2020 ANNUAL REPORT
Message from the CEO
To our Shareholders,
2020 was a year of transformative positioning and progress. We
worked hard to overcome the challenges of the global pandemic and
the unexpected decline in demand from our former largest customer.
Yet, during this extraordinarily challenging year, we also acquired
Holzworth, controlled our costs, increased our gross profit margins,
and ended the year with strong bookings growth. Our success
responding to and managing through these challenges is attributable
to the resilience and strength of our employees, our culture, and the
significant value of our global brands.
We have continued to execute on our mission to bring specialized
solutions that enable the development, test, and deployment
of wireless communication and connectivity. We launched new
products to market, and we executed on our acquisition strategy.
We believe we are now at an inflection point for the business, and
the accomplishments during the year have expanded our addressable
markets, grown our customer base, increased our backlog, and
positioned us for growth in the year ahead and beyond.
We remain confident in our strategy, our people and our future
focused on growth opportunities in 5G, spectrum deployment, private
networks, and satellite and military applications.
Leading through Change and Challenges
Operational agility tackles the challenges of the pandemic and safeguards
our employees; a realigned structure balances reduced demand from our
former largest customer and positions us well for future growth
We adjusted our cost structure and operating plan entering 2020 to
address an unexpected decline in demand from our former largest
customer. Despite this obstacle, we maintained our investments and
conviction in our R&D programs and our higher margin, growth
businesses.
In the first quarter of 2020 we also made significant modifications
to our operations in response to the unexpected impacts of the
global pandemic. As a result, our goals throughout the year focused
on protecting the health and safety of our employees, serving our
customers’ needs with unparalleled service and commitment, and
continued investments in the future of our business.
We are pleased we accomplished each of these goals in 2020. Our
culture has been strengthened by new skills and experiences and we
have realized operational improvements during this challenging period
of time. We have also fueled innovation, realized greater efficiencies
and have an increased excitement and potential about our future.
Growth orientation and execution
Holzworth acquisition and integration success, continued new product
launches, and added CRO leadership
In February 2020 we closed the acquisition of Holzworth
Instrumentation, a specialized provider of noise measurement and
synthesis for precise testing requirements. Holzworth’s products
serve growing market trends including 5G, advanced semiconductor
test requirements, satellite communication, military, aerospace and
quantum computing.
The acquisition leverages our existing Test & Measurement sales
channels, customer relationships and operational platform. We
successfully integrated the business and Holzworth’s results for 2020
exceeded our expectations. We are excited about Holzworth’s future
opportunities.
In addition to our successful M&A execution, our strategy includes
organic growth driven by R&D investments and new product
introductions. In the last four years, we released 22 new products,
nine of which were launched in 2020 alone. These investments
continue to advance our leadership in network densification and
spectrum deployment, advance our LTE and 5G software offerings,
and innovate sophisticated test and measurement solutions for
applications in defense, radar and satellite communications, quantum
computing, and applications for the semiconductor and aerospace
industries as well as the military, and large defense contractors. Like
all long-term investments, our R&D and new product launches are
expected to drive success over many years.
Our focus on driving growth also includes our investments in our
executive team where we added a Chief Revenue Officer, Alfred
Rodriguez, from Xilinx. He is an experienced and skilled sales
executive with the vision and leadership to help us realize the
potential of our new products and software solutions in markets
poised for growth.
Execution and Delivery
Profitability, Cash Flow, Bookings and Backlog Growth
During 2020, we increased our consolidated gross profit margin to
50.2%, compared to 48.4% in 2019 and above our long-term target of
50%. We also significantly increased our cash flow from operations to
approximately $3 million, and we generated four strong quarters of
bookings, which contributed to our backlog increasing 117% from the
prior year to $8.3 million at year-end.
Our increase in gross margins was driven by the successful execution
of our strategy to drive increased growth of our higher margin
business in Test & Measurement solutions, including Holzworth, and
the increase of software and services revenues in our Radio, Baseband,
and Software solutions.
Our bookings also include significant qualitative wins. This includes
the return of demand for our RBS hardware cards as well as six new
customers for our software and services solutions, demonstrating the
momentum in our NXP collaboration and advancement of our 4G
and 5G software. Importantly, we exited the year with our strongest
quarter of bookings, helping increase our backlog and visibility into
the year ahead.
Looking ahead, the expected increased spending by carriers deploying
spectrum, growth in private network buildouts, and the expansion
of satellite communications along with other secular growth trends
driven by 5G are expected to drive meaningful opportunities for our
business. Our long-term customer relationships, agile approach, and
commitment to innovation and quality are aligned to revenue growth
and customer success.
We are dedicated to creating unmatched value for our customers
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
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.
Wireless Telecom Group is comprised of five brands – Microlab, Boonton, Noisecom, CommAgility and Holzworth. The
Company is organized as one reporting segment as of result of certain internal reorganizations occurring in the six to nine months prior
to June 2020. Prior to June 2020, the Company was organized in three reporting segments. In June 2020 we determined that the Chief
Operating Decision Maker (“CODM”) as defined in Accounting Standards Codification (“ASC”) 280 Segment Reporting evaluates
operating results and makes decisions on how to allocate resources at the consolidated level. Although the CODM reviews key
performance indicators including bookings, shipments and gross profit at a product group level, this information by itself is not sufficient
enough to make operating decisions. Rather, operating decisions are made based on review of consolidated profitability metrics rather
than the individual results of each product group. The Company continues to report gross profit at the product group level. Our product
groups are organized as follows: Radio Frequency Components (“RFC”) is comprised of our Microlab brand; Radio, Baseband,
Software (“RBS”) is comprised of our CommAgility brand; and Test and Measurement (“T&M”) is comprised of our Boonton,
Noisecom and Holzworth brands.
Our customers include wireless carriers, aerospace and defense companies, military and government agencies, satellite
communication companies, network equipment manufacturers, tower companies, semiconductor companies, system integrators, neutral
host providers, medical device manufacturers and other global technology companies.
Our products include components, modules, instruments, systems and software used across the lifecycle of wireless connectivity
and communication development, deployment and testing. Our services include software customization, calibration, repair and
maintenance. Our customers use these products in the development and deployment of long-term evolution (“LTE”) and 5G private
networks, small cell solution development and deployment, 5G test environments, automated test environments, research labs, network
densification and deployment, expansion and upgrade of distributed antenna systems, and medical device manufacturing In addition,
the Company’s products are used in the development and testing of satellite communication systems, radar systems, semiconductor
manufacturing, automotive electronics and avionics.
The consolidated financial statements for the 2020 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,
Microlab/FXR, Wireless Telecommunications Ltd., CommAgility Limited and Holzworth Instrumentation, Inc. The corporate website
address is www.wirelesstelecomgroup.com. Noise Com, Inc., Boonton Electronics Corporation, Microlab/FXR, CommAgility Limited
Ltd., and Holzworth Instrumentation, Inc. are hereinafter referred to as “Noisecom”, “Boonton”, “Microlab”, “CommAgility” and
“Holzworth”, 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 2017, the Company expanded to include the delivery of digital signal
processing hardware cards and the delivery, implementation and configuration of LTE and 5G physical layer and stack software. In
February 2020, we acquired Holzworth which specializes in supplying signal generators and phase noise analyzers to global aerospace
and defense companies, the semiconductor industry and government labs. Approximately 82% and 93% of the Company’s consolidated
revenues in fiscal years 2020 and 2019, respectively, were derived from commercial customers. The remaining consolidated revenues
(approximately 18% and 7% in 2020 and 2019, respectively) were comprised of revenues from the United States government
(particularly the armed forces) and prime defense contractors.
1
Brands and Products
Microlab
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. In 2020, Microlab expanded its
portfolio of RF components for ultra-wide band frequency ranges enabling the deployment of commercial wireless networks utilizing
new licensed and unlicensed mid-band spectrum allocations. Management believes mid-band spectrum is especially well suited for 5G
mobile broadband due to its wide coverage, low latency and high reliability.
Microlab components possess unique capabilities in the area of broadband frequency coverage, minimal loss and low passive
intermodulation (“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.
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.
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 power measurements and signal analysis for RF 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 RF 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 RF 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 is 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.
2
Holzworth
Holzworth designs and manufactures specialty phase noise analyzers and signal generators used by aerospace and defense
companies, government labs, the semiconductor industry, and network equipment providers. Holzworth products are used in, among
other things, research and automated test environments and for quantum computing. 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.
CommAgility
CommAgility develops the software which enables specialized LTE and 5G deployments, applications and private network
solutions including the LTE physical layer and stack software, for mobile network and related applications. CommAgility also develops
embedded signal processing hardware and RF modules which enable 5G and LTE mobile network and application solutions. Combining
the latest digital processing platforms and RF 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 research and development 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, private and specialized networks, satellite communications, radar
and electronic warfare. Additionally, CommAgility licenses, implements and customizes 5G and LTE physical layer and stack software
for private networks supporting satellite communications, the military and aerospace industries, offering our customers unique
implementation capabilities built on 3rd Generation Partnership Project (“3GPP”) standards.
In January 2020, CommAgility announced a collaboration agreement with NXP Semiconductors in connection with the NXP
Layerscape Access Programmable Baseband Processors for 5G New Radio Platforms. The collaboration enables CommAgility to
accelerate 5G hardware and software development and enhance the performance of its 5G platform, providing advantages to customers
developing 5G solutions and reducing their time of development. The collaboration will help CommAgility address needs for private
and specialized network solutions.
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 aerospace and defense companies, distributors, telecommunications
service providers, systems integrators, neutral host operators, global technology and services companies, U.S. and foreign governments,
and medical device manufacturers. For the year ended December 31, 2020, no one customer accounted for more than 10% of total
consolidated revenues. For the year ended December 31, 2019 one customer, Viavi Solutions, accounted for 24.8% of total consolidated
revenues.
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, Mavenir, Altiostar 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.
3
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 three of the major U.S. carriers with hundreds of approved Microlab products
an embedded base of products and instruments which leads to recurring purchases of our Boonton, Noisecom and
Holzworth products
extensive knowhow and IP related to 3GPP, LTE 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 $8.3 million
at December 31, 2020, compared to approximately $3.8 million at December 31, 2019. The increase in backlog from the prior year is
due to the addition of Holzworth, as well as an increase in CommAgility backlog. It is anticipated that the majority of the backlog orders
at December 31, 2020 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, 2020, two suppliers accounted
for 14% of total consolidated inventory purchases, respectively. For the year ended December 31, 2019, three suppliers accounted for
18%, 14%, and 10%, 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 46% of Microlab’s revenues are traced to products that are sourced from offshore vendors. The majority of
Microlab products that come from offshore suppliers are subject to tariffs. The impact of tariffs has decreased our consolidated gross
profit margin by approximately 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.
Holzworth products are designed, developed, assembled and tested in our facility in Boulder, Colorado.
4
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
typically 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. If the defective product cannot be
repaired, the Company typically replaces the product free of charge but unrepairable products are an infrequent occurrence.
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
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. As described in the Recent
Developments section of Item 7 the Company has implemented additional safety measures for staff working in our facilities as a result
of the COVID-19 pandemic (also see Pandemic Risks risk factor).
ITAR and Export Controls
Certain of the Company’s products may be 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.
5
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 March 1, 2021, the Company has 150 full time 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.
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. 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, 2021, the Company had 351 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
See Item 3.02 of Form 8-K filed on February 7, 2020 regarding issuance of common stock to Holzworth founders in connection
with the Holzworth acquisition and issuance of stock warrant to Muzinich in connection with our Muzinich term loan facility. No other
unregistered securities were issued in 2020.
6
Issuer Purchases of Equity Securities
The Company did not repurchase any securities during the year ended December 31, 2020.
Equity Compensation Plan Information
Set forth below is certain aggregated information with respect to the Company’s equity compensation plans.
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
3,396,167
-
3,396,167
$1.64
-
$1.64
Number of securities
remaining available for
future issuance under
equity compensation
plan (excluding
securities reflected in
the previous columns)
226,568
-
226,568
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Item 6. Selected Financial Data
Not applicable.
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 generators, phase noise analyzers, signal
processing modules, LTE and 5G 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 2020 Developments and Financial Results
Fiscal 2020 was one of the most challenging years in the Company’s recent history. We began 2020 with an expectation of
significantly reduced demand from our formerly largest customer for our CommAgility signal processing hardware cards. Accordingly,
we adjusted our costs and expenses to help offset the impact of the reduced revenues. These adjustments included headcount reductions
at our Parsippany N.J. headquarters and various discretionary cost and expense reductions. We also carefully managed our capital
expenditures throughout 2020 in order to preserve liquidity. Despite the expected reduction of the top line for our CommAgility
hardware cards, the Company successfully completed the acquisition of Holzworth on February 7, 2020, which was financed through
our new term loan facility with Muzinich BDC. In 2020, Holzworth exceeded our revenue and profitability expectations.
In March 2020, one month after the close of the Holzworth acquisition, the unforeseen impact of the COVID-19 pandemic
negatively impacted the Company’s operations and outlook. Throughout 2020 all of our locations and brands were challenged with
travel bans, quarantines, and shelter-in-place orders as authorities implemented measures to contain the COVID-19 virus. We
implemented new cleaning, monitoring and distancing measures to ensure additional procedures and preventative actions were taken in
accordance with CDC and local government guidelines to help protect the health and well-being of our employees, customers, partners
and communities. The Company was able to continue operations at our manufacturing facilities in Parsippany, N.J. and Boulder,
Colorado locations as an “essential business” due to the industries and customers we serve including critical telecommunications
infrastructure, the U.S. government and numerous global aerospace and defense subcontractors that supply the U.S. government.
All employees that do not have critical in-person functions have been working remotely since March 16, 2020. For those
employees working in our facilities we instituted measures during 2020 including flexible work arrangements, increased distancing of
workstations, enhanced cleaning protocols, required completion of daily health screening forms for all employees and visitors entering
our facilities and other safety precautions. In March 2020 we formed a COVID-19 task force made up of various members of the
management team including operations, finance and sales. The task force meets regularly to monitor COVID-19 developments and
ensure the Company reacts quickly to help protect the well-being of its employees. The task force is also planning our return to normal
strategy that will be based on data, facts and advice of federal, state and local government leaders in the jurisdictions in which we operate
as well as medical professionals. Under our current plans, the Company expects to continue to have the majority of our workforce
working remotely until May 1, 2021, at which time we will begin a phased re-entry plan, meaning that employees will begin working
in the office on a limited basis. However, this timeline may be adjusted based on the facts and circumstances of each jurisdiction in
which we operate.
We believe our 2020 financial results were adversely impacted by the COVID-19 pandemic because we experienced a decrease
in orders related to our Boonton and Noisecom brands as customers closed facilities, slowed orders and instituted capital expenditure
freezes due to the pandemic. We also saw a significant decline in Microlab orders throughout our second, third and fourth quarters due
primarily to large venue project delays and cancellations. We believe this was caused by the uncertainty of reopening guidelines from
states, as well as the uncertainty of conventions, college and professional sports, and college and university return to campus schedules
for students. Further, we believe certain project timelines and decisions on large private network projects on which our CommAgility
brand has bids were delayed given the economic uncertainty driven by the pandemic.
Despite the challenges posed by the COVID-19 pandemic our research and development efforts continued throughout 2020
most notably CommAgility’s progression on the 5G roadmap and our collaboration with NXP Semiconductors. Additionally, among
other product releases, we announced Ultra-Wide Band Microlab products for 5G network deployment and densification and launched
our new PMX 40 Boonton Power Meter.
8
On May 4, 2020, the Company received $2.0 million pursuant to a loan under the Paycheck Protection Program (“PPP”) of the
2020 Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) administered by the Small Business Association (see
description in Liquidity and Capital Resources below). The Company’s covered period as defined by the terms of the PPP loan ended
on October 19, 2020. The Company used the funds for those purposes as defined under the terms of the PPP loan, most notably payroll
expenses for our U.S. based employees. The Company filed for forgiveness in the fourth quarter of 2020 and is awaiting a decision
from the Small Business Association. The Company can provide no assurance that the loan will be forgiven in whole or in part.
The financial information presented herein includes: (i) Consolidated Balance Sheets as of December 31, 2020 and 2019; (ii)
Consolidated Statements of Operations and Comprehensive Income/(Loss) for the years ended December 31, 2020 and 2019; (iii)
Consolidated Statement of Changes in Shareholders’ Equity for the years ended December 31, 2020 and 2019; and (iv) Consolidated
Statements of Cash Flows for the years ended December 31, 2020 and 2019.
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.
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, digital signal processing hardware, power meters, analyzers,
noise/signal generators, phase noise analyzers and other components 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 CommAgility brand 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 of the Company’s products are generally considered a single
performance obligation and revenue is recognized as the services are rendered.
Certain software arrangements in the CommAgility brand 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.
9
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.
Business Combinations
The Company uses the acquisition method of accounting for business combinations which requires the tangible and intangible
assets acquired and liabilities assumed to be recorded at their respective fair market value as of the acquisition date. Goodwill represents
the excess of the consideration transferred over the fair value of the net assets acquired. The fair values of the assets acquired and
liabilities assumed are determined based upon the Company’s valuation and involves making significant estimates and assumptions
based on facts and circumstances that existed as of the acquisition date. The Company uses 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, or more frequently if events occur or circumstances change that
would indicate that goodwill might be impaired, 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.
The Company has three reporting units with goodwill – Holzworth, Microlab and CommAgility. The Company performed a
qualitative assessment in the fourth quarter of 2020 of each reporting unit. The qualitative assessment of Holzworth and Microlab did
not indicate any impairment of goodwill. As a result of declining demand of CommAgility’s signal processing hardware cards from a
single customer and the particularly high uncertainty associated with the ultimate trajectory of the pandemic, including the degree to
which governments would continue to restrict business and personal activities, and the impact that uncertainty has on the growth of
new software license and services revenue to offset the signal processing hardware sales decline, the Company performed a quantitative
impairment test of the goodwill of the CommAgility reporting unit.
10
For goodwill impairment testing using the quantitative approach, the Company estimates the fair value of the selected reporting
unit using the income approach and the market approach. Fair value under the income approach is derived 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. Fair value under the market approach is derived by applying a multiple to our best estimate of future
revenue. The Company applies equal weighting to the income approach and the market approach to arrive at an estimated fair value.
The estimated fair value is compared 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. Both the income approach and
market approach require 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.
In the fourth quarter of 2020, the Company recorded a goodwill impairment charge of $4.7 million related to the CommAgility
reporting unit. The non-cash impairment charge was due to a number of factors that arose as part of our quantitative assessment,
including an assessment of our historical results and the significant decline in hardware sales in 2020, the difficulty of predicting future
customer demand, the uncertainty of future sales of 4G hardware cards, the uncertainty of the growth of 5G software and services
revenues due to the early stages of 5G adoption for new technology and expectations for 5G deployments, the uncertainty of the
continued future impacts of the COVID 19 pandemic on customer spending, and the potential for a more prolonged recovery for
enterprise spending and longer-term investment. Despite the asset impairment charge, the Company believes the markets in which
CommAgility operates, specifically LTE and 5G private networks, have long-term growth potential and the Company is committed to
growing the revenue and profitability of the reporting unit.
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. After recording the 2020 goodwill
impairment charge, the Company’s consolidated goodwill balance as of December 31, 2020 was comprised of $1.4 million related to
the Microlab reporting unit, $6.0 million related to the Holzworth reporting unit and $4.1 million related to the CommAgility reporting
unit.
As of December 31, 2019, the Company’s consolidated goodwill balance of $10.1 million was comprised of $1.4 million
related to the Microlab reporting unit and $8.7 million related to the CommAgility reporting unit. Management’s qualitative assessment
performed in the fourth quarter of 2019 did not indicate any impairment of goodwill.
Intangible and Long-lived Assets
Intangible assets include acquired technology, patents, non-competition agreements, customer relationships and tradenames.
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 twelve 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, 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
11
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, 2020 and 2019, 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. As a result of our acquisition of Holzworth on
February 7, 2020, Colorado is a “major” tax jurisdiction for fiscal year 2020. Additionally, the Company has identified the United
Kingdom as a “major” tax jurisdiction as of December 31, 2020 and 2019. 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, 2020 and 2019, 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 equity awards on the date of grant. The fair value of restricted share awards and
restricted stock unit awards is determined using the market value of our common stock on the date of the grant. The fair value of stock
options at the date of grant is estimated using the Black-Scholes option pricing model. When stock 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 for all equity awards 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.
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 our 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
12
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, 2020 with the year ended December 31, 2019
Net Revenues (in thousands)
Twelve months ended December 31
Revenue
% of Revenue
Change
RF components
$ 17,667
$ 21,830
Test and measurement
20,551
13,566
Radio, baseband, software
3,530
13,525
2020
2019
2020
42.3%
49.2%
8.5%
2019
44.6%
27.7%
27.7%
Amount
Pct.
$ (4,163)
-19.1%
6,985
51.5%
(9,995)
-73.9%
Total net revenues
$ 41,748
$ 48,921
100.0%
100.0%
$ (7,173)
-14.7%
Consolidated revenues declined $7.2 million or 14.7% due primarily to lower sales in our RBS product group of our digital
signal processing hardware cards. Sales of the RBS hardware cards declined $10.7 million from the prior year. The loss was only
partially offset by higher sales of our higher margin RBS software and services. Additionally, the acquisition of Holzworth on February
7, 2020 contributed $8.8 million in revenue to our T&M product group in 2020. This acquisition helped offset declines in our Boonton
and Noisecom brands, which experienced lower sales from the prior year primarily due to the impacts of the COVID-19 pandemic on
capital expenditure spending of our customers. Our RFC product group revenue declined $4.2 million or 19.1% due to lower sales of
our passive components as wireless carriers delayed buildouts and upgrades of in-building wireless systems due to the COVID-19
pandemic.
Gross Profit (in thousands)
Twelve months ended December 31
Gross Profit
Gross Profit %
Change
RF components
Test and measurement
2020
2019
$ 7,695
$ 9,216
11,347
7,320
Radio, baseband, software
1,925
5,753
Total gross profit
$ 20,967
$ 22,289
2020
43.6%
55.2%
54.5%
50.2%
2019
42.2%
54.0%
42.5%
45.6%
Amount
Pct.
$ (1,521)
-15.9%
4,027
55.0%
(3,828)
-66.5%
$ (1,322)
-5.9%
Consolidated gross profit declined $1.3 million or 5.9% from the prior year. The decrease was primarily due to lower volumes
at our RBS and RFC product groups which were only partially offset by the revenue and gross margin contribution of Holzworth. Our
gross margin as a percentage of sales increased from 45.6% to 50.2% due to the higher margin software and services sales at our RBS
product group, the contribution of higher margin product sales from Holzworth and cost savings initiatives at our RFC product group.
13
Operating Expenses (in thousands)
Twelve months ended December 31
Operating Expenses
% of Revenue
Change
2020
2019
2020
2019
Amount
Pct.
Research and development
$ 6,389
$ 5,917 15.3%
12.1%
$ 472
Sales and marketing
General and administrative
Goodwill impairment
Loss on change in fair value
of contingent consideration
6,955
7,677 16.7%
15.7%
(722)
9,907
10,174 23.7%
20.8%
(267)
4,742
-
11.4%
0.0%
1,073
-
2.6%
0.0%
Total operating expenses
$ 29,066
$ 23,768 69.6%
48.6%
8.0%
-9.4%
-2.6%
0.0%
0.0%
22.3%
4,742
1,073
5,298
Research and development expenses increased $472,000 or 8% from the prior year period due to the acquisition of Holzworth
which contributed $545,000 in expenses in 2020 and an increase in third party research and development expenses of $500,000 from
the prior year primarily related to 5G roadmap development and product development in our Boonton brand. The increase was partially
offset by declines in salaries and benefits and other discretionary expenses of approximately $600,000 due primarily to expense
reductions including headcount reductions.
Sales and marketing expenses decreased $722,000 from the prior year period due to a decline in salaries and benefits due to
expense reduction initiatives including headcount reductions, a decline in external and internal commissions due to lower order and
sales volumes and declines in marketing expenses and travel expenses caused by the COVID-19 pandemic. These decreases from the
prior year period totaled $1.9 million and were partially offset by the acquisition of Holzworth which contributed $1.2 million in sales
and marketing expenses in 2020.
General and administrative expenses decreased $267,000 as increases from the addition of Holzworth of $795,000 and the
recognition of $255,000 of deferred Form S-3 costs were offset by decreases in merger and acquisition expenses and other discretionary
expenses that declined due to expense reduction initiatives.
The goodwill impairment charge of $4.7 million relates to our CommAgility reporting unit and is the result of our annual
goodwill impairment analysis which indicated that the estimated fair value of the CommAgility reporting unit was lower than the
carrying value as of the valuation date.
The loss on change in fair value of contingent consideration of $1.1 million relates primarily to the earn-out consideration to
be paid in connection with the Holzworth acquisition for the 2020 calendar year. Our estimate of the earn-out payment was increased
from our original estimate recorded at the time of the acquisition due to the improved financial results of Holzworth.
Other income/expense
Other income increased $189,000 due primarily to an increase in gains on sales of assets and foreign currency exchange gains.
Interest Expense
Interest expense increased $680,000 due to the interest on our new term loan facility with Muzinich and the amortization of
debt issuance costs related to securing the new term loan facility.
Tax
The Company’s consolidated tax benefit decreased $563,000 from the prior year due primarily to taxable income in the US
jurisdiction driven primarily by the acquisition of Holzworth.
14
Net Loss
Net loss increased from $414,000 to $8.1 million due primarily to lower gross profit on lower revenues, the goodwill
impairment charge recorded at the CommAgility reporting unit, recognition of the loss on change in fair value of contingent
consideration and the increase in interest expense due to our new term loan.
Liquidity and Capital Resources
The Company has two credit facilities – an asset based revolving loan which is subject to a borrowing base calculation (as
defined) with Bank of America, N.A. (the “Credit Facility” or the “Revolver”) and a term loan facility dated February 7, 2020 with
Muzinich BDC Inc. (“Muzinich”) to finance the Holzworth Acquisition in the amount of $8.4 million (the “Term Loan Facility”).
Additionally, on May 4, 2020 the Company received $2.0 million pursuant to a loan under the PPP of the 2020 CARES Act administered
by the Small Business Association.
Revolver
On February 16, 2017 the Company entered into the Credit Facility which provided for a term loan in the aggregate principal
amount of $760,000 (the “BOA Term Loan”) and the Revolver which has a maximum availability of up to $9.0 million subject to a
borrowing base calculation applicable to the Company’s assets. 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. 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 the
BOA Term Loan in the amount of $340,000.
By entering into Amendment No. 5, Holzworth and CommAgility, 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) modified certain provisions of the Credit Facility to accommodate the Holzworth acquisition, the
Company’s incurrence of the Term Loan Facility 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 below) upon compliance with a liquidity test.
Effectiveness of Amendment No. 5 was conditioned upon, among other things, the prepayment of the remaining principal
balance ($304,000) of the $760,000 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.
On May 4, 2020, the Company, its subsidiaries and Bank of America entered into Amendment No. 6 which, among other
things, amended the definition of “Debt” to include the PPP loan as long as the proceeds are used for allowable purposes under the
CARES Act and the Company promptly submits an application for forgiveness and substantially all of the loan is forgiven.
On February 25, 2021, the Company, its subsidiaries and Bank of America entered into Amendment No. 7 which revised the
Credit Facility to accommodate the changes to the deferred purchase price payments to and notes with the Holzworth sellers as described
below and provided Bank of America’s consent to the Company entering into the Muzinich Second Amendment, as described below.
In all other material respects, the Credit Facility remains unchanged.
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.
15
Term Loan Facility
In connection with the Holzworth acquisition, on February 7, 2020, the Company, as borrower, and its subsidiaries, as
guarantors, and Muzinich, entered into the Term Loan Facility, which provides for a term loan in the principal amount of $8.4 million
(“Initial Term Loan”), all of which was used to fund the cash portion of the purchase price and related debt and closing fees for the
Holzworth acquisition. Principal payments on the Initial Term Loan are $21,000 per quarter with a balloon payment at maturity on
February 7, 2025. The Term Loan Facility includes an upfront fee of 2.50% of the aggregate principal amount. The Term Loan Facility
provides for an additional $11.6 million term loan (the “Second Term Loan”) to be used for a second unannounced acquisition
opportunity (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 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 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. Prior to Amendment 2
described below, the required leverage ratio started at 4.75 to 1.0 for the twelve month periods ended March 31, 2020 and June 30, 2020,
and decreased 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 as Chief Executive
Officer, Chief Financial Officer or Chief Technology Officer, respectively, of the Company 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.
On May 4, 2020, the Company entered into the First Amendment to the Term Loan Facility which, among other things,
amended the definition of “Indebtedness” to include the PPP loan as long as the proceeds are used for allowable purposes under the
CARES Act, the receipt of the loan does not violate the Credit Facility and the Company submits an application for forgiveness and
substantially all of the loan is forgiven.
On February 25, 2021, the Company, its subsidiaries and Muzinich entered into the Second Amendment to the Credit
Agreement and Limited Waiver (“Amendment 2”) in which Muzinich agreed to waive the Company’s obligation to comply with the
consolidated leverage ratio and fixed charge coverage ratio financial covenants in the Term Loan Facility for the fiscal quarter ending
December 31, 2020. We were not in compliance with such covenants primarily as a result of the impact the COVID-19 pandemic had
16
on our consolidated financial results. Amendment 2, among other things, amended the definition of consolidated EBITDA to include
certain cash tax benefits related to our UK tax jurisdiction and reduced our consolidated leverage ratio for the twelve month periods
ended September 30, 2021 from 3.00 to 2.75, December 31, 2021 from 2.75 to 2.25, March 31, 2022 from 2.50 to 2.00 and June 30 ,
2022 from 2.25 to 2.00. Additionally, the interest rate margin was increased from 7.25% to 9.25% effective January 1, 2021 and will
step down to 8.50% and 7.25% upon the Company achieving consolidated EBITDA on a trailing twelve-month basis of $4.0 million
and $6.3 million, respectively. Muzinich and the Company also agreed on an excess cash flow payment of $428,000 and Muzinich
provided consent for the Company to change the deferred purchase price payments to and enter into notes with the Holzworth sellers in
the amount of $750,000, as described below.
PPP Loan
On May 4, 2020, the Company received $2.0 million pursuant to a loan from Bank of America N.A. under the PPP program of
the 2020 CARES Act administered by the Small Business Association (“SBA”). The loan has an interest rate of 1% and a term of 24
months. A repayment schedule has not yet been provided by Bank of America. Accordingly, the full amount of the term loan has been
shown as due in May 2022. Funds from the loan may only be used for certain purposes, including payroll, benefits, rent and utilities.
The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount of the loan upon application to the SBA for
forgiveness by the Company. The loan is evidenced by a promissory note, which contains customary events of default relating to,
among other things, payment defaults and breaches of representations and warranties. The Company may prepay the loan at any time
prior to maturity with no prepayment penalties. The Company applied for forgiveness of the loan in the fourth quarter of 2020 and has
elected to account for the loan in accordance with ASC 470 Debt unless and until such time that forgiveness is approved by the SBA.
The Company can provide no assurance that the loan will be forgiven in whole or in part.
Sources and Uses of Cash
As of December 31, 2020, the Company’s consolidated cash balance was $4.9 million as compared to $4.2 million as of the
prior year. No funds were drawn on our Revolver and we had availability under our borrowing base of $7.2 million as of December 31,
2020. The outstanding balances of our Term Loan Facility and PPP Loan were $8.3 million and $2.0 million, respectively.
Our primary sources of cash were the receipt of the Term Loan Facility in the amount of $8.4 million which was used to pay
the cash portion of the Holzworth purchase price and related debt and transaction fees, receipt of the PPP loan in the amount of $2.0
million which was used to fund operating payroll during the covered period and cash generated from operations of $3.0 million which
was primarily the result of a decrease in net working capital from the prior year (net of the impact of the Holzworth acquired working
capital).
Operating Activities
Cash from operations increased from $80,000 in the prior year to $3.0 million in 2020. The increase was due to cash generated
from a decrease in working capital from the prior year, net of the acquired working capital of Holzworth. The working capital decrease
was primarily due to receipt of the UK tax refund and increased accrued expenses.
Investing Activities
Cash used by investing activities increased from $818,000 in the prior year to $8.6 million in 2020 which includes $8.2 million
of cash paid related to the Holzworth acquisition in February 2020 representing $7.2 million in cash paid at close, $750,000 related to
the first deferred purchase price payment, and $600,000 in indemnification holdback payments offset by a $292,000 working capital
adjustment in the Company’s favor. Capital expenditures were flat at $364,000 in 2020 as compared to $392,000 in the prior year.
Financing Activities
Cash from financing activities increased from a use of cash of $212,000 in the prior year to cash generated of $6.3 million due
primarily to the receipt of the Term Loan Facility, net of debt issuance costs and the receipt of the PPP loan.
17
Holzworth Deferred Purchase Price and Earnout
On February 19, 2021, the Company entered into the Second Amendment with Holzworth and Sellers. The Second
Amendment, among other things, converts the second deferred purchase price of $750,000 into unsecured seller notes with interest at
an annual rate of 6.5% starting from April 1, 2021 until final payment. The payment date has been changed from March 31, 2021 to
three equal installments of $250,000, plus accrued interest, due on July 1, 2021, October 1, 2021 and January 1, 2022.
Additionally, the parties amended the payment dates of the earnout consideration. The payment date of the first earnout payment
based on the financial results of the calendar year ended 2020 (“Year 1 Earnout”) has been amended from March 31, 2021 to (i) six (6)
equal quarterly installments of 10% of the Year 1 Earnout payable on the last business day of each calendar quarter between June 30,
2021 and September 30, 2022 and (ii) one (1) installment payment equal to 40% of the Year 1 Earnout on December 31, 2022. The Year
1 Earnout is payable in cash or shares of the Company’s common stock based on the 90 trading day volume weighted average price
immediately preceding final determination of the Year 1 Earnout or $2.19 per share. The estimated payment for the Year 1 Earnout is
$3.4 million. The payment date for the second earnout payment which is based on the financial results of the calendar year ended 2021
(“Year 2 Earnout”) has been amended from March 31, 2022 to four equal quarterly installments payable on the last business day of each
calendar quarter between March 31, 2022 and December 31, 2022. The Year 2 Earnout is also payable in cash or stock at the Company’s
discretion. The aggregate earnout payments of the Year 1 Earnout and the Year 2 Earnout cannot exceed $7.0 million.
The parties also amended the provisions with respect to restrictions on transfer to adjust for the change in timing of earnout
payments, as described above. Finally, the parties added a requirement that any earned but unpaid earnout consideration will be
accelerated in the event the Company desires to enter into a material asset or equity acquisition in the future.
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. 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, including the COVID-19 pandemic and the significantly decreased demand from our formerly largest
customer for our digital signal processing cards and ongoing low sales to that customer due to reduced demand, as well as delayed
decisions on large private network projects that we believe are caused by economic uncertainty driven by the pandemic. We expect these
uncertainties to extend to our business in the first two quarters of 2021, as sales, deliveries, cash collections, our supply chain and our
business partners could be adversely affected.
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.
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 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. The shelf registration statement expires on September 17, 2021. The Company intends
to update the registration statement prior to expiration.
Purchase obligations consist of inventory that arises in the normal course of business operations. Future obligations and
commitments as of December 31, 2020 consisted of the following:
18
Table of Contractual Obligations
Payments by year (in thousands)
Facility leases
$ 2,210
$ 700
$ 688
$ 328
$ 210
$ 215
$ 69
Total
2021
2022
2023
2024
2025
Thereafter
Operating and equipment leases
157
31
Purchase obligations
Muzinch term loan
PPP loan
Holzworth deferred purchase price
Holzworth earn out
4,278
4,278
8,316
2,045
950
3,423
512
-
700
1,027
29
-
84
2,045
250
2,396
29
-
84
-
-
-
29
-
84
-
-
-
29
-
7,552
-
-
-
10
-
-
-
-
-
$ 21,379
$ 7,248
$ 5,492
$ 441
$ 323
$ 7,796
$ 79
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.
19
Item 8. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Balance Sheets as of December 31, 2020 and 2019
Statements of Operations and Comprehensive Income/(Loss) for the Two Years Ended December 31, 2020
Statement of Changes in Shareholders’ Equity for the Two Years Ended December 31, 2020
Statements of Cash Flows for the Two Years Ended December 31, 2020
Notes to Consolidated Financial Statements
Page
21
23
24
25
26
27
20
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,
2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of
America.
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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements
that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.
Goodwill Impairment Assessment
As described in Notes 1 and 6 to the consolidated financial statements, the Company’s consolidated goodwill balance was $11.5 million
as of December 31, 2020. Management evaluates goodwill, at the reporting unit level, for impairment annually during the fourth quarter,
or more frequently, if events occur or circumstances change which would indicate that goodwill might be impaired. As a result of
declining demand of signal processing hardware from a single customer in one of the Company’s reporting units, CommAgility, as well
as the high uncertainty associated with the ultimate trajectory of the COVID-19 pandemic, management performed a quantitative
analysis of the fair value of the CommAgility reporting unit and determined its fair value was below its carrying value. Fair value of the
reporting unit was estimated using a combination of the income approach and the market approach. The Company used a discounted
cash flow model for the income approach valuation method and the guideline public company and guideline transaction methods for the
market approach valuation method. The determination of the fair value of the reporting unit required management to make significant
estimates and assumptions related to projected revenue growth, future operating margins, discount rates and terminal values. As
disclosed by management, changes in these estimates and assumptions could have a significant impact on the fair value of the reporting
unit, the amount of the goodwill impairment, or both. As a result of the quantitative impairment analysis discussed above, the Company
recorded a goodwill impairment of $4.7 million during the year ended December 31, 2020.
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Wireless Telecom Group, Inc.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the
CommAgility reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value
measurement of the reporting unit; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and
evaluating management’s significant estimates and assumptions in determining the fair value of the reporting unit; and (iii) the audit
effort involved the use of professionals with specialized skill and knowledge.
Our audit procedures related to management’s evaluation of goodwill impairment included (i) evaluating the appropriateness of the
income approach and market approach methods; (ii) testing the underlying data used by the Company in its analysis; and (iii) evaluating
the reasonableness of significant estimates and assumptions used by management. Evaluating management’s estimates and assumptions
involved evaluating whether the estimates and assumptions used by management were reasonable considering (i) the current and past
performance of the reporting unit and (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit.
We utilized our valuation specialist to assist in evaluating the reasonableness of the Company’s valuation methodology. Furthermore,
we assessed the appropriateness of the disclosures in the consolidated financial statements.
Business Combination – Acquisition of Holzworth Instrumentation, Inc. (“Holzworth”)
In February 2020, the Company completed the acquisition of Holzworth for a purchase price of approximately $12 million, which
includes $2.4 million of contingent consideration, estimated at the acquisition date. The Company accounted for the acquisition under
the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired
and liabilities assumed based on their respective fair values, including total intangible assets of $4.3 million. Management, with the
assistance of an independent valuation expert, estimated the fair value of the intangible assets using the multi-period excess earnings
method and the relief from royalty methodology, which are both variations of the income approach. Additionally, management, with
the assistance of an independent valuation expert, estimated the fair value of the contingent consideration using the Monte Carlo
Simulation model.
Given the fair value determination of the intangible assets and contingent consideration requires management to make significant
estimates and assumptions related to the forecasts of future cash flows and the selection of the discount rate, performing audit procedures
to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent
of effort, including the need to involve our valuation specialists.
Our auditing procedures related to the forecasts of future cash flows and the selection of the discount rate included (i) obtaining an
understanding of management’s key assumptions in developing the forecast; (ii) assessing the reasonableness of management's forecasts
of future cash flows by comparing the projections to historical results; (iii) evaluating whether the estimated future cash flows were
consistent with projections used by the Company, as well as evidence obtained in other areas of the audit; (iv) evaluating the
reasonableness of the discount rate and (v) testing the mathematical accuracy of the calculations. Furthermore, we assessed the
appropriateness of the disclosures in the consolidated financial statements.
/s/ PKF O’Connor Davies, LLP
New York, New York
March 19, 2021
We have served as the Company’s auditor since 2006.
* * * * *
22
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 $38 and $69, respectively
Inventories - net of reserves of $1,129 and $969, respectively
Prepaid expenses and other current assets
TOTAL CURRENT ASSETS
December 31
2020
December 31
2019
$ 4,910
5,520
8,796
2,172
21,398
$ 4,245
6,152
7,325
1,871
19,593
PROPERTY PLANT AND EQUIPMENT - NET
1,824
2,147
OTHER ASSETS
Goodwill
Acquired intangible assets, net
Deferred income taxes, net
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 debt
Long term leases
Other long term liabilities
Deferred tax liability
TOTAL LONG TERM LIABILITIES
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
11,512
5,242
5,701
1,680
561
24,696
10,069
2,219
6,013
1,436
874
20,611
$ 47,918
$ 42,351
$ 512
1,546
534
7,997
924
11,513
$ 2,696
2,227
440
2,657
42
8,062
8,895
1,200
82
377
10,554
-
1,018
77
503
1,598
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued
Common stock, $.01 par value, 75,000,000 shares authorized, 34,888,904 and 34,488,252
shares issued, 21,669,361 and 21,300,252 shares outstanding
Additional paid in capital
Retained earnings/(deficit)
Treasury stock at cost, 13,219,543 and 13,188,000 shares
Accumulated other comprehensive income
TOTAL SHAREHOLDERS' EQUITY
-
-
349
50,163
(946)
(24,556)
841
25,851
345
49,062
7,142
(24,509)
651
32,691
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 47,918
$ 42,351
The accompanying notes are an integral part of these consolidated financial statements.
23
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
Goodwill impairment charge
Loss on change in fair value
of contingent consideration
Total operating expenses
Operating loss
Other income/(expense)
Interest expense
Loss before taxes
Tax benefit
Net loss
Other comprehensive income/(loss):
Foreign currency translation adjustments
Comprehensive income/(loss)
Loss per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
Twelve Months Ended
December 31
2020
2019
$ 41,748
$ 48,921
20,781
26,632
20,967
22,289
6,389
6,955
9,907
4,742
5,917
7,677
10,174
-
1,073
29,066
-
23,768
(8,099)
(1,479)
187
(985)
(2)
(305)
(8,897)
(1,786)
(809)
(1,372)
$ (8,088)
$ (414)
190
$ (7,898)
539
$ 125
$ (0.37)
$ (0.37)
$ (0.02)
$ (0.02)
21,657
21,657
21,111
21,111
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.
24
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/(Defi
cit)
Treasury
Stock
Accumulated
Other
Comprehensive
Income
Total
Shareholders'
Equity
Balances at January 1, 2019
34,393,252
$ 344
$ 48,479
$ 7,556
$ (24,509)
$ 112
$ 31,982
Net 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
Net loss
Issuance of shares in connection with
stock options exercised
Issuance of restricted stock
Forfeiture of restricted stock
Issuance of shares in connection with
Holzworth acquisition
Issuance of warrants
Shares withheld for employee taxes
Share-based compensation expense
Cumulative translation adjustment
-
20,000
50,000
(16,667)
347,319
-
-
-
-
-
-
1
-
3
-
-
-
-
-
15
(1)
-
462
151
-
474
-
(8,088)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(47)
-
-
-
-
-
-
-
-
-
-
190
(8,088)
15
-
-
465
151
(47)
474
190
Balances at December 31, 2020
34,888,904
$ 349
$ 50,163
$ (946)
$ (24,556)
$ 841
$ 25,851
The accompanying notes are an integral part of these consolidated financial statements.
25
CONSOLIDATED STATEMENTS OF CASH FLOWS
Wireless Telecom Group, Inc.
(In thousands)
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization
Goodwill impairment
Amortization of debt issuance fees
Share-based compensation expense
Deferred rent
Deferred income taxes
Provision for doubtful accounts
Inventory reserves
Changes in assets and liabilities, net of acquisition:
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
CASH FLOWS PROVIDED/(USED) BY FINANCING ACTIVITIES
Revolver borrowings
Revolver repayments
Term loan borrowings
Term loan repayments
Debt issuance fees
Paycheck Protection Program loan
Payment of contingent consideration
Proceeds from exercise of stock options
Tax withholding payments for vested equity awards
Net cash provided/(used) by financing activities
For the Twelve Months
Ended December 31
2020
2019
$ (8,088)
$ (414)
2,238
4,742
297
474
(29)
178
(31)
157
2,151
-
63
584
(24)
(551)
25
103
1,209
(186)
923
(842)
-
1,938
2,980
2,465
(502)
42
(1,055)
(772)
(2,035)
80
(364)
(8,246)
(8,610)
(392)
(426)
(818)
39,935
(42,289)
8,400
(426)
(1,327)
2,045
-
16
(46)
6,308
36,544
(35,712)
-
(152)
(110)
-
(782)
-
-
(212)
Effect of exchange rate changes on cash and cash equivalents
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
(13)
665
180
(770)
Cash and cash equivalents, at beginning of period
4,245
5,015
CASH AND CASH EQUIVALENTS, AT END OF PERIOD
$ 4,910
$ 4,245
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest
Cash paid during the period for income taxes
Non cash issuance of common stock in connection with acquisition – see Note 2
$ 703
$ 65
$ 185
$ 108
The accompanying notes are an integral part of these consolidated financial statements.
26
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”),
specializes in the design and manufacture of advanced radio frequency (“RF”) 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.
Our customers include wireless carriers, aerospace companies, defense contractors, military and government agencies, satellite
communication companies, network equipment manufacturers, tower companies, semiconductor device manufacturers, system
integrators, neutral host providers and medical device manufacturers.
Our products include components, modules, instruments, systems and software 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”) and 5G 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 accompanying consolidated financial statements include the accounts of Wireless Telecom Group, Inc., doing business as
and operating under the trade name, Noisecom, and its wholly owned subsidiaries including Boonton Electronics Corporation
(“Boonton”), Microlab/FXR LLC (“Microlab”), Holzworth Instrumentation, Inc. (“Holzworth”), Wireless Telecommunications
Ltd. and CommAgility Limited (“CommAgility”). They have been prepared using accounting principles generally accepted in
the United States (“U.S. GAAP”). All intercompany transactions and balances have been eliminated in consolidation.
In June 2020 the Company completed an internal reorganization and now presents its operations as one reportable segment.
Prior to June 2020 the Company presented its operations in three reportable segments. The Company identifies segments in
accordance with ASC 280 Segment Reporting (“ASC 280”). As a result of internal reorganizations that occurred over the six to
nine months prior to June 30, 2020 the Company evaluated its segment reporting. We determined that the Chief Operating
Decision Maker (“CODM”) as defined in ASC 280 evaluates operating results and makes decisions on how to allocate resources
at the consolidated level. Although the CODM reviews key performance indicators including bookings, shipments and gross
profit at a product group level, this information by itself is not sufficient enough to make operating decisions. Rather, operating
decisions are made based on review of consolidated profitability metrics rather than the individual results of each product group.
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, goodwill and 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 cash
equivalents and trade 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 twelve months ended December 31, 2020, no one customer accounted for more than 10% of the Company’s total
consolidated revenues. For the twelve months ended December 31, 201,9 one CommAgility customer accounted for 24.8% of
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
the Company’s total consolidated revenues. At December 31, 2020, one customer exceeded 10% of consolidated gross accounts
receivable at 12.7%. At December 31, 2019 one customer exceeded 10% of consolidated gross accounts receivable at 12.9%.
For the year ended December 31, 2020, two suppliers exceeded 10% of consolidated inventory purchases at 14% each. For the
year ended December 31, 2019, three suppliers comprised or exceeded 10% of consolidated inventory purchases at 18% and
14% and 10%, respectively.
Cash and Cash Equivalents
Cash and cash equivalents represent deposits in banks and highly liquid investments purchased with maturities of three months
or less at the date of purchase.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable and contract assets for unbilled receivables are stated at the amount owed by the customer, net of
allowances for doubtful accounts, returns and rebates. 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 or net realizable value. Inventory cost is determined on an average cost basis. 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 Income/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 $1.1 million as of December 31, 2020 and $1.0 million
as of December 31, 2019.
Inventories consist of (in thousands):
Raw materials
Work-in-process
Finished goods
Prepaid Expenses and Other Current Assets
December 31,
2020
$ 4,644
618
3,534
$ 8,796
December 31,
2019
$ 4,023
406
2,896
$ 7,325
Prepaid expenses and other current assets generally consist of income tax receivables, contract assets for unbilled receivables,
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 $1.2 million and $1.1 million as of December 31, 2020 and December
31, 2019, respectively.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Property, Plant and Equipment
Property, plant and equipment are reflected at cost, less accumulated depreciation. Upon application of acquisition accounting,
property, plant and equipment are measured at estimated fair value as of the acquisition date to establish a new historical cost
basis.
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:
Machinery and computer equipment/software
Furniture and fixtures
3-8 years
5-7 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.
Business Combinations
The Company uses the acquisition method of accounting for business combinations which requires the tangible and intangible
assets acquired and liabilities assumed to be recorded at their respective fair market value as of the acquisition date. Goodwill
represents the excess of the consideration transferred over the fair value of the net assets acquired. The fair values of the assets
acquired and liabilities assumed are determined based upon the Company’s valuation and involves making significant estimates
and assumptions based on facts and circumstances that existed as of the acquisition date. The Company uses 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.
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, or more frequently if events occur or circumstances
change that would indicate that goodwill might be impaired, 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 the Company determines 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.
The Company has three reporting units with goodwill – Holzworth, Microlab and CommAgility. The Company performed a
qualitative assessment in the fourth quarter of 2020 of each reporting unit. The qualitative assessment of Holzworth and
Microlab did not indicate any impairment of goodwill. As a result of declining demand of CommAgility’s signal processing
hardware cards from a single customer and the particularly high uncertainty associated with the ultimate trajectory of the
pandemic, including the degree to which governments continue to restrict business and personal activities, and the impact that
uncertainty has on the growth of new software license and services revenue 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 using the income approach and the market approach. Fair value under the income approach is derived 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. Fair value under the market approach is derived by applying a multiple to our
best estimate of future revenue. The Company applies equal weighting to the income approach and the market approach to
arrive at an estimated fair value. The estimated fair value is compared 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. Both the income approach and market approach require judgmental assumptions about projected
revenue growth, future operating margins, discount rates and terminal values over a multi-year period. There are inherent
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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.
In the fourth quarter of 2020, the Company recorded a goodwill impairment charge of $4.7 million related to the CommAgility
reporting unit. The non-cash impairment charge was due to a number of factors that arose as part of our quantitative assessment,
including an assessment of our historical results and the significant decline in hardware sales in 2020, the difficulty of predicting
future customer demand, the uncertainty of future sales of 4G hardware cards, the uncertainty of the growth of 5G software and
services revenues due to the early stages of 5G adoption for new technology and expectations for 5G deployments, the
uncertainty of the continued future impacts of the COVID 19 pandemic on customer spending, and the potential for a more
prolonged recovery for enterprise spending and longer-term investment. Despite the asset impairment charge the Company
believes the markets in which CommAgility operates, specifically LTE and 5G private networks, have long term growth potential
and the Company is committed to growing the revenue and profitability of the reporting unit.
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. After recording the 2020
goodwill impairment charge, the Company’s consolidated goodwill balance as of December 31, 2020 was comprised of $1.4
million related to the Microlab reporting unit, $6.0 million related to the Holzworth reporting unit and $4.1 million related to
the CommAgility reporting unit.
As of December 31, 2019, the Company’s consolidated goodwill balance of $10.1 million was comprised of $1.4 million related
to the Microlab reporting unit and $8.7 million related to the CommAgility reporting unit. Management’s qualitative assessment
performed in the fourth quarter of 2019 did not indicate any impairment of goodwill.
Intangible and Long-lived Assets
Intangible assets include acquired technology, patents, non-competition agreements, customer relationships and tradenames.
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 twelve 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, 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.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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.
We believe the carrying value of the loan obtained under the Paycheck Protection Program approximates fair value due to the
expected short term nature of the loan.
During the fourth quarter of 2020, the Company recorded a goodwill impairment charge of $4.7 million related to the
CommAgility reporting unit. The determination of the impairment charge was based on the income and market approaches
which are based on the present value of future cash flows and an estimated multiple of future revenues, respectively. The
determination of the impairment charge was based on Level 3 valuation inputs.
Contingent Consideration
Under the terms of the Holzworth Share Purchase Agreement (as defined in Note 2) the Company is required to pay additional
purchase price in the form of deferred purchase price payments and an earnout if certain financial targets are achieved for the
years ending December 31, 2020 and December 31, 2021 (see Note 2). As of the acquisition date, the Company estimated the
fair value of the deferred purchase price and earnout remaining to be paid related to the 2020 and 2021 financial targets to be
$660,000 and $2.4 million, respectively. The earnout may be paid in cash or common stock at the Company’s option. The
Company is required to reassess the fair value of the contingent consideration at each reporting period.
The significant inputs used in this fair value estimate include estimated gross revenues and Adjusted EBITDA, as defined in the
Holzworth Share Purchase Agreement, and scenarios for the earnout periods for which probabilities are assigned to each scenario
to arrive at a single estimated outcome. The estimated outcome is then discounted based on the individual risk analysis of the
liability. The contingent consideration liabilities are considered a Level 3 fair value measurement.
Due to the better than expected financial performance of the Holzworth reporting unit during fiscal 2020, the Company recorded
an increase to the contingent consideration liabilities in the amount of $1.1 million in the fourth quarter of 2020. The adjustment
was recorded as a loss on change in fair value of contingent consideration in the Consolidated Statement of Operations and
Comprehensive Income/(Loss).
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.
Aggregate foreign currency gains and losses, such as those resulting from the settlement of receivables or payables in a currency
other than the subsidiary’s functional currency, are recorded in the Consolidated Statements of Operations and Comprehensive
Income/(Loss) (included in other income/expense). Foreign currency transaction gains were $64,000 in fiscal 2020. Foreign
currency transaction losses in in fiscal 2019 were not material.
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.
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Research and Development Costs
Research and development (R&D) costs are charged to operations when incurred. R&D costs include salaries and benefits,
depreciation expense on equipment used for R&D purposes and third-party material and consulting costs, if clearly related to an
R&D activity. Salaries and benefits of engineers working on customer contracts for which the Company is earning services or
consulting revenues are allocated to costs of revenues. The amounts charged to operations for R&D costs for the years ended
December 31, 2020 and 2019 were $6.4 million and $5.9 million, respectively.
Advertising Costs
Advertising expenses are charged to operations during the year in which they are incurred and aggregated to $235,000 and
$91,000 for the years ended December 31, 2020 and 2019, respectively.
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 equity awards on the
date of grant. The fair value of restricted share awards and restricted stock unit awards is determined using the market value of
our common stock on the date of the grant. The fair value of stock options at the date of grant are estimated using the Black-
Scholes option pricing model. When performance-based stock 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 for all equity awards 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.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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, the weighted-average number of restricted stock units and the weighted average number
of warrants to purchase common stock outstanding for the period. Shares from stock options and warrants 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 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,
2019
2020
Weighted average common shares outstanding
Potentially dilutive equity awards
Weighted average common shares outstanding, assuming dilution
21,656,906
313,341
21,970,247
21,110,632
522,996
21,633,628
The weighted average number of options and warrants 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 2020 was 3,114,792. The estimated number of shares
issuable under the terms of the Holzworth earnout, if the entire earnout was paid in shares of common stock, (see Note 2) at
December 31, 2020 was 1,559,807.
The weighted average number of options to purchase common stock not included in diluted loss per share in 2019, because the
effects are anti-dilutive or the performance condition was not met, was 1,324,548.
Recent Accounting Pronouncements Adopted in 2020
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 2020 calendar year, with early adoption permitted. The adoption of this standard did not have a material impact on
our consolidated financial statements.
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 December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.
The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic
740 and improve consistent application by clarifying and amending existing guidance. The new standard is effective for fiscal
years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the
amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment.
We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting. The amendments provide optional expedients and exceptions for applying generally
accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if
certain criteria are met. The amendments are intended to ease the potential burden in accounting for, or recognizing the effects
of, reference rate reform on financial reporting. The new standard is effective March 12, 2020 through December 31, 2022, with
the adoption date being dependent upon the Company’s election. We do not expect the adoption of this standard to have a
material impact on our consolidated financial statements.
NOTE 2 – Acquisition of Holzworth
On November 13, 2019 the Company entered into a Share Purchase Agreement with Holzworth Instrumentation Inc.
(“Holzworth”), its founders and shareholders (collectively, the “Sellers”), as amended by a First Amendment to Share Purchase
Agreement, dated January 31, 2020 and a Second Amendment to Share Purchase Agreement dated February 19, 2021
(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. Holzworth instruments which include signal
generators and phase noise analyzers are used by government labs, aerospace and defense companies, the semiconductor
industry, and network equipment providers, among others, in research and automated test environments. Holzworth is a
complimentary business for our Boonton and Noisecom brands with a common customer base and channel partners. For the
twelve months ended December 31, 2020, net revenues of $8.8 million, and operating income of $1.4 million, respectively, was
included in the Consolidated Statements of Operations and Comprehensive Income/(Loss) related to the Holzworth business,
representing the results from the date of acquisition. For the twelve months ended December 31, 2020, the Company recorded
$243,000 of transaction expenses related to the Acquisition and these expenses were recognized in general and administrative
expenses in the Consolidated Statements of Operations and Comprehensive Income/(Loss).
The aggregate purchase price for the Acquisition is a maximum of $17.0 million, consisting of payments in cash and stock, a
working capital adjustment, and contingent consideration in the form of deferred purchase price payments and an earnout.
Additionally, the parties made 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.
At closing, a portion of the purchase price was paid to the Sellers through the issuance of 347,319 shares of the Company’s
common stock, valued at approximately $500,000 based upon a 90-day volume weighted average price for shares of stock of
the Company. The shares issued to the Sellers are subject to Lock-up and Voting Agreements.
During 2020, the Company paid $8.3 million in net cash to the Sellers consisting of $7.2 million in cash at close, $600,000 in
indemnification holdback payments and $750,000 in deferred purchase price reduced by $292,000 of a working capital
adjustment that was owed to the Company by the Sellers. The final indemnification holdback payment of $200,000 is due on
March 31, 2021.
The Sellers earned a second deferred purchase price payment of $750,000 by way of exceeding $1.25 million in EBITDA (as
defined in the Share Purchase Agreement) for the twelve months ended December 31, 2020. Additionally, the Sellers earned
$3.4 million in additional purchase price in the form of an earnout (“Year 1 Earnout”) which was also based on Holzworth’s
EBITDA for the twelve months ended December 31, 2020.
On February 19, 2021, the Company entered into the Second Amendment to Share Purchase Agreement (the “Second
Amendment”) with Holzworth. The Second Amendment, among other things, converted the second deferred purchase price of
$750,000 into unsecured seller notes with interest at an annual rate of 6.5% starting from April 1, 2021 until final payment. The
payment date has been changed from March 31, 2021 to three equal installments of $250,000, plus accrued interest, due on July
1, 2021, October 1, 2021 and January 1, 2022.
Additionally, the parties amended the payment dates of the earnout consideration. The payment date of the first earnout payment
based on the financial results of the calendar year ended 2020 (“Year 1 Earnout”) has been amended from March 31, 2021 to (i)
six (6) equal quarterly installments of 10% of the Year 1 Earnout payable on the last business day of each calendar quarter
between June 30, 2021 and September 30, 2022 and (ii) one (1) installment payment equal to 40% of the Year 1 Earnout on
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
December 31, 2022. The Year 1 Earnout is payable in cash or shares of the Company’s common stock based on the 90 trading
day volume weighted average price immediately preceding final determination of the Year 1 Earnout or $2.19 per share. The
estimated payment for the Year 1 Earnout is $3.4 million which is recorded in accrued expenses and other current liabilities in
the Consolidated Balance Sheet as of December 31, 2020.
The Company may also be required to pay additional amounts in cash and stock as earnout consideration based on Holzworth’s
EBITDA for the fiscal year ending December 31, 2021 (“Year 2 Earnout”). The Year 2 Earnout will be equal to two times the
amount, if any, by which Holzworth’s EBITDA for fiscal year December 31, 2021 exceeds Holzworth’s EBITDA for fiscal year
2020. Pursuant to the Second Amendment to the Share Purchase Agreement the Year 2 Earnout is payable in 4 equal quarterly
installments payable on the last business day of each calendar quarter between March 31, 2022 and December 31, 2022. The
aggregate earnout payments cannot exceed $7.0 million.
Pursuant to the Share 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 agreed that, without the prior written consent by the Company, such Seller
would 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 of the Company
(as defined in the Lock-up and Voting Agreement). In the Second Amendment, the parties also amended the provisions with
respect to restrictions on transfer to adjust for the change in timing of earnout payments, as described above.
In addition, each Seller, subject to certain limitations, agreed, 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.
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 are 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 million of Earnout Consideration shall not be considered Lock-Up Shares. In addition, in the Second
Amendment, the parties added a requirement that any earned but unpaid earnout consideration will be accelerated in the event
the Company desires to enter into a material asset or equity acquisition in the future.
The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC 805, Business
Combinations. Accounting for acquisitions requires us to recognize separately from goodwill the assets acquired and the
liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of
consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While
we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date our
estimates are inherently uncertain and subject to refinement. Various valuation techniques were used to estimate the fair value
of assets acquired and the liabilities assumed which use significant unobservable inputs, or Level 3 inputs as defined by the fair
value hierarchy. Using these valuation approaches requires the Company to make significant estimates and assumptions.
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
As of September 30, 2020, the valuation studies necessary to determine the fair market value of the assets acquired and liabilities
assumed were completed, including the validation of the underlying cash flows used to determine the fair value of the identified
intangible assets and contingent consideration. The following amounts represent the determination of the fair value of
identifiable assets acquired and liabilities assumed from the Acquisition along with measurement period adjustments recorded
from the preliminary purchase price allocation to September 30, 2020 (in thousands):
Cash at close
Equity issued at close
Purchase price holdback
Working capital adjustment
Deferred purchase price
Contingent consideration
Amounts
Recognized as of
Acquisition Date
$ 7,219
465
800
(295)
1,300
555
Measurement
Period
Adjustments
$ -
-
-
3
110
1,885
Amounts Recognized
as of Acquisition
Date
(as adjusted)
$ 7,219
465
800
(292)
1,410
2,440
Total purchase price
10,044
1,998
12,042
Cash
Accounts receivable
Inventory
Intangible assets
Other assets
Fixed assets
Accounts payable
Accrued expenses
Deferred revenue
Other long term liabilities
30
485
1,218
4,500
960
144
(129)
(425)
(13)
(740)
-
29
220
(240)
7
-
-
(4)
-
-
30
514
1,438
4,260
967
144
(129)
(429)
(13)
(740)
Net assets acquired
6,030
12
6,042
Goodwill
$ 4,014
$ 1,986
$ 6,000
Goodwill is calculated as the excess of consideration paid over the net assets acquired and represents synergies, assembled
workforce, organic growth and other benefits that are expected to arise from integrating Holzworth into our operations. The
goodwill recorded in this transaction is expected to be tax deductible.
The following unaudited pro forma information presents the Company's operations as if the Holzworth acquisition and related
financing activities had occurred on January 1, 2019. The pro forma information includes the following adjustments (i)
amortization of acquired intangible assets; (ii) interest expense incurred in connection with the Term Loan Facility (described
in further detail in Note 3) used to finance the acquisition of Holzworth; and (iii) inclusion of acquisition-related expenses in the
earliest period presented. The amounts related to Holzworth included in the following unaudited pro forma information are
based on their historical results and, therefore, may not be indicative of the actual results when operated as part of the Company.
The pro forma adjustments represent management’s best estimates based on information available at the time the pro forma
information was prepared and may differ from the adjustments that may actually have been required. Accordingly, the unaudited
pro forma financial information should not be relied upon as being indicative of the results that would have been realized had
the Holzworth acquisition occurred as of the date indicated or that may be achieved in the future.
The following table presents the unaudited pro forma consolidated results of operations for the Company for the twelve months
ended December 31, 2020 and 2019 as though the Acquisition had been completed as of January 1, 2019 (in thousands, except
per share amounts):
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
2020 Pro-forma
2019 Pro-forma
Net revenues
Net income/(loss)
Earnings per diluted share
$ 41,845
$ (8,212)
$ (0.38)
$ 54,761
$ (1,754)
$ (0.08)
NOTE 3 – Debt
Debt consists of the following (in thousands):
Revolver at LIBOR plus margin
Term loan at LIBOR plus margin
Less: Debt issuance costs, net of amortization
Less: Fair value of warrants, net of amortization
Paycheck Protection Program loan
Total Debt
Less: Debt maturing within one year
Non-current portion of long term debt
Term loan payments by period (in thousands):
2021
2022
2023
2024
2025
Total
December 31, 2020
$ -
8,316
(831)
(123)
2,045
9,407
(512)
$ 8,895
$ 512
2,129
84
84
7,552
$ 10,361
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 which is February 7, 2025. The Term Loan Facility includes an upfront fee of 2.50%
of the aggregate principal amount of the Initial Term Loan. In connection with the Term Loan Facility, the Company incurred
costs of $1.0 million, including the aforementioned 2.5% upfront fee to Muzinich, which were recorded as a reduction of the
carrying amount of the debt and are being amortized over the term of the loan.
On May 4, 2020, the Company entered into the First Amendment to the Term Loan Facility which, among other things,
amended the definition of “Indebtedness” to include the PPP loan as long as the proceeds are used for allowable purposes under
the CARES Act, the receipt of the loan does not violate the Credit Facility and the Company submits an application for
forgiveness and substantially all of the loan is forgiven.
On February 25, 2021, the Company and its subsidiaries entered into the Second Amendment to the Credit Agreement and
Limited Waiver (“Amendment 2”) with Muzinich, in which Muzinich agreed to waive the Company’s obligation to comply
with the consolidated leverage ratio and fixed charge coverage ratio financial covenants in the Term Loan Facility for the fiscal
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
quarter ending December 31, 2020. We were not in compliance with such covenants primarily as a result of the impact the
COVID-19 pandemic had on our consolidated financial results. Amendment 2, among other things, amends the definition of
consolidated EBITDA to include certain cash tax benefits related to our UK tax jurisdiction and reduced our consolidated
leverage ratio for the twelve month periods ended September 30, 2021 from 3.00 to 2.75, December 31, 2021 from 2.75 to
2.25, March 31, 2022 from 2.50 to 2.00 and June 30, 2022 from 2.25 to 2.00. Additionally, the interest rate margin was increased
from 7.25% to 9.25% effective January 1, 2021 and will step down to 8.50% and 7.25% upon the Company achieving
consolidated EBITDA on a trailing twelve-month basis of $4.0 million and $6.3 million, respectively. Muzinich and the
Company also agreed on an excess cash flow payment of $428,000 and Muzinich provided consent for the Company to change
the deferred purchase price payments to and enter into notes with the Holzworth sellers in the amount of $750,000, as described
below.
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 Term Loan Facility provides for an additional $11.6 million term loan (the “Second Term Loan”) to be used for a second
unannounced acquisition opportunity (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, as described above, is defined as the ratio of total consolidated
indebtedness, as defined, to consolidated EBITDA, as defined. Prior to Amendment 2, the required leverage ratio started at
4.75 to 1.0 for the twelve month periods ended March 31, 2020 and June 30, 2020, and decreased in various increments to 4.0
to 1.0 for the twelve months ended September 30, 2020, 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
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.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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 $760,000 (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 a percentage
of eligible accounts receivable and inventory, as defined, subject to certain caps and limits. The borrowing base is calculated
on a monthly basis and interest is calculated at LIBOR plus a margin. The proceeds of the Term Loan and Revolver were used
to finance the acquisition of CommAgility in 2017.
In connection with the Holzworth 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 (“Amendment 5”) to the Credit Facility. By entering
into Amendment 5, 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.
Amendment 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 5 was conditioned upon, among other things, the prepayment of the remaining principal balance
($304,000) of the $760,000 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. In connection with the Amendment the Company
incurred costs of $270,000 which are capitalized as other current and non-current assets in the Consolidated Balance Sheets
and are being amortized over the term of the revolver.
On May 4, 2020, the Company, its subsidiaries and Bank of America entered into Amendment No. 6 which, among other
things, amended the definition of “Debt” to include the PPP loan as long as the proceeds are used for allowable purposes under
the CARES Act and the Company promptly submits an application for forgiveness and substantially all of the loan is forgiven.
On February 25, 2021, the Company, its subsidiaries and Bank of America entered into Amendment No. 7 which revised the
Credit Facility to accommodate the changes to the deferred purchase price payments to and notes with the Holzworth sellers
as described above and provided Bank of America’s consent to the Company entering into the Muzinich Second Amendment,
as described above.
As of December 31, 2020, the interest rate on the Term Loan Facility was 8.25% and the interest rate on the Revolver was
2.15%. The Company had zero drawn on the asset based revolver as of December 31, 2020.
On May 4, 2020, the Company received $2.0 million pursuant to a loan from Bank of America N.A. under the Paycheck
Protection Program (“PPP”) of the 2020 Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered
by the Small Business Association (“SBA”). The loan has an interest rate of 1% and a term of 24 months. A repayment schedule
has not yet been provided by Bank of America. Accordingly, the full amount of the term loan has been shown as due in May
2022. Funds from the loan may only be used for certain purposes, including payroll, benefits, rent and utilities. The CARES
Act and the PPP provide a mechanism for forgiveness of up to the full amount of the loan upon application to the SBA for
forgiveness by the Company. The loan is evidenced by a promissory note, which contains customary events of default relating
to, among other things, payment defaults and breaches of representations and warranties. The Company may prepay the loan at
any time prior to maturity with no prepayment penalties. As of December 31, 2020, the Company has applied for forgiveness
of the loan, however, has elected to account for the loan in accordance with Accounting Standard Codification 470 Debt until
such time that forgiveness is approved by the SBA. The Company can provide no assurance that the loan will be forgiven in
whole or in part.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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. Additionally,
the exercise price may be adjusted based on a formula in the event of a common stock offering by the Company at an offering
price below fair market value, as defined, and below exercise price. 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 (as defined in Term Loan Facility above) 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.
The stock warrants issued to Muzinich are classified as equity. The fair value of the warrants, as calculated using the Black
Scholes model as of the issuance date, was approximately $150,000 and was recorded as a reduction to the carrying value of
the debt. The significant inputs included in the Black Scholes calculation were a risk free rate of 1.41%, volatility of 48.7%
and the stock price on date of grant of $1.34.
NOTE 4 - 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 Sheets as of December 31, 2020 and 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 on January 1, 2019. With our acquisition of Holzworth on February 7, 2020, we acquired a right-of-use
asset of $789,000. There have been no other right-of-use assets recognized since the date of adoption of the new lease standard.
Cash paid for amounts included in the present value of operating lease liabilities was $648,000 and $508,000 during the twelve
months ended December 31, 2020 and 2019, respectively, and is included in operating cash flows.
Operating lease costs were $1.0 million and $892,000 during the twelve months ended December 31, 2020 and 2019,
respectively.
The following table presents information about the amount and timing of cash flows arising from the Company’s operating
leases as of December 31, 2020.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
(in thousands)
Maturity of Lease Liabilities
2021
2022
2023
2024
2025
Thereafter
Total undiscounted operating lease payments
Less: imputed interest
Present Value of operating lease liabilities
Balance sheet classification
Current lease liabilities
Long-term lease liabilities
Total operating lease liabilities
Other information
December 31, 2020
$ 619
637
276
158
163
69
1,922
(188)
$ 1,734
$ 534
1,200
$ 1,734
Weighted-average remaining lease term (months)
Weighted-average discount rate for operating leases
44
5.88%
NOTE 5 – REVENUE
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% of the Company’s total revenue for the twelve months ended
December 31, 2020 and 2019.
Nature of Products and Services
Hardware
The Company generally has one performance obligation in its arrangements involving the sales of radio frequency solutions,
digital signal processing hardware, power meters, analyzers, noise/signal generators, phase noise analyzers and other
components. 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 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
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Software
Arrangements involving licenses of software in the CommAgility brand 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 involving CommAgility software licenses 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 of the Company’s products 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 (unbilled revenue) 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. Unbilled revenue is $260,000 and $147,000 as of December 31, 2020 and 2019,
respectively, and recorded in prepaid expenses and other current assets. Deferred revenue is $924,000 and $42,000 as of
December 31, 2020 and 2019, respectively. The increase in deferred revenue from the prior year is primarily due to billings in
advance of revenue recognition for certain CommAgility projects involving multiple performance obligations.
Disaggregated Revenue
We disaggregate our revenue from contracts with customers by product family and geographic location 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).
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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, 2020
Twelve Months Ended
December 31, 2019
$ 17,633
13,356
5,737
1,672
1,284
2,066
$ 41,748
$ 31,329
6,329
4,090
$ 41,748
$ 21,830
6,198
6,109
13,013
14
1,757
$ 48,921
$ 30,161
16,500
2,260
$ 48,921
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, 2020 and 2019, sales in the United States amounted to $30.6 million and $30.0 million, respectively.
For the year ended December 31, 2020 shipments to the EMEA region were largely concentrated in the UK, Russia and France.
Shipments to the UK, Russia and France in 2020 amounted to $1.7 million, $897,000 and $859,000, respectively. For the year
ended December 31, 2019 shipments to the EMEA region were largely concentrated in the UK, Germany and Italy. Shipments
to the UK, Germany and Italy in 2019 amounted $12.7 million, $737,000 and $506,000, respectively.
The largest concentration of shipments in the APAC region is to China. For the years ended December 31, 2020 and 2019,
shipments to China amounted to $2.0 million and $1.3 million, of all shipments to the APAC region, respectively. There were
no other shipments significantly concentrated in one country in the APAC region.
NOTE 6 - GOODWILL AND INTANGIBLE ASSETS
Goodwill consists of the following (in thousands):
Holzworth
Microlab
CommAgility
Total
Balance as of January 1, 2019
$ -
$ 1,351
$ 8,427
$ 9,778
Foreign currency translation
-
-
291
291
Balance as of December 31, 2019
-
1,351
8,718
10,069
Holzworth acquisition
Goodwill impairment
6,000
-
-
-
-
(4,742)
6,000
(4,742)
Foreign currency translation
-
-
185
185
Balance as of December 31, 2020
$ 6,000
$ 1,351
$ 4,161
$ 11,512
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Intangible assets consist of the following (in thousands):
Gross Carrying
Amount
Accumulated
Amortization
Foreign Exchange
Translation
Net Carrying
Amount
December 31, 2020
Customer relationships
$ 5,075
$ (2,564)
$ 121
$ 2,632
Patents
615
(491)
26
150
Proprietary technology
1,550
(142)
-
1,408
Non-compete agreements
1,107
(1,150)
43
-
Holzworth tradename
400
(31)
-
369
CommAgility tradename
629
-
54
683
Total
$ 9,376
$ (4,378)
$ 244
$ 5,242
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
CommAgility tradename
629
-
31
660
Total
$ 5,117
$ (3,110)
$ 212
$ 2,219
Amortization of acquired intangible assets was $1.3 million and $1.1 million for the twelve months ended December 31, 2020
and 2019, respectively. Amortization of proprietary technology is included in costs of revenues in the Consolidated Statements
of Operations and Comprehensive Income/(Loss). Amortization of all other acquired intangible assets is included in general
and administrative expenses.
The estimated future amortization expense related to intangible assets is as follows as of December 31, 2020 (in thousands):
2021
2022
2023
2024
2025
$ 1,307
665
573
573
573
Thereafter
868
Total
$ 4,559
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, consist of the following as of December 31 (in thousands):
Machinery & computer equipment/software
Furniture & fixtures
Leasehold improvements
Gross property, plant and equipment
Less: Accumulated depreciation
Net property, plant and equipment
2020
$ 9,085
483
1,358
10,926
2019
$ 8,662
461
1,331
10,454
9,102
8,307
$ 1,824
$ 2,147
Depreciation expense of $1.1 million and $841,000 was recorded for the years ended December 31, 2020 and 2019, respectively.
NOTE 8 - OTHER ASSETS
Other assets consist of the following as of December 31 (in thousands):
Product demo assets
Debt issuance costs - Revolver
Deferred costs
Income tax receivable
Security deposit
Deferred S3 costs
Other
Total
2020
$ 187
127
82
65
63
-
37
$ 561
2019
$ 128
91
82
230
50
255
38
$ 874
Product demo assets are net of accumulated amortization expense of $397,000 and $317,000 as of December 31, 2020 and 2019,
respectively. Amortization expense related to demo assets was $84,000 and $249,000 in 2020 and 2019, respectively.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 9 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following as of December 31 (in thousands):
2020
2019
Holzworth earnout
$ 3,423
$ -
Holzworth deferred purchase price
Payroll and related benefits
Commissions
950
-
864
308
605
430
Goods received not invoiced
458
346
Professional fees
Sales and use and VAT tax
Return reserve
Warranty reserve
Bonus
Harris arbitration liability
Severance
Other
Total
331
464
315
355
212
199
140
160
123
126
116
-
460
49
102
118
$ 7,997
$ 2,657
NOTE 10 - ACCOUNTING FOR STOCK BASED COMPENSATION
The Company follows the provisions of ASC 718. The Company’s results for the years ended December 31, 2020 and December
31, 2019 include stock based compensation expense totaling $474,000 and $584,000, respectively. Such amounts have been
included in the Consolidated Statement of Operations and Comprehensive Income/(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, 2020, there are approximately 227,000 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
targets are achieved. Performance targets are approved by the Company’s compensation committee of the Board of Directors.
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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 stock-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
2020
$ 117
205
99
53
$ 474
2019
$ 278
245
(90)
151
$ 584
As of December 31, 2020, $423,000 of unrecognized compensation costs related to unvested stock options is expected to be
recognized over a remaining weighted average period of 4.9 years, $93,000 of unrecognized compensation costs related to
unvested restricted shares is expected to be recognized over a remaining weighted average period of 2.3 years and $81,000 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, 2020 the Company reversed $6,000 and $16,000 in share based compensation
expense related to 6,250 unvested stock options and 16,667 unvested restricted shares, respectively, which were forfeited as a
result of an employee exiting the company.
During the twelve months ended December 31, 2019 the Company reversed $121,000 in share based compensation expense
related to 240,000 unvested stock options that were forfeited as a result of employees exiting the company.
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, 2020 and 2019, and changes during the twelve months ended December 31,
2020 and 2019, are presented below:
Non-vested Restricted Shares
Non-vested as of January 1
Granted
Vested and issued
Forfeited
Non-vested as of December 31
2020
2019
Number
of Shares
Weighted
Average Grant
Date Fair
Value
Number
of Shares
Weighted
Average Grant
Date Fair
Value
$1.63
$1.20
$1.66
$1.56
$1.52
232,123
95,000
(64,583)
-
$1.68
$1.56
$1.70
-
262,540
$1.63
262,540
50,000
(95,203)
(16,667)
200,670
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
On August 4, 2020 the Company granted 50,000 restricted share awards to our Chief Revenue Officer under the 2012 plan.
The fair market value of the award is $1.20 per granted share and the award vests in four equal installments of 12,500 shares
on August 1 of 2021, 2022, 2023 and 2024, respectively.
The following table summarizes the restricted common stock awards granted during the years ended December 31, 2020 and
2019 under the 2012 Plan:
Number
of
Shares
Fair Market
Value per
Granted Share
Vesting
2020
8/4/20 – Service grant - Employee
50,000
$1.20
Annual vesting through August 2024
2019
1/11/19 - Service grant - Employees
95,000
$1.56
Annual vesting through January 2022
Restricted Stock Units:
In fiscal 2020 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 RSUs 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, 2020 and 2019, and changes during the twelve months ended December 31, 2020 and
2019, are presented below:
Non-vested Restricted Stock Units
2020
2019
Number
of Shares
Weighted
Average Grant
Date Fair
Value
Number
of Shares
Weighted
Average Grant
Date Fair
Value
Non-vested as of January 1
147,917
Granted
Vested and issued
Forfeited
161,507
(147,917)
-
-
$1.56
$1.21
$1.56
125,000
147,917
(125,000)
-
Non-vested as of December 31
161,507
$1.21
147,917
48
$2.25
$1.56
$2.25
-
$1.56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
2020
6/4/2020 - Service grant – Board of Directors
12/28/2020 – Service grant – Board of Directors
2019
5/30/2019 - Service grant – Board of Directors
7/8/2019 – Service grant – Board of Directors
Performance-Based Stock Option Awards
Number
of
Shares
150,000
11,507
125,000
22,917
Fair Market
Value per
Granted Share
Vesting
$1.18
$1.66
$1.55
$1.58
Annual board meeting – June 2021
Annual board meeting – June 2021
Annual board meeting – June 2020
Annual board meeting – June 2020
On August 4, 2020 the Company granted 150,000 performance-based stock options to our Chief Revenue Officer under the
2012 Plan.
On April 7, 2020 the Company granted 970,000 performance-based stock options to various employees under the 2012 Plan.
The performance options granted on both August 4 and April 7, 2020 vest when the Company achieves consolidated revenue
targets as outlined in the schedule below:
Consolidated annualized gross revenues $55.0 million – 25% vesting
Consolidated annualized gross revenues $61.5 million – 50% vesting
Consolidated annualized gross revenues $69.0 million – 75% vesting
Consolidated annualized gross revenues $77.5 million – 100% vesting
Consolidated annualized gross revenues include revenue from Holzworth from acquisition date (February 7, 2020) forward,
but do not include any additional acquisitions from February 7, 2020 forward. Consolidated annualized gross revenues is
calculated on a calendar year basis (i.e. twelve months ended December 31).
In accordance with ASC 718, compensation expense 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. The estimated implicit service period is April 2020 thru December 2025 for the
April performance-based options and August 2020 thru December 2025 for the August performance-based options.
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
A summary of performance-based stock option activity, and related information for the years ended December 31, 2020 and
December 31, 2019 follows:
2020
2019
Options
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Outstanding as of January 1
105,000
$1.61
305,000
$1.45
Granted
Exercised
Forfeited
Expired
1,120,000
$1.50
-
-
(20,000)
$0.78
-
-
-
(200,000)
-
$1.36
-
-
-
-
Outstanding as of December 31
1,205,000
$1.52
105,000
$1.61
Exercisable at December 31
-
-
20,000
$0.78
As of December 31, 2020, none of the performance-based stock options outstanding were exercisable as the performance
metrics were not met. The aggregate intrinsic value of performance-based stock options outstanding that were “in the money”
(exercise price was lower than market price) as of December 31, 2020 was $325,000 and the weighted average remaining life
was 7.7 years.
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. As of December 31, 2019, 20,000 performance-based stock options were exercisable.
The range of exercise prices of outstanding performance-based options at December 31, 2020 is $1.20 to $1.83 with a weighted
average exercise price of $1.52 per share.
Service-Based Stock Option Awards
A summary of service-based stock option activity and related information for the years ended December 31, 2020 and 2019
follows:
Outstanding as of January 1
Granted
Exercised
Forfeited
Expired
2020
2019
Weighted
Average
Exercise Price
Options
Weighted
Average
Exercise Price
Options
1,950,000
-
$1.52
-
1,975,000
15,000
-
-
-
(6,250)
(18,750)
$1.66
$1.66
(40,000)
-
$1.52
$1.56
-
$1.52
-
$1.52
Outstanding as of December 31
1,925,000
$1.52
1,950,000
Exercisable at December 31
1,736,250
$1.51
1,515,000
$1.50
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
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, 2020 was $455,000 and the weighted average remaining contractual life was 6 years.
The aggregate intrinsic value of exercisable “in the money” service-based stock options as of December 31, 2020 was $415,000
and the weighted average remaining contractual life was 6 years.
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, 2020 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, 2020 and 2019:
2020
4/7/2020 – Performance grant - Employees
8/4/2020 – Performance grant - Employees
2019
1/11/2019 – Service Grant - Employees
Number of
Options
Option
Term
(in years)
Exercise
Price
Risk Free
Interest
Rate
Expected
Volatility
Fair Value
at Grant
Date
Expected
Dividend
Yield
970,000
150,000
10
10
$1.50
$1.20
0.48%
0.19%
50.85%
52.06%
$0.86
$1.20
$0.00
$0.00
15,000
3
$1.56
2.52%
49.80%
$0.56
$0.00
NOTE 11 - SEGMENT AND RELATED INFORMATION
In June 2020, as a result of certain internal reorganizations completed over the prior six to nine months, the Company concluded
it now operates as one reportable segment in accordance with ASC 280 Segment Reporting. Prior to June 2020 the Company
operated as three reportable segments. In June 2020 we determined that the Chief Operating Decision Maker (“CODM”) as
defined in ASC 280 evaluates operating results and makes decisions on how to allocate resources at the consolidated level.
Although the CODM reviews key performance indicators including bookings, shipments and gross profit at a product group
level, this information by itself is not sufficient enough to make operating decisions. Rather, operating decisions are made
based on review of consolidated profitability metrics rather than the individual results of each product group.
NOTE 12 - 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, 2020 and 2019 amounted to $44,000 and $286,000, respectively.
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 13 - INCOME TAXES
The components of income tax (benefit)/expense related to net income/(loss) from operations are as follows (in thousands):
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
Total
Years Ended December 31,
2020
2019
$ -
73
(1,060)
182
129
(133)
$ (809)
$ (9)
45
(859)
(188)
(233)
(128)
$ (1,372)
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,
2020
% of
Pre Tax
Earnings
(21.0) %
(6.6)
7.7
9.4
8.5
(8.1)
-
1.1
2019
% of
Pre Tax
Earnings
(21.0) %
0.1
7.2
(10.6)
0.9
(53.1)
1.3
(1.6)
(9.0) %
(76.8) %
In 2020, the difference between the statutory and effective tax rate is due primarily to permanent differences between U.S.
GAAP book income and taxable income including the goodwill impairment charge for the CommAgility reporting unit and the
loss on contingent consideration related to the Holzworth earnout. Additionally, in 2020 the difference between the statutory
and effective tax rate was due to an increase in the state net operating loss valuation allowance and research and development
deductions in the United Kingdom. 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 net operating loss valuation allowance.
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
The components of deferred income taxes are as follows (in thousands):
Deferred tax assets:
Net operating loss carryforwards
$ 11,888
$ 11,538
Years Ended December 31,
2020
2019
Inventory
Research and development credit
Stock compensation
Other
Gross deferred tax asset
Less valuation allowance
Total deferred tax asset
Deferred tax liabilities:
Goodwill and intangible assets
Fixed assets
Total deferred tax liability
509
648
335
280
397
648
285
326
13,660
13,194
(7,668)
(6,652)
$ 5,992
$ 6,542
(368)
(300)
(757)
(275)
$ (668)
$ (1,032)
Net deferred tax asset
$ 5,324
$ 5,510
The Company has domestic federal and state net operating loss carryforwards as of December 31, 2020 of approximately $16.3
million and $42.4 million, respectively, which begin to expire in 2029. $600,000 of the federal net operating loss carryforward
and $1.6 million of state net operating loss carryforward has no expiration. The Company also has foreign net operating loss
carryforwards at December 31, 2020 of approximately $15.7 million for German trade tax purposes, 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 $7.7 million and $6.7 million at December 31, 2020
and 2019, respectively, 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, 2020, 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.
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
NOTE 13 - 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
As previously disclosed, on June 5, 2019, L3Harris 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 claimed 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. In its arbitration demand, Harris
claimed that CommAgility caused Harris significant monetary damages, the sum of which could not be determined until such
time as discovery has been conducted but was estimated by Harris to be less than $250,000. Harris did not include a request
for monetary damages in its Statement of Claim, which was filed with the arbitration panel on May 22, 2020. On December
10, 2020, Harris released CommAgility from any and all claims that Harris may have had against CommAgility related to the
Agreements before arbitration proceedings began. In 2020, the Company incurred approximately $50,000 in legal expense
related to this matter. The remainder of legal expenses incurred in 2019 and 2020 related to this matter were covered under
our professional indemnity insurance policy.
Risks and Uncertainties
The Company has been and continues to be unable to accurately predict the full impact that the COVID-19 Pandemic will have
on our results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration
and severity of the pandemic and containment measures, the nature and length of actions taken by governments, businesses and
individuals to contain or mitigate its impact, the severity and duration of the economic impact caused by the pandemic, the
uncertainty surrounding possible treatments and rollout of vaccines, along with the effectiveness of our response. Our
compliance with containment and mitigation measures has impacted our day-to-day operations and is expected to continue to
disrupt our business and operations, as well as that of our key customers, suppliers (including contract manufacturers) and other
counterparties, at least through the third quarter of 2021.
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.
NOTE 15 – SUBSEQUENT EVENTS
Second Amendment to Holzworth Share Purchase Agreement
On February 19, 2021, the Company entered into the Second Amendment with Holzworth and Sellers. The Second Amendment,
among other things, converted the second deferred purchase price of $750,000 into unsecured seller notes with interest at an
annual rate of 6.5% starting from April 1, 2021 until final payment. The payment date has been changed from March 31, 2021
to three equal installments of $250,000, plus accrued interest, due on July 1, 2021, October 1, 2021 and January 1, 2022.
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless Telecom Group, Inc.
Additionally, the parties amended the payment dates of the earnout consideration. The payment date of the first earnout payment
based on the financial results of the calendar year ended 2020 (“Year 1 Earnout”) has been amended from March 31, 2021 to (i)
six (6) equal quarterly installments of 10% of the Year 1 Earnout payable on the last business day of each calendar quarter
between June 30, 2021 and September 30, 2022 and (ii) one (1) installment payment equal to 40% of the Year 1 Earnout on
December 31, 2022. The Year 1 Earnout is payable in cash or shares of the Company’s common stock based on the 90 trading
day volume weighted average price immediately preceding final determination of the Year 1 Earnout or $2.19 per share. The
estimated payment for the Year 1 Earnout is $3.4 million which is recorded in accrued expenses and other current liabilities in
the Consolidated Balance Sheet as of December 31, 2020.
The parties also amended the provisions with respect to restrictions on transfer to adjust for the change in timing of earnout
payments, as described above. Finally, the parties added a requirement that any earned but unpaid earnout consideration will
be accelerated in the event the Company desires to enter into a material asset or equity acquisition in the future.
Second Amendment to Muzinich Credit Agreement and Limited Waiver
On February 25, 2021, the Company, its subsidiaries and Muzinich entered into Amendment 2, in which Muzinich agreed to
waive the Company’s obligation to comply with the consolidated leverage ratio and fixed charge coverage ratio financial
covenants in the Term Loan Facility for the fiscal quarter ending December 31, 2020. We were not in compliance with such
covenants primarily as a result of the impact the COVID-19 pandemic had on our consolidated financial results. Amendment
2, among other things, amended the definition of consolidated EBITDA to include certain cash tax benefits related to our UK
tax jurisdiction and reduced our consolidated leverage ratio for the twelve month periods ended September 30, 2021 from 3.00
to 2.75, December 31, 2021 from 2.75 to 2.25, March 31, 2022 from 2.50 to 2.00 and June 30, 2022 from 2.25 to 2.00.
Additionally, the interest rate margin was increased from 7.25% to 9.25% effective January 1, 2021 and will step down to
8.50% and 7.25% upon the Company achieving consolidated EBITDA on a trailing twelve-month basis of $4.0 million and
$6.3 million, respectively. Muzinich and the Company also agreed on an excess cash flow payment of $428,000 and Muzinich
provided consent for the Company to enter into the aforementioned notes with the Holzworth Sellers in the amount of $750,000,
as described above.
Amendment No. 7 to the Loan and Security Agreement with Bank of America, N.A.
On February 25, 2021, the Company, its subsidiaries and Bank of America entered into Amendment No. 7 which revised the
Credit Facility to accommodate the changes to the deferred purchase price payments to and notes with the Holzworth sellers
as described above and provided Bank of America’s consent to the Company entering into the Muzinich Second Amendment,
as described above.
55
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).
2020
Net revenues
Gross profit
Operating income/(loss)
Net income/(loss)
Quarter
1st
2nd
3rd
4th
$ 9,429
$ 11,108
$ 10,868
$ 10,343
4,428
(1,354)
5,668
(59)
5,654
(348)
5,218
(6,336)
(1,147)
(668)
(775)
(5,498)
Diluted earnings/(loss) per share
$ (0.05)
$ (0.03)
$ (0.04)
$ (0.25)
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)
235
Diluted earnings/(loss) per share
$ (0.02)
$ 0.01
$ (0.02)
$ 0.01
NOTE: The quarterly amounts above may not add to the full year Consolidated Statements of Operations and
Comprehensive Income/(Loss) due to rounding
56
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, 2020, 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, 2020.
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.
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Directors
Alan L. Bazaar
Chief Executive Officer of Hollow Brook Wealth
Management LLC, Independent Investment Advisory Firm
Jennifer Fritzsche
Managing Director, Greenhill & Co.
Investment Bank
C. Scott Gibson
President of Gibson Enterprises
Professional Board Member for public and nonprofit entities
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
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
Alfred Rodriguez
Chief Revenue 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
Corporate Profile
Annual Meeting
The Annual Meeting of the Stockholders will be held at 8:00 a.m. on
Thursday, June 3, 2021 via live webcast at:
www.virtualshareholdermeeting.com/WTT2021
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, 2020, 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.
We have included in the message from the CEO “forward-looking
statements” within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Exchange Act relating to our
operations, results of operations and other matters that are based
on our current expectations, estimates, assumptions and projections.
Actual outcomes and results may differ materially from what is
expressed or forecast in these forward-looking statements because
of risks and uncertainties, including those discussed in Item 1A,
“Risk Factors” in our Annual Report on Form 10-K and in other
documents we file with the SEC. Our forward-looking statements
speak only as of the date they are made.
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