UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

(Mark One)

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

OR

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                                        to                                       

 

Commission file number

1-11916

 

 

 

WIRELESS TELECOM GROUP, INC.

(Exact name of registrant as specified in its charter)

 

New Jersey   22-2582295
(State or Other Jurisdiction   (I.R.S. Employer
of Incorporation or Organization)   Identification No.)
25 Eastmans Road
Parsippany, New Jersey
  07054
(Address of Principal Executive Offices)   (Zip Code)

 

(973) 386-9696

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x Emerging growth
company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

Number of shares of Common Stock outstanding as of July 26, 2017: 22,381,874

 

WIRELESS TELECOM GROUP, INC.
Table of Contents

 

Item 1 – Financial Statements 3
   
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7
   
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 25
   
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 32
   
ITEM 4 – CONTROLS AND PROCEDURES 32
   
PART II – OTHER INFORMATION 33
   
Item 1. LEGAL PROCEEDINGS 33
   
Item 1A. RISK FACTORS 33
   
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 33
   
Item 3. DEFAULTS UPON SENIOR SECURITIES 33
   
Item 5. OTHER INFORMATION 33
   
Item 6. EXHIBITS 33
   
SIGNATURES 35
2

PART 1 – FINANCIAL INFORMTION
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

 

Item 1 – Financial Statements

 

    June 30     December 31,  
Assets   2017     2016  
    (unaudited)        
CURRENT ASSETS                
Cash & cash equivalents   $ 2,814,839     $ 9,350,803  
Accounts receivable - net of reserves of $6,892 and $10,740, respectively     6,866,188       5,183,869  
Inventories - net of reserves of $2,572,851 and $1,549,089, respectively     7,326,706       8,452,751  
Prepaid expenses and other current assets     2,563,984       866,035  
TOTAL CURRENT ASSETS     19,571,717       23,853,458  
                 
PROPERTY PLANT AND EQUIPMENT - NET     2,410,918       2,166,566  
                 
OTHER ASSETS                
Goodwill     8,879,991       1,351,392  
Acquired Intangible Assets, net     9,351,256       -  
Deferred income taxes     8,895,791       7,403,600  
Other long term assets     784,826       660,119  
TOTAL OTHER ASSETS     27,911,864       9,415,111  
                 
TOTAL ASSETS     49,894,499       35,435,135  
Liabilities and Shareholders’ Equity                
CURRENT LIABILITIES                
Short term debt   $ 1,674,426       -  
Accounts payable     3,414,665       2,986,797  
Accrued expenses and other current liabilities     4,739,720       673,067  
Deferred Revenue     385,731       -  
                 
TOTAL CURRENT LIABILITIES     10,214,542       3,659,864  
                 
LONG TERM LIABILITIES                
Long term debt     570,000       -  
Other long term liabilities     1,516,916       69,058  
Deferred Tax Liability     1,590,150       -  
TOTAL LONG TERM LIABILITIES     3,677,067       69,058  
                 
COMMITMENTS AND CONTINGENCIES                
                 
SHAREHOLDERS’ EQUITY                
Preferred stock, $.01 par value, 2,000,000 shares authorized, none issued     -       -  
Common stock, $.01 par value, 75,000,000 shares authorized, 33,416,752 and 29,786,224 shares issued, 22,381,874 and 18,751,346 shares outstanding     334,167       297,862  
Additional paid in capital     46,846,617       40,563,002  
Retained earnings     9,069,252       11,668,829  
Treasury stock at cost, - 11,034,878 and 11,034,878 shares, respectively     (20,823,480 )     (20,823,480 )
Accumulated Other Comprehensive Income     576,334       -  
                 
TOTAL SHAREHOLDERS’ EQUITY     36,002,890       31,706,213  
               
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 49,894,499     $ 35,435,135  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
(unaudited)

 

    Three Months Ended     Year to Date Ended  
    June 30     June 30  
             
    2017     2016     2017     2016  
NET REVENUES   $ 11,933,174     $ 7,610,104     $ 21,481,932     $ 13,978,519  
                                 
COST OF REVENUES     8,589,013       4,271,214       13,805,262       7,919,515  
                                 
GROSS PROFIT     3,344,161       3,338,890       7,676,670       6,059,004  
                                 
Operating Expenses                                
Research and development     1,129,809       1,029,941       2,216,723       2,094,262  
Sales and marketing     1,662,652       1,236,081       3,214,738       2,487,257  
General and administrative     2,820,816       1,426,256       6,233,307       2,751,524  
Total Operating Expenses     5,613,277       3,692,278       11,664,768       7,333,043  
                                 
Other income/(expense)     (1,674 )     (9,913 )     (3,220 )     (51,517 )
Interest Expense     (109,627 )     (353 )     (158,846 )     (353 )
                                 
Income/(Loss) Before Taxes     (2,380,417 )     (363,653 )     (4,150,164 )     (1,325,909 )
                                 
Tax Provision/(Benefit)     (1,012,286 )     (145,461 )     (1,550,587 )     (531,389 )
                                 
Net (Loss)/Income   $ (1,368,131 )   $ (218,192 )   $ (2,599,577 )   $ (794,520 )
                                 
Other Comprehensive Income/(Loss):                                
Foreign currency translation adjustments     635,242       -       576,334       -  
Comprehensive (Loss)   $ (732,889 )   $ (218,192 )   $ (2,023,243 )   $ (794,520 )
                                 
Net (Loss)/Income Per Common Share:                                
Basic   $ (0.07 )   $ (0.01 )   $ (0.13 )   $ (0.04 )
Diluted   $ (0.07 )   $ (0.01 )   $ (0.13 )   $ (0.04 )
                                 
Weighted Average Shares Outstanding:                                
Basic     19,765,101       18,622,116       19,577,271       18,614,350  
Diluted     19,765,101       18,622,116       19,577,271       18,614,350  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

WIRELESS TELECOM GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

    For the Six Months  
    Ended June 30,  
    2017     2016  
             
CASH FLOWS PROVIDED/USED BY OPERATING ACTIVITIES                
Net income (loss)   $ (2,599,577 )   $ (794,520 )
Adjustments to reconcile net income (loss) to net cash provided/(used) by operating activities:                
Depreciation and amortization     1,059,355       232,696  
Amortization of debt issuance fees     28,758       -  
Share-based compenation expense     283,872       197,238  
Deferred rent     13,215       19,302  
Deferred income taxes     (1,492,191 )     (531,389 )
Provision for doubtful accounts     (3,848 )     (38,646 )
Inventory reserves     1,278,036       121,369  
Changes in assets and liabilities:                
Accounts receivable     657,526       798,730  
Inventories     1,005,156       (719,034 )
Prepaid expenses and other assets     84,385       84,203  
Accounts payable     (771,055 )     302,650  
Accrued expenses and other current liabilities     944,532       (137,824 )
Net cash provided/(used) by operating activities     488,164       (465,225 )
CASH FLOWS (USED) BY INVESTING ACTIVITIES                
Capital expenditures     (318,074 )     (502,023 )
Proceeds from asset disposal     7,397       -  
Acquisition of business net of cash acquired     (8,842,122 )     -  
Net cash (used by) investing activities     (9,152,799 )     (502,023 )
                 
CASH FLOWS PROVIDED/(USED) BY FINANCING ACTIVITIES                
Revolver borrowings     15,794,004       -  
Revolver repayments     (14,271,578 )     -  
Term loan borrowings     760,000       -  
Term loan repayments     (38,000 )     -  
Debt issuance fees     (215,358 )     -  
Proceeds from exercise of stock options     37,500       -  
Repayments of equipment lease payable     -       (79,180 )
Repurchase of common stock - 42,995 shares     -       (65,468 )
Net cash provided/(used by) financing activities     2,066,568       (144,648 )
Effect of exchange rate changes on cash and cash equivalents     62,103       -  
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     (6,535,964 )     (1,111,893 )
                 
Cash and cash equivalents, at beginning of period     9,350,803       9,726,007  
                 
CASH AND CASH EQUIVALENTS, AT END OF PERIOD   $ 2,814,839     $ 8,614,114  
                 
SUPPLEMENTAL INFORMATION:                
Cash paid during the period for interest   $ 73,184     $ -  
Cash paid during the period for income taxes   $ 38,780     $ 35,938  
                 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Capital expenditures   $ -     $ (41,904 )
Equipment lease payable   $ -     $ 41,904  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited)

 

          Common                 Other           Total  
    Common     Stock     Additional Paid     Retained     Comprehensive           Shareholders’  
    Stock Issued     Amount     In Capital     Earnings     Income     Treasury Stock     Equity  
                                                         
Balances at December 31, 2016     29,786,224     $ 297,862     $ 40,563,002     $ 11,668,829       -       ($20,823,480 )   $ 31,706,213  
Net Income (loss)                             (2,599,577 )                     (2,599,577 )
Issuance of shares in connection with stock options exercised     50,000       500       37,000                               37,500  
Issuance of shares in connection with CommAgility acquisition     3,487,528       34,875       5,963,673                               5,998,548  
Issuance of restricted stock     150,000       1,500       (1,500 )                                
Forfeiture of Restricted Stock     (57,000 )     (570 )     570                                  
Share-based compensation expense                     283,872                               283,872  
Cumulative translation adjustment                                     576,334               576,334  
Balances at June 30, 2017     33,416,752     $ 334,167     $ 46,846,617     $ 9,069,252       $576,334       ($20,823,480 )   $ 36,002,890  

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES

 

Basis of Presentation

 

The condensed consolidated balance sheet as of June 30, 2017, the condensed consolidated statements of operations and comprehensive (loss) for the three and six months ended June 30, 2017 and 2016 and the condensed consolidated statements of cash flows and shareholders’ equity for the six months ended June 30, 2017 have been prepared by the Company (as defined below) without audit. The condensed 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, Wireless Telecommunications Ltd. and CommAgility Limited (“CommAgility”) which are collectively referred to herein as, the “Company”. All intercompany transactions and balances have been eliminated in consolidation.

 

Interim Financial Statements

 

In the opinion of management, the accompanying condensed consolidated financial statements referred to above contain all necessary adjustments, consisting of normal accruals and recurring entries, which are necessary to fairly present the Company’s results for the interim periods being presented.

 

The accounting policies followed by the Company are set forth in Note 1 to the Company’s financial statements included in its annual report on Form 10-K for the year ended December 31, 2016. Specific reference is made to that report since certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States of America (US GAAP) have been condensed or omitted from this report.

 

The results of operations for the three and six month periods ended June 30, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.

 

Use of Estimates

 

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including inventory valuation, accounts receivable valuation, valuation of deferred tax assets, intangible assets, estimated fair values of stock options and vesting periods of performance-based stock options and restricted stock and estimated fair values of acquired assets and liabilities in business combinations) and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of net revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Concentration Risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.

 

The Company generally has limited concentration of credit risk in accounts receivable due to the large number of entities comprising the Company’s customer base and their dispersion across many different industries and geographies. 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. Credit evaluation is performed independent of the Company’s sales team to ensure segregation of duties.

7

WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

For the three and six months ended June 30, 2017, one customer accounted for approximately 16% and 11% of the Company’s consolidated revenues, respectively. For the three and six months ended June 30, 2016, one customer accounted for approximately 12% and 11%, respectively, of the Company’s consolidated revenues. At June 30, 2017 one customer represented 19% of the Company’s gross accounts receivable. At December 31, 2016, one customer represented 16% of the Company’s gross accounts receivable balance.

 

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

 

The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities. The Company’s term loan and revolving credit facility bear interest at a variable interest rate plus an applicable margin and, therefore, carrying amount approximates fair value.

 

Contingent Consideration

 

Under the terms of the CommAgility Share Purchase Agreement the Company may be required to pay additional purchase price if certain financial targets are achieved for the years ending December 31, 2017 and December 31, 2018 (“CommAgility Earn-Out”). As of the acquisition date, the Company estimated the fair value of the contingent consideration to be $1,509,000 (see Note 3) and the Company is required to reassess the fair value of the contingent consideration at each reporting period.

 

The significant inputs used in this fair value estimate include gross revenues and Adjusted EBITDA, as defined, scenarios for the earn-out periods for which probabilities are assigned to each scenario to arrive at a single estimated outcome (Level 3). The estimated outcome is then discounted based on the individual risk analysis of the liability. Although the Company believes its estimates and assumptions are reasonable, different assumptions, including those regarding the operating results of CommAgility, or changes in the future may result in different estimated amounts.

 

The contingent consideration is included in accrued expense and other current liabilities and other long term liabilities in the accompanying condensed consolidated balance sheets. The Company will satisfy this obligation with a cash payment to the sellers of CommAgility upon the achievement of the respective milestone discussed above.

8

WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

Revenue Recognition

 

Revenue from product shipments, including shipping and handling fees, is recognized once delivery has occurred, provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectability is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Revenues from international distributors are recognized in the same manner. If title does not pass until the product reaches the customer’s delivery site, then revenue recognition is deferred until that time. There are no formal sales incentives offered to any of the Company’s customers. Volume discounts may be offered from time to time to customers purchasing large quantities on a per transaction basis.

 

Standalone sales of software or software-related items are recognized in accordance with the software revenue recognition guidance. For multiple deliverable arrangements that only include software items, the Company generally uses the residual method to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered items equals the total arrangement consideration, less the fair value of the undelivered items. Where vendor-specific objective evidence of fair value for the undelivered items cannot be determined, the Company generally defers revenue until all items are delivered and services have been performed, or until such evidence of fair value can be determined for the undelivered items.

 

Software arrangements that require significant customization or modification of software are accounted for under percentage of completion accounting. The Company uses the input method to measure progress for arrangements accounted for under percentage of completion accounting.

 

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 Condensed Consolidated Statements of Shareholders’ Equity. Gains and losses resulting from foreign currency transactions, which are denominated in currencies other than the Company’s functional currency, are included in the Condensed Consolidated Statements of Operations and Comprehensive (Loss).

 

Other Comprehensive Income (Loss)

 

Other comprehensive income (loss) is recorded directly to a separate section of shareholders’ equity in accumulated other comprehensive income and primarily includes unrealized gains and losses excluded from the Consolidated Statements of Operations. These unrealized gains and losses consist of changes in foreign currency translation.

 

Intangible and Long-lived Assets

 

Intangible assets include patents, non-competition agreements and customer relationships and are amortized using the straight-line method over the estimated economic lives of the assets, which range from five to seven 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

9

WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

determine the estimated useful lives could change due to numerous factors including product demand, market conditions, technological developments, economic conditions and competition.

 

Goodwill

 

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill is evaluated for impairment annually by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. After assessing the totality of events or circumstances, if we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform additional quantitative tests to determine the magnitude of any impairment.

 

Subsequent Events

 

Management has evaluated subsequent events and determined that there were no subsequent events or transactions requiring recognition or disclosure in the condensed consolidated financial statements through the date the financial statements were issued.

 

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

 

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, and early adoption is permitted. The Company early adopted this standard as of January 1, 2017.

 

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations: Clarifying the Definition of a Business (“ASU 2017-01”). ASU 2017-01 clarifies the definition of a business for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this ASU is not expected to have a material impact on our consolidated financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments , to address some questions about the presentation and classification of certain cash receipts and payments in the statement of cash flows. The update addresses eight specific issues, including contingent consideration payments made after a business combination, distribution received from equity method investees and the classification of cash receipts and payments that have aspects of more than one class of cash flows. This standard will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of the adoption of ASU 2016-15 on its consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases , which creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease primarily will depend on its classification as a finance or operating lease. The guidance also requires new disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with early application permitted. The new standard is to be applied using a modified

10

WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

retrospective approach. The Company is in the process of evaluating the impact of ASU 2016-02 on its consolidated financial statements.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which defers the effective date by one year, with early adoption on the original effective date permitted. As a result, ASU 2014-09 will be effective for annual and interim periods beginning after December 15, 2017. The Company is in the process of evaluating the impact of this ASU on its consolidated financial statements.

 

The Company does not believe there are any other recently issued, but not yet effective accounting pronouncements, if adopted, that would have a material effect on the accompanying consolidated financial statements.

 

NOTE 3 – ACQUISITION

 

On February 17, 2017, Wireless Telecommunications, Ltd. (the “Acquisition Subsidiary”), a company incorporated in England and Wales which is a wholly owned subsidiary of Wireless Telecom Group, Inc., completed the acquisition of all of the issued shares in CommAgility Limited, (“CommAgility”) a company incorporated in England and Wales (the “Acquisition”) from CommAgility’s founders. The Acquisition was completed pursuant to the terms of a Share Purchase Agreement, dated February 17, 2017, and entered into by and among the Company, the Acquisition Subsidiary and the founders. The Company paid $11,317,500 in cash on acquisition date and issued 3,487,528 shares of newly issued common stock (“Consideration Shares”) with an acquisition date fair value of $5,998,548. The Company financed the cash portion of the transaction with proceeds from a term loan totaling $760,000, proceeds from an asset based revolver totaling $1,098,000 and cash on hand of $9,459,500. Refer to Note 8 for additional details regarding the financing arrangement entered into in connection with this transaction. In addition to the acquisition date cash purchase price the sellers are to be paid an additional £2,000,000 (approximately $2,500,000 at acquisition date) in the form of deferred purchase price payable beginning in March 2017 through January 2019 and are due an additional purchase price adjustment based on working capital and cash levels delivered to the buyer as of February 17, 2017 (“Completion Cash Adjustment”). Lastly, the sellers may earn up to an additional £10,000,000 (approximately $12,500,000 at the acquisition date) payment if certain financial targets are achieved by CommAgility during calendar years 2017 and 2018.

 

Pursuant to the Share Purchase Agreement, 2,092,516 of the Consideration Shares are subject to forfeiture and return to the Company if (a) 2017 Adjusted EBITDA, as defined, generated by CommAgility is less than £2,400,000; or (b) 2018 Adjusted EBITDA, as defined, generated by CommAgility is less than £2,400,000 (in each case as determined by an audit of CommAgility conducted by the accountants of the Acquisition Subsidiary in accordance with the terms of the Share Purchase Agreement). As of acquisition date the Company recorded a contingent asset of $1,619,607 based on a probability factor that the 2,092,516 of Consideration Shares will be forfeited. This contingent asset is included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet as of June 30, 2017.

 

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 as well as contingent consideration, where applicable, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities

11

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations and comprehensive (loss).

 

The Company incurred $17,434 and $1,289,517 of acquisition-related costs during the three months and six months ended June 30, 2017, respectively, which is included as part of general and administrative expense in the accompanying condensed consolidated statements of operations and comprehensive (loss) . Since the acquisition date of February 17, 2017, CommAgility contributed $3,000,216 and $3,996,992 of net sales to the Company for the three and six months ended June 30, 2017, respectively.

 

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. The estimated fair values are expected to change as the Company completes is valuation analyses and purchase price allocation. Management is responsible for these internal and third-party valuations and appraisals and is continuing to review the amounts and allocations. The following table summarizes the preliminary allocation of the purchase consideration to the estimated fair value of assets acquired and liabilities assumed at the date of acquisition:

 

    Amounts
Recognized as of
Acquisition Date
    Measurement Period
Adjustments
    Amounts
Recognized as of
Acquisition Date
(as adjusted)
 
Cash at close     $11,317,500               $11,317,500  
Equity issued at close     5,998,548               5,998,548  
Completion Cash Adjustment     1,382,288               1,382,288  
Deferred Purchase Price     2,515,000               2,515,000  
Contingent Consideration     2,700,353       (1,191,353 )     1,509,000  
                         
Total Purchase Price     23,913,689       (1,191,353 )     22,722,336  
                         
Cash     4,566,510               4,566,510  
Accounts Receivable     2,267,124               2,267,124  
Inventory     1,125,532               1,125,532  
Intangible Assets     9,657,600               9,657,600  
Contingent Asset             1,619,607       1,619,607  
Other Assets     167,650               167,650  
Fixed Assets     303,904               303,904  
Accounts Payable     (1,171,846 )             (1,171,846 )
Accrued Expenses     (417,213 )             (417,213 )
Deferred Revenue     (638,671 )             (638,671 )
Deferred Tax Liability     (1,701,586 )     95,366       (1,606,220 )
Other Long Term Liabilities     (339,096 )             (339,096 )
                         
Net Assets Acquired     13,819,908               15,534,881  
                         
Goodwill     $10,093,781               $  7,187,455  
12

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

Goodwill is calculated as the excess of consideration paid over the net assets acquired and represents synergies, organic growth and other benefits that are expected to arise from integrating CommAgility into our operations. None of the goodwill recorded in this transaction is expected to be tax deductible.

 

The following table summarizes the activity related to contingent consideration and deferred purchase price for the three and six months ended June 30, 2017:

 

    Contingent Consideration     Deferred Purchase Price  
Balance at Beginning of Period   $ -     $ -  
Fair Value At Acquisition Date     2,700,353       2,515,000  
Accretion of Interest     21,916          
Payment             (419,166 )
Foreign Currency Translation     (8,521 )     (6,834 )
Balance as of March 31, 2017   $ 2,713,748     $ 2,089,000  
                 
Accretion of Interest     46,287          
Payment             (325,000 )
Measurement Period Adjustment     (1,191,353 )        
Foreign Currency Translation     101,617       77,667  
Balance as of June 30, 2017   $ 1,670,299     $ 1,841,667  

 

As of June 30, 2017, $1,040,000 of contingent consideration and $1,408,333 of deferred purchase price is included in accrued expenses and other current liabilities on the condensed consolidated balance sheet. As of June 30, 2017, $630,299 of contingent consideration and $433,334 of deferred purchase price is included in other long term liabilities on the condensed consolidated balance sheet.

 

Pro Forma Information (Unaudited)

 

The following unaudited pro forma information presents the Company’s operations as if the CommAgility acquisition and related financing activities had occurred on January 1, 2016. The pro forma information includes the following adjustments (i) amortization of acquired definite-lived intangible assets; (ii) interest expense incurred in connection with the New Credit Facility (described in further detail in Note 8) used to finance the acquisition of CommAgility; and (iii) inclusion of acquisition-related expenses in the earliest period presented. The pro forma combined statements of operations are not necessarily indicative of the results of operations as they would have been had the transaction been effected on the assumed date and are not intended to be a projection of future results.

 

Pro-forma results for the three months ended June 30, 2016 are presented below:

 

(Unaudited)   2016  
Net Revenues   10,277,273  
Net (loss)   $ (198,089 )
Basic net (loss) per share   $ (0.01 )
Diluted net (loss) per share   $ (0.01 )
13

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

Pro-forma results for the six months ended June 30, 2016 and 2017 are presented below:

 

(Unaudited)   2017     2016  
Net Revenues   $ 22,855,776     $ 19,452,462  
Net (loss)   $ (1,852,342 )   $ (1,812,036 )
Basic net (loss) per share   $ (0.09 )   $ (0.09 )
Diluted net (loss) per share   $ (0.09 )   $ (0.09 )

 

NOTE 4 – INCOME TAXES

 

The Company records deferred taxes in accordance with Accounting Standards Codification (“ASC”) 740, “ Accounting for Income Taxes .” ASC 740 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 assets and determines the necessity for a valuation allowance.

 

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 amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.

 

The effective rate of income tax benefit of 37% for the six months ended June 30, 2017 was higher than the statutory rate of 34% primarily due to research and development deductions, state tax benefits related to net operating losses offset by nondeductible expenses and a lower rate in the United Kingdom.

 

NOTE 5 - INCOME (LOSS) PER COMMON SHARE

 

Basic earnings (loss) per share is calculated by dividing 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 are calculated by using the weighted average number of shares of common stock outstanding and, when dilutive, potential shares from stock options, contingent shares and restricted shares, using the treasury stock method.

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
Weighted average common shares outstanding     19,765,101       18,622,116       19,577,271       18,614,350  
Potentially dilutive shares                        
Weighted average common shares outstanding, assuming dilution     19,765,101       18,622,116       19,577,271       18,614,350  

 

Common stock options are included in the diluted earnings (loss) per share calculation when the various option exercise prices are less than their relative average market price during the periods presented in

14

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

this quarterly report. The weighted average number of shares not included in diluted earnings (loss) per share, because the effects are anti-dilutive, was 2,921,500 and 352,073 for the three-months ended June 30, 2017 and 2016, respectively. For the six months ended June 30, 2017 and 2016, the weighted average number of shares not included in diluted earnings (loss) per share was 2,476,598 and 425,601, respectively.

 

NOTE 6 – INVENTORIES

 

Inventory carrying value is net of inventory reserves of $2,572,851 and $1,549,089 at June 30, 2017 and December 31, 2016, respectively.

 

Inventories consist of:

 

      June 30,
2017
    December 31,
2016
 
  Raw materials     $ 2,954,106       $ 3,558,430  
  Work-in-process       689,408         531,210  
  Finished goods       3,683,192         4,363,111  
        $ 7,326,706       $ 8,452,751  

 

During the three month period ended June 30, 2017 the Company recorded inventory adjustments totaling $1,930,000, comprised of an increase to the Company’s excess and obsolescence reserve of $1,121,000 and the write off of gross inventory of $809,000. The charge was effected as a result of a review of inventory balances and net realizable value of the inventory following the launch of the Company’s lean manufacturing initiative and the adoption of a strategic product plan focused on product lifecycle acceleration.

 

NOTE 7 – GOODWILL AND INTANGIBLE ASSETS

 

The Company’s goodwill balance of $8,879,991 at June 30, 2017 relates to two of the Company’s reporting units, Microlab ($1,351,392) and Embedded Solutions ($7,528,599). Management’s qualitative assessment performed in the fourth quarter of 2016 did not indicate any impairment of Microlab’s goodwill as its fair value was estimated to be in excess of its carrying value. Furthermore, no events have occurred since then that would change this assessment. The Embedded Solutions reporting unit was acquired on February 17, 2017 (see Note 3). No events have occurred since the acquisition date that would indicate any impairment of Embedded Solutions goodwill.

 

Goodwill consists of the following:

 

    June 30, 2017
Beginning Balance   $ 1,351,392  
CommAgility Acquisition     10,093,781  
Measurement Period Adjustment     (2,906,326 )
Foreign Currency Translation     341,144  
Ending Balance   $ 8,879,991  

 

15

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

Intangible assets consist of the following:

 

    Gross Carrying
Amount
    Accumulated
Amortization
    Foreign
Exchange
Translation
    Net Carrying
Amount
 
Customer Relationships     $7,419,250       ($400,240 )     $239,246       $7,258,256  
Patents     1,320,375       (99,682 )     41,932       1,262,625  
Non-Compete Agreements     917,975       (115,504 )     27,904       830,375  
Total     $9,657,600       ($615,426 )     $309,082       $9,351,256  

 

Amortization of acquired intangible assets was $414,781 and $615,426 for the three and six months ended June 30, 2017. Amortization of acquired intangible assets is included as part of general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive (loss).

 

The estimated future amortization expense related to intangible assets is as follows as of June 30, 2017:

 

Remainder of 2017       $  842,524  
2018       1,685,048  
2019       1,685,048  
2020       1,408,255  
2021       1,368,714  
Thereafter       2,361,667  
           
Total       $9,351,256  

 

NOTE 8 – DEBT

 

Debt consists of the following:

 

    June 30
2017
 
Revolver at LIBOR Plus Margin     $1,522,426  
Term Loan at LIBOR Plus Margin     722,000  
Total Debt     2,244,426  
         
Debt Maturing within one year     (1,674,426 )
Non-current portion of long term debt     $   570,000  

 

16

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

In connection with the acquisition of CommAgility, the Company entered into a Credit Agreement with Bank of America, N.A. (the “Lender”) on February 16, 2017 (the “New 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 New Credit Facility) of up to a maximum availability of $9,000,000 (“Revolver Commitment Amount”). The borrowing base is calculated as 85% of Eligible accounts receivable and inventory, as defined, subject to certain caps and limits. The borrowing base is calculated on a monthly basis. The proceeds of the term loan and revolver were used to finance the acquisition of CommAgility.

 

In connection with the issuance of the New Credit Facility, the Company paid lender and legal fees of $215,358 which were primarily related to the Revolver and are capitalized and presented as other current and non-current assets in the condensed consolidated balance sheets. These costs are recognized as additional interest expense over the term of the related debt instrument using the straight line method.

 

The Company must repay the Term Loan in installments of $38,000 per quarter due on the first day of each fiscal quarter beginning April 1, 2017 and continuing until the term loan maturity date, on which the remaining balance is due in a final installment. The future principal payments under the term loan are $76,000 for the remainder of 2017, $152,000 in 2018 and $494,000 in 2019. The Term Loan and Revolver are both scheduled to mature on November 16, 2019.

 

The Term and Revolving Loans bear interest at the LIBOR rate plus a margin. The margin on the outstanding balance of the Company’s Term Loans and Revolving Loans is 3.50% and 3.00% per annum, respectively, at June 30, 2017 and will continue at these rates until September 30, 2017. Thereafter, the margins shall be subject to increase or decrease by Lender on the first day of each of the Borrowers’ fiscal quarters based upon the Fixed Charge Coverage Ratio as of the most recently ended fiscal quarter falling into three levels. If the Company’s Fixed Coverage Leverage Ratio (as defined in the New Credit Facility) is greater than or equal to ratio 1.25 to 1.00, a margin of 3.25% and 2.75%, respectively, is added to LIBOR rate with a step up to 3.50% and 3.00%, respectively, if the ratio is greater than or equal 1.00 to 1.00 but less than 1.25 to 1.00 and another step up to 3.75% and 3.25%, respectively, if the ratio is less than 1.00 to 1.00. The Company is also required to pay a commitment fee on the unused commitments under the Revolver at a rate equal to 0.50% per annum and an early termination fee of (a) 2% of the Revolver Commitment Amount and Term Loan if termination occurs before the first anniversary of the New Credit Facility or (b) 1% of the Revolver Commitment Amount and Term Loan if termination occurs after the first anniversary of the New Credit Facility but before the second anniversary of the New Credit Facility.

 

The New Credit Facility is secured by liens on substantially all of the Company’s and its domestic subsidiaries’ assets including a pledge of 66 2/3% of the equity interests in the Company’s Foreign Subsidiaries (as defined in the New Credit Facility). The New Credit 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. Events of default under the New Credit Facility include but are not limited to: failure to pay obligations when due, breach or failure of any covenant, insolvency or bankruptcy, materially misleading representations or warranties, occurrence of a Change in Control (as defined) or occurrence of conditions that have a Material Adverse Effect (as defined).

 

On August 3, 2017 the Company entered into Amendment No. 1 to the New Credit Facility, effective June 30, 2017, which amended the definition of EBITDA to exclude the non-cash inventory adjustment of $1,930,000 recorded during the three months ended June 30, 2017 and to reduce the pledge of equity interests in the Company’s Foreign Subsidiaries from 66 2/3% to 66 1/3%. Accordingly, as of June 30, 2017, and the date hereof, the Company is in compliance with the covenants of the New Credit Facility.

17

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

NOTE 9 - ACCOUNTING FOR SHARE BASED COMPENSATION

 

The Company follows the provisions of ASC 718, “ Share-Based Payment. ” The Company’s results for the three month period ended June 30, 2017 includes a credit of $17,517 related to share-based compensation expense due to forfeitures during the quarter. The Company’s results for the six month period ended June 30, 2017 include share-based compensation expense totaling $283,872. Results for the three and six month period ended June 30, 2016 include share-based compensation expense totaling $98,619 and $197,238, respectively. Such amounts have been included in the Condensed Consolidated Statements of Operations within operating expenses.

 

For the three months ended June 30, 2017 the Company reversed $324,922 and $52,117 in stock compensation expense for stock options and restricted shares, respectively, that were forfeited as a result of employees exiting the Company. The total amounts forfeited during the quarter were 87,000 restricted shares and 655,000 stock options. The result on total share-based compensation expense for the quarter is net credit to expense in the amount of $17,517. The Company had assumed a zero forfeiture rate in prior periods.

 

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 restricted stock awards, 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 2,000,000 shares of common stock, plus those shares still available under the Company’s prior incentive compensation plan. In June 2014, the Company’s shareholders approved the Amended and Restated 2012 Incentive Compensation Plan (the “2012 Plan”) allowing for an additional 1,658,045 shares of the Company’s common stock to be available for future grants under the 2012 Plan. As of June 30, 2017, there were 26,000 shares available for issuance under the 2012 Plan, including those shares available under the Company’s prior incentive compensation plan as of such date.

 

All service-based 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 agreed to, and 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 at prices equal to or above the fair market value on the date of the grant.

 

The following summarizes the components of share-based compensation expense by equity type for the three and six months ended June 30:

18

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

    Three Months Ended  
    June 30,  
    2017     2016  
Service - based Restricted Common Stock     $87,685       $55,500  
Performance-based Stock Options     (216,138 )     28,650  
Service -based Stock Options     152,346       9,116  
Performance-based Restricted Common Stock     (41,410 )     5,353  
      ($17,517 )     $98,619  

 

    Six Months Ended  
    June 30,  
    2017     2016  
Service - based Restricted Common Stock     $144,433       $111,000  
Performance-based Stock Options     (157,497 )     57,300  
Service -based Stock Options     332,993       18,232  
Performance-based Restricted Common Stock     (36,057 )     10,706  
      $283,872       $197,238  

 

As of June 30, 2017, $1,125,722 of unrecognized compensation costs related to unvested stock options is expected to be recognized over a remaining weighted average period of 3.3 years and $250,780 of unrecognized compensation costs related to unvested restricted shares is expected to be recognized over a remaining weighted average period of 1.3 years.

 

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 June 30, 2017, and changes during the six months ended June 30, 2017, are presented below:

 

Non-vested Restricted Shares   Number of Shares   Weighted Average
Grant Date Fair Value
Non-vested at January 1, 2017     244,291           $1.52  
Granted     150,000       $1.65  
Forfeited     (87,000 )     $1.77  
Vested     (121,042 )     $1.40  
Non-vested at June 30, 2017     186,249       $1.66  

 

Performance-Based Stock Option Awards:

 

A summary of performance-based stock option activity, and related information for the six months ended June 30, 2017 follows:

19

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

    Options     Weighted Average
Exercise Price
 
Outstanding, January 1, 2017     2,165,000                         $1.32  
Granted     -       -  
Exercised     (50,000 )                   $0.75  
Forfeited     (540,000 )     $1.77  
Expired     -       -  
Outstanding, June 30, 2017     1,575,000         $1.18  
                 
Options exercisable:                
June 30, 2017     1,040,000       $0.95  

 

The aggregate intrinsic value of performance-based stock options outstanding (regardless of whether or not such options are exercisable) as of June 30, 2017 was $721,000 and the weighted average remaining contractual life was 3.9 years. The aggregate intrinsic value of performance-based stock options exercisable as of June 30, 2017 was $673,000 and the weighted average remaining contractual life was 2.0 years. The intrinsic value of options exercised during the six months ended June 30, 2017 was $36,550.

 

Under the terms of the performance-based stock option agreements, the awards will fully vest and become exercisable on the date on which the Company’s Board of Directors shall have determined that specific financial performance milestones have been met, provided the employee remains in the employ of the Company at such time; provided, however, upon a Change in Control (as defined in the stock option agreements and the 2012 Plan), the stock options shall automatically vest as permitted by the 2012 Plan. As of June 30, 2017, the Company has determined that the performance conditions are probable of being achieved by the year ending 2020. The Company’s performance-based stock options granted prior to 2013 (consisting of 1,040,000 options) are fully amortized.

 

Service-Based Stock Option Awards:

 

A summary of service-based stock option activity and related information for the six months ended June 30, 2017 follows:

 

    Options     Weighted Average
Exercise Price
 
Outstanding, January 1, 2017     1,198,000       $1.51  
Granted     845,000                      1.68  
Exercised     -       -  
Forfeited     (115,000 )     1.45  
Expired     (3,000 )     2.40  
Outstanding, June 30, 2017     1,925,000                         $1.59  
                 
Options exercisable:                
June 30, 2017     290,000       $1.80  

 

The aggregate intrinsic value of service-based stock options (regardless of whether or not such options are exercisable) as of June 30, 2017 was $212,250 and the weighted average remaining contractual life was 9.0 years. The aggregate intrinsic value of service-based stock options exercisable as of June 30, 2017 was $56,700 and the weighted average remaining contractual life was 6.5 years.

 

The following table presents the assumptions used to estimate the fair value of stock option awards granted during the six months ended June 30, 2016:

20

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

  Option Term
(in years)
Exercise
Price
Risk Free
Interest Rate
Expected
Volatility
Fair Value at
Grant Date
Expected
Dividend
Yield
Expected
Forfeiture
Rate
1/2/17 Grant 4 $1.91 1.94% 77.78% $1.11 0 0
1/12/17 Grant 4 1.92 1.87% 77.88% 1.11 0 0
2/17 17 Grant 4 1.72 1.92% 72.01% 0.94 0 0
               
5/22/17 Grant 4 1.38 1.80% 68.93% 0.73 0 0
6/5/17 Grant 1 1.65 1.74% 69.02% 0.46 0 0
6/5/17 Grant 4 1.65 1.74% 69.02% 0.87 0 0
6/15/17 Grant 4 1.60 1.76% 69.09% 0.84 0 0

 

NOTE 10 – SEGMENT INFORMATION

 

The operating businesses of the Company are segregated into three reportable segments: (i) network solutions, (ii) test and measurement and (iii) embedded solutions. The network solutions segment is comprised primarily of the operations of Wireless Telecom Group Inc.’s subsidiary, Microlab. The test and measurement segment is comprised primarily of the Company’s operations of the Noisecom product line and the operations of its subsidiary, Boonton. The embedded solutions segment is comprised of the operations of CommAgility Limited which was acquired on February 17, 2017.

 

The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. The Company allocates resources and evaluates the performance of segments based on income or loss from operations, excluding interest, corporate expenses and other income (expenses).

 

Financial information by reportable segment is set forth below:

 

    Three Months Ended June 30,   Six Months Ended June 30,
    2017   2016   2017   2016
Net revenues by segment:                                
Network solutions   $ 5,617,263     $ 5,476,421     $ 11,132,564     $ 9,689,734  
Test and measurement     3,315,695       2,133,683       6,352,376       4,288,785  
Embedded solutions     3,000,216       -       3,996,992       -  
Consolidated net revenues of reportable segments     11,933,174       7,610,104       21,481,932       13,978,519  
                                 
Segment income (loss):                                
Network solutions     (329,899)     1,044,335       578,322       1,384,261  
Test and measurement     (541,338)     (366,652)     (516,132)     (679,099)
Embedded solutions     75,327       -       (154,146)     -  
Income (loss) from reportable segments   $ (795,910)   $ 677,683     $ (91,956)   $ 705,162  
                                 
Other unallocated amounts:                                
Corporate expenses     (1,473,206)     (1,031,071)     (3,896,142)     (1,979,201)
Other (expenses) income - net     (111,301)     (10,266)     (162,066)     (51,870)
Consolidated income (loss) before                     -       -  
Income tax provision (benefit)   $ (2,380,417)   $ (363,653)   $ (4,150,164)   $ (1,325,909)
21

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

    Three Months Ended June 30,   Six Months Ended June 30,
    2017   2016   2017   2016
Depreciation and amortization by segment:                                
Network solutions     103,628       57,957       204,992       113,704  
Test and measurement     95,247       58,881       188,634       118,992  
Embedded solutions     446,359       -       665,729       -  
Total depreciation and amortization for reportable segments   $ 645,234     $ 116,838     $ 1,059,355     $ 232,696  
                                 
Capital expenditures by segment:                                
Network solutions     58,580       228,149       142,539       283,379  
Test and measurement     40,691       199,400       106,830       218,644  
Embedded solutions     26,728       -       68,705       -  
Total consolidated capital expenditures by reportable segment   $ 125,998     $ 427,549     $ 318,074     $ 502,023  
                                 
      2017       2016                  
Total assets by segment:                                
Network solutions   $ 9,167,082     $ 10,594,770                  
Test and measurement     6,733,907       7,851,479                  
Embedded solutions     22,057,874       -                  
Total assets for reportable segments   $ 37,958,863     $ 18,446,249                  
                                 
Corporate assets, principally cash and cash equivalents and deferred income taxes   $ 11,935,636     $ 16,988,886                  
Total consolidated assets   $ 49,894,499     $ 35,435,135                  
22

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

Consolidated net sales by region were as follows:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2017     2016     2017     2016  
Sales by region                                
Americas   $ 8,294,953     $ 5,802,032     $ 15,259,706     $ 10,867,668  
Europe, Middle East, Africa (EMEA)     3,235,077       1,493,030       5,202,116       2,441,387  
Asia Pacific (APAC)     403,144       315,042       1,020,110       669,464  
Total Sales   $ 11,933,174     $ 7,610,104     $ 21,481,932     $ 13,978,519  

 

Net sales 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 three-months ended June 30, 2017 and 2016, revenues in the United States for all reportable segments amounted to $7,965,566 and $5,611,283, respectively. For the six-months ended June 30, 2017 and 2016, revenues in the United States for all reportable segments amounted to $14,430,391 and $10,383,454, respectively.

 

Shipments to the EMEA region for all reportable segments were largely concentrated in the UK, Germany and Israel. For the three-months ended June 30, 2017 shipments to the UK, Germany and Israel amounted to $2,183,460, $288,782 and $118,322, respectively. For the three-months ended June 30, 2016 shipments were largely concentrated in Israel and Germany amounting to $340,750 and $236,005, respectively. For the six-months ended June 30, 2017 shipments to the UK, Germany and Israel amounted to $2,784,356, $543,792 and $367,744, respectively. For the six-months ended June 30, 2016, shipments to Israel and Germany amounted to $373,177 and $472,405, respectively.

 

The largest concentration of shipments in the APAC region is to China. For the three-month period ending June 30, 2017 and 2016, shipments to China amounted to $159,789 and $233,999, respectively. For the six-month period ending June 30, 2017 and 2016 shipments to China amounted to $608,847 and $421,169, respectively.

 

NOTE 11 – COMMITMENTS AND CONTINGENCIES

 

Warranties:

 

The Company typically provides one-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. Historically, the Company’s warranty expense has been minimal.

 

Leases:

 

In May 2015, the Company and its landlord entered into an amendment to the existing lease agreement to provide for the Company to remain at its principal corporate headquarters in Hanover Township, Parsippany, New Jersey through March 31, 2023. Monthly lease payments range from approximately $33,000 in year one to approximately $41,000 in year eight. Additionally, the Company had available an allowance of approximately $300,000 towards alterations and improvements to the premises, which expired on January 31, 2017. The Company used substantially all of the improvement allowance prior to its expiration. The lease can be renewed at the Company’s option for one five-year period at fair market value to be determined at term expiration.

 

The following is a summary of the Company’s contractual obligations as of June 30, 2017:

23

WIRELESS TELECOM GROUP, INC.

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

 

    Payments by Period
          Remainder                    
    Total     2017     2018-2019     2020-2021     Thereafter  
Facility Leases   $ 2,791,517     $ 242,813     $ 1,003,356     $ 934,184     $ 611,164  
Purchase Obligations     2,966,875       2,966,875       -       -       -  
Operating and Equipment Leases     252,157       27,017       108,067       108,067       9,006  
    $ 6,010,549     $ 3,236,705     $ 1,111,423     $ 1,042,251     $ 620,169  

 

Risks and Uncertainties:

 

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.

24

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion of our financial condition and results of operations should be read in conjunction with our interim condensed consolidated financial statements and the notes to those statements included in Part I, Item I of this Quarterly Report on Form 10-Q and in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2016.

 

INTRODUCTION

 

The Company develops, manufactures and markets a wide variety of radio frequency and microwave noise sources, electronic testing and measuring instruments including power meters, voltmeters and modulation meters and passive components for wireless radio frequency conditioning. Additionally, the Company is a supplier of signal processing technology for network validation systems, supporting LTE/4G and emerging 5G networks. The majority of the Company’s products are primarily used by its customers in relation to commercial infrastructure development in support of the expansion and upgrade to distributed antenna systems, deployment of small cell technology and private LTE networks. In addition, the Company’s products are used to test the performance and capability of cellular/PCS and satellite communication systems and to measure the power of radio frequency and microwave systems. Other applications include radio, radar, wireless local area network and digital television.

 

Highlights from the Second Quarter:

 

· Net revenues of $11,933,174 and $21,481,932 for the three and six months ended June 30, 2017, a year over year increase of 56.8% and 53.7%, respectively.

 

· Net loss of $1,368,131 and $2,599,577 for the three and six months ended June 30, 2017 representing an increase in net loss of $514,698 and $1,228,723, respectively.

 

o Net loss negatively impacted by $1,930,000 non-cash inventory impairment charge during the three months ended June 30, 2017.

 

· New customer orders of $12,110,000 for the three months ended June 30, 2017 representing a year over year increase of $3,083,000 or 34.1%

 

· June 30, 2017 order backlog of $6,970,000 representing a year over year increase of $3,316,000 or 90.7%

 

RESULTS OF OPERATIONS

 

Three Months Ended June 30, 2017 Compared with Three Months Ended June 30, 2016

 

Net Revenues

 

    Three months ended June 30,
    Revenue     % of Rev   Change
    2017     2016     2017   2016   Amount     Pct.
Network solutions   $ 5,617,263     $ 5,476,421       47.1 %     72.0 %   $ 140,842       2.6 %
Test and measurement     3,315,695       2,133,683       27.8 %     28.0 %     1,182,012       55.4 %
Embedded solutions     3,000,216       -       25.1 %     0.0 %     3,000,216       -  
Total net revenues   $ 11,933,174     $ 7,610,104       100.0 %     100.0 %   $ 4,323,070       56.8 %

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Net consolidated revenues for the three months ended June 30, 2017 were $11,933,174 as compared to $7,610,104 for the three months ended June 30, 2016, an increase of $4,323,070 or 56.8%. The primary driver for the year over year increase is the inclusion of the Embedded solutions segment which was acquired on February 17, 2017 and contributed $3,000,216 in revenue for the period.

 

Net revenues from the Company’s Network solutions products for the three months ended June 30, 2017 were up modestly. Net revenues from Network solutions products accounted for 47.1% and 72.0% of net consolidated revenues for the three months ended June 30, 2017 and 2016, respectively. The increase in revenues in this segment was primarily due to increased demand for the Company’s passive radio frequency components and subassemblies, largely as a result of increased capital spending by domestic wireless carriers and tower operators.

 

Net revenues from the Company’s Test and measurement products for the three months ended June 30, 2017 were up significantly over the prior year period. Net revenues from Test and measurement products accounted for 27.8% and 28.0% of net consolidated revenues for the three months ended June 30, 2017 and 2016, respectively. The increase in revenues was primarily due to an increase in military and government spending as compared to the corresponding period in the prior year.

 

Gross Profit

 

    Three months ended June 30,
    Gross Profit     Gross Margin   Change
    2017     2016     2017   2016   Amount     Pct.
Network solutions   $ 1,182,027     $ 2,503,137       21.0 %     45.7 %     (1,321,110 )     -52.8 %
Test and measurement     832,129       835,753       25.1 %     39.2 %     (3,623 )     -0.4 %
Embedded solutions     1,330,005       -       44.3 %     0.0 %     1,330,005       -  
Total gross profit   $ 3,344,161     $ 3,338,890       28.0 %     43.9 %     5,271       0.2 %

 

Consolidated gross profit for the three months ended June 30, 2017 was negatively impacted by a non-cash inventory adjustment of $1,930,000. The adjustment was effected as a result of a review of inventory balances and net realizable value of the inventory following the launch of the Company’s lean manufacturing initiative and the adoption of product lifecycle acceleration. The lean manufacturing program focuses on inventory reductions, the minimization of product redesign for alternate use, and the acceleration of the evaluation process of slow moving inventory for product redesign and repurpose.  This, combined with the need to focus manufacturing, operations and engineering efforts on the increasing current order flow, dictated the significant write down at the end of the quarter. The inventory adjustments negatively impacted the Network solutions segment gross margin by $1,206,266 and the Test and measurement segment gross margin by $723,734. The impact of the inventory adjustment was offset by the gross profit of the Embedded solutions segment which contributed $1,330,005 to the overall gross profit increase from the same period last year.

 

Operating Expenses

 

Consolidated operating expenses for the three months ended June 30, 2017 were $5,613,277 or 47.0% of consolidated net revenues as compared to $3,692,278 or 48.5% of consolidated net revenues for the three months ended June 30, 2016. For the three months ended June 30, 2017 as compared to the prior year, consolidated operating expenses increased by $1,920,999 or 52.0%. Consolidated operating expenses were higher in the three months ended June 30, 2017 due to the inclusion of $1,254,678 of expenses associated with the Embedded solutions segment which was acquired on February 17, 2017 and included $414,781 of amortization expense related to purchased intangibles. Additionally, operating expenses increased from the same period in the prior year due to severance and legal charges of $470,273 associated with two restructuring actions during the three months ended June 30, 2017 and increased commission expense of $181,783 due to higher revenues.

26

Interest Expense

 

Interest expense increased $109,274 related to our new credit facility, amortization of capitalized debt issuance costs and accretion of the contingent consideration liability.

 

Taxes

 

For the three months ended June 30, 2017, the Company recorded a tax benefit of $1,012,286 due primarily to losses generated from the Company’s operations. For the three months ended June 30, 2016, the Company recorded a tax benefit of $145,461 primarily due to losses generated from the Company’s operations during the period.

 

Net Loss

 

For the three months ended June 30, 2017, the Company realized a net loss of $1,368,131 or $.07 loss per share on a basic and diluted basis, as compared to a net loss of $218,192 or $.01 loss per share on a basic and diluted basis for the three months ended June 30, 2016, a decrease of $1,149,939 or $.06 per diluted share. The decrease was due to the factors discussed above.

 

Six Months Ended June 30, 2017 Compared with Six Months Ended June 30, 2016

 

Net Revenues

 

    Six months ended June 30,
    Revenue     % of Rev   Change
    2017     2016     2017   2016   Amount     Pct.
Network solutions   $ 11,132,564     $ 9,689,735       51.8 %     69.3 %   $ 1,442,829       14.9 %
Test and measurement     6,352,376       4,288,784       29.6 %     30.7 %     2,063,592       48.1 %
Embedded solutions     3,996,992       -       18.6 %     0.0 %     3,996,992       -  
Total net revenues   $ 21,481,932     $ 13,978,519       100.0 %     100.0 %   $ 7,503,413       53.7 %

 

Net consolidated revenues for the six months ended June 30, 2017 were $21,481,932 as compared to $13,978,519 for the six months ended June 30, 2016, an increase of $7,503,413 or 53.7%. The primary driver for the year over year increase is the inclusion of the Embedded solutions segment which was acquired on February 17, 2017 and contributed $3,996,992 in revenue for the period.

 

Net revenues from the Company’s Network solutions products were up significantly over the prior year period. Net revenues from Network solutions products accounted for 51.8% and 69.3% of net consolidated revenues for the six months ended June 30, 2017 and 2016, respectively. The increase in revenues was primarily due to increased demand for the Company’s passive radio frequency components and subassemblies, largely as a result of increased capital spending by domestic wireless carriers and tower operators.

 

Net revenues from the Company’s Test and measurement products were up significantly over the prior year period. Net revenues from Test and measurement products accounted for 29.6% and 30.7% of net consolidated revenues for the six months ended June 30, 2017 and 2016, respectively. The increase in revenues was primarily due to an increase in military and government spending as compared to the corresponding period in the prior year.

27

Gross Profit

 

    Six months ended June 30,
    Gross Profit     Gross Margin   Change
    2017     2016     2017   2016   Amount     Pct.
Network solutions   $ 3,642,509     $ 4,286,127       32.7 %     44.2 %     (643,618 )     -15.0 %
Test and measurement     2,166,337       1,772,877       34.1 %     41.3 %     393,460       22.2 %
Embedded solutions     1,867,826       -       46.7 %     0.0 %     1,867,826       -  
Total gross profit   $ 7,676,670     $ 6,059,004       35.7 %     43.3 %     1,617,666       26.7 %

 

The Company’s gross profit on consolidated net revenues for the six months ended June 30, 2017 was negatively impacted by a non cash inventory adjustment of $1,930,000. The adjustment was effected as a result of a review of inventory balances and net realizable value of the inventory following the launch of the Company’s lean manufacturing initiative and the adoption of product lifecycle acceleration.  The lean manufacturing program focuses on inventory reductions, the minimization of product redesign for alternate use, and the acceleration of the evaluation process of slow moving inventory for product redesign and repurpose.  This, combined with the need to focus manufacturing, operations and engineering efforts on the increasing current order flow, dictated the significant write down at the end of the quarter. The inventory adjustments negatively impacted the Network solutions segment gross margin by $1,206,266 and the Test and measurement segment gross margin by $723,734. The impact of the inventory adjustment was offset by the gross profit of the Embedded Solutions segment which contributed $1,867,826 to the overall gross profit increase from the same period last year.

 

Operating Expenses

 

Consolidated operating expenses for the six months ended June 30, 2017 were $11,664,768 or 54.3% of consolidated net revenues as compared to $7,333,043 or 52.5% of consolidated net revenues for the six months ended June 30, 2016. For the six months ended June 30, 2017 as compared to the prior year, consolidated operating expenses increased by $4,331,724 or 59.1%. Consolidated operating expenses were higher in the six months ended June 30, 2017 due to the inclusion of $2,021,970 of expenses associated with the Embedded solutions segment which was acquired on February 17, 2017 and included $615,426 of amortization expense related to purchased intangibles. Additionally, operating expenses increased from the same period in the prior year due to $1,289,517 of expenses related to the CommAgility acquisition consisting primarily of professional fees, severance and legal charges of $470,273 associated with two restructuring actions during the three months ended June 30, 2017, increased commission expenses of $375,263 due to higher revenues and higher salaries and benefits due to increased headcount.

 

Other Expenses

 

Other expenses decreased $48,297 as the Company incurred $38,000 in the six months ended June 30, 2016 related to ground water remediation efforts. Interest expense increased $158,493 related to our new credit facility, amortization of capitalized debt issuance costs and accretion of the contingent consideration liability.

 

Tax

 

For the six months ended June 30, 2017, the Company recorded a tax benefit of $1,550,587 due primarily to losses generated from the Company’s operations. For the six months ended June 30, 2016, the Company recorded a tax benefit of $531,389 primarily due to losses generated from the Company’s operations during the period.

28

Net Loss

 

For the three months ended June 30, 2017, the Company realized a net loss of $2,599,577 or $.13 loss per share on a basic and diluted basis, as compared to a net loss of $794,520 or $.04 loss per share on a basic and diluted basis for the three months ended June 30, 2016, a decrease of $1,805,057 or $.09 per diluted share. The decrease was due to the factors discussed above.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We expect our existing cash balance, cash generated by operations and borrowings available under our new credit facility (as described in Note 8 to the financial statements) to be our primary sources of short-term liquidity, and we believe these sources will be sufficient to meet our liquidity needs for at least the next twelve months. Our ability to meet our cash requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

 

Operating Activities

 

Cash provided by operating activities was $488,164 for the six months ended June 30, 2017 as compared to cash used by operating activities of $465,225 for the six months ended June 30, 2016. During the six months ended June 30, 2017 changes in our operating assets and liabilities resulted in a net increase in cash of $1,920,544 primarily due to cash provided from accounts receivable and higher accrued expenses and other liabilities. During the six months ended June 30, 2016, changes in our operating assets and liabilities resulted in a net increase in cash of $328,728 primarily due to cash provided by accounts receivable and an increase in accounts payable. These increases were offset by cash used for inventory.

 

Investing Activities

 

Cash used by investing activities was $9,152,799 for the six months ended June 30, 2017 and was primarily comprised of cash used for the CommAgility acquisition of $8,842,122, net of cash acquired and capital expenditures of $318,074. For the six months ended June 30, 2016 cash used by investing activities was $502,023 and was related to capital expenditures.

 

Financing Activities

 

Cash provided by financing activities was $2,066,568 for the six months ended June 30, 2017 as compared to cash used of $144,648 for the six months ended June 30, 2016. During the six months ended June 30, 2017 the Company received net proceeds of $1,522,426 from the asset based revolver and received $760,000 from the term loan. Principal repayments of the term loan during the six months ended June 30, 2017 were $38,000. Additionally, the Company paid $215,358 in debt issuance costs associated with the new credit facility. During the six months ended June 30, 2016 the Company paid $79,180 related to a capital equipment lease and $65,468 related to the repurchase of common stock.

 

As noted in Note 8 to the financial statements, on February 16, 2017 the Company entered into a Credit Agreement which provided for a term loan in the aggregate principal amount of $760,000 and an asset based revolving loan (the “Revolver”), which is subject to a Borrowing Base Calculation (as defined in the New Credit Facility) of up to a maximum availability of $9,000,000. The proceeds of the term loan and revolver were used to finance the acquisition of CommAgility. As of June 30, 2017, $1,522,426 was outstanding on the asset based revolver. At June 30, 2017 the Company has excess availability under the Revolver of $3,198,163.

 

On August 3, 2017 the Company entered into Amendment No. 1 to the New Credit Facility, effective June 30, 2017, which amended the definition of EBITDA to exclude the non-cash inventory adjustment of $1,930,000 recorded during the three months ended June 30, 2017 and to reduce the pledge of equity interests in the Company’s Foreign Subsidiaries from 66 2/3% to 66 1/3%. Accordingly, as of June 30, 2017, and the date hereof, the Company is in compliance with the covenants of the New Credit Facility.

29

As of June 30, 2017, future minimum lease payments related to the Company’s facility lease and equipment leases are shown below:

 

    Payments by Period
          Remainder                    
    Total     2017     2018-2019     2020-2021     Thereafter  
Facility Leases   $ 2,791,517     $ 242,813     $ 1,003,356     $ 934,184     $ 611,164  
Purchase Obligations     2,966,875       2,966,875       -       -       -  
Operating and Equipment Leases     252,157       27,017       108,067       108,067       9,006  
    $ 6,010,549     $ 3,236,705     $ 1,111,423     $ 1,042,251     $ 620,169  

 

The Company may pursue strategic opportunities, including potential acquisitions, mergers, divestitures or other activities, which may require significant use of the Company’s capital resources. The Company may incur costs as a result of such activities and such activities may affect the Company’s liquidity in future periods. In order to fund such activities the Company may need to incur additional debt or issue additional securities if market conditions are favorable. However, there can be no certainty that such funding will be available in needed quantities or terms favorable to the Company.

 

The Company believes that its financial resources from working capital and availability under the asset based revolver are adequate to meet its current needs. The Company expects the cash flow of CommAgility to fund the deferred purchase price and contingent consideration liabilities. However, should current global economic conditions deteriorate, additional working capital funding may be required which may be difficult to obtain due to restrictive credit markets.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company does not have any off-balance sheet arrangements.

 

INFLATION AND SEASONALITY

 

The Company does not anticipate that inflation will significantly impact its business or its results of operations nor does it believe that its business is seasonal.

 

Critical Accounting Policies

 

There have been no change in our critical accounting policies or significant accounting estimates as disclosed in our 2016 Form 10-K, except as disclosed below:

 

Revenue Recognition

 

Revenue from product shipments, including shipping and handling fees, is recognized once delivery has occurred, provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectability is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Revenues from international distributors are recognized in the same manner. If title does not pass until the product reaches the customer’s delivery site, then revenue recognition is deferred until that time. There are no formal sales incentives offered to any of the Company’s customers. Volume discounts may be offered from time to time to customers purchasing large quantities on a per transaction basis.

 

Standalone sales of software or software-related items are recognized in accordance with the software revenue recognition guidance. For multiple deliverable arrangements that only include software items, the Company generally uses the residual method to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered items equals the total

30

arrangement consideration, less the fair value of the undelivered items. Where vendor-specific objective evidence of fair value for the undelivered items cannot be determined, the Company generally defers revenue until all items are delivered and services have been performed, or until such evidence of fair value can be determined for the undelivered items.

 

Software arrangements that require significant customization or modification of software are accounted for under percentage of completion accounting. The Company uses the input method to measure of progress for arrangements accounted for under percentage of completion accounting.

 

Valuation of Goodwill

 

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination. Goodwill is evaluated for impairment annually by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. After assessing the totality of events or circumstances, if we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform additional quantitative tests to determine the magnitude of any impairment.

 

Intangible and Long-lived Assets

 

Intangible assets include patents and customer relationships and are amortized using the straight-line method over the estimated economic lives of the assets, which range from five to seven 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.

 

FORWARD LOOKING STATEMENTS

 

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as “believes,” “expects,” “intends,” “plans,” “may,” “will,” “should,” “anticipates” or “continues” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These statements are based on the Company’s current expectations of future events and are subject to a number of risks and uncertainties that may cause the Company’s actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the ability of our management to successfully implement our business plan and strategy, product demand and development of competitive technologies in our market sector, the impact of competitive products and pricing, the loss of any significant customers, our abilities to protect our property rights, the effects of adoption of newly announced accounting standards, the effects of economic conditions and trade, legal and other economic risks, among others. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. These risks and uncertainties are disclosed including in our Annual Report on Form 10-K for the year ended December 31, 2016. The Company’s forward-looking statements speak only as of the date of this Quarterly Report. The Company undertakes no obligation to publicly update or review any forward-looking statements whether as a result of new information, future developments or otherwise.

31

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

 

ITEM 4 – CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Our disclosure controls and procedures are designed to ensure that the information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that the information relating to Wireless Telecom Group, Inc., including our consolidated subsidiaries, is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of the period covered by this report, our disclosure controls and procedures are effective.

 

(b) Changes in Internal Control over Financial Reporting

 

We acquired CommAgility on February 17, 2017. We have begun the process to integrate the operations of CommAgility into our overall system of internal control over financial reporting.

 

There were no other changes in our internal control over financial reporting during the three or six months ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as described in our 2016 Annual Report on Form 10-K.

32

PART II – OTHER INFORMATION

 

Item 1. LEGAL PROCEEDINGS
  There have been no material developments in the legal proceedings described in Item 3 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.
   
Item 1A. RISK FACTORS
  There have been no material changes in our risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.
   
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  None.
   
Item 3. DEFAULTS UPON SENIOR SECURITIES
  None.
   
Item 4. MINE SAFETY DISCLOSURES
  Not applicable.
   
Item 5. OTHER INFORMATION
  None.
   
Item 6. EXHIBITS

 

Exhibit No. Description

 

3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to our Annual Report on Form 10-K/A filed with the SEC on April 22, 2005 , Commission File No. 1-11916 )

 

3.2 Amended and Restated By-laws (incorporated herein by reference to Exhibit 3.1 to Wireless Telecom Group, Inc.’s Current Report on Form 8-K, filed on July 1, 2016, Commission File No. 011-11916)

 

10.1 Share Purchase Agreement, dated February 17, 2017, by and among Wireless Telecom Group, Inc., Edward De Salis Young, Paul Moakes, Simon Pack and Martin Hollinshead (incorporated herein by reference to Exhibit 10.2 to Wireless Telecom Group Inc.’s Current Report on Form 8-K, filed on February 21, 2017, Commission File No. 001-11916)

 

10.2 Registration Rights Agreement, dated February 17, 2017, by and among Wireless Telecom Group, Inc., Edward De Salis Young, Paul Moakes, Simon Pack and Martin Hollinshead (incorporated herein by reference to Exhibit 10.2 to Wireless Telecom Group Inc.’s Current Report on Form 8-K, filed on February 21, 2017, Commission File No. 001-11916)

 

10.3 Lock Up Agreement, dated February 17, 2017, by and among Wireless Telecom Group, Inc., Edward De Salis Young, Paul Moakes, Simon Pack and Martin Hollinshead (incorporated herein by reference to Exhibit 10.3 to Wireless Telecom Group Inc.’s Current Report on Form 8-K, filed on February 21, 2017, Commission File No. 001-11916)

 

10.4 Voting Agreement, dated February 17, 2017, by and among Wireless Telecom Group, Inc., Edward De Salis Young, Paul Moakes, Simon Pack and Martin Hollinshead (incorporated herein by reference to Exhibit 10.4 to Wireless Telecom Group Inc.’s Current Report on Form 8-K, filed on February 21, 2017, Commission File No. 001-11916)

 

10.5 Loan and Security Agreement, dated February 16, 2017, Wireless Telecom Group, Inc. Boonton Electronics Corporation, Microlab/FXR and Bank of America, N.A. (incorporated herein by reference to Exhibit 10.5 to Wireless Telecom Group Inc.’s Current Report on Form 8-K, filed on February 21, 2017, Commission File No. 001-11916)
33
10.6 Amendment No. 1 to the Loan and Security Agreement by and among Wireless Telecom Group, Inc., Boonton Electronic Corporation, Microlab/FXR and Bank of America, N.A. dated August 3, 2017.

 

10.7* Separation Agreement and General Release by and between Wireless Telecom Group, Inc. and Paul Steven Genova dated May 22, 2017.

 

10.8* Amendment to the Executive Employment Agreement by and between Wireless Telecom Group Inc. and Timothy Whelan executed on June 9, 2017.

 

31.1 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer)

 

31.2 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer)

 

32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer)

 

32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer)

 

101** The following financial statements from Wireless Telecom Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, filed on May 15, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations and comprehensive (loss), (iii) condensed consolidated statements of cash flows, (iv) condensed consolidated statement of shareholders’ equity, and (v) the notes to interim condensed consolidated financial statements.

 

101.INS** XBRL INSTANCE DOCUMENT

 

101.SCH** XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

 

101.CAL** XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT

 

101.DEF** XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT

 

101.LAB** XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT

 

101.PRE** XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

 

* Denotes a management contract or compensatory plan or arrangement.

** Furnished herewith.

34

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    WIRELESS TELECOM GROUP, INC.
    (Registrant)
     
  Date:  August 9, 2017 /s/ Timothy Whelan  
    Timothy Whelan
  Chief Executive Officer
     
  Date:  August 9, 2017 /s/ Michael Kandell  
    Michael Kandell
    Chief Financial Officer
35

EXHIBIT INDEX

 

Exhibit No. Description

 

10.6 Amendment No. 1 to the Loan and Security Agreement by and among Wireless Telecom Group, Inc., Boonton Electronic Corporation, Microlab/FXR and Bank of America, N.A. dated August 3, 2017.

 

10.7* Separation Agreement and General Release by and between Wireless Telecom Group, Inc. and Paul Steven Genova dated May 22, 2017.

 

10.8* Amendment to the Executive Employment Agreement by and between Wireless Telecom Group Inc. and Timothy Whelan executed on June 9, 2017.

 

31.1 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer)

 

31.2 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer)

 

32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Executive Officer)

 

32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Financial Officer)

 

101** The following financial statements from Wireless Telecom Group, Inc.’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2017, filed on August 9, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) condensed consolidated balance sheets, (ii) condensed consolidated statements of operations and comprehensive (loss), (iii) condensed consolidated statements of cash flows, (iv) condensed consolidated statement of shareholders’ equity, and (v) the notes to interim condensed consolidated financial statements.

 

 

 

101.INS** XBRL INSTANCE DOCUMENT

 

101.SCH** XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT

 

101.CAL** XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT

 

101.DEF** XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT

 

101.LAB** XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT

 

101.PRE** XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT

 

*Denotes a management contract or compensatory plan or arrangement.

** Furnished herewith.

36

Exhibit 10.6

 

AMENDMENT NO. 1 TO LOAN AGREEMENT

 

This AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT (this “ Amendment No. 1 ”) is entered into as of June 30, 2017, by and among Wireless Telecom Group, Inc. , a New Jersey corporation (“ WTG ”), BOONTON ELECTRONIC CORPORATION , a New Jersey corporation, (“ Boonton ”), MICROLAB/FXR , a New Jersey corporation (“Microlab” and, together with WTG and Boonton, each a “ Borrower ” and collectively, the “ Borrowers ”) and Bank of America, N.A. (the “ Lender ”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement.

 

RECITALS

 

WHEREAS, reference is made to that certain Loan and Security Agreement, dated as of February 16, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), by and among Borrowers and Lender; and

 

WHEREAS, upon the Borrowers’ request, Lender has agreed, subject to the terms and conditions set forth herein, to amend a certain provision of the Loan Agreement, as more fully described herein.

 

NOW, THEREFORE, in consideration of the foregoing, the terms, covenants and conditions contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

Section 1            Confirmation by Borrowers of Obligations . Borrowers hereby acknowledge, confirm and agree that, as of June 30, 2017, Borrowers are indebted to the Lender for Revolver Loans in the aggregate outstanding principal amount of $1,522,426, the Term Loan in the aggregate outstanding principal amount of $722,000 and Letters of Credit in the aggregate outstanding face amount of $0, together with interest accrued and accruing thereon. The foregoing amounts do not include other fees, expenses and other amounts which are chargeable or otherwise reimbursable under the Loan Agreement. Borrowers do not have any rights of offset, defenses, claims or counterclaims with respect to any of the Obligations.

 

Section 2            Amendment to Loan Agreement .

 

(a)                 The definition of EBITDA appearing in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

EBITDA : shall mean for any period with respect to Borrowers and their Domestic Subsidiaries on a consolidated basis, the sum of (without duplication): (a) net income (or loss) for such period; plus (b) all interest expense for such period; plus (c) all charges against income for such period for federal, state and local taxes; plus (d) depreciation expenses for such period; plus (e) amortization expenses for such period; plus (f) non-cash foreign exchange translations; plus (g) expenses incurred in connection with the Target Acquisition and the closing of this Agreement,

 

to the extent expensed for the Fiscal Quarter ended March 31, 2017, up to $1,300,000; plus (h) as a one-time accommodation to Borrowers, integration expenses incurred in connection with the Target Acquisition up to $550,000; plus (i) as a one-time accommodation to Borrowers, the expense of writing off Inventory in the amount of up to (i) $550,000 for the Fiscal Quarter ending December 31, 2016, which Inventory has been owned by Borrowers for at least three years, and (y) $1,930,000 for the Fiscal Quarter ending June 30, 2017; provided , that , any income derived from the sale of any Inventory which was the subject of a write off shall not be included in net income for the purposes of this definition; plus (j) any non-cash adjustments (including non-cash purchase accounting adjustments), in each case as required or permitted by the application of GAAP (including purchase method of accounting for acquisitions and consolidations, changes in accounting for the amortization of goodwill and certain other intangibles and write downs of long-lived assets, provided , that , the foregoing clause (j) shall not apply to the write down or impairment of the value of Inventory or Accounts); plus (k) non-cash stock compensation expense; plus (l) merger and acquisition costs incurred in connection with the Target Acquisition; plus (m) documented non-recurring expenses and non-cash restructuring costs, provided , that , net income will be reduced in the amount of such costs as they are paid in cash (collectively, “Non-Recurring Expenses”), provided further , that , the aggregate amount under clause (m) hereof shall not exceed the lesser of (x) $1,500,000 and (y) 10% of EBITDA (calculated before giving effect to the addbacks under clause (m) hereof) in the aggregate for any four consecutive Fiscal Quarter period. Notwithstanding the foregoing proviso, as a one-time accommodation to Borrowers, the foregoing limitation shall not apply to the first $200,000 of non-cash restructuring costs ultimately paid in cash.”

 

(b)                Section 7.1(i) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“(i)       all Investment Property, except , that , Lender’s Lien upon any Borrowers’ Equity Interests in a Foreign Subsidiary shall be limited to 66 1/3% of such Equity Interests in such Foreign Subsidiary;”

 

Section 3            Representations and Warranties . Borrowers hereby represent and warrant to Lender as follows:

 

(a)                 Authorization .

 

(i)                  Each Borrower has the power and authority to execute, deliver and perform this Amendment and to obtain the extensions and increases of credit under the Loan Agreement as amended by this Amendment No. 1 (the “ Amended Loan Agreement ”).

 

(ii)                No consent or authorization of, filing with, notice to or other act by, or in respect of, any Governmental Authority or any other Person is required to be obtained

2

by Borrowers in connection with this Amendment No. 1, except consents, authorizations, filings, acts and notices which have been obtained, taken or made and are in full force and effect.

 

(iii)              This Amendment No. 1 has been duly executed and delivered by Borrowers. This Amendment No. 1 and the Loan Agreement, as amended hereby, constitute the legal, valid and binding obligations of Borrowers and are enforceable against Borrowers in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

(b)                Representations in Loan Documents . Each of the representations and warranties made by or on behalf of Borrowers to Lender in any of the Loan Documents was true and correct when made, and is true and correct on and as of the date of this Amendment No. 1 with the same full force and effect as if each of such representations and warranties had been made by or on behalf of Borrowers on the date hereof (other than such representations and warranties that relate solely to a prior point in time, and other than as expressly waived pursuant to this Amendment No. 1).

 

(c)                 Binding Effect; Loan Document . This Amendment No. 1 and the other Loan Documents have been duly executed and delivered to Lender by Borrowers and are in full force and effect, as modified hereby. This Amendment No. 1 shall constitute a Loan Document.

 

(d)                No Conflict, Etc . The execution, delivery and performance of this Amendment No. 1 by Borrowers will not violate or cause a default under any Loan Document, Applicable Law or material contract of Borrowers and will not result in or require the creation or imposition of any Lien on any of its properties or revenues, other than permitted liens set forth in Section 10.2.2 of the Loan Agreement.

 

(e)                 No Default or Event of Default . Except as expressly waived herein, (i) no Default or Event of Default existed immediately prior to the execution of this Amendment No. 1 and (ii) no Default or Event of Default will exist immediately after the execution of this Amendment No. 1.

 

(f)                 Additional Events of Default . Any misrepresentation by Borrowers, or any failure of any Borrower to comply with the covenants, conditions and agreements contained in any Loan Document, this Amendment No. 1 or in any other document, instrument or agreement at any time executed and/or delivered by any Borrower with, to or in favor of Lender, subject to the terms and provisions of the Loan Agreement and the other Loan Documents, shall constitute an Event of Default hereunder, under the Loan Agreement and under the other Loan Documents.

 

Section 4            Conditions to Effectiveness of This Amendment .

 

The effectiveness of the terms and provisions of this Amendment No. 1 shall be subject to the receipt by Lender of this Amendment No. 1 duly authorized, executed and delivered by Borrowers.

3

Section 5            Provisions of General Application .

 

(a)                 Effect of this Amendment . Except as modified pursuant hereto, no other changes or modifications to the Loan Documents are intended or implied and in all other respects the Loan Documents are hereby specifically ratified, restated and confirmed as of the Effective Date. To the extent of any conflict between the terms of this Amendment No. 1 and the other Loan Documents, the terms of this Amendment No. 1 shall control. Any Loan Document amended hereby shall be read and construed with this Amendment No. 1 as one agreement.

 

(b)                Costs and Expenses . Borrowers absolutely and unconditionally agree to pay to Lender, on demand by Lender at any time and as often as the occasion therefor may require, whether or not all or any of the transactions contemplated by this Amendment No. 1 are consummated: all reasonable fees and disbursements of counsel to Lender in connection with the preparation, negotiation, execution and delivery of this Amendment No. 1 and any agreements or certificates delivered in connection herewith, and all reasonable out-of-pocket expenses which shall at any time be incurred or sustained by Lender or its directors, officers, employees or Lenders as a consequence of or in any way in connection with the preparation, negotiation, execution, or delivery of this Amendment No. 1 and any agreements prepared, negotiated, executed or delivered in connection herewith.

 

(c)                 No Third Party Beneficiaries . The terms and provisions of this Amendment No. 1 shall be for the benefit of the parties hereto and their respective successors and assigns; no other person, firm, entity or corporation shall have any right, benefit or interest under this Amendment No. 1.

 

(d)                Further Assurances . Borrowers shall execute and deliver such additional documents and take such additional action as may be reasonably necessary or desirable to effectuate the provisions and purposes of this Amendment No. 1.

 

(e)                 Binding Effect . This Amendment No. 1 shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

 

(f)                 Merger . This Amendment No. 1 sets forth the entire agreement and understanding of the parties with respect to the matters set forth herein. This Amendment No. 1 cannot be changed, modified, amended or terminated except in a writing executed by the party to be charged.

 

(g)                 Survival of Representations and Warranties . All representations and warranties made in this Amendment No. 1 or any other document furnished in connection with this Amendment No. 1 shall survive the execution and delivery of this Amendment No. 1.

 

(h)                Severability . Any provision of this Amendment No. 1 held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment No. 1.

 

(i)                  Reviewed by Attorneys . Each Borrower represents and warrants to Lender that it (a) understands fully the terms of this Amendment No. 1 and the consequences of the execution and delivery of this Amendment No. 1, (b) has been afforded an opportunity to have this

4

Amendment No. 1 reviewed by, and to discuss this Amendment No. 1 and each document executed in connection herewith with, such attorneys and other persons as such Borrower may wish, and (c) has entered into this Amendment No. 1 and executed and delivered all documents in connection herewith of its own free will and accord and without threat, duress or other coercion of any kind by any Person. The parties hereto acknowledge and agree that neither this Amendment No. 1 nor the other documents executed pursuant hereto shall be construed more favorably in favor of one than the other based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation and preparation of this Amendment No. 1 and the other documents executed pursuant hereto or in connection herewith.

 

(j)                  Governing Law; Consent to Jurisdiction and Venue .

 

(i)                  THIS AMENDMENT NO. 1 SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

 

(ii)                EACH BORROWER HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT SITTING IN OR WITH JURISDICTION OVER NEW YORK COUNTY, NEW YORK, IN ANY PROCEEDING OR DISPUTE RELATING IN ANY WAY HERETO, AND AGREES THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT. EACH BORROWER IRREVOCABLY WAIVES ALL CLAIMS, OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 12.3 OF THE LOAN AGREEMENT. Nothing herein shall limit the right of Lender to bring proceedings against any Borrower in any other court located in a jurisdiction where the Borrower or its assets are physically located, nor limit the right of any party to serve process in any other manner permitted by Applicable Law. Nothing in this Amendment No. 1 shall be deemed to preclude enforcement by Lender of any judgment or order obtained in any forum or jurisdiction.

 

(k)                Waivers . TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER WAIVES (A) THE RIGHT TO TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY PROCEEDING OR DISPUTE OF ANY KIND RELATING IN ANY WAY HERETO; (B) PRESENTMENT, DEMAND, PROTEST, NOTICE OF PRESENTMENT, DEFAULT, NON-PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY COMMERCIAL PAPER, ACCOUNTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER ON WHICH A BORROWER MAY IN ANY WAY BE LIABLE, AND HEREBY RATIFIES ANYTHING LENDER MAY DO IN THIS REGARD; (C) NOTICE PRIOR TO TAKING POSSESSION OR CONTROL OF ANY COLLATERAL; (D) ANY BOND OR SECURITY THAT MIGHT BE REQUIRED BY A COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY RIGHTS OR REMEDIES; (E) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;

5

(F) ANY CLAIM AGAINST LENDER ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) IN ANY WAY RELATING TO ANY ENFORCEMENT ACTION, OBLIGATIONS, LOAN DOCUMENTS OR TRANSACTIONS RELATING THERETO; AND (G) NOTICE OF ACCEPTANCE HEREOF. Each Borrower acknowledges that the foregoing waivers are a material inducement to Lender entering into this Amendment No. 1 and that Lender is relying upon the foregoing in its dealings with such Borrower. Each Borrower has reviewed the foregoing waivers with its legal counsel and has knowingly and voluntarily waived its jury trial and other rights following consultation with legal counsel. In the event of litigation, this Amendment No. 1 may be filed as a written consent to a trial by the court.

 

(l)                  Counterparts . This Amendment No. 1 may be executed in one or more counterparts, each of which shall constitute but one and the same Waiver. In making proof of this Amendment No. 1, it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the parties hereto. Delivery of an executed counterpart of this Amendment No. 1 electronically or by facsimile shall be effective as delivery of an original executed counterpart of this Amendment No. 1.

 

[Signature pages to follow]

6

IN WITNESS WHEREOF, this Amendment No. 1 has been executed by the parties hereto as of the date first written above.

 

  Borrowers
   
  WIRELESS TELECOM GROUP, INC.
   
  By:  /s/Michael Kandell  
  Name: Michael Kandell
  Title: Chief Financial Officer
  Address:
  25 Eastmans Road
  Parsippany, NJ 07054
       Attn:      
   Telecopy:      

 

  BOONTON ELECTRONIC CORPORATION
   
  By: /s/Michael Kandell  
  Name: Michael Kandell
  Title: Chief Financial Officer
  Address:
  25 Eastmans Road
  Parsippany, NJ 07054
       Attn:      
   Telecopy:      

 

  MICROLAB/FXR
   
  By: /s/Michael Kandell  
  Name: Michael Kandell
  Title: Chief Financial Officer
  Address:
  25 Eastmans Road
  Parsippany, NJ 07054
       Attn:      
   Telecopy:      

 

Signature Page to Amendment No. 1 to Loan Agreement

 
  Lender
   
  BANK OF AMERICA, N.A., as Lender
   
  By:  /s/Steve Blumberg  
  Name: Steve Blumberg
  Title: Senior Vice President

 

Signature Page to Amendment No. 1 to Loan Agreement

 

Exhibit 10.7

 

EXECUTION COPY

 

SEPARATION Agreement and GENERAL Release

 

This Separation Agreement and General Release (“Agreement”) is made and entered by and between Paul Steven Genova (“Employee”) and Wireless Telecom Group, Inc. and its subsidiaries (the “Company”). Employee and the Company, together, are at times referred to as the “Parties”.

 

WHEREAS, Employee and the Company are parties to a Severance Agreement dated December 10, 2012 (the “Severance Agreement”) that provides for a specified Severance payment and Continuation of Benefits if Employee’s employment is terminated by the Company for a reason other than death, permanent disability or Cause, or if Employee resigns for Good Reason (as those capitalized terms are defined in the Severance Agreement);

 

WHEREAS, the Company and Employee have agreed that Employee will cease serving as an officer of the Company on May 22, 2017, and will cease employment with the Company on June 30, 2017 (the “Separation Date”);

 

WHEREAS, the Company and Employee have agreed to terminate the Severance Agreement in consideration for entering into this Agreement; and

 

WHEREAS, the Company and Employee wish to confirm the terms of Employee’s employment after ceasing to serve as an officer through the Separation Date (the “Transition Period”) and separation from employment, and to settle, release and discharge, with prejudice, any and all claims, causes of action or disputes Employee has or may have against any of the Releasees (defined in Section 6(a) below), including but not limited to those arising or which may be arising out of his employment with the Company and/or his separation from that employment, other than as set forth in this Agreement (including Attachment A hereto).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the legal sufficiency of which is hereby acknowledged, the Company and Employee do hereby agree as follows:

 

1. Mutual Termination of Severance Agreement. Employee and the Company agree that the Severance Agreement shall terminate, and that Employee hereby waives any right under the Severance Agreement to receive a Severance payment and Continuation of Benefits, effective as of the Effective Date (as defined in Section 3 below) of this Agreement.

 

2. Transition Period and Separation from Employment . During the Transition Period Employee will make himself available to assist in the transition of his duties as requested by the Chief Executive Officer of the Company, and will continue to be paid salary and to be eligible for benefits as an active employee. Employee agrees to use all vacation/PTO accrued through the Separation Date during the Transition Period. Employee’s employment with the Company will end on the Separation Date. Employee understands that, following the Separation Date, he will have no right to any salary or employee benefits provided by the Company under any employee benefit plans, except for any continuation of benefit rights expressly described in this Agreement, and that Employee will not be paid a bonus for 2017 (except as the same is included in the Severance Payment). Employee’s rights to exercise stock options that have vested or will vest on or before the Separation Date (“Vested Options”) are governed by the Stock Option

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Agreement between the Company and Employee, dated April 11, 2008, and the Stock Option Agreement between the Company and Employee, dated November 24, 2009, both as amended in May 2017 by an amendment executed by Employee simultaneously with his execution of this Agreement (the “Stock Option Agreements”). The receipt of benefits hereunder after the Separation Date will not extend Employee’s service date with respect to health benefits, stock options, bonus, incentive compensation, profit sharing or other compensation or benefits. Similarly, Employee acknowledges that, as of the Separation Date, his duties and obligations to the Company will be extinguished with the exception of his duties and obligations to continue to protect the Company’s Confidential Information (defined in Section 9(b) below) and those duties and obligations otherwise stated herein.

 

3. Review and Revocation Periods; Effective Date . Employee understands that he has a period of twenty-one (21) calendar days from his receipt of this Agreement to consider the terms and conditions of this Agreement, except that if the last day of this period falls on a Saturday, Sunday or holiday observed by the Company, Employee shall have until the close of business on the next immediate business day (the “Review Period”). Employee may accept this Agreement by fully signing, notarizing and returning it to Matt O’Connor, Human Resources Director, Wireless Telecom Group, Inc., 25 Eastmans Road, Parsippany, New Jersey 07054, by no later than 5:00 p.m. on the last day of his Review Period. By signing this Agreement, Employee expressly acknowledges and agrees that (a) he has had up to twenty-one (21) calendar days to carefully read and fully consider the terms of this Agreement and that he understands he can use as much of the Review Period or all of the Review Period before signing the Agreement; (b) to the extent that he signs the Agreement prior to the expiration of the Review Period, he is voluntarily and knowingly waiving the balance of the Review Period; (c) he has been advised in writing to discuss this Agreement with an attorney before signing it and the time afforded him provided him a full and fair opportunity to do so; (d) he has so consulted an attorney or knowingly waived the right to do so before signing this Agreement; (e) he has carefully read this Agreement and fully understands the terms and information stated therein; (f) he is physically and emotionally competent and of sound mind to execute this Agreement; and (g) he is knowingly and voluntarily signing this Agreement of his own free will, act and deed. He warrants that he has made such investigation of the facts pertaining to this Agreement and all matters contained herein as he deems necessary, desirable and appropriate, and agrees that the release provided for herein shall remain in all respects effective and enforceable and not subject to termination or rescission by reason of any later discovery of new, different or additional facts. Employee understands that he has an additional period of seven (7) calendar days after he signs the Agreement to revoke his acceptance of the Agreement, except that if the seventh (7 th ) calendar day after he signs the Agreement falls on a Saturday, Sunday or legal holiday, he will have until the close of business on the next immediate business day (the “Revocation Period”). Employee agrees that this Agreement shall become fully effective and enforceable the first calendar day following the expiration of the Revocation Period, provided he does not first timely provide a notice of revocation to the Company (the “Effective Date”). Employee understands that if he does not sign this Agreement and return it to the Company by the end of his Review Period, or if he executes his right to revoke this Agreement, he will not be entitled to receive the Severance Payment and other benefits described below in Section 4, and the terms of the Agreement shall be deemed null and void.

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4. Payment and Benefits to Employee in Exchange for Release . In exchange for and in consideration of Employee’s promises as set forth in this Agreement and the Release attached to this Agreement as Attachment A (“Release”), and contingent upon the Company’s timely receipt of signed copies of this Agreement and the Release (which may only be executed on or after the Separation Date, but no later than five (5) business days after the Separation Date) and Employee’s not revoking both this Agreement and the Release, the Company agrees to provide Employee with the following payment and other benefits on behalf of all Releasees:

 

(a) The Company will pay Employee a gross lump sum amount of $375,000, less all applicable income and employment taxes and other required or elected withholdings (the “Severance Payment”), on the first regularly scheduled payroll date that is at least five (5) business days after the Release Effective Date (as defined in the Release). The Severance Payment was calculated as an amount equal to Employee’s base salary for one year plus a bonus for the portion of 2017 in which Employee was employed by the Company.

 

(b) To the extent Employee is eligible for and timely elects COBRA continuation coverage in accordance with the Company’s COBRA healthcare continuation coverage policies for group medical and dental coverage (but not any flexible spending account) and continues to pay the premiums for such plans at the active monthly rate applicable to the health coverage in effect for active employees (the “Active Rate”), the Company will pay, on his behalf and for a twelve (12) month period only, an amount equal to the portion of his COBRA healthcare continuation coverage premium for such plans that exceeds the Active Rate based upon the type of coverage Employee elected prior to his/her Separation Date, subject to all applicable taxes (the “COBRA Subsidy”).

 

  i. Employee understands that if he/she does not elect healthcare continuation coverage pursuant to COBRA or chooses to reduce his/her coverage level pursuant to COBRA, he/she will not receive the cash equivalent of the Company’s share of the premium, or any difference in the Company’s share of the premium between his/her election prior to termination and his/her COBRA election.

 

  ii. Employee also understands that if he/she remains eligible for COBRA healthcare continuation coverage after the month when the COBRA Subsidy is in effect, he/she will be responsible to pay the full premiums with respect to such coverage at the COBRA rate. He/she understands and agrees that the Company has and will have no obligation to make any payments toward COBRA healthcare continuation coverage for him/her and his/her eligible dependents beyond the twelve (12) month COBRA Subsidy period and that the COBRA Subsidy will not extend the period of his eligibility or the eligibility of his/her dependents for healthcare continuation coverage under COBRA.

 

(c) Employee will be entitled to a continuation of benefits for at least 12 months after the Separation Date under the Company’s life insurance program (to the extent permitted under such employee benefit plan).

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(d) Employee agrees that the Severance Payment and COBRA Subsidy, and his continued employment during the Transition Period, constitute good and adequate consideration in exchange for his promises and releases herein and is in addition to anything of value to which he is presently entitled by virtue of his employment with the Company and any of the Releasees’ policies, practices, plans or prior understandings with him regarding compensation, vacation, bonuses, severance, on-call time, paid time off, commissions, incentive compensation stock options, offer letters, or any other fringe benefit plan, program, policy or practice.

 

(e) Company represents and warrants that the Chief Executive Officer of the Company has no knowledge, as of the date that the Company executes this Agreement, of any claims by the Company against Employee.

 

(f) Company further represents and warrants that as of the Effective Date Employee has vested options to purchase 720,000 Company shares subject to applicable Stock Option Agreements (“Vested Options”), and that as of the Separation Date, Company projects that Employee will have no additional vested options.

 

(g) Company covenants that following the Effective Date, Company will cooperate, consistent with applicable law and the terms of Employee’s applicable Stock Option Plan and Stock Option Agreements, with Employee and his broker in exercising options and in selling any stock resulting from such exercise or any restricted stock that vested on or before the Separation Date, including providing without charge an opinion of counsel to enable Employee to sell shares under Rule 144 and removal of legends within one business day of request and Company will file any necessary Form 4s at the request of Employee, subject to Employee’s timely providing information to the Company necessary to complete the Form 4s.

 

(h) Company acknowledges that following the Separation Date Employee is no longer subject to the Company’s Policy on Insider Trading and Tipping as adopted on November 9, 2015 or any successor policy, provided that Employee acknowledges he is subject to laws regarding insider trading.

 

(i) On or before the Effective Date, the Company will execute the amendment to the Stock Option Agreements in the form attached to this Agreement as Attachment B.

 

5. Receipt of All Prior Pay and Benefits Due; No Injuries . Employee agrees that, as of the date he signs this Agreement, the Company does not owe him any further compensation, remuneration, overtime payments, bonuses, incentives, benefits, severance, commissions, or other employment payments of any kind whatsoever other than as set forth in the Agreement, the Stock Option Agreements, or Company policies in effect at the time of this agreement as related to accrued, unused paid time off and other than for wages, and benefits for the period covered by the next Company payroll (to the extent it covers periods prior to the date he signs this Agreement) and all Company payrolls covering periods through the Separation Date (even if such payrolls extend beyond the Separation Date) and 401k matches to the extent not deposited by the Company. Employee warrants that he has not suffered any work-related injuries, has not contracted any known occupational diseases, and has been provided all family, medical and other benefits to which he was ever entitled.

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6. Release of Claims and Covenant Not to Sue .

 

(a) In exchange for the Company providing Employee with the payment and benefits described above, Employee, on his own behalf and on behalf his heirs, executors, personal representatives, administrators and assigns (hereinafter collectively referred to as the “Releasers”), forever releases and discharges the Company and all of its parent corporations, subsidiaries, divisions, affiliated entities, predecessors, successors and assigns (including Wireless Telecom Group, Inc. and Noise Com), all of its and their employee benefit and/or pension plans or funds, and all of its and their past and present officers, directors, stockholders, agents, trustees, administrators, employees, managers, attorneys, insurers, reinsurers, contractors and assigns (whether acting as agents for such entities or in their individual capacities) (hereinafter collectively referred to as “Releasees”), from any and all claims, demands, causes of action, fees and liabilities of any kind whatsoever (based upon any legal or equitable theory, whether contractual, common-law, statutory, federal, state, local or otherwise), whether known or unknown, which Employee ever had, now has, or may have against Releasees by reason of any actual or alleged act, omission, transaction, practice, conduct, occurrence or other matter up to and including the Effective Date of this Agreement.

 

i. Without limiting the generality of the foregoing, this Agreement is intended to and shall release the Releasees from any and all waivable claims arising out of or alleged to be arising out of and in any way concerning Employee’s employment with the Company, the terms, conditions, and privileges of that employment, the termination of that employment and/or any and all violations and/or alleged violations of any federal, state and local fair employment practices or other laws by any of the Releasees for any reason and under any legal theory including but not limited to the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act (“OWBPA”), Title VII of the Civil Rights Act of 1964 (“Title VII”), the Genetic Information Nondiscrimination Act of 2008 (“GINA”), the Worker Adjustment and Retraining Notification Act (“WARN”), the Occupational Safety and Health Act (“OSHA”),the Americans with Disabilities Act (“ADA”), the Employee Retirement Income Security of 1974, (“ERISA”), the National Labor Relations Act (“NLRA”), the Labor Management Relations Act (“LMRA”), the Fair Labor Standards Act (“FLSA”), the Family and Medical Leave Act (“FMLA”) the Uniformed Services Employment and Reemployment Act (“USERRA”), the Fair Credit Reporting Act (“FCRA”), the Equal Pay Act of 1963 (the “EPA”), the Lilly Ledbetter Fair Pay Act, the Civil Rights Act of 1991, the New Jersey Law Against Discrimination (“NJLAD”), the New Jersey Conscientious Employee Protection Act (“CEPA”), the New Jersey Fair Credit Reporting Act (“NJFCRA”), the New Jersey Wage and Hour Law, the New Jersey Workers’ Compensation Act, the New Jersey Temporary Disability Benefits and Family Leave Insurance Law, the New Jersey Discrimination in Wages Law, the New Jersey Millville Dallas Airmotive Plant Job Loss Notification Act, and the New Jersey Civil Rights Act, all as amended.

 

ii. Employee also forever waives and releases all claims, whether accrued or unaccrued, real or perceived, liquidated or contingent, or known or unknown, for breach of implied or express contract, breach of promise, breach of the covenant of good faith and fair dealing, fraud, misrepresentation, negligence, estoppel, defamation, intentional infliction of emotional distress, violation of public policy, wrongful, retaliatory or constructive discharge, or any other claim or tort arising under any federal, state or local law, statute, rule, regulation,

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ordinance, judicial decision and/or the United States or New Jersey constitutions, including any and all claims arising out of the terms and conditions of Employee’s employment the termination of such employment, the benefits and attributes of that employment, any of the events relating directly or indirectly to or surrounding that termination, and all claims for attorneys’ fees, costs, disbursements and/or the like.

 

(b) Employee represents and warrants that: (i) he is the lawful owner of all claims released through this Agreement; (ii) he has the beneficial interest in the payment and benefits that he will receive under this Agreement; (iii) he has not assigned, and will not assign, any interest in any claim released through this Agreement; (iv) he has not filed, and is not and has not been subject to, a voluntary or involuntary bankruptcy petition in the past three (3) years; (v) he is not a debtor in any pending bankruptcy case; (vi) no receiver, bankruptcy trustee or other third party may assert a right to any claim released through this Agreement or the payment tendered or to be tendered under this Agreement. Employee agrees that the foregoing representations and warranties shall survive the execution, performance and consummation or termination of this Agreement. He also agrees that he will fully indemnify and hold the Releasees harmless to the extent any of the foregoing representations and warranties is or becomes untrue for any claims or damages, including attorneys’ fees, fines, costs, liquidated damages and punitive damages, asserted or awarded against any of the Releasees and, should it be determined that any bankruptcy trustee or other third party has a right to any payment made to him under this Agreement, he immediately will return to the Company an amount equivalent to the full value of the Severance Payment.

 

(c) Employee warrants that he has not filed or initiated any complaint, charge, arbitration demand, grievance and/or administrative action against any of the Releasees in any federal, state or local court, in any administrative agency, or with any arbitration panel. He further agrees not to file any claim or lawsuit against any of the Releasees in any federal, state or local court concerning any claim, demand or cause of action released through this Agreement and not specifically excluded in Section 7 below. Should Employee file a lawsuit or commence an arbitration proceeding against the Releasees with any court or arbitration panel regarding any claim that is waived above and not excluded in Section 7 below, he agrees that he will be responsible to pay the legal fees and costs incurred by the Releasees in defending such suit and the nothing shall limit the Releasees’ rights to obtain restitution, repayment, recoupment or set off of any monies paid to Employee under this Agreement.

 

7. Exclusions from Release of Claims and Covenant Not to Sue . The Parties agree that the release set forth in Section 6 and its subparagraphs above: (a) does not limit Employee’s right to bring any action to enforce the terms of this Agreement or to recover for the breach thereof; (b) does not waive Employee’s right to purchase or continue to purchase continuation health benefits coverage to the extent he and his eligible dependents are eligible for such coverage under law or waive Employee’s right to continued life insurance benefits under the Company’s plan (to the extent permitted under such employee benefit plan); (c) does not prohibit Employee from filing, cooperating with or participating in any proceeding with the Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), or any similar federal, state or local board or agency, although he does waive his right to recover any payments or other relief from the Company that any such board or agency may pursue or obtain on his behalf; (d) does not waive Employee’s vested rights in any 401(k) plan or his right to contribute or for firm

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contributions to such plan for periods worked on or prior to the Separation Date; (e) does not prohibit Employee from filing any claim with the New Jersey Department of Labor & Workforce Development for unemployment compensation benefits or from collecting any award of unemployment compensation benefits granted to him; (f) does not affect any of Employee’s rights with respect to Vested Options, or Employee’s ownership interests in the Company’s shares, if any, that Employee continues to hold following the Effective Date; (g) does not affect Employee’s rights to indemnification and advancement of legal fees or insurance coverage Employee may have before or after the Effective Date or the Separation Date, including, without limitation, any rights under governing statutory law or common law, any indemnification agreement, the Company’s organizational documents, including its certificate of incorporation and bylaws, or any “D&O coverage,” that Employee may have with respect to any claims made or threatened against Employee in Employee’s capacity as a current or former director, officer or employee of the Company or any of its affiliates; and (h) does not affect any claims for contribution in the event Employee and any of the Releasees are found to be jointly liable or otherwise.

 

8. Continuing Protection of Confidential Information; Non-Disparagement; and Return of Company Property .

 

(a) Employee warrants that he has not used or disclosed any Confidential Information (as defined below), except as permitted in connection with his performance of his job duties during his employment. Employee also agrees that he has not engaged, and will not, at any time, engage in any conduct that is injurious to Releasees’ reputation or interest, including but not limited to (a) divulging, communicating, or in any way making use for himself or any third party of Confidential Information acquired or developed by Employee in the performance of his employment duties with the Company; and (b) publicly disparaging (or including or encouraging others to publicly disparage) any of the Releasees. Employee agrees that, on or before the Separation Date, he will return to the Company all Confidential Information and other property in his possession (including but not limited to identification badges, keys, keyfobs, access cards, computers and equipment, personal digital assistance, cellular telephones, documents, pricing, customer and supplier lists, personnel information, product information, electronic passwords, memoranda, marketing and sales information and/or files in whatever form, including any electronic data format), and that he will not retain any copies of any such information. Employee further agrees that he will reconcile to the Company’s satisfaction any outstanding amounts due to the Company on account of charges incurred by him prior to his Separation Date.

 

(b) Employee agrees that, to the extent he has transferred or transfers any Confidential Information and/or other business information belonging to the Company and/or any of the Releasees, any personal computer equipment, personal electronic storage devices, or any cloud or other file sharing service to which he has access, he has properly disposed or will dispose of such materials after returning a complete, true copy of the same to the Company and he has also fully deleted and otherwise appropriately removed, or will delete and otherwise appropriately remove, all electronic copies of the same from his personal computer equipment, other electronic devices and any cloud or other file sharing services to which he has access in a manner reasonably performed to effectively prevent the disclosure of any sensitive personal data and/or other Confidential Information and/or other business information belonging to the Company.

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(c) Notwithstanding any provision of this Agreement, or any other agreement executed by Employee, to the contrary, there are no contractual restrictions on Employee’s (a) reporting violations of any law or regulation, (b) providing truthful testimony or information pursuant to subpoena, court order, or similar legal process, (c) providing truthful information to government or regulatory agencies, or (d) otherwise engaging in whistleblower activity protected by the Securities Exchange Act of 1934, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any rules or regulations issued thereunder, including, without limitation, Rule 21F-17. In addition, 18 U.S.C. §1833(b) provides, “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Nothing in this Agreement, any other agreement executed by Employee, or any Company policy is intended to conflict with this statutory protection.

 

9. Non-Competition; Non-Servicing; Non-Solicitation .

 

(a) Non-Competition . Employee agrees that during the Transition Period and for a period of one (1) year after the Separation Date (together, the “Restricted Period”), Employee will not, as a principal, manager, agent, consultant, officer, stockholder, partner, member, investor, employee, or in any other capacity, be associated with or provide services to or on behalf of Westell Communications, Commscope, PCTEL, Baylin/Galtronics, JMA Technologies, TIK, Comba Technologies, Kathrein Solutions, or Meca Electronics, Inc. (the “Restricted Companies”), or any other company that acquires substantially all of the assets of, or enters into a merger with, any of the Restricted Companies, to the extent they continue to engage in the “Business” or otherwise compete with the Company with respect to the Business anywhere in the world. For purposes of this Section 9, “Business” means the design, development, manufacturing, testing, and deployment of RF and microwave components, modules, systems and instruments for the wireless, telecommunication, satellite, military, aerospace, semiconductor and medical industries. Nothing herein shall be construed so as to preclude Employee from investing directly or indirectly in any publicly traded equity securities, provided that no such investment in any class of securities may exceed 5% of the outstanding securities of such class.

 

(b) Non-Servicing and Non-Solicitation . Employee agrees that during the Restricted Period, Employee will not directly, or indirectly call upon or cause to be called upon, solicit, divert or take away, or attempt to divert or to take away, the business or patronage of, or provide services to, any “Client of the Company” with respect to the Business. For purposes of this Agreement, a “Client of the Company” means any person or entity to whom the Company sold products or services during the two year period before the Separation Date.

 

(c) Non-Hiring and Non-Solicitation . Employee agrees that during the Restricted Period, Employee, on Employee’s own behalf or on behalf of any person or entity, will not directly or indirectly solicit, employ, hire, cause to be hired, or retain any officer, manager, sales person, or any other employee who developed or had access to Confidential Information, who was employed by the Company at any time during the one year period immediately preceding

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the Separation Date. General advertisements such as in a newspaper, or listing of opportunities on a job board that is available to the general public, shall not constitute solicitation prohibited by this Agreement, but descriptions of or references to employment opportunities by Employee on social media accounts that require Employee’s or an employer’s authorization for access (such as Facebook, Linked In, etc.) are subject to the prohibition on solicitation.

 

(d) Confidential Information . During the Transition Period and at all times after the Separation Date, Employee will take all steps necessary to hold the proprietary confidential information of the Company (“Confidential Information”) in trust and confidence, and will not use, or assist another to use, any such Confidential Information in any manner or for any purpose other than for the benefit of the Company, and will not disclose any such Confidential Information to any third party without first obtaining the express written consent of an officer of the Company (“Officer”) on a case-by-case basis. By way of illustration but not limitation, “Confidential Information” includes (a) trade secrets, trade names, trademarks, service marks, domain names, trade dresses, logos, corporate names, slogans, indicia of sources of origin, rights of publicity and privacy, artistic and moral rights, inventions, shop rights, mask works, artworks, ideas, processes, techniques, formulae, algorithms, source and object codes, data, databases, data structures, programs, software, other works of authorship, copyrightable subject matter, industrial property rights, know-how, improvements, discoveries, developments, designs and techniques, whether or not used in the Company’s business; (b) information regarding the Company’s plans for research, development, new products or services, trading strategies, styles, instruments, markets, or sectors, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and (c) information regarding the skills of employees of, and independent contractors engaged by, the Company. Notwithstanding the other provisions of this Agreement, nothing received by Employee will be considered to be Confidential Information if (1) it has been published or is otherwise readily available to the public other than by a breach of this Agreement or other confidentiality obligation; (2) is generally known in the Business; or (3) it was lawfully known to Employee prior to Employee’s first becoming employed by the Company.

 

10. Cooperation; Response to Subpoenas .

 

(a) Employee will reasonably cooperate with the Company and all other Releasees and its/their counsel in connection with any investigation, administrative proceeding or litigation relating to any matter in which Employee was involved or of which Employee has knowledge as a result of his employment with the Company. Employee agrees that such cooperation shall not, in any way, be construed as compensatory time and that he shall not be entitled to payment for the time spent in connection with the same; however, he will be reimbursed for all associated reasonable and necessary travel and parking expenses.

 

(b) Employee agrees that in the event he is subpoenaed by any person or entity (including, but not limited to, any government agency) to give testimony (in a deposition, court proceeding or otherwise) which in any way relates to Employee’s employment with the Company or any other Releasees, he will promptly give notice of such request to the Company unless otherwise prohibited by law and will make no disclosure until the Company has had a reasonable opportunity to contest the right of the requesting person or entity to such disclosure.

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11. No Admission of Liability . Employee understands that the making of this Agreement is not intended and shall not, in any way, be construed, as an admission that Releasees have violated any federal, state or local law (statutory or decisional), ordinance or regulation, breached any contract, or committed any wrong whatsoever against the Employee. Employee understands that, to the contrary, the Company maintains that all of the Releasees have treated him in a fair, lawful, non-discriminatory and non-retaliatory manner. The Parties agree that this Agreement may only be used as evidence in a subsequent proceeding in which any of the Parties allege a breach of this Agreement.

 

12. Binding Nature . This Agreement is binding upon, and shall inure to the benefit of, the Parties and their respective heirs, executors, administrators, successors and permitted assigns. Employee may not assign this Agreement, and any purported assignment by Employee shall be null and void.

 

13. Governing Law and Venue . This Agreement shall in all respects be interpreted, enforced and governed under the laws of the State of New Jersey, exclusive of any choice of law rules. Any dispute regarding this Agreement shall be brought in, and the Parties consent to the personal jurisdiction of, the state and federal courts of the State of New Jersey (to the extent that subject matter jurisdiction exists).

 

14. Equitable Modification; Severability . The Parties agree that the terms of this Agreement are severable. If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, void, or unenforceable, such provision shall be modified to be enforceable to the greatest extent permitted by applicable law. Whether or not such modification is allowed, the illegality or unenforceability of such provision shall have no effect upon, and shall not impair the enforceability of, any other provision of this Agreement; however, if the release within Section 6 of this Agreement is deemed illegal, void or unenforceable by a court of competent jurisdiction, Employee agrees either to return promptly to the Company the value of the Severance Payment and other benefits provided to his under this Agreement or to execute a release, waiver and/or covenant that is legal and enforceable. Further, if Employee seeks to challenge the validity of or otherwise vitiate this Agreement or any other provision thereof (including, without limitation, the terms of Section 6), Employee shall, as a precondition, be required, to the extent permitted by applicable law, to repay to the Company the value of the Severance Payment and other benefits provided to his under this Agreement. Finally any breach of the terms of Sections 6, 8, 9 or 10 shall constitute a material breach of this Agreement as to which the Company may seek appropriate relief (including but not limited to repayment of the value of the benefits to him under this Agreement) in a court of competent jurisdiction.

 

15. No Reliance Upon Verbal Representations; Entire Agreement; Amendments . This Agreement and the Release constitute the complete understanding between the Parties with respect to its subject matter and supersede any and all agreements, understandings, and discussions, whether written or oral, between the Parties concerning its subject matter, including without limitation the Severance Agreement. Employee agrees that no promises or inducements have been made to him to cause him to sign this Agreement other than those expressly provided for in this Agreement. Employee also understands and agrees that no other promises or agreements, and no amendments to this Agreement, shall be binding unless in writing and signed

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by the Parties to be bound thereby after the date that the Employee returns this Agreement, duly executed and acknowledged.

 

IN WITNESS WHEREOF, intending to be forever legally bound hereby, the Parties have executed this Agreement on the dates set forth below:

 

Wireless telecom group, inc. (d/b/a noise com)

 

By:   /s/ Timothy Whelan   Date:  May 22, 2017
  Timothy Whelan    
  Chief Executive Officer    
By: /s/ Paul Genova   Date:  May 22, 2017
  Paul Steven Genova    

 

ACKNOWLEDGMENT

 

STATE OF New Jersey )
  :ss
COUNTY OF )

 

On this 22nd day of May 2017 before me personally came Paul Steven Genova known and identified to me known to be the person described herein, who executed the foregoing Separation Agreement and General Release, duly acknowledging to me that he signed the same on his own free will, act and deed for the uses and purposes therein mentioned.

 

IN WITNESS WHEREOF, I have hereunto set my hand and seal at Parsippany, New Jersey on the day and year aforesaid.

 

  /s/Rosalie Nystrand  
  Notary Public  
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SEPARATION AGREEMENT AND GENERAL RELEASE

 

ATTACHMENT “A”

 

RELEASE

 

This Release (“Release”) is being executed pursuant to a Separation Agreement and General Release (the “Agreement”) between Paul Steven Genova (the “Employee”) and Wireless Telecom Group, Inc. and its subsidiaries (the “Company”) executed on May 22, 2017. Any capitalized word not defined in this Release (other than a proper noun) has the meaning defined in the Agreement.

 

1. Review and Revocation Periods; Effective Date . Employee acknowledges that he has had at least twenty-one (21) calendar days from his receipt of this Release to consider the terms and conditions of this Release (the “Review Period”). Employee may accept this Release by fully signing, notarizing and returning it to Matt O’Connor, Human Resources Director, Wireless Telecom Group, Inc., 25 Eastmans Road, Parsippany, New Jersey 07054, by no earlier than the Separation Date and no later than five (5) business days after the Separation Date (“Release Return Date”). By signing this Release, Employee expressly acknowledges and agrees that (a) he has had up to twenty-one (21) calendar days to carefully read and fully consider the terms of this Release and that he understands he can use as much of the Review Period or all of the Review Period before signing the Release; (b) he has been advised in writing to discuss this Release with an attorney before signing it and the time afforded him provided him a full and fair opportunity to do so; (c) he has so consulted an attorney or knowingly waived the right to do so before signing this Release; (d) he has carefully read this Release and fully understands the terms and information stated therein; (e) he is physically and emotionally competent and of sound mind to execute this Release; and (f) he is knowingly and voluntarily signing this Release of his own free will, act and deed. He warrants that he has made such investigation of the facts pertaining to this Release and all matters contained herein as he deems necessary, desirable and appropriate, and agrees that the release provided for herein shall remain in all respects effective and enforceable and not subject to termination or rescission by reason of any later discovery of new, different or additional facts. Employee understands that he has an additional period of seven (7) calendar days after he signs the Release to revoke his acceptance of the Release, except that if the seventh (7 th ) calendar day after he signs the Release falls on a Saturday, Sunday or legal holiday, he will have until the close of business on the next immediate business day (the “Revocation Period”). Employee agrees that this Release shall become fully effective and enforceable the first calendar day following the expiration of the Revocation Period, provided he does not first timely provide a notice of revocation to the Company (the “Release Effective Date”). Employee understands that if he does not sign this Release and return it to the Company by the Release Return Date, or if he executes his right to revoke this Release, he will not be entitled to receive the Severance Payment and other benefits described in the Agreement, and the terms of the Agreement shall be deemed null and void.

 

2. Receipt of All Prior Pay and Benefits Due; No Injuries . Employee agrees that, as of the date he signs this Release, the Company does not owe him any further compensation, remuneration, overtime payments, bonuses, incentives, benefits, severance, commissions, or

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other employment payments of any kind whatsoever other than as set forth in the Agreement, the Stock Option Agreements, for compensation and benefits to the extent a Company payroll after the Release Effective Date covers a period prior to the Separation Date or Company policies in effect at the time of this Release as related to accrued, unused paid time off. Employee warrants that he has not suffered any work-related injuries, has not contracted any known occupational diseases, and has been provided all family, medical and other benefits to which he was ever entitled.

 

3. Release of Claims and Covenant Not to Sue .

 

(a) In exchange for the Company providing Employee with the payment and benefits described in the Agreement, Employee, on his own behalf and on behalf his heirs, executors, personal representatives, administrators and assigns (hereinafter collectively referred to as the “Releasers”), forever releases and discharges the Company and all of its parent corporations, subsidiaries, divisions, affiliated entities, predecessors, successors and assigns (including Wireless Telecom Group, Inc. and Noise Com), all of its and their employee benefit and/or pension plans or funds, and all of its and their past and present officers, directors, stockholders, agents, trustees, administrators, employees, managers, attorneys, insurers, reinsurers, contractors and assigns (whether acting as agents for such entities or in their individual capacities) (hereinafter collectively referred to as “Releasees”), from any and all claims, demands, causes of action, fees and liabilities of any kind whatsoever (based upon any legal or equitable theory, whether contractual, common-law, statutory, federal, state, local or otherwise), whether known or unknown, which Employee ever had, now has, or may have against Releasees by reason of any actual or alleged act, omission, transaction, practice, conduct, occurrence or other matter up to and including the Effective Date of this Release.

 

i. Without limiting the generality of the foregoing, this Release is intended to and shall release the Releasees from any and all waivable claims arising out of or alleged to be arising out of and in any way concerning Employee’s employment with the Company, the terms, conditions, and privileges of that employment, the termination of that employment and/or any and all violations and/or alleged violations of any federal, state and local fair employment practices or other laws by any of the Releasees for any reason and under any legal theory including but not limited to the Age Discrimination in Employment Act (“ADEA”), the Older Workers Benefit Protection Act (“OWBPA”), Title VII of the Civil Rights Act of 1964 (“Title VII”), the Genetic Information Nondiscrimination Act of 2008 (“GINA”), the Worker Adjustment and Retraining Notification Act (“WARN”), the Occupational Safety and Health Act (“OSHA”),the Americans with Disabilities Act (“ADA”), the Employee Retirement Income Security of 1974, (“ERISA”), the National Labor Relations Act (“NLRA”), the Labor Management Relations Act (“LMRA”), the Fair Labor Standards Act (“FLSA”), the Family and Medical Leave Act (“FMLA”) the Uniformed Services Employment and Reemployment Act (“USERRA”), the Fair Credit Reporting Act (“FCRA”), the Equal Pay Act of 1963 (the “EPA”), the Lilly Ledbetter Fair Pay Act, the Civil Rights Act of 1991, the New Jersey Law Against Discrimination (“NJLAD”), the New Jersey Conscientious Employee Protection Act (“CEPA”), the New Jersey Fair Credit Reporting Act (“NJFCRA”), the New Jersey Wage and Hour Law, the New Jersey Workers’ Compensation Act, the New Jersey Temporary Disability Benefits and Family Leave Insurance Law, the New Jersey Discrimination in Wages Law, the New Jersey

Page 13 of 19

Millville Dallas Airmotive Plant Job Loss Notification Act, and the New Jersey Civil Rights Act, all as amended.

 

ii. Employee also forever waives and releases all claims, whether accrued or unaccrued, real or perceived, liquidated or contingent, or known or unknown, for breach of implied or express contract, breach of promise, breach of the covenant of good faith and fair dealing, fraud, misrepresentation, negligence, estoppel, defamation, intentional infliction of emotional distress, violation of public policy, wrongful, retaliatory or constructive discharge, or any other claim or tort arising under any federal, state or local law, statute, rule, regulation, ordinance, judicial decision and/or the United States or New Jersey constitutions, including any and all claims arising out of the terms and conditions of Employee’s employment the termination of such employment, the benefits and attributes of that employment, any of the events relating directly or indirectly to or surrounding that termination, and all claims for attorneys’ fees, costs, disbursements and/or the like.

 

(b) Employee represents and warrants that: (i) he is the lawful owner of all claims released through this Release; (ii) he has the beneficial interest in the payment and benefits that he will receive under this Release; (iii) he has not assigned, and will not assign, any interest in any claim released through this Release; (iv) he has not filed, and is not and has not been subject to, a voluntary or involuntary bankruptcy petition in the past three (3) years; (v) he is not a debtor in any pending bankruptcy case; (vi) no receiver, bankruptcy trustee or other third party may assert a right to any claim released through this Release or the payment tendered or to be tendered under this Release. Employee agrees that the foregoing representations and warranties shall survive the execution, performance and consummation or termination of this Release. He also agrees that he will fully indemnify and hold the Releasees harmless to the extent any of the foregoing representations and warranties is or becomes untrue for any claims or damages, including attorneys’ fees, fines, costs, liquidated damages and punitive damages, asserted or awarded against any of the Releasees and, should it be determined that any bankruptcy trustee or other third party has a right to any payment made to him under the Agreement, he immediately will return to the Company an amount equivalent to the full value of the Severance Payment.

 

(c) Employee warrants that he has not filed or initiated any complaint, charge, arbitration demand, grievance and/or administrative action against any of the Releasees in any federal, state or local court, in any administrative agency, or with any arbitration panel. He further agrees not to file any claim or lawsuit against any of the Releasees in any federal, state or local court concerning any claim, demand or cause of action released through this Release and not specifically excluded in Section 4 below. Should Employee file a lawsuit or commence an arbitration proceeding against the Releasees with any court or arbitration panel regarding any claim that is waived above and not excluded in Section 4 below, he agrees that he will be responsible to pay the legal fees and costs incurred by the Releasees in defending such suit and the nothing shall limit the Releasees’ rights to obtain restitution, repayment, recoupment or set off of any monies paid to Employee under the Agreement.

 

4. Exclusions from Release of Claims and Covenant Not to Sue . The release set forth in Section 3 and its subparagraphs above: (a) does not limit Employee’s right to bring any action to enforce the terms of this Release or the Agreement, or for to recover for breach of the foregoing; (b) does not waive Employee’s right to purchase or continue to purchase continuation health

Page 14 of 19

benefits coverage to the extent he and his eligible dependents are eligible for such coverage under law or waive Employee’s right to continued life insurance benefits under the Company’s plan (to the extent permitted under such employee benefit plan); (c) does not prohibit him from filing, cooperating with or participating in any proceeding with the Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board (“NLRB”), or any similar federal, state or local board or agency, although he does waive his right to recover any payments or other relief from the Company that any such board or agency may pursue or obtain on his behalf; (d) does not waive his vested rights in any 401(k) plan; and (e) does not prohibit him from filing any claim with the New Jersey Department of Labor & Workforce Development for unemployment compensation benefits or from collecting any award of unemployment compensation benefits granted to him; (f) does not affect any of Employee’s rights with respect to Vested Options, or Employee’s ownership interests in the Company’s shares, if any, that Employee continues to hold following the Separation Date; (g) does not affect Employee’s rights to indemnification and advancement of legal fees or insurance coverage Employee may have before or after the Separation Date, including, without limitation, any rights under governing statutory law or common law, any indemnification agreement, the Company’s organizational documents, including its certificate of incorporation and bylaws, or any “D&O coverage,” that Employee may have with respect to any claims made or threatened against Employee in Employee’s capacity as a current or former director, officer or employee of the Company or any of its affiliates; and (h) does not affect any claims for contribution in the event Employee and any of the Releasees are found to be jointly liable.

 

5. Continuing Protection of Confidential Information and Return of Company Property .

 

(a) Employee warrants that he has not used or disclosed any Confidential Information, except as permitted in connection with his performance of his job duties during his employment. Employee warrants that, as of the date he signs this Release, he has returned to the Company all Confidential Information and other property in his possession (including but not limited to identification badges, keys, keyfobs, access cards, computers and equipment, personal digital assistance, cellular telephones, documents, pricing, customer and supplier lists, personnel information, product information, electronic passwords, memoranda, marketing and sales information and/or files in whatever form, including any electronic data format), and that he has retained no copies of any such information. Employee further represents that he has reconciled to the Company’s satisfaction any outstanding amounts due to the Company on account of charges incurred by him prior to his Separation Date.

 

(b) Employee agrees that, to the extent he has transferred any Confidential Information and/or other business information belonging to the Company and/or any of the Releasees, any personal computer equipment, personal electronic storage devices, or any cloud or other file sharing service to which he has access, he has properly disposed of such materials after returning a complete, true copy of the same to the Company and has also will fully deleted and otherwise appropriately removed all electronic copies of the same from his personal computer equipment, other electronic devices and any cloud or other file sharing services to which he has access in a manner reasonably performed to effectively prevent the disclosure of any sensitive personal data and/or other Confidential Information and/or other business information belonging to the Company.

Page 15 of 19

6. Binding Nature . This Release is binding upon Employee and his heirs, executors and administrators, and is binding upon and shall inure to the benefit of the Company and its successors and assigns.

 

7. Governing Law and Venue . This Release shall in all respects be interpreted, enforced and governed under the laws of the State of New Jersey, exclusive of any choice of law rules. Any dispute regarding this Release shall be brought in, and the Parties consent to the personal jurisdiction of, the state and federal courts of the State of New Jersey (to the extent that subject matter jurisdiction exists).

 

8. Severability . If any provision of this Release is held invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall in no way be affected or impaired thereby.

 

9. No Oral Modification . This Release may not be changed, modified or amended except by a written amendment signed by Employee and an authorized officer of the Company. This Release and the Agreement reflect the entire agreement of the parties, and supersede any prior oral or written agreements related to the same subject matter, except that this Release does not extinguish any of Employee’s or Company’s obligations under the Stock Option Agreements.

 

By:      /s/Paul Genova   Date: June 30, 2017
  Paul Steven Genova    

 

ACKNOWLEDGMENT

 

STATE OF New Jersey )
  :ss
COUNTY OF )

 

On this 30th day of June 2017 before me personally came Paul Steven Genova known and identified to me known to be the person described herein, who executed the foregoing Separation Agreement and General Release, duly acknowledging to me that he signed the same on his own free will, act and deed for the uses and purposes therein mentioned.

 

IN WITNESS WHEREOF, I have hereunto set my hand and seal at Parsippany, New Jersey on the day and year aforesaid.

 

    /s/Rosalie Nystrand    
  Notary Public    
Page 16 of 19

“ATTACHMENT B”

Page 17 of 19

AMENDMENT TO

STOCK OPTION AGREEMENTS

PURSUANT TO THE TERMS OF THE

AMENDED AND RESTATED
WIRELESS TELECOM GROUP, INC. 2000 STOCK OPTION

 

THIS AMENDMENT is made and effective this 22nd day of May, 2017 (the “Effective Date”), by and between Wireless Telecom Group, Inc., a New Jersey corporation (the “Company”), and Paul Steven Genova (the “Optionee”).

 

Background

 

A. The Optionee was originally granted options (the “Options”) to acquire shares of the Company common stock pursuant to the terms of the Amended and Restated Wireless Telecom Group, Inc. 2000 Stock Option Plan (as amended, the “2000 Plan”).

 

B. The Options are evidenced by (i) the Stock Option Agreement, dated April 11, 2008, and (ii) the Stock Option Agreement, dated November 24, 2009, each executed by both the Optionee and the Company ((i) and (ii) collectively, the “Awards”).

 

D. The Committee (as defined in the 2000 Plan) that administers the 2000 Plan has authorized this amendment to the Awards, pursuant to Section 21 of the 2000 Plan, for the purpose of extending the exercise provisions of the Awards in the event of termination of the Optionee’s employment with the Company.

 

E. The Optionee consents to the amendment of the Awards as provided herein.

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, effective as of the Effective Date, the parties hereto agree as follows:

 

1. By deleting existing Section 1.8 of each Award in its entirety and by substituting therefor the following:

 

“1.8. Expiration Date ” means the earliest of the following:

 

(a) if Optionee shall voluntarily terminate his employment with the Employer (other than as a result of his death any time), such Optionee shall have the right to exercise the option as vested at that time, within sixty (60) days after such termination of employment; or

 

(b) if Optionee’s employment with the Employer shall be Involuntarily Terminated (other than as a result of his death any time), such Optionee shall have the right to exercise the option as vested at that time, any time within sixty (60) days after such Involuntary Termination of employment; or

 

(c) if Optionee dies, the date one (1) year after death; or

Page 18 of 19

(d) the day before the tenth (10 th ) anniversary of the Grant date.”

 

2. All other terms of the Awards shall remain in full force and effect, as reflected by the Awards, except to the extent amended hereby.

 

This Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same document. A signed copy of this Amendment delivered by facsimile, email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Amendment.

 

IN WITNESS WHEREOF, the parties have executed and sealed this Amendment as of the day and year first set forth above.

 

  WIRELESS TELECOM GROUP, INC.
     
  By: /s/Timothy Whelan
 
 
     
  Title: Chief Executive Officer
 
 
     
  OPTIONEE:  
     
  /s/Paul Genova  
  Paul Steven Genova  
Page 19 of 19

Exhibit 10.8

 

AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT

 

WHEREAS, Wireless Telecom Group, Inc. (together with its successors and assigns, the “ Company ”), and Timothy Whelan (“ Executive ”) entered into an EXECUTIVE EMPLOYMENT AGREEMENT dated as of June 30, 2016 (the “ Agreement ”); and

 

WHEREAS, the parties desire to amend the Agreement as set forth in this amendment to the Agreement (“ Amendment ”),

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1. All capitalized terms in this Amendment not otherwise defined herein have the meanings defined in the Agreement.

 

2. Paragraph 2(a) of the Agreement is hereby amended by replacing the date “June 30, 2017” with “June 30, 2021.”

 

3. Paragraph 3.1 of the Agreement is hereby amended to read as follows:

 

Base Salary . Commencing on the Effective Date and continuing through the duration of the Term, the Company hereby agrees to pay to Executive an annualized base salary (the “ Salary ”) payable in equal installments on the Company’s regularly-scheduled paydays as it is earned, subject to all applicable federal, state and local income and employment taxes and other required or elected withholdings and deductions. The amount of Salary for the period June 30, 2016 through June 30, 2017 is Two Hundred Seventy Five Thousand Dollars ($275,000); salary for the remainder of the Term will be paid at the rate of Three Hundred Twenty Five Thousand Dollars ($325,000) per year. Executive’s Salary will be reviewed annually by the compensation committee (the “ Compensation Committee ”) of the Board, or the full Board, commencing in January 2018, taking into account the performance of Executive, the performance of the Company and other information deemed appropriate by the Compensation Committee, and may be adjusted by the Compensation Committee or the Board in their sole discretion (in which case such new amount shall be the “Salary” hereunder).”

 

4. Paragraph 3.2 of the Agreement is hereby amended to read as follows:

 

Annual Cash Bonus .

 

For the calendar year ending December 31, 2017 and each subsequent calendar year of the Term, Executive shall be entitled to receive a cash incentive award (the “ Annual Cash Bonus ”) of up to $200,000 for meeting the performance targets determined by the Compensation Committee. Within ninety (90) days after the end of the 2017 calendar year and each calendar year thereafter during the Term, the Board shall consult with Executive and shall determine and approve Executive’s Annual Cash Bonus taking into account the performance targets established for Executive, it being understood that the Compensation Committee (or the independent members of the Board) shall be entitled to award the Annual Cash Bonus in an amount greater than $200,000 for performance at greater than target levels. Subject to any valid deferral election by Executive, the applicable Annual Cash Bonus shall be paid in a cash lump sum as soon as

 

reasonably practicable following the Board’s approval thereof, provided that Executive remains employed through such date, but in no event later than April 15 of the calendar year following the calendar year for which the applicable Annual Cash Bonus is being awarded.

 

5. Paragraph 3.3 of the Agreement is hereby amended by adding the following sentence to the end of the paragraph:

 

“In connection with Executive’s agreement to extend the Term of his employment as Chief Executive Officer of the Company to June 30, 2021, on June 5, 2017, the Company granted to Executive an option to acquire two hundred thousand (200,000) shares of common stock of the Company at an exercise price equal to the closing price of the common stock as of June 5, 2017. The option shall vest in equal quarterly installments over a period of four years and shall have a term of ten years.”

 

6. The amendments to the Agreement set forth herein are effective as of July 1, 2017, except that the amendment to Section 3.3 of the Agreement is effective June 5, 2017. Except as specifically amended by this Amendment, the Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects.

 

7. This Amendment shall be governed by and construed and interpreted in accordance with the laws of the State of New Jersey, exclusive of any choice of law rules.

 

8. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument. Signatures delivered by facsimile or e-mail (as a .pdf, .tif or similar un-editable attachment) shall be effective for all purposes.

 

    Wireless Telecom Group, Inc.
         
    By:  /s/ Alan Bazaar  
      Name: Alan Bazaar  
      Title:   Chairman  
         
ACCEPTED AND AGREED THIS 9TH DAY OF JUNE, 2017      
       
    /s/ Timothy Whelan  
    Timothy Whelan  
2

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Timothy Whelan, certify that:

 

1.        I have reviewed this quarterly report on Form 10-Q of Wireless Telecom Group, Inc.;

 

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.        The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5.        The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date: August 9, 2017

 

  /s/ Timothy Whelan  
  Timothy Whelan
  Chief Executive Officer
  (Principal Executive Officer)
 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Michael Kandell, certify that:

 

1.        I have reviewed this quarterly report on Form 10-Q of Wireless Telecom Group, Inc.;

 

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.        The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5.        The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

 

Date: August 9, 2017 /s/ Michael Kandell  
  Michael Kandell
  Chief Financial Officer
  (Principal Financial Officer)
 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Wireless Telecom Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Timothy Whelan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) The Periodic Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  /s/ Timothy Whelan  
  Timothy Whelan
  Chief Executive Officer
  August 9, 2017

 

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Wireless Telecom Group, Inc. (the “Company”) on Form 10-Q for the quarter ending June 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Michael Kandell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

(1) The Periodic Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

  /s/ Michael Kandell  
  Michael Kandell
  Chief Financial Officer
  August 9, 2017

 

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.