The accompanying notes are an integral part
of these condensed consolidated financial statements.
The accompanying notes are an integral part
of these condensed consolidated financial statements.
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
|
|
For the Six Months
|
|
|
|
Ended June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS (USED) BY OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(794,520
|
)
|
|
$
|
277,859
|
|
Adjustments to reconcile net income (loss) to net cash (used) by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
232,696
|
|
|
|
223,755
|
|
Share-based compensation expense
|
|
|
197,238
|
|
|
|
171,926
|
|
Deferred rent
|
|
|
19,302
|
|
|
|
11,151
|
|
Deferred income taxes
|
|
|
(531,389
|
)
|
|
|
149,695
|
|
Provision for doubtful accounts
|
|
|
(38,646
|
)
|
|
|
9,193
|
|
Inventory reserves
|
|
|
121,369
|
|
|
|
—
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
798,730
|
|
|
|
(911,565
|
)
|
Inventories
|
|
|
(719,034
|
)
|
|
|
(524,008
|
)
|
Prepaid expenses and other assets
|
|
|
84,206
|
|
|
|
495,857
|
|
Accounts payable
|
|
|
302,650
|
|
|
|
304,058
|
|
Accrued expenses and other current liabilities
|
|
|
(137,824
|
)
|
|
|
(836,203
|
)
|
Net cash (used) by operating activities
|
|
|
(465,222
|
)
|
|
|
(628,282
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS (USED) BY INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(502,023
|
)
|
|
|
(280,717
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS (USED) BY FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options
|
|
|
—
|
|
|
|
23,400
|
|
Repayments of equipment leases payable
|
|
|
(79,180
|
)
|
|
|
(95,877
|
)
|
Repurchase of common stock - 42,995 shares
|
|
|
(65,468
|
)
|
|
|
—
|
|
Net cash (used) by financing activities
|
|
|
(144,648
|
)
|
|
|
(72,477
|
)
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
(1,111,893
|
)
|
|
|
(981,476
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, at beginning of period
|
|
|
9,726,007
|
|
|
|
10,723,513
|
|
CASH AND CASH EQUIVALENTS, AT END OF PERIOD
|
|
$
|
8,614,114
|
|
|
$
|
9,742,037
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for income taxes
|
|
$
|
35,938
|
|
|
$
|
63,762
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
(41,904
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Equipment leases payable
|
|
$
|
41,904
|
|
|
$
|
—
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(unaudited)
|
|
Common
Stock Issued
|
|
|
Common
Stock
Amount
|
|
|
Additional Paid
In Capital
|
|
|
Retained
Earnings
|
|
|
Treasury Stock
|
|
|
Total
Shareholders’
Equity
|
|
Balances at December 31, 2015
|
|
|
29,627,891
|
|
|
$
|
296,279
|
|
|
$
|
39,865,331
|
|
|
$
|
13,500,853
|
|
|
$
|
(20,758,012
|
)
|
|
$
|
32,904,451
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(794,520
|
)
|
|
|
—
|
|
|
|
(794,520
|
)
|
Stock issued under equity compensation plan
|
|
|
128,333
|
|
|
|
1,283
|
|
|
|
(1,283
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Share-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
197,238
|
|
|
|
—
|
|
|
|
—
|
|
|
|
197,238
|
|
Repurchase of treasury stock
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(65,468
|
)
|
|
|
(65,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2016
|
|
|
29,756,224
|
|
|
$
|
297,562
|
|
|
$
|
40,061,286
|
|
|
$
|
12,706,333
|
|
|
$
|
(20,823,480
|
)
|
|
$
|
32,241,701
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND
POLICIES
The condensed consolidated balance
sheet as of June 30, 2016, the condensed consolidated statements of operations for the three and six-month periods ended June
30, 2016 and 2015, and the condensed consolidated statements of cash flows for the six-month periods ended June 30, 2016 and 2015,
and the condensed consolidated statement of shareholders’ equity for the six-month period ended June 30, 2016 have been
prepared by the Company (as defined below) without audit. The condensed consolidated financial statements include the accounts
of Wireless Telecom Group, Inc., which operates one of its product lines under the trade name Noisecom, Inc. (“Noisecom”),
and its wholly-owned subsidiaries Boonton Electronics Corporation (“Boonton”), Microlab/FXR (“Microlab”),
WTG Foreign Sales Corporation and NC Mahwah, Inc., which are collectively referred to herein as, the “Company”. All
intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management,
the accompanying condensed consolidated financial statements referred to above contain all necessary adjustments, consisting of
normal accruals and recurring entries, which are necessary to fairly present the Company’s results for the interim periods being
presented.
The accounting policies followed
by the Company are set forth in Note 1 to the Company’s financial statements included in its annual report on Form 10-K for the
year ended December 31, 2015. Specific reference is made to that report since certain information and footnote disclosures normally
included in financial statements in accordance with accounting principles generally accepted in the United States of America (US
GAAP) have been condensed or omitted from this report.
The preparation of financial statements
in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities (including inventory valuation, accounts receivable valuation, valuation of deferred tax assets, estimated fair values
of stock options and vesting periods of performance-based stock options and restricted stock) and disclosure of contingent assets
and liabilities at the date of the financial statements and reported amounts of net sales and expenses during the reporting period.
Actual results could differ from those estimates.
The results of operations for
the three and six-month periods ended June 30, 2016 are not necessarily indicative of the results to be expected for the full
year ending December 31, 2016.
Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.
The Company maintains significant
cash investments primarily with two financial institutions, which at times may exceed federally insured limits. The Company performs
periodic evaluations of the relative credit rating of these institutions as part of its investment strategy.
The Company has limited concentration
of credit risk in accounts receivable due to the large number of entities comprising our customer base and their dispersion across
many different industries and geographies. Credit evaluations are performed on customers requiring credit over a certain amount.
Credit risk is mitigated to a lesser extent through collateral such as letters of credit, bank guarantees or payment terms like
cash in advance. Credit evaluation is performed independent of the Company’s sales team to ensure segregation of duties.
For the three and six-months ended
June 30, 2016, one customer accounted for approximately 12% and 11%, respectively, of the Company’s consolidated revenues.
For the three and six-months ended June 30, 2015, no customer accounted for 10% or more of the Company’s consolidated revenues.
At June 30, 2016, two customers each represented approximately 10% of the Company’s gross accounts receivable. At December
31, 2015, no customer represented 10% or more of the Company’s gross accounts receivable.
The carrying amounts of cash and
cash equivalents, trade receivables, other current assets and liabilities approximate fair value due to the short-term nature
of these instruments.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND
POLICIES (Continued)
The Company considers all highly
liquid investments purchased with maturities of three months or less at the time of purchase to be cash equivalents. Cash and
cash equivalents consist of bank and money market accounts.
Management has evaluated subsequent
events and determined that there were no subsequent events or transactions requiring recognition or disclosure in the condensed
consolidated financial statements through the date the financial statements were issued.
NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS
In March 2016, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “
Compensation -
Stock Compensation: Improvements to Employee Share-Based Payment Accounting,”
which relates to the accounting
for employee share-based payments. This standard addresses several aspects of the accounting for share-based payment award
transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and
(c) classification on the statement of cash flows. This standard will be effective for fiscal years beginning after December
15, 2016, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of
the adoption of ASU 2016-09 on its consolidated financial statements.
In February 2016, the FASB issued
ASU 2016-02
“Leases”,
which creates new accounting and reporting guidelines for leasing arrangements. The new
standard will require organizations that lease assets to recognize assets and liabilities on the balance sheet related to the
rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent
with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily
will depend on its classification as a finance or operating lease. The standard will also require new disclosure to help financial
statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard will
be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period,
with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is in
the process of evaluating the impact of the new pronouncement on its consolidated financial statements.
In July 2015, the FASB issued
ASU 2015-11,
“Simplifying the Measurement of Inventory.”
ASU 2015-11 applies to inventory that is measured
using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at
the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of
business, less reasonably predictable costs of completion, disposal and transportation. The amendments in ASU 2015-11 more
closely align the measurement of inventory in US GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). ASU
2015-11 is effective for fiscal years beginning after December 15, 2016. The Company is in the process of evaluating
the impact of this ASU on its consolidated financial statements.
In May 2014, the FASB issued ASU
2014-09, “
Revenue from Contracts with Customers
” (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition
model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting
the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14,
“
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
,” which defers the effective
date by one year, with early adoption on the original effective date permitted. As a result, ASU 2014-09 will be effective for
annual and interim periods beginning after December 15, 2016. The Company is currently in the process of evaluating the impact
the adoption of this ASU will have on the Company’s consolidated financial statements, but does not expect the impact to be material.
Management does not believe that
any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying
condensed consolidated financial statements.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 – INCOME TAXES
The Company records deferred taxes
in accordance with Accounting Standards Codification (“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.
The Company had a domestic net
operating loss carryforward at June 30, 2016 of approximately $18,200,000 which expires in 2029. The Company also had a German
net operating loss carryforward at June 30, 2016 of approximately $23,400,000.
Realization of the Company’s
deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in
future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating
losses. The Company’s valuation allowance of $7,012,134 is associated with the Company’s German net operating loss
carryforward from an inactive German entity. 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 June 30, 2016, management believed that it is more
likely than not that the Company will fully realize the benefits of its deferred tax asset associated with its domestic net operating
loss carryforward.
The deferred income tax assets
(liabilities) are summarized as follows:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Net deferred tax asset:
|
|
|
|
|
|
|
|
|
Uniform capitalization of inventory costs for tax purposes
|
|
$
|
170,262
|
|
|
$
|
158,599
|
|
Reserves on inventories
|
|
|
492,663
|
|
|
|
444,115
|
|
Accruals
|
|
|
50,000
|
|
|
|
10,000
|
|
Tax effect of goodwill
|
|
|
(524,040
|
)
|
|
|
(507,524
|
)
|
Book depreciation over tax
|
|
|
(55,463
|
)
|
|
|
(43,514
|
)
|
Other timing differences
|
|
|
150,117
|
|
|
|
105,725
|
|
Net operating loss carryforward
|
|
|
14,273,913
|
|
|
|
13,858,662
|
|
|
|
|
14,557,452
|
|
|
|
14,026,063
|
|
Valuation allowance for deferred tax assets
|
|
|
(7,012,134
|
)
|
|
|
(7,012,134
|
)
|
|
|
$
|
7,545,318
|
|
|
$
|
7,013,929
|
|
Under ASC 740, the Company must
recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on
examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial
statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being
realized upon the ultimate resolution of the position.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 3 – INCOME TAXES (Continued)
The components of income tax expense
(benefit) related to income from operations are as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
2,826
|
|
|
$
|
—
|
|
|
$
|
17,457
|
|
State
|
|
|
—
|
|
|
|
13,292
|
|
|
|
—
|
|
|
|
44,576
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(126,988
|
)
|
|
|
41,442
|
|
|
|
(463,903
|
)
|
|
|
134,717
|
|
State
|
|
|
(18,473
|
)
|
|
|
6,029
|
|
|
|
(67,486
|
)
|
|
|
14,978
|
|
|
|
$
|
(145,461
|
)
|
|
$
|
63,589
|
|
|
$
|
(531,389
|
)
|
|
$
|
211,728
|
|
The Company has analyzed its filing
positions in all of the Federal and state jurisdictions where it is required to file income tax returns. As of June 30, 2016 and
December 31, 2015, the Company identified its Federal tax return and its state tax return in New Jersey as “major”
tax jurisdictions, as defined, in which it is required to file income tax returns. Based on the evaluations noted above, the Company
concluded that there were no significant uncertain tax positions requiring recognition or disclosure in its condensed consolidated
financial statements.
NOTE 4 - INCOME (LOSS) PER COMMON SHARE
Basic earnings (loss) per share
is calculated by dividing 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 are calculated by using the weighted average number of shares
of common stock outstanding and, when dilutive, potential shares from stock options and warrants to purchase common stock, using
the treasury stock method.
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Weighted average common shares outstanding
|
|
|
18,622,116
|
|
|
|
19,524,258
|
|
|
|
18,614,350
|
|
|
|
19,510,434
|
|
Potentially dilutive stock options
|
|
|
352,073
|
|
|
|
834,984
|
|
|
|
425,691
|
|
|
|
1,045,116
|
|
Weighted average common shares outstanding, assuming dilution
|
|
|
18,974,189
|
|
|
|
20,359,242
|
|
|
|
19,040,041
|
|
|
|
20,555,550
|
|
Common stock options are included
in the diluted earnings (loss) per share calculation when the various option exercise prices are less than their relative average
market price during the periods presented in this quarterly report. The weighted average number of shares of common stock underlying
options not included in diluted earnings (loss) per share, because the effects are anti-dilutive, was 2,919,662 and 1,727,192
for the three-months ended June 30, 2016 and 2015, respectively. For the six-months ended June 30, 2016 and 2015, the weighted
average number of shares of common stock underlying options not included in diluted earnings (loss) per share was 2,894,178 and
1,522,742, respectively.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 5 – INVENTORIES
Inventory carrying value is net
of inventory reserves of $1,231,657 and $1,110,288 at June 30, 2016 and December 31, 2015, respectively.
Inventories consist of:
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Raw materials
|
|
$
|
4,028,133
|
|
|
$
|
3,993,052
|
|
Work-in-process
|
|
|
792,985
|
|
|
|
628,140
|
|
Finished goods
|
|
|
3,845,275
|
|
|
|
3,447,536
|
|
|
|
$
|
8,666,393
|
|
|
$
|
8,068,728
|
|
NOTE 6 - GOODWILL
Goodwill represents the excess
of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill is
not amortized but rather is reviewed for impairment at least annually or more frequently if a triggering event occurs. Management
first makes a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than
its carrying amount before applying the two-step goodwill impairment test described below. If, based on the qualitative assessment,
the estimated fair value is well in excess of its carrying amount, management will not perform a quantitative assessment. If,
however, the conclusion is that it is more likely than not that the fair value of a reporting unit is less than its carrying amount,
management then performs a two-step goodwill impairment test. Under the first step, the fair value of the reporting unit is compared
with its carrying value, and, if an indication of goodwill impairment exists for the reporting unit, the Company must perform
step two of the impairment test (measurement).
Under step two, an impairment
loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill as determined by allocating the
fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation
is the implied fair value of the reporting unit’s goodwill.
The Company’s goodwill balance
of $1,351,392 at June 30, 2016 and December 31, 2015 related to one of the Company’s reporting units, Microlab. Management’s
qualitative assessment performed in the fourth quarter of 2015 did not indicate any impairment of Microlab’s goodwill as
its fair value was estimated to be in excess of its carrying value. Furthermore, no events have occurred since then that would
change this assessment.
NOTE 7 - ACCOUNTING FOR SHARE BASED
COMPENSATION
The Company follows the provisions
of ASC 718, “
Share-Based Payment.
” The Company’s results for the three and six-month periods ended June 30,
2016 include share-based compensation expense totaling $98,619 and $197,238, respectively. Results for the three and six-month
periods ended June 30, 2015 included share-based compensation expense totaling $85,963 and $171,926, respectively. Such amounts
have been included in the Condensed Consolidated Statements of Operations 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 restricted stock awards, non-qualified stock options and incentive stock options in compliance with the Internal
Revenue Code of 1986, as amended, to employees, officers, directors, consultants and advisors of the Company who are expected
to contribute to the Company’s future growth and success. When originally approved, the Initial 2012 Plan provided for the grant
of awards relating to 2,000,000 shares of common stock, plus those shares still available under the Company’s prior incentive
compensation plan.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - ACCOUNTING FOR SHARE BASED
COMPENSATION (Continued)
In June 2014, the Company’s
shareholders approved the Amended and Restated 2012 Incentive Compensation Plan (the “2012 Plan”) allowing for an
additional 1,658,045 shares of the Company’s common stock to be available for future grants under the 2012 Plan. As of June
30, 2016, there were 1,286,001 shares available for issuance under the 2012 Plan, including those shares available under the Company’s
prior incentive compensation plan as of such date.
All service-based options granted
have ten-year terms from the date of grant and vest annually and become fully exercisable after a maximum of five years. Performance-based
options granted have ten-year terms and vest and become fully exercisable when determinable performance targets are achieved.
Performance targets are agreed to, and approved by, the Company’s Board of Directors or the Compensation Committee of the
Board of Directors.
Provisions of the 2012 Plan require
that all awards that are stock options be made at exercise prices equal to or greater than the fair market value on the date of
the grant.
The following summarizes the components
of share-based compensation expense by equity type for the three and six-months ended June 30:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Service-based Restricted Common Stock
|
|
$
|
55,500
|
|
|
$
|
49,800
|
|
|
$
|
111,000
|
|
|
$
|
99,600
|
|
Performance-based Stock Options
|
|
|
28,650
|
|
|
|
30,035
|
|
|
|
57,300
|
|
|
|
60,070
|
|
Service-based Stock Options
|
|
|
9,116
|
|
|
|
—
|
|
|
|
18,232
|
|
|
|
—
|
|
Performance-based Restricted Common Stock
|
|
|
5,353
|
|
|
|
6,128
|
|
|
|
10,706
|
|
|
|
12,256
|
|
Total Share-Based Compensation Expense
|
|
$
|
98,619
|
|
|
$
|
85,963
|
|
|
$
|
197,238
|
|
|
$
|
171,926
|
|
Stock-based compensation for the
three and six-months ended June 30, 2016 and 2015 is included in general and administrative expenses in the accompanying condensed
consolidated statement of operations.
Restricted Common Stock
Awards:
On June 8, 2016, the Company granted
150,000 shares of restricted common stock to certain non-employee directors of the Company under the 2012 Plan. The shares were
granted at a price of $1.33 per share. On June 30, 2016, Timothy Whelan, the Company’s newly appointed Chief Executive Officer,
forfeited the 30,000 shares of restricted common stock that were granted to him on June 8, 2016 as a non-employee director in
connection with his appointment as Chief Executive Officer of the Company. The remaining 120,000 shares of restricted common stock
granted on June 8, 2016 will fully vest on the date of the Company’s next annual shareholders meeting to be held in June
2017, or a vesting period of approximately one year, provided that the director’s service continues through the vesting
date. The total compensation expense to be recognized over the one-year vesting period with respect to the remaining 120,000 shares
of restricted common stock is $159,600.
On June 30, 2016, the Company
granted 8,333 shares of restricted common stock to its newly appointed Chief Executive Officer under the 2012 Plan. The shares
were granted at a price of $1.34 per share and will vest in sixteen equal quarterly installments over a period of four years,
provided that the executive officer’s service with the Company continues through each quarterly vesting date, so that the
shares will fully vest on June 30, 2020. The total compensation expense to be recognized over the four-year vesting period is
$11,166.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - ACCOUNTING FOR SHARE BASED
COMPENSATION (Continued)
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 June 30, 2016, and changes during the six-months ended June 30, 2016, are presented below:
Non-vested Restricted Shares
|
|
Number of Shares
|
|
|
Weighted Average
Grant Date Fair Value
|
|
Non-vested at January 1, 2016
|
|
|
187,000
|
|
|
$
|
2.01
|
|
Granted
|
|
|
158,333
|
|
|
$
|
1.33
|
|
Forfeited
|
|
|
(30,000
|
)
|
|
$
|
1.33
|
|
Vested
|
|
|
(100,000
|
)
|
|
$
|
2.22
|
|
Non-vested at June 30, 2016
|
|
|
215,333
|
|
|
$
|
1.51
|
|
Under the terms of the performance-based
restricted common stock award agreements pertaining to the 87,000 shares of restricted stock granted to employees in 2013, the
awards will fully vest and become exercisable on the date on which the Company’s Board of Directors shall have determined
that specific financial milestones have been met, provided the employee remains in the employ of the Company at such time; provided,
however, upon a Change in Control (as defined in the award agreements and the 2012 Plan), the restricted stock shall automatically
vest as permitted by the 2012 Plan. For the performance-based restricted stock awarded in 2013, the Company’s Board of Directors
adopted specific revenue and earnings performance targets as vesting conditions. During the first quarter of 2015, management
determined the performance conditions related to these restricted stock awards are probable to be achieved by the year ending
2020. As a result, the Company adjusted the amortization of the fair market value of these awards over the revised implicit service
period from December 2017 to December 2020. If management determines in future periods the achievement of performance conditions
are probable to occur sooner than expected, the Company will accelerate the expensing of the unamortized balance as of that determination
date.
As of June 30, 2016, the unearned
compensation related to Company granted restricted common stock was $267,124 of which $159,600 (pertaining to 120,000 service-based
restricted common stock awards) will be amortized on a straight-line basis through the date of the Company’s next annual
shareholders meeting scheduled to be held in June 2017, the vesting date, and $11,166 (pertaining to 8,333 service-based restricted
common stock awards) will be amortized on a straight-line basis through June 30, 2020, the date which they will have fully vested.
The remaining balance of $96,358 (pertaining to 87,000 performance-based shares of restricted common stock awarded in 2013) will
be amortized on a straight-line basis through December 31, 2020, the implicit service period.
Performance-Based Stock
Option Awards:
A summary of performance-based
stock option activity, and related information for the six-months ended June 30, 2016 follows:
|
|
Options
|
|
|
Weighted Average
Exercise Price
|
|
Outstanding, January 1, 2016
|
|
|
1,965,000
|
|
|
$
|
1.32
|
|
Granted
|
|
|
200,000
|
|
|
$
|
1.36
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
Expired
|
|
|
—
|
|
|
|
—
|
|
Outstanding, June 30, 2016
|
|
|
2,165,000
|
|
|
$
|
1.32
|
|
|
|
|
|
|
|
|
|
|
Options exercisable:
|
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
1,090,000
|
|
|
$
|
0.96
|
|
The aggregate intrinsic value
of performance-based stock options outstanding and exercisable as of June 30, 2016 and December 31, 2015 was $449,750 and $846,350,
respectively.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - ACCOUNTING FOR SHARE BASED
COMPENSATION (Continued)
On September 8, 2015, the Company
granted a performance-based stock option to a non-executive officer employee to acquire 50,000 shares of common stock at an exercise
price of $1.83 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT
on the date of grant. The per share fair-value of this performance-based option was $1.03. The per share fair-value was estimated
on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield
0%, risk-free interest rate of 1.53% and expected option life of 4 years. Volatility assumption was 75.46% and the forfeiture
rate was assumed to be 0%.
Under the terms of the performance-based
stock option agreements granted prior to 2016, the awards will fully vest and become exercisable on the date on which the Company’s
Board of Directors shall have determined that specific financial performance milestones have been met, provided the employee remains
in the employ of the Company at such time; provided, however, upon a Change in Control (as defined in the stock option agreements
and the 2012 Plan), the stock options shall automatically vest as permitted by the 2012 Plan. During the first quarter of 2015,
management determined the performance conditions related to the stock option awards granted in 2013 and grants made subsequent
thereto (but on or prior to the date of determination) are probable to be achieved by the year ending 2020. As a result, the Company
adjusted the amortization of the fair market value of these awards over the revised implicit service period from December 2017
to December 2020. If management determines in future periods the achievement of performance conditions are probable to occur sooner
than expected, the Company will accelerate the expensing of the unamortized balance as of that determination date.
On May 16, 2016, the Company granted
a performance-based stock option to a non-executive officer employee to acquire 200,000 shares of common stock at an exercise
price of $1.36 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT
on the date of grant. The per share fair-value of this performance-based option was $0.78. The per share fair-value was estimated
on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield
0%, risk-free interest rate of 1.26% and expected option life of four years. The volatility assumption was 77.54% and the forfeiture
rate was assumed to be 0%.
Under the terms of the performance-based
stock option agreement granted on May 16, 2016, the award will incrementally vest and become exercisable upon achievement of specific
annualized revenue targets in the Company’s network solutions segment. As of June 30, 2016, the Company had not incurred
expense relating to this performance-based stock option as management determined it was more likely than not that the revenue
targets would not be achieved.
As of June 30, 2016, the unearned
compensation related to the performance-based stock options to acquire 825,000 shares of common stock granted in August 2013 (with
a weighted average per share exercise price of $1.77) and the performance-based stock option to acquire 50,000 shares of common
stock granted in September 2015 (with a weighted average per share exercise price of $1.83) is $471,533 and $44,166, respectively,
which have been, and are expected to be, amortized on a straight-line basis through December 31, 2020, the implicit service period.
Unearned compensation in the amount of $155,810 related to the performance-based stock option granted in May 2016 (with a weighted
average per share exercise price of $1.36) will begin to be amortized when achievement of specific annualized revenue targets
in the Company’s network solutions segment are determined to be probable.
The Company’s performance-based
stock options granted prior to 2013 (consisting of options to acquire 1,090,000 shares) are fully amortized.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - ACCOUNTING FOR SHARE BASED
COMPENSATION (Continued)
Service-Based Stock Option Awards:
A summary of service-based stock
option activity, and related information for the six-months ended June 30, 2016 follows:
|
|
Options
|
|
|
Weighted Average
Exercise Price
|
Outstanding, January 1, 2016
|
|
|
523,000
|
|
|
$
|
2.23
|
Granted
|
|
|
750,000
|
|
|
$
|
1.34
|
Exercised
|
|
|
—
|
|
|
|
—
|
Forfeited
|
|
|
(70,000
|
)
|
|
$
|
1.34
|
Expired
|
|
|
(120,000
|
)
|
|
$
|
2.72
|
Outstanding, June 30, 2016
|
|
|
1,083,000
|
|
|
$
|
1.61
|
|
|
|
|
|
|
|
|
Options exercisable:
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
282,167
|
|
|
$
|
2.41
|
The aggregate intrinsic value
of service-based stock options outstanding (regardless of whether or not such options are exercisable) as of June 30, 2016 and
December 31, 2015 was $7,600 and $0, respectively.
The aggregate intrinsic value
of service-based stock options exercisable as of June 30, 2016 and December 31, 2015 was $967 and $0, respectively.
On November 19, 2015, the Company
granted to the members of the Company’s Strategic Planning and Operating Committee service-based stock options to acquire
145,000 shares of common stock at an exercise price of $1.30 per share, which represented the closing price of the Company’s
common stock as reported on the NYSE MKT on November 19, 2015, the date of grant. The per share fair-value of these service-based
options was $0.75. The per share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and
included the following range of assumptions: dividend yield 0%, risk-free interest rate of 1.68% and expected option life of 4
years. The volatility assumption was 78.22% and the forfeiture rate was assumed to be 0%.
Under the terms of the service-based
stock option agreements relating to the November 19, 2015 stock option grants, the awards vest in twelve equal quarterly installments
over a period of three years and shall be fully vested on November 19, 2018.
On June 8, 2016, the Company granted
to certain non-employee directors of the Company service-based stock options to acquire collectively 350,000 shares of common
stock at an exercise price of $1.33 per share, which represented the closing price of the Company’s common stock as reported
on the NYSE MKT on June 8, 2016, the date of grant. The per share fair-value of these service-based options was $0.76. The per
share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range
of assumptions: dividend yield 0%, risk-free interest rate of 1.23% and expected option life of four years. The volatility assumption
was 76.72% and the forfeiture rate was assumed to be 0%. These stock options were granted in connection with the annual compensation
for services as a Company director. Such equity awards are intended to replace the cash component of the director compensation.
On June 30, 2016, the service-based
stock option to acquire 70,000 shares of common stock that was granted to Timothy Whelan on June 8, 2016, was terminated, unvested,
in connection with his appointment as Chief Executive Officer of the Company.
Under the terms of the remaining
service-based stock option agreements relating to the June 8, 2016 stock option grants to the non-employee directors of the Company,
the awards will fully vest on the date of the Company’s next annual shareholder’s meeting to be held in June 2017,
or a vesting period of approximately one year, provided that the director’s service continues through the vesting date.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - ACCOUNTING FOR SHARE BASED
COMPENSATION (Continued)
On June 30, 2016, the Company
granted to Timothy Whelan, its newly appointed Chief Executive Officer, a service-based stock option to acquire 400,000 shares
of common stock at an exercise price of $1.34 per share, which represented the closing price of the Company’s common stock
as reported on the NYSE MKT on the date of grant. The per share fair-value of this service-based option was $0.76. The per share
fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range of
assumptions: dividend yield 0%, risk-free interest rate of 1.01% and expected option life of four years. The volatility assumption
was 76.68% and the forfeiture rate was assumed to be 0%.
Under the terms of the service-based
stock option agreements relating to the June 30, 2016 stock option grants, the awards vest in sixteen equal quarterly installments
over a period of four years and shall be fully vested on June 30, 2020.
Under the terms of Mr. Whelan’s
employment agreement, dated June 30, 2016, if Mr. Whelan’s employment is terminated by the Company without Cause, upon a
Change of Control or by Mr. Whelan for Good Reason (as such terms are defined in his employment agreement), in each case, subject
to his compliance with certain conditions, Mr. Whelan is entitled to (among other benefits) extension of the post-termination
exercise period for all outstanding stock options of the Company’s common stock held by Mr. Whelan as of the date of his
termination to the earlier of (a) the first anniversary of the date of termination, and (b) the date of expiration of the respective
option, during which post-termination period such options shall continue to vest in accordance with their respective terms (to
the extent not already fully vested).
As of June 30, 2016, the unearned
compensation related to the service-based stock option to acquire 145,000 shares of common stock granted in November 2015 (with
a weighted average per share exercise price of $1.30) was $91,155, which will be amortized on a straight-line basis over the service
period through November 2018.
As of June 30, 2016, the unearned
compensation related to the service-based stock option to acquire 280,000 shares granted in June 2016 (with a weighted average
per share exercise price of $1.33) to non-executive directors was $211,461, which will be amortized on a straight-line basis over
the service period through June 2017.
As of June 30, 2016, the unearned
compensation related to the service-based stock option to acquire 400,000 shares granted in June 2016 (with a weighted average
per share exercise price of $1.34) to the Company’s newly appointed Chief Executive Officer was $303,207, which will be
amortized on a straight-line basis over the service period through June 2020.
At June 30, 2016, the Company’s
service-based stock options granted prior to November 2015 were fully amortized.
NOTE 8 – SEGMENT INFORMATION
The operating businesses of the
Company are segregated into two reportable segments: (i) network solutions; and (ii) test and measurement. The network solutions
segment is comprised primarily of the operations of Wireless Telecom Group Inc.’s subsidiary, Microlab. The test and measurement
segment is comprised primarily of the Company’s operations of the Noisecom product line and the operations of its subsidiary,
Boonton.
The accounting policies of the
reportable segments are the same as those described in the summary of significant accounting policies. The Company allocates resources
and evaluates the performance of segments based on income or loss from operations, excluding interest, corporate expenses and
other income (expenses).
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 8 – SEGMENT INFORMATION (Continued)
Financial information by reportable
segment for the three and six-months ended June 30, 2016 and 2015 is set forth below:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net revenues by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network solutions
|
|
$
|
5,476,420
|
|
|
$
|
5,331,327
|
|
|
$
|
9,689,734
|
|
|
$
|
11,226,486
|
|
Test and measurement
|
|
|
2,133,684
|
|
|
|
2,881,970
|
|
|
|
4,288,785
|
|
|
|
5,614,502
|
|
Total consolidated net revenues of reportable segments
|
|
$
|
7,610,104
|
|
|
$
|
8,213,297
|
|
|
$
|
13,978,519
|
|
|
$
|
16,840,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network solutions
|
|
$
|
1,044,335
|
|
|
$
|
723,556
|
|
|
$
|
1,384,261
|
|
|
$
|
1,694,947
|
|
Test and measurement
|
|
|
(366,652
|
)
|
|
|
137,748
|
|
|
|
(679,099
|
)
|
|
|
354,212
|
|
Income from reportable segments
|
|
|
677,683
|
|
|
|
861,304
|
|
|
|
705,162
|
|
|
|
2,049,159
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other unallocated amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenses
|
|
|
(1,031,071
|
)
|
|
|
(713,410
|
)
|
|
|
(1,979,201
|
)
|
|
|
(1,562,538
|
)
|
Other (expense) income - net
|
|
|
(10,266
|
)
|
|
|
(300
|
)
|
|
|
(51,870
|
)
|
|
|
2,966
|
|
Consolidated income (loss) before income tax provision (benefit)
|
|
$
|
(363,654
|
)
|
|
$
|
147,594
|
|
|
$
|
(1,325,909
|
)
|
|
$
|
489,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network solutions
|
|
$
|
57,957
|
|
|
$
|
55,069
|
|
|
$
|
113,704
|
|
|
$
|
106,130
|
|
Test and measurement
|
|
|
58,881
|
|
|
|
59,502
|
|
|
|
118,992
|
|
|
|
117,625
|
|
Total depreciation and amortization for reportable segments
|
|
$
|
116,838
|
|
|
$
|
114,571
|
|
|
$
|
232,696
|
|
|
$
|
223,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures by segment (a):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Network solutions
|
|
$
|
228,149
|
|
|
$
|
30,841
|
|
|
$
|
283,379
|
|
|
$
|
175,598
|
|
Test and measurement
|
|
|
199,400
|
|
|
|
3,040
|
|
|
|
218,644
|
|
|
|
105,119
|
|
Total consolidated capital expenditures by reportable segment
|
|
$
|
427,549
|
|
|
$
|
33,881
|
|
|
$
|
502,023
|
|
|
$
|
280,717
|
|
Financial information by reportable
segment as of June 30, 2016 and December 31, 2015:
|
|
2016
|
|
|
2015
|
|
Total assets by segment:
|
|
|
|
|
|
|
|
|
Network solutions
|
|
$
|
11,168,936
|
|
|
$
|
10,638,961
|
|
Test and measurement
|
|
|
6,652,062
|
|
|
|
7,153,310
|
|
Total assets for reportable segments
|
|
|
17,820,998
|
|
|
|
17,792,271
|
|
|
|
|
|
|
|
|
|
|
Corporate assets, principally cash and cash equivalents and deferred and current taxes
|
|
|
16,369,427
|
|
|
|
16,914,053
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
$
|
34,190,425
|
|
|
$
|
34,706,324
|
|
|
|
|
|
(a)
|
Net of equipment lease payable of $41,904 (network solutions) for the six-months ended
June 30, 2016.
|
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 8 – SEGMENT INFORMATION (Continued)
Consolidated net revenues by region
were as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
Revenues by region
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Americas
|
|
$
|
5,802,032
|
|
|
$
|
6,155,218
|
|
|
$
|
10,867,668
|
|
|
$
|
12,621,854
|
|
Europe, Middle East, Africa (EMEA)
|
|
|
1,493,030
|
|
|
|
1,559,426
|
|
|
|
2,441,387
|
|
|
|
3,295,268
|
|
Asia Pacific (APAC)
|
|
|
315,042
|
|
|
|
498,653
|
|
|
|
669,464
|
|
|
|
923,866
|
|
Total Sales
|
|
$
|
7,610,104
|
|
|
$
|
8,213,297
|
|
|
$
|
13,978,519
|
|
|
$
|
16,840,988
|
|
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 three-months ended June 30, 2016 and 2015, revenues in the United States for all reportable
segments amounted to $5,611,283 and $5,614,787, respectively. For the six-months ended June 30, 2016 and 2015, revenues in the
United States for all reportable segments amounted to $10,383,454 and $11,407,261, respectively. Shipments to the EMEA region
were largely concentrated in two countries, Israel and Germany. For the three-months ended June 30, 2016, revenues to Israel and
Germany for all reportable segments amounted to $340,750 and $236,005 of all shipments to the EMEA region, respectively. For the
three-months ended June 30, 2015, revenues to Israel and Germany for all reportable segments amounted to $364,921 and $194,708,
respectively of all shipments to the EMEA region. For the six-months ended June 30, 2016, revenues to Israel and Germany amounted
to $373,177 and $472,405 of all the shipments to the EMEA region, respectively. For the six-months ended June 30, 2015, revenues
to Israel and Germany amounted to $908,315 and $661,552, respectively of all shipments to the EMEA region. Shipments to the APAC
region were largely concentrated in China. For the three-months ended June 30, 2016 and 2015, revenues in China for all reportable
segments amounted to $233,999 and $328,747, respectively. For the six-months ended June 30, 2016 and 2015, revenues in China for
all reportable segments amounted to $421,169 and $597,329, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Warranties:
The Company typically provides
one-year warranties on all of its products covering both parts and labor. The Company, at its option, repairs or replaces products
that are defective during the warranty period if the proper preventive maintenance procedures have been followed by its customers.
Historically, the Company’s warranty expense has been minimal.
Leases:
In May 2015, the Company and its
landlord entered into an amendment to the existing lease agreement to remain at its principal corporate headquarters in Hanover
Township, Parsippany, New Jersey through March 31, 2023. Monthly lease payments range from approximately $33,000 in year one to
approximately $41,000 in year eight. Additionally, the Company has available an allowance of approximately $300,000 towards alterations
and improvements to the premises through November 30, 2016 of which the Company has used approximately $165,000 to date. The lease
can be renewed at the Company’s option for one five-year period at fair market value to be determined at term expiration.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 9 - COMMITMENTS AND CONTINGENCIES
(Continued)
The following is a summary of
the Company’s contractual obligations as of June 30, 2016:
Table of Contractual Obligations
|
|
|
|
|
|
|
Payments by Period
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
4-5- Years
|
|
|
5 Years
|
|
Facility Leases
|
|
$
|
3,052,980
|
|
|
$
|
414,960
|
|
|
$
|
1,321,079
|
|
|
$
|
948,094
|
|
|
$
|
368,847
|
|
Operating and Equipment Leases
|
|
|
154,123
|
|
|
|
63,775
|
|
|
|
90,348
|
|
|
|
—
|
|
|
|
—
|
|
|
|
$
|
3,207,103
|
|
|
$
|
478,735
|
|
|
$
|
1,411,427
|
|
|
$
|
948,094
|
|
|
$
|
368,847
|
|
Environmental Contingencies:
In 1982, the Company and the New
Jersey Department of Environmental Protection (the “NJDEP”) agreed upon a plan to correct ground water contamination
at a site, formerly leased by Boonton, located in the Township of Parsippany-Troy Hills, pursuant to which wells have been installed
by the Company. The plan contemplates that the wells will be operated and that soil and water samples will be taken and analyzed
until such time that contamination levels are satisfactory to the NJDEP. In 2014, the Company received approval for a groundwater
permit from the NJDEP to carry out the final Remedial Action Work Plan and report. Under the final phase of the Remedial Action
Work Plan, there will be limited and reduced monitoring and testing as long as concentrations at the site continue on a decreasing
trend.
While management anticipates that
the expenditures in connection with this site will not be substantial in future years, the Company could be subject to significant
future liabilities and may incur significant future expenditures if further contaminants from Boonton’s testing are identified
and the NJDEP requires additional remediation activities. Management is unable to estimate future remediation costs, if any, at
this time. The Company will continue to be liable under the plan, in all future years, until such time as the NJDEP releases it
from all obligations applicable thereto.
At this time, the Company believes
that it is in material compliance with all environmental laws, does not anticipate any material expenditure to meet current or
pending environmental requirements, and generally believes that its processes and products do not present any unusual environmental
concerns. Besides the matter referred to above with the NJDEP, the Company is unaware of any existing, pending or threatened contingent
liability that may have a material adverse effect on its ongoing business operations.
Line of Credit:
The Company maintains a line of
credit with a bank. The credit facility provides borrowing availability of up to 100% of the Company’s money market account
balance and 99% of the Company’s short-term investment securities (U.S. Treasury bills) and, under the terms and conditions
of the loan agreement, the facility is fully secured by the Company’s money fund account and short-term investment holdings
held with the bank. Advances under the facility will bear interest at a variable rate equal to the London InterBank Offered Rate
(“LIBOR”) in effect at the time of borrowing. Additionally, under the terms and conditions of the loan agreement,
there is no annual fee and any amount outstanding under the loan facility may be paid at any time in whole or in part without
penalty.
As of June 30, 2016, the Company
had no borrowings outstanding under the facility and approximately $4,500,000 of borrowing availability. The Company has no current
plans to borrow from this credit facility as it believes its present cash balances will adequately meet near-term working capital
requirements.
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 9 - COMMITMENTS AND CONTINGENCIES
(Continued)
Risks and Uncertainties:
Proprietary information and know-how
are important to the Company’s commercial success. There can be no assurance that others will not either develop independently
the same or similar information or obtain and use proprietary information of the Company. Certain key employees have signed confidentiality
and non-compete agreements regarding the Company’s proprietary information.
The Company believes that its
products do not infringe the proprietary rights of third parties. There can be no assurance, however, that third parties will
not assert infringement claims in the future.