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, 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 July 31, 1998, the registrant had 3,078,598 shares of Common Stock, $.01
par value, issued and outstanding.
1
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEET
July 31 October 31
1998 1997
---------- ----------
(Unaudited) (Audited)
ASSETS
- ------------------
CURRENT ASSETS
Cash ............................................... $1,197,509 $ 877,587
Investments in available-for-sale securities ....... 1,111,221 642,799
Trade accounts receivable less allowance
for doubtful accounts of $22,227 ................... 752,961 765,433
Inventories - Note 3 ............................... 2,409,689 2,251,582
Prepaid expenses and deposits ...................... 235,595 293,218
Deferred tax assets ................................ 42,000 42,000
Note receivable from stockholder ................... 70,000 70,000
---------- ----------
TOTAL CURRENT ASSETS .......................... 5,818,975 4,942,619
FIXED ASSETS
Furniture and office equipment ..................... 139,657 108,206
Equipment and tooling .............................. 489,922 436,361
---------- ----------
Fixed assets, at cost ......................... 629,579 544,567
Less accumulated depreciation and amortization ..... 457,993 425,427
---------- ----------
NET FIXED ASSETS .............................. 171,586 119,140
Deferred tax assets ................................ 89,000 89,000
Other assets ....................................... 4,900 4,900
---------- ----------
TOTAL ASSETS .................................. $6,084,461 $5,155,659
========== ==========
See Notes to Financial Statements
2
<PAGE>
BALANCE SHEET
July 31 October 31
1998 1997
---------- ----------
LIABILITIES AND (Unaudited) (Audited)
STOCKHOLDERS' EQUITY
- ---------------------------------------
CURRENT LIABILITIES
Accounts payable ............................. $ 234,570 $ 154,256
Accrued expenses ............................. 371,946 295,387
----------- -----------
TOTAL CURRENT LIABILITIES ............... 606,516 449,643
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 3,078,598 shares ...... 30,786 30,646
Capital paid in excess of par value .......... 4,373,868 4,803,366
Retained earnings ............................ 1,438,311 767,451
Unearned compensation ........................ (365,020) (895,447)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .............. 5,477,945 4,706,016
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ................. $ 6,084,461 $ 5,155,659
=========== ===========
See Notes to Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
July 31 July 31
--------------------- ---------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales .......................... $1,585,907 $1,523,442 $4,901,897 $5,202,370
Cost of Sales ...................... 783,650 796,540 2,404,007 2,917,852
---------- ---------- ---------- ----------
Gross Profit .................. 802,257 726,902 2,497,890 2,284,518
---------- ---------- ---------- ----------
Operating expenses:
Engineering ................... 110,356 106,280 355,982 327,875
Selling and general ........... 381,486 360,419 1,102,912 1,155,500
---------- ---------- ---------- ----------
Total ....................... 491,842 466,699 1,458,894 1,483,375
---------- ---------- ---------- ----------
Operating income .............. 310,415 260,203 1,038,996 801,143
Interest income .................... 34,502 17,834 81,864 48,534
---------- ---------- ---------- ----------
Income before provision
for income tax ..................... 344,917 278,037 1,120,860 849,677
Provision for state & federal
income tax ......................... 138,000 112,000 450,000 340,000
---------- ---------- ---------- ----------
Net income .................... $ 206,917 $ 166,037 $ 670,860 $ 509,677
========== ========== ========== ==========
Per share data:
Net income .................... $ 0.06 $ 0.05 $ 0.20 $ 0.16
========== ========== ========== ==========
Weighted average common
and common equivalent shares
outstanding ........................ 3,414,859 3,315,157 3,405,355 3,153,946
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
July 31
-------------------------
1998 1997
---------- ----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income ............................................. $ 670,860 $ 509,677
Adjustments to reconcile net income
to net cash provided by operations
Depreciation and amortization ..................... 32,566 31,234
Amortization of unearned compensation ............. 99,669 461,660
Change in assets - (incr) decr:
Accounts receivable - trade .................. 12,472 (84,190)
Inventories .................................. (158,107) (341,226)
Other assets ................................. 57,623 (194,609)
Change in liabilities - incr (decr):
Accounts payable ............................. 80,314 112,143
Accrued expenses ............................. 76,559 (21,813)
----------- -----------
Net cash provided by
operating activities ...................... 871,956 472,876
----------- -----------
INVESTING ACTIVITIES
Purchase of available-for-sale securities ..... (468,422) (28,662)
Capital expenditures .......................... (85,012) (51,298)
----------- -----------
Net cash used in investing activities ................ (553,434) (79,960)
----------- -----------
FINANCING ACTIVITIES
Proceeds from exercise of common stock options 1,400 1,584
----------- -----------
Net cash provided by financing activities .... 1,400 1,584
----------- -----------
Net increase in cash
and cash equivalents ........................... 319,922 394,500
Cash and cash equivalents at the
beginning of the period ........................ 877,587 403,547
----------- -----------
Cash and cash equivalents at the end of period .... $ 1,197,509 $ 798,047
=========== ===========
</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 July 31, 1998 and the results of operations
for the three month and nine month periods ended July 31, 1998 and
1997.
Note 2 - Interim reporting
The results of operation for the three month and nine month periods
ended July 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
July 31, 1998
---------------------
(Unaudited)
Raw material and supplies.......... $ 294,588
Finished goods .................... 2,115,101
----------
TOTAL ............................ $2,409,689
6
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three Months 1998 vs. Three Months 1997
Sales increased 4.1%, or $62,465, to $1,585,907 from $1,523,442 in the third
quarter of fiscal 1998. Sales at RF Connector increased 10.1% to $1,391,239
compared to $1,262,756 for the same quarter last year. The increase in Connector
sales was due to an improved product mix and cable product sales. Sales at
Neulink decreased 25.3% to $194,668 compared to $260,686 last year, as this
division experienced delays in receipt of orders from a number of its major
customers.
Cost of sales decreased 1.6%, or $12,890, to $783,650 from $796,540 and as a
percentage of sales declined to 49.4% of sales from 52.2% last year. The higher
margin on sales is attributable to an improved product mix during the quarter.
Engineering expenses increased 3.8%, or $4,076, to $110,356 from $106,280 last
year and remained at 6.9% of sales for both quarters.
Selling and general expenses increased 5.8%, or $21,067, to $381,486 from
$360,419 last year, and increased, as a percent of sales, to 24% from 23.6% last
year. Selling and general expenses were higher due to greater customer support,
training, increased trade shows and new hires.
Interest income increased $16,668 to $34,502 from $17,834 last year due to the
company's higher average cash balances and an increase in the rate of interest
received.
Nine Months 1998 vs. Nine Months 1997
Net sales decreased 5.7%, or $300,473, to $4,901,897 from $5,202,370 in the
first nine months of fiscal 1998. RF Connectors sales increased 4.7% to
$3,961,022 from $3,782,070 in the same period last year. Connectors' sales in
the first nine months of fiscal 1998 increased due to the introduction of cable
assembly products and an improved product mix. Neulink sales were $940,874, down
33.7% from the same period last year, due to delays in orders from major
customers.
Cost of sales decreased 17.6%, or $513,845, to $2,404,007 from $2,917,852 last
year and as a percentage of sales decreased to 49% from 56% last year. The
decline in cost of sales is due to an improved product mix at both Connectors
and Neulink divisions.
Engineering expenses increased 8.5%, or $28,107, to $355,982 from $327,875 last
year and increased, as a percentage of sales, to 7.3% from 6.3% last year.
Engineering expenses increased to support the development of new wireless
products. These expenses vary considerably depending upon the development of new
Connector or wireless products.
Selling and general expenses decreased 4.5%, or $52,588, to $1,102,912 from
$1,155,500. Selling and general expenses remained at 22% of sales for both
periods.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Interest income increased $33,330 to $81,864 from $48,534 due to the company's
higher average cash balances and an increase in the rate of interest received.
The provision for income taxes increased $110,000 due to higher net earnings,
which resulted in a blended tax rate of 40% for the nine month period.
Material changes in financial condition:
Improved operating profitability helped raise cash $319,922 to $1,197,509
compared to the October 31, 1997 fiscal year end balance of $877,587. Cash and
cash equivalents increased to $2,308,730 at July 31, 1998, compared to
$1,520,386 at October 31, 1997.
Trade accounts receivable decreased $12,472, or 1.6% to $752,961 compared to the
October 31, 1997 balance of $765,433. Trade accounts receivable have remained
relatively constant at approximately 50% of quarterly sales.
Inventories increased $158,107 compared to the October 31, 1997 inventory level
as a result of purchases to meet higher customer demand. Inventory increases
have been concentrated in the Connector products.
Prepaid expenses and deposits decreased $57,623 from October 31, 1997. This
decrease is primarily due to fewer deposits on 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, 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: August 26, 1998 By: /s/ Howard F. Hill
-------------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: August 26 , 1998 By: /s/ Terrie A. Gross
-------------------------------
Terrie A. Gross
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 1,197,509
<SECURITIES> 1,111,221
<RECEIVABLES> 775,188
<ALLOWANCES> 22,227
<INVENTORY> 2,409,689
<CURRENT-ASSETS> 5,818,975
<PP&E> 629,579
<DEPRECIATION> 457,993
<TOTAL-ASSETS> 6,084,461
<CURRENT-LIABILITIES> 606,516
<BONDS> 0
0
0
<COMMON> 30,786
<OTHER-SE> 5,447,159
<TOTAL-LIABILITY-AND-EQUITY> 6,084,461
<SALES> 4,901,897
<TOTAL-REVENUES> 4,901,897
<CGS> 2,404,007
<TOTAL-COSTS> 3,862,901
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (81,864)
<INCOME-PRETAX> 1,120,860
<INCOME-TAX> 450,000
<INCOME-CONTINUING> 670,860
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 670,860
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
