FORM 10-Q/A
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
September 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 October 28, 1998
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page(s)
Item 1 -- Consolidated Financial Statements:
Condensed Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997 3
Condensed Statements of Operations for the Three and Nine
Months Ended September 30, 1998 and 1997 (unaudited) 4
Condensed Statements of Cash Flows for the Nine
Months Ended September 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 - 10
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings 11
Item 2 -- Changes in Securities 11
Item 3 -- Defaults upon Senior Securities 11
Item 4 -- Submission of Matters to a Vote of Security Holders 11
Item 5 -- Other Information 11
Item 6 -- Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibit 11.1 13
Exhibit 27 14
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PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ASSETS -
SEPTEMBER 30, DECEMBER 31,
1998 1997
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 8,317,713 $ 7,546,625
Accounts receivable -- net of allowance for
doubtful accounts of $146,288 and
$120,616, respectively 3,534,041 4,728,640
Inventories 7,655,130 8,810,230
Prepaid expenses and other current assets 980,777 224,413
TOTAL CURRENT ASSETS 20,487,661 21,309,908
PROPERTY, PLANT AND EQUIPMENT - NET 2,868,912 2,254,829
OTHER ASSETS 617,360 646,317
$ 23,973,933 $ 24,211,054
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES
Accounts payable $ 1,080,450 $ 1,652,601
Accrued expenses and other current liabilities 496,770 204,818
TOTAL CURRENT LIABILITIES 1,577,220 1,857,419
DEFERRED INCOME TAXES 145,374 125,404
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 15,711,064 15,896,934
Treasury stock at cost, 145,000 shares (267,809) (267,809)
22,251,339 22,228,231
$ 23,973,933 $ 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 Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
NET SALES $4,321,434 $6,761,626 $13,694,022 $20,940,413
COSTS AND EXPENSES
Cost of sales 2,354,446 2,121,168 7,074,103 6,080,358
Operating expenses 2,292,182 1,844,685 5,834,458 5,427,572
Interest, dividend
and other income (112,337) (110,848) (303,734) (333,662)
TOTAL COSTS AND EXPENSES 4,534,291 3,855,005 12,604,827 11,174,268
INCOME (LOSS) BEFORE
INCOME TAXES (212,857) 2,906,621 1,089,195 9,766,145
PROVISION FOR INCOME TAXES (77,668) 1,105,874 397,520 3,583,154
NET INCOME (LOSS) $(135,189) $1,800,747 $ 691,675 $6,182,991
NET INCOME (LOSS) PER COMMON SHARE (Note 2):
BASIC $(.01) $.10 $.04 $.35
DILUTED $(.01) $.10 $.04 $.35
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 Nine Months
Ended September 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 691,675 $ 6,182,991
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 335,423 194,994
Deferred income taxes 19,970 67,519
Provision for losses on accounts receivable 25,672 13,657
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 1,168,927 (1,192,787)
(Increase) decrease in inventories 1,155,100 (2,234,923)
(Increase) in prepaid expenses and other assets (727,407) (192,737)
Increase (decrease) in accounts payable and
accrued expenses (280,199) 567,093
Net cash provided by operating activities 2,389,161 3,405,807
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (949,506) (880,760)
Officer's life insurance - (186,522)
Net cash (used) for investing activities (949,506) (1,067,282)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (877,545) (2,616,221)
Proceeds from exercise of stock options 208,978 370,961
Acquisition of treasury stock - (207,483)
Net cash (used) for financing activities (668,567) (2,452,743)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 771,088 (114,218)
Cash and cash equivalents, at beginning of year 7,546,625 8,039,128
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $ 8,317,713 $ 7,924,910
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ 1,038,000 $ 3,555,000
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 September 30, 1998 and the
condensed consolidated statements of operations for the three and nine month
periods ended September 30, 1998 and 1997 and the condensed consolidated
statements of cash flows f or the nine month periods ended September 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,
since February 1996, its wholly-owned subsidi ary WTG Foreign Sales
Corporation.
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 reference 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 nine month periods ended September
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 Sta tement 128.
NOTE 3 - REVOLVING CREDIT LINE
The Company had 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. This agreement
expired September 30, 1998 and there were no direct borrowings against the
line of credit.
NOTE 4 - DIVIDENDS
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. 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., (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 telecommunicati ons industry,
the Company has been developing and marketing test instruments designed to
fulfill the requirements of such customers.
The financial information presented herein includes:
(i) Condensed consolidated balance sheets as of September 30, 1998 and as of
December 31, 1997 (ii) Condensed consolidated statements of operations for
the three and nine month periods ended September 30, 1998 and 1997 and (iii)
Condensed consolid ated statements of cash flows for the nine month periods
ended September 30, 1998 and 1997.
OPERATIONS
For the nine months ended September 30, 1998 as compared to the corresponding
period of the previous year, net sales decreased to $13,694,022 from
$20,940,413 a decrease of $7,246,391 or 34.6%. For the quarter ended September
30, 1998 as compared to the corresponding period of the previous year, net
sales decreased to $4,321,434 from $6,761,626 a decrease of $2,440,192 or
36.1%. This decrease was due to the weakness in the Asian economy, primarily
Korea, resulting in a decline in sales to inter national 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 year ending December 31, 1997.
The Company's gross profit on net sales for the nine months ended September
30, 1998 was $6,619,919 or 48.3% as compared to $14,860,055 or 71.0% for the
nine months ended September 30, 1997. Gross profit on net sales for the
quarter ended September 30, 1998 was $1,966,988 or 45.5% as compared to
$4,640,458 or 68.6% for the three months ended September 30, 1997. Variations
in gross profit are primarily attributed to lower economies of scale from the
decline in revenues. In addition, the Company has experienced variations in
gross profit based upon the mix of product sales.
Operating expenses for the nine months ended September 30, 1998 were
$5,834,458 or 42.6% of net sales as compared to $5,427,572 or 25.9% of net
sales for the nine months ended September 30, 1997. Operating expenses for the
quarter ended September 30, 1998 were $2,292,182 or 53.0% of net sales as
compared to $1,844,685 or 27.3% of net sales for the quarter ended September
30, 1997.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
For the nine months ended September 30, 1998 as compared to the same period of
the prior year, operating expenses increased in dollars by $406,886. This
increase was due to several factors. The Company incurred additional
professional fees to examine strategic opportunities in the corporate
marketplace. Depreciation expense has also increased due to the higher level
of capital expenditures made in the last half of 1997 and during 1998. Also,
as previously reported, additional rent expense wa s incurred due to the
additional facility the Company leased beginning in July 1998. These
increases were partially offset by a reduction in research and development
expenditures. For the three months ended September 30, 1998 as compared to
the sam e period of the prior year, operating expenses increased in dollars by
$447,497. This increase was due primarily to professional fees and additional
rent and depreciation expense as described above. In addition, the Company
experienced higher adver tising and selling expenses as it has expanded its
efforts to promote its product line. These increases were offset by a
reduction in research and development expenditures.
Interest, dividend and other income decreased by $29,928 for the nine months
ended September 30, 1998 and increased by $1,489 for the quarter ended
September 30, 1998. The year to date decrease is primarily due to a lower
average investment balance during fiscal 1998.
Net income was $691,675, or $.04 per share, for the nine months ended
September 30, 1998 as compared to $6,182,991, or $.35 per share for the nine
months ended September 30, 1997. The Company incurred a net loss for the
quarter ended September 30, 19 98 of $135,189 or $.01 per share as compared to
net income of $1,800,747 or $.10 per share for the three months ended
September 30, 1997. The explanation of these changes can be derived from the
analysis given above of operations for the three and ni ne month periods
ending September 30, 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital has decreased by $542,048 to $18,910,441 at
September 30, 1998, from $19,452,489 at December 31, 1997. At September 30,
1998 the Company had a current ratio of 13.0 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 $2,389,161 for the nine
month period ending September 30, 1998. Cash provided by net income of
$691,675, a reduction of outstanding receivables of $1,168,927 and a reduction
of inventory of $1,155, 100 was offset by an increase in prepaid expenses of
$727,407 and a decrease in accounts payable of $280,199.
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.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Operating activities provided $3,405,807 in cash flow for the comparable
period in 1997. Cash provided from operations was primarily due to net income
offset by increases in accounts receivable and inventory.
Net cash used for investing activities for the nine month periods ending
September 30, 1998 and 1997 were $949,506 and $1,067,282, respectively.
Capital expenditures for the Company's increasing product line and workforce
were the primary use of fund s. In addition, in 1997 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 nine month periods ending
September 30, 1998 and 1997 were $668,567 and $2,452,743, 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 are adequate to meet current requirements.
IMPACT OF THE YEAR 2000 ISSUE
The year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could potentially result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in other s imilar normal business activities.
The Company had already planned on upgrading its computer software to increase
operational efficiencies and information analysis and will ensure that the new
systems properly utilize dates beyond December 31, 1999. The Company has
selected a vendor a nd plans to begin the implementation of the new system in
November 1998. This system is expected to be fully operational by July 1999.
The total cost of this project, including the portion addressing the year 2000
issue, is not expected to have a m aterial effect on the operations of the
Company and will be funded through operating cash flows.
The Company plans to initiate formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to address their own
Year 2000 issues. Their can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted or
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
their failure to make such a conversion will not have an adverse effect on the
Company's systems.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events. However
there can be no gu arantee that these estimates will be achieved, and actual
results could differ materially from those anticipated. Specific factors that
might cause such material delays or difficulties in implementing the project
include, but are not limited to, the availability and cost of personnel
trained in this area, the ability to locate and correct all relevant computer
codes and similar uncertainties.
The Company is currently in process of formulating contingency plans to
address potential uncertainties due to the Year 2000 issue.
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 ma terially
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
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of per share earnings
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Registrant during the
quarterly period ended September 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: October 30, 1998 /S/Demir Richard Eden
Demir Richard Eden
President
Date: October 30, 1998 /S/Eugene Ferrara
Eugene Ferrara
Chief Financial Officer