10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

^{______________}

FORM 10-Q

^{______________}

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

For the quarterly period ended September 30, 2005

OR

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

For the transition period from                to               

Commission file number 000-7336

^{______________}

RELM WIRELESS CORPORATION

(Exact name of registrant as specified in its charter)

^{______________}

Nevada	59-3486297
State or other jurisdiction of Incorporation or organization	(I.R.S. Employer Identification No.)

7100 Technology Drive

West Melbourne, Florida  32904

(Address of principal executive offices and Zip Code)

(321) 984-1414

Registrant’s telephone number, including area code:

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   ý    No   ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes   ¨    No   ý

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

Yes   ¨    No   ý

There were 13,113,324 shares of common stock, $0.60 par value, of the registrant outstanding at October 14, 2005.

PART I. - FINANCIAL INFORMATION

Item 1.

Financial Statements

RELM WIRELESS CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share data) (Unaudited)

	September 30, 2005		December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	2,385	$	3,140
Trade accounts receivable (net of allowance for doubtful accounts of $79 in 2005 and $89 in 2004)		5,922		3,651
Inventories, net		5,920		4,735
Deferred tax assets, net		165		1,338
Prepaid expenses and other current assets		414		326
Total current assets		14,806		13,190
Property, plant and equipment, net		1,228		1,291
Deferred tax assets, net		4,924		4,924
Other assets		364		288
Total assets	$	21,322	$	19,693

See notes to condensed consolidated financial statements.

1

RELM WIRELESS CORPORATION

Condensed Consolidated Balance Sheets

(In thousands, except share data) (Unaudited)

	September 30 2005			December 31, 2004
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	—		$	700
Accounts payable		292			520
Accrued compensation and related taxes		997			549
Accrued warranty expense		164			118
Accrued other expenses and other current liabilities		353			352
Total current liabilities		1,806			2,239
Long-term debt		—			—
Commitments and Contingencies
Stockholders’ equity:
Preferred stock; $1.00 par value; 1,000,000 authorized shares none issued or outstanding.		—			—
Common stock; $.60 par value; 20,000,000 authorized shares: 13,113,324 and 12,872,618 issued and outstanding shares at September 30, 2005 and December 31, 2004, respectively		7,868			7,723
Additional paid-in capital		22,702			22,794
Accumulated Deficit		(11,054	)		(13,063	)
Total stockholders’ equity		19,516			17,454
Total liabilities and stockholders’ equity	$	21,322		$	19,693

See notes to condensed consolidated financial statements.

2

RELM WIRELESS CORPORATION

Condensed Consolidated Statements of Income

(In thousands, except per share data) (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30, 2005			September 30, 2004			September 30, 2005			September 30, 2004
	(see note 1)			(see note 1)			(see note 1)			(see note 1)
Sales	$	7,602		$	5,186		$	19,550		$	15,104
Expenses
Cost of products		3,424			2,758			9,667			8,242
Selling, general & administrative		2,319			1,847			6,691			5,412
		5,743			4,605			16,358			13,654
Operating income		1,859			581			3,192			1,450
Other income (expense):
Interest expense		(15	)		(77	)		(28	)		(222	)
Other income (expense)		25			(2	)		28			14
Total other income		10			(79	)		—			(208	)
Income before income tax		1,869			502			3,192			1,242
Income tax expense		(703	)		—			(1,183	)		—
Net income	$	1,166		$	502		$	2,009		$	1,242
Net income per share-basic:	$	0.09		$	0.04		$	0.15		$	0.11
Net income per share-diluted:	$	0.09		$	0.04		$	0.15		$	0.11
Weighted average shares outstanding basic		13,101,016			12,864,715			13,054,458			11,114,553
Weighted average shares outstanding diluted		13,704,831			13,362,264			13,553,644			11,769,487

See notes to condensed consolidated financial statements.

3

RELM WIRELESS CORPORATION

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	Nine Months Ended
	September 30, 2005			September 30, 2004
Cash flows from operating activities
Net income	$	2,009		$	1,242
Adjustments to reconcile net income to net cash provided by operating activities:
Allowance for doubtful accounts		(10	)		32
Inventories reserve		79			64
Deferred tax expense		1,173			—
Depreciation and amortization		411			494
Loss on disposal - PPE & other Assets		38			—
Change in operating assets and liabilities:
Accounts receivable		(2,261	)		(506	)
Inventories		(1,264	)		704
Accounts payable		(228	)		(153	)
Prepaid expenses and other current assets		(88	)		124
Other assets		(76	)		51
Accrued compensation and related taxes		448			(34	)
Accrued warranty expense		46			22
Accrued other expenses and other current liabilities		1			21
Net cash provided by operating activities		278			2,061
Cash flows from investing activities
Purchases of property, plant and equipment		(386	)		(222	)
Net cash used in investing activities		(386	)		(222	)
Cash flows from financing activities
Proceeds from issuance of common stock		53			3,372
Net decrease in revolving credit lines		—			(1,272	)
Repayment of debt		(700	)		—
Cash provided by (used in) financing activities		(647	)		2,100
Increase (decrease) in cash		(755	)		3,939
Cash and cash equivalents, beginning of year		3,140			1,293
Cash and cash equivalents, end of period	$	2,385		$	5,232
Supplemental disclosure
Interest paid	$	47		$	222
Income tax paid	$	45		$	—
Non-cash financing activity
Conversion of notes to stockholders’ equity	$	—		$	200
Conversion of warrants to stockholders’ equity	$	99		$	—

See notes to condensed consolidated financial statements.

4

Notes to Condensed Consolidated Financial Statements
Unaudited
(in Thousands, Except Share Data and Percentages)

1.

Condensed Consolidated Financial Statements

The condensed consolidated balance sheet as of September 30, 2005, the condensed consolidated statements of income for the three and nine months ended September 30, 2005 and 2004 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2005 and 2004 have been prepared by RELM Wireless Corporation (the Company), and are unaudited. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation have been made. The condensed consolidated balance sheet at December 31, 2004 has been derived from the Company’s audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2005 are not necessarily indicative of the operating results for a full year.

Recent Accounting Pronouncements

In May 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”), which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements-An Amendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes retrospective application, or the latest practicable date, as the required method for accounting for and reporting a change in accounting principle and a correction of an error. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005 and is required to be adopted by the Company no later than January 1, 2006. The Company does not expect that the adoption of SFAS No. 154 wi ll have material impact on its consolidated financial position, results of operations or cash flows.

2.

Significant Events and Transactions

In July 2005, the Company was awarded a contract by the United States Postal Service (USPS) to provide on an exclusive basis two-way portable radios and accessories to installations throughout the U.S. and its territories and possessions, including main and associate post offices, administrative offices, training and technical centers, and headquarters. These products will be utilized by delivery and administrative operations, window services, law enforcement, and general applications. The contract is designated as an exclusive requirements contract. Accordingly, it requires that all USPS two-way radio requirements in these categories be provided by RELM. The contract has an initial term of one year and provides for four one-year renewals, and is terminable by either party upon 180 days’ written notice. The contract does not specify purchase dates or quantities of equipment.

In August 2005, the Company’s APCO Project 25 (P25) digital portable radio, the DPHx, was recommended for fire use by the U. S. Bureau of Land Management (BLM), after passing rigorous testing by BLM and the U. S. National Inter-Agency Fire Center (NIFC) for durability under extreme fire conditions. The Company believes this recommendation represents a significant sales opportunity, as BLM agencies are now permitted to purchase the DPHx for fire applications.

In September 2005, the Company received orders totaling approximately $8.9 million from four federal government agencies and the California Department of Forestry. The orders were for a variety of products, including digital radios that are compliant with the P25 technical standard. Initial product orders were delivered in September 2005, with the remainder scheduled for delivery during the fourth quarter 2005.

Effective on October 14, 2005, the Company’s common stock was listed on the American Stock Exchange and commenced trading under the symbol “RWC.”

5

Notes to Condensed Consolidated Financial Statements
Unaudited
(in Thousands, Except Share Data and Percentages)

3.

Allowance on Trade Receivables

The allowance for collection losses on trade receivables was approximately $79 on gross trade receivables of $6,000 at September 30, 2005. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected on the Company’s gross receivables as of September 30, 2005. Because the amount that the Company will actually collect on the receivables outstanding as of September 30, 2005 cannot be known with certainty, the Company relies on prior experience. The Company’s historical collection losses have typically been infrequent with write-offs of trade receivables being less than 1% of sales. The Company maintains a general allowance of approximately 1% to 5% of the gross trade receivables balance in order to allow for future collection losses that arise from customer accounts that do not indicate an inability to pay but turn out to have such an inability. Cu rrently, the Company’s allowance on trade receivables is approximately 1.3% of gross trade receivables. The Company may also maintain a specific allowance for customer accounts that the Company knows may not be collectible due to reasons such as bankruptcy and other customer liquidity issues. The Company analyzes the trade receivable portfolio based on the age of each customer’s invoice. In this way, the Company can identify those accounts that are more likely than not to have collection problems. The Company may reserve a portion or all of a particular customer’s balance. As of September 30, 2005, there was no specific allowance.

4.

Inventories

The components of inventory, net of reserves totaling $2,557 at September 30, 2005 and $2,478 at December 31, 2004, respectively, consist of the following:

	September 30, 2005		December 31, 2004
Finished goods	$	2,642	$	1,952
Work in process		1,537		851
Raw materials		1,741		1,932
	$	5,920	$	4,735

The reserve for slow-moving, excess, or obsolete inventory is used to state the Company’s inventories at the lower of cost or market. Because the amount of inventory that the Company will actually recoup through sales of its inventory as of September 30, 2005 cannot be known with certainty, the Company relies on past sales experience, future sales forecasts, and its strategic business plans to determine the amount of the reserve. Generally, in analyzing inventory, the Company classifies it as having been used or unused during the past year. For raw material inventory with no usage in the past year, the Company reserves 85% of its cost which takes into account a 15% scrap value, while for finished goods inventory with no usage in the past year, the Company reserves 80% of its cost. For inventory with usage in the past year, the Company reviews the average annual usage over the past three years, projects that amount over the next five years, and then reserves 25% of the excess amount (in which the excess amount equals inventory on hand less a five year projected usage amount). The Company believes that 25% represents the value of excess inventory it would not be able to recover due to new product introductions and other technological advancements over the next five years.

5.

Income Taxes

Non-cash deferred tax expense of approximately $703 and $1,173 has been recorded for the three and nine months ended September 30, 2005, respectively.

As of September 30, 2005, the Company recognized a net deferred tax asset of approximately $5,089 compared to $6,262 as of December 31, 2004. This asset is primarily composed of net operating loss carry forwards (NOL’s). These NOL’s total approximately $26,800 for federal purposes and $28,500 for state purposes, with expirations starting in 2005 through 2024.

In order to fully realize the net deferred tax asset, the Company must generate sufficient taxable income in future years prior to the expiration of its NOL’s. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (Statement 109) requires the Company to analyze all positive and negative evidence to determine if, based on the weight of available evidence, the Company is more likely than not to realize the benefit of the net deferred tax asset. The recognition of the net deferred tax asset is based upon the Company’s conclusions regarding, among other considerations, estimates of future earnings based on information currently available, current and anticipated customers, contracts and product introductions, as well as recent operating results during 2005 and historical operating results in 2004, 2003 and 2002, and certain tax planning strategies.

6

Notes to Condensed Consolidated Financial Statements
Unaudited
(in Thousands, Except Share Data and Percentages)

The Company has evaluated the available evidence and the likelihood of realizing the benefit of its net deferred tax asset. The Company concluded that based on the weight of available evidence it is more likely than not to realize a benefit from its net deferred tax asset recorded at September 30, 2005. The amount of the net deferred tax asset as of September 30, 2005 decreased by approximately $1,173 from December 31, 2004, reflecting the tax effect of the Company’s taxable income for the nine months ended September 30, 2005.

The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax asset may be deemed appropriate in the future. Future losses or income may make it necessary to decrease or increase the net deferred tax asset and recognize an income tax expense or benefit.

The Federal and state net operating loss carryforwards could be subject to limitation if, within any three year period prior to the expiration of the applicable carryforward period, there is a greater than 50% change in ownership of the Company.

6.

Stockholders’ Equity

The consolidated changes in stockholders’ equity for the nine months ended September 30, 2005 are as follows:

	Common Stock Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Total
Balance at December 31, 2004	12,872,618	$	7,723	$	22,794		$	(13,063	)	$	17,454
Common stock option exercise	75,500		46		7			—			53
Common stock warrant exercise	165,206		99		(99	)		—			—
Net income	—		—		—			2,009			2,009
Balance at September 30, 2005	13,113,324	$	7,868	$	22,702		$	(11,054	)	$	19,516

7.

Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended				Nine Months Ended
	September 30, 2005		September 30, 2004		September 30, 2005		September 30, 2004
Numerator:
Net income (numerator for basic and diluted earnings per share)	$	1,166	$	502	$	2,009	$	1,242
Denominator:
Denominator for basic earnings per share weighted average shares		13,101,016		12,864,715		13,054,458		11,114,553
Effect of dilutive securities:
Options		603,815		449,150		499,185		510,513
Warrants		—		48,399		—		144,421
Denominator:
Denominator for diluted earnings per share weighted average shares		13,704,831		13,362,264		13,553,644		11,769,487
Basic earnings per share	$	0.09	$	0.04	$	0.15	$	0.11
Diluted earnings per share	$	0.09	$	0.04	$	0.15	$	0.11

A total of 320,000 and 375,000 shares related to options are not included in the computation of earnings per share for the three and nine months ended September 30, 2005, respectively, and a total of  1,569,148 shares related to convertible notes are not included in the computation of earnings per share for the three and nine months ended September 30, 2004, respectively, because the exercise prices of these options and the conversion prices of these convertible notes exceeded the average market price for the Company’s common stock.

7

Notes to Condensed Consolidated Financial Statements
Unaudited
(in Thousands, Except Share Data and Percentages)

8.

Stock Based Compensation

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payments” (“SFAS No. 123R”). SFAS No. 123R requires the recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements and measurement based on the grant-date fair value of the award. It requires the cost to be recognized over the period during which an employee is required to provide service in exchange for the award. Additionally, compensation expense will be recognized over the remaining employee service period for the outstanding portion of any awards for which compensation expense had not been previously recognized or disclosed under SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). SFAS No. 123R replaces SFAS No. 123 and supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, an d its related interpretations.

SFAS No. 123R was originally required to be adopted by the Company beginning no later than the third quarter of 2005. However, in April 2005, the Securities and Exchange Commission announced the adoption of a new rule that amends the compliance dates for SFAS No. 123R. Accordingly, the Company is required to adopt SFAS No. 123R no later than January 1, 2006. The Company is currently assessing the timing and impact of adopting SFAS No. 123R.

No compensation cost is reflected in the Company’s net income related to the stock option plans for the periods presented, as all options had an exercise price greater than or equal to the market value of the underlying common stock on the date of grant. Had the expense for the stock-based compensation been determined using the fair value based method defined in SFAS 123R, the Company’s net income and net income per share would have been reduced to the pro forma amounts indicated below:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2005			2004			2005			2004
	(in thousands)						(in thousands)
Net income as reported	$	1,166		$	502		$	2,009		$	1,242
Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(37	)		(34	)		(106	)		(89	)
Pro forma net income	$	1,129		$	468		$	1,903		$	1,153
Basic income per share:
As reported	$	0.09		$	0.04		$	0.15		$	0.11
Pro forma	$	0.09		$	0.04		$	0.15		$	0.11
Diluted income per share:
As reported	$	0.09		$	0.04		$	0.15		$	0.11
Pro forma	$	0.08		$	0.04		$	0.14		$	0.11

These pro forma results may not be indicative of the future results for the full fiscal year due to potential grants vesting and other factors.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 2005 and 2004, respectively: risk-free interest rates of 3.98% and 4.625%; dividend yields of 0%; volatility factors of the expected market price of the common stock of 103.7% and 99.3%; and a weighted-average expected life of the option of four years.

8

Notes to Condensed Consolidated Financial Statements
Unaudited
(in Thousands, Except Share Data and Percentages)

9.

Commitments and Contingencies

From time to time, the Company may become liable with respect to pending and threatened litigation, tax, environmental and other matters.

Legal Proceedings

On August 26, 2002, a products liability lawsuit was filed in the Probate Court of Galveston County, Texas against the Company, RELM Communications, Incorporated, the Company’s former specialty-manufacturing subsidiary and the purchaser of the assets of such former specialty-manufacturing subsidiary. The Company has insurance coverage for this matter. Counsel named by the insurer is continuing to vigorously defend this claim. Counsel believes the Company has meritorious defenses and the likelihood of an unfavorable outcome is remote.

The Company is involved in various claims and legal actions arising in the ordinary course of business. It is the opinion of management that the ultimate disposition of these matters would not have a material effect upon the Company’s consolidated financial position or results of operations.

Other

As of September 30, 2005, the Company has commitments for purchase orders to suppliers of approximately $4,072.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE CONCERNING

FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are “forward-looking statements” within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  You can expect to identify these statements by forward-looking words such as “may,” “might,” “could,” “would,” “anticipate,” “believe,” “plan,” “estimate,” “project,” “expect,” “intend,” “seek” and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the “Risk Factors” section of and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2004 and in our subsequent filings with the Securities and Exchange Commission, and include, among others, the following:

·

changes in customer preferences;

·

our inventory and debt levels;

·

heavy reliance on sales to the U.S. Government;

·

federal, state and local government budget deficits and spending limitations;

·

quality of management, business abilities and judgment of our personnel;

·

the availability, terms and deployment of capital;

·

competition in the land mobile radio industry;

·

reliance on contract manufacturers;

·

limitations in available radio spectrum for use of land mobile radios;

·

changes or advances in technology; and

·

general economic and business conditions.

We assume no obligation to publicly update or revise any forward-looking statements made in this report, whether as a result of new information, future events, changes in assumptions or otherwise, after the date of this report.

Executive Summary

Our operating results and financial position for the three and nine months ended September 30, 2005 improved compared to the same periods last year. Additionally, we were awarded a contract from the U. S. Postal Service and our digital APCO Project 25 (P25) portable radio was recommended for fire use by the U. S. Bureau of Land Management. We believe both of these events will contribute to our near-term and future growth.

For the three months ended September 30, 2005, sales increased approximately 46.6% ($2.4 million) compared to the same period last year. For the nine months ended September 30, 2005, sales increased approximately 29.4% ($4.4 million) compared to the same period last year. Gross margins as a percent of sales for the three and nine months ended September 30, 2005 improved to 55.0% and 50.6%, respectively, compared to 46.8% and 45.4% for the same periods last year. Pretax income for the three and nine months ended September 30, 2005 increased approximately 272.3% ($1.4 million) and 157.0% ($2.0 million), respectively, compared to the same periods last year. For the three and nine months ended September 30, 2005, we recognized non-cash deferred tax expense of approximately $0.7 million and $1.2 million, respectively. For the same periods last year we did not

10

record any income tax expense or benefit. Net income for the three and nine months ended September 30, 2005 totaled approximately $1.2 million ($0.09 per basic and fully diluted share) and $2.0 million ($0.15 per basic and fully diluted share), respectively, compared to net income of approximately $0.5 million ($0.04 per basic and fully diluted share) and $1.2 million ($0.11 per basic and fully diluted share) for the same periods last year.

Our balance sheet as of September 30, 2005 also improved compared to the period ended December 31, 2004, including an approximately 12.3% ($1.6 million) increase in current assets and the retirement of all the remaining current maturities of long term debt.

We were awarded in July 2005 an exclusive contract to provide portable two-way radios to the United States Postal Service. The contract has an initial term of one year and provides for four one-year renewals. It is terminable by either party upon 180 days’ written notice. The contract does not specify purchase dates or quantities of equipment.

In August 2005 our P25 digital portable radio, the DPHx, was recommended for fire use by the U. S. Bureau of Land Management (BLM), after passing rigorous testing by BLM and the U. S. National Inter-Agency Fire Center (NIFC) for durability under extreme fire conditions. We believe this recommendation represents a significant sales opportunity, as BLM agencies are now permitted to purchase the DPHx for fire applications.

In September 2005, we received orders totaling approximately $8.9 million from four federal government agencies and the California Department of Forestry. The orders were for a variety of products, including digital radios that are compliant with the P25 technical standard. We delivered portions of these product orders in September 2005. The remainder is scheduled for delivery during the fourth quarter 2005.

Effective on October 14, 2005, our common stock was listed on the American Stock Exchange and commenced trading under the symbol “RWC.”

Results of Operations

The following table shows each item from the condensed consolidated statements of income expressed as a percentage of sales:

	Percentage of Sales				Percentage of Sales
	Three Months Ended				Nine Months Ended
	September 30, 2005		September 30, 2004		September 30, 2005		September 30, 2004
Sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	(45.0	)	(53.2	)	(49.4	)	(54.6	)
Gross margin	55.0		46.8	%	50.6		45.4	%
Selling, general and administrative expenses	(30.5	)	(35.6	)	(34.2	)	(35.8	)
Interest expense	(0.2	)	(1.4	)	(0.1	)	(1.5	)
Other income	(0.3	)	0.0		0.1		0.1
Pretax income	24.0		9.8		16.4		8.2
Income tax expense	(9.2	)	—		(6.1	)	—
Net income	14.8	%	9.8	%	10.3	%	8.2	%

Net Sales

Net sales for the three months ended September 30, 2005 increased approximately 46.6% ($2.4 million) to approximately $7.6 million from approximately $5.2 million for the same period last year.

Net sales for the nine months ended September 30, 2005 increased approximately 29.4% ($4.4 million) to approximately $19.6 million from approximately $15.1 million for the same period last year.

During the third quarter and year-to-date we experienced sales growth in both the government and public safety, and the commercial and industrial segments of our business, fueled by new products, customers and contracts, as well as demand from recurring customers and existing contracts. This includes sales of our new GPH-CMD portable radio custom-designed for the California Department of Forestry, which was specified in the contract awarded by the CDF during the first quarter. Additionally, our digital P25 radios with new encryption capabilities targeted for homeland security, public-safety and other government agencies, contributed to sales for the quarter and year-to-date. In particular, we realized the initial sales of our P25-compliant digital mobile radio, the DMH, which received FCC type-acceptance and was introduced in June 2005. Sales of our expanded line of RELM and

11

RELM/BK products, many of which were introduced during the first quarter 2005, targeting commercial, industrial and municipal applications, also increased.

More new P25 digital products and related capabilities are planned for later this year and next year. The migration of two-way radio users to products with P25 digital technology, we believe, will drive growth in digital sales and total sales.

Cost of Sales and Gross Margin

Cost of sales as a percentage of sales for the three months ended September 30, 2005 decreased to 45.0% from 53.2% for the same period last year. Cost of sales as a percentage of sales for the nine months ended September 30, 2005 decreased to 49.4% from 54.6% for the same period last year.

Contract manufacturing relationships have helped improve our production efficiencies and reduce material and labor costs. They have also enabled us to effectively control internal manufacturing support expenses. Furthermore, increased sales volumes have enabled us to more fully utilize and absorb our base of manufacturing support expenses. As volumes increase, we believe additional efficiencies and cost reductions can be realized. We continuously evaluate manufacturing alternatives to improve quality and reduce our product costs. We anticipate that the current contract manufacturing relationships or comparable alternatives will be available to us in the future.

The mix of products in our total sales has also contributed to improved margins. Sales of newer, higher-specification products that incorporate recent, more cost-effective product designs, including P25 digital products, and sales of new analog products, comprised a greater portion of our year-to-date sales compared to the same period last year.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses consist of marketing, sales, commissions, engineering, development, management information systems, accounting and headquarters expenses.

For the three months ended September 30, 2005, SG&A expenses totaled approximately $2.3 million (30.5% of sales) compared to approximately $1.8 million (35.6% of sales) for the same period last year. For the nine months ended September 30, 2005, SG&A expenses totaled approximately $6.7 million (34.2% of sales) compared to approximately $5.4 million (35.8% of sales) for the same period last year.

The overall increase in SG&A expenses is attributed primarily to increases in product development and selling and marketing initiatives combined with certain headquarters expenses.

Engineering and product development expenses increased by approximately $101,000 (19.6%) and $405,000 (30.0%), respectively, for the three and nine months ended September 30, 2005 compared to the same periods last year. The additional investment in engineering and product development is intended to expedite the completion and introduction of new products, including additional P25 digital products. Bringing such products to market and achieving a significant share of the market will continue to require investment. Internal development efforts are focused on our digital product program. This program is planned to yield additional products through 2006. We anticipate that these products will be a primary source of sales growth in the future.

Marketing and selling expenses increased by approximately $224,000 (29.1%) and $617,000 (27.3%), respectively, for the three and nine months ended September 30, 2005 compared to the same periods last year. We incurred additional sales, marketing and promotion expenses for initiatives designed to drive sales growth from government and public safety opportunities for P25 digital products, as well as from opportunities with commercial, business and security concerns.

General and administrative expenses increased by approximately ($147,000) (26.2%) for the three months ended September 30, 2005, and increased approximately $385,000 (23.1%) for the nine months ended September 30, 2005 compared to the same periods last year. The increases were the result of certain headquarters expenses and professional fees, including those related to achieving a listing on the American Stock Exchange, evaluating strategic alternatives and commencing an investor relations program. We also incurred expenses pertaining to compliance with public company internal control and reporting requirements.

Operating Income

Operating income for the three months ended September 30, 2005 increased approximately 220.0% ($1.3 million) to $1.9 million, compared to $581,000 for the same period last year. Operating income for the nine months ended September 30, 2005 increased approximately 120.1% ($1.7 million) to $3.2 million compared to

12

$1.5 million for the same period last year. The improvement is attributable to sales growth as well as product and operating improvements which reduced product costs.

Interest Expense

For the three months ended September 30, 2005, interest expense decreased by approximately 80.5% ($62,000) to $15,000 from $77,000 for the same period last year.  For the nine months ended September 30, 2005, interest expense decreased by approximately 87.4% ($194,000) to $28,000 from $222,000 for the same period last year.  We incur interest expense on borrowings from our revolving line of credit. These reductions are the result of the December 31, 2004 retirement of our convertible subordinated notes. Also, primarily as a result of our improved cash position, we had no outstanding principal balance under the revolving line of credit as of September 30, 2005. The interest rate on our revolving line of credit is variable and will fluctuate with the prime lending rate.

The subordinated convertible notes matured on December 31, 2004. Notes totaling $2.25 million were repaid and retired on that date. Notes totaling an additional $550,000 were retired in January 2005. The remaining note totaling $150,000 was repaid and retired in August 2005.

Income Taxes

We recorded non-cash deferred tax expense of approximately $703,000 and $1,183,000 for the three and nine months ended September 30, 2005, respectively. No income tax expense or benefit was recorded for the same period last year.

As of September 30, 2005, we recognized a net deferred tax asset of approximately $5.1 million. This asset is primarily composed of net operating loss carry forwards (NOL’s). These NOL’s total $26.8 million for federal purposes and $28.5 million for state purposes, with expirations starting in 2005 through 2024.

In order to fully realize the net deferred tax asset, we must generate sufficient taxable income in future years prior to the expiration of our NOL’s. Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (Statement 109) requires us to analyze all positive and negative evidence to determine if, based on the weight of available evidence, we are more likely than not to realize the benefit of the net deferred tax asset. The recognition of the net deferred tax asset is based upon our conclusions regarding, among other considerations, estimates of future earnings based on information currently available, current and anticipated customers, contracts and product introductions, as well as recent operating results during 2005 and historical operating results in 2004, 2003 and 2002, and certain tax planning strategies.

We have evaluated the available evidence and the likelihood of realizing the benefit of our net deferred tax asset. We concluded that based on the weight of available evidence we are more likely than not to realize a benefit from our net deferred tax asset recorded at September 30, 2005. The amount of the net deferred tax asset as of September 30, 2005 decreased by approximately $1.2 million during the nine months ended September 30, 2005 reflecting the tax effect of our taxable income for the nine month period.

We cannot presently estimate what, if any, changes to the valuation of our deferred tax asset may be deemed appropriate in the future. Future losses or income may make it necessary to decrease or increase our net deferred net tax asset and recognize an income tax expense or benefit.

The Federal and state net operating loss carryforwards could be subject to limitation if, within any three year period prior to the expiration of the applicable carryforward period, there is a greater than 50% change in ownership of RELM.

Significant Customers

Sales to the United States government represented approximately $4.2 million (55.3%) and $8.1 million (41.7%) of our total sales for the three and nine months ended September 30, 2005, respectively, compared to approximately $2.70 million (52.2%) and $6.83 million (45.2%), respectively, for the same periods last year.

Inflation and Changing Prices

Inflation and changing prices for the three and nine months ended September 30, 2005 have contributed to increases in certain costs. These inflationary effects were more than offset by increases in sales of higher priced products and reduced manufacturing costs associated with our initiatives to utilize contract manufacturers.

13

Liquidity and Capital Resources

For the nine months ended September 30, 2005, net cash provided by operating activities totaled approximately $0.3 million, compared to approximately $2.1 million for the same period last year. The cash provided by operations is primarily attributable to net income for the period of approximately $2.0 million compared to net income of approximately $1.2 million for the same period last year. Changes in components of working capital, particularly accounts receivable, inventory and deferred tax assets also contributed to cash provided by operations.

Accounts receivable for the nine months ended September 30, 2005 increased approximately $2.3 million compared to an increase of $0.5 million for the same period last year due to increased sales during the third quarter, particularly in September. Inventory net of reserve increased by approximately $1.3 million during the period reflecting the purchases of new product inventory to meet anticipated increases in demand. This compares to a decrease of $0.7 million for the same period last year driven by sales of older products in existing inventory. Net deferred tax assets decreased approximately $1.2 million reflecting the impact of deferred tax expense for the period. No net deferred tax asset was recognized for the same period last year. Depreciation and amortization totaled approximately $411,000 for the nine months ended September 30, 2005 compared to $494,000 for the same period last year as certain assets became fully depreciated or amortized.

Cash used in investing activities was primarily to fund the acquisition of equipment and leasehold improvements pertaining to our development of new digital products as well as computer and test equipment. Capital expenditures for the period were approximately $386,000 compared to approximately $222,000 for the same period last year. We anticipate that future capital expenditures will be funded through existing cash balances, operating cash flow and our revolving line of credit.

Net cash totaling approximately $0.6 million was used in financing activities for the nine months ended September 30, 2005 compared to approximately $2.1 million provided by financing activities during the same period last year. We repaid $700,000 of our subordinated convertible notes during the period. There were no note repayments for the same period last year. There were no amounts outstanding under the revolving line of credit as of September 30, 2005. During the same period last year we repaid the entire balance, approximately $1.3 million, on our revolving line of credit.  Also, during the first nine months last year we received approximately $3.4 million in net proceeds from the exercise of public warrants and the conversion of certain subordinated convertible notes.

We have a revolving line of credit for up to $3.5 million, which expires in January 2007 and is secured by substantially all of the Company’s assets, principally trade receivables and inventory. In October 2004, certain terms and conditions of the credit agreement were modified, which reduced related costs and eased reporting requirements. Under the formula for calculating the available credit on our facility, approximately $3.5 million was available as of September 30, 2005. The credit agreement contains customary financial and restrictive covenants with which we must comply. As of September 30, 2005, we were in compliance with all such covenants.

Our subordinated convertible notes matured on December 31, 2004. Notes totaling $2.25 million were repaid and retired on that date, and as of December 31, 2004, notes totaling $700,000 remained outstanding. Notes totaling $550,000 were tendered, repaid and retired in January 2005. The remaining note totaling $150,000 was tendered, repaid and retired in August 2005.

Our cash balance at September 30, 2005 was approximately $2.4 million. We believe these funds combined with cash generated from operations and borrowing availability under our credit facility are sufficient to meet our current working capital requirements for the next twelve months. If sales volumes increase substantially, additional sources of working capital may be required to fulfill the demand.

Critical Accounting Policies

In response to the SEC’s financial reporting release, FR-60, Cautionary Advice Regarding Disclosure about Critical Accounting Policies, we have selected for disclosure our sales recognition process and our more subjective accounting estimation processes. These processes affect our reported sales and current assets and are therefore critical in assessing the financial and operation status of the Company. The processes for determining the allowance for collection of trade receivables and the reserves for excess or obsolete inventory involve certain assumptions that if incorrect could create an adverse impact on the Company’s operations and financial position.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities

14

are measured using the enacted tax rates expected to apply in the period in which the deferred tax asset or liability is expected to be realized. The effect of changes in net deferred tax assets and liabilities is recognized on the Company’s balance sheet and statement of operations in the period in which the change is recognized. Valuation allowances are provided to the extent that impairment of tax assets are more likely than not. In determining whether a tax asset is realizable, the Company considers among other things, estimates of future earnings based on information currently available, current and anticipated customers, contracts and new product introductions, as well as recent and historical operating results, and certain tax planning strategies. If the Company fails to achieve the future results anticipated in the calculation and valuation of net deferred tax assets, the Company may be required to reduce its deferred tax assets in the future.

Sales

Sales are recognized when the earnings process is complete and collection is reasonably assured. The earnings process is generally complete when the product is shipped, or received by the customer, depending upon whether the title to the goods, as well as the risks and benefits of ownership are transferred to the customer at point of shipment or point of delivery. We periodically review our sales recognition procedures to assure that such procedures are in accordance with accounting principles generally accepted in the United States and Staff Accounting Bulleting No. 104.

Allowance for Collection Losses

The allowance for collection losses was approximately $79,000 on gross trade receivables of approximately $6.0 million as of September 30, 2005. This allowance is used to state trade receivables at a net realizable value or the amount that we estimate will be collected on our gross receivables as of September 30, 2005. Because the amount that we will actually collect on the receivables outstanding as of September 30, 2005 cannot be known with certainty, we rely on prior experience. Our historical collection losses have typically been infrequent with write-offs of trade receivables being less than 1% of sales. We maintain a general allowance of approxi­mately 1% to 5% of the gross trade receivables balance in order to allow for future collection losses that arise from customer accounts that do not indicate an inability to pay but turn out to have such an inability. Currently, our allowance on trade receivables is approxi mately 1.3% of gross receivables. We may also maintain a specific allowance for customer accounts that we anticipate may not be collectible for various reasons such as bankruptcy and other liquidity issues. We analyze the trade receivable portfolio based on the age of each customer’s invoice. In this way, we can identify those accounts that are more likely than not to have collection problems. Based on this analysis, we may reserve a portion or all of a particular customer’s balance. As of September 30, 2005, there was no specific allowance. We believe that sales and total receivables will increase during 2005, and accordingly, we may experience an increase in this allowance.

Inventory Reserve

The reserve for slow-moving, excess, or obsolete inventory was approximately $2.6 million at September 30, 2005. The reserve for excess or obsolete inventory is used to state our inventories at the lower of cost or market. Because the amount of inventory that we will actually recoup through sales of our inventory as of September 30, 2005 cannot be known with certainty, we rely on past sales experience, future sales forecasts, and our strategic business plans to determine the amount of the reserve. Generally, in analyzing our inventory levels, we classify inventory as having been used or unused during the past year. For raw material inventory with no usage in the past year, we reserve 85% of its cost which takes into account a 15% scrap value, while for finished goods inventory with no usage in the past year we reserve 80% of its cost. For inventory with usage in the past year, we review the average annual usage over the past thr ee years, project that amount over the next five years, and then reserve 25% of the excess amount (in which the excess amount equals inventory on hand less a five year projected usage amount). We believe that 25% represents the value of excess inventory we would not be able to recover due to our new product introductions and other technological advancements over the next five years.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We may be subject to the risk of fluctuating interest rates in the ordinary course of business for borrowings under our revolving credit facility, which bear interest at a variable rate. The lender presently charges interest at 1.00% over the prime rate. As of September 30, 2005, we had no debt outstanding under this facility.

Our primary exposure to market risk is to changes in interest rates. Changes in interest rates can impact the amount of interest we incur on borrowings from our credit facility and cash flows but do not impact the net market value of the debt instrument.

15

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer (who serves as our principal financial and accounting officer) have evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of September 30, 2005. Based on this evaluation, they have concluded that our disclosure controls and procedures were effective as of September 30, 2005.

Changes in Internal Controls

There was no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the three months ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II- OTHER INFORMATION

Item 1.

Legal Proceedings

Reference is made to Note 9 to the Company’s condensed consolidated financial statements included elsewhere in this report for the information required by this Item.

Item 4.

Submission of Matters to a Vote of Security Holders

None.

Item 6.

Exhibits

Exhibit 3.1

Bylaws of RELM Wireless Corporation, as amended (incorporated by reference from RELM Wireless Corporation’s Registration Statement on Form S-3 (Registration No. 333-129113)).

Exhibit 10.1

Contract dated July 6, 2005 by and between RELM Wireless Corporation and the United States Postal Service.

Exhibit 31.1

Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2

Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K).

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K).

17

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 thereunto duly authorized.

	RELM WIRELESS CORPORATION
		(The “Registrant”)
Date:    November 1, 2005	By:	/s/ DAVID P. STOREY
		David P. Storey President and Chief Executive Officer (Principal executive officer and duly authorized officer)
Date:    November 1, 2005	By:	/s/ WILLIAM P. KELLY
		William P. Kelly Executive Vice President and Chief Financial Officer (Principal financial and accounting officer and duly authorized officer)

18

Exhibit Index

Exhibit Number	Description
3.1	Bylaws of RELM Wireless Corporation, as amended (incorporated by reference from RELM Wireless Corporation’s Registration Statement on Form S-3 (Registration No. 333-129113)).
10.1	Contract dated July 6, 2005 by and between RELM Wireless Corporation and the United States Postal Service.
31.1	Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K).
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of Regulation S-K).

19

EX-10.1

EXHIBIT 10.1

1CTELE-05-A-3002

1

1CTELE-05-A-3002

PART 1 – SCHEDULE

SCOPE AND NARRATIVE

a. The Postal Service is soliciting proposals to provide "Radio Devices and Accessories".  The USPS requires a communication device for its smaller non-processing facilities in order for employees, management, and Law Enforcement to communicate.  The USPS wants to make use of the latest radio technology to provide enhanced communications capabilities while keeping the communications system compact, simple and user friendly.  Attachment 1 – “Statement of Work” outlines the equipment requirements for this solicitation.  

b. The period of performance of this contract is for a one-(1) year period from the date of award and contains four-(4), one-(1) year renewals.  Either party, upon receipt of a 180-day written notice from either the USPS Contracting Officer or the authorized supplier representative, may terminate the contract(s) resulting from this solicitation.  Otherwise, termination is in accordance with Clause 4-1.

c. This solicitation will become the contract document upon selection of successful supplier(s).  Resulting contract(s) will be categorized as MANDATORY USE contracts implemented on a national basis.  The coverage area for the contract shall be the 48 contiguous states, Alaska, Hawaii, and Puerto Rico as well as any other United States territory or location where the postal service has facility offices.

d. The proposed contract vehicle is a "Requirements Contract" which would award all the potential postal business for this category of equipment to a successful supplier.  Interested suppliers must respond in writing to this notice by submitting a priced proposal in accordance with the solicitation proposal requirements outlined in Provision 4-1.  There is no current value estimate for this contract award and no guarantied order quantity.  

e. Proposals will be evaluated in accordance with Provision 4-2.

 ITEMS AND PRICES

a. Unit Pricing - All proposed pricing will be FOB Destination pricing.  The Postal Service is requesting pricing for two devices that meet the SOW requirements.  Pricing for the two devices must be submitted for the following quantities:

(1 – 10, 11- 50, 50 – 100, 100 – 250, 250 – 500 & 500+)

The Postal Service is also requesting accessory pricing (batteries, antennas, carrying solutions, chargers, etc) for all accessories that correspond to the two priced radio devices.  This pricing must be FOB Destination pricing and show the same quantity segmentation pricing and the radio devices.  All radio devices and accessories must include the manufacturer’s model number.

b. Demo Units - Potential Suppliers will provide two-(2) fully functional, demo radio models (product samples) with batteries and standard accessories to be shipped, by the proposal submission date, to the address below.  These units will meet the requirements in Attachment 1 – SOW and will be same units as priced in the supplier proposal offering.  These demo units will be return promptly at the conclusion of the evaluation.

Attn: Warren Schwartz (919) 501-9049

RITSC Telecommunications

4200 Wake Forest Rd

Raleigh, NC 27668-9700

c. Warranty – As part of the supplier’s proposal; the standard manufacturer’s warranty shall be provided for all equipment on the pricing worksheet.  The supplier may improve the warranty by extending the effective term of the warranty or by providing other warranty benefits.  Improvements to the standard warranty terms should be identified clearly.  This submission will be evaluated as part of the “proposal specific factors” evaluation.  

d. Maintenance and Support Plan – Potential suppliers may offer a “maintenance and support plan” to complement their offer.  This support plan should include as a minimum, service level parameters, shipping plan for repairables, and annual pricing schedules.  This plan will be evaluated as a component of the overall priced proposal.

2

1CTELE-05-A-3002

ACKNOWLEDGMENT OF AMENDMENTS

The offeror acknowledges receipt of amendments to the solicitation numbered and dated as follows:

Amendment Number

Date

Amendment Number

Date

____________

________

____________

________

____________

________

____________

________

____________

________

____________

________

____________

________

____________

________

____________

________

____________

________

REMITTANCE ADDRESS

Remittance Address (if different from Block 14a, PS Form 8203)

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

PRIVACY ACT STATEMENT

To the extent that the information you provide is about an individual, the Privacy Act will apply.  Collection of that information is authorized by 39 USC 401.  As a routine use, the information may be disclosed to an appropriate government agency, domestic or foreign, for law enforcement purposes; where pertinent, in a legal proceeding to which the USPS is a party or has an interest; to a government agency in order to obtain information relevant to a USPS decision concerning employment, security clearances, contracts, licenses, grants, permits, or other benefits; to a government agency upon its request when relevant to its decision concerning employment, security clearances, security, or suitability investigations, contracts, licenses, grants, or other benefits; to a congressional office at your request; to an expert, consultant, or other person under contract with the USPS to fulfill an agency function; to the Federal Records Center for storage; to the Office of Management a nd Budget for review of private relief legislation; to an independent certified public accountant during an official audit of USPS finances; to an investigator, administrative judge or complaints examiner appointed by the Equal Employment Opportunity Commission for investigation of a formal EEO complaint under 29 CFR 1614; to the Merit Systems Protection Board or Office of Special Counsel for proceedings or investigations involving personnel practices and other matters within their jurisdiction; to a labor organization as required by the National Labor Relations Act; to a federal, state or local agency, financial institution or other appropriate entity for the purpose of verifying an individual's or entity's eligibility or suitability for engaging in a transaction.  In addition, the following disclosures may be made to any person: a solicitation mailing list when a purchase is highly competitive and competitions will not be harmed by release, or to provide an opportunity for potential subcontractors see king business; a list of lessors of real or personal property to the Postal Service; a list of entities with whom the Postal Service transacts for goods or services, interests in real property, construction, financial instruments, or intellectual property; and the identity of the successful offeror.  Completion of this form is voluntary; however, if this information is not provided, we will be unable to process your request.

3

1CTELE-05-A-3002

PART 2 - PROVISIONS

PROVISION 2-5 Evaluation Exclusive of Unpriced Options (May 2005)

The Postal Service will evaluate the unpriced option at the time the option is exercised.

PROVISION 4-1 Standard Solicitation Provisions (May 2005)

a. Proposal Deliverables below must be emailed to the contract administrator  patrick.j.freeman@usps.gov by the submission date listed on the cover page, block 8.  The following constitutes the proposal deliverable requirements:
  

1.

Signed copy of solicitation with the following sections filled out:

Page 1 - block 14a, 14b, 16, 18, 28a, b, c.

Page 3 – Remittance Address

Page 5, 6 & 7 - Representations and Certifications

2.  

Two-(2) fully functional, Demo Models Units.

3.

Pricing of Demo units (product samples) and accessories.  

4.

Warranty terms and proposed warranty improvements.

5.

Proposed delivery schedule for the quantities above.

6.

Maintenance and Support Plan Description and pricing.

b. Submission of Offers. Submit signed and dated offers to the office specified in this solicitation at or before the exact time specified on this solicitation. Offers may be submitted on PS Form 8203, Order/Solicitation/Offer/Award, letterhead stationary, or as otherwise specified in the solicitation. As a minimum offers must show:

(1) Solicitation number;

(2) The name, address and telephone number of the offeror;

(3) A technical description of the items being offered in sufficient detail to evaluate compliance with the requirements in the solicitation. This may include product literature, or other documents, if necessary;

(4) Terms of any expressed warranty;

(5) Price and any discount terms;

(6) "Remit to" address, if different than mailing address;

(7) A completed copy of the representations and certifications;

(8) Acknowledgment of Solicitation Amendments;

(9) Past performance information, when included as an evaluation factor, to include recent and relevant contracts for the same or similar items, and other references (including contract numbers, point of contact, with telephone numbers, and other relevant information); and

(10) If the offer is not submitted on PS Form 8203, include a statement specifying the extent of agreement with all terms and conditions and provisions included in the solicitation. Offers that fail to furnish required representations or information, or reject the terms and conditions of the solicitation may be excluded from consideration.

c. Product Samples. When required by the solicitation, product samples must be submitted at or prior to the time specified for receipt of offers. Unless otherwise specified in the solicitation, these samples must be submitted at no expenses to the Postal Service and returned at the sender's request and expense, unless they are destroyed during preaward testing.

d. Multiple Offers. Offerors are encouraged to submit multiple offers presenting alternative terms and conditions or commercial items for satisfying the requirements of this solicitation. Each offer submitted will be evaluated separately.

e. Late Offers. Offers or modifications of offers received at the address specified for the receipt of offers after the exact time specified for receipt of offers will not be considered unless determined to be in the best interests of the Postal Service.

f. Type of Contract. The Postal Service plans to award a Requirements type of contract under this solicitation, and all proposals must be submitted on this basis. Alternate proposals based on other contract types will [_] will not X  be considered.

4

1CTELE-05-A-3002

g. Contract Award. The Postal Service may evaluate offers and award a contract without discussions with offerors. Therefore, the offeror's initial offer should contain the offeror's best terms from a price and technical standpoint. Discussions may be conducted if the Postal Service determines they are necessary. The Postal Service may reject any or all offers if such action is in the best interest of the Postal Service; accept other than the lowest offer, and waive informalities and minor irregularities in offers received.

h. Multiple Awards. The Postal Service may accept any item or group of items of an offer, unless the offeror qualifies the offer by specific limitations. Unless otherwise provided in the Schedule, offers may not be submitted for quantities less than those specified. The Postal Service reserves the right to make an award on any items for quantity less than the quantities offered, at the unit prices offered, unless the offeror specifies otherwise in the offer.

i. Incorporation by Reference. Wherever in this solicitation or contract a standard provision or clause is incorporated by reference, the incorporated term is identified by its title, the provision or clause number assigned to it in the Postal Service's Interim Internal Purchasing Guidelines, and its date. The text of incorporated terms may be found in Appendix A (for provisions), or Appendix B (for clauses) of the Interim Internal Purchasing Guidelines, accessible online at www.usps.com/business. If checked, the following provision is incorporated in this solicitation by reference:

(Contracting officer will check as appropriate.)

[_] Provision 3-1, Notice of Small, Minority, and Woman-owned Business Subcontracting Requirements (May 2005)

PROVISION 4-2 Evaluation (May 2005) (4.2.2)

a. General. The Postal Service will award a contract resulting from this solicitation to the offeror whose offer conforming to the solicitation is deemed to offer the Postal Service the best value, price and other factors as specified considered. The following performance evaluation factors will be used in the evaluation of offers:  

1.  Solicitation (Proposal Specific Factors)

The “proposal specific factors” listed below are listed in their order of importance.  

a.

Demo (Equipment) Evaluation

b.

Delivery Terms

c.

Maintenance and Support Plan

d.

Improved Warranty Offer

2.  Price Submission

Suppliers will provide pricing for the demo equipment units and all related accessories for the demo equipment.  

3.  Overall Evaluation

Supplier specific and proposal specific evaluation factors, when combined are considered less important than price.

b. Options. The Postal Service will __ will not  X evaluate offers for award purposes by adding the total price for all options to the total price for the basic requirement. The Postal Service may determine that an offer is unacceptable if the option prices are significantly unbalanced. Evaluation of options will not obligate the Postal Service to exercise the option(s).

c. Notice of Award. The Postal Service may accept an offer (or part of an offer), whether or not there are discussions after its receipt, before an offer's specified expiration time, unless a written notice of withdrawal is received before award. A written notice of award or acceptance of an offer, mailed or otherwise furnished to the successful offeror within the time for acceptance specified in the offer, will result in a binding contract without further action by either party.

PROVISION 4-3 Representations and Certifications (May 2005) (4.2.2)

a. Type of Business Organization. The offeror, by checking the applicable blocks, represents that it:

(1) Operates as:

[__] a corporation incorporated under the laws of the state of _____________________;

[__] an individual;

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[__] a partnership;

[__] a joint venture;

[__] a limited liability company;

[__] a nonprofit organization; or

[__] an educational institution; and

(2) Is (check all that apply)

[__] a small business concern;

[__] a minority business (indicate minority below):

[__] Black American

[__] Hispanic American

[__] Native American

[__] Asian American:

[__] a woman-owned business; or

[__] none of the above entities.

(3) Small Business Concern. A small business concern for the purposes of Postal Service purchasing means a business, including an affiliate, that is independently owned and operated, is not dominant in producing or performing the supplies or services being purchased, and has no more than 500 employees, unless a different size standard has been established by the Small Business Administration (see 13 CFR 121, particularly for different size standards for airline, railroad, and construction companies). For subcontracts of $50,000 or less, a subcontractor having no more than 500 employees qualifies as a small business without regard to other factors.

(4) Minority Business. A minority business is a concern that is at least 51 percent owned by, and whose management and daily business operations are controlled by, one or more members of a socially and economically disadvantaged minority group, namely U.S. citizens who are Black Americans, Hispanic Americans, Native Americans, or Asian Americans. (Native Americans are American Indians, Eskimos, Aleuts, and Native Hawaiians. Asian Americans are U.S. citizens whose origins are Japanese, Chinese, Filipino, Vietnamese, Korean, Samoan, Laotian, Kampuchean (Cambodian), Taiwanese, in the U.S. Trust Territories of the Pacific Islands or in the Indian subcontinent.)

(5) Woman-owned Business. A woman-owned business is a concern at least 51 percent of which is owned by a woman (or women) who is a U.S. citizen, controls the firm by exercising the power to make policy decisions, and operates the business by being actively involved in day-to-day management.

(6) Educational or Other Nonprofit Organization. Any corporation, foundation, trust, or other institution operated for scientific or educational purposes, not organized for profit, no part of the net earnings of which inures to the profits of any private shareholder or individual.

b. Parent Company and Taxpayer Identification Number

(1) A parent company is one that owns or controls the basic business polices of an offeror. To own means to own more than 50 percent of the voting rights in the offeror. To control means to be able to formulate, determine, or veto basic business policy decisions of the offeror. A parent company need not own the offeror to control it; it may exercise control through the use of dominant minority voting rights, proxy voting, contractual arrangements, or otherwise.

(2) Enter the offeror's Taxpayer Identification Number (TIN) in the space provided. The TIN is the offeror's Social Security number or other Employee Identification Number used on the offeror's Quarterly Federal Tax Return, U.S. Treasury Form 941. Offeror's TIN: ____________________________

(3) Check this block if the offeror is owned or controlled by a parent company: [__]

(4) If the block above is checked, provide the following information about the parent company:

Parent Company's Name:_______________________________

Parent Company's Main Office:___________________________

Address:_____________________________________________

No. and Street:________________________________________

City:________________ State:______ ZIP Code:_____________

Parent Company's TIN:__________________________________

(5) If the offeror is a member of an affiliated group that files its federal income tax return on a consolidated basis (whether or not the offeror is owned or controlled by a parent company, as provided above) provide the name and TIN of the common parent of the affiliated group:

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Name of Common Parent: ______________________________

Common Parent's TIN: _________________________________

c. Certificate of Independent Price Determination

(1) By submitting this proposal, the offeror certifies, and in the case of a joint proposal each party to it certifies as to its own organization, that in connection with this solicitation:

(a) The prices proposed have been arrived at independently, without consultation, communication, or agreement, for the purpose of restricting competition, as to any matter relating to the prices with any other offeror or with any competitor;

(b) Unless otherwise required by law, the prices proposed have not been and will not be knowingly disclosed by the offeror before award of a contract, directly or indirectly to any other offeror or to any competitor; and

(c) No attempt has been made or will be made by the offeror to induce any other person or firm to submit or not submit a proposal for the purpose of restricting competition.

(2) Each person signing this proposal certifies that:

(a) He or she is the person in the offeror's organization responsible for the decision as to the prices being offered herein and that he or she has not participated, and will not participate, in any action contrary to paragraph a above; or

(b) He or she is not the person in the offeror's organization responsible for the decision as to the prices being offered but that he or she has been authorized in writing to act as agent for the persons responsible in certifying that they have not participated, and will not participate, in any action contrary to paragraph a above, and as their agent does hereby so certify; and he or she has not participated, and will not participate, in any action contrary to paragraph a above.

(3) Modification or deletion of any provision in this certificate may result in the disregarding of the proposal as unacceptable. Any modification or deletion should be accompanied by a signed statement explaining the reasons and describing in detail any disclosure or communication.

d. Certification of Nonsegregated Facilities

(1) By submitting this proposal, the offeror certifies that it does not and will not maintain or provide for its employees any segregated facilities at any of its establishments, and that it does not and will not permit its employees to perform services at any location under its control where segregated facilities are maintained. The offeror agrees that a breach of this certification is a violation of the Equal Opportunity clause in this contract.

(2) As used in this certification, segregated facilities means any waiting rooms, work areas, rest rooms or wash rooms, restaurants or other eating areas, time clocks, locker rooms or other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment area, transportation, or housing facilities provided for employees that are segregated by explicit directive or are in fact segregated on the basis of race, color, religion, or national origin, because of habit, local custom, or otherwise.

(3) The offeror further agrees that (unless it has obtained identical certifications from proposed subcontractors for specific time periods) it will obtain identical certifications from proposed subcontractors before awarding subcontracts exceeding $10,000 that are not exempt from the provisions of the Equal Opportunity clause; that it will retain these certifications in its files; and that it will forward the following notice to these proposed subcontractors (except when they have submitted identical certifications for specific time periods):

Notice: A certification of nonsegregated facilities must be submitted before the award of a subcontract exceeding $10,000 that is not exempt from the Equal Opportunity clause. The certification may be submitted either for each subcontract or for all subcontracts during a period (quarterly, semiannually, or annually).

e. Certification Regarding Debarment, Proposed Debarment, and Other Matters

(This certification must be completed with respect to any offer with a value of $100,000 or more.)

(1) The offeror certifies, to the best of its knowledge and belief, that it or any of its principals:

(a) Are [__] are not [__] presently debarred or proposed for debarment, or declared ineligible for the award of contracts by any Federal, state, or local agency;

(b) Have [__] have not [__], within the three-year period preceding this offer, been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in connection with obtaining, attempting to obtain, or performing a public (Federal, state, or local) contract or subcontract; violation of Federal or state antitrust statutes relating to the submission of offers; or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, or receiving stolen property;

(c) Are [__] are not [__] presently indicted for, or otherwise criminally or civilly charged by a governmental entity with, commission of any of the offenses enumerated in subparagraph (b) above;

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(d) Have [__] have not [__] within a three-year period preceding this offer, been convicted of or had a civil judgment rendered against them for commission of fraud or a criminal offense in conjunction with obtaining, attempting to obtain, or performing a public (Federal, state or local) contract or subcontract; violation of Federal or state antitrust statutes relating to the submission of offers; or commission of embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion or receiving stolen property; and

(e) Are [__] are not [__] presently indicted for, or otherwise criminally or civilly charged by a governmental entity with, commission of any of the offenses enumerated in subparagraph (d) above.

(2) The offeror has [__] has not [__], within a three-year period preceding this offer, had one or more contracts terminated for default by any Federal, state, or local agency.

(3) "Principals," for the purposes of this certification, means officers, directors, owners, partners, and other persons having primary management or supervisory responsibilities within a business entity (e.g., general manager, plant manager, head of a subsidiary, division, or business segment, and similar positions).

(4) The offeror must provide immediate written notice to the Contracting Officer if, at any time prior to contract award, the offeror learns that its certification was erroneous when submitted or has become erroneous by reason of changed circumstances.

(5) A certification that any of the items in paragraph (a) of this provision exists will not necessarily result in withholding of an award under this solicitation. However, the certification will be considered as part of the evaluation of the offeror's capability (see 2.1.9.c.3 of the Interim Internal Purchasing Guidelines). The offeror's failure to furnish a certification or provide additional information requested by the contracting officer will affect the capability evaluation.

(6) Nothing contained in the foregoing may be construed to require establishment of a system of records in order to render, in good faith, the certification required by paragraph (a) of this provision. The knowledge and information of an offeror is not required to exceed that which is normally possessed by a prudent person in the ordinary course of business dealings.

(7) This certification concerns a matter within the jurisdiction of an agency of the United States and the making of a false, fictitious, or fraudulent certification may render the maker subject to prosecution under section 1001, Title 18, United States Code.

(8) The certification in paragraph (a) of this provision is a material representation of fact upon which reliance was placed when making the award. If it is later determined that the offeror knowingly rendered an erroneous certification, in addition to other remedies available to the Postal Service, the Contracting Officer may terminate the contract resulting from this solicitation for default.

f. Incorporation by Reference. Wherever in this solicitation or contract a standard provision or clause is incorporated by reference, the incorporated term is identified by its title, its provision or clause number assigned to it in the Postal Service's Interim Internal Purchasing Guidelines, and its date. The text of incorporated terms may be found in Appendix A (for provisions), or Appendix B (for clauses) of the Guidelines, accessible online at www.usps.com/business. If checked, the following provision(s) is incorporated in this solicitation by reference:

(Contracting officer will check as appropriate)

[_] (1) Provision 1-2, Domestic Source Certificate - Supplies (May 2005) ___

[_] (2) Provision 1-3, Domestic Source Certificate - Construction Materials (May 2005) ___

 X  (3) Provision 9-1, Equal Opportunity Affirmative Action Program (May 2005) ___

[_] (4) Provision 9-2, Preaward Equal Opportunity Compliance Review (May 2005) ___

[_] (5) Provision 9-3, Notice of Requirements for Equal Opportunity Affirmative Action (May 2005)

PART 3 - CONTRACT CLAUSES

CLAUSE B-3 Contract Type (May 2005) (B.1.2)

This is a Requirements contract.

CLAUSE 2-20 Option to Renew (with Preliminary Notice) (May 2005)

This contract is renewable, at the option of the Postal Service, by the contracting officer giving written notice of renewal to the supplier within the period specified in the Schedule; provided that, the contracting officer will have given preliminary notice of the Postal Service's intent to renew at least 60 days before this contract is to expire (such a preliminary notice will not be deemed to commit the Postal Service to renewals). If the Postal Service exercises this option for renewal, the contract as renewed includes this option clause. The duration of this contract, including renewals, may not exceed the time limit set forth in the Schedule.

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CLAUSE 2-39 Ordering (May 2005)

a. Supplies or services to be furnished under this contract will be ordered by authorized Postal Service credit card, or issuance of delivery orders, during the period and by the activities specified in the Schedule.

b. Orders may be issued in writing, by written telecommunication, electronic data interchange (EDI), or orally. Oral orders, other than authorized Postal Service credit card orders, must be confirmed in writing. Orders sent by mail are considered issued when placed in the mail.

c. The supplier must report to the contracting officer in the format and intervals specified in the Schedule all orders charged to an authorized Postal Service credit card.

d. All orders are subject to the terms and conditions of this contract. If there is any conflict between an order and this contract, the contract is controlling.

CLAUSE 2-40 Delivery-Order Limitations (May 2005)

a. When the Postal Service requires supplies or services covered by this contract in an amount less than $50.00, the Postal Service is not obligated to purchase, and the supplier is not obligated to furnish, those supplies or services under this contract.

b. The supplier is not obligated to honor:

(1) Any order for a single item in excess of $100,000.00;

(2) Any order for a combination of items in excess of $1,000,000.00; or

(3) A series of orders from the same ordering office in the course of   7 days that together call for quantities exceeding the limitations stated in subparagraph b.1 or b.2 above.

c. If this is a requirements contract, the Postal Service is not required to order a part of any one requirement from the supplier if that requirement exceeds the limitations stated in paragraph b above.

d. If it is the supplier's intent not to honor an order received that exceeds the limitations stated in paragraph b above, the supplier must return the order to the ordering office within 5 days (Contracting officer specify) after issuance, with a written notice rejecting the order and giving the reasons; the Postal Service may then obtain the supplies or services from another source.  If the supplier does not return the order with a notice of rejection as required, the supplier must honor the order as issued.

CLAUSE 2-43 Requirements (May 2005)

a. This is a requirements contract for supplies or services described in the Schedule for the period specified. The supplies or services are not purchased until ordered. If the Postal Service's requirements do not result in orders in the quantities described as estimated or maximum in the Schedule, that fact may not be the basis for an equitable price adjustment unless specifically provided elsewhere in this contract.

b. Delivery or performance must be as directed in orders issued in accordance with the Ordering clause and the contract Schedule. The supplier must furnish to the Postal Service, when ordered, the supplies or services specified in the Schedule, subject to any limitations in the Delivery-Order Limitations clause or in the contract Schedule. Orders may require delivery to multiple destinations or performance at multiple locations.

c. Except as otherwise provided in this contract, the Postal Service must order from the supplier all the supplies or services specified in the Schedule that are required to be purchased by the activity or activities identified in the Ordering clause or the Schedule.

d. The Postal Service is not required to purchase from the supplier requirements in excess of any limit on total orders under this contract.

e. If the Postal Service urgently requires delivery or performance before the earliest date specified under this contract, and if the supplier will not accept an order providing for the accelerated delivery or performance, the Postal Service may purchase the urgently required supplies or services from another source.

f. Any order issued during the effective period of this contract and not completed within that period must be completed by the supplier within the time specified in the order, and the rights and obligations of the supplier and the Postal Service with respect to the order will be the same as if the order were completed during the effective period of the contract.

CLAUSE 3-2 Participation of Small, Minority, and Woman-owned Businesses (February 2005)

a. The policy of the Postal Service is to encourage the participation of small, minority, and woman-owned business in its purchases of supplies and services to the maximum extent practicable consistent with efficient contract performance. The supplier agrees to follow the same policy in performing this contract.

b. Subject to the agreement of the supplier and the Postal Service, the supplier will report subcontracting activity on one of the following bases:

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(1) Showing the amount of money paid to subcontractors during the reporting period;

(2) Showing subcontracting activity that is allocable to this contract using generally accepted accounting practices; or

(3) A combination of the methods listed above.

c. The supplier will submit a report to the contracting officer within 15 calendar days after the end of each calendar-year quarter, describing all subcontract awards to small, minority, or woman-owned businesses. The contracting officer may require more frequent reports.

CLAUSE 4-1 General Terms and Conditions (May 2005)

a. Inspection and Acceptance. The supplier will only tender for acceptance those items that conform to the requirements of this contract. The Postal Service reserves the right to inspect or test supplies or services that have been tendered for acceptance. The Postal Service may require repair or replacement of nonconforming supplies or reperformance of nonconforming services at no increase in contract price. The Postal Service must exercise its post acceptance rights (1) within a reasonable period of time after the defect was discovered or should have been discovered and (2) before any substantial change occurs in the condition of the items, unless the change is due to the defect in the item.

b. Assignment. If this contract provides for payments aggregating $10,000 or more, claims for monies due or to become due from the Postal Service under it may be assigned to a bank, trust company, or other financing institution, including any federal lending agency, and may thereafter be further assigned and reassigned to any such institution. Any assignment or reassignment must cover all amounts payable and must not be made to more than one party, except that assignment or reassignment may be made to one party as agent or trustee for two or more parties participating in financing this contract. No assignment or reassignment will be recognized as valid and binding upon the Postal Service unless a written notice of the assignment or reassignment, together with a true copy of the instrument of assignment, is filed with:

(1) The contracting officer;

(2) The surety or sureties upon any bond; and

(3) The office, if any, designated to make payment, and the contracting officer has acknowledged the assignment in writing.

(4) Assignment of this contract or any interest in this contract other than in accordance with the provisions of this clause will be grounds for termination of the contract for default at the option of the Postal Service.

c. Changes

(1) The contracting officer may, in writing, without notice to any sureties, order changes within the general scope of this contract in the following:

(a) Drawings, designs, or specifications when supplies to be furnished are to be specially manufactured for the Postal Service in accordance with them;

(b) Statement of work or description of services;

(c) Method of shipment or packing;

(d) Places of delivery of supplies or performance of services;

(e) Delivery or performance schedule;

(f) Postal Service furnished property or facilities.

(2) Any other written or oral order (including direction, instruction, interpretation, or determination) from the contracting officer that causes a change will be treated as a change order under this paragraph, provided that the supplier gives the contracting officer written notice stating (a) the date, circumstances, and source of the order and (b) that the supplier regards the order as a change order.

(3) If any such change affects the cost of performance or the delivery schedule, the contract will be modified to effect an equitable adjustment.

(4) The supplier's claim for equitable adjustment must be asserted within 30 days of receiving a written change order. A later claim may be acted upon - but not after final payment under this contract - if the contracting officer decides that the facts justify such action.

(5) Failure to agree to any adjustment is a dispute under Clause B-9, Claims and Disputes, which is incorporated into this contract by reference (see paragraph s). Nothing in that clause excuses the supplier from proceeding with the contract as changed.

d. Reserved

e. Reserved

f. Reserved

g. Invoices

(1) The supplier's invoices must be submitted before payment can be made. The supplier agrees that submission of an invoice to the Postal Service for payment is a certification that:

(a) Any services being billed for have been performed in accordance with the contract requirements; and

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(b) Any supplies for which the Postal Service is being billed have been shipped pr delivered in accordance with the instructions issued by the contracting officer and that the supplies are in the quantity and of the quality designated in the contract.

(2) To ensure prompt payment, an original invoice (or electronic invoice, if authorized) must be submitted to the address designated in the contract to receive invoices for each destination and shipment. An invoice must contain:

(a) The supplier's name, remit to address (including ZIP+4) and phone number;

(b) Unique invoice number and invoice date;

(c) Any applicable task or delivery order number;

(d) A description of the supplies or services and the dates delivered or performed;

(e) The point of shipment or delivery;

(f) Quantity, unit of measure, unit price(s) and extension(s) of the items delivered;

(g) Shipping and payment terms, including GBL number if applicable; and

(h) Any additional information required by the contract.

h. Patent Indemnity. The supplier will indemnify the Postal Service and its officers, employees and agents against liability, including costs for actual or alleged direct or contributory infringement of, or inducement to infringe, any United States or foreign patent, trademark, or copyright, arising out of the performance of this contract, provided the supplier is reasonably notified of such claims and proceedings.

i. Payment

(1) Payment will be made for items accepted by the Postal Service that have been delivered to the delivery destinations set forth in this contract. The Postal Service will make payment in accordance with the Prompt Payment Act (31 U.S.C. 3903) and 5 CFR 1315. Payments under this contract may be made by the Postal Service either by check, electronic funds transfer or government credit card at the option of the Postal Service.

(2) In conjunction with any discount offered for early payment, time will be computed from the date of the invoice. For purposes of computing the discount earned, payment will be considered to have been made on the date which appears on the payment check or the date on which an electronic funds transfer was made.

j. Risk of Loss. Unless the contract specifically provides otherwise, risk of loss or damage to the supplies provided under this contract will remain with the supplier until, and will pass to the Postal Service upon:

(1) Delivery of the supplies to a carrier, if transportation is f.o.b. origin, or;

(2) Delivery of the supplies to the Postal Service at the destination specified in the contract, if transportation is f.o.b. destination.

k. Taxes. The contract price includes all applicable federal, state, and local taxes and duties.

l. Termination for the Postal Service's Convenience. The Postal Service reserves the right to terminate this contract, or any part hereof, for its sole convenience. In the event of such termination, the supplier must immediately stop all work and must immediately cause any and all of its suppliers and subcontractors to cease work. Subject to the terms of this contract, the supplier will be paid a percentage of the work performed prior to the notice of termination, plus reasonable charges the supplier can demonstrate to the satisfaction of the Postal Service using its standard record keeping system, have resulted from the termination. The supplier will not be required to comply with the cost accounting standards and principles for this purpose. This paragraph does not give the Postal Service any right to audit the supplier's records. The supplier will not be paid for any work performed or costs incurred which reasonable could have been avoided.

m. Termination for Default. The Postal Service may terminate this contract, or any part hereof, for default by the supplier, or if the supplier fails to provide the Postal Service, upon request, with adequate assurances of future performance. In the event of termination for default, the Postal Service will not be liable to the supplier for any amount for supplies or services not accepted, and the supplier will be liable to the Postal Service for any and all rights and remedies provided by law. The debarment, suspension, or ineligibility of the supplier, its partners, officers, or principal owners under the Postal Service's procedures (see 39 CFR Part 601) may constitute an act of default under this contract, and such act will not be subject to notice and cure pursuant to any termination of default provision of this contract. If it is determined that the Postal Service improperly terminated this contract for default, such termination will be deemed a termination for convenience.

n. Title. Unless specified elsewhere in this contract, title to items furnished under this contract will pass to the Postal Service upon acceptance, regardless of when or were the Postal Service takes physical possession.

o. Warranty. The supplier warrants and implies that the items delivered under this contract are merchantable and fit for the use for the particular purpose described in this contract.

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p. Limitation of Liability. Except as otherwise provided by an express or implied warranty, the supplier will not be liable to the Postal Service for consequential damages resulting from any defect or deficiencies in accepted items.

q. Other Compliance Requirements. The supplier will comply with all applicable Federal, State, and local laws, executive orders, rules and regulations applicable to its performance under this contract.

r. Order of Precedence. Any inconsistencies in this solicitation or contract will be resolved by giving precedence in the following order; (1) the schedule of supplies and services; (2) the Assignment, Disputes, Payments, Invoice, Other Compliances and Compliance with Laws Unique to the Postal Service Contracts paragraphs of this clause; (3) the clause at 4-2 Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders; (4) addenda to this solicitation or contract, including any license agreements for computer software; (5) solicitation provisions if this is a solicitation; (6) other paragraphs of this clause; (7) Form 8203; (8) other documents, exhibits, and attachments, and (9) the specifications.

s. Incorporation by Reference. Wherever in this solicitation or contract a standard provision or clause is incorporated by reference, the incorporated term is identified by its title, the provision or clause number assigned to it in the Postal Service Interim Internal Purchasing Guidelines, and its date. The text of incorporated terms may be found in Appendix A (for provisions), or Appendix B (for clauses) of the Guidelines, accessible at www.usps.com/business. The following clauses are incorporated in this contract by reference:

(1) B-1, Definitions (May 2005)

(2) B-9, Claims and Disputes (May 2005)

(3) B-15, Notice of Delay (May 2005)

(4) B-16, Suspensions and Delays (May 2005)

(5) B-19, Excusable Delays (May 2005)

(6) B-30, Permits and Responsibilities (May 2005)

(7) 2-9 Definition of Delivery Terms and Supplier's Responsibilities (December 2003)

t. Shipping. The supplier must deliver goods that meet the prescribed physical limitations of the current U.S. Postal Service Domestic Mail Manual either by its own personnel/equipment or by use of the United States Postal Service, unless the contracting officer grants a waiver of this requirement. The supplier is responsible for ensuring that the packing and packaging are sufficient to protect the goods and ensure usability upon receipt.

CLAUSE 4-2 Contract Terms and Conditions Required to Implement Policies, Statutes or Executive Orders (May 2005)

a. Incorporation by Reference

(1) Wherever in this solicitation or contract a standard provision or clause is incorporated by reference, the incorporated term is identified by its title, the provision or clause number assigned to it in the Postal Service Interim Internal Purchasing Guidelines, and its date. The text of incorporated terms may be found in Appendix A (for provisions), or Appendix B (for clauses) of the Guidelines, accessible at www.usps.com/business. The following clauses are incorporated in this contract by reference:

(1)

Clause 1-5, Gratuities or Gifts (May 2005)

(2)

Clause B-9, Claims and Disputes (May 2005)

(3)

Clause B-25, Advertising of Contract Awards (May 2005)

(4)

Clause 9-1, Convict Labor (May 2005)

(5)

Clause 9-5, Contract Work Hours and Safety Standards Act - Safety Standards (May 2005)

(2) If checked, the following additional clauses are also incorporated in this contract by reference:

(Contracting officer will check as appropriate.)

(1) X Clause 1-1, Privacy Protection (May 2005)

(2) [ ] Clause 1-6, Contingent Fees (May 2005)

(3) X Clause 1-9, Preference for Domestic Supplies (May 2005)

(4) [ ] Clause 1-10, Preference for Domestic Construction Materials (May 2005)

(5) [ ] Clause 3-1, Small, Minority, and Woman-owned Business Subcontracting Requirements (May 2005)

(6) [ ] Clause 3-2, Participation of Small, Minority, and Woman-owned Businesses (May 2005)

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(7) [ ] Clause 9-2, Contract Work Hours and Safety Standards Act - Overtime Compensation (May 2005)

(8) [ ] Clause 9-3, Davis-Bacon Act(May 2005)

(9) [ ] Clause 9-6, Walsh-Healey Public Contracts Act (May 2005)

(10) X Clause 9-7, Equal Opportunity (May 2005)

(11) [ ] Clause 9-10, Service Contract Act (May 2005)

(12) [ ] Clause 9-11, Service Contract Act - Short Form

(May 2005)

(13) [ ] Clause 9-12, Fair Labor Standards Acts and Services Contract Act - Price Adjustments (May 2005)

(14) [ ] Clause 9-13, Affirmative Action for Handicapped Workers (May 2005)

(15) X Clause 9-14, Affirmative Action for Disabled Veterans and Veterans of the Vietnam Era (May 2005)

b. Examination of Records.

(1) Records. "Records" includes books, documents, accounting procedures and practices, and other data, regardless of type and regardless of whether such items are in written form, in the form of computer data, or in any other form.

(2) Examination of Costs. If this is a cost-type contract, the supplier must maintain, and the Postal Service will have the right to examine and audit all records and other evidence sufficient to reflect properly all costs claimed to have been incurred or anticipated to be incurred directly or indirectly in performance of this contract. This right of examination includes inspection at all reasonable times of the supplier's plants, or parts of them, engaged in the performance of this contract.

(3) Cost or Pricing Data. If the supplier is required to submit cost or pricing data in connection with any pricing action relating to this contract, the Postal Service, in order to evaluate the accuracy, completeness, and currency of the cost or pricing data, will have the right to examine and audit all of the supplier's records, including computations and projections, related to:

(a) The proposal for the contract, subcontract, or modification;

(b) The discussions conducted on the proposal(s), including those related to negotiating;

(c) Pricing of the contract, subcontract, or modification; or

(d) Performance of the contract, subcontract or modification.

(4) Reports. If the supplier is required to furnish cost, funding or performance reports, the contracting officer or any authorized representative of the Postal Service will have the right to examine and audit the supporting records and materials, for the purposes of evaluating:

(a) The effectiveness of the supplier's policies and procedures to produce data compatible with the objectives of these reports; and

(b) The data reported.

(5) Availability. The supplier must maintain and make available at its office at all reasonable times the records, materials, and other evidence described in paragraphs (a) through (d) of this clause, for examination, audit, or reproduction, until three years after final payment under this contract or any longer period required by statute or other clauses in this contract. In addition:

(a) If this contract is completely or partially terminated, the supplier must make available the records related to the work terminated until three years after any resulting final termination settlement; and

(b) The supplier must make available records relating to appeals under the claims and disputes clause or to litigation or the settlement of claims arising under or related to this contract. Such records must be made available until such appeals, litigation or claims are finally resolved.

CLAUSE 4-16 Substitution of Information Technology (May 2005)

This clause acknowledges that some of the contracted for equipment may not be readily available or may permanently go out of production. Based on the authority of this clause, the supplier may request a one-time or permanent substitution of one or more contract line items. Such requests must be made in writing to the contracting officer, with a copy to the COR.

The following conditions must be met:

a. The replacement item(s) must meet or exceed all contract specifications that were applicable to the items being replaced.

b. The replacement item(s) must be priced equal to, or less than, the item(s) being replaced.

c. The replacement item(s) must be reviewed, and be determined to be acceptable by the Postal Service technical representative.

d. The replacement item(s) must be approved in writing by the contracting officer and incorporated into the contract.

The supplier's request for a replacement may not exceed the required delivery time of any items. Upon formal acceptance of a replacement, the contracting officer may grant a day-to-day extension to the delivery schedule for the time the Postal Service took to approve the replacement. No extension may be granted in the case of unaccepted proposed replacements.

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1CTELE-05-A-3002

CLAUSE 4-17 Technology Enhancement (May 2005)

a. Definitions

(1) Enhancement, replacement, and upgrade are used interchangeably throughout this clause.

(2) Cost to performance ration is a form of comparative measurement and means the contracts costs of a given item or configuration per a quantifiable unit of performance or capability, such as (but not limited to) storage capacity (in megabytes), speed (in megahertz), energy consumption efficiency, etc.

b. The supplier must propose technology enhancement of information technology equipment, firmware, or software configurations being provided under this contract whenever product lines of newer technology become available that may save money, improve performance, or save energy. All proposed upgrades must meet the following requirements:

(1) All mandatory requirements of the contract must continue to be met.

(2) Overall contract life cycle costs may not increase as a result of the upgrade.

(3) The proposed upgrade or enhancement will: (1) either afford a better cost to performance ration compared to existing contract offerings/configurations; or (2) at minimum, must result in at least equal operability, maintainability, reliability, and overall system performance while providing some additional benefit or advantage to the Postal Service.

(4) The replacement configuration proposal must be acceptable to the COR.

c. As a minimum, the following information must be submitted by the supplier with each proposal:

(1) A description of the difference between the existing contract requirement and the proposed change along with the comparative advantages and disadvantages of each.

(2) Suggested contract requirements which should be changed if the proposed technology enhancement is adopted.

(3) A complete pricing proposal that evidences the commerciality of the pricing. (The price for the upgraded product, or configuration, can be no greater than the standard commercial price of the replacement product less a discount factor equal at least to the discount afforded the Postal Service in the supplier's final proposal for the original, taking into account the age of the original product in its life cycle.

(4) An evaluation of the proposed change's effect on collateral costs, costs of related items, and costs of maintenance and operation.

(5) Timing as to when the modification adopting the technology enhancement must be issued to ensure the maximum benefit to the Postal Service.

(6) Identify any effect on the contract completion or delivery schedule.

(7) Any other information that may be required by the contracting officer.

d. Technology enhancements, as contemplated by this clause, will not be added to the contract except by written, bilateral modification to the contract.

e. The decision by the contracting officer to accept or reject any proposal under this contract is final and not subject to the Disputes clause.

DELIVERABLE REPORTS (Clause OB-37) (Revised June 2005)

Reports called for under this contract must be delivered in accordance with the following schedule:

   REPORT TITLE

  DATE
Diversity Sub-Contracting Report

Quarterly
            Spend Data Report

Monthly

(specific format and content of the report to be established after award)

** In accordance with solicitation clause 3-2 - Participation of Small, Minority and Woman-Owned Businesses in Part 3 - General Clauses, the supplier is required to submit a report to the contracting officer.  The report must be submitted within 15 calendar days after the end of each calendar-year quarter, describing all subcontract awards to small, minority, or woman-owned businesses. The contracting officer may require more frequent reports, if considered necessary.  Electronic reporting will be utilized.

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1CTELE-05-A-3002

PART 4 - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS

Attachment No.

 No of Pages

Attachment Title

1

5

Statement of Work

15

1CTELE-05-A-3002

Attachment 1

Statement of Work

United States Postal Service

Radio Devices

1.0

Scope

This Statement of Work (SOW) describes the contractor’s responsibilities to satisfy the requirements of the United States Postal Service (USPS) for a Land Mobile Radio Device.  The geographic area of this SOW includes the 50 states and all possessions (US&P).  The contractor will supply, ship and program/configure the proposed devices.  

1.1

Background

The USPS requires a communication device for its smaller non-processing facilities in order for employees, management and Law Enforcement to communicate. The USPS wants to make use of the latest radio technology to provide enhanced communications capabilities while keeping the communications system compact, simple and user friendly.

1.2

Frequency Coordination and Assignments

All radio devices that are to be proposed and supplied must operate in the 406.1000 MHz to 420.0000 MHZ band.  Only one simplex frequency will be used.

1.3

Postal Organizations

There are a number of USPS organizations that will require support under this SOW, the major entities are as follows:

·

Delivery Operations

·

Administrative Operations

·

Window Services

·

General Office Operations

1.4

Postal Facilities

There are many configurations of USPS Facilities that require radio system and component support under this SOW, the major facilities are as follows:

·

Main Post Offices (MPO)

·

Associate Post Offices (AO)

·

Administrative Offices

·

Training and Technical Centers

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Attachment 1

·

Headquarters and Domiciled Units

1.5

Applicable Documents

·

NTIA Manual of Regulations and Procedures for Federal Radio Frequency Management – Chapter 5

·

FCC Bulletin OET 65

·

FCC CFR 47

2.0

Radio Equipment Operating Requirements

All radio equipment offered under this SOW is to be fully compliant with all FCC and NTIA regulations for use in the 406.1000MHz to 420.0000MHz spectrum.  The proposed device is to radiate 4 watts of power in the transmit mode.   The proposed device must have at least four channels.

2.1

Channelization

All radio equipment shall provide 12.5 KHz Channelization in the allocated USPS frequency spectrum.  

2.2

Transmit/Receive Technology

Analog radio equipment technology is to be offered under this SOW.

2.2.1

Transmit Timer

All radio devices shall have an automatic transmit timer which shall turn off the transmitter after a predetermined length of transmission and alert the operator that the transmitter is off with an audible tone.  The timer length shall be programmable.    

2.3

Encryption

None required under this SOW.

2.4

Voice Quality

Voice quality for all transmissions shall be crisp and clear.  Voice recognition should be distinguishable between male and female voices.  The words and phrases stated by a user shall be clearly understood by another.

2.5

Display

None required under this SOW.

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Attachment 1

2.6

Keypad Requirements

None required under this SOW.

2.7

Battery/Charger Requirements

The battery for the proposed device shall provide for 8 hours of operation assuming a duty cycle of 5% transmit, 5% receive and 90% standby.  The proposed battery charger should be able to fully charge the battery at a rapid rate.  Both single and multiple unit chargers should be proposed.

2.8

Antenna Requirements

The proposed device will utilize an antenna so that the appearance does not appear out of the ordinary from a wireless device.  The antenna should be the shortest in length available for that particular frequency. The antenna shall be detachable.

2.9

External Operations

The proposed device shall be capable of operating with an external headset, speaker microphone and an external antenna.

2.10

Device Quality

The proposed device should be able to operate in a normal office environment.  The volume of the device must be audible within a normal office environment.  

2.11

Coded Squelch Systems

The proposed devices must utilize Coded Squelch.     

3.0

Inventory and Site Database

The contractor is to develop and maintain an inventory and site database that would offer at a minimum, the following informational categories:

·

Location Name

·

Location Address

·

Location Function Type (as outlined in section 1.3)

·

Radio Equipment Quantity Delivered

The database must be in a format that is compatible and compliant with current USPS LAN technology and software.  The database should be considered to have “CONFIDENTIAL” data on it and must be protected and secured accordingly.

4.0

Radio Equipment Programming

All radio equipment purchased under this contract will be fully programmed either at the

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Attachment 1

contractors place of business or at the affected USPS Facility.  The devices will utilize one simple frequency in the UHF Band (406.0000 to 420.0000 MHz).   

4.1

Definition of Radio Equipment

For purposes of this section, the term Radio Device means the following:

·

Any device which transmits or receives radio signals

·

Any device which connects the transmitter/receiver to an antenna

·

All radio antennas

·

All devices which permit the operation of any radio equipment to function

5.0

Instruction

The proposed device must be shipped with clear and concise documentation on the following criteria:

·

How to put together the radio device when received

·

Proper power up and shutdown of the radio equipment

·

Channel selection and the properties of each

·

Proper talk methods, listen modes

·

Battery charging and battery replacement procedures

·

Coverage limits of the equipment

·

Explain all buttons and lights on the radio equipment

·

Warranty return procedures

6.0

Warranty

All radio equipment purchased under this contract must be fully warranted for one (1) year once received by the USPS.  The warranty will include repairs or replacement of all purchased radio equipment that fails to operate as designed.  All of the repairs, replacement, travel and other related items whether labor or material costs will be borne by the

contractor.  The warranty covers all parts and equipment that were purchased under the contract.  The warranty insures that the USPS is covered in the event of poor workmanship, defective equipment, bad design and malfunctioning equipment.  The USPS is not covered when equipment has been damaged by the USPS or caused to be damaged by acts of nature and/or neglect.

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7.0

Maintenance

All radio equipment and related components purchased under this contract must be fully warranted for one (1) year from date of acceptance.  During the warranty period all radio equipment will fall under this paragraph as maintenance.  The contractor will supply a toll free maintenance telephone number for USPS personnel to report any maintenance problems with radio equipment purchased under this contract.  

7.1

After Warranty Maintenance

None required under this SOW.  

7.2

Spend Reporting

The contractor is to develop a database or spreadsheet that will be provided to the Contracting Officer.  This report will be required once during each of the first three months of the contract and quarterly thereafter.  At a minimum, this report will offer the following informational categories:

·

Location Name

·

Location Address

·

Location Function Type (as outlined in section 1.3)

·

Price of items as listed above

·

Date of Radio Shipped

It is our intention to track the total spend of this contract through this vehicle.  The spend should be able to be analyzed through any of the sub-categories above.

The spreadsheet or database must be in a format that is compatible and compliant with current USPS LAN technology and software.  The spreadsheet or database should be considered to have “CONFIDENTIAL” data on it and must be protected and secured accordingly.

5 of 5

EX-31.1

BP - x1-54709 - Relm Wireless - Exhibit 31.1

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, William P. Kelly, Executive Vice President – Finance and Chief Financial Officer of RELM Wireless Corporation, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of RELM Wireless Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 1, 2005

/s/  WILLIAM P. KELLY

William P. Kelly

Executive Vice President and

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

RELM WIRELESS CORPORATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RELM Wireless Corporation (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David P. Storey, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

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

RELM Wireless Corporation

/s/  DAVID P. STOREY

David P. Storey

President and Chief Executive Officer

November 1, 2005

EX-32.2

EXHIBIT 32.2

RELM WIRELESS CORPORATION

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RELM Wireless Corporation (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William P. Kelly, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

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

RELM Wireless Corporation

/s/  WILLIAM P. KELLY

William P. Kelly

Executive Vice President and

Chief Financial Officer

November 1, 2005