UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT
REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
February 27, 2015
Date of Report (date of earliest event reported)
PCTEL, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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000-27115 |
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77-0364943 |
(State or Other Jurisdiction
of Incorporation) |
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(Commission
File Number) |
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(IRS Employer Identification No.) |
471 Brighton Drive
Bloomingdale, Illinois 60108
(Address of Principal Executive Offices, including Zip Code)
(630) 372-6800
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12(b)) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Explanatory Note
On February 27, 2015, PCTEL, Inc. acquired substantially all of the assets of, and assumed certain specified liabilities of, Nexgen Wireless, Inc., an
Illinois corporation (Nexgen), pursuant to an Asset Purchase Agreement dated as of February 27, 2015 among PCTEL, Inc., Nexgen, and the principals of Nexgen as more fully described in the Companys Current Report filed on Form
8-K on March 5, 2015. This amendment No. 1 on Form 8-K/A amends the Companys March 5, 2015, Form 8-K to provide financial statements of Nexgen and pro forma financial information related to the acquisition as required by
Item 9.01(a) and 9.01(b).
Item 9.01 Financial Statements and Exhibits
(b) |
Financial Statements of Business Acquired |
The financial statements of Nexgen for the years ended
December 31, 2014 and 2013 are included as exhibit 99.1 to this Amendment No. 1.
(b) |
Pro Forma Financial Information |
The unaudited pro forma financial statements of PCTEL, Inc. required by
this item are included as Exhibit 99.2 to this Amendment No. 1.
(d) Exhibits.
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23 |
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Consent of CJG Partners, LLP |
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99.1 |
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The financial statements of Nexgen for the years ended December 31, 2014 and 2013 |
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99.2 |
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PCTEL, Inc. unaudited pro forma consolidated condensed statement of operations for the year ended December 31, 2014 and the three months ended March 31, 2015 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 15, 2015
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PCTEL, INC. |
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By: |
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/s/ John W. Schoen |
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John W. Schoen, Chief Financial Officer |
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We
consent to incorporation by reference in the Registration Statements on Form S-8 (No. 333-122117, No. 333-34910, No. 333-61926, No. 333-82120, No. 333-103233 and No. 333-112621) of
PCTEL, Inc., of our report dated February 24, 2015 relating to the consolidated balance sheets of Nexgen Wireless, Inc. as of December 31, 2014 and 2013, and the related statements of income, stockholders equity, and cash flows,
which appears in this Current Report on Form 8-K/A of PCTEL, Inc.
/s/ CJG Partners LLP
Schaumburg, Illinois
May 15, 2015
Exhibit 99.1
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Certified Public Accountants |
Nexgen Wireless, Inc.
Financial Statements and
Independent Auditors Report
December 31, 2014 and 2013
Nexgen Wireless, Inc.
Financial Statements
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Table of Contents |
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Page Number |
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Independent Auditors Report |
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1 - 2 |
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Balance Sheets |
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3 |
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Statements of Income |
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4 |
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Statements of Changes in Stockholders Equity |
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5 |
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Statements of Cash Flows |
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6 - 7 |
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Notes to Financial Statements |
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8 - 12 |
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Certified Public Accountants |
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A |
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Woodfield Executive Center |
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1101 Perimeter Drive. Suite 800 |
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Schaumburg, IL 60173 |
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P |
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(847) 517-8222 |
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F |
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(847) 517-8553 |
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W |
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www.cjgpartners.com |
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders
of Nexgen
Wireless, Inc.
We have audited the accompanying financial statements of Nexgen Wireless, Inc. (an Illinois Corporation), which comprise the balance
sheets as of December 31, 2014 and 2013, and the related statements of income, changes in stockholders equity, and cash flows for the years then ended, and the related notes to the financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted
in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud
or error.
Auditors Responsibility
Our
responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend
on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys
internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the
financial statements referred to above present fairly, in all material respects, the financial position of Nexgen Wireless, Inc. as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in
accordance with accounting principles generally accepted in the United States of America.
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Certified Public Accountants |
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Stockholders
of Nexgen
Wireless, Inc.
(Continued)
Correction of
Error
As discussed in Note 11 to the financial statements, certain errors in the financial statements that were previously reported as of
December 31, 2013, were discovered by management of Nexgen Wireless, Inc. during the current year. Accordingly, amounts previously reported have been restated in the 2013 financial statements now presented, and an adjustment has been made to
retained earnings as of December 31, 2012, to correct the error. Our opinion covering the period ending December 31, 2013, is not modified with respect to this matter.
cjg partners LLP
Certified Public Accountants
Schaumburg, Illinois
February 24, 2015
Nexgen Wireless, Inc.
Balance Sheets
December 31, 2014 and 2013
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2013 |
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2014 |
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(Restated) |
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Assets |
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Current Assets |
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Cash |
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$ |
2,714,184 |
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$ |
2,790,058 |
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Accounts receivable, net |
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6,259,339 |
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1,821,801 |
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Pre-paid expenses |
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18,083 |
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10,794 |
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Total Current Assets |
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8,991,606 |
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4,622,653 |
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Property and Equipment, net |
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181,785 |
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123,404 |
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Total Assets |
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$ |
9,173,391 |
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$ |
4,746,057 |
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Liabilities |
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Current Liabilities |
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Accounts payable |
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$ |
36,797 |
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$ |
104,129 |
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Credit card payable |
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130,933 |
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93,711 |
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Line-of-credit |
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250,000 |
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Accrued expenses |
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837,693 |
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410,586 |
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Income taxes payable |
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114,258 |
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73,078 |
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Current portion of long-term debt |
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19,630 |
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10,339 |
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Total Current Liabilities |
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1,389,311 |
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691,843 |
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Long-Term Liabilities |
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64,324 |
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33,073 |
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Total Liabilities |
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1,453,635 |
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724,916 |
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Stockholders Equity |
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Common stock, no par value; 1,000 shares authorized, 1,000 shares issued and outstanding |
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1,000 |
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1,000 |
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Retained earnings |
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7,718,756 |
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4,020,141 |
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Total Stockholders Equity |
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7,719,756 |
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4,021,141 |
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Total Liabilities and Stockholders Equity |
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$ |
9,173,391 |
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$ |
4,746,057 |
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The accompanying notes are an integral part of the financial statements.
3
Nexgen Wireless, Inc.
Statements of Income
For
the Years Ended December 31, 2014 and 2013
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2013 |
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2014 |
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(Restated) |
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Sales |
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$ |
23,826,949 |
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100 |
% |
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$ |
15,543,420 |
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100 |
% |
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Cost of Sales |
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13,523,591 |
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56.8 |
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11,100,292 |
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71.4 |
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Gross Profit |
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10,303,358 |
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43.2 |
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4,443,128 |
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28.6 |
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Operating Expenses |
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2,762,486 |
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11.6 |
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1,808,209 |
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11.6 |
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Income from Operations |
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7,540,872 |
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31.6 |
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2,634,919 |
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17.0 |
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Other Income (Expense) |
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Interest income |
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115 |
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Interest expense |
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(3,041 |
) |
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(940 |
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Income Before Taxes |
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7,537,946 |
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31.6 |
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2,633,979 |
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17.0 |
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Income Tax Provision |
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119,200 |
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0.5 |
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74,100 |
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0.5 |
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Net Income |
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$ |
7,418,746 |
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31.1 |
% |
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$ |
2,559,879 |
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16.5 |
% |
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The accompanying notes are an integral part of the financial statements.
4
Nexgen Wireless, Inc.
Statements of Changes in Stockholders Equity
For the Years Ended December 31, 2014 and 2013
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Common Stock |
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Additional Paid-in Capital |
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Retained Earnings |
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Total |
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Balance at December 31, 2012 (Restated) |
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$ |
1,000 |
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$ |
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$ |
2,084,762 |
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$ |
2,085,762 |
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Net Income |
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2,559,879 |
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2,559,879 |
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Distributions |
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(624,500 |
) |
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(624,500 |
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Balance at December 31, 2013 (Restated) |
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1,000 |
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4,020,141 |
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4,021,141 |
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Net Income |
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7,418,746 |
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7,418,746 |
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Distributions |
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(3,720,131 |
) |
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(3,720,131 |
) |
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Balance at December 31, 2014 |
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$ |
1,000 |
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$ |
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$ |
7,718,756 |
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$ |
7,719,756 |
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The accompanying notes are an integral part of the financial statements.
5
Nexgen Wireless, Inc.
Statements of Cash Flows
For the Years Ended December 31, 2014 and 2013
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2013 |
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2014 |
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(Restated) |
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Cash Flows from Operating Activities: |
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Cash received from customers |
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$ |
19,389,411 |
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$ |
15,360,920 |
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Cash paid for salaries and suppliers |
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(15,763,179 |
) |
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(12,481,653 |
) |
Interest received |
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|
115 |
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Rent paid |
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(87,978 |
) |
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|
(44,607 |
) |
Interest paid |
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(3,041 |
) |
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|
(940 |
) |
Income taxes paid |
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(78,020 |
) |
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|
(15,355 |
) |
Donations |
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(1,960 |
) |
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Net Cash Provided by Operating Activities |
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|
3,457,308 |
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|
2,816,405 |
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Cash Flows from Investing Activities: |
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Capital expenditures |
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(35,910 |
) |
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(23,265 |
) |
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Net Cash Used for Investing Activities |
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|
(35,910 |
) |
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|
(23,265 |
) |
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Cash Flows from Financing Activities: |
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Repayment of long-term debt |
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(27,141 |
) |
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(9,486 |
) |
Net borrowings under line-of-credit agreement |
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|
250,000 |
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Distributions |
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|
(3,720,131 |
) |
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|
(624,500 |
) |
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Net Cash Used for Financing Activities |
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|
(3,497,272 |
) |
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|
(633,986 |
) |
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Net Increase (Decrease) in Cash and Cash Equivalents |
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|
(75,874 |
) |
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|
2,159,154 |
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Cash and Cash Equivalents at Beginning of Year |
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|
2,790,058 |
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|
630,904 |
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Cash and Cash Equivalents at End of Year |
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$ |
2,714,184 |
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|
$ |
2,790,058 |
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|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
6
Nexgen Wireless, Inc.
Statements of Cash Flows
For the Years Ended December 31, 2014 and 2013
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2014 |
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2013 (Restated) |
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Reconciliation of Net Income to Net Cash Provided by Operating Activities: |
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Net Income |
|
$ |
7,418,746 |
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|
$ |
2,559,879 |
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|
|
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Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: |
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Depreciation |
|
|
35,921 |
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|
33,441 |
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(Increase) decrease in assets: |
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|
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Accounts receivable |
|
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(4,437,538 |
) |
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|
(182,500 |
) |
Prepaid expenses |
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|
(7,289 |
) |
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|
(2,406 |
) |
Increase (decrease) in liabilities: |
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|
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|
|
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Accounts payable |
|
|
(67,332 |
) |
|
|
75,501 |
|
Credit card payable |
|
|
37,222 |
|
|
|
62,462 |
|
Accrued expenses |
|
|
427,107 |
|
|
|
211,087 |
|
Income taxes payable |
|
|
41,180 |
|
|
|
58,745 |
|
Current portion of long term debt |
|
|
9,291 |
|
|
|
195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjustments |
|
|
(3,961,438 |
) |
|
|
256,525 |
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|
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|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities |
|
$ |
3,457,308 |
|
|
$ |
2,816,404 |
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|
|
|
|
|
|
|
|
|
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|
|
Supplemental schedule of non-cash investing and financing activities: |
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|
|
|
|
|
|
|
|
|
|
Debt obligation incurred to purchase automobile |
|
$ |
58,394 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial statements.
7
Nexgen Wireless, Inc.
Notes to Financial Statements
December 31, 2014 and 2013
|
|
|
|
|
1. |
|
Summary of Accounting Policies |
|
|
|
|
|
|
|
History and Business Activity |
|
The Company (an Illinois Corporation) was formed in 2000 and is primarily engaged in the development and testing of software for the telecommunications industry. |
|
|
|
|
|
Revenue Recognition |
|
The Company provides network engineering services and software development. The Company recognizes revenue when the following criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have
been rendered, price is fixed and determinable, and collectability is reasonably assured. |
|
|
|
|
|
Property and Equipment |
|
Property and equipment are carried at cost less accumulated depreciation. Additions, major renewals, replacements and betterments are
capitalized; maintenance and repairs are charged against income as incurred. Provision for depreciation is generally computed by the straight-line and accelerated methods over the estimated useful lives of the respective assets. Annual depreciation
rates range from 7% to 25% for equipment. The Company reviews the carrying value of
property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where
undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this
assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there was no impairment at
December 31, 2014 or 2013. |
|
|
|
|
|
Cash Equivalents |
|
For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. |
|
|
|
|
|
Receivables and Credit Policies |
|
Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Accounts receivable are stated at the amount billed to the customer. Customer account
balances with invoices dated over 90 days old are considered delinquent. Payments of accounts receivable are allocated to the specific invoices identified on the customers remittance advice or, if unspecified, are applied to the earliest
unpaid invoices. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects managements best estimate of the amount that will not be collected. Management individually reviews all accounts receivable balances
that exceed 90 days from the invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. |
|
|
|
|
|
Advertising |
|
The Company expenses advertising costs as they are incurred. Advertising expenses for the years ended December 31, 2014 and 2013, were $6,053 and $28,419, respectively. |
8
Nexgen Wireless, Inc.
Notes to Financial Statements
December 31, 2014 and 2013
|
|
|
|
|
1. |
|
Summary of Accounting Policies (Continued) |
|
|
|
|
|
|
|
Income Tax Status |
|
The stockholders of the Company elected, under the small business corporation provision of the Internal Revenue Code, to have the
Companys net income or loss reflected in their individual income tax returns. Consequently, no provision for income taxes other than various state corporate level taxes has been provided for. The Company files income tax returns in the U.S.
federal jurisdiction and the states of Illinois and California. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for the years before 2011.
The Company includes penalties and interest assessed by income tax authorities in
operating expenses. The Company did not have penalties and interest expenses for the years ended December 31, 2014 and 2013, respectively. |
|
|
|
|
|
Concentration of Credit Risk |
|
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company grants credit to all customers. The Company performs ongoing credit
evaluations of its customers financial conditions, and generally, requires no collateral from its customers. The Company maintains its cash at several banks. Accounts at these institutions are insured by the Federal Deposit Insurance
Corporation up to $250,000. At December 31, 2014, the Companys uninsured cash balance was $2,464,184. The Companys three largest customers accounted for approximately 87% and 90% of its sales for the years ended December 31, 2014 and
2013, respectively. |
|
|
|
|
|
Estimates |
|
The preparation of financial statements in conformity with United States of America generally accepted accounting principles requires management to make estimates and assumptions 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 amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
|
|
|
|
|
Cost of Sales |
|
The Cost of Sales consists of field equipment cost, equipment rental cost, field staff wages, and subcontractor services. |
|
|
|
|
|
Subsequent Events |
|
In accordance with ASC 855, the Company evaluated subsequent events through February 24, 2015, the date these financial statements were available to be issued. There were no material subsequent events that required recognition or
additional disclosures in these financial statements. |
|
|
|
|
|
Reclassifications |
|
Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform to the presentation in the current-year financial statements. |
9
Nexgen Wireless, Inc.
Notes to Financial Statements
December 31, 2014 and 2013
|
|
|
|
|
2. |
|
Accounts and Notes Receivable |
|
Accounts and notes receivable amounts at December 31, 2014 and 2013 as restated consist of: |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 (Restated) |
|
Current Customer Accounts |
|
$ |
6,259,339 |
|
|
$ |
1,821,801 |
|
Allowance for uncollectible customer accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,259,339 |
|
|
$ |
1,821,801 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately 87% of gross accounts receivable at December 31, 2014 and 81% at December 31, 2013 were from the Companys three largest customers. |
|
|
|
3. |
|
Property and Equipment |
|
At December 31, 2014 and 2013 property and equipment are summarized as follows: |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Equipment |
|
$ |
118,992 |
|
|
$ |
118,992 |
|
Furniture and fixtures |
|
|
40,163 |
|
|
|
26,681 |
|
Office equipment |
|
|
16,440 |
|
|
|
1,515 |
|
Vehicles |
|
|
176,682 |
|
|
|
110,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
352,277 |
|
|
|
257,975 |
|
Accumulated depreciation |
|
|
(170,492 |
) |
|
|
(134,571 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
181,785 |
|
|
$ |
123,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for the years ended December 31, 2014 and 2013 was $35,921 and $33,441, respectively. |
|
|
|
4. |
|
Compensated Absences |
|
Employees of the Company are entitled to paid vacation, depending on job classifications, length of service, and other factors. The estimated liability for compensated absences is $113,060 and $ - as of December 31, 2014 and 2013,
respectively. |
|
|
|
5. |
|
Accrued Expenses |
|
Accrued expenses consist of the following at December 31, 2014 and 2013: |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Salaries, commissions and vacation pay |
|
$ |
826,535 |
|
|
$ |
410,586 |
|
Other |
|
|
11,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
837,693 |
|
|
$ |
410,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. |
|
Line-of-Credit |
|
The Company entered into a new, outstanding line-of-credit with a bank in December 2014. The amount of $1,500,000 which is secured by all otherwise unsecured assets. The agreement provides for interest to be paid on any outstanding
balances at Libor plus 3% (at December 31, 2014 3.45%). The outstanding balances on this line-of-credit were $250,000 at December 31, 2014. |
10
Nexgen Wireless, Inc.
Notes to Financial Statements
December 31, 2014 and 2013
|
|
|
|
|
6. |
|
Line-of-Credit (Continued) |
|
The Company had an outstanding line-of-credit with a bank in the amount of $1,000,000 which was secured by all otherwise unsecured assets. The agreement provided for interest to be paid on any outstanding balances at the Prime rate
less .25%. Outstanding balances on this line-of-credit were partially guaranteed by the principal shareholder. The outstanding balance on this line-of-credit was $ - at December 31, 2013. This facility ended during 2014. |
|
|
|
7. |
|
Long-Term Debt |
|
Long-term debt at December 31, 2014 and 2013 consists of the following: |
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Note payable due 12/31/17, payable in monthly installments of $921, including interest of 1.9%, secured by Vehicles. |
|
$ |
32,068 |
|
|
$ |
43,412 |
|
|
|
|
Note payable due March 2020, payable in monthly installments of $912, including interest of 3.88%, secured by Vehicles. |
|
|
51,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,954 |
|
|
|
43,412 |
|
|
|
|
Less Current Portion |
|
|
(19,630 |
) |
|
|
(10,339 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
64,324 |
|
|
$ |
33,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities of long-term debt for the five years subsequent to December 31, 2014 are as follows: 2015 - $19,630; 2016 - $20,191; 2017 - $20,617; 2018 - $10,213; 2019 - $13,303. |
|
|
|
8. |
|
Leases |
|
The Company leases its principal offices under a non-cancelable lease agreement. Total rent expense for the years ended December 31, 2014 and 2013 were $87,978 and $44,607, respectively. Annual minimum rental commitments under the
lease at December 31, 2014 are as follows: 2015 - $89,970; 2016 - $92,678; 2017 - $94,852; 2018 - $65,264. |
|
|
|
9. |
|
Employee Profit Sharing Plan |
|
The Company maintains a qualified defined contribution plan which covers substantially all employees, who have completed one year of service as defined in the plan. Under the plan, employees may elect to make pre-tax or Roth
contributions to the plan. These contributions may be a fixed dollar amount or a percentage of their salary up to the annual maximum as defined. The Company did not make any discretionary profit sharing contributions for the years ended December 31,
2014 and 2013. |
|
|
|
10. |
|
Contingent Liability |
|
The Company was issued demand letters by two former employees alleging the Company owed wages and commissions to them at the time of their termination of employment. The two parties have agreed to the Company owing $262,000, which
is included in accrued liabilities at December 31, 2014. Management does not believe any possible additional liability would materially affect the Companys financial position or results of operations. |
11
Nexgen Wireless, Inc.
Notes to Financial Statements
December 31, 2014 and 2013
|
|
|
|
|
11. |
|
Restatement |
|
In 2014, the Company made prior year adjustments causing 2012 retained earnings and the 2013 financial statements to be restated. The prior year adjustments were due to management reviewing their sales cutoff. The following changes
were made to the 2012 retained earnings and the 2013 balance sheet and income statement: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 Prior |
|
|
2012 Adjusted |
|
|
Change |
|
|
|
|
|
Retained earnings |
|
$ |
1,239,852 |
|
|
$ |
2,084,762 |
|
|
$ |
844,910 |
|
|
|
|
|
|
|
2013 Prior |
|
|
2013 Adjusted |
|
|
Change |
|
Income Statement |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
16,094,993 |
|
|
$ |
15,543,420 |
|
|
$ |
(551,573 |
) |
|
|
|
|
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
1,528,464 |
|
|
$ |
1,821,801 |
|
|
$ |
293,337 |
|
Retained earnings |
|
$ |
3,726,804 |
|
|
$ |
4,020,141 |
|
|
$ |
293,337 |
|
12
Exhibit 99.2
PCTEL, Inc.
UNAUDITED
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(in thousands, except per share data)
The unaudited condensed consolidated pro forma financial statements include the financial statement information for PCTEL, Inc. (PCTEL) and Nexgen Wireless,
Inc. (Nexgen).
The unaudited pro forma consolidated financial information has been prepared using the purchase method of accounting in which
the total cost of the Nexgen acquisition was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. This allocation has been done on a provisional basis and
is subject to change pending final determination of the fair values of the assets and assumed liabilities. The adjustments included in the unaudited condensed consolidated pro forma financial statements represent the provisional determination of
such adjustments based upon currently available information. Accordingly, the actual fair value of the assets acquired, liabilities assumed and the related adjustments may differ from those reflected in this Current Report on Form 8-K/A.
The unaudited condensed consolidated pro forma statement of operations for the year ended December 31, 2014 combines the condensed consolidated statement
of operations of PCTEL for the year ended December 31, 2014 and the audited condensed consolidated statements of operations for Nexgen for the year ended December 31, 2014 as if the merger had occurred on January 1, 2014.
The unaudited condensed consolidated pro forma statement of operations for the three months ended March 31, 2015 combines the condensed consolidated
statement of operations of PCTEL for the three months ended March 31, 2015 and the unaudited condensed consolidated statements of operations for Nexgen for the two months ended February 28, 2015 as if the acquisition had occurred on
January 1, 2014.
The balance sheet as of March 31, 2015 includes the provisional purchase accounting for Nexgen. See our Quarterly Report on
Form 10-Q for the balance sheet and additional information related to the acquisition of substantially all of the assets of, and assumption of certain specified liabilities of Nexgen.
No pro forma effects have been given to any operational or other synergies that may be realized from the Nexgen acquisition. The unaudited pro forma condensed
consolidated financial information is based on the estimates and assumptions described in the notes to the unaudited condensed consolidated pro forma financial statements.
The unaudited condensed consolidated pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the
operating results or financial position that might have been achieved had the transaction occurred as of an earlier date, and they are not necessarily indicative of future operating results or financial position. These pro forma amounts do not,
therefore, project PCTELs financial position or results of operations for any future date or period. The accompanying unaudited condensed consolidated pro forma financial information should be read in conjunction with the historical financial
statements and the related notes thereto of PCTEL, which are included in its Annual Report on Form 10-K and its Quarterly Reports on Forms 10-Q, as well as other financial information included elsewhere in
this Current Report on Form 8-K/A.
PCTEL, INC.
CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, 2015
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCTEL, Inc. (as Reported) |
|
|
Nexgen |
|
|
Proforma Adjustments |
|
|
PCTEL, Inc. (Pro Forma) |
|
|
|
|
|
|
REVENUES |
|
$ |
26,326 |
|
|
$ |
2,958 |
|
|
$ |
0 |
|
|
$ |
29,284 |
|
COST OF REVENUES |
|
|
16,137 |
|
|
|
1,907 |
|
|
|
0 |
|
|
|
18,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
10,189 |
|
|
|
1,051 |
|
|
|
0 |
|
|
|
11,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
2,738 |
|
|
|
296 |
|
|
|
0 |
|
|
|
3,034 |
|
Sales and marketing |
|
|
3,530 |
|
|
|
201 |
|
|
|
0 |
|
|
|
3,731 |
|
General and administrative |
|
|
3,363 |
|
|
|
65 |
|
|
|
(704 |
) (a), (b) |
|
|
2,724 |
|
Amortization of intangible assets |
|
|
654 |
|
|
|
0 |
|
|
|
484 |
(c) |
|
|
1,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
10,285 |
|
|
|
562 |
|
|
|
(220 |
) |
|
|
10,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS) |
|
|
(96 |
) |
|
|
489 |
|
|
|
220 |
|
|
|
613 |
|
Other income (expense), net |
|
|
44 |
|
|
|
1 |
|
|
|
(1 |
) (d) |
|
|
44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
(52 |
) |
|
|
490 |
|
|
|
219 |
|
|
|
657 |
|
Expense (benefit) for income taxes |
|
|
(19 |
) |
|
|
3 |
|
|
|
256 |
(e) |
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
|
(33 |
) |
|
|
487 |
|
|
|
(38 |
) |
|
|
416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
$ |
0.02 |
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to common shareholders |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
$ |
0.02 |
|
|
|
|
|
|
Weighted average shares - Basic |
|
|
18,312 |
|
|
|
|
|
|
|
|
|
|
|
18,312 |
|
Weighted average shares - Diluted |
|
|
18,312 |
|
|
|
|
|
|
|
|
|
|
|
18,312 |
|
* |
see accompanying footnotes to the pro forma financial statements |
PCTEL, INC.
CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS (Unaudited)
Year Ended December 31, 2014
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PCTEL, Inc. (as Reported) |
|
|
Nexgen |
|
|
Proforma Adjustments |
|
|
PCTEL, Inc. (Pro Forma) |
|
|
|
|
|
|
REVENUES |
|
$ |
107,164 |
|
|
$ |
23,827 |
|
|
$ |
0 |
|
|
$ |
130,991 |
|
COST OF REVENUES |
|
|
63,577 |
|
|
|
13,524 |
|
|
|
0 |
|
|
|
77,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
43,587 |
|
|
|
10,303 |
|
|
|
0 |
|
|
|
53,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
11,736 |
|
|
|
1,456 |
|
|
|
0 |
|
|
|
13,192 |
|
Sales and marketing |
|
|
12,961 |
|
|
|
987 |
|
|
|
0 |
|
|
|
13,948 |
|
General and administrative |
|
|
12,819 |
|
|
|
320 |
|
|
|
29 |
(f) |
|
|
13,168 |
|
Amortization of intangible assets |
|
|
1,967 |
|
|
|
0 |
|
|
|
2,923 |
(g) |
|
|
4,890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
39,483 |
|
|
|
2,763 |
|
|
|
2,952 |
|
|
|
45,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS) |
|
|
4,104 |
|
|
|
7,540 |
|
|
|
(2,952 |
) |
|
|
8,692 |
|
Other income (expense), net |
|
|
1,666 |
|
|
|
(2 |
) |
|
|
(4 |
) (h) |
|
|
1,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES |
|
|
5,770 |
|
|
|
7,538 |
|
|
|
(2,956 |
) |
|
|
10,352 |
|
Expense (benefit) for income taxes |
|
|
1,158 |
|
|
|
119 |
|
|
|
1,560 |
(i) |
|
|
2,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
4,612 |
|
|
|
7,419 |
|
|
|
(4,516 |
) |
|
|
7,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
$ |
0.41 |
|
Diluted Earnings per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders |
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
|
$ |
0.41 |
|
|
|
|
|
|
Weighted average shares - Basic |
|
|
18,159 |
|
|
|
|
|
|
|
|
|
|
|
18,159 |
|
Weighted average shares - Diluted |
|
|
18,389 |
|
|
|
|
|
|
|
|
|
|
|
18,389 |
|
* |
see accompanying footnotes to the pro forma financial statements |
PCTEL, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(in thousands)
Acquisition of Nexgen Wireless, Inc.
On
February 27, 2015, the Company acquired substantially all of the assets of, and assumed certain specified liabilities of, Nexgen Wireless, Inc., an Illinois corporation (Nexgen), pursuant to an Asset Purchase Agreement dated as of
February 27, 2015 (the Nexgen APA) among PCTEL, Inc., Nexgen, and the principals of Nexgen.
The business of Nexgen is based in
Schaumburg, Illinois. Nexgen provides Meridian, a network analysis tool portfolio, and engineering services. Nexgens Meridian software product portfolio translates real-time network performance data into engineering actions to optimize
operator performance. Meridian, with its modules of Network IQ, Subscriber IQ, and Map IQ, supports crowd-based, cloud-based data analysis to enhance network performance. Nexgen provides performance engineering, specialized
staffing, and trend analysis for carriers, infrastructure vendors, and neutral hosts for 2G, 3G, 4G, and LTE networks.
The provisional purchase
consideration for Nexgen was $21.5 million, consisting of $18.25 million in cash paid at closing, $2.25 million held in escrow, an estimated $0.9 million excess working capital true up to be paid in cash, and a potential $2.0 million contingency
payment that has been provisionally calculated with a fair value of $0.1 million. The contingent payment was dependent on the achievement of revenue-based goals pertaining to the acquired business for the period commencing on March 1, 2015 and
ending on April 30, 2016. The cash consideration paid was provided from the Companys existing cash. The assets acquired consisted primarily of customer relationships, intellectual property (including trade names), working capital
(accounts receivable, work in process, accounts payable and accrued liabilities), and fixed assets. The Nexgen Parties are bound by non-competition covenants under the Nexgen APA, which generally expire on February 27, 2019. The Company
calculates the fair value of the assets acquired by using a blended analysis of the present value of future discounted cash flows and the market approach of valuation. The intangible assets recorded have a weighted average amortization period of 5.0
years.
The amortization period by asset is as follows:
|
|
|
Intangible Assets |
|
Useful Life |
Customer relationships |
|
5 years |
Trade names |
|
5 years |
Technology |
|
5 years |
Backlog |
|
4 months |
Non-compete |
|
4 years |
The purchase accounting related to the valuation of certain tangible and intangible assets was still in process
at March 31, 2015. The purchase accounting is expected to be completed no later than the quarter ended September 30, 2015. The following is the provisional allocation of the purchase price for the assets from Nexgen at the date of the
acquisition as of March 31, 2015:
|
|
|
|
|
Tangible assets: |
|
|
|
|
Accounts receivable |
|
$ |
5,437 |
|
Prepaid and other assets |
|
|
49 |
|
Deferred cost of sales |
|
|
24 |
|
Fixed assets |
|
|
43 |
|
|
|
|
|
|
Total tangible assets |
|
|
5,553 |
|
|
|
|
|
|
|
|
Intangible assets: |
|
|
|
|
Customer relationships |
|
|
9,258 |
|
Trade names |
|
|
972 |
|
Technology |
|
|
3,165 |
|
Backlog |
|
|
109 |
|
Non-compete |
|
|
538 |
|
Goodwill |
|
|
2,456 |
|
|
|
|
|
|
Total intangible assets |
|
|
16,498 |
|
|
|
|
|
|
Total assets |
|
|
22,051 |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
200 |
|
Accrued liabilities |
|
|
337 |
|
|
|
|
|
|
Total liabilities |
|
|
537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
21,514 |
|
|
|
|
|
|
A reconciliation of the assets acquired with the cash paid at closing is as follows:
|
|
|
|
|
Net assets acquired |
|
$ |
21,514 |
|
Due Nexgen - contingent liability |
|
|
(91 |
) |
Due Nexgen - working capital adjustment |
|
|
(923 |
) |
|
|
|
|
|
Cash paid at closing |
|
$ |
20,500 |
|
|
|
|
|
|
Mr. Jigar Thakkar, the primary founder of Nexgen, remains with the acquired business as the Companys
newly-appointed Vice President, Network Analytics, under an employment arrangement that includes non-competition covenants for the duration of his employment with PCTEL, Inc. and for 12 months thereafter (which covenants are in addition to his
non-competition covenants under the Nexgen APA described above). The Company assumed Nexgens existing lease for Nexgens offices in Schaumburg, Illinois and will operate the acquired business from that location.
The Company does not have any material relationship with Mr. Thakkar and the other principals of Nexgen other than in respect of the Nexgen APA, the
Nexgen APA Amendment, the transactions provided for therein, and Mr. Thakkars post-acquisition role as the Companys Vice President and Chief Technology Officer, RF Solutions.
Pro Forma Adjustments Three Months Ended March 31, 2015
(a) |
To eliminate transactions costs of $711 consisting of investment banking fees, due diligence, and legal fees incurred. |
(b) |
To include additional bank fees of $7 related to lower cash balances. |
(c) |
To record the amortization for the intangible assets acquired from Nexgen. |
(d) |
To record the elimination of interest expense related to expense incurred by Nexgen for its lines of credit and other debt and to record the elimination of interest income related to cash investments used for the
purchase of Nexgen. |
(e) |
To record income tax expense related to the Nexgen pretax earnings and related to the pro forma adjustments. Since Nexgen was a pass through entity for tax purposes, the pro forma income tax adjustment for Nexgen
represents a true-up to the Companys statutory rate for federal and state taxes. |
Pro Forma Adjustments Year Ended
December 31, 2014
(f) |
To include additional bank fees of $29 related to lower cash balances. |
(g) |
To record the amortization for the intangible assets acquired from Nexgen. |
(h) |
To record the elimination of interest expense related to expense incurred by Nexgen for its lines of credit and other debt and to record the elimination of interest income related to cash investments used for the
purchase of Nexgen. |
(i) |
To record income tax expense related to the Nexgen pretax earnings and related to the pro forma adjustments. Since Nexgen was a pass through entity for tax purposes, the pro forma income tax adjustment for Nexgen
represents a true-up to the Companys statutory rate for federal and state taxes. |
Reclassifications
For the purpose of this unaudited pro forma information, certain amounts in Nexgens unaudited consolidated statements of income for the year ended
December 31, 2014 and for the two months ended February 28, 2015 were reclassified to maintain consistency in presentation with PCTELs financial information.
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