| Significant Accounting Policies [Text Block] | NOTE 1 - DESCRIPTION OF COMPANY AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization and Basis of Presentation Wireless Telecom Group, Inc., a
New Jersey corporation, together with its subsidiaries (“we”, “us”, “our” or the
“Company”), is a global designer and manufacturer of advanced RF, microwave and millimeter wave components,
modules, systems and instruments and currently markets its products and services worldwide under the Boonton, Microlab,
Noisecom and CommAgility brands. Serving the wireless, telecommunication, satellite, military, aerospace, and semiconductor
industries, Wireless Telecom Group products enable innovation across a wide range of traditional and emerging wireless
technologies. With a unique set of high-performance products including peak power meters, signal analyzers, signal processing
modules, long term evolution (“LTE”) physical layer (“PHY”) and stack software, power splitters and
combiners, global positioning system (“GPS”) repeaters, public safety monitors, noise sources, and programmable
noise generators, Wireless Telecom Group supports the development, testing, and deployment of wireless technologies around
the globe. The consolidated financial statements include the accounts of Wireless Telecom Group, Inc., doing business as, and
operating under the trade name, Noise Com, Inc. (“Noisecom”), and its wholly owned subsidiaries including Boonton
Electronics Corporation (“Boonton”), Microlab/FXR (“Microlab”), Wireless Telecommunications Ltd. and
CommAgility Limited (“CommAgility”). The accompanying Consolidated
Financial Statements include the accounts of the Company and its wholly owned subsidiaries. The Consolidated Financial Statements
have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) and include the
results of companies acquired by the Company from the date of each acquisition. All intercompany accounts and transactions have
been eliminated in consolidation. The Company presents its operations
in three reportable segments: (1) Network Solutions, (2) Test and Measurement and (3) Embedded Solutions. The Network Solutions
segment is comprised primarily of the operations of Microlab. The Test and Measurement segment is comprised of the operations of
Boonton and Noisecom. The Embedded Solutions segment is comprised of the operations of CommAgility. Use of Estimates The accompanying financial statements
have been prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions 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. Accordingly, actual results could differ
from those estimates. The most significant estimates and assumptions include management’s analysis in support of inventory
valuation, accounts receivable valuation, valuation of deferred tax assets, returns reserves, warranty accruals, intangible assets,
estimated fair values of stock options and vesting periods of performance-based stock options and restricted stock and estimated
fair values of acquired assets and liabilities in business combinations. Reclassification Certain prior period
amounts have been reclassified to conform with the current period presentation. Concentrations of Credit
Risk, Purchases and Fair Value Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. 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. For the years ended December
31, 2018 and 2017 one customer, from the Embedded Solutions segment, accounted for 22.0% and 10.4% of the Company’s total
consolidated revenues, respectively. At December 31, 2018 one customer exceeded 10% of consolidated gross accounts receivable at
32.1%. At December 31, 2017, two customers exceeded 10% of consolidated gross accounts receivable at 17.8% and 11.2%, respectively. For the year ended December
31, 2018 two suppliers exceed 10% of consolidated inventory purchases at 15% and 13%, respectively. For the year ended December
31, 2017 no single third-party supplier accounted for 10% or more of the Company’s total consolidated inventory purchases. Cash and Cash Equivalents The Company considers all highly
liquid investments purchased with maturities of three months or less at the date of purchase to be cash equivalents. Cash and cash
equivalents consist of operating accounts. Accounts Receivable and
Allowance for Doubtful Accounts Trade accounts receivable are
recorded at the invoiced amount and do not bear interest. The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments. Estimated allowances for doubtful accounts are
reviewed periodically taking into account the customer’s recent payment history, the customer’s current financial statements
and other information regarding the customer’s credit worthiness. Account balances are charged off against the allowance
when it is determined the receivable will not be recovered. Inventories Inventories are stated at
the lower of cost (average cost) or net realizable value. Net realizable value is based upon an estimated average selling
price reduced by estimated costs of completion, disposal and transportation. Reductions in inventory valuation are included
in cost of sales in the accompanying Consolidated Statements of Operations and Comprehensive Loss. Finished goods and
work-in-process include material, labor and manufacturing expenses. The Company reviews inventory
for excess and obsolescence based on best estimates of future demand, product lifecycle status and product development plans. The
Company uses historical information along with these future estimates to reduce the inventory cost basis. Subsequent changes in
facts and circumstances do not result in the restoration or increase in that newly established cost basis. During the year ended 2017 the
Company recorded inventory adjustments totaling $1.9 million comprised of an increase to the Company’s excess and obsolescence
reserve of $1.1 million and the write off of gross inventory of $0.8 million. The charge was effected as a result of a review of
inventory balances and net realizable value of the inventory following the launch of the Company’s lean manufacturing initiative
and the adoption of a strategic product plan focused on product lifecycle acceleration. Inventory carrying value is
net of inventory reserves of approximately $1.9 million as of December 31, 2018 and 2017.
Inventories consist of (in thousands): December 31, December 31,
2018 2017
Raw materials $ 3,248 $ 3,231
Work-in-process 557 631
Finished goods 3,079 2,664
$ 6,884 $ 6,526 Prepaid Expenses and Other Current Assets Prepaid expenses and other current
assets generally consist of income tax receivables, prepaid insurance, prepaid maintenance agreements and the short term portion
of debt issuance costs. As of December 31, 2017, prepaid and other current assets included a $3.6 million contingent asset representing
the fair value of consideration shares issued in connection with the CommAgility acquisition. Under the claw back provisions of
the Share Purchase Agreement (see Note 3) the consideration shares were forfeited in March 2018 and are no longer outstanding.
Accordingly, prepaid expenses and other current assets decreased by $3.6 million from December 31, 2017. The forfeited shares are
recorded as treasury stock in the consolidated statement of shareholders’ equity as of December 31, 2018. Property, Plant and Equipment Property, plant and equipment
are reflected at cost, less accumulated depreciation. Depreciation and amortization are provided on a straight-line basis over
the estimated useful lives of the assets. The estimated useful lives for the property, plant and equipment are:
Machinery and computer equipment 3-8 years
Furniture and fixtures 5-7 years
Transportation equipment 4 years Leasehold improvements are amortized
over the shorter of the remaining term of the lease or the estimated economic life of the improvement. Repairs and maintenance
are charged to operations as incurred; renewals and betterments are capitalized. 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
evaluated for impairment annually by first performing a qualitative assessment to determine whether a quantitative goodwill test
is necessary. After assessing the totality of events or circumstances, if we determine it is more likely than not that the fair
value of a reporting unit is less than its carrying amount, then we perform additional quantitative tests to determine the magnitude
of any impairment. The Company’s goodwill
balance relates to two of the Company’s reporting units, Embedded Solutions and Network Solutions. Management’s qualitative
assessment performed in the fourth quarters of 2018 and 2017 did not indicate any impairment of goodwill as each reporting units
fair value is estimated to be in excess of its carrying value. Intangible and Long-lived
Assets Intangible assets include patents,
non-competition agreements, customer relationships and trademarks. Intangible assets with finite lives are amortized using the
straight-line method over the estimated economic lives of the assets, which range from three to five years. Long-lived assets,
including intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted
future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived
assets that management expects to hold and use is based on the estimated fair value of the asset. Long-lived assets to be disposed
of are reported at the lower of carrying amount or estimated fair value less costs to sell. The estimated useful lives of intangible
and long-lived assets are based on many factors including assumptions regarding the effects of obsolescence, demand, competition
and other economic factors, expectations regarding the future use of the asset, and our historical experience with similar assets.
The assumptions used to determine the estimated useful lives could change due to numerous factors including product demand, market
conditions, technological developments, economic conditions and competition. Intangible assets determined to have indefinite useful
lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that
indicate an asset may be impaired. Fair Value of Financial Instruments Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between
market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the
inputs used in the valuation methodologies in measuring fair value: Level 1 - Quoted prices in active
markets for identical assets or liabilities. Level 2 - Inputs other than
Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs
that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The categorization of a financial
instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The carrying amounts of the
Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximate
fair value due to their relatively short maturities. The Company’s term loan and revolving credit facility bear interest
at a variable interest rate plus an applicable margin and, therefore, carrying amount approximates fair value. Contingent Consideration Under
the terms of the CommAgility Share Purchase Agreement (See Note 3) the Company may be required to pay additional purchase price
if certain financial targets are achieved for the years ending December 31, 2017 and December 31, 2018. The financial targets for
2017 were not achieved therefore there was no earn-out payment made in the twelve months ended December 31, 2018 .
As of December 31, 2017, the Company estimated the fair value of the contingent consideration
remaining to be paid based on the 2018 financial results to be $0.6 million. The Company is required to reassess the fair value
of the contingent consideration at each reporting period. The significant inputs used
in this fair value estimate include gross revenues and Adjusted EBITDA, as defined, and scenarios for the earn-out periods for
which probabilities are assigned to each scenario to arrive at a single estimated outcome. The estimated outcome is then discounted
based on the individual risk analysis of the liability. Although the Company believes its estimates and assumptions are reasonable,
different assumptions, including those regarding the operating results of CommAgility or changes in the future, may result in different
estimated amounts. During the twelve months ended
December 31, 2018 the Company recorded a loss on change in fair value of contingent consideration liability of $0.6 million due
to the improved financial results at CommAgility as compared to prior estimates. As of December 31, 2018, the Company’s contingent
consideration liability is $1.4 million and is recorded in accrued expenses and other current liabilities in the accompanying consolidated
balance sheet. The Company will satisfy this obligation with a cash payment to the sellers of CommAgility in the first quarter
of 2019. The contingent consideration liability is considered a Level 3 fair value measurement. Foreign Currency Translation Assets and liabilities of non-U.S.
subsidiaries that operate in a local currency environment, where the local currency is the functional currency, are translated
from foreign currencies into U.S. dollars at period-end exchange rates while income and expenses are translated at the weighted
average spot rate for the periods presented. Translation gains or losses related to net assets located outside the U.S. are shown
as a component of accumulated other comprehensive income in the Consolidated Statements of Changes in Shareholders’ Equity.
Gains and losses resulting from foreign currency transactions, which are denominated in currencies other than the Company’s
functional currency, are included in the Consolidated Statements of Operations and Comprehensive Loss. The Company recognized $0.1
million in foreign exchange transaction losses in fiscal 2017 and 2018. Other Comprehensive
Income (Loss) Other comprehensive income (loss)
is recorded directly to a separate section of shareholders’ equity in accumulated other comprehensive income and includes
unrealized gains and losses excluded from net income. These unrealized gains
and losses consist of changes in foreign currency translation. Research and Development
Costs Research and development costs
are charged to operations when incurred. The amounts charged to operations for the years ended December 31, 2018 and 2017 were
$4.9 million and $4.4 million, respectively. Advertising Costs Advertising expenses are charged
to operations during the year in which they are incurred and aggregated $0.1 million for the years ended December 31, 2018 and
2017. Stock-Based Compensation The Company follows the provisions
of Accounting Standards Codification (“ASC”) 718, “Compensation – Stock Compensation” which requires
that compensation expense be recognized, based on the fair value of the stock awards. The fair value of the stock awards is equal
to the fair value of the Company’s stock on the date of grant. The fair value of options at the date of grant are estimated
using the Black-Scholes option pricing model. When performance-based options are granted, the Company takes into consideration
guidance under ASC 718 and SEC Staff Accounting Bulletin No. 107 (SAB 107) when determining assumptions. The expected option life
is derived from assumed exercise rates based upon historical exercise patterns and represents the period of time that options granted
are expected to be outstanding. The expected volatility is based upon historical volatility of our shares using daily price observations
over an observation period that approximates the expected life of the options. The risk-free rate is based on the U.S. Treasury
yield curve rate in effect at the time of grant for periods similar to the expected option life. The Company accounts for forfeitures
when they occur. Management estimates are necessary
in determining compensation expense for stock options with performance-based vesting criteria. Compensation expense for this type
of stock-based award is recognized over the period from the date the performance conditions are determined to be probable of occurring
through the implicit service period, which is the date the applicable conditions are expected to be met. If the performance conditions
are not considered probable of being achieved, no expense is recognized until such time as the performance conditions are considered
probable of being met, if ever. If the award is forfeited because the performance condition is not satisfied, previously recognized
compensation cost is reversed. Management evaluates performance conditions on a quarterly basis. Income Taxes The Company records deferred
taxes in accordance with ASC 740, “Accounting for Income Taxes”. This ASC 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 asset, a majority of which has been generated by a history of net operating losses and determines
the necessity for a valuation allowance. The Company evaluates which portion, if any, will more likely than not be realized by
offsetting future taxable income, taking into consideration any limitations that may exist on its use of its net operating loss
carry-forwards. Under ASC 740, the Company must
recognize and disclose uncertain tax positions 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 amounts recognized in the financial statements attributable
to such position, if any, are recorded if there is a greater than 50% likelihood of being realized upon the ultimate resolution
of the position. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions
requiring recognition or disclosure in its consolidated financial statements. On December 22, 2017, the United
States enacted the Tax Cuts and Jobs Act (“TCJA”), which instituted fundamental changes to the taxation of multinational
corporations, including a reduction the U.S. corporate income tax rate to 21% beginning in 2018. As a result, the Company re-measured
its U.S. deferred tax assets at the new lower corporate income tax rate. The TCJA also requires a one-time transition tax on the
mandatory deemed repatriation of the cumulative earnings of the Company’s foreign subsidiary as of December 31, 2017. To
determine the amount of this transition tax, the Company must determine the amount of earnings generated since inception by the
relevant foreign subsidiary, as well as the amount of non-U.S. income taxes paid on such earnings, in addition to potentially other
factors. See Note 12 for a discussion of the impact the TCJA. Earnings (Loss) Per Common
Share Basic earnings (loss) per
share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of shares
of common stock outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss)
available to common shareholders by the weighted average number of common shares outstanding for the period and, when
dilutive, potential shares from stock options using the treasury stock method, the weighted average number of unvested
restricted shares and the weighted-average number of restricted stock units outstanding for the period. Shares from stock
options are included in the diluted earnings per share calculation only when options exercise prices are lower than the
average market value of the common shares for the period presented. In periods with a net loss, the basic loss per share
equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they
are anti-dilutive. In accordance with ASC 260, “Earnings Per Share”, the following table reconciles basic shares
outstanding to fully diluted shares outstanding.
For the Years Ended December 31,
2018 2017
Weighted average common shares outstanding 20,858,298 19,983,747
Potentially dilutive equity awards 707,492 877,935
Weighted average common shares outstanding, assuming dilution 21,565,790 20,861,682 The weighted average number
of options to purchase common stock not included in diluted loss per share because the performance condition was not met in 2018
was 285,000. The weighted average number of options to purchase common stock not included in diluted loss per share in 2017, because
the effects are anti-dilutive or the performance condition was not met, was 1,048,000. Recent Accounting Pronouncements
Adopted in 2018 On January 1, 2018, the Company
adopted Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606) Upon adoption, a cumulative
effect adjustment of $0.3 million was made and the impact resulted in an increase to the January 1, 2018 opening balance of retained
earnings. The adjustment was based on customer-specific contracts in effect at December 31, 2017 and reflects revenue that would
have been recognized in 2018 in accordance with Accounting Standard Codification (“ASC”) Topic 605, Revenue Recognition Software The most significant impact
of Topic 606 relates to the Company’s accounting for software license agreements which have multiple deliverables. Under
Topic 605 the Company could not establish vendor specific objective evidence of fair value (“VSOE”) for its undelivered
elements and therefore was not able to separate its delivered software licenses from its future undelivered software license releases.
Topic 606 no longer requires separability of promised goods, such as software licenses, on the basis of VSOE. Rather, Topic 606
requires the Company to identify the performance obligations in the contract — that is, those promised goods and services
(or bundles of promised goods or services) that are distinct — and allocate the transaction price of the contract to those
performance obligations on the basis of estimated standalone selling prices (“SSPs”). For these arrangements, the Company
will recognize revenue for each deliverable at a point in time when control is transferred to the customer since each deliverable
has standalone value. The primary impact of adopting
the new standard results in an acceleration of revenues recognized for the aforementioned multiple deliverable software license
arrangements, which are primarily in the Embedded Solutions segment. These multiple deliverable arrangements represented less than
2% of total consolidated revenues for the year ended December 31, 2017. The timing of revenue recognition
for digital signal processing hardware in the Embedded Solutions segment, radio frequency solutions in the Network Solutions segment
and noise generators and components and power meters and analyzers and related services in the Test and Measurement segment remains
substantially unchanged. The following line items in
our Consolidated Statement of Operations and Comprehensive Income/(Loss) for the twelve months ended December 31, 2018 and Consolidated
Balance Sheet as of December 31, 2018 have been provided to reflect both the adoption of Topic 606 as well as a comparative presentation
in accordance with Topic 605 previously in effect (in thousands):
Twelve Months Ended December 31, 2018
CONDENSED CONSOLIDATED STATEMENT As Reported (in Accordance with ASC Topic 606) Balances Without Impact of Adoption
Net Revenues $ 52,788 $ 52,590 $ 198
Operating income 779 581 198
Net income/(loss) 35 (163) 198
As of December 31, 2018
CONDENSED CONSOLIDATED BALANCE As Reported (in Accordance with ASC Topic 606) Balances Without Adoption of ASC Topic 606 Impact of Adoption Higher/(Lower)
CURRENT LIABILITIES
Deferred revenue $ 103 $ 608 $ (505)
SHAREHOLDERS’ EQUITY
Retained earnings 7,556 7,051 505 Recent Accounting Pronouncements
Not Yet Adopted In February 2016, the FASB issued
ASU 2016-02, Leases (Topic 842) On June 20, 2018, the FASB issued
ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Compensation - Stock Compensation Subtopic 505-50, Equity - Equity-Based Payments to Non-Employees In June 2016, the FASB issued
ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) In August 2018, the FASB issued
ASU 2018-13, Fair Value Measurement, Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement
(Topic 820) |
