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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

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

 

For the quarterly period ended March 31, 2022

 

OR

 

☐ 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)

 

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Common Stock, par value $0.01 per share   WTT   NYSE American

 

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 ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☐   Accelerated filer ☐
         
Non-accelerated filer ☐   Smaller reporting company ☒
         
  Emerging growth company ☐

 

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. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐   No ☒

 

Number of shares of Common Stock outstanding as of May 2, 2022: 22,972,009

 

 

 

 

 

 

WIRELESS TELECOM GROUP, INC.

Form 10-Q

Table of Contents

 

PART I – FINANCIAL INFORMATION  
   
Item 1. Financial Statements (Unaudited) 3
     
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
     
Item 4. Controls and Procedures 21
     
PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 22
     
Item 1A. Risk Factors 22
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
     
Item 3. Defaults Upon Senior Securities 22
     
Item 4. Mine Safety Disclosures 22
     
Item 5. Other Information 22
     
Item 6. Exhibits 22
     
SIGNATURES 23

 

2

 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and par value)

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

   (Unaudited)     
  

March 31

2022

  

December 31

2021

 
CURRENT ASSETS          
Cash & cash equivalents  $19,072   $4,472 
Accounts receivable - net of reserves of $180 and $196, respectively   3,875    2,407 
Inventories - net of reserves of $695 and $681, respectively   4,976    5,088 
Prepaid expenses and other current assets   2,233    1,689 
Current assets of discontinued operations   -    6,869 
TOTAL CURRENT ASSETS   30,156    20,525 
           
PROPERTY PLANT AND EQUIPMENT - NET   1,300    1,110 
           
OTHER ASSETS          
Goodwill   10,012    10,108 
Acquired intangible assets, net   3,418    3,661 
Deferred income taxes   2,314    5,580 
Right of use assets   1,007    1,146 
Other assets   290    284 
Non current assets of discontinued operations   -    1,937 
TOTAL OTHER ASSETS   17,041    22,716 
           
TOTAL ASSETS  $48,497   $44,351 
           
CURRENT LIABILITIES          
Short term debt  $62   $126 
Accounts payable   1,470    1,481 
Short term leases   599    585 
Accrued expenses and other current liabilities   6,259    6,676 
Deferred revenue   89    408 
Current liabilities of discontinued operations   -    1,965 
TOTAL CURRENT LIABILITIES   8,479    11,241 
           
LONG TERM LIABILITIES          
Long term debt   267    3,595 
Long term leases   462    615 
Other long term liabilities   52    52 
Deferred tax liability   222    228 
TOTAL LONG TERM LIABILITIES   1,003    4,490 
           
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
36,230,636 and 35,915,636 shares issued, 22,972,009 and 22,666,072 shares outstanding		   362    359 
Additional paid in capital   51,906    51,555 
Retained earnings   10,751    554 
Treasury stock at cost, 13,258,627 and 13,249,564 shares   (24,638)   (24,619)
Accumulated other comprehensive income   634    771 
TOTAL SHAREHOLDERS’ EQUITY   39,015    28,620 
           
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $48,497   $44,351 

 

See accompanying Notes to Consolidated Financial Statements.

 

3

 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME/(LOSS)

(UNAUDITED)

(In thousands, except per share amounts)

 

         
   For the Three Months Ended 
   March 31 
   2022   2021 
Net revenues  $7,596   $8,184 
           
Cost of revenues   3,241    3,330 
           
Gross profit   4,355    4,854 
           
Operating expenses          
Research and development   1,159    1,156 
Sales and marketing   1,260    1,195 
General and administrative   3,392    2,853 
Total operating expenses   5,811    5,204 
           
Operating loss   (1,456)   (350)
           
Loss on extinguishment of debt   (792)   - 
Other income/(expense)   101    27 
Interest expense   (177)   (297)
           
Loss before taxes   (2,324)   (620)
           
Tax benefit   (851)   (145)
           
Net loss from continuing operations  $(1,473)  $(475)
           
Net income from discontinued operations, net of taxes   11,670    242 
Net income/(loss)  $10,197   $(233)
           
Other comprehensive income/(loss):          
Foreign currency translation adjustments   (137)   75 
Comprehensive income/(loss)  $10,060   $(158)
           
Loss per share from continuing operations:          
Basic  $(0.07)  $(0.02)
Diluted  $(0.07)  $(0.02)
           
Income per share from discontinued operations:          
Basic  $0.52   $0.01 
Diluted  $0.47   $0.01 
           
Income/(loss) per share:          
Basic  $0.45   $(0.01)
Diluted  $0.40   $(0.01)
           
Weighted average shares outstanding:          
Basic   22,603    21,742 
Diluted   25,070    24,050 

 

In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive.

 

See accompanying Notes to Consolidated Financial Statements.

 

4

 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

         
   For the Three Months 
   Ended March 31 
   2022   2021 
CASH FLOWS USED BY OPERATING ACTIVITIES          
Net income/(loss)  $10,197   $(233)
Adjustments to reconcile net loss to net cash used by operating activities:          
Depreciation and amortization   433    530 
Loss on extinguishment of term debt   792    - 
Gain on sale of Microlab   (16,403)   - 
Amortization of debt issuance fees   55    83 
Share-based compensation expense   330    114 
Deferred rent   (7)   (7)
Deferred income taxes   3,265    - 
Provision for doubtful accounts   (16)   3 
Inventory reserves   24    61 
Changes in assets and liabilities, net of divestiture:          
Accounts receivable   (1,411)   (853)
Inventories   (132)   (517)
Prepaid expenses and other assets   (184)   (254)
Accounts payable   304    606 
Deferred revenue   (317)   - 
Accrued expenses and other liabilities   (505)   235 
Net cash used by operating activities   (3,575)   (232)
           
CASH FLOWS PROVIDED/(USED) BY INVESTING ACTIVITIES          
Capital expenditures   (151)   (144)
Deferred purchase price payment   (250)   (200)
Divestiture of Microlab, net   22,753    - 
Net cash provided/(used) by investing activities   22,352    (344)
           
CASH FLOWS USED BY FINANCING ACTIVITIES          
Term loan repayments   (4,104)   (449)
Proceeds from exercise of stock options   24    - 
Shares withheld for employee taxes   (19)   (17)
Net cash provided/(used) by financing activities   (4,099)   (466)
           
Effect of Exchange Rate Changes on Cash and Cash Equivalents   (78)   12 
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS   14,600    (1,030)
           
Cash and Cash Equivalents, at Beginning of Period   4,472    4,910 
           
CASH AND CASH EQUIVALENTS, AT END OF PERIOD  $19,072   $3,880 
           
SUPPLEMENTAL INFORMATION:          
Cash paid during the period for interest  $122   $213 
Cash paid during the period for income taxes  $12   $13 

 

See accompanying Notes to Consolidated Financial Statements.

 

5

 

 

WIRELESS TELECOM GROUP, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share amounts)

 

   Common
Stock Issued		   Common
Stock Amount		   Additional Paid
In Capital		   Retained
Earnings		   Treasury
Stock		   Accumulated
Other
Comprehensive
Income/(Loss)		   Total
Shareholders’
Equity		 
Balances at January 1, 2021   34,888,904   $349   $50,163   $(946)  $(24,556)  $841   $25,851 
                                    
Net income/(loss)   -    -    -    (233)   -    -    (233)
Shares withheld for employee taxes   -    -    -    -    (17)   -    (17)
Share-based compensation expense   -    -    114    -    -                  -    114 
Cumulative translation adjustment   -    -    -    -    -    75    75 
Balances at March 31, 2021   34,888,904   $349   $50,277   $(1,179)  $(24,573)  $916   $25,790 

 

   Common
Stock Issued		   Common
Stock
Amount		   Additional Paid
In Capital		   Retained
Earnings		   Treasury
Stock		   Accumulated
Other
Comprehensive
Income/(Loss)		   Total
Shareholders’
Equity		 
Balances at January 1, 2022   35,915,636   $359   $51,555   $554   $(24,619)  $771   $28,620 
                                    
Net income/(loss)   -    -    -    10,197    -    -    10,197 
Issuance of shares in connection with stock options exercised   15,000    -    24    -    -    -    24 
Issuance of restricted stock   300,000    3    (3)   -    -    -    - 
Shares withheld for employee taxes   -    -    -    -    (19)   -    (19)
Share-based compensation expense   -    -    330    -    -    -    330 
Cumulative translation adjustment   -    -    -    -    -    (137)   (137)
Balances at March 31, 2022   36,230,636   $362   $51,906   $10,751   $(24,638)  $634   $39,015 

 

See accompanying Notes to Consolidated Financial Statements.

 

6

 

 

NOTE 1 - Summary of Significant Accounting Principles and Policies

 

Basis of Presentation and Preparation

 

Wireless Telecom Group, Inc., a New Jersey corporation, together with its subsidiaries (“we”, “us”, “our” or the “Company”), specializes in the design and manufacture of advanced radio frequency and microwave devices which enable the development, testing and deployment of wireless technology. The Company provides unique, highly customized and configured solutions which drive innovation across a wide range of traditional and emerging wireless technologies.

 

The consolidated financial statements for the 2021 fiscal year included the accounts of Wireless Telecom Group, Inc., doing business as, and operating under the trade name Noise Com, Inc., and its wholly owned subsidiaries including Boonton Electronics Corporation, Microlab/FXR, Wireless Telecommunications Ltd., CommAgility Limited and Holzworth Instrumentation, Inc. Noise Com, Inc., Boonton Electronics Corporation, Microlab/FXR, CommAgility Limited Ltd., and Holzworth Instrumentation, Inc. are hereinafter referred to as “Noisecom”, “Boonton”, “Microlab”, “CommAgility” and “Holzworth”, respectively.

 

As more fully described in Note 3, on March 1, 2022, the Company completed the sale of Microlab to RF Industries, Ltd. In accordance with applicable accounting guidance, the results of Microlab are presented as discontinued operations in the Consolidated Statements of Operations and Comprehensive Income/(Loss) and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of Microlab as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of December 31, 2021. The Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations.

 

Our consolidated financial statements from continuing operations include the accounts of Noisecom, Boonton, Holzworth, and CommAgility and have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”). All intercompany transactions and balances have been eliminated in consolidation.

 

It is suggested that these interim consolidated financial statements be read in conjunction with the audited consolidated financial statements, and the notes thereto, included in the Company’s latest annual report (Form 10-K).

 

The Company’s fiscal periods are based on the calendar year. Except as otherwise specified, references to “first quarter(s)” or “three months” indicate the Company’s fiscal periods ended March 31, 2022 and March 31, 2021, and references to “year-end” indicate the fiscal year ended December 31, 2021.

 

Consolidated Financial Statements

 

In the opinion of management, the accompanying 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 consolidated financial statements included in its annual report on Form 10-K for the year ended December 31, 2021. Specific reference is made to that report since certain information and footnote disclosures normally included in financial statements in accordance with US GAAP have been reduced for interim periods in accordance with SEC rules.

 

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.

 

Critical Accounting Estimates

 

The preparation of our consolidated financial statements requires the Company to make estimates and judgments that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses for each period. We base our assumptions, judgements and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. At least quarterly, we evaluate our assumptions, judgments and estimates, and make changes as deemed necessary.

 

7

 

 

The COVID-19 pandemic and the conflict between Russia and Ukraine have negatively impacted regional and global economies, disrupted global supply chains and created significant volatility and disruption of financial markets. Although these disruptions did not impact our estimates and judgements as of the date of this report, it is reasonably possible that our accounting estimates and judgements may change as new events occur and additional information becomes available or is obtained. Furthermore, actual results could differ materially from our estimates as of the date of issuance of this Quarterly Report on Form 10-Q under different assumptions or conditions.

 

For further information about our critical accounting estimates, see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Policies” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

 

Concentration Risk

 

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

 

Credit evaluations are performed on customers requiring credit over a certain amount. Credit risk is mitigated to a lesser extent through collateral such as letters of credit, bank guarantees or payment terms like cash in advance.

 

One customer accounted for 11.2% of consolidated revenue for the three months ended March 31, 2022. A different customer accounted for 17.4% of consolidated revenue for the three months ended March 31, 2021.

 

One customer accounted for 19.3% of consolidated accounts receivable as of March 31, 2022. At December 31, 2021, no one customer accounted for greater than 10% of consolidated accounts receivable.

 

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.

 

Contingent Consideration

 

Under the terms of the Holzworth Share Purchase Agreement, the Company was required to pay additional purchase price in the form of an earnout based on Holzworth’s financial results for the years ended December 31, 2020 and 2021.

 

As of March 31, 2022, the amount due for the Holzworth earnout was $2.9 million and included in accrued expenses and other current liabilities in the Consolidated Balance Sheet.

 

8

 

 

Segments

 

The Company evaluates its financial reporting in accordance with ASC 280 Segment Reporting. As of March 1,2022, the Company determined that the chief operating decision maker makes financial decisions and allocates resources based on segment profit information for two segments. See Note 12.

 

NOTE 2 – Accounting Pronouncements

 

Recently Adopted Accounting Standards

 

There have been no changes to our significant accounting policies as described in the 2021 Form 10-K that had a material impact on our consolidated financial statements and related notes.

 

Recent Accounting Pronouncements Not Yet Adopted

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). ASU 2016-13 changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. This pronouncement is effective for small reporting companies for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2022. The Company plans to adopt the standard effective January 1, 2023. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

 

NOTE 3 – Discontinued Operations

 

On March 1, 2022, the Company completed the sale of Microlab to RF Industries, Ltd (the “Transaction”). At closing, the Company received approximately $22.8 million in proceeds net of indemnification and purchase price adjustment holdbacks of $150,000 and $100,000, respectively, and direct expenses. The indemnification holdback expires one year from close and the final purchase price adjustment, which is primarily comprised of a working capital adjustment, is to be settled 90 days after close. $4.1 million of the net proceeds were used to repay our outstanding Term Loan Facility (as defined in Note 4) with Muzinich BDC, approximately $600,000 of the net proceeds were used to repay our outstanding revolver balance related to the Bank of America Credit Facility (as defined in Note 4) and approximately $486,000 were used to pay our advisors.

 

The Company terminated its Term Loan Facility with Muzinich BDC and Credit Facility with Bank of America N.A. as of the Transaction close date (see Note 4 below). Additionally, concurrent with the closing, the Company entered into a sublease with RF Industries, Ltd for approximately one-half of the square footage of our corporate headquarters in Parsippany, NJ (see Note 5 below).

 

The Transaction will be treated as a sale of the assets and liabilities of Microlab to RF Industries, Ltd. for U.S. federal and applicable state income tax purposes. The Company has approximately $14.9 million of U.S. federal net operating loss carryforwards and approximately $41.2 million of New Jersey state net operating loss carryforwards as of December 31, 2021. We expect to utilize all of our federal net operating loss carryforwards and approximately 50% of our state net operating loss carryforwards to offset the taxable gain generated from the Microlab divestiture.

 

In accordance with Accounting Standards Codfication (“ASC”) 205-20 Discontinued Operations, the results of Microlab are presented as discontinued operations in the Consolidated Statements of Operations and, as such, have been excluded from continuing operations. Further, the Company reclassified the assets and liabilities of Microlab as assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of December 31, 2021. The Consolidated Statements of Cash Flows are presented on a consolidated basis for both continuing operations and discontinued operations.

 

9

 

 

The following table summarizes the significant items included in income from discontinued operations, net of tax in the Consolidated Statement of Operations for the three months ended March 31, 2022 and 2021 (in thousands):

 

         
   Three months ended 
   March 31, 2022   March 31, 2021 
Net revenues  $2,477   $3,137 
Cost of revenues   1,626    2,046 
Gross profit   851    1,091 
Operating expenses   693    756 
Gain on divestiture, net of expenses   16,403    - 
Income from Discontinued Operations before income taxes   16,561    335 
Income tax expense   4,891    93 
Income from Discontinued Operations, net of income taxes  $11,670   $242 

 

The following table summarizes the carrying value of the significant classes of assets and liabilities classified as discontinued operations as of December 31, 2021:

 

     
Current Assets    
Accounts receivable, net  $2,883 
Inventories, net   3,986 
Total current assets   6,869 
      
Property, plant and equipment, net   421 
      
Goodwill   1,351 
Other non current assets   165 
Total non current assets   1,937 
      
Total assets  $8,806 
      
      
Current liabilities     
Accounts payable  $783 
Accrued expenses and other current liabilities   1,182 
      
Total current liabilities  $1,965 

 

 

The cash flows related to discontinued operations have not been segregated and are included in the consolidated statements of cash flows for all periods presented. Microlab depreciation expense for the three months ended March 31, 2021 and included in the consolidated statement of cash flow was $61,000. Depreciation expense recorded in the three months ended March 31, 2022 for Microlab was not material. There were no material Microlab capital expenditures in the three months ended March 31, 2022 or 2021.

 

NOTE 4 – Debt

 

Termination of Muzinich Term Loan Facility and Bank of America N.A. Credit Facility

 

On March 1, 2022, the Company repaid in full and terminated that certain Credit Agreement dated February 7, 2020, among the Company, its subsidiaries and Muzinich BDC, Inc., as amended on May 4, 2020, February 25, 2021, May 27, 2021 and September 28, 2021 (the “Term Loan Facility”). The Company repaid the outstanding principal balance of $4.1 million and accrued interest thereon. Additionally, on March 1, 2022, the Company terminated that certain Loan and Security Agreement dated as of February 16, 2017 among the Company, its subsidiaries and Bank of America, as amended on June 30, 2017, January 23, 2019, February 27, 2019, November 8, 2019, February 7, 2020, May 1, 2020, February 25, 2021 and September 28, 2021 (the “Credit Facility”), which included an asset based revolving loan (“revolver”) which was subject to a borrowing base calculation. The outstanding balance of the revolver at March 1, 2022 was approximately $600,000. The repayment of the Term Loan Facility and Revolver were funded by the proceeds of the Microlab divestiture.

 

10

 

 

The Company accounted for the termination of the Term Loan Facility and Credit Facility as an extinguishment of debt in accordance with ASC 470 Debt. The Company recognized a loss on extinguishment of debt of $792,000 which was primarily comprised of unamortized debt issuance costs.

 

CIBLS Loan

 

On May 27, 2021, CommAgility entered into the Coronavirus Business Interruption Loan Agreement (“CIBLS Loan”) with Lloyds Bank PLC (“Lloyds”). Under the terms of the CIBLS Loan CommAgility can draw up to a maximum of £250,000 for purposes of supporting daily business cash flow. The CIBLS Loan is repayable in 48 consecutive equal monthly installments beginning in month 13 after the initial loan drawdown (12 month principal repayment holiday). Interest is payable monthly at the official bank rate of the Bank of England plus an interest margin of 2.35% per annum. Interest payments begin in month 13 after the initial loan drawdown. The first twelve months of interest payments are paid by the U.K. government. The CIBLS Loan is secured by the assets of CommAgility.

 

On July 1, 2021, CommAgility executed a draw down of the maximum amount of £250,000. As of March 31, 2022, $62,000 is included in short term debt and $267,000 is included long term debt on the Consolidated Balance Sheet.

 

NOTE 5 – Leases

 

The Company’s lease agreements consist of building leases for its operating locations and office equipment leases for printers and copiers with lease terms that range from less than 12 months to 8 years. At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Company’s leases for office equipment such as printers and copiers contain lease and non-lease components (i.e. maintenance). The Company accounts for lease and non-lease components of office equipment as a single lease component.

 

All of the Company’s leases are operating leases and are presented as right of use lease asset, short term lease liability and long term lease liability on the consolidated balance sheets as of March 31, 2022 and December 31, 2021. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental borrowing rate. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

 

Lease expense is recognized on a straight-line basis over the lease term and is included in cost of revenues and general and administrative expenses on the Consolidated Statement of Operations and Comprehensive Income/(Loss).

 

An initial right-of-use asset of $1.9 million was recognized as a non-cash asset addition with the adoption of the new lease accounting standard on January 1, 2019. With our acquisition of Holzworth on February 7, 2020, we acquired a right-of-use asset of $789,000. There have been no other right-of-use assets recognized since the date of adoption of the new lease standard. Cash paid for amounts included in the present value of operating lease liabilities was $156,000 and $151,000 during the three months ended March 31, 2022 and 2021, respectively, and was included in operating cash flows.

 

Operating lease costs for the three months ended March 31, 2022 and March 31, 2021 were $247,000 and $276,000, respectively.

 

The following table presents information about the amount and timing of cash flows arising from the Company’s leases as of March 31, 2022:

 Schedule of Maturity of Operating Lease Liabilities

(in thousands)  March 31, 2022 
Maturity of Lease Liabilities     
Remainder of 2022  $481 
2023   276 
2024   158 
2025   163 
2026   69 
Total undiscounted operating lease payments   1,147 
Less: imputed interest   (86)
Present value of operating lease liabilities  $1,061 
      
Balance sheet classification     
Current lease liabilities  $599 
Long-term lease liabilities   462 
Total operating lease liabilities  $1,061 
      
Other information     
Weighted-average remaining term (months) for operating leases   34 
Weighted-average discount rate for operating leases   5.88%

 

On March 1, 2022, the Company entered into a sublease for approximately one-half of the corporate headquarters in Parsippany N.J. with RF Industries, Ltd. The sublease co-terminates with the master lease on March 31, 2023. The Company evaluated the sublease in accordance with ASC 842 Leases and determined that the sublease is an operating lease. Accordingly, sublease income is recognized on the Consolidated Statement of Operations as other income.

 

11
 

 

NOTE 6 – Revenue

 

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for promised goods or services. The Company’s performance obligations are satisfied either over time or at a point in time. Revenue from performance obligations that transferred at a point in time accounted for approximately 91% and 97% of the Company’s consolidated revenue for the three months ended March 31, 2022 and 2021, respectively.

 

Nature of Products and Services

 

Hardware

 

The Company generally has one performance obligation in its arrangements involving the sales of digital signal processing hardware, power meters, analyzers, noise/signal generators, phase noise analyzers and other components. When the terms of a contract include the transfer of multiple products, each distinct product is identified as a separate performance obligation. Generally, satisfaction occurs when control of the promised goods is transferred to the customer in exchange for consideration in an amount for which we expect to be entitled. Generally, control is transferred when legal title of the asset moves from the Company to the customer. We sell our products to a customer based on a purchase order, and the shipping terms per each individual order are primarily used to satisfy the single performance obligation. However, in order to determine when control has transferred to the customer, the Company also considers:

 

  ● when the Company has a present right to payment for the asset;
  ● when the Company has transferred physical possession of the asset to the customer;
  ● when the customer has the significant risks and rewards of ownership of the asset; and
  ● when the customer has accepted the asset.

 

Software

 

Arrangements involving licenses of software in the CommAgility brand may involve multiple performance obligations, most notably subsequent releases of the software. The Company has concluded that each software release in a multiple deliverable arrangement involving CommAgility software licenses is a distinct performance obligation and, accordingly, transaction price is allocated to each release when the customer obtains control of the software.

 

Performance obligations that are not distinct at contract inception are combined. Specifically, with the Company’s sales of software, contracts that include customization may result in the combination of the customization services with the license as one distinct performance obligation and recognized over time. The duration of these performance obligations are typically one year or less.

 

Services

 

Arrangements involving calibration and repair services of the Company’s products are generally considered a single performance obligation and are recognized as the services are rendered.

 

12

 

 

Shipping and Handling

 

Shipping and handling activities performed after the customer obtains control are accounted for as fulfillment activities and recognized as cost of revenues.

 

Significant Judgments

 

For the Company’s more complex software and services arrangements, significant judgment is required in determining whether licenses and services are distinct performance obligations that should be accounted for separately or are not distinct and thus accounted for together. Further, in cases where we determine that performance obligations should be accounted for separately, judgment is required to determine the standalone selling price for each distinct performance obligation.

 

Contract Balances

 

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in contract assets (unbilled revenue) or contract liabilities (deferred revenue) on the Company’s Consolidated Balance Sheet. The Company records unbilled revenue when revenue is recognized prior to invoicing, or deferred revenue when revenue is recognized subsequent to invoicing. Unbilled revenue was $297,000 and $292,000 as of March 31, 2022 and December 31, 2021, respectively, and recorded in prepaid expenses and other current assets. Deferred revenue was $89,000 and $408,000 as of March 31, 2022 and December 31, 2021, respectively. The decrease in deferred revenue from December 31, 2021 is primarily due to recognition of revenue for certain CommAgility projects involving multiple performance obligations.

 

13

 

 

Disaggregated Revenue

 

We disaggregate our revenue from contracts with customers by product family and geographic location as we believe it best depicts how the nature, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the tables below (in thousands). Revenues from signal generators, components, analyzers and power meters are attributable to the T&M segment in 2022 and 2021. Approximately $494,000 and $440,000 of services revenue are attributable to the T&M segment in 2022 and 2021, respectively.

 

  

Three Months

Ended

March 31, 2022

  

Three Months Ended

March 31, 2021

 
Total net revenues by revenue type          
Signal generators and components  $3,471   $3,329 
Signal analyzers and power meters   2,094    1,558 
Signal processing hardware   411    1,483 
Software licenses   417    990 
Services   1,203    824 
Total net revenue  $7,596   $8,184 
           
Total net revenues by geographic areas          
Americas  $5,192   $5,011 
EMEA   979    2,260 
APAC   1,425    913 
Total net revenue  $7,596   $8,184 

 

NOTE 7 – Income Taxes

 

The Company records deferred taxes in accordance with 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 Company’s major tax jurisdictions are New Jersey, Colorado and the United Kingdom (“U.K.”). The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed.

 

As of March 31, 2022, the Company’s net deferred tax asset of $2.3 million is net of a valuation allowance of approximately $7.1 million which is associated with the Company’s foreign net operating loss carryforward from an inactive foreign entity, state net operating loss carryforward and a state research and development credit. The net deferred tax asset decreased approximately $3.3 million from December 31, 2021 due to the taxable gain to be recognized on the Microlab divestiture. The Company expects to utilize in 2022 all of its federal net operating loss carryforwards and approximately one-half of its New Jersey state net operating loss carryforwards to offset the taxable gain recognized on the Microlab divestiture. The reduction in the net deferred tax asset from December 31, 2021 is due to the reduction in Federal and New Jersey state net operating loss carryforwards.

 

In accordance with Accounting Standards Update (“ASU”) 2019-12 the Company recorded a tax provision of approximately $4.9 million related to income from discontinued operations and a tax benefit of approximately $851,000 related to loss from continuing operations for the three months ended March 31, 2022 and a tax provision of approximately $93,000 related to income from discontinued operations and a tax benefit of approximately $145,000 related to loss from continuing operations for the three months ended March 31, 2021.

 

14

 

 

NOTE 8 – Earnings (Loss) Per Share

 

Basic earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period and, when dilutive, potential shares from stock options using the treasury stock method, the weighted average number of unvested restricted shares, the weighted-average number of restricted stock units, the number of shares issuable under the terms of the Holzworth earnout and the weighted average number of warrants to purchase common stock outstanding for the period. Shares from stock options are included in the diluted earnings per share calculation only when options exercise prices are lower than the average market value of the common shares for the period presented. In periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation because they are anti-dilutive. In accordance with ASC 260, “Earnings Per Share”, the following table reconciles basic shares outstanding to fully diluted shares outstanding.

 

   2022   2021 
   For the Three Months 
   Ended March 31, 
   2022   2021 
         
Weighted average common shares outstanding   22,603,330    21,741,550 
Potentially dilutive equity awards   2,467,056    2,308,144 
Weighted average common shares outstanding, assuming dilution   25,070,386    24,049,694 

 

For the three months ended March 31, 2022, the weighted average number of options to purchase common stock not included in potentially dilutive equity awards because the effects are anti-dilutive, or the performance condition was not met was 1,320,000. The number of shares issuable under the terms of the Holzworth earnout, if all paid in shares of common stock, is 1,340,637 and is included in potentially dilutive equity awards in the chart above.

 

For the three months ended March 31, 2021, the weighted average number of options to purchase common stock not included in potentially dilutive equity awards because the effects are anti-dilutive, or the performance condition was not met was 1,320,000. The number of shares issuable under the terms of the Holzworth earnout, if all paid in shares of common stock, is 1,599,807 and is included in potentially dilutive equity awards in the chart above.

 

NOTE 9 – Inventories

 

Inventory carrying value is net of inventory reserves of $695,000 at March 31, 2022 and $681,000 at December 31, 2021.

 

   March 31,
2022		   December 31,
2021		 
Inventories consist of (in thousands):        
         
   March 31,
2022		   December 31,
2021		 
Raw materials  $3,462   $3,213 
Work-in-process   384    542 
Finished goods   1,130    1,333 
Total Inventory  $4,976   $5,088 

 

15
 

 

NOTE 10 – Accrued Expenses and Other Current Liabilities

 

As of March 31, 2022, and December 31, 2021 accrued expenses and other current liabilities consisted of the following (in thousands):

 

   March 31,
2022		   December 31
2021		 
Holzworth earnout (Year 1 and Year 2)  $2,942   $2,942 
Payroll and related benefits   911    718 
Accrued income taxes   827    - 
Accrued bonus   41    590 
Goods received not invoiced   352    277 
Accrued commissions   314    465 
Accrued professional fees   216    524 
Sales and use and VAT tax   166    276 
Holzworth deferred purchase price   -    250 
Warranty reserve   61    61 
Other   429    573 
Total  $6,259   $6,676 

 

NOTE 11 - Accounting for Stock Based Compensation

 

The Company’s results for the three months ended March 31, 2022 and 2021 include $330,000 and $114,000, respectively, related to stock based compensation expense. Such amounts have been included in the Consolidated Statement of Operations and Comprehensive Income/(Loss) within general and administrative expenses in operating expenses. The Company accounts for forfeitures when they occur.

 

Incentive Compensation Plan

 

In the second quarter of 2021, the Company’s Board of Directors and shareholders approved the 2021 Long Term Incentive Plan (the “2021 Incentive Plan”), which provides for the grant of equity-based and cash incentives, including restricted stock awards, restricted stock unit awards, performance unit awards, non-qualified stock options, incentive stock options and cash awards, including dividend equivalent rights to employees, officers, directors or other service providers of the Company who are expected to contribute to the Company’s future growth and success. The 2021 Incentive Plan provides for the grant of awards relating to 1.5 million shares of common stock. As of March 31, 2022, there are 442,500 shares available for grant under the 2021 Incentive Plan.

 

All service-based (time vesting) options granted have ten-year terms from the date of grant and typically vest annually and become fully exercisable after a maximum of five years. However, vesting conditions are determined on a grant by grant basis.

 

On January 6, 2022 the Compensation Committee of the Board of Directors approved the grant of restricted common stock awards to named executive officers Tim Whelan, Mike Kandell, Dan Monopoli and Alfred Rodriguez of 125,000, 75,000, 50,000 and 50,000 shares respectively which vest in equal annual installments over two years. If an executive’s service with the Company terminates before the restricted awards are fully vested, then the shares that are not then fully vested are forfeited and immediately returned to the Company. The grant date value per share was $2.11.

 

NOTE 12 – Reportable Segments

 

In March 2022 the Company reorganized into two segments – Test and Measurement (T&M) and Radio, Baseband and Software (RBS). The T&M segment is comprised of the Boonton, Noisecom and Holzworth brands. T&M is primarily engaged in supplying noise source components and instruments and electronic testing and measurement instruments to customers in the semiconductor, military, aerospace, medical and commercial communications industries.

 

16

 

 

The RBS segment is comprised of CommAgility and develops the software which enables specialized LTE and 5G deployments, applications and private network solutions including the LTE physical layer and stack software, for mobile network and related applications. RBS engineers work closely with customers to provide hardware and software solutions in specialized applications and use-cases in wireless baseband, private networks, and non-terrestrial (“NTN”) communications. Additionally, CommAgility licenses, implements and customizes 5G and LTE physical layer and stack software for private networks supporting satellite communications, the military and aerospace industries, offering our customers unique implementation capabilities built on 3rd Generation Partnership Project (“3GPP”) standards.

 

For internal reporting purposes, the Company’s chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the Company’s internal management systems. Segment profitability includes the direct expenses of each segment and certain corporate allocations for rent and insurance. Management does not include in its measures of segment profitability certain corporate expenses such as information technology expenses, finance and accounting expenses, legal and professional fees, public company expenses and other discreet items that are not core to the measurement of segment management’s performance but rather are controlled at the corporate level.

 

Summarized financial information relating to the Company’s reportable segments is shown in the following table:

 

                         
  Three months ended   Three months ended 
   March 31, 2022   March 31, 2021 
   T&M   RBS   Consolidated   T&M   RBS   Consolidated 
Net revenues  $6,059   $1,537   $7,596   $5,327   $2,857   $8,184 
Cost of revenues   2,551    690    3,241    2,273    1,057    3,330 
Gross profit   3,508    847    4,355    3,054    1,800    4,854 
                               
Segment Operating Expenses   1,871    1,598    3,469    1,401    1,835    3,236 
                               
Segment Profitability   1,637    (751)   886    1,653    (35)   1,618 
                               
Corporate Expenses             2,342              1,968 
                               
Operating Loss             (1,456)             (350)
                               
Other income/(expense)             (691)             27 
Interest expense             (177)             (297)
                               
Income/(Loss) before taxes             (2,324)             (620)
                               
Tax provision/(benefit)             (851)             (145)
                               
Net income/(loss) from continuing operations             (1,473)             (475)
                               
Net income from Discontinued Operations, net of tax             11,670              242 
Net income/(loss)            $10,197             $(233)
                               
Depreciation and Amortization  $279   $154   $433   $224   $246   $470 

 

NOTE 13 – COMMITMENTS AND CONTINGENCIES

 

There have been no material changes in our commitments and contingencies and risks and uncertainties as of March 31, 2022 from that previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021.

 

NOTE 14 - SUBSEQUENT EVENTS

 

There were no subsequent events or transactions requiring recognition or disclosure in the consolidated financial statements, and the notes thereto, through the date the financial statements were issued.

 

17

 

 

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 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 audited consolidated financial statements contained in our annual report on Form 10-K for the year ended December 31, 2021.

 

Introduction

 

On March 1, 2022 the Company completed the sale of Microlab to RF Industries, Ltd. and received approximately $23.7 million in cash. Concurrent with the divestiture we repaid our outstanding Term Loan Facility with Muzinich BDC and Credit Facility with Bank of America N.A. and terminated both facilities. The divestiture of Microlab represents a strategic shift for the Company away from lower margin RF Components business to our higher growth higher margin T&M and RBS segments.

 

RESULTS OF OPERATIONS

 

Three Months Ended March 31, 2022 Compared with Three Months Ended March 31, 2021

 

Net Revenues (in thousands)

 

   Three months ended March 31, 
   Revenue   % of Revenue   Change 
   2022   2021   2022   2021   Amount   Pct. 
Test and measurement  $6,059   $5,327    79.8%   65.1%  $732    13.7%
Radio, baseband, software   1,537    2,857    20.2%   34.9%   (1,320)   -46.2%
Total net revenues  $7,596   $8,184    100.0%   100.0%  $(588)   -7.2%

 

Net consolidated revenues decreased 7.2% due to lower sales of our digital signal processing cards and lower software sales at our RBS segment. The lower software revenue is the result, in part, of more volatile quarter to quarter revenue recognition patterns due to the timing, delivery and complexity of RBS projects. This was only partially offset by higher revenue at our T&M segment due primarily to higher orders for our legacy T&M products.

 

Gross Profit (in thousands)

 

   Three months ended March 31, 
   Gross Profit   Gross Profit %   Change 
   2022   2021   2022   2021   Amount   Pct. 
Test and measurement  $3,508   $3,054    57.9%   57.3%  $454    14.9%
Radio, baseband, software   847    1,800    55.1%   63.0%   (953)   -52.9%
Total gross profit  $4,355   $4,854    57.3%   59.3%  $(499)   -10.3%

 

Consolidated gross profit declined 10% due to lower sales of higher margin software at our RBS segment. This was only partially offset by T&M gross profit which increased due to higher revenues.

 

Operating Expenses (in thousands)

 

   Three months ended March 31, 
   Operating Expenses   % of Revenue   Change 
   2022   2021   2022   2021   Amount   Pct. 
Research and development  $1,159   $1,156    15.3%   14.1%  $3    0.3%
Sales and marketing   1,260    1,195    16.6%   14.4%   65    5.4%
General and administrative   3,392    2,853    44.7%   34.9%   539    18.9%
Total operating expenses  $5,811   $5,204    76.5%   63.6%  $607    11.7%

 

18

 

 

Research and development expenses were flat with the prior year as modest declines in headcount costs at RBS due to allocations to customer projects were offset by higher third party expenses.

 

Sales and marketing expenses increased 5.4% due to higher headcount and marketing expenses.

 

General and administrative expenses increased 18.9% due primarily to expenses associated with the divestiture of Microlab of approximately $530,000 and higher stock based compensation expense which increased $215,000 from the prior year due to equity grants to employees which were offset by lower legal, accounting, bonus and other miscellaneous expenses.

 

Loss on Extinguishment of Debt

 

The loss on extinguishment of debt represents the write off of unamortized debt costs associated with our Term Loan Facility with Muzinich BDC and Credit Facility with Bank of America N.A. which were repaid in full and terminated on March 1, 2022.

 

Other Income/(Expense)

 

Other income increased $74,000 primarily due to sublease income as a result of our sublease arrangement with RF Industries Ltd. as well as higher gains on sales of assets.

 

Interest Expense

 

Consolidated interest expense decreased $120,000 due primarily to the termination of our Term Loan Facility and Credit Facility on March 1, 2022.

 

Taxes

 

Consolidated tax benefit increased $706,000 from the prior year period due to a higher loss from continuing operations before taxes.

 

Net loss from continuing operations

 

Consolidated net loss from continuing operations for the first quarter 2022 increased $998,000 primarily due to lower gross profit driven by lower RBS revenue and margin, higher operating expenses and a loss on extinguishment of debt. This was only partially offset by higher other income, lower interest expense and a higher tax benefit recognized in the quarter.

 

Net income from discontinued operations, net of tax

 

Net income from discontinued operations, net of tax in the first quarter of 2022 is comprised of the pre divestiture net income of Microlab of $158,000 and the net gain on sale of Microlab of approximately $16.4 million net of tax provision of approximately $4.9 million.

 

Net income from discontinued operations, net of tax in the first quarter of 2021 is comprised of the results of Microlab of $335,000 net of tax provision of $93,000.

 

19

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

On March 1, 2022 the Company completed the divestiture of Microlab and received net proceeds of $22.8 million, of which, the Company used approximately $4.1 million and $600,000 to repay in full and terminate the Muzinich Term Loan Facility and Bank of America Credit Facility, respectively. As of March 31, 2022 the Company’s only debt obligation is the CIBLS loan in the U.K. which has an outstanding principal balance of $329,000 as of March 31, 2022 and is more fully described in Note 4 of the consolidated financial statements. The Company expects to repay in full the CIBLS loan prior to the expiration of the principal and interest holiday which expires on July 1, 2022

 

As of March 31, 2022 our consolidated cash balance was approximately $19.1 million. We expect our cash balance and cash generated from operations 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, including the fact that the Company will no longer benefit from the performance of the Microlab brand which historically accounted for a substantial portion of our consolidated revenue and that we will be entirely dependent on the RBS and T&M segments.

 

The Microlab divestiture will be treated as a sale of the assets and liabilities for U.S. federal and applicable state income tax purposes. The Company has approximately $14.9 million of U.S. federal net operating loss carryforwards and approximately $41.2 million of New Jersey state net operating loss carryforwards as of December 31, 2021. We expect to utilize in 2022 all of our federal net operating loss carryforwards and approximately 50% of our state net operating loss carryforwards to offset the taxable gain generated from the Microlab divestiture. Accordingly, in the future, the Company could be subject to cash income taxes which is expected to reduce our liquidity. Additionally, CommAgility benefits from a research and development deduction which significantly reduces the cash needed to pay taxes in the UK.

 

Operating Activities

 

Cash used by operating activities increased $3.3 million from the prior year period due to the loss from operations in the quarter as well as an increase in working capital of $2.2 million due primarily to an increase in accounts receivable driven by lower accounts receivable balances at December 31, 2021.

 

Investing Activities

 

Cash provided by investing activities increased $22.7 million from the prior year period due to the net proceeds received related to the Microlab divestiture of $22.8 million.

 

Financing Activities

 

Cash used by financing activities increased $3.6 million due primarily to the full repayment of the Term Loan Facility on March 1, 2022.

 

Off-Balance Sheet Arrangements

 

Other than contractual obligations incurred in the normal course of business, the Company does not have any off-balance sheet arrangements.

 

Critical Accounting Policies

 

There have been no changes in our critical accounting policies or significant accounting estimates as disclosed in our 2021 Form 10-K.

 

20

 

 

Forward Looking Statements

 

The statements contained in this Quarterly Report on Form 10-Q that are not historical facts, including, without limitation, some of 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 include statements about our expectations that our existing cash balance and cash generated by operations will be sufficient to meet our liquidity needs for at least the next twelve months and our expectation to repay our CIBLS loan before the expiration of the principal and interest holiday. Investors are cautioned that such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results, including, among others, the ongoing impact that the conflict in Ukraine and related sanctions have had and may continue to have on our business, supply chain, transportation costs, and our backlog; the impact that the evolving COVID-19 pandemic has had and may continue to have on our supply chain, human capital and the general economy in the future; the potential impact of inflation on our business and the economy in general, our dependency on capital spending on data and communication networks by our customers and end users; our dependency on the deployment of 4G LTE and 5G NR private networks and related services to grow our business; the impact of the loss of any significant customers; the ability of our management to successfully implement our evolving business plan; the impact of competitive products and pricing; our abilities to protect our intellectual property rights and our ability to manage risks related to our information technology and cyber security as well as other risks and uncertainties set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. These forward-looking statements speak only as of the date of this release and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law.

 

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

 

There were no changes in our internal control over financial reporting during the three months ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as described in our 2021 Annual Report on Form 10-K.

 

21

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings

 

No material changes in the quarter.

 

Item 1A. Risk Factors

 

There have been no material changes in our risk factors as previously disclosed in Part I, Item 1A of our Annual Report on Form10-K for the year ended December 31, 2021.

 

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 Number   Exhibit Description
     
3.1   Amended and Restated By-laws, as amended on April 7, 2020 (incorporated by reference to Exhibit 3.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 13, 2020, Commission File No. 001-11916)
     
10.1   Membership Interest Purchase Agreement dated as of December 16, 2021 by and among RF Industries Ltd., Wireless Telecom Group, Inc. and Microlab/FXR LLC (incorporated by reference to Exhibit 10.1 to our Form 8-K filed with the SEC on December 20, 2021, Commission File No. 001-11916)
     
10.2   Amended and Restated Executive Employment Agreement by and between Wireless Telecom Group, Inc. and Timothy Whelan dated January 31, 2022 (incorporated by reference to Exhibit 10.43 to our Current Report on Form 10-K filed with the SEC on March 17, 2022, Commission File No. 001-11916)
     
10.3   Amended Employment Letter Agreement, dated January 31, 2022, between Wireless Telecom Group, Inc. and Michael Kandell (incorporated by reference to Exhibit 10.44 to our Current Report on Form 10-K filed with the SEC on March 17, 2022, Commission File No. 001-11916)
     
10.4   Amended Employment Letter Agreement, dated January 31, 2022, between Wireless Telecom Group, Inc. and Daniel Monopoli (incorporated by reference to Exhibit 10.45 to our Current Report on Form 10-K filed with the SEC on March 17, 2022, Commission File No. 001-11916)
     
10.5   Amended Employment Letter Agreement, dated January 31, 2022, between Wireless Telecom Group, Inc. and Alfred Rodriguez (incorporated by reference to Exhibit 10.44 to our Current Report on Form 10-K filed with the SEC on March 17, 2022, Commission File No. 001-11916)
     
10.6   Sublease Agreement dated as of December 16, 2021, by and between Boonton Electronics Corp. and RF Industries Ltd.
     
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101**   The following financial information from Wireless Telecom Group, Inc.’s Quarterly Report on Form 10-Q for the three months ended March 31,2021, filed on May 13, 2021, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Income/(Loss), (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Shareholders’ Equity, and (v) the Notes to the Consolidated Financial Statements.
     
101.INS**   INLINE XBRL INSTANCE DOCUMENT
     
101.SCH**   INLINE XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT
   
101.CAL**   INLINE XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT
     
101.DEF**   INLINE XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT
     
101.LAB**   INLINE XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT
     
101.PRE**   INLINE XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

** Furnished herewith.

 

22

 

 

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.
  
Dated: May 11, 2022By:/s/ Timothy Whelan
  Timothy Whelan
  Chief Executive Officer

 

Dated: May 11, 2022By:/s/ Michael Kandell
  Michael Kandell
  Chief Financial Officer

 

23

 

Exhibit 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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; and

 

5. The registrant’s other certifying officer 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.

 

 Dated: May 11, 2022

 

By:  /s/ Timothy Whelan
  Timothy Whelan
  Chief Executive Officer

 

 

 

Exhibit 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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; and

 

5. The registrant’s other certifying officer 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.

 

Dated: May 11, 2022

 

  By: /s/ Michael Kandell
  Michael Kandell
  Chief Financial Officer

 

 

 

Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

 

I, Timothy Whelan, Chief Executive Officer of Wireless Telecom Group, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

 

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

 

Dated: May 11, 2022    
     
  By: /s/ Timothy Whelan
    Timothy Whelan
    Chief Executive Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff on request.

 

 

 

Exhibit 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002, PURSUANT TO SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODE

 

I, Michael Kandell, Chief Financial Officer of Wireless Telecom Group, Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

 

The Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

 

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

 

Dated: May 11, 2022  
   
  By: /s/ Michael Kandell
    Michael Kandell
    Chief Financial Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff on request.

 

 

 

Exhibit 10.6

 

SUBLEASE

 

THIS SUBLEASE (this “Sublease”) made as of the 16th day of December, 2021, by and between Boonton Electronics Corp., a New Jersey corporation (“Sublandlord”), and RF Industries, Ltd., a Nevada corporation (“Subtenant”).

 

Witnesseth:

 

WHEREAS, Icon Keystone NJP III Owner Pool 4 NJ, LLC, (“Prime Landlord”) and Sublandlord are parties to the Prime Lease described on Exhibit A (the “Prime Lease”) pursuant to which Prime Landlord leases to Sublandlord certain premises containing approximately 45,700 rentable square feet of space, as more particularly described in the Prime Lease (the “Premises”) in the building located at 25 Eastmans Road, Suite 100, Parsippany, New Jersey 07054 (the “Building”); and

 

WHEREAS, Sublandlord has agreed to sublet to Subtenant and Subtenant has agreed to sublet from Sublandlord a portion of the Premises;

 

NOW, THEREFORE, in consideration of the rents herein provided and of the covenants and agreements herein contained and intending to be legally bound hereby, Sublandlord and Subtenant hereby covenant and agree as follows:

 

1. Demise.

 

a. Subject to all of the provisions of this Sublease, Sublandlord hereby demises and subleases to Subtenant, and Subtenant hereby takes and hires from Sublandlord, that portion of the Premises depicted on Exhibit B attached hereto and made a part hereof (the “Subleased Premises”). For purposes of this Sublease, the Subleased Premises are deemed to contain 23,300 rentable square feet of space. Subtenant shall have access to the Subleased Premises twenty four hours a day, seven days a week, subject to the terms and conditions hereof and of the Prime Lease. The portion of the Premises excluding the Subleased Premises shall be referred to as the “Retained Premises.”

 

b. Sublandlord shall perform the work set forth on Exhibit C attached hereto and made a part hereof in the Subleased Premises (“Sublandlord’s Work”) in a good and workmanlike manner and in compliance with all applicable governmental laws, rules, regulations, and requirements. Prior to commencement of Sublandlord’s Works, Sublandlord shall deliver to Subtenant a reasonably detailed cost estimate for Sublandlord’s Work for Subtenant’s approval (the “Cost Estimate”). Sublandlord shall complete Sublandlord’s Work by no later than the Commencement Date and provide Subtenant an invoice therefor with reasonable evidence of the cost incurred by Sublandlord. Subtenant shall reimburse Sublandlord on the Commencement Date for one-half (1/2) of the cost of the Sublandlord’s Work, which shall not exceed one-half (1/2) of the Cost Estimate unless the cost of the Sublandlord’s Work exceeds the Cost Estimate by ten percent (10%) or more. If Sublandlord fails to complete Sublandlord’s Work by the Commencement Date, then Subtenant shall be entitled to an additional day for day abatement of Base Rent for the number of days between the Commencement Date and the date the Sublandlord’s Work is completed.

 

 

 

 

c. Subtenant shall be permitted to use fifty-three (53) parking spaces in the Building’s parking facilities at no additional charge, which use shall be on a first-come first-served basis in common with Sublandlord and its employees, agents, contractors, licensees, and invitees.

 

2. Term. The term of this Sublease (the “Term”) shall commence on the Closing Date (the “Commencement Date”) as defined in and under that certain Membership Interest Purchase Agreement of even date herewith between Sublandlord, Subtenant, and Microlab/FXR LLC (the “MIPA”) and shall expire on March 30, 2023, unless sooner terminated pursuant to any of the terms of this Sublease. Effective as of the Commencement Date, this Sublease shall be deemed to have been assigned by Subtenant to Microlab/FXR LLC. and Subtenant shall be fully released from any and all liability in connection with this Sublease, the Prime Lease, and the Subleased Premises whether arising prior to or after the Commencement Date and shall have no further obligations hereunder. Notwithstanding anything contained to the contrary herein, if the MIPA is terminated for any reason, this Sublease shall be null and void and neither party shall have any liability in connection with this Sublease, the Prime Lease and the Subleased Premises whether arising prior to or after the Commencement Date, and neither Subtenant nor Microlab/FXR LLC shall have any further obligations hereunder; except Subtenant shall remain liable for the reimbursement set forth in Section 1.b hereof.

 

3. Rent.

 

a. Subtenant covenants and agrees to pay Sublandlord, in advance, on or before the Commencement Date and on the first day of each subsequent calendar month during the Term base rent (“Base Rent”) in the following amounts:

 

  Period   Monthly Rent PSF   Monthly Installment
  Months 1*-12   $10.45   $20,290.42
  Months 13-Expiration   $10.76   $20,892.33
  [* including any initial partial month]        

 

b. All amounts other than Base Rent that may be due Sublandlord under this Sublease shall be deemed “Additional Rent.” Subtenant covenants and agrees to pay Sublandlord all Additional Rent when due hereunder, without any setoff, abatement or deduction whatsoever. If no time period or due date is set forth herein for any particular item of Additional Rent, such Additional Rent shall be due within fifteen (15) days after presentation of an invoice therefor. Additional Rent and Base Rent shall hereinafter be collectively referred to herein as “Rent.”

 

c. In addition to Base Rent, Subtenant shall pay to Sublandlord together with each installation of Base Rent, fifty-one percent (51%) (“Subtenant’s Share”) of Sublandlord’s Pro Rata Share (as defined in the Prime Lease) of (i) real estate taxes charged by Prime Landlord as set forth in Section 5 of the Prime Lease, (ii) common area maintenance and management costs charged by Prime Landlord as set forth in Section 7 of the Prime Lease, (iii) insurance for the Building charged by Prime Landlord as set forth in Section 9 of the Prime Lease, and (iv) all other amounts payable by Sublandlord under the Prime Lease other than (A) the Base Rent set forth therein, (B) amounts applicable to maintenance, repair, or replacement of only the Retained Premises, and (C) amounts due in connection with a breach or default by Sublandlord under the Prime Lease not caused by a breach or default of Subtenant hereunder. Subject to Section 11 hereof, Sublandlord shall be and shall remain responsible under the Prime Lease for all payments owed to Prime Landlord, except for any payments arising out of any act, request, violation, breach, or default of Subtenant, which shall be paid to Sublandlord, or, at Sublandlord’s election, to Prime Landlord, not less than five (5) business days before the date due to Prime Landlord. Sublandlord shall promptly deliver to Subtenant all statements, invoices and true-ups received from the Prime Landlord pursuant to Section 5 and Section 7 of the Prime Lease.

 

-2-
 

 

d. Subtenant shall pay as Additional Rent Subtenant’s Share of all utilities consumed in the Premises within fifteen (15) days of Sublandlord’s presentation of the applicable utility company invoices therefor.

 

e. If the Term does not begin on the first day or end on the last day of a calendar month, the monthly installment of Rent for that partial month shall be prorated by multiplying the Rent amount by a fraction, the numerator of which is the number of days of that calendar month included in the Term and the denominator of which is the total number of days in the calendar month in question.

 

f. All Rent shall be paid to Sublandlord in lawful currency of the United States at Sublandlord’s address set forth in Section 9 or at such other place designated by Sublandlord from time to time by written notice to Subtenant. Subtenant shall pay a late fee equal to five percent (5%) of any Rent not timely paid. In addition, all sums due and payable as Rent not paid within five (5) days following notice of nonpayment shall bear interest from the date originally due until paid at a rate per annum equal to the lesser of ten percent (10%) per annum and the maximum rate permitted under applicable law. All interest accrued under this Subsection shall be deemed to be Additional Rent.

 

g. Concurrently with the execution of this Sublease, Subtenant shall deposit with Sublandlord the sum of $40,581.00 to secure the faithful performance by Subtenant of all of the terms, covenants, and conditions of this Sublease by Subtenant to be kept and performed during the Term hereof. Subtenant agrees if it shall fail beyond any applicable notice and cure period to pay any installment of Rent provided in this Sublease, or if Subtenant shall be in default or breach of any of the other terms, covenants, or conditions of this Sublease beyond any applicable notice and cure period and Sublandlord shall suffer any damages as a result thereof, then Sublandlord may, at its option (but shall not be required to) apply said deposit to any Rent or other sum due and unpaid by Subtenant to Sublandlord hereunder, to any damage suffered by Sublandlord as a result of such default or breach and to any reasonable attorneys’ fees incurred by Sublandlord in connection therewith. Should any portion of the deposit be applied, then Subtenant shall forthwith remit to Sublandlord a sufficient amount in cash to restore said security deposit to its original amount, and Subtenant’s failure to do so within five(5) business days after demand shall constitute a breach of this Sublease. The unappropriated balance of said security deposit shall be returned to Subtenant following the expiration of the Term or upon any earlier termination not resulting from Subtenant’s default within thirty (30) days of such expiration or earlier termination. Under no circumstances shall the deposit be used as or considered pre-paid rent.

 

-3-
 

 

4. Use. Subtenant shall occupy and use the Subleased Premises only for the purposes and in all respects only as permitted under the Prime Lease.

 

5. Subject to the Prime Lease.

 

a. This Sublease shall be subject and subordinate in all respects to (i) the Prime Lease and to all of its terms, covenants, and conditions; and (ii) any and all matters to which the tenancy of Sublandlord, as tenant under the Prime Lease, is or may be subordinate. Except to the extent inapplicable to, deleted or modified by the terms of this Sublease, or otherwise inconsistent with the express terms of this Sublease, all of the covenants, agreements, terms, provisions, and conditions of the Prime Lease are hereby incorporated in and made a part of this Sublease and shall be binding upon the parties hereto, and such rights and obligations as are contained in the Prime Lease are hereby imposed upon the respective parties hereto, the Sublandlord herein being substituted for the landlord named in the Prime Lease, the Subtenant herein being substituted for the tenant named in the Lease, the Subleased Premises herein being substituted for the Premises and the Term herein being substituted for the term set forth in the Prime Lease. Notwithstanding the foregoing, the following are hereby excluded from such incorporation: Sections 1, 2, 3.a, 3.b, 3.c, 3.d, 4, 6, 14.c, 17, 19, 20, 21, and 22 of the Prime Lease; and all provisions of the Amendments other than Paragraph 9 of the Fourth Amendment and Paragraph 5 of the Fifth Amendment.

 

b. Sublandlord represents and warrants to Subtenant: (i) the Prime Lease is the full agreement by Prime Landlord and Sublandlord with respect to the Premises and has not been modified or amended in any respect, (ii) to Sublandlord’s actual knowledge, the Subleased Premises are, and shall be on the Commencement Date, in good working order and condition, in compliance with the Prime Lease, free of hazardous substances and watertight, (iii) Sublandlord has received no written notice from Prime Landlord of any current default or pending default under the Prime Lease, (iv) Sublandlord has received no written notice from Prime Landlord or any governmental authority that the Subleased Premises is in violation of any applicable laws, and (v) Sublandlord has no actual knowledge of any default of Prime Landlord of any of its obligations under the Prime Lease.

 

c. Subtenant shall not do, or permit or suffer to be done, any act or omission by Subtenant, its agents, employees, contractors or invitees that would constitute a default under the Prime Lease; and Subtenant shall indemnify, defend, and hold Sublandlord harmless from and against all claims, demands, judgments, damages, costs, losses, and expenses (including reasonable attorneys’ fees and disbursements) arising out of any such act, omission, violation, or default, which obligation shall survive the expiration or earlier termination of this Sublease.

 

d. Sublandlord shall not do, or permit or suffer to be done, any act or omission by Sublandlord, its agents, employees, contractors, or invitees that would constitute a default under the Prime Lease; and Sublandlord shall indemnify, defend, and hold Subtenant harmless from and against all claims, demands, judgments, damages, costs, losses, and expenses (including reasonable attorneys’ fees and disbursements) arising out of any such act, omission, violation, or default, which obligation shall survive the expiration or earlier termination of this Sublease. Sublandlord shall not, without Subtenant’s prior written consent, modify or amend the Prime Lease in a manner that would materially increase the obligations of Subtenant, decrease the rights of Subtenant or materially adversely impact or interfere with the conduct of Subtenant’s business at the Subleased Premises.

 

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e. In all provisions of the Prime Lease requiring the approval or consent of or notice to the Prime Landlord, Subtenant shall be required to obtain the approval or consent of or provide notice to, whichever the case may be, both Prime Landlord and Sublandlord. Except as may be set forth herein or in the Prime Lease, Sublandlord shall not unreasonably withhold, condition, or delayed its consent.

 

f. Notwithstanding anything to the contrary contained in this Sublease, should the Prime Lease expire or terminate during the Term for any reason, this Sublease shall terminate on the date of such expiration or termination of the Prime Lease, with the same force and effect as if such expiration or termination date had been specified in this Sublease as the expiration of the Term. Sublandlord shall have no liability to Subtenant in the event of any such expiration or termination.

 

g. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Prime Lease.

 

6. Prime Landlord’s Obligations.

 

a. Notwithstanding anything to the contrary contained in this Sublease or the Prime Lease, including, but not limited to, any provisions of the Prime Lease incorporated into this Sublease, Sublandlord shall not be bound by any of the representations or warranties made by Prime Landlord, and Sublandlord shall have no obligation to perform any of the terms, covenants or conditions contained in the Prime Lease to be performed by the Prime Landlord. Without limiting the foregoing, Sublandlord shall have no obligation to provide any or all of the services, utilities, parking rights, work, alterations, repairs, maintenance or insurance coverages to be provided by Prime Landlord under the Prime Lease, and Sublandlord shall in no way be liable to Subtenant for any failure of Prime Landlord to provide such services, utilities, parking rights, work, alterations, repairs, maintenance or insurance coverages. Notwithstanding anything to the contrary contained in this Sublease or the Prime Lease, Sublandlord shall not be required to indemnify, hold harmless, or defend Subtenant pursuant to any of the terms of the Prime Lease or for any act, omission, violation, breach, or default of Prime Landlord, except to the extent of Sublandlord’s obligations pursuant to Section 7.b. The rights of Prime Landlord under the Prime Lease shall in no way be diminished by the terms of this Sublease.

 

b. If Prime Landlord fails to provide any services, utilities, parking rights, work, alterations, repairs, maintenance or insurance coverages required under the Prime Lease or otherwise fails to perform any other material term, covenant, condition, or obligation of Prime Landlord under the Prime Lease, Sublandlord shall, upon the written request of Subtenant, give Prime Landlord prompt notice of such failure and shall use commercially reasonable efforts to cause Prime Landlord to provide same and/or perform same. If following such notice and the expiration of any applicable grace period granted Prime Landlord under the Prime Lease, Prime Landlord shall fail to perform its obligations under the Prime Lease, then Subtenant shall have the right to take such action in its own name. If (i) any such action against the Prime Landlord in Subtenant’s name is barred by reason of lack of privity, non-assignability, or otherwise, and (ii) the failure of Prime Landlord to perform its obligations under the Prime Lease has, or may have, a materially adverse effect upon Subtenant’s permitted use of the Subleased Premises, then provided Subtenant is not in default hereunder, Subtenant may bring such action in Sublandlord’s name and Sublandlord shall execute all documents reasonably required in connection therewith, provided same is without cost or expense to Sublandlord.

 

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7. Indemnification.

 

a. Subtenant shall protect, indemnify, and save Sublandlord harmless from and against all costs, losses, damages, liabilities, and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) of every kind and nature whatsoever, incurred by Sublandlord by reason of or to the extent arising out of (i) any accident, death, injury, or damage in, on, about or in connection with, the Subleased Premises or any part thereof, or any matter involving the condition, occupancy, maintenance, alteration, repair, use, non-use, or operation of the Subleased Premises or any part thereof; (ii) any failure by Subtenant or by Subtenant’s employees, agents, contractors, or invitees to perform or observe any of the agreements, terms, covenants, or conditions of the Prime Lease or this Sublease on Subtenant’s part to be performed or observed; (iii) any negligence or willful misconduct of Subtenant or of Subtenant’s employees, agents, contractors, or invitees; (iv) any failure by Subtenant to vacate the Subleased Premises and surrender the Subleased Premises in the condition required under this Sublease on or before the expiration or earlier termination of this Sublease; and (v) any action by Subtenant pursuant to Section 6.b hereof at Subtenant’s request and direction; in each case, except to the extent the same arises out of or in connection with the negligence or willful misconduct of or breach of this Sublease or the Prime Lease by Sublandlord or its employees, agents, contractors, or invitees. Subtenant’s obligation to protect, indemnify, and save Sublandlord harmless, as set forth in this Section 7.a, shall survive the expiration or earlier termination of this Sublease.

 

b. Sublandlord shall protect, indemnify ,and save Subtenant harmless from and against all costs, losses, damages, liabilities, and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) of every kind and nature whatsoever, incurred by Subtenant by reason of or arising out of (i) any accident, death, injury, or damage in, on, about or in connection with, the Retained Premises or any part thereof, or any matter involving the condition, occupancy, maintenance, alteration, repair, use, non-use or operation of the Retained Premises or any part thereof, (ii) any failure by Sublandlord or by Sublandlord’s employees, agents, contractors, or invitees to perform or observe any of the agreements, terms, covenants, or conditions of this Sublease on Sublandlord’s part to be performed or observed, or any breach of the Prime Lease by Sublandlord or by Sublandlord’s employees, agents, or contractors, or (iii) any negligence or willful misconduct of Sublandlord or of Sublandlord’s employees, agents, contractors, or invitees; in each case, except to the extent the same arises out of or in connection with the negligence or willful misconduct of Subtenant or its employees, agents, or contractors. Sublandlord’s obligation to protect, indemnify, and save Subtenant harmless, as set forth in this Section 7.b, shall survive the expiration or earlier termination of this Sublease.

 

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c. Notwithstanding anything to the contrary herein, in no event shall Sublandlord or Subtenant have any liability for any consequential, special, or punitive damages in connection with this Sublease; provided the foregoing shall not exclude indemnification for claims by third parties for such types of damages.

 

8. Insurance.

 

a. Subtenant shall provide and maintain during the Term, with an insurance company acceptable to Sublandlord and Prime Landlord, all insurance required by Section 9 of the Prime Lease. Such insurance shall provide that it may not be canceled or amended except upon thirty (30) days’ written notice to Sublandlord and Prime Landlord. All liability insurance shall name Sublandlord and Prime Landlord as additional insureds. Subtenant shall furnish Sublandlord and Prime Landlord with certificates of insurance evidencing compliance with the foregoing insurance requirements.

 

b. Subtenant shall keep its personal property and trade fixtures and all alterations in the Subleased Premises insured with “all risk” insurance in an amount to cover 100% of the replacement cost of such personal property, fixtures and alterations.

 

c. Subtenant’s insurance policies shall (i) be issued by responsible insurance companies acceptable to Sublandlord and licensed to do business in the state where the Subleased Premises is located; (ii) provided that the insurance shall not be canceled or materially changed in the scope or the amount of coverage unless thirty (30) days’ prior written notice is given to Prime Landlord and Sublandlord; and (iii) be primary policies and not as contributory with, or in excess of, any coverage that Prime Landlord or Sublandlord may carry. In addition, the liability policy described in Section 8.a above shall name Sublandlord and Prime Landlord as additional insureds.

 

d. By the Commencement Date and upon each renewal of any of its insurance policies, Subtenant shall deliver to Sublandlord, and, if requested, to Prime Landlord certificates of insurance and, if required by Sublandlord, copies of all insurance policies, evidencing compliance with all of the requirements of this Section.

 

e. Notwithstanding anything to the contrary set forth in this Sublease, Sublandlord and Subtenant do hereby waive any and all claims against one another for damage to or destruction of real or personal property to the extent such damage or destruction is or would be covered by the property insurance of the type required by this Sublease or the Prime Lease (it being acknowledged that Sublandlord shall also carry all insurance required of the tenant under the Prime Lease), or is actually covered by property insurance whether or not required hereunder. The risk to be borne by each party shall also include the satisfaction of any deductible amounts required to be paid under the applicable property insurance carried by the party whose property is damaged, and each party agrees that the other party shall not be responsible for satisfaction of such deductible. These waivers shall apply if the damage would have been covered by the required insurance, even if the party fails to obtain such coverage. The intent of this provision is that each party shall look solely to its insurance with respect to property damage or destruction which can be covered by the property insurance required by this Sublease or the Prime Lease. Each such policy shall include a waiver of all rights of subrogation by the insurance carrier against the other party, its agents, and employees with respect to property damage covered by the applicable policy.

 

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9. Notices. All notices or other communications required or permitted under this Sublease shall be in writing and shall be sent by registered or certified mail or by a nationally recognized overnight courier, postage prepaid, to the following addresses:

 

  To Sublandlord: Boonton Electronics Corp.
    25 Eastmans Road, Suite 100
    Parsippany, New Jersey 07054
    Attention: Michael Kandell
     
    with a copy to (which copy shall not constitute notice):
     
    McCarter & English, LLP
    Four Gateway Center
    100 Mulberry Street
    Newark, New Jersey 07102
    Attention: Thomas DaCosta Lobo, Esq.
     
  To Subtenant: RF Industries, Ltd.
    7610 Miramar Road,
    San Diego, CA 92126
    Attention: Peter Yin, CFO
     
    with a copy to (which copy shall not constitute notice):
     
    DLA Piper LLP
    4365 Executive Drive, Suite 1100
    San Diego, CA 92121
    Attention: Martin Nichols

 

All notices shall be deemed given upon receipt of the same or when receipt is rejected by the receiving party. Either party may change its respective notice addresses by giving notice to the other party in the manner provided above.

 

10. Assignment and Subletting. Notwithstanding anything to the contrary contained in the Prime Lease, Subtenant shall not, by operation of law or otherwise, assign, transfer, mortgage, hypothecate or encumber this Sublease, nor sublet all or any part of the Subleased Premises or permit the Subleased Premises or any part thereof to be used by any other person or entity without the prior written consent of Sublandlord, which consent shall not be unreasonably withheld. Any such attempted assignment, transfer, mortgaging, hypothecation, encumbering, subletting or permitted use by any other person or entity without the prior written consent of Sublandlord will be void and will, at the option of Sublandlord, terminate this Sublease. For purposes of this Sublease, the sale or transfer of fifty percent (50%) or more of the ownership interests the merger or consolidation of Subtenant into another entity shall constitute an assignment Sublease. Notwithstanding Sublandlord’s consent to any such assignment or subletting, the provisions of this Section shall be applicable to each and every subsequent assignment or subletting, and Subtenant shall not be released from any obligations under this Sublease. Notwithstanding the foregoing, Subtenant shall have the right to assign this Sublease or sublet the entire Subleased Premises to any one or more of the following without Sublandlord’s consent, but subject to any consent requirement under the Prime Lease: (a) any party controlling, controlled by, or under common control with Subtenant; (b) any party merging with, or surviving a reorganization of, Subtenant; and (c) any party acquiring all or substantially all of either or both Subtenant’s assets or equity; in the case of (b) and (c), provided Subtenant provides Sublandlord reasonable evidence such transferee has a net worth not less than Subtenant’s net worth as of the Commencement Date or as of the date immediately preceding such transfer, whichever is greater.

 

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11. Condition and Maintenance of Subleased Premises.

 

a. Subject to the completion of Sublandlord’s Work, Subtenant shall accept the Subleased Premises on the Commencement Date in “as is” condition. Except as set forth in this Sublease, Subtenant acknowledges that no representations have been made to Subtenant with respect to the condition of the Subleased Premises and that Subtenant relied upon its own examination of the Subleased Premises in entering into this Sublease.

 

b. Sublandlord shall perform all repair and maintenance obligations of Tenant under the Prime Lease with respect to the entire Premises and Subtenant shall reimburse Sublandlord for the reasonable and actual cost thereof within fifteen (15) days of presentation of an invoice and reasonable supporting documentation. For costs applicable: (a) solely to the Subleased Premises, Subtenant shall reimburse the entire reasonable and actual cost; (b) in part to the Subleased Premises, such reimbursement shall be on a reasonable pro rata basis; and (c) to the entire Premises, such reimbursement shall be for Subtenant’s Share.

 

12. Alterations. Notwithstanding anything to the contrary that may be contained in Section 11.c of the Prime Lease, Subtenant shall not make any additions, alterations, changes, or improvements to the Subleased Premises without the prior written consent of Sublandlord and, if required under the Prime Lease, Prime Landlord, pursuant to the same terms of conditions of Section 11.c of the Prime Lease; provided Sublandlord’s consent shall not be required for decorative or cosmetic changes that do not require a building permit or the consent of Prime Landlord. All additions, alterations, changes, or improvements made to the Subleased Premises by Subtenant shall be made in compliance with all applicable governmental laws, rules, regulations, and requirements, including, but not limited to, the Americans with Disabilities Act of 1990 and its implementing regulations, as amended or supplemented from time to time, and all similar applicable state and local laws, rules, and regulations. Subtenant will indemnify, defend, and hold Sublandlord harmless from and against all claims, demands, judgments, damages, costs, losses, and expenses (including reasonable attorneys’ fees and disbursements) arising out of or related to Subtenant’s failure to comply with the provisions of this Section. Subtenant’s obligation to hold Sublandlord harmless and indemnify Sublandlord, as set forth in this Section 12, shall survive the expiration or earlier termination of this Sublease.

 

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13. Casualty and Condemnation. Subtenant shall be entitled to abatement of Rent in the event Sublandlord receives an abatement rent pursuant to Section 10 or Section 12 of the Prime Lease but only to the extent such abatement under the Prime Lease is attributable to the Subleased Premises. Subtenant shall have the right to terminate this Sublease in connection with a casualty or condemnation affecting the Subleased Premises to the same extent as Sublandlord has such right with respect to the Premises pursuant to Section 10 or Section 12 of the Prime Lease.

 

14. Brokers. Sublandlord and Subtenant each warrants and represents to the other that it had no dealing with any broker or finder concerning the subletting of the Subleased Premises. Each party hereto agrees to indemnify and hold the other party harmless from any and all liabilities and expenses, including, without limitation, reasonable attorneys’ fees and disbursements, arising out of claims against the other party by any broker, consultant, finder or like agent claiming to have brought about this Sublease based upon the alleged acts of the indemnifying party. This obligation to indemnify and hold the other party harmless, as set forth in this Section 14, shall survive expiration or earlier termination of this Sublease.

 

15. Surrender of Subleased Premises. At the expiration or earlier termination of this Sublease, Subtenant shall quit and surrender the Subleased Premises broom clean, in substantially as good condition as it was at the beginning of the Term, reasonable wear and tear excepted, and shall, to the extent not inconsistent with any specific provision of this Sublease, comply with all of the terms and conditions of the Prime Lease regarding surrender of the Premises, provided Subtenant shall not be obligated to remove any Sublandlord’s Work or other additions, alterations, improvements, wiring, or cabling not installed by Subtenant or repair any damage caused by Sublandlord or its agents, contractors, employees, or invitees. Without limitation of any of the foregoing, Subtenant shall on or before the expiration or earlier termination of this Sublease, (a) remove all of Subtenant’s personal property and repair any damage caused by such removal; (b) at Sublandlord’s request, remove all additions, alterations, and changes made to the Subleased Premises by or on behalf of Subtenant (other than Sublandlord’s Work) removal of which is required under the Prime Lease and repair any damage caused thereby; and (c) remove all trash and broom sweep the Subleased Premises. If Subtenant shall fail to quit and surrender the Subleased Premises as required, Subtenant shall pay to Sublandlord the greater of (x) any amounts owed by Sublandlord to Prime Landlord as a result of Subtenant’s holding over and (y) monthly holdover Base Rent equal to 150% of the monthly Base Rent payable in the last month of the Term. In addition, Subtenant shall be liable for any liability of Sublandlord to Prime Landlord to the extent arising from such holding over by Subtenant. If any personal property of Subtenant shall remain in the Subleased Premises after the expiration or earlier termination of this Sublease, at the election of Sublandlord, it shall be deemed to have been abandoned by Subtenant and may be retained by Sublandlord as its own property; or such property may be removed and disposed of by Sublandlord and Subtenant shall be obligated to reimburse Sublandlord for all costs incurred for such removal and disposal. Subtenant’s obligation to observe or perform under this Section 15 shall survive the expiration or earlier termination of this Sublease.

 

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16. No Waiver. The failure of Sublandlord or Subtenant to insist in any one or more instances upon the strict performance of any of the covenants, agreements, terms, provisions or conditions of this Sublease, or to exercise any election or option contained herein, shall not be construed as a waiver or relinquishment, in the future or in any other instance, of such covenant, agreement, term, provision, condition, election or option. To be effective, a waiver must be set forth in a writing signed by the waiving party.

 

17. Default. Time is of the essence in the performance of all covenants and conditions. Subtenant shall be in default under this Sublease if:

 

a. Subtenant fails to pay Rent or any other charge within five (5) business days of notice of such failure;

 

b. Subtenant fails to perform any of Subtenant’s non-monetary obligations under this Sublease for a period of twenty (20) days after written notice from Sublandlord; provided if more than twenty (20) days is reasonably required to complete such performance, Subtenant shall not be in default if Subtenant promptly commences such performance and thereafter diligently pursues its completion;

 

c. Subtenant makes a general assignment or general arrangement for the benefit of creditors; a petition for adjudication of bankruptcy or for reorganization or rearrangement is filed by or against Subtenant and is not dismissed within sixty (60) days; a trustee or receiver is appointed to take possession of substantially all of Subtenant’s assets located at the Premises or of Subtenant’s interest in this Sublease and possession is not restored to Subtenant within sixty (60) days; or substantially all of Subtenant’s assets located at the Premises or of Subtenant’s interest in this Sublease is subjected to attachment, execution or other judicial seizure which is not discharged within sixty (60) days.

 

18. Remedies. If Subtenant commits any default beyond applicable notice and cure periods under this Sublease, Sublandlord shall have the remedies available under Section 15.b of the Prime Lease, as applied to this Sublease. Sublandlord’s rights shall be in addition to any and all other rights Sublandlord may have under this Sublease or the Prime Lease or under law. In addition, if this Sublease is terminated as a result of Subtenant’s default, Subtenant shall reimburse Sublandlord for the unamortized portion of the cost of Sublandlord’s Work paid by Sublandlord as of the time of such default.

 

19. Environmental Provisions.

 

a. Subtenant shall not release, generate, manufacture, store, treat, transport, or dispose of Hazardous Materials (as hereinafter defined) on, in, or from the Subleased Premises except to the extent consistent with Sublandlord’s part practices at the Premises as to type, quantity, and purpose and in accordance with applicable Environmental Law (as defined in Paragraph 16 of the Prime Lease). Subtenant shall defend, indemnify and save Sublandlord harmless from and against any injuries, claims, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and disbursements) caused as a result of Hazardous Materials introduced to the Subleased Premises or the Building by Subtenant or any employee, contractor, agent, licensee, or invitee of Subtenant. Subtenant’s obligation to defend, indemnify and save Sublandlord harmless, as set forth in this Section 19, shall survive the expiration or earlier termination of this Sublease. As used herein, “Hazardous Material” means (i) “hazardous substances” or “toxic substances” as those terms are defined by the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §9601, et seq., or the Hazardous Materials Transportation Act, 49 U.S.C. §1801, all as amended and as amended after this date; (ii) “hazardous wastes”, as that term is defined by the Resource Conservation and Recovery Act (“RCRA”), 42 U.S.C. §6901, et seq., as amended and as amended after this date; (iii) any pollutant or contaminant or hazardous, dangerous, or toxic chemicals, materials, or substances within the meaning of any other federal, state, or local law, regulation, ordinance, or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic, or dangerous waste, substance or material, all as amended and as amended after this date; (iv) crude oil or any fraction thereof which is liquid at standard conditions of temperature and pressure (60° Fahrenheit and 14.7 pounds per square inch absolute); (v) any radioactive material, including any source, special nuclear or by-product material as defined at 42 U.S.C. §2011, et seq., as amended and as amended after this date; (vi) asbestos in any form or condition; and (vii) polychlorinated biphenyls (“PCBs”) or substances or compounds containing PCBs.

 

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b. Sublandlord shall defend, indemnify and save Subtenant harmless from and against any injuries, claims, damages, liabilities, costs and expenses (including reasonable attorneys’ fees and disbursements) caused as a result of Hazardous Materials introduced to the Premises or the Building by Sublandlord or any employee, contractor, agent, licensee or invitee of Sublandlord in violation of any Environmental Law. Sublandlord’s obligation to defend, indemnify and save Subtenant harmless, as set forth in this Section 19, shall survive the expiration or earlier termination of this Sublease.

 

c. Compliance With ISRA.

 

(i) Except as explicitly set forth below, Subtenant shall comply, at Subtenant’s own expense, with all Environmental Laws, including the Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq. (“ISRA”), and as required in Section 19.a hereof, shall not cause the release of Hazardous Materials at, under, or from the Subleased Premises during the term of the Sublease.

 

(ii) If ISRA is triggered at the expiration of this Sublease and/or the Prime Lease on March 31, 2023, or by the sale of the Premises of other action taken by Prime Landlord, Sublandlord, or any Prime Landlord affiliate before expiration of the Prime Lease or Sublease, Sublandlord shall, at its sole cost and expense, comply with all requirements of ISRA (the “Sublandlord’s ISRA Compliance”) and any obligations Sublandlord has under ISRA pursuant to the Prime Lease. Without limiting the generality of the foregoing, to the extent required under the Prime Lease, Sublandlord will undertake any and all actions necessary to obtain an entire site response action outcome under ISRA, including: (A) retaining the services of a “Licensed Site Remediation Professional” as defined in the Site Remediation Reform Act, N.J.S.A. Section 58:10C-1, et seq. (“LSRP”), (B) obtaining and maintaining a remediation funding source, if necessary under ISRA, in the amount determined by Sublandlord’s LSRP in accordance with applicable requirements, (C) having Sublandlord identified pursuant to N.J.A.C. Section 7:26C-2.3 as the Person Responsible for Conducting the Remediation on any forms or other documents necessary to comply with ISRA, (D) complying with related permitting and financial assurance requirements, if any, and (E) taking any other actions required to achieve Sublandlord’s ISRA Compliance.

 

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(iii) Sublandlord will keep Subtenant informed of its progress in achieving Sublandlord’s ISRA Compliance by sending to Subtenant copies of all final submissions to NJDEP within five (5) business days of submission. Sublandlord shall take commercially reasonable steps to avoid any material interference or disruption of Subtenant’s operations during the performance of any work to achieve Sublandlord’s ISRA Compliance.

 

(iv) Sublandlord shall indemnify and hold harmless Subtenant from any and all claims, losses, injuries, liabilities, damages or expenses (including reasonable attorneys’ and consultants’ fees and costs), arising out of or in connection with a violation by Sublandlord or Sublandlord’s LSRP of any applicable laws, rules, registrations, or ordinances and any bodily injury or property damage resulting from access to, entry upon, or activity conducted by or on behalf of Sublandlord or Sublandlord’s LSRP in connect with Sublandlord’s ISRA Compliance.

 

(v) Notwithstanding the foregoing obligations of Sublandlord in this Section 19c., Subtenant shall be responsible for and shall reimburse and indemnify Sublandlord with respect to the necessary and reasonable costs of any ISRA obligations or other obligations under other Environmental Laws, including but not limited to, the costs of required investigations and remedial actions due to the presence of, or release of Hazardous Materials at, under or from the Premises, caused by Subtenant following the commencement of this Sublease.

 

(vi) If ISRA is triggered by a termination of the Sublease, cessation of business, change of Subtenant control, or other Subtenant-related event initiated by the Subtenant or any Subtenant affiliate prior to termination of the Sublease on March 31, 2023, constituting “Transferring ownership or operations” or “Closing operations,” each as defined in ISRA, Subtenant shall be responsible, at its sole cost and expense, for resulting ISRA compliance in connection with the Subleased Premises (the “Subtenant’s ISRA Compliance”), including but not limited to, as the Person Responsible for Conducting Remediation and shall obtain a Response Action Outcome and satisfy related permitting and financial assurance requirements, if any. In such event, Subtenant shall be responsible for satisfying the obligations set forth Section 19.c(ii) and (iii) with respect to the Subleased Premises, which otherwise would be the responsibility of Sublandlord. In addition, in this event, Sublandlord shall be responsible for ISRA compliance respecting the area of the Leased Premises, not including the area of the Subleased Premises, in connection with the termination of the Prime Lease on March 31, 2023.

 

(vii) Subtenant shall indemnify and hold harmless Sublandlord from any and all claims, losses, injuries, liabilities, damages or expenses (including reasonable attorneys’ and consultants’ fees and costs), arising out of or in connection with a violation by Subtenant or Subtenant’s LSRP of any applicable laws, rules, registrations, or ordinances and any bodily injury or property damage resulting from access to, entry upon, or activity conducted by or on behalf of Subtenant or Subtenant’s LSRP in connect with Subtenant’s ISRA Compliance.

 

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(viii) In the event ISRA is triggered as a result of a circumstance outlined in Section 19.b(vi), Subtenant shall complete all actions required of Subtenant pursuant to Section 19.b(vi) before Prime Lease and Sublease termination to the satisfaction of Subtenant’s LSRP or the New Jersey Department of Environmental Protection, as applicable. In the event such actions are not complete by such date, Subtenant shall be responsible to pay penalties to Prime Landlord imposed on Tenant by Paragraph 16.b of the Prime Lease for failure to fully comply with ISRA and any other applicable Environmental Law prior to the Termination Date of the Prime Lease.

 

20. Rules and Regulations. In addition to the rules and regulations set forth in the Prime Lease, if any, Subtenant, its employees, agents, contractors and invitees shall comply with any reasonable rules and regulations Sublandlord or Prime Landlord may establish from time to time for the safety, care, order or cleanliness of the Subleased Premises or the Building.

 

21. Quiet Enjoyment. So long as Subtenant shall not be in default under this Sublease beyond all applicable notice and cure periods, Subtenant shall be entitled to peaceful and quiet enjoyment of the Subleased Premises without interference by Sublandlord or any party lawfully claiming by or through Sublandlord, subject to the terms of this Sublease.

 

22. Miscellaneous.

 

a. This Sublease contains the entire agreement of the parties with respect to the subject matter it covers and supersedes all prior or other negotiations, representations, understandings, and agreements of, by, or between the parties, all of which shall be deemed fully merged herein.

 

b. This Sublease may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

 

c. Each party represents and warrants to the other that the person signing this Sublease on its behalf is duly authorized to execute and deliver this sublease.

 

d. The captions herein are inserted only as a matter of convenience and for reference and in no way define, limit, construe or describe the scope of this Sublease or the meaning or intent of any provision hereof.

 

e. This Sublease shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors, assigns, heirs and legal representatives.

 

f. If any provision of this Sublease is held to be invalid or unenforceable to any extent, then that provision and the remainder of this Sublease shall continue in effect and be enforceable to the fullest extent permitted by law.

 

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g. This Sublease shall be governed by the laws of the State in which the Building is situate, without regard to its choice of law provisions.

 

h. The submission of this Sublease for examination does not constitute a reservation of or option for the Subleased Premises, and this Sublease shall not be effective or binding unless signed by both parties and an originally signed counterpart is delivered to Subtenant.

 

i. Subtenant may not record this Sublease or any memorandum thereof without the Sublandlord’s prior written consent.

 

j. The parties’ remedies shall survive the termination of this Sublease when the termination is caused by the default of the other party.

 

k. This Sublease may be modified only by a writing signed by both parties.

 

l. All of Subtenant’s furniture, removable trade fixtures, equipment, and other personal property installed in the Subleased Premises (“Subtenant’s Personal Property”) shall be and remain the property of Subtenant and may be removed by Subtenant. If Subtenant has granted a security interest in Subtenant’s Personal Property to a secured party, then any such secured party may remove Subtenant’s Personal Property at any time. Sublandlord agrees to waive any lien or security interest Sublandlord may have on Subtenant’s Personal Property and to enter into a subordination or access agreement with a secured party holding a first-priority financing lien on Subtenant’s Personal Property in form and substance reasonably acceptable to Sublandlord and such party, at Subtenant’s cost.

 

m. Sublandlord represents and warrants to Subtenant that, as of the date hereof and the Commencement Date, the Prime Lease will be in full force and effect, and Sublandlord shall not be in default thereunder.

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Sublease as of the day and year first above written.

 

Boonton Electronics Corp.

 

By: /s/Michael Kandell  
Name: Michael Kandell  
Title: CFO  

 

RF Industries, Ltd.

 

By: /s/Rob Dawson  
Name: Rob Dawson  
Title: CEO  

 

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EXHIBIT A

 

Prime Lease

 

Lease dated as of September 26, 1994

 

Letter Agreement dated as of July 30, 1997

 

Second Amendment to Lease dated as of September 12, 2001

 

Third Amendment to Lease dated as of May 5, 2011

 

Fourth Amendment to Lease dated as of February 25, 2014

 

Fifth Amendment to Lease dated May 1, 2015

 

 

 

 

EXHIBIT B

 

Subleased Premises

 

 

 

 

EXHIBIT C

 

Sublandlord’s Work

 

Install a 3’ X 7’ interior security grade door between the sales department and production department in the middle south section of the building.

 

Install an 8’ X 8” sheetrock wall with a centered 3’ X 7’ interior security grade door between the quality department and shipping/receiving department in the middle north section of the building.