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, 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 January 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
January 31 October 31
1999 1998
----------- -----------
(Unaudited) (Audited)
ASSETS
- ----------------------
CURRENT ASSETS
Cash ............................................... $1,291,123 $1,209,143
Investments in available-for-sale securities ....... 1,146,429 1,129,582
Trade accounts receivable less allowance
for doubtful accounts of $27,210 ................... 783,150 806,669
Inventories - Note 3 ............................... 2,384,313 2,466,448
Prepaid expenses and deposits ...................... 203,903 244,407
Deferred tax assets ................................ 66,000 66,000
Note receivable from stockholder ................... 70,000 70,000
---------- ----------
TOTAL CURRENT ASSETS .......................... 5,944,918 5,992,249
FIXED ASSETS
Furniture and office equipment ..................... 142,920 158,628
Equipment and tooling .............................. 500,713 479,880
---------- ----------
Fixed assets, at cost ......................... 643,633 638,508
Less accumulated depreciation and amortization ..... 488,637 475,734
---------- ----------
NET FIXED ASSETS .............................. 154,996 162,774
Deferred tax assets ................................ 100,000 100,000
Other assets ....................................... 4,900 4,900
---------- ----------
TOTAL ASSETS .................................. $6,204,814 $6,259,923
========== ==========
2
<PAGE>
BALANCE SHEET
January 31 October 31
1999 1998
----------- -----------
(Unaudited) (Audited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
- ---------------------------------------
CURRENT LIABILITIES
Accounts payable ............................. $ 138,769 $ 203,650
Accrued expenses ............................. 300,836 458,670
----------- -----------
TOTAL CURRENT LIABILITIES ............... 439,605 662,320
STOCKHOLDERS' EQUITY
Common Stock - $.01 par value
Authorized - 10,000,000 shares
Issued & outstanding 3,078,598 shares ...... 30,786 30,786
Additional paid-in capital ................... 4,373,868 4,373,868
Retained earnings ............................ 1,658,678 1,524,450
Unearned compensation ........................ (298,123) (331,501)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .............. 5,765,209 5,597,603
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ................. $ 6,204,814 $ 6,259,923
=========== ===========
See Notes to Financial Statements
3
<PAGE>
Item 1: Financial Statements (continued)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
January 31
---------------------------
1999 1998
---------- ----------
Net sales ..................................... $ 1,330,798 $ 1,450,387
Cost of Sales ................................. 661,605 705,627
----------- -----------
Gross profit ............................... 669,193 744,760
Operating expenses:
Engineering ................................ 65,593 187,715
Selling and general ........................ 411,820 353,284
----------- -----------
Total .................................. 477,413 540,999
----------- -----------
Income from operations ..................... 191,780 203,761
Interest income, net .......................... 31,448 23,236
----------- -----------
Income before provision for income tax .... 223,228 226,997
Provision for income tax .................. (89,000) 91,000
----------- -----------
Net income ............................ $ 134,228 $ 135,997
=========== ===========
Per share data:
Basic earnings per share .............. $ 0.04 $ 0.04
=========== ===========
Diluted earnings per share ............ $ 0.04 $ 0.04
=========== ===========
Diluted shares outstanding .................... 3,603,081 3,533,850
=========== ===========
See notes to Financial Statements
4
<PAGE>
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
January 31
-----------------------
Net income ....................................... $ 134,228 $ 135,997
Adjustments to reconcile net income
to net cash provided by operations
Depreciation and amortization ............... 12,903 11,084
Amortization of unearned compensation ....... 33,378 32,631
Change in assets - (incr) decr:
Accounts receivable - trade ............ 23,519 (56,281)
Inventories ............................ 82,135 128,600
Other assets ........................... 40,504 (58,037)
Change in liabilities - incr (decr):
Accounts payable ....................... (64,881) 86,621
Accrued expenses ....................... (157,834) 115,093
----------- -----------
Net cash provided by
operating activities ..................... 103,952 324,705
----------- -----------
INVESTING ACTIVITIES
Purchase of available-for-sale securities .. (16,847) (9,464)
Capital expenditures ....................... (5,125) (3,860)
----------- -----------
Net cash used in investing activities ...... (21,972) (13,324)
----------- -----------
Net increase in cash
and cash equivalents ..................... 81,980 311,381
Cash and cash equivalents at the
beginning of the period .................. 1,209,143 403,547
----------- -----------
Cash and cash equivalents at
the end of period ........................ $ 1,291,123 $ 714,928
=========== ===========
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, 1999 and the results of
operations for the three month period ended January 31, 1999 and 1998.
Note 2 - Interim reporting
The results of operation for the three month period ended January 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
January 31, 1999
---------------------
(Unaudited)
Raw material and supplies ............... $ 279,969
Finished goods .......................... 2,101,344
-----------
TOTAL ................................ $ 2,384,313
Note 4 - Basic earnings per share
In February 1997, the Financial 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
structures 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 3,078,598 and 3,064,598
weighted average common shares outstanding for the three months ended
January 31, 1999 and 1998, respectively. Diluted earnings per share was
computed based on 3,603,081 and 3,533,850 weighted average common and
common equivalent shares outstanding for the three months ended January
31, 1999 and 1998, 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 1999 vs. Three Months 1998
Net sales decreased 8.2%, or $119,589, to $1,330,798 from $1,450,387 in the
first three months of fiscal 1999. RF Connectors sales decreased 11.5% to
$1,050,319, from the same period last year, due to the overall slow down in the
electronic distributor market. RF Neulink sales were $286,385, up 6.4% from the
same period last year. This increase can be attributed to shipments of backlog
in the first quarter.
Cost of sales decreased 6.2%, or $44,021, to $661,606 from $705,627 last year
and as a percentage of sales increased to 49.7% from 48.6% last year. This
decrease is due to a reduction in Material Control Expenses.
Engineering expenses decreased 65.0%, or $122,122, to $65,593 from $187,715 last
year. This decrease is due to a reduction in Neulink R&D for the first quarter.
Selling and general expenses increased 16.5%, or $58,536, to $411,820 from
$353,284 last year. The increase is due to increased travel, co-op advertising,
advertising and insurance expenses.
Interest income increased $8,212 to $31,448 from $23,232 due to the company's
higher average cash balances and an increase in the rate of interest received.
The provision for income taxes decreased $11,000. This reduction is in direct
relation to the reduction in income before taxes.
Material changes in financial condition:
Cash increased $81,980 to $1,291,123 compared to the October 31, 1998 fiscal
year balance of $1,209,143. Cash and investments are $2,437,552 at January 31,
1999.
Trade accounts receivable decreased $23,519, or 2.9% to $783,150 compared to the
October 31, 1998 balance of $806,669, but increased to 59% of sales for the
quarter. This decrease is due to a decrease in sales.
Inventories decreased $82,135 compared to the October 31, 1998 inventory level.
This decrease is in balance with the current demand.
Prepaid expenses and deposits decreased $40,504 from October 31, 1998 due to
fewer deposits for inventory purchases.
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
remediate 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.
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, 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: March 12, 1999 By: /s/ Howard F. Hill
--------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: March 12, 1999 By: /s/ Terrie A. Gross
--------------------------
Terrie A. Gross
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 1,291,123
<SECURITIES> 1,146,429
<RECEIVABLES> 810,360
<ALLOWANCES> 27,210
<INVENTORY> 2,384,313
<CURRENT-ASSETS> 5,944,918
<PP&E> 643,633
<DEPRECIATION> 488,637
<TOTAL-ASSETS> 6,204,814
<CURRENT-LIABILITIES> 439,605
<BONDS> 0
0
0
<COMMON> 30,786
<OTHER-SE> 5,734,423
<TOTAL-LIABILITY-AND-EQUITY> 6,204,814
<SALES> 1,330,798
<TOTAL-REVENUES> 1,330,798
<CGS> 661,605
<TOTAL-COSTS> 1,139,018
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (31,448)
<INCOME-PRETAX> 223,228
<INCOME-TAX> 89,000
<INCOME-CONTINUING> 134,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134,228
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
