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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 April 30, 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 issuer's classes of
common stock at the latest practicable date.
As of April 30, 1996, the registrant had 2,738,547 shares of Common Stock, $.01
par value, issued and outstanding.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEET
April 30 October 31
1996 1995
---------- ----------
(unaudited) (audited)
CURRENT ASSETS
Cash ................................................ $ 353,295 $ 211,290
Investments in available-for-sale securities ........ 582,436 569,453
Trade accounts receivable less allowance
for doubtful accounts of $25,705 .................... 507,076 343,596
Inventories - Note 3 ................................ 1,544,107 1,397,319
Prepaid expenses and deposits ....................... 295,810 225,169
Deferred tax assets ................................. 43,000
---------- ----------
TOTAL CURRENT ASSETS ........................... 3,282,724 2,789,827
FIXED ASSETS
Furniture and office equipment ...................... 105,897 99,893
Equipment and tooling ............................... 375,560 360,217
---------- ----------
Fixed assets, at cost .......................... 481,457 460,110
Less accumulated depreciation and amortization ...... 355,256 333,033
---------- ----------
NET FIXED ASSETS ............................... 126,201 127,077
.
Deferred tax assets ................................. 33,000
Other assets ........................................ 4,901 5,067
---------- ----------
TOTAL ASSETS................................... $3,413,826 $2,954,971
========== ==========
See Notes to Financial Statements
<PAGE>
BALANCE SHEET (continued)
April 30 October 31
1996 1995
---------- ----------
(unaudited) (audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
CURRENT LIABILITIES
Accounts payable ................................. $ 105,958 $ 170,074
Accrued expenses ................................. 313,669 74,985
----------- -----------
TOTAL CURRENT LIABILITIES ................... 419,627 245,059
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 2,738,547 shares ............ 27,385 25,385
Capital paid in excess of par value .............. 3,237,938 3,219,938
Accumulated deficit .............................. (149,729) (394,851)
Unearned compensation ............................ (121,395) (140,560)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .................. 2,994,199 2,709,912
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ..................... $ 3,413,826 $ 2,954,971
=========== ===========
See Notes to Financials
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
April 30 April 30
---------------------- ---------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales ................... $ 1,269,624 $ 901,775 $ 2,179,589 $ 1,644,801
Cost of Sales ............... 510,839 466,667 961,804 772,795
----------- ----------- ----------- -----------
Gross Profit ........... 758,785 435,108 1,217,785 872,006
----------- ----------- ----------- -----------
Operating expenses:
Engineering ............ 130,582 105,143 235,239 161,880
Selling and general .... 362,025 317,999 642,333 555,929
----------- ----------- ----------- -----------
Total ................ 492,607 423,142 877,572 717,809
----------- ----------- ----------- -----------
Operating income ....... 266,178 11,966 340,213 154,196
Interest expenses (income) .. (10,898) (7,138) (24,909) (13,943)
----------- ----------- ----------- -----------
Income before provision
for income tax .............. 277,076 19,104 365,122 168,139
Provision for state & federal
income tax .................. 100,000 3,000 120,000 43,000
----------- ----------- ----------- -----------
Net income ............. $ 177,076 $ 16,104 $ 245,122 $ 125,139
=========== =========== =========== ===========
Per share data:
Net income ............. $ 0.06 $ 0.01 $ 0.08 $ 0.06
=========== =========== =========== ===========
Weighted average common
and common equivalent
shares outstanding 2,988,235 2,300,571 2,921,202 2,085,650
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
April 30
--------------------
1996 1995
------ ------
OPERATING ACTIVITIES
Net income............................................ $ 245,122 $ 125,139
Adjustments to reconcile net income
to net cash (used in) provided by operations
Depreciation and amortization ................... 22,223 38,332
Amortization of unearned compensation ........... 19,165 28,040
Change in assets - (incr) decr:
Accounts receivable - trade ................. (163,480) ( 11,597)
Inventories ................................. (146,788) (250,779)
Other assets ................................ 5,525 (67,933)
Change in liabilities - incr (decr):
Accounts payable ............................ (64,116) (26,077)
Accrued expenses ............................ 238,684 89,807
--------- ---------
Net cash (used in) provided by
operating activities ..................... 156,335 (75,068)
--------- ---------
INVESTING ACTIVITIES
Purchase of available-for-sale securities ... (12,983) 0
Capital expenditures ........................ (21,347) (23,006)
--------- ---------
Net cash provided by (used in)
operating activities ...................... (34,330) (23,006)
--------- ---------
FINANCING ACTIVITIES
Proceeds from exercise of common
stock options .......................... 20,000 7,780
--------- ---------
Net (decrease) increase in cash
and cash equivalents ......................... 142,005 (90,294)
Cash and cash equivalents at the
beginning of the period ...................... 211,290 862,050
--------- ---------
Cash and cash equivalents at the end of period .. $ 353,295 $ 771,756
========= ========
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 April 30, 1996 and the results of operations
for the three month and six month periods ended April 30, 1996 and
1995.
Note 2 - Interim reporting
The results of operation for the three month and six month periods
ended April 30, 1996 and 1995 are not necessarily indicative of the
results to be expected for the remainder of the year.
Note 3 - Components of Inventory
April 30, 1996
----------------------
(Unaudited)
Raw material and supplies.............. $ 220,300
Finished goods......................... 1,323,807
------------
TOTAL................... $ 1,544,107
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIX MONTHS 1996 VS. SIX MONTHS 1995
Sales increased $534,788, or 33% to $2,179,589 in the six month period
from $1,644,801 in the first six months of fiscal 1995. The sales gain is
attributable to the company's increased customer base, higher inventory levels
to meet customer demand, and greater product exposure due to the company's
expanded marketing efforts. Neulink sales were $472,204 compared to $70,554 in
the comparable period last year. For the first six months, RF Connector sales
increased $133,137 compared to connector sales in the first half of 1995.
Cost of sales rose $189,009 but declined, as a percentage of sales, to
44% compared to 47% 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 $73,359 to support the development and
planned introduction of new RF Connector and Neulink products in fiscal 1996. As
a percent of sales, engineering expense increased to 11% from 10% of sales last
year.
Selling and general expenses increased $86,404 due to higher labor
costs, advertising expenses, 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 29%
from 34% of sales last year. The decline is primarily due to the company's
increased sales and cost control efforts.
Interest income increased $10,966 due to the company's higher average
cash balances and an increase in the rate of interest received.
The provision for income taxes increased $77,000 to $120,000. 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 increased $367,849, or 41% to $1,269,624 from $901,775 in the
second quarter of fiscal 1995. The sales gain is attributable to those reasons
set out in the six month analysis. Neulink sales were $276,098 in the quarter,
compared to $41,531 in the second quarter of 1995. RF Connector sales increased
$131,862 from the same quarter last year.
Cost of sales rose $44,172 but declined, as a percentage of sales, to
40% compared to 52% last year. The decline is primarily attributable to reasons
discussed in the six month analysis, as well as an improvement in RF Connector
pricing during the quarter.
Engineering expenses increased $25,439. During the quarter, the company
commenced development on a large connector program. These higher priced large
connectors should allow the Connector Division to move into a new market area.
Neulink contributed to the increased expense in order to introduce a high
performance modular receiver, wireless digital repeater, and a RTU (Remote
Terminal Unit) for multiple control and monitoring of wireless networks. As a
percent of sales, engineering expense declined to 10% 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 increased $44,026 primarily due to reasons
described in the six month analysis. As a percentage of sales, selling and
general expenses declined to 29% from 35% last year. The decline is primarily
due to the company's increased sales.
Interest income increased $3,760 due to the company's higher average
cash balances and an increase in the rate of interest received.
The provision for income taxes increased $97,000. This is due to
reasons addressed in the six month analysis.
MATERIAL CHANGES IN FINANCIAL CONDITION:
Cash increased $142,005 to $353,295, 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 $935,731, 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 $163,480, or 48% to $507,076
compared to the October 31, 1995 balance of $343,596. The increase is due to the
addition of new customers and the company's sales growth during the period.
Inventories increased $146,788 compared to the October 31, 1995
inventory level as a result of purchases to meet higher sales and customer
demand.
Prepaid expenses increased $70,641 from October 31, 1995. This increase
is due to higher deposits for future inventory purchases.
Accounts payable declined $64,116 compared to October 31, 1995.
Accounts payable remain low due to the company's strong cash flow and tight cost
controls.
Accrued expense increased $238,684 from the $74,985 October 31, 1995 level.
The increase is primarily due to the 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 April 30, 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.
By: /s/ HOWARD F. HILL
--------------------------------
Howard F. Hill, President
Dated: May 22, 1996
By: /s/ HOWARD F. HILL
-------------------------------
Howard F. Hill, President
Chief Financial Officer
Dated: May 22, 1996