-----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, Vi8wGQOuDvo2FkRktb/qoKgMfU6f5lHRfyQbpcHux1sHkqzdMh92nxiRgOc+1chs dSHOkJHrdPffEH2kmyBJog== 0001021408-01-500879.txt : 20010515 0001021408-01-500879.hdr.sgml : 20010515 ACCESSION NUMBER: 0001021408-01-500879 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RELM WIRELESS CORP CENTRAL INDEX KEY: 0000002186 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 042225121 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07336 FILM NUMBER: 1631580 BUSINESS ADDRESS: STREET 1: 7100 TECHNOLOGY DRIVE CITY: WEST MELBOURNE STATE: FL ZIP: 32904 BUSINESS PHONE: 2154303900 MAIL ADDRESS: STREET 1: 7100 TECHNOLOGY DRIVE CITY: WEST MELBOURNE STATE: FL ZIP: 32904 FORMER COMPANY: FORMER CONFORMED NAME: ADAGE INC DATE OF NAME CHANGE: 19920703 10-Q 1 d10q.txt FORM 10-Q FOR PERIOD ENDING 3/31/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ---------------------------- FORM 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 --------------- 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: (321) 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 -- 5,346,174 shares outstanding as of March 31, 2001 PART I- FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS -------------------- RELM WIRELESS CORPORATION Condensed Consolidated Balance Sheets (In thousands)
March 31 December 31 2001 2000 ----------------------------------- (Unaudited) (see note 1) ASSETS Current assets: Cash and cash equivalents $ 102 $ 208 Trade accounts receivable (net of allowance for doubtful accounts 2,282 3,712 of $1,551 as of March 31, 2001 and $1,555 as of March 31, 2000) Inventories, net 9,107 8,940 Prepaid expenses and other current 538 528 ------------- ------------ Total current assets 12,029 13,388 Property, plant and equipment, net 2,678 2,833 Notes receivable less current portion 984 984 Debt issuance costs, net 640 682 Other assets 505 535 ------------- ------------ Total assets $ 16,836 $ 18,422 ============= ============
See notes to condensed consolidated financial statements. 1 RELM WIRELESS CORPORATION Condensed Consolidated Balance Sheets (In thousands except share data)
March 31 December 31 2001 2000 -------------- ------------- (Unaudited) (see note 1) LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Current maturities of long-term liabilities $ 422 $ 848 Accounts payable 3,402 3,604 Accrued compensation and related taxes 472 361 Accrued expenses and other current liabilities 855 896 -------------- ------------ Total current liabilities 5,151 5,709 Long-term liabilities: Line of credit 2,452 3,193 Convertible subordinated notes 3,150 3,150 Capital lease obligations 10 10 -------------- ------------ 5,612 6,353 Stockholders' equity: Common stock; $.60 par value; 10,000,000 authorized shares: 5,346,174 issued and outstanding shares at March 31, 2001 and December 31, 2000 3,207 3,207 Additional paid-in capital 21,452 21,452 Accumulated deficit (18,586) (18,299) -------------- ------------ Total stockholders' equity 6,073 6,360 -------------- ------------ Total liabilities and stockholders' equity $ 16,836 $ 18,422 ============== ============
See notes to condensed consolidated financial statements. 2 RELM WIRELESS CORPORATION Condensed Consolidated Statements of Operations (Unaudited) (In thousands except per share data) THREE MONTHS ENDED --------------------------- March 31 March 31 2001 2000 --------- ----------- Unaudited (see note 1) Sales $ 4,720 $ 4,596 Expenses Cost of products 3,471 3,609 Selling, general & administrative 1,388 1,526 --------- ----------- 4,859 5,135 --------- ----------- Operating income (loss) (139) (539) Other income (expense): Interest expense (158) (298) Gain on sale of facility and equipment - 1,165 Other income 10 63 --------- ----------- Net income (loss) $ (287) $ 391 ========= =========== Earnings (loss) per share-basic $ (0.05) $ 0.08 ========= =========== Earnings (loss) per share-diluted $ (0.05) $ 0.07 ========= =========== See notes to condensed consolidated financial statements. 3 RELM WIRELESS CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
THREE MONTHS ENDED ------------------------------------ March 31 March 31 2001 2000 -------------- --------------- Cash provided (used) by operations $ 1,097 $(1,040) Investing activities: Cash paid for Uniden product line - (2,016) Property and equipment purchases (36) (94) Proceeds from disposals of assets - 5,208 Other - 4 ---------- ------------ Cash provided (used) by investing activities (36) 3,102 Financing activities: Net change in line of credit (741) (1,141) Proceeds from long term debt - 3,250 Repayment of debt and capital leases (426) (3,799) Payment of debt issuance costs - (188) ---------- ------------ Cash used by financing activities (1,167) (1,878) Increase (decrease) in cash (106) 184 Cash and cash equivalents at beginning of period 208 1 ---------- ------------ Cash and cash equivalents at end of period $ 102 $ 185 ========== ============ Supplemental disclosure: Interest paid $ 158 $ 298 ========== ============ 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. 4 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, 2001, the condensed consolidated statements of operations for the three months ended March 31, 2001 and 2000 and the condensed consolidated statements of cash flows for the three months ended March 31, 2001 and 2000 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, 2000 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, 2000 Annual Report to Stockholders. The results of operations for the three month period ended March 31, 2001 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 30, 2001 for the first quarter of fiscal 2001. The quarter began on January 1, 2001. 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 was allocated to tooling and inventory based on their estimated fair values. 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 $488. 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. The registration of the common stock shares underlying the convertible notes was effective June 2000. Portions of the proceeds from this private placement were used to acquire the Uniden land mobile radio products. The debt issuance costs included grants to Simmonds Capital Limited 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 of the Company's common stock valued at $409. The warrants have a five year term and an exercise price of 5 Private Placement-continued $3.25 per share. Additionally, the Company incurred approximately $817 in costs related to the private placement. These costs are currently being amortized on a straight-line basis over the life of the notes. 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 transaction resulted in a net gain of $1,165 and provided approximately $1,600 in cash after related expenses and after payoff of the note and satisfaction of the mortgage on the property. Upon the sale of the building, the Company leased approximately 54 square feet of comparable space at a nearby location. On March 23, 2000, the Company entered into a contract manufacturing agreement for the manufacture of certain land mobile radio subassemblies. Under this agreement, the contract manufacturer employed sixty-eight of the Company's direct manufacturing workforce and agreed to purchase certain existing raw material inventories from the Company as needed, based on material requirements indicated by purchase orders for finished product from the Company. Revenues are recognized as the contract manufacturer uses these inventories. Until that time, they are treated as an asset of the Company and are included in the Company's inventory reserve analysis. 3. Inventories The components of inventory, net of reserves totaling $1,978 at March 31, 2001 and December 31, 2000, consist of the following: March 31 December 31 2001 2000 ------------------ -------------------- Finished goods $ 5,337 $ 5,043 Work in process 690 796 Raw materials 3,080 3,101 ------------------ -------------------- $ 9,107 $ 8,940 ================== ==================== 4. Stockholders' Equity The consolidated changes in stockholders' equity for the three months ended March 31, 2001 are as follows:
Additional Common Stock Paid-In Accumulated -------------------------- Shares# Amount Capital Deficit Total -------------------------------------------------------------------------- Balance at December 31, 2000 5,346,174 $ 3,207 $ 21,452 $ (18,299) $6,360 Net loss - - - (287) (287) -------------------------------------------------------------------------- Balance at March 31, 2001 5,346,174 $ 3,207 $ 21,452 $ (18,586) $6,073 ==========================================================================
6 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 2001 2000 ------------- ----------- Numerator: Net income (loss)(numerator for basic earnings per share) $ (287) $ 391 Effect of dilutive securities: 8% convertible notes - 11 ------------- ----------- Net income (loss) (numerator for dilutive earnings per share) (287) 402 ------------- ----------- Denominator: Denominator for basic earnings per share-weighted average shares 5,346,174 5,090,405 Effect of dilutive securities: 8% convertible notes - 166,667 Options - 341,297 ------------- ----------- Denominator for diluted earnings per share - adjusted weighted average shares 5,346,174 5,598,369 ============= =========== Basic earnings per share $ (0.05) $ 0.08 ============= =========== Diluted earnings per share $ (0.05) $ 0.07 ============= ===========
Shares related to options and convertible debt are not included in the computation of loss per share for the three months ended March 31, 2001, because to do so would have been anti-dilutive. 6. Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and its amendments Statements 137 and 138, in June 1999 and June 2000, respectively. The Statements require the Company to recognize all derivatives on the balance sheet at fair value. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change of fair value of assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company adopted these Statements on January 1, 2001, and did not have a material impact on the Company's financial position or results of operations. At March 31, 2001, the Company had no hedges or firm commitments outstanding. 7. Contingent Liabilities From time to time, the Company may become liable with respect to pending and threatened litigation, tax, environmental and other matters. 7 General Insurance Under the Company's insurance programs, coverage is obtained for catastrophic exposures as well as those risks required to be insured by law or contract. It is the policy of the Company to retain a significant portion of certain expected losses related primarily to workers' compensation, physical loss to property, business interruption resulting from such loss and comprehensive general, product, and vehicle liability. Provisions for losses expected under these programs are recorded based upon the Company's estimates of the aggregate liability for claims incurred. Such estimates utilize certain actuarial assumptions followed in the insurance industry and are included in accrued expenses. The amounts accrued are included in accrued compensation and related taxes in the balance sheets. Former Affiliate In 1993, a civil action was brought against the Company by a plaintiff to recover losses sustained on notes of a former affiliate. The plaintiff alleges violations of federal securities and other laws by the Company in collateral arrangements with the former affiliate. In response, the Company filed a motion to dismiss the complaint in the fall of 1993, which the court has yet to rule. In February 1994, the plaintiff executed and circulated for signature, a stipulation of voluntary dismissal. After the stipulation was executed the plaintiff refused to file the stipulation with the court. Subsequently the Company and others named in the complaint filed a motion to enforce their agreement with the plaintiff. The court has also yet to rule on that motion. In a second related action, an adversarial action in connection with the bankruptcy proceedings of the former affiliate has been filed. In response to that complaint the Company filed motion to dismiss for failure to state a cause of action. Although the motion for dismissal was filed during 1995, the bankruptcy court has not yet ruled on the motion. The range of potential loss, if any, as a result of these actions cannot be presently determined. Former Affiliate-continued In February 1986, the liquidator of the former affiliate filed a complaint claiming intentional and negligent conduct by the Company and others named in the complaint caused the former affiliate to suffer millions of dollars of losses leading to its ultimate failure. The complaint does not specify damages but an unfavorable outcome could have a material adverse impact on the Company's financial position. The range of potential loss, if any, cannot be presently determined. Management, with the advice of counsel, believes the Company has meritorious defenses and the likelihood of an unfavorable outcome in each of these actions is remote. Counter Claims In February 1999, the Company initiated collection and legal proceedings against its former Brazilian dealer, Chatral, for failure to pay for 1998 product shipments totaling $1.4 million which has been fully 8 reserved. On December 8, 1999, Chatral filed a counter claim against the Company that alleges damages totaling $8 million as a result of the Company's discontinuation of shipments to Chatral. Although the Company and its counsel believe the Company has a meritorious defense, the outcome of this action is uncertain. An unfavorable outcome could have a material adverse effect on the financial position of the Company. 9 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 2001 2000 ------------- ----------- Sales 100.0% 100.0% Cost of sales 73.5 78.5 Gross Margin 26.5 21.5 Selling, general and administrative expenses (29.4) (33.2) Interest expense (3.4) (6.5) Other income 0.2 26.7 ------------- ----------- Net income (6.1%) 8.5% ============= =========== Net Sales Net sales for the three months ended March 31, 2001 increased approximately $124,000 or 2.7% compared to the same period for the prior year. Revenues for our core land mobile radio (LMR) products increased approximately $261,000 or 5.9% due to stronger sales in our government and public safety markets and sales of our Uniden products, which were not offered for sale during the same period for the prior year. Non-LMR revenues decreased $137,000 or 97.2% compared to the same period for the prior year as we exited businesses and discontinued products that performed poorly or did not fit our strategic focus in wireless communications. Cost of Sales and Gross Margins Cost of sales as a percentage of net sales decreased from 78.5% to 73.5% for the three months ended March 31, 2001 compared to the same period for the prior year. This improvement is primarily the result of our continued actions to reduce manufacturing overhead costs while improving efficiency and quality. Specifically, we have moved operations to a smaller, lower cost facility and reduced both our direct and indirect workforce. Additionally, we have out-sourced the surface-mount and other portions of our front-end manufacturing processes as well as the production of our Uniden products. Also, the mix of product revenues during the first quarter of 2001 compared to the same period for the prior year was greater in our higher margin BK Radio and Uniden products. 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, 2001, SG&A expenses totaled $1,388,000 or 29.4% of sales compared to $1,526,000 or 33.2% of sales for the same period in 2000. The decrease in SG&A 10 Selling, General and Administrative Expenses-continued expenses reflects our actions to structure our SG&A support activities in accordance with our current revenue run-rates and overall business conditions. Marketing and selling expenses decreased approximately 23.5% compared to the same period in 2000 as we reengineered our marketing and sales departments. Also, we reduced our engineering staff compared to the same period for the prior year, reflecting our strategy to utilize external engineering resources, where possible, for specific research and development projects. Staffing and expense reductions have also been made in our general and administrative functions such as finance, human resources, and headquarters. Interest Expense For the three months ended March 31, 2001 interest expense totaled $158,000 or 3.4% of sales compared with $298,000 or 6.5% of sales for the same period in 2000. The decrease is primarily a result of the satisfaction of the mortgage on our facility in connection with its sale in the first quarter of 2000. Also, we sold certain manufacturing equipment during the fourth quarter of 2000 and satisfied the related capital lease commitment. A portion of the proceeds from our private placement of convertible subordinate notes and working capital generated in part from expense reductions enabled us to reduce the amounts outstanding on our revolving credit facility and existing capital lease obligations. Other Income On March 24, 2000, we completed the sale of our 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. We currently lease approximately 54,000 square feet of comparable space at a nearby location. Income Taxes No income tax provision was provided for the three months ended March 31, 2001 or March 31, 2000 as we have net operating loss carryforward benefits totaling approximately $30 million at March 31, 2001. We have evaluated our tax position in light of the requirements of SFAS No. 109, Accounting for Income Taxes, and do not believe that we have met the more-likely-than-not criteria for recognizing a deferred tax asset. As a result, we have provided valuation allowances against our net deferred tax assets. Inflation and Changing Prices Inflation and changing prices for the three months ended March 31, 2001 and 2000 have contributed to increases in wages, facilities, and raw material costs. Effects of these inflationary effects were partially offset by increased prices to customers. We believe that we will be able to pass on most of our future inflationary increases to our customers. We are also subject to changing foreign currency exchange rates in our purchase of some raw materials. We employ 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. Liquidity and Capital Resources - ------------------------------- As of March 31, 2001, we had working capital of $6.9 million compared with $7.7 million as of December 31, 2000. This decrease was primarily the result of accounts receivable collections, which were utilized primarily to reduce long-term borrowings under our revolving line of credit. 11 Liquidity and Capital Resources-continued We have a $7 million revolving line of credit. As of March 31, 2001, the formula under the terms of the agreement supported a borrowing base totaling approximately $4.5 million, of which approximately $1.0 million was available. As of December 31, 2000, we were in default of certain financial covenants under the line of credit. In February 2000, our lender signed a waiver of those defaults effective as of December 31, 2000. In March 2001, our lender agreed to modify those covenants effective as of January 1, 2001. Capital expenditures for property and equipment for the three months ended March 31, 2001 were $36,000 compared to $94,000 for the same period in 2000. Forward-Looking Statements - -------------------------- This report contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act Of 1995 and is subject to the safe-harbor created by such act. These forward-looking statements concern the Company's operations, economic performance and financial condition and are based largely on the Company's beliefs and expectations. These statements involve known and unknown 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 and risks include, among others, the following: the factors described in the Company's filings with the Securities and Exchange Commission; general economic and business conditions; changes in customer preferences; competition; changes in technology; changes in business strategy; the indebtedness of the Company; quality of management, business abilities and judgment of the Company's personnel; and the availability, terms and deployment of capital. Certain of these factors and risks, as well as other risks and uncertainties are stated in more detail in the Company's Annual Report on Form 10-K. These forward-looking statements are made as of the date of this report, and the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK - ------ ------------------------------------------------------- None. 12 PART II- OTHER INFORMATION -------------------------- ITEM 1. LEGAL PROCEEDINGS ----------------- None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. ------------------------------------------ None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. -------------------------------- None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ---------------------------------------------------- None ITEM 5. OTHER INFORMATION ----------------- We have filed an appeal of a NASDAQ staff determination dated April 26, 2001 to remove our listing on the National Market System for failure to maintain a minimum market value of public float of $5,000,000 as required by Marketplace Rule 4450(a)(2). Our application for transfer to the SmallCap Market System was not approved by NASDAQ because we do not meet the Small Cap Market's $1.00 minimum bid price requirement. We are presently in compliance with all other SmallCap Market listing requirements. The NASDAQ listing qualifications panel (the "Panel") has granted our request for an oral hearing which is scheduled to be held on June 8, 2001 to review the staff determination. We will continue to trade under the symbol RELM pending the outcome of these proceedings. There can be no assurance that the Panel will grant our request for continued listing on the National Market System or for transfer to the Small Cap Market System subject to a temporary exception from the minimum bid price requirement. ITEM 6. EXHIBITS AND REPORTS FORM 8-K ----------------------------- (a) The following documents are filed as part of this report: 10.1 Fourth Amendment to Loan and Security Agreement between the RELM Communications, Inc., RELM Wireless Corporation, RXD, Inc. and Summit Commercial/Gibraltar Corp. dated May 4, 2001. (b) Reports on Form 8-K during the fiscal quarter ended March 31, 2001. The Registrant filed a report dated December 22, 2000 on Form 8-K on January 11, 2001, reporting an Item 5 event. 13 SIGNATURES ---------- 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 (The "Registrant") Date: May 14, 2001 By: /s/ W. P. Kelly ----------------------------- William P. Kelly Vice President - Finance and Chief Financial Officer (principal financial and accounting officer and duly authorized officer) 14 EX-10.1 2 dex101.txt 4TH AMENDMENT TO LOAN & SECURITY AGREEMENT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ RELM WIRELESS CORPORATION ------------------------ FORM 10-Q QUARTERLY REPORT FOR THE FISCAL QUARTER ENDED: MARCH 31, 2001 ------------------------- EXHIBITS ------------------------- EXHIBIT 10.1 ------------ FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ----------------------------------------------- THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT ("Amendment") is made effective as of the 4 day of May, 2001, by and between RELM COMMUNICATIONS, INC., RELM WIRELESS CORPORATION, RXD, INC. (jointly, severally and collectively, "Borrower") and SUMMIT COMMERCIAL/GIBRALTAR CORP. ("Lender"). BACKGROUND ---------- A. Pursuant to that certain Loan and Security Agreement dated February 26, 1999 by and between Borrower and Lender (as amended by that certain Amendment to Loan and Security Agreement dated December 17, 1999, that certain Second Amendment to Loan and Security Agreement dated March 10, 2000, that certain Third Amendment to Loan and Security Agreement dated March 24, 2000 and as the same may be amended, modified, supplemented or restated from time to time, the "Loan Agreement"), Lender agreed to extend certain credit facilities to Borrower. B. Borrower and Lender have agreed to amend the Loan Agreement as described herein. C. All capitalized terms used herein and not separately defined shall have the meanings provided for such terms in the Loan Agreement. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. Financial Covenants. Effective January 1, 2001, Sections 8.1 and 8.2 ------------------- of the Loan Agreement are hereby deleted in their entirety and replaced with the following: "8.1 Cash Flow Coverage Ratio. Borrower shall have a Cash Flow ------------------------ Coverage Ratio as of the end of each fiscal quarter of Borrower, measured on a cumulative year to date basis, of not less than (a) .5 to 1.0 as of March 31, 2001; and (b) 1.0 to 1.0 as of each fiscal quarter of Borrower ending thereafter. 8.2 Tangible Net Worth. Borrower shall have a Tangible Net ------------------ Worth of not less than (a) Five Million Two Hundred Thousand Dollars ($5,200,000.00) as of March 31, 2001; (b) Five Million Four Hundred Thousand Dollars ($5,400,000) as of June 30, 2001; (c) Five Million Four Hundred Fifty Thousand Dollars ($5,450,000.00) as of September 30, 2001; and (d) Five Million Five Hundred Thousand Dollars ($5,500,000.00) as of December 31, 2001 and as of the end of each fiscal quarter of Borrower thereafter." 2. Amendment Fee. On the date hereof, Borrower shall pay to Lender an -------------- amendment fee equal to Two Thousand Dollars $2,000.00), which fee may be charged to the Line. 3. Additional Documents; Further Assurances. Borrower shall execute and ---------------------------------------- deliver or cause to be executed and delivered to Lender any and all documents, agreements, corporate resolutions, certificates and opinions as Lender shall request in connection with the execution and delivery of this Amendment or any documents in connection herewith, all of which shall be in form and content acceptable to Lender in its sole discretion. 4. Further Agreements and Representations of Borrower. Borrower does -------------------------------------------------- hereby: (a) ratify, confirm and acknowledge that, as amended hereby, the Loan Agreement and the other Loan Documents are valid, binding and in full force and effect; (b) covenant and agree to perform all of its obligations under the Loan Agreement and the other Loan Documents, as amended; (c) acknowledge and agree that as of the date hereof Borrower has no defense, set-off, counterclaim or challenge against the payment of any sums owing under the Lender Indebtedness or the enforcement of any of the terms of the Loan Agreement or the other Loan Documents, as amended; (d) acknowledge and agree that all representations and warranties of Borrower contained in the Loan Agreement and/or the other Loan Documents, as amended, are true, accurate and correct on and as of the date hereof as if made on and as of the date hereof; (e) represent and warrant that no Event of Default exists or will exist upon the delivery of notice, passage of time or both, and all information described in the foregoing Background is true and accurate; and (f) acknowledge and agree that nothing contained herein and no actions taken pursuant to the terms hereof is intended to constitute a novation of the Loan Agreement or any of the other Loan Documents and does not constitute a release, termination or waiver of any of the liens, security interests, rights or remedies granted to the Lender therein, which liens, security interests, rights and remedies are hereby ratified, confirmed, extended and continued as security for the Lender Indebtedness. 5. Costs and Expenses. In addition to the fee set forth in Section 2 ------------------ --------- hereof, upon execution of this Amendment, Borrower shall pay to Lender all costs and expenses incurred by Lender in connection with the review, preparation and negotiation of this Amendment and all documents in Connection therewith, including, without limitation, all of Lender's attorneys' fees and costs. 6. Inconsistencies. To the extent of any inconsistency between the terms, --------------- conditions and provisions of this Amendment and the terms, conditions and provisions of the Loan Agreement or the other Loan Documents, the terms, conditions and provisions of this Amendment shall prevail. All terms, conditions and provisions of the Loan Agreement and the other Loan Documents not inconsistent herewith shall remain in full force arid effect. 7. Construction. All references to the Loan Agreement therein or in any ------------ other Loan Documents shall be deemed to be a reference to the Loan Agreement as amended hereby. 8. No Waiver. Nothing contained herein is intended to nor shall it --------- constitute a waiver by Lender of any rights and remedies available to it at law or in equity or as provided in the Loan Agreement or in the Loan Documents. 2 9. Binding Effect. This Amendment shall be binding upon and inure to the -------------- benefit of the parties hereto and their respective successors and assigns. 10. Governing Law. This Amendment shall be governed by and construed in ------------- accordance with the laws of the State of New York. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed the day and year first above written. RELM COMMUNICATIONS, INC. By: /s/ W. P. Kelly -------------------------------------------- William P. Kelly, Vice President/CFO (CORPORATE SEAL) RELM WIRELESS CORPORATION By: /s/ W. P. Kelly -------------------------------------------- William P. Kelly, Vice President/CFO (CORPORATE SEAL) RXD, INC. By: /s/ W. P. Kelly -------------------------------------------- William P. Kelly, Vice President/CFO (CORPORATE SEAL) SUMMIT COMMERCIAL/GIBRALTAR CORP. By: /s/ Stewart J. Jensen. -------------------------------------- Name/Title Stewart J. Jensen, V.P. ------------------------------- The undersigned, intending to be legally bound hereby, acknowledge and agree (a) to the terms of the foregoing Amendment; (b) that the foregoing Amendment shall not in any way adversely affect or impair the obligations of the undersigned to Lender under those certain Surety Agreements front the undersigned to Lender, each dated February 26, 1999, or under any documents in connection therewith or collateral thereto; and (c) that such Surety Agreement and all such other documents are hereby ratified, confirmed and continued as of this 4 day of May, 2001. REDGO PROPERTIES, INC. 3 By: /s/ W. P. Kelly --------------------------------------------- William P. Kelly, Vice President/CFO (CORPORATE SEAL) RELM COMMUNICATIONS OF FLORIDA, INC. By: /s/ W. P. Kelly --------------------------------------------- William P. Kelly, Vice President/CFO (CORPORATE SEAL) 4 -----END PRIVACY-ENHANCED MESSAGE-----