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 January 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 January 31, 1997, the registrant had 2,778,191 shares of Common Stock,
$.01 par value, issued and outstanding.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEET
January 31 October 31
1997 1996
----------- -----------
(Unaudited) (Audited)
ASSETS
- ------------------
CURRENT ASSETS
Cash ............................................... $ 714,928 $ 403,547
Investments in available-for-sale securities ....... 613,650 604,186
Trade accounts receivable less allowance
for doubtful accounts of $13,299 ................... 666,476 703,097
Inventories - Note 3 ............................... 1,880,626 1,861,856
Prepaid expenses and deposits ...................... 298,087 276,109
Deferred tax assets ................................ 98,000 60,000
---------- ----------
TOTAL CURRENT ASSETS .......................... 4,271,767 3,908,795
FIXED ASSETS
Furniture and office equipment ..................... 111,493 107,633
Equipment and tooling .............................. 381,891 381,891
---------- ----------
Fixed assets, at cost ......................... 493,384 489,524
Less accumulated depreciation and amortization ..... 389,037 377,715
---------- ----------
NET FIXED ASSETS .............................. 104,347 111,809
Deferred tax assets ................................ 38,000
Other assets ....................................... 4,900 4,900
---------- ----------
TOTAL ASSETS .................................. $4,381,014 $4,063,504
========== ==========
See Notes to Financial Statements
<PAGE>
Item 1: Financial Statements (continued)
BALANCE SHEET
January 31 October 31
1997 1996
------------ -----------
(Unaudited) (Audited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
- -----------------------
CURRENT LIABILITIES
Accounts payable ............................. $ 130,066 $ 186,250
Accrued expenses ............................. 365,096 268,015
----------- -----------
TOTAL CURRENT LIABILITIES ............... 495,162 454,265
TOTAL LIABILITIES
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 2,778,191 shares ..... 27,782 27,782
Capital paid in excess of par value .......... 4,777,017 3,868,642
Retained earnings ............................ 407,019 166,547
Unearned compensation ........................ (1,325,966) (453,732)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ............... 3,885,852 3,609,239
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY .................. $ 4,381,014 $ 4,063,504
=========== ===========
See Notes to Financial Statements
<PAGE>
Item 1: Financial Statements (continued)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
January 31
------------------------
1997 1996
---------- ----------
Net sales ........................................ $1,928,097 $ 909,965
Cost of sales .................................... 1,070,432 450,965
---------- ----------
Gross profit .................................... 857,665 459,000
Operating expenses:
Engineering ................................... 111,828 104,657
Selling and general ........................... 337,042 280,308
---------- ----------
Total ...................................... 448,870 384,965
---------- ----------
Income from operations ........................ 408,795 74,035
Interest income, net ............................ 14,674 14,011
---------- ----------
Income before provision for income taxes ...... 423,469 88,046
Provision for income taxes .................... 183,000 20,000
---------- ----------
Net income ................................. $ 240,469 $ 68,046
========== ==========
Per share data:
Net income ................................. $ 0.08 $ 0.02
========== ==========
Weighted average common
and common equivalent
shares outstanding ............................... 3,105,646 2,785,969
========== ==========
See Notes to Financial Statements
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
January 31
---------------------
1997 1996
------- -------
OPERATING ACTIVITIES
Net income ........................................ $ 240,472 $ 68,046
Adjustments to reconcile net income
to net cash provided by (used in) operations
Depreciation and amortization ..................... 11,322 11,032
Amortization of unearned compensation ............. 36,141 9,582
Change in assets - (incr) decr:
Accounts receivable - trade ..................... 36,621 (221,387)
Inventories ..................................... (18,770) (53,671)
Other assets .................................... (21,978) 15,070
Change in liabilities - incr (decr):
Accounts payable ................................ (56,184) (28,809)
Accrued expenses ................................ 97,081 56,717
--------- ---------
Net cash provided by (used in)
operating activities .......................... 324,705 (143,420)
--------- ---------
INVESTING ACTIVITIES
Purchase of available for sale securities ......... (9,464) (18,145)
Capital Expenditures .............................. (3,860) (17,623)
--------- ---------
Net cash used in investing activities .......... (13,324) (35,768)
--------- ---------
FINANCING ACTIVITIES
Proceeds from exercise of stock options ........... 0 20,000
--------- ---------
Net cash provided by financing activities ......... 0 20,000
--------- ---------
Net decrease in cash and cash equivalents ............ 311,381 (159,188)
Cash and cash equivalents at the beginning of period . 403,547 211,290
--------- ---------
Cash and cash equivalents at the end of period ....... $ 714,928 $ 52,102
========= =========
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 fairly the financial
position of RF Industries, Ltd. as of January 31, 1997 and the results
of operations and cash flows for the three month periods ended January
31, 1997 and 1996.
Note 2 - Interim reporting
The result of operations for the three month periods ended January 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
January 31 October 31
1997 1996
---------- ----------
(Unaudited) (Audited)
Raw materials & supplies ........ $ 375,626 $ 379,390
Finished goods .................. 1,505,000 1,482,466
---------- ----------
Total .................. $1,880,626 $1,861,856
========== ==========
Note 4 - Compensatory stock options
During the quarter ended January 31, 1997, in connection with the
employment agreements, two executives received options to purchase
100,000 shares of common stock each at $.10 per share. These options
will be earned ratably over a ten year period. In connection with
another employment agreement, another executive was granted an option
to purchase 15,000 shares of common stock at $4.40 per share. This
option will be earned over a two year period. As a result of these
option, unearned compensation, representing the difference between the
fair market value of a common share at the date of grant and the option
strike price multiplied by the number of options granted, was increased
by $908,375.
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months 1997 vs. Three Months 1996
Sales increased $1,018,132, or 112% to $1,928,097 for the quarter ended January
31, 1997 compared to $909,965 in the first quarter of fiscal 1996. The sales
gain is attributable to the company's expanded RF Connectors distribution, which
helped raise Connectors sales 70% to $1,202,000. Net sales also benefited from
gains in Neulink wireless products, which reached $726,000 for the quarter
compared to $196,000 last year.
Cost of sales increased $619,467 and increased, as a percent of sales, to 56%
from 50% last year. Cost of sales increased due to the higher portion of Neulink
product shipped compared to 1996. The company's Neulink products have lower
gross margins.
Engineering expenses increased $7,171. The majority of engineering expenses
during the quarter were related to the development of various modems. As a
percent of sales, engineering expenses declined to 6% from 12% of sales last
year.
Selling and general expenses increased $56,734, or 20% for the three months
ended January 31, 1997 compared to the same period ended January 31, 1996. The
increase is due to higher labor, sales, advertising and marketing costs, trade
show expenses and the design of a new catalog. The company is incurring expenses
for promoting its products at numerous trade shows throughout North America.
Expenses associated with Hytek's consulting agreement also account for a portion
of the increased expense. As a percentage of sales, selling and general expenses
declined to 17% from 31% of sales last year. The decline is due to the company's
increased sales and cost control efforts.
The provision for income taxes increased $163,000 to $183,000. 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.
Material changes in financial condition:
Cash and investments increased $320,845 to $1,328,578, compared to the October
31, 1996 fiscal year end balance of $1,007,733. The increase in cash is
attributable to the company's increased sales and improved profitability.
Management anticipates that combined cash and cash equivalents, together with
internally generated capital, will be adequate to fund the company throughout
the current fiscal year.
Trade accounts receivable declined due to expanded collection efforts by the
accounts receivable department.
Inventories increased $18,770 for the quarter ended January 31, 1997, and remain
at a relatively high level to enable the company rapidly to meet customer and
distributor demands.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Prepaid expenses increased $21,978 due to more deposits for inventory purchases.
Accounts payable decreased $56,184 compared to their October 31, 1996 level.
Payables remain in control due to the company's strong cash flow.
Accrued expenses increased $97,081. The increase is due to increased income tax
accrual.
Working capital increased $322,075, or 9% from fiscal year end levels. This is
primarily due to the company's profitability and is accounted for by high
inventory levels and a significant increase in cash.
PART II. OTHER INFORMATION
Items 1-4: Not applicable.
Item 5: Information required in lieu of Form 8-K
None.
Item 6: (a) Exhibits on Form 8-K:
10.23 Employment Agreement - Perlman
10.24 Employment Agreement - LaFay
10.25 Employment Agreement - Ekroos
b) Reports on Form 8-K:
Noreports on Form 8-K were filed during the
fiscal quarter ended January 31, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Acto 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: March 7, 1997 By: Howard F. Hill
------------------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: March 7, 1997 By: Howard F. Hill
------------------------------------
Howard F. Hill, President
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 714,928
<SECURITIES> 613,650
<RECEIVABLES> 679,775
<ALLOWANCES> 13,299
<INVENTORY> 1,880,626
<CURRENT-ASSETS> 4,271,767
<PP&E> 493,384
<DEPRECIATION> 389,037
<TOTAL-ASSETS> 4,381,014
<CURRENT-LIABILITIES> 130,066
<BONDS> 0
0
0
<COMMON> 27,782
<OTHER-SE> 3,858,070
<TOTAL-LIABILITY-AND-EQUITY> 4,381,014
<SALES> 1,928,097
<TOTAL-REVENUES> 1,928,097
<CGS> 1,070,432
<TOTAL-COSTS> 1,519,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,674)
<INCOME-PRETAX> 423,469
<INCOME-TAX> 183,000
<INCOME-CONTINUING> 240,469
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 240,469
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
