-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Vj+DBQ3LkSDh/Q+Y5kJmbb/l2rS4IfcVT5Z11CqfY4V/stbeELu3taDjwtRazSM9 oos5/CzQ95XnNe52A8Fh3g== 0000950115-00-000708.txt : 20000516 0000950115-00-000708.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950115-00-000708 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RELM WIRELESS CORP CENTRAL INDEX KEY: 0000002186 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC & OTHER ELECTRICAL EQUIPMENT (NO COMPUTER EQUIP) [3600] IRS NUMBER: 042225121 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07336 FILM NUMBER: 631497 BUSINESS ADDRESS: STREET 1: 7505 TECHNOLOGY DRIVE CITY: WEST MELBOURNE STATE: FL ZIP: 32904 BUSINESS PHONE: 2154303900 MAIL ADDRESS: STREET 1: 750 TECHNOLOGY DRIVE CITY: WEST MELBOURNE STATE: FL ZIP: 32904 FORMER COMPANY: FORMER CONFORMED NAME: ADAGE INC DATE OF NAME CHANGE: 19920703 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 2000 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 0-7336 RELM WIRELESS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) NEVADA 04-2225121 - ------------------------------- ------------------ (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7100 TECHNOLOGY DRIVE WEST MELBOURNE, FLORIDA --------------------------------------- (Address of principal executive offices) 32904 ---------- (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (407) 984-1414 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 _______ Common Stock, $.60 Par Value -- 5,090,405 shares outstanding as of May 4, 2000 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS RELM WIRELESS CORPORATION Condensed Consolidated Balance Sheets (In thousands) March 31 December 31, 2000 1999 ----------- ------------ (Unaudited) (see note 1) ASSETS Current Assets: Cash and cash equivalents $ 185 $ 1 Accounts receivable, net 2,051 1,966 Inventories 11,627 10,211 Notes receivable 400 400 Prepaid expenses and other current 654 501 Investment securities - trading -- 1 ------- ------- Total Current Assets 14,917 13,080 Property and equipment, net 4,119 8,024 Notes Receivable 1,291 1,295 Debt issuance costs, net 752 -- Other Assets 446 454 ------- ------- Total Assets $21,525 $22,853 ======= ======= See notes to condensed consolidated financial statements. ITEM 1 - FINANCIAL STATEMENTS - Continued RELM WIRELESS CORPORATION Condensed Consolidated Balance Sheets (In thousands except share data)
March 31, December 31, 2000 1999 ----------- ------------ (Unaudited) (see note 1) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term liabilities $ 1,546 $ 1,807 Accounts payable 3,084 4,447 Accrued compensation and related taxes 421 514 Accrued expenses and other current liabilities 1,004 636 Common stock and common stock warrants payable 1,059 -- ------- ------- Total Current Liabilities 7,114 7,404 Long-Term Liabilities: Loans, notes and mortgages 3,733 8,281 Convertible subordinate notes 3,250 -- Capital lease obligations 660 791 ------- ------- 7,643 9,072 Stockholders' equity: Common; $.60 par value: 10,000,000 authorized shares: 5,046,406 issued and outstanding shares 3,053 3,053 Additional paid-in capital 20,195 20,195 Accumulated deficit (16,480) (16,871) ------- ------- Total stockholders' equity 6,768 6,377 ------- ------- Total Liabilities and sockholders' equity $21,525 $22,853 ======= =======
See notes to condensed consolidated financial statements. ITEM 1 - FINANCIAL STATEMENTS - Continued RELM WIRELESS CORPORATION Condensed Consolidated Statements of Income (Unaudited) (In thousands except per share data)
Three Months Ended ----------------------- March 31, March 31, 2000 1999 -------- -------- Sales $4,596 $6,465 Expenses: Cost of sales 3,609 4,518 Selling, general & administrative 1,526 1,771 ------ ------ 5,135 6,289 ------ ------ Operating income (loss) 539 176 Other income (expense): Interest expense (298) (249) Gain on sale of facility 1,165 -- Net gains on investments -- 48 Other income 63 80 ------ ------ Net income $ 391 $ 55 ====== ====== Earnings per share-basic $ 0.08 $ 0.01 Earnings per share-diluted $ 0.07 $ 0.01 ====== ======
See notes to condensed consolidated financial statements. ITEM 1 - FINANCIAL STATEMENTS - Continued RELM WIRELESS CORPORATION Condensed Consolidated Statements of Cash Flow (Unaudited) (In thousands)
Three Months Ended ---------------------- March 31, March 31, 2000 1999 -------- -------- Cash used by operations $(1,040) $(2,314) Investing activities: Cash paid for Uniden product line (2,016) -- Property and equipment purchases (94) (246) Proceeds from disposals of assets 5,208 -- Proceeds from sale of marketable securities -- 748 Other 4 (55) ------- ------ Cash provided by investing activities 3,102 447 Financing activities: Net changes in lines of credit (1,141) 627 Proceeds from long term debt 3,250 1,065 Payment of long term debt (3,799) (260) Payment of debt issuance costs (188) -- ------- ------ Cash provided (used) by financing activities (1,878) 1,432 Increase (decrease) in cash 184 (435) Cash and cash equivalents at beginning of period 1 464 ------- ------ Cash and cash equivalents at end of period $ 185 $ 29 ======= ====== Supplemental disclosure: Interest paid $ 298 $ 249 ======= ====== Non-cash transactions: Common stock and common stock warrants payable for debt issuance and acquisition costs $ 1,059 $ -- ======= ======
See notes to condensed consolidated financial statements. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (In thousands except share data) 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheet as of March 31, 2000, the condensed consolidated statements of operations for the three months ended March 31, 2000 and 1999 and the condensed consolidated statements of cash flows for the three months ended March 31, 2000 and 1999 have been prepared by RELM Wireless Corporation (the Company), without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation have been made. The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1999 Annual Report to Stockholders. The results of operations for the three month period ended March 31, 2000 are not necessarily indicative of the operating results for a full year. The Company maintains its records on a calendar year basis. The Company's first, second, and third quarters normally end on the Friday closest to the last day of the last month of such quarter, which was March 31, 2000 for the first quarter of fiscal 2000. The quarter began on January 1, 2000. Certain prior period amounts have been reclassified to correspond to the current period presentation. 2. SIGNIFICANT TRANSACTIONS ACQUISITION OF PRODUCT LINE On March 13, 2000, the Company completed the acquisition of certain private radio communications products from Uniden America Corporation (Uniden) for $1,864 which included assumption of certain liabilities related to the product line. Additionally, the Company incurred acquisition costs of $639. The entire purchase price of $2,853 was preliminarily allocated to inventory and tooling based on their estimated fair values, pending final determination of certain acquired balances. Uniden will continue to provide manufacturing support for certain Uniden land mobile radio products, which will be marketed by the Company. Acquisition costs included grants of 150,000 shares at $3.25 per share of the Company's common stock valued at $487. The grants are subject to the approval of the Company's stockholders. If not approved, the grants are to be paid in cash equivalent. Accordingly, the Company has recorded the common stock grants as payable at March 31, 2000. ITEM 1 - FINANCIAL STATEMENTS - Continued SIGNIFICANT TRANSACTIONS - Continued PRIVATE PLACEMENT On March 16, 2000, the Company completed the private placement of $3,250 of convertible subordinated notes. The notes earn interest at 8% per annum, are convertible at $3.25 per share, and are due on December 31, 2004. Additionally, the Company incurred approximately $759 in costs related to the private placement. These costs are currently being amortized on a straight line basis over the life of the notes. The debt issuance costs included grants of 50,000 shares at $3.25 per share of the Company's common stock valued at $163 and warrants to purchase 300,000 shares at $3.25 per share of the Company's common stock valued at $409. The warrants have a five year term and an exercise price of $3.25 per share. The grants are subject to the approval of the Company's stockholders. If not approved, the grants are payable in cash equivalent. Accordingly, the Company has recorded the common stock and common stock warrant grants as payable at March 31, 2000. Although the Company anticipates filing a registration statement for the common stock shares underlying the convertible notes during the second quarter of 2000, they currently have not been registered under securities laws and may not be sold in the U.S. absent registration or an exemption. Registration rights have been granted to the note holders. Portions of the proceeds from this private placement were used to acquire the Uniden land mobile radio products. SALE OF WEST MELBOURNE, FLORIDA FACILITY AND COMPLETION OF MANUFACTURING AGREEMENT On March 24, 2000, the Company completed the sale of its 144 square foot facility located in West Melbourne, Florida for $5,600. The gain of approximately $1,165 is reflected in the statements of income for the period ended March 31, 2000. Additionally, the Company has secured a lease for a nearby facility for approximately 54 square feet in size. The Company has entered into a contract manufacturing agreement for the manufacture of certain land mobile radio subassemblies. Under this agreement, the contract manufacturer employed approximately sixty-eight of the Company's direct manufacturing workforce and agreed to purchase certain existing inventories from the Company as needed, based on material requirements indicated by purchase orders for finished product from the Company. ITEM 1 - FINANCIAL STATEMENTS - Continued 3. INVENTORIES The components of inventory consist of the following: March 31 December 31 2000 1999 ---- ---- Finished goods $ 7,073 $ 5,065 Work in process 1,318 1,645 Raw materials 3,236 3,501 ------- ------- $11,627 $10,211 ------- ------- 4. STOCKHOLDERS' EQUITY The consolidated changes in stockholders' equity for the three months ended March 31, 2000 are as follows:
Common Stock Additional --------------- Paid-In Accumulated Shares Amount Capital Deficit Total ------ ------ ------- ------- ----- Balance at December 31, 1999 5,090,405 $3,053 $20,195 $(16,871) $6,377 Net income 391 $ 391 --------- ------ ------- -------- ------ Balance at March 31, 2000 5,090,405 $3,053 $20,195 $(16,480) $6,768 --------- ------ ------- -------- ------
ITEM 1 - FINANCIAL STATEMENTS - Continued 5. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended -------------------------- March 31 March 31 2000 1999 ---- ---- Numerator: Net income (numerator for basic earnings per share) $ 391 $ 55 Effect of dilutive securities: 8% convertible notes 11 -- ---------- ---------- Net income (numerator for dilutive earnings per share) 402 $ 55 ---------- ---------- Denominator: Denominator for basic earnings per share-weighted average shares 5,090,405 5,046,416 Effect of dilutive securities: 8% convertible notes 166,667 -- Options 341,297 -- Denominator for diluted earnings per share - adjusted weighted average shares 5,598,369 5,046,416 ========== ========== Basic earnings per share $ 0.08 $ 0.01 ========== ========== Diluted earnings per share $ 0.07 $ 0.01 ---------- ---------- 6. COMPREHENSIVE INCOME Total comprehensive income for the three months ended March 31, 2000 was $391 compared to $55 for the same period in the previous year. ITEM 1 - FINANCIAL STATEMENTS - Continued 7. REAL ESTATE ASSETS HELD FOR SALE The Company's remaining property held for sale was sold during the second quarter of 1999. The real estate operations produced sales of $798; selling, general and administrative expenses of $75; and operating income of $723 for the three months ended March 31, 1999. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS RESULTS OF OPERATIONS As an aid to understanding the Company's operating results, the following table shows each item from the consolidated statement of operations expressed as a percentage of net sales: Percentage of Sales ----------------------------- Three Months Ended March 31 March 31 2000 1999 ---- ---- Sales 100.0% 100.0% Cost of sales 78.5 69.9 ----- ----- Gross margin 21.5 30.1 Selling, general and administrative expenses (33.2) (27.4) Interest expense (6.5) (3.8) Other income 26.7 0.2 ----- ----- Net income 8.5% 0.9% ----- ----- NET SALES Net sales for the three months ended March 31, 2000 decreased approximately $1.9 million (28.9%) compared to the same period for the prior year. Revenues for the Company's core land mobile radio (LMR) products increased approximately $208,000 (4.9%) due to stronger sales in the Company's government and public safety markets. Non-LMR revenues decreased $2.1 million (93.1%) as the Company exited businesses and discontinued products that performed poorly or did not fit its strategic focus in wireless communications. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS-Continued GROSS MARGIN Cost of sales as a percentage of net sales increased 8.6%, from 69.9% to 78.5% for the three months ended March 31, 2000 compared to the same period for the prior year. The cost of sales percentage for the prior year was favorably impacted by the sale of commercial real estate totaling $798,000. The book value of the real estate was significantly reduced in periods prior to 1999 as the Company had increased related valuation allowances to reflect current market projections at the time. Excluding this sale, cost of sales for the prior year was 79.7%. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative (SG&A) expenses consist of marketing, sales, commissions, engineering, research and development, management information systems, accounting and headquarters expenses. For the three months ended March 31, 2000, SG&A expenses totaled $1,526,000 or 33.2% of sales compared to $1,771,000 or $27.4% of sales for the same period in 1999. The decrease in SG&A expenses reflects the Company's actions to reduce spending on SG&A support as it exits certain businesses and discontinues poorly performing products. Furthermore, several new product development projects are largely completed, resulting in lower engineering and R&D expenses. Marketing and selling expenses, which are included in SG&A expenses, increased approximately 10% compared to the same period in 1999 as the Company started selling its new line of commercial products that were acquired in March 2000. INTEREST EXPENSE For the three months ended March 31, 2000 interest expense totaled $298,000 or 6.5% of sales compared with $249,000 or 3.8% of sales for the same period in 1999. The Company increased the utilization of its revolving credit facility to fund working capital requirements. Also, in March 2000, the Company completed the private placement of 8% convertible notes. OTHER INCOME On March 24, 2000, the Company completed the sale of its 144,000 square foot facility located in West Melbourne, Florida for $5.6 million. The transaction resulted in a gain of approximately $1.2 million and approximately $1.6 million in cash after related expenses and the satisfaction of the mortgage on the property. The Company has lease approximately 54,000 square feet of comparable space at a nearby location. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS-Continued INCOME TAXES No income tax provision was provided for the three months ended March 31, 2000 or 1999 as the Company has net operating loss carryforward benefits totaling approximately $12 million at March 31, 2000. The Company has evaluated its tax position versus the requirements of SFAS No. 109, Accounting for Income Taxes, and does not believe that it has met the more-likely-than-not criteria for recognizing a deferred tax asset and has provided valuation allowances against net deferred tax assets. INFLATION AND CHANGING PRICES Inflation and changing prices for the three months ended March 31, 2000 and 1999 have contributed to increases in wages, facilities, and raw material costs. Effects of these inflationary effects were partially offset by increased prices to customers. The Company believes that it will be able to pass on most of its future inflationary increases to its customers. The Company is also subject to changing foreign currency exchange rates in its purchase of some raw materials. The Company employs several methods to protect against increases in cost due to currency fluctuations. It is not always possible to pass on these effects. Competitors in the LMR markets are subject to similar fluctuations. YEAR 2000 DISCUSSION GENERAL The Company completed year 2000 readiness procedures during 1999. The Company has not experienced any material adverse impact from any issue related to the year 2000. Total aggregate costs to complete the year 2000 readiness was approximately $25,000. INTERNAL COMPANY SYSTEMS The Company implemented a new enterprise-wide information system in 1997. The current release of this software is year 2000 compliant. The Company implemented the current release. Costs associated with the upgrade were approximately $20,000 and were recognized as they were incurred. It is the Company's policy to utilize the most current releases of software. The aforementioned upgrade would have been performed regardless of the year 2000 issue. No other information technology projects were impacted by the upgrade. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS-Continued YEAR 2000 DISCUSSION-Continued THIRD PARTY RELATIONSHIPS The Company has material relationships with certain suppliers and customers. Generally, suppliers provide components that are necessary to manufacture a finished product. The Company's products are sold primarily to dealers and distributors who resell to end-users. The Company determined the state of readiness of material third parties through the use of questionnaires. Other than the U.S. Government, no single customer represents a significant portion (greater than 10%) of the Company's sales. The cost of administering the questionnaire program was less than $5,000. The Company has not experienced any material adverse impact from supplier or customer issues related to the year 2000. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2000, the Company had working capital of $7.8 million compared with $5.7 million as of December 31, 1999. This increase was primarily the result of 1) new product inventory that was part of the Company's acquisition of Uniden America's private radio communications product lines, 2) the successful private placement of $3.25 million in subordinated convertible notes, and 3) the sale of the Company's 144,000 square foot facility in West Melbourne, Florida. Please see the notes to the condensed consolidated financial statements for further information. The Company has a $7 million revolving line of credit. As of March 31, 2000, the available credit on this line was approximately $1.3 million. Capital expenditures for property and equipment for the three months ended March 31, 2000 were $94,000 compared to $246,000 for the same period in 1999. FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe-harbor created by such sections. Such forward-looking statements concern the Company's operations, economic performance and financial condition. Such statements involve known risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS-Continued FORWARD-LOOKING STATEMENTS - Continued following: general economic and business conditions; changes in customer preferences; competition; changes in technology; the integration of any acquisitions; changes in business strategy; the indebtedness of the Company; quality of management, business abilities and judgment of the Company's personnel; the availability, terms and deployment of capital; and various other factors referenced in this Report. The words "believe", "estimate", "expect", "intend", "anticipate", "will", "may" and similar expressions and variations thereof identify certain of such forward-looking statements. The forward-looking statements are made as of the date of this Report, and the Company assumes no obligation to update those forward-looking statements or to update the reasons why actual results could differ form those projected in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK None. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K a) The following documents are filed as part of this report: 3. exhibits: The exhibits listed below are filed as a part of, or incorporated by reference in this report: Number Exhibit ------ ------- 4(ii) 8% Convertible Subordinate Promissory Note* 10(e) Amendment to Security and Loan Agreement* 10(f) 2nd Amendment to Security and Loan Agreement* 10(g) 3rd Amendment to Security and Loan Agreement* 10(h) Simmonds Agreement* 10(i) Contract for Sale of West Melbourne FL. Real Estate* 10(j) Sub Lease Agreement* 10(k) Uniden Asset Purchase Agreement* 10(l) OEM Uniden Purchase Agreement* 10(m) Uniden ESAS Technology Agreement* 10(n) Manufacturing Agreement* 10(o) Transaction Agreement for Real Estate Sale and Contract Manufacturing* 27 Financial Data Schedule b) Reports on Form 8-K The Registrant was not required to file reports on Form 8K during the quarter ended March 31, 2000. * Incorporated by reference from the Company's report on form 10K for the year ended December 31, 1999. Pursuant to the requirements of securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned there unto duly authorized. RELM WIRELESS CORPORATION ------------------------------ William P. Kelly Chief Financial Officer and May 15, 2000 Vice President - Finance EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JAN-1-2000 MAR-31-2000 185 0 3,739 (1,688) 11,627 14,917 11,156 (7,037) 21,525 7,114 0 0 0 3,053 3,715 21,525 4,596 5,824 3,609 0 1,526 0 298 391 0 0 0 0 0 391 0.08 0.07
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