<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ______________ to ________________
Commission file number 1-11916
WIRELESS TELECOM GROUP, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2582295
-------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
East 64 Midland Avenue,
Paramus, New Jersey 07652
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(201) 261-8797
------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- -------------------------------------- ------------------------------
Common Stock, par value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
------------------------------------------------------
none
(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 March 15, 2000: $119,869,778
Number of shares of Wireless Telecom Group, Inc. Common Stock, $.01 par
value, outstanding as of March 15, 2000: 17,214,754
===============================================================================
DOCUMENTS INCORPORATED BY REFERENCE
N/A
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PART I
ITEM 1. BUSINESS
Wireless Telecom Group, Inc., a New Jersey corporation (the "Company"),
develops, manufactures and markets a wide variety of electronic noise sources,
and in addition, until March 11, 1999, test instruments for the wireless
telecommunication industry. The Company's products have historically been
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. On March 11, 1999,
the Company consummated the sale of its wireless and satellite test equipment
business ("Wireless Test Equipment Business"). See "Sale of Division".
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 Company expanded its product line to include test
equipment designed specifically for use by commercial customers in wireless
communications, and, as stated above, disposed of such business on March 11,
1999. Approximately 82% of the Company's sales in fiscal 1999 were derived from
commercial applications. The remaining sales (approximately 18%) were comprised
of sales made to the United States government (particularly the armed forces)
and prime defense contractors.
PRODUCTS
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 and interference in devices and components utilized in
communications equipment. 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.
Coupled with other electronic devices, noise generators are also an
effective means of jamming, blocking and disturbing enemy radar and other
communications, as well as insulating and protecting friendly communications. In
the jamming mode, the Company's noise source products block out or disrupt
unwanted radar and radio transmissions generally without being detected.
The Company's noise source products are used in radar systems as part
of built-in test equipment to continuously monitor the radar receiver and in
satellite communications where the use of back-up receivers are becoming more
common 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
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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 for a fee to its domestic and international customers and
also calibrates test equipment manufactured by others. Although such services
accounted for less than 5% of fiscal 1999 sales, the Company feels this area
will continue to grow as more products are sold into the global marketplace.
SALE OF DIVISION
On March 11, 1999 the Company consummated the sale of all of its
Wireless Test Equipment Business to Telecom Analysis Systems, Inc., a New Jersey
corporation ("TAS"), for a purchase price of approximately $19 million pursuant
to an Asset Purchase Agreement, dated January 7, 1999, between the Company and
TAS (the "Asset Purchase Agreement"). Also, pursuant to the Asset Purchase
Agreement, the Company purchased TAS' products relating to single-function noise
generation (the "Noise Assets"), and the Company and TAS entered into
non-competition agreements with the businesses associated with the respective
products purchased by each. In consideration for TAS' sale of the Noise Assets
and TAS' entering into a non-compete agreement with the Company, the Company
paid $2.5 million to TAS.
MARKETING AND SALES
As of March 15, 2000, the Company's in-house marketing and sales force
currently consists of two 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, manufacturers' 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, 1999 and
1998, respectively. For the years ended December 31, 1999 and 1998, one of the
Company's representatives accounted for approximately 20% and 7% 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. 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.
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CUSTOMERS
Since its inception in 1985, the Company has sold its products to more
than 1,000 customers. The Company currently sells the majority of its products
to various commercial users in the communications industry. Other sales are made
to large defense contractors which incorporate the Company's products into their
products for sale to the U.S. and foreign governments, multi-national concerns
and Fortune 500 companies. In fiscal 1999, approximately 82% of sales were
derived from commercial applications. The remaining sales were comprised of
government and military applications.
For fiscal 1999, 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. There can be no assurance,
however, that the Company will not experience future shifts in sales patterns
not having a material adverse effect on its business.
Export sales, including sales of discontinued operations, for fiscal
1999 were $2,529,000, or approximately 30% of total sales. These sales were made
predominantly to customers in Asia ($1,366,000 or 16%) and Europe ($884,000 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 5 of Notes to the Financial Statements.
RESEARCH AND DEVELOPMENT
The Company currently maintains an engineering staff (six individuals
as of March 15, 2000) 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 $581,000 and $2,348,000 for
the years ended December 31, 1999 and 1998, respectively. See Note 1 of Notes to
the Financial Statements.
Research and development expenditures for fiscal 1999 have decreased
from fiscal 1998 levels due to the sale of the Wireless Test Equipment Business.
Notwithstanding, the Company continues to consider its research and development
efforts to be vital to its future business expansion and success.
COMPETITION
The Company competes against many companies which utilize similar
technology to that of the Company, some which are larger and have substantially
greater resources and expertise in financial, technical and marketing areas than
the Company, including Hewlett Packard and Agilent Technologies.
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.
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BACKLOG
The Company's backlog of firm orders was approximately $1,100,000 at
December 31, 1999, compared to $1,600,000 at December 31, 1998. 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. 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 supplier accounted for more
than 10% of the Company's total inventory purchases for fiscal 1999. See
"-Marketing and Sales."
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. See "-Marketing and
Sales."
The Company does not manufacture nor assemble its products on a
continuous mass-production basis. Instead, small lot production techniques are
used. 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. See "-Marketing and Sales."
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.
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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.
EMPLOYEES
As of March 15, 2000, the Company had 28 full-time employees, including
its officers, 14 of whom are engaged in manufacturing and repair services, 6 in
administration and financial control, 6 in engineering and research and
development, and 2 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 located in Paramus,
New Jersey which is currently being used as its principal corporate headquarters
and manufacturing plant. The Company also owns a 44,000 square foot facility
located in Mahwah, New Jersey. In connection with the sale of the Wireless Test
Equipment Business to TAS in March 1999, the Company subleased 40% of the Mahwah
premises (excluding the warehouse area of the leased premises) to TAS for a
period of twelve months. Such lease will terminate as of March 31, 2000. Also,
in 1998, the Company leased a 600 square foot facility in San Diego, California
but has since terminated this lease. See Notes 3 and 8 of Notes to the Financial
Statements.
ITEM 3. LEGAL PROCEEDINGS
On March 15, 1999, a complaint was filed in the Superior Court of the
State of California for the County of Orange. The action was brought by Mr.
David Day, an individual; David Day d/b/a Day Test & Measurements and Day Test &
Measurements, as plaintiffs against Noise Com, Inc., a New Jersey corporation;
Wireless Telecom Group, Inc., a New Jersey corporation; Telecom Analysis
Systems, Inc., Bowthorpe PLC and Does 1 through 100, inclusive, as defendants.
The action sets forth several causes of action, including breach of contract and
fraud relating to an alleged failure of the defendants to pay full commissions
allegedly owed to the plaintiff. The plaintiffs allege damages in excess of $1
million from each of the defendants. The Company believes that the damages that
might be awarded to the plaintiffs in connection with this matter would not have
a material adverse effect on the Company's business, financial condition or
results of operations.
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.
<TABLE>
<CAPTION>
2000 Fiscal Year High Low
---------------- ---- ---
<S> <C> <C>
1st Quarter $9.88 $3.00
(through March 15, 2000)
1999 Fiscal Year
----------------
1st Quarter $2.69 $1.50
2nd Quarter 2.94 1.56
3rd Quarter 2.31 1.69
4th Quarter 4.31 1.50
1998 Fiscal Year
----------------
1st Quarter $9.63 $5.63
2nd Quarter 7.88 2.31
3rd Quarter 3.81 1.44
4th Quarter 2.38 1.44
</TABLE>
On March 15, 2000 the Company had approximately 438 stockholders of
record.
The Company declared quarterly dividends from June 1999 until March
1998. The table below details quarterly dividends declared for the past two
years. On May 15, 1998, the Company ceased paying a quarterly dividend.
Quarterly Dividends/Share of Common Stock
<TABLE>
<CAPTION>
Fiscal Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
1999 $.00 $.00 $.00 $.00
1998 $.05 $.00 $.00 $.00
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below as of December 31, 1999,
1998, 1997, 1996 and 1995 were derived from the Company's financial statements
after restatement for discontinued operations accounting (See Note 1 of Notes to
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>
SELECTED STATEMENT OF OPERATIONS DATA: 1999 1998 1997 1996 1995
-------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $6,848,557 $6,834,815 $6,762,833 $5,843,225 $4,982,629
Income from continuing operations 3,682,962 1,785,048 2,052,573 1,908,172 1,494,788
Before income taxes
Provision for income taxes 1,260,169 329,443 744,953 684,827 565,030
Net income from continuing operations 2,422,793 1,455,605 1,307,620 1,223,345 929,758
SELECTED PER SHARE DATA(1):
---------------------------
Net income from continuing operations $.14 $.08 $.07 $.07 $.05
per common share - Diluted
Shares used in computation of earnings 17,441,552 17,548,460 17,785,882 17,735,007 17,510,538
per share - Diluted
Cash dividends per common share $.00 $.05 $.20 $.15 $.08
SELECTED BALANCE SHEET DATA:
----------------------------
Working Capital $24,775,641 $22,078,429 $19,452,489 $16,183,137 $11,650,974
Total Assets 33,365,375 24,091,815 24,211,054 19,044,242 13,402,353
Total liabilities 4,890,425 1,252,420 1,982,823 1,444,716 953,938
Shareholders' equity 28,474,950 22,839,395 22,228,231 17,599,526 12,448,415
<FN>
- ---------------------
(1) Common share data has been adjusted to reflect the 2-for-1 and 3-for-2 stock splits paid on May 28, 1996
and July 18, 1995, respectively.
</FN>
</TABLE>
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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 information is
presented after restatement for discontinued operations accounting (See Note 1
of Notes of Financial Statements). 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, 1999 COMPARED TO 1998
Net sales for the year ended December 31, 1999 were $6,848,557 as
compared to $6,834,815 for 1998, an increase of $13,742 or .2%.
The Company's gross profit on net sales for the year ended December 31,
1999 was $4,827,232 or 70.5% as compared to $4,082,377 or 59.7% as reported in
the previous year. 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, 1999 were $2,384,782
or 34.8% of net sales as compared to $2,701,676 or 39.5% of net sales for the
year ended December 31, 1998. For the year ended December 31, 1999 as compared
to the prior year, operating expenses decreased in dollars by $316,894. This
decrease is attributable to a reduction in research and development expense as
well as a decrease in bad debt expense. The decrease in these and other expenses
relate to the sale of the Wireless Test Equipment Business in March, 1999.
(see Note 1 of Notes of Financial Statements).
Interest, dividend and other income increased by $836,165 for the year
ended December 31, 1999. The increase was due to a larger average investment
balance in 1999 resulting primarily from the proceeds from the sale of the
Wireless Test Equipment Business.
Net income from continuing operations increased to $2,422,793 or $.14
per share on a diluted basis, for the year ended December 31, 1999 as compared
to $1,455,605 or $.08 per share on a diluted basis, for the year ended December
31, 1998. The explanation of this increase can be derived from the operational
analysis provided above.
RESULTS OF CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO 1997
Net sales for the year ended December 31, 1998 were $6,834,815 as
compared to $6,762,833 for 1997, an increase of $71,982 or 1.1%.
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The Company's gross profit on net sales for the year ended December 31,
1998 was $4,082,377 or 59.7% as compared to $4,122,444 or 60.9% 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 work force 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, 1998 were $2,701,676
or 39.5% of net sales as compared to $2,176,472 or 32.2% of net sales for the
year ended December 31, 1997. For the year ended December 31, 1998 as compared
to the prior year, operating expenses increased in dollars by $525,204. This
increase is attributable to greater advertising, promotional and selling
expenses incurred to generate sales and to expand customer awareness of the
Company's products. Additional personnel, wage increases and bonuses, and rent
expenses for the Company's larger facility were also a factor.
Interest, dividend and other income increased by $297,746 for the year
ended December 31, 1998. The increase was due to a larger average investment
balance in 1998.
Net income from continuing operations increased to $1,455,605 or $.08
per share on a diluted basis, for the year ended December 31, 1998 as compared
to $1,307,620 or $.07 per share on a diluted basis, for the year ended December
31, 1997. The explanation of this increase can be derived from the operational
analysis provided above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital has increased by $2,697,212 to
$24,775,641 at December 31, 1999, from $22,078,429 at December 31, 1998. At
December 31, 1999, the Company had a current ratio of 19.9 to 1, and a ratio of
debt to net worth of .17 to 1. At December 31, 1998, the Company had a current
ratio of 24.3 to 1, and a ratio of debt to net worth of less than .1 to 1.
Net cash provided from operations has allowed the Company to meet its
liquidity requirements, research and development activities and capital
expenditures. Operating activities provided $2,594,885 in cash for the year
ending December 31, 1999 compared to $3,213,069 and $4,556,733 in cash flows for
the years ending December 31, 1998 and 1997, respectively. Cash provided by
operations was primarily due to net income, decreases in accounts receivable and
increases in accounts payable, accrued expenses and income taxes payable.
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 sale of the Wireless Test Equipment Business line, the
volume of items and accordingly the total dollar value of inventory has
decreased. Inventory is being monitored to balance anticipated production
requirements while maintaining manageable levels of goods on hand.
Net cash provided from investing activities for 1999 amounted to
$11,515,921 as opposed to net cash used for investing activities of $1,059,403
and $1,733,068 for the years ending December 31, 1998 and 1997, respectively.
From 1997 to 1998, capital expenditures for the new leased facilities in Mahwah
were the primary use of funds. For 1999, the sale of the Wireless Test Equipment
Business was the primary source of cash provided.
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Net cash used for financing activities was $1,003,026, $668,567 and
$3,316,168 for the years ending December 31, 1999, 1998 and 1997, respectively.
For 1999, the principal use of cash was for the acquisition of treasury stock.
The payment of quarterly cash dividends was the primary use of these funds in
1998 and 1997. 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 in 1998 and
1997.
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 aggregated $877,545 and was paid on March 31, 1998. On
May 15, 1998 the Company ceased paying a quarterly cash dividend.
For details of dividends paid in the years ended December 31, 1998 and
1997 refer to Item 5. The Company does not currently anticipate paying cash
dividends.
The Company believes that its financial resources from working capital
provided by operations are adequate to meet its current needs.
IMPACT OF THE YEAR 2000 ISSUE
Prior to January 1, 2000 the Company assessed its information
technology ("IT") and non-IT computer systems and operations to identify and
determine the extent to which any such systems would be susceptible to potential
malfunctions as a result of the Year 2000 ("Y2K") problem. The Y2K problem arose
because many existing computer programs use only the last two digits to refer to
a particular year, rather than four. Therefore, these computer programs do not
properly recognize a year that begins with "20" instead of the familiar "19".
Any of the Company's systems utilizing such last two-digit system to refer to a
particular year may not recognize the year 2000; but rather, assume the year to
be 1900. This could potentially result in major system failures or
miscalculations, causing disruption of operations, including, but not limited
to, a temporary inability to process transactions, billing and customer service
or to engage in normal business activities.
The Company upgraded its computer systems and operations to ensure that
all such systems are Y2K compliant. The Company estimates that it incurred
aggregate costs of $60,000 for such upgrade. Such costs came from the Company's
general working capital funds.
In addition to assessing its own computer systems and operations, the
Company conducted an external review of its vendors and suppliers. The Company
does not believe that its relationship with any one vendor or supplier is
material to the extent that such party's Y2K noncompliance would have a material
adverse effect on the Company's business and operations. Notwithstanding, the
Company may experience problems to the extent that a large number of its
suppliers or vendors are not Y2K compliant, and there can be no assurance that
such problems will not have a material adverse effect on the Company.
The Company believes, although there can be no assurance, that its
computer systems and operations are fully Y2K compliant. The Company does not
currently have any contingency plans in the event such systems and operations
are not, and there can be no assurance that any effective contingency plans will
be developed or implemented. To date, in the year 2000, the Company has not
experienced any internal or external Y2K problems.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly
impact its business nor does it believe that its business is seasonal.
11
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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.
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>
Edward Garcia (1)(2)(3).......................... 35 Chairman of the Board, Chief Executive
Officer and President
Henry L. Bachman (4)............................. 70 Director
John Wilchek (1)(4).............................. 59 Director
Demir Richard Eden (3)........................... 60 Director
Franklin H. Blecher ............................. 71 Director
<FN>
- -----------------------------
(1) Member of Stock Option Committee
(2) Trustee for Profit Sharing Plan
(3) Member of Compensation Committee
(4) Member of Audit Committee
</FN>
</TABLE>
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.
12
<PAGE>
Edward Garcia has served as Chairman of the Board, Chief Executive
Officer and President of the Company since January 1999. Prior to becoming
Chairman of the Board, Chief Executive Officer and President, Mr. Garcia had
served as Vice President of Operations since October 1995 and Executive Vice
President and Chief Operating Officer since August 1996. Mr. Garcia joined the
Company in 1990 and has served in various positions, including sales manager and
Chief Engineer.
Henry L. Bachman became a director of the Company in January 1999 and
has a 48 year career in the electronics industry. From 1951 to 1996, Mr. Bachman
served as Vice President of Hazeltine, a subsidiary of Marconi Aerospace Systems
Inc., Advanced Systems Division, on a full-time basis and currently provides
consulting services to them on a part-time basis. Mr. Bachman was President of
The Institute of Electrical and Electronics Engineers (IEEE). Mr. Bachman has a
Bachelor's degree and MS degree from Polytechnic University as well as completed
the Advanced Management Program at Harvard Sloan School of Management.
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, became a director of the Company in May 1993 and
served as President of the Company from October 1998 to January 1999. Mr. Eden
has also served as President, CEO and the Chairman of Intra Computer, Inc., a
manufacturing and engineering consulting company, since its founding in 1979.
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.
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
13
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December 31,
1999, 1998 and 1997, the annual and long-term compensation for the Company's
chief executive officer and its most highly compensated executive officers whose
annual compensation exceeded $100,000 for the fiscal year ended December 31,
1999 (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- -------------
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS COMPENSATION (1)
------------------ ---- ------ ----- ----- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Edward Garcia
- -Chairman of the Board, CEO
and President 1999 $152,650 $100,000(2) - 80,000 $8,081
1998 $128,376 - - 75,000 $7,947
1997 $125,185 $ 20,000 - 25,000 $7,802
<FN>
- -----------------------
(1) Includes the total estimated value for the use of an automobile of
$1,645, $1,470 and $1,420 for fiscal years ended December 31, 1999,
1998 and 1997, respectively, for Mr. Garcia. Also includes the total
premiums paid on split-dollar life insurance for Mr. Garcia and the
matching contribution to the Wireless Telecom Group 401(k) Profit
Sharing Plan.
(2) Granted to Mr. Garcia in connection with the successful sale of the
Wireless Test Equipment Business.
</FN>
</TABLE>
14
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
TERM
-----------------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE OF
OPTION/SARS FISCAL YEAR BASE PRICE
NAME GRANTED (#) 1999 ($/SH) EXPIRATION DATE 5% ($) 10% ($)
- ------------------------------ ----------- ----------- ------------ --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Edward Garcia
- -Chairman of the Board, CEO 80,000 24.4% $1.69 4/15/09 $84,901 $215,155
and President
</TABLE>
15
<PAGE>
AGGREGATE OPTION EXERCISES IN THE
YEAR ENDED DECEMBER 31, 1999 AND OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options In-the-Money Options at
at Fiscal Year End (1) Fiscal Year End (2)
------------------------------- -------------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward Garcia
- -Chairman, CEO and - - 72,000 148,000 $8,438 $153,750
President
<FN>
- ----------------
(1) Based upon the closing market price of the Company's Common Stock ($3.188 per share) on December 31,
1999.
(2) Based the aggregate value realized upon the date of exercise.
</FN>
</TABLE>
16
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Company's
Common Stock owned as of March 15, 2000 by (i) each person who is known by the
Company to own beneficially more than 5% of its outstanding Common Stock, (ii)
each director and named executive officer, and (iii) all officers and directors
as a group. Except as otherwise set forth below, the address of each such person
is c/o Wireless Telecom Group, Inc., E. 64 Midland Avenue, Paramus, New Jersey,
07652.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAMES AND ADDRESSES BENEFICIAL OWNERSHIP (1) PERCENTAGE OWNED(2)
------------------- ------------------------ -------------------
<S> <C> <C>
Edward Garcia (3) 142,000 *
Demir Richard Eden (4) 45,000 *
120-10 Audley Street
Kew Gardens, NY
John Wilchek (5) 32,000 *
211 Mohican Lane
Franklin Lakes, NJ
Franklin H. Blecher (6) 22,500 *
6039 Collins Ave.
Miami Beach, FL
Henry Bachman (7) 17,000 *
5 Brandy Road
Cold Spring Harbor, NY
All officers and directors 258,500 1.5%
as a group (5 persons) (3) (4) (5) (6) (7)
FMR Corp (8) 1,606,500 9.3%
82 Devonshire Street
Boston, MA 02109
<FN>
- ---------------------------
* Less than one percent.
(1) Except as otherwise set forth in the footnotes below, all shares are
beneficially owned, and the sole voting and investment power is held by
the persons named.
(2) Based upon 17,214,754 shares of Common Stock outstanding as of March
15, 2000.
(3) Includes 92,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of March 15, 2000. Excludes
an aggregate of 128,000 shares of Common Stock subject to options which
are not exercisable within 60 days of March 15, 2000.
(4) Includes 20,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of March 15, 2000. Excludes
an aggregate of 80,000 shares of Common Stock subject to options which
are not exercisable within 60 days of March 15, 2000.
17
<PAGE>
(5) Includes 20,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of March 15, 2000. Excludes
an aggregate of 80,000 shares of Common Stock subject to options which
are not exercisable within 60 days of March 15, 2000.
(6) Includes 20,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of March 15, 2000. Excludes
an aggregate of 80,000 shares of Common Stock subject to options which
are not exercisable within 60 days of March 15, 2000.
(7) Includes 16,000 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of March 15, 2000. Excludes
an aggregate of 64,000 shares of Common Stock subject to options which
are not exercisable within 60 days of March 15, 2000.
(8) Based on information set forth in Form 13-G dated February 14, 2000,
filed with the Securities and Exchange Commission.
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
<TABLE>
<S> <C>
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, 1999 and 1998
Consolidated Statements of Operations for the Three Years in
the Period ended December 31, 1999
Consolidated Statements of Changes in Shareholders' Equity for
the Three Years in the Period ended December 31, 1999
Consolidated Statements of Cash Flows for the Three Years in the Period
ended December 31, 1999
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 (1)
3.2 Amended and Restated By-laws (1)
3.3 Amendment to the Certificate of Incorporation (3)
3.4 Amendment to the Certificate of Incorporation (4)
4.2 Form of Stock Certificate (1)
10.3 Summary Plan Description of Profit Sharing Plan of the Registrant (1)
10.4 Incentive Stock Option Plan of the Registrant and related agreement (1)
10.4a Amendment to Registrant's Incentive Stock Option Plan
and related agreement (4)
</TABLE>
18
<PAGE>
<TABLE>
<S> <C>
10.7 Form of Manufacturers Representative Agreement (1)
10.11 Credit Agreement with Chemical Bank dated August 10, 1992 (2)
10.11a Amendment to Credit Agreement with Chemical Bank (4)
10.11b Amendment to Credit Agreement with Chase Manhattan Bank (5)
10.11c Amendment to Credit Agreement with Chase Manhattan Bank (6)
10.12 Lease between the Company and Paramus Parkway Building Associates (5)
10.13 Lease, July 14, 1998, between the Company and Panorama
Park, Inc., as amended
10.14 Asset Purchase Agreement, dated as of January 7, 1999,
between the Company and Telecom Analysis Systems, Inc.(7)
10.15 Non-Competition Agreement, dated March 11, 1999, between the Company and Telecom
Analysis Systems, Inc. relating to the Test Equipment Assets (7)
10.16 Non-Competition Agreement, dated March 11, 1999, between the Company and Telecom
Analysis Systems, Inc. relating to the Noise Assets (7)
11.1 Computation of Per Share Earnings
23.1 Consent of Independent Auditors (Lazar Levine & Felix LLP)
27.1 Financial Data Schedule (EDGAR version only)
<FN>
- --------------------
(1) Filed as an exhibit to the Company's Registration Statement on Form
S-18 (File No.33-42468-NY) and incorporated by reference herein.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1992 and incorporated by reference herein.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1994 and incorporated by reference herein.
(4) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1995 and incorporated by reference herein.
(5) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1996 and incorporated by reference herein.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 1997 and incorporated by reference herein.
(7) Filed as an exhibit to the Company's Current Report on Form 8-K, dated
March 11, 1999, filed with the Securities and Commission on March 26,
1999.
(b) Reports on Form 8-K -- None
(c) See Item 14(a)(3), above.
(d) See Item 14(a)(2), above.
</FN>
</TABLE>
<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: March 27, 2000 By: /s/ Edward Garcia
-------------------------------------
Edward Garcia, 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.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Edward Garcia Chairman of the Board, March 27, 2000
- -------------------------------------- Chief Executive Officer
Edward Garcia
- -------------------------------------- Director
John Wilchek
/s/ Demir Richard Eden Director March 27, 2000
- -------------------------------------
Demir Richard Eden
/s/ Franklin H. Blecher Director March 27, 2000
- -------------------------------------
Franklin H. Blecher
- -------------------------------------- Director
Henry L. Bachman
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Exhibits
- --------
<S> <C>
10.13 Lease, July 14, 1998, between the Company and Panorama Park, Inc., as amended
11.1 Computation of Per Share Earnings
23.1 Consent of Independent Auditors (Lazar Levine & Felix LLP)
27.1 Financial Data Schedule (EDGAR version only)
</TABLE>
21
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
Independent Auditors' Report F - 2
Consolidated Financial Statements:
Balance Sheets as of December 31, 1999 and 1998 F - 3
Statements of Operations for the Three Years in the Period
Ended December 31, 1999 F - 4
Statement of Changes in Shareholders' Equity for the Three
Years in the Period Ended December 31, 1999 F - 5
Statements of Cash Flows for the Three Years in the Period
Ended December 31, 1999 F - 6
Notes to Consolidated Financial Statements F - 7
</TABLE>
F - 1
<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 audits 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, 1999 and 1998 and the results of its operations
and its cash flows for the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
------------------------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
February 11, 2000, except
as to Note 10 which is dated
March 2, 2000
F - 2
<PAGE>
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
- ASSETS -
<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
------------ -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,139,504 $ 9,031,724
Accounts receivable - net of allowance for doubtful accounts of
$44,681 and $134,013 for 1999 and 1998, respectively 919,404 2,146,563
Inventories 1,389,887 1,201,291
Prepaid expenses and other current assets 1,636,245 982,803
Net assets of discontinued operations (Note 1) - 9,661,858
------------ -----------
TOTAL CURRENT ASSETS 26,085,040 23,024,239
------------ -----------
PROPERTY, PLANT AND EQUIPMENT - NET (Notes 1 and 2) 4,857,565 975,769
------------ -----------
OTHER ASSETS:
Goodwill net of accumulated amortization of $134,615 2,365,385 -
Other assets 57,385 91,807
------------ -----------
2,422,770 91,807
------------ -----------
$ 33,365,375 $24,091,815
============ ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 287,488 $ 780,410
Accrued expenses and other current liabilities 772,011 165,400
Current portion of mortgage payable (Note 3) 31,509 -
Income taxes payable 218,391 -
------------ -----------
TOTAL CURRENT LIABILITIES 1,309,399 945,810
------------ -----------
DEFERRED INCOME TAXES (Note 7) 206,610 306,610
------------ -----------
LONG TERM LIABILITIES:
Mortgage payable (Note 3) 3,229,976 -
Other 144,440 -
------------ -----------
TOTAL LONG TERM LIABILITIES 3,374,416 -
------------ -----------
COMMITMENTS AND CONTINGENCIES (Notes 6, 8 and 10)
SHAREHOLDERS' EQUITY (Note 4):
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000 shares authorized,
17,702,298 shares issued for 1999 and 1998 177,023 177,023
Additional paid-in capital 6,631,061 6,631,061
Retained earnings 22,937,701 16,299,120
Treasury stock, at cost - 588,900 and 145,000 shares, respectively (1,270,835) (267,809)
------------ -----------
28,474,950 22,839,395
------------ -----------
$ 33,365,375 $24,091,815
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES (Note 5) $6,848,557 $6,834,815 $6,762,833
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 2,021,325 2,752,438 2,640,389
Operating expenses (Note 1) 2,384,782 2,701,676 2,176,472
Interest, dividends and other income (1,240,512) (404,347) (106,601)
---------- ---------- ----------
TOTAL COSTS AND EXPENSES 3,165,595 5,049,767 4,710,260
---------- ---------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 3,682,962 1,785,048 2,052,573
Provision for income taxes (Note 7) 1,260,169 329,443 744,953
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS 2,422,793 1,455,605 1,307,620
DISCONTINUED OPERATIONS:
(Loss) income from operations of a product division
disposed of - net of income taxes of ($1,540),( $39,805)
and $3,781,247 for 1999, 1998 and 1997, respectively (Note 1) 2,611 (175,874) 6,637,253
---------- ---------- ----------
Gain on sale of test equipment product division - net of income
taxes of $2,228,640 4,213,177 - -
---------- ---------- ----------
NET INCOME $6,638,581 $1,279,731 $7,944,873
========== ========== ==========
NET INCOME (LOSS) PER COMMON SHARE - BASIC
Continuing operations $0.14 $0.08 $0.07
Discontinued operations 0.24 (0.01) 0.39
---------- ---------- ----------
$0.38 $0.07 $0.46
========== ========== ==========
NET INCOME (LOSS) PER COMMON SHARE - DILUTED
Continuing operations $0.14 $0.08 $0.07
Discontinued operations 0.24 (0.01) 0.38
---------- ---------- ----------
$0.38 $0.07 $0.45
========== ========== ==========
CASH DIVIDENDS PER COMMON SHARE $0.00 $0.05 $0.20
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
Additional Treasury
Common Paid-in Retained Stock
Stock Capital Earnings at Cost Total
-------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $175,029 $6,044,782 $ 11,441,707 $ (61,992) $17,599,526
Dividends - $.20 per share - - (3,489,646) - (3,489,646)
Purchase of treasury stock - - - (207,483) (207,483)
Exercise of stock options 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
Dividends - $.05 per share - - (877,545) - (877,545)
Exercise of stock options 888 208,090 - - 208,978
Net income - - 1,279,731 - 1,279,731
-------- ---------- ----------- ----------- -----------
Balance at December 31, 1998 177,023 6,631,061 16,299,120 (267,809) 22,839,395
PURCHASE OF TREASURY STOCK - - - (1,003,026) (1,003,026)
NET INCOME - - 6,638,581 - 6,638,581
-------- ---------- ----------- ----------- -----------
BALANCE AT DECEMBER 31, 1999 $177,023 $6,631,061 $22,937,701 $(1,270,835) $28,474,950
======== ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 6,638,581 $ 1,279,731 $ 7,944,873
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 322,208 468,725 291,386
Deferred income taxes (100,000) 181,206 60,329
Provision for losses on accounts receivable 227,287 13,397 45,909
Amortization of non-compete covenant (55,560) - -
Gain on sale of discontinued division (6,441,816) - -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 999,872 2,103,290 (522,434)
(Increase) decrease in inventory (188,596) 948,087 (3,811,655)
(Increase) decrease in prepaid expenses and other current assets (38,447) (900,142) 70,547
Increase (decrease) in accounts payable, accrued expenses and
income taxes 1,231,356 (881,225) 477,778
----------- ------------ ------------
Net cash provided by operating activities 2,594,885 3,213,069 4,556,733
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,101,701) (1,089,322) (1,523,529)
Officers' life insurance 20,152 29,919 (209,539)
Proceeds from sale of discontinued division 17,230,730 - -
Proceeds from covenant not to compete 200,000 - -
Purchase of noise product line (2,500,000) - -
Expenses related to disposal of division (2,333,260) - -
----------- ------------ ------------
Net cash provided by (used in) investing activities 11,515,921 (1,059,403) (1,733,068)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid - (877,545) (3,489,646)
Proceeds from exercise of stock options - 208,978 380,961
Acquisition of treasury stock (1,003,026) - (207,483)
----------- ------------ ------------
Net cash (used) for financing activities (1,003,026) (668,567) (3,316,168)
----------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 13,107,780 1,485,099 (492,503)
Cash and cash equivalents, at beginning of year 9,031,724 7,546,625 8,039,128
----------- ------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF YEAR $22,139,504 $ 9,031,724 $ 7,546,625
=========== ============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Taxes $ 3,133,500 $ 1,038,000 $ 4,350,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION:
Wireless Telecom Group, Inc. and Subsidiaries (the Company),
manufactures a wide variety of electronic noise sources 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 subsidiaries, WTG Foreign Sales Corporation
and NC Mahwah, Inc. In March 1999, the Company consummated the sale of
the assets of a product division which was in the business of
designing, developing, assembling, manufacturing and selling certain
wireless and satellite test equipment for a purchase price of
approximately $19 million. The net assets sold to the purchaser
aggregated approximately $10,000,000. The agreement also contained
non-compete clauses and a provision for a portion of the purchase
price ($2 million) to be placed in escrow to secure payment of certain
indemnification obligations and/or purchase price adjustments. As of
December 31, 1999, the balance held in escrow aggregated $1.5 million
of which all but approximately $21,000 was released to the Company in
March 2000.This product division is being accounted for as
discontinued operations and accordingly, amounts in the financial
statements and related notes for all periods shown have been restated
to reflect discontinued operations accounting. Operating results of
the discontinued operations are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- -----------
<S> <C> <C> <C>
Net sales $1,522,617 $10,465,848 $20,503,776
---------- ----------- -----------
Earnings (loss) before taxes 4,151 (215,679) 10,418,500
Income taxes (benefit) 1,540 (39,805) 3,781,247
---------- ----------- -----------
Net earnings (loss) from
discontinued operations $ 2,611 $ (175,874) $ 6,637,253
========== =========== ===========
</TABLE>
The product division sold by the Company occupied the facilities
located in Mahwah, New Jersey (see Note 8) and the purchaser subleased
this facility for a twelve month period. In December 1999, the Company
exercised its option to purchase this building (see Note 3).
The agreement also provided for the Company to acquire the noise
generation product line of the above purchaser and incorporate these
assets and related business into its on-going operations. The cost of
these assets, including a non-compete agreement, aggregated
$2,500,000.
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.
F - 7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
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.
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, 1999 primarily all of the Company's receivables do pertain to the
telecommunications industry.
The carrying amounts of cash and cash equivalents, trade receivables,
other current assets, accounts payable and long term debt approximate
fair value.
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, 1999 and 1998, the Company had approximately $18,000,000
and $6,000,000, respectively, invested in commercial paper.
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.
F - 8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
INVENTORIES (CONTINUED):
Inventories, including the portion related to discontinued operations,
consist of:
<TABLE>
<CAPTION>
December 31,
1999 1998
---------- ----------
<S> <C> <C>
Raw materials $1,177,637 $ 688,471
Work-in-process 96,019 254,150
Finished goods 116,231 258,670
---------- ----------
$1,389,887 $1,201,291
========== ==========
</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:
Building and improvements 39 years
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.
INTANGIBLE ASSETS:
Goodwill relative to the purchase of the noise generation product line
(see Note 1), aggregating $2,500,000, is being amortized on a straight
line basis over 15 years. Amortization expense for the year and
accumulated amortization as of December 31, 1999 aggregated $134,615.
REVENUE RECOGNITION:
The Company recognizes revenue from all product sales at the time of
shipment.
RESEARCH AND DEVELOPMENT COSTS:
Research and development costs, including those of discontinued
operations, are charged to operations when incurred and are included
in operating expenses. The amounts charged for the years ended
December 31, 1999, 1998 and 1997 were $581,383, $2,348,353 and
$2,467,879, respectively.
F - 9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
ADVERTISING COSTS:
Advertising expenses, including those of discontinued operations, are
charged to operations during the year in which they are incurred and
aggregated $233,740, $697,849 and $665,573 for the years ended
December 31, 1999, 1998 and 1997, respectively.
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 differences 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 (see also Note 7).
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. Income per common share is
computed by dividing net income by the weighted average number of
common shares and common equivalent sales outstanding during each
period.
POSTRETIREMENT BENEFITS:
The Company does not currently provide any 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.
ACCOUNTING PRONOUNCEMENTS:
SFAS 130 "Reporting Comprehensive Income" is effective for years
beginning after December 15, 1997. This statement prescribes standards
for reporting other 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 31,
1997. The Company does not presently believe that it operates in more
than one identifiable segment, however, see Note 5 regarding certain
geographical sales information.
F - 10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 1 - DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued):
RECLASSIFICATIONS:
Certain items on the financial statements for the 1998 and 1997 years
have been reclassified to conform to the current year's presentation.
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, consists of the following:
<TABLE>
<CAPTION>
December 31,
1999 1998
---------- ----------
<S> <C> <C>
Building and improvements $3,547,711 $ -
Machinery and equipment 1,247,382 1,209,435
Furniture and fixtures 226,285 351,000
Transportation equipment 121,522 86,472
Leasehold improvements 192,259 353,300
---------- ----------
5,335,159 2,000,207
Less: accumulated depreciation and amortization 1,177,594 1,024,438
---------- ----------
4,157,565 975,769
Add: land 700,000 -
---------- ----------
$4,857,565 $ 975,769
========== ==========
</TABLE>
NOTE 3 - MORTGAGE PAYABLE:
In December 1999, the Company exercised its option to purchase a
facility, which was previously being leased, for a purchase price of
$4,225,000 (including land). At the time of closing, the Company
assumed the mortgage note, on this property, in the amount of
$3,263,510. This note bears interest at an annual rate of 7.45%,
requires monthly payments of principal and interest of $23,750 and
matures in August 2013.
Maturities of long-term debt for the next five years are $31,509,
$36,910, $39,756, $42,821, $46,123, respectively and $3,064,366
thereafter.
F - 11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 4 - 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 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.
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.
All share and per share data, as appropriate, reflect the effects of
these splits.
The Company has paid quarterly cash dividends aggregating $877,545 and
$3,489,646 for the years ending December 31, 1998 and 1997. No
dividends were paid in 1999.
In June 1998, the Company retained J.W. Genesis as its financial
adviser. In connection with this appointment, the Company issued to
J.W. Genesis, warrants to acquire 250,000 shares of the Company's
common stock at a price of $3.0625 per share, the fair market value at
the date of issuance. These warrants expire in June 2003.
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 five years from the
date of grant.
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 were
estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted average assumptions for 1999, 1998
and 1997, respectively; risk-free interest rates of 5%, 5% and 6.1%;
dividend yields of 1.5%, 1.9% and 2.6%; volatility factors of the
expected market price of the Company's common stock of 62%, 60% and
65%; and a weighted average expected life of the options of seven
years.
F - 12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 4 - SHAREHOLDERS' EQUITY (Continued):
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>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net income from continuing operations:
As reported $2,422,793 $1,455,605 $1,307,620
Pro forma 2,175,504 1,258,133 1,063,835
Basic earnings per share:
As reported $.14 $.08 $.07
Pro forma .06 .06 .06
Diluted earnings per share:
As reported .14 .08 .07
Pro forma .06 .06 .06
</TABLE>
F - 13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 4 - 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, 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
Granted 1,177,400 2.74
Exercised (88,800) 2.35
Canceled (935,000) 6.08
---------- -----
Outstanding, December 31, 1998 1,247,000 3.46
Weighted average fair value of options
granted during the year 0.73
Granted 751,000 1.69
Exercised - -
Canceled (742,600) 3.32
---------- -----
Outstanding, December 31, 1999 1,255,400 $2.48
========== =====
Options exercisable:
December 31, 1997 238,600 $4.84
December 31, 1998 194,000 4.94
December 31, 1999 197,280 4.23
</TABLE>
Exercise prices for options outstanding as of December 31, 1999 ranged
from $1.69 to $6.75. The weighted average remaining contractual life
of these options is eight years.
F - 14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 5 - OPERATIONAL INFORMATION AND EXPORT SALES:
The Company's operations are in a single industry segment and involve
the manufacture of various types of electronic test equipment. All of
the Company's assets are domestic.
For the years ended December 31, 1999, 1998 and 1997, no customer
accounted for more than 10% of total assets.
In addition to its in-house sales staff, the Company uses various
manufacturers representatives to sell its products. For the years
ended December 31, 1999, 1998 and 1997, one representative accounted
for 20%, 7% and 18% of sales, respectively.
Export sales, including sales related to discontinued operations,
which are all transacted in US dollars, were approximately 30%, 35%
and 31% of total sales for the years ended December 31, 1999, 1998 and
1997, respectively. Export sales by geographic location are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Asia $1,366,000 $3,307,000 $4,853,000
Europe 884,000 2,658,000 3,002,000
Other 279,000 173,000 501,000
---------- ---------- ----------
$2,529,000 $6,138,000 $8,356,000
========== ========== ==========
</TABLE>
NOTE 6 - 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, 1999, 1998 and 1997 aggregated $30,191, $47,544 and $48,485,
respectively.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 7 - INCOME TAXES:
The components of income tax expense related to income from continuing
operations are as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $990,531 $262,931 $582,977
State 369,638 15,000 152,105
Deferred:
Federal (72,824) 44,908 2,601
State (27,176) 6,604 7,270
---------- -------- --------
$1,260,169 $329,443 $744,953
========== ======== ========
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1999 1998
--------- -----------
<S> <C> <C>
Deferred tax assets:
Uniform capitalization of inventory costs for tax purposes $ 175,000 $ 56,083
Allowances for doubtful accounts 55,000 33,899
Deferred tax liabilities:
Tax over book depreciation (315,610) (268,192)
Other (121,000) (128,400)
--------- -----------
Net deferred tax liability $(206,610) $(306,610)
========= ===========
</TABLE>
The following is a reconciliation of the maximum statutory
federal tax rate to the Company's effective tax rate:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1999 1998 1997
----- ------- --------
% of % of % of
Pre Tax Pre Tax Pre Tax
Earnings Earnings Earnings
-------- -------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate 34.0% 34.0% 35.0%
State income tax 6.1 5.1 5.2
Foreign sales corporation (1.2) (2.9) (0.8)
Other, including research and development
credit, capital gains treatment (4.7) (17.7) (3.1)
-------- -------- ---------
34.2% 18.5% 36.3%
======== ======== =========
</TABLE>
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
WARRANTIES:
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.
LEASES:
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. The lease on the 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 five year term. In 1998, the Company
leased an additional 600 square foot facility in San Diego,
California. This lease was terminated in 1999.
On July 14, 1998 the Company entered into a 15 year lease for a 44,000
square foot facility located in Mahwah, New Jersey. This new facility
was leased to serve as the headquarters and manufacturing plant for
one of the Company's divisions. In December 1999, the Company
exercised its option to purchase this building (see Note 3).
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>
2000 $ 247,700
2001 247,700
2002 247,700
2003 247,700
2004 247,700
Thereafter 371,550
------------
$1,610,050
============
</TABLE>
Rent expense for the years ended December 31, 1999, 1998 and 1997 was
$279,302, $480,161 and $378,930, respectively.
LITIGATION:
In March 1999, a complaint was filed in the Superior Court of the
State of California by Mr. David Day, an individual, et al as
plaintiffs against the Company and various other entities. In the
lawsuit, Mr. Day claims that while acting as the Company's exclusive
sales representative, in Northern California and Arizona, for the
period from 1992 to 1998, the Company failed to account for all sales
activities which Day claims were commissionable to him and therefore
to pay full commission owed to him. The plaintiffs allege damages in
excess of $1,000,000 from each of the defendants and in February 2000,
notified the Company that they would accept $1,000,000 in complete
resolution of the litigation. The Company believes that the damages
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
WIRELESS TELECOM GROUP, INC.
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
that might be awarded to the plaintiffs in connection with this matter
would not have a material adverse effect on the Company's business,
financial condition or results of operations.
NOTE 9 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of selected quarterly financial data from
continuing operations (in thousands, except per share amounts).
<TABLE>
<CAPTION>
1999
QUARTER
-----------------------------------------
1st 2nd 3rd 4th
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET SALES $1,544 $1,766 $1,794 $1,745
GROSS PROFIT 1,155 1,201 1,268 1,204
OPERATING INCOME 658 654 574 557
NET INCOME FROM CONTINUING OPERATIONS 543 635 669 576
DILUTED NET INCOME PER SHARE FROM
CONTINUING OPERATIONS $.03 $.04 $.04 $.03
<CAPTION>
1998
Quarter
-----------------------------------------
1st 2nd 3rd 4th
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $2,067 $2,005 $1,383 $1,380
Gross profit 1,282 1,252 723 825
Operating income 669 539 56 117
Net income from continuing operations 491 407 107 451
Diluted net income per share from
continuing operations $.03 $.02 $.01 $.02
</TABLE>
NOTE 10 - SUBSEQUENT EVENT:
On March 2, 2000, the Company executed an agreement to merge Boonton
Electronics Corporation (an OTC Bulletin Board Company) into a newly
formed subsidiary of Wireless Telecom Group, Inc. Boonton designs and
produces electronic testing and measuring devices and has revenues of
approximately $7,000,000 annually. Under the terms of the agreement,
each share of Boonton common stock (approximately 2,400,000 shares)
will be converted into .79 shares of Wireless common stock at closing.
The merger is expected to be completed during the Company's second
quarter of 2000.
F-18
<PAGE>
WIRELESS TELECOM GROUP, INC.
EXHIBIT 11.1
<TABLE>
<CAPTION>
For the Year Ended December 31,
1999 1998 1997
--------------- ------------- -------------
<S> <C> <C> <C>
Income from continuing operations $2,422,793 $1,455,605 $1,307,620
Income (loss) from discontinued operations 4,215,788 (175,874) 6,637,253
--------------- -------------- -------------
Net income $6,638,581 $1,279,731 $7,944,873
=============== ============== =============
BASIC EARNINGS:
Weighted average number of common shares outstanding 17,343,339 17,539,259 17,438,834
=============== ============== =============
Basic earnings (loss) per common share:
Continuing operations $0.14 $0.08 $0.07
Discontinued operations 0.24 (0.01) 0.39
--------------- -------------- -------------
$0.38 $0.07 $0.46
=============== ============== =============
DILUTED EARNINGS: 1999 1998 1997
--------------- -------------- -------------
Weighted average number of common shares outstanding 17,343,339 17,539,259 17,438,834
Stock options 98,213 9,201 347,048
--------------- -------------- -------------
Weighted average number of common shares outstanding, as
adjusted 17,441,552 17,548,460 17,785,882
=============== ============== =============
Diluted earnings (loss) per common share:
Continuing operations $0.14 $0.08 $0.07
Discontinued operations 0.24 (0.01) 0.38
--------------- -------------- -------------
$0.38 $0.07 $0.45
=============== ============== =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements for the year ended December 31, 1999 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 22,139,504
<SECURITIES> 0
<RECEIVABLES> 964,085
<ALLOWANCES> 44,681
<INVENTORY> 1,389,887
<CURRENT-ASSETS> 26,085,040
<PP&E> 6,035,159
<DEPRECIATION> 1,177,594
<TOTAL-ASSETS> 33,365,375
<CURRENT-LIABILITIES> 1,309,399
<BONDS> 3,581,026
<COMMON> 177,023
0
0
<OTHER-SE> 28,297,927
<TOTAL-LIABILITY-AND-EQUITY> 33,365,375
<SALES> 6,848,557
<TOTAL-REVENUES> 6,848,557
<CGS> 2,021,325
<TOTAL-COSTS> 3,165,595
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 227,287
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,682,962
<INCOME-TAX> 1,260,169
<INCOME-CONTINUING> 2,422,793
<DISCONTINUED> 4,215,788
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,638,581
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.38
</TABLE>
