<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarter Ended
March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _______
Commission file number
1-11916
WIRELESS TELECOM GROUP, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
(201) 261-8797
-------------------------------------------------------------------
Registrant's telephone number, including area code
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the most recent practicable date.
<TABLE>
<S> <C>
Common Stock -- Par Value $.01 17,243,007
- ------------------------------ ------------------
Class Outstanding Shares
At May 8, 2000
</TABLE>
<PAGE>
WIRELESS TELECOM GROUP, INC.
Table of Contents
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page(s)
<S> <C>
Item 1 -- Consolidated Financial Statements:
Condensed Balance Sheets as of March 31, 2000
(unaudited) and December 31, 1999 3
Condensed Statements of Operations for the Three
Months Ended March 31, 2000 and 1999 (unaudited) 4
Condensed Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 (unaudited) 5
Notes to Interim Condensed Financial Statements (unaudited) 6
Review Report on Interim Condensed Financial Statements 7
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 9
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings 10
Item 2 -- Changes in Securities 10
Item 3 -- Defaults upon Senior Securities 10
Item 4 -- Submission of Matters to a Vote of Security Holders 10
Item 5 -- Other Information 10
Item 6 -- Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 11.1 12
Exhibit 27 13
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1 -- Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
-- ASSETS --
MARCH 31, DECEMBER 31,
2000 1999
------------- -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 23,567,656 $ 22,139,504
Accounts receivable -- net of allowance for
doubtful accounts of $58,592 and $44,681, respectively 1,247,044 919,404
Inventories 1,424,749 1,389,887
Prepaid expenses and other current assets 701,493 1,636,245
------------ ------------
TOTAL CURRENT ASSETS 26,940,942 26,085,040
------------ ------------
PROPERTY, PLANT AND EQUIPMENT -- NET 602,006 609,854
------------ ------------
OTHER ASSETS:
Goodwill -- net 2,323,718 2,365,385
Investment property net of accumulated depreciation(Note 3) 4,225,538 4,247,711
Other assets 558,964 57,385
------------ ------------
TOTAL OTHER ASSETS 7,108,220 6,670,481
------------ ------------
$ 34,651,168 $ 33,365,375
============ ============
-- LIABILITIES AND SHAREHOLDERS' EQUITY --
CURRENT LIABILITIES:
Accounts payable $ 564,330 $ 287,488
Accrued expenses and other current liabilities 764,439 772,011
Current portion of mortgage payable 30,400 31,509
Income tax payable 218,391 218,391
------------ ------------
TOTAL CURRENT LIABILITIES 1,577,560 1,309,399
------------ ------------
DEFERRED INCOME TAXES 206,610 206,610
------------ ------------
LONG TERM LIABILITIES:
Mortgage payable 3,225,647 3,229,976
Other 127,772 144,440
------------ ------------
TOTAL LONG TERM LIABILITIES 3,353,419 3,374,416
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY(NOTE4):
Preferred stock, $.01 par value, 2,000,000
shares authorized, none issued -- --
Common stock, $.01 par value, 30,000,000 shares
authorized, 17,805,854 and 17,702,298 shares issued, respectively 178,059 177,023
Additional paid-in-capital 7,005,977 6,631,061
Retained earnings 23,600,378 22,937,701
Treasury stock at cost, 588,900 shares (1,270,835) (1,270,835)
------------ ------------
29,513,579 28,474,950
------------ ------------
$ 34,651,168 $ 33,365,375
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------------
2000 1999
---- ----
<S> <C> <C>
NET SALES $ 2,141,335 $ 1,543,724
----------- -----------
COSTS AND EXPENSES:
Cost of sales 672,849 389,200
Operating expenses 781,063 496,981
Interest, dividend and other income (407,241) (213,580)
----------- -----------
TOTAL COSTS AND EXPENSES 1,046,671 672,601
----------- -----------
INCOME FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAX 1,094,664 871,123
PROVISION FOR INCOME TAXES 431,986 327,846
----------- -----------
INCOME FROM CONTINUING OPERATIONS 662,678 543,277
DISCONTINUED OPERATIONS:
Income (Loss) from discontinued operations -- net of
income taxes -- (17,982)
Gain on sale of test equipment business -- net of
income taxes -- 3,578,834
----------- -----------
NET INCOME $ 662,678 $ 4,104,129
=========== ===========
NET INCOME PER COMMON SHARE (NOTE 2):
BASIC
Continuing Operations $ .04 $ .03
Discontinued Operations $ .00 $ .20
----------- -----------
$ .04 $ .23
=========== ===========
DILUTED
Continuing Operations $ .04 $ .03
Discontinued Operations .00 .20
----------- -----------
$ .04 $ .23
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 662,678 $ 4,104,129
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 109,191 135,896
Other income (16,668) (5,556)
Provision for losses on accounts receivable 13,911 (97,648)
Gain on sale of discontinued division -- (5,583,204)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (341,551) 694,428
(Increase) in inventories (34,862) (108,586)
Decrease in prepaid expenses and other assets 934,752 915,865
Increase (decrease) in accounts payable and accrued expenses 269,271 (127,004)
Increase in income taxes payable -- 1,922,809
----------- ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,596,722 1,851,129
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investment (500,000) --
Capital expenditures (37,504) (162,784)
Officer's life insurance -- 24,159
Proceeds from sale of discontinued division -- 16,730,730
Proceeds from covenant not to compete -- 200,000
Purchase of Noise Product line -- (2,500,000)
Expenses related to disposal -- (1,186,551)
Increase of real estate escrow (1,579) --
----------- ------------
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES (539,083) 13,105,554
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgage (5,437) --
Proceeds from exercise of stock options\warrants 375,950 --
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 370,513 --
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,428,152 14,956,683
Cash and cash equivalents, at beginning of year 22,139,504 9,031,724
------------ ------------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 23,567,656 $ 23,988,407
============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 725,400 $ 15,280
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
The condensed consolidated balance sheet as of March 31, 2000 and the
condensed consolidated statements of operations for the three month periods
ended March 31, 2000 and 1999 and the condensed consolidated statements of
cash flows for the three month periods ended March 31, 2000 and 1999 have
been prepared by the Company without audit. The financial statements for
the period ended March 31, 2000 have been reviewed by our auditors. 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. WTG Foreign Sales Corporation began
operations as a subsidiary of the Company in February 1996.
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") for a purchase price
of approximately $2.5 million, and the Company and TAS entered into
non-competition agreements with the businesses associated with the
respective products purchased by each.
In the opinion of management, the accompanying condensed consolidated
financial statements referred to above contain all necessary adjustments,
consisting of normal accruals and recurring entries only, which are
necessary to present fairly the Company's results for the interim periods
being presented.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements included in its annual report on Form
10-K for the year ended December 31, 1999, which is incorporated herein by
reference. Specific reference is made to this report for a description of
the Company's securities and the notes to financial statements included
therein, since certain information and footnote disclosures normally
included in financial statements in accordance with generally accepted
accounting principles have been condensed or omitted.
The results of operations for the three month periods ended March 31, 2000
and 1999 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2 -- INCOME PER COMMON SHARE
Income per common share is computed by dividing the net income by the
weighted average number of common shares and common equivalent shares
outstanding during each period. 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 have been restated in accordance with
Statement 128.
NOTE 3 -- INVESTMENT PROPERTY
The Company has reclassified the land and building it owns in Mahwah, New
Jersey. This property is not being utilized for operations and is currently
available for sale.
6
<PAGE>
REVIEW REPORT ON INTERIM CONDENSED FINANCIAL STATEMENTS
To the Shareholders
Wireless Telecom Group, Inc.
We have reviewed the accompanying balance sheet, statement of operations and
statement of cash flows of Wireless Telecom Group, Inc. as of March 31, 2000 and
for the three month period then ended. These financial statements are the
responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
/s/ Lazar Levine & Felix LLP
----------------------------
LAZAR LEVINE & FELIX LLP
New York, New York
May 10, 2000
7
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
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 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") for a purchase price of approximately
$2.5 million, and the Company and TAS entered into non-competition
agreements with the businesses associated with the respective products
purchased by each.
The financial information presented herein includes:
(i) Condensed consolidated balance sheets as of March 31, 2000 and as
of December 31, 1999 (ii) Condensed consolidated statements of
operations for the three month periods ended March 31, 2000 and
1999 and (iii) Condensed consolidated statements of cash flows
for the three month periods ended March 31, 2000 and 1999.
The financial statements as of and for the period ended March 31, 2000
have been reviewed by our auditors.
OPERATIONS
For the three months ended March 31, 2000 as compared to the
corresponding period of the previous year, net sales increased to
$2,141,335 from $1,543,724 an increase of $597,611 or 38.7%. This is
primarily due to an increase in application of the Company's products
as built-in testers in wireless networks and an overall increase in the
market for the Company's noise-based communication products.
The Company's gross profit on net sales for the three months ended
March 31, 2000 was $1,468,486 or 68.6% as compared to $1,154,524 or
74.8% for the three months ended March 31, 1999. 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 three months ended March 31, 2000 were
$781,063 or 36.5% of net sales as compared to $496,981 or 32.2% of net
sales for the three months ended March 31, 1999.
For the three months ended March 31, 2000 as compared to the same
period of the prior year, operating expenses increased in dollars by
$284,082. This increase is primarily due to increased expenditures in
research and development and commission expenses. The amortization of
goodwill in connection with the acquisition of products relating to
single-function noise generation from Telecom Analysis Systems is also
responsible for the increase in operating expenses.
Interest, dividend and other income increased by $193,661 for the three
months ended March 31, 2000. This increase was due to a higher average
investment balance during 2000.
8
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Net income from continuing operations increased to $662,678, or $.04
per share, for the three months ended March 31, 2000 as compared to
$543,277, or $.03 per share for the three months ended March 31, 1999.
The explanation of these changes can be derived from the analysis given
above of operations for the quarters ending March 31, 2000 and 1999,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital has increased by $587,741 to $25,363,382
at March 31, 2000, from $24,775,641 at December 31, 1999. At March 31,
2000 the Company had a current ratio of 17.1 to 1, and a ratio of debt
to net worth of .17 to 1. 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.
Cash provided by operations was $1,596,722 for the period ending March
31, 2000. Cash provided by net income was $662,678. In addition,
prepaid expenses decreased by $934,752 and accounts payable and accrued
expenses increased by $269,271. This was offset by an increase in
accounts receivable of $341,551.
Operating activities provided $1,851,129 in cash flows for the
comparable period in 1999. Cash provided by operations was primarily
due to net income and an increase in income taxes payable offset by the
gain on sale of discontinued division.
Net cash used for investing activities for the quarter ending March 31,
2000 was $539,083. The primary use of these funds was the purchase of a
$500,000 investment in equity securities of an unrelated entity. For
the quarter ended March 31, 1999 net cash provided by investing
activities was $13,105,554. In 1999, the Company realized proceeds of
$16,730,730 from the sale of its Wireless Test Equipment Business
partially offset by $2,500,000 for the purchase of the Noise Product
Line from Telecom Analysis Systems, and $1,186,551 for expenses
relating to the disposal of the Wireless Test Equipment Business.
Net cash provided by financing activities for the quarters ending March
31, 2000 and 1999 were $370,513 and $0.00, respectively. Proceeds from
the exercise of stock options and warrants were the primary source of
these funds in 2000. These proceeds were partially offset by cash
outlays for mortgage payments on the Company's Mahwah facility.
The Company believes that its financial resources from working capital
provided by operations are adequate to meet current requirements.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly
impact its business nor does it believe that its business is seasonal.
9
<PAGE>
PART II -- OTHER INFORMATION
Item 1. 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. The action is
scheduled to be tried on June 19, 2000.
On April 23, 1999, Noise Com commenced an arbitration proceeding
against Day Test and Measurements ("Day Test"), a plaintiff in the
aforementioned California action. In the arbitration, venued in New
Jersey and brought under the rules of the American Arbitration
Association, Noise Com alleges that Day Test, a former sales
representative for Noise Com, failed to act with diligence and loyalty
in performing its duties as Noise Com's agent. Also, the arbitration
seeks to resolve the dispute concerning the commissions allegedly due
Day Test. On April 27, 1999, Day Test objected to the arbitration,
claiming that it never agreed to arbitrate disputes with Noise Com. In
response to Day Test's objection, on May 6, 1999, Noise Com filed an
action in the Superior Court of New Jersey, County of Bergen, seeking a
declaratory judgement requiring Day Test to participate in the
aforementioned New Jersey arbitration. Alternatively, Noise Com asks
that the parties' disputes be decided by the New Jersey Court.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<S> <C> <C>
11.1 Computation of per share earnings
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
Not applicable.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WIRELESS TELECOM GROUP, INC.
(Registrant)
Date: May 12, 2000 /S/ Edward Garcia
-----------------------------------------
Edward Garcia
Chairman and Chief Executive Officer
Date: May 12, 2000 /S/ Demir Richard Eden
----------------------
Demir Richard Eden
Acting Chief Financial Officer
11
<PAGE>
Exhibit 11.1
WIRELESS TELECOM GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Income from continuing operations $ 662,678 $ 543,277
Income from discontinued operations and
Gain on sale of test equipment business
net of income tax -- 3,560,852
-------------- -----------
Net Income $ 662,678 $ 4,104,129
============== ===========
BASIC EARNINGS:
Weighted average number of common shares 17,162,257 17,557,298
Outstanding ============== ===========
Basic earnings per common share:
Continuing operations $0.04 $0.03
Discontinued operations 0.00 0.20
----- -----
$0.04 $0.23
===== =====
DILUTED EARNINGS:
Weighted average number of common shares outstanding 17,162,257 17,557,298
Stock Options 772,138 --
-------------- -----------
Weighted average number of common shares outstanding, as 17,934,395 17,557,298
adjusted ============== ===========
Diluted earnings per common share:
Continuing operations $0.04 $0.03
Discontinued operations 0.00 0.20
----- -----
$0.04 $0.23
===== =====
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements for the quarter ended March 31, 2000 and is
qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 23,567,656
<SECURITIES> 0
<RECEIVABLES> 1,305,636
<ALLOWANCES> 58,592
<INVENTORY> 1,424,749
<CURRENT-ASSETS> 26,940,942
<PP&E> 1,824,952
<DEPRECIATION> 1,222,946
<TOTAL-ASSETS> 34,651,168
<CURRENT-LIABILITIES> 1,577,560
<BONDS> 0
<COMMON> 178,059
0
0
<OTHER-SE> 29,335,520
<TOTAL-LIABILITY-AND-EQUITY> 34,651,168
<SALES> 2,141,335
<TOTAL-REVENUES> 2,141,335
<CGS> 672,849
<TOTAL-COSTS> 1,453,912
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,911
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,094,664
<INCOME-TAX> 431,986
<INCOME-CONTINUING> 662,678
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 662,678
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.04
</TABLE>
