NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
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”), specializes in the design and manufacture of advanced radio frequency (“RF”) and microwave
devices which enable the development, testing and deployment of wireless technology. The Company provides unique, highly customized
and configured solutions which drive innovation across a wide range of traditional and emerging wireless technologies.
Our
customers include wireless carriers, aerospace companies, defense contractors, military and government agencies, satellite communication
companies, network equipment manufacturers, tower companies, semiconductor device manufacturers, system integrators, neutral host
providers and medical device manufacturers.
Our
products include components, modules, instruments, systems and software used across the lifecycle of wireless connectivity and
communication development, deployment and testing. Our customers use these products in relation to commercial infrastructure development,
the expansion and upgrade of distributed antenna systems, deployment of small cell technology, use of medical devices and private
long-term evolution (“LTE”) and 5G networks. In addition, the Company’s products are used in the development
and testing of satellite communication systems, radar systems, semiconductor devices, automotive electronics and avionics.
The
accompanying consolidated financial statements include the accounts of Wireless Telecom Group, Inc., doing business as
and operating under the trade name, Noisecom, and its wholly owned subsidiaries including Boonton Electronics Corporation (“Boonton”),
Microlab/FXR LLC (“Microlab”), Holzworth Instrumentation, Inc. (“Holzworth”), Wireless Telecommunications
Ltd. and CommAgility Limited (“CommAgility”). They have been prepared using accounting principles generally accepted
in the United States (“U.S. GAAP”). All intercompany transactions and balances have been eliminated in consolidation.
In
June 2020 the Company completed an internal reorganization and now presents its operations as one reportable segment. Prior to
June 2020 the Company presented its operations in three reportable segments. The Company identifies segments in accordance with
ASC 280 Segment Reporting (“ASC 280”). As a result of internal reorganizations that occurred over the six to
nine months prior to June 30, 2020 the Company evaluated its segment reporting. We determined that the Chief Operating Decision
Maker (“CODM”) as defined in ASC 280 evaluates operating results and makes decisions on how to allocate resources
at the consolidated level. Although the CODM reviews key performance indicators including bookings, shipments and gross profit
at a product group level, this information by itself is not sufficient enough to make operating decisions. Rather, operating decisions
are made based on review of consolidated profitability metrics rather than the individual results of each product group.
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, goodwill and intangible assets, estimated fair values of stock options and vesting periods of performance-based
stock options and restricted stock.
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 cash equivalents
and trade 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 twelve months ended December 31, 2020, no one customer accounted for more than 10% of the Company’s total consolidated
revenues. For the twelve months ended December 31, 201,9 one CommAgility customer accounted for 24.8% of the Company’s total
consolidated revenues. At December 31, 2020, one customer exceeded 10% of consolidated gross accounts receivable at 12.7%. At
December 31, 2019 one customer exceeded 10% of consolidated gross accounts receivable at 12.9%.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
For
the year ended December 31, 2020, two suppliers exceeded 10% of consolidated inventory purchases at 14% each. For the year ended
December 31, 2019, three suppliers comprised or exceeded 10% of consolidated inventory purchases at 18% and 14% and 10%, respectively.
Cash
and Cash Equivalents
Cash
and cash equivalents represent deposits in banks and highly liquid investments purchased with maturities of three months or less
at the date of purchase.
Accounts
Receivable and Allowance for Doubtful Accounts
Trade
accounts receivable and contract assets for unbilled receivables are stated at the amount owed by the customer, net of allowances
for doubtful accounts, returns and rebates. 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 or net realizable value. Inventory cost is determined on an average cost basis. 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 revenues in the accompanying Consolidated Statements of Operations and
Comprehensive Income/Loss. Finished goods and work-in-process include material, labor and overhead 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.
Inventory
carrying value is net of inventory reserves of approximately $1.1 million as of December 31, 2020 and $1.0 million as of December
31, 2019.
|
|
December 31,
|
|
|
December 31,
|
|
Inventories consist of (in thousands):
|
|
2020
|
|
|
2019
|
|
Raw materials
|
|
$
|
4,644
|
|
|
$
|
4,023
|
|
Work-in-process
|
|
|
618
|
|
|
|
406
|
|
Finished goods
|
|
|
3,534
|
|
|
|
2,896
|
|
|
|
$
|
8,796
|
|
|
$
|
7,325
|
|
Prepaid
Expenses and Other Current Assets
Prepaid
expenses and other current assets generally consist of income tax receivables, contract assets for unbilled receivables, prepaid
insurance, prepaid maintenance agreements and the short term portion of debt issuance costs. The income tax receivable balance
included in prepaid and other current assets was $1.2 million and $1.1 million as of December 31, 2020 and December 31, 2019,
respectively.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
Property,
Plant and Equipment
Property,
plant and equipment are reflected at cost, less accumulated depreciation. Upon application of acquisition accounting, property,
plant and equipment are measured at estimated fair value as of the acquisition date to establish a new historical cost basis.
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/software
|
3-8
years
|
Furniture
and fixtures
|
5-7
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.
Business
Combinations
The
Company uses the acquisition method of accounting for business combinations which requires the tangible and intangible assets
acquired and liabilities assumed to be recorded at their respective fair market value as of the acquisition date. Goodwill represents
the excess of the consideration transferred over the fair value of the net assets acquired. The fair values of the assets acquired
and liabilities assumed are determined based upon the Company’s valuation and involves making significant estimates and
assumptions based on facts and circumstances that existed as of the acquisition date. The Company uses a measurement period following
the acquisition date to gather information that existed as of the acquisition date that is needed to determine the fair value
of the assets acquired and liabilities assumed. The measurement period ends once all information is obtained, but no later than
one year from the acquisition date.
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, or more frequently if events occur or circumstances change that would indicate
that goodwill might be impaired, by first performing a qualitative evaluation of events and circumstances impacting the reporting
unit to determine the likelihood of goodwill impairment. Based on that qualitative evaluation, if the Company determines it is
more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further evaluation is necessary.
Otherwise we perform a quantitative impairment test.
The
Company has three reporting units with goodwill – Holzworth, Microlab and CommAgility. The Company performed a qualitative
assessment in the fourth quarter of 2020 of each reporting unit. The qualitative assessment of Holzworth and Microlab did not
indicate any impairment of goodwill. As a result of declining demand of CommAgility’s signal processing hardware cards
from a single customer and the particularly high uncertainty associated with the ultimate trajectory of the pandemic, including
the degree to which governments continue to restrict business and personal activities, and the impact that uncertainty has on
the growth of new software license and services revenue to offset the signal processing hardware sales decline, the Company performed
a quantitative impairment test of the goodwill of the CommAgility reporting unit.
For
goodwill impairment testing using the quantitative approach, the Company estimates the fair value of the selected reporting unit
using the income approach and the market approach. Fair value under the income approach is derived primarily through the use of
a discounted cash flow model based on our best estimate of amounts and timing of future revenues and cash flows and our most recent
business and strategic plans. Fair value under the market approach is derived by applying a multiple to our best estimate of future
revenue. The Company applies equal weighting to the income approach and the market approach to arrive at an estimated fair value.
The estimated fair value is compared to the carrying value of the reporting unit, including goodwill. If the fair value of the
reporting unit exceeds the carrying value, no impairment charge is recorded. If the carrying value of the reporting unit exceeds
the fair value an impairment charge is recorded to goodwill in the amount by which carrying value exceeds fair value. Both the
income approach and market approach require judgmental assumptions about projected revenue growth, future operating margins, discount
rates and terminal values over a multi-year period. There are inherent uncertainties related to these assumptions and management’s
judgment in applying them to the analysis of goodwill impairment. While the Company believes it has made reasonable estimates
and assumptions to calculate the fair value of its reporting units, it is possible a material change could occur.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
In
the fourth quarter of 2020, the Company recorded a goodwill impairment charge of $4.7 million related to the CommAgility reporting
unit. The non-cash impairment charge was due to a number of factors that arose as part of our quantitative assessment, including
an assessment of our historical results and the significant decline in hardware sales in 2020, the difficulty of predicting future
customer demand, the uncertainty of future sales of 4G hardware cards, the uncertainty of the growth of 5G software and services
revenues due to the early stages of 5G adoption for new technology and expectations for 5G deployments, the uncertainty of the
continued future impacts of the COVID 19 pandemic on customer spending, and the potential for a more prolonged recovery for enterprise
spending and longer-term investment. Despite the asset impairment charge the Company believes the markets in which CommAgility
operates, specifically LTE and 5G private networks, have long term growth potential and the Company is committed to growing the
revenue and profitability of the reporting unit.
Due
to the many variables inherent in the estimation of a reporting unit’s fair value and the relative size of our recorded
goodwill, differences in assumptions may have a material effect on the results of our impairment analysis. After recording the
2020 goodwill impairment charge, the Company’s consolidated goodwill balance as of December 31, 2020 was comprised of $1.4
million related to the Microlab reporting unit, $6.0 million related to the Holzworth reporting unit and $4.1 million related
to the CommAgility reporting unit.
As
of December 31, 2019, the Company’s consolidated goodwill balance of $10.1 million was comprised of $1.4 million related
to the Microlab reporting unit and $8.7 million related to the CommAgility reporting unit. Management’s qualitative assessment
performed in the fourth quarter of 2019 did not indicate any impairment of goodwill.
Intangible
and Long-lived Assets
Intangible
assets include acquired technology, patents, non-competition agreements, customer relationships and tradenames. 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 twelve 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.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
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. We believe the carrying value of the loan obtained under the Paycheck Protection Program approximates fair value due to
the expected short term nature of the loan.
During
the fourth quarter of 2020, the Company recorded a goodwill impairment charge of $4.7 million related to the CommAgility reporting
unit. The determination of the impairment charge was based on the income and market approaches which are based on the present
value of future cash flows and an estimated multiple of future revenues, respectively. The determination of the impairment charge
was based on Level 3 valuation inputs.
Contingent
Consideration
Under
the terms of the Holzworth Share Purchase Agreement (as defined in Note 2) the Company is required to pay additional purchase
price in the form of deferred purchase price payments and an earnout if certain financial targets are achieved for the years ending
December 31, 2020 and December 31, 2021 (see Note 2). As of the acquisition date, the Company estimated the fair value of the
deferred purchase price and earnout remaining to be paid related to the 2020 and 2021 financial targets to be $660,000 and $2.4
million, respectively. The earnout may be paid in cash or common stock at the Company’s option. 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 estimated gross revenues and Adjusted EBITDA, as defined in the Holzworth
Share Purchase Agreement, and scenarios for the earnout 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.
The contingent consideration liabilities are considered a Level 3 fair value measurement.
Due
to the better than expected financial performance of the Holzworth reporting unit during fiscal 2020, the Company recorded an
increase to the contingent consideration liabilities in the amount of $1.1 million in the fourth quarter of 2020. The adjustment
was recorded as a loss on change in fair value of contingent consideration in the Consolidated Statement of Operations and Comprehensive
Income/(Loss).
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.
Aggregate
foreign currency gains and losses, such as those resulting from the settlement of receivables or payables in a currency other
than the subsidiary’s functional currency, are recorded in the Consolidated Statements of Operations and Comprehensive Income/(Loss)
(included in other income/expense). Foreign currency transaction gains were $64,000 in fiscal 2020. Foreign currency transaction
losses in in fiscal 2019 were not material.
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/(loss). These unrealized gains and losses
consist of changes in foreign currency translation.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
Research
and Development Costs
Research
and development (R&D) costs are charged to operations when incurred. R&D costs include salaries and benefits, depreciation
expense on equipment used for R&D purposes and third-party material and consulting costs, if clearly related to an R&D
activity. Salaries and benefits of engineers working on customer contracts for which the Company is earning services or consulting
revenues are allocated to costs of revenues. The amounts charged to operations for R&D costs for the years ended December
31, 2020 and 2019 were $6.4 million and $5.9 million, respectively.
Advertising
Costs
Advertising
expenses are charged to operations during the year in which they are incurred and aggregated to $235,000 and $91,000 for the years
ended December 31, 2020 and 2019, respectively.
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 equity awards on the
date of grant. The fair value of restricted share awards and restricted stock unit awards is determined using the market value
of our common stock on the date of the grant. The fair value of stock options at the date of grant are estimated using the Black-Scholes
option pricing model. When performance-based stock 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
for all equity awards 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.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
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, the weighted-average number of restricted stock units and the weighted average number of warrants
to purchase common stock outstanding for the period. Shares from stock options and warrants 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,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
21,656,906
|
|
|
|
21,110,632
|
|
Potentially dilutive equity awards
|
|
|
313,341
|
|
|
|
522,996
|
|
Weighted average common shares outstanding, assuming dilution
|
|
|
21,970,247
|
|
|
|
21,633,628
|
|
The
weighted average number of options and warrants to purchase common stock not included in diluted loss per share because the effects
are anti-dilutive, or the performance condition was not met in 2020 was 3,114,792. The estimated number of shares issuable under
the terms of the Holzworth earnout, if the entire earnout was paid in shares of common stock, (see Note 2) at December 31, 2020
was 1,559,807.
The
weighted average number of options to purchase common stock not included in diluted loss per share in 2019, because the effects
are anti-dilutive or the performance condition was not met, was 1,324,548.
Recent
Accounting Pronouncements Adopted in 2020
In
August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software, Customers Accounting
for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 aligns the requirements
for capitalizing implementation costs in cloud computing arrangements with the requirements for capitalizing implementation costs
incurred to develop or obtain internal-use software. This pronouncement is effective for the Company’s 2020 calendar year,
with early adoption permitted. The adoption of this standard did not have a material impact on our consolidated financial statements.
Recent
Accounting Pronouncements Not Yet Adopted
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). ASU 2016-13 changes the
impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured
as amortized cost. This pronouncement is effective for small reporting companies for fiscal years, and for interim periods within
those fiscal years, beginning after December 15, 2022. The Company plans to adopt the standard effective January 1, 2023. We do
not expect the adoption of this standard to have a material impact on our consolidated financial statements.
In
December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes. The amendments
simplify the accounting for income taxes by removing certain exceptions to the general principles of Topic 740 and improve consistent
application by clarifying and amending existing guidance. The new standard is effective for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2020. Early adoption is permitted, with the amendments to be applied on
a retrospective, modified retrospective or prospective basis, depending on the specific amendment. We do not expect the adoption
of this standard to have a material impact on our consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
In
March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform
on Financial Reporting. The amendments provide optional expedients and exceptions for applying generally accepted accounting
principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are
met. The amendments are intended to ease the potential burden in accounting for, or recognizing the effects of, reference rate
reform on financial reporting. The new standard is effective March 12, 2020 through December 31, 2022, with the adoption date
being dependent upon the Company’s election. We do not expect the adoption of this standard to have a material impact on
our consolidated financial statements.
NOTE
2 – Acquisition of Holzworth
On
November 13, 2019 the Company entered into a Share Purchase Agreement with Holzworth Instrumentation Inc. (“Holzworth”),
its founders and shareholders (collectively, the “Sellers”), as amended by a First Amendment to Share Purchase Agreement,
dated January 31, 2020 and a Second Amendment to Share Purchase Agreement dated February 19, 2021 (collectively, the “Share
Purchase Agreement”). On February 7, 2020, the Company completed the acquisition (the “Acquisition”) of all
of the outstanding shares of Holzworth, from the Sellers. Holzworth instruments which include signal generators and phase noise
analyzers are used by government labs, aerospace and defense companies, the semiconductor industry, and network equipment providers,
among others, in research and automated test environments. Holzworth is a complimentary business for our Boonton and Noisecom
brands with a common customer base and channel partners. For the twelve months ended December 31, 2020, net revenues of $8.8 million,
and operating income of $1.4 million, respectively, was included in the Consolidated Statements of Operations and
Comprehensive Income/(Loss) related to the Holzworth business, representing the results from the date of acquisition. For
the twelve months ended December 31, 2020, the Company recorded $243,000 of transaction expenses related to the Acquisition and
these expenses were recognized in general and administrative expenses in the Consolidated Statements of Operations and
Comprehensive Income/(Loss).
The
aggregate purchase price for the Acquisition is a maximum of $17.0 million, consisting of payments in cash and stock, a working
capital adjustment, and contingent consideration in the form of deferred purchase price payments and an earnout. Additionally,
the parties made a 338(h)(10) election to treat the Acquisition as a purchase and sale of assets, and the Company has agreed to
pay any incremental taxes of Sellers resulting from that election.
At
closing, a portion of the purchase price was paid to the Sellers through the issuance of 347,319 shares of the Company’s
common stock, valued at approximately $500,000 based upon a 90-day volume weighted average price for shares of stock of the Company.
The shares issued to the Sellers are subject to Lock-up and Voting Agreements.
During
2020, the Company paid $8.3 million in net cash to the Sellers consisting of $7.2 million in cash at close, $600,000 in indemnification
holdback payments and $750,000 in deferred purchase price reduced by $292,000 of a working capital adjustment that was owed to
the Company by the Sellers. The final indemnification holdback payment of $200,000 is due on March 31, 2021.
The
Sellers earned a second deferred purchase price payment of $750,000 by way of exceeding $1.25 million in EBITDA (as defined in
the Share Purchase Agreement) for the twelve months ended December 31, 2020. Additionally, the Sellers earned $3.4 million in
additional purchase price in the form of an earnout (“Year 1 Earnout”) which was also based on Holzworth’s EBITDA
for the twelve months ended December 31, 2020.
On
February 19, 2021, the Company entered into the Second Amendment to Share Purchase Agreement (the “Second Amendment”)
with Holzworth. The Second Amendment, among other things, converted the second deferred purchase price of $750,000 into unsecured
seller notes with interest at an annual rate of 6.5% starting from April 1, 2021 until final payment. The payment date has been
changed from March 31, 2021 to three equal installments of $250,000, plus accrued interest, due on July 1, 2021, October 1, 2021
and January 1, 2022.
Additionally,
the parties amended the payment dates of the earnout consideration. The payment date of the first earnout payment based on the
financial results of the calendar year ended 2020 (“Year 1 Earnout”) has been amended from March 31, 2021 to (i) six
(6) equal quarterly installments of 10% of the Year 1 Earnout payable on the last business day of each calendar quarter between
June 30, 2021 and September 30, 2022 and (ii) one (1) installment payment equal to 40% of the Year 1 Earnout on December 31, 2022.
The Year 1 Earnout is payable in cash or shares of the Company’s common stock based on the 90 trading day volume weighted
average price immediately preceding final determination of the Year 1 Earnout or $2.19 per share. The estimated payment for the
Year 1 Earnout is $3.4 million which is recorded in accrued expenses and other current liabilities in the Consolidated Balance
Sheet as of December 31, 2020.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
The
Company may also be required to pay additional amounts in cash and stock as earnout consideration based on Holzworth’s EBITDA
for the fiscal year ending December 31, 2021 (“Year 2 Earnout”). The Year 2 Earnout will be equal to two times the
amount, if any, by which Holzworth’s EBITDA for fiscal year December 31, 2021 exceeds Holzworth’s EBITDA for
fiscal year 2020. Pursuant to the Second Amendment to the Share Purchase Agreement the Year 2 Earnout is payable in 4 equal quarterly
installments payable on the last business day of each calendar quarter between March 31, 2022 and December 31, 2022. The aggregate
earnout payments cannot exceed $7.0 million.
Pursuant
to the Share Purchase Agreement the Company entered into a lock-up and voting agreement (the “Lock-up and Voting Agreement”)
with each of the Sellers. Pursuant to the Lock-up and Voting Agreement, each Seller agrees to restrict the sale, assignment, transfer,
encumbrance or other disposition of its portion of the Stock Consideration (the “Lock-up Shares”). For a period commencing
on the closing date of the Acquisition (the “Effective Date”) and ending on the date which is 36 calendar months following
the Effective Date, each Seller agreed that, without the prior written consent by the Company, such Seller would not sell, assign,
transfer, encumber or otherwise dispose of the Lock-up Shares or enter into any swap, option or short sale, among other transactions.
Upon the prior written consent of the Company, a Seller may transfer Lock-up Shares as a bona fide gift, by will or intestacy
or to a family member or trust for the benefit of the Seller or a family member; provided that any recipient of the Lock-up
Shares sign and deliver to the Company a lock-up and voting agreement substantially in the form of the Lock-up and Voting Agreement.
The Lock-up Shares cease to be locked up in the event of a Change of Control of the Company (as defined in the Lock-up and Voting
Agreement). In the Second Amendment, the parties also amended the provisions with respect to restrictions on transfer to adjust
for the change in timing of earnout payments, as described above.
In
addition, each Seller, subject to certain limitations, agreed, among other things, to appear at each meeting of the shareholders
of the Company and vote all of such Seller’s Lock-up Shares (a) in favor or against any proposal presented to the shareholders
in the same manner that the Company’s Board of Directors (the “Board”) recommends shareholders vote on such
proposal and (b) in favor of any proposal presented to the shareholders with respect to an action of the Company which the Board
has approved, but as to which the Board has not made any recommendation, including in favor of any proposal to adjourn or postpone
any meeting of the Company’s shareholders if such adjournment or postponement is conducted in accordance with the terms
of the Lock-up and Voting Agreement.
To
the extent any shares of Company common stock are issued in payment of any Earnout Consideration (as defined in the Share Purchase
Agreement) in accordance with the terms of the Share Purchase Agreement, such shares shall be subject to all applicable transfer
restrictions, voting and other provisions set forth in the Lock-up and Voting Agreement, with the Effective Date with respect
to such shares being the date such shares are issued; provided that, to the extent the portion of the first $1.5 million of Earnout
Consideration that is paid in cash represents less than 30% of such Earnout Consideration, the portion of shares of Company common
stock issued as Earnout Consideration constituting the difference between the cash percentage paid and 30% of the first $1.5 million
of Earnout Consideration shall not be considered Lock-Up Shares. In addition, in the Second Amendment, the parties added a requirement
that any earned but unpaid earnout consideration will be accelerated in the event the Company desires to enter into a material
asset or equity acquisition in the future.
The
acquisition has been accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations.
Accounting for acquisitions requires us to recognize separately from goodwill the assets acquired and the liabilities assumed
at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred
over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates
and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date our estimates are inherently
uncertain and subject to refinement. Various valuation techniques were used to estimate the fair value of assets acquired and
the liabilities assumed which use significant unobservable inputs, or Level 3 inputs as defined by the fair value hierarchy. Using
these valuation approaches requires the Company to make significant estimates and assumptions.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
As
of September 30, 2020, the valuation studies necessary to determine the fair market value of the assets acquired and liabilities
assumed were completed, including the validation of the underlying cash flows used to determine the fair value of the identified
intangible assets and contingent consideration. The following amounts represent the determination of the fair value of identifiable
assets acquired and liabilities assumed from the Acquisition along with measurement period adjustments recorded from the preliminary
purchase price allocation to September 30, 2020 (in thousands):
|
|
Amounts Recognized as of Acquisition Date
|
|
|
Measurement Period Adjustments
|
|
|
Amounts Recognized as of Acquisition Date
(as adjusted)
|
|
Cash at close
|
|
$
|
7,219
|
|
|
$
|
-
|
|
|
$
|
7,219
|
|
Equity issued at close
|
|
|
465
|
|
|
|
-
|
|
|
|
465
|
|
Purchase price holdback
|
|
|
800
|
|
|
|
-
|
|
|
|
800
|
|
Working capital adjustment
|
|
|
(295
|
)
|
|
|
3
|
|
|
|
(292
|
)
|
Deferred purchase price
|
|
|
1,300
|
|
|
|
110
|
|
|
|
1,410
|
|
Contingent consideration
|
|
|
555
|
|
|
|
1,885
|
|
|
|
2,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
|
10,044
|
|
|
|
1,998
|
|
|
|
12,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
30
|
|
|
|
-
|
|
|
|
30
|
|
Accounts receivable
|
|
|
485
|
|
|
|
29
|
|
|
|
514
|
|
Inventory
|
|
|
1,218
|
|
|
|
220
|
|
|
|
1,438
|
|
Intangible assets
|
|
|
4,500
|
|
|
|
(240
|
)
|
|
|
4,260
|
|
Other assets
|
|
|
960
|
|
|
|
7
|
|
|
|
967
|
|
Fixed assets
|
|
|
144
|
|
|
|
-
|
|
|
|
144
|
|
Accounts payable
|
|
|
(129
|
)
|
|
|
-
|
|
|
|
(129
|
)
|
Accrued expenses
|
|
|
(425
|
)
|
|
|
(4
|
)
|
|
|
(429
|
)
|
Deferred revenue
|
|
|
(13
|
)
|
|
|
-
|
|
|
|
(13
|
)
|
Other long term liabilities
|
|
|
(740
|
)
|
|
|
-
|
|
|
|
(740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
|
6,030
|
|
|
|
12
|
|
|
|
6,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
4,014
|
|
|
$
|
1,986
|
|
|
$
|
6,000
|
|
Goodwill
is calculated as the excess of consideration paid over the net assets acquired and represents synergies, assembled workforce,
organic growth and other benefits that are expected to arise from integrating Holzworth into our operations. The goodwill recorded
in this transaction is expected to be tax deductible.
The
following unaudited pro forma information presents the Company’s operations as if the Holzworth acquisition and related
financing activities had occurred on January 1, 2019. The pro forma information includes the following adjustments (i) amortization
of acquired intangible assets; (ii) interest expense incurred in connection with the Term Loan Facility (described in further
detail in Note 3) used to finance the acquisition of Holzworth; and (iii) inclusion of acquisition-related expenses in the earliest
period presented. The amounts related to Holzworth included in the following unaudited pro
forma information are based on their historical results and, therefore, may not be indicative of the actual results when operated
as part of the Company. The pro forma adjustments represent management’s best estimates based on information available at
the time the pro forma information was prepared and may differ from the adjustments that may actually have been required. Accordingly,
the unaudited pro forma financial information should not be relied upon as being indicative of the results that would have been
realized had the Holzworth acquisition occurred as of the date indicated or that may be achieved in the future.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
The
following table presents the unaudited pro forma consolidated results of operations for the Company for the twelve months ended
December 31, 2020 and 2019 as though the Acquisition had been completed as of January 1, 2019 (in thousands, except per share
amounts):
|
|
2020 Pro-forma
|
|
|
2019 Pro-forma
|
|
Net revenues
|
|
$
|
41,845
|
|
|
$
|
54,761
|
|
Net income/(loss)
|
|
$
|
(8,212
|
)
|
|
$
|
(1,754
|
)
|
Earnings per diluted share
|
|
$
|
(0.38
|
)
|
|
$
|
(0.08
|
)
|
NOTE
3 – Debt
Debt
consists of the following (in thousands):
|
|
December 31, 2020
|
|
Revolver at LIBOR plus margin
|
|
$
|
-
|
|
Term loan at LIBOR plus margin
|
|
|
8,316
|
|
Less: Debt issuance costs, net of amortization
|
|
|
(831
|
)
|
Less: Fair value of warrants, net of amortization
|
|
|
(123
|
)
|
Paycheck Protection Program loan
|
|
|
2,045
|
|
Total Debt
|
|
|
9,407
|
|
Less: Debt maturing within one year
|
|
|
(512
|
)
|
Non-current portion of long term debt
|
|
$
|
8,895
|
|
Term
loan payments by period (in thousands):
2021
|
|
$
|
512
|
|
2022
|
|
|
2,129
|
|
2023
|
|
|
84
|
|
2024
|
|
|
84
|
|
2025
|
|
|
7,552
|
|
Total
|
|
$
|
10,361
|
|
In
connection with the Holzworth acquisition, on February 7, 2020, the Company, as borrower, and its subsidiaries, as guarantors,
and Muzinich BDC, Inc., as lender (“Muzinich”), entered into a Term Loan Facility, which provides for a term loan
in the principal amount of $8.4 million (the “Initial Term Loan”). All proceeds of the Initial Term Loan were used
to fund the cash portion of the purchase price for the Holzworth acquisition. Principal payments on the Initial Term Loan are
$21,000 per quarter with a balloon payment at maturity which is February 7, 2025. The Term Loan Facility includes an upfront fee
of 2.50% of the aggregate principal amount of the Initial Term Loan. In connection with the Term Loan Facility, the Company incurred
costs of $1.0 million, including the aforementioned 2.5% upfront fee to Muzinich, which were recorded as a reduction of the carrying
amount of the debt and are being amortized over the term of the loan.
On
May 4, 2020, the Company entered into the First Amendment to the Term Loan Facility which, among other things, amended the definition
of “Indebtedness” to include the PPP loan as long as the proceeds are used for allowable purposes under the CARES
Act, the receipt of the loan does not violate the Credit Facility and the Company submits an application for forgiveness and substantially
all of the loan is forgiven.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
On
February 25, 2021, the Company and its subsidiaries entered into the Second Amendment to the Credit Agreement and Limited
Waiver (“Amendment 2”) with Muzinich, in which Muzinich agreed to waive the Company’s
obligation to comply with the consolidated leverage ratio and fixed charge coverage ratio financial covenants in the Term Loan
Facility for the fiscal quarter ending December 31, 2020. We were not in compliance with such covenants primarily as a result
of the impact the COVID-19 pandemic had on our consolidated financial results. Amendment 2, among other things, amends the definition
of consolidated EBITDA to include certain cash tax benefits related to our UK tax jurisdiction and reduced our consolidated leverage
ratio for the twelve month periods ended September 30, 2021 from 3.00 to 2.75, December 31, 2021 from 2.75 to 2.25, March 31,
2022 from 2.50 to 2.00 and June 30, 2022 from 2.25 to 2.00. Additionally, the interest rate margin was increased from 7.25% to
9.25% effective January 1, 2021 and will step down to 8.50% and 7.25% upon the Company achieving consolidated EBITDA on a trailing
twelve-month basis of $4.0 million and $6.3 million, respectively. Muzinich and the Company also agreed on an excess cash flow
payment of $428,000 and Muzinich provided consent for the Company to change the deferred purchase price payments to and enter
into notes with the Holzworth sellers in the amount of $750,000, as described below.
The
Company may prepay the Initial Term Loan at any time. Prepayments made prior to (a) February 7, 2022 are subject to a prepayment
premium in the amount of 2.0% of the prepaid principal amount and (b) February 7, 2023 are subject to a prepayment premium in
the amount of 1.0% of the prepaid principal amount. The Company is required to make prepayments of the Initial Term Loan with
the proceeds of certain asset dispositions, insurance recoveries and extraordinary receipts, subject to specified reinvestment
rights. The Company is also required to make prepayments of the Initial Term Loan upon the issuance of certain indebtedness and
to make an annual prepayment based upon the Company’s excess cash flow. Mandatory prepayments with asset sale, insurance
or condemnation proceeds and excess cash flow may be made without penalty. Mandatory prepayments with the proceeds of indebtedness
are subject to the same prepayment penalties as are applicable to voluntary prepayments.
The
Term Loan Facility provides for an additional $11.6 million term loan (the “Second Term Loan”) to be used for a second
unannounced acquisition opportunity (the “Additional Acquisition”). There can be no assurance that the Additional
Acquisition will be completed. In the event the Additional Acquisition is completed, the Second Term Loan will be made available
to the Company on the same terms and conditions as the Initial Term Loan, including interest rate, amortization schedule and financial
covenants, subject to the payment of an additional upfront fee and satisfaction of customary conditions to funding.
The
Term Loan Facility is secured by liens on substantially all of the Company’s and its subsidiaries’ assets including
a pledge of the equity interests in the Company’s subsidiaries. The Term Loan Facility contains customary affirmative and
negative covenants for a transaction of this type, including, among others, the provision of annual, quarterly and monthly financial
statements and compliance certificates, maintenance of property, insurance, compliance with laws and environmental matters, restrictions
on incurrence of indebtedness, granting of liens, making investments and acquisitions, paying dividends, entering into affiliate
transactions and asset sales. In addition, the Company must maintain certain financial covenants typical for this type of arrangement,
including a consolidated leverage ratio, a consolidated fixed charge coverage ratio and minimum liquidity of its foreign subsidiaries.
The consolidated leverage ratio, as described above, is defined as the ratio of total consolidated indebtedness, as defined, to
consolidated EBITDA, as defined. Prior to Amendment 2, the required leverage ratio started at 4.75 to 1.0 for the twelve month
periods ended March 31, 2020 and June 30, 2020, and decreased in various increments to 4.0 to 1.0 for the twelve months ended
September 30, 2020, 3.75 to 1.0 for the twelve months ended December 31, 2020, 2.75 to 1.0 for the twelve months ended December
31, 2021 and 2.0 to 1.0 for the twelve months ended December 31, 2022 and thereafter. The consolidated fixed charge coverage ratio
is the ratio of consolidated EBITDA, as defined, less consolidated capital expenditures and cash income taxes paid to consolidated
fixed charges, as defined, calculated on a twelve-month basis. The consolidated fixed charge coverage ratio for the twelve month
periods ended March 31, 2020, June 30, 2020 and September 30, 2020 must be 1.35 to 1 and increases in various increments on a
quarterly basis to 1.5 to 1.0 for the twelve month period ended December 31, 2020 and 2021, and to 1.75 to 1.0 for the 12 months
ending December 31, 2022 and thereafter. Lastly, the Company must maintain minimum liquidity, defined as cash and availability
under the UK borrowing base, as defined, of $1.0 million over any trailing four-week period until such time as the foreign subsidiary
has positive EBITDA, as defined, for three consecutive quarters and the Holzworth deferred purchase price has been paid in full.
The Term Loan Facility also provides for a number of events of default, including, among others, nonpayment, bankruptcy, inaccuracy
of representations and warranties, breach of covenant, change in control, entry of final judgement or order, breach of material
contracts, and as long as the Company’s consolidated leverage ratio is greater than 1.0 to 1.0 (as calculated in accordance
with the terms of the Term Loan Facility), the cessation of service of any two of Tim Whelan, Michael Kandell or Daniel Monopoli
as Chief Executive Officer, Chief Financial Officer or Chief Technology Officer, respectively, of the Borrower without a satisfactory
replacement within 60 days. Any exercise of remedies by Muzinich is subject to compliance with the intercreditor agreement entered
into at the closing of the Term Loan Facility among the Company, Muzinich and Bank of America, N.A., as lender under the Credit
Facility referenced below.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
The
Company entered into a Credit Facility with Bank of America, N.A. (the “Lender”) on February 16, 2017 (the “Credit
Facility”), which provided for a term loan in the aggregate principal amount of $760,000 (the “Term Loan”) and
an asset based revolving loan (the “Revolver”), which is subject to a Borrowing Base Calculation (as defined in the
Credit Facility) of up to a maximum availability of $9.0 million (“Revolver Commitment Amount”). The borrowing base
is calculated as a percentage of eligible accounts receivable and inventory, as defined, subject to certain caps and limits. The
borrowing base is calculated on a monthly basis and interest is calculated at LIBOR plus a margin. The proceeds of the Term Loan
and Revolver were used to finance the acquisition of CommAgility in 2017.
In
connection with the Holzworth acquisition, on February 7, 2020, the Company and certain of its subsidiaries (the “Borrowers”),
and Bank of America, N.A. entered into Amendment No. 5 (“Amendment 5”) to the Credit Facility. By entering into Amendment
5, Holzworth, together with CommAgility Limited, became borrowers under the Credit Facility. The obligations of the Borrowers
under the Credit Facility are guaranteed by Wireless Telecom Group, Ltd. CommAgility Limited and Wireless Telecom Group, Ltd.
are both wholly owned subsidiaries of the Company.
Amendment
5 (a) effected certain modifications to the Credit Facility to accommodate the Holzworth acquisition, the Company’s incurrence
of the Initial Term Loan and the granting of the related liens and security interests, (b) subject to the satisfaction of certain
conditions precedent, made available to CommAgility an asset based revolving loan, subject to a borrowing base calculation applicable
to CommAgility’s assets, of up to a maximum availability of $5.0 million (the “UK Revolver Commitment”), (c)
reduced the interest rate margin applicable to revolving loans made under the Credit Facility from a range of 2.75% to 3.25% to
a range of 2.00% to 2.50%, based on the Borrowers’ Fixed Charge Coverage Ratio (as defined in the Credit Facility) of the
most recently completed fiscal quarter, (d) extended the Revolver Termination Date to March 31, 2023 and (e) conditioned the Borrowers’
ability to make certain debt payments under the Term Loan Facility (described above) upon compliance with a liquidity test. In
all other material respects, the Credit Facility remains unchanged.
Effectiveness
of Amendment 5 was conditioned upon, among other things, the prepayment of the remaining principal balance ($304,000) of the $760,000
term loan made available under the Credit Facility and the payment of a closing fee in the amount of $25,000. The Borrowers satisfied
all such conditions on February 7, 2020. In connection with the Amendment the Company incurred costs of $270,000 which are capitalized
as other current and non-current assets in the Consolidated Balance Sheets and are being amortized over the term of the revolver.
On
May 4, 2020, the Company, its subsidiaries and Bank of America entered into Amendment No. 6 which, among other things, amended
the definition of “Debt” to include the PPP loan as long as the proceeds are used for allowable purposes under the
CARES Act and the Company promptly submits an application for forgiveness and substantially all of the loan is forgiven.
On
February 25, 2021, the Company, its subsidiaries and Bank of America entered into Amendment No. 7 which revised the Credit Facility
to accommodate the changes to the deferred purchase price payments to and notes with the Holzworth sellers as described above
and provided Bank of America’s consent to the Company entering into the Muzinich Second Amendment, as described above.
As
of December 31, 2020, the interest rate on the Term Loan Facility was 8.25% and the interest rate on the Revolver was 2.15%. The
Company had zero drawn on the asset based revolver as of December 31, 2020.
On
May 4, 2020, the Company received $2.0 million pursuant to a loan from Bank of America N.A. under the Paycheck Protection Program
(“PPP”) of the 2020 Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered by
the Small Business Association (“SBA”). The loan has an interest rate of 1% and a term of 24 months. A repayment schedule
has not yet been provided by Bank of America. Accordingly, the full amount of the term loan has been shown as due in May 2022.
Funds from the loan may only be used for certain purposes, including payroll, benefits, rent and utilities. The CARES Act and
the PPP provide a mechanism for forgiveness of up to the full amount of the loan upon application to the SBA for forgiveness by
the Company. The loan is evidenced by a promissory note, which contains customary events of default relating to, among other things,
payment defaults and breaches of representations and warranties. The Company may prepay the loan at any time prior to maturity
with no prepayment penalties. As of December 31, 2020, the Company has applied for forgiveness of the loan, however, has elected
to account for the loan in accordance with Accounting Standard Codification 470 Debt until such time that forgiveness is
approved by the SBA. The Company can provide no assurance that the loan will be forgiven in whole or in part.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
Issuance
of Stock Warrants
Pursuant
to the Term Loan Facility, the Company issued a Warrant, dated February 7, 2020 (the “Warrant”), to Muzinich. Under
the Warrant, Muzinich has the right to purchase 266,167 shares of common stock of the Company at an exercise price of $1.3923
per share (an aggregate value of approximately $370,588), based on a 90-day volume weighted average price for shares of stock
of the Company (the “Warrant Stock”). The Warrant is exercisable for an indefinite period from the date of the Warrant
and may be exercised on a cashless basis. The number of shares of common stock deliverable upon exercise of the Warrant is subject
to adjustment for subdivision or consolidation of shares and other standard dilutive events. Additionally, the exercise price
may be adjusted based on a formula in the event of a common stock offering by the Company at an offering price below fair market
value, as defined, and below exercise price. In connection with the issuance of the Warrant, the Company granted Muzinich one
demand registration right and piggyback registration rights with respect to the Warrant Stock, subject to certain exceptions.
If
the Additional Acquisition (as defined in Term Loan Facility above) is consummated, the Company has agreed to issue to
Muzinich at the closing of the Additional Acquisition an additional Warrant for the right to purchase 367,564 shares of common
stock of the Company at an exercise price of $1.3923 per share (an aggregate value of approximately $511,765), based upon a 90-day
volume weighted average price for shares of stock of the Company as of February 7, 2020 (the “Additional Warrant”).
The Additional Warrant will contain the same terms and conditions as the Warrant, except that Muzinich will have only one demand
registration right, subject to certain exceptions, with respect to shares of common stock of the Company issued under the Warrant
and the Additional Warrant.
The
stock warrants issued to Muzinich are classified as equity. The fair value of the warrants, as calculated using the Black Scholes
model as of the issuance date, was approximately $150,000 and was recorded as a reduction to the carrying value of the debt. The
significant inputs included in the Black Scholes calculation were a risk free rate of 1.41%, volatility of 48.7% and the stock
price on date of grant of $1.34.
NOTE
4 - LEASES
The
Company’s lease agreements consist of building leases for its operating locations and office equipment leases for printers
and copiers with lease terms that range from less than 12 months to 8 years. At inception, the Company determines if an arrangement
contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Company’s
leases for office equipment such as printers and copiers contain lease and non-lease components (i.e. maintenance). The Company
accounts for lease and non-lease components of office equipment as a single lease component.
All
of the Company’s leases are operating leases and are presented as right of use lease asset, short term lease liability and
long term lease liability on the Consolidated Balance Sheets as of December 31, 2020 and 2019. These assets and liabilities
are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s
incremental borrowing rate. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance
sheet.
Lease
expense is recognized on a straight-line basis over the lease term and is included in cost of revenues and general and administrative
expenses on the Consolidated Statement of Operations and Comprehensive Income/(Loss).
An
initial right-of-use asset of $1.9 million was recognized as a non-cash asset addition with the adoption of the new lease accounting
standard on January 1, 2019. With our acquisition of Holzworth on February 7, 2020, we acquired a right-of-use asset of $789,000.
There have been no other right-of-use assets recognized since the date of adoption of the new lease standard. Cash paid for amounts
included in the present value of operating lease liabilities was $648,000 and $508,000 during the twelve months ended December
31, 2020 and 2019, respectively, and is included in operating cash flows.
Operating
lease costs were $1.0 million and $892,000 during the twelve months ended December 31, 2020 and 2019, respectively.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
The
following table presents information about the amount and timing of cash flows arising from the Company’s operating leases
as of December 31, 2020.
(in thousands)
|
|
December 31, 2020
|
|
Maturity of Lease Liabilities
|
|
|
|
|
2021
|
|
$
|
619
|
|
2022
|
|
|
637
|
|
2023
|
|
|
276
|
|
2024
|
|
|
158
|
|
2025
|
|
|
163
|
|
Thereafter
|
|
|
69
|
|
Total undiscounted operating lease payments
|
|
|
1,922
|
|
Less: imputed interest
|
|
|
(188
|
)
|
Present Value of operating lease liabilities
|
|
$
|
1,734
|
|
|
|
|
|
|
Balance sheet classification
|
|
|
|
|
Current lease liabilities
|
|
$
|
534
|
|
Long-term lease liabilities
|
|
|
1,200
|
|
Total operating lease liabilities
|
|
$
|
1,734
|
|
|
|
|
|
|
Other information
|
|
|
|
|
Weighted-average remaining lease term (months)
|
|
|
44
|
|
Weighted-average discount rate for operating leases
|
|
|
5.88
|
%
|
NOTE
5 – REVENUE
Revenue
is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration
to which the Company expects to be entitled in exchange for promised goods or services. The Company’s performance obligations
are satisfied either over time or at a point in time. Revenue from performance obligations that transferred at a point in time
accounted for approximately 99% of the Company’s total revenue for the twelve months ended December 31, 2020 and 2019.
Nature
of Products and Services
Hardware
The
Company generally has one performance obligation in its arrangements involving the sales of radio frequency solutions, digital
signal processing hardware, power meters, analyzers, noise/signal generators, phase noise analyzers and other components. When
the terms of a contract include the transfer of multiple products, each distinct product is identified as a separate performance
obligation. Generally, satisfaction occurs when control of the promised goods is transferred to the customer in exchange for consideration
in an amount for which we expect to be entitled. Generally, control is transferred when legal title of the asset moves from the
Company to the customer. We sell our products to a customer based on a purchase order, and the shipping terms per each individual
order are primarily used to satisfy the single performance obligation. However, in order to determine control has transferred
to the customer, the Company also considers:
|
●
|
when
the Company has a present right to payment for the asset
|
|
●
|
when
the Company has transferred physical possession of the asset to the customer
|
|
●
|
when
the customer has the significant risks and rewards of ownership of the asset
|
|
●
|
when
the customer has accepted the asset
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
Software
Arrangements
involving licenses of software in the CommAgility brand may involve multiple performance obligations, most notably subsequent
releases of the software. The Company has concluded that each software release in a multiple deliverable arrangement involving
CommAgility software licenses is a distinct performance obligation and, accordingly, transaction price is allocated to each release
when the customer obtains control of the software.
Performance
obligations that are not distinct at contract inception are combined. Specifically, with the Company’s sales of software,
contracts that include customization may result in the combination of the customization services with the license as one distinct
performance obligation and recognized over time. The duration of these performance obligations are typically one year or less.
Services
Arrangements
involving calibration and repair services of the Company’s products are generally considered a single performance obligation
and are recognized as the services are rendered.
Shipping
and Handling
Shipping
and handling activities performed after the customer obtains control are accounted for as fulfillment activities and recognized
as cost of revenues.
Significant
Judgments
For
the Company’s more complex software and services arrangements significant judgment is required in determining whether licenses
and services are distinct performance obligations that should be accounted for separately, or, are not distinct and thus accounted
for together. Further, in cases where we determine that performance obligations should be accounted for separately, judgment is
required to determine the standalone selling price for each distinct performance obligation.
Certain
of the Company shipments include a limited return right. In accordance with Topic 606 the Company recognizes revenue net of expected
returns.
Contract
Balances
The
timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in contract
assets (unbilled revenue) or contract liabilities (deferred revenue) on the Company’s Consolidated Balance Sheet. The Company
records a contract asset when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent
to invoicing. Unbilled revenue is $260,000 and $147,000 as of December 31, 2020 and 2019, respectively, and recorded in prepaid
expenses and other current assets. Deferred revenue is $924,000 and $42,000 as of December 31, 2020 and 2019, respectively. The
increase in deferred revenue from the prior year is primarily due to billings in advance of revenue recognition for certain CommAgility
projects involving multiple performance obligations.
Disaggregated
Revenue
We
disaggregate our revenue from contracts with customers by product family and geographic location as we believe it best depicts
how the nature, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the tables
below (in thousands).
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
|
|
Twelve Months Ended
December 31, 2020
|
|
|
Twelve Months Ended
December 31, 2019
|
|
Total net revenues by revenue type
|
|
|
|
|
|
|
|
|
Passive and active RF solutions
|
|
$
|
17,633
|
|
|
$
|
21,830
|
|
Noise generators and components
|
|
|
13,356
|
|
|
|
6,198
|
|
Power meters and analyzers
|
|
|
5,737
|
|
|
|
6,109
|
|
Signal processing hardware
|
|
|
1,672
|
|
|
|
13,013
|
|
Software licenses
|
|
|
1,284
|
|
|
|
14
|
|
Services
|
|
|
2,066
|
|
|
|
1,757
|
|
Total net revenue
|
|
$
|
41,748
|
|
|
$
|
48,921
|
|
|
|
|
|
|
|
|
|
|
Total net revenues by geographic areas
|
|
|
|
|
|
|
|
|
Americas
|
|
$
|
31,329
|
|
|
$
|
30,161
|
|
EMEA
|
|
|
6,329
|
|
|
|
16,500
|
|
APAC
|
|
|
4,090
|
|
|
|
2,260
|
|
Total net revenue
|
|
$
|
41,748
|
|
|
$
|
48,921
|
|
Net
revenues are attributable to a geographic area based on the destination of the product shipment.
The
majority of shipments in the Americas are to customers located within the United States. For the years ended December 31, 2020
and 2019, sales in the United States amounted to $30.6 million and $30.0 million, respectively.
For
the year ended December 31, 2020 shipments to the EMEA region were largely concentrated in the UK, Russia and France. Shipments
to the UK, Russia and France in 2020 amounted to $1.7 million, $897,000 and $859,000, respectively. For the year ended December
31, 2019 shipments to the EMEA region were largely concentrated in the UK, Germany and Italy. Shipments to the UK, Germany and
Italy in 2019 amounted $12.7 million, $737,000 and $506,000, respectively.
The
largest concentration of shipments in the APAC region is to China. For the years ended December 31, 2020 and 2019, shipments to
China amounted to $2.0 million and $1.3 million, of all shipments to the APAC region, respectively. There were no other shipments
significantly concentrated in one country in the APAC region.
NOTE
6 - GOODWILL AND INTANGIBLE ASSETS
Goodwill
consists of the following (in thousands):
|
|
Holzworth
|
|
|
Microlab
|
|
|
CommAgility
|
|
|
Total
|
|
Balance as of January 1, 2019
|
|
$
|
-
|
|
|
$
|
1,351
|
|
|
$
|
8,427
|
|
|
$
|
9,778
|
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
291
|
|
|
|
291
|
|
Balance as of December 31, 2019
|
|
|
-
|
|
|
|
1,351
|
|
|
|
8,718
|
|
|
|
10,069
|
|
Holzworth acquisition
|
|
|
6,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
Goodwill impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,742
|
)
|
|
|
(4,742
|
)
|
Foreign currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
185
|
|
|
|
185
|
|
Balance as of December 31, 2020
|
|
$
|
6,000
|
|
|
$
|
1,351
|
|
|
$
|
4,161
|
|
|
$
|
11,512
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
Intangible
assets consist of the following (in thousands):
|
|
December 31, 2020
|
|
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Foreign Exchange Translation
|
|
|
Net Carrying Amount
|
|
Customer relationships
|
|
$
|
5,075
|
|
|
$
|
(2,564
|
)
|
|
$
|
121
|
|
|
$
|
2,632
|
|
Patents
|
|
|
615
|
|
|
|
(491
|
)
|
|
|
26
|
|
|
|
150
|
|
Proprietary technology
|
|
|
1,550
|
|
|
|
(142
|
)
|
|
|
-
|
|
|
|
1,408
|
|
Non-compete agreements
|
|
|
1,107
|
|
|
|
(1,150
|
)
|
|
|
43
|
|
|
|
-
|
|
Holzworth tradename
|
|
|
400
|
|
|
|
(31
|
)
|
|
|
-
|
|
|
|
369
|
|
CommAgility tradename
|
|
|
629
|
|
|
|
-
|
|
|
|
54
|
|
|
|
683
|
|
Total
|
|
$
|
9,376
|
|
|
$
|
(4,378
|
)
|
|
$
|
244
|
|
|
$
|
5,242
|
|
|
|
December 31, 2019
|
|
|
|
Gross Carrying Amount
|
|
|
Accumulated Amortization
|
|
|
Foreign Exchange Translation
|
|
|
Net Carrying Amount
|
|
Customer relationships
|
|
$
|
2,766
|
|
|
$
|
(1,644
|
)
|
|
$
|
113
|
|
|
$
|
1,235
|
|
Patents
|
|
|
615
|
|
|
|
(365
|
)
|
|
|
25
|
|
|
|
275
|
|
Non-compete agreements
|
|
|
1,107
|
|
|
|
(1,101
|
)
|
|
|
43
|
|
|
|
49
|
|
CommAgility tradename
|
|
|
629
|
|
|
|
-
|
|
|
|
31
|
|
|
|
660
|
|
Total
|
|
$
|
5,117
|
|
|
$
|
(3,110
|
)
|
|
$
|
212
|
|
|
$
|
2,219
|
|
Amortization
of acquired intangible assets was $1.3 million and $1.1 million for the twelve months ended December 31, 2020 and 2019, respectively.
Amortization of proprietary technology is included in costs of revenues in the Consolidated Statements of Operations
and Comprehensive Income/(Loss). Amortization of all other acquired intangible assets is included in general and administrative
expenses.
The
estimated future amortization expense related to intangible assets is as follows as of December 31, 2020 (in thousands):
2021
|
|
$
|
1,307
|
|
2022
|
|
|
665
|
|
2023
|
|
|
573
|
|
2024
|
|
|
573
|
|
2025
|
|
|
573
|
|
Thereafter
|
|
|
868
|
|
Total
|
|
$
|
4,559
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
NOTE
7 - PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment, consist of the following as of December 31 (in thousands):
|
|
2020
|
|
|
2019
|
|
Machinery & computer equipment/software
|
|
$
|
9,085
|
|
|
$
|
8,662
|
|
Furniture & fixtures
|
|
|
483
|
|
|
|
461
|
|
Leasehold improvements
|
|
|
1,358
|
|
|
|
1,331
|
|
Gross property, plant and equipment
|
|
|
10,926
|
|
|
|
10,454
|
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
9,102
|
|
|
|
8,307
|
|
Net property, plant and equipment
|
|
$
|
1,824
|
|
|
$
|
2,147
|
|
Depreciation
expense of $1.1 million and $841,000 was recorded for the years ended December 31, 2020 and 2019, respectively.
NOTE
8 - OTHER ASSETS
Other
assets consist of the following as of December 31 (in thousands):
|
|
2020
|
|
|
2019
|
|
Product demo assets
|
|
$
|
187
|
|
|
$
|
128
|
|
Debt issuance costs - Revolver
|
|
|
127
|
|
|
|
91
|
|
Deferred costs
|
|
|
82
|
|
|
|
82
|
|
Income tax receivable
|
|
|
65
|
|
|
|
230
|
|
Security deposit
|
|
|
63
|
|
|
|
50
|
|
Deferred S3 costs
|
|
|
-
|
|
|
|
255
|
|
Other
|
|
|
37
|
|
|
|
38
|
|
Total
|
|
$
|
561
|
|
|
$
|
874
|
|
Product
demo assets are net of accumulated amortization expense of $397,000 and $317,000 as of December 31, 2020 and 2019, respectively.
Amortization expense related to demo assets was $84,000 and $249,000 in 2020 and 2019, respectively.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
NOTE
9 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued
expenses and other current liabilities consist of the following as of December 31 (in thousands):
|
|
2020
|
|
|
2019
|
|
Holzworth earnout
|
|
$
|
3,423
|
|
|
$
|
-
|
|
Holzworth deferred purchase price
|
|
|
950
|
|
|
|
-
|
|
Payroll and related benefits
|
|
|
864
|
|
|
|
308
|
|
Commissions
|
|
|
605
|
|
|
|
430
|
|
Goods received not invoiced
|
|
|
458
|
|
|
|
346
|
|
Professional fees
|
|
|
331
|
|
|
|
464
|
|
Sales and use and VAT tax
|
|
|
315
|
|
|
|
355
|
|
Return reserve
|
|
|
212
|
|
|
|
199
|
|
Warranty reserve
|
|
|
140
|
|
|
|
160
|
|
Bonus
|
|
|
123
|
|
|
|
126
|
|
Harris arbitration liability
|
|
|
116
|
|
|
|
49
|
|
Severance
|
|
|
-
|
|
|
|
102
|
|
Other
|
|
|
460
|
|
|
|
118
|
|
Total
|
|
$
|
7,997
|
|
|
$
|
2,657
|
|
NOTE
10 - ACCOUNTING FOR STOCK BASED COMPENSATION
The
Company follows the provisions of ASC 718. The Company’s results for the years ended December 31, 2020 and December 31,
2019 include stock based compensation expense totaling $474,000 and $584,000, respectively. Such amounts have been included in
the Consolidated Statement of Operations and Comprehensive Income/(Loss) within operating expenses.
Incentive
Compensation Plan
In
2012, the Company’s Board of Directors and shareholders approved the 2012 Incentive Compensation Plan (the “Initial
2012 Plan”), which provides for the grant of equity, including restricted stock awards, restricted stock units, non-qualified
stock options and incentive stock options in compliance with the Internal Revenue Code of 1986, as amended, to employees, officers,
directors, consultants and advisors of the Company who are expected to contribute to the Company’s future growth and success.
When originally approved, the Initial 2012 Plan provided for the grant of awards relating to 2 million shares of common stock,
plus those shares subject to awards previously issued under the Company’s 2000 Stock Option Plan that expire, are canceled
or are terminated after adoption of the Initial 2012 Plan without having been exercised in full and would have been available
for subsequent grants under the 2000 Stock Option Plan. In June 2014, the Company’s shareholders approved the Amended and
Restated 2012 Incentive Compensation Plan (the “2012 Plan”) allowing for an additional 1.6 million shares of the Company’s
common stock to be available for future grants under the 2012 Plan. The 2012 Plan provides that if awards are forfeited, expire
or otherwise terminate without issuance of the shares underlying the awards, or if the award does not result in issuance of all
or part of the shares underlying the award, the unissued shares are again available for awards under the 2012 Plan. As a result
of certain award forfeitures and cancellations, as of December 31, 2020, there are approximately 227,000 shares available for
issuance under the 2012 Plan.
All
service-based (time vesting) options granted have ten-year terms from the date of grant and typically vest annually and become
fully exercisable after a maximum of five years. However, vesting conditions are determined on a grant by grant basis. Performance-based
options granted have ten-year terms and vest and become fully exercisable when determinable performance targets are achieved.
Performance targets are approved by the Company’s compensation committee of the Board of Directors. Under the 2012 Plan,
options may be granted to purchase shares of the Company’s common stock exercisable only at prices equal to or above the
fair market value on the date of the grant.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
The
following summarizes the components of stock-based compensation expense for the years ending December 31 (in thousands):
|
|
2020
|
|
|
2019
|
|
Service based restricted stock awards
|
|
$
|
117
|
|
|
$
|
278
|
|
Service based restricted stock units
|
|
|
205
|
|
|
|
245
|
|
Performance based stock options
|
|
|
99
|
|
|
|
(90
|
)
|
Service based stock options
|
|
|
53
|
|
|
|
151
|
|
|
|
$
|
474
|
|
|
$
|
584
|
|
As
of December 31, 2020, $423,000 of unrecognized compensation costs related to unvested stock options is expected to be recognized
over a remaining weighted average period of 4.9 years, $93,000 of unrecognized compensation costs related to unvested restricted
shares is expected to be recognized over a remaining weighted average period of 2.3 years and $81,000 of unrecognized compensation
costs related to unvested restricted stock units is expected to be recognized over 6 months.
During
the twelve months ended December 31, 2020 the Company reversed $6,000 and $16,000 in share based compensation expense related
to 6,250 unvested stock options and 16,667 unvested restricted shares, respectively, which were forfeited as a result of an employee
exiting the company.
During
the twelve months ended December 31, 2019 the Company reversed $121,000 in share based compensation expense related to 240,000
unvested stock options that were forfeited as a result of employees exiting the company.
Restricted
Common Stock Awards
A
summary of the status of the Company’s non-vested restricted common stock, as granted under the Company’s approved
equity compensation plans, as of December 31, 2020 and 2019, and changes during the twelve months ended December 31, 2020 and
2019, are presented below:
|
|
2020
|
|
|
2019
|
|
Non-vested Restricted Shares
|
|
Number
of Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
Number
of Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested as of January 1
|
|
|
262,540
|
|
|
$
|
1.63
|
|
|
|
232,123
|
|
|
$
|
1.68
|
|
Granted
|
|
|
50,000
|
|
|
$
|
1.20
|
|
|
|
95,000
|
|
|
$
|
1.56
|
|
Vested and issued
|
|
|
(95,203
|
)
|
|
$
|
1.66
|
|
|
|
(64,583
|
)
|
|
$
|
1.70
|
|
Forfeited
|
|
|
(16,667
|
)
|
|
$
|
1.56
|
|
|
|
-
|
|
|
|
-
|
|
Non-vested as of December 31
|
|
|
200,670
|
|
|
$
|
1.52
|
|
|
|
262,540
|
|
|
$
|
1.63
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
On
August 4, 2020 the Company granted 50,000 restricted share awards to our Chief Revenue Officer under the 2012 plan. The fair market
value of the award is $1.20 per granted share and the award vests in four equal installments of 12,500 shares on August 1 of 2021,
2022, 2023 and 2024, respectively.
The
following table summarizes the restricted common stock awards granted during the years ended December 31, 2020 and 2019 under
the 2012 Plan:
|
|
Number of
Shares
|
|
|
Fair Market
Value per
Granted Share
|
|
|
Vesting
|
2020
|
|
|
|
|
|
|
|
|
8/4/20 – Service grant - Employee
|
|
|
50,000
|
|
|
$
|
1.20
|
|
|
Annual vesting through August 2024
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
1/11/19 - Service grant - Employees
|
|
|
95,000
|
|
|
$
|
1.56
|
|
|
Annual vesting through January 2022
|
Restricted
Stock Units:
In
fiscal 2020 and fiscal 2019 the Company granted Restricted Stock Units (“RSU”) to each of our board members. Each
RSU represents the Company’s obligation to issue one share of the Company’s common stock subject to the RSU award
agreement and 2012 Plan. The RSUs vest on the day before the first anniversary of the grant date or, if earlier, the effective
date of a separation of service due to death or disability, provided the board member has rendered continuous service to the Company
as a member of the board of directors from grant date to vesting date. Once vested, the RSU will be settled by delivery of shares
to the board member no later than 30 days following: 1) the third anniversary of the grant date, 2) separation from service following,
or coincident with, a vesting date, or 3) a change in control.
A
summary of the status of the Company’s non-vested restricted stock units, as granted under the Company’s approved
equity compensation plans, as of December 31, 2020 and 2019, and changes during the twelve months ended December 31, 2020 and
2019, are presented below:
|
|
2020
|
|
|
2019
|
|
Non-vested Restricted Stock Units
|
|
Number
of Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
Number
of Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested as of January 1
|
|
|
147,917
|
|
|
$
|
1.56
|
|
|
|
125,000
|
|
|
$
|
2.25
|
|
Granted
|
|
|
161,507
|
|
|
$
|
1.21
|
|
|
|
147,917
|
|
|
$
|
1.56
|
|
Vested and issued
|
|
|
(147,917
|
)
|
|
$
|
1.56
|
|
|
|
(125,000
|
)
|
|
$
|
2.25
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Non-vested as of December 31
|
|
|
161,507
|
|
|
$
|
1.21
|
|
|
|
147,917
|
|
|
$
|
1.56
|
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
|
|
Number
of
Shares
|
|
|
Fair
Market
Value
per
Granted
Share
|
|
|
Vesting
|
2020
|
|
|
|
|
|
|
|
|
6/4/2020
- Service grant – Board of Directors
|
|
|
150,000
|
|
|
$
|
1.18
|
|
|
Annual
board meeting – June 2021
|
12/28/2020
– Service grant – Board of Directors
|
|
|
11,507
|
|
|
$
|
1.66
|
|
|
Annual
board meeting – June 2021
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
5/30/2019
- Service grant – Board of Directors
|
|
|
125,000
|
|
|
$
|
1.55
|
|
|
Annual
board meeting – June 2020
|
7/8/2019
– Service grant – Board of Directors
|
|
|
22,917
|
|
|
$
|
1.58
|
|
|
Annual
board meeting – June 2020
|
Performance-Based
Stock Option Awards
On
August 4, 2020 the Company granted 150,000 performance-based stock options to our Chief Revenue Officer under the 2012 Plan.
On
April 7, 2020 the Company granted 970,000 performance-based stock options to various employees under the 2012 Plan.
The
performance options granted on both August 4 and April 7, 2020 vest when the Company achieves consolidated revenue targets as
outlined in the schedule below:
Consolidated
annualized gross revenues $55.0 million – 25% vesting
Consolidated
annualized gross revenues $61.5 million – 50% vesting
Consolidated
annualized gross revenues $69.0 million – 75% vesting
Consolidated
annualized gross revenues $77.5 million – 100% vesting
Consolidated
annualized gross revenues include revenue from Holzworth from acquisition date (February 7, 2020) forward, but do not include
any additional acquisitions from February 7, 2020 forward. Consolidated annualized gross revenues is calculated on a calendar
year basis (i.e. twelve months ended December 31).
In
accordance with ASC 718, compensation expense 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. The estimated implicit service period is April 2020 thru December 2025 for the April performance-based options
and August 2020 thru December 2025 for the August performance-based options.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
A
summary of performance-based stock option activity, and related information for the years ended December 31, 2020 and December
31, 2019 follows:
|
|
2020
|
|
|
2019
|
|
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
Outstanding as of January 1
|
|
|
105,000
|
|
|
$
|
1.61
|
|
|
|
305,000
|
|
|
$
|
1.45
|
|
Granted
|
|
|
1,120,000
|
|
|
$
|
1.50
|
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(20,000
|
)
|
|
$
|
0.78
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
(200,000
|
)
|
|
$
|
1.36
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31
|
|
|
1,205,000
|
|
|
$
|
1.52
|
|
|
|
105,000
|
|
|
$
|
1.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
$
|
0.78
|
|
As
of December 31, 2020, none of the performance-based stock options outstanding were exercisable as the performance metrics were
not met. The aggregate intrinsic value of performance-based stock options outstanding that were “in the money” (exercise
price was lower than market price) as of December 31, 2020 was $325,000 and the weighted average remaining life was 7.7 years.
The
aggregate intrinsic value of performance-based stock options outstanding that were “in the money” (exercise price
was lower than the market price) as of December 31, 2019 was $13,000 and the weighted average remaining contractual life was 1.0
years. As of December 31, 2019, 20,000 performance-based stock options were exercisable.
The
range of exercise prices of outstanding performance-based options at December 31, 2020 is $1.20 to $1.83 with a weighted average
exercise price of $1.52 per share.
Service-Based
Stock Option Awards
A
summary of service-based stock option activity and related information for the years ended December 31, 2020 and 2019 follows:
|
|
2020
|
|
|
2019
|
|
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
Outstanding as of January 1
|
|
|
1,950,000
|
|
|
$
|
1.52
|
|
|
|
1,975,000
|
|
|
$
|
1.52
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
$
|
1.56
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(6,250
|
)
|
|
$
|
1.66
|
|
|
|
(40,000
|
)
|
|
$
|
1.52
|
|
Expired
|
|
|
(18,750
|
)
|
|
$
|
1.66
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of December 31
|
|
|
1,925,000
|
|
|
$
|
1.52
|
|
|
|
1,950,000
|
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31
|
|
|
1,736,250
|
|
|
$
|
1.51
|
|
|
|
1,515,000
|
|
|
$
|
1.50
|
|
The
aggregate intrinsic value of service-based stock options outstanding that were “in the money” (exercise price was
lower than the market price) as of December 31, 2020 was $455,000 and the weighted average remaining contractual life was 6 years.
The aggregate intrinsic value of exercisable “in the money” service-based stock options as of December 31, 2020 was
$415,000 and the weighted average remaining contractual life was 6 years.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
The
aggregate intrinsic value of service-based stock options outstanding that were “in the money” (exercise price was
lower than the market price) as of December 31, 2019 was $77,600 and the weighted average remaining contractual life was 2.6 years.
The aggregate intrinsic value of exercisable “in the money” service-based stock options as of December 31, 2019 was
$72,225 and the weighted average remaining contractual life was 3.0 years.
The
range of exercise prices of outstanding service-based options at December 31, 2020 is $1.30 to $1.92 with a weighted average exercise
price of $1.52 per share.
The
following table presents the assumptions used to estimate the fair value of stock option awards granted during the twelve months
ended December 31, 2020 and 2019:
|
|
Number of
Options
|
|
|
Option Term
(in years)
|
|
|
Exercise Price
|
|
|
Risk Free Interest Rate
|
|
|
Expected Volatility
|
|
|
Fair Value at Grant Date
|
|
|
Expected Dividend Yield
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/7/2020 – Performance grant - Employees
|
|
|
970,000
|
|
|
|
10
|
|
|
$
|
1.50
|
|
|
|
0.48
|
%
|
|
|
50.85
|
%
|
|
$
|
0.86
|
|
|
$
|
0.00
|
|
8/4/2020 – Performance grant - Employees
|
|
|
150,000
|
|
|
|
10
|
|
|
$
|
1.20
|
|
|
|
0.19
|
%
|
|
|
52.06
|
%
|
|
$
|
1.20
|
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/11/2019 – Service Grant - Employees
|
|
|
15,000
|
|
|
|
3
|
|
|
$
|
1.56
|
|
|
|
2.52
|
%
|
|
|
49.80
|
%
|
|
$
|
0.56
|
|
|
$
|
0.00
|
|
NOTE
11 - SEGMENT AND RELATED INFORMATION
In
June 2020, as a result of certain internal reorganizations completed over the prior six to nine months, the Company concluded
it now operates as one reportable segment in accordance with ASC 280 Segment Reporting. Prior to June 2020 the Company operated
as three reportable segments. In June 2020 we determined that the Chief Operating Decision Maker (“CODM”) as defined
in ASC 280 evaluates operating results and makes decisions on how to allocate resources at the consolidated level. Although the
CODM reviews key performance indicators including bookings, shipments and gross profit at a product group level, this information
by itself is not sufficient enough to make operating decisions. Rather, operating decisions are made based on review of consolidated
profitability metrics rather than the individual results of each product group.
NOTE
12 - RETIREMENT PLAN
The
Company has a 401(k) profit sharing plan covering all eligible U.S. employees. Company contributions to the plan for the years
ended December 31, 2020 and 2019 amounted to $44,000 and $286,000, respectively.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
NOTE
13 - INCOME TAXES
The
components of income tax (benefit)/expense related to net income/(loss) from operations are as follows (in thousands):
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
(9
|
)
|
State
|
|
|
73
|
|
|
|
45
|
|
Foreign
|
|
|
(1,060
|
)
|
|
|
(859
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
182
|
|
|
|
(188
|
)
|
State
|
|
|
129
|
|
|
|
(233
|
)
|
Foreign
|
|
|
(133
|
)
|
|
|
(128
|
)
|
Total
|
|
$
|
(809
|
)
|
|
$
|
(1,372
|
)
|
The
following is a reconciliation of the maximum statutory federal tax rate to the Company’s effective tax relative to operations:
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
% of
Pre Tax
Earnings
|
|
|
% of
Pre Tax
Earnings
|
|
Statutory federal income tax rate
|
|
|
(21.0
|
)%
|
|
|
(21.0
|
)%
|
State income tax net of federal tax benefit
|
|
|
(6.6
|
)
|
|
|
0.1
|
|
Foreign rate difference
|
|
|
7.7
|
|
|
|
7.2
|
|
Change in valuation allowance
|
|
|
9.4
|
|
|
|
(10.6
|
)
|
Permanent differences
|
|
|
8.5
|
|
|
|
0.9
|
|
Research and development incentive
|
|
|
(8.1
|
)
|
|
|
(53.1
|
)
|
Global intangible low-taxed income
|
|
|
-
|
|
|
|
1.3
|
|
Other
|
|
|
1.1
|
|
|
|
(1.6
|
)
|
Total
|
|
|
(9.0
|
)%
|
|
|
(76.8
|
)%
|
In
2020, the difference between the statutory and effective tax rate is due primarily to permanent differences between U.S.
GAAP book income and taxable income including the goodwill impairment charge for the CommAgility reporting unit and the loss on
contingent consideration related to the Holzworth earnout. Additionally, in 2020 the difference between the statutory and effective
tax rate was due to an increase in the state net operating loss valuation allowance and research and development deductions in
the United Kingdom. In 2019, the difference between the statutory and effective tax rate is due primarily to research and development
deductions in the United Kingdom and a reduction in the state net operating loss valuation allowance.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
The
components of deferred income taxes are as follows (in thousands):
|
|
Years Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
11,888
|
|
|
$
|
11,538
|
|
Inventory
|
|
|
509
|
|
|
|
397
|
|
Research and development credit
|
|
|
648
|
|
|
|
648
|
|
Stock compensation
|
|
|
335
|
|
|
|
285
|
|
Other
|
|
|
280
|
|
|
|
326
|
|
Gross deferred tax asset
|
|
|
13,660
|
|
|
|
13,194
|
|
Less valuation allowance
|
|
|
(7,668
|
)
|
|
|
(6,652
|
)
|
Total deferred tax asset
|
|
$
|
5,992
|
|
|
$
|
6,542
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Goodwill and intangible assets
|
|
|
(368
|
)
|
|
|
(757
|
)
|
Fixed assets
|
|
|
(300
|
)
|
|
|
(275
|
)
|
Total deferred tax liability
|
|
$
|
(668
|
)
|
|
$
|
(1,032
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
5,324
|
|
|
$
|
5,510
|
|
The
Company has domestic federal and state net operating loss carryforwards as of December 31, 2020 of approximately $16.3 million
and $42.4 million, respectively, which begin to expire in 2029. $600,000 of the federal net operating loss carryforward
and $1.6 million of state net operating loss carryforward has no expiration. The Company also has foreign net operating loss carryforwards
at December 31, 2020 of approximately $15.7 million for German trade tax purposes, which has no expiration.
Realization
of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate
tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization
of net operating losses. The Company’s valuation allowances of $7.7 million and $6.7 million at December 31, 2020 and 2019,
respectively, are associated with the Company’s foreign net operating loss carryforward from an inactive foreign entity,
state net operating loss carryforward and a state research and development credit. The amount of deferred tax assets considered
realizable is subject to adjustment in future periods if estimates of future taxable income are changed. As of December 31, 2020,
management believes that it is more likely than not that the Company will fully realize the benefits of its deferred tax assets
associated with its domestic federal net operating loss carryforward.
The
Company does not have any significant unrecognized tax positions and does not anticipate a significant increase or decrease in
unrecognized tax positions within the next twelve months.
The
Company has elected to record taxes related to the global intangible low-taxed income as a period cost.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
NOTE
13 - COMMITMENTS AND CONTINGENCIES
Warranties
The
Company typically provides one to three year warranties on all of its products covering both parts and labor. The Company, at
its option, repairs or replaces products that are defective during the warranty period if the proper preventive maintenance procedures
have been followed by its customers.
Legal
Proceeding
As
previously disclosed, on June 5, 2019, L3Harris Corporation (“Harris”) filed a request for arbitration before the
American Arbitration Association in accordance with the terms of an executed purchase order, statement of work and software license
agreement (collectively referred to as “Agreements”) with CommAgility entered into in 2014. Harris claimed that CommAgility
breached the Agreements by offering for sale, marketing, and promoting techniques, capabilities, products and services that incorporate
Work Product, as defined in the Agreements, owned by Harris. In its arbitration demand, Harris claimed that CommAgility caused
Harris significant monetary damages, the sum of which could not be determined until such time as discovery has been conducted
but was estimated by Harris to be less than $250,000. Harris did not include a request for monetary damages in its Statement of
Claim, which was filed with the arbitration panel on May 22, 2020. On December 10, 2020, Harris released CommAgility from any
and all claims that Harris may have had against CommAgility related to the Agreements before arbitration proceedings began. In
2020, the Company incurred approximately $50,000 in legal expense related to this matter. The remainder of legal expenses incurred
in 2019 and 2020 related to this matter were covered under our professional indemnity insurance policy.
Risks
and Uncertainties
The
Company has been and continues to be unable to accurately predict the full impact that the COVID-19 Pandemic will have on our
results of operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and
severity of the pandemic and containment measures, the nature and length of actions taken by governments, businesses and individuals
to contain or mitigate its impact, the severity and duration of the economic impact caused by the pandemic, the uncertainty surrounding
possible treatments and rollout of vaccines, along with the effectiveness of our response. Our compliance with containment and
mitigation measures has impacted our day-to-day operations and is expected to continue to disrupt our business and operations,
as well as that of our key customers, suppliers (including contract manufacturers) and other counterparties, at least through
the third quarter of 2021.
Proprietary
information and know-how are important to the Company’s commercial success. There can be no assurance that others will not
either develop independently the same or similar information or obtain and use proprietary information of the Company. Certain
key employees have signed confidentiality and non-compete agreements regarding the Company’s proprietary information.
The
Company believes that its products do not infringe the proprietary rights of third parties. There can be no assurance, however,
that third parties will not assert infringement claims in the future.
The
Company’s deferred tax asset is recorded at tax rates expected to be in existence when those assets are utilized. Should
the tax rates change materially in the future the amount of deferred tax asset could be materially impacted.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
NOTE
15 – SUBSEQUENT EVENTS
Second
Amendment to Holzworth Share Purchase Agreement
On
February 19, 2021, the Company entered into the Second Amendment with Holzworth and Sellers. The Second Amendment, among other
things, converted the second deferred purchase price of $750,000 into unsecured seller notes with interest at an annual rate of
6.5% starting from April 1, 2021 until final payment. The payment date has been changed from March 31, 2021 to three equal installments
of $250,000, plus accrued interest, due on July 1, 2021, October 1, 2021 and January 1, 2022.
Additionally,
the parties amended the payment dates of the earnout consideration. The payment date of the first earnout payment based on the
financial results of the calendar year ended 2020 (“Year 1 Earnout”) has been amended from March 31, 2021 to (i) six
(6) equal quarterly installments of 10% of the Year 1 Earnout payable on the last business day of each calendar quarter between
June 30, 2021 and September 30, 2022 and (ii) one (1) installment payment equal to 40% of the Year 1 Earnout on December 31, 2022.
The Year 1 Earnout is payable in cash or shares of the Company’s common stock based on the 90 trading day volume weighted
average price immediately preceding final determination of the Year 1 Earnout or $2.19 per share. The estimated payment for the
Year 1 Earnout is $3.4 million which is recorded in accrued expenses and other current liabilities in the Consolidated Balance
Sheet as of December 31, 2020.
The
parties also amended the provisions with respect to restrictions on transfer to adjust for the change in timing of earnout payments,
as described above. Finally, the parties added a requirement that any earned but unpaid earnout consideration will be accelerated
in the event the Company desires to enter into a material asset or equity acquisition in the future.
Second
Amendment to Muzinich Credit Agreement and Limited Waiver
On
February 25, 2021, the Company, its subsidiaries and Muzinich entered into Amendment 2, in which Muzinich agreed to waive the
Company’s obligation to comply with the consolidated leverage ratio and fixed charge coverage ratio financial covenants
in the Term Loan Facility for the fiscal quarter ending December 31, 2020. We were not in compliance with such covenants primarily
as a result of the impact the COVID-19 pandemic had on our consolidated financial results. Amendment 2, among other things, amended
the definition of consolidated EBITDA to include certain cash tax benefits related to our UK tax jurisdiction and reduced our
consolidated leverage ratio for the twelve month periods ended September 30, 2021 from 3.00 to 2.75, December 31, 2021 from 2.75
to 2.25, March 31, 2022 from 2.50 to 2.00 and June 30, 2022 from 2.25 to 2.00. Additionally, the interest rate margin was increased
from 7.25% to 9.25% effective January 1, 2021 and will step down to 8.50% and 7.25% upon the Company achieving consolidated EBITDA
on a trailing twelve-month basis of $4.0 million and $6.3 million, respectively. Muzinich and the Company also agreed on an excess
cash flow payment of $428,000 and Muzinich provided consent for the Company to enter into the aforementioned notes with the Holzworth
Sellers in the amount of $750,000, as described above.
Amendment
No. 7 to the Loan and Security Agreement with Bank of America, N.A.
On
February 25, 2021, the Company, its subsidiaries and Bank of America entered into Amendment No. 7 which revised the Credit Facility
to accommodate the changes to the deferred purchase price payments to and notes with the Holzworth sellers as described above
and provided Bank of America’s consent to the Company entering into the Muzinich Second Amendment, as described above.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Wireless
Telecom Group, Inc.
NOTE
16– SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The
following is a summary of selected quarterly financial data from operations (in thousands, except per share amounts).
2020
|
|
Quarter
|
|
|
|
1st
|
|
|
2nd
|
|
|
3rd
|
|
|
4th
|
|
Net revenues
|
|
$
|
9,429
|
|
|
$
|
11,108
|
|
|
$
|
10,868
|
|
|
$
|
10,343
|
|
Gross profit
|
|
|
4,428
|
|
|
|
5,668
|
|
|
|
5,654
|
|
|
|
5,218
|
|
Operating income/(loss)
|
|
|
(1,354
|
)
|
|
|
(59
|
)
|
|
|
(348
|
)
|
|
|
(6,336
|
)
|
Net income/(loss)
|
|
|
(1,147
|
)
|
|
|
(668
|
)
|
|
|
(775
|
)
|
|
|
(5,498
|
)
|
Diluted earnings/(loss) per share
|
|
$
|
(0.05
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
Quarter
|
|
|
|
|
1st
|
|
|
|
2nd
|
|
|
|
3rd
|
|
|
|
4th
|
|
Net revenues
|
|
$
|
13,032
|
|
|
$
|
13,508
|
|
|
$
|
10,812
|
|
|
$
|
11,569
|
|
Gross profit
|
|
|
5,727
|
|
|
|
6,133
|
|
|
|
4,825
|
|
|
|
5,604
|
|
Operating income/(loss)
|
|
|
(398
|
)
|
|
|
146
|
|
|
|
(677
|
)
|
|
|
(550
|
)
|
Net income/(loss)
|
|
|
(345
|
)
|
|
|
157
|
|
|
|
(460
|
)
|
|
|
235
|
|
Diluted earnings/(loss) per share
|
|
$
|
(0.02
|
)
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.01
|
|
NOTE:
The quarterly amounts above may not add to the full year Consolidated Statements of Operations and Comprehensive
Income/(Loss) due to rounding