February 9, 2005
Mail Stop 03-06
Paul Genova
President and Chief Financial Officer
Wireless Telecom Group, Inc.
25 Eastmans Road
Parsippany, New Jersey 07054
Re: Wireless Telecom Group, Inc.
Preliminary Schedule 14A filed January 11, 2005
File No. 001-11916
Dear Mr. Genova:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Preliminary Schedule 14A
General
1. Please update your filing to fill in all of the blanks.
2. Please eliminate the use of capitalized defined terms
throughout
the forepart (cover page, summary term sheet, question-and-answer
section, and risk factors) of the filing, and limit their use in
the
rest of the filing. We note, for example, "Stock Purchase
Agreement," "Acquisition," "Issuance," "Acquisition
Consideration,"
"IP Allegations," etc. For further guidance on drafting
disclosure
in plain English, please see our website.
Questions and Answers . . . - Page ii
What do I need to do now? - Page iv
3. Relocate the second paragraph to be part of the answer provided
to
the question entitled, "How will votes be counted at the special
meeting?"
Summary - Page 1
4. Relocate the summary term sheet so that it precedes the
questions-
and-answers section. See Item 1001 of Regulation M-A. Revise the
disclosure so that the summary term sheet information is written
in
plain English, and logically arrange the disclosure so that it is
informative to investors. For example, it would make sense to
explain to investors why you are engaging in the acquisition at
the
beginning of the summary, rather than on page 5. Also, balance
the
disclosure by listing the potential disadvantages of the
transaction.
5. Your summary disclosure should summarize and explain the
material
factors investors should consider in deciding whether to approve
this
transaction, rather than simply lifting whole sections from the
proxy
statement and duplicating them here under caption headings.
Please
revise.
6. Eliminate duplicative disclosure between the summary term sheet
and the questions and answers.
7. Disclose in an appropriate location in the summary that Willtek
has two shareholders, identify them, and disclose the percentage
of
total outstanding equity of Wireless Telecom Group each will hold
after the acquisition.
8. Your cross references to large blocks of disclosure (for
example,
the cross reference to "Pages 38 through 76") are not helpful to
investors. Please revise.
Indemnification Provisions - Page 4
9. Revise to briefly explain the IP allegations so an investor
reading the summary can understand this discussion.
Regulatory Filings - Page 9
10. Update the disclosure on page 61 to disclose the status of
your
efforts to comply with regulatory laws.
New Loan Agreement - Page 7
11. Expand in this paragraph to disclose the relationship between
Investcorp and Willtek. Explain why you entered into this
agreement.
Wireless Telecom Group, Inc. Unaudited Pro Forma Condensed
Consolidated Financial Statements - Page 13
Pro Forma Condensed Consolidated Balance Sheet - Page 15
12. We note the intangible assets row does not foot across. Based
on
your preliminary purchase price allocation on page 18, it appears
the
pro forma consolidated amount of intangible assets should be
$14,500.
Please revise your pro forma balance sheet to correct, or revise
your
preliminary purchase price allocation on page 18 as appropriate.
Pro Forma Condensed Consolidated Statement of Operations - Page 16
13. It appears that your pro forma statement does not foot or
cross-
foot. Please revise accordingly.
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements - Page 18
Note 1 - Basis of Presentation - Page 18
14. Tell us why you have included the elimination of the
historical
shareholders` equity of Willtek, existing intangible assets of
Willtek and the reduction of the pension obligation to funded
status
in your preliminary purchase price allocation. Refer to
paragraphs
35-46 of SFAS 141. Your purchase price allocation should allocate
the total cost of the acquired entity to the assets acquired and
liabilities assumed based on their estimated fair values as of the
date of the acquisition. Therefore, you should not be allocating
any
portion of the purchase price to reduce the values of assets or
liabilities of the acquired entity. Please revise your
preliminary
purchase price allocation table as appropriate.
15. Explain why in the second paragraph you state that pursuant to
the Stock Purchase Agreement, WTT will issue "up to" 8,000,000
shares
of its common stock.
Note 2 - Pro Forma Adjustments - Page 19
16. It appears that you have only applied adjustment (l) for the
year
ending December 31, 2003. However, your adjustments for the nine
months ended September 30, 2004 include an adjustment relating to
(m), which is to record a tax benefit arising from adjustment (l).
Please revise to include an adjustment relating to (l) for the
nine
months ended September 30, 2004.
Comparative Historical and Pro Forma Per Share Data - Page 21
17. You state that your calculation of historical and pro forma
book
value per share as of September 30, 2004 is based on the actual
and
pro forma number of shares outstanding at that date. However, it
appears that the actual calculation instead uses the fully diluted
weighted average shares outstanding from January 1, 2004 to
September
30, 2004. Please supplementally provide us with your calculation
of
historical and pro forma book value per share. Revise your filing
to
show the book value per share based on the actual and pro forma
number of shares outstanding at September 30, 2004.
Alternatively,
tell us why you believe use of the fully diluted weighted average
number of shares is appropriate and revise your disclosure to more
accurately describe how the book value per share was calculated.
The Acquisition - Page 38
Background of the Acquisition - Page 38
18. Expand to disclose what happened after Capitalink was
furnished
with the IP letter. Disclose whether it was asked to reaffirm its
opinion that was issued prior to knowing about the allegations.
If
so, did it do so? If not, explain why not.
Reasons for the Acquisition - Page 44
19. If Capitalink did not reaffirm its opinion after it received
the
IP letter, expand to discuss what consideration the board gave to
that fact.
20. We note in the first bullet point on page 45 that your board
considered "possible alternative means of achieving the
anticipated
benefits of the Acquisition, including the possibility of one or
more
strategic combinations with other companies." Please disclose in
the
section entitled "Background of the Acquisition" details regarding
alternatives that your board considered and when they considered
them.
21. The bulleted lists of benefits and risks on page 45 do not
give
investors much insight into the Board`s deliberative process in
determining whether or not to approve the acquisition or why it is
recommending that shareholders approve it. Please revise.
22. Revise the disclosure at the bottom of page 45 to discuss
whether
the Board considered the history of Willtek`s operating losses in
deciding to approve the merger. In balancing this factor with
some
of the other factors, what conclusions did the Board reach?
Clarify
why you refer to "substantial dilution to WTT`s current
shareholders"
as a "risk" when, in fact, it is a certainty.
23. We note your disclosure on page 19 that "WTT may incur
significant restructuring charges upon completion of the
acquisition
or in subsequent quarters for severance or relocation costs
related
to WTT employees." Expand to discuss what consideration the Board
gave to these costs.
Opinion of Capitalink, L.C. - Page 46
24. Supplementally provide copies of the materials that Capitalink
prepared in connection with its fairness opinion or otherwise
provided to the WTT board in connection with this transaction. We
may have additional comments after we review those materials.
25. Revise the last sentence in the first paragraph on page 49 to
more specifically explain your reference to the "Risk Factors"
section.
26. Please revise the disclosure to state specifically what
conclusions Capitalink drew from each analysis and whether and how
it
supports the fairness finding. We note the disclosure that,
"Capitalink did not form a conclusion as to whether any individual
analysis, considered in isolation, supported or failed to support
an
opinion as to whether, on the date of such opinion, the
consideration
to be received ... is fair, from a financial point of view, to
WTT`s
shareholders." This language does not negate the need for
disclosure
that fully explains to investors the basis for Capitalink`s
opinion
and how it determined that the consideration to be paid is fair.
We
may have further comments when we review revised disclosure in
response to this comment.
27. Explain how the "Equity Value of Willtek" was calculated for
purposes for purposes of determining the "Valuation Overview."
Directors and Executive Officers of WTT Following Completion of
the
Acquisition - Page 57
28. Confirm supplementally that WTT will not be making severance
payments to any officers or directors who will be leaving as a
result
of the acquisition.
The Stock Purchase Agreement - Page 62
29. Please revise the introductory paragraph to clarify that your
disclosure includes all material provisions of the agreement, and
revise your disclosure as appropriate.
30. Please file all material exhibits to the stock purchase
agreement, including the indemnification escrow agreement, and
summarize their material terms here.
Acquisition Consideration - Page 62
31. Expand the disclosure to describe in more detail the "certain
liabilities and obligations of Willtek" that you are assuming in
connection with the acquisition.
Other Agreements Related to the Acquisition - Page 73
32. Revise the introductory paragraph to state that you have
discussed all material provisions of the agreements, and revise
your
disclosure as appropriate.
New Loan Agreement - Page 76
33. Please disclose your reason for refinancing Willtek`s
outstanding
indebtedness to Investcorp, and describe the material terms of the
indebtedness both before and after entry into the new loan
agreement.
34. We note that you have agreed to guaranty Willtek`s obligations
under the new loan agreement. Have you entered into a written
guaranty? If so, please amend your filing to include this
agreement,
and summarize its material terms here and in the summary.
Security Ownership of Beneficial Owners and Management of WTT-
Page
77
35. Name the natural persons who have voting and/or investment
control over the shares held by Investcorp Technology Ventures LP
and
Damany Holding GmbH.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations of WTT - Page 79
Critical Accounting Policies - Page 79
36. Please revise to provide greater insight into the quality and
variability of information regarding financial condition and
operating performance within your critical accounting policies.
Revise your future filings to address specifically why your
accounting estimates or assumptions bear the risk of change. Also,
please revise to analyze, to the extent material, such factors as
how
you arrived at the estimate, how accurate the estimate/assumption
has
been in the past, how much the estimate/assumption has changed in
the
past, and whether the estimate/assumption is reasonably likely to
change in the future. Since critical accounting estimates and
assumptions are based on matters that are highly uncertain, you
should analyze their specific sensitivity to change, based on
other
outcomes that are reasonably likely to occur and would have a
material effect. You should provide quantitative as well as
qualitative disclosure when quantitative information is reasonably
available and will provide material information for investors.
Results of Operations - Page 80
For the Nine Months Ended September 30, 2004 Compared to September
30, 2003 - Page 80
37. We note you attribute the increase in revenues for the nine
months ended September 30, 2004 to increased sales activity of the
Boonton peak power meter instruments. Revise to discuss why there
has been increased sales activity of these products. In your
revised
disclosure indicate whether there has been a change in your
prices,
decreased competition, release of new products, etc. Management`s
discussion and analysis should identify and quantify factors
responsible for changes in financial statement line items and
describe why those factors occurred. Refer to Item 303(a)(3) of
Regulation S-K.
38. We note you attribute improvement in gross profit to higher
sales
volume. Management`s discussion and analysis should separately
discuss and quantify changes from volume, prices and other
factors.
Refer to Item 303(a)(3)(iii) of Regulation S-K.
For the Year Ended December 31, 2003 Compared to December 31, 2002
- -
Page 80
39. Please revise the discussion of net sales to provide an
indication of why revenues decreased between the periods. Please
note this comment also applies to the discussion of the net sales
for
the year ended December 31, 2002 compared to the year ended
December
31, 2001.
40. Please revise to discuss why your Noise Com and Boonton
operations generated higher gross profit margins. Discuss any
unusual or infrequent items that may have contributed to the
improved
gross margins. Discuss any trends or uncertainties that may exist
relating to your different business lines.
For the Year Ended December 31, 2002 Compared to December 31, 2001
- -
Page 81
41. Revise to discuss why your gross profit margin declined from
54.4% in 2001 to 50.4% in 2002.
Liquidity and Capital Resources - Page 82
42. We note your current ratio has increased from 11.9:1 at
December
31, 2003 to 21.3:1 at September 30, 2004. Revise your filing to
discuss what factors caused the current ratio to increase so
significantly.
43. You state that you have historically been able to collect your
account receivables approximately every two months. However, we
note
that your days sales outstanding has increased from approximately
57
days at December 31, 2003 to approximately 74 days at September
30,
2004. Revise your filing to discuss why your days sales
outstanding
has increased. Discuss why your accounts receivable has increased
at
a greater rate than your sales.
Willtek Operating and Financial Review - Page 88
Quantitative and Qualitative Disclosures About Market Risk - Page
93
44. Please revise to provide quantitative information about market
risk relating to exposure to U.S. dollar and the British pound
sterling in one of the three alternative formats provided for in
Item
305(a) of Regulation S-K. In addition, provide the qualitative
information required by Item 305(b) of Regulation S-K.
Wireless Telecom Group, Inc. Consolidated Financial Statements as
of
December 31, 2003
Consolidated Statements of Operations - Page F-4
45. Please revise your statement of operations, or include a
footnote
to the financial statements, which shows the components of
interest,
dividends and other (income) expense. Support the timing of the
recognition of and accounting for any significant items noted.
Please note that the guidance at Rule 5-03(b)(7) and (9) of
Regulation S-X does not permit material items to be netted.
46. Provide us with your calculation of the basic and diluted
weighted average shares outstanding. We note that you had
19,875,378
and 19,992,378 shares outstanding at December 31, 2002 and 2003,
respectively. However, the weighted average shares numbers used
in
your earnings per share calculation are significantly lower.
Revise
your filing as appropriate to correct the share figures presented
on
the balance sheet or the weighted average shares outstanding
figures
presented on the income statement. If shares are being excluded
from
this calculation, revise your disclosures to clearly indicate the
nature of the shares being excluded and why they are being
excluded.
Support your position for excluding these shares by reference to
appropriate accounting literature. Finally, please note these
comments also apply to the weighted average share information
presented on pages 10, 16, 17, and 21 of this filing, as well as
the
per share information presented throughout the annual and interim
period financial statements.
Note 1 - Description of Company and Summary of Significant
Accounting
Policies - Page F-7
47. Please revise to define the abbreviation "FSC."
Intangible Assets - Page F-9
48. We see that goodwill impairment testing in 2003 was based on
an
independent valuation consulting firm. If you intend to
incorporate
the 10-K by reference in any registration statement, you must
specifically identify each appraiser as an expert and include
their
consent in the registration statement. Alternatively, you should
revise to eliminate those references and to clearly disclose that
management is primarily responsible for determining fair values
for
goodwill impairment testing purposes and instead discuss the
methods
and significant assumptions used to make your valuations. We will
not object if you wish to state, in revised disclosure, that
management considered a number of factors, including valuations or
appraisals, when making these determinations. In any case, your
disclosure should clearly indicate that management is responsible
for
these valuations. Please revise to comply. Please note this
comment
also applies to Note 4 of the interim condensed consolidated
financial statements.
Revenue Recognition - Page F-9
49. We note that you sell to distributors. Please revise your
filing
to clearly indicate your revenue recognition policy relating to
sales
to distributors.
50. Revise your filing to discuss any post-shipment obligations
that
may exist in any of your arrangements, including right of return,
price protection, or volume pricing. Please cite the specific
accounting literature that you are relying upon in your response.
Stock Based Compensation - Page F-10
51. Please revise to present the pro forma net income per share as
if
the fair value method had been used in the Summary of Significant
Accounting Policies footnote. Please refer to paragraph 2(e) of
SFAS
148. Please note this comment also applies to your interim
condensed
consolidated financial statements.
52. In addition, please revise the format of your reconciliation
of
pro forma net income per share as presented in Note 5 to comply
with
the presentation requirements prescribed by paragraph 2(e) of SFAS
148. Please note this comment also applies to your interim
condensed
consolidated financial statements.
Note 5 - Shareholders` Equity - Page F-11
53. Please revise to present the weighted average grant date fair
value for options granted during the year. Refer to paragraph
47(b)
of SFAS 123.
54. Please revise to also present the number, weighted-average
exercise price and weighted average remaining contractual life of
options outstanding, and the number and weighted average exercise
price of options currently exercisable by exercise price range, as
required by paragraph 48 of SFAS 123.
Note 6 - Operational Information and Export Sales - Page F-14
55. We note throughout management`s discussion and operations that
you discuss various operating subsidiaries, including Boonton
Electronics Corporation, Microlab/FXR and Noise Com. Tell us why
you
do not believe these operating subsidiaries meet the definition of
operating segments as defined in paragraphs 10-15 of SFAS 131.
Alternatively, if you are applying the aggregation criteria of
SFAS
131, tell us why you believe the operating segments qualify for
aggregation based on the guidance in paragraph 17 of SFAS 131.
Willtek Communications GmbH Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm - Page F-
25
56. We note your auditors did not audit the financial statements
of
Willtek Communications Incorporated as of and for the period ended
March 31, 2003, but instead chose to rely on the work of the other
auditor and refer to that other auditor in its opinion. We
further
note the assets of Willtek Communications Inc. constitute
approximately 37% of the consolidated assets, and the revenues of
this subsidiary constitute 26% of the consolidated revenues.
Given
the significance of the subsidiary that was audited by other
auditors, please revise your filing to include the report of the
auditor in this filing. Refer to Rule 2-05 of Regulation S-X.
Note 1 - Description of Business and Summary of Significant
Accounting Policies - Page F-31
Revenue Recognition - Page F-34
57. We note you sell to distributors. Please supplementally tell
us
and revise your footnote to disclose how you recognize revenue on
sales to distributors. In addition, tell us how you account for
any
post-shipment obligations relating to these or any of your other
sales.
* * *
As appropriate, please revise your proxy statement in response to
these comments and to update your disclosure. As required by Rule
14a-6(h), please provide us with marked copies of the revised
proxy
statement to expedite our review. Please furnish a cover letter
with
your revised proxy statement that keys your responses to our
comments
and provides any requested supplemental information. Detailed
cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your revised proxy
statement
and responses to our comments.
Direct questions on the financial statements and related
disclosure to Kevin Vaughn at (202) 824-5387 or Daniel Gordon,
Branch
Chief, at (202) 942-2813. Direct any other questions to Donald C.
Hunt at (202) 824-5662 or to me at (202) 942-1880.
Sincerely,
Peggy Fisher
Assistant Director
cc (via fax): Robert H. Cohen, Esq. - Greenberg Traurig
Anthony J. Marsico, Esq. - Greenberg Traurig
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Paul Genova
Wireless Telecom Group, Inc.
July 22, 2005
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