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 31,1999
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 July 31,1999, the registrant had 3,148,598 shares of Common Stock, $.01
par value, issued and outstanding.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEET
July 31 October 31
1999 1998
----------- -----------
(Unaudited) (Audited)
ASSETS
- ---------------
CURRENT ASSETS
Cash .................................................. $ 986,255 $1,209,143
Investments in available-for-sale securities .......... 2,024,604 1,129,582
Trade accounts receivable less allowance
for doubtful accounts of $27,400 & $30,000 ............ 645,651 806,669
Inventories - Note 3 .................................. 2,384,955 2,466,448
Prepaid expenses and deposits ......................... 248,793 244,407
Deferred tax assets ................................... 66,000 66,000
Note receivable from stockholder ...................... 70,000 70,000
---------- ----------
TOTAL CURRENT ASSETS ............................... 6,426,258 5,992,249
FIXED ASSETS
Furniture and office equipment ........................ 152,838 158,628
Equipment and tooling ................................. 510,454 479,880
---------- ----------
Fixed assets, at cost ............................ 663,292 638,508
Less accumulated depreciation and amortization ........ 521,705 475,734
---------- ----------
NET FIXED ASSETS ................................. 141,587 162,774
Deferred tax assets ................................... 100,000 100,000
Other assets .......................................... 4,900 4,900
---------- ----------
TOTAL ASSETS ..................................... $6,672,745 $6,259,923
========== ==========
See Notes to Financial Statements
<PAGE>
BALANCE SHEET
July 31 October 31
1999 1998
----------- -----------
(Unaudited) (Audited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
- -------------------------
CURRENT LIABILITIES
Accounts payable .................................. $ 134,572 $ 203,650
Accrued expenses .................................. 298,889 458,670
----------- -----------
TOTAL CURRENT LIABILITIES .................... 433,461 662,320
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 3,078,598 shares ........... 31,486 30,786
Capital paid in excess of par value ............... 4,400,868 4,373,868
Retained earnings ................................. 2,110,878 1,524,450
Unearned compensation ............................. (251,095) (331,501)
Treasury stock, at cost (29,400 shares) ........... (52,853) 0
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ................... 6,239,284 5,597,603
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ...................... $ 6,672,745 $ 6,259,923
=========== ===========
See Notes to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited) (Audited)
Three Months Ended Nine Months Ended
July 31 July 31
----------------------- ----------------------
1999 1998 1999 1998
----------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Net Sales ........................................ $1,598,851 $1,585,907 $4,421,668 $4,901,897
Cost of Sales .................................... 618,884 783,650 2,028,026 2,404,007
---------- ---------- ---------- ----------
Gross Profit ................................ 979,967 802,257 2,393,642 2,497,890
---------- ---------- ---------- ----------
Operating expenses:
Engineering ................................. 73,065 110,356 213,564 355,982
Selling and general ......................... 441,912 381,486 1,290,000 1,102,912
---------- ---------- ---------- ----------
Total ..................................... 514,977 491,842 1,503,564 1,458,894
---------- ---------- ---------- ----------
Operating income ............................ 464,990 310,415 890,078 1,038,996
Interest income .................................. 31,041 34,502 94,350 81,864
---------- ---------- ---------- ----------
Income before provision
for income tax .............................. 496,031 344,917 984,428 1,120,860
Provision for state & federal
income tax .................................. 202,000 138,000 398,000 450,000
---------- ---------- ---------- ----------
Net income .................................. $ 294,031 $ 206,917 $ 586,428 $ 670,860
========== ========== ========== ==========
Per share data:
Basic earnings per share .................... $ 0.10 $ 0.07 $ 0.19 $ 0.22
========== ========== ========== ==========
Diluted earnings per share .................. $ 0.08 $ 0.06 $ 0.16 $ 0.19
========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
July 31
-------------------------
1999 1998
--------- ---------
Net income .......................................... $ 586,428 $ 670,860
Adjustments to reconcile net income
to net cash (used in) provided by operations
Depreciation and amortization ................... 45,971 32,566
Amortization of unearned compensation ........... 80,406 99,669
Change in assets - (incr) decr:
Accounts receivable - trade ................ 161,018 12,472
Inventories ................................ 81,493 (158,107)
Other assets ............................... (4,386) 57,623
Change in liabilities - incr (decr):
Accounts payable ........................... (69,078) 80,314
Accrued expenses ........................... (159,781) 76,559
----------- -----------
Net cash provided by operating activities ......... 722,071 871,956
----------- -----------
INVESTING ACTIVITIES
Purchase of available-for-sale securities .... (895,022) (468,422)
Capital expenditures ......................... (24,784) (85,012)
----------- -----------
Net cash used in financing activities ................ (919,806) (553,434)
----------- -----------
FINANCING ACTIVITIES
Purchase of treasury stock ................. (52,853) 0
Proceeds from exercise of common
stock options ............... 27,700 1,400
----------- -----------
Net cash provided by (used in) financing activities .. (25,153) 1,400
----------- -----------
Net increase in cash and cash equivalents ........... (222,888) 319,922
Cash and cash equivalents at the
beginning of the period ........................ 1,209,143 877,587
----------- -----------
Cash and cash equivalents at the end of period ...... $ 986,255 $ 1,197,509
=========== ===========
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 the financial
position of RF Industries, Ltd. as of July 31,1999 and the results of
operations for the three month and nine month periods ended July
31,1999 and 1998.
Note 2 - Interim reporting
The results of operations for the three month and nine month
periods ended July 31,1999 and 1998 are not necessarily indicative of
the results to be expected for the remainder of the year.
Note 3 - Components of Inventory
July 31,1999
--------------
(Unaudited)
Raw material and supplies $ 282,000
Finished goods .......... 2,102,955
----------
TOTAL ................... $2,384,955
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three Months Ending July 31, 1999 vs. Three Months Ending July 31, 1998
Sales increased $12,944, to $1,598,851 from $1,585,907 in the third quarter of
fiscal 1998. Connector Division sales decreased 5% to $1,316,153 compared to
$1,391,239 for the same quarter last year. Sales at RF Connector continue to be
affected by sluggish market demand. Sales at Neulink increased 45% to $282,803
compared to $194,668 last year. The increase in Neulink sales is due to
contracts received earlier in the year.
Cost of sales declined $164,766 to $618,884 from $763,650. As a percent of
sales, cost of sales declined to 39% of sales, compared to 49% of sales in the
same quarter last year. The decline in cost of sales is attributable to
increased shipments of higher-margin products during the quarter, including the
Company's new Coaxial Cable Assemblies, and higher sales from the Neulink
Division.
Engineering expenses decreased by $37,291, to $73,065 from $110,356 last year
and also declined to 5% of sales from 7% of sales last year. Engineering
expenses for Neulink were lower in the quarter, compared to unusually high
expenses last year to support development of new wireless modem products.
Selling and general expenses increased $60,426, to $441,912 from $381,486 last
year, and increased, as a percent of sales, to 28% of sales from 24% of sales
last year. This increase is due to increased advertising to promote our
products.
Interest income declined to $31,041 from $34,502 last year due to lower average
interest rates received on the Company's cash investments.
Nine Months Ended July 31, 1999 vs. Nine Months Ended July 31, 1998
Net sales decreased 10%, or $480,229, to $4,421,667 from $4,901,897 in the first
nine months of fiscal 1998. RF Connectors sales decreased 10% to $3,554,697 from
$3,961,022 in the same period last year. Neulink sales were $866,970, down 8%
from the same period last year. The decline in sales is attributable to the
overall slow-down in the electronic distributor market.
Cost of sales declined $375,981 to $2,028,026 from $2,404,007. As a percent of
sales, cost of sales declined to 46% of sales compared to 49% of sales in the
same quarter last year. The reduction in cost of sales for the period is due to
an improved product mix.
Engineering expenses decreased 40%, or $142,418, to $213,564 from $355,982 last
year. This decrease is due to lower Neulink R&D expenses compared to last year.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (continued)
Selling and general expenses increased 17%, or $187,088, to $1,290,000 from
$1,102,912 for the same period last year. Selling and general expenses increased
to 29% of sales compared to 23% for the same period last year. The increase is
due to increased advertising and trade show expenses.
Interest income increased 15%, or $12,000, to $94,000 from $82,000 due to the
company's higher average invested balances.
The provision for income taxes declined by $52,000 due to lower net income. The
blended tax rate remained at approximately 40% in both nine month periods.
Material changes in financial condition:
Cash and decreased $222,888 to $986,255 compared to the October 31, 1998 fiscal
year balance of $1,209,143. Cash was applied to investments in available for
sale securities, which increased by $895,022 to $2,024,604 from $1,129,582. The
total of cash and investments increased by $672,134 to $3,010,859 at July 31,
1999 from $2,338,725 at October 31, 1998.
Trade accounts receivable declined by $161,018, or 20% to $645,651 compared to
the October 31, 1998 balance of $806,669. The decline is due to lower sales in
fiscal 1999.
Inventories decreased $81,493 to $2,384,955 from $2,466,448 at October 31, 1998,
due to lower sales in fiscal 1999. The Company endeavors to maintain inventories
which are in balance with customer demand.
Prepaid expenses and deposits were essentially unchanged, increasing $4,386 to
$248,793 from $244,407. The change is associated with prepayments for inventory.
Accounts payable declined by $69,078, or approximately 34% to $134,572 from
$203,650 due to the decline in sales and the Company's strong cash position.
Accrued expenses declined by $159,781 to $298,889 from $458,670. This is due to
a difference in the timing of payments for accrued federal and state taxes.
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.
<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 July 31, 1999.
<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: September 22, 1999 By: Howard F. Hill
-------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: September 22, 1999 By: Terrie A. Gross
-------------------------
Terrie A. Gross
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 986,255
<SECURITIES> 2,024,604
<RECEIVABLES> 618,251
<ALLOWANCES> 27,400
<INVENTORY> 2,384,955
<CURRENT-ASSETS> 6,426,258
<PP&E> 663,292
<DEPRECIATION> 521,705
<TOTAL-ASSETS> 6,672,745
<CURRENT-LIABILITIES> 231,460
<BONDS> 0
0
0
<COMMON> 31,486
<OTHER-SE> 6,409,799
<TOTAL-LIABILITY-AND-EQUITY> 6,672,745
<SALES> 4,421,668
<TOTAL-REVENUES> 4,421,668
<CGS> 2,028,026
<TOTAL-COSTS> 3,531,590
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (94,350)
<INCOME-PRETAX> 984,428
<INCOME-TAX> 398,000
<INCOME-CONTINUING> 586,428
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 586,428
<EPS-BASIC> .19
<EPS-DILUTED> .16
</TABLE>
