<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended
June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
1-11916
WIRELESS TELECOM GROUP, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2582295
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
East 64 Midland Avenue
Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
(201) 261-8797
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the most recent practicable date.
Common Stock - Par Value $.01 17,434,698
Class Outstanding Shares
At July 7, 1997
<PAGE>
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION
Page(s)
Item 1 -- Consolidated Financial Statements:
Condensed Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996 3
Condensed Statements of Operations for the Three and Six
Months Ended June 30, 1997 and 1996 (unaudited) 4
Condensed Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996 (unaudited) 5
Notes to Interim Condensed Financial Statements (unaudited) 6-7
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings 11
Item 2 -- Changes in Securities 11
Item 3 -- Defaults upon Senior Securities 11
Item 4 -- Submission of Matters to a Vote of Security Holders 11
Item 5 -- Other Information 11
Item 6 -- Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 11.1 13
Exhibit 27 14
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ASSETS -
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,659,879 $ 8,039,128
Accounts receivable -- net of allowance for
doubtful accounts of $81,954 and
$74,707, respectively 4,508,709 4,252,115
Inventories 6,450,543 4,998,575
Prepaid expenses and other current assets 376,701 272,960
---------- ----------
TOTAL CURRENT ASSETS 19,995,832 17,562,778
PROPERTY, PLANT AND EQUIPMENT - NET 1,389,709 1,022,686
OTHER ASSETS 625,784 458,778
---------- ----------
$ 22,011,325 $ 19,044,242
========== ==========
- - LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES
Accounts payable $ 1,278,338 $ 1,219,754
Accrued expenses and
other current liabilities 345,170 159,887
TOTAL CURRENT LIABILITIES 1,623,508 1,379,641
DEFERRED INCOME TAXES 72,264 65,075
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (Note 4):
Preferred stock, $.01 par value, 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000 shares
authorized, 17,584,698 and 17,502,898
shares issued, respectively 175,847 175,029
Additional paid-in-capital 6,328,396 6,044,782
Retained earnings 14,080,785 11,441,707
Treasury stock at cost, 150,000 and 130,000
shares, respectvely (269,475) (61,992)
---------- ----------
20,315,553 17,599,526
---------- ----------
$ 22,011,325 $ 19,044,242
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $ 7,036,286 $ 5,031,174 $14,178,787 $10,379,138
COSTS AND EXPENSES
Cost of sales 1,991,994 1,473,592 3,959,190 2,798,444
Operating expenses 1,832,556 1,188,099 3,582,887 2,381,860
Interest, dividend
and other income (117,638) (76,950) (222,814) (162,400)
TOTAL COSTS AND EXPENSES 3,706,912 2,584,741 7,319,263 5,017,904
INCOME FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES 3,329,374 2,446,433 6,859,524 5,361,234
PROVISION FOR INCOME TAXES 1,186,410 915,965 2,477,280 2,013,819
NET INCOME $ 2,142,964 $ 1,530,468 $ 4,382,244 $ 3,347,415
NET INCOME PER
COMMON SHARE (Note 2):
PRIMARY $.12 $.09 $.25 $.19
FULLY DILUTED $.12 $.09 $.25 $.19
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 4,382,244 $ 3,347,415
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 117,159 76,511
Deferred income taxes 7,189 3,595
Provision for losses on accounts receivable 7,247 14,805
Changes in assets and liabilities:
(Increase) in accounts receivable (263,841) (758,421)
(Increase) in inventories (1,451,968) (797,550)
(Increase) decrease in prepaid expenses
and other assets (84,225) 95,998
Increase in accounts payable and
accrued expenses 243,867 114,368
--------- ---------
Net cash provided by operating activities 2,957,672 2,096,721
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (484,182) (242,899)
Officer's life insurance (186,522) (139,845)
--------- ---------
Net cash (used) for investing activities (670,704) (382,744)
========= =========
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (1,743,166) (1,213,086)
Acquisition of treasury stock (207,483) -
Proceeds from exercise of stock options 284,432 245,063
---------- ----------
Net cash (used) for financing activities (1,666,217) (968,023)
=========== ==========
NET INCREASE IN CASH AND CASH EQUIVALENTS 620,751 745,954
Cash and cash equivalents, at beginning of year 8,039,128 5,839,865
---------- ---------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 8,659,879 $ 6,585,819
========== =========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 2,360,000 $ 1,697,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
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, 1997 and the condensed
consolidated statements of operations for the three and six month periods
ended June 30, 1997 and 1996 and the condensed consolidated statements of cash
flows for the six month periods ended June 30, 1997 and 1996 have been
prepared by the Company without audit. The consolidated financial statements
include the accounts of Wireless Telecom Group, Inc. and its wholly-owned
subsidiary WTG Foreign Sales Corporation. WTG Foreign Sales Corporation began
operations as a subsidiary of the Company in February 1996.
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 only, which are necessary
to present fairly the Company's results for the interim periods being
presented.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's financial statements included in its annual report on Form 10-K for
the year ended December 31, 1996, which is incorporated herein by reference.
Specific reference is made to this report for a description of the Company's
securities and the notes to financial statements included therein.
The results of operations for the three and six month periods ended June 30,
1997 and 1996 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2 - INCOME PER COMMON SHARE
Income per common share is computed by dividing the net income
by the weighted average number of common shares and common equivalent
shares outstanding during each period.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128 "Earnings Per Share" ("SFAS 128"), which changes the method for
calculating earnings per share. SFAS 128 requires the presentation of "basic"
and "diluted" earnings per share on the face of the income statement. SFAS 128
is effective for financial statements for periods ending after December 15,
1997. The Company will adopt SFAS 128 for the year ending December 31, 1997,
and accordingly restate prior periods, as early adoption is not permitted.
Statement No. 128 is not expected to materially differ from primary or fully
diluted earnings per share as reported in Exhibit 11.1 in the Company's
quarterly Form 10-Q.
NOTE 3 - REVOLVING CREDIT LINE
The Company renewed the agreement with its bank which provides for an
unsecured line of credit in the amount of $5,000,000 at the bank's prime
lending rate. There are no direct borrowings currently against the line of
credit. This agreement expires on June 30, 1998.
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<PAGE>
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 - DIVIDENDS
On January 27, 1997 and May 19, 1997, the Company announced the declaration
of quarterly cash dividends of $.05 per share to shareholders of record on
March 24, 1997 and June 23, 1997, respectively. These cash dividends
aggregated $1,743,166 and we re paid by March 31, 1997 and June 30, 1997,
respectively.
It is the Company's present intention to maintain a quarterly dividend policy.
The Company paid cash dividends aggregating $.15 per share for the year ending
December 31, 1996.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Wireless Telecom Group, Inc., formerly Noise Com, Inc., (the "Company")
develops, manufactures and markets a wide variety of electronic noise sources
and test instruments for wireless telecommunications. The Company's products
are used to test the p erformance and capability of satellite, cellular and
personal (PCS) communications, radio, radar, wireless local area network
(WLAN), high-definition television (HDTV) and other communications systems. To
further address the needs of the ever-evolving wireless telecommunications
industry, the Company has been developing and marketing test instruments
designed to fulfill the requirements of such customers. The Company is
expanding its product offerings to these customers as this emerging industr y
is expected to provide an opportunity for substantial growth.
The financial information presented herein includes:
(i) Condensed consolidated balance sheets as of June 30, 1997 and as of
December 31, 1996 (ii) Condensed consolidated statements of operations for
the three and six month periods ended June 30, 1997 and 1996 and (iii)
Condensed consolidated state ments of cash flows for the six month periods
ended June 30, 1997 and 1996.
OPERATIONS
For the six months ended June 30, 1997 as compared to the corresponding period
of the previous year, net sales increased to $14,178,787 from $10,379,138
an increase of $3,799,649 or 36.6%. For the quarter ended June 30, 1997 as
compared to the corresponding period of the previous year, net sales increased
to $7,036,286 from $5,031,174 an increase of $2,005,112 or 39.9%. These volume
increases are the result of the continued growth of commercial applications of
the Company's products of whi ch the most notable are the sales of the
Company's wireless telecommunications instruments.
The Company's gross profit on net sales for the six months ended June 30, 1997
was $10,219,597 or 72.1% as compared to $7,580,694 or 73.0% for the six months
ended June 30, 1996. Gross profit on net sales for the quarter ended June 30,
1997 was $5,044,292 or 71.7% as compared to $3,557,582 or 70.7% for the three
months ended June 30, 1996. Variations in gross profit are attributed to the
mix of product sales. The Company continues to rigidly monitor costs
associated with material acquisition, manufacturing and production.
Operating expenses for the six months ended June 30, 1997 were $3,582,887 or
25.3% of net sales as compared to $2,381,860 or 22.9% of net sales for the six
months ended June 30, 1996. Operating expenses for the quarter ended June 30,
1997 were $1,832,556 or 26.0% of net sales as compared to $1,188,099 or 23.6%
of net sales for the quarter ended June 30, 1996.
For the six months ended June 30, 1997 as compared to the same period of the
prior year, operating expenses increased in dollars by $1,201,027.
Approximately 38% of this increase is due to greater expenditures for research
and development of new products. An additional 43% of the increase is
attributable to greater advertising and selling expenses incurred to generate
sales and to expand customer awareness of the Company's products. Also,
increased rent expense for the Company's larger facility accounted for 5% of
the dollar increase from 1996.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
For the quarter ended June 30, 1997 as compared to the same period of the
prior year, operating expenses increased in dollars by $644,457.
Approximately 32% of this increase is due to greater expenditures for research
and development of new products. An additional 50% of the increase is
attributable to greater advertising and selling expenses incurred to generate
sales and to expand customer awareness of the Company's wireless
telecommunications instruments. Also, increased rent expense for the Company's
larger facility accounted for 6% of the increase in dollars from 1996.
Interest, dividend and other income increased by $60,414 for the six months
ended June 30, 1997 and by $40,688 for the quarter ended June 30, 1997. This
increase was due to additional cash generated by operations.
Net income increased to $4,382,244, or $.25 per share, for the six months
ended June 30, 1997 as compared to $3,347,415, or $.19 per share for the six
months ended June 30, 1996. Net income for the quarter ended June 30, 1997 was
$2,142,964 or $.12 per share as compared to $1,530,468 or $.09 per share for
the three months ended June 30, 1996. The explanation of these increases can
be derived from the analysis given above of operations for the six month
periods ending June 30, 1997 and 1996, resp ectively.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital has increased by $2,189,187 to $18,372,324 at
June 30, 1997, from $16,183,137 at December 31, 1996. At June 30, 1997 the
Company had a current ratio of 12.3 to 1, and a ratio of debt to net worth of
less than .1 to 1. At December 31, 1996 the Company had a current ratio of
12.7 to 1, and a ratio of debt to net worth of less than .1 to 1.
Net cash provided from operations has allowed the Company to meet its
liquidity requirements, research and development activities and capital
expenditures. Operating activities provided $2,957,672 in cash for the six
month period ending June 30, 1997 versus $2,096,721 in cash flows for the
comparable period in 1996. This increase was primarily due to net income
offset by increases in accounts receivable and inventory.
Management believes that accounts receivable have been increasing commensurate
with the increase in sales. The Company has historically been able to turn
over its accounts receivable approximately every two months. This average
collection period has been sufficient to provide the working capital and
liquidity necessary to operate the Company.
Due to the Company's expanding product line, the volume of items and
accordingly the total dollar value of inventory has increased. As the Company
plans to further expand its product line, inventory is being monitored closely
to balance production r equirements while maintaining manageable levels of
goods on hand.
Net cash used for investing activities for the six month periods ending June
30, 1997 and 1996 were $670,704 and $382,744, respectively. Capital
expenditures for the Company's increasing product line and workforce were the
primary use of funds. In addition, funds were used for premiums on life
insurance for certain of the Company's officers and other key employees.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Net cash used for financing activities for the six month periods ending June
30, 1997 and 1996 were $1,666,217 and $968,023, respectively. The payment of
quarterly cash dividends were the primary use of these funds. The Company
also reacquired 20,000 shares of its common stock in the open market during
the second quarter of 1997. These cash outlays were partially offset by
proceeds from the exercise of stock options. The Company increased its
quarterly cash dividend payout by 25% to $.05 per share in the first quarter
of 1997.
On January 27, 1997 and May 19, 1997 the Company announced the declaration of
quarterly cash dividends of $.05 per share payable to shareholders of record
on March 24, 1997 and June 23, 1997, respectively. These cash dividends
aggregated $1,743,166 and were paid by March 31, 1997 and June 30, 1997,
respectively.
In February 1996, the Company established a Foreign Sales Corporation.
On May 13, 1996 the Company announced the declaration of a two-for-one stock
split on the Company's common stock. The split was effective for shareholders
of record on May 22, 1996 and was paid on May 28, 1996. All share and per
share data have bee n retroactively adjusted to show the effects of the split.
During 1996, the Company declared quarterly cash dividends aggregating
$2,602,215 or $.15 per common share. It is the Company's present intention to
maintain a quarterly dividend policy.
The Company believes that its financial resources from working capital
provided by operations and its bank line of credit are adequate to meet
current requirements.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly impact its
business nor does it believe that its business is seasonal.
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<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on May 16, 1997.
(b) The following matter was voted upon and the result was as follows:
(1) The following persons were nominated by management and each was
elected to serve as directors until the next Annual Meeting of
Stockholders or until their successors are elected and shall qualify:
Franklin H. Blecher, Ph.D., Demir Eden, Seymour K ramer, Saul Panken,
Dominick Scaringella, Gary Simonyan, Dale Sydnor, John Wilchek. The
Stockholders voted 16,335,397 shares in the affirmative and 215,907 shares
withheld authority for the directors listed above.
Item 5. OTHER INFORMATION
On May 19, 1997 the Company announced a cash dividend of $.05 per share to
shareholders of record on June 23, 1997. The cash dividend was paid by
June 30, 1997.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the quarterly
period ended June 30, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WIRELESS TELECOM GROUP, INC.
--------------------------
(Registrant)
Date: July 15, 1997 /S/Dale Sydnor
-----------------------------------
Dale Sydnor
Chairman and Chief Executive Officer
Date: July 15, 1997 /S/Eugene Ferrara
------------------------------
Eugene Ferrara
Chief Financial Officer
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<PAGE>
Exhibit 11.1
WIRELESS TELECOM GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET INCOME $ 2,142,964 $1,530,468 $ 4,382,244 $ 3,347,415
--------- --------- --------- ---------
PRIMARY
Weighted average shares 17,435,186 17,329,144 17,422,635 17,310,290
Assumed conversions:
Stock options and warrants 380,954 525,850 397,503 386,161
Total weighted average ---------- ---------- ---------- ----------
shares outstanding 17,816,140 17,854,994 17,820,138 17,696,451
Per share amounts $.12 $.09 $.25 $.19
==== ==== ==== ====
FULLY DILUTED
Weighted average shares 17,435,186 17,329,144 17,422,635 17,310,290
Assumed conversions:
Stock options and warrants 403,463 529,601 421,021 485,622
Total weighted average ---------- ---------- ---------- ----------
shares outstanding 17,838,649 17,858,745 17,843,656 17,795,912
Per share amounts $.12 $.09 $.25 $ .19
==== ==== ==== =====
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 8,659,879
<SECURITIES> 0
<RECEIVABLES> 4,590,663
<ALLOWANCES> 81,954
<INVENTORY> 6,450,543
<CURRENT-ASSETS> 19,995,832
<PP&E> 2,250,069
<DEPRECIATION> 860,360
<TOTAL-ASSETS> 22,011,325
<CURRENT-LIABILITIES> 1,623,508
<BONDS> 0
0
0
<COMMON> 175,847
<OTHER-SE> 20,139,706
<TOTAL-LIABILITY-AND-EQUITY> 22,011,325
<SALES> 14,178,787
<TOTAL-REVENUES> 14,178,787
<CGS> 3,959,190
<TOTAL-COSTS> 7,319,263
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,859,524
<INCOME-TAX> 2,477,280
<INCOME-CONTINUING> 4,382,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,382,244
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
