Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2017 | May 01, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | RELM WIRELESS CORP | |
Entity Central Index Key | 2,186 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
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 | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 13,844,584 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 8,325 | $ 10,910 |
Trade accounts receivable, net | 3,288 | 3,448 |
Inventories, net | 14,751 | 13,999 |
Prepaid expenses and other current assets | 1,042 | 1,410 |
Total current assets | 27,406 | 29,767 |
Property, plant and equipment, net | 2,506 | 2,486 |
Available-for-sale securities | 9,673 | 6,472 |
Deferred tax assets, net | 2,398 | 3,418 |
Other assets | 371 | 401 |
Total assets | 42,354 | 42,544 |
Current liabilities: | ||
Accounts payable | 2,647 | 1,973 |
Accrued compensation and related taxes | 1,280 | 2,193 |
Accrued warranty expense | 846 | 650 |
Accrued other expenses and other current liabilities | 402 | 169 |
Dividends payable | 1,242 | 1,235 |
Deferred revenue | 144 | 142 |
Total current liabilities | 6,561 | 6,362 |
Deferred revenue | 382 | 408 |
Total liabilities | 6,943 | 6,770 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock; $1.00 par value; 1,000,000 authorized shares; none issued or outstanding | 0 | 0 |
Common stock; $.60 par value; 20,000,000 authorized shares; 13,844,584 and 13,754,749 issued and outstanding shares at March 31, 2017 and December 31, 2016, respectively | 8,307 | 8,253 |
Additional paid-in capital | 25,513 | 25,382 |
Accumulated earnings (deficit) | (2,270) | 240 |
Accumulated other comprehensive income | 4,120 | 2,061 |
Treasury stock, at cost, 49,722 and 30,422 at March 31, 2017 and December 31, 2016 respectively | (259) | (162) |
Total stockholders' equity | 35,411 | 35,774 |
Total liabilities and stockholders' equity | $ 42,354 | $ 42,544 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 31, 2017 | Dec. 31, 2016 |
Stockholders equity: | ||
Preferred stock, par value | $ 1 | $ 1 |
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 | $ .60 | $ .60 |
Common stock, authorized shares | 20,000,000 | 20,000,000 |
Common stock, issued shares | 13,844,584 | 13,754,749 |
Common stock, outstanding shares | 13,844,584 | 13,754,749 |
Treasury stock, shares | 49,722 | 30,422 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||
Sales, net | $ 7,380 | $ 12,069 |
Expenses | ||
Cost of products | 5,143 | 8,240 |
Selling, general and administrative | 3,443 | 3,063 |
Total expenses | 8,586 | 11,303 |
Operating (loss) income | (1,206) | 766 |
Other (expense) income: | ||
Net interest income | 8 | 1 |
Other (expense) income | (87) | 1 |
Loss on disposal of property, plant and equipment | (104) | 0 |
Total other (expense) income | (183) | 2 |
(Loss) income before taxes | (1,389) | 768 |
Income tax benefit (expense) | 121 | (255) |
Net (loss) income | $ (1,268) | $ 513 |
Net (loss) earnings per share-basic | $ (0.09) | $ 0.04 |
Net (loss) earnings per share-diluted | $ (0.09) | $ 0.04 |
Weighted average shares outstanding-basic | 14,038,949 | 13,730,562 |
Weighted average shares outstanding-diluted | 14,038,949 | 13,798,191 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Condensed Consolidated Statements Of Comprehensive Income | ||
Net (loss) income | $ (1,268) | $ 513 |
Unrealized gain on available- for-sale securities, net of tax | 2,059 | 293 |
Total comprehensive income | $ 791 | $ 806 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities | ||
Net (loss) income | $ (1,268) | $ 513 |
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||
Inventories allowances | 33 | 43 |
Deferred tax expense | (121) | 255 |
Depreciation and amortization | 229 | 214 |
Share-based compensation expense | 2 | 12 |
Loss on disposal of property, plant and equipment | 104 | 0 |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | 160 | (3,127) |
Inventories | (785) | (785) |
Prepaid expenses and other current assets | 368 | (64) |
Other assets | (5) | 9 |
Accounts payable | 673 | 1,860 |
Accrued compensation and related taxes | (912) | 199 |
Accrued warranty expense | 196 | (20) |
Deferred revenue | (24) | (24) |
Customer deposits | 0 | 3,507 |
Accrued other expenses and other current liabilities | 233 | 20 |
Net cash (used in) provided by operating activities | (1,117) | 2,612 |
Investing activities | ||
Purchases of property, plant and equipment | (319) | (455) |
Investment in securities | 0 | (481) |
Net cash used in investing activities | (319) | (936) |
Financing activities | ||
Proceeds from issuance of common stock | 183 | 0 |
Cash dividends declared and paid | (1,235) | 0 |
Repurchase of common stock | (97) | 0 |
Cash provided by financing activities | (1,149) | 0 |
Net change in cash and cash equivalents | (2,585) | 1,676 |
Cash and cash equivalents, beginning of period | 10,910 | 4,669 |
Cash and cash equivalents, end of period | 8,325 | 6,345 |
Supplemental disclosure | ||
Cash paid for interest | 0 | 0 |
Income tax paid | 0 | 0 |
Non-cash financing activity | ||
Cashless exercise of stock options and related conversion of net shares to stockholders' equity | $ 27 | $ 0 |
1. Condensed Consolidated Finan
1. Condensed Consolidated Financial Statements | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 1 - Condensed Consolidated Financial Statements | Basis of Presentation The condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016, the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2017 and 2016 and the condensed consolidated statements of cash flows for the three months ended March 31, 2017 and 2016 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, 2016 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 (U.S. GAAP) 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 fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the operating results for a full year. Fair Value The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable and available-for-sale securities, accounts payable, accrued expenses and other liabilities. As of March 31, 2017 and December 31, 2016, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs as defined in accounting guidance) that it believes market participants would use in pricing the available-for-sale securities. There were no sales of available-for-sale securities, nor gains or losses reclassified out of accumulated other comprehensive income as a result of an other-than-temporary impairment of the available-for-sale securities. There were no transfers of available-for-sale securities between Level 1 and Level 2 during the quarter ended March 31, 2017. Available-For-Sale Securities Investments reported on the March 31, 2017 balance sheet consist of marketable equity securities of a publicly held company. As of both March 31, 2017 and December 31, 2016, the investment cost was $3,242. Management intends to hold such securities for a sufficient period in which to realize a reasonable return, which periods may range between one to several years, although there is no assurance that positive returns will be realized or that such securities will not be liquidated in a shorter-than-expected time frame to accommodate future liquidity requirements. Accordingly, investments were classified as non-current and available-for-sale. Investments are marked to market at each measurement date, with unrealized gains or losses presented as adjustments to accumulated other comprehensive income or loss. Other Comprehensive Income Other comprehensive income consists of net income and unrealized gain on available-for-sale securities, net of taxes. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 on “Revenue from Contracts with Customers,” which provides for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance. In August 2015, the FASB issued ASU 2015-14, which delays the effective date of ASU 2014-09 by one year. The guidance is effective for annual and interim periods beginning on or after December 15, 2017, and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. It permits the use of either a retrospective or cumulative effect transition method and early adoption is not permitted. The Company has begun to analyze the impact of the new standard on its future financial results based on a review of its current contracts and business practices and currently believes that it will retain much of the same accounting treatment as used to recognize revenue under the current standards with no material impact on its consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, “ ,” In January 2016, the FASB issued ASU 2016-01 “Financial Instruments,” which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company has not yet determined the potential effects of the adoption of ASU 2016-01 on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases,” which amends leasing guidance by requiring companies to recognize a right-of-use asset and a lease liability for all operating and capital (finance) leases with lease terms of greater than twelve months. The lease liability will be equal to the present value of lease payments. The lease asset will be based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases will continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company expects this will result in the recognition of right-of-use assets and lease liabilities not currently recorded on our consolidated financial statements under existing accounting guidance, but the Company is still evaluating all of the Company’s contractual arrangements and the impact that adoption of ASU 2016-02 will have on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company has adopted the new guidance with no material impact on its consolidated financial statements. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
2. Significant Events and Trans
2. Significant Events and Transactions | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 2 - Significant Events and Transactions | During the first quarter of 2017, the Company implemented a number of leadership changes to senior management and the Board of Directors. Timothy Vitou was promoted to President, replacing David Storey. Mr. Vitou served as the Company’s Senior Vice President of Sales and Marketing since May 2008. The Company’s Board was also reconfigured with the appointments of General Gray Payne, Charles Lanktree, Ryan Turner, John Struble and Michael Dill, who joined incumbent directors Lewis Johnson and Kyle Cerminara on the Company’s board. Mr. Cerminara was appointed Chairman of the Board. Former directors Goebert and O’Neil resigned from the Board. In May 2016, the Company announced and began implementing a capital return program that included a stock repurchase program and a quarterly dividend. Under the program, the Company’s Board of Directors approved the repurchase of up to 500,000 shares of the Company's common stock, from time to time, pursuant to a stock repurchase plan in conformity with the provisions of Rule 10b5-1 and Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended. The repurchase program has no termination date. Please refer to Part II, Item 2 of this report for additional details. Pursuant to the program, the Company’s Board of Directors declared a quarterly dividends of $0.09 per share of the Company's common stock on March 17, 2017 to shareholders of record as of March 31, 2017. These dividends were paid on April 17, 2017. |
3. Allowance for Doubtful Accou
3. Allowance for Doubtful Accounts | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 3 - Allowance for Doubtful Accounts | The allowance for doubtful accounts on trade receivables was approximately $50 on gross trade receivables of $3,338 and $3,498 at March 31, 2017 and December 31, 2016, 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 Company’s gross trade receivables. |
4. Inventories, net
4. Inventories, net | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 4 - Inventories, net | The components of inventory, net of allowances for slow-moving, excess or obsolete inventory, consist of the following: March 31, 2017 December 31, 2016 Finished goods $ 3,553 $ 3,216 Work in process 6,778 6,612 Raw materials 4,420 4,171 $ 14,751 $ 13,999 Allowances for slow-moving, excess, or obsolete inventory are used to state the Company’s inventories at the lower of cost or net realizable value. The allowances were approximately $1,631 at March 31, 2017, compared with approximately $1,607 at December 31, 2016. |
5. Income Taxes
5. Income Taxes | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 5 - Income Taxes | Income tax benefit totaling approximately $121 and income tax expense totaling approximately $255 have been recorded for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017 and December 31, 2016, the Company’s net deferred tax assets totaled approximately $2,398 and $3,418, respectively, and are primarily composed of net operating loss carryforwards (“NOLs”), and research and development costs and tax credits partially offset by an increase to deferred tax liabilities of $1,142 derived from the unrealized gain on available-for-sale securities. As of March 31, 2017, these NOLs total approximately $1,625 for federal and $11,899 for state purposes, with expirations starting in 2018 through 2030. 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. The Company analyzed 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 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 historical operating results and certain tax planning strategies. Based on management’s analysis of all available evidence, both positive and negative, the Company’s management has concluded that the Company does not have the ability to generate sufficient taxable income in the necessary period to utilize the entire benefit for the deferred tax asset. Management asserts that it is more likely than not that approximately $129 of the Company’s deferred tax asset will not be realized due to the inability to generate sufficient Florida taxable income in the necessary period to fully utilize its Florida NOLs. 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 March 31, 2017. |
6. Investment in Securities
6. Investment in Securities | 3 Months Ended |
Mar. 31, 2017 | |
Schedule of Investments [Abstract] | |
NOTE 6 - Investment in Securities | As of March 31, 2017, the Company, through its wholly owned subsidiary, had purchased approximately 1.8 million shares of Iteris, Inc. (NASDAQ: ITI), which represented approximately 5.5% of Iteris’s outstanding shares. At March 31, 2017, the corresponding unrealized gain of approximately $3,201, net of tax of $1,142, is included in accumulated other comprehensive income as a separate component of stockholders’ equity. There was no impact to the Company’s statement of operations. On July 29, 2016, the Company, one of the Company’s significant stockholders, and certain of their affiliates, entered into an agreement with Iteris. Pursuant to the agreement, a director of the Company, who is an executive, co-founder and partner of the significant stockholder that is party to the agreement, was appointed to the Board of Directors of Iteris. As of March 31, 2017, the Company and the significant stockholder of the Company beneficially own in the aggregate 2,600,194 shares of Iteris, which represents approximately 8.1% of Iteris’s outstanding shares. |
7. Stockholders' Equity
7. Stockholders' Equity | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 7 - Stockholders' Equity | The changes in consolidated stockholders’ equity for the three months ended March 31, 2017 are as follows: Accumulated Common Common Additional Accumulated Other Stock Stock Paid-In Earnings Comprehensive Treasury Shares Amount Capital (Deficit) Income Stock Total Balance at December 31, 2016 13,754,749 $ 8,253 $ 25,382 $ 240 $ 2,061 $ (162 ) $ 35,774 Common stock options exercised and issued 89,835 54 129 - - - 183 Share-based compensation expense - - 2 - - - 2 Dividends declared (1,242 ) - - (1,242 ) Net loss - - - (1,268 ) - - (1,268 ) Unrealized gain on available-for-sale securities - - - - 2,059 - 2,059 Repurchase of common stock - - - - - (97 ) (97 ) Balance at March 31, 2017 13,844,584 $ 8,307 $ 25,513 $ (2,270 ) $ 4,120 $ (259 ) $ 35,411 |
8. Income per Share
8. Income per Share | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 8 - Income per Share | The following table sets forth the computation of basic and diluted income per share: Three Months Ended March 31, 2017 March 31, 2016 Numerator: Net (loss) income (numerator for basic and diluted earnings per share) $ (1,268 ) $ 513 Denominator: Denominator for basic earnings per share weighted average shares 14,038,949 13,730,562 Effect of dilutive securities: Options - 67,629 Denominator: Denominator for diluted earnings per share weighted average shares 14,038,949 13,798,191 Basic (loss) earnings per share $ (0.09 ) $ 0.04 Diluted (loss) earnings per share $ (0.09 ) $ 0.04 Approximately 106,000 stock options granted for the three months ended March 31, 2017 were excluded from the calculation because they were anti-dilutive. |
9. Non-Cash Share-Based Employe
9. Non-Cash Share-Based Employee Compensation | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 9 - Non-Cash Share-Based Employee Compensation | The Company has employee and non-employee director stock option programs. Related to these programs, the Company recorded non-cash share-based employee compensation expense of $2 for the three months ended March 31, 2017, compared with $12 for the same quarter last year. The Company considers its non-cash share-based employee compensation expenses as a component of cost of products and selling, general and administrative expenses. There was no non-cash share-based employee compensation expense capitalized as part of capital expenditures or inventory for the periods presented. The Company uses the Black-Scholes-Merton option valuation model to calculate the fair value of a stock option grant. The non-cash share-based employee compensation expense recorded in the three months ended March 31, 2017 was calculated using certain assumptions. Such assumptions are described more comprehensively in Note 11 (Share-Based Employee Compensation) of the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016. A summary of activity under the Company’s stock option plans during the three months ended March 31, 2017 is presented below: As of January 1, 2017 Stock Options Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) Wgt. Avg. Grant Date Fair Value ($) Per Share Aggregate Intrinsic Value ($) Outstanding 311,000 3.48 - 1.96 - Vested 231,000 3.30 - 1.97 - Nonvested 80,000 4.01 - 1.93 - Period activity Issued 178,500 5.10 - 1.36 - Exercised 125,000 2.88 - 1.62 - Forfeited 60,000 3.95 - 2.03 - Expired - - - - - As of March 31, 2017 Outstanding 304,500 4.58 7.46 1.73 150,960 Vested 108,000 3.80 3.77 2.37 136,850 Nonvested 196,500 5.02 9.50 1.38 14,110 |
10. Commitments and Contingenci
10. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 10 - 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. On March 28, 2017, The Sales Group, Inc. (“TSG”) purported to file a lawsuit in the U.S. District Court for the Central District of California against the Company. TSG was a sales representative of the Company that the Company terminated in March 2017. TSG has asserted claims against the Company for alleged breach of oral contract, violation of the California and Arizona sales representative statutes, and an accounting of alleged unpaid sales commissions. TSG’s complaint seeks damages in the amount of $6,090,000 for alleged unpaid past and future sales commissions. On April 3, 2017, counsel for TSG sent the Company a letter outlining additional alleged grounds for recovery against the Company and offering to settle the litigation in exchange for the continued payment of sales commissions to TSG for a negotiated period of time, a buyout of TSG’s alleged rights for a negotiated sum, or reinstatement of TSG for a period of at least 2.5 years with commission rates equal to those in effect at the time of TSG’s termination. The Company believes that TSG’s claim has no merit, that the Company had the right to terminate TSG without the payment of any further sales commissions and intends to defend against this litigation vigorously. The outcome of this uncertainty cannot presently be determined, accordingly no provision related to this matter has been made in the condensed consolidated financial statements. Purchase Commitments As of March 31, 2017, the Company had purchase orders to suppliers for inventory of approximately $5,249. Significant Customers Sales to the United States government agencies represented approximately $2,917 (39.5%) of the Company’s total sales for the three months ended March 31, 2017, compared with approximately $6,729 (55.8%) for the same quarter last year. Accounts receivable from agencies of the United States government were $1,180 as of March 31, 2017, compared with approximately $4,185 at the same date last year. Sales to a Canadian governmental agency represented approximately $1,321 (17.90%) of the Company’s total sales for the three months ended March 31, 2017, compared with approximately $1,660 (13.75%) for the same quarter last year. Accounts receivable from this Canadian governmental agency were $1,052 as of March 31, 2017, compared with $1,659 at the same date last year. |
11. Debt
11. Debt | 3 Months Ended |
Mar. 31, 2017 | |
Notes to Financial Statements | |
NOTE 11 - Debt | The Company has a secured revolving credit facility with Silicon Valley Bank with maximum borrowing availability of $1,000 (subject to a borrowing base) and a maturity date of December 27, 2017. As of March 31, 2017, the Company was in compliance with all covenants under the loan and security agreement, as amended, governing this revolving credit facility. For a description of such covenants and the other terms and conditions of the loan and security agreement, as amended, reference is made to Note 6 (Debt) of the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016. As of March 31, 2017, there were no borrowings outstanding under the revolving credit facility and there was $1,000 of borrowing available under the revolving credit facility. |
1. Condensed Consolidated Fin18
1. Condensed Consolidated Financial Statements (Policies) | 3 Months Ended |
Mar. 31, 2017 | |
Condensed Consolidated Financial Statements Policies | |
Basis of Presentation | The condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016, the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2017 and 2016 and the condensed consolidated statements of cash flows for the three months ended March 31, 2017 and 2016 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, 2016 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 (U.S. GAAP) 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 fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the operating results for a full year. |
Fair Value | The Company’s financial instruments consist of cash and cash equivalents, trade accounts receivable and available-for-sale securities, accounts payable, accrued expenses and other liabilities. As of March 31, 2017 and December 31, 2016, the carrying amount of cash and cash equivalents, trade accounts receivable, accounts payable, accrued expenses and other liabilities approximated their respective fair value due to the short-term nature and maturity of these instruments. The Company uses observable market data or assumptions (Level 1 inputs as defined in accounting guidance) that it believes market participants would use in pricing the available-for-sale securities. There were no sales of available-for-sale securities, nor gains or losses reclassified out of accumulated other comprehensive income as a result of an other-than-temporary impairment of the available-for-sale securities. There were no transfers of available-for-sale securities between Level 1 and Level 2 during the quarter ended March 31, 2017. |
Available-For-Sale Securities | Investments reported on the March 31, 2017 balance sheet consist of marketable equity securities of a publicly held company. As of both March 31, 2017 and December 31, 2016, the investment cost was $3,242. Management intends to hold such securities for a sufficient period in which to realize a reasonable return, which periods may range between one to several years, although there is no assurance that positive returns will be realized or that such securities will not be liquidated in a shorter-than-expected time frame to accommodate future liquidity requirements. Accordingly, investments were classified as non-current and available-for-sale. Investments are marked to market at each measurement date, with unrealized gains or losses presented as adjustments to accumulated other comprehensive income or loss. |
Other Comprehensive Income | Other comprehensive income consists of net income and unrealized gain on available-for-sale securities, net of taxes. |
Recent Accounting Pronouncements | In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 on “Revenue from Contracts with Customers,” which provides for a single, principles-based model for revenue recognition and replaces the existing revenue recognition guidance. In August 2015, the FASB issued ASU 2015-14, which delays the effective date of ASU 2014-09 by one year. The guidance is effective for annual and interim periods beginning on or after December 15, 2017, and will replace most existing revenue recognition guidance under U.S. GAAP when it becomes effective. It permits the use of either a retrospective or cumulative effect transition method and early adoption is not permitted. The Company has begun to analyze the impact of the new standard on its future financial results based on a review of its current contracts and business practices and currently believes that it will retain much of the same accounting treatment as used to recognize revenue under the current standards with no material impact on its consolidated financial statements. In July 2015, the FASB issued ASU 2015-11, “ ,” In January 2016, the FASB issued ASU 2016-01 “Financial Instruments,” which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company has not yet determined the potential effects of the adoption of ASU 2016-01 on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases,” which amends leasing guidance by requiring companies to recognize a right-of-use asset and a lease liability for all operating and capital (finance) leases with lease terms of greater than twelve months. The lease liability will be equal to the present value of lease payments. The lease asset will be based on the lease liability, subject to adjustment, such as for initial direct costs. For income statement purposes, leases will continue to be classified as operating or capital (finance), with lease expense in both cases calculated substantially the same as under the prior leasing guidance. The updated guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company expects this will result in the recognition of right-of-use assets and lease liabilities not currently recorded on our consolidated financial statements under existing accounting guidance, but the Company is still evaluating all of the Company’s contractual arrangements and the impact that adoption of ASU 2016-02 will have on the Company’s consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” The guidance is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years with early adoption permitted. The Company has adopted the new guidance with no material impact on its consolidated financial statements. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures. |
4. Inventories, net (Tables)
4. Inventories, net (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Inventories Net Tables | |
Components of inventory | March 31, 2017 December 31, 2016 Finished goods $ 3,553 $ 3,216 Work in process 6,778 6,612 Raw materials 4,420 4,171 $ 14,751 $ 13,999 |
7. Stockholders' Equity (Tables
7. Stockholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Stockholders Equity Tables | |
Changes in consolidated stockholders' equity | Accumulated Common Common Additional Accumulated Other Stock Stock Paid-In Earnings Comprehensive Treasury Shares Amount Capital (Deficit) Income Stock Total Balance at December 31, 2016 13,754,749 $ 8,253 $ 25,382 $ 240 $ 2,061 $ (162 ) $ 35,774 Common stock options exercised and issued 89,835 54 129 - - - 183 Share-based compensation expense - - 2 - - - 2 Dividends declared (1,242 ) - - (1,242 ) Net loss - - - (1,268 ) - - (1,268 ) Unrealized gain on available-for-sale securities - - - - 2,059 - 2,059 Repurchase of common stock - - - - - (97 ) (97 ) Balance at March 31, 2017 13,844,584 $ 8,307 $ 25,513 $ (2,270 ) $ 4,120 $ (259 ) $ 35,411 |
8. Income per Share (Tables)
8. Income per Share (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Income Per Share Tables | |
Computation of basic and diluted income per share | Three Months Ended March 31, 2017 March 31, 2016 Numerator: Net (loss) income (numerator for basic and diluted earnings per share) $ (1,268 ) $ 513 Denominator: Denominator for basic earnings per share weighted average shares 14,038,949 13,730,562 Effect of dilutive securities: Options - 67,629 Denominator: Denominator for diluted earnings per share weighted average shares 14,038,949 13,798,191 Basic (loss) earnings per share $ (0.09 ) $ 0.04 Diluted (loss) earnings per share $ (0.09 ) $ 0.04 |
9. Non-Cash Share-Based Emplo22
9. Non-Cash Share-Based Employee Compensation (Tables) | 3 Months Ended |
Mar. 31, 2017 | |
Non-cash Share-based Employee Compensation Tables | |
A summary of stock option activity | As of January 1, 2017 Stock Options Wgt. Avg. Exercise Price ($) Per Share Wgt. Avg. Remaining Contractual Life (Years) Wgt. Avg. Grant Date Fair Value ($) Per Share Aggregate Intrinsic Value ($) Outstanding 311,000 3.48 - 1.96 - Vested 231,000 3.30 - 1.97 - Nonvested 80,000 4.01 - 1.93 - Period activity Issued 178,500 5.10 - 1.36 - Exercised 125,000 2.88 - 1.62 - Forfeited 60,000 3.95 - 2.03 - Expired - - - - - As of March 31, 2017 Outstanding 304,500 4.58 7.46 1.73 150,960 Vested 108,000 3.80 3.77 2.37 136,850 Nonvested 196,500 5.02 9.50 1.38 14,110 |
3. Allowance for Doubtful Acc23
3. Allowance for Doubtful Accounts (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Allowance For Doubtful Accounts Details Narrative | ||
Allowance for doubtful accounts on trade receivables | $ 3,338 | $ 3,498 |
4. Inventories, net (Details)
4. Inventories, net (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Inventories Net Details | ||
Finished goods | $ 3,553 | $ 3,216 |
Work in process | 6,778 | 6,612 |
Raw materials | 4,420 | 4,171 |
Total Inventory | $ 14,751 | $ 13,999 |
4. Inventories, net (Details Na
4. Inventories, net (Details Narrative) - USD ($) $ in Thousands | Mar. 31, 2017 | Dec. 31, 2016 |
Inventories Net Details Narrative | ||
Reserves for slow-moving, excess, or obsolete inventory | $ 1,631 | $ 1,607 |
5. Income Taxes (Details Narati
5. Income Taxes (Details Narative) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Dec. 31, 2016 | |
Income tax benefit (expense) | $ 121 | $ (255) | |
Net deferred tax assets | 2,398 | $ 3,418 | |
Federal | |||
Operating loss carry forwards | 1,625 | ||
State | |||
Operating loss carry forwards | $ 11,899 |
7. Stockholders' Equity (Detail
7. Stockholders' Equity (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Beginning Balance, Amount | $ 35,774 | |
Beginning Balance, Shares | 13,754,749 | |
Common stock option exercised and issued, Amount | $ 183 | |
Share - based compensation expense | 2 | |
Dividends declared | (1,242) | |
Net income | (1,268) | $ 513 |
Unrealized gain on available- for-sales securities, net of tax | 2,059 | |
Repurchase of common stock | (97) | $ 0 |
Ending Balance, Amount | $ 35,411 | |
Ending Balance, Shares | 13,844,584 | |
Common Stock | ||
Beginning Balance, Amount | $ 8,253 | |
Beginning Balance, Shares | 13,754,749 | |
Common stock option exercised and issued, Amount | $ 54 | |
Common stock option exercised and issued, Shares | 89,835 | |
Ending Balance, Amount | $ 8,307 | |
Ending Balance, Shares | 13,844,584 | |
Additional Paid In Capital | ||
Beginning Balance, Amount | $ 25,382 | |
Common stock option exercised and issued, Amount | 129 | |
Share - based compensation expense | 2 | |
Ending Balance, Amount | 25,513 | |
Retained Earnings | ||
Beginning Balance, Amount | 240 | |
Dividends declared | (1,242) | |
Net income | (1,268) | |
Ending Balance, Amount | (2,270) | |
Accumulated Other Comprehensive Income | ||
Beginning Balance, Amount | 2,061 | |
Unrealized gain on available- for-sales securities, net of tax | 2,059 | |
Ending Balance, Amount | 4,120 | |
Treasury Stock | ||
Beginning Balance, Amount | (162) | |
Repurchase of common stock | (97) | |
Ending Balance, Amount | $ (259) |
8. Income per Share (Details)
8. Income per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Numerator: | ||
Net (loss) income (numerator for basis and diluted earnings per share) | $ (1,268) | $ 513 |
Denominator: | ||
Denominator for basic earnings per share weighted average shares | 14,038,949 | 13,730,562 |
Effect of dilutive securities: | ||
Options | 0 | 67,629 |
Denominator | ||
Denominator for diluted earnings per share weighted average shares | 14,038,949 | 13,798,191 |
Basic (loss) earnings per share | $ (0.09) | $ 0.04 |
Diluted (loss) earnings per share | $ (0.09) | $ 0.04 |
9. Non-Cash Share-Based Emplo29
9. Non-Cash Share-Based Employee Compensation (Details) $ / shares in Units, $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($)$ / sharesshares | |
Notes to Financial Statements | |
Outstanding Stock Options, beginning | shares | 311,000 |
Vested Stock Options, beginning | shares | 231,000 |
Nonvested Stock Options, beginning | shares | 80,000 |
Issued Stock Options | shares | 178,500 |
Exercised Stock Options | shares | 125,000 |
Forfeited Stock Options | shares | 60,000 |
Expired Stock Options | shares | 0 |
Outstanding Stock Options, ending | shares | 304,500 |
Vested Stock Options, ending | shares | 108,000 |
Nonvested Stock Options, ending | shares | 196,500 |
Outstanding Wgt. Avg. Exercise Price, beginning | $ 3.48 |
Vested Wgt. Avg. Exercise Price, beginning | 3.30 |
Nonvested Wgt. Avg. Exercise Price, beginning | 4.01 |
Issued Wgt. Avg. Exercise Price | 5.10 |
Exercised Wgt. Avg. Exercise Price | 2.88 |
Forfeited Wgt. Avg. Exercise Price | 3.95 |
Expired Wgt. Avg. Exercise Price | 0 |
Outstanding Wgt. Avg. Exercise Price, ending | 4.58 |
Vested Wgt. Avg. Exercise Price, ending | 3.80 |
Nonvested Wgt. Avg. Exercise Price, ending | $ 5.02 |
Outstanding Contractual Life | 7 years 5 months 13 days |
Vested Contractual Life | 3 years 9 months 7 days |
Nonvested Contractual Life | 9 years 6 months |
Outstanding Grant Date Fair Value, beginning | $ 1.96 |
Vested Grant Date Fair Value, beginning | 1.97 |
Nonvested Grant Date Fair Value, beginning | 1.93 |
Issued Grant Date Fair Value | 1.36 |
Exercised Grant Date Fair Value | 1.62 |
Forfeited Grant Date Fair Value | 2.03 |
Expired Grant Date Fair Value | 0 |
Outstanding Grant Date Fair Value | 1.73 |
Vested Grant Date Fair Value | 2.37 |
Nonvested Grant Date Fair Value | $ 1.38 |
Outstanding Aggregate Intrinsic Value | $ | $ 0 |
Vested Aggregate Intrinsic Value | $ | $ 0 |
Nonvested Aggregate Intrinsic Value | $ 0 |
Issued Aggregate Intrinsic Value | $ 0 |
Exercised Aggregate Intrinsic Value | $ | $ 0 |
Forfeited Aggregate Intrinsic Value | $ 0 |
Expired Aggregate Intrinsic Value | $ 0 |
Outstanding Aggregate Intrinsic Value | $ | $ 150,960 |
Vested Aggregate Intrinsic Value | $ | $ 136,850 |
Nonvested Aggregate Intrinsic Value | $ 14,110 |
11. Debt (Details Narrative)
11. Debt (Details Narrative) - SiliconValleyBankMember $ in Thousands | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Credit facility with maximum borrowing | $ 1,000 |
Maturity date | December 27, 2017 |
Revolving credit outstanding balance | $ 0 |
Borrowing available under the revolving credit facility | $ 1,000 |