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, 1997
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 July 31, 1997, the registrant had 3,064,599 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
1997 1996
----------- -----------
(Unaudited) (Audited)
ASSETS
- -----------------
CURRENT ASSETS
Cash ............................................... $ 798,047 $ 403,547
Investments in available-for-sale securities ....... 632,848 604,186
Trade accounts receivable less allowance
for doubtful accounts of $11,596 ................... 787,287 703,097
Inventories - Note 3 ............................... 2,203,082 1,861,856
Prepaid expenses and deposits ...................... 470,718 276,109
Deferred tax assets ................................ 60,000 60,000
---------- ----------
TOTAL CURRENT ASSETS .......................... 4,951,982 3,908,795
FIXED ASSETS
Furniture and office equipment ..................... 107,633 107,633
Equipment and tooling .............................. 433,189 381,891
---------- ----------
Fixed assets, at cost ......................... 540,822 489,524
Less accumulated depreciation and amortization ..... 408,949 377,715
---------- ----------
NET FIXED ASSETS .............................. 131,873 111,809
Deferred tax assets ................................ 38,000 38,000
Other assets ....................................... 4,901 4,900
---------- ----------
TOTAL ASSETS .................................. $5,126,756 $4,063,504
========== ==========
See Notes to Financial Statements
2
<PAGE>
Item 1: Financial Statements (continued)
BALANCE SHEET
July 31 October 31
1997 1996
----------- ----------
(Unaudited) (Audited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
- ----------------------------
CURRENT LIABILITIES
Accounts payable ............................. $ 298,393 $ 186,250
Accrued expenses ............................. 246,202 268,015
----------- -----------
TOTAL CURRENT LIABILITIES ............... 544,595 454,265
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 3,064,599 shares ...... 30,646 27,782
Capital paid in excess of par value .......... 4,803,366 3,868,642
Retained earnings ............................ 676,227 166,547
Unearned compensation ........................ (928,078) (453,732)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .............. 4,582,161 3,609,239
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ................. $ 5,126,756 $ 4,063,504
=========== ===========
See Notes to Financial Statements
3
<PAGE>
Item 1: Financial Statements (continued)
STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
July 31 July 31
---------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
Net Sales ................... $1,523,442 $1,649,959 $5,202,370 $3,829,549
Cost of Sales ............... 796,540 750,331 2,917,852 1,711,959
---------- ---------- ---------- ----------
Gross Profit ........... 726,902 899,628 2,284,518 2,117,590
---------- ---------- ---------- ----------
Operating expenses:
Engineering ............ 106,280 112,618 327,875 347,856
Selling and general .... 360,419 330,215 1,155,500 972,548
---------- ---------- ---------- ----------
Total ................ 466,699 442,833 1,483,375 1,320,404
---------- ---------- ---------- ----------
Operating income ....... 260,203 456,795 801,143 797,186
Interest income ............. 17,834 13,144 48,534 38,053
---------- ---------- ---------- ----------
Income before provision
for income tax .............. 278,037 469,939 849,677 835,239
Provision for state & federal
income tax .................. 112,000 176,000 340,000 296,000
---------- ---------- ---------- ----------
Net income ............. $ 166,037 $ 293,939 $ 509,677 $ 539,239
========== ========== ========== ==========
Per share data:
Net income ............. $ 0.05 $ 0.10 $ 0.16 $ 0.18
========== ========== ========== ==========
Weighted average common
and common equivalent shares
outstanding ................. 3,315,157 2,996,614 3,153,946 2,939,836
========== ========== ========== ==========
See Notes to Financial Statements
4
<PAGE>
STATEMENTS OF CASH FLOWS
Net income ........................................... $ 509,677 $ 539,239
Adjustments to reconcile net income
to net cash (used in) provided by operations
Depreciation and amortization ................... 31,234 33,473
Amortization of unearned compensation ........... 461,660 35,246
Change in assets - (incr) dear:
Accounts receivable - trade ................ (84,190) (469,732)
Inventories ................................ (341,226) (439,686)
Other assets ............................... (194,609) (148,688)
Change in liabilities - incr. (decr.):
Accounts payable ........................... 112,143 139,062
Accrued expenses ........................... (21,813) 451,629
--------- ---------
Net cash (used in) provided by
operating activities .................... 472,876 140,543
--------- ---------
INVESTING ACTIVITIES
Purchase of available-for-sale securities ... (28,662) (24,337)
Capital expenditures ........................ (51,298) (29,415)
--------- ---------
Net cash provided by (used in)
operating activities ....................... (79,960) (53,752)
--------- ---------
FINANCING ACTIVITIES
Proceeds from exercise of common stock options 1,584 42,651
--------- ---------
Net cash provided by financing activities .... 1,584 42,651
--------- ---------
Net (decrease) increase in cash
and cash equivalents ......................... 394,500 129,442
Cash and cash equivalents at the
beginning of the period ...................... 403,547 211,290
--------- ---------
Cash and cash equivalents at the end of period... $ 798,047 $ 340,732
========= =========
See Notes to Financial Statements
5
<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, 1997 and the results of operations
for the three month and nine month periods ended July 31, 1997 and
1996.
Note 2 - Interim reporting
The results of operations for the three month and nine month periods
ended July 31, 1997 and 1996 are not necessarily indicative of the
results to be expected for the remainder of the year.
Note 3 - Components of Inventory
July 31, 1997
-------------
(Unaudited)
Raw material and supplies....... $ 345,454
Finished goods ................. 1,857,628
----------
TOTAL ....................... $2,203,082
6
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NINE MONTHS 1997 VS. NINE MONTHS 1996
Net sales increased 36%, or $1,372,821, to $5,202,370 from $3,829,549 in the
first nine months of fiscal 1997. RF Connectors sales increased 32% to
$3,782,070, and RF Neulink sales increased 49% to $1,420,300, from the first
nine months of fiscal 1996.
Cost of sales increased 70%, or $1,205,893, to $2,917,852 from $1,711,959 last
year and increased to 56% of sales from 45% of sales last year. The increase is
primarily due to the increase in sales. The increase in cost of sales, as a
percent of sales, is primarily due to reduced sales from the Neulink division
and the higher costs, as a percentage of sales, which are associated with the
lower Neulink sales.
Engineering expenses decreased 6%, or $19,981, to $327,875 from $347,856 last
year and declined, as a percent of sales, to 6% from 9% of sales last year due
to the increase in net sales.
Selling and general expenses increased 19%, or $182,952, to $1,155,500 from
$972,548, but declined, as a percent of sales, to 22% from 25% last year. The
decline as a percent of sales is attributable to the sales increase.
Interest income increased $10,481 to $48,534 from $38,053 due to the company's
higher average cash balances and an increase in the rate of interest received.
The provision for income taxes increased $44,000. The lower tax rate in fiscal
1996 benefitted from the use of tax loss carryforwards.
THREE MONTHS 1997 VS. THREE MONTHS 1996
Sales decreased 8%, or $126,517, to $1,523,442 from $1,649,959 in the third
quarter of fiscal 1997. Connector sales increased 8% to $1,262,757 and Neulink
sales declined 46% to $260,685 in the third quarter. Neulink sales declined in
the third quarter due to delays in receipt of orders from major customers. The
cause of these delays vary but include the acquisition of a major customer by a
large corporation, rescheduled satellite launches, project delays for
underground steam monitoring systems and the postponement of the FCCs decision
to deploy the emergency alert system to cable TV networks.
Cost of sales increased 6%, or $46,209, to $796,540 from $750,331 and as a
percentage of sales increased to 52% from 45% last year. The reasons for the
increase are discussed in the nine month results.
Engineering expenses decreased 5%, or $6,338, to $106,280 from $112,618 last
year and increased, as a percent of sales, to 7% from 6% of sales last year.
Engineering expenses increased, as a percent of sales, primarily as a result of
the decline in Neulink sales.
Selling and general expenses increased 9%, or $30,204, to $360,419 from 330,215,
and increased, due to the decline in sales, to 24% from 20% of sales last year.
Interest income increased $4,690 to $17,834 due to the company's higher average
cash balances and an increase in the rate of interest received.
7
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
MATERIAL CHANGES IN FINANCIAL CONDITION:
Cash increased $394,500 to $798,047 compared to the October 31, 1996 fiscal year
balance of $403,547. Cash and cash equivalents are $1,430,895 at July 31, 1997.
Trade accounts receivable increased $84,190, or 12% to $787,287 compared to the
October 31, 1996 balance of $703,097. This is due to the company's increased
sales .
Inventories increased $341,226 compared to the October 31, 1996 inventory level
as a result of purchases to meet higher customer demand.
Prepaid expenses and deposits increased $194,609 from October 31, 1996 due to
more deposits for inventory purchases.
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, 1997.
8
<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 27, 1997 By: /s/ Howard F. Hill
-------------------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: August 27, 1997 By: /s/ Terrie A. Gross
-------------------------------------
Terrie A. Gross
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 798,047
<SECURITIES> 632,848
<RECEIVABLES> 798,883
<ALLOWANCES> 11,596
<INVENTORY> 2,203,082
<CURRENT-ASSETS> 4,951,982
<PP&E> 540,822
<DEPRECIATION> 408,959
<TOTAL-ASSETS> 5,126,756
<CURRENT-LIABILITIES> 544,595
<BONDS> 0
0
0
<COMMON> 30,646
<OTHER-SE> 4,551,515
<TOTAL-LIABILITY-AND-EQUITY> 5,126,756
<SALES> 5,202,370
<TOTAL-REVENUES> 5,202,370
<CGS> 2,917,852
<TOTAL-COSTS> 4,401,227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (48,534)
<INCOME-PRETAX> 849,677
<INCOME-TAX> 340,000
<INCOME-CONTINUING> 509,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 509,677
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
