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% We believe RELM Wireless is positioned to capitalize upon a large market opportunity due to the ongoing migration from analog to digital technology in the $5 billion North American land mobile radio (“LMR”) market. Digital radios generate significantly higher gross profit margins than analog products.

% During the past year, the Company has been introducing its next-generation KNG series of feature-rich, high-performance, price-competitive, small digital radios that are compliant with the APCO Project 25 (P25) standard. The new KNG radio series will significantly expand the number of federal, state and local government agencies (e.g., Department of Homeland Security, Department of Defense, forestry, police, fire, EMS) that RELM can target with its products.

% RELM Wireless, which currently commands less than a 1% share of the $5 billion North American LMR market, produces high-performance radios that are priced significantly below the product prices of the industry leader. This should provide compelling value to government agencies operating under tight budget restrictions during the current recessionary economic environment.

% While RELM accomplished a dramatic earnings turnaround during the first half of the current decade, profitability suffered in 2008 due to (1) reduced government agency spending on radios and other equipment, and (2) costs associated with the development of a new line of P25-compliant products. We believe unanticipated delays in the introduction of RELM’s new products also had a negative impact on new orders during 2008. The Company has now introduced the first four radio models in its expanding BK Radio high-performance KNG P25 digital product line, with additional radios, trunking capabilities and supporting products to follow in the next few months. These new products should significantly expand RELM’s “addressable” share of the LMR market.

% The Company has significantly reduced corporate overhead and other expenses in recent months, thereby lowering its annualized “breakeven” revenue level to an estimated $20 million.

% Recently announced purchases of the new KNG series of radios by the Department of Defense and Department of Interior suggest that the Company’s new products are beginning to gain traction in the marketplace.  The waterproof, small, feature-rich KNG radios are priced significantly below the products sold by the leader in the Land Mobile Radio market, and we believe this represents a significant potential competitive advantage for RELM in the current environment of shrinking tax revenues and tight budgets among public safety and other agencies at the federal, state and local government levels.

% RELM reported significant improvements in sales and profitability during the second quarter of 2009, suggesting that its new line of KNG P25 digital radios is beginning to gain traction among both new and legacy customers, particularly at the federal government level. Net sales increased 57% to a record $9.9 million relative to $6.3 million in the prior-year quarter, and sales were up 148% when compared with the first quarter of 2009. The Company reported net earnings of $1,954,000, or $0.15 per diluted share, in the three months ended June 30, 2009, versus a prior-year net loss of ($259,000), or ($0.02) per share.

% During the four years ended 12/31/07, RELM generated EBITDA margins averaging 16.2% of sales, without leveraging its balance sheet at all. The Company earned $0.24 per diluted share in 2006 and $0.13 in 2007. Although RWC was unprofitable in 2008, we believe EPS could recover to over $0.30 (annualized) within the next 12-18 months as new products gain traction in the marketplace. If such operating performance is realized, a multiple of only 15X-18X earnings should support a stock price 50%-80% or more above current levels.

% Migration from analog to digital technology.As in many other industries, a conversion is underway from analog to digital technology in the LMR industry. More specifically, federal, state and local government agencies are primarily purchasing digital radios that are compliant with the APCO Project 25 standard that was established in 1995. This is particularly important for RELM Wireless, because approximately 82% of the Company’s total sales in 2007 were derived from the government and public safety market, where its radios are used by military, fire, rescue, forest service, law enforcement and emergency medical personnel. P25-compliant digital radios are more efficient than analog radios in the way they use available radio spectrum, and they utilize an “open architecture” design, which promotes competition among LMR manufacturers. Because RELM generates substantially higher gross profit margins from its expanding line of P25-compliant radios than from analog products, we believe government agency conversion from analog to digital technology has very positive implications for the Company’s future profitability. With less than 15% of all land mobile radios currently in use being digital in design (see Figure 1), we believe the migration towards digital technology will continue for the next several years and could eventually result in over 50% of new LMR sales being digital. While some business/industrial users will continue to favor analog technology due to its lower cost, we believe most state and federal government agencies will switch to P25 radios as they expand and upgrade their radio networks.

% Focus on Interoperability of Communications Among First Responders and Other Public Safety Agencies. LMR radios that were manufactured under the old APCO 16 standard, many of which are still used by government agencies, are unable to “talk” to radios that were made by another manufacturer. This was painfully evident during the 9/11 terrorist attacks in 2001 and in the aftermath of Hurricane Katrina in August 2005, when many first responders and disparate public safety agencies were unable to communicate with each other over their portable and mobile radios during times of crisis when thousands of lives were at risk. As a result of these communications failures, and in order to assure the “interoperability” of land mobile radios among first responders and public safety agencies, the Department of Homeland Security (DHS) has effectively mandated that DHS grants for LMR equipment allocated to its sub-agencies be used to purchase only P25-compatible products. In addition, both the Department of Interior (DOI) and the Department of Agriculture (USDA) have adopted the P25 standard, and state/local agencies that rely upon federal funding must purchase P25 radios unless compelling reasons for not using such equipment exist. We believe DHS initiatives will continue to accelerate the adoption of digital P25-compliant technology for many years to come, because there is still a massive installed base of government agency analog radios that will have to be converted to digital. As an example, a report by the Office of the Inspector General (OIG) concluded that 73% of the 4,163 radio system sites used by the Department of Justice are so old that they are no longer supported by the manufacturer.

% Expansion in “addressable market”. Historically, RELM’s sales potential has been limited by the fact that its digital radios operated only on VHF frequencies, which are used by a limited number of public safety agencies (e.g., state and federal forest services are among the Company’s largest customers). During 2009 and 2010, the Company will introduce 28 new P25 products that we believe will offer very cost-effective LMR solutions to an expanded customer set. These products will include smaller, lighter, high-performance digital radios that are upgradable, immersible and will challenge the market leaders. Management has estimated that its new products will expand the Company’s “addressable market” by up to $3 billion annually by targeting large metropolitan police and fire departments, federal and international defense agencies, and other users of two-way radios that operate on UHF and 700/800 megahertz frequencies.