FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended
June 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
1-11916
WIRELESS TELECOM GROUP, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-2582295
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
East 64 Midland Avenue
Paramus, New Jersey 07652
(Address of principal executive offices) (Zip Code)
(201) 261-8797
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the most recent practicable date.
Common Stock - Par Value $.01 17,557,298
Class Outstanding Shares
At July 27, 1998
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page(s)
Item 1 -- Consolidated Financial Statements:
Condensed Balance Sheets as of June 30, 1998
(unaudited) and December 31, 1997 3
Condensed Statements of Operations for the Three and Six
Months Ended June 30, 1998 and 1997 (unaudited) 4
Condensed Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 (unaudited) 5
Notes to Interim Condensed Financial Statements
(unaudited) 6
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 -9
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings 10
Item 2 -- Changes in Securities 10
Item 3 -- Defaults upon Senior Securities 10
Item 4 -- Submission of Matters to a Vote of Security Holders 10
Item 5 -- Other Information 10
Item 6 -- Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 11.1 12
Exhibit 27 13
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PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ASSETS -
JUNE 30, DECEMBER 31,
1998 1997
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 8,348,315 $ 7,546,625
Accounts receivable -- net of allowance for
doubtful accounts of $145,587 and
$120,616, respectively 3,475,198 4,728,640
Inventories 7,820,064 8,810,230
Prepaid expenses and other current assets 842,976 224,413
TOTAL CURRENT ASSETS 20,486,553 21,309,908
PROPERTY, PLANT AND EQUIPMENT - NET 2,469,353 2,254,829
OTHER ASSETS 608,299 646,317
$ 23,564,205 $ 24,211,054
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES
Accounts payable $ 998,152 $ 1,652,601
Accrued expenses and other
current liabilities 42,139 204,818
TOTAL CURRENT LIABILITIES 1,040,291 1,857,419
DEFERRED INCOME TAXES 137,386 125,404
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (Note 4):
Preferred stock, $.01 par value, 2,000,000
shares authorized, none issued - -
Common stock, $.01 par value, 30,000,000 shares
authorized, 17,702,298 and 17,613,498
shares issued, respectively 177,023 176,135
Additional paid-in-capital 6,631,061 6,422,971
Retained earnings 15,846,253 15,896,934
Treasury stock at cost, 145,000 shares (267,809) (267,809)
22,386,528 22,228,231
$ 23,564,205 $ 24,211,054
The accompanying notes are an integral part of these financial statements.
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WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
NET SALES $ 3,313,701 $ 7,036,286 $9,372,588 $14,178,787
COSTS AND EXPENSES
Cost of sales 2,314,280 1,991,994 4,719,657 3,959,190
Operating expenses 1,669,740 1,832,556 3,542,276 3,582,887
Interest, dividend and
other income (91,488) (117,638) (191,397) (222,814)
TOTAL COSTS AND EXPENSES 3,892,532 3,706,912 8,070,536 7,319,263
INCOME (LOSS) BEFORE
INCOME TAXES (578,831) 3,329,374 1,302,052 6,859,524
PROVISION FOR INCOME TAXES (205,149) 1,186,410 475,188 2,477,280
NET INCOME (LOSS) $ (373,682) $ 2,142,964 $ 826,864 $ 4,382,244
NET INCOME (LOSS) PER COMMON SHARE (Note 2):
BASIC $ (.02) $ .12 $ .05 $ .25
DILUTED $ (.02) $ .12 $ .05 $ .25
The accompanying notes are an integral part of these financial statements.
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WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months
Ended June 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 826,864 $ 4,382,244
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 212,794 117,159
Deferred income taxes 11,982 7,189
Provision for losses on accounts receivable 24,971 7,247
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 1,228,471 (263,841)
(Increase) decrease in inventories 990,166 (1,451,968)
(Increase) in prepaid expenses and other assets (580,545) (84,225)
Increase (decrease) in accounts payable and
accrued expenses (817,128) 243,867
Net cash provided by operating activities 1,897,575 2,957,672
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (427,318) (484,182)
Officer's life insurance - (186,522)
Net cash (used) for investing activities (427,318) (670,704)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (877,545) (1,743,166)
Proceeds from exercise of stock options 208,978 284,432
Acquisition of treasury stock - (207,483)
Net cash (used) for financing activities (668,567) (1,666,217)
NET INCREASE IN CASH AND CASH EQUIVALENTS 801,690 620,751
Cash and cash equivalents, at beginning of year 7,546,625 8,039,128
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 8,348,315 $ 8,659,879
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 1,038,000 $ 2,360,000
The accompanying notes are an integral part of these financial statements.
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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 June 30, 1998 and the condensed
consolidated statements of operations for the three and six month periods
ended June 30, 1998 and 1997 and the condensed consolidated statements of cash
flows for the six month periods ended June 30, 1998 and 1997 have been
prepared by the Company without audit. The consolidated financial statements
include the accounts of Wireless Telecom Group, Inc. and its wholly-owned
subsidiary WTG Foreign Sales Corporation. WTG Foreign Sales Corporation began
operations as a subsidiary of the Company in February 1996.
In the opinion of management, the accompanying condensed consolidated
financial statements referred to above contain all necessary adjustments,
consisting of normal accruals and recurring entries only, which are necessary
to present fairly the Compa ny'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, 1997, which is incorporated herein by reference.
Specific refere nce is made to this report for a description of the Company's
securities and the notes to financial statements included therein.
The results of operations for the three and six month periods ended June 30,
1998 and 1997 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2 - INCOME PER COMMON SHARE
Income per common share is computed by dividing the net income by the weighted
average number of common shares and common equivalent shares outstanding
during each period. The Company has adopted SFAS 128 "Earnings Per Share"
("SFAS 128"), which has changed the method for calculating earnings per share.
SFAS 128 requires the presentation of "basic" and "diluted" earnings per share
on the face of the income statement. Prior period earnings per share data have
been restated in accordance with Statement 128.
NOTE 3 - REVOLVING CREDIT LINE
The Company has an agreement with its bank for an unsecured line of credit in
the amount of $7,000,000 at the bank's prime lending rate. There are no
direct borrowings currently against the line of credit. This agreement
expires on September 30, 1998.
NOTE 4 - DIVIDENDS
On January 26, 1998, the Company announced the declaration of quarterly cash
dividend of $.05 per share to shareholders of record on March 23, 1998. This
cash dividend aggregated $877,545 and was paid by March 31, 1998. On May 15,
1998 the Company ceased paying a quarterly cash dividend to reinvest earnings
in the Company. The Company paid cash dividends aggregating $.20 per share
for the year ending December 31, 1997.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
Wireless Telecom Group, Inc., formerly Noise Com, Inc., (the "Company")
develops, manufactures and markets a wide variety of electronic noise sources
and test instruments for wireless telecommunications. The Company's products
are used to test the performance and capability of satellite, cellular and
personal (PCS) communications, radio, radar, wireless local area network
(WLAN), high-definition television (HDTV) and other communications systems. To
further address the needs of the ever-evolving wireless telecommunications
industry, the Company has been developing and marketing test instruments
designed to fulfill the requirements of such customers. The Company is
expanding its product offerings to these customers as this emerging industry
is expected to provide an opportunity for substantial growth.
The financial information presented herein includes:
(i) Condensed consolidated balance sheets as of June 30, 1998 and as of
December 31, 1997 (ii) Condensed consolidated statements of operations for
the three and six month periods ended June 30, 1998 and 1997 and (iii)
Condensed consolidated statements of cash flows for the six month periods
ended June 30, 1998 and 1997.
OPERATIONS
For the six months ended June 30, 1998 as compared to the corresponding period
of the previous year, net sales decreased to $9,372,588 from $14,178,787 a
decrease of $4,806,199 or 33.9%. For the quarter ended June 30, 1998 as
compared to the corre sponding period of the previous year, net sales
decreased to $3,313,701 from $7,036,286 a decrease of $3,722,585 or 52.9%.
This decrease was due to the weakness in the Asian economy, primarily Korea,
resulting in a decline in sales to international and domestic customers, most
notably Motorola. In addition, a decline in current demand for the Company's
existing products is being experienced partially due to a transition in
technology as the industry focuses on test solutions for third generation
phones. The Company has been aggressively pursuing the development of
products for this new technology. The Company expects that revenues and income
for the remainder of 1998 will be substantially lower than the results
reported for the comparable quarters in the year ending December 31, 1997.
The Company's gross profit on net sales for the six months ended June 30, 1998
was $4,652,931 or 49.6% as compared to $10,219,597 or 72.1% for the six months
ended June 30, 1997. Gross profit on net sales for the quarter ended June 30,
1998 was $999,421 or 30.2% as compared to $5,044,292 or 71.7% for the three
months ended June 30, 1997. Variations in gross profit are primarily
attributed to lower economies of scale from the decline in revenues.
Furthermore the Company has increased headcount to provide greater customer
support for existing products and enhance its production capability. In
addition, the Company has experienced variations in gross profit based upon
the mix of product sales.
Operating expenses for the six months ended June 30, 1998 were $3,542,276 or
37.8% of net sales as compared to $3,582,887 or 25.3% of net sales for the six
months ended June 30, 1997. Operating expenses for the quarter ended June 30,
1998 were $1,669,740 or 50.4% of net sales as compared to $1,832,556 or 26.0%
of net sales for the quarter ended June 30, 1997. The above increases
measured as a percentage of sales are generally due to the lower revenue
volume in these periods.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
For the three and six months ended June 30, 1998 as compared to the same
periods of the prior year, operating expenses decreased in dollars by $162,816
and $40,611, respectively. The Company experienced lower advertising and
selling expenses primarily attributable to a decline in sales commissions
relating to the lower revenue volume. An additional dollar decline was due to
a reduction in research and development expenditures primarily due to the
timing of material purchases, not a reduction of research and development
activities. These dollar decreases were offset by an increase in professional
fees incurred as the Company examines strategic opportunities in the corporate
marketplace. The Company anticipates these fees will continue to increase as
it examines additional opportunities. The Company also incurred increased
charges for depreciation and its reserve for customer receivables. The
Company recently negotiated a lease for an additional facility and accordingly
its rent expense will increase beginning in the third quarter of 1998. The
Company will seek to reduce its overall rental expense by subletting a portion
of its existing facility however there is no assurance that the Company will
be successful in these efforts.
Interest, dividend and other income decreased by $31,417 for the six months
ended June 30, 1998 and by $26,150 for the quarter ended June 30, 1998. This
decrease was due to a lower average investment balance during 1998.
Net income decreased to $826,864, or $.05 per share, for the six months ended
June 30, 1998 as compared to $4,382,244, or $.25 per share for the six months
ended June 30, 1997. The Company incurred a net loss for the quarter ended
June 30, 1998 of $373,682 or $.02 per share as compared to net income of
$2,142,964 or $.12 per share for the three months ended June 30, 1997. The
explanation of these changes can be derived from the analysis given above of
operations for the three and six month perio ds ending June 30, 1998 and 1997,
respectively.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital has decreased by $6,227 to $19,446,262 at June
30, 1998, from $19,452,489 at December 31, 1997. At June 30, 1998 the Company
had a current ratio of 19.7 to 1, and a ratio of debt to net worth of less
than .1 to 1. At December 31, 1997 the Company had a current ratio of 11.5 to
1, and a ratio of debt to net worth of less than .1 to 1.
The Company realized cash provided by operations of $1,897,575 for the six
month period ending June 30, 1998. Cash provided by net income of $826,864, a
reduction of outstanding receivables of $1,228,471 and a reduction of
inventory of $990,166 was offset by an increase in prepaid expenses of
$580,545 and a decrease in accounts payable of $817,128.
The Company has historically been able to turn over its accounts receivable
approximately every two months. This average collection period has been
sufficient to provide the working capital and liquidity necessary to operate
the Company. The Company also realized a reduction in inventory and continues
to monitor production requirements and delivery schedules while maintaining
manageable levels of goods on hand. The increase in prepaid expenses was
primarily due to 1998 corporate income taxes. Trade payables were settled
consistent with the Company's normal payment practices.
Operating activities provided $2,957,672 in cash flow for the comparable
period in 1997. Cash provided from operations was primarily due to net income
offset by an increase in inventory.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Net cash used for investing activities for the six month periods ending June
30, 1998 and 1997 were $427,318 and $670,704, respectively. Capital
expenditures for the Company's increasing product line and workforce were the
primary use of funds. In addition, funds were used for premiums on life
insurance for certain of the Company's officers and other key employees.
Net cash used for financing activities for the six month periods ending June
30, 1998 and 1997 were $668,567 and $1,666,217, respectively. The payment of
quarterly cash dividends were the primary use of these funds. The Company
also reacquired 20,000 shares of its common stock in the open market during
the second quarter of 1997. These cash outlays were partially offset by
proceeds from the exercise of stock options.
On January 26, 1998, the Company announced the declaration of a quarterly cash
dividend of $.05 per share to shareholders of record on March 23, 1998. This
cash dividend aggregated $877,545 and was paid by March 31, 1998.
On May 15, 1998 the Company ceased paying a quarterly cash dividend to instead
reinvest earnings in the Company. The Company paid cash dividends
aggregating $.20 per share for the year ending December 31, 1997.
The Company believes that its financial resources from working capital
provided by operations and its bank line of credit are adequate to meet
current requirements.
INFLATION AND SEASONALITY
The Company does not anticipate that inflation will significantly impact its
business nor does it believe that its business is seasonal.
OTHER
This report contains forward-looking statements and information that is based
on management's beliefs and assumptions, as well as information currently
available to management. When used in this document, the words "anticipate,"
"estimate," "expect, " "intend," and similar expressions are intended to
identify forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to be correct. Such
statements are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or expected. Among the key factors that may
have a direct bearing on the Company's operating results are fluctuations in
the global economy, the degree and nature of competition, the risk of delay in
product development and release dates and acceptance of, and demand for, the
Company's products.
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PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on May 15, 1998.
(b) The following matter was voted upon and the result was as follows:
(1) The following persons were nominated by management and each was elected to
serve as directors until the next Annual Meeting of Stockholders or until
their successors are elected and shall qualify: Franklin H. Blecher, Ph.D.,
Demir Eden, Dominick Scaringella, Dale Sydnor, John Wilchek. The Stockholders
voted 16,815,913 shares in the affirmative and 208,374 shares withheld
authority for Mr. Scaringella and Mr. Wilchek, 16,815,813 shares in the
affirmative and 208,474 shares withheld authority for Mr. Sydnor, 16,816,413
shares in the affirmative and 207,874 shares withheld authority for Mr. Eden
and 16,814,013 shares in the affirmative and 210,274 shares withheld authority
for Dr. Blecher.
Item 5. OTHER INFORMATION
On May 15, 1998 the Company ceased paying a quarterly cash dividend to
reinvest earnings in the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of per share earnings
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarterly period ended June 30, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WIRELESS TELECOM GROUP, INC.
(Registrant)
Date: July 30, 1998 /S/ C.Ronald Dietrich
C. Ronald Dietrich
President
Date: July 30, 1998 /S/Eugene Ferrara
Eugene Ferrara
Chief Financial Officer
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