SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended October 31, 1996
Commission File Number 0-13301
RF INDUSTRIES, LTD.
-------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0168936
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(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
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g)of the Act:
Common Stock, $.01 par value.
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.
Yes X No
-------
The issuer's revenues for the year ended October 31, 1996 were $6,083,545.
<PAGE>
The approximate aggregate market value of the voting stock held by
non-affiliates of the registrant as of December 31, 1996, based on the average
of the closing bid and asked prices of one share of the Common Stock of the
Company, as reported on December 31, 1996 was $ 8,718,696. As of December 31,
1996, the registrant had outstanding 2,778,191shares of common stock, $.01 par
value.
Number of Pages/ Index to Exhibits
This Form 10-KSB consists of a total of 20 pages. The Index to Exhibits can be
found on page 18.
2
<PAGE>
PART I
ITEM 1. BUSINESS
General:
RF Industries, Ltd. (hereinafter the "Company") has two operating divisions, the
RF Connector Division and the RF Neulink Division.
RF Connector Division
- ---------------------
The Company, through its RF Connector Division, is engaged in the design,
manufacture and distribution of coaxial connectors used in radio communication
applications as well as in computers, test instruments, PC LANs and antenna
devices. Coaxial products are distributed through approximately 60 major
domestic and international distributors. RF Connector has introduced
subminiature SMA, SMB, MCX, Semi-Rigid/Flexible cable connectors; in series and
between-series adapters; cellular connectors; connectors for large diameter,
low-loss cables and corrugated cable applications.
RF Neulink Division
- -------------------
The Company, through its RF Neulink Division, designs and manufactures wireless
digital transmission products, commonly known as RF Data Links. A few of the
many applications for data links include industrial monitoring SCADA
(Supervisory Control And Data Acquisition) systems, wireless linking of private
WANs (Wide Area Networks), and GPS (Global Positioning Systems) tracking and
locations systems. These point to point and point to multi-point wireless data
networks are used by banks, casinos, petrochemical and gas and oil companies,
U.S. and foreign governments, and military agencies, utility companies and
manufacturing plants, just to name a few users.
The Company considers these Divisions to be operating in a single segment
involving the design, manufacture and/or sale of communications equipment.
The Company's principal executive office is located at 7610 Miramar Road,
Building #6000, San Diego, California.
Product Description:
The Company's products fall into two main categories which are produced by two
"Strategic Business Units" as follows:
3
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1. Coaxial connectors for radio communications equipment, PC LANs, antenna
devices, instruments and other radio frequency devices are produced by
the Company's RF Connector Division. The Company entered the coaxial
connector design, production and distribution business in May 1987
with the acquisition of the assets of RF Industries division of
Hytek International, Hialeah, Florida. Coaxial connectors continue to
have applications ranging through industrial, scientific and military
markets.
2. The wireless data transport products, manufactured by the RF Neulink
Division, are available in a wide range of configurations to satisfy
varied applications. Low data speeds (300bps) to medium data speeds to
very high data speeds (1,000,000bps), various RF output options, as
well as dumb and smart modems are available in various configurations.
Many frequency ranges are also supported from LF (50MHz), VHF (136-
174MHz), UHF (403-512MHz), 928-960MHz and the 2.400-2.499GHz ISM band.
Product Enhancements:
During 1996, the RF Connector Division introduced a new series of
connectors for large diameter, low-loss cables and corrugated cable
applications. These connectors, which address cable applications in the
growing PCS market, are expected to achieve volume production early in
1997. Recent additions to the division's RF Subminiature line include
MCX connectors and other new products for use with flexible as well as
semirigid cable.
The RF Connector Division has recently stepped up its design and
production of specialized connectors to meet customer's requirements
and FCC Regulation 15 demands for non-standard connector interfaces.
The RF Neulink Division added store and forward repeater capability
to its popular NEULINK 9600 transceiver modem. This feature allows
the user to eliminate the "blind spots" in a wireless network.
Neulink also introduced the SkyLine RTU, a SCADA device based on
the mature NEULINK 9600 radio platform. SkyLine supports a wide range
of wireless configurations for the remote control and monitoring of
alarms, pumps, motor generators, sensors, etc.
New products under development and scheduled for full production in
the first half of fiscal 1997 include the DCL-2400-SS, a high speed,
1Mbps over-the-air, highly intelligent transceiver modem in the 2.4GHz
ISM band (no license required to operate). Also under development is a
synthesized 5 watt paging exciter (DPT-150-S) in the VHF frequency
band aimed at the China, Taiwan, Hong Kong and Macao paging market.
In addition, the DPT-150-S has already been integrated with the syn-
thesized Emergency Alert System VHF receiver and NEUMODEM 9600,
providing the Company with an intelligent NEULINK 9600 transceiver
modem in the VHF frequency band. Neulink is just completing development
of the NEULINK 9600-EC, a 385-403MHz transceiver modem targeted at the
European marketplace.
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Distribution, Marketing and Customers:
Sales methods vary greatly between the two divisions.
RF Connector continues to be the Company's core business. RF Connector presently
sells its products primarily through warehousing distributors and OEM (Original
Equipment Manufacturer) customers which utilize coaxial connectors in the
manufacture of their products. The OEM market, which includes manufacturers of
communications equipment, instruments and computers, accounted for 40% while
distributors accounted for 60%, of the Company's RF Connector division sales for
fiscal 1996.
Neulink sells its products almost exclusively on a direct basis to the system
integrators and OEMs. A small percentage of sales are to end users and
re-sellers. System integrators and OEMs integrate and/or mate Company equipment
with their hardware and software to produce turn-key wireless systems. These
systems are then either sold or leased to utility companies, financial
institutions, petrochemical companies, government agencies, and irrigation/water
management companies, just to name a few of the many applications.
Sales to two customers in fiscal 1996 represented 16% and 15%, respectively, of
total sales compared to sales to one customer representing 10% of the Company's
total sales in fiscal 1995.
Raw Materials:
RF Connector currently sources its manufacturing from Japan, the United States,
and ISO approved factories in Taiwan.
Neulink purchases its electronic products from a moderate number of both
domestic and foreign suppliers. All Neulink wireless modem transceivers, with
the exception of the 928-960MHz crystal controlled transceiver, are built in the
United States. The 928-960MHz transceiver is assembled in Japan and tested in
San Diego. In the event of a large production order, this unit would also be
built in the USA.
Personnel:
The Company presently employs 29 full-time employees, and three part-time
employees. The RF Connector Division employs 22 full-time and three part-time
employees. The Neulink Division employs the remaining seven full-time employees.
The Company believes that it has a good relationship with its employees and, at
this time, no employees are represented by a union.
5
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Patents, Trademarks and Licenses:
The Company has no patent protection for any of its products, nor has it
registered any product trademarks.
Backlog, Warranties and Terms:
As of October 31, 1996, the Company had a sales order backlog of approximately
$3,123,000 compared to a backlog of $945,000 as of October 31, 1995.
The Company warrants its products to be free from defects in material and
workmanship for varying warranty periods, depending upon the product. Products
are generally warranted to the dealer for one year, with the dealer responsible
for any additional warranty it may make. Certain Neulink products are sold
directly to end-users and are warranted to those purchasers. The RF Connector
products are warranted for the useful life of the connectors.
The Company usually sells to customers on 30 day terms and does not generally
grant extended payment terms. Sales to most foreign customers are made on cash
terms at time of shipment.
Competition:
RF Connector has over 65 competitors in approximately a $400,000,000 market.
Management believes this should be a $650,000,000 market by the year 2000.
Management believes no one competitor has over 15% of the total market, while
the three leaders hold no more than 30% of the total market.
Major competitors for Neulink include Microwave Data Systems, E.F. Johnson, Data
Radio (selling Motorola radios), GRE America and Pacific Crest Corporation. When
the Company begins to market the 2.4GHz spread spectrum ISM radio, competitors
will include Cylink, Proxim, Aironet, and PrimeLink.
Government Regulations:
The Company's present and future products have been designed to meet any present
or proposed specifications and management believes it should have little
difficulty in meeting standards for approvals by government regulatory agencies
throughout the world.
Neulink products are subject to the regulations of the Federal Communications
Commission (FCC) in the United States, the Department of Communications (D.O.C.)
in Canada, and the future E.C.C. Radio Regulation Division in Europe. The
Company's present equipment is "type-accepted" for use in the United States and
Canada.
6
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Development of Business:
General:
During the three years ended October 31, 1996, the Company has continued its
efforts in the following areas:
o Continued the expansion of RF Connector through broadening the
selection of inventory available for sale. Management believes that the
success of this division hinges on having product available when other
firms cannot deliver. This broadened inventory also allows the Company
to emphasize sales to OEMs.
o Neulink has continued to improve and expand its wireless product lines
through 1996. In an effort to concentrate on sales and service, Neulink
has formed a strong strategic alliance with Sonik Technologies, Inc., a
privately held high tech wireless solutions company. Neulink contracts
with Sonik to develop the new products that the Company believes will
be in future demand, or that the Company can develop a market for.
Sonik will then develop the new product contracted for by Neulink,
and supervise the assembly of production hardware. The final
integration, alignment, and all final electrical and RF testing is
performed at the Neulink facility.
Foreign Operations:
Direct export sales by the Company to customers in South America, Canada,
Mexico, Europe, Australia, the Middle East, and the Orient accounted for
approximately 16% of Company sales for the year ended October 31, 1996, compared
to approximately 13% in fiscal 1995. The Company is attempting to aggressively
expand its foreign distribution under the RFI logo, while it concurrently seeks
new private label customers world wide.
The Company does not own, or directly operate any manufacturing operations or
sales offices in foreign countries at this time. It does manufacture much of its
Neulink product through contract manufacturing in the Orient and USA. RF
Connector purchases almost all of its connector products from contract
manufacturers in Taiwan and the United States.
ITEM 2. PROPERTIES:
The Company leases its corporate headquarters building at 7610 Miramar Road,
Building 6000, San Diego, California. The building consists of approximately
10,000 square feet which houses administrative, sales and marketing,
engineering, production and warehousing for the Company's Connector Division.
The rapid growth of both divisions of the Company required the leasing of an
7
<PAGE>
additional building to house the Neulink Division in 1996. The building is
located adjacent to our corporate headquarters at 7606 Miramar Road, Building
7200. The building consists of approximately 2,400 square feet which houses the
production and sales staff of the Neulink Division. The lease on both buildings
will terminate in May 31, 2000. The monthly rental is approximately $7,900
plus utilities, maintenance and insurance.
ITEM 3. LEGAL PROCEEDINGS:
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None.
8
<PAGE>
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
Market information: The Company's stock is listed on the NASDAQ-OTC Bulletin
Board where it currently trades.
For the periods indicated, the following tables sets forth the high and low BID
prices per share of Common Stock. These prices represent inter-dealer quotations
without retail mark-up, markdown or commission and may not necessarily represent
actual transactions.
Quarter High Low
- ------- ---- ---
Fiscal 1996
- -----------
November 1, 1995 - January 31, 1996 1 1/2 7/8
February 1, 1996 - April 30, 1996 3 7/16 1 1/4
May 1, 1996 - July 31, 1996 5 3/8 2 7/8
August 1, 1996 - October 31, 1996 6 3/4 4 1/8
Fiscal 1995
- -----------
November 1, 1994 - January 31, 1995 2 1
February 1, 1995 - April 30, 1995 2 3/8 1 5/8
May 1, 1995 - July 31, 1995 1 3/4 1 1/2
August 1, 1995 - October 31, 1995 1 5/8 1 1/4
On December 31, 1996 the reported closing prices of the Common Stock of the
Company were $4.75 BID and $5.75 ASKED.
As of December 31, 1996, there were 893 holders of the Company's Common Stock
per records of the Company's transfer agent, Continental Stock Transfer Co., New
York, NY.
The Company has not paid and does not presently intend to pay cash dividends on
its Common Stock.
9
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition:
- --------------------
The following table presents the key measures of financial condition as of
October 31, 1996 and 1995:
1996 1995
------------------ ------------------
% of % of
Total Total
Amount Assets Amount Assets
------- ------- ------- -------
Cash and cash equivalents ............. $ 403,547 9.9% $ 211,290 7.2%
Investments in available-for-sale
securities ........................... 604,186 14.9 569,453 19.3
Current assets ........................ 3,908,795 96.2 2,822,827 95.5
Current liabilities ................... 454,265 11.2 245,059 8.3
Working capital ....................... 3,454,530 85.0 2,577,768 87.2
Property & equipment - net ............ 111,809 2.8 127,077 4.3
Total assets .......................... 4,063,504 100.0 2,954,971 100.0
Stockholders' equity .................. 3,609,239 88.8 2,709,912 91.7
Liquidity and Capital Resources:
- --------------------------------
Management believes that cash generated from operations will be sufficient to
fund the anticipated growth of the Company in fiscal 1997. Management believes
that any financing requirements can be met through a combination of cash and
investments held as of October 31, 1996, internally generated cash flow, advance
payments from customers and borrowing on favorable credit terms from commercial
banking establishments.
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There is little expected need for additional capital equipment in fiscal 1997.
In the past, the Company has financed much of its fixed asset requirements
through capital leases. No additional capital equipment purchases have been
identified that would require significant additional leasing or capital
obligations during fiscal 1997. Management also believes that based on the
Company's financial condition at October 31, 1996, the absence of outstanding
bank debt and recent operating results, the Company would be able to obtain bank
loans to finance its expansion, if necessary.
General Outlook:
- ----------------
Management believes that because of a number of achievements during the year
ended October 31, 1996, the Company could maintain steady growth in the year
ended October 31, 1997.
As explained above, management believes the Company has capital resources
available to fund operations at current and expanded levels.
RF Connector Division is attacking all vertical markets within the RF arena
through the addition of new distributor and OEM accounts. Two of these
distributors, each having annual sales exceeding one billion dollars and one
being over 50 years old, provide the RF Connector Division with large worldwide
distribution potential through multiple outlets. Coupled with these new
distributor and OEM accounts, and the rebound of the RF market in Mexico, the
Connector Division is penetrating deeper into existing accounts through the use
of private label programs and new product introductions.
The Neulink Division has continued the major effort started in 1995, to provide
new products for the rapidly growing wireless market. These new products, 2.4GHz
ISM radio, 150MHz paging exciter for China, a VHF NEULINK 9600 transceiver
modem, a 230MHz and 280MHz paging exciter, and a European certified radio,
should position Neulink to address many new applications in 1997 and beyond.
Results of Operations:
- ----------------------
The following summarizes sales, cost of sales and gross profit in 1996 and 1995:
1996 1995
--------------------- -----------------------
% of % of
Amount Sales Amount Sales
---------- ------ ----------- -------
Sales ................. $6,083,545 100% $3,384,829 100%
Cost of Sales ......... 3,271,470 53.8 1,638,354 48.4
---------- ------ ----------- ------
Gross Profit .......... $2,812,075 46.2% $1,746,475 51.6%
========== ====== ========== ======
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Net sales increased $2,698,700 or 79.7% in 1996 compared to 1995. The increase
in sales was primarily due to increased demand by customers, and increased
inventory available to meet customer demands. The Company has expended much
effort and funding on new and improved products to position the Company to be
highly competitive in the coming years. The increase in sales volume was the
result of the Company's efforts to improve visibility in the industry by its
active participation in many industry trade shows. In addition, the Company is
assisting customers in marketing the Company's products.
The gross profit was increased by approximately $1,065,600 in 1996 as compared
to 1995.
Engineering and selling and general administrative expenses increased
approximately $380,050 in 1996 as compared with 1995. The increase in
engineering was due in large part to upgrading the Neulink Division's existing
product line. The Company is accomplishing this through a strategic alliance
with Sonik Technologies, Inc., a privately held wireless design and
manufacturing company. Neulink, teamed with Sonik, is bringing new and exciting
products to market.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements of the Company with related Notes and
accountants' report are attached hereto as pages F-1 to F-14 and filed as part
of this Annual Report:
o Report of J.H. Cohn LLP, Independent Public Accountants
o Balance Sheet as of October 31, 1996
o Statements of Income for the years ended October 31, 1996 and 1995
o Statements of Stockholders' Equity for the years ended October 31, 1996
and 1995
o Statements of Cash Flows for the years ended October 31, 1996 and 1995
o Notes to Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III.
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors: Age Date of Election Position
Jack A. Benz 64 February 1990 Chairman
Howard F. Hill 56 November 1979 President/CEO/CFO
John Ehret 59 November 1991 Director
Jack A. Benz is an electronic engineer by education, holding a degree from
Milwaukee School of Engineering. He has been involved in the sales and marketing
end of the electronics and communications industry for over 40 years. He has
owned and successfully operated businesses in the manufacturers representative
and export field. He managed RF Industries, Ltd. when it operated as a separate
company in Florida prior to its acquisition in 1987 by Celltronics. Currently,
Mr. Benz is employed by Hytek International, Ltd., a principal stockholder of
the Company.
Howard F. Hill, a founder of the Company in 1979, has degrees in manufacturing
engineering, quality engineering and industrial management. He took over the
presidency of the Company in July of 1993. He has held various positions in the
electronics industry over the past 30 years.
John Ehret holds a B.S. degree in Industrial Management from the University of
Baltimore. He is Vice-President and CFO as well as co-owner of TPL Electronics
of Los Angeles, California. He has been in the electronics industry for over 30
years.
Officers:
Jack A. Benz - See biography above.
Howard F. Hill - See biography above.
Terrie Gross joined the Company in January 1992 as accounting manager. She was
elected to Corporate Secretary in February 1995.
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ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table:
- ---------------------------
The Company does not have any executive officer paid in excess of $100,000.00
The following table presents the annual cash and other compensation of Howard F.
Hill, the Company's President:
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards
--------------------------------------------------------------------------
(a) (b) (c) (f) (g)
Name and Restricted
Principal Stock Options
Position Year Salary($) Awards SARs (#)
- --------- ------ ---------- ----------- ---------
Howard F. Hill 1996 $85,000 0 4,000
President
1995 $85,000 0 4,000
The following categories have no balance so they have been excluded from the
Summary Compensation Table:
(d) Bonus
(e) Other Annual Compensation
(h) LTIP Payout
(I) All Other Compensation
Note:Pursuant to the terms of the employment contract discussed below between
the Company and Mr. Hill, Mr. Hill was granted the option to acquire
500,000 shares of common stock at $.10 per share on June 1, 1994. These
options vest ratably over the six year period ending in July 1999.
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Option Tables:
The following table depicts the options granted to the President during the year
ended October 31, 1996:
Option Grants in Last Fiscal Year
Individual Grants
----------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to or Base
Granted Employees Price per Expiration
Name (#) in Fiscal Year Share Date
-------- ----------- --------------- ---------- -----------
Howard Hill, President
Incentive Stock Option 2,000 7% $5.75 October, 2006
Non-Qualified Option 2,000 9% $4.88 October, 2006
The following table depicts the options held by the President as of October 31,
1996:
Aggregated Option Exercises and Fiscal Year End Option Positions
----------------------------------------------------------------
Number of Value of
Unexercised Unexercised
Options at Options at
Shares FY-End FY-End
Acquired on Value Exercisable Exercisable
Exercise Realized /Unexer- /Unexer-
Name # $ cisable cisable
- -------- ----------- -------- ----------- -----------
Howard Hill, President 2,000 $11,300 282,000/ $1,549,580/
250,000 $1,412,500
Long-Term Incentive Awards:
- ---------------------------
There are no awards under long-term incentive plans, such as phantom stock
grants and restricted stock grants, that vest upon the satisfaction of
performance goals.
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Compensation of Directors:
The Company has no standard arrangement by which its Directors are compensated.
Employment Contracts:
- ---------------------
The Company has no employment or severance agreements for payments of more than
$100,000. However, on June 1, 1994, the Company entered into a six year,
renewable employment contract with the President calling for annual compensation
of $85,000 plus a bonus to be determined by the Board. In addition, the
employment contract granted the President options to acquire 500,000 shares of
common stock at $.10 per share. Such options vest ratably over the six year term
of the initial agreement. At October 31, 1996 options to purchase 250,000 shares
were vested.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information with respect to all
shareholders who are beneficial owners of more than 5% of the Company's
outstanding common stock, by each director and by all directors and officers as
a group as of October 31, 1996. The beneficial owner is the owner of record and
has sole voting and investment power over the shares shown, except as otherwise
indicated.
Number of
Shares (1) Percentage (1)
Name and Address Beneficially Beneficially
of Beneficial Owner Owned Owned
------------------- ------------ ------------
Hytek International, Ltd.
690 West 28th Street
Hialeah, FL 33010 1,027,167 32.0%
Jack A. Benz
7610 Miramar Rd.
San Diego, CA 92126 59,320 (2) 1.8%
Howard F. Hill
7610 Miramar Rd.
San Diego, CA 92126 306,000 (3) 9.5%
All Directors & Officers
as a group 416,153 (4) 13.0%
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(1) Shares available through outstanding options which are exercisable
within 60 days of this report are treated as outstanding for purposes
of computing the number and percentage of shares each stockholder
beneficially owns.
(2) Includes 10,000 shares which Mr. Benz has the right to acquire upon
exercise of options exercisable within 60 days of the date of this
report.
(3) Includes 282,000 shares which Mr. Hill has the right to acquire upon
exercise of options exercisable within 60 days of the date of this
report.
(4) Includes 325,833 shares which all Directors and Officers, as a group,
have the right to acquire upon exercise of options exercisable within
60 days of the date of this report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
RF Industries, Ltd. contracted on January 1, 1995 with Hytek International, Ltd.
("Hytek"), a principal stockholder of the Company, for technical development as
well as marketing services for a period of three years from January 1, 1995
through December 31, 1997. The Company will issue to Hytek a total of 600,000
shares of common stock at the rate of 200,000 shares per year. In both February
1995 and 1996, 200,000 shares were delivered and the remaining shares are to be
delivered in February 1997. As payment for the shares, Hytek will remit a total
of $60,000 in three equal installments of $20,000; the first two installments
were paid on January 1, 1995 and 1996, respectively and the remaining
installment will be paid on January 1, 1997. The difference of $690,000 between
the market value of $1.25 per share of common stock at January 1, 1995 and the
aggregate purchase price of the shares will be amortized to expense over the
service period ($230,000 was amortized in 1995 and 1996). The Chairman of the
Board of the Company is an employee of Hytek.
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PART IV.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
The following documents have been filed as part of this report:
(1) Exhibits
10.21 Public Relations Agreement - Neil G. Berkman Associates
10.22 Employment Contract -Donald Catledge
23.1 Consent of Independent Public Accountants
The following are incorporated by reference to Form 10-K for fiscal year ended
October 31, 1986 filed on February 4, 1987 as amended by Amendment No. 1 filed
on August 2, 1987 and Form 10-KSB for fiscal year ended October 31, 1992 filed
on March 5, 1993, and October 31, 1994 filed on February 14, 1995, October 31,
1995 filed on January 31, 1996:
3.2.1 Company Bylaws as Amended through August, 1985
3.2.2 Amendment to Bylaws dated January 24, 1986
3.2.3 Amendment to Bylaws dated February 1, 1989
10.1 Asset Purchase Agreement
10.2 Settlement Agreement
10.3 Funds Impound Escrow Agreement
10.4 Stock Escrow Agreement
10.5 Lease - San Diego, CA Facility
10.6 Lease - Gardena, CA Facility
10.7 Celltronics, Inc. Incentive Stock Option Plan
10.8 Form of Incentive Stock Option Plan
10.9 Directors' Nonqualified Stock Option Agreements
10.10 Consulting Agreements
10.11 Consultants' Nonqualified Stock Option Agreements
10.12 Agreement for Cancellation of Shares
10.13 Neutec Sale Agreement
10.14 Trilectric Sale Agreement
10.15 Incentive Stock Option Plan
10.16 Amended Lease Agreement - San Diego, CA Facility
10.17 Lease Agreement - San Diego, CA Facility
10.18 Employment Contract - Howard Hill
10.19 Consulting Agreement - Hytek International
10.20 Lease Agreement - San Diego, CA Facility
(2) Reports on Form 8-K
None
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Shareholders of the Company may obtain a copy of any exhibit referenced in this
10-KSB Report by writing to: Secretary, RF Industries, Ltd., 7610 Miramar Road,
Bldg. 6000, San Diego, CA 92126. The written request must specify the
shareholder's good faith representation that such shareholder is a stock holder
of record of common stock of the Company. A charge of twenty cents ($.20) per
page will be made to cover Company expenses in furnishing the requested
documents.
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SIGNATURE
------------------
Pursuant to the requirements of Section 13 and 15 (d) 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.
Date:
Howard F. Hill, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Dated: January 30, 1997 By: Jack A. Benz
--------------------------------
Jack A. Benz
Chairman - Board of Directors
Dated: January 30, 1997 By: Howard F. Hill
--------------------------------
Howard F. Hill
Chief Financial Officer
(Principal Accounting Officer)
Dated: January 30, 1997 By: Howard F. Hill
---------------------------------
Howard F. Hill, Chief Executive Officer
Dated: January 30, 1997 By: John Ehret
---------------------------------
John Ehret, Director
20
<PAGE>
RF INDUSTRIES, LTD.
INDEX TO FINANCIAL STATEMENTS
[ATTACHMENT TO ITEM 7]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ....................... F-2
BALANCE SHEET
OCTOBER 31, 1996 ............................................. F-3
STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 1996 AND 1995 ........................ F-4
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1996 AND 1995 ........................ F-5
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996 AND 1995 ........................ F-6
NOTES TO FINANCIAL STATEMENTS .................................. F-7/14
* * *
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
RF Industries, Ltd.
We have audited the accompanying balance sheet of RF INDUSTRIES, LTD. as of
October 31, 1996, and the related statements of income, stockholders' equity and
cash flows for the years ended October 31, 1996 and 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these finan cial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RF Indus tries, Ltd. as of
October 31, 1996, and its results of operations and cash flows for the years
ended October 31, 1996 and 1995, in conformity with generally accepted
accounting principles.
J.H. COHN LLP
San Diego, California
December 13, 1996
F-2
<PAGE>
RF INDUSTRIES, LTD.
BALANCE SHEET
OCTOBER 31, 1996
ASSETS
------
Current assets:
Cash and cash equivalents .................................. $ 403,547
Investments in available-for-sale securities ................. 604,186
Trade accounts receivable, net of allowance for
doubtful accounts of $16,000 ........................... 703,097
Inventories, net of valuation allowance of $47,000 ........... 1,861,856
Prepaid expenses and deposits .............................. 276,109
Deferred tax assets ........................................ 60,000
-----------
Total current assets ..................................... 3,908,795
-----------
Property and equipment:
Equipment and tooling ........................................ 381,891
Furniture and office equipment ............................... 107,633
-----------
489,524
Less accumulated depreciation and amortization ............. 377,715
-----------
Total .................................................... 111,809
-----------
Deferred tax assets ............................................ 38,000
Other assets ................................................... 4,900
-----------
Total .................................................... $4,063,504
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable ............................................. $ 186,250
Accrued expenses ............................................. 268,015
------------
Total liabilities ........................................ 454,265
------------
Commitments and contingencies
Stockholders' equity:
Common stock - authorized 10,000,000 shares of $.01
par value; 2,778,191 shares issued and outstanding ..... 27,782
Additional paid-in capital ................................. 3,868,642
Retained earnings .......................................... 166,547
Unearned compensation ...................................... (453,732)
-----------
Total stockholder's equity ............................... 3,609,239
-----------
Total .................................................... $4,063,504
===========
See Notes to Financial Statements.
F-3
<PAGE>
RF INDUSTRIES, LTD.
STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 1996 AND 1995
1996 1995
----------- -----------
Net sales .................................... $ 6,083,545 $ 3,384,829
Cost of sales ................................ 3,271,470 1,638,354
----------- -----------
Gross profit ................................. 2,812,075 1,746,475
----------- -----------
Operating expenses:
Engineering ................................ 462,930 348,656
Selling and general ........................ 1,429,296 1,163,498
----------- -----------
Totals ................................... 1,892,226 1,512,154
----------- -----------
Operating income ............................. 919,849 234,321
Other income ................................. 58,153 41,066
Interest expense ............................. (1,604) (441)
----------- -----------
Income before provision for income taxes ..... 976,398 274,946
Provision for income taxes ................... 415,000 103,300
----------- -----------
Net income ................................... $ 561,398 $ 171,646
=========== ===========
Net income per share:
Primary .................................. $ .19 $ .07
=========== ===========
Fully-diluted ............................ $ .18 $ .07
=========== ===========
See Notes to Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
RF INDUSTRIES, LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1996 AND 1995
Retained
Additional Earnings Total
Common Stock Paid-In (Accumulated Unearned Stockholders'
Shares Amount Capital Deficit) Compensation Equity
----------------------------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
November 1,
1994 ..................... 2,225,747 $ 22,257 $2,961,786 $ (566,497) $ (178,890) $2,238,656
Shares issued on
exercise of
stock options ............ 112,800 1,128 10,152 11,280
Shares issued
under consult-
ing service
agreement ................ 200,000 2,000 248,000 250,000
Amortization of
unearned
compensation ............. 38,330 38,330
Net income ................. 171,646 171,646
---------- ---------- ---------- ---------- ---------- ----------
Balance
October 31,
1995 ..................... 2,538,547 25,385 3,219,938 (394,851) (140,560) 2,709,912
Shares issued on
exercise of
stock options ............. 39,644 397 23,204 23,601
Shares issued
under consult-
ing service
agreement ................. 200,000 2,000 248,000 250,000
Grant of
compensatory
stock options
for purchase of
100,000 shares ............ 377,500 (377,500)
Amortization of
unearned
compensation .............. 64,328 64,328
Net income .................. 561,398 561,398
---------- ---------- ---------- ---------- ---------- ----------
Balance,
October 31,
1996 2,778,191 $ 27,782 $3,868,642 $ 166,547 $ (453,732) $3,609,239
========== ========== ========== ========== ========== ==========
See Notes to Financial Statements.
F-5
</TABLE>
<PAGE>
RF INDUSTRIES, LTD.
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1996 AND 1995
1996 1995
--------- ---------
Operating activities:
Net income ....................................... $ 561,398 $ 171,646
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization .................. 44,849 54,535
Amortization of costs under consulting
agreement ............................... 230,000 230,000
Amortization of unearned compensation ...... 64,328 38,330
Deferred income taxes ...................... (22,000) 95,000
Changes in operating assets and liabilities:
Trade accounts receivable .................... (359,501) 49,404
Inventories .................................. (464,537) (617,709)
Prepaid expenses and deposits
and other assets ...................... (50,940) (156,385)
Accounts payable ............................. 16,176 122,814
Accrued expenses ............................. 193,030 (37,636)
--------- ---------
Net cash provided by (used in)
operating activities .............. 212,803 (50,001)
--------- ---------
Investing activities:
Purchases of investments in available-
for-sale securities ........................ (34,733) (569,453)
Capital expenditures ........................... (29,414) (62,586)
--------- ---------
Net cash used in investing
activities ........................ (64,147) (632,039)
--------- ---------
Financing activities:
Proceeds from shares issued:
On exercise of stock options ............... 23,601 11,280
Under consulting service agreement ......... 20,000 20,000
--------- ---------
Net cash provided by financing
activities ........................ 43,601 31,280
--------- ---------
Net increase (decrease) in cash and cash
equivalents ...................................... 192,257 (650,760)
Cash and cash equivalents at beginning of year ..... 211,290 862,050
--------- ---------
Cash and cash equivalents at end of year ........... $403,547 $211,290
========== ==========
Supplemental cash flow information:
Interest paid .................................... $ 1,569 $ 441
========== ==========
Income taxes paid ................................ $256,340 $ 46,574
========== ==========
See Notes to Financial Statements.
F-6
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Business activities and summary of significant accounting policies:
Business activities: The Company operates two divisions within a
single business segment involving the design, manufacture
and/or sale of communications equipment primarily to the
radio and other professional communications related
industries. The Company is engaged in the design and
distribution of coax ial connectors used primarily in radio
and other profes sional communications applications (the "RF
CONNECTOR Division") and the design, manufacture and sale of
radio links for receiving and transmitting control signals
for remote operation and monitoring of equipment (the
"NEULINK Division").
Use of estimates: The preparation of financial statements in
conformity with generally accepted accounting principles
requires manage ment to make estimates and assumptions that
affect certain reported amounts and disclosures.
Accordingly, actual results may differ from those estimates.
Cash equivalents: The Company considers all highly liquid
investments with a maturity of three months or less when
purchased to be cash equivalents.
Investments: Pursuant to Statement of Financial Accounting
Standards No.115, "Accounting for Certain Investments in
Debt and Equity Securities, "the Company's investments in
mutual fund units have been classified as available-for-sale
securities and,accordingly, are valued at fair value at the
end of each period. Any material unrealized holding gains
and losses arising from such valuation are ex- cluded from
income and recognized, net of applicable income taxes, as a
separate component of stockholders' equity until realized.
Inventories: Inventories are stated at the lower of cost or
market. Cost has been determined using the weighted average
cost method (see Note 4).
Property and equipment: Equipment, tooling and furniture are
recorded at cost and depreciated over their estimated useful
lives (generally 3 to 7 years) using the straight-line
method. Depreciation expense was $44,849 in 1996 and $53,535
in 1995.
F-7
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Business activities and summary of significant accounting policies
(concluded):
Income taxes: The Company accounts for income taxes pursuant to
the asset and liability method which requires deferred
income tax assets and liabilities to be computed annually
for temporary differences between the financial statement
and tax bases of assets and liabilities that will result in
taxable or deductible amounts in future periods based on
enacted laws and rates applicable to the periods in which
the temporary differences are expected to affect taxable
income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be
realized. The income tax provision or credit is the tax
payable or refundable for the period plus or minus the
change during the period in deferred tax assets and
liabilities.
Net income per share: Primary net income per share was computed
based on the 2,994,016 and 2,510,437 weighted average number
of common and common equivalent shares outstanding in 1996
and 1995, respectively. Common equivalent shares reflect the
dilu tive effect of the assumed exercise of outstanding
stock options based on average market prices during each
year.
Fully-diluted net income per share was computed based on the
3,144,244 weighted average number of common and common
equivalent shares outstanding in 1996, which reflects the
additional dilutive effect of the assumed exercise of out-
standing stock options based on the market price as of the
end of that year to the extent that it exceeded the related
average market price for such options.
Note 2 - Concentration of credit risk and sales to major customers:
The Company maintains all of its cash balances in one financial
institution. At times, these balances exceed the Federal Deposit
Insurance Corporation limitation for coverage of $100,000 thereby
exposing the Company to credit risk. The Company reduces its
exposure to credit risk by maintaining such deposits with high
quality financial institutions. Accounts receivable are financial
instruments that also ex pose the Company to a concentration of
credit risk. Such exposure is limited by the large number of
customers comprising the Company's customer base and their disper-
sion across different geographic areas. In addition, the Company
routinely assesses the financial strength of its customers and
maintains an allowance for doubtful accounts that management
believes will adequately provide for credit losses.
F-8
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 2 - Concentration of credit risk and sales to major customers (concluded):
During 1996, sales to two customers represented 16% and 15%, res-
pectively, of total sales. During 1995, sales to one customer
represented 10% of total sales.
Note 3 - Investments:
At October 31, 1996, investments in available-for-sale securities
consisted of units issued by mutual funds as described below
Short-term secured obligation funds $485,902
Short-term U.S. Treasury fixed income
obligation funds 118,284
---------
Total $604,186
=========
The investments in mutual funds were carried at cost which approxi-
mated fair value at October 31, 1996. Gross unrealized holding
gains and losses on these investments were not material as of
October 31, 1996 or 1995. There were no realized gains and losses
from sales of investments during 1996 or 1995.
Note 4 - Inventories:
Inventories consisted of the following as of October 31, 1996:
Raw materials and supplies $ 426,390
Finished goods 1,482,466
---------
Total 1,908,856
Less allowance for slow-moving inventory 47,000
---------
Total $1,861,856
==========
The allowance for slow-moving inventory was established through
charges to earnings (which were not material in 1996 and 1995) to
reduce the carrying value of certain inventory to estimated fair
values.
Note 5 - Lease commitments:
The Company leases its facilities in San Diego, California under a
noncancelable operating lease. The lease expires in May 2000 and
requires minimum annual rental payments that are subject to fixed
annual increases The minimum annual rentals under this lease are
being charged to expense on a straight-line basis over the lease
term. Deferred rentals were not material at October 31, 1996.
The lease also requires the payment of the Company's pro rata share
of the real estate taxes and insurance, maintenance and other
operating expenses related to the facilities. Rent expense was
$67,970 in 1996 and $65,969 in 1995.
F-9
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 5 - Lease commitments (concluded):
Future minimum rental commitments under the facilities'operating
lease for years subsequent to October 31, 1996 are as follows:
Year Ending
October 31,
-------------
1997 $ 79,000
1998 83,000
1999 86,000
2000 44,000
--------
Total $292,000
========
Note 6 - Income taxes:
The provision (credit) for income taxes consisted of the following:
1996 1995
-------- -------
Current:
Federal $340,000 $(19,700)
State 97,000 28,000
-------- --------
437,000 8,300
-------- --------
Deferred:
Federal (16,000) 98,000
State (6,000) (3,000)
-------- --------
(22,000) 95,000
-------- --------
Totals $415,000 $103,300
======== ========
Income tax at the Federal statutory rate is reconciled to the
Company's actual income tax provision as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- ------------------
% of Pretax % of Pretax
Amount Income Amount Income
------- -------- -------- --------
<S> <C> <C> <C> <C>
Income tax at Federal
statutory rate ..................... $ 331,975 34.0% $ 93,482 34.0%
State tax provision, net
of Federal tax benefit ............. 60,866 6.2 16,500 6.0
Other provision (credit) ............. 22,159 2.3 (6,682) (2.4)
--------- ----- -------- -----
Total income tax
provision ........................ $ 415,000 42.5% $ 103,300 37.6%
========= ===== ========= =====
</TABLE>
F-10
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 6 - Income taxes (concluded):
The Company's total deferred tax assets and deferred tax liabilities
at October 31, 1996 and 1995 are as follows:
1996 1995
-------- ------
Total deferred tax assets $122,000 $99,000
Total deferred tax liabilities 24,000 23,000
-------- -------
Net deferred tax assets $ 98,000 $76,000
======== =======
The temporary differences generating net current and noncurrent
deferred tax assets were primarily related to accrued vacation
expense, reserves for doubtful accounts, deferred compensation and
inventory obsolescence.
Note 7 - Stock options:
Incentive and Non-Qualified Stock Option Plans: The Board of
Directors approved an Incentive Stock Option Plan (the
"Incentive Plan") during fiscal 1990 that provides for
grants of options to purchase up to 500,000 shares of
common stock to employees of the Company. Under the
Incentive Plan, the option price cannot be less than
the fair market value on the date options are granted
and options can expire no later than ten years after
the date of grant. All options granted through October
31, 1996 expire five years from the date of grant.
Options vest immediately upon grant. The Board of
Directors also approved a Non-Qualified Stock Option
Plan (the "Non-Qualified Plan") during fiscal 1990 that
provides for grants of options to purchase up to
200,000 shares of common stock to officers, directors
and other recipients selected by the Board of
Directors. Under the Non- Qualified Plan, the option
price cannot be less than 85% of the fair market value
on the date options are granted and options can expire
no later than five years after the date of grant.
Options vest immediately upon grant.
Compensatory stock option plans:
The Company granted to its President an option for the
purchase of 500,000 shares of common stock at $.10 per
share pursuant to the terms of his employment contract
dated June 1, 1994 that became effective as of July 1,
1993. Options for the purchase of 83,333 shares vest
annually from July 1994 through July 1999. The difference
of $230,000 between the market value and the aggregate
purchase price of the shares subject to option at the
date of grant was initially recorded as unearned
compensation and deducted from stock holders' equity, of
which $38,330 was amortized to compensation expense in
both 1996 and 1995.
F-11
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 7 - Stock options (continued):
Compensatory stock option plans (concluded):
Additionally, in connection with an agreement with a consultant
for the provision of public relations services, on January 1,
1996, the Company granted an option to purchase 50,000 shares of
common stock at $.94 per share, the market value of a share of
common stock on January 1, 1996. Options to purchase 10,000
shares vest annually from January 1996 through January 2000.
The Company also granted to an executive an option to purchase
100,000 shares of common stock at $.10 per share pursuant to the
terms of an employment contract dated July 1, 1996. Options to
purchase 20,000 shares vest annually from July 1997 through July
2001. The difference of $377,500 between the market value and the
aggregate purchase price of the shares subject to option at the
date of grant was initially recorded as unearned compensation
and deducted from stockholders' equity, of which $25,998 was
amortized to compensation expense in 1996.
Additional required disclosures related to stock option plans:
The Company has adopted the disclosure-only provisions of State-
ment of Financial Accounting Standards No.123, "Accounting for
Stock-Based Compensation" ("SFA S 123"). Accordingly, no earned or
unearned compensation cost was recognized in the accompanying
financial statements for stock options granted in 1996 other than
the amounts attributable to the options for 100,000 shares granted
to the executive officer on July 1, 1996 described above. Had
compensation cost been determined based on the fair value at
the grant date for all awards in 1996 consistent with the
provisions of SFAS No. 123, the Company's net income and net
income per share would have been reduced to the pro forma amounts
set forth below:
Net income - as reported $561,398
Net income - pro forma $423,193
Net income per share - as reported $.19
Net income per share - pro forma $.14
The fair value of each option granted in 1996 was estimated
on the date of grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions: dividend yield of
0%; expected volatility of .28%; risk-free interest rate of 7%;
and expected lives of 4 to 6 years.
F-12
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 7 - Stock options (concluded):
Additional required disclosures related to stock option plans
(concluded):
Additional information regarding options outstanding under all
of the Company's stock option plans at October 31, 1996 and 1995
and changes in outstanding options in 1996 and 1995 follows:
1996 1995
------------------- ------
Weighted
Shares Average Shares
or Price Exercise or Price
Per Share Price Per Share
--------- --------- ---------
Options outstanding at
beginning of year .... 640,579 $ .30 700,045
Options granted ....... 221,810 2.08 53,334
Options exercised ..... (39,644) .60 (112,800)
------- --------
Options outstanding at
end of year .......... 822,745 .79 640,579
======== ========
Option price range at
end of year ........ $.10-$5.75 $.10-$1.50
Options available for
grant at end of year 304,095 373,051
Weighted average fair
value of options granted
during the year .... $2.52
Option price range for
options exercised
during the year ... $ 10-$1.50 $.10
The following table summarizes information about stock options
outstanding at October 31, 1996, all of which are at fixed-prices:
Options Options
Outstanding Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
----------- ------------ ----------- -------- ----------- --------
$ .10 610,000 7.5 yrs $ .10 260,000 $ .10
85-1.50 143,789 4.1 yrs 1.13 103,789 1.21
4.88-5.75 68,956 10.0 yrs 5.63 68,956 5.63
------- -------
.10-5.75 822,745 432,745
======= =======
F-13
<PAGE>
RF INDUSTRIES, LTD.
NOTES TO FINANCIAL STATEMENTS
Note 8 - Shares issuable under consulting agreement:
Effective January 1, 1995, the Company entered into an agreement with
an organization (the "Consultants") whereby the Consultants will
provide technical development and marketing consulting services to
the Company over the three year period from January 1995 through
December 1997. As part of the consideration for such services, the
Company agreed to issue to the Consultants a total of 600,000 shares
of common stock at the rate of 200,000 shares per year and the
Consultants agreed to pay a total of $60,000 at the rate of $20,000
per year. As of October 31, 1996, the Company had received $40,000
and had issued 400,000 shares.
As of January 1, 1995, the 600,000 shares had an approximate market
value of $750,000. The difference of $690,000 between the market
value at January 1, 1995 and the total to be paid by the Consultants
for the shares is being amortized to expense over the service period
on a straight-line basis and, accordingly, $230,000 was amortized in
1996 and 1995.
At October 31, 1996 and 1995, the Consultants owned 1,027,167
and 827,167 shares of common stock of the Company, representing 37.0%
and 32.6% of the shares then outstanding, respectively. The Chairman
of the Board of the Company is an employee of the organization that
is providing the consulting services.
Note 9 - Adjustments affecting interim financial statements:
During the fourth quarter of fiscal 1996, the Company made certain
adjustments related to the computation of the cost of sales and the
provision for income taxes. If such adjustments had been made as of
the beginning of fiscal 1996, they would have had no material effect
on the results of operations reported by the Company during the first
and second quarters of the year, but they would have reduced net
income in the third quarter to approximately $233,000 or $.08 per
share from $294,000 or $.10 per share previously reported.
* * *
F-14
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
We consent to the incorporation by reference in the Registration Statement on
Form S-8 originally filed on October 31, 1990 by RF Industries, Ltd. (previously
Celltronics, Inc.) of our report dated December 13, 1996 appearing in this
Annual Report of Form 10-KSB for the fiscal lyear ended October 31, 1996 (the
"Form 10-KSB"), on our audits of the financial statements of RF Industries, Ltd.
as of October 31, 1996 and for each of the two years in the period ended October
31, 1996 also appearing in this Form 10-KSB.
J.H. COHN LLP
San Diego, California
December 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 403,547
<SECURITIES> 604,186
<RECEIVABLES> 750,097
<ALLOWANCES> 16,000
<INVENTORY> 1,861,856
<CURRENT-ASSETS> 3,908,795
<PP&E> 489,524
<DEPRECIATION> 377,715
<TOTAL-ASSETS> 4,063,504
<CURRENT-LIABILITIES> 186,250
<BONDS> 0
0
0
<COMMON> 27,782
<OTHER-SE> 3,581,457
<TOTAL-LIABILITY-AND-EQUITY> 4,063,504
<SALES> 6,083,545
<TOTAL-REVENUES> 6,083,545
<CGS> 3,271,470
<TOTAL-COSTS> 5,163,696
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (56,549)
<INCOME-PRETAX> 976,398
<INCOME-TAX> 415,000
<INCOME-CONTINUING> 561,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 561,398
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
