Subject: [NEXTEL-1] Looks Like Relm Is On The Way Out- Auditors concerned about Relm's future

From: Marcel <[email-masked]>
Date: Sun, 20 Apr 2003 14:47:32 -0400

Apr 11, 10:38 PM

Auditors concerned about Relm's future

Company officials disagree, say auditors are seeing 'worst-case
scenario'

By Wayne Price and Brian Monroe
FLORIDA TODAY

WEST MELBOURNE -- Relm Wireless Corp. could be on its last legs, say
auditors, though company officials stress otherwise.

The announcement caused the company's stock to plunge 56 percent over the
last two days. -- from 48 cents at Wednesday's close to 21 cents at Friday's
close, in Nasdaq SmallCap Market trading.

The West Melbourne-based manufacturer of two-way, business-band radios
and other equipment, said its auditors have doubts about the company's
"ability to continue" due to its losses and violation of its credit agreement.
Relm employs about 80 people locally.

The news came as Relm this week announced a fourth-quarter net loss of
$2.22 million, or 26 cents a share, compared with a year-earlier net profit of
$51,000, or 1 cent a share.

Sales for the quarter slumped to $2.32 million from $5.68 million.

The net loss for the year was $3.63 million, or 47 cents a share.

In a news release, the company said its lender may demand immediate
payment of money owed -- something it has not done -- which would force
the company to find alternative financing or severely curtail or close its
operations.

The company said it plans to enter into a "forbearance" agreement with a term
of three months under which Relm would pay a higher interest rate. Relm said
it is seeking a replacement line of credit to fund working-capital demands.

David Storey, Relm's president and chief executive, said 2002 proved to be
"an extremely challenging year, given lower revenues from our two largest
customers, certain non-recurring charges and industrywide softness."

"Despite obstacles, we are aggressively addressing our challenges and have
already implemented clearly defined initiatives for improvement in 2003, and
we remain optimistic about our future prospects," Storey said.

"We made significant progress on new-product development during the year,
" he said.

Storey said he is striving to bring the company back to profitability, and a big
part of that will be the company's first digital radio, which he said would be
the "flagship of our success."

He said the radio, which recently obtained Federal Communications
Commission approval, would be out later this year and retail for around
$1,400, much less than competitors' models that sell for nearly $4,000.

He added that past customers also could upgrade their analog radios to their
new digital counterpart for $950, saving more than $400.

The new radio adds two distinct advantages of its predecessors, Storey said
-- spectrum efficiency and interoperability.

For instance, he said if a disaster happened and various government agencies
converged on that locale, they all could communicate with each other if they
had the Relm radio, helping those groups coordinate rescue efforts.

Storey also said he strongly disagreed with the auditor's statement about his
company's future, saying it was a "worst-case scenario, but in a worst-case
scenario, the Earth could also be destroyed by an asteroid."

The paragraph was "painful," but is not "the future of the company," he said.
"It's the reality of a bad fourth quarter and an inflexible banking arrangement."

William Kelly, executive vice president and chief financial officer of Relm,
agreed that the company "has no intention of shutting its doors."

He said the "picture that statement paints is much bleaker than reality."

In short, he said lawyers and auditors had to add the statement because of the
position taken by the company's lender, Fleet. As a result of the losses for the
year, the company violated its financial covenant and technically is in default,
Kelly said.

This same scenario has happened in the past, but the previous lender allowed
the company to sign a waiver and continue operating.

Fleet, however, has chosen not to issue that waiver, Kelly said, which forced
the auditors to put in the "worst-case scenario" statement about the
"company's ability to continue."

"In this day and age, they have to do that," Kelly said, referring to the
scandals that ravaged Enron, WorldCom and the like.

Currently, Kelly said Fleet is not calling on the loan and Relm is about to enter
a short-term agreement to monitor the health of the company in 90-day
segments.

"As long as we track close to our business plan, the relationship will continue,"
he said. "Our plan is to find a new financing source, and Fleet has pledged to
work with us during that time."

http://www.floridatoday.com/!NEWSROOM/moneystoryA49297A.htm

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