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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2005
__________________________________________
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
25 Eastmans Road
Parsippany, New Jersey 07054
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(201) 261-8797
--------------------------------------------------
Registrant's telephone number, including area code
Not Applicable
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined on Exchange Act Rule 12b-2). YES NO X
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock - Par Value $.01 17,474,551
- ------------------------------ ----------
Class Outstanding Shares
At May 13, 2005
WIRELESS TELECOM GROUP, INC.
Table of Contents
PART I. FINANCIAL INFORMATION Page(s)
Item 1 -- Consolidated Financial Statements:
Condensed Balance Sheets as of March 31, 2005 (unaudited)
and December 31, 2004 3
Condensed Statements of Operations for the Three Months
Ended March 31, 2005 (unaudited) and 2004 (unaudited) 4
Condensed Statements of Cash Flows for the Three Months
Ended March 31, 2005 (unaudited) and 2004 (unaudited) 5
Notes to Interim Condensed Financial Statements (unaudited) 6 - 8
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 12
Item 3 -- Quantitative and Qualitative Disclosures About Market Risk 12
Item 4 -- Controls and Procedures 12
PART II. OTHER INFORMATION
Item 1 -- Legal Proceedings 13
Item 2 -- Changes in Securities 13
Item 3 -- Defaults upon Senior Securities 13
Item 4 -- Submission of Matters to a Vote of Security Holders 13
Item 5 -- Other Information 13
Item 6 - Exhibits 13
Signatures 14
Exhibit Index 15
2
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
- ASSETS -
MARCH, 31 DECEMBER 31,
2005 2004
------------ ------------
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $14,998,240 $15,783,816
Accounts receivable -- net of allowance for doubtful accounts of
$228,525 and $190,155 for 2005 and 2004, respectively 4,191,724 3,196,750
Inventories 6,781,237 6,780,445
Current portion of deferred tax asset 198,266 198,266
Prepaid expenses, taxes and other current assets 324,801 338,144
------------ ------------
TOTAL CURRENT ASSETS 26,494,268 26,297,421
------------ ------------
PROPERTY, PLANT AND EQUIPMENT - NET 5,956,451 5,937,788
------------ ------------
OTHER ASSETS:
Goodwill 1,351,392 1,351,392
Deferred tax asset 886,741 886,741
Other assets 1,042,183 933,526
------------ ------------
TOTAL OTHER ASSETS 3,280,316 3,171,659
------------ ------------
TOTAL ASSETS $35,731,035 $35,406,868
============ ============
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $1,815,539 $1,915,707
Accrued expenses and other current liabilities 635,326 778,704
Current portion of mortgage payable 44,312 43,485
------------ ------------
TOTAL CURRENT LIABILITIES 2,495,177 2,737,896
------------ ------------
LONG TERM LIABILITIES:
Mortgage payable 3,034,002 3,045,395
Deferred rent payable 152,968 144,745
------------ ------------
TOTAL LONG TERM LIABILITIES 3,186,970 3,190,140
------------ ------------
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, 20,523,251
and 20,511,001 shares issued for 2005 and 2004, respectively, 17,473,551
and 17,461,301 shares outstanding for 2005 and 2004, respectively 205,233 205,110
Additional paid-in-capital 14,109,945 14,086,756
Retained earnings 23,435,139 22,888,395
Treasury stock at cost, - 3,049,700 shares (7,701,429) (7,701,429)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 30,048,888 29,478,832
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $35,731,035 $35,406,868
============ ============
See accompanying notes
3
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months
Ended March 31,
--------------------------------------
2005 2004
---- ----
NET SALES $ 6,048,177 $ 5,486,445
----------- -----------
COSTS AND EXPENSES:
Cost of sales 2,769,652 2,395,149
Operating expenses 2,055,764 2,970,953
Interest (income) (68,307) (122,281)
Interest expense 58,318 59,085
Other (income) (37,851) (84,614)
----------- -----------
TOTAL COSTS AND EXPENSES 4,777,576 5,218,292
----------- -----------
INCOME BEFORE INCOME TAXES 1,270,601 268,153
PROVISION FOR INCOME TAXES 200,000 80,286
----------- -----------
NET INCOME $1,070,601 $ 187,867
========== ===========
NET INCOME PER COMMON
SHARE:
BASIC $ 0.06 $ 0.01
========= ==========
DILUTED $ 0.06 $ 0.01
========= ==========
See accompanying notes
4
WIRELESS TELECOM GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months
Ended March 31,
--------------------------------------
2005 2004
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,070,601 $187,867
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 116,229 100,371
Deferred rent 8,223 10,432
Provision for losses on accounts receivable 38,370 (1,220)
Changes in assets and liabilities:
(Increase) in accounts receivable (1,033,344) (520,582)
(Increase) in inventories (792) (344,372)
Decrease in prepaid expenses and other current assets 11,168 84,758
(Decrease) in accounts payable and accrued expenses (243,545) (209,892)
---------- --------
Net cash (used for) operating activities (33,090) (692,638)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (134,093) (110,139)
Costs associated with potential acquisition (107,282) -
---------- --------
Net cash (used for) investing activities (241,375) (110,139)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of mortgage note (10,566) (9,799)
Cash dividends paid (523,857) (510,576)
Proceeds from exercise of stock options/warrants 23,312 139,487
---------- --------
Net cash (used for) financing activities (511,111) (380,888)
---------- --------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (785,576) (1,183,665)
Cash and cash equivalents, at beginning of year 15,783,816 16,265,765
---------- --------
CASH AND CASH EQUIVALENTS, AT END OF PERIOD $14,998,240 $15,082,100
=========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Taxes $ - $ 199,286
Interest $ 58,318 $ 59,085
See accompanying notes
5
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
The condensed, consolidated balance sheet as of March 31, 2005 and the
condensed, consolidated statements of operations for the three month periods
ended March 31, 2005 and 2004 and the condensed, consolidated statements of cash
flows for the three month periods ended March 31, 2005 and 2004 have been
prepared by the Company without audit. The consolidated financial statements
include the accounts of Wireless Telecom Group, Inc. and its wholly-owned
subsidiaries Boonton Electronics Corporation, Microlab/FXR, WTG Foreign Sales
Corporation and NC Mahwah, Inc.
In the opinion of management, the accompanying condensed consolidated
financial statements referred to above contain all necessary adjustments,
consisting of normal accruals and recurring entries, which are necessary to
present fairly the Company's results for the interim periods being presented.
The accounting policies followed by the Company are set forth in Note 1 to
the Company's financial statements included in its annual report on Form 10-K
for the year ended December 31, 2004, which note is incorporated herein by
reference. Specific reference is made to that report for a description of the
Company's securities and the notes to financial statements included therein,
since certain information and footnote disclosures normally included in
financial statements in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted from this report.
The results of operations for the three month periods ended March 31, 2005
and 2004 are not necessarily indicative of the results to be expected for the
full year.
Certain prior years' information has been reclassified to conform to the
current year's reporting presentation.
NOTE 2 - INCOME PER COMMON SHARE
Income per common share is computed by dividing the net income by the
weighted average number of common shares and common equivalent shares
outstanding during each period. As promulgated in SFAS 128 "Earnings Per Share"
("SFAS 128"), SFAS 128 requires the presentation of "basic" and "diluted"
earnings per share on the face of the income statement.
NOTE 3 - SHAREHOLDERS' EQUITY
During the three months ended March 31, 2005, no shares were repurchased by
the Company under the stock repurchase program authorized by the Board of
Directors on November 27, 2000 and as amended on October 5, 2001.
6
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 4 - GOODWILL AND OTHER INTANGIBLE ASSETS
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets".
In accordance with SFAS No. 142, intangible assets, including purchased
goodwill, must be evaluated for impairment. Those intangible assets that will
continue to be classified as goodwill or as other intangibles with indefinite
lives are no longer amortized, but will be tested for impairment periodically.
During 2004, the goodwill relating to the acquisition of Microlab/FXR was tested
for impairment by an independent valuation consulting firm for the year ended
December 31, 2004. The conclusion of the valuation was that this goodwill was
not impaired under Statement of Financial Accounting Standards No. 142
requirements for goodwill impairment testing. Additional testing will be done at
the end of this year and each year going forward to continue to test for
impairment of goodwill.
NOTE 5 - ACCOUNTING FOR STOCK OPTIONS
The Company accounts for its stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and has adopted the disclosure-only alternative of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure."
The following table illustrates the effect on net income and earnings per
share had compensation expense for the employee stock-based plans been recorded
based on the fair value method under SFAS No. 123:
For the Three Months
Ended March 31,
2005 2004
---- ----
Net income:
As reported $ 1,070,601 $ 187,867
Less: stock based compensation
expense - net of tax 45,059 26,827
----------- ---------
Pro forma $ 1,025,542 $ 161,040
=========== =========
Basic earnings per share:
As reported $ .06 $ .01
Pro forma .06 .01
Diluted earnings per share:
As reported $ .06 $ .01
Pro forma .06 .01
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company's former CEO, who resigned in March 2004, is now employed by
the Company as an outside engineering consultant. The Company has agreed to pay
this former CEO on a project basis for fees ranging from $80 to $120 per hour.
This verbal agreement can be terminated at any time.
7
WIRELESS TELECOM GROUP, INC.
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 7 - POTENTIAL ACQUISITION
On October 5, 2004, Wireless Telecom Group, Inc., a New Jersey corporation
("WTT"), entered into a stock purchase agreement (the "Purchase Agreement") with
Willtek Communications GmbH, a limited liability corporation organized under the
laws of Germany ("Willtek"), Damany Holding GmbH, a limited liability
corporation organized under the laws of Germany and the owner of approximately
20% of Willtek's outstanding capital stock ("Damany"), and Investcorp Technology
Ventures LP, a limited partnership organized under the laws of the Cayman
Islands and the owner of approximately 80% of Willtek's outstanding capital
stock ("Investcorp", together with Damany, the "Willtek Shareholders"), pursuant
to which WTT agreed to acquire all of the outstanding capital stock of Willtek
from the Willtek Shareholders. As a result of the proposed acquisition, Willtek
will become a wholly-owned subsidiary of WTT. Willtek, based in Ismaning,
Germany, is a leading provider of solutions that enable manufacturers and
operators of wireless communications devices to test mobile phones, air
interface, and base stations of cellular networks. Willtek's product range
includes high-speed, state-of-the-art test and measurement solutions for
handsets and wireless devices, as well as for radio frequencies and network
testing tasks.
Under the terms of the Purchase Agreement, WTT will purchase all of the
outstanding capital stock of Willtek in exchange for an aggregate purchase price
of $7,000,000 in cash and 8,000,000 shares of WTT common stock, par value $0.01
per share (the "Purchase Price"), 1,000,000 of which shares will be deposited
into an escrow account at the closing of the acquisition for a period of one
year to secure the indemnification obligations of the Willtek Shareholders under
the Purchase Agreement, and the assumption of certain existing liabilities and
obligations valued at $4.8 million. Based on the $2.40 closing price per share
of WTT common stock on October 4, 2004 on the American Stock Exchange, the value
of the Purchase Price for the proposed acquisition is approximately $26.2
million. The Purchase Agreement does not provide for an adjustment in the number
of shares of WTT common stock to be issued to the Willtek Shareholders in the
acquisition in the event of a fluctuation in the market value of WTT common
stock. Giving effect to the proposed acquisition, the Willtek Shareholders would
own approximately 32% of the outstanding shares of WTT common stock.
On March 29, 2005, the Company, Willtek and the Willtek Shareholders
entered into an amended and restated stock purchase agreement (the "Amended
Purchase Agreement"), which modifies the terms of the Original Purchase
Agreement. The terms were modified, in part, due to the operating results of
Willtek during the past six months and the parties' desire to conserve the
Company's existing cash resources. Under the terms of the Amended Purchase
Agreement, the Original Purchase Price was reduced by eliminating the $7.0
million cash component. The purchase price now consists solely of 8,000,000
shares of the Company's common stock (the "Purchase Price"). Based on the $2.54
closing price of a share of the Company's common stock as reported on the
American Stock Exchange on March 28, 2005, the dollar value of the Purchase
Price is approximately $20.3 million. Based on the number of shares of the
Company's common stock outstanding on March 28, 2005, giving effect to the
proposed acquisition, the Willtek Shareholders would own in the aggregate
approximately 31.4% of the outstanding shares of the Company's common stock. As
was the case with the Original Purchase Agreement, the Amended Purchase
Agreement does not provide for an adjustment in the number of shares of the
Company's common stock to be issued to the Willtek Shareholders in the
acquisition in the event of a fluctuation in the market price of the Company's
common stock.
In connection with the acquisition, substantial changes will be made to the
composition of the Company's board of directors and to its senior management
team, including the appointment of Cyrille Damany, Willtek's current Chief
Executive Officer, as the Company's new Chief Executive Officer, and the
appointment of two designees of Investcorp to the Company's seven-member board
of directors at the closing of the acquisition, one of whom will be appointed
Chairman of the Board. It is currently anticipated that, at the closing of the
acquisition, Karabet "Gary" Simonyan will continue to serve on the board as
non-executive Vice Chairman of the Board. Paul Genova, the Company's President
and Chief Financial Officer, will continue as such and report directly to Mr.
Damany following completion of the acquisition. Investcorp will continue to be
entitled to designate up to two individuals for nomination for election to the
Company's board of directors, provided Investcorp's level of beneficial
ownership of the Company's common stock continuously equals or exceeds certain
percentage thresholds.
8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
- ------------
Wireless Telecom Group, Inc., and its operating subsidiaries, Boonton
Electronics Corporation and Microlab/FXR (collectively, the "Company"), develop,
manufacture and market a wide variety of electronic noise sources, electronic
testing and measuring instruments including power meters, voltmeters and
modulation meters and high-power passive microwave components. The Company's
products have historically been primarily used to test the performance and
capability of cellular/PCS and satellite communication systems and to measure
the power of RF and microwave systems. Other applications include radio, radar,
wireless local area network (WLAN) and digital television.
The financial information presented herein includes:
(i) Condensed Consolidated Balance Sheets as of March 31, 2005 and as of
December 31, 2004 (ii) Condensed Consolidated Statements of Operations for the
three month periods ended March 31, 2005 and 2004 and (iii) Condensed
Consolidated Statements of Cash Flows for the three month periods ended March
31, 2005 and 2004.
FORWARD LOOKING STATEMENTS
- --------------------------
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts, including, without limitation, the statements under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," are forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may be identified
by, among other things, the use of forward-looking terminology such as
"believes," "expects," "intends," "plans," "may," "will," "should,"
"anticipates" or "continues" or the negative thereof of other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. These statements are based on the Company's current expectations
of future events and are subject to a number of risks and uncertainties that may
cause the Company's actual results to differ materially from those described in
the forward-looking statements. These risks and uncertainties include, but are
not limited to, product demand and development of competitive technologies in
our market sector, the impact of competitive products and pricing, the loss of
any significant customers, the effects of adoption of newly announced accounting
standards, the effects of economic conditions and trade, legal and other
economic risks, among others. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated or projected. These risks
and uncertainties are disclosed from time to time in the Company's filings with
the Securities and Exchange Commission, the Company's press releases and in oral
statements made by or with the approval of authorized personnel. The Company
assumes no obligation to update any forward-looking statements as a result of
new information or future events or developments.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
Management's discussion and analysis of the financial condition and results
of operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amount
of revenues and expenses for each period. The following represents a summary of
the Company's critical accounting policies, defined as those policies that the
Company believes are: (a) the most important to the portrayal of its financial
condition and results of operations, and (b) that require management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effects of matters that are inherently uncertain.
ALLOWANCES FOR DOUBTFUL ACCOUNTS
- --------------------------------
The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of any of its customers were to decline, additional
allowances might be required.
9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
INCOME TAXES
- ------------
As part of the process of preparing the consolidated financial statements,
the Company is required to estimate its income taxes in each of the
jurisdictions in which it operates. The process incorporates an assessment of
the current tax exposure together with temporary differences resulting from
different treatment of transactions for tax and financial statement purposes.
Such differences result in deferred tax assets and liabilities, which are
included within the consolidated balance sheet. The recovery of deferred tax
assets from future taxable income must be assessed and, to the extent that
recovery is not likely, the Company establishes a valuation allowance. Increases
in valuation allowances result in the recording of additional tax expense.
Further, if the ultimate tax liability differs from the periodic tax provision
reflected in the consolidated statements of operations, additional tax expense
may be recorded.
VALUATION OF LONG-LIVED ASSETS
- ------------------------------
The Company assesses the potential impairment of long-lived tangible and
intangible assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Changes in the operating strategy can
significantly reduce the estimated useful life of such assets.
RESULTS OF OPERATIONS
- ---------------------
The following discussion of our financial condition and results of
operations should be read in conjunction with our interim condensed consolidated
financial statements and the notes to those statements included in Part I, Item
I of this Quarterly Report on Form 10-Q and in conjunction with the consolidated
financial statements contained in our Annual Report on Form 10-K for the year
ended December 31, 2004.
For the three months ended March 31, 2005 as compared to the corresponding
period of the previous year, net sales increased to $6,048,000 from $5,486,000,
an increase of $562,000 or 10.2%. The increase in the three months ended March
31, 2005 is primarily the result of increased sales activity in 2005, of the
Noise Com components for certain existing and potential customers, in part, due
to the Company's continuous efforts to publicize the advantages and many
applications of our products on a commercial basis.
Gross profit on net sales for the three months ended March 31, 2005 was
$3,279,000 or 54.2% as compared to $3,091,000 or 56.3% of net sales for the
three months ended March 31, 2004. Gross profit dollars are higher for the three
months ended March 31, 2005 than in the same period for 2004 primarily due to
higher sales volume. However, the gross profit percentage for the three months
ended March 31, 2005 was slightly lower than that of the same period for 2004
due to higher manufacturing labor and direct overhead costs, and the product mix
being sold during this period being of a slightly lower margin. The Company can
experience variations in gross profit based upon the mix of products sold as
well as variations due to revenue volume and economies of scale. The Company
continues to carefully monitor costs associated with material acquisition,
manufacturing and production.
Operating expenses for the quarter ended March 31, 2005 were $2,056,000 or
34.0% of net sales as compared to $2,971,000 or 54.2% of net sales for the
quarter ended March 31, 2004.
For the three months ended March 31, 2005 as compared to the same period of
the prior year, operating expenses decreased in dollars by $915,000. This
decrease is primarily due to a one-time payout in the first quarter of 2004 to
the Company's former Chief Executive Officer of $685,000, and decreases in
research and development expenses and sales and marketing expenses of $53,000
and $50,000, respectively.
10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Interest income decreased by $54,000 for the three months ended March 31,
2005. This decrease was primarily due to lower returns in a working capital
management account, classified as cash equivalents, due to the fact that they
were highly liquid and readily convertible to cash and were intended to be
liquidated by the Company on a short-term basis.
Other income decreased by $48,000. This was primarily due to realized
losses of short term bonds in the above-mentioned working capital management
account.
Net income increased to $1,071,000, or $.06 per share (diluted), for the
three months ended March 31, 2005 as compared to $188,000, or $.01 per share
(diluted) for the three months ended March 31, 2004. The explanation of these
changes can be derived from the analysis given above of operations for the three
month periods ending March 31, 2005 and 2004, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
The Company's working capital has increased by $439,000 to $23,999,000 at
March 31, 2005, from $23,560,000 at December 31, 2004. At March 31, 2005 the
Company had a current ratio of 10.6 to 1, and a ratio of debt to net worth of
0.19 to 1. At December 31, 2004 the Company had a current ratio of 9.6 to 1, and
a ratio of debt to net worth of 0.20 to 1.
The Company used cash for operations of $33,000 for the three month period
ending March 31, 2005. The use of this cash was primarily due to an increase in
accounts receivable of $1,033,000 and a decrease in accounts payable and accrued
expenses of $244,000, partially offset by net income of $1,071,000, a non-cash
adjustment for depreciation and amortization of $116,000.
The Company has historically been able to collect its account receivables
approximately every two months. This average collection period has been
sufficient to provide the working capital and liquidity necessary to operate the
Company. The Company continues to monitor production requirements and delivery
times while maintaining manageable levels of goods on hand.
Operating activities used $693,000 in cash flows for the comparable period
in 2004. The use of these funds was primarily due to an increase in accounts
receivable of $521,000, an increase in inventories of $344,000, and a decrease
in accounts payable and accrued expenses of $210,000, partially offset by net
income of $188,000, and a non-cash adjustment for depreciation and amortization
of $100,000.
Net cash used for investing activities for the three months ended March 31,
2005 was $241,000. The primary use of these funds was capital expenditures of
$134,000 and costs associated with the potential acquisition of Willtek of
$107,000. For the three months ended March 31, 2004, net cash used for investing
activities was $110,000. The primary use of these funds was capital expenditures
of $110,000.
Net cash used for financing activities for the three months ended March 31,
2005 was $511,000. The primary use of these funds was for dividends paid in the
amount of $524,000, partially offset by proceeds from the exercise of stock
options in the amount of $23,000. Net cash used for financing activities in the
same period of 2004 was $381,000. The primary use of these funds in 2004 was for
dividends paid of $511,000, partially offset by proceeds from the exercise of
stock options in the amount of $139,000.
The Company's former CEO, who resigned in March 2004, is now employed by
the Company as an outside engineering consultant. The Company has agreed to pay
this former CEO on a project basis for fees ranging from $80 to $120 per hour.
This verbal agreement can be terminated at any time.
11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
The Company anticipates that its resources provided by its cash flow from
operations will be sufficient to meet its financing requirements for at least
the next twelve-month period. The Company does not believe it will need to
borrow funds during the next twelve-month period.
INFLATION AND SEASONALITY
- -------------------------
The Company does not anticipate that inflation will significantly impact
its business or its results of operations nor does it believe that its business
is seasonal.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4 - CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures designed to ensure
that information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the specified time periods. As of the end of the period covered
by this report, the Company's Chief Executive Officer and Chief Financial
Officer evaluated, with the participation of the Company's management, the
effectiveness of the Company's disclosure controls and procedures. Based on the
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective.
There were no changes in the Company's internal control over financial reporting
that occurred during the Company's most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
12
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is not aware of any material legal proceeding against the
Company or in which any of their property is subject.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS
11.1 Computation of per share earnings
31.1 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
(Principal Executive Officer)
31.2 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
(Principal Financial Officer)
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Executive
Officer)
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Financial
Officer)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WIRELESS TELECOM GROUP, INC.
----------------------------
(Registrant)
Date: May 13, 2005 /S/Karabet Simonyan
------------------------------------
Karabet Simonyan
Chief Executive Officer
Date: May 13, 2005 /S/Paul Genova
----------------------------------
Paul Genova
President, Chief Financial Officer
14
EXHIBIT LIST
11.1 Computation of per share earnings
31.1 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
(Principal Executive Officer)
31.2 Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002
(Principal Financial Officer)
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Executive
Officer)
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of The Sarbanes-Oxley Act of 2002 (Principal Financial
Officer)
15