2019 ANNUAL REPORT
Holzworth Acquisition Expands our Addressable Market and
Operational Scale
In 2019, we also successfully signed the purchase agreement for the
acquisition of Holzworth Instrumentation, which closed in February of
2020. The acquisition strengthens our business by adding new specialized
products and customer relationships, and increases our addressable
markets for more precise, higher millimeter wave testing requirements
driven by 5G, advanced semiconductor test requirements, satellite
communication and quantum computing. Holzworth also leverages our
existing segments, generating both strategic and financial synergies, and
improves margins. Based on anticipated contribution margins, we expect
a strong return on our investment.
Looking ahead, while we remain committed to our long-term inorganic
growth aspirations, our focus in the near-term is on efficient integration
of Holzworth and sound capital management.
Building Our Future
During 2019, we successfully adjusted and reduced operating costs,
renegotiated supplier agreements and continued advancing a lean
operations culture, while at the same time demonstrating the flexibility of
our business model. Looking ahead, lean operations allow us to continue
investments in R&D, advance our product roadmap development and
continue sales expansion efforts to build a foundation for long-term
organic growth. These efforts are anticipated to realize significant
operational scale, profitability expansion, and cash flow.
The growth of wireless technology and devices, the demands of higher
frequency testing, expansion of satellite communications and demands
of 5G deployments, private LTE networks and network densification are
expected to drive long-term opportunities for our business. In the near-
term, we believe our
focus on customer-responsiveness and
operational excellence will lead to significant value for our shareholders.
We are dedicated to serving as a leader enabling the
development, testing, and deployment of wireless technology and
communications.
Thank you for your continued support of Wireless Telecom Group.
Timothy Whelan, Chief Executive Officer
Message from the CEO
To our Shareholders,
Wishing you and your loved ones safety and health during these trying
times. While the recent Coronavirus outbreak clouds the picture for
2020, I wanted to provide some color on our efforts to realize our
long-term vision. As an essential business in New Jersey, our facility
remains open, and we have made a number of adjustments to ensure
the protection of our employees. A solutions-oriented business is only
as good as its people, and we are fortunate to have a dedicated, hard-
working team committed to delivering for our customers, on-time
and on-spec. The WTT Board, executive team and shareholders are
indebted to their service.
2019 was a year of challenges and unexpected declines in our financial
results after two consecutive years of growth in revenue and Adjusted
EBITDA. Unexpected delays in government spending and carrier projects
along with lower Embedded Solutions software and services projects
led to weaker than expected revenues. Despite those challenges, we
remained focused on lean operations and profitability, and we are
confident in our strategy, our people and our future.
We also made meaningful progress in 2019 towards our vision and
mission to solve the most demanding wireless challenges though agile
innovation and execution excellence. We launched new 5G products,
expanded and strengthened partner collaboration, and expanded our
product sets to wide-band spectrum and higher-frequency solutions.
We signed the Holzworth acquisition, added new customers and were
granted additional design-in awards.
These accomplishments are expected to expand our addressable
markets, grow our customer base and lay the foundation for growth
in the years ahead. Our focus remains on our customers’ long-term
investments in building and densifying next generation networks, 5G
deployments, and increasing military and satellite spend.
Continued R&D Innovation to Drive Revenue Growth
The Company reported 2019 R&D growth of 20%, which included
increases primarily within the Embedded Solutions segment. Across all
of our segments, we have a common strategy to drive top-line organic
revenue growth through innovative, specialized solutions to (1) address
changing technology needs for new spectrum and higher frequency
solutions, (2) diversify our revenue to new customers and expand non-
telecom revenues, and (3) increase our total addressable market of
opportunity.
Recent launches have included SMART coupler solutions for the public
safety markets, Modular Point-of-Interface solutions for multicarrier
combination, new noise sources for 5G system test, expanded calibrated
noise sources for 67 GHz frequency ranges, new cellular reference
platforms, and most importantly, our 5G R15 compliant reference
stack software for small cell development. Each of these introductions
were well-informed solutions in response to customer demand, as we
continue to streamline collaboration between sales and R&D across our
operating segments.
Our investments leverage our in-house domain expertise in 5G network
deployments, sophisticated telecommunication applications, defense
applications, and radar and satellite communications for the military,
large defense contractors, and the government. A 2020 priority is to
generate wider market awareness of our expertise and new product
introductions, which should continue to drive organic revenue growth.
Item 1. Business
Overview
PART I
Wireless Telecom Group, Inc., a New Jersey corporation, together with its subsidiaries (“we”, “us”, “our” or the “Company”),
specializes in the design and manufacture of advanced radio frequency and microwave devices which enable the development, testing
and deployment of wireless technology. The Company provides unique, highly customized and configured solutions which drive
innovation across a wide range of traditional and emerging wireless technologies.
In 2019, Wireless Telecom Group was comprised of four brands – Microlab, Boonton, Noisecom, and CommAgility – organized
into three reporting segments – Network Solutions, Test and Measurement and Embedded Solutions. Since our acquisition of Holzworth
Instrumentation, Inc. (“Holzworth”) in February of 2020, we are also offering the Holzworth brand in our Test and Measurement
segment.
Our customers include wireless carriers, defense contractors, military and government agencies, satellite communication companies,
network equipment manufacturers, tower companies, semiconductor device manufacturers, system integrators and medical device
manufacturers.
Our products include components, modules, systems and instruments used across the lifecycle of wireless connectivity and
communication development, deployment and testing. Our customers use these products in relation to commercial infrastructure
development, the expansion and upgrade of distributed antenna systems, deployment of small cell technology, use of medical devices
and private long term evolution (“LTE”) networks. In addition, the Company’s products are used in the development and testing of
satellite communication systems, radar systems, semiconductor devices, automotive electronics and avionics.
The consolidated financial statements for the 2019 fiscal year 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 including Boonton Electronics Corporation,
is
Microlab/FXR, Wireless Telecommunications Ltd. and CommAgility Limited. The corporate website address
www.wirelesstelecomgroup.com. Noise Com, Inc., Boonton Electronics Corporation, Microlab/FXR and CommAgility Limited Ltd.
are hereinafter referred to as “Noisecom”, “Boonton”, “Microlab” and “CommAgility”, respectively.
Market
Since the Company’s incorporation in the State of New Jersey in 1985, it has been primarily engaged in supplying noise source
components and instruments, electronic testing and measurement instruments, and radio frequency (“RF”) passive components to
customers. With the CommAgility acquisition in February of 2017 the Company expanded to include the delivery of signal processing
modules and the delivery, implementation and configuration of LTE physical layer and stack software. Approximately 93% and 90%
of the Company’s consolidated revenues in fiscal years 2019 and 2018, respectively, were derived from commercial customers. The
remaining consolidated revenues (approximately 7% and 10% in 2019 and 2018, respectively) were comprised of revenues from the
United States government (particularly the armed forces) and prime defense contractors.
Products
Our Network Solutions segment is comprised of our Microlab business.
Microlab designs and manufactures a wide selection of RF components and integrated subsystems for signal conditioning and
distribution in the wireless infrastructure markets as well as for use in medical devices. Microlab products are used in small cell
deployments, distributed antenna systems, in-building wireless solutions and cellular base-stations. Microlab is a leader in low passive
intermodulation (“PIM”) radio frequency and microwave products for these purposes due to our quality, design consultation for
specialized services, long history and expertise.
Microlab components possess unique capabilities in the area of broadband frequency coverage, minimal loss and low PIM.
High performance components – such as power combiners, directional couplers, attenuators, terminators and filters – are developed for
broadband applications to support commercial in-building wireless networks, public safety networks, rail and transportation
deployments, corrosive salt/fog environment build-outs and global positioning system (“GPS”) signal distribution.
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Along with components and integrated subsystems, the Microlab portfolio also includes system performance monitoring and
timing synchronization solutions. These products include a portfolio of GPS digital repeaters and splitters for cellular timing
synchronization as well as a passive systems monitor for real-time diagnostics of an in-building distributed antenna system.
Our Test and Measurement segment is comprised of the Boonton and Noisecom brands and, subsequent to the closing of our
acquisition of Holzworth, the Holzworth brand.
Boonton
Boonton is a leader in high performance RF and microwave test equipment for radar, avionics, electronic warfare, electromagnetic
interference compatibility, and satellite and wireless communications applications due to our product quality and measurement speed
and accuracy. Used across the semiconductor, military, aerospace, medical and commercial communications industries, Boonton
products enable a wide range of radio frequency power measurements and signal analysis for radio frequency product design, production,
maintenance and testing.
Boonton designs and produces electronic test and measurement equipment including power meters, power sensors, voltmeters, and
audio and modulation analyzers. These products measure and analyze the performance of radio frequency and microwave systems used
by the military and commercial sectors. 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.
Noisecom
Noisecom is a leader in radio frequency and microwave noise sources for signal jamming, system impairment, reference level
comparison and calibration, receiver robustness testing, and jitter injection due to our product quality and product design flexibility.
Noisecom designs and produces noise generation instruments, calibrated noise sources, noise modules and diodes. Noisecom noise
products are used to provide wide band interference and test signals for sophisticated commercial communication and defense
applications, and as a stable reference standard for advanced systems found in radar applications and satellite communications. Noise
source products:
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simulate challenging signaling conditions in data and radio frequency transmission systems, such as jitter testing for high
speed data lines used in modern computer architecture;
send signals for noise measurement to allow wireless receivers and transmitters to be optimized;
are used for jamming radio frequency signals, blocking or disturbing enemy radar and other communications and insulating
and protecting friendly communications; and
comprise components 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.
Electronic noise generation devices from Noisecom come in a variety of product types including noise diodes, built-in-test modules
(“BITE”), calibrated noise sources, jitter sources, cryogenic noise standards and programmable instruments. Calibrated noise sources
are available from audio to millimeter wavelengths in coaxial or waveguide modules. Programmable instruments are highly
configurable and able to generate precise carrier-to-noise, signal-to-noise and broadband white noise levels. Noisecom products are
customizable to meet the unique needs of challenging applications and can be designed for high power, high crest factor, and specific
filtering.
Holzworth
Holzworth designs and manufactures specialty phased noise analyzers and signal generators used by government labs, the
semiconductor industry, and network equipment providers, among others, in research and automated test environments. Holzworth
signal generators are optimized for ultra-low phase noise performance, spectral purity and fast switching speeds and their phase noise
analyzers are of the same innovative design philosophy, optimized for measurement speed, z540 traceable accuracy and high reliability
while measuring to noise floors at the theoretical limit.
Our Embedded Solutions segment consists of our subsidiary CommAgility.
2
CommAgility develops the software which enables private network deployments including the LTE physical layer and stack
software, for 4G and emerging 5G mobile network and related applications. CommAgility also develops embedded signal processing
and radio frequency modules which enable 4G and 5G mobile network solutions and related applications. Combining the latest digital
signal processing (“DSP”), field programmable gate array (“FPGA”) and radio frequency technologies with advanced, industry-leading
software, CommAgility provides compact, powerful and reliable products for integration into high performance test equipment,
specialized radio and intelligence systems, satellite systems and R&D demonstrators.
CommAgility engineers work closely with customers to provide hardware and software solutions for the most demanding real-time
signal processing, test and control challenges in wireless baseband, semiconductor processing, medical imaging, radar and sonar
applications. Additionally, CommAgility licenses, implements and customizes LTE physical layer and stack software for private LTE
networks supporting satellite communications, the military and aerospace industries, offering our customers unique implementation
capabilities built on the LTE standard.
Marketing and Sales
The Company’s products are sold globally through our in-house sales force, industry-specific manufacturers’ representatives
and through a network of authorized distributors. The Company promotes the sale of its products through its website, product literature,
published articles, technical conference presentations, direct mailings, trade advertisements and trade show exhibitions.
The Company’s relationships with its manufacturers’ representatives and distributors are governed by written contracts that
either run for one-year renewable periods terminable by either party on 30 to 60 days prior notice or have indefinite lives terminable by
either party on 30 to 60 days prior notice. The contracts generally provide for territorial and product representation.
Customers
The Company currently sells the majority of its products to telecommunications service providers, systems integrators, neutral
host operators, distributors, large defense contractors, global technology and services companies, U.S. and foreign governments, and
medical device manufacturers.
For the years ended December 31, 2019 and 2018 one customer, Viavi Solutions, accounted for 24.8% and 22.0% of total consolidated
revenues, respectively.
Competition
We compete against many companies which utilize similar technology, some of which are larger and have substantially greater
resources and expertise in financial, technical and marketing areas than us. Some of these companies include Keysight Technologies,
Inc., Rohde & Schwarz GmbH & Co. KG, Anritsu Corporation, Kathrein, Commscope, Qualcomm and Azcom. We also compete
against smaller offshore vendors with significantly lower costs and expenses than us, such as Sym Technology, Inc., Innowave RF and
Wireless Supply.
The Company believes its competitive strengths include:
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long-standing relationships with a core group of diverse customers in the wireless, telecommunication, satellite, military,
aerospace, semiconductor and medical industries
agility in providing highly customized and configured solutions to the customer’s technical specifications
a long tradition of developing highly engineered wireless solutions through our strong design capabilities and technology
know-how
long-standing, well-established sales channels and relationships which allow us to bring new solutions to market quickly
diversification across multiple customer segments, providing solutions to enable development, testing and deployment
being an approved vendor at all four of the major U.S. carriers with hundreds of approved Network Solutions products
an embedded base of products and instruments in our Test & Measurement segment which leads to recurring purchases of
our products
3
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extensive knowhow and IP in the Embedded Solutions segment related to 3rd Generation Partnership Project (“3GPP”) 4G
and 5G wireless standards which enable us to address complex and customized requirements for specialized networks
Backlog
The Company’s consolidated backlog of firm orders to be shipped in the next twelve months was approximately $3.8 million
at December 31, 2019, compared to approximately $8.2 million at December 31, 2018. It is anticipated that the majority of the backlog
orders at December 31, 2019 will be filled during the current year. The stated backlog is not necessarily indicative of Company revenues
for any future period nor is a backlog any assurance that the Company will realize a profit from the orders.
Inventory, Supplies and Manufacturing
The Company purchases components, devices and subassemblies from a wide variety of sources. The Company’s procurement
policy requires maintaining adequate levels of raw materials inventory to minimize the Company’s production lead times with third-
party suppliers and to improve the Company’s capacity to expedite fulfillment of customer orders. Although the procurement team
focuses its efforts to work closely with its suppliers to avoid adverse effects of shortages or delays in delivery of inventories, delays in
the future may have an adverse impact on the Company’s operations. For the year ended December 31, 2019, three suppliers accounted
for 18%, 14%, and 10%, respectively, of total consolidated inventory purchases. For the year ended December 31, 2018, two suppliers
accounted for 15% and 13%, respectively, of total consolidated inventory purchases.
The Company is not party to any long term contracts 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.
For Boonton and Noisecom products, the Company develops, designs, manufactures, assembles, calibrates and tests the
products at our facility in Parsippany, New Jersey. Testing of Boonton and Noisecom products is generally accomplished at the end of
the manufacturing process and is performed in-house, as are all quality control processes.
Approximately 48% of Microlab’s revenues are traced to products that are sourced from offshore vendors. Certain of
Microlab’s products that were sourced from offshore vendors were subject to tariffs throughout the entirety of fiscal 2019, and, effective
September 1, 2019, all of Microlab products that come from offshore suppliers are subject to tariffs. The impact of tariffs has decreased
our consolidated gross profit margin by less than 1%. The remainder of Microlab products are designed and manufactured by the
Company in Parsippany, New Jersey. All Microlab products are tested by the Company in Parsippany, New Jersey.
CommAgility hardware products are built by contract manufacturers to CommAgility designs, and tested either by the contract
manufacturer or by CommAgility. Software products are licensed to customers through a system that allows the customer to download
the software once access has been granted.
Warranty and Service
The Company typically provides one to three 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.
In cases of defective products the customer typically returns them to the Company’s 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 facility, and
the Company charges its customers a fee for those service items that are not covered by warranty. The Company typically does not offer
their customers any formal written service contracts.
Product Liability Coverage
The testing of electronic communications equipment and the accurate transmission of information entail a risk of product
liability to the Company. Product liability claims could be asserted against the Company by end-users of any of the Company’s products.
The Company maintains product liability insurance coverage. No claims have been asserted for product liability due to a defective or
malfunctioning device in the past five years.
Intellectual Property
4
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 patents, copyrights, trademarks and trade secrets, as well as confidentiality agreements to
establish and protect our proprietary rights. All employees are subject to the Company’s policies to ensure that all of the Company’s
intellectual property and business information are maintained in confidence. Key employees have signed non-disclosure and non-
competition agreements.
Regulation
Environmental
The Company’s operations are subject to various federal, state and local 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.
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. The Company is unaware of any existing, pending or threatened contingent environmental liability
that may have a material adverse effect 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 effect on its results of operations or financial condition.
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. Because some of the Company’s
products could have military or strategic applications, it must ensure its compliance with ITAR.
In addition, the Company is subject to the Export Administration Regulations, or EAR, which regulates the export of certain
“dual use” items and technologies and, in some instances, requires a license from the U.S. Department of Commerce in connection with
sales of the Company’s products.
The Company believes it is in material compliance with all such export regulations.
FAR and DFARS
Certain of the Company’s contracts with the U.S. Government are subject to Federal Acquisition Regulations (“FAR”)
regarding government procurement. Further, certain of the Company’s contracts are subject to the IT security requirements of Defense
Federal Acquisition Regulation Supplement (“DFARS”) for controlled unclassified information.
The Company believes it is in material compliance with applicable requirements of FAR and DFARS.
Employees
As of February 29, 2020, the Company has 154 full time employees, including Holzworth employees. The Company is not
subject to collective bargaining agreements in the United States or internationally and considers its relationship with its employees to
be good.
Investor Information
The Company is subject to the disclosure requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”).
Therefore, the Company files periodic reports, proxy statements and other information with the Securities and Exchange Commission
(“SEC”). 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.
5
You can access financial and other information, including copies of our recent SEC filings, at the Company’s Investor Relations
page on its website. The address of the website is www.wirelesstelecomgroup.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.
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 involves 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 are set forth in our annual report on Form 10-K and in this document. 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. The Company assumes no obligation to update any forward-looking statements
as a result of new information or future events or developments.
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 is traded on the NYSE American under the name Wireless Telecom Group, Inc. (Symbol:
WTT). On March 6, 2020, the Company had 364 stockholders of record. These stockholders of record do not include beneficial owners
whose shares are held in “nominee” or “street name”.
Recent Sales of Unregistered Securities
None in fiscal 2019.
Issuer Purchases of Equity Securities
The Company did not repurchase any securities during the year ended December 31, 2019.
Equity Compensation Plan Information
Set forth below is certain aggregated information with respect to the Company’s equity compensation plans.
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
2,055,000
-
2,055,000
$1.53
-
$1.53
Number of securities
remaining available for
future issuance under
equity compensation
plan (excluding
securities reflected in
the previous columns)
1,695,079
-
1,695,079
6
Item 6. Selected Financial Data
Not applicable.
7
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
The Company is a global designer and manufacturer of advanced RF, microwave and millimeter wave components, modules,
systems and instruments. Serving the wireless, telecommunication, satellite, military, aerospace, semiconductor and medical industries,
Wireless Telecom Group products enable innovation across a wide range of traditional and emerging wireless technologies. With a
unique set of high-performance products including peak power meters, signal analyzers, signal processing modules, LTE physical layer
and stack software, power splitters and combiners, GPS repeaters, public safety monitors, noise sources, and programmable noise
generators, Wireless Telecom Group supports the development, testing and deployment of wireless technologies around the globe.
Key 2019 Developments and Financial Results
Fiscal 2019 was a year with some disappointments as well as growth oriented investment. Consolidated and segment revenue
declined from the prior year which negatively impacted profitability. These declines were driven by lower high margin software sales
and delays of certain large projects expected to be awarded in the year. Lower software revenue was caused by the slowdown of 4G
software sales which was not offset by the adoption of emerging 5G software and standards. Despite these challenges, the Company
invested in future growth and profitability through acquisitions and R&D investments and believes the revenue declines in 2019 can be
overcome.
The decline in Embedded Solutions software and services revenue from prior years represented declines in the Company’s
highest margin revenue streams. Further, the Test and Measurement segment experienced a 4.5% revenue decline as large government
projects were delayed, but increased segment gross profit margin from 49.4% to 54.0%. The industry in which the Network Solutions
segment operates was impacted by highly competitive pricing from offshore vendors as well as a slowdown in large venue projects.
The Test and Measurement segment gross profit margin increased on higher demand of noise generation devices and real time power
sensors. The Company also invested heavily in 5G NR product roadmap development in fiscal 2019 and, in January 2020, announced
a collaboration with NXP Semiconductors to accelerate 5G hardware and software development. At the same time, the Company
maintained an active merger and acquisition pipeline as part of its strategic plan to add complimentary, accretive and profitable
businesses and drive growth opportunity through acquisitions. In connection with this, the Company signed a definitive agreement to
purchase Holzworth Instrumentation, Inc. in the fourth quarter which closed on February 7, 2020. Holzworth is a Colorado based
provider of specialty noise analyzers and signal generators which is an adjacent product line to our Boonton brand.
The Company presents its operations in three reportable segments: (1) Network Solutions, (2) Test and Measurement and (3)
Embedded Solutions. In fiscal 2019 the Network Solutions segment is comprised primarily of the operations of Microlab; the Test and
Measurement segment is comprised of the operations of Boonton and Noisecom; and the Embedded Solutions segment is comprised of
CommAgility.
The financial information presented herein includes: (i) Consolidated Balance Sheets as of December 31, 2019 and 2018; (ii)
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2019 and 2018; (iii) Consolidated
Statement of Changes in Shareholders’ Equity for the years ended December 31, 2019 and 2018; and (iv) Consolidated Statements of
Cash Flows for the years ended December 31, 2019 and 2018.
Critical Accounting Policies
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, or U.S. GAAP. 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. It is reasonably possible
that these estimates may ultimately differ materially from actual results. See Note 1 in the Notes to the Consolidated Financial Statements
included elsewhere in this Form 10-K for a description of all of our significant accounting policies.
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Revenue Recognition
Effective January 1, 2018 the Company adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts
with Customers (Topic 606)”, (“Topic 606”) using the “modified retrospective” method, meaning the standard is applied only to the
most current period presented in the financial statements. Topic 606 requires the Company to identify the performance obligations in
our revenue arrangements – that is, those promised goods and services (or bundles of promised goods or services) that are distinct – and
allocate the transaction price of the revenue arrangement to those performance obligations on the basis of estimated standalone selling
prices (“SSP’s”).
Sales of hardware which include sales of radio frequency solutions in the Network Solutions segment, digital signal processing
hardware in the Embedded Solutions segment and power meters and analyzers and noise generators and components in the Test and
Measurement segment generally consist of one performance obligation which is satisfied upon shipment to the customer. When contract
terms require transfer of control upon delivery at a customer’s location, revenue is recognized on the date of delivery. Sales of hardware
to distributors that include a limited right of return are recorded net of expected returns.
Sale of software licenses in the Embedded Solutions segment may involve multiple performance obligations including multiple
software releases and consultancy services. In these cases transaction price is allocated to each distinct performance obligation on the
basis of SSP and revenue is recognized when the distinct performance obligation is satisfied. The company determines performance
obligations and SSP’s in arrangements with multiple performance obligations in accordance with Topic 606 which requires significant
judgement.
Services arrangements involving repairs and calibrations in the Company’s Test and Measurement segment are generally
considered a single performance obligation and revenue is recognized as the services are rendered.
Certain software arrangements in the Embedded Solutions segment may involve the transfer of software along with significant
customization services. In these cases the customization services and software licenses are combined as one distinct performance
obligation and revenue is recognized over time as the project is completed. The duration of these performance obligations are typically
one year or less.
Leases
We lease office space and certain equipment under non-cancelable lease agreements. Prior to January 1, 2019, we applied the
accounting guidance in ASC 840, Leases, to our lease agreements. The leases were reviewed for classification as operating or capital
leases. For operating leases, rent was recognized on a straight-line basis over the lease period. For capital leases, we recorded the leased
asset with a corresponding liability and amortized the asset over the lease term. Payments were recorded as reductions to the liability
with an appropriate interest charge recorded based on the then-outstanding remaining liability.
Effective January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective transition
method and established our lease accounting policy pursuant to this new standard. We initially applied the transition provisions at
January 1, 2019, which allowed us to continue to apply the legacy guidance in ASC 840 for periods prior to 2019. Based on the new
guidance, we assess all arrangements, that convey the right to control the use of property, plant and equipment, at inception, to determine
if it is, or contains, a lease based on the unique facts and circumstances present in that arrangement. For those leases identified, we
determine the lease classification, recognition, and measurement at the lease commencement date. For arrangements that contain a
lease we: (i) identify lease and non-lease components; (ii) determine the consideration in the contract; (iii) determine whether the lease is
an operating or financing lease; and (iv) recognize lease Right of Use (“ROU”) assets and corresponding lease liabilities.
Lease liabilities are recorded based on the present value of lease payments over the expected lease term. The corresponding ROU asset
is measured from the initial lease liability, adjusted by (i) accrued or prepaid rents; (ii) remaining unamortized initial direct costs and
lease incentives; and (iii) any impairments of the ROU asset. The interest rate implicit in our lease contracts is typically not readily
determinable and as such, we use our incremental borrowing rate based on the information available at the lease commencement date,
which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount
equal to the lease payments in a similar economic environment.
9
Business Combinations
Business combinations are accounted under the acquisition method of accounting in accordance with Accounting Standards
Codification (“ASC”) 805, “Business Combinations” which requires assets acquired and liabilities assumed be recorded at their fair
values on the acquisition date. Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. The
fair values of the assets acquired and liabilities assumed are determined based upon management’s valuation and involves making
significant estimates and assumptions based on facts and circumstances that existed as of the acquisition date. We use a measurement
period following the acquisition date to gather information that existed as of the acquisition date that is needed to determine the fair
value of the assets acquired and liabilities assumed. The measurement period ends once all information is obtained, but no later than one
year from the acquisition date.
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 evaluated for impairment annually by first performing a qualitative evaluation of events and
circumstances impacting the reporting unit to determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if
we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is
necessary. Otherwise we perform a quantitative impairment test.
As of December 31, 2019 the Company’s consolidated goodwill balance of $10.1 million is comprised of $1.4 million related
to the Microlab reporting unit and $8.7 million related to the CommAgility reporting unit. The Company performed a qualitative
assessment in the fourth quarter of 2019 of each reporting unit. The qualitative assessment of Microlab did not indicate any impairment
of goodwill. As a result of declining future demand of the CommAgility’s signal processing hardware and the uncertainty associated
with new software license and services revenues to offset the signal processing hardware sales decline, the Company performed a
quantitative impairment test of the goodwill of the CommAgility reporting unit.
For goodwill impairment testing using the quantitative approach, the Company estimates the fair value of the selected reporting
unit primarily through the use of a discounted cash flow model based on our best estimate of amounts and timing of future revenues and
cash flows and our most recent business and strategic plans, and compares the estimated fair value to the carrying value of the reporting
unit, including goodwill. If the fair value of the reporting unit exceeds the carrying value, no impairment charge is recorded. If the
carrying value of the reporting unit exceeds the fair value an impairment charge is recorded to goodwill in the amount by which carrying
value exceeds fair value. The discounted cash flow model requires judgmental assumptions about projected revenue growth, future
operating margins, discount rates and terminal values over a multi-year period. There are inherent uncertainties related to these
assumptions and management’s judgment in applying them to the analysis of goodwill impairment. While the Company believes it has
made reasonable estimates and assumptions to calculate the fair value of its reporting units, it is possible a material change could occur.
If actual results are not consistent with management’s estimates and assumptions, goodwill may be overstated and a charge would need
to be taken against net earnings.
Changes in our projections used in the discounted cash flow model could affect the estimated fair value of the Company’s reporting
unit and could result in a goodwill impairment charge in a future period. In order to evaluate the sensitivity of the fair value calculations
used in the quantitative goodwill impairment test, the Company applied a hypothetical 10% decrease to the fair value of the CommAgility
reporting unit and compared those values to the carrying value. Based on this sensitivity analysis, the Company did not identify any
goodwill impairment. Due to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our
recorded goodwill, differences in assumptions may have a material effect on the results of our impairment analysis.
As of December 31, 2018 the Company’s consolidated goodwill balance of $9.8 million was comprised of $1.4 million related
to the Microlab reporting unit and $8.4 million related to the CommAgility reporting unit. Management’s qualitative assessment
performed in the fourth quarters of 2018 did not indicate any impairment of goodwill.
Intangible and Long-lived Assets
Intangible assets include patents, non-competition agreements, customer relationships and trademarks. Intangible assets with
finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from three to five
years. Long-lived assets, including intangible assets with finite lives, 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 future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment
loss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Long-lived assets to
be disposed of are reported at the lower of carrying amount or estimated fair value less costs to sell. The estimated useful lives of
intangible and long-lived assets are based on many factors including assumptions regarding the effects of obsolescence, demand,
10
competition and other economic factors, expectations regarding the future use of the asset, and our historical experience with similar
assets. The assumptions used to determine the estimated useful lives could change due to numerous factors including product demand,
market conditions, technological developments, economic conditions and competition. Intangible assets determined to have indefinite
useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that
indicate an asset may be impaired.
Income taxes
The Company records deferred taxes in accordance with ASC 740, “Accounting for Income Taxes.” ASC 740 requires
recognition of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at
which they are carried in the financial statements, based upon the enacted rates in effect for the year in which the differences are expected
to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be
realized. The Company periodically assesses the value of its deferred tax assets and determines the necessity for a valuation allowance.
Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in the
appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from
utilization of net operating losses. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if
estimates of future taxable income are changed.
Uncertain tax positions
Under ASC 740, the Company must recognize and disclose uncertain tax positions 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 amounts
recognized in the financial statements attributable to such position, if any, are recorded if there is 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 jurisdictions where it is required to file income tax returns. As of
December 31, 2019 and 2018, the Company has identified its federal tax return and its state tax return in New Jersey as “major” tax
jurisdictions, as defined in ASC 740, in which it is required to file income tax returns. Additionally, the Company has identified the
United Kingdom as “major” tax jurisdiction as of December 31, 2019 and 2018. 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, 2019 and 2018, 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 the next twelve months.
Stock-based compensation
The Company follows the provisions of ASC 718, “Compensation - Stock Compensation” which requires that compensation
expense be recognized based on the fair value of the stock awards. 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 is 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 daily 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 Company accounts for forfeitures when they occur.
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.
11
Inventories and Inventory Valuation
Inventories are stated at the lower of cost (average cost) or net realizable value. The Company reviews inventory for excess
and obsolescence based on best estimates of future demand, product lifecycle status and product development plans.
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.
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 their 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.
Warranties
The Company generally offers standard warranties against product defects. We estimate future warranty costs to be incurred
based on historical warranty claims experience including estimates of material and service costs over the warranty period.
Comparison of the results of operations for the year ended December 31, 2019 with the year ended December 31, 2018
Net Revenues (in thousands)
Network Solutions
Test and Measurement
Embedded Solutions
Twelve months ended December 31
Revenue
% of Revenue
Change
2019
2018
$ 21,830
$ 22,275
13,566
14,212
13,525
16,301
2019
44.6%
27.7%
27.7%
2018
42.2%
26.9%
30.9%
Amount
Pct.
$ (445)
-2.0%
(646)
-4.5%
(2,776)
-17.0%
Total Net Revenues
$ 48,921
$ 52,788
100.0%
100.0%
$ (3,867)
-7.3%
Consolidated net revenues were impacted by declines in all three segments. Embedded Solutions revenue decreased from the
prior year on lower sales of LTE software licenses and related services offset only partially by increased sales of digital processing
hardware to our largest customer. We believe that the transition from 4G to 5G was a factor in the decline in software license revenue
and related services. Test and Measurement revenues declined on fewer government orders and large projects. Network Solutions
revenues were lower than the prior year due to fewer large venue projects and a highly competitive pricing environment impacting the
entire industry.
As part of our 2020 planning process, the Company determined that demand for our Embedded Solutions digital signal
processing hardware cards from the Company’s largest customer will be significantly reduced from levels in fiscal 2019 and 2018. The
Company expects the decline in Embedded Solutions hardware revenue to be partially offset by increased higher margin software license
and services specifically related to 5G NR private network projects. Overall, however, the Company expects a decline in revenues for
Embedded Solutions in 2020 as compared to 2019.
12
Gross Profit (in thousands)
Twelve months ended December 31
Gross Profit
Gross Profit %
Change
Network Solutions
Test and Measurement
Embedded Solutions
2019
2018
$ 9,216
$ 9,756
7,320
7,018
5,753
7,393
Total Gross Profit
$ 22,289
$ 24,167
2019
42.2%
54.0%
42.5%
45.6%
2018
43.8%
49.4%
45.4%
45.8%
Amount
Pct.
$ (540)
302
-5.5%
4.3%
(1,640)
-22.2%
$ (1,878)
-7.8%
Consolidated gross profit margin in 2019 was flat compared to 2018. Gross profit margin in the Test and Measurement segment
increased from the prior year on favorable product mix as the Company sold higher margin Noisecom noise generation devices as well
as Boonton power sensors. Network Solutions gross profit margins declined year over year due to a highly competitive pricing
environment impacting the entire passive RF industry as well as lower volumes resulting in lower absorption of fixed labor and overhead
charges. Embedded Solutions gross profit margin declined on product mix as higher margin software and service sales declined year
over year as well as lower volumes resulting in lower absorption of fixed labor and overhead charges.
Operating Expenses (in thousands)
Twelve months ended December 31
Operating Expenses
% of Revenue
Change
2019
2018
2019
2018
Amount
Pct.
Research and Development
$ 5,917
$ 4,909 12.1%
9.3%
$ 1,008
20.5%
Sales and Marketing
7,677
7,595 15.7%
14.4%
82
General and Administrative
10,174
10,306 20.8%
19.5%
(132)
1.1%
-1.3%
Loss on Change in Fair Value
of Contingent Consideration
-
578
0.0%
1.1%
(578)
-100.0%
Total Operating Expenses
$ 23,768
$ 23,388 48.6%
44.3%
$ 380
1.6%
Research and development expenses overall increased $1.0 million primarily due to increased expenses in the Embedded
Solutions segment. Embedded Solutions segment research and development expenses increased $1.4 million primarily for headcount
deployment on product roadmap initiatives, specifically the 5G NR product roadmap. The increase in the Embedded Solutions segment
research and development expenses was offset by a $0.4 million decrease in research and development expenses in the Network
Solutions and Test and Measurement segments due to headcount reductions and lower third party spend.
Sales and marketing expenses increased $0.1 million primarily due to increased headcount in the Test and Measurement and
Network Solutions segments offset by lower commission expense in the Embedded Solutions segment due to lower volumes.
General and administrative expenses decreased $0.1 million due to lower bonus, legal and stock compensation expenses offset
by higher mergers and acquisitions expenses.
In 2018 the Company recorded a loss on change in fair value of contingent consideration of $0.6 million as our estimate of the
earn-out payment related to the CommAgility acquisition was increased from our original estimate recorded at the time of acquisition
due to the then improved financial results of the business. The contingent consideration payment was made in Q1 2019.
In early fiscal 2020, the Company undertook restructuring actions and cost and expense reductions across all of its segments
to drive efficiency and improved operation leverage. These actions are expected to reduce consolidated costs and expenses in fiscal
2020 by approximately $1.5 million as compared to fiscal 2019.
13
Other income/expense
Other expenses decreased $0.1 million due to lower foreign exchange unrealized and realized losses on transactions
denominated in currencies other than our functional currencies.
Interest Expense
Interest expense decreased $0.3 million primarily due to lower interest expense related to the CommAgility contingent
consideration liability as final payment was made in March 2019.
Tax
The Company recorded a tax benefit in fiscal 2019 of $1.4 million due primarily to a net taxable loss in the U.K. driven by
deductible research and development expenses as compared to a tax expense in fiscal 2018 of $48,000 due to deferred federal taxes in
the U.S. offset by current and deferred tax benefits related to the U.K.
Net Loss
The Company recorded a net loss in the amount of $0.4 million in fiscal 2019 as compared to net income of $35,000 in fiscal
2018 due to lower consolidated gross profit and higher operating expenses partially offset by lower consolidated interest expense and
the recognition of a tax benefit.
Liquidity and Capital Resources
As disclosed in Note 4 to the Consolidated Financial Statements, on February 16, 2017 the Company entered into a Credit
Facility which provided for a term loan in the aggregate principal amount of $0.8 million (the “Term Loan”) and an asset based revolving
loan (the “Revolver”), which is subject to a Borrowing Base Calculation (as defined in the Credit Facility) of up to a maximum
availability of $9 million. The proceeds of the Term Loan and Revolver were used to finance the acquisition of CommAgility. On
February 26, 2019 the Company entered into Amendment No. 3 to the Credit Facility which extended the term of the Revolver to March
31, 2020, and on November 8, 2019 the Company entered into Amendment No. 4 to the Credit Facility which extended the maturity
date of the Term Loan to March 31, 2020 to coincide with that of the Revolver. As described more fully below, on February 7, 2020,
in connection with the Holzworth acquisition, the Company entered into Amendment No. 5 to the Credit Facility which, inter alia,
extended the Revolver maturity date to March 31, 2023. Additionally, the Company prepaid the remaining principal balance of Term
Loan in the amount of $0.3 million.
As of December 31, 2019 the Company had consolidated net cash (consolidated cash and cash equivalents less consolidated
debt outstanding) of $1.5 million as compared to net cash of $3.0 million as of December 31, 2018. The decrease in net cash was
primarily attributable to a net loss in 2019 as compared to net earnings in 2018 and the payment of deferred purchase price and contingent
consideration in the first quarter of 2019 related to the CommAgility acquisition offset by lower working capital and lower capital
expenditures as compared to the prior year. As of December 31, 2019, substantially all of our cash and cash equivalents are held outside
the United States. As of December 31, 2019, $2.4 million was outstanding on our asset based Revolver and $0.3 million was outstanding
on our Term Loan. As of December 31, 2019 and 2018, and the date hereof, the Company is in compliance with the covenants of the
Credit Facility. The asset based Revolver under our Credit Facility is secured by the Company’s U.S. assets. Income taxes have been
provided on foreign earnings such that there would be no significant income tax expense to repatriate the portion of this cash that is not
required to meet operational needs of our international subsidiary.
Operating Activities
Cash provided by operating activities was $80,000 for the year ended December 31, 2019 as compared to cash provided by
operating activities of $4.0 million for the year ended December 31, 2018. The decline was primarily due to lower operating income,
the payment of contingent consideration, a portion of which is included as cash used from operations in accordance with ASU 2016-15,
payment of deferred purchase price and 2018 bonuses, which are reflected as a decrease in accrued expenses and other current liabilities
offset by cash generated from working capital.
14
Investing Activities
Cash used by investing activities was $0.8 million for the year ended December 31, 2019 and was primarily comprised of cash
used for capital expenditures of $0.4 million and payment of deferred purchase price related to the CommAgility acquisition of $0.4
million. For the year ended December 31, 2018 cash used by investing activities was $1.7 million and was primarily related to cash
used for the payment of the CommAgility deferred purchase price of $0.8 million and capital expenditures of $0.9 million.
Financing Activities
Cash used by financing activities was $0.2 million for the year ended December 31, 2019 as compared to cash provided by
financing activities of $0.5 million for the year ended December 31, 2018. During the year ended December 31, 2019, cash used by
financing included net borrowings under the Credit Facility of $0.8 million offset by payment of contingent consideration related to the
CommAgility acquisition, of which $0.8 million is included in financing activities, payment of fees related to our new term loan and
amended credit facility of $0.1 million, and term loan payments of $0.2 million. During the year ended December 31, 2018, net
borrowings under the Credit Facility were $0.3 million and proceeds from stock option exercises were $0.3 million which were both
partially offset by Term Loan principal payments of $0.2 million.
New Term Loan Facility and Amended Credit Facility
In connection with the Holzworth Acquisition, on February 7, 2020, the Company, as borrower, and its subsidiaries, as
guarantors, and Muzinich BDC, Inc., as lender (“Muzinich”), entered into a Term Loan Facility, which provides for a term loan in the
principal amount of $8.4 million (the “Initial Term Loan”). All proceeds of the Initial Term Loan were used to fund the cash portion
of the purchase price for the Holzworth acquisition. Principal payments on the Initial Term Loan are $21,000 per quarter with a balloon
payment at maturity. The term loan bears interest at LIBOR (subject to a floor of 1.0%) plus a margin of 7.25%. The Term Loan Facility
includes an upfront fee of 2.50% of the aggregate principal amount of the Initial Term Loan.
The Company may prepay the Initial Term Loan at any time. Prepayments made prior to (a) February 7, 2022 are subject to a
prepayment premium in the amount of 2.0% of the prepaid principal amount and (b) February 7, 2023 are subject to a prepayment
premium in the amount of 1.0% of the prepaid principal amount. The Company is required to make prepayments of the Initial Term
Loan with the proceeds of certain asset dispositions, insurance recoveries and extraordinary receipts, subject to specified reinvestment
rights. The Company is also required to make prepayments of the Initial Term Loan upon the issuance of certain indebtedness and to
make an annual prepayment based upon the Company’s excess cash flow. Mandatory prepayments with asset sale, insurance or
condemnation proceeds and excess cash flow may be made without penalty. Mandatory prepayments with the proceeds of indebtedness
are subject to the same prepayment penalties as are applicable to voluntary prepayments. The maturity date for the Initial Term Loan is
February 7, 2025.
The Term Loan Facility provides for an additional $11.6 term loan (the “Second Term Loan”) to be used for a second
unannounced acquisition for which the Company has entered into a confidential, non-binding letter-of-intent (the “Additional
Acquisition”). There can be no assurance that the Additional Acquisition will be completed. In the event the Additional Acquisition is
completed, the Second Term Loan will be made available to the Company on the same terms and conditions as the Initial Term Loan,
including interest rate, amortization schedule and financial covenants, subject to the payment of an additional upfront fee and satisfaction
of customary conditions to funding.
The Term Loan Facility is secured by liens on substantially all of the Company’s and its subsidiaries’ assets including a pledge
of the equity interests in the Company’s subsidiaries. The Term Loan Facility contains customary affirmative and negative covenants
for a transaction of this type, including, among others, the provision of annual, quarterly and monthly financial statements and
compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters, restrictions on incurrence
of indebtedness, granting of liens, making investments and acquisitions, paying dividends, entering into affiliate transactions and asset
sales. In addition, the Company must maintain certain financial covenants typical for this type of arrangement, including a consolidated
leverage ratio, a consolidated fixed charge coverage ratio and minimum liquidity of its foreign subsidiaries. The consolidated leverage
ratio is defined as the ratio of total consolidated indebtedness, as defined, to consolidated EBITDA, as defined. The required leverage
ratio starts at 4.75 to 1.0 for the twelve month periods ended March 31, 2020 and June 30, 2020, and decrease in various increments to
3.75 to 1.0 for the twelve months ended December 31, 2020, 2.75 to 1.0 for the twelve months ended December 31, 2021 and 2.0 to 1.0
for the twelve months ended December 31, 2022 and thereafter. The consolidated fixed charge coverage ratio is the ratio of consolidated
EBITDA, as defined, less consolidated capital expenditures and cash income taxes paid to consolidated fixed charges, as defined,
calculated on a twelve month basis. The consolidated fixed charge coverage ratio for the twelve month periods ended March 31, 2020,
June 30 2020 and September 30, 2020 must be 1.35 to 1 and increases in various increments on a quarterly basis to 1.5 to 1.0 for the
twelve month period ended December 31, 2020 and 2021, and to 1.75 to 1.0 for the 12 months ending December 31, 2022 and
15
thereafter. Lastly, the Company must maintain minimum liquidity, defined as cash and availability under the UK borrowing base, as
defined, of $1.0 million over any trailing four-week period until such time as the foreign subsidiary has positive EBITDA, as defined,
for three consecutive quarters and the Holzworth deferred purchase price has been paid in full. The Term Loan Facility also provides
for a number of events of default, including, among others, nonpayment, bankruptcy, inaccuracy of representations and warranties,
breach of covenant, change in control, entry of final judgement or order, breach of material contracts, and as long as the Company’s
consolidated leverage ratio is greater than 1.0 to 1.0 (as calculated in accordance with the terms of the Term Loan Facility), the cessation
of service of any two of Tim Whelan, Michael Kandell or Daniel Monopoli as Chief Executive Officer, Chief Financial Officer or Chief
Technology Officer, respectively, of the Borrower without acceptable replacements within 60 days. Any exercise of remedies by
Muzinich is subject to compliance with the intercreditor agreement entered into at the closing of the Term Loan Facility among the
Company, Muzinich and Bank of America, N.A., as lender under the Credit Facility referenced below.
Also in connection with the Acquisition, on February 7, 2020, the Company and certain of its subsidiaries (the “Borrowers”),
and Bank of America, N.A. entered into Amendment No. 5 (the “Amendment”) to the Credit Facility. By entering into the Amendment,
Holzworth, and CommAgility Limited, became borrowers under the Credit Facility. The obligations of the Borrowers under the Credit
Facility are guaranteed by Wireless Telecom Group, Ltd. CommAgility Limited and Wireless Telecom Group, Ltd. are both wholly
owned subsidiaries of the Company.
Amendment No. 5 (a) effected certain modifications to the Credit Facility to accommodate the Holzworth Acquisition, the
Company’s incurrence of the Initial Term Loan and the granting of the related liens and security interests, (b) subject to the satisfaction
of certain conditions precedent, made available to CommAgility an asset based revolving loan, subject to a borrowing base calculation
applicable to CommAgility’s assets, of up to a maximum availability of $5.0 million (the “UK Revolver Commitment”), (c) reduced the
interest rate margin applicable to revolving loans made under the Credit Facility from a range of 2.75% to 3.25% to a range of 2.00% to
2.50%, based on the Borrowers’ Fixed Charge Coverage Ratio (as defined in the Credit Facility) of the most recently completed fiscal
quarter, (d) extended the Revolver Termination Date to March 31, 2023 and (e) conditioned the Borrowers’ ability to make certain debt
payments under the Term Loan Facility (described above) upon compliance with a liquidity test. In all other material respects, the
Credit Facility remains unchanged.
Effectiveness of Amendment No. 5 was conditioned upon, among other things, the prepayment of the remaining principal
balance (approximately $0.3 million) of the $0.8 million term loan made available under the Credit Facility and the payment of a closing
fee in the amount of $25,000. The Borrowers satisfied all such conditions on February 7, 2020.
Any exercise of remedies by Bank of America, N.A. under the Credit Facility is subject to compliance with the intercreditor
agreement entered into at the closing of Amendment No. 5 among the Company, Muzinich, as lender under the Term Loan Facility, and
Bank of America, N.A.
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 and state
income taxes will be substantially reduced. Additionally, CommAgility benefits from a research and development deduction which
significantly reduces the cash needed to pay taxes in the UK.
The Company may pursue strategic opportunities, including potential acquisitions, mergers, divestitures or other activities,
which may require significant use of the Company’s capital resources. The Company may incur costs as a result of such activities and
such activities may affect the Company’s liquidity in future periods. In order to fund such activities, the Company may need to incur
additional debt or issue additional securities if market conditions are favorable. However, there can be no certainty that such funding
will be available in needed quantities on terms favorable to the Company or at all.
On August 27, 2018 the Company filed a shelf registration statement on Form S-3 which was declared effective on September
17, 2018. The Form S-3 will permit the Company to issue and sell, from time to time, up to $40 million in aggregate value of shares of
its common stock through one or more methods of distribution, subject to applicable SEC limits on the value of securities that the
Company, as a smaller reporting company, may sell during an applicable period, market conditions, and the Company’s capital desires
and needs. The Company has no current plans to offer any common stock under the shelf registration statement. The terms of any
offering of the Company’s common stock, and the intended use of the net proceeds resulting therefrom, will be established at the times
of the offerings and will be described in prospectus supplements filed with the SEC at the times of the offerings. The shelf registration
statement is intended to provide financial flexibility to access capital in a competitive and expeditious manner when market conditions
are appropriate.
16
The Company expects demand for its Embedded Solutions signal processing hardware cards from the Company’s largest
customer to be significantly lower in fiscal 2020 as compared to fiscal 2019. The Company expects this hardware revenue decline to
be partially offset by increased Embedded Solutions software and services revenue but expects this transition to take several quarters.
Additionally, the Company undertook restructuring actions and cost and expense reductions across all of its segments in early 2020 to
drive efficiency and improved operating leverage.
We expect borrowings available to us under our Credit Facility, our existing cash balance and cash generated by operations
will be sufficient to meet our liquidity needs for the next twelve months. The Company expects the cash flow of Holzworth to fund the
deferred purchase price related to the Holzworth Acquisition. Our ability to meet our cash requirements will depend on our ability to
generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are
beyond our control.
Purchase obligations consist of inventory that arises in the normal course of business operations. Future obligations and
commitments as of December 31, 2019 consisted of the following:
Table of Contractual Obligations
Payments by year (in thousands)
Total
2020
2021
2022
2023
Facility Leases
$ 1,597
$ 512
$ 474
$ 488
$ 123
Operating and Equipment Leases
117
54
54
9
-
Purchase Obligations
3,652
3,652
-
-
-
$ 5,366
$ 4,218
$ 528
$ 497
$ 123
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.
Effects of Inflation and Changing Prices
The Company does not anticipate that inflation or other expected changes in prices will significantly impact its business.
Recent Accounting Pronouncements Affecting the Company
A discussion of recent accounting pronouncements is included in Note 1 to the Consolidated Financial Statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
17
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Balance Sheets as of December 31, 2019 and 2018
Statements of Operations and Comprehensive Income/(Loss) for the Two Years Ended December 31, 2019
Statement of Changes in Shareholders’ Equity for the Two Years Ended December 31, 2019
Statements of Cash Flows for the Two Years Ended December 31, 2019
Notes to Consolidated Financial Statements
Page
19
20
21
22
23
24
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Wireless Telecom Group, Inc.
To the Board of Directors and Shareholders
Wireless Telecom Group, Inc.
Parsippany, NJ
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Wireless Telecom Group, Inc. (the “Company”) as of December 31,
2019 and 2018, and the related consolidated statements of operations and comprehensive income/(loss), changes in shareholders’ equity
and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of
America.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in
2019.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part
of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
/s/ PKF O’Connor Davies, LLP
We have served as the Company’s auditor since 2006.
New York, New York
March 19, 2020
19
CONSOLIDATED BALANCE SHEETS
Wireless Telecom Group, Inc.
(In thousands, except number of shares and par value)
CURRENT ASSETS
Cash & Cash Equivalents
Accounts Receivable - net of reserves of $69 and $44, respectively
Inventories - net of reserves of $969 and $1,910, respectively
Prepaid Expenses and Other Current Assets
TOTAL CURRENT ASSETS
December 31
2019
December 31
2018
$ 4,245
6,152
7,325
1,871
19,593
$ 5,015
8,638
6,884
1,689
22,226
PROPERTY PLANT AND EQUIPMENT - NET
2,147
2,578
OTHER ASSETS
Goodwill
Acquired Intangible Assets, net
Deferred Income Taxes
Right of Use Assets
Other Assets
TOTAL OTHER ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Short Term Debt
Accounts Payable
Short Term Leases
Accrued Expenses and Other Current Liabilities
Deferred Revenue
TOTAL CURRENT LIABILITIES
LONG TERM LIABILITIES
Long Term Leases
Other Long Term Liabilities
Deferred Tax Liability
TOTAL LONG TERM LIABILITIES
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value, 2,000,000 shares authorized, none issued
Common Stock, $.01 par value, 75,000,000 shares authorized, 34,488,252 and 34,393,252
shares issued, 21,300,251 and 21,205,251 shares outstanding
Additional Paid in Capital
Retained Earnings
Treasury Stock at Cost, 13,188,000
Accumulated Other Comprehensive Income
TOTAL SHAREHOLDERS' EQUITY
10,069
2,219
6,013
1,436
874
20,611
9,778
3,206
5,592
-
787
19,363
$ 42,351
$ 44,167
$ 2,696
2,227
440
2,657
42
8,062
$ 2,016
3,252
-
6,083
103
11,454
1,018
77
503
1,598
-
115
616
731
-
-
345
49,062
7,142
(24,509)
651
32,691
344
48,479
7,556
(24,509)
112
31,982
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 42,351
$ 44,167
The accompanying notes are an integral part of these consolidated financial statements.
20
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)
Wireless Telecom Group, Inc.
(In thousands, except per share amounts)
NET REVENUES
COST OF REVENUES
GROSS PROFIT
Operating Expenses
Research and Development
Sales and Marketing
General and Administrative
(Gain)/Loss on Change in Fair Value
of Contingent Consideration
Total Operating Expenses
Operating Income/(Loss)
Other Income/(Expense)
Interest Expense
Twelve Months Ended
December 31
2019
2018
$ 48,921
$ 52,788
26,632
28,621
22,289
24,167
5,917
7,677
10,174
4,909
7,595
10,306
-
23,768
578
23,388
(1,479)
779
(2)
(305)
(121)
(575)
Income/(Loss) before taxes
(1,786)
83
Tax Provision/(Benefit)
Net Income/(Loss)
Other Comprehensive Income/(Loss):
Foreign Currency Translation Adjustments
Comprehensive Income/(Loss)
Earnings/(Loss) Per Share:
Basic
Diluted
Weighted Average Shares Outstanding:
Basic
Diluted
(1,372)
48
$ (414)
$ 35
539
$ 125
(892)
$ (857)
$ (0.02)
$ (0.02)
$ 0.00
$ 0.00
21,111
21,111
20,858
21,566
In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from
the per share calculation because they are anti-dilutive.
The accompanying notes are an integral part of these consolidated financial statements.
21
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Wireless Telecom Group, Inc.
(In thousands, except share amounts)
Common
Stock
Issued
Common
Stock
Amount
Additional Paid
In Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income/(Loss)
Total
Shareholders'
Equity
Balances at December 31, 2017
33,868,252
Adoption of Accounting Standard
-
Adjusted Opening Equity
33,868,252
$ 339
$ 47,494
$ 7,176
$ (20,910)
$ 1,004
$ 35,103
-
-
345
-
-
345
$ 339
$ 47,494
$ 7,521
$ (20,910)
$ 1,004
$ 35,448
-
-
-
-
-
35
288
-
(3,599)
702
(892)
Net Income/(Loss)
Issuance of Shares in Connection with
Stock Options Exercised
Issuance of Restricted Stock
-
300,000
225,000
-
-
35
-
3
285
-
-
2
(2)
-
-
Forfeiture of Shares Issued in
Connection with CommAgility
acquisition
Share-based Compensation Expense
Cumulative Translation Adjustment
-
-
-
-
-
-
(3,599)
-
702
-
-
-
-
-
-
(892)
Balances at December 31, 2018
34,393,252
$ 344
$ 48,479
$ 7,556
$ (24,509)
$ 112
$ 31,982
Net Income/(Loss)
Issuance of Restricted Stock
Share-based Compensation Expense
Cumulative Translation Adjustment
-
95,000
-
-
-
-
(414)
-
1
(1)
-
-
-
584
-
-
-
-
-
-
-
-
-
539
(414)
-
584
539
Balances at December 31, 2019
34,488,252
$ 345
$ 49,062
$ 7,142
$ (24,509)
$ 651
$ 32,691
The accompanying notes are an integral part of these consolidated financial statements.
22
CONSOLIDATED STATEMENTS OF CASH FLOWS
Wireless Telecom Group, Inc.
(In thousands)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net Income/(Loss)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and Amortization
Amortization of Debt Issuance Fees
Share-based Compensation Expense
Non Cash Lease Expense
Deferred Income Taxes
Provision for Doubtful Accounts
Inventory Reserves
Changes in Assets and Liabilities:
Accounts Receivable
Inventories
Prepaid Expenses and Other Assets
Accounts Payable
Payment of Contingent Consideration
Accrued Expenses and Other Liabilities
Net Cash Provided by Operating Activities
CASH FLOWS (USED) BY INVESTING ACTIVITIES
Capital Expenditures
Acquisition of Business, Net of Cash Acquired
Net Cash (Used) by Investing Activities
For the Twelve Months
Ended December 31
2019
2018
$ (414)
$ 35
2,151
63
584
(24)
(551)
25
103
2,305
78
702
11
233
-
359
2,465
(502)
42
(1,055)
(772)
(2,035)
80
231
(751)
(850)
(735)
-
2,372
3,990
(392)
(426)
(818)
(853)
(805)
(1,658)
CASH FLOWS PROVIDED/(USED) BY FINANCING ACTIVITIES
Revolver Borrowings
Revolver Repayments
Term Loan Repayments
Debt Issuance Fees
Payment of Contingent Consideration
Proceeds from Exercise of Stock Options
Net Cash Provided/(Used) by Financing Activities
36,544
(35,712)
(152)
(110)
(782)
-
(212)
37,695
(37,355)
(152)
-
-
288
476
Effect of Exchange Rate Changes on Cash and Cash Equivalents
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
180
(770)
(251)
2,557
Cash and Cash Equivalents, at Beginning of Period
5,015
2,458
CASH AND CASH EQUIVALENTS, AT END OF PERIOD
$ 4,245
$ 5,015
SUPPLEMENTAL INFORMATION:
Cash Paid During the Period for Interest
Cash Paid During the Period for Income Taxes
$ 185
$ 108
$ 176
$ 41
The accompanying notes are an integral part of these consolidated financial statements.
23
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., a New Jersey corporation, together with its subsidiaries (“we”, “us”, “our” or the “Company”),
is a global designer and manufacturer of advanced RF, microwave and millimeter wave components, modules, systems and
instruments and currently markets its products and services worldwide under the Boonton, Microlab, Noisecom and
CommAgility brands. Serving the wireless, telecommunication, satellite, military, aerospace, and semiconductor industries,
Wireless Telecom Group products enable innovation across a wide range of traditional and emerging wireless technologies.
With a unique set of high-performance products including peak power meters, signal analyzers, signal processing modules, long
term evolution (“LTE”) physical layer (“PHY”) and stack software, power splitters and combiners, global positioning system
(“GPS”) repeaters, public safety monitors, noise sources, and programmable noise generators, Wireless Telecom Group supports
the development, testing, and deployment of wireless technologies around the globe. The consolidated financial statements
include the accounts of Wireless Telecom Group, Inc., doing business as, and operating under the trade name, Noise Com, Inc.
(“Noisecom”), and its wholly owned subsidiaries including Boonton Electronics Corporation (“Boonton”), Microlab/FXR
(“Microlab”), Wireless Telecommunications Ltd. and CommAgility Limited (“CommAgility”).
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries.
The Consolidated Financial Statements have been prepared using accounting principles generally accepted in the United States
(“U.S. GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.
The Company presents its operations in three reportable segments: (1) Network Solutions, (2) Test and Measurement and (3)
Embedded Solutions. The Network Solutions segment is comprised of the operations of Microlab. The Test and Measurement
segment is comprised of the operations of Boonton and Noisecom. The Embedded Solutions segment is comprised of the
operations of CommAgility.
Use of Estimates
The accompanying financial statements have been prepared in accordance with 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 inventory valuation, accounts receivable valuation, valuation of deferred tax assets,
returns reserves, warranty accruals, intangible assets, estimated fair values of stock options and vesting periods of performance-
based stock options and restricted stock.
Concentrations of Credit Risk, Purchases and Fair Value
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and
accounts receivable.
Credit evaluations are performed on customers requiring credit over a certain amount. Credit risk is mitigated to a lesser extent
through collateral such as letters of credit, bank guarantees or payment terms like cash in advance.
For the years ended December 31, 2019 and 2018 one customer, from the Embedded Solutions segment, accounted for 24.8%
and 22.0% of the Company’s total consolidated revenues, respectively. At December 31, 2019, one customer exceeded 10% of
consolidated gross accounts receivable at 12.9%. At December 31, 2018 one customer exceeded 10% of consolidated gross
accounts receivable at 32.1%.
For the year ended December 31, 2019, three suppliers comprised or exceeded 10% of consolidated inventory purchases at 18%,
14%, and 10% respectively. For the year ended December 31, 2018 two suppliers comprised or exceeded 10% of consolidated
inventory purchases at 15% and 13%, respectively.
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with maturities of three months or less at the date of purchase
to be cash equivalents. Cash and cash equivalents consist of operating accounts.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. 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
Inventories are stated at the lower of cost (average cost) or net realizable value. Net realizable value is based upon an estimated
average selling price reduced by estimated costs of completion, disposal and transportation. Reductions in inventory valuation
are included in cost of revenues in the accompanying Consolidated Statements of Operations and Comprehensive Loss. Finished
goods and work-in-process include material, labor and overhead expenses.
The Company reviews inventory for excess and obsolescence based on best estimates of future demand, product lifecycle status
and product development plans. The Company uses historical information along with these future estimates to reduce the
inventory cost basis. Subsequent changes in facts and circumstances do not result in the restoration or increase in that newly
established cost basis.
Inventory carrying value is net of inventory reserves of approximately $1.0 million as of December 31, 2019 and $1.9 million
as of December 31, 2018.
Inventories consist of (in thousands):
Raw materials
Work-in-process
Finished goods
Prepaid Expenses and Other Current Assets
December 31,
2019
$ 4,023
406
2,896
$ 7,325
December 31,
2018
$ 3,248
557
3,079
$ 6,884
Prepaid expenses and other current assets generally consist of income tax receivables, contract assets, prepaid insurance, prepaid
maintenance agreements and the short term portion of debt issuance costs. The income tax receivable balance included in
prepaid and other current assets was $1.1 million as of December 31, 2019 as compared to a balance of $0.8 million as of
December 31, 2018.
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 estimated useful lives of the assets. The estimated useful lives for the property, plant and
equipment are:
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Machinery and computer equipment
Furniture and fixtures
Transportation equipment
3-8 years
5-7 years
4 years
Leasehold improvements are amortized over the shorter of the remaining term of the lease or the estimated economic life of the
improvement. Repairs and maintenance are charged to operations as incurred; renewals and betterments are capitalized.
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 evaluated for impairment annually by first performing a qualitative evaluation of events and
circumstances impacting the reporting unit to determine the likelihood of goodwill impairment. Based on that qualitative
evaluation, if we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further
evaluation is necessary. Otherwise we perform a quantitative impairment test.
As of December 31, 2019 the Company’s consolidated goodwill balance of $10.1 million is comprised of $1.4 million related
to the Microlab reporting unit and $8.7 million related to the CommAgility reporting unit. The Company performed a qualitative
assessment in the fourth quarter of 2019 of each reporting unit. The qualitative assessment of Microlab did not indicate any
impairment of goodwill. As a result of declining future demand of the CommAgility’s signal processing hardware and the
uncertainty associated with new product revenues to offset the signal processing hardware sale decline, the Company performed
a quantitative impairment test of the goodwill of the CommAgility reporting unit.
For goodwill impairment testing using the quantitative approach, the Company estimates the fair value of the selected reporting
unit primarily through the use of a discounted cash flow model based on our best estimate of amounts and timing of future
revenues and cash flows and our most recent business and strategic plans, and compares the estimated fair value to the carrying
value of the reporting unit, including goodwill. If the fair value of the reporting unit exceeds the carrying value, no impairment
charge is recorded. If the carrying value of the reporting unit exceeds the fair value an impairment charge is recorded to goodwill
in the amount by which carrying value exceeds fair value. The discounted cash flow model requires judgmental assumptions
about projected revenue growth, future operating margins, discount rates and terminal values over a multi-year period. There
are inherent uncertainties related to these assumptions and management’s judgment in applying them to the analysis of goodwill
impairment. While the Company believes it has made reasonable estimates and assumptions to calculate the fair value of its
reporting units, it is possible a material change could occur. If actual results are not consistent with management’s estimates and
assumptions, goodwill may be overstated and a charge would need to be taken against net earnings.
Changes in our projections used in the discounted cash flow model could affect the estimated fair value of the Company’s
reporting unit and could result in a goodwill impairment charge in a future period. In order to evaluate the sensitivity of the fair
value calculations used in the quantitative goodwill impairment test, the Company applied a hypothetical 10% decrease to the
fair value of the CommAgility reporting unit and compared those values to the carrying value. Based on this sensitivity analysis,
the Company did not identify any goodwill impairment. Due to the many variables inherent in the estimation of a reporting
unit’s fair value and the relative size of our recorded goodwill, differences in assumptions may have a material effect on the
results of our impairment analysis.
As of December 31, 2018 the Company’s consolidated goodwill balance of $9.8 million was comprised of $1.4 million related
to the Microlab reporting unit and $8.4 million related to the CommAgility reporting unit. Management’s qualitative assessment
performed in the fourth quarters of 2018 did not indicate any impairment of goodwill.
Intangible and Long-lived Assets
Intangible assets include patents, non-competition agreements, customer relationships and trademarks. Intangible assets with
finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from three
to five years. Long-lived assets, including intangible assets with finite lives, 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 future cash flows resulting from the use of the asset and its eventual
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the
estimated fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or estimated
fair value less costs to sell. The estimated useful lives of intangible and long-lived assets are based on many factors including
assumptions regarding the effects of obsolescence, demand, competition and other economic factors, expectations regarding the
future use of the asset, and our historical experience with similar assets. The assumptions used to determine the estimated useful
lives could change due to numerous factors including product demand, market conditions, technological developments,
economic conditions and competition. Intangible assets determined to have indefinite useful lives are not amortized but are
tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be
impaired.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly
transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy,
which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not
active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the
assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities.
The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant
to the fair value measurement.
The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, accounts payable and
accrued liabilities, approximate fair value due to their relatively short maturities. The Company’s term loan and revolving credit
facility bear interest at a variable interest rate plus an applicable margin and, therefore, carrying amount approximates fair value.
Foreign Currency Translation
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where the local currency is the
functional currency, are translated from foreign currencies into U.S. dollars at period-end exchange rates while income and
expenses are translated at the weighted average spot rate for the periods presented. Translation gains or losses related to net
assets located outside the U.S. are shown as a component of accumulated other comprehensive income in the Consolidated
Statements of Changes in Shareholders’ Equity. Gains and losses resulting from foreign currency transactions, which are
denominated in currencies other than the Company’s functional currency, are included in the Consolidated Statements of
Operations and Comprehensive Loss. Foreign exchange transaction losses were not material in fiscal 2019 and were $0.1 million
in 2018.
Other Comprehensive Income (Loss)
Other comprehensive income (loss) is recorded directly to a separate section of shareholders’ equity in accumulated other
comprehensive income and includes unrealized gains and losses excluded from net income/(loss). These unrealized gains and
losses consist of changes in foreign currency translation.
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, 2019 and 2018 were $5.9 million and $4.9 million, respectively.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Advertising Costs
Advertising expenses are charged to operations during the year in which they are incurred and aggregated $0.1 million for the
years ended December 31, 2019 and 2018.
Stock-Based Compensation
The Company follows the provisions of Accounting Standards Codification (“ASC”) 718, “Compensation – Stock
Compensation” which requires that compensation expense be recognized, based on the fair value of the stock awards. 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 are 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 daily 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 Company accounts for forfeitures when they occur.
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, a majority of which has been generated by a history of
net operating losses and determines the necessity for a valuation allowance. The Company evaluates which portion, if any, will
more likely than not be realized by offsetting future taxable income, taking into consideration any limitations that may exist on
its use of its net operating loss carry-forwards.
Under ASC 740, the Company must recognize and disclose uncertain tax positions 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 amounts
recognized in the financial statements attributable to such position, if any, are recorded if there is a greater than 50% likelihood
of being realized upon the ultimate resolution of the position. 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.
Earnings (Loss) Per Common Share
Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted
average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is calculated by
dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding
for the period and, when dilutive, potential shares from stock options using the treasury stock method, the weighted average
number of unvested restricted shares and the weighted-average number of restricted stock units outstanding for the period.
Shares from stock options are included in the diluted earnings per share calculation only when options exercise prices are lower
than the average market value of the common shares for the period presented. In periods with a net loss, the basic loss per share
equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
anti-dilutive. In accordance with ASC 260, “Earnings Per Share”, the following table reconciles basic shares outstanding to
fully diluted shares outstanding.
For the Years Ended December 31,
2018
2019
Weighted average common shares outstanding
Potentially dilutive equity awards
Weighted average common shares outstanding, assuming dilution
21,110,632
522,996
21,633,628
20,858,298
707,492
21,565,790
The weighted average number of options to purchase common stock not included in diluted loss per share because the effects
are anti-dilutive, or the performance condition was not met in 2019 was 1,324,548. The weighted average number of options to
purchase common stock not included in diluted loss per share in 2018, because the effects are anti-dilutive or the performance
condition was not met, was 285,000.
Recent Accounting Pronouncements Adopted in 2019
In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which created new
accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to
recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of
whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and
presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating
lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and
uncertainty of cash flows arising from leases.
The Company adopted the requirements of the new standard effective January 1, 2019 using the modified retrospective transition
method, which applies the provisions of the standard at the effective date without adjustment to the comparative periods
presented. The Company adopted the following practical expedients and elected the following accounting policies related to
this standard:
(cid:120) Carry forward of historical lease classifications and accounting treatment;
(cid:120) Short-term lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for
leases with a term of 12 months or less; and
(cid:120) The option to not separate lease and non-lease components for certain equipment lease categories such as office
printers and copiers.
Adoption of this standard resulted in the recognition of operating lease right-of-use assets and corresponding lease liabilities of
$1.9 million on the consolidated balance sheet as of January 1, 2019. The standard did not materially impact operating results
or liquidity. Disclosures related to the amount, timing and uncertainty of cash flows arising from leases are included in Note 2.
On June 20, 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve
financial reporting for share-based payments issued to nonemployees. This ASU expands the scope of ASC Topic 718,
Compensation - Stock Compensation, which currently only includes share-based payments issued to employees, to also include
share-based payments issued to nonemployees for goods and services. Consequently, the accounting for share-based payments
to nonemployees and employees will be substantially aligned. ASU 2018-07 supersedes ASC Subtopic 505-50, Equity - Equity-
Based Payments to Non-Employees. The amendments in this ASU are effective for public companies for fiscal years beginning
after December 15, 2018, including interim periods within that fiscal year. The Company adopted this standard on January 1,
2019 and it did not have an impact on our financial statements as we did not issue share-based awards to nonemployees during
the year.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
In January, 2017, FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350) Simplifying the Test for Goodwill
Impairment.” ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation to measure goodwill
impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value,
not to exceed the carrying amount of goodwill. This pronouncement is effective for the Company’s 2020 calendar year, with
early adoption permitted. The Company has elected to adopt this standard effective with the December 31 2019, financials and
its valuation of the CommAgility and Microlab goodwill assessment in the fourth quarter of fiscal 2019.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). ASU 2016-13 changes the
impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured as
amortized cost. This pronouncement is effective for small reporting companies for fiscal years, and for interim periods within
those fiscal years, beginning after December 15, 2022. The Company plans to adopt the standard effective January 1, 2023. We
do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Disclosure Framework – Changes to the Disclosure
Requirements for Fair Value Measurement (Topic 820). ASU 2018-13 eliminates, modifies and adds disclosure requirements
for fair value measurements. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years,
beginning after December 15, 2019, with early adoption permitted. We are currently in the process of evaluating the effects of
this pronouncement on our consolidated financial statements
In August 2018, the FASB issued ASU 2018-15, “Intangibles – Goodwill and Other – Internal-Use Software, Customers
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract.” ASU 2018-15
aligns the requirements for capitalizing implementation costs in cloud computing arrangements with the requirements for
capitalizing implementation costs incurred to develop or obtain internal-use software. This pronouncement is effective for the
Company’s 2023 calendar year, with early adoption permitted. The Company is in the process of evaluating the impact of ASU
2018-15 on its consolidated financial statements.
NOTE 2 - LEASES
The Company’s lease agreements consist of building leases for its operating locations and office equipment leases for printers
and copiers with lease terms that range from less than 12 months to 8 years. At inception, the Company determines if an
arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The
Company’s leases for office equipment such as printers and copiers contain lease and non-lease components (i.e. maintenance).
The Company accounts for lease and non-lease components of office equipment as a single lease component.
All of the Company’s leases are operating leases and are presented as right of use lease asset, short term lease liability and long
term lease liability on the consolidated balance sheet as of December 31, 2019. These assets and liabilities are recognized at
the commencement date based on the present value of remaining lease payments over the lease term using the Company’s
incremental borrowing rate. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance
sheet.
Lease expense is recognized on a straight-line basis over the lease term and is included in cost of revenues and general and
administrative expenses on the consolidated statement of operations and comprehensive income/(loss).
An initial right-of-use asset of $1.9 million was recognized as a non-cash asset addition with the adoption of the new lease
accounting standard. Subsequent to adoption of the new standard there were no new right-of-use assets recognized during the
twelve months ended December 31, 2019. Cash paid for amounts included in the present value of operating lease liabilities
was $0.5 million during the twelve months ended December 31, 2019 and is included in operating cash flows.
Operating lease costs were $0.8 million during the twelve months ended December 2019.
The following table presents information about the amount and timing of cash flows arising from the Company’s operating
leases as of December 31, 2019.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
(in thousands)
Maturity of Lease Liabilities
2020
2021
2022
2023
Thereafter
Total Undiscounted operating lease payments
Less: imputed interest
Present Value of operating lease liabilities
Other information
Weighted-average remaining lease term (months)
Weighted-average discount rate for operating leases
December 31, 2019
$ 511
474
488
123
-
1,596
(138)
$ 1,458
38
5.76%
Total annual commitments under non-cancelable lease agreements as of December 31, 2018 under the previous accounting
guidance were as follows:
2019
2020
2021
2022
2023
Total
NOTE 3 – REVENUE
$ 539
510
474
488
123
$ 2,134
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the
consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company’s
performance obligations are satisfied either over time or at a point in time. Revenue from performance obligations that
transferred at a point in time accounted for approximately 99% and 95% of the Company’s total revenue for the twelve months
ended December 31, 2019 and 2018, respectively.
Nature of Products and Services
Hardware
The Company generally has one performance obligation in its arrangements involving the sales of radio frequency solutions in
the Network Solutions segment, digital signal processing hardware in the Embedded Solutions segment and noise generators
and components and power meter and analyzers in the Test and Measurement segment. When the terms of a contract include
the transfer of multiple products, each distinct product is identified as a separate performance obligation. Generally, satisfaction
occurs when control of the promised goods is transferred to the customer in exchange for consideration in an amount for which
we expect to be entitled. Generally, control is transferred when legal title of the asset moves from the Company to the customer.
We sell our products to a customer based on a purchase order, and the shipping terms per each individual order are primarily
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
used to satisfy the single performance obligation. However, in order to determine control has transferred to the customer, the
Company also considers:
(cid:120) when the Company has a present right to payment for the asset
(cid:120) when the Company has transferred physical possession of the asset to the customer
(cid:120) when the customer has the significant risks and rewards of ownership of the asset
(cid:120) when the customer has accepted the asset
Software
Arrangements involving licenses of software in the Embedded Solutions segment may involve multiple performance
obligations, most notably subsequent releases of the software. The Company has concluded that each software release in a
multiple deliverable arrangement in the Embedded Solutions segment is a distinct performance obligation and, accordingly,
transaction price is allocated to each release when the customer obtains control of the software.
Performance obligations that are not distinct at contract inception are combined. Specifically, with the Company’s sales of
software, contracts that include customization may result in the combination of the customization services with the license as
one distinct performance obligation and recognized over time. The duration of these performance obligations are typically one
year or less.
Services
Arrangements involving calibration and repair services in the Company’s Test and Measurement segment are generally
considered a single performance obligation and are recognized as the services are rendered.
Shipping and Handling
Shipping and handling activities performed after the customer obtains control are accounted for as fulfillment activities and
recognized as cost of revenues.
Significant Judgments
For the Company’s more complex software and services arrangements significant judgment is required in determining whether
licenses and services are distinct performance obligations that should be accounted for separately, or, are not distinct, and thus
accounted for together. Further, in cases where we determine that performance obligations should be accounted for separately,
judgment is required to determine the standalone selling price for each distinct performance obligation.
Certain of the Company shipments include a limited return right. In accordance with Topic 606 the Company recognizes
revenue net of expected returns.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in
contract assets or contract liabilities (deferred revenue) on the Company’s Consolidated Balance Sheet. The Company records
a contract asset when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to
invoicing. Contract assets are recorded in prepaid expenses and other current assets and are $0.1 million and $0.3 million as
of December 31, 2019 and 2018, respectively. Deferred revenue is $42,000 and $0.1 million as of December 31, 2019 and
2018, respectively.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Disaggregated Revenue
We disaggregate our revenue from contracts with customers by product family and geographic location for each of our
segments as we believe it best depicts how the nature, timing and uncertainty of our revenue and cash flows are affected by
economic factors. See details in the tables below (in thousands).
Total Net Revenues by Revenue Type
Passive and Active RF Solutions
Noise Generators and Components
Power Meters and Analyzers
Signal Processing Hardware
Software Licenses
Services
Total Net Revenue
Total Net Revenues by Geographic Areas
Americas
EMEA
APAC
Total Net Revenue
Twelve Months Ended December 31, 2019
Network
Solutions
Test and
Measurement
Embedded
Solutions
Total
$ 21,830
-
-
-
-
-
$ 21,830
$ -
6,198
6,109
-
-
1,259
$ 13,566
$ -
-
-
13,013
14
498
$ 13,525
$ 21,830
6,198
6,109
13,013
14
1,757
$ 48,921
$ 19,318
2,241
271
$ 21,830
$ 9,522
2,105
1,939
$ 13,566
$ 1,321
12,154
50
$ 13,525
$ 30,161
16,500
2,260
$ 48,921
Total Net Revenues by Revenue Type
Passive and Active RF Solutions
Noise Generators and Components
Power Meters and Analyzers
Signal Processing Hardware
Software Licenses
Services
Total Net Revenue
Total Net Revenues by Geographic Areas
Americas
EMEA
APAC
Total Net Revenue
Twelve Months Ended December 31, 2018
Network
Solutions
Test and
Measurement
Embedded
Solutions
Total
$ 22,275
-
-
-
-
-
$ 22,275
$ -
6,130
6,769
-
-
1,313
$ 14,212
$ -
-
-
12,746
704
2,851
$ 16,301
$ 22,275
6,130
6,769
12,746
704
4,164
$ 52,788
$ 18,871
2,591
813
$ 22,275
$ 10,223
1,659
2,330
$ 14,212
$ 3,755
12,019
527
$ 16,301
$ 32,849
16,269
3,670
$ 52,788
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 4 - DEBT
Debt consists of the following (in thousands):
Revolver at LIBOR Plus Margin
Term Loan at LIBOR Plus Margin
Total Debt
Debt Maturing within one year
Non-current portion of long term debt
December 31, 2019
$ 2,354
342
2,696
(2,696)
$ -
The Company entered into a Credit Facility with Bank of America, N.A. (the “Lender”) on February 16, 2017 (the "Credit
Facility"), which provided for a term loan in the aggregate principal amount of $0.8 million (the "Term Loan") and an asset
based revolving loan (the “Revolver”), which is subject to a Borrowing Base Calculation (as defined in the Credit Facility) of
up to a maximum availability of $9.0 million (“Revolver Commitment Amount”). The borrowing base is calculated as 85% of
eligible accounts receivable and inventory, as defined, subject to certain caps and limits. The borrowing base is calculated on a
monthly basis. The proceeds of the Term Loan and Revolver were used to finance the acquisition of CommAgility.
In connection with the issuance of the Credit Facility, the Company paid lender and legal fees of $0.2 million which were
primarily related to the Revolver and are capitalized and presented as other current and non-current assets in the Consolidated
Balance Sheets. These costs are recognized as additional interest expense over the term of the related debt instrument using the
straight line method which approximates the effective interest method.
The Company must repay the Term Loan in installments of $38,000 per quarter due on the first day of each fiscal quarter
beginning April 1, 2017 and continuing until the Term Loan maturity date, on which the remaining balance is due in a final
installment. The future principal payments under the Term Loan are $0.3 million in 2020. The Term Loan and Revolver were
both scheduled to mature on November 16, 2019. On February 26, 2019 the Company entered into Amendment No. 3 to the
Credit Facility which extends the termination date of the Revolver from November 16, 2019 to March 31, 2020 (See Note 15).
On November 8, 2019 the Company entered into Amendment No. 4 to the Credit Facility which extends the maturity date of the
Term Loan to coincide with the extension of the Revolver at March 31, 2020, and then on February 7, 2020, entered into
Amendment No. 5 (see Note 15 Subsequent Event), which, inter alia, extended the maturity date of the Revolver to March 31,
2023.
The Term Loan and Revolver bear interest at the LIBOR rate plus a margin. The margin on the outstanding balance of the
Company’s Term Loan and Revolver were fixed at 3.50% and 3.00% per annum, respectively, through September 30, 2017.
Thereafter, the margins were subject to increase or decrease by Lender on the first day of each of the Borrowers’ fiscal quarters
based upon the Fixed Charge Coverage Ratio (as defined in the Credit Facility) as of the most recently ended fiscal quarter
falling into three levels. If the Company's Fixed Charge Coverage Ratio is greater than or equal to 1.25 to 1.00, a margin of
3.25% and 2.75%, respectively, is added to LIBOR rate with a step up to 3.50% and 3.00%, respectively, if the ratio is greater
than or equal 1.00 to 1.00 but less than 1.25 to 1.00 and another step up to 3.75% and 3.25%, respectively, if the ratio is less
than 1.00 to 1.00. The Company is also required to pay a commitment fee on the unused commitments under the Revolver at a
rate equal to 0.50% per annum and early termination fee of (a) 2% of the Revolver Commitment Amount and Term Loan if
termination occurs before the first anniversary of the Credit Facility or (b) 1% of the Revolver Commitment Amount and Term
Loan if termination occurs after the first anniversary of the Credit Facility but before the second anniversary of the Credit
Facility. The Company’s interest rate plus margin as of December 31, 2019 was 4.63% and 5.13% for the Revolver and Term
Loan, respectively. The Company’s interest rate plus margin as of December 31, 2018 was 5.38% and 5.88% for the Revolver
and Term Loan, respectively.
The Credit Facility is secured by liens on substantially all of the Company’s and its domestic subsidiaries’ assets including a
pledge of 66 1/3% of the equity interests in the Company’s Foreign Subsidiaries (as defined in the Credit Facility). The Credit
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Facility contains customary affirmative and negative covenants for a transaction of this type, including, among others, the
provision of annual, quarterly and monthly financial statements and compliance certificates, maintenance of property, insurance,
compliance with laws and environmental matters, restrictions on incurrence of indebtedness, granting of liens, making
investments and acquisitions, paying dividends, entering into affiliate transactions and asset sales. Events of default under the
Credit Facility include but are not limited to: failure to pay obligations when due, breach or failure of any covenant, insolvency
or bankruptcy, materially misleading representations or warranties, occurrence of a Change in Control (as defined) or occurrence
of conditions that have a Material Adverse Effect (as defined).
As of December 31, 2019, and the date hereof, the Company is in compliance with the covenants of the Credit Facility.
NOTE 5 - GOODWILL AND INTANGIBLE ASSETS
Goodwill consists of the following (in thousands):
Network
Solutions
Embedded
Solutions
Total
Balance as of January 1, 2018
$ 1,351
$ 8,909
$ 10,260
Foreign Currency Translation
-
(482)
(482)
Balance as of December 31, 2018
1,351
8,427
9,778
Foreign Currency Translation
-
291
291
Balance as of December 31, 2019
$ 1,351
$ 8,718
$ 10,069
Intangible assets consist of the following (in thousands):
Gross Carrying
Amount
Accumulated
Amortization
Foreign Exchange
Translation
Net Carrying
Amount
December 31, 2019
Customer Relationships
$ 2,766
$ (1,644)
$ 113
$ 1,235
Patents
615
(365)
25
275
Non-Compete Agreements
1,107
(1,101)
43
49
Tradename
Total
629
-
31
660
$ 5,117
$ (3,110)
$ 212
$ 2,219
Gross Carrying
Amount
Accumulated
Amortization
Foreign Exchange
Translation
Net Carrying
Amount
December 31, 2018
Customer Relationships
$ 2,766
$ (1,082)
$ 71
$ 1,755
Patents
615
(240)
15
390
Non-Compete Agreements
1,107
(727)
41
421
Tradename
Total
629
-
11
640
$ 5,117
$ (2,049)
$ 138
$ 3,206
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Amortization of acquired intangible assets was $1.1 million for each of the twelve months ended December 31, 2019 and 2018.
Amortization of acquired intangible assets is included as part of general and administrative expenses in the accompanying
consolidated statements of operations and comprehensive loss.
The estimated future amortization expense related to intangible assets is as follows as of December 31, 2019 (in thousands):
2020
2021
2022
Total
$ 759
710
90
$ 1,559
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, consist of the following as of December 31 (in thousands):
Machinery & Equipment
Furniture & Fixtures
Transportation Equipment
Leasehold Improvements
Gross property, plant and equipment
Less: accumulated depreciation
Net property, plant and equipment
2019
2018
$ 8,662
$ 7,928
461
5
1,326
10,454
8,307
440
2
1,217
9,587
7,009
$ 2,147
$ 2,578
Depreciation expense of $0.8 million and $1.0 million was recorded for the years ended December 31, 2019 and 2018,
respectively.
NOTE 7 - OTHER ASSETS
Other assets consist of the following as of December 31 (in thousands):
Deferred S3 Costs
Tax Receivable – Long Term
Product demo assets
Long term debt issuance
Deferred cost
Security deposit
Other
Total
2018
$ 255
-
351
-
96
50
35
$ 787
2019
$ 255
230
128
91
82
50
38
$ 874
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Product demo assets are net of accumulated amortization expense of $0.3 million and $1.2 million as of December 31, 2019 and
2018, respectively. Amortization expense related to demo assets was $0.3 million and $0.2 million in 2019 and 2018,
respectively.
NOTE 8 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following as of December 31 (in thousands):
Professional fees
Commissions
Sales and use and VAT tax
Goods received not invoiced
Payroll and related taxes
Return Reserve
Warranty Reserve
Bonus
Severance
Other
2019
2018
$ 464
$ 233
430
444
355
374
346
435
308
755
199
199
160
90
126
800
102
167
-
459
Contingent Consideration Liability
-
1,442
Deferred Purchase Price
Total
-
852
$ 2,657
$ 6,083
NOTE 9 - ACCOUNTING FOR STOCK BASED COMPENSATION
The Company follows the provisions of ASC 718. The Company’s results for the years ended December 31, 2019 and December
31, 2018 include stock based compensation expense totaling $0.6 million and $0.7 million, respectively. Such amounts have
been included in the consolidated statement of operations and comprehensive loss within operating expenses.
Incentive Compensation Plan
In 2012, the Company’s Board of Directors and shareholders approved the 2012 Incentive Compensation Plan (the “Initial 2012
Plan”), which provides for the grant of equity, including restricted stock awards, restricted stock units, non-qualified stock
options and incentive stock options in compliance with the Internal Revenue Code of 1986, as amended, to employees, officers,
directors, consultants and advisors of the Company who are expected to contribute to the Company's future growth and success.
When originally approved, the Initial 2012 Plan provided for the grant of awards relating to 2 million shares of common stock,
plus those shares subject to awards previously issued under the Company’s 2000 Stock Option Plan that expire, are canceled or
are terminated after adoption of the Initial 2012 Plan without having been exercised in full and would have been available for
subsequent grants under the 2000 Stock Option Plan. In June 2014, the Company’s shareholders approved the Amended and
Restated 2012 Incentive Compensation Plan (the “2012 Plan”) allowing for an additional 1.6 million shares of the Company’s
common stock to be available for future grants under the 2012 Plan. The 2012 Plan provides that if awards are forfeited, expire
or otherwise terminate without issuance of the shares underlying the awards, or if the award does not result in issuance of all or
part of the shares underlying the award, the unissued shares are again available for awards under the 2012 Plan. As a result of
certain award forfeitures and cancellations, as of December 31, 2019, there are approximately 1.7 million shares available for
issuance under the 2012 Plan.
All service-based (time vesting) options granted have ten-year terms from the date of grant and typically vest annually and
become fully exercisable after a maximum of five years. However, vesting conditions are determined on a grant by grant basis.
Performance-based options granted have ten-year terms and vest and become fully exercisable when determinable performance
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
targets are achieved. Performance targets are approved by the Company’s compensation committee of the Board of Directors.
Under the 2012 Plan, options may be granted to purchase shares of the Company’s common stock exercisable only at prices
equal to or above the fair market value on the date of the grant.
The following summarizes the components of share-based compensation expense for the years ending December 31 (in
thousands):
Service Based Restricted Stock Awards
Service Based Restricted Stock Units
Performance Based Stock Options
Service Based Stock Options
2019
$ 278
245
(90)
151
$ 584
2018
$ 172
175
50
305
$ 702
As of December 31, 2019, $0.1 million of unrecognized compensation costs related to unvested stock options is expected to be
recognized over a remaining weighted average period of 1.8 years, $0.2 million of unrecognized compensation costs related to
unvested restricted shares is expected to be recognized over a remaining weighted average period of 1.6 years and $0.1 million
of unrecognized compensation costs related to unvested restricted stock units is expected to be recognized over 6 months.
During the twelve months ended December 31, 2019 the Company reversed $0.1 million in share based compensation expense
related to 240,000 unvested stock options that were forfeited as a result of employees exiting the company.
The company had no stock option or restricted share forfeitures during the twelve months ended December 31, 2018.
Restricted Common Stock Awards
A summary of the status of the Company’s non-vested restricted common stock, as granted under the Company’s approved
equity compensation plans, as of December 31, 2019 and 2018, and changes during the twelve months ended December 31,
2019 and 2018, are presented below:
2019
2018
Non-vested Restricted Shares
Number
of Shares
Weighted
Average Grant
Date Fair
Value
Number
of Shares
Weighted
Average Grant
Date Fair
Value
Non-vested as of January 1
232,123
Granted
Vested and Issued
Forfeited
95,000
(64,583)
-
$1.68
$1.56
$1.70
-
159,207
225,000
(152,084)
-
$1.64
$1.68
$1.64
-
Non-vested as of December 31
262,540
$1.63
232,123
$1.68
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
The following table summarizes the restricted common stock awards granted to certain employees and officers of the Company
during the years ended December 31, 2019 and 2018 under the 2012 Plan:
Fair
Market
Value
per
Granted
Share
Number
of
Shares
Vesting
2019
1/11/19 - Service Grant - Employees
95,000
$1.56
Annual Vesting through January 2022
2018
8/1/2018 – Service Grant – Employees
12/20/18 – Service Grant - Employees
2018 Total
Restricted Stock Units:
75,000
150,000
225,000
$2.01
$1.52
Annual Vesting through August 2021
Annual Vesting through December 2022
In fiscal 2018 and fiscal 2019 the Company granted Restricted Stock Units (“RSU”) to each of our board members. Each RSU
represents the Company’s obligation to issue one share of the Company’s common stock subject to the RSU award agreement
and 2012 Plan. The RSU’s vest on the day before the first anniversary of the grant date or, if earlier, the effective date of a
separation of service due to death or disability, provided the board member has rendered continuous service to the Company as
a member of the board of directors from grant date to vesting date. Once vested, the RSU will be settled by delivery of shares
to the board member no later than 30 days following: 1) the third anniversary of the grant date, 2) separation from service
following, or coincident with, a vesting date, or 3) a change in control.
A summary of the status of the Company’s non-vested restricted stock units, as granted under the Company’s approved equity
compensation plans, as of December 31, 2019 and 2018, and changes during the twelve months ended December 31, 2019 and
2018, are presented below:
Non-vested Restricted Stock Units
2019
2018
Number
of Shares
Weighted
Average Grant
Date Fair
Value
Number
of Shares
Weighted
Average Grant
Date Fair
Value
Non-vested as of January 1
125,000
Granted
Vested and Issued
Forfeited
147,917
(125,000)
-
-
$2.25
$1.56
$2.25
-
-
125,000
$2.25
-
-
-
-
Non-vested as of December 31
147,917
$1.56
125,000
$2.25
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Fair
Market
Value
per
Granted
Share
$1.55
$1.58
Number
of
Shares
125,000
22,917
Vesting
Annual Board Meeting – June 2020
Annual Board Meeting – June 2020
2019
5/30/2019 - Service Grant – Board of Directors
7/8/2019 – Service Grant – Board of Directors
2018
6/5/2018 – Service Grant – Board of Directors
125,000
$2.25
Annual Board Meeting – May 2019
Performance-Based Stock Option Awards
A summary of performance-based stock option activity, and related information for the years ended December 31, 2019 and
December 31, 2018 follows:
2019
2018
Options
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Outstanding as of January 1
305,000
$1.45
605,000
$1.21
Granted
Exercised
Forfeited
Expired
-
-
-
-
-
-
(300,000)
(200,000)
$1.36
-
$0.96
-
-
-
-
-
Outstanding as of December 31
105,000
$1.61
305,000
$1.45
Exercisable at December 31
20,000
$0.78
20,000
$0.78
The aggregate intrinsic value of performance-based stock options outstanding that were “in the money” (exercise price was
lower than the market price) as of December 31, 2019 was $13,000 and the weighted average remaining contractual life was
1.0 years. All of the aforementioned performance-based stock options were exercisable as of December 31, 2019.
The range of exercise prices of outstanding performance-based options at December 31, 2019 is $0.78 to $1.83 with a weighted
average exercise price of $1.61 per share.
Under the terms of the performance-based stock option agreements, the awards will fully vest and become exercisable on the
date on which the Company’s Board of Directors shall have determined that specific financial performance milestones 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 stock options shall automatically vest as permitted
by the 2012 Plan. As of December 31, 2019 and 2018, the Company has determined that the performance conditions on 85,000
and 285,000 options, respectively, granted in 2013 and later are probable of being achieved by the year ending 2021. The
Company’s performance-based stock options granted prior to 2013 (consisting of 20,000 options) are fully amortized.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Service-Based Stock Option Awards
A summary of service-based stock option activity and related information for the years ended December 31, 2019 and 2018
follows:
Outstanding as of January 1
Granted
Exercised
Forfeited
Expired
2019
2018
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Options
1,975,000
15,000
$1.52
$1.56
1,815,000
160,000
-
-
-
(40,000)
$1.52
-
-
-
-
$1.53
$1.52
-
-
-
Outstanding as of December 31
1,950,000
$1.52
1,975,000
$1.52
Exercisable at December 31
1,515,000
$1.50
1,225,000
$1.49
The aggregate intrinsic value of service-based stock options outstanding that were “in the money” (exercise price was lower
than the market price) as of December 31, 2019 was $77,600 and the weighted average remaining contractual life was 2.6
years. The aggregate intrinsic value of exercisable “in the money” service-based stock options as of December 31, 2019 was
$72,225 and the weighted average remaining contractual life was 3.0 years.
The range of exercise prices of outstanding service-based options at December 31, 2019 is $1.30 to $1.92 with a weighted
average exercise price of $1.52 per share.
The following table presents the assumptions used to estimate the fair value of stock option awards granted during the twelve
months ended December 31, 2019 and 2018:
Number of
Options
Option
Term
(in years)
Exercise
Price
Risk Free
Interest
Rate
Expected
Volatility
Fair Value
at Grant
Date
Expected
Dividend
Yield
2019
1/11/2019 – Service Grant
2018
12/20/2018 – Service Grant
15,000
160,000
3
4
$1.56
2.52%
49.80%
$0.56
$0.00
$1.52
2.65%
48.53%
$0.62
$0.00
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 10 - SEGMENT AND RELATED INFORMATION
Financial information by segment
The operating businesses of the Company are segregated into three reportable segments: (i) Network Solutions, (ii) Test and
Measurement and (iii) Embedded Solutions.
Network Solutions
The Network Solutions segment is comprised primarily of the operations of the Company’s subsidiary, Microlab. Network
Solutions designs and manufactures a wide selection of RF passive components and integrated subsystems for signal
conditioning and distribution in the wireless infrastructure markets, particularly for small cell deployments, distributed antenna
systems (“DAS”), the in-building wireless solutions industry and radio base-station market. Network Solutions also offers
active solution sets to assist in network timing for tunnels and in-building wireless signaling. Network Solutions customers
include telecommunications service providers, systems integrators, neutral host operators and distributors.
Test and Measurement
The Test and Measurement segment is comprised primarily of the Company’s operations of the Noisecom product line and the
operations of its subsidiary, Boonton. Noisecom designs and produces noise generation equipment and instruments, calibrated
noise sources, noise modules and diodes. Noise components and instruments are used as a method to provide wide band signals
for sophisticated telecommunication and defense applications, and as a stable reference standard for instruments and systems,
including radar and satellite communications. Boonton products are also used to test terrestrial and satellite communications,
radar and telemetry. Certain power meter products are designed for measuring signals based on wideband modulation formats,
allowing a variety of measurements to be made, including maximum power, peak power, average power and minimum power.
Customers of the Test and Measurement segment include large defense contractors and the U.S. and foreign governments.
Embedded Solutions
The Embedded Solutions segment is comprised of the operations of CommAgility. Embedded Solutions supplies signal
processing technology for network validation systems supporting LTE and emerging 5G networks. Additionally, this segment
licenses, implements and configures LTE PHY layer and stack software for private LTE networks supporting satellite
communications, the military and aerospace industries. Customers include wireless communication test equipment companies,
defense subcontractors and global technology and services companies.
The accounting policies of the reportable segments are the same as those described in the summary of significant accounting
policies. The Company allocates resources and evaluates the performance of segments based on income or loss from operations,
excluding interest, corporate expenses and other income (expenses).
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Financial information by reportable segment as of and for the years ended December 31, 2019 and 2018 is presented below (in
thousands):
Net sales by segment:
Network Solutions
Test and Measurement
Embedded Solutions
Total consolidated net sales of reportable segments
Segment income:
Network Solutions
Test and Measurement
Embedded Solutions
Income from reportable segments
For the twelve months ended December 31,
2019
2018
$ 21,830
13,566
13,525
$ 48,921
$ 22,275
14,212
16,301
$ 52,788
$ 2,973
2,125
(1,049)
4,049
$ 3,476
1,728
1,093
6,297
Other unallocated amounts:
Corporate expenses
Other expenses - net
Consolidated income/(loss) before Income tax provision/(benefit)
(5,528)
(307)
$ (1,786)
(5,519)
(695)
$ 83
Depreciation and amortization by segment:
Network Solutions
Test and Measurement
Embedded Solutions
Total depreciation and amortization for reportable segments
$ 393
530
1,228
$ 2,151
$ 539
527
1,239
$ 2,305
Capital expenditures by segment:
Network Solutions
Test and Measurement
Embedded Solutions
Total consolidated capital expenditures by reportable segment
Total assets by segment:
Network Solutions
Test and Measurement
Embedded Solutions
Total assets for reportable segments
$ 83
149
160
$ 392
$ 359
193
301
$ 853
December 31,
2019
December 31,
2018
$ 9,610
7,380
14,330
31,320
$ 10,088
5,943
16,804
32,835
Corporate assets, principally cash and cash equivalents and
deferred income taxes
Total consolidated assets
11,031
$ 42,351
11,332
$ 44,167
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Regional Revenues
Net consolidated revenues from operations by region were as follows (in thousands):
Americas
Europe, Middle East, Africa (EMEA)
Asia Pacific (APAC)
Total revenues
Twelve Months Ended
December 31
2019
2018
$ 30,161
$ 32,849
16,500
2,260
16,269
3,670
$ 48,921
$ 52,788
Net revenues 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, 2019 and 2018, sales in the United States amounted to $30.0 and $31.9 million, respectively.
For the year ended December 31, 2019 shipments to the EMEA regions for all reportable segments were largely concentrated
in the UK, Germany and Italy. Shipments to the UK, Germany and Italy in 2019 amounted to $12.7 million, $0.7 million and
$0.5 million, respectively. For the year ended December 31, 2018 shipments to the EMEA region for all reportable segments
were largely concentrated in the UK, Italy and Ireland. Shipments to the UK, Italy and Ireland in 2018 amounted $12.4 million,
$0.5 million and $0.5 million, respectively.
The largest concentration of shipments in the APAC region is to China. For the years ended December 31, 2019 and 2018,
shipments to China amounted to $1.3 million and $2.0 million, of all shipments to the APAC region, respectively. There were
no other shipments significantly concentrated in one country in the APAC region.
NOTE 11 - 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, 2019 and 2018 amounted to $0.3 million and $0.2 million, respectively.
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 12 - INCOME TAXES
The components of income tax (benefit)/expense related to net income (loss) from operations are as follows:
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
Years Ended December 31,
2019
2018
$ (9)
45
(859)
(188)
(233)
(128)
$ (1,372)
$ -
46
(223)
389
(41)
(123)
$ 48
The following is a reconciliation of the maximum statutory federal tax rate to the Company’s effective tax relative to operations:
Statutory federal income tax rate
State income tax net of federal tax benefit
Foreign rate difference
Change in valuation allowance
Permanent differences
Research and development incentive
Global intangible low-taxed income
Other
Total
Years Ended December 31,
2019
% of
Pre Tax
Earnings
(21.0) %
0.1
7.2
(10.6)
0.9
(53.1)
1.3
(1.6)
2018
% of
Pre Tax
Earnings
21.0 %
137.5
(239.7)
(138.2)
11.8
(342.7)
607.6
(0.2)
(76.8) %
57.1 %
In 2019, the difference between the statutory and effective tax rate is due primarily to research and development deductions in
the United Kingdom and a reduction in the state valuation allowance. In 2018, the difference between the statutory and effective
tax rate is due to global intangible low-taxed income, research and development deductions in the United Kingdom, foreign
tax rate differences and a reduction in the state valuation allowance.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
The components of deferred income taxes are as follows:
Deferred tax assets:
Net operating loss carryforwards
Inventory
Research and development credit
Stock compensation
Other
Goodwill and intangible assets
Fixed assets
Gross deferred tax asset
Less valuation allowance
Net deferred tax asset
Years Ended December 31,
2019
2018
$ 11,538
$ 11,259
397
943
648
648
285
138
326
73
(757)
(925)
(275)
(438)
12,162
11,698
(6,652)
(6,722)
$ 5,510
$ 4,976
The Company has domestic federal and state net operating loss carryforwards at December 31, 2019 of approximately $18.2
million and $44.1 million, respectively, which begin to expire in 2029. $0.6 million of the federal net operating loss
carryforward has no expiration. The Company also has foreign net operating loss carryforwards at December 31, 2019 of
approximately $15.0 million for German trade tax purposes, which has no expiration. The Company has domestic federal
interest expense carryforward at December 31, 2019 of approximately $0.2 million 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 allowances of $6.7 million at December 31, 2019 and 2018 are
associated with the Company’s foreign net operating loss carryforward from an inactive foreign entity, state net operating loss
carryforward and a state research and development credit. The 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, 2019, management
believes that it is more likely than not that the Company will fully realize the benefits of its deferred tax assets associated with
its domestic federal net operating loss carryforward.
The Company does not have any significant unrecognized tax positions and does not anticipate a significant increase or decrease
in unrecognized tax positions within the next twelve months.
The Company has elected to record taxes related to the global intangible low-taxed income as a period cost.
NOTE 13 – FAIR VALUE MEASUREMENTS
Fair value is defined by ASC 820 “Fair Value Measurement” as the price that would be received upon selling an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a
three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize
the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value
are as follows:
(cid:120) Level 1 - Quoted prices in active markets for identical assets and liabilities.
(cid:120) Level 2 - Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the
asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
(cid:120) Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value
of the assets and liabilities. This includes pricing models, discounted cash flow methodologies and similar techniques
that use significant unobservable inputs.
Payment of a portion of the CommAgility purchase price was contingent on the achievement of certain financial targets for the
years ending December 31, 2017 and 2018. The Company estimated the fair value of contingent consideration at acquisition
date to be $0.8 million. During the twelve months ended December 31, 2018 the Company reassessed the fair value of the
contingent consideration and recorded a loss in the amount of $0.6 million as a result of the improved financial results at
CommAgility as compared to prior estimates. The significant inputs used in the fair value estimate included anticipated gross
revenues and Adjusted EBITDA, as defined, and scenarios for the earn-out periods for which probabilities are assigned to each
scenario to arrive at a single estimated outcome. The estimated outcome was then discounted based on individual risk analysis
of the liability which was 15% at December 31, 2018 and was paid in March 2019. The contingent consideration liability is
considered a Level 3 fair value measurement.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
Warranties
The Company typically provides one to three 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.
Legal Proceeding
On June 5, 2019 Harris Corporation (“Harris”) filed a request for arbitration before the American Arbitration Association in
accordance with the terms of an executed purchase order, statement of work and software license agreement (collectively
referred to as “Agreements”) with CommAgility entered into in 2014. Harris claims that CommAgility breached the
Agreements by offering for sale, marketing, and promoting techniques, capabilities, products and services that incorporate
Work Product, as defined in the Agreements, owned by Harris. Harris claims that CommAgility has caused Harris monetary
damages, the sum of which cannot be determined until such time as discovery has been conducted, but is estimated by Harris
to be less than $250,000. Harris is also seeking an injunction against CommAgility’s use of the Work Product which includes
rights to certain technology used for air-to-ground communications. The Company believes the claims are without merit and
intends to defend all of the claims vigorously. The Company has not accrued any amounts in respect of this matter and cannot
estimate the possible loss, if any, that the Company may incur with respect to it.
The ultimate outcome of this matter is unknown but, in the opinion of management, we do not believe this proceeding will
have a material adverse effect upon our financial condition, cash flows or future results of operations. Legal expenses incurred
in connection with the arbitration from August 2019 are covered by our professional indemnity insurance policy.
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.
The Company’s deferred tax asset is recorded at tax rates expected to be in existence when those assets are utilized. Should
the tax rates change materially in the future the amount of deferred tax asset could be materially impacted.
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 15 – SUBSEQUENT EVENTS
Holzworth Acquisition
On November 13, 2019 the Company entered into a Share Purchase Agreement with Holzworth Instrumentation Inc., a
Colorado corporation (“Holzworth”), Jason Breitbarth, Joe Koebel, and Leyla Bly (collectively, the “Sellers”), and Jason
Breitbarth, as the designated representative of the Sellers, as amended by a First Amendment to Share Purchase Agreement,
dated January 31, 2020 (collectively, the “Share Purchase Agreement”). On February 7, 2020, the Company completed the
acquisition (the “Acquisition”) of all of the outstanding shares of Holzworth, from the Sellers. The Acquisition was completed
pursuant to the terms of the Share Purchase Agreement. Holzworth instruments which include signal generators and phased
noise analyzers are used by government labs, the semiconductor industry, and network equipment providers, among others, in
research and automated test environments. Holzworth is a complimentary business for our Test and Measurement segment
with a common customer base and channel partners. Holzworth revenues for the year end fiscal 2018 were $4.0 million and
for the nine months ended September 30, 2019 were $4.3 million. For the fiscal year ended December 31, 2020, the Company
will report the financial results of Holzworth in our Test and Measurement segment.
The aggregate purchase price for the Acquisition is a maximum of $17.0 million, consisting of payments in cash and stock,
deferred purchase price payments and contingent consideration in the form of an earnout. At the closing, the Company issued
a promissory note, which required the Company to pay on the next business day $0.5 million of the purchase price by issuing
347,318 shares of its common stock (the “Stock Consideration”), and $8.0 million in cash (the “Cash Consideration”), reduced
by an indemnification holdback of $0.8 million and payment of certain of Sellers’ transaction expenses and indebtedness of
Holzworth. The parties intend to make a 338(h)(10) election to treat the Acquisition as a purchase and sale of assets, and the
Company has agreed to pay any incremental taxes of Sellers resulting from that election.
The first deferred purchase price payment of $750,000 is due in three equal quarterly installments on March 31, 2020, June 30,
2020 and September 30, 2020, respectively. The second deferred purchase price payment of $750,000 is payable on March
31, 2021. Each deferred payment may be reduced as provided in the Purchase Agreement if Holzworth’s EBITDA (as defined
in the Purchase Agreement) for each fiscal year ending December 31, 2019 and December 31, 2020, respectively, is less than
$1.25 million.
The Company may also be required to pay additional amounts in cash and stock as earnout consideration. The first earnout
payment will be equal to two times the amount, if any, by which Holzworth’s EBITDA for the fiscal year ending December
31, 2020 exceeds $1.25 million. The second earnout payment will be equal to two times the amount, if any, by which
Holzworth’s EBITDA for the fiscal year ending December 31, 2021 exceeds the greater of $1.25 million or Holzworth’s
EBITDA for the prior fiscal year. The aggregate earnout payments, if any, cannot exceed $7.0 million.
Pursuant to the Purchase Agreement the Company entered into a lock-up and voting agreement (the “Lock-up and Voting
Agreement”) with each of the Sellers. Pursuant to the Lock-up and Voting Agreement, each Seller agrees to restrict the sale,
assignment, transfer, encumbrance or other disposition of its portion of the Stock Consideration (the “Lock-up Shares”). For
a period commencing on the closing date of the Acquisition (the “Effective Date”) and ending on the date which is 36 calendar
months following the Effective Date, each Seller agrees that, without prior written consent by the Company, such Seller shall
not sell, assign, transfer, encumber or otherwise dispose of the Lock-up Shares or enter into any swap, option or short sale,
among other transactions. Upon the prior written consent of the Company, a Seller may transfer Lock-up Shares as a bona
fide gift, by will or intestacy or to a family member or trust for the benefit of the Seller or a family member; provided that any
recipient of the Lock-up Shares sign and deliver to the Company a lock-up and voting agreement substantially in the form of
the Lock-up and Voting Agreement. The Lock-up Shares cease to be locked up in the event of a Change of Control (as defined
in the Lock-up and Voting Agreement).
In addition, each Seller, subject to certain limitations, agrees, among other things, to appear at each meeting of the shareholders
of the Company and vote all of such Seller’s Lock-up Shares (a) in favor or against any proposal presented to the shareholders
in the same manner that the Company’s Board of Directors (the “Board”) recommends shareholders vote on such proposal and
(b) in favor of any proposal presented to the shareholders with respect to an action of the Company, which the Board has
approved, but as to which the Board has not made any recommendation, including in favor of any proposal to adjourn or
postpone any meeting of the Company’s shareholders if such adjournment or postponement is conducted in accordance with
the terms of the Lock-up and Voting Agreement.
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
To the extent any shares of Company common stock are issued in payment of any Earnout Consideration (as defined in the
Share Purchase Agreement) in accordance with the terms of the Share Purchase Agreement, such shares shall be subject to all
applicable transfer restrictions, voting and other provisions set forth in the Lock-up and Voting Agreement, with the Effective
Date with respect to such shares being the date such shares were issued; provided that, to the extent the portion of the first $1.5
million of Earnout Consideration that is paid in cash represents less than 30% of such Earnout Consideration, the portion of
shares of Company common stock issued as Earnout Consideration constituting the difference between the cash percentage
paid and 30% of the first $1.5 of Earnout Consideration shall not be considered Lock-Up Shares.
New Term Loan Facility and Amended Credit Facility
In connection with the Acquisition, on February 7, 2020, the Company, as borrower, and its subsidiaries, as guarantors, and
Muzinich BDC, Inc., as lender (“Muzinich”), entered into the Term Loan Facility, which provides for a term loan in the
principal amount of $8.4 million (the “Initial Term Loan”). Principal payments on the Initial Term Loan are $21,000 per quarter
with a balloon payment at maturity. The term loan bears interest at LIBOR (subject to a floor of 1.0%) plus a margin of 7.25%.
The Term Loan Facility includes an upfront fee of 2.50% of the aggregate principal amount of the Initial Term Loan.
The Company may prepay the Initial Term Loan at any time. Prepayments made prior to (a) February 7, 2022 are subject to a
prepayment premium in the amount of 2.0% of the prepaid principal amount and (b) February 7, 2023 are subject to a
prepayment premium in the amount of 1.0% of the prepaid principal amount. The Company is required to make prepayments
of the Initial Term Loan with the proceeds of certain asset dispositions, insurance recoveries and extraordinary receipts, subject
to specified reinvestment rights. The Company is also required to make prepayments of the Initial Term Loan upon the issuance
of certain indebtedness and to make an annual prepayment based upon the Company’s excess cash flow. Mandatory
prepayments with asset sale, insurance or condemnation proceeds and excess cash flow may be made without penalty.
Mandatory prepayments with the proceeds of indebtedness are subject to the same prepayment penalties as are applicable to
voluntary prepayments. The maturity date for the Initial Term Loan is February 7, 2025.
The Term Loan Facility provides for an additional $11.6 term loan (the “Second Term Loan”) to be used for a second
unannounced acquisition for which the Company has entered into a confidential, non-binding letter-of-intent (the “Additional
Acquisition”). There can be no assurance that the Additional Acquisition will be completed. In the event the Additional
Acquisition is completed, the Second Term Loan will be made available to the Company on the same terms and conditions as
the Initial Term Loan, including interest rate, amortization schedule and financial covenants, subject to the payment of an
additional upfront fee and satisfaction of customary conditions to funding.
The Term Loan Facility is secured by liens on substantially all of the Company’s and its subsidiaries’ assets including a pledge
of the equity interests in the Company’s subsidiaries. The Term Loan Facility contains customary affirmative and negative
covenants for a transaction of this type, including, among others, the provision of annual, quarterly and monthly financial
statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters,
restrictions on incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, entering
into affiliate transactions and asset sales. In addition, the Company must maintain certain financial covenants typical for this
type of arrangement, including a consolidated leverage ratio, a consolidated fixed charge coverage ratio and minimum liquidity
of its foreign subsidiaries. The consolidated leverage ratio is defined as the ratio of total consolidated indebtedness, as defined,
to consolidated EBITDA, as defined. The required leverage ratio starts at 4.75 to 1.0 for the twelve month periods ended March
31, 2020 and June 30, 2020, and decrease in various increments to 3.75 to 1.0 for the twelve months ended December 31, 2020,
2.75 to 1.0 for the twelve months ended December 31, 2021 and 2.0 to 1.0 for the twelve months ended December 31, 2022
and thereafter. The consolidated fixed charge coverage ratio is the ratio of consolidated EBITDA, as defined, less consolidated
capital expenditures and cash income taxes paid to consolidated fixed charges, as defined, calculated on a twelve month
basis. The consolidated fixed charge coverage ratio for the twelve month periods ended March 31, 2020, June 30 2020 and
September 30, 2020 must be 1.35 to 1 and increases in various increments on a quarterly basis to 1.5 to 1.0 for the twelve
month period ended December 31, 2020 and 2021, and to 1.75 to 1.0 for the 12 months ending December 31, 2022 and
thereafter. Lastly, the Company must maintain minimum liquidity, defined as cash and availability under the UK borrowing
base, as defined, of $1.0 million over any trailing four-week period until such time as the foreign subsidiary has positive
EBITDA, as defined, for three consecutive quarters and the Holzworth deferred purchase price has been paid in full. The Term
Loan Facility also provides for a number of events of default, including, among others, nonpayment, bankruptcy, inaccuracy
of representations and warranties, breach of covenant, change in control, entry of final judgement or order, breach of material
contracts, and as long as the Company’s consolidated leverage ratio is greater than 1.0 to 1.0 (as calculated in accordance with
the terms of the Term Loan Facility), the cessation of service of any two of Tim Whelan, Michael Kandell or Daniel Monopoli
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
as Chief Executive Officer, Chief Financial Officer or Chief Technology Officer, respectively, of the Borrower without a
satisfactory replacement within 60 days. Any exercise of remedies by Muzinich is subject to compliance with the intercreditor
agreement entered into at the closing of the Term Loan Facility among the Company, Muzinich and Bank of America, N.A.,
as lender under the Credit Facility referenced below.
Also in connection with the Acquisition, on February 7, 2020, the Company and certain of its subsidiaries (the “Borrowers”),
and Bank of America, N.A. entered into Amendment No. 5 (the “Amendment”) to the Credit Facility. By entering into the
Amendment, Holzworth, together with CommAgility Limited, became borrowers under the Credit Facility. The obligations of
the Borrowers under the Credit Facility are guaranteed by Wireless Telecom Group, Ltd. CommAgility Limited and Wireless
Telecom Group, Ltd. are both wholly owned subsidiaries of the Company.
The Amendment (a) effected certain modifications to the Credit Facility to accommodate the Acquisition, the Company’s
incurrence of the Initial Term Loan and the granting of the related liens and security interests, (b) subject to the satisfaction of
certain conditions precedent, made available to CommAgility an asset based revolving loan, subject to a borrowing base
calculation applicable to CommAgility’s assets, of up to a maximum availability of $5.0 million (the “UK Revolver
Commitment”), (c) reduced the interest rate margin applicable to revolving loans made under the Credit Facility from a range
of 2.75% to 3.25% to a range of 2.00% to 2.50%, based on the Borrowers’ Fixed Charge Coverage Ratio (as defined in the
Credit Facility) of the most recently completed fiscal quarter, (d) extended the Revolver Termination Date to March 31, 2023
and (e) conditioned the Borrowers’ ability to make certain debt payments under the Term Loan Facility (described above) upon
compliance with a liquidity test. In all other material respects, the Credit Facility remains unchanged.
Effectiveness of the Amendment was conditioned upon, among other things, the prepayment of the remaining principal balance
(approximately $0.3 million) of the $0.8 million term loan made available under the Credit Facility and the payment of a closing
fee in the amount of $25,000. The Borrowers satisfied all such conditions on February 7, 2020.
Issuance of Stock Warrants
Pursuant to the Term Loan Facility, the Company issued a Warrant, dated February 7, 2020 (the “Warrant”), to Muzinich.
Under the Warrant, Muzinich has the right to purchase 266,167 shares of common stock of the Company at an exercise price
of $1.3923 per share (an aggregate value of approximately $370,588), based on a 90-day volume weighted average price for
shares of stock of the Company (the “Warrant Stock”). The Warrant is exercisable for an indefinite period from the date of the
Warrant and may be exercised on a cashless basis. The number of shares of common stock deliverable upon exercise of the
Warrant is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events. In connection
with the issuance of the Warrant, the Company granted Muzinich one demand registration right and piggyback registration
rights with respect to the Warrant Stock, subject to certain exceptions.
If the Additional Acquisition is consummated, the Company has agreed to issue to Muzinich at the closing of the Additional
Acquisition an additional Warrant for the right to purchase 367,564 shares of common stock of the Company at an exercise
price of $1.3923 per share (an aggregate value of approximately $511,765), based upon a 90-day volume weighted average
price for shares of stock of the Company as of February 7, 2020 (the “Additional Warrant”). The Additional Warrant will
contain the same terms and conditions as the Warrant, except that Muzinich will have only one demand registration right,
subject to certain exceptions, with respect to shares of common stock of the Company issued under the Warrant and the
Additional Warrant.
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data from operations (in thousands, except per share amounts).
2019
Net revenues
Gross profit
Operating income/(loss)
Net income/(loss)
Quarter
1st
2nd
3rd
4th
$ 13,032
$ 13,508
$ 10,812
$ 11,569
5,727
(398)
6,133
146
4,825
(677)
5,604
(550)
(345)
157
(460)
234
Diluted earnings/(loss) per share
$ (0.02)
$ 0.01
$ (0.02)
$ 0.01
2018
Net revenues
Gross profit
Operating income/(loss)
Net income/(loss)
Quarter
1st
2nd
3rd
4th
$ 13,264
$ 13,414
$ 14,019
$ 12,091
6,268
568
6,171
33
6,464
919
5,264
(741)
374
(179)
558
(718)
Diluted earnings/(loss) per share
$ 0.02
$ (0.01)
$ 0.03
$ (0.03)
51
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 U.S. GAAP. 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, 2019, 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,”
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the assessment,
management determined that the Company maintained effective internal control over financial reporting as of December 31, 2019.
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 and smaller reporting companies from the auditor attestation requirement of Section 404 (b) of the Sarbanes-Oxley Act.
(c) Changes in Internal Controls over Financial Reporting
There have been no changes 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.
52
Corporate Profile
Annual Meeting
The Annual Meeting of the Stockholders will be held at 8:00 a.m. on
Thursday, June 4, 2020 via live webcast at:
www.virtualshareholdermeeting.com/WTT2020
A copy of the Annual Report on Form 10-K
as filed with the Securities and Exchange Commission
may be obtained without charge by written request
addressed to:
Michael Kandell
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, 2019, 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
Executive Officer certification as required by the New York Stock
Exchange Listed Company Manual.
Directors
Alan L. Bazaar
Chief Executive Officer of Hollow Brook Wealth
Management LLC, Private Equity Firm
Joseph Garrity
Chief Operating Officer & Chief Financial Officer, Salem
Global Partners, Inc., Strategic Consulting and Recruiting
Company
Mitchell Herbets
Managing Principal, Herbets Consulting LLC,
Consulting Company
Chairman of Thales Defense and Security, Inc.
Michael H. Millegan
Former President, Verizon Global Wholesale
Allan D. L. Weinstein
Managing Partner, Gainline Capital Partners LP,
Private Equity Firm
Joseph M. Manko Jr.
Senior Principal, Horton Capital Management
Investment Advisor
Timothy Whelan
Wireless Telecom Group, Chief Executive Officer
Officers
Timothy Whelan
Chief Executive Officer
Michael Kandell
Chief Financial Officer and Corporate Secretary
Daniel Monopoli
Chief Technology Officer
Transfer Agent and Registrar
American Stock Transfer & Trust Company
Independent Accountants
PKF O’Connor Davies, LLP
Legal Counsel
Bryan Cave Leighton Paisner LLP, New York, NY
Exchange Listing
NYSE-American Symbol: WTT
25 Eastmans Rd
Parsippany, NJ
United States
Tel:+1 973 386 9696
Fax: +1 973 386 9191
www.wirelesstelecomgroup.com
Follow us on:
WTGinnovation
Wireless Telecom Group
WTGinnovation
Wireless Telecom Group Inc.
25 Eastmans Rd
Parsippany, NJ 07054
United States
Tel: +1 973 386 9696
Fax: +1 973 386 9191
www.wirelesstelecomgroup.com
2019 ANNUAL REPORT