Nevada
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59-3486297
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State or other jurisdiction of
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(I.R.S. Employer
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Incorporation or organization
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Identification No.)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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þ
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Smaller reporting company
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o
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(Do not check if a smaller reporting company)
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September 30,
2011
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December 31,
2010
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|||||||
ASSETS | ||||||||
Current assets:
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||||||||
Cash and cash equivalents
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$ | 4,899 | $ | 5,050 | ||||
Trade accounts receivable (net of allowance for doubtful
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||||||||
accounts of $44 at September 30, 2011 and at December 31, 2010, respectively)
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3,267 | 3,900 | ||||||
Inventories, net
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12,220 | 11,942 | ||||||
Deferred tax assets, net
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2,165 | 2,165 | ||||||
Prepaid expenses and other current assets
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505 | 703 | ||||||
Total current assets
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23,056 | 23,760 | ||||||
Property, plant and equipment, net
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1,245 | 1,357 | ||||||
Deferred tax assets, net
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5,637 | 5,637 | ||||||
Capitalized software, net
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3,027 | 3,776 | ||||||
Other assets
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228 | 262 | ||||||
Total assets
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$ | 33,193 | $ | 34,792 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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||||||||
Current liabilities:
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||||||||
Accounts payable
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$ | 1,474 | $ | 2,753 | ||||
Accrued compensation and related taxes
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856 | 795 | ||||||
Accrued warranty expense
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297 | 266 | ||||||
Accrued other expenses and other current liabilities
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261 | 202 | ||||||
Total current liabilities
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2,888 | 4,016 | ||||||
Deferred revenue
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612 | 386 | ||||||
Long-term debt
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1,800 | 2,000 | ||||||
Commitments and Contingencies
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||||||||
Stockholders’ equity:
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||||||||
Preferred stock; $1.00 par value; 1,000,000 authorized shares:
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||||||||
none issued or outstanding
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− | − | ||||||
Common stock; $.60 par value; 20,000,000 authorized shares:
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||||||||
13,519,323 and 13,508,815 issued and outstanding shares at September 30, 2011 and December 31, 2010, respectively
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8,111 | 8,105 | ||||||
Additional paid-in capital
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24,529 | 24,404 | ||||||
Accumulated deficit
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(4,747 | ) | (4,119 | ) | ||||
Total stockholders' equity
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27,893 | 28,390 | ||||||
Total liabilities and stockholders' equity
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$ | 33,193 | $ | 34,792 |
Three Months Ended
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Nine months Ended
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|||||||||||||||
September 30,
2011
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September 30,
2010
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September 30,
2011
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September 30,
2010
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|||||||||||||
Sales, net
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$ | 6,976 | $ | 7,052 | $ | 18,361 | $ | 20,579 | ||||||||
Expenses
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||||||||||||||||
Cost of products
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3,467 | 3,780 | 10,594 | 10,943 | ||||||||||||
Selling, general and administrative
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2,541 | 3,003 | 8,273 | 8,810 | ||||||||||||
Total expenses
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6,008 | 6,783 | 18,867 | 19,753 | ||||||||||||
Operating income (loss)
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968 | 269 | (506 | ) | 826 | |||||||||||
Other expense:
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||||||||||||||||
Net interest expense
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(27 | ) | (6 | ) | (89 | ) | (6 | ) | ||||||||
Other expense
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(2 | ) | (2 | ) | (8 | ) | (8 | ) | ||||||||
Total other expense
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(29 | ) | (8 | ) | (97 | ) | (14 | ) | ||||||||
Income (loss) before income taxes
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939 | 261 | (603 | ) | 812 | |||||||||||
Income tax expense
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(25 | ) | (134 | ) | (25 | ) | (344 | ) | ||||||||
Net income (loss)
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$ | 914 | $ | 127 | $ | (628 | ) | $ | 468 | |||||||
Net earnings (loss) per share-basic:
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$ | 0.07 | $ | 0.01 | $ | (0.05 | ) | $ | 0.03 | |||||||
Net earnings (loss) per share-diluted:
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$ | 0.07 | $ | 0.01 | $ | (0.05 | ) | $ | 0.03 | |||||||
Weighted average shares outstanding-basic
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13,518,638 | 13,489,815 | 13,512,125 | 13,472,207 | ||||||||||||
Weighted average shares outstanding-diluted
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13,525,082 | 13,736,386 | 13,512,125 | 13,827,014 |
Nine months Ended
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||||||||
September 30,
2011
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September 30,
2010
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Operating activities
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||||||||
Net (loss) income
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$ | (628 | ) | $ | 468 | |||
Adjustments to reconcile net (loss) income to net cash provided by (used in)operating activities:
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||||||||
Allowance for doubtful accounts
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- | 17 | ||||||
Inventories reserve
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107 | 247 | ||||||
Deferred tax asset
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- | 342 | ||||||
Depreciation and amortization
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1,059 | 486 | ||||||
Shared-based compensation expense
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131 | 231 | ||||||
Excess tax benefit from share-based compensation
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- | (20 | ) | |||||
Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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633 | (750 | ) | |||||
Inventories
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(385 | ) | (3,798 | ) | ||||
Prepaid expenses and other current assets
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198 | (194 | ) | |||||
Other assets
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34 | 58 | ||||||
Accounts payable
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(1,279 | ) | 1,110 | |||||
Accrued compensation and related taxes
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61 | (257 | ) | |||||
Accrued warranty expense
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31 | 15 | ||||||
Deferred revenue
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226 | 78 | ||||||
Accrued other expenses and other current liabilities
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59 | 111 | ||||||
Net cash provided by (used in) operating activities
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247 | (1,856 | ) | |||||
Investing activities
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||||||||
Purchases of property, plant and equipment
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(198 | ) | (439 | ) | ||||
Capitalized software
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- | (1,149 | ) | |||||
Net cash used in investing activities
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(198 | ) | (1,588 | ) | ||||
Financing activities
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||||||||
Proceeds from issuance of common stock
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- | 79 | ||||||
Excess tax benefit from share-based compensation
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- | 20 | ||||||
Increase in revolving credit line
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1,500 | 2,000 | ||||||
Decrease in revolving credit line
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(1,700 | ) | - | |||||
Cash (used in) provided by financing activities
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(200 | ) | 2,099 | |||||
Net change in cash and cash equivalents
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(151 | ) | (1,345 | ) | ||||
Cash and cash equivalents, beginning of period
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5,050 | 7,660 | ||||||
Cash and cash equivalents, end of period
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$ | 4,899 | $ | 6,315 | ||||
Supplemental disclosure
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||||||||
Cash paid for interest
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$ | 90 | $ | 6 | ||||
Income tax paid
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$ | - | $ | 11 | ||||
Non-cash financing activity
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||||||||
Cashless exercise of stock options and related conversion of net shares to stockholders’ equity
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$ | 6 | $ | - |
September 30, 2011
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December 31,
2010 |
|||||||
Finished goods
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$ | 3,260 | $ | 3,110 | ||||
Work in process
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5,497 | 6,075 | ||||||
Raw materials
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3,463 | 2,757 | ||||||
$ | 12,220 | $ | 11,942 |
Common Stock
Shares
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Common Stock
Amount
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Additional Paid-In Capital
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Accumulated
Deficit
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Total
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||||||||||||||||
Balance at December 31, 2010
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13,508,815 | $ | 8,105 | $ | 24,404 | $ | (4,119 | ) | $ | 28,390 | ||||||||||
Common stock option exercise and issued
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10,508 | 6 | (6 | ) | - | |||||||||||||||
Share-based compensation expense
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− | − | 131 | − | 131 | |||||||||||||||
Net loss
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− | − | − | (628 | ) | (628 | ) | |||||||||||||
Balance at September 30, 2011
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13,519,323 | $ | 8,111 | $ | 24,529 | $ | (4,747 | ) | $ | 27,893 |
Three Months Ended
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Nine months Ended
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September 30, 2011
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September 30, 2010
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September 30, 2011
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September 30, 2010
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Numerator:
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||||||||||||||||
Net income (loss) (numerator for basic and diluted earnings per share)
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$ | 914 | $ | 127 | $ | (628 | ) | $ | 468 | |||||||
Denominator:
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||||||||||||||||
Denominator for basic earnings per share weighted average shares
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13,518,638 | 13,489,815 | 13,512,125 | 13,472,207 | ||||||||||||
Effect of dilutive securities:
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||||||||||||||||
Options
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2,719 | 246,571 | - | 354,808 | ||||||||||||
Denominator
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||||||||||||||||
Denominator for diluted earnings per share weighted average shares
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13,521,357 | 13,736,386 | 13,512,125 | 13,827,014 | ||||||||||||
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Basic income (loss) per share
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$ | 0.07 | $ | 0.01 | $ | (0.05 | ) | $ | 0.03 | |||||||
Diluted income (loss) per share
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$ | 0.07 | $ | 0.01 | $ | (0.05 | ) | $ | 0.03 |
As of July 1, 2011
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Stock Options
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Wgt. Avg. Exercise
Price ($)
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Wgt. Avg. Remaining Contractual Life (Years)
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Wgt. Avg. Grant Date Fair Value($)
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Aggregate Intrinsic
Value ($)
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|||||||||||||||
Outstanding
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1,030,224 | 2.72 | - | 1.79 | - | |||||||||||||||
Vested
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958,556 | 2.68 | - | 1.76 | - | |||||||||||||||
Nonvested
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71,668 | 3.20 | - | 2.14 | - | |||||||||||||||
Period activity
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||||||||||||||||||||
Issued
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- | - | - | - | - | |||||||||||||||
Exercised
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41,412 | 1.00 | - | 0.71 | - | |||||||||||||||
Forfeited
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- | - | - | - | - | |||||||||||||||
Expired
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- | - | - | - | - | |||||||||||||||
As of September 30, 2011
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||||||||||||||||||||
Outstanding
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988,812 | 2.79 | 2.90 | 1.83 | 250 | |||||||||||||||
Vested
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917,144 | 2.76 | 2.59 | 1.81 | 250 | |||||||||||||||
Nonvested
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71,668 | 3.20 | 6.85 | 2.14 | 0 |
·
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calculation of the “borrowing base” was adjusted by increasing the “eligible inventory” threshold to $1,000 from $500 within the definition of “borrowing base” and clause (i) of the definition of “eligible accounts”, which relates to accounts owing from an account debtor which is a United States government entity or any department, agency or instrumentality thereof, was amended to, among other things, increase the threshold to $2,000 from $1,500; and
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·
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the required “adjusted quick ratio” was reduced to 1.00 to 1.0. Prior to the amendment the required quick ratio was 1.75 to 1.0.
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·
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changes in customer preferences;
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·
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our inventory and debt levels;
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·
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heavy reliance on sales to agencies of the United States government;
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·
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federal, state and local government budget deficits and spending limitations;
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·
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quality of management, business abilities and judgment of our personnel;
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·
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the availability, terms and deployment of capital;
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·
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competition in the land mobile radio industry;
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·
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reliance on contract manufacturers;
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·
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limitations in available radio spectrum for use of land mobile radios;
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·
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changes or advances in technology; and
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·
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general economic and business conditions.
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Percentage of Sales
Three Months Ended
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Percentage of Sales
Nine months Ended
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|||||||||||||||
September 30,
2011
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September 30,
2010
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September 30,
2011
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September 30,
2010
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|||||||||||||
Sales
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100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of products
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(49.7 | ) | (53.6 | ) | (57.7 | ) | (53.2 | ) | ||||||||
Gross margin
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50.3 | 46.4 | 42.3 | 46.8 | ||||||||||||
Selling, general and administrative expenses
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(36.4 | ) | (42.6 | ) | (45.1 | ) | (42.8 | ) | ||||||||
Net interest expense
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(0.4 | ) | (0.1 | ) | (0.5 | ) | (0.0 | ) | ||||||||
Other expense
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(0.0 | ) | (0.0 | ) | (0.0 | ) | (0.0 | ) | ||||||||
Pretax income (loss)
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13.5 | 3.7 | (3.3 | ) | 4.0 | |||||||||||
Income tax expense
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(0.4 | ) | (1.9 | ) | (0.1 | ) | (1.7 | ) | ||||||||
Net income (loss)
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13.1 | % | 1.8 | % | (3.4 | )% | 2.3 | % |
Exhibit Number
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Description
|
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Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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||
Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
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).
|
||
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).
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RELM WIRELESS CORPORATION | |||
(The “Registrant”) | |||
Date: November 9, 2011
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By:
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/s/ David P. Storey | |
David P. Storey, | |||
President and Chief Executive Officer | |||
(Principal executive officer and duly authorized officer) | |||
Date: November 9, 2011 | By: | /s/ William P. Kelly | |
William P. Kelly, | |||
Executive Vice President and Chief Financial Officer | |||
(Principal financial and accounting officer and duly authorized officer) |
Exhibit Number
|
Description
|
|
Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
Certification Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
||
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).
|
||
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).
|
Date: November 9, 2011
|
|
/s/ David P. Storey | |
David P. Storey, | |||
President and Chief Executive Officer |
Date: November 9, 2011
|
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/s/ William P. Kelly | |
William P. Kelly, | |||
Executive Vice President and Chief Financial Officer |
|
(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 | |||
November 9, 2011
|
|
/s/ David P. Storey | |
David P. Storey, | |||
President and Chief Executive Officer |
|
(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 | |||
November 9, 2011
|
|
/s/ William P. Kelly | |
William P. Kelly, | |||
Executive Vice President and Chief Financial Officer |
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
ASSETS | ||
Allowance for doubtful accounts, net | $ 44 | $ 44 |
Stockholders equity: | ||
Preferred stock, par value | $ 1.00 | $ 1.00 |
Preferred stock, authorized shares | 1,000,000 | 1,000,000 |
Preferred stock, issued shares | 0 | 0 |
Preferred stock, outstanding shares | 0 | 0 |
Common stock, par value | $ 0.60 | $ 0.60 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 13,519,323 | 13,508,815 |
Common stock, outstanding shares | 13,519,323 | 13,508,815 |
Condensed Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Share data | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Income Statement [Abstract] | ||||
Sales, net | $ 6,976 | $ 7,052 | $ 18,361 | $ 20,579 |
Expenses | ||||
Cost of products | 3,467 | 3,780 | 10,594 | 10,943 |
Selling, general and administrative | 2,541 | 3,003 | 8,273 | 8,810 |
Total expenses | 6,008 | 6,783 | 18,867 | 19,753 |
Operating (loss) income | 968 | 269 | (506) | 826 |
Other (expense) income: | ||||
Net Interest expense | (27) | (6) | (89) | (6) |
Other income (expense ) | (2) | (2) | (8) | (8) |
Total other (expense) income | (29) | (8) | (97) | (14) |
Income (loss) before income taxes | 939 | 261 | (603) | 812 |
Income tax (expense) | (25) | (134) | (25) | (344) |
Net income (loss) | $ 914 | $ 127 | $ (628) | $ 468 |
Net earnings (loss) per share-basic: | $ 0.07 | $ 0.01 | $ (0.05) | $ 0.03 |
Net earnings (loss) per share-diluted: | $ 0.07 | $ 0.01 | $ (0.05) | $ 0.03 |
Weighted average shares outstanding-basic | 13,518,638 | 13,489,815 | 13,512,125 | 13,472,207 |
Weighted average shares outstanding-diluted | 13,525,082 | 13,736,386 | 13,512,125 | 13,827,014 |
Document and Entity Information (USD $) | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Oct. 24, 2011 | |
Document And Entity Information | ||
Entity Registrant Name | RELM WIRELESS CORP | |
Entity Central Index Key | 0000002186 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2011 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Public Float | $ 24,956,489 | |
Entity Common Stock, Shares Outstanding | 13,519,815 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 |
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Income (loss) per Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income (loss) per Share |
7. Income (loss) per Share The following table sets forth the computation of basic and diluted income (loss) per share:
A total of 988,812 shares related to options are not included in the computation of diluted loss per share for the nine months ended September 30, 2011, because to do so would have been anti-dilutive for this period. |
Inventories, net | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories, net |
3. Inventories, net The components of inventory, net of reserves for slow-moving, excess or obsolete inventory, consist of the following:
Reserves for slow-moving, excess, or obsolete inventory were approximately $2,725 at September 30, 2011, compared with approximately $2,617 at December 31, 2010. The reserve for slow-moving, excess, or obsolete inventory is used to state the Companys inventories at the lower of cost or market.
|
Commitments and Contingencies | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Commitments and Contingencies |
9. Commitments and Contingencies Legal Proceedings From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. There were no pending material claims or legal matters as of September 30, 2011. Other As of September 30, 2011, the Company had purchase orders to suppliers of approximately $2,009. Significant Customers Sales to United States government agencies represented approximately $4,722 (67.7%) and $9,822 (53.5%) of the Companys total sales for the three and nine months ended September 30, 2011, respectively, compared with approximately $4,778 (67.8%) and $14,081 (68.4%) for the same periods last year. Accounts receivable from agencies of the United States government were approximately $2,074 as of September 30, 2011 compared with approximately $3,070 at the same date last year. |
Debt | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Debt |
10. Debt The Company has a secured revolving credit facility with Silicon Valley Bank (SVB) with maximum borrowing availability of $5,000 (subject to a borrowing base) and a maturity date of December 31, 2012. On June 22, 2011, the Company and SVB amended the related loan and security agreement by entering into the second amendment thereto, pursuant to which the Companys revolving credit facility was amended as follows: · calculation of the borrowing base was adjusted by increasing the eligible inventory threshold to $1,000 from $500 within the definition of borrowing base and clause (i) of the definition of eligible accounts, which relates to accounts owing from an account debtor which is a United States government entity or any department, agency or instrumentality thereof, was amended to, among other things, increase the threshold to $2,000 from $1,500; and · the required adjusted quick ratio was reduced to 1.00 to 1.0. Prior to the amendment the required quick ratio was 1.75 to 1.0. Under the second amendment, SVB waived any event of default that may have existed by reason of the loans, advances and other extensions of credit made to the Company exceeding the borrowing base at any time during the period from January 1, 2011 through the date of the second amendment. The Company continues to be subject to substantially the same customary borrowing terms and conditions under the revolving credit facility as it was prior to the second amendment, including the accuracy of representations and warranties, compliance with financial maintenance and restrictive covenants and the absence of events of default. As of September 30, 2011, the Company was in compliance with all covenants under the loan and security agreement, as amended. For a description of such covenants and the other terms and conditions of the loan and security agreement, as amended by the second amendment, reference is made to Note 6 (Debt) of the Companys Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 and the second amendment to the loan and security agreement, a copy of which is filed as Exhibit 10.1 to the Companys Current Report on Form 8-K dated June 22, 2011, and is incorporated herein by reference. Borrowings outstanding under the revolving credit facility as of September 30, 2011 totaled $1,800. As of September 30, 2011 there was approximately $1,374 of additional borrowing available under the credit facility.
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Non-Cash Share-Based Employee Compensation | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Cash Share-Based Employee Compensation |
8. Non-Cash Share-Based Employee Compensation The Company has employee and non-employee director stock option programs. Related to these programs, and in accordance with ASC Topic 718, Compensation-Stock Compensation, the Company recorded non-cash share-based employee compensation expense of $40 and $131, respectively, for the three and nine months ended September 30, 2011, compared with $51 and $231 for the same periods last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products ($4 and $11 for the three and nine months ended September 30, 2011, respectively, compared with $3 and $22 for the same periods last year) and selling, general and administrative expenses ($36 and $120 for the three and nine months ended September 30, 2011, respectively, compared with $48 and $209 for the same periods last year). There was no non-cash sharebased employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented. The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The non-cash share-based employee compensation expense recorded in the three and nine months ended September 30, 2011 was calculated using certain assumptions. For a description of such assumptions, reference is made to Note 10 (Share-Based Employee Compensation) of the Companys Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2010. A summary of stock option activity under the Companys stock option plans as of September 30, 2011, and changes during the three months ended September 30, 2011 are presented below:
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Condensed Consolidated Financial Statements | 9 Months Ended |
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Sep. 30, 2011 | |
Notes to Financial Statements | |
Condensed Consolidated Financial Statements |
1. Condensed Consolidated Financial Statements The condensed consolidated balance sheets as of September 30, 2011 and December 31, 2010, the condensed consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2011 and 2010 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, 2010 has been derived from the Companys 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 Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended September 30, 2011 are not necessarily indicative of the operating results for a full year. Recent Accounting Pronouncements There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the quarterly or nine month periods ended September 30, 2011 and 2010, or which are expected to impact future periods, which were not previously disclosed in prior periods. |
Income Taxes | 9 Months Ended |
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Sep. 30, 2011 | |
Notes to Financial Statements | |
Income Taxes |
4. Income Taxes Income tax expense totaling approximately $25 has been recorded for the three and nine months ended September 30, 2011. As of September 30, 2011 and December 31, 2010, the Companys net deferred tax assets totaled approximately $7,802, and are primarily composed of net operating loss carry forwards (NOLs). These NOLs total $13,621 for federal and $19,374 for state purposes, with expirations starting in 2017 through 2028. In order to fully utilize the net deferred tax assets, the Company will need to generate sufficient taxable income in future years to utilize its NOLs prior to their expiration. ASC Topic 740, Income Taxes, 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 assets. The recognition of the net deferred tax assets and related tax benefits is based upon the Companys 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 historical operating results and certain tax planning strategies. The Company has evaluated the available evidence and the likelihood of realizing the benefit of its net deferred tax assets. From its evaluation the Company has concluded that based on the weight of available evidence, it is more likely than not to not realize a portion of the benefit of its net deferred tax assets recorded at September 30, 2011. Accordingly, for the nine months ended September 30, 2011, the Company has established a valuation allowance totaling approximately $1,047 for the portion of benefit of its federal and state deferred tax assets that more likely than not will not be realized. This represents a $727 increase to the valuation allowance of $320 the Company established at December 31, 2010 for the portion of benefit of its state deferred tax assets that more likely than not will not be realized. The Company cannot presently estimate what, if any, changes to the valuation of its deferred tax assets may be deemed appropriate in the future. If the Company incurs future losses, it may be necessary to record additional valuation allowance related to the deferred tax assets recognized as of September 30, 2011. |
Capitalized Software | 9 Months Ended |
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Sep. 30, 2011 | |
Notes to Financial Statements | |
Capitalized Software |
5. Capitalized Software The Company accounts for the costs of software within its products in accordance with ASC Topic 985-20 Costs of Software to be Sold, Leased or Marketed, under which certain software costs incurred subsequent to the establishment of technological feasibility are capitalized and amortized over the estimated lives of the related products. The Company determines technological feasibility to be established upon the internal release of a detailed program design as specified by Topic 985-20. Upon the general release of the product to customers, development costs for that product are amortized over periods not exceeding five years, based on current and future revenue of the product. For the three and nine months ended September 30, 2011, the Companys amortization cost was approximately $250 and $750, respectively, compared with $58 and $176 for the same periods last year. Net capitalized software costs totaled $3,027 and $3,776 as of September 30, 2011 and December 31, 2010, respectively. |
Stockholders’ Equity | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders’ Equity |
6. Stockholders Equity The changes in consolidated stockholders equity for the nine months ended September 30, 2011 are as follows:
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Allowance for Doubtful Accounts | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Notes to Financial Statements | |
Allowance for Doubtful Accounts |
2. Allowance for Doubtful Accounts The allowance for doubtful accounts on trade receivables was approximately $44 on gross trade receivables of $3,311 and $3,944 at September 30, 2011 and December 31, 2010, respectively. This allowance is used to state trade receivables at a net realizable value or the amount that the Company estimates will be collected of the Companys gross receivables. |