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, 1998
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, 1998, the registrant had 3,064,598 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
1998 1997
---------- ----------
(Unaudited) (Audited)
ASSETS
- -------------------
CURRENT ASSETS
Cash ............................................... $1,261,636 $ 877,587
Investments in available-for-sale securities ....... 654,458 642,799
Trade accounts receivable less allowance
for doubtful accounts of $32,945 ................... 821,714 765,433
Inventories - Note 3 ............................... 2,122,982 2,251,582
Prepaid expenses and deposits ...................... 351,255 293,218
Deferred tax assets ................................ 42,000 42,000
Note receivable from stockholder ................... 70,000 70,000
---------- ----------
TOTAL CURRENT ASSETS .......................... 5,324,045 4,942,619
FIXED ASSETS
Furniture and office equipment ..................... 108,206 108,206
Equipment and tooling .............................. 436,361 436,361
---------- ----------
Fixed assets, at cost ......................... 544,567 544,567
Less accumulated depreciation and amortization ..... 436,511 425,427
---------- ----------
NET FIXED ASSETS .............................. 108,056 119,140
Deferred tax assets ................................ 89,000 89,000
Other assets ....................................... 4,900 4,900
---------- ----------
TOTAL ASSETS .................................. $5,526,001 $5,155,659
========== ==========
2
<PAGE>
BALANCE SHEET
January 31 October 31
1998 1997
---------- ----------
(Unaudited) (Audited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
- --------------------------
CURRENT LIABILITIES
Accounts payable ............................. $ 240,877 $ 154,256
Accrued expenses ............................. 410,480 295,387
----------- -----------
TOTAL CURRENT LIABILITIES ............... 651,357 449,643
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 3,064,598 shares ...... 30,646 30,646
Additional paid-in capital ................... 4,372,608 4,803,366
Retained earnings ............................ 903,448 767,451
Unearned compensation ........................ (432,058) (895,447)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .............. 4,874,644 4,706,016
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ................. $ 5,526,001 $ 5,155,659
=========== ===========
See Notes to Financial Statements
3
<PAGE>
Item 1: FINANCIAL STATEMENTS (continued)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
January 31
-------------------------
1998 1997
---------- ----------
Net sales ........................................ $1,450,387 $1,928,097
Cost of Sales .................................... 705,627 1,070,432
---------- ----------
Gross profit .................................. 744,760 857,665
Operating expenses:
Engineering ................................... 187,715 111,828
Selling and general ........................... 353,284 337,042
---------- ----------
Total ..................................... 540,999 448,870
---------- ----------
Income from operations ........................ 203,761 408,795
Interest income, net ............................. 23,236 14,674
---------- ----------
Income before provision for income tax ....... 226,997 423,469
Provision for income tax ..................... 91,000 183,000
---------- ----------
Net income ............................... $ 135,997 $ 240,469
========== ==========
Per share data:
Basic earnings per share ................. $ 0.04 $ 0.08
========== ==========
Diluted earnings per share ............... $ 0.04 $ 0.08
========== ==========
See notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
January 31
------------------------
1998 1997
--------- ---------
<S> <C> <C>
Net income .............................................. $ 135,997 $ 240,472
Adjustments to reconcile net income
to net cash provided by operations
Depreciation and amortization ...................... 11,084 11,322
Amortization of unearned compensation .............. 32,631 36,141
Change in assets - (incr) decr:
Accounts receivable - trade ................... (56,281) 36,621
Inventories ................................... 128,600 (18,770)
Other assets .................................. (58,037) (21,978)
Change in liabilities - incr (decr):
Accounts payable .............................. 86,621 (56,184)
Accrued expenses .............................. 115,093 97,081
----------- -----------
Net cash provided by
operating activities ....................... 395,708 324,705
----------- -----------
INVESTING ACTIVITIES
Purchase of available-for-sale securities ...... (11,659) (9,464)
Capital expenditures ........................... 0 (3,860)
----------- -----------
Net cash used in operating activities .................. (11,659) (13,324)
----------- -----------
Net increase in cash
and cash equivalents ............................ 384,049 311,381
Cash and cash equivalents at the
beginning of the period ......................... 877,587 403,547
----------- -----------
Cash and cash equivalents at the end of period ..... $ 1,261,636 $ 714,928
=========== ===========
</TABLE>
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 January 31, 1998 and the results of
operations for the three month period ended January 31, 1998 and 1997.
Note 2 - Interim reporting
The results of operation for the three month period ended January 31,
1998 and 1997 are not necessarily indicative of the results to be
expected for the remainder of the year.
Note 3 - Components of Inventory
January 31, 1998
---------------------
(Unaudited)
Raw material and supplies $ 287,432
Finished goods 1,835,550
----------------
TOTAL. $ 2,122,982
Note 4 - Basic earnings per share
In February 1997, the Financail Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," ("SFAS 128") which replaces the presentation of primary
earnings per share required under previously promulgated accounting
standards with the presentation of basic earnings per share. It also
requires duel presentation of basic and diluted earnings per share on
the face of the income statement for all entities with complex capital
strutures and provides guidance on other computational changes. SFAS
128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Accordingly, the Company has
adopted SFAS 128 for three months ended January 31, 1998 and has
retroactively applied its provisions to earnings per share for the
three months ended January 31, 1997.
Basic earnings per share was computed based on 3,394,670 and 3,038,191
weighted average common and common equivalent shares outstanding for
the three months ended January 31, 1998 and 1997, respectively. Common
equivalent shares reflect vested stock options with a nominal exercise
price. Diluted earnings per share was computed based on 3,602,870 and
3,227,575 weighted average common and common equivalent shares
outstanding for the three months ended January 31, 1998 and 1997,
respectively. Common equivalent shares reflect the additional dilutive
effect of the exercise of outstanding stock options based on the
average market price for the quarter.
6
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three Months 1998 vs. Three Months 1997
Net sales decreased 24.8%, or $477,710, to $1,450,387 from $1,928,097 in the
first three months of fiscal 1998. RF Connectors sales declined $19,488 to
$1,182,442. Last year, Connectors' achieved record sales in the first quarter,
typically its seasonally weakest period. Sales at RF Neulink were $267,945, down
63% from record sales of $726,379 last year. Neulink's record sales last year
were due to initial shipments of wireless Emergency Alert System receivers.
Cost of sales decreased $364,805, to $705,627 from $1,070,432 last year. As a
percentage of sales, cost of sales declined to 49% of sales from 56% of sales
last year. Cost of sales declined due to lower sales at the RF Neulink division.
Engineering expenses increased 67.9%, or $75,887, to $187,715 from $111,828 last
year. The increase in engineering expenses is primarily related to
customer-funded engineering and development contract at the RF Neulink Division.
Selling, marketing and administrative expenses increased 4.8%, or $16,242, to
$353,284 from $337,042 last year. These expenses increased to 24% of sales from
17% of sales last year due to higher sales, marketing and administrative costs
to support expanded distribution, promote products at industry trade shows and
provide training for RF Connectors' distributors' sales agents.
Interest income increased $8,562 to $23,236 from $14,674 last year due to the
company's higher average cash balances and an increase in the rate of interest
received.
The provision for income taxes decreased $92,000 due to lower net earnings,
which resulted in a blended tax rate of 40% for the quarter compared to 42% in
the same period last year.
Material changes in financial condition:
Cash increased $384,049 to $1,261,636 compared to the October 31, 1997 fiscal
year balance of $877,587. This increase can be attributed to sales of a more
profitable mix of products.
Cash equivalents and investments were $1,916,094 at January 31, 1998 compared to
$1,520,386 at October 31, 1997.
Trade accounts receivable increased $56,281, or 7.4% to $821,714 compared to the
October 31, 1997 balance of $765,433.
Inventories decreased $128,600 compared to the October 31, 1997 inventory level.
The decrease can be attributed to an improved inventory control system.
Prepaid expenses and deposits increased $58,037 from October 31, 1997 due to
more deposits, by the Company, for inventory purchases.
7
<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 January 31, 1998.
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: March 12, 1998 By: Howard F. Hill
--------------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: March 12, 1998 By: Terrie A. Gross
--------------------------------
Terrie A. Gross
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 1,261,636
<SECURITIES> 654,458
<RECEIVABLES> 821,714
<ALLOWANCES> 32,945
<INVENTORY> 2,122,982
<CURRENT-ASSETS> 5,324,045
<PP&E> 544,567
<DEPRECIATION> 436,511
<TOTAL-ASSETS> 5,526,001
<CURRENT-LIABILITIES> 651,357
<BONDS> 0
0
0
<COMMON> 30,646
<OTHER-SE> 4,843,998
<TOTAL-LIABILITY-AND-EQUITY> 5,526,001
<SALES> 1,450,387
<TOTAL-REVENUES> 1,450,387
<CGS> 705,627
<TOTAL-COSTS> 1,246,626
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (23,236)
<INCOME-PRETAX> 226,997
<INCOME-TAX> 91,000
<INCOME-CONTINUING> 135,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,997
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
