UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q 

(Mark One)

For the quarterly period ended September 30, 2016

OR

For the transition period fromto

Commission file number

1-11916

WIRELESS TELECOM GROUP, INC.

(Exact name of registrant as specified in its charter) 

(973) 386-9696

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(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. Yesx  Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx  Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (see the definitions of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one): 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso  Nox

Number of shares of Common Stock outstanding as of July 29,October 28, 2016: 18,721,346

WIRELESS TELECOM GROUP, INC.

Table of Contents

PART 1 – FINANCIAL INFORMATION

Item 1 – Financial Statements

WIRELESS TELECOM GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

- ASSETS -

The accompanying notes are an integral part of these condensed consolidated financial statements.

WIRELESS TELECOM GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

WIRELESS TELECOM GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

WIRELESS TELECOM GROUP, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES

The condensed consolidated balance sheet as of JuneSeptember 30, 2016, the condensed consolidated statements of operations for the three and six-monthnine-month periods ended JuneSeptember 30, 2016 and 2015, and the condensed consolidated statements of cash flows for the six-monthnine-month periods ended JuneSeptember 30, 2016 and 2015, and the condensed consolidated statement of shareholders’ equity for the six-monthnine-month period ended JuneSeptember 30, 2016 have been prepared by the Company (as defined below) without audit. The condensed consolidated financial statements include the accounts of Wireless Telecom Group, Inc., which operates one of its product lines under the trade name Noisecom, Inc. (“Noisecom”), and its wholly-owned subsidiaries Boonton Electronics Corporation (“Boonton”), Microlab/FXR (“Microlab”), WTG Foreign Sales Corporation and NC Mahwah, Inc., which are collectively referred to herein as, the “Company”. All intercompany transactions and balances have been eliminated in consolidation.

In the opinion of management, the accompanying condensed consolidated financial statements referred to above contain all necessary adjustments, consisting of normal accruals and recurring entries, which are necessary to fairly present the Company’s results for the interim periods being presented.

The accounting policies followed by the Company are set forth in Note 1 to the Company’s financial statements included in its annual report on Form 10-K for the year ended December 31, 2015. Specific reference is made to that report since certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP) have been condensed or omitted from this report.

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including inventory valuation, accounts receivable valuation, valuation of deferred tax assets, estimated fair values of stock options and vesting periods of performance-based stock options and restricted stock) and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates.

The results of operations for the three and six-monthnine-month periods ended JuneSeptember 30, 2016 are not necessarily indicative of the results to be expected for the full year ending December 31, 2016.

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.

The Company maintains significant cash investments primarily with two financial institutions, which at times may exceed federally insured limits. The Company performs periodic evaluations of the relative credit rating of these institutions as part of its investment strategy.

The Company has limited concentration of credit risk in accounts receivable due to the large number of entities comprising our customer base and their dispersion across many different industries and geographies. Credit evaluations are performed on customers requiring credit over a certain amount. Credit risk is mitigated to a lesser extent through collateral such as letters of credit, bank guarantees or payment terms like cash in advance. Credit evaluation is performed independent of the Company’s sales team to ensure segregation of duties.

For the three and six-monthsnine-months ended JuneSeptember 30, 2016, one customer accounted for approximately 12%11% and 11%10%, respectively, of the Company’s consolidated revenues. For the three and six-monthsnine-months ended JuneSeptember 30, 2015, no customer accounted for 10% or more of the Company’s consolidated revenues. At JuneSeptember 30, 2016, two customers eachone customer represented approximately 10%15% of the Company’s gross accounts receivable. At December 31, 2015, no customer represented 10% or more of the Company’s gross accounts receivable.

The carrying amounts of cash and cash equivalents, trade receivables, other current assets and liabilities approximate fair value due to the short-term nature of these instruments.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES (Continued)

The Company considers all highly liquid investments purchased with maturities of three months or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of bank and money market accounts.

Management has evaluated subsequent events and determined that there were no subsequent events or transactions requiring recognition or disclosure in the condensed consolidated financial statements through the date the financial statements were issued.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

In MarchAugust 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, “Classification of Certain Cash Receipts and Cash Payments,” to address some questions about the presentation and classification of certain cash receipts and payments in the statement of cash flows. The update addresses eight specific issues, including contingent consideration payments made after a business combination, distribution received from equity method investees and the classification of cash receipts and payments that have aspects of more than one class of cash flows. This standard will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of the adoption of ASU 2016-15 on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation:  Improvements to Employee Share-Based Payment Accounting,” which relates to the accounting for employee share-based payments. This standard addresses several aspects of the accounting for share-based payment award transactions, including:  (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. This standard will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of the adoption of ASU 2016-09 on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02“Leases”, which creates new accounting and reporting guidelines for leasing arrangements. The new standard will require organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The standard will also require new disclosure to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard will be effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified retrospective approach. The Company is in the process of evaluating the impact of the new pronouncementASU 2016-02 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11,“Simplifying the Measurement of Inventory.” ASU 2015-11 applies to inventory that is measured using first-in, first-out (FIFO) or average cost.  An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The amendments in ASU 2015-11 more closely align the measurement of inventory in US GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS). ASU 2015-11 is effective for fiscal years beginning after December 15, 2016. The Company is in the process of evaluating the impact of this ASU on its consolidated financial statements.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which defers the effective date by one year, with early adoption on the original effective date permitted. As a result, ASU 2014-09 will be effective for annual and interim periods beginning after December 15, 2016.2017. The Company is currently in the process of evaluating the impactdoes not expect the adoption of this ASU willto have a material impact on the Company’s consolidated financial statements, but does not expect the impact to be material.statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.

WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 3 – INCOME TAXES

The Company records deferred taxes in accordance with Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes.” ASC 740 requires recognition of deferred tax assets and liabilities for temporary differences between tax basis of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted rates in effect for the year in which the differences are expected to reverse. The Company establishes a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. The Company periodically assesses the value of its deferred tax assets and determines the necessity for a valuation allowance.

The Company had a domestic net operating loss carryforward at JuneSeptember 30, 2016 of approximately $18,200,000$17,800,000 which expires in 2029. The Company also had a German net operating loss carryforward at JuneSeptember 30, 2016 of approximately $23,400,000.12,900,000 Euro’s and approximately 12,400,000 Euro’s for German Corporate tax and German Trade tax purposes, respectively.

Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses. The Company’s valuation allowanceallowances of $7,012,134 is$4,331,265 and $4,188,688 at September 30, 2016 and December 31, 2015, respectively, are associated with the Company’s German net operating loss carryforward from an inactive German entity. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. As of JuneSeptember 30, 2016, management believed that it iswas more likely than not that the Company will fully realize the benefits of its deferred tax asset associated with its domestic net operating loss carryforward.

The deferred income tax assets (liabilities) are summarized as follows:

Under ASC 740, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 3 – INCOME TAXES (Continued)

The components of the provision for income tax expensetaxes (benefit) related to income from operations are as follows:

The Company has analyzed its filing positions in all of the Federal and state jurisdictions where it is required to file income tax returns. As of JuneSeptember 30, 2016 and December 31, 2015, the Company identified its Federal tax return and its state tax return in New Jersey as “major” tax jurisdictions, as defined, in which it is required to file income tax returns. Based on the evaluations noted above, the Company concluded that there were no significant uncertain tax positions requiring recognition or disclosure in its condensed consolidated financial statements.

NOTE 4 - INCOME (LOSS) PER COMMON SHARE

Basic earnings (loss) per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earningsincome (loss) per share areis calculated by using the weighted average number of shares of common stock outstanding and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method.

Common stock options are included in the diluted earningsincome (loss) per share calculation when the various option exercise prices are less than their relative average market price during the periods presented in this quarterly report. The weighted average number of shares of common stock underlying options not included in diluted earningsincome (loss) per share, because the effects are anti-dilutive, was 2,919,6622,781,844 and 1,727,1922,061,830 for the three-months ended JuneSeptember 30, 2016 and 2015, respectively. For the six-monthsnine-months ended JuneSeptember 30, 2016 and 2015, the weighted average number of shares of common stock underlying options not included in diluted earningsincome (loss) per share was 2,894,1782,992,083 and 1,522,742,1,691,515, respectively.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 5 – INVENTORIES

Inventory carrying value is net of inventory reserves of $1,231,657$1,331,657 and $1,110,288 at JuneSeptember 30, 2016 and December 31, 2015, respectively.

Inventories consist of:

NOTE 6 - GOODWILL

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill is not amortized but rather is reviewed for impairment at least annually or more frequently if a triggering event occurs. Management first makes a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying amount before applying the two-step goodwill impairment test described below. If, based on the qualitative assessment, the estimated fair value is well in excess of its carrying amount, management will not perform a quantitative assessment. If, however, the conclusion is that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management then performs a two-step goodwill impairment test. Under the first step, the fair value of the reporting unit is compared with its carrying value, and, if an indication of goodwill impairment exists for the reporting unit, the Company must perform step two of the impairment test (measurement).

Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill as determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit’s goodwill.

The Company’s goodwill balance of $1,351,392 at JuneSeptember 30, 2016 and December 31, 2015 related to one of the Company’s reporting units, Microlab. Management’s qualitative assessment performed in the fourth quarter of 2015 did not indicate any impairment of Microlab’s goodwill as its fair value was estimated to be in excess of its carrying value. Furthermore, no events have occurred since then that would change this assessment.

NOTE 7 - ACCOUNTING FOR SHARE BASED COMPENSATION

The Company follows the provisions of ASC 718, “Share-Based Payment.” The Company’s results for the three and six-monthnine-month periods ended JuneSeptember 30, 2016 include share-based compensation expense totaling $98,619$235,374 and $197,238,$432,612, respectively. Results for the three and six-monthnine-month periods ended JuneSeptember 30, 2015 included share-based compensation expense totaling $85,963$51,347 and $171,926,$223,273, respectively. Such amounts have been included in the Condensed Consolidated Statements of Operations within operating expenses.

Incentive Compensation Plan:

In 2012, the Company’s Board of Directors and shareholders approved the 2012 Incentive Compensation Plan (the “Initial 2012 Plan”), which provides for the grant of restricted stock awards, non-qualified stock options and incentive stock options in compliance with the Internal Revenue Code of 1986, as amended, to employees, officers, directors, consultants and advisors of the Company who are expected to contribute to the Company’s future growth and success. When originally approved, the Initial 2012 Plan provided for the grant of awards relating to 2,000,000 shares of common stock, plus those shares still available under the Company’s prior incentive compensation plan.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 7 - ACCOUNTING FOR SHARE BASED COMPENSATION (Continued)

In June 2014, the Company’s shareholders approved the Amended and Restated 2012 Incentive Compensation Plan (the “2012 Plan”) allowing for an additional 1,658,045 shares of the Company’s common stock to be available for future grants under the 2012 Plan. As of JuneSeptember 30, 2016, there were 1,286,0011,261,001 shares available for issuance under the 2012 Plan, including those shares available under the Company’s prior incentive compensation plan as of such date.

All service-based options granted have ten-year terms from the date of grant and vest annually and become fully exercisable after a maximum of five years. Performance-based options granted have ten-year terms and vest and become fully exercisable when determinable performance targets are achieved. Performance targets are agreed to, and approved by, the Company’s Board of Directors or the Compensation Committee of the Board of Directors.

Provisions of the 2012 Plan require that all awards that are stock options be made at exercise prices equal to or greater than the fair market value on the date of the grant.

The following summarizes the components of share-based compensation expense by equity type for the three and six-monthsnine-months ended June 30:September 30, 2016 and 2015:

Stock-based compensation for the three and six-monthsnine-months ended JuneSeptember 30, 2016 and 2015 is included in general and administrative expenses in the accompanying condensed consolidated statement of operations.

Restricted Common Stock Awards:

On June 8, 2016, the Company granted 150,000 shares of restricted common stock to certain non-employee directors of the Company under the 2012 Plan. The shares were granted at a price of $1.33 per share. On June 30, 2016, Timothy Whelan, the Company’s newly appointed Chief Executive Officer, forfeited the 30,000 shares of restricted common stock that were granted to him on June 8, 2016 as a non-employee director in connection with his appointment as Chief Executive Officer of the Company. The remaining 120,000 shares of restricted common stock granted on June 8, 2016 will fully vest on the date of the Company’s next annual shareholdersshareholders’ meeting to be held in June 2017, or a vesting period of approximately one year, provided that the director’s service continues through the vesting date. The total compensation expense to be recognized over the one-year vesting period with respect to the remaining 120,000 shares of restricted common stock is $159,600.

On June 30, 2016, the Company granted 8,333 shares of restricted common stock to its newly appointed Chief Executive Officer under the 2012 Plan. The shares were granted at a price of $1.34 per share and will vest in sixteen equal quarterly installments over a period of four years, provided that the executive officer’s service with the Company continues through each quarterly vesting date, so that the shares will fully vest on June 30, 2020. The total compensation expense to be recognized over the four-year vesting period is $11,166.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 7 - ACCOUNTING FOR SHARE BASED COMPENSATION (Continued)

A summary of the status of the Company’s non-vested restricted common stock, as granted under the Company’s approved equity compensation plans, as of JuneSeptember 30, 2016, and changes during the six-monthsnine-months ended JuneSeptember 30, 2016, are presented below:

Under the terms of the performance-based restricted common stock award agreements pertaining to the 87,000 shares of restricted stock granted to employees in 2013, the awards will fully vest and become exercisable on the date on which the Company’s Board of Directors shall have determined that specific financial milestones have been met, provided the employee remains in the employ of the Company at such time; provided, however, upon a Change in Control (as defined in the award agreements and the 2012 Plan), the restricted stock shall automatically vest as permitted by the 2012 Plan. For the performance-based restricted stock awarded in 2013, the Company’s Board of Directors adopted specific revenue and earnings performance targets as vesting conditions. During the first quarter of 2015, management determined the performance conditions related to these restricted stock awards are probable to be achieved by the year ending 2020. As a result, the Company adjusted the amortization of the fair market value of these awards over the revised implicit service period from December 2017 to December 2020. If management determines in future periods the achievement of performance conditions are probable to occur sooner than expected, the Company will accelerate the expensing of the unamortized balance as of that determination date.

As of JuneSeptember 30, 2016, the unearned compensation related to Company granted restricted common stock was $267,124$221,173 of which $159,600$119,700 (pertaining to 120,000 service-based restricted common stock awards) will be amortized on a straight-line basis through the date of the Company’s next annual shareholders meeting scheduled to be held in June 2017, the vesting date, and $11,166$10,468 (pertaining to 8,333 service-based restricted common stock awards) will be amortized on a straight-line basis through June 30, 2020, the date which they will have fully vested. The remaining balance of $96,358$91,005 (pertaining to 87,000 performance-based shares of restricted common stock awarded in 2013) will be amortized on a straight-line basis through December 31, 2020, the implicit service period.

Performance-Based Stock Option Awards:

A summary of performance-based stock option activity, and related information for the six-monthsnine-months ended JuneSeptember 30, 2016 follows:

The aggregate intrinsic value of performance-based stock options outstanding and exercisable as of JuneSeptember 30, 2016 and December 31, 2015 was $449,750$824,550 and $846,350, respectively.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 7 - ACCOUNTING FOR SHARE BASED COMPENSATION (Continued)

On September 8, 2015, the Company granted a performance-based stock option to a non-executive officer employee to acquire 50,000 shares of common stock at an exercise price of $1.83 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT on the date of grant. The per share fair-value of this performance-based option was $1.03. The per share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield 0%, risk-free interest rate of 1.53% and expected option life of 4 years. Volatility assumption was 75.46% and the forfeiture rate was assumed to be 0%.

Under the terms of the performance-based stock option agreements granted prior to 2016, the awards will fully vest and become exercisable on the date on which the Company’s Board of Directors shall have determined that specific financial performance milestones have been met, provided the employee remains in the employ of the Company at such time; provided, however, upon a Change in Control (as defined in the stock option agreements and the 2012 Plan), the stock options shall automatically vest as permitted by the 2012 Plan. During the first quarter of 2015, management determined the performance conditions related to the stock option awards granted in 2013 and grants made subsequent thereto (but on or prior to the date of determination) are probable to be achieved by the year ending 2020. As a result, the Company adjusted the amortization of the fair market value of these awards over the revised implicit service period from December 2017 to December 2020. If management determines in future periods the achievement of performance conditions are probable to occur sooner than expected, the Company will accelerate the expensing of the unamortized balance as of that determination date.

On May 16, 2016, the Company granted a performance-based stock option to a non-executive officer employee to acquire 200,000 shares of common stock at an exercise price of $1.36 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT on the date of grant. The per share fair-value of this performance-based option was $0.78. The per share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield 0%, risk-free interest rate of 1.26% and expected option life of four years. The volatility assumption was 77.54% and the forfeiture rate was assumed to be 0%.

Under the terms of the performance-based stock option agreement granted on May 16, 2016, the award will incrementally vest and become exercisable upon achievement of specific annualized revenue targets in the Company’s network solutions segment. As of JuneSeptember 30, 2016, the Company had not incurred expense relating to this performance-based stock option as management determined it was more likely than not that the revenue targets would not be achieved.

As of JuneSeptember 30, 2016, the unearned compensation related to the performance-based stock options to acquire 825,000 shares of common stock granted in August 2013 (with a weighted average per share exercise price of $1.77) and the performance-based stock option to acquire 50,000 shares of common stock granted in September 2015 (with a weighted average per share exercise price of $1.83) is $471,533$445,337 and $44,166,$41,713, respectively, which have been, and are expected to be, amortized on a straight-line basis through December 31, 2020, the implicit service period. Unearned compensation in the amount of $155,810 related to the performance-based stock option granted in May 2016 (with a weighted average per share exercise price of $1.36) will begin to be amortized when achievement of specific annualized revenue targets in the Company’s network solutions segment are determined to be probable.

The Company’s performance-based stock options granted prior to 2013 (consisting of options to acquire 1,090,000 shares) are fully amortized.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 7 - ACCOUNTING FOR SHARE BASED COMPENSATION (Continued)

Service-Based Stock Option Awards:

A summary of service-based stock option activity, and related information for the six-monthsnine-months ended JuneSeptember 30, 2016 follows:

The aggregate intrinsic value of service-based stock options outstanding (regardless of whether or not such options are exercisable) as of JuneSeptember 30, 2016 and December 31, 2015 was $7,600$325,600 and $0, respectively.

The aggregate intrinsic value of service-based stock options exercisable as of JuneSeptember 30, 2016 and December 31, 2015 was $967$23,500 and $0, respectively.

On November 19, 2015, the Company granted to the members of the Company’s Strategic Planning and Operating Committee service-based stock options to acquire 145,000 shares of common stock at an exercise price of $1.30 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT on November 19, 2015, the date of grant. The per share fair-value of these service-based options was $0.75. The per share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield 0%, risk-free interest rate of 1.68% and expected option life of 4 years. The volatility assumption was 78.22% and the forfeiture rate was assumed to be 0%.

Under the terms of the service-based stock option agreements relating to the November 19, 2015 stock option grants, the awards vest in twelve equal quarterly installments over a period of three years and shall be fully vested on November 19, 2018.

On June 8, 2016, the Company granted to certain non-employee directors of the Company service-based stock options to acquire collectively 350,000 shares of common stock at an exercise price of $1.33 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT on June 8, 2016, the date of grant. The per share fair-value of these service-based options was $0.76. The per share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield 0%, risk-free interest rate of 1.23% and expected option life of four years. The volatility assumption was 76.72% and the forfeiture rate was assumed to be 0%. These stock options were granted in connection with the annual compensation for services as a Company director. Such equity awards are intended to replace the cash component of the director compensation.

On June 30, 2016, the service-based stock option to acquire 70,000 shares of common stock that was granted to Timothy Whelan on June 8, 2016, was terminated, unvested, in connection with his appointment as Chief Executive Officer of the Company.

Under the terms of the remaining service-based stock option agreements relating to the June 8, 2016 stock option grants to the non-employee directors of the Company, the awards will fully vest on the date of the Company’s next annual shareholder’s meeting to be held in June 2017, or a vesting period of approximately one year, provided that the director’s service continues through the vesting date.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 7 - ACCOUNTING FOR SHARE BASED COMPENSATION (Continued)

On June 30, 2016, the Company granted to Timothy Whelan, its newly appointed Chief Executive Officer, a service-based stock option to acquire 400,000 shares of common stock at an exercise price of $1.34 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT on the date of grant. The per share fair-value of this service-based option was $0.76. The per share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield 0%, risk-free interest rate of 1.01% and expected option life of four years. The volatility assumption was 76.68% and the forfeiture rate was assumed to be 0%.

Under the terms of the service-based stock option agreements relating to the June 30, 2016 stock option grants, the awards vest in sixteen equal quarterly installments over a period of four years and shall be fully vested on June 30, 2020.

Under the terms of Mr. Whelan’s employment agreement, dated June 30, 2016, if Mr. Whelan’s employment is terminated by the Company without Cause, upon a Change of Control or by Mr. Whelan for Good Reason (as such terms are defined in his employment agreement), in each case, subject to his compliance with certain conditions, Mr. Whelan is entitled to (among other benefits) extension of the post-termination exercise period for all outstanding stock options of the Company’s common stock held by Mr. Whelan as of the date of his termination to the earlier of (a) the first anniversary of the date of termination, and (b) the date of expiration of the respective option, during which post-termination period such options shall continue to vest in accordance with their respective terms (to the extent not already fully vested).

On September 16, 2016, the Company granted to certain employees of the Company service-based stock options to acquire collectively 200,000 shares of common stock at an exercise price of $1.60 per share, which represented the closing price of the Company’s common stock as reported on the NYSE MKT on September 16, 2016, the date of grant. The per share fair-value of these service-based options was $0.95. The per share fair-value was estimated on the date of grant using the Black-Scholes option pricing method and included the following range of assumptions: dividend yield 0%, risk-free interest rate of 1.21% and expected option life of four years. The volatility assumption was 81.21% and the forfeiture rate was assumed to be 0%.

Under the terms of the service-based stock option agreements relating to the September 16, 2016 stock option grants, the awards vest in four equal annual installments over a period of four years and shall be fully vested on September 16, 2020.

As of JuneSeptember 30, 2016, the unearned compensation related to the service-based stock option to acquire 145,000 shares of common stockoptions granted in November 2015 (with a weighted average per share exercise price of $1.30)and 2016 was $91,155,$634,890, which will be amortized on a straight-line basis over each of the grant’s respective service period through November 2018.

As of June 30, 2016, the unearned compensation related to the service-based stock option to acquire 280,000 shares granted in June 2016 (with a weighted average per share exercise price of $1.33) to non-executive directors was $211,461, which will be amortized on a straight-line basis over the service period through June 2017.

As of June 30, 2016, the unearned compensation related to the service-based stock option to acquire 400,000 shares granted in June 2016 (with a weighted average per share exercise price of $1.34) to the Company’s newly appointed Chief Executive Officer was $303,207, which will be amortized on a straight-line basis over the service period through June 2020.periods.

At JuneSeptember 30, 2016, the Company’s service-based stock options granted prior to November 2015 were fully amortized.

NOTE 8 – SEGMENT INFORMATION

The operating businesses of the Company are segregated into two reportable segments: (i) network solutions; and (ii) test and measurement. The network solutions segment is comprised primarily of the operations of Wireless Telecom Group Inc.’s subsidiary, Microlab. The test and measurement segment is comprised primarily of the Company’s operations of the Noisecom product line and the operations of its subsidiary, Boonton.

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The Company allocates resources and evaluates the performance of segments based on income or loss from operations, excluding interest, corporate expenses and other income (expenses).

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 8 – SEGMENT INFORMATION (Continued)

Financial information by reportable segment for the three and six-monthsnine-months ended JuneSeptember 30, 2016 and 2015 is set forth below:

Financial information by reportable segment as of JuneSeptember 30, 2016 and December 31, 2015:

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 8 – SEGMENT INFORMATION (Continued)

Consolidated net revenues by region were as follows:

Net revenues are attributable to a geographic area based on the destination of the product shipment.shipment, which may not be the final geographic destination of our international distributors’ end customer. The majority of shipments in the Americas are to customers located within the United States. For the three-months ended JuneSeptember 30, 2016 and 2015, revenues in the United States for all reportable segments amounted to $5,611,283$6,210,423 and $5,614,787,$6,087,609, respectively. For the six-monthsnine-months ended JuneSeptember 30, 2016 and 2015, revenues in the United States for all reportable segments amounted to $10,383,454$16,593,877 and $11,407,261,$17,494,870, respectively. Shipments to the EMEA region were largely concentrated in two countries, Israel and Germany. For the three-months ended JuneSeptember 30, 2016, revenues to Israel and Germany for all reportable segments amounted to $340,750$349,418 and $236,005$100,653 of all shipments to the EMEA region, respectively. For the three-months ended JuneSeptember 30, 2015, revenues to Israel and Germany for all reportable segments amounted to $364,921$338,867 and $194,708,$229,682, respectively of all shipments to the EMEA region. For the six-monthsnine-months ended JuneSeptember 30, 2016, revenues to Israel and Germany amounted to $373,177$722,595 and $472,405$573,058 of all the shipments to the EMEA region, respectively. For the six-monthsnine-months ended JuneSeptember 30, 2015, revenues to Israel and Germany amounted to $908,315$1,247,182 and $661,552,$891,234, respectively of all shipments to the EMEA region. Shipments to the APAC region were largely concentrated in China. For the three-months ended JuneSeptember 30, 2016 and 2015, revenues in China for all reportable segments amounted to $233,999$231,485 and $328,747,$303,263, respectively. For the six-monthsnine-months ended JuneSeptember 30, 2016 and 2015, revenues in China for all reportable segments amounted to $421,169$652,654 and $597,329,$900,592, respectively.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Warranties:

The Company typically provides one-year warranties on all of its products covering both parts and labor. The Company, at its option, repairs or replaces products that are defective during the warranty period if the proper preventive maintenance procedures have been followed by its customers. Historically, the Company’s warranty expense has been minimal.

Leases:

In May 2015, the Company and its landlord entered into an amendment to the existing lease agreement to remain at its principal corporate headquarters in Hanover Township, Parsippany, New Jersey through March 31, 2023. Monthly lease payments range from approximately $33,000 in year one to approximately $41,000 in year eight. Additionally, the Company has available an allowance of approximately $300,000 towards alterations and improvements to the premises through November 30, 2016 of which the Company has used approximately $165,000$249,000 to date. The lease can be renewed at the Company’s option for one five-year period at fair market value to be determined at term expiration.

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 9 - COMMITMENTS AND CONTINGENCIES (Continued)

The following is a summary of the Company’s contractual obligations as of JuneSeptember 30, 2016: