<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended November 30, 1997
Commission File No. 0-24414
RF MONOLITHICS, INC.
(Exact name of registrant as specified in its charter)
-------------------------
DELAWARE 75-1638027
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification)
4441 SIGMA ROAD, DALLAS, TEXAS 75244
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 233-2903
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.
[X] YES [ ] NO
AS OF DECEMBER 31, 1997, 5,612,590 SHARES OF THE REGISTRANT'S COMMON STOCK,
$.001 PAR VALUE, WERE OUTSTANDING.
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RF MONOLITHICS, INC.
FORM 10-Q
QUARTER ENDED NOVEMBER 30, 1997
TABLE OF CONTENTS
ITEM
NUMBER Page
- ------ ----
PART I. CONDENSED FINANCIAL INFORMATION
1. Condensed Financial Statements:
Condensed Balance Sheets
November 30, 1997 (Unaudited), and August 31, 1997 1
Condensed Statements of Income - Unaudited
Three Months Ended November 30, 1997 and 1996 2
Condensed Statements of Cash Flows - Unaudited
Three Months Ended November 30, 1997 and 1996 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
1. Legal Proceedings 12
2. Changes in Securities 12
3. Defaults Upon Senior Securities 12
4. Submission of Matters to a Vote of Security Holders 12
5. Other Information 12
6. Exhibits and Reports on Form 8-K 12
SIGNATURES
<PAGE>
PART I. CONDENSED FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
RF MONOLITHICS, INC.
CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, AUGUST 31,
ASSETS 1997 1997
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,852 $ 482
Short-term investments 5,512 5,487
Trade receivables - net 8,069 9,517
Inventories 5,829 4,934
Prepaid expenses and other 993 961
Deferred income tax benefits 745 747
------- -------
Total current assets 23,000 22,128
PROPERTY AND EQUIPMENT - Net 14,755 13,694
DEFERRED INCOME TAX BENEFITS 698 890
OTHER ASSETS - Net 615 648
------- -------
TOTAL $39,068 $37,360
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and line of credit $ 1,175 $ 1,165
Accounts payable - trade 2,563 2,135
Accounts payable - construction and equipment 807 604
Accrued expenses and other liabilities 3,039 2,965
Income taxes payable 710 585
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Total current liabilities 8,294 7,454
LONG-TERM DEBT 1,656 1,911
STOCKHOLDERS' EQUITY:
Common stock: 5,527 and 5,514 shares issued and outstanding 6 6
Additional paid-in capital 25,608 25,535
Retained earnings 3,625 2,593
Unearned compensation (127) (142)
Unrealized gain on short-term investments 6 3
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Total stockholders' equity 29,118 27,995
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TOTAL $39,068 $37,360
======= =======
</TABLE>
See notes to condensed financial statements.
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RF MONOLITHICS, INC.
CONDENSED STATEMENTS OF INCOME - UNAUDITED
(In Thousands, Except Per-Share Amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
NOVEMBER 30,
---------------------------
1997 1996
<S> <C> <C>
SALES $12,882 $10,077
COST OF SALES 7,634 6,090
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GROSS PROFIT 5,248 3,987
OPERATING EXPENSES:
Research and development 1,467 914
Sales and marketing 1,394 1,357
General and administrative 728 700
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Total operating expenses 3,589 2,971
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INCOME FROM OPERATIONS 1,659 1,016
OTHER INCOME (EXPENSE):
Interest income 78 65
Interest expense (69) (94)
Other expense (2) (19)
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Total 7 (48)
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INCOME BEFORE INCOME TAXES 1,666 968
INCOME TAX EXPENSE 633 368
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NET INCOME $ 1,033 $ 600
======= =======
EARNINGS PER SHARE $ 0.17 $ 0.11
======= =======
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING 5,992 5,599
======= =======
</TABLE>
See notes to condensed financial statements.
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RF MONOLITHICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
(In Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED
NOVEMBER 30,
----------------
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,033 $ 600
Noncash items included in net income:
Deferred taxes 194 318
Depreciation and amortization 853 708
Provision for doubtful accounts 10 24
Other 15 21
Cash from (used in) operating working capital:
Trade receivables 1,438 (176)
Inventories (895) 58
Prepaid expenses and other (32) (42)
Accounts payable - trade 428 866
Accrued expenses and other liabilities 74 (241)
Income taxes payable 125 33
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Net cash from operations 3,243 2,169
INVESTING ACTIVITIES:
Increase in short-term investment (1,419) (899)
Decrease in short-term investments 1,397 895
Acquisition of property and equipment (1,897) (1,590)
Proceeds from sale of assets - 13
Decrease in other assets 16 20
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Net cash used in investing activities (1,904) (1,561)
FINANCING ACTIVITIES:
Repayments of notes payable (125) (125)
Repayments of capital lease obligations (120) (78)
Borrowings of accounts payable - construction and equipment 203 726
Common stock issued for options exercised 73 122
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Net cash from financing activities 31 645
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INCREASE IN CASH AND CASH EQUIVALENTS 1,370 1,253
CASH AND CASH EQUIVALENTS:
Beginning of period 482 1,029
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End of period $ 1,852 $ 2,282
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SUPPLEMENTAL INFORMATION:
Interest paid $ 58 $ 99
======= =======
Income taxes paid $ 258 $ 6
======= =======
</TABLE>
See notes to condensed financial statements.
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RF MONOLITHICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
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1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed financial statements include all adjustments,
consisting only of normal recurring adjustments and accruals, that in the
opinion of the management of RF Monolithics, Inc. (the "Company" or "RFM") are
necessary for a fair presentation of the Company's financial position as of
November 30, 1997, and the results of operations and cash flows for the three
months ended November 30, 1997 and 1996. These unaudited interim condensed
financial statements should be read in conjunction with the audited financial
statements of the Company and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended August 31, 1997, filed with the
Securities and Exchange Commission.
Operating results for the three months ended November 30, 1997, are not
necessarily indicative of the results to be achieved for the full fiscal year
ending August 31, 1998.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
NOV. 30, AUG. 31,
1997 1997
<S> <C> <C>
Raw materials and supplies $3,278 $2,569
Work in process 664 1,239
Finished goods 1,887 1,126
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Total $5,829 $4,934
====== ======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment includes construction in progress of $2,709,000 at
November 30, 1997, and $3,021,000 at August 31, 1997, which is composed of
equipment and other assets not yet placed in service primarily related to
increasing the capacity of the Company's manufacturing facilities.
4. CREDIT FACILITIES
In December 1997, the Company renewed the $5.0 million line of credit facility
with a commercial bank, and extended the commitment date to December 31, 1999.
5. CAPITAL STOCK
In October 1997, in conjunction with the appointment of two new members of the
board of directors, the Company granted to certain non-employee directors
options to purchase an aggregate of 25,000 shares of the Company's Common Stock
at an exercise price of $27.0625 per share, which was the market value at the
date of grant.
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In December 1997, the Company granted to employees Incentive Stock Options to
purchase 74,000 shares of the Company's Common Stock at an exercise price of
$11.125, which was the market value at the date of grant. The options were
granted in accordance with the Company's 1982 Stock Option Plan (the Plan) and
resulted in approximately 16,500 shares of common stock remaining available for
grant under the plan at December 31, 1997.
6. ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which was effective for the Company beginning
September 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based
compensation arrangements with employees and encourages (but does not require)
compensation cost to be measured based on the fair value of the equity
instrument awarded. Companies are permitted, however, to continue to apply APB
Opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument awarded. The Company will continue to apply APB Opinion
No. 25 to its stock-based compensation awards to employees and will disclose the
required pro forma effect on net income and earnings per share in its annual
financial statements.
7. EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," which
establishes new standards for computing and presenting earnings per share and is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. The
Company does not expect the adoption of SFAS No. 128 to have a significant
impact upon the Company's reported earnings per share.
-5-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion may be understood more fully by reference to the
financial statements, notes to the financial statements, and management's
discussion and analysis contained in the Company's Annual Report on Form 10-K
for the year ended August 31, 1997, filed with the Securities and Exchange
Commission.
GENERAL
RFM offers products in four product areas: low-power components, low-
power Virtual Wire/(R)/ radio systems, frequency control modules and filters.
The Company sells to original equipment manufacturers in automotive, computer,
consumer, industrial and telecommunications market segments world-wide.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
the section entitled "Legal Proceedings" and those discussed in the Company's
Form 10-K for the year ended August 31, 1997.
The Company is still evaluating the year 2000 issues to determine whether
such issues are expected to be material to the Company's business, financial
condition and results of operations. It will address any changes needed within
its systems to ensure it can be fully compliant with year 2000 requirements. The
year 2000 issues may create risk for the Company from unforeseen problems in its
own computer systems and from that of the systems of other companies on which
the Company's operations may rely upon. At this time, the Company does not
expect it will incur significant expenditures to effect these changes.
RESULTS OF OPERATIONS
The following discussion relates to the financial statements of the
Company for the three months ended November 30, 1997 (current quarter), of the
fiscal year ending August 31, 1998, in comparison to the three months ended
November 30, 1996 (comparable quarter of the prior year). In addition, certain
comparisons with the three months ended August 31, 1997 (previous quarter), are
provided where management believes it is useful to the understanding of trends.
The selected financial data for the periods presented may not be
indicative of the Company's future financial condition or results of operations.
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The following table sets forth, for the three months ended November 30, (i)
the percentage relationship of certain items from the Company's statements of
income to sales and (ii) the percentage change in these items between the
current period and the comparable period of the prior year:
<TABLE>
<CAPTION>
Percentage of
Total Sales
--------------------------- Percentage Change
Quarter Ended From Quarter Ended
November 30, November 30, 1996
--------------------------- to Quarter Ended
1997 1996 November 30, 1997
------------ ----------- -------------------
<S> <C> <C> <C>
Sales 100 % 100 % 28 %
Cost of sales 59 60 25
---- ---- ----
Gross profit 41 40 32
---- ---- ----
Research and development 11 9 61
Sales and marketing 11 14 3
General and administrative 6 7 4
---- ---- ----
Total operating expenses 28 30 21
---- ---- ----
Income from operations 13 10 63
Other income (expense), net - - (115)
---- ---- ----
Income before income taxes 13 10 72
Income tax expense 5 4 72
---- ---- ----
Net income 8 % 6 % 72 %
==== ==== ====
</TABLE>
SALES
The following table sets forth the components of the Company's sales and the
percentage relationship of the components to sales by product area for the
periods ended as indicated (in thousands, except percentage data):
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------
November 30, November 30,
1997 1996
----------------------------- ---------------------------
Amounts % of Total Amounts % of Total
----------------------------- ---------------------------
<S> <C> <C> <C> <C>
Low-power components $ 9,228 72 % $ 8,209 81 %
Low-power Virtual Wire(R) radio systems 682 5 682 7
Frequency control modules 802 6 575 6
Filters 2,115 16 511 5
Technology development sales 55 1 100 1
------- ---- ------- ----
Sales $12,882 100 % $10,077 100 %
======= ==== ======= ====
</TABLE>
Total sales increased 28% in the current quarter, compared to the comparable
quarter of the prior year and decreased 9% compared to the previous quarter. The
increase in the current quarter sales compared to the comparable quarter of the
prior year was primarily attributable to an increased number of units shipped in
three of the Companies four product areas. Low-power component sales in the
current quarter increased
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<PAGE>
12% over the comparable quarter of the prior year primarily due to an increased
number of units sold of the Company's surface mount resonator products for
customers in automotive markets, which was partially offset by a decline in the
average selling price. Low-power component sales decreased 12% from the previous
quarter, primarily due to a decreased number of units sold of the Company's
older style, leaded through hole resonator products. Sales for these products
were particularly strong in the previous quarter as customers ordered in excess
of their normal order patterns to satisfy peak demand that they were
experiencing.
The low-power component product line experienced a decline in the average per
unit selling price of approximately 10% in both fiscal 1996 and 1997. The
Company believes that the decline may be greater in fiscal 1998 and that lower
average selling prices may be significant enough in future periods to offset
the sale of an increased number of units potentially resulting in lower sales.
There can be no assurance that sales for low-power components will continue to
increase or remain at the same level they have been in previous periods.
Low-power Virtual Wire/(R)/ radio systems sales in the current quarter
remained at the same level as the comparable quarter of the prior year. The
Company has devoted a considerable amount of its capital, technical, sales and
marketing resources in to the Virtual Wire/(R)/ radio systems products. It has
developed and released to manufacturing status a number of Virtual Wire/(R)/
radio products. The Company believes these types of products provide an
opportunity to exploit its proprietary technology and pursue its strategy of
focusing on value-added products. The Company is helping a number of customers
to incorporate these products into a wide variety of new applications. The
timing of when any sales resulting from such new applications reach the
production phase is dependent upon the timing of both the customers' product
development cycles and their product introduction cycles. There can be no
assurance as to when, or if, these new products will have a significant
impact on the Company's sales.
Sales of frequency control modules products increased 39% over the comparable
quarter of the prior year primarily due to an increase in the number of units
sold of the Company's standard and high reliability oscillator products. These
products are generally used in telecommunications and military applications. The
increase in sales of these higher priced oscillator products resulted in an
increase in the average per unit selling price for this product line. There can
be no assurance that sales of frequency control module products will continue
to increase or remain at the same level they have been in previous years.
Sales of filter products increased 314% over the comparable quarter of the
prior year and 9% over the previous quarter, primarily due to an increase in the
number of units shipped to customers in the telecommunications and wireless LAN
computer markets. In future periods, the Company will devote significant
resources to developing and supporting the growth of its filter products. The
product development and introduction cycle for filter products takes between six
months to a year to complete. Therefore, the timing of any revenue in this area
is difficult to predict. There can be no assurance as to when or if this
strategy to focus on filter products will have a significant impact on the
Company's sales, or that the sales of filter products will continue to increase
or remain at the same level they have been in previous periods.
The Company's top five customers accounted for approximately 30%, 25% and 27%
of the Company's sales in the current quarter, the comparable quarter of the
prior year and the previous quarter, respectively. No single customer accounted
for more than 10% of sales.
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<PAGE>
International sales were approximately 53%, 52% and 52% of the Company's
sales during the current quarter, the comparable quarter of the prior year and
the previous quarter, respectively. The Company considers all product sales
with a delivery destination outside of North America to be international sales.
These sales are denominated primarily in U.S. currency. The Company intends to
continue its focus on international sales in the future and expects that
international sales will continue to represent a significant portion of its
business. There can be no assurance, however, that this can be achieved.
Included in international sales were sales to customers in Asia of approximately
17%, 12% and 12% of the total Company sales during the current quarter, the
comparable quarter of the prior year and the previous quarter, respectively. The
Company has not experienced any significant impact on its sales resulting
from the economic instability in Asian markets. However, there can be no
assurance that such economic instability will not have a material adverse affect
on the Company's financial condition and results of operations in future
periods.
While the Company has achieved sales increases in prior periods, there can be
no assurance that such sales increases can be achieved in future periods. The
Company's success is highly dependent on achieving technological advantages in
its product design and manufacturing capabilities, as well as its ability to
sell its products in a competitive marketplace that can be influenced by outside
factors such as economic and regulatory conditions. The Company experiences
increased competition from companies that offer alternative technology or
aggressive product pricing. There can be no assurance that competition from
alternative technologies or from competitors duplicating the Company's
technologies will not adversely affect selling prices and market share of the
Company's products.
GROSS PROFIT
The current quarter gross margin of 40.7% increased from 39.6% in the
comparable quarter of the prior year, primarily reflecting improved gross
margins for the Company's low-power component and filter product lines.
Substantial reductions in average selling prices for low-power components and
filters resulting from increased price competition were offset by reductions in
per unit manufacturing costs. The reduction in per unit manufacturing costs
resulted from continued improvements in yield and labor productivity, purchasing
cost reductions and an increase in the number of units produced, allowing for
fixed overhead expenses to be spread over a larger number of units. Gross
margins increased for the Company's frequency control module products primarily
due to increased average per unit selling prices for these value added products.
The increase in gross margin was partially offset by a reduction in gross
margins for low-power Virtual Wire/(R)/ products resulting from relatively high
costs incurred in the ramp up of the production for these products.
More recently, the gross margin in the current quarter was 40.7%, compared to
42.5% in the previous quarter. The reduction in gross margin from the previous
quarter primarily resulted from the reduction in gross margins for low-power
component products resulting from a decrease in average selling prices that
exceeded the reduction in per unit manufacturing costs. This reduction was
partially offset by an increase in gross margins for filter products resulting
from a larger reduction in the per unit manufacturing cost than the reduction in
average selling prices caused by competitive pressures. There can be no
assurance that lower average selling prices resulting from competitive pressures
will continue to be offset by reductions in per unit manufacturing cost. If
average selling prices decline more than per unit manufacturing costs, the
Company's gross profit margin would be adversely affected.
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The Company has in the past experienced sudden increases in demand which have
put pressure on its manufacturing facilities to increase capacity to meet this
demand. In addition, new products sometimes require different manufacturing
processes than the Company currently possesses. The Company has devoted the
bulk of its capital expenditures towards increasing capacity and improving its
manufacturing processes. There can be no assurance that the Company can
continue to increase its manufacturing capacity and improve its manufacturing
processes in a timely manner so as to take advantage of increased market demand.
Failure to do this would result in a loss of potential sales in the periods
impacted.
RESEARCH AND DEVELOPMENT
Research and development expenses in the current quarter increased
approximately $553,000, or 61%, over the comparable quarter of the prior year.
These costs increased due to the Company's increase in staffing for these
activities and in other product development costs. As a result of such increases
research and development costs increased to 11% of sales in the current quarter,
compared to 9% of sales in the comparable quarter of the prior year. The Company
believes that the continued development of its technology and new products is
essential to its success and is committed to continue its investment in research
and development. The Company expects that research and development expenses will
increase in absolute dollars in future periods.
SALES AND MARKETING
Current quarter sales and marketing expenses increased approximately $37,000,
or 3%, from the prior comparable period. Since sales and marketing expenses
increased slower than sales, these expenses decreased to 11% of sales in the
current quarter, compared to 14% of sales in the comparable quarter of the prior
year. The Company expects to incur higher sales and marketing expenses in
absolute dollars in future periods as it continues to expand its sales and
marketing efforts.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the current quarter increased
approximately $28,000, or 4%, from the prior comparable period. Since sales
increased faster than general and administrative expenses, such expenses
decreased to 6% of total sales in the current quarter, compared to 7% of total
sales in the comparable quarter of the prior year. The Company expects general
and administrative expenses will increase in absolute dollars in future periods.
INCOME FROM OPERATIONS
Income from operations was $1,659,000, or 13% of total sales in the current
quarter, compared to $1,016,000 or 10% of sales in the comparable quarter of the
prior year. The increase in income from operations as a percent of sales
reflects the increase in gross profit margin and lower total operating expenses
as a percentage of a sales.
INCOME TAX EXPENSE
The Company's income tax expense was $633,000 in the current quarter,
compared to $368,000 in the comparable quarter of the prior year, reflecting the
comparable income before income taxes for the respective periods.
NET INCOME
Net income increased 72% to $1,033,000, or $.17 per share, in the current
quarter, compared to $600,000, or $.11 per share, for comparable quarter of the
prior year. Earnings per share amounts were impacted by an increase in the
weighted average common and common equivalent shares outstanding of 7% as
compared to the comparable quarter of the prior year.
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of liquidity at November 30, 1997, consisted of $7.4
million of cash and short-term investments and $7.6 million of unused credit
facilities. These credit facilities include $5.0 million unused under a line of
credit agreement with a commercial bank which was renewed until December 31,
1999, and $2.6 million in an equipment lease facility with a commercial bank,
available until December 31, 1998. The credit facilities contain restrictions
and financial covenants relating to various matters, including net worth,
interest coverage and levels of debt compared to tangible net worth. As of
November 30, 1997, the Company was in compliance with such restrictions and
covenants.
Net cash provided by operating activities was $3.2 million and $2.2 million
for the first quarter of fiscal 1998 and 1997, respectively. Increased cash
generated from operations was primarily due to an increase in net income and
non-cash items included in net income for the comparable periods. Additionally,
the increase in fiscal 1998 was due to a reduction in accounts receivable
resulting from improved collections.
Cash used in investing activities was $1.9 million and $1.6 million for the
first quarter of fiscal 1998 and 1997, respectively, primarily as a result of
capital expenditures. The Company expects to acquire a total of approximately
$8 million to $12 million of capital equipment by the end of fiscal 1998,
consisting primarily of equipment needed for its manufacturing facilities. Some
of this equipment may be acquired under the equipment-collateralized operating
lease facility.
Net cash generated from financing activities was $31,000 and $0.6 million for
the first quarter of fiscal 1998 and 1997, respectively. These activities
primarily related to the borrowings in support of the capital equipment
acquisitions offset by payments on these borrowings, as well as the proceeds
from common stock issued for options that were exercised.
The Company believes that cash generated from operations, if any, banking
facilities and the $7.4 million balance in cash and short-term investments will
be sufficient to meet the Company's operating cash requirements through the rest
of the fiscal year. To the extent that these sources of funds are insufficient
to meet the Company's capital requirements, the Company may be required to raise
additional funds. No assurance can be given that additional financing will be
available or, if available, that it will be available on acceptable terms.
-11-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 7, 1996 the Company was served with a complaint filed by TimeKeeping
Systems, Inc. ("TimeKeeping") in the Court of Common Pleas for Cuyahoga County,
Ohio, captioned TimeKeeping Systems, Inc. v. R.F. Monolithics, Inc., No. 308658.
The Company has removed the action to the United States District Court for the
Northern District of Ohio, where it is pending as No. 1:96 CV 1451. The Company
is the only defendant named in the complaint. The complaint purports to state a
single cause of action for breach of contract and alleges that the Company
failed to timely fulfill certain purchase orders TimeKeeping issued in 1995. A
motion for Leave to amend was granted, which permitted TimeKeeping to add claims
for fraud and spoliation of evidence and a continuation was granted. The
complaint seeks compensatory damages of $4,000,000 and punitive damages in the
amount of $250,000. The Company has submitted a counterclaim for $33,000 in
unpaid billings plus related legal expenses. The Company believes that the
allegations in the TimeKeeping complaint are without merit and intends to
vigorously defend itself against such action. The matter has been assigned to a
new trial judge and no trial date has yet been set.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The Company hereby incorporates by reference all exhibits filed
in connection with Form 10-K for the year ended August 31, 1997.
(b) The Company did not file any reports on Form 8-K during the quarter ended
November 30, 1997.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
-12-
<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 MONOLITHICS, INC.
Dated: January 14, 1998 By: /s/ Sam L. Densmore
-----------------------
Sam L. Densmore
CEO, President and Director
By: /s/ James P. Farley
-----------------------
James P. Farley
VP Finance, Controller
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
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