SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FOR 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
Securities Exchange Act of 1934
for Quarter ended July 31, 1996
Commission File Number 0-13301
RF INDUSTRIES, LTD.
(Exact name of registrant as specified in its charter)
Nevada 88-0168936
(State of Incorporation) (I.R.S. Employer Identification No.)
7610 Miramar Road., Bldg. 6000, San Diego, California 92126-4202
(Address of principal executive offices) (Zip Code)
(619) 549-6340 FAX (619) 549-6345
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days
Yes X No
Indicate the number of shares outstanding of each of the issuers classes
of common stock at the latest practicable date.
As of July 31, 1996, the registrant had 2,775,440 shares of Common Stock,
$.01 par value, issued and outstanding.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEET
July 31 October 31
1996 1995
---------- ----------
(unaudited) (audited)
ASSETS
- ------------------
CURRENT ASSETS
Cash ................................................ $ 340,732 $ 211,290
Investments in available-for-sale securities ........ 593,790 569,453
Trade accounts receivable less allowance
for doubtful accounts of $22,818 and $28,000 ........ 813,328 343,596
Inventories - Note 3 ................................ 1,837,005 1,397,319
Prepaid expenses and deposits ....................... 450,023 225,169
Deferred tax assets ................................. 43,000
---------- ----------
TOTAL CURRENT ASSETS ........................... 4,034,878 2,789,827
FIXED ASSETS
Furniture and office equipment ...................... 86,129 99,893
Equipment and tooling ............................... 403,396 360,217
---------- ----------
Fixed assets, at cost .......................... 489,525 460,110
Less accumulated depreciation and amortization ...... 366,506 333,033
---------- ----------
NET FIXED ASSETS ............................... 123,019 127,077
Deferred tax assets.................................. 33,000
Other assets ........................................ 4,901 5,067
---------- ----------
TOTAL ASSETS.................................... $4,162,798 $2,954,971
=========== ==========
See Notes to Financial Statements
<PAGE>
BALANCE SHEET (continued)
July 31 October 31
1996 1995
----------- ----------
(unaudited) (audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------
CURRENT LIABILITIES
Accounts payable ................................... $ 309,136 $ 170,074
Accrued expenses ................................... 526,614 74,985
----------- -----------
TOTAL CURRENT LIABILITIES ..................... 835,750 245,059
STOCKHOLDERS EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 2,775,440 and 2,538,547 shares 27,754 25,385
Capital paid in excess of par value ................ 3,260,220 3,219,938
Accumulated deficit ................................ 144,388 (394,851)
Unearned compensation .............................. (105,314) (140,560)
----------- -----------
TOTAL STOCKHOLDERS EQUITY ..................... 3,327,048 2,709,912
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY ....................... $ 4,162,798 $ 2,954,971
=========== ===========
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
July 31 July 31
------------------------- -------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales .................... $ 1,649,959 $ 797,294 $ 3,829,549 $ 2,442,095
Cost of Sales ................ 750,331 424,476 1,711,959 1,197,272
----------- ----------- ----------- -----------
Gross Profit ............ 899,628 372,818 2,117,590 1,244,823
----------- ----------- ----------- -----------
Operating expenses:
Engineering ............. 112,618 96,420 347,856 258,299
Selling and general ..... 330,215 332,118 972,548 888,048
----------- ----------- ----------- -----------
Total ................. 442,833 428,538 1,320,404 1,146,347
----------- ----------- ----------- -----------
Operating income (loss) . 456,795 (55,720) 797,186 98,476
Interest income .............. (13,144) (13,847) (38,053) (27,790)
----------- ----------- ----------- -----------
Income (loss) before provision
for income tax ............... 469,939 (41,873) 835,239 126,266
Provision (credit) for state &
federal income tax ........... 176,000 (16,750) 296,000 26,250
----------- ----------- ----------- -----------
Net income (loss) ....... $ 293,939 $ (25,123) $ 539,239 $ 100,016
=========== =========== =========== ===========
Per share data:
Net income (loss) ....... $ 0.10 $ ( 0.01) $ 0.18 $ 0.03
=========== =========== =========== ===========
Weighted average common
and common equivalent shares
outstanding .................. 2,996,614 2,300,571 2,939,836 2,085,650
=========== =========== =========== ===========
See Notes to Financial Statements
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
July 31
--------------------
1996 1995
------- -------
OPERATING ACTIVITIES
Net income.............................................. 539,239 $ 100,016
Adjustments to reconcile net income
to net cash (used in) provided by operations
Depreciation and amortization ..................... 33,473 42,919
Amortization of unearned compensation ............. 35,246 67,082
Change in assets - (incr) decr:
Accounts receivable - trade ................... (469,732) 126,271
Inventories ................................... (439,686) (489,146)
Other assets .................................. (148,688) (108,268)
Change in liabilities - incr (decr):
Accounts payable .............................. 139,062 22,266
Accrued expenses .............................. 451,629 (96,568)
--------- ---------
Net cash (used in) provided by
operating activities ...................... 140,543 (335,428)
--------- ---------
INVESTING ACTIVITIES
Purchase of available-for-sale securities ..... (24,337) 0
Capital expenditures .......................... (29,415) (47,907)
--------- ---------
Net cash used in investing activities ......... (53,752) (47,907)
--------- ---------
FINANCING ACTIVITIES
Proceeds from exercise of common
stock options ............................ 42,651 257,780
--------- ---------
Net cash provided by
financing activities ................... 42,651 257,780
--------- ---------
Net (decrease) increase in cash
and cash equivalents ........................... 129,442 (125,555)
Cash and cash equivalents at the
beginning of the period ........................ 211,290 862,050
Cash and cash equivalents at the end of period .... $ 340,732 $ 736,495
========= =========
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1 - Management's opinion
In the opinion of management, the accompanying financial statements contain
all adjustments necessary to present the financial position of RF Industries,
Ltd. as of July 31, 1996 and the results of operations for the three month and
nine month periods ended July 31, 1996 and 1995.
Note 2 - Interim reporting
The results of operation for the three month and nine month periods ended
July 31, 1996 and 1995 are not necessarily indicative of the results to be
expected for the remainder of the year.
Note 3 - Components of Inventory
July 31 October 31
1996 1995
------------ ------------
(Unaudited) (Audited)
Raw material and supplies........ $ 236,000 $ 146,547
Finished goods................... 1,601,005 1,250,772
------------- -------------
TOTAL......................... $ 1,837,005 $ 1,297,319
============= =============
<PAGE>
Item 2: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Nine Months 1996 vs. Nine Months 1995
Sales increased $1,387,454, or 57% to $3,829,549 in the nine month period
ended July 31, 1996, compared to $2,442,095 in the same period in fiscal 1995.
The sales gain is attributable to the company's expanded customer base, higher
inventory levels to meet customer demand and improved market exposure associated
with the company's expanded sales and marketing efforts. Neulink sales were
$955,108 compared to $126,452 in the comparable period last year. For the first
nine months, RF Connector sales increased $558,798 compared to connector sales
in the first half of 1995.
Cost of sales rose $514,687 but declined, as a percentage of sales, to 45%
compared to 49% of sales last year. The decline is primarily due to an improved
product mix, efficiencies associated with higher utilization of facilities,
increased sales, volume purchasing, and improved RF Connector pricing.
Engineering expenses increased $89,557 to support the development and
planned introduction of new RF Connector and Neulink products in fiscal 1996. As
a percent of sales, engineering expense decreased to 9% from 11% of sales last
year.
Selling and general expenses increased $84,500 due to higher labor costs
associated with the company's growth and increased advertising, marketing and
trade show expenses. The company continues to travel to trade shows throughout
North America to promote its products. As a percentage of sales, selling and
general expenses declined to 25% from 36% of sales last year. The decline is
primarily due to the companys increased sales and cost control efforts.
Interest income increased $10,263 due to the company higher average cash
balances and an increase in the rate of interest received.
The provision for income taxes increased $269,750 to $296,000. The increase
in the company's tax rate is due to the absence of tax loss carry forwards which
reduced the company's tax rate last year.
Three Months 1996 vs. Three Months 1995
Sales reached $1,649,959, and increase of $852,665, or 107%, over sales of
$797,294 for the third quarter last year. The sales gain is attributable to
those reasons set out in the nine month analysis. Neulink sales were $482,904 in
the quarter, compared to $55,900 in the third quarter of 1995. RF Connector
sales increased $425,661, or 57%, compared to Connector sales for the same
quarter last year.
Cost of sales rose $325,855 but declined, as a percentage of sales, to 45%
compared to 53% last year. The decline is primarily attributable to reasons
discussed in the six month analysis, as well as an improved RF Connector pricing
earlier this year.
Engineering expenses increased $16,198. Part of this increase in
engineering is due to the commencement by RF Connector of a large connector
program. These large connectors, which accommodate coaxial cable from 1/2 to
1.5inches, sell at much higher per unit prices and will enable this division to
enter a new segment of the connector market. Neulink engineering expenses
increased to develop a new high-performance modular receiver, a wireless digital
repeater and an RTU (Remote Terminal Unit) for multiple control and monitoring
of wireless networks. As a percent of sales, engineering expense declined to 7%
from 12% last year due to the increase in sales.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)
Selling and general expenses declined $1,903, primarily due to reasons
described in the nine month analysis. Due to the strong sales increase, selling
and general expenses declined to 20% of sales from 42% last year.
Interest income decreased $703 due to a lower average balance of interest
bearing deposits during the quarter.
The provision for income taxes increased $192,750. This is due to reasons
addressed in the nine month analysis.
Material changes in financial condition:
Cash at July 31, 1996 increased $129,442 to $340,732, compared to the
October 31, 1995 fiscal year end balance of $211,290. The increase in cash is
attributable to the company's increased sales and improved profitability.
Management anticipates that combined cash and cash equivalents of $934,522,
together with internally generated capital, will be adequate to fund the company
throughout the current fiscal year. If additional capital is required for
operations, the company will seek to open a line of credit with a local bank.
Trade accounts receivable increased $469,732, or 137% to $813,328 compared
to the October 31, 1995 balance of $343,596. The increase is due to the addition
of new customers and the companys sales growth during the period.
Inventories increased $439,686, or 31% compared to the October 31, 1995
inventory level. Inventories have been expanded to meet higher sales demand and
the addition of several new distributors.
Prepaid expenses and deposits increased $224,854 from October 31, 1995.
This increase is due to higher deposits for future inventory purchases.
Accounts payable increased $139,062 compared to October 31, 1995. This
increase is due to the companys growth.
Accrued expenses increased $451,629 from the $74,985 October 31, 1995
level. This increase is primarily attributable to higher income taxes payable.
<PAGE>
PART II. OTHER INFORMATION
Items 1-4: Not applicable
Item 5: Information required in lieu of Form 8-K
None.
Item 6: Exhibits and Reports on 8-K
(a) None required
(b) Reports on Form 8-K
No reports on Form 8-K were filed during fiscal quarter ended July 31,
1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RF INDUSTRIES, LTD.
Dated: August 29, 1996 By: Howard F. Hill
-----------------------------------------
Howard F. Hill, President
Dated: August 29, 1996 By: Howard F. Hill
-----------------------------------------
Howard F. Hill, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 340,732
<SECURITIES> 593,790
<RECEIVABLES> 836,146
<ALLOWANCES> 22,818
<INVENTORY> 1,837,005
<CURRENT-ASSETS> 4,034,878
<PP&E> 489,525
<DEPRECIATION> 366,506
<TOTAL-ASSETS> 4,162,798
<CURRENT-LIABILITIES> 835,750
<BONDS> 0
0
0
<COMMON> 27,754
<OTHER-SE> 3,299,294
<TOTAL-LIABILITY-AND-EQUITY> 4,162,798
<SALES> 3,829,549
<TOTAL-REVENUES> 3,829,549
<CGS> 1,711,959
<TOTAL-COSTS> 3,032,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (38,053)
<INCOME-PRETAX> 835,239
<INCOME-TAX> 296,000
<INCOME-CONTINUING> 539,239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 539,239
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
