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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
East 64 Midland Avenue,
Paramus, New Jersey 07652
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(Address of principal executive offices) (Zip Code)
(201) 261-8797
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, $.01 par value per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by check whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
The aggregate market value of Wireless Telecom Group, Inc. Common
Stock, $.01 par value, held by non-affiliates computed by reference to the
closing price as reported by AMEX on February 2, 1998: $100,376,088.
Number of shares of Wireless Telecom Group, Inc. Common Stock, $.01
par value, outstanding as of February 2, 1998: 17,468,498.
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DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of Registrant's Proxy Statement relating to the 1998 Annual
Meeting of Shareholders.
Part IV - Portions of previously filed reports and registration statements.
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PART 1
ITEM 1. BUSINESS
Wireless Telecom Group, Inc. (the "Company"), develops, manufactures
and markets a wide variety of test instruments and electronic noise sources for
wireless telecommunications. The Company's products are primarily used to test
the performance and capability of cellular/PCS and satellite communications
systems. Other applications include radio, radar, wireless local area network
(WLAN) and digital television. 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 industry is expected to provide an opportunity for substantial
growth.
MARKET
Since the Company's incorporation in the State of New Jersey in 1985,
it has been primarily engaged in supplying noise source products to various
customers. In 1993, the product line was expanded to include test equipment
designed specifically for use by commercial customers in wireless
communications. Through the constant introduction of new instruments, as well as
the increased demand by commercial users for pre-existing products,
approximately 95% of the Company's sales in fiscal 1997 were derived from
commercial applications. The remaining sales (approximately 5%) were comprised
of sales made to the United States government (particularly the armed forces)
and prime defense contractors.
The emergence of the wireless telecommunications field continues
to provide the Company with many opportunities. Frost and Sullivan, in a July
1994 report, projected that the US communications test equipment market would
reach $1.3 billion by the year 2000. In 1997, the Company increased its sales by
21% due to continued expansion into the wireless industry. The Company has
combined its expertise in noise generation with sophisticated hardware and
software to provide versatile and powerful test equipment solutions for various
wireless applications. The Company's commitment to educating its market as to
the advantages of its products continues to be paramount in achieving growth.
All of the Company's products are considered test devices; therefore management
considers the Company to operate within a single segment.
PRODUCTS
Since 1993, the Company has introduced 19 test instruments
specifically designed to serve the wireless telecommunications market. These
products perform a variety of tests which are required for performance
verification during the development of wireless communication equipment. They
are also used to monitor the performance of installed equipment. These
state-of-the-art instruments simplify complex measurements and perform analysis
of the devices being tested. Innovative and user-friendly software combined with
powerful hardware are used to create highly accurate, versatile products.
In 1997, the Company continued the expansion of its product line with
the introduction of CATS(TM) (CDMA Automated Test Software), a testing control
and interface management software solution. This software works in conjunction
with the Company's test stations to provide complete and accurate testing of
CDMA-based mobile phones and base stations. The Company's hardware and CATS(TM)
software were selected by the CTIA (Cellular Telecommunications Industry
Association) and the CDMA Development Group (CDG) for its
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certification program. The Company's equipment will be used to determine whether
CDMA handsets conform to industry standards.
The Company's products can perform many different testing functions.
For example, one test is the emulation of multipath fading effects on a wireless
communication link. This test mimics the real world condition of a temporary
fading and/or loss of signals as a mobile receiver (i.e. car phone) moves
through the environment. The user can create multiple scenarios depending on
geographical conditions (i.e. city vs. rural landscape) and determine how the
device under test will perform.
In digital communications systems, bit error rate testing is another
common application of the Company's technology. Noise is added to a signal which
is applied to a receiver and the performance of the receiver is then analyzed.
The noise added by the Company's instrument is measurable and repeatable which
allows the user to determine the performance of the device or devices being
tested. The user also has the ability to compare similar devices to determine
which product is better suited to a particular application. Other tests that can
be performed are distortion measurements of transmitters and receivers which
operate in high density signal environments, noise figure measurements, and
generation of precision carrier to noise ratios. The selling prices for
individual products range from $18,000 to over $100,000 per unit with most sales
occurring between $25,000 to $70,000 per unit. Selling prices for complete test
stations approximate $200,000.
Noise source products are primarily used as a method of testing to
determine if sophisticated communications systems are capable of receiving the
information being transmitted. The widest application for the Company's noise
source products are as a reference standard in test instruments which measure
unwanted noise. This is accomplished by comparing a noise source with known
characteristics to the unwanted noise found in the communications system being
tested. By generating a random noise signal, in combination with a live
transmission signal, a noise generator simulates real world signals and allows
the manufacturer to determine if its product is performing to specifications.
Noise source testing is often more cost-efficient, faster and more accurate than
alternative conventional methods using signal generators.
The Company's noise source products are widely used in radar systems
as part of built-in test equipment to continuously monitor the radar receiver.
The Company has also continually experienced sales growth in the area of
satellite communications where the use of back-up receivers are becoming more
common as the demand for communication availability and reliability is
increasing. Testing by the Company's noise source products assures that the
back-up receiver is always functional and ready should the communication using
the first receiver fail. The Company's noise source products can test satellite
communication receivers for video, telephone and data communications.
The Company's products come in various sizes, styles and models with
varying degrees of capabilities and can be customized to meet particular
customer requirements. They may be incorporated directly into the electronic
equipment concerned or may be stand alone components or devices that are
connected to, or used in conjunction with, such equipment operating from an
external site, in the factory or in the field. The Company's noise source
products range from relatively simple items with no control mechanisms or
auxiliary components to complex, automated components containing computerized or
microprocessor based controls. Prices of noise source devices range from
approximately $200 to $50,000 per unit, with most sales occurring between $700
and $2,500 per unit.
The Company's products have extended useful lives but are generally
recalibrated every year to ensure their accuracy. The Company provides
recalibration services
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for a fee to its domestic and international customers and also calibrates test
equipment manufactured by others. Although such services accounted for less than
2% of fiscal 1997 sales, the Company feels this area will continue to grow as
more products are sold into the global marketplace.
MARKETING AND SALES
The Company's in-house marketing and sales force currently consists of
10 individuals. The Company attempts to promote the sale of its products to
customers and manufacturers' representatives through its product literature,
publication of articles, presentations at technical conferences, direct
mailings, trade advertisements and trade show exhibitions. The Company believes
that extensive advertising is a major factor in generating in-house sales.
The Company's products are sold globally through its in-house sales
people and by over thirty non-exclusive manufacturers' representatives.
Generally, representatives do not stock inventories of the Company's products.
Manufacturers' representatives accounted for an aggregate of 49% and 42% of the
Company's sales for the years ended December 31, 1997 and 1996, respectively.
For the years ended December 31, 1997 and 1996, one of the Company's
representatives accounted for approximately 18% and 15% of sales, respectively.
The Company does not believe that, although there can be no assurance, the loss
of any or all of its representatives would have a material adverse affect on its
business.
The Company's relationship with its representatives is usually
governed by written contracts that run for one year renewable periods terminable
by either party on 60 days prior notice. The contracts generally provide for
exclusive territorial and product representation, and prohibit the handling of
competing products. One of its representatives oversees and supervises its
international sales through foreign representatives. The Company continually
reviews and assesses the performance of its representatives and makes changes
from time to time based on such assessments.
The Company believes that educating its existing and potential
customers as to the advantages and applications of its products is a vital
factor in its continued success as is its commitment to rapid product
introductions and timely revisions to existing products. Management believes
that its products offer state-of-the-art performance combined with outstanding
customer and technical support. The Company has always placed great emphasis on
designing its products to be user-friendly.
CUSTOMERS
Since its inception, the Company has sold its products to more than
1,000 customers. The Company has experienced continued growth in its commercial
business, and will continue to offer additional products to this market. The
Company currently sells the majority of its products to various commercial users
in the wireless communications field. Other sales are made to large defense
contractors which incorporate them into their products for sale to the U.S. and
foreign governments, multi-national concerns and Fortune 500 companies. In
fiscal 1997, approximately 95% of sales were derived from commercial
applications. The remaining sales were comprised of government and military
applications.
For fiscal 1997, no one customer accounted for more than 10% of total
sales. The Company's largest customers vary from year to year. Accordingly,
while the complete loss of any large customer or substantial reduction of sales
to such customers could have a material adverse effect on the Company, the
Company has experienced shifts in sales patterns with such large companies in
the past without any material adverse effect.
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Export sales for Fiscal 1997, were $8,356,000 or approximately 31% of
total sales. These sales were made predominantly to customers in Asia
($4,853,000 or 18%) and Europe ($3,002,000 or 11%). In February 1996, the
Company established a Foreign Sales Corporation (FSC). The Company receives a
federal tax deduction for a portion of its export profits. See Note 4 of Notes
to the Financial Statements.
RESEARCH AND DEVELOPMENT
In 1998, the Company opened an office in San Diego, California to
expand its research and development efforts. The Company maintains an
engineering staff (24 individuals as of February 2, 1998, including 2 located in
the Company's San Diego facility) whose duties include the improvement of
existing products, modification of products to meet customer needs and the
engineering, research and development of new products and applications. Expenses
for research and development involve engineering for improvements and
development of new products for commercial markets. Such expenditures include
the cost of engineering services and engineering-support personnel and were
$2,468,000 and $1,653,000 for the years ended December 31, 1997 and 1996,
respectively. See Note 1 of Notes to the Financial Statements.
The Company intends to continue and increase its research and
development activities and considers these efforts to be vital to its future
business expansion and success.
COMPETITION
With regard to its products, the Company competes against many
companies which utilize similar technology. Some of them are larger and have
substantially greater resources in financial, technical and marketing areas than
the Company. The Company's competitors include Hewlett Packard, Telecom Analysis
Systems and English Electric Valve.
The Company designs its products with special attention to making them
user-friendly and constantly re-evaluates its products for the purpose of
enhancing and improving them. The Company believes that these efforts, along
with its willingness to adapt its products to the particular needs of its
customers and its intensive efforts in customer and technical support, are
factors that add to the competitiveness of its products.
BACKLOG
The Company's backlog of firm orders was approximately $3,000,000 at
December 31, 1997 and $5,400,000 at December 31, 1996. It is anticipated that
all of the backlog orders will be filled during the current year. The stated
backlog is not necessarily indicative of Company sales for any future period nor
is a backlog any assurance that the company will realize a profit from the
orders.
INVENTORY, SUPPLIES AND MANUFACTURING
The Company purchases components, devices and subassemblies from a
wide variety of sources. For example, its noise source diodes, a key component
in all of its noise source products, are made by third parties in accordance
with the Company's designs and specifications. To date, because of its multiple
sources of supply, the Company has experienced only minimal difficulties in
obtaining components and materials for its manufacturing and assembly process.
The Company's inventory policy stresses maintaining substantial raw materials in
order to lessen its dependency on third party suppliers and to improve its
capacity to facilitate production. However, shortages or delays of supplies may,
in the future, have a material adverse impact on the Company's operations. No
third party
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supplier accounted for more than 10% of the Company's total inventory purchases
for Fiscal 1997.
The Company is not party to any formal written contract regarding the
deliveries of its supplies and components. It generally purchases such items
pursuant to written purchase orders of both the individual and blanket variety.
Blanket purchase orders usually cover the purchase of a larger amount of items
at fixed prices for delivery and payment on specific dates.
The Company does not manufacture nor assemble its products on a
continuous mass-production basis. Instead, small lot production techniques are
used. The Company also uses external contract manufacturers for routine tasks
such as printed circuit board assembly and mechanical assembly. The Company
anticipates that its use of contract manufacturers will continue to increase.
Testing of products is generally accomplished at the end of the manufacturing
process and is performed in-house as are all quality control processes. The
Company utilizes modern equipment for the design, engineering, manufacture,
assembly and testing of its products.
WARRANTY AND SERVICE
The Company 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. Repairs that are
necessitated by misuse of such products or are required outside the warranty
period are not covered by the Company's warranty.
In cases of defective products, the customer typically returns them to
the Company's facility. The Company's service personnel replace or repair the
defective items and ship them back to the customer. Generally, all servicing is
done at the Company's plant, and it charges its customers a fee for those
service items that are not covered by warranty. The Company usually does not
offer its customers any formal written service contracts.
PRODUCT LIABILITY COVERAGE
The testing of electronic communications equipment and the accurate
transmission of information entail a risk of product liability by customers and
others. Claims may be asserted against the Company by end-users of any of the
Company's products. The Company has maintained product liability insurance
coverage since August 1991. To date the Company has not received or encountered
any formal claims for liability due to a defective or malfunctioning device made
by it. However, it is possible that the Company may be subject to such claims in
the future and corresponding litigation should one or more of its products fail
to perform or meet certain minimum specifications.
INTELLECTUAL PROPERTY
Proprietary information and know-how are important to the Company's
commercial success. The Company holds no patents nor owns any trademarks. There
can be no assurance that others will not either develop independently the same
or similar information or obtain and use proprietary information of the Company.
Certain key employees have signed confidentiality and non-competition agreements
regarding the Company's proprietary information.
The Company believes that its products do not infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not assert infringement claims in the future.
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EMPLOYEES
On February 2, 1998 the Company had 90 full-time employees, including
its officers, of whom 44 were engaged in manufacturing and repair services, 12
in administration and financial control, 24 in engineering and research and
development, and 10 in marketing and sales.
None of its employees are covered by a collective bargaining agreement
or are represented by a labor union. The Company considers its relationship with
its employees to be satisfactory.
The design and manufacture of the Company's products require
substantial technical capabilities in many disparate disciplines, from mechanics
and computer science to electronics and mathematics. While the Company believes
that the capability and experience of its technical employees compares favorably
with other similar manufacturers, there can be no assurance that it can retain
existing employees or attract and hire the highly capable technical employees it
may need in the future on terms deemed favorable to the Company.
ITEM 2. PROPERTIES
The Company leases a 25,000 square foot facility in Paramus, New
Jersey which is used as its principal corporate headquarters and manufacturing
plant. In 1998, the Company has leased an additional 600 square foot facility in
San Diego, California. See Note 8 of Notes to the Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company knows of no material litigation or proceeding, pending or
threatened, to which the Company is or may become a party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Company has traded on the American Stock
Exchange under the name Wireless Telecom Group, Inc. (Symbol: WTT) since
September 12, 1994. The following table sets forth the high and low sales prices
of the Company's Common Stock for the periods indicated as reported on the
American Stock Exchange. This table has been adjusted to give retroactive effect
for the 2-for-1 stock split paid on May 28, 1996.
<TABLE>
<CAPTION>
High Low
1997 Fiscal Year ---- ----
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<S> <C> <C>
1st Quarter $13.38 $ 9.38
2nd Quarter 11.25 8.81
3rd Quarter 13.00 9.06
4th Quarter 9.63 5.75
1996 Fiscal Year
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1st Quarter $ 8.75 $ 6.19
2nd Quarter 16.75 6.44
3rd Quarter 14.38 7.75
4th Quarter 12.63 9.06
</TABLE>
On February 2, 1998, the closing price of the Common Stock of the
Company as reported was $6.19. On February 2, 1998 the Company had 479
stockholders of record.
Quarterly dividends on the Company's Common Stock have been declared
since June 1993. The table below details quarterly dividends declared for the
past two years. This table has been adjusted to give retroactive effect for the
2-for-1 stock split paid on May 28, 1996.
<TABLE>
<CAPTION>
Quarterly Dividends Per Share
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1st 2nd 3rd 4th
--- --- --- ---
<S> <C> <C> <C> <C>
1997 $.05 $.05 $.05 $.05
1996 $.03 $.04 $.04 $.04
</TABLE>
It is the Company's present intention to maintain a quarterly dividend
policy.
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below as of December 31, 1997,
1996, 1995, 1994 and 1993 were derived from the Company's financial statements.
The information set forth below is qualified in its entirety by reference to,
and should be read in conjunction with, the financial statements and related
notes contained elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Selected Statement of Operations Data:
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Net sales $27,266,649 $22,463,029 $16,040,537 $8,589,872 $5,022,702
Income from continuing
operations before income taxes 12,471,073 11,621,211 8,116,535 3,639,962 1,450,252
Provision for income taxes 4,526,200 4,170,754 3,065,827 1,418,856 564,184
Net income from continuing operations 7,944,873 7,450,457 5,050,708 2,221,106 886,068
Selected Per Share Data (1):
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Net income from continuing operations
per common share - Diluted $.45 $.42 $.29 $.13 $.06
Shares used in computation of
earnings per share - Diluted 17,785,882 17,735,007 17,510,538 16,672,614 15,898,788
Cash dividends per common share $.20 $.15 $.08 $.04 $.06
Selected Balance Sheet Data:
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Working capital $19,452,489 $16,183,137 $11,650,974 $7,162,455 $5,046,007
Total assets 24,211,054 19,044,242 13,402,353 8,117,150 5,780,399
Total liabilities 1,982,823 1,444,716 953,938 467,551 411,110
Shareholders' equity 22,228,231 17,599,526 12,448,415 7,649,599 5,369,289
</TABLE>
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(1) Common share data has been adjusted to reflect the 2-for-1, 3-for-2 and
2-for-1 stock splits paid on May 28, 1996, July 18, 1995 and November 28,
1994, respectively. Dividends paid in 1993 include a special dividend of
$.03 per share paid in February, 1993.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. This discussion
should be read in conjunction with the financial statements and notes thereto
included elsewhere herein.
This report contains forward-looking statements and information that
is based on management's beliefs and assumptions, as well as information
currently available to management. When used in this document, the words
"anticipate," "estimate," "expect," "intend," and similar expressions are
intended to identify forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. Such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should the underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or expected. Among the key factors
that may have a direct bearing on the Company's operating results are
fluctuations in the global economy, the degree and nature of competition, the
risk of delay in product development and release dates and acceptance of, and
demand for, the Company's products.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO 1996
Net sales for the year ended December 31, 1997 were $27,266,649 as
compared to $22,463,029 for 1996, an increase of $4,803,620 or 21.4%. This
volume increase is the result of the continued growth of commercial applications
of the Company's products of which the most notable are the sales of the
Company's wireless telecommunications instruments. Approximately 95% of the
Company's revenues are derived from commercial applications of its products. The
remaining 5% of sales consist of products sold for government and military
applications.
The Company's gross profit on net sales for the year ended December
31, 1997 was $19,142,323 or 70.2% as compared to $16,624,799 or 74.0% as
reported in the previous year. Variations in gross profit are attributed to an
increase in labor costs due to the hiring of additional personnel to support the
Company's expanding product line and other associated costs such as factory
maintenance and depreciation due to its expanding workforce and larger facility.
In addition, the Company can experience variations in gross profit based upon
the mix of product sales as well as variations due to revenue volume and
economies of scale. The Company continues to rigidly monitor costs associated
with material acquisition, manufacturing and production.
Operating expenses for the year ended December 31, 1997 were
$7,101,048 or 26.0% of net sales as compared to $5,356,260 or 23.8% of net sales
for the year ended December 31, 1996. For the year ended December 31, 1997 as
compared to the prior year, operating expenses increased in dollars by
$1,744,788. Approximately 47% of this increase is due to increased expenditures
for research and development of new products. An additional 25% of this increase
is attributable to greater advertising, promotional and selling expenses
incurred to generate sales and to expand customer awareness of the Company's
wireless telecommunications instruments. Additional personnel, wage increases
and bonuses accounted for 8% of the increase in dollars for 1997. Also,
increased rent expense for the Company's larger facility accounted for 6% of the
dollar increase from 1996.
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Interest, dividend and other income increased by $77,126 for the year
ended December 31, 1997. The increase was due to a larger average investment
balance during 1997.
Net income increased to $7,944,873 or $.45 per share on a diluted
basis, for the year ended December 31, 1997 as compared to $7,450,457 or $.42
per share on a diluted basis, for the year ended December 31, 1996. The
explanation of this increase can be derived from the operational analysis
provided above.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995
Net sales for the year ended December 31, 1996 were $22,463,029 as
compared to $16,040,537 for 1995, an increase of $6,422,492 or 40.0%. This
volume increase is the result of the continued growth of commercial applications
of the Company's products of which the most notable are the sales of the
Company's wireless telecommunications instruments. Approximately 96% of the
Company's revenues are derived from commercial applications of its products. The
remaining 4% of sales consist of products sold for government and military
applications.
The Company's gross profit on net sales for the year ended December
31, 1996 was $16,624,799 or 74.0% as compared to $11,797,603 or 73.5% as
reported in the previous year. The Company rigidly monitors costs associated
with material acquisition, manufacturing and production. Gross profit margins
can vary based upon the mix of product sales.
Operating expenses for the year ended December 31, 1996 were
$5,356,260 or 23.8% of net sales as compared to $4,074,619 or 25.4% of net sales
for the year ended December 31, 1995. For the year ended December 31, 1996 as
compared to prior year, operating expenses increased in dollars by $1,281,641.
Approximately 34% of this increase is attributable to greater advertising,
promotional and selling expenses incurred to generate sales and to expand
customer awareness of the Company's wireless telecommunications instruments. An
additional 32% of this increase is due to increased expenditures for research
and development of new products. Bonuses, increased salaries and additional
personnel accounted for 19% of the increase in dollars for 1996. Operating
expenses when viewed as a percentage of net sales have declined by 1.6% due to
the fixed nature of many of these costs and the economies of scale resulting
from the increase in sales volume.
Interest, dividend and other income decreased by $40,879 for the year
ended December 31, 1996. The decrease was due to the recognition in 1995 of a
gain of $101,298 on the sale of the Company's available-for-sale holdings in a
highly liquid mutual fund. The Company's overall investment balance increased in
1996 and an additional $60,419 in interest income was generated in 1996,
excluding the effect of the $101,298 gain mentioned above. The increase in the
Company's investment balance is due to additional cash generated by the
business.
Net income increased to $7,450,457 or $.42 per share on a diluted
basis, for the year ended December 31, 1996 as compared to $5,050,708 or $.29
per share on a diluted basis, for the year ended December 31, 1995. The
explanation of this increase can be derived from the operational analysis
provided above.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital has increased by $3,269,352 to
$19,452,489 at December 31, 1997, from $16,183,137 at December 31, 1996. At
December 31, 1997 the Company had a current ratio of 11.5 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 $4,556,733 in cash for the year
ending December 31, 1997 versus $5,255,044 and $2,739,952 in cash flows for the
years ending December 31, 1996 and 1995, respectively. Cash provided by
operations was primarily due to net income offset by increases in accounts
receivable and inventory.
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 requirements while maintaining manageable levels of goods
on hand.
Net cash used for investing activities were $1,733,068, $756,435 and
$326,588 for the years ending December 31, 1997, 1996 and 1995, 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.
Net cash used for financing activities were $3,316,168, $2,299,346 and
$373,682 for the years ending December 31, 1997, 1996 and 1995, 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 34% in 1997 and 82% in 1996.
The Company entered into an agreement with its bank which provides for
an unsecured line of credit in the amount of $7,000,000 at the bank's prime
lending rate. As of December 31, 1997 the Company had no debt outstanding under
this line of credit. The line of credit agreement, which was renewed, expires on
September 30, 1998.
For details of dividends paid in the years ended December 31, 1997 and
1996 refer to Item 5. It is the Company's present intention to maintain a
quarterly dividend policy.
On January 26, 1998, the Company announced the declaration of a
quarterly cash dividend of $.05 per share to shareholders of record on March 23,
1998. This cash dividend will be paid on April 1, 1998.
The Company believes that its financial resources from working capital
provided by operations and its bank line of credit are adequate to meet its
current needs.
-12-
<PAGE>
<PAGE>
IMPACT OF THE YEAR 2000 ISSUE:
The year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could
potentially result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in other similar normal business
activities. The Company had already planned on upgrading its computer software
to increase operational efficiencies and information analysis and will ensure
that the new systems properly utilize dates beyond December 31, 1999. The cost
of this upgrade project, as it relates to the year 2000 issue, is not expected
to have a material effect on the operations of the Company and will be funded
through operating cash flows.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly
impact its business nor does it believe that its business is seasonal.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in a separate section of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
-13-
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The current directors and executive officers of the Company are
as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Dale Sydnor (1)(2)(3)................... 41 Chairman of the Board, Chief
Executive Officer and
President
Edward Garcia .......................... 33 Executive Vice President,
Chief Operating Officer
Eugene Ferrara (2)...................... 32 Executive Vice President,
Chief Financial Officer and
Secretary
Bent Hessen-Schmidt..................... 36 Vice President, Sales and
Marketing
Inho Alex Kim........................... 35 Vice President, Business
Development
Dominick Scaringella(3)................. 59 Director
John Wilchek (1)(4)..................... 57 Director
Demir Richard Eden (3)(4)............... 58 Director
Franklin H. Blecher .................... 69 Director
</TABLE>
- --------------------
(1) Member of Stock Option Committee
(2) Trustee for Profit Sharing Plan
(3) Member of Compensation Committee
(4) Member of Audit Committee
All directors hold office until the next annual meeting of
shareholders or until their successors are elected and qualify. Executive
officers hold office until their successors are chosen and qualify, subject to
earlier removal by the Board of Directors.
Set forth below is a biographical description of each director and
executive officer of the Company based on information supplied by each of them.
Dale Sydnor has served as Chairman of the Board since May 1997. He was
elected Chief Executive Officer and as a member of the Board of Directors in May
1996 and he has served as the Company's President since July 1995. Mr. Sydnor
also held the position of Chief Operating Officer from April 1991 until August
1996. Mr. Sydnor has been associated with the Company since 1988. Mr. Sydnor has
a bachelor's degree in Electrical Engineering and has undertaken graduate
studies in Business Administration.
-14-
<PAGE>
<PAGE>
Edward Garcia joined the Company in 1990 and has served in various
positions including Chief Engineer since 1992. Mr. Garcia was elevated to Vice
President of Operations in October 1995 and elected Executive Vice President and
Chief Operating Officer in August 1996. He has a bachelor's degree in Electrical
Engineering.
Eugene Ferrara, a certified public accountant, has served as the
Company's Chief Financial Officer since August 1994. Mr. Ferrara has also served
as Executive Vice President since October 1996 and Secretary since July 1997. He
joined the Company as Controller in October 1993. Prior to joining the Company,
he was employed by Witco Corporation and Coopers & Lybrand. He has a bachelor's
degree in Accounting.
Bent Hessen-Schmidt joined the Company in 1988 as an engineer and
later served as the Company's sales and marketing manager. Mr. Hessen-Schmidt,
was elected to the office of Vice President of Sales and Marketing in May 1996.
He has a master's degree in Electrical Engineering.
Inho Alex Kim was elected Vice President of Business Development in
1997. Since joining the Company in January 1995, Mr. Kim has worked in various
positions including Business Development Manager and Marketing Manager. Prior to
joining the Company, Mr. Kim was Vice President of Marketing at Fibersense, a
fiber optic component manufacturer. Mr. Kim has a bachelor's degree in
Electrical Engineering from the Massachusetts Institute of Technology and has
also obtained master's degrees in both Electrical Engineering and Business
Administration.
Dominick Scaringella became a Director of the Company in August 1991.
From 1988 to date, he has served as President of Precision Electronics, Inc., a
manufacturer of electronics products. Previously, Mr. Scaringella served as a
Director and Vice President of MSI Electronics, a manufacturer of
semiconductors.
John Wilchek became a director of the Company in May 1993. He was the
founder, President, CEO and Chairman of Zenith Knitting Mills until his
retirement in 1991.
Demir Richard Eden is and has been since its founding in 1979, the
President, CEO and the Chairman of Intra Computer, Inc., a manufacturing and
engineering consulting company. Mr. Eden has a Master of Science degree in
Electronics and Business Administration from Istanbul Technical University as
well as an MS in Computer Science from New York Polytechnic University. Mr. Eden
became a director of the Company in May 1993.
Franklin H. Blecher, Ph.D. became a director of the Company in
November 1994. In a distinguished thirty-seven year career with AT&T Bell
Laboratories, Dr. Blecher held several significant positions including Executive
Director of the Technical Information Systems Division from 1987 to 1989 and
Executive Director of the Integrated Circuit Design Division from 1982 to 1987
and previously Director of the Mobile Communications Laboratory. Dr. Blecher has
made significant contributions in the area of transistor design for computer
applications. He has also developed widely used telephone and cellular
transmission systems. His laboratory's work in the cellular field was used by
the FCC to establish standards for commercial cellular systems. Dr. Blecher
received his Ph.D. from New York Polytechnic University where he is presently a
member of the Corporate Board and is Past Chairman of the Engineering
Foundation.
The information relating to compliance with Section 16(a) of the
Exchange Act will be set forth in the Company's proxy statement to be filed with
the Securities and Exchange Commission within 120 days of the Company's 1997
year end and is incorporated herein by reference.
-15-
<PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item will be set forth in the
Company's proxy statement to be filed with the Securities and Exchange
Commission within 120 days of the Company's 1997 year end and is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required under this item will be set forth in the
Company's proxy statement to be filed with the Securities and Exchange
Commission within 120 days of the Company's 1997 year end and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
-16-
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Operations for the Three Years in the
Period ended December 31, 1997
Consolidated Statements of Changes in Shareholders' Equity for
the Three Years in the Period ended December 31, 1997
Consolidated Statements of Cash Flows for the Three Years in the
Period ended December 31, 1997
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules have been omitted because the required information
is included in the financial statements or notes thereto or because
they are not required.
(3) Exhibits
3.1 -- Certificate of Incorporation, as amended*
3.2 -- Amended and Restated By-laws*
3.3 -- Amendment to the Certificate of Incorporation***
3.4 -- Amendment to the Certificate of Incorporation****
4.2 -- Form of Stock Certificate*
10.3 -- Summary Plan Description of Profit Sharing Plan of the
Registrant*
10.4 -- Incentive Stock Option Plan of the Registrant and related
agreement*
10.4a -- Amendment to Registrant's Incentive Stock Option Plan and
related agreement****
10.7 -- Form of Manufacturers Representative Agreement*
10.11 -- Credit Agreement with Chemical Bank dated August 10,
1992**
10.11a -- Amendment to Credit Agreement with Chemical Bank****
10.11b -- Amendment to Credit Agreement with Chase Manhattan
Bank*****
10.11c -- Amendment to Credit Agreement with Chase Manhattan Bank
10.12 -- Lease between the Registrant and Paramus Parkway Building
Associates*****
11.1 -- Computation of Per Share Earnings
23.0 -- Consent of Independent Auditors (Lazar Levine & Felix LLP)
27.0 -- Financial Data Schedule (EDGAR version only)
- --------------------
* These exhibits were filed as exhibits to the Company's registration
statement on Form S-18 (File No. 33-42468-NY) and are incorporated
herein by reference.
** Filed as Exhibits to the Company's Annual Report on Form 10-K for the
year ended December 1992.
*** Filed as Exhibits to the Company's Annual Report on Form 10-K for the
year ended December 1994.
**** Filed as Exhibits to the Company's Annual Report on Form 10-K for the
year ended December 1995.
***** Filed as Exhibits to the Company's Annual Report on Form 10-K for the
year ended December 1996.
(b) Reports on Form 8-K -- None
(c) See Item 14(a)(3), above.
(d) See Item 14(a)(2), above.
-17-
<PAGE>
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WIRELESS TELECOM GROUP, INC.
Date: February 12, 1998 By: /s/ Dale Sydnor
-----------------------------------
Dale Sydnor, Chairman of the Board,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Dale Sydnor February 12, 1998
- -----------------------------------------
Dale Sydnor, Chairman of the Board,
Chief Executive Officer
/s/ Eugene Ferrara February 12, 1998
- -----------------------------------------
Eugene Ferrara, Chief Financial Officer
and Secretary
/s/ Dominick Scaringella February 12, 1998
- -----------------------------------------
Dominick Scaringella, Director
/s/ John Wilchek February 12, 1998
- -----------------------------------------
John Wilchek, Director
/s/ Demir Richard Eden February 12, 1998
- -----------------------------------------
Demir Richard Eden, Director
/s/ Franklin H. Blecher February 12, 1998
- -----------------------------------------
Franklin H. Blecher, Director
-18-
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
PAGE
-----
Independent Auditors' Report F - 1
Consolidated Financial Statements:
Balance Sheets as of December 31, 1997 and 1996 F - 2
Statements of Operations for the Three Years in the Period
Ended December 31, 1997 F - 3
Statements of Changes in Shareholders' Equity for the Three
Years in the Period Ended December 31, 1997 F - 4
Statements of Cash Flows for the Three Years in the Period
Ended December 31, 1997 F - 5
Notes to Consolidated Financial Statements F - 6
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
Wireless Telecom Group, Inc.
Paramus, New Jersey
We have audited the accompanying consolidated financial statements of Wireless
Telecom Group, Inc. as listed in the Index under Item 14 in this Form 10-K.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wireless Telecom
Group, Inc. as of December 31, 1997 and 1996 and the results of its operations
and its cash flows for the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
/s/ Lazar levine & FElix LLP
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
January 26, 1998
F-1
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
- ASSETS -
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $7,546,625 $8,039,128
Accounts receivable - net of allowance for doubtful accounts of $120,616
and $74,707 for December 31, 1997 and 1996, respectively 4,728,640 4,252,115
Inventories (Note 1) 8,810,230 4,998,575
Prepaid expenses and other current assets 224,413 272,960
----------- -----------
TOTAL CURRENT ASSETS 21,309,908 17,562,778
PROPERTY, PLANT AND EQUIPMENT - NET (NOTES 1 AND 2) 2,254,829 1,022,686
OTHER ASSETS 646,317 458,778
----------- -----------
$24,211,054 $19,044,242
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 1,652,601 $ 1,219,754
Accrued expenses and other current liabilities 204,818 159,887
----------- -----------
TOTAL CURRENT LIABILITIES 1,857,419 1,379,641
----------- -----------
DEFERRED INCOME TAXES (NOTES 1 AND 6) 125,404 65,075
------------ -------------
COMMITMENTS AND CONTINGENCIES (NOTES 4, 5, 7 AND 8)
SHAREHOLDERS' EQUITY (NOTE 3):
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000 shares authorized, 17,613,498 and
17,502,898 shares issued for December 31, 1997 and 1996, respectively 176,135 175,029
Additional paid-in capital 6,422,971 6,044,782
Retained earnings 15,896,934 11,441,707
Treasury stock, at cost - 145,000 and 130,000 shares, respectively (267,809) (61,992)
----------- -----------
22,228,231 17,599,526
----------- -----------
$24,211,054 $19,044,242
=========== ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-2
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
For The Year Ended December 31,
---------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
NET SALES (NOTE 4) $27,266,649 $22,463,029 $16,040,537
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 8,124,326 5,838,230 4,242,934
Operating expenses (Note 1) 7,101,048 5,356,260 4,074,619
Interest, dividend and other income (429,798) (352,672) (393,551)
------------ ------------ -----------
TOTAL COSTS AND EXPENSES 14,795,576 10,841,818 7,924,002
------------ ------------ -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 12,471,073 11,621,211 8,116,535
Provision for income taxes (Notes 1 and 6) 4,526,200 4,170,754 3,065,827
----------- ----------- ------------
NET INCOME $7,944,873 $ 7,450,457 $ 5,050,708
========== =========== ===========
NET INCOME PER COMMON SHARE: BASIC (NOTE 1) $ 0.46 $ 0.43 $ 0.30
======= ====== ======
NET INCOME PER COMMON SHARE: DILUTED (NOTE 1) $ 0.45 $ 0.42 $ 0.29
======= ====== ======
CASH DIVIDENDS PER COMMON SHARE (NOTE 3) $ 0.20 $ 0.15 $ 0.08
======= ====== ======
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-3
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
Unrealized
Additional Gain (Loss) Treasury
Common Paid-in Retained on Equity Stock
Stock Capital Earnings Securities at Cost Total
------ ---------- -------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $57,020 $4,809,516 $2,973,512 ($121,790) ($68,659) $7,649,599
Dividends - $.08 per share (Note 3) (1,430,755) (1,430,755)
Three-for-two common stock split
(Note 3) 28,510 (28,899) (389)
Exercise of stock options (Note 3) 1,608 1,052,521 3,333 1,057,462
Reversal of unrealized loss (Note 1) 121,790 121,790
Net income 5,050,708 5,050,708
------ --------- ---------- -------- ------- -----------
Balance at December 31, 1995 87,138 5,833,138 6,593,465 -- (65,326) 12,448,415
Dividends - $.15 per share (Note 3) (2,602,215) (2,602,215)
Two-for-one common stock split (Note 87,137 (87,137) --
Exercise of stock options (Note 3) 754 298,781 3,334 302,869
Net income 7,450,457 7,450,457
------ --------- ---------- -------- ------- ----------
Balance at December 31, 1996 175,029 6,044,782 11,441,707 -- (61,992) 17,599,526
DIVIDENDS - $.20 PER SHARE (NOTE 3) (3,489,646) (3,489,646)
PURCHASE OF TREASURY STOCK (207,483) (207,483)
EXERCISE OF STOCK OPTIONS (NOTE 3) 1,106 378,189 1,666 380,961
NET INCOME 7,944,873 7,944,873
------- --------- ---------- -------- ------- ------------
BALANCE AT DECEMBER 31, 1997 $176,135 $6,422,971 $15,896,934 -- ($267,809) $22,228,231
======== ========== =========== ======== ========= ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F-4
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
For The Year Ended December 31,
-------------------------------
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $7,944,873 $ 7,450,457 $5,050,708
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 291,386 169,053 130,574
Deferred income taxes (benefit) 60,329 14,379 (9,985)
Provision for losses on accounts receivable 45,909 39,097 13,571
Changes in assets and liabilities:
(Increase) in accounts receivable (522,434) (927,023) (1,337,980)
(Increase) in inventory (3,811,655) (2,224,650) (1,226,780)
(Increase) Decrease in prepaid expenses and other current
assets 70,547 257,332 (376,528)
Increase in accounts payable and accrued expenses 477,778 476,399 496,372
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,556,733 5,255,044 2,739,952
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,523,529) (616,590) (320,553)
Officer's life insurance (209,539) (139,845) (107,333)
Purchase of mutual fund shares -- -- (2,418,675)
Sale of mutual fund shares -- -- 2,519,973
---------- ---------- ----------
NET CASH USED FOR INVESTING ACTIVITIES (1,733,068) (756,435) (326,588)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (3,489,646) (2,602,215) (1,430,755)
Proceeds from exercise of stock options 380,961 302,869 1,057,073
Acquisition of treasury stock (207,483) -- --
---------- ---------- ----------
NET CASH USED FOR FINANCING ACTIVITIES (3,316,168) (2,299,346) (373,682)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (492,503) 2,199,263 2,039,682
Cash and cash equivalents, at beginning of year 8,039,128 5,839,865 3,800,183
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $7,546,625 $8,039,128 $5,839,865
========== ========== ==========
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Taxes $4,350,000 $3,807,000 $2,748,000
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F-5
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
Wireless Telecom Group, Inc. and Subsidiary (the Company),
manufactures a wide variety of test equipment for wireless
telecommunications which it sells to customers throughout the
United States and through its foreign sales corporation to
certain foreign customers. The consolidated financial statements
include the accounts of Wireless Telecom Group, Inc. and its
wholly-owned subsidiary, WTG Foreign Sales Corporation. All
intercompany balances and transactions have been eliminated. The
Company's accounting policies are in accordance with generally
accepted accounting principles. Outlined below are those
policies which are considered particularly significant.
REVENUE RECOGNITION:
The Company recognizes revenue from all product sales at the
time of shipment.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents. Cash and cash equivalents consist of bank and money
market accounts and commercial paper all stated at cost, which
approximates market value. As of December 31, 1997 and 1996, the
Company had approximately $6,000,000 and $5,000,000,
respectively invested in commercial paper.
CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE:
Financial instruments that potentially subject the Company to
Concentrations of Credit Risk consist principally of cash
investments and accounts receivable.
The Company maintains significant cash investments primarily
with one financial institution. The Company performs periodic
evaluations of the relative credit rating of this institution as
part of its investment strategy.
Concentrations of Credit Risk with respect to accounts
receivable are limited due to the Company's large customer base.
However, at December 31, 1997 primarily all of the Company's
receivables do pertain to the wireless telecommunications
industry.
The carrying amounts of cash and cash equivalents, trade
receivables, other current assets and accounts payable
approximate fair value.
F-6
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
INVESTMENTS IN EQUITY SECURITIES:
Effective January 1, 1994, the Company adopted the provisions of
SFAS 115 Accounting for Certain Investments in Debt and Equity
Securities which requires greater disclosure of these
instruments including the methods to be used in determining fair
value, and when to record unrealized holding gains and losses in
earnings or in a separate component of shareholders' equity.
In October 1995, the Company sold its entire available-for-sale
holdings which were invested in a highly liquid mutual fund. The
Company received proceeds in the amount of $2,519,973 and
realized a gain of $101,298.
INVENTORIES:
Raw material inventories are stated at the lower of cost
(first-in, first-out method) or market. Finished goods and
work-in-process are valued at average cost of production, which
includes material, labor and manufacturing expenses.
Inventories consist of:
<TABLE>
<CAPTION>
December 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Raw materials $4,159,272 $2,554,979
Work-in-process 2,739,634 1,246,512
Finished goods 1,911,324 1,197,084
---------- -----------
$8,810,230 $4,998,575
========== ===========
</TABLE>
FIXED ASSETS AND DEPRECIATION:
Fixed assets are reflected at cost. Depreciation and
amortization are provided on a straight-line basis over the
following useful lives:
Machinery and equipment 8 years
Furniture and fixtures 5 years
Transportation equipment 5 years
Leasehold improvements are amortized over the term of the lease.
Repairs and maintenance are charged to operations as incurred;
renewals and betterments are capitalized.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs are charged to operations when
incurred and are included in operating expenses. The amounts
charged for the years ended December 31, 1997, 1996 and 1995
were $2,467,879, $1,653,224, and $1,248,726, respectively.
F-7
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
INCOME TAXES:
The Company has adopted SFAS 109, Accounting for Income Taxes,
which requires use of the asset and liability approach of
providing for income taxes. This statement requires recognition
of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the
financial statements or tax returns. Under this method deferred
tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse. Under
Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period
that includes the enactment date.
INCOME PER COMMON SHARE:
The Company has adopted SFAS 128 "Earnings Per Share" ("SFAS
128"), which has changed 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. Prior period earnings per share data has been
restated in accordance with Statement 128. Income per common
share is computed by dividing net income by the weighted average
number of common shares and common equivalent shares outstanding
during each period.
USE OF ESTIMATES:
In preparing financial statements in accordance with generally
accepted accounting principles, management makes certain
estimates and assumptions, where applicable, 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. While actual results could
differ from those estimates, management does not expect such
variances, if any, to have a material effect on the financial
statements.
ADVERTISING COSTS:
Advertising expenses are charged to operations during the year
in which they are incurred, and aggregated $665,573, $537,300
and $406,665 for the years ended December 31, 1997, 1996 and
1995, respectively.
POSTRETIREMENT BENEFITS:
During 1997, the Company provided certain health care and life
insurance benefits for its former Chairman and CEO, who retired
during the year. The costs incurred for health benefits were
charged to operations while the insurance benefits are reflected
as a corporate asset for the cash surrender value of the life
insurance.
F-8
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED):
POSTRETIREMENT BENEFITS (CONTINUED):
The Company does not currently provide any other Postretirement
benefits. However, the Company will utilize the provisions of
SFAS 106 "Employers' Accounting for Postretirement Benefits
Other than Pensions", if such a plan is established.
NEW ACCOUNTING PRONOUNCEMENTS:
SFAS 130 "Reporting Comprehensive Income" is effective for years
beginning after December 15, 1997 and early adoption is
permitted. This statement prescribes standards for reporting
comprehensive income and its components. Since the Company
currently does not have any items of other comprehensive income,
a statement of comprehensive income is not yet required.
SFAS 131 "Disclosures About Segments of an Enterprise and
Related Information", is effective for years beginning after
December 15, 1997 and early adoption is encouraged. The Company
does not presently believe that it operates in more than one
identifiable segment.
See also Income Per Common Share, above.
IMPACT OF THE YEAR 2000 ISSUE:
The year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. Any of the Company's computer programs that
have date-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could potentially
result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices, or
engage in other similar normal business activities. The Company
had already planned on upgrading its computer software to
increase operational efficiencies and information analysis and
will ensure that the new systems properly utilize dates beyond
December 31, 1999. The cost of this upgrade project, as it
relates to the year 2000 issue, is not expected to have a
material effect on the operations of the Company and will be
funded through operating cash flows.
F-9
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
2. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following (see
also Note 1):
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
---- -----
<S> <C> <C>
Machinery and equipment $2,737,973 $1,332,795
Furniture and fixtures 209,878 172,386
Transportation equipment 155,254 94,076
Leasehold improvements 183,361 163,680
---------- ----------
3,286,466 1,762,937
Less: accumulated depreciation
and amortization 1,031,637 740,251
---------- ----------
$2,254,829 $1,022,686
========== ==========
</TABLE>
3. SHAREHOLDERS' EQUITY:
On October 27, 1995, the shareholders approved a proposal to
amend the Company's Certificate of Incorporation to increase its
number of authorized Common Shares to 30,000,000.
On May 13, 1996, the Company announced the declaration of a
two-for-one common stock split. The split was effective for
shareholders of record on May 22, 1996 and was paid by May 28,
1996. On June 12, 1995, the Company announced the declaration of
a three-for-two common stock split. The split was effective for
shareholders of record on July 5, 1995 and was paid by July 18,
1995. All share and per share data, as appropriate, reflect the
effects of these splits.
The Company has paid quarterly cash dividends aggregating
$3,489,646, $2,602,215 and $1,430,755 for the years ending
December 31, 1997, 1996 and 1995, respectively.
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related Interpretations in accounting for its employee
stock options because, as discussed below, the alternative fair
value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" requires use of option
valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price
of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation
expense is recognized.
The Company's 1995 Incentive Stock Option Plan (the "Plan") has
authorized the grant of options to purchase up to a maximum of
1,750,000 shares of common stock to be granted to officers and
other key employees. Prior to 1995, the Company had established
an Incentive Stock Option Plan under which options to purchase
up to 1,500,000 shares of common stock were available to be
granted to officers and other key employees. All options granted
have 10 year terms and vest and become fully exercisable after a
maximum of 5 years from the date of grant.
F-10
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
3. SHAREHOLDERS' EQUITY (CONTINUED):
Pro forma information regarding net income and earnings per
share is required by Statement 123, and has been determined as
if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997, 1996 and 1995,
respectively: risk-free interest rates of 6.1%, 6.8% and 8.4%;
dividend yields of 2.6%, 1.8% and 1.8%; volatility factors of
the expected market price of the Company's common stock of 65%,
65% and 69%; and a weighted-average expected life of the options
of 7 years.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock
options.
For purposes of pro forma disclosures, the estimated fair value
of the options is amortized to expense over the options vesting
period. The Company's pro forma information follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income
As reported $7,944,873 $ 7,450,457 $ 5,050,708
Pro forma $7,701,088 $ 7,271,191 $ 4,932,034
Basic earnings per share
As reported $.46 $ .43 $ .30
Pro forma $.44 $ .42 $ .29
Diluted earnings per share
As reported $.45 $ .42 $ .29
Pro forma $.44 $ .41 $ .29
</TABLE>
F-11
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
3. SHAREHOLDERS' EQUITY (CONTINUED):
A summary of stock activity, and related information for the
years ended December 31, follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------- -----------------
<S> <C> <C>
Outstanding, December 31, 1994 432,000 $ 1.01
Granted 636,000 5.29
Exercised (321,540) .87
Canceled (9,000) .67
--------- -----
Outstanding, December 31, 1995 737,460 4.72
Weighted average fair value of options
granted during the year 4.10
Granted 296,000 7.02
Exercised (75,400) 4.02
Canceled (54,000) 6.93
-------- ------
Outstanding, December 31, 1996 904,060 5.40
Weighted average fair value of options
granted during the year 2.30
Granted 401,000 7.89
Exercised (110,600) 3.44
Canceled (101,060) 6.53
-------- ------
Outstanding, December 31, 1997 1,093,400 $6.38
========= =====
Weighted average fair value of options
Granted during the year $2.32
=====
Options exercisable:
December 31, 1995 110,460 $1.39
December 31, 1996 186,460 $3.17
December 31, 1997 238,600 $4.84
</TABLE>
Exercise prices for options outstanding as of December 31, 1997
ranged from $.74 to $11.63. The weighted-average remaining
contractual life of these options is 8 years.
F-12
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
4. OPERATIONAL INFORMATION AND EXPORT SALES:
The Company's operations are in a single industry segment and
involve the manufacture of various types of test equipment. All
of the Company's assets are domestic.
For the years ended December 31, 1997, 1996 and 1995, no
customer accounted for more than 10% of total sales.
In addition to its in-house sales staff, the Company uses
various manufacturers representatives to sell its products. For
the years ended December 31, 1997, 1996 and 1995, one
representative accounted for 18%, 15% and 10% of sales,
respectively.
Export sales, which are all transacted in US dollars, were
approximately 31%, 35% and 28% of total sales for the years
ended December 31, 1997, 1996 and 1995, respectively. Export
sales by geographic location are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Asia $4,853,000 $4,312,000 $2,383,000
Europe 3,002,000 2,677,000 1,500,000
Other 501,000 852,000 633,000
---------- ---------- ----------
$8,356,000 $7,841,000 $4,516,000
========== ========== =========
</TABLE>
5. 401 (K) PROFIT SHARING PLAN:
During the year ended December 31, 1990 the Company adopted a
resolution to institute a 401 (k) profit sharing plan effective
January 1, 1991, to cover all eligible employees. The Company's
contributions to the plan are discretionary but may not exceed
6% of participants' compensation. Contributions to the plan for
the years ended December 31, 1997, 1996 and 1995 aggregated
$48,485, $42,013, and $34,810, respectively.
F-13
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
6. INCOME TAXES:
The components of income tax expense are as follows (see Note
1):
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $3,541,780 $3,252,712 $2,426,309
State 924,091 903,663 649,503
Deferred:
Federal 9,736 11,139 (7,735)
State 50,593 3,240 (2,250)
--------- ---------- ----------
$4,526,200 $4,170,754 $3,065,827
=========== ========== ==========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Uniform capitalization of inventory
costs for tax purposes $23,689 $ 5,100
Allowances for doubtful accounts 43,776 25,400
Deferred tax liabilities:
Tax over book depreciation (152,120) (75,126)
Other (40,749) (20,449)
--------- -------
Net deferred tax liability ($125,404) ($65,075)
======== =======
</TABLE>
The following is a reconciliation of the maximum statutory
federal tax rate to the Company's effective tax rate:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996 1995
---- ---- ----
% of % of % of
Pre Tax Pre Tax Pre Tax
Earnings Earnings Earnings
-------- -------- ---------
<S> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income tax 5.2 5.2 5.3
Foreign Sales Corporation (0.8) (1.0) 0.0
Other (3.1) (3.3) (1.5)
---- ---- ----
36.3% 35.9% 37.8%
==== ==== ====
</TABLE>
F-14
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
7. REVOLVING CREDIT LINE:
The Company has renewed its agreement with its bank which
provides for an unsecured line of credit in the amount of
$7,000,000 with interest at the bank's prime rate. As of
December 31, 1997, there were no direct borrowings under this
agreement. This agreement currently expires on September 30,
1998.
8. COMMITMENTS AND CONTINGENCIES:
The Company provides one year warranties on all 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. The costs related to these
warranties are not certain and cannot be reasonably estimated.
In addition, based upon past experience, these costs have been
minimal and therefore, no provision for these costs has been
made.
The Company currently leases a 25,000 square foot facility in
Paramus, New Jersey which is used as its principal corporate
headquarters and manufacturing plant. Rent expense for the years
ended December 31, 1997, 1996 and 1995 was $378,930, $188,302
and $114,530, respectively. The lease on this facility includes
an option for the Company to rent additional space within the
complex. The lease on this space terminates in 2006 and the
Company has an option to renew this lease for an additional 5
year term. In 1998, the Company has leased an additional 600
square foot facility in San Diego, California.
The Company is also responsible for its proportionate cost of
utilities, repairs, taxes and insurance. The future minimum
lease payments are shown below:
<TABLE>
<S> <C>
1998 $ 188,889
1999 200,000
2000 201,389
2001 212,500
Remaining five years 1,113,895
----------
$1,916,673
==========
</TABLE>
F-15
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of selected quarterly financial data
(in thousands, except per share amounts).
<TABLE>
<CAPTION>
1997
QUARTER
---------------------------------
1ST 2ND 3RD 4TH
--- --- --- ---
<S> <C> <C> <C> <C>
NET SALES $7,143 $7,036 $6,762 $6,326
GROSS PROFIT 5,175 5,044 4,640 4,283
OPERTING INCOME 3,425 3,212 2,796 2,608
NET INCOME 2,239 2,143 1,801 1,762
DILUTED NET INCOME PER SHARE $.13 $.12 $.10 $.10
<CAPTION>
1996
Quarter
----------------------------------
1st 2nd 3rd 4th
--- --- --- ----
<S> <C> <C> <C> <C>
Net sales $5,348 $5,031 $6,059 $6,025
Gross Profit 4,023 3,557 4,625 4,420
Operting income 2,830 2,369 3,182 2,888
Net income 1,817 1,530 2,062 2,041
Diluted net income per share $.10 $.09 $.12 $.11
</TABLE>
F-16
<PAGE>
<PAGE>
EXHIBIT 10.11c
THE CHASE MANHATTAN BANK
CHASE
MASTER GRID NOTE
$ 7,000,000.00
New York, N.Y.
November 18, 1997
but in no event later than September 31, 1998
On the due date for each Advance or on Demand the undersigned hereby
promises to pay to the order of THE CHASE MANHATTAN BANK (hereinafter the
"Bank") at its offices at 270 Park Avenue, New York, the principal sum of the
aggregate unpaid principal amount of each Advance (as recorded on the grid
attached hereto or on any additional pages thereof) made by the Bank to the
undersigned. The undersigned further promises to pay interest on the unpaid
principal amount of each Advance (computed on the basis of the actual number of
days elapsed on the 947968462basis of a 360-day year) on November 31, 1997
(specific date) and the last day of each month (insert "month", "third month",
"quarter", etc.) thereafter, and at maturity, at the per annum rate of interest
recorded for such equal to the rate of Prime, but in no event higher than the
maximum interest rate permitted under applicable law. The interest rate shall
change on each date on which the Prime Rate changes. Prime Rate shall be the
rate of interest as is publicly announced at the Bank's principal office from
time to time as its prime rate. Interest on any past due amount, whether at the
due date thereof or by acceleration, shall be paid at a rate of one percent per
annum in excess of the above stated rate, but in no event higher than the
maximum permitted under applicable law. Time for payment extended by law shall
be included in the computation of interest.
If any principal of any Advance hereunder which bears interest at a fixed
rate of interest is paid prior to the scheduled maturity date set forth on the
grid attached hereto or on any additional pages thereof (whether by
acceleration, prepayment or otherwise), the undersigned also agrees to pay to
the Bank, on demand, such amount as is reasonably determined by the Bank to
represent the aggregate losses, costs, and expenses incurred or suffered by the
Bank as a result of such payment (including losses, costs and expenses resulting
from not receiving the rate of interest set forth above for the entire loan
period and/or the liquidation or redeployment of funds). A certificate of the
Bank setting forth the foregoing amount shall, absent manifest error, be
conclusive and binding for all purposes.
The undersigned hereby grants to the Bank a lien on, security interest in
and right of set-off against all monies, securities and other property of the
undersigned and the proceeds thereof now or hereafter delivered to remain with
or in transit in any manner to the Bank, its correspondents or its agents from
or for the undersigned, whether for safekeeping, custody, pledge, transmission,
collection or for any other purpose, or coming into possession, control or
custody of the Bank, Chase Securities Inc., or any other affiliate of the Bank
in any way, and, also, any balance of any deposit account and credits of the
undersigned with, and any other claims of the undersigned against, the Bank,
Chase Securities Inc., or any other affiliate of the Bank at any time existing
(all of which are hereinafter collectively called "Collateral"), as collateral
security for the payment of this note and all other liabilities and obligations
now or hereafter owed by the undersigned to the Bank, contracted with or
acquired by the Bank, whether joint, several, direct, indirect, absolute,
contingent, secured, unsecured, matured or unmatured (all of which are hereafter
collectively called "Liabilities"), hereby authorizing the Bank at any time or
times, without notice or demand, to apply any such Collateral or any proceeds
thereof to any of such Liabilities in such amounts as it in its sole discretion
may select, whether contingent, unmatured or otherwise and whether any other
collateral security therefor is deemed adequate or not. The undersigned
authorizes the Bank to deliver to others a copy of this note as written
notification of the undersigned's transfer of a security interest in the
Collateral. The Bank further is authorized at any time or times, without demand
or notice to the undersigned, to transfer to or register in the name of its
nominee or nominees all or any part of the Collateral and to exercise any and
all rights, power and privileges (except that prior to an Event of Default the
Bank shall not have the right to vote or to direct the voting of any
Collateral). The collateral security and other rights described herein shall be
in addition to any other collateral security described in any separate agreement
executed by the undersigned.
In the event of: default in the prompt payment of any Liabilities; default
in any other indebtedness of the undersigned (which, for the purposes of this
sentence, means the undersigned or any guarantor, surety or endorser of, or any
person or entity which has pledged any of its property to secure, any
Liabilities); complete or partial liquidation or suspension of any business of
the undersigned; dissolution, merger, consolidation or reorganization of the
undersigned; death of or loss of employment by an individual or any
Form #03-9257
109659
<PAGE>
<PAGE>
member of any partnership (if the undersigned is an individual or a
partnership); failure to furnish any financial information or to permit
inspection of any books or records at the Bank's request; a representation,
warranty or statement of the undersigned proving false in any material respect
when made or furnished; general assignment for the benefit of creditors or
insolvency of the undersigned; commencement of any proceeding supplementary to
any execution relating to any judgment against the undersigned; attachment;
distraint, levy, execution or final judgment against the undersigned or against
the property of the undersigned; assignment by the undersigned of any equity in
any of the Collateral without the written consent of the Bank; appointment of a
receiver, conservator, rehabilitator or similar officer for the undersigned, or
for any property of the undersigned; tax assessment by the United States
Government or any state or political subdivision thereof against the
undersigned; the taking of possession of, or assumption of control over, all or
any substantial part of the property of the undersigned by the United States
Government, or any state or political subdivision thereof, foreign government
(de facto or de jure) or any agency of any thereof; calling of a meeting of
creditors, assignment for the benefit of creditors or bulk sale or notice
thereof; any mortgage, pledge of or creation of a security interest in any
assets without the consent of the holder of this note; filing of a petition in
bankruptcy, commencement of any proceeding under any bankruptcy or debtor's law
(or similar law analogous in purpose or effect) for the relief, reorganization,
composition, extension, arrangement or readjustment of any of the obligations by
or against the undersigned; then, and in any of those events (each, an "Event of
Default"), all Liabilities, although otherwise unmatured or contingent, shall
forthwith become due and payable without notice or demand and notwithstanding
anything to the contrary contained herein or in any other instrument. Further,
acceptance of any payments shall not waive or affect any prior demand or
acceleration of these Liabilities, and each such payment made shall be applied
first to the payment of accrued interest, then to the aggregate unpaid principal
or otherwise as determined by the Bank in its sole discretion. The undersigned
hereby irrevocably consents to the in personam jurisdiction of the federal
and/or state courts located within the State of New York over controversies
arising from or relating to this note or the Liabilities and IRREVOCABLY WAIVES
TRIAL BY JURY and the right to interpose any counterclaim or offset of any
nature in any such litigation. The undersigned further irrevocably waives
presentment, demand, protest, notice of dishonor and all other notices or
demands of any kind in connection with this note or any Liabilities. The
undersigned shall be jointly and severally liable hereon.
The Bank may, at its option, at any time when in the judgment of the Bank
the Collateral is inadequate or the Bank deems itself insecure, or upon or at
any time after the occurrence of an Event of Default, proceed to enforce payment
of the same and exercise any of or all the rights and remedies afforded the Bank
by the Uniform Commercial Code (the "Code") or otherwise possessed by the Bank.
Any requirement of the Code for reasonable notice to the undersigned shall be
deemed to have been complied with if such notice is mailed, postage prepaid, to
the undersigned and such other persons entitled to notice, at the addresses
shown on the records of the Bank at least four (4) days prior to the time of
sale, disposition or other event requiring notice under the Code.
The undersigned agrees to pay to the Bank, as soon as incurred, all costs
and expenses incidental to the care, preservation, processing, sale or
collection of or realization upon any of or all the Collateral or incurred in
connection with the enforcement or collection of this note, or in any way
relating to the rights of the Bank hereunder, including reasonable inside or
outside counsel fees and expenses. Each and every right and remedy hereby
granted to the Bank or allowed to it by law shall be cumulative and not
exclusive and each may be exercised by the Bank from time to time and as often
as may be necessary. The undersigned shall have the sole responsibility for
notifying the Bank in writing that the undersigned wishes to take advantage of
any redemption, conversion or other similar right with respect to any of the
Collateral. The Bank may release any party (including any partner of any
undersigned) without notice to any of the undersigned, whether as co-makers,
endorsers, guarantors, sureties, assigns or otherwise, without affecting the
liability of any of the undersigned hereof or any partner of any undersigned
hereof.
Upon any transfer of this note, the undersigned hereby waiving notice of
any such transfer, the Bank may deliver the Collateral or any part thereof to
the transferee who shall thereupon become vested with all the rights herein or
under applicable law given to the Bank with respect thereto and the Bank shall
thereafter forever be relieved and fully discharged from any liability or
responsibility in the matter; but the Bank shall retain all rights hereby given
to it with respect to any Liabilities and Collateral not so transferred. No
modification or waiver of any of the provisions of this note shall be effective
unless in writing, signed by the Bank, and only to the extent therein set forth;
nor shall any such waiver be applicable except in the specific instance for
which given. This agreement sets forth the entire understanding of the parties,
and the undersigned acknowledges that no oral or other agreements, conditions,
promises, understandings, representations or warranties exist in regard to the
obligations hereunder, except those specifically set forth herein.
Form #03-9257 2
109659
<PAGE>
<PAGE>
If the undersigned is a partnership, the agreement herein contained shall
remain in force and applicable, notwithstanding any changes in the individuals
composing the partnership or any release of any partner or partners and their
partners shall not thereby be released from any liability. If this note is
signed by more than one party, the terms "undersigned", as used herein, shall
include and mean the "undersigned and each of them" and each undertaking herein
contained shall be their joint and several undertaking, provided, however, that
in the phrases "of the undersigned", "by the undersigned", "against the
undersigned", "for the undersigned", "to the undersigned", and "on the
undersigned", the term "undersigned" shall mean the "undersigned or any of
them", and the Bank may release or exchange any of the Collateral belonging to
any of the parties hereto and it may renew or extend any of the liabilities of
any of them and may make additional advances or extensions of credit to any of
them or release or fail to set off any deposit account or credit to any of them
or grant other indulgences to any of them, all from time to time, before or
after maturity hereof, with or without further notice to or assent from any of
the other parties hereto. Each reference herein to the Bank shall be deemed to
include its successors, endorsers, and assigns, in whose favor the provisions
hereof shall also inure. Each reference herein to the undersigned shall be
deemed to include the heirs, executors, administrators, legal representatives,
successors and assigns of the undersigned, all of whom shall be bound by the
provisions hereof.
The provisions of this note shall be construed and interpreted and all
rights and obligations hereunder determined in accordance with the laws of the
State of New York, and, as to interest rates, applicable Federal Law.
Wireless Telecom Group, Inc.
/s/ Wireless Telecom Group Inc.
-------------------------- -----------------------------------
Address: Address: E. 64 Midland Avenue
-------------------------- Paramus, New Jersey 07652
Form #03-9257 3
109659
<PAGE>
<PAGE>
Exhibit 11.1
WIRELESS TELECOM GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
For the year ended December 31, 1997
----------------------------------------------
Per Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
Net income from operations $7,944,873
==========
BASIC EPS
Income available to common shareholders 7,944,873 17,438,834 $.46
====
EFFECT OF DILUTIVE SECURITIES
Stock options -- 347,048
---------- ----------
DILUTED EPS
Income available to common
shareholders plus assumed conversions $7,944,873 17,785,882 $.45
========== ========== ====
<CAPTION>
For the year ended December 31, 1996
----------------------------------------------
Per Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
Net income from operations $7,450,457
==========
BASIC EPS
Income available to common shareholders 7,450,457 17,334,750 $.43
====
EFFECT OF DILUTIVE SECURITIES
Stock options -- 400,257
---------- ----------
DILUTED EPS
Income available to common
shareholders plus assumed conversions $7,450,457 17,735,007 $.42
========== ========== ====
<CAPTION>
For the year ended December 31, 1995
----------------------------------------------
Per Share
Income Shares Amount
------ ------ ---------
<S> <C> <C> <C>
Net income from operations $5,050,708
==========
BASIC EPS
Income available to common shareholders 5,050,708 17,101,928 $.30
====
EFFECT OF DILUTIVE SECURITIES
Stock options -- 408,610
---------- ----------
DILUTED EPS
Income available to common
shareholders plus assumed conversions $5,050,708 17,510,538 $.29
========== ========== ====
</TABLE>
-19-
<PAGE>
<PAGE>
EXHIBIT 23.0
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 26, 1998 which appears on page
F-1 of Form 10-K for Wireless Telecom Group, Inc. For the year ended December
31, 1997.
/s/ Lazar Levine & Felix LLP
-----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
February 11, 1998
<PAGE>
<TABLE> <S> <C>
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