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, 1999
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, 1999, 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
April 30 October 31
1999 1998
---------- -----------
(Unaudited) (Audited)
ASSETS
- ----------------------
CURRENT ASSETS
Cash ................................................. $1,491,050 $1,209,143
Investments in available-for-sale securities ......... 1,166,684 1,129,582
Trade accounts receivable less allowance
for doubtful accounts of $27,271 & $30,000 ........... 640,668 806,669
Inventories - Note 3 ................................. 2,329,943 2,466,448
Prepaid expenses and deposits ........................ 186,219 244,407
Deferred tax assets .................................. 66,000 66,000
Note receivable from stockholder ..................... 70,000 70,000
---------- ----------
TOTAL CURRENT ASSETS ............................ 5,950,564 5,992,249
FIXED ASSETS
Furniture and office equipment ....................... 142,919 158,628
Equipment and tooling ................................ 508,430 479,880
---------- ----------
Fixed assets, at cost ........................... 651,349 638,508
Less accumulated depreciation and amortization ....... 495,458 475,734
---------- ----------
NET FIXED ASSETS ................................ 155,891 162,774
Deferred tax assets .................................. 100,000 100,000
Other assets ......................................... 4,900 4,900
---------- ----------
TOTAL ASSETS .................................... $6,211,355 $6,259,923
========== ==========
See Notes to Financial Statements
2
<PAGE>
BALANCE SHEET
April 30 October 31
1999 1998
---------- -----------
(Unaudited) (Audited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
- ---------------------------------------
CURRENT LIABILITIES
Accounts payable .................................... $ 67,969 $ 203,650
Accrued expenses .................................... 249,347 458,670
---------- ----------
TOTAL CURRENT LIABILITIES ...................... 317,316 662,320
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 3,078,598 shares ............. 30,786 30,786
Capital paid in excess of par value ................. 4,373,868 4,373,868
Retained earnings ................................... 1,816,847 1,524,450
Unearned compensation ............................... (274,609) (331,501)
Treasury stock, at cost (29,400 shares) ............. (52,853) 0
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ..................... 5,894,039 5,597,603
---------- ----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ........................$ 6,211,355 $ 6,259,923
=========== ===========
See Notes to Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited) (Unaudited)
Three Months Ended Six Months Ended
April 30 April 30
-------------------- --------------------
1999 1998 1999 1998
------- ------ ------- ------
<S> <C> <C> <C> <C>
Net Sales ..................... $1,492,019 $1,865,603 $2,822,817 $3,315,990
Cost of Sales ................. 747,537 914,730 1,409,142 1,620,357
---------- ---------- ---------- ----------
Gross Profit ............. 744,482 950,873 1,413,675 1,695,633
---------- ---------- ---------- ----------
Operating expenses:
Engineering .............. 74,905 57,911 140,498 245,626
Selling and general ...... 436,269 368,142 848,089 721,426
---------- ---------- ---------- ----------
Total .................. 511,174 426,053 988,587 967,052
---------- ---------- ---------- ----------
Operating income ......... 233,308 524,820 425,088 728,581
Interest income ............... 31,861 24,122 63,309 47,362
---------- ---------- ---------- ----------
Income before provision
for income tax ........... 265,169 548,942 488,397 775,943
Provision for state & federal
income tax ............... 107,000 221,000 196,000 312,000
---------- ---------- ---------- ----------
Net income ............... $ 158,169 $ 347,942 $ 292,397 $ 463,943
========== ========== ========== ==========
Per share data:
Basic earnings per share . $ 0.05 $ 0.11 $ 0.09 $ 0.15
========== ========== ========== ==========
Diluted earnings per share $ 0.04 $ 0.10 $ 0.08 $ 0.14
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
April 30
--------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income ....................................................... $ 292,397 $ 463,943
Adjustments to reconcile net income
to net cash (used in) provided by operations
Depreciation and amortization ............................... 19,724 18,985
Amortization of unearned compensation ....................... 56,892 (66,150)
Change in assets - (incr) decr:
Accounts receivable - trade ............................ 166,001 (181,358)
Inventories ............................................ 136,505 (17,404)
Other assets ........................................... 58,188 19,652
Change in liabilities - incr (decr):
Accounts payable ....................................... (135,681) 16,951
Accrued expenses ....................................... (209,323) 243,500
----------- -----------
Net cash provided by operating activities ..................... 384,703 630,419
----------- -----------
INVESTING ACTIVITIES
Purchase of available-for-sale securities ............... (37,102) (448,534)
Capital expenditures .................................... (12,841) (51,295)
----------- -----------
Net cash (used in) operating activities ......................... (49,943) (499,829)
----------- -----------
FINANCING ACTIVITIES
Purchase of treasury stock ............................. (52,853) 0
Proceeds from exercise of common stock options ......... 0 400
----------- -----------
Net cash provided by (used in) financing activities ............. (52,853) 400
----------- -----------
Net increase in cash and cash equivalents ...................... 281,907 130,990
Cash and cash equivalents at the
beginning of the period .................................... 1,209,143 877,587
-----------
Cash and cash equivalents at the end of period .................. $ 1,491,050 $ 1,008,577
=========== ===========
</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 April 30, 1999 and the results of operations
for the three month and six month periods ended April 30, 1999 and
1998.
Note 2 - Interim reporting
The results of operations for the three month and six month periods
ended April 30, 1999 and 1998 are not necessarily indicative of the
results to be expected for the remainder of the year.
Note 3 - Components of Inventory
April 30, 1999
-----------------
(Unaudited)
Raw material and supplies $ 280,600
Finished goods .......... 2,049,343
----------
TOTAL ................... $2,329,943
6
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months 1999 vs. Three Months 1998
Sales decreased 20%, or $373,584, to $1,492,019 from $1,865,603 in the second
quarter of fiscal 1999. Sales at RF Connector decreased 14% to $1,193,034
compared to $1,384,342 for the same quarter last year. Sales at Neulink
decreased 38% to $298,985 compared to $481,261 last year. The decrease in sales
can be attributed to a general slow down in the electronic distributor market.
Cost of sales decreased 18%, or $167,193, to $747,537 from $914,730. The
decrease is due to reduction in material control expenses.
Engineering expenses increased 29%, or $16,994, to $74,905 from $57,911 last
year and increased, as a percent of sales, to 5% from 3% of sales last year. The
increase is due to an increase in R & D for the second quarter.
Selling and general expenses increased 19%, or $68,127, to $436,269 from
$368,142 last year, and increased, as a percent of sales, to 29% from 20% last
year. This increase is due to increased travel, advertising, insurance, and
trade show expenses.
Interest income increased $7,739 to $31,861 from $24,122 last year due to the
company's higher average cash balances and an increase in the rate of interest
received.
Six Months 1999 vs. Six Months 1998
Net sales decreased 15%, or $493,173, to $2,822,817 from $3,315,990 in the first
six months of fiscal 1999. RF Connectors sales decreased 13% to $2,238,544 from
$2,566,784 in the same period last year.
Neulink sales were $584,273, down 22% from the same period last year. The
decrease in sales in due to the general slow down in the electronic distributor
market.
Cost of sales decreased 13%, or $211,215, to $1,409,142 from $1,620,357 last
year. The decrease is due to a reduction in material control expenses.
Engineering expenses decreased 43%, or $105,128, to $140,498 from $245,626 last
year. This decrease is due to a reduction in Neulink R&D expenses for the first
six months.
Selling and general expenses increased 18%, or $126,663, to $848,089 from
$721,426. Selling and general expenses increased, as a percentage of sales, to
30% from 22% for the same six month period last year. The increase is due to
increased expenses in travel, advertising, insurance and trade shows.
Interest income increased 34%, or $15,947, to $63,309 from $47,362 due to the
company's higher average cash balances and an increase in the rate of interest
received.
The provision for income taxes decreased $116,000 due to lower net earnings,
which resulted in a blended tax rate of 40% for the six month period.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Material changes in financial condition:
Cash increased $281,907 to $1,491,050 compared to the October 31, 1998 fiscal
year balance of $1,209,143. Cash and cash equivalents are $2,657,734 at April
30, 1999, compared to $2,338,725 at October 31, 1998.
Trade accounts receivable decreased $166,001, or 21% to $640,668 compared to the
October 31, 1998 balance of $806,669. The decrease can be attributed to lower
sales in fiscal 1999.
Inventories decreased $136,505 compared to the October 31, 1998 inventory level.
Inventories are in direct balance to customer demand.
Prepaid expenses and deposits decreased $58,188 from October 31, 1998. The
decrease is due to less prepaid inventory expenses.
Year 2000 Issue
The Year 2000 issue is the result of computer programs using only two digits to
identify a year within date fields. Date-sensitive software may recognize a date
using "00" as year 1900 rather than the year 2000. Such an error could result in
a system failure causing disruptions of operations. The Company is assessing the
readiness of its significant suppliers and large customers to determine the
extent to which the Company is vulnerable to those third parties' failure to
remedy their own year 2000 issues. The Company has updated equipment and does
not expect any problems resulting from the Year 2000 issue. However, there can
be no guarantee that the systems of other companies will be timely converted, or
that a failure to convert by another company would not have a material effect on
the Company. The Company has determined that it has no exposure to contingencies
related to the Year 2000 issue for the products it has sold.
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, 1999.
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: June 13, 1999 By: Howard F. Hill
-----------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: June 13, 1999 By: Terrie A. Gross
-----------------------------
Terrie A. Gross
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<CASH> 1,491,050
<SECURITIES> 1,166,684
<RECEIVABLES> 667,939
<ALLOWANCES> 27,271
<INVENTORY> 2,329,943
<CURRENT-ASSETS> 5,950,564
<PP&E> 651,349
<DEPRECIATION> 495,458
<TOTAL-ASSETS> 6,211,355
<CURRENT-LIABILITIES> 317,316
<BONDS> 0
0
0
<COMMON> 30,786
<OTHER-SE> 5,863,253
<TOTAL-LIABILITY-AND-EQUITY> 6,211,355
<SALES> 2,822,817
<TOTAL-REVENUES> 2,822,817
<CGS> 1,409,142
<TOTAL-COSTS> 2,397,729
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (63,309)
<INCOME-PRETAX> 488,397
<INCOME-TAX> 196,000
<INCOME-CONTINUING> 292,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 292,397
<EPS-BASIC> .09
<EPS-DILUTED> .08
</TABLE>
