SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FOR 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
Securities Exchange Act of 1934
for Quarter ended April 30, 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 April 30, 1998, the registrant had 3,068,598 shares of Common Stock, $.01
par value, issued and outstanding.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEET
April 30 October 31
1998 1997
---------- ----------
(Unaudited) (Audited)
ASSETS
- ----------------------
CURRENT ASSETS
Cash ................................................ $1,008,577 $ 877,587
Investments in available-for-sale securities ........ 1,091,333 642,799
Trade accounts receivable less allowance
for doubtful accounts of $31,326 .................... 946,791 765,433
Inventories - Note 3 ................................ 2,268,986 2,251,582
Prepaid expenses and deposits ....................... 273,566 293,218
Deferred tax assets ................................. 42,000 42,000
Note receivable from stockholder .................... 70,000 70,000
---------- ----------
TOTAL CURRENT ASSETS ........................... 5,701,253 4,942,619
FIXED ASSETS
Furniture and office equipment ...................... 116,196 108,206
Equipment and tooling ............................... 479,666 436,361
---------- ----------
Fixed assets, at cost .......................... 595,862 544,567
Less accumulated depreciation and amortization ...... 444,412 425,427
---------- ----------
NET FIXED ASSETS ............................... 151,450 119,140
Deferred tax assets ................................. 89,000 89,000
Other assets ........................................ 4,900 4,900
---------- ----------
TOTAL ASSETS ................................... $5,946,603 $5,155,659
========== ==========
See Notes to Financial Statements
<PAGE>
BALANCE SHEET
April 30 October 31
1998 1997
---------- ----------
(Unaudited) (Audited)
LIABILITIES AND
STOCKHOLERS' EQUITY
- ---------------------------------------
CURRENT LIABILITIES
Accounts payable ................................. $ 171,207 $ 154,256
Accrued expenses ................................. 538,887 295,387
----------- -----------
TOTAL CURRENT LIABILITIES ................... 710,094 449,643
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 3,068,598 shares .......... 30,686 30,646
Capital paid in excess of par value .............. 4,372,968 4,803,366
Retained earnings ................................ 1,231,394 767,451
Unearned compensation ............................ (398,539) (895,447)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .................. 5,236,509 4,706,016
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ..................... $ 5,946,603 $ 5,155,659
=========== ===========
See Notes to Financial Statements
2
<PAGE>
STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
April 30 April 30
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
Net Sales .................. $1,865,603 $1,750,831 $3,315,990 $3,678,928
Cost of Sales .............. 914,730 1,050,880 1,620,357 2,121,312
---------- ---------- ---------- ----------
Gross Profit .......... 950,873 699,951 1,695,633 1,557,616
---------- ---------- ---------- ----------
Operating expenses:
Engineering ........... 57,911 109,767 245,626 221,595
Selling and general ... 368,142 458,039 721,426 795,081
---------- ---------- ---------- ----------
Total ............... 426,053 567,806 967,052 1,016,676
---------- ---------- ---------- ----------
Operating income ...... 524,820 132,145 728,581 540,940
Interest income ............ 24,122 16,026 47,362 30,700
---------- ---------- ---------- ----------
Income before provision
for income tax ............. 548,942 148,171 775,943 571,640
Provision for state & federal
income tax ................. 221,000 45,000 312,000 228,000
---------- ---------- ---------- ----------
Net income ............ $ 327,942 $ 103,171 $ 463,943 $ 343,640
========== ========== ========== ==========
Per share data:
Net income ............ $ 0.10 $ 0.03 $ 0.14 $ 0.11
========== ========== ========== ==========
Weighted average common
and common equivalent shares
outstanding ................ 3,406,538 3,163,291 3,400,604 3,125,872
========== ========== ========== ==========
See Notes to Financial Statements
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
April 30
-----------------------
1998 1997
-------- --------
Net income .......................................... $ 463,943 $ 343,640
Adjustments to reconcile net income
to net cash (used in) provided by operations
Depreciation and amortization ..................... 18,985 19,142
Amortization of unearned compensation ............. ( 66,150) 109,677
Change in assets - (incr) decr:
Accounts receivable - trade ................... (181,358) (57,624)
Inventories .................................. (17,404) (97,362)
Other assets ................................. 19,652 (236,618)
Change in liabilities - incr (decr):
Accounts payable ............................. 16,951 178,723
Accrued expenses ............................. 243,500 125,440
----------- -----------
Net cash (used in) provided by
operating activities ...................... 630,419 385,018
----------- -----------
INVESTING ACTIVITIES
Purchase of available-for-sale securities ..... (448,534) (18,861)
Capital expenditures .......................... (51,295) (23,959)
----------- -----------
Net cash provided by (used in)
operating activities ............................. (499,829) (42,820)
----------- -----------
FINANCING ACTIVITIES
Proceeds from sale of common stock ............ 0 20,000
Proceeds from exercise of common stock options 400 69,350
----------- -----------
Net cash provided by financing activities ..... 400 89,350
----------- -----------
Net (decrease) increase in cash
and cash equivalents ........................... 130,990 431,548
Cash and cash equivalents at the
beginning of the period ........................ 877,587 403,547
----------- -----------
Cash and cash equivalents at the end of period .... $ 1,008,577 $ 835,095
=========== ===========
See Notes to Financial Statements
3
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1 - Management's opinion
In the opinion of management, the accompanying financial statements
contain all adjustments necessary to present the financial position of
RF Industries, Ltd. as of April 30, 1998 and the results of operations
for the three month and six month periods ended April 30, 1998 and
1997.
Note 2 - Interim reporting
The results of operation for the three month and six month periods
ended April 30, 1998 and 1997 are not necessarily indicative of the
results to be expected for the remainder of the year.
Note 3 - Components of Inventory
April 30, 1998
---------------------
(Unaudited)
Raw material and supplies........... $ 276,813
Finished goods ..................... 1,992,173
----------
TOTAL ....................... $2,268,986
4
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months 1998 vs. Three Months 1997
Sales increased 7%, or $114,772, to $1,865,603 from $1,750,831 in the second
quarter of fiscal 1998. Sales at RF Connector increased 5% to $1,384,342
compared to $1,317,384 for the same quarter last year. Sales at Neulink
increased 8% to $481,261 compared to $443,447 last year.
Cost of sales decreased 13%, or $136,150, to $914,730 from $1,050,880 and as a
percentage of sales declined to 49% of sales from 60% last year. The higher
margin on sales is attributable to an improved product mix during the quarter.
Engineering expenses decreased 47%, or $51,856, to $57,911 from $109,767 last
year and declined, as a percent of sales, to 3% from 6% of sales last year.
Engineering expenses were higher last year due to the development of the large
connector product line.
Selling and general expenses decreased 20%, or $89,8970, to $368,142 from
$458,039 last year, and decreased, as a percent of sales, to 20% from 26% last
year. Selling and general expenses were higher last year to support start-up
costs associated with the training of sales staff at a number of the Company's
major new distributors.
Interest income increased $8,096 to $24,122 from $16,026 last year due to the
company's higher average cash balances and an increase in the rate of interest
received.
Six Months 1998 vs. Six Months 1997
Net sales decreased 9.8%, or $362,938, to $3,315,990 from $3,678,928 in the
first six months of fiscal 1998. RF Connectors sales increased 2% to $2,566,784
from $2,519,314 in the same period last year. Connectors' sales in the first six
months of fiscal 1997 benefitted from record sales in the first quarter,
typically the Company's seasonally weakest period. Neulink sales were $749,206,
down 35% from the same period last year. Neulink's sales in the first six months
last year were significantly higher due to initial shipments of wireless
receivers for the nation's new Emergency Alert System.
Cost of sales decreased 23.6%, or $500,955, to $1,620,357 from $2,121,312 last
year and as a percentage of sales decreased to 49% from 58% last year. The
decline in cost of sales is due to an improved product mix.
Engineering expenses increased 10.8%, or $24,031, to $245,626 from $221,595 last
year. These expenses vary considerable depending upon the development of new
Connector or wireless products.
Selling and general expenses decreased 9.2%, or $73,655, to $721,426 from
$795,081. Selling and general expenses remained at 22% of sales for both
periods.
Interest income increased $16,658 to $47,362 from $30,700 due to the company's
higher average cash balances and an increase in the rate of interest received.
The provision for income taxes increased $84,000 due to higher net earnings,
which resulted in a blended tax rate of 40% for the six month period.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Material changes in financial condition:
Cash increased $130,990 to $1,008,577 compared to the October 31, 1997 fiscal
year balance of $877,587. Cash and cash equivalents are $2,099,910 at April 30,
1998, compared to $1,520,000 at October 31, 1997.
Trade accounts receivable increased $181,358, or 24% to $946,791 compared to the
October 31, 1997 balance of $765,433. The increase is due to higher 2nd quarter
shipments.
Inventories increased $17,404 compared to the October 31, 1997 inventory level
as a result of purchases to meet higher customer demand.
Prepaid expenses and deposits decreased $19,652 from October 31, 1997.
PART II. OTHER INFORMATION
Items 1-4: Not applicable
Item 5: Information required in lieu of Form 8-K
None.
Item 6: Exhibits and Reports on 8-K
(a) None required
(b) Reports on Form 8-K
No reports on Form 8-K were filed during fiscal
quarter ended April 30, 1998.
6
<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: June 11, 1998 By: /s/ Howard F. Hill
-----------------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: June 11, 1998 By: /s/ Terrie A. Gross
-----------------------------------
Terrie A. Gross
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<CASH> 1,008,577
<SECURITIES> 1,091,333
<RECEIVABLES> 978,117
<ALLOWANCES> 31,326
<INVENTORY> 2,268,986
<CURRENT-ASSETS> 5,701,253
<PP&E> 595,862
<DEPRECIATION> 444,412
<TOTAL-ASSETS> 5,946,603
<CURRENT-LIABILITIES> 710,094
<BONDS> 0
0
0
<COMMON> 30,686
<OTHER-SE> 5,205,823
<TOTAL-LIABILITY-AND-EQUITY> 5,946,603
<SALES> 3,315,990
<TOTAL-REVENUES> 3,315,990
<CGS> 1,620,357
<TOTAL-COSTS> 2,587,409
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (47,358)
<INCOME-PRETAX> 775,939
<INCOME-TAX> 312,000
<INCOME-CONTINUING> 463,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 463,939
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
