to the previous year. The increase in other income was primarily due to a net realized gain on
the sale of the Mahwah Building of $188,403 and the recording of a realized gain on the sale of an investment
security of $161,500 in 2013, partially offset by lower rental income of $160,830 due to the sale of the Mahwah
Building in 2013.
For the years ended December 31, 2013 and 2012, the Company realized a tax benefit of $1,275,659 and
$389,763, respectively. For both years, 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. In 2013 and 2012, the Company
analyzed its deferred tax asset on a quarterly basis and adjusted the deferred tax valuation allowance based on its
projection of estimated taxable income. Based on this analysis, coupled with the Company’s history of generating
taxable income and utilizing its domestic net operating loss carryforward, management determined it is more likely than
not that the Company’s deferred tax assets will be fully realized. Accordingly, the associated valuation allowance on the
Company’s net operating losses has been reduced to zero. The adjustments to the valuation allowance had a significant
impact on the Company’s effective tax rate. The Company will continue to evaluate the need for a valuation allowance
against this tax asset and will adjust the valuation allowance as deemed appropriate.
Net income was $3,842,200 or $0.16 per share on a diluted basis for the year ended December 31, 2013 as
compared to net income of $3,170,801 or $0.13 per share on a diluted basis for the year ended December 31, 2012, an
increase of $671,399 or $0.03 per diluted share. The increase was primarily due to the analysis discussed above.
Liquidity and Capital Resources
The Company’s working capital has increased by $2,689,432 to $29,205,447 at December 31, 2013, from
$26,516,015 at December 31, 2012. At December 31, 2013 and 2012, respectively, the Company’s current ratio was
10.4 to 1 and 6.0 to 1.
The Company had cash and cash equivalents of $16,599,249 at December 31, 2013, compared to a balance of
$12,969,513 at December 31, 2012. In 2013, the Company repurchased 174,741 shares of its outstanding common stock
at a cost of $229,350. The Company believes its current level of cash is sufficient to fund the current operating,
investing and financing activities.
23
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. As of December 31,
2013, the remaining balance of the valuation allowance of $7,012,134 relates to the Company’s foreign net operating
loss carryforwards which is unlikely to be realized in future periods.
Operating activities provided $3,497,090 in cash for the year ended December 31, 2013. For the year ended
December 31, 2012, operating activities provided $2,179,280 in cash flows. For 2013, cash provided by operations was
primarily due to income from operations, an increase in accounts payable, accrued expenses and other current liabilities,
a decrease in accounts receivable and a decrease in inventories, partially offset by an increase in prepaid expenses and
other assets. For 2012, cash provided by operations was primarily due to income from operations and an increase in
accounts payable, accrued expenses and other current liabilities, partially offset by increases in accounts receivable,
inventory and prepaid expenses and other assets.
The Company has historically turned 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.
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 provided by investing activities for the year ended December 31, 2013 was $3,052,019. The source of
this cash was due to proceeds from the sale of the Mahwah Building and proceeds from the sale of a non-marketable
security, offset by capital expenditures. Net cash used for investing activities for the year ended December 31, 2012 was
$447,900. The use of cash was for capital expenditures.
Financing activities used $2,919,373 in cash for the year ended December 31, 2013. The use of these funds was
for the final payment on a mortgage note, the acquisition of treasury stock and periodic payments on an equipment
lease. Financing activities used $851,649 in cash for the year ended December 31, 2012. The use of these funds was for
the repurchase of treasury stock and periodic payments on the mortgage note for the Mahwah Building.
Table of Contractual Obligations
Total
Less than 1 Year
Payments by Period
1-3 Years
4-5 Years
Facility Leases
Operating and Equipment leases
$428,438
313,561
$741,999
$342,750
63,775
$406,525
$ 85,688
191,325
$277,013
$ -
58,461
$ 58,461
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 and, under the terms and conditions of the loan agreement, is fully secured by said money fund
account and any short-term investment holdings. Advances under the facility will bear interest at a variable rate equal to
the London InterBank Offered Rate 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 December 31, 2013, the Company had no borrowings outstanding under the
facility and approximately $4,500,000 of borrowing availability. Since the credit facility is based upon our current
investment balance, borrowing availability has declined over time due to the Company’s funding of its stock
repurchases. The Company has no current plans to borrow from this credit facility as it believes cash generated from
operations will adequately meet near-term working capital requirements.
From time to time, the Company has pursued, and may continue to pursue, strategic opportunities including
24
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 or other securities. The Company
incurs costs as a result of such activities and such activities may affect the Company’s liquidity in future periods.
On August 1, 2013, the Company was awarded a contract 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 with a considerable portion of the order,
approximately $800,000, expected to be realized over fiscal year 2014. Additionally, on March 3, 2014, the Company
received a significant order from one of its customers to supply its Low PIM Attenuators. The total order value of the
product to be sold under the purchase order is approximately $1,800,000 with a majority of the revenue expected to be
realized in 2014.
The Company believes that its financial resources from working capital provided by operations 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
Other than contractual obligations incurred in the normal course of business, 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 nor does it believe that its
business is seasonal.
Recent Accounting Pronouncements Affecting the Company
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. This ASU was effective for the Company beginning January 1, 2013. The adoption of this ASU did
not have a material impact on its consolidated financial statements.
The Company does not believe there are any other recently issued, but not yet effective accounting
pronouncements, if adopted, that would have a material effect on the accompanying consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Industry Risk
The electronic test and measurement industry is cyclical which can cause significant fluctuations in sales, gross
profit margins and profits, from year to year. It is difficult to predict the timing of the changing cycles in the electronic
test and measurement industry.
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted in a separate section of this report. See the Consolidated Financial
Statements and accompanying notes set forth below.
25
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. 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. Our disclosure controls and procedures are designed to provide
reasonable assurance that the information required to be included in our SEC reports is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms, relating to Wireless Telecom Group,
Inc. 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) Management’s Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. The Company’s internal control over financial reporting is a process designed under the
supervision of the Company’s principal executive officer and principal financial officer to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external
purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how
well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurances with respect to financial statement preparation and presentation. Additionally, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2013, management assessed the effectiveness of the Company’s internal control over
financial reporting based on the criteria for effective internal control over financial reporting established in “Internal
Control — Integrated Framework,” (1992) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO 1992 criteria). Based on the assessment, management determined that the Company maintained
effective internal control over financial reporting as of December 31, 2013.
This annual report does not include an attestation report of the Company’s independent registered public
accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation
by the Company’s independent registered public accounting firm pursuant to the Dodd-Frank Wall Street and Consumer
Protection Act, which exempts non-accelerated filers from the auditor attestation requirement of Section 404 (b) of the
Sarbanes-Oxley Act.
.
(c) Changes in Internal Controls over Financial Reporting
In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there
was no change identified in our internal control over financial reporting that occurred during the last fiscal quarter that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
26
Item 10. Directors, Executive Officers and Corporate Governance
PART III
The information required under this item is set forth in the Company’s Definitive Proxy Statement relating to
the Company’s 2014 annual meeting of shareholders and is incorporated herein by reference. Such Proxy Statement will
be filed with the Commissions within 120 days of the Company’s year-end.
Item 11. Executive Compensation
The information required under this item is set forth in the Company’s Definitive Proxy Statement relating to
the Company’s 2014 annual meeting of shareholders and is incorporated herein by reference. Such Proxy Statement will
be filed with the Commissions within 120 days of the Company’s year-end.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required under this item is set forth in the Company’s Definitive Proxy Statement relating to
the Company’s 2014 annual meeting of shareholders and is incorporated herein by reference. Such Proxy Statement will
be filed with the Commissions within 120 days of the Company’s year-end.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item is set forth in the Company’s Definitive Proxy Statement relating to
the Company’s 2014 annual meeting of shareholders and is incorporated herein by reference. Such Proxy Statement will
be filed with the Commissions within 120 days of the Company’s year-end.
Item 14. Principal Accountant Fees and Services
The information required under this item is set forth in the Company’s Definitive Proxy Statement relating to
the Company’s 2014 annual meeting of shareholders and is incorporated herein by reference. Such Proxy Statement will
be filed with the Commissions within 120 days of the Company’s year-end.
27
Item 15. Exhibits and Financial Statement Schedules
PART IV
(a)
(1)
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2013 and 2012
Consolidated Statements of Operations for the Two Years in the Period
ended December 31, 2013
Consolidated Statements of Changes in Shareholders’ Equity for the Two
Years in the Period ended December 31, 2013
Consolidated Statements of Cash Flows for the Two Years in the Period
ended December 31, 2013
Notes to Consolidated Financial Statements
All other schedules have been omitted because the required information is included
in the financial statements or notes thereto or because they are not required.
(2)
Exhibits
3.1
Certificate of Incorporation, as amended (1)
3.2
Amended and Restated By-laws (7)
3.3
Amendment to the Certificate of Incorporation (2)
3.4
Amendment to the Certificate of Incorporation (3)
4.2
Form of Stock Certificate (1)
10.1
Summary Plan Description of Profit Sharing Plan of the Registrant (1)
10.2 Amendment to Registrant’s Incentive Stock Option Plan and related agreement (3)
10.3 Wireless Telecom Group, Inc. 2000 Stock Option Plan (4)
10.8 Amended and Restated Severance Agreement, dated December 10, 2012, between Wireless
Telecom Group, Inc. and Paul Genova (8)
10.9 Severance Agreement, dated December 10, 2012, between Wireless Telecom Group, Inc, and
Joseph Debold (8)
10.10 2012 Incentive Compensation Plan of Wireless Telecom Group, Inc (6)
10.11 Form of Restricted Stock Award Agreement under 2012 Incentive Compensation Plan (8)
10.12 Severance Agreement, dated June 14, 2013, between Wireless Telecom Group, Inc. and Robert
Censullo (9)
10.13 Form of Stock Option Agreement under the Company’s 2012 Incentive Compensation Plan (10)
14 Code of Ethics (5)
21.1 List of subsidiaries
23.1
Consent of Independent Registered Public Accounting Firm (PKF O’Connor Davies, a division
of O’Connor Davies, LLP) filed herewith as Exhibit 23.1
28
31.1 Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. section 1350
32.2 Certification pursuant to 18 U.S.C. section 1350
101 The following financial statements from Wireless Telecom Group, Inc.’s Annual Report on
Form 10-K for the year ended December 31, 2013, filed on March 31, 2014, formatted in Extensible
Business Reporting Language (XBRL): (i) consolidated balance sheets, (ii) consolidated
statements of operations, (iii) consolidated statements of cash flows, (iv) consolidated statement of
changes in shareholders’ equity, and (v) the notes to the consolidated financial statements. (11)
___________________
* All exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The
Registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange
Commission upon its request.
(1)
Filed as an exhibit to the Company’s Registration Statement on Form S-18
(File No.33-42468-NY) and incorporated by reference herein.
Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 1994 and
incorporated by reference herein.
Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 1995 and
incorporated by reference herein.
(2)
(3)
(4) Filed as Annex B to the Definitive Proxy Statement of the Company filed on July 17, 2000 and incorporated by
reference herein.
(5) Filed as exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 and
incorporated by reference herein.
(6)
Filed as Annex A to the Definitive Proxy Statement of the Company filed on April 30, 2012 and incorporated by
reference herein.
(7) Filed as exhibit 3.1 to the Company’s Current Report on Form 8-K, dated October 12, 2012, filed with the
Commission on October 15, 2012 and incorporated by reference herein.
(8) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, filed
with the Commission on April 1, 2013 and incorporated by reference herein.
(9) Filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed
with the Commission on August 14, 2013, and incorporated by reference herein.
(10) Filed as exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013,
filed with the Commission on November 14, 2013, and incorporated by reference herein.
(11) As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Securities
11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
29
Pursuant to the requirements of Section 13 or 15(d) 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.
S I G N A T U R E S
Date: March 31, 2014
WIRELESS TELECOM GROUP, INC.
By: /s/ Paul Genova
Paul Genova
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Glenn Luk
Glenn Luk
/s/ Paul Genova
Paul Genova
/s/ Robert Censullo
Robert Censullo
/s/ Henry Bachman
Henry Bachman
Chairman of the Board
March 31, 2014
Chief Executive Officer
March 31, 2014
Chief Financial Officer
March 31, 2014
Director
March 31, 2014
/s/ Joseph Garrity
Joseph Garrity
Director
/s/ Anand Radhakrishnan
Anand Radhakrishnan
Director
/s/ Alan Bazaar
Alan Bazaar
Director
March 31, 2014
March 31, 2014
March 31, 2014
30
Exhibit 21.1
SUBSIDIARIES OF WIRELESS TELECOM GROUP, INC.
ENTITY NAME
Boonton Electronics Corp.
Microlab/FXR
WTG Foreign Sales Corp.
NC Mahwah, Inc.
COUNTRY OR STATE OF
INCORPORATION/FORMATION
New Jersey
New Jersey
New Jersey
New Jersey
31
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No.
333-147411) pertaining to the shares registered for public offering by Investcorp Technology
Ventures L.P. and Form S-8 (No. 333-182819, No. 333-59856 and No. 333-04893) pertaining to the
2012 Incentive Compensation Plan, the 2000 stock option plan and the 1995 stock option plan of our
report dated March 28, 2014, on the consolidated financial statements of Wireless Telecom Group,
Inc. as of and for the years ended December 31, 2013 and 2012.
/s/ PKF O’Connor Davies
a division of O’Connor Davies, LLP
March 28, 2014
New York, NY
32
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Paul Genova, certify that:
1.
I have reviewed this annual report on Form 10-K of Wireless Telecom Group, Inc.;
2.
Based on my knowledge, this annual 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
annual 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(s) 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;
The registrant's other certifying officer(s) and I have disclosed, based on our most recent
5.
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 function):
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: March 31, 2014
/s/ Paul Genova
Paul Genova
Chief Executive Officer, (Principal Executive
Officer)
33
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Robert Censullo, certify that:
1.
I have reviewed this annual report on Form 10-K of Wireless Telecom Group, Inc.;
2.
Based on my knowledge, this annual 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
annual 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(s) 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 function):
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: March 31, 2014
/s/ Robert Censullo
Robert Censullo
Chief Financial Officer, (Principal Financial
Officer)
34
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 accompanying Annual Report on Form 10-K of Wireless Telecom Group, Inc.
(the “Company”) for the year ended December 31, 2013 as filed with the Securities and Exchange
Commission on the date hereof (the “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:
The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of
(1)
the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial
(2)
condition and result of operations of the Company.
/s/ Paul Genova
Paul Genova
Chief Executive Officer, (Principal Executive
Officer)
March 31, 2014
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C.,
§ 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and is not to be incorporated by reference into any filing of the Company, whether made
before or after the date hereof, regardless of any general incorporation language in such filing.
A signed original of this written statement required by Section 906 has been provided to Wireless
Telecom Group, Inc. and will be retained by Wireless Telecom Group, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.
35
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 accompanying Annual Report on Form 10-K of Wireless Telecom Group, Inc.
(the “Company”) for the year ended December 31, 2013 as filed with the Securities and Exchange
Commission on the date hereof (the “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:
The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of
(1)
the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial
(2)
condition and result of operations of the Company.
/s/ Robert Censullo
Robert Censullo
Chief Financial Officer, (Principal Financial
Officer)
March 31, 2014
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C.,
§ 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, and is not to be incorporated by reference into any filing of the Company, whether made
before or after the date hereof, regardless of any general incorporation language in such filing.
A signed original of this written statement required by Section 906 has been provided to Wireless
Telecom Group, Inc. and will be retained by Wireless Telecom Group, Inc. and furnished to the
Securities and Exchange Commission or its staff upon request.
36
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Balance Sheets as of December 31, 2013 and 2012
Statements of Operations for the Two Years
Ended December 31, 2013
Statement of Changes in Shareholders’ Equity for the Two
Years Ended December 31, 2013
Statements of Cash Flows for the Two Years
Ended December 31, 2013
Notes to Consolidated Financial Statements
Page(s)
F - 2
F - 3
F - 4
F - 5
F - 6
F - 7
F – 1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Wireless Telecom Group, Inc.
Parsippany, NJ
We have audited the accompanying consolidated balance sheets of Wireless Telecom Group, Inc. and Subsidiaries as of
December 31, 2013 and 2012, and the related consolidated statements of operations, changes in shareholders’ equity and
cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Wireless Telecom Group, Inc. and Subsidiaries at December 31, 2013 and 2012 and the results of their
operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the
United States of America.
March 28, 2014
New York, NY
/s/PKF O’Connor Davies
a division of O’Connor Davies, LLP
F – 2
CONSOLIDATED BALANCE SHEETS
Wireless Telecom Group, Inc.
-ASSETS-
December 31,
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable - net of allowance for doubtful accounts of
2013 2012
$16,599,249
$12,969,513
Deferred income taxes - current
$135,742 and $57,333 for 2013 and 2012, respectively
Inventories
5,676,015
8,289,635
1,127,553
588,726
Assets held for sale - 3,179,002
31,830,444
TOTAL CURRENT ASSETS
5,357,769
8,169,276
1,462,552
720,229
Prepaid expenses and other current assets
32,309,075
PROPERTY, PLANT AND EQUIPMENT - NET
1,609,427
1,266,692
OTHER ASSETS:
1,351,392
Goodwill
Deferred income taxes – non-current 7,454,935 6,084,042
697,054
8,132,488
TOTAL OTHER ASSETS
712,202
9,518,529
Other assets
1,351,392
TOTAL ASSETS
$43,437,031
$41,229,624
- LIABILITIES AND SHAREHOLDERS’ EQUITY -
CURRENT LIABILITIES:
$1,258,426
Accounts payable
Accrued expenses and other current liabilities
1,426,788
Equipment lease payable – current 120,103 -
2,629,215
Current portion of mortgage payable
5,314,429
TOTAL CURRENT LIABILITIES
-
3,103,628
$1,459,594
1,523,931
LONG TERM LIABILITIES:
Equipment lease payable 59,296 -
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, 29,232,557 and 29,012,557
shares issued, 24,033,231 and 23,987,972 shares outstanding, respectively 292,326
38,970,783
Additional paid-in capital
Retained earnings
10,700,020
Treasury stock, at cost – 5,199,326 and 5,024,585 shares, respectively (9,689,022) (9,459,672)
290,126
38,226,921
6,857,820
-
-
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$43,437,031
$41,229,624
40,274,107
35,915,195
The accompanying notes are an integral part of these consolidated financial statements.
F – 3
CONSOLIDATED STATEMENTS OF OPERATIONS
Wireless Telecom Group, Inc.
For the Year Ended December 31,
2013 2012
NET SALES $33,825,073 $29,594,544
COST OF SALES 17,696,723 14,817,747
GROSS PROFIT 16,128,350 14,776,797
OPERATING EXPENSES
Research and development 2,645,070 2,524,030
Sales and marketing 4,858,239 4,603,316
General and administrative 6,429,278 4,891,833
TOTAL OPERATING EXPENSES 13,932,587 12,019,179
OPERATING INCOME 2,195,763 2,757,618
OTHER (INCOME) EXPENSE
Interest expense - net 114,193 201,191
Other (income) – net (484,971) (224,611)
TOTAL OTHER (INCOME) EXPENSE (370,778) (23,420)
INCOME FROM OPERATIONS BEFORE
(BENEFIT) FROM INCOME TAXES 2,566,541 2,781,038
(BENEFIT) FROM INCOME TAXES (1,275,659) (389,763)
NET INCOME $3,842,200 $3,170,801
INCOME PER COMMON SHARE:
Basic
$0.16 $0.13
Diluted $0.16 $0.13
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
23,935,486 24,258,853
Basic
Diluted 24,534,162 24,632,755
The accompanying notes are an integral part of these consolidated financial statements.
F – 4
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
Wireless Telecom Group, Inc.
Common
Stock
Additional Paid-
in-Capital
Retained
Earnings
Treasury
Stock at Cost
Total
BALANCE AT
DECEMBER 31,
2011
Net income
Shares issued under
restricted stock
plan
Stock
compensation
expense
Repurchase of
treasury stock
BALANCE AT
DECEMBER 31,
2012
Net income
Shares issued
under
restricted stock
plan
Stock
compensation
expense
Repurchase of
treasury stock
BALANCE AT
DECEMBER
31, 2013
$288,839
$37,918,844
$3,687,019
$(8,681,720)
$33,212,982
-
-
3,170,801
1,287
(1,287)
-
309,364
-
-
-
-
-
3,170,801
-
309,364
-
-
-
(777,952)
(777,952)
$290,126
$38,226,921
$6,857,820
$(9,459,672)
$35,915,195
-
-
3,842,200
-
3,842,200
2,200
(2,200)
-
746,062
-
-
-
-
-
746,062
-
-
-
(229,350)
(229,350)
$292,326
$38,970,783
$10,700,020
$(9,689,022)
$40,274,107
The accompanying notes are an integral part of these consolidated financial statements.
F – 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Wireless Telecom Group, Inc.
For the Year Ended December 31,
2013 2012
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 3,842,200 $ 3,170,801
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 344,577 351,356
Stock compensation expense 746,062 309,364
Realized gain on sale of non-marketable security (161,500) -
Realized gain on sale of building (188,403) -
Deferred income taxes (1,705,892) (765,595)
Provision for (recovery of) doubtful accounts
78,409 (65,202)
Changes in assets and liabilities:
Accounts receivable 239,837 (940,183)
Inventories 120,359 (712,584)
Prepaid expenses and other assets (86,489) (58,262)
Accounts payable, accrued expenses and other current liabilities 267,930 889,585
Net cash provided by operating activities 3,497,090 2,179,280
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (504,400) (447,900)
Proceeds from sale of non-marketable securities 162,500 -
Proceeds from sale of building 3,393,919 -
Net cash provided by (used for) investing activities 3,052,019 (447,900)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of mortgage note (2,629,215) (73,697)
Repayments on equipment lease payable (60,808) -
Repurchase of treasury stock (229,350) (777,952)
Net cash (used for) financing activities (2,919,373) (851,649)
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,629,736 879,731
Cash and cash equivalents, at beginning of year 12,969,513 12,089,782
CASH AND CASH EQUIVALENTS, AT END OF YEAR $ 16,599,249 $ 12,969,513
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Taxes $ 290,194 $ 385,396
Interest $ 115,103 $ 201,842
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Capital expenditures $(240,206) $ -
Equipment lease payable $ 240,206 $ -
The accompanying notes are an integral part of these consolidated financial statements.
F – 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
Organization and Basis of Presentation:
Wireless Telecom Group, Inc. and Subsidiaries (the “Company”) develops and manufactures a wide variety
of electronic noise sources, testing and measurement instruments and high-power, passive microwave
components, which it sells to customers throughout the United States and worldwide through its foreign
sales corporation and foreign distributors to commercial and government customers in the electronics
industry. The 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. All intercompany transactions are eliminated in consolidation.
The Company discloses its operations in two reportable segments, test and measurement and network
solutions. The test and measurement segment is comprised primarily of the operations of Boonton and
Noisecom. The network solutions segment is comprised primarily of the operations of Microlab.
Use of Estimates:
The accompanying financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”), which requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Accordingly, actual results could differ from those
estimates. The most significant estimates and assumptions include management’s analysis in support of
realization of the Company’s deferred tax asset, accounting for performance-based stock options, inventory
reserves and allowance for doubtful accounts.
Concentrations of Credit Risk and Fair Value:
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 is diversified due to the large number of
entities comprising our customer base and their dispersion across many different industries and geographies.
Credit evaluations are performed on customers requiring credit over a certain amount. Credit risk is
mitigated through collateral such as letters of credit, bank guarantees or payment terms like cash in advance.
Credit evaluation is performed independent of the Company’s sales team to ensure segregation of duties.
One customer accounted for 11% of the Company’s total consolidated sales for each of the years ended
December 31, 2013 and 2012. At December 31, 2013 and 2012, no customer represented 10% or more of the
Company’s gross accounts receivable balance.
The carrying amounts of cash and cash equivalents, trade receivables, prepaid expenses and other current
assets, accounts payable and accrued expenses and other current liabilities approximate fair value due to the
short-term nature of these instruments.
At December 31, 2012, the fair value (estimated based upon expected cash outflows discounted at current
market rates) and carrying value of the fixed rate mortgage amounted to $2,690,786 and $2,629,215,
respectively.
F – 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued):
Cash and Cash Equivalents:
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 operating and money market accounts.
The Company classifies investments as short-term investments if their original or remaining maturities are
greater than three months and their remaining maturities are one year or less. As of December 31, 2013,
substantially all of the Company’s investments consisted of cash and cash equivalents.
Accounts Receivable and allowance for doubtful accounts:
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The volatility of the
industries the Company serves can cause certain of its customers to experience shortages of cash flows,
which can impact their ability to make required payments. The Company maintains allowances for doubtful
accounts for estimated losses resulting from the inability of its customers to make required payments.
Estimated allowances for doubtful accounts are reviewed periodically taking into account the customer’s
recent payment history, the customer’s current financial statements and other information regarding the
customer’s credit worthiness. Account balances are charged off against the allowance when it is determined
the receivable will not be recovered.
Inventories:
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. Inventory carrying value is net of inventory reserves of $765,413 and $621,996 as
of December 31, 2013 and 2012, respectively.
Inventories consist of:
Raw materials
Work-in-process
Finished goods
December 31,
2013
$5,028,743
470,983
2,669,550
$8,169,276
2012
$5,186,555
390,188
2,712,892
$8,289,635
Property, Plant and Equipment:
Property, plant and equipment are reflected at cost, less accumulated depreciation. Depreciation and
amortization are provided on a straight-line basis over the following useful lives:
Machinery and equipment 5-10 years
Furniture and fixtures 5-10 years
Transportation equipment 3-5 years
Leasehold improvements are amortized over the remaining term of the lease and reflect the estimated life of
the improvements. Repairs and maintenance are charged to operations as incurred; renewals and betterments
are capitalized.
F – 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued):
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. 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 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 December 31, 2013 and 2012 relates to one of the
Company’s reporting units, Microlab. Management’s qualitative assessment performed in the fourth quarters
of 2013 and 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.
Impairment of long-lived assets:
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an
estimate of undiscounted cash flows resulting from the use of the assets and its eventual disposition.
Measurement of an impairment loss for long-lived assets that management expects to hold for sale is based
on the fair value of the assets. Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value less costs to sell.
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 special post shipment obligations or acceptance provisions that exist with any sales
arrangements.
Research and Development Costs:
Research and development costs are charged to operations when incurred. The amounts charged to operations
for the years ended December 31, 2013 and 2012 were $2,645,070 and $2,524,030, respectively.
F – 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued):
Advertising Costs:
Advertising expenses are charged to operations during the year in which they are incurred and aggregated
$302,269 and $326,431 for the years ended December 31, 2013 and 2012, respectively.
Stock-Based Compensation:
The Company follows the provisions of ASC 718, “Share-Based Payment” which requires that compensation
expense be recognized, based on the fair value of the stock awards less estimated forfeitures. The fair value of
the stock awards is equal to the fair value of the Company’s stock on the date of grant. The fair value of
options at the date of grant was estimated using the Black-Scholes option pricing model. When performance-
based options are granted, the Company takes into consideration guidance under ASC 718 and SEC Staff
Accounting Bulletin No. 107 (SAB 107) when determining 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 that approximates the expected life of
the options. 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 implicit service period, which is 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. If the award is forfeited
because the performance condition is not satisfied, previously recognized compensation cost is reversed.
Management evaluates performance conditions on a quarterly basis.
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.
The Company had historically analyzed its deferred tax asset on a quarterly basis and adjusted the deferred
tax 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. During the
fourth quarter of 2013, the Company evaluated the realizability of its deferred tax asset and the need for a
valuation allowance based upon the Company’s history of generating taxable income, analysis of expected
future taxable income, as well as other factors deemed appropriate. As a result, management determined that
the entire deferred tax asset is expected to be realized and accordingly has not provided a valuation
allowance to its deferred tax asset on its domestic net operating losses.
F – 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued):
Under ASC 740, the Company must recognize and disclose 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 and disclosed 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 December 31, 2013 and 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 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 consolidated financial statements, no reserves for uncertain income tax positions have been recorded
pursuant to ASC 740 during the years ended December 31, 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.
Income Per Common Share:
Basic income 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 income per share is
calculated by dividing income available to common shareholders by the weighted average number of
common shares outstanding for the period and, when dilutive, potential shares from stock options and
warrants to purchase common stock, using the treasury stock method. In accordance with ASC 260,
“Earnings Per Share”, the following table reconciles basic shares outstanding to fully diluted shares
outstanding.
Years Ended December 31,
Weighted average number of common shares
outstanding — Basic
Potentially dilutive stock options
Weighted average number of common and equivalent
2013
2012
23,935,486
598,676
24,258,853
373,902
shares outstanding-Diluted
24,534,162
24,632,755
Common stock options are included in the diluted income (loss) per share calculation only when option
exercise prices are lower than the average market price of the common shares for the period presented. The
weighted average number of common stock options not included in diluted income (loss) per share, because
the effects are anti-dilutive, was 2,481,748 and 1,904,792 for 2013 and 2012, respectively.
Subsequent events:
The Company has evaluated subsequent events and, except as described in Note 10, the Company has
determined that there were no subsequent events or transactions requiring recognition or disclosure in the
consolidated financial statements.
F – 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued):
Recent Accounting Pronouncements Affecting the Company:
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 consolidated financial statements.
Management does not believe there are any other recently issued, but not yet effective accounting
pronouncements, if adopted, that would have a material effect on the accompanying consolidated financial
statements.
Reclassifications:
Certain information from the prior year’s presentation has been reclassified to conform to the current year’s
reporting presentation.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, consists of the following:
Machinery and equipment
Furniture and fixtures
Transportation equipment
Leasehold improvements
Less: accumulated depreciation
December 31,
2012
$4,031,389
108,431
141,190
1,095,617
5,376,627
4,109,935
$1,266,692
2013
$4,656,346
110,444
157,677
984,105
5,908,572
4,299,145
$1,609,427
Depreciation expense of $344,577 and $351,356 was recorded for the years ended December 31, 2013 and
2012, respectively.
F – 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 3 - OTHER ASSETS:
Other assets consist of the following:
Product demo assets
Security deposit
Miscellaneous
Total
December 31,
2013
2012
$653,436
$643,399
50,000
8,766
$712,202
50,000
3,655
$697,054
NOTE 4 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities consist of the following:
December 31,
Payroll and related benefits
Commissions
Goods received not invoiced
Professional fees
Sales and use tax
Warranty reserve
Accrued disposition costs
Other 73,276
Total
$ 1,523,931
2013
$ 960,559
152,427
117,907
100,242
105,378
-
14,142
2012
$ 803,134
80,942
151,618
119,283
76,434
75,000
63,186
57,191
$ 1,426,788
NOTE 5 - SALE OF BUILDING:
On August 1, 2013, the Company closed on the sale of a property previously owned by the Company and
located in Mahwah, New Jersey (the “Mahwah Building”) and repaid the existing mortgage loan 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
Company expects the escrow amount to be released subsequent to the filing of its 2013 tax returns in mid-
2014. The terms of the mortgage loan relating to the Mahwah Building required monthly payments of
$23,750 applied to both principal and interest at the annual rate of 7.45%. As a result of the sale and the
repayment of the mortgage loan, the Company recognized a gain of $188,403 and is no longer obligated to
make any loan payments. At December 31, 2012, the Mahwah Building is included in Assets Held for Sale
in the accompanying consolidated balance sheets at a carrying value of $3,179,002.
Included in the Company’s consolidated statement of operations, recorded as non-operating income, are
certain income and expenses directly related to the Mahwah Building. The Company’s results of operations
included rental income of $225,161 and $385,992 for the years ended December 31, 2013 and 2012,
respectively. For the years ended December 31 2013 and 2012, the Company’s results of operations included
mortgage interest expense of $115,103 and $201,842 and building depreciation expenses of $0 and $66,698,
respectively.
F – 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 6 -
SHAREHOLDERS’ EQUITY:
Incentive Compensation Plan:
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 December 31, 2013, there were 746,304
shares available for issuance under the 2012 Plan. The 2012 Plan provides for the grant of Restricted Stock
Awards, Non-Qualified Stock Options and Incentive Stock Options in compliance with the Internal Revenue
Code of 1986, as amended, to employees, officers, directors, consultants and advisors of the Company who
are expected to contribute to the Company's future growth and success.
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.
Restricted common stock awards:
On August 19, 2013, the Board of Directors approved the grant of performance-based restricted stock
awards to certain employees of the Company, including its officers. On August 19, 2013, the Company
entered into restricted stock agreements pursuant to which certain employees of the Company were awarded,
collectively, up to 100,000 shares of the Company’s common stock at $1.77 per share, which represents the
closing price of the Company’s common stock on the date of grant.
Under the terms of the restricted stock agreements, the awards will fully vest and become exercisable on the
date on which the Board shall have determined that specific revenue and earnings performance targets have
been met, provided the employee remains in the employ of the Company at such time; provided, however,
upon a Change in Control (as defined in the restricted stock agreements and the 2012 Plan), the restricted
stock shall automatically vest as permitted by the 2012 Plan. As of December 31, 2013, the Company has
not incurred expense relating to these performance-based stock awards as it is improbable that the
performance targets will be achieved.
On June 12, 2013, certain members of the Company’s Board of Directors were each granted 20,000 shares
of restricted common stock, 120,000 shares in total, at $1.51 per share, which represents the closing price of
the Company’s common stock on the date of grant. These shares will vest on the date of the Company’s next
annual meeting of shareholder’s to be held in June 2014, provided that the director’s service continues
through the vesting date.
F – 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 6 - SHAREHOLDERS’ EQUITY (Continued):
The following tables summarize the restricted common stock awards granted to certain directors, officers
and employees of the Company during the years ended December 31, 2013 and 2012 under the 2012 Plan:
Year ended December 31, 2013 Number of
Individuals
Chief Executive Officer
Chief Financial Officer
V.P. of Sales and Marketing
Various Other Employees
Board of Directors
Shares
Granted
42,000
11,000
26,000
21,000
120,000
220,000
Price per
Vesting Date
Granted Share
Performance based
$1.77
Performance based
$1.77
Performance based
$1.77
$1.77
Performance based
$1.51 Next Annual Meeting
(June 2014)
Year ended December 31, 2012 Number of
Individuals
Chief Executive Officer
V.P. of Sales and Marketing
Board of Directors
Shares
Granted
50,000
26,957
21,739
80,000
80,000
258,696
Price per
Vesting Date
Granted Share
$1.15
June 13, 2012
$1.15 March 20, 2013
March 20, 2013
$1.15
June 13, 2012
$1.15
June 13, 2013
$1.15
(vested upon grant)
(vested upon grant)
During the year ended December 31, 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 which represented the trading price at the date of repurchase.
During the year ended December 31, 2012, the Company repurchased 23,334 shares of restricted common
stock from its Chief Executive Officer for $26,834, or $1.15 per share which represented the trading price at
the date of repurchase. 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 December 31, 2013 and 2012, and changes during the
years ended December 31, 2013 and 2012 are presented below:
Non-vested Shares
Non-vested at January 1, 2012
Number of Shares
90,000
Weighted Average
Grant Date
Fair Value
$0.95
Forfeited
Granted
Vested
Non-vested at December 31, 2012
Forfeited
Granted
Vested
Non-vested at December 31, 2013
(90,000)
258,696
(130,000)
128,696
-
220,000
(128,696)
220,000
$0.95
$1.15
$1.15
$1.15
-
$1.63
$1.15
$1.63
For the years ended December 31, 2013 and 2012, the Company recorded compensation expense related to
restricted common stock in the amount of $155,268 and $112,432, respectively.
F – 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 6 - SHAREHOLDERS’ EQUITY (Continued):
As of December 31, 2013, the unearned compensation related to Company granted restricted common stock
is $267,600 of which $90,600 will be amortized on a straight-line basis through the date of the Company’s
next annual meeting to be held in June 2014, the vesting date. The remaining balance of $177,000 will begin
to be amortized when it is determined that certain vesting conditions are probable of being achieved.
Performance-based stock option awards:
On August 19, 2013, the Board of Directors approved the grant of performance-based stock options to
certain employees of the Company, including its officers. Accordingly, the Company entered into stock
option agreements pursuant to which certain employees of the Company were awarded options to purchase,
collectively, up to 950,000 shares of the Company’s common stock at an exercise price of $1.77 per share,
which represents the closing price of the Company’s common stock on the date of grant.
Under the terms of the stock option agreements the options will fully vest and become exercisable on the
date on which the Board shall have determined that specific revenue and earnings performance targets have
been met, provided the employee remains in the employ of the Company at such time; provided, however,
upon a Change in Control (as defined in the stock option agreements and the 2012 Plan), the options shall
automatically accelerate and become fully exercisable as permitted by the 2012 Plan. As of December 31,
2013, the Company has not incurred expense relating to these performance-based stock options as it is
improbable that the performance targets will be achieved.
A summary of performance-based stock option activity, and related information for the years ended
December 31 2013 and 2012 follows:
Non-vested, January 1, 2012
Granted
Exercised
Forfeited
Canceled/Expired
Non-vested, December 31, 2012
Granted
Vested
Exercised
Forfeited
Canceled/Expired
Non-vested, December 31, 2013
Options exercisable:
December 31, 2012
December 31, 2013
Options
Weighted Average
Exercise Price
1,340,000
-
-
-
(40,000)
1,300,000
950,000
(1,300,000)
-
-
-
950,000
$0.92
-
-
-
$0.78
$0.93
$1.77
$0.93
-
-
-
$1.77
-
1,300,000
-
$0.93
The aggregate intrinsic value of performance-based stock options outstanding as of December 31, 2013 and
2012 was $1,896,250 and $416,150, respectively. The aggregate intrinsic value of performance-based stock
options exercisable as of December 31, 2013 and 2012 was $1,563,750 and $0, respectively.
F – 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 6 - SHAREHOLDERS’ EQUITY (Continued):
For the years ended December 31, 2013 and 2012, the Company recorded compensation expense related to
performance-based options in the amount of $590,794 and $196,932, respectively.
Management evaluates the likelihood of achieving certain vesting conditions with respect to performance-
based stock awards on a quarterly basis. Since the end of 2011, the Company had been amortizing its
performance-based options issued prior to 2013 on a straight-line basis through December 31, 2015, the
expected implicit service period at the time, which resulted in annual compensation expense of $196,932.
During the three-months ended September 30, 2013, management determined that the performance targets
for those options granted prior to 2013 were likely to be met as of December 31, 2013. As a result, the
Company accelerated the expensing of such options through December 31, 2013, the revised implicit service
date. The impact of the accelerated expense on net income for the year ended December 31, 2013 was
$393,862, or $0.02 per basic and diluted share. Additionally, due to the acceleration, this tranche of options
has been fully amortized at December 31, 2013.
The aggregate grant date fair-value of performance-based options granted in 2013 was $867,683, or
approximately $0.91 per share. The unearned compensation of $867,683 will not be recognized until
management considers it probable that the respective performance conditions to be achievable.
Service-based stock option awards:
A summary of service-based stock option activity, and related information for the years ended December 31,
follows:
Options
Weighted Average
Exercise Price
Outstanding, December 31, 2011
Granted
Exercised
Forfeited
Canceled/Expired
Outstanding, December 31, 2012
Granted
Exercised
Forfeited
Canceled/Expired
Outstanding, December 31, 2013
Options exercisable:
December 31, 2012
December 31, 2013
1,008,667
-
-
-
(146,667)
862,000
-
-
-
(75,000)
787,000
862,000
787,000
$2.61
-
-
-
$2.56
$2.61
-
-
-
$2.26
$2.65
$2.61
$2.65
At December 31, 2013, the Company’s service-based stock options were fully amortized.
F – 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 6 - SHAREHOLDERS’ EQUITY (Continued):
The options outstanding and exercisable as of December 31, 2013 are summarized as follows:
Range of
exercise prices
$0.75 - $1.42
$1.69 - $2.25
$2.28 - $3.02
Weighted average
exercise price
$0.93
$1.77
$2.65
Options
Outstanding
1,300,000
950,000
787,000
3,037,000
Options
Exercisable
1,300,000
-
787,000
2,087,000
Weighted average
remaining life
6.1 years
9.7 years
1.8 years
The following summarizes the components of stock-based compensation expense by equity type for the years
ended December 31:
Performance-Based Stock Options
Restricted Common Stock
Total Share-Based Compensation Expense
2013
$590,794
155,268
$746,062
2012
$196,932
112,432
$309,364
Stock-based compensation for the years ended 2013 and 2012 is included in general and administrative
expenses in the accompanying consolidated statement of operations.
NOTE 7 - SEGMENT AND RELATED INFORMATION:
Financial information by segment:
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 (Noisecom) 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).
F – 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 7 - SEGMENT AND RELATED INFORMATION (Continued):
Financial information by reportable segment as of and for the years ended December 31, 2013 and 2012 is
presented below:
Net sales by segment:
Test and measurement
Network solutions
Total consolidated net sales and net sales of reportable segments
Segment income:
Test and measurement
Network solutions
Income from reportable segments
Other unallocated amounts:
Corporate expenses
Interest and other income - net
2013
2012
$11,793,524
22,031,549
$33,825,073
$15,260,449
14,334,095
$29,594,544
$1,154,067
5,558,019
6,712,086
$2,592,323
3,498,076
6,090,399
(4,516,323)
370,778
(3,332,781)
23,420
Consolidated income from operations before income tax (benefit)
$2,566,541
$2,781,038
Depreciation by segment:
Test and measurement
Network solutions
Total depreciation for reportable segments
Capital expenditures by segment (net of equipment lease payable of
$240,206):
Test and measurement
Network solutions
Total consolidated capital expenditures by reportable segment
Total assets by segment:
Test and measurement
Network solutions
Total assets for reportable segments
Corporate assets, principally cash and cash equivalents and deferred
and current taxes
Total consolidated assets
$217,429
127,148
$344,577
$272,330
79,026
$351,356
$327,525
176,875
$504,400
$259,844
188,056
$447,900
$8,270,614
9,649,681
17,920,295
$12,104,700
8,864,541
20,969,241
25,486,736
20,260,383
$43,407,031
$41,229,624
F – 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 7 - SEGMENT AND RELATED INFORMATION (Continued):
In addition to its in-house sales staff, the Company uses various manufacturers’ representatives to sell its
products. For the years ended December 31, 2013 and 2012, no representative accounted for more than 10%
of total consolidated sales.
Regional Sales:
Net consolidated sales from operations by region were as follows:
Ended December 31,
For the Year
2013 2012___
Americas $26,760,912 $22,511,566
Europe, Middle East, Africa (EMEA) 4,434,037 4,718,669
Asia Pacific (APAC) 2,630,124 2,364,309
$33,825,073 $29,594,544
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 years ended
December 31, 2013 and 2012, sales in the United States amounted to $25,152,929 and $20,930,669,
respectively. Shipments to the remaining regions presented above were largely concentrated in Germany
(EMEA) and China (APAC). For the years ended December 31, 2013 and 2012, sales to Germany amounted
to $1,330,645, or 30% of all shipments to the EMEA region, and $1,394,467, or 30% of all shipments to the
EMEA region, respectively. Sales to China, for the years ended December 31, 2013 and 2012, amounted to
$1,609,182, or 61% of all shipments to the APAC region, and $1,414,485, or 60% of all shipments to the
APAC region, respectively. There were no other shipments significantly concentrated in one country.
Purchases:
For the years ended 2013 and 2012, no third-party supplier accounted for more than 11% and 8% of the
Company’s total consolidated inventory purchases, respectively.
NOTE 8 - RETIREMENT PLAN:
The Company has a 401(k) profit sharing plan covering all eligible U.S. employees. Company contributions
to the plan for the years ended December 31, 2013 and 2012 amounted to $353,463 and $320,276,
respectively.
NOTE 9 - INCOME TAXES:
The components of income tax expense (benefit) related to income from operations are as follows:
Year Ended December 31,
2013 2012
Current:
Federal $ 42,036 $ 45,117
State 388,196 330,714
Deferred:
Federal (1,439,614) (650,755)
State (266,277) (114,839)
$ (1,275,659) $ (389,763)
F – 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 9 - INCOME TAXES (Continued):
The following is a reconciliation of the maximum statutory federal tax rate to the Company’s effective tax
relative to operations:
Year Ended December 31,
2013 2012
% of % of
Pre Tax Pre Tax
Earnings Earnings
Statutory federal income tax rate 34.0% 34.0%
Change in valuation allowance on deferred taxes (94.4) (55.9)
State income tax net of federal tax benefit 16.3 13.4
Permanent differences (4.9) (6.3)
Other (0.7) 0.8
(49.7)% (14.0)%
In 2013 and 2012, the difference between the statutory and the effective tax rate is primarily due to a change
in valuation allowance on deferred taxes based upon management’s updated assumptions related to expected
realizability of future taxable income.
The components of deferred income taxes are as follows:
2013 2012
December 31,
Allowances for doubtful accounts
Deferred tax assets:
Uniform capitalization of inventory costs for tax purposes $ 225,022 $ 221,155
Reserves on inventories 556,368 499,001
22,933
195,149
(321,636)
(252,204) (49,618)
15,547,580 16,556,713
17,123,697
(9,912,102)
$7,211,595
Accruals
Tax effect of goodwill
Book depreciation over tax
Net operating loss carryforward
15,929,621
(7,012,134)
$8,917,487
Valuation allowance for deferred tax assets
54,297
234,008
(435,450)
The Company has a domestic net operating loss carryforward at December 31, 2013 of approximately
$21,300,000 which expires in 2029. The Company also has a foreign net operating loss carryforward at
December 31, 2013 of approximately $23,400,000 which has no expiration.
Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient
taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net
deductible temporary differences and from utilization of net operating losses. The Company’s valuation
allowance of $7,012,134 at December 31, 2013, is associated with the Company’s foreign net operating loss
carryforward from an inactive foreign entity which is unlikely to be realized in future periods. The amount
of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future
taxable income are changed. As of December 31, 2013, management believes that is more likely than not
that the Company will fully realize the benefits of its deferred tax assets associated with its domestic net
operating loss carryforward.
The Company files income tax returns in its U.S. (federal and state of New Jersey) taxing jurisdictions. With
few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax
jurisdictions for periods before 2009.
F – 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 9 - INCOME TAXES (Continued):
During the year ended December 31, 2013, the State of New Jersey conducted a field examination of one of
the Company’s subsidiary tax returns (Boonton) for the years 2009 through 2012. The examination was
completed in October 2013 and the State of New Jersey did not propose any significant adjustments to the
Company’s tax positions. Additionally, the State of New Jersey is currently in the process of conducting a
field examination of another of the Company’s subsidiary tax returns (Microlab) for the years 2009 through
2012. The Company expects the examination to be completed in mid 2014.
The Company does not have any significant unrecognized tax benefits and does not anticipate significant
increase or decrease in unrecognized tax benefits within the next twelve months. Amounts recognized for
income tax related interest and penalties as a component of the provision for income taxes are immaterial for
the years ended December 31, 2013 and 2012.
NOTE 10 - 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.
Operating Leases:
The Company leases a 45,700 square foot facility located in Hanover Township, Parsippany, New Jersey,
which is currently being used as its principal corporate headquarters and manufacturing plant. On February
25, 2014, the Company entered into an agreement to extend the building lease term for an additional six
months through March 31, 2015. The lease can be renewed at the Company’s option for one five-year period
at fair market value to be determined at term expiration. The current minimum monthly base rent payment
remains at approximately $29,000.
The Company is also responsible for its proportionate share of the cost of utilities, repairs, taxes, and
insurance. The future minimum lease payments are shown below:
2014 $ 342,750
2015
85,668
$ 428,438
Rent expense, inclusive of common area maintenance charges, for the years ended December 31, 2013 and
2012 was $463,160 and $466,461, respectively.
The Company leases certain equipment under operating lease arrangements. These operating leases expire in
various years through 2018. All leases may be renewed at the end of their respective leasing periods. Future
payments relative to continuing operations consist of the following at December 31, 2013:
2015
2014 $ 63,775
63,775
2016 63,775
2017 63,775
2018 58,461
$313,561
F – 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued):
In June 2013, the Company entered into a lease agreement for production test equipment. The agreement
requires monthly payments in the amount of approximately $10,000 through June 2015. The net book value
of the equipment was $179,399 at December 31, 2013.
Environmental Contingencies:
The New Jersey Department of Environmental Protection (the “NJDEP”) conducted an investigation in 1982
concerning disposal at a facility previously leased by the Company’s Boonton operations. The focus of the
investigation involved certain materials formerly used by Boonton’s manufacturing operations at that site
and the possible effect of such disposal on the aquifer underlying the property. The disposal practices and
the use of the materials in question were discontinued in 1978. The Company has cooperated with the
NJDEP investigation and has been diligently pursuing the matter in an attempt to resolve it in accordance
with applicable NJDEP operating procedures. The above referenced activities were conducted by Boonton
prior to the acquisition of that entity in 2000.
In 1982, the Company and the NJDEP agreed upon a plan to correct ground water contamination at the site,
located in the township of Parsippany-Troy Hills, pursuant to which wells have been installed by the
Company. The plan contemplates that the wells will be operated and that soil and water samples will be
taken and analyzed until such time that contamination levels are satisfactory to the NJDEP. 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 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.
Expenditures incurred by the Company during the year ended December 31, 2013 in connection with the site
amounted to approximately $51,000. 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.
At this time, the Company believes that it is in material compliance with all environmental laws, does not
anticipate any material expenditure to meet current or pending environmental requirements, and generally
believes that its processes and products do not present any unusual environmental concerns. Besides the
matter referred to above with the NJDEP, the Company is unaware of any existing, pending or threatened
contingent liability that may have a material adverse affect on its ongoing business operations.
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 and, under the terms and conditions of the loan agreement, is fully secured
by said money fund account and any short-term investment holdings. 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 December 31, 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 cash generated from operations will adequately meet near-term working capital requirements.
F – 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 10 - COMMITMENTS AND CONTINGENCIES (Continued):
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.
NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of selected quarterly financial data from operations (in thousands, except per
share amounts).
2013
Quarter
1st 2nd 3rd 4th
$6,797 $8,705 $8,791 $9,532
Net sales
Gross profit
3,320 4,080 4,235 4,493
Operating income 244 717 572 663
Net income from operations 346 1,058 1,090 1,348
Diluted net income per share from
operations $.01 $.04 $.04 $.05
2012
Quarter
1st 2nd 3rd 4th
$6,902 $7,092 $7,385 $8,216
Net sales
Gross profit
3,355 3,590 3,700 4,132
Operating income 551 609 773 824
Net income from operations 656 655 855 1,005
Diluted net income per share from
operations $.03 $.03 $.03 $.04
F – 24
Corporate Profile
Annual Meeting
The Annual Meeting of the Stockholders will be held at 10:00 a.m. on
Wednesday June 11, 2014 at:
The Offices of Reed Smith LLP
599 Lexington Avenue
22nd Floor
New York, NY 10022
A copy of the Form 10-K Report as filed with the
Securities and Exchange Commission may be obtained
without charge by written request addressed to:
Robert Censullo
Chief Financial Officer and Corporate Secretary
Wireless Telecom Group, Inc.
25 Eastmans Road
Parsippany, NJ 07054
USA
Certifications
The Company has filed as exhibits to its Annual Report on Form 10-K
for the fiscal year ended December 31, 2013, and the Chief Executive
Officer and Chief Financial Officer certifications required by Section
302 of the Sarbanes-Oxley Act of 2002. The Company has also filed
with the New York Stock Exchange the required annual Chief Execu-
tive Officer certification as required by the New York Stock Exchange
Listed Company Manual.
Directors
Henry Bachman (retired)
Alan L. Bazaar
Chief Executive Officer of Hollow Brook
Joseph Garrity
Chief Operating Officer & Chief Financial Officer
of Salem Global Partners, Inc.
Paul Genova
Chief Executive Officer, Wireless Telecom Group,
Inc.
Officers
Paul Genova
Chief Executive Officer
Joseph Debold
Senior Vice President, Global Sales and Marketing
Robert Censullo
Chief Financial Officer and Corporate Secretary
Transfer Agent and Registrar
American Stock Transfer & Trust Company
Independent Accountants
PKF O’Connor Davies, a division of
O’Connor Davies, LLC
Legal Counsel
Reed Smith LLP, New York, New York
Exchange Listing
NYSE-MKT Symbol: WTT
25 Eastmans Rd
Parsippany, NJ
United States
Tel:
Fax:
www.wtcom.com
+1 973 386 9696
+1 973 386 9191
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Wireless Telecom Group
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WTGinnovation
Wireless Telecom Group Inc.
25 Eastmans Rd
Parsippany, NJ 07054
United States
Tel:
Fax:
www.wtcom.com
+1 973 386 9696
+1 973 386 9191