<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
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, 1999
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, 1999, 5,954,839 shares of the Registrant's Common Stock,
$.001 par value, were outstanding.
<PAGE>
RF MONOLITHICS, INC.
FORM 10-Q
QUARTER ENDED NOVEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item
Number Page
-------- -----
<S> <C>
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets
November 30, 1999 (Unaudited), and August 31, 1999 1
Condensed Consolidated Statements of Income - Unaudited
Three Months Ended November 30, 1999 and 1998 2
Condensed Consolidated Statements of Cash Flows - Unaudited
Three Months Ended November 30, 1999 and 1998 3
Notes to Condensed Consolidated Financial Statements 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
1. Legal Proceedings 13
2. Changes in Securities 13
3. Defaults Upon Senior Securities 13
4. Submission of Matters to a Vote of Security Holders 13
5. Other Information 13
6. Exhibits and Reports on Form 8-K 13
SIGNATURES
</TABLE>
<PAGE>
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RF MONOLITHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 30, August 31,
ASSETS 1999 1999
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 895 $ 672
Short-term investments 4,125 4,516
Trade receivables - net 8,134 10,840
Inventories 11,498 11,593
Prepaid expenses and other 895 1,208
Income taxes receivable 2,509 851
Deferred income tax benefits 876 647
------- --------
Total current assets 28,932 30,327
PROPERTY AND EQUIPMENT - Net 16,739 17,645
OTHER ASSETS - Net 624 536
------- --------
TOTAL $46,295 $ 48,508
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and line of credit $ 7,143 $ 5,452
Accounts payable - trade 4,564 4,305
Accounts payable - construction and equipment 418 844
Accrued expenses and other liabilities 2,290 2,340
------- --------
Total current liabilities 14,415 12,941
LONG-TERM DEBT 41 68
STOCKHOLDERS' EQUITY:
Common stock: 5,923 and 5,875 shares issued 6 6
Additional paid-in capital 28,170 28,043
Treasury stock, 36 common shares (227) (227)
Retained earnings 4,224 8,082
Unearned compensation (334) (405)
Unrealized gain on short-term investments -- --
------- --------
Total stockholders' equity 31,839 35,499
------- --------
TOTAL $46,295 $ 48,508
======= ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
RF MONOLITHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In Thousands, Except Per-Share Amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
November 30,
--------------------------
1999 1998
<S> <C> C>
SALES $ 9,329 $12,880
COST OF SALES 10,766 8,338
------- -------
GROSS PROFIT (1,437) 4,542
OPERATING EXPENSES:
Research and development 1,231 1,144
Sales and marketing 1,496 1,296
General and administrative 1,265 655
------- -------
Total operating expenses 3,992 3,095
------- -------
INCOME (LOSS) FROM OPERATIONS (5,429) 1,447
OTHER INCOME (EXPENSE):
Interest income 55 66
Interest expense (175) (93)
Other expense (4) 10
------- -------
Total (124) (17)
------- -------
INCOME (LOSS) BEFORE INCOME TAXES (5,553) 1,430
INCOME TAX (BENEFIT) EXPENSE (1,694) 507
------- -------
NET (LOSS) INCOME $(3,859) $ 923
======= =======
EARNINGS PER SHARE
Basic $ (0.68) $ 0.16
======= =======
Diluted $ (0.68) $ 0.16
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 5,716 5,708
======= =======
Diluted 5,716 5,890
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE>
RF MONOLITHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
November 30,
---------------------
1999 1998
OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) income $(3,859) $ 923
Noncash items included in net (loss) income:
Deferred taxes (448) 257
Depreciation and amortization 1,217 1,050
Provision for doubtful accounts 15 30
Amortization of unearned compensation 40 -
Other 33 13
Cash from (used in) operating working capital:
Trade receivables 2,691 1,514
Inventories 95 (2,343)
Prepaid expenses and other 313 117
Accounts payable - trade 260 1,522
Accrued expenses and other liabilities (51) (93)
Income taxes payable/receivable (1,439) 170
------- -------
Net cash (used in) from operations (1,133) 3,160
INVESTING ACTIVITIES:
Increase in short-term investments (1,099) (1,909)
Decrease in short-term investments 1,490 2,136
Acquisition of property and equipment (292) (2,792)
Decrease (increase) in other assets (107) 2
------- -------
Net cash used in investing activities (8) (2,563)
FINANCING ACTIVITIES:
Repayments of notes payable (125) (125)
Repayments of capital lease obligations (211) (156)
Borrowings (repayments) of accounts payable - construction and equipment (426) 441
Borrowings of line of credit 2,000 -
Common stock issued for options exercised 126 123
------- -------
Net cash from financing activities 1,364 283
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 223 880
CASH AND CASH EQUIVALENTS:
Beginning of period 672 199
------- -------
End of period $ 895 $ 1,079
======= =======
SUPPLEMENTAL INFORMATION:
Interest paid $ 175 $ 93
======= =======
Income taxes paid $ 95 $ 73
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
RF MONOLITHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated 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, 1999, and the results of operations and cash flows for the
three months ended November 30, 1999 and 1998. 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, 1999, filed with the
Securities and Exchange Commission.
Operating results for the three months ended November 30, 1999, are not
necessarily indicative of the results to be achieved for the full fiscal year
ending August 31, 2000.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
Nov. 30, Aug. 31,
1999 1999
<S> <C> <C>
Raw materials and supplies $ 5,702 $ 5,713
Work in process 2,525 3,099
Finished goods 3,271 2,781
------- -------
Total $11,498 $11,593
======= =======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment includes construction in progress of $2,972,000 at
November 30, 1999, and $2,679,000 at August 31, 1999, 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 1999, the Company utilized $1.8 million available under a $6.0
million equipment-collateralized lease facility. This utilization will be
recorded as an operating lease. The Company still has a $1.7 million equipment-
collateralized lease facility with a commercial bank, to be advanced in stages
prior to December 31, 2000.
As of November 30, 1999, the Company was in violation of certain covenants in
regards to a $7.5 million line of credit with a commercial bank. The Company has
negotiated a revised agreement, in which the bank has waived the covenant
violation for the period ended November 30, 1999, and modified the terms and
conditions of the agreement, resulting in covenants that the Company does not
expect will result in a covenants violation during the balance of the fiscal
year. In addition, the structure of the loan has been modified to tie amounts
borrowed under the agreement to a borrowing base consisting of certain
receivables,
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<PAGE>
inventory fixed assets and marketable securities, all of which are pledged as
collateral. Additionally, the expiration date of the line of credit was changed
to December 31, 2000. The Company plans to negotiate an extension of the credit
facility beyond that date.
5. CAPITAL STOCK
During the first quarter of 1999, the Company granted to employees Non-qualified
Stock Options to purchase 115,500 shares of the Company's Common Stock at an
exercise price, which was the market value on the date of grant, ranging between
$6.375 to $9.875. The options were granted in accordance with the Company's 1999
Equity Incentive Plan (representing 45,500 shares) and the 1997 Equity Incentive
Plan (representing 70,000 shares).
On December 9, 1999, the Company also granted to employees Non-qualified Stock
Options to purchase 51,000 shares of the Company's Common Stock and Incentive
Stock Options to purchase 12,000 shares of the Company's Common Stock, both at
an exercise price of $6.00, the market value on the date of grant. The options
were granted in accordance with the Company's 1999 Equity Incentive Plan and the
1997 Equity Incentive Plan, respectively, resulted in approximately 1,000 and
69,000 shares of Common Shares remaining available for grant under the plans,
respectively, at December 31, 1999.
6. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE, is
effective for the Company for the quarter ended February 28, 1998. It requires a
reconciliation of both the numerator and denominator of the earnings per share
calculations and restatement of previous periods. There are no adjustments to
net earnings to arrive at income for either per share calculation.
Reconciliation of share amounts is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months ended
November 30,
-------------------------
1999 1998
<S> <C> <C>
Shares outstanding for basic
earnings per share 5,716 5,708
Effect of dilutive stock options - 182
----- -----
Shares outstanding for dilutive
earnings per share 5,716 5,890
===== =====
</TABLE>
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<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, 1999, filed with the Securities and Exchange
Commission.
General
RFM offers products in four product areas: low-power components, Virtual
Wire(R) short-range radio device systems, frequency control modules and filters.
The Company sells to original equipment manufacturers in automotive, computer,
consumer, industrial and telecommunications market segments worldwide.
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 and those
discussed in the Company's Form 10-K for the year ended August 31, 1999.
The Company incurred a significant loss in the first quarter of its fiscal
year 2000. As a result, it does not expect to overcome this loss this year and
anticipates reporting a loss for fiscal year 2000.
Results of Operations
The following discussion relates to the financial statements of the Company
for the three months ended November 30, 1999 (current quarter), of the fiscal
year ending August 31, 2000, in comparison to the three months ended November
30, 1998 (comparable quarter of the prior year). In addition, certain
comparisons with the three months ended August 31, 1999 (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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<PAGE>
The following table sets forth, for the three months ended November 30,
1999 and 1998, (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 Percentage Change
Total Sales From Quarter Ended
-----------------------
Quarter Ended November 30,1998
November 30, to Quarter Ended
-----------------------
1999 1998 November 30, 1999
----------------------- -----------------
<S> <C> <C> <C>
Sales 100 % 100% (28)%
Cost of sales 115 65 29
--- --- -----
Gross profit (15) 35 (132)
--- --- -----
Research and development 13 9 8
Sales and marketing 16 10 15
General and administrative 14 5 93
--- --- -----
Total operating expenses 43 24 29
--- --- -----
Income (loss) from operations (58) 11 (475)
Other expense, net (1) - 629
--- --- -----
Income (loss) before income taxes (59) 11 (488)
Income tax (benefit) expense (18) 4 (434)
--- --- -----
Net(loss) income (41)% 7% (518)%
=== === =====
</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,
1999 1998
---------------------------- ---------------------------
Amounts % of Total Amounts % of Total
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
Low-power components $6,424 69% $ 9,211 72%
Virtual Wire(R) radio device systems 1,525 16 1,049 8
Frequency control modules 488 5 1,082 8
Filters 779 9 1,492 12
Technology development sales 113 1 46 0
------ --- ------- ----
Sales $9,329 100% $ 12,880 100%
====== === ======== ====
</TABLE>
Total sales decreased 28% in the current quarter compared to the
comparable quarter of the prior year and decreased 24% compared to the previous
quarter. The decrease was primarily due to a decline in quarterly turns business
and the Company's decision not to offer special sales promotions programs to
make up the revenue shortfall because of the potential impact such promotions
have on long-term gross
-7-
<PAGE>
margins. This greatly effected the Company's largest product line, low-power
components, which had a 30% decrease in sales from the comparable quarter of the
prior year. Additionally, the low-power component product line experienced a
decline in the average per unit selling price of approximately 13% due to
competitive pressures in the current quarter compared to the comparable quarter
of the prior year, continuing a trend towards lower average selling prices. The
Company expects the trend towards lower prices will continue into future
periods. As a result, sales for low-power components may not increase, or return
to the levels they had been in previous periods
Virtual Wire(R) short-range radio device systems sales in the current
quarter increased 45% in comparison to the comparable quarter of the prior year.
This was primarily attributable to an increased number of units sold for those
products, offset by a decrease in average selling price. The Company has devoted
significant capital and technical, sales and marketing resources to the Virtual
Wire(R) short-range radio device systems products, including the recent
introduction of a second generation of transmitter and receiver products, as
well as the transceiver (two way communication) product. The Company believes
these products offer robust operation, small size, low-power consumption and low
costs for short-range wireless data applications. The Company is helping a
number of customers 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. As a result,
it is difficult to predict when, or if, these new products will have a
significant impact on the Company's sales.
Sales of filter products decreased 48% from the comparable quarter of the
prior year, and decreased 26% from the previous quarter. The decreases were
mainly due to variations in the delivery schedule of a major customer, as well
as that customer's conversion to lower price products. The Company has devoted
significant resources to developing and supporting the growth of its filter
products. The product development and introduction cycle for filter products
takes between six to eighteen months to complete. As a result, it is difficult
to predict when, or if, this strategy to focus on filter products will have a
significant impact on the Company's sales.
The Company's top five customers accounted for approximately 34%, 31% and
33% 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.
International sales were approximately 57%, 54% and 57% 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. However, international sales are subject to fluctuations as a result
of local economic conditions and competition. Therefore, the Company cannot
predict whether it will continue to derive a significant portion of its business
from international sales.
While the Company has achieved sales increases in prior periods, there can
be no assurance that this can be achieved in future periods. The Company's
success is highly dependent on achieving technological advances 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. Competition includes alternative
technologies or from competitors duplicating the Company's technologies may
adversely affect the selling prices and market share.
-8-
<PAGE>
Gross Profit
The current quarter gross margin of a negative 15.4% decreased from 35.3%
in the comparable quarter of the prior year and decreased from 12.3% gross
margin in the previous quarter. The decrease was due several factors and
occurred in most of the product lines. The first factor was the decline in sales
that resulted in a large fixed cost base to be allocated across fewer units.
The second factor was decrease in yield and productivity from historical rates,
resulting in fewer units produced and therefore relatively high per unit
manufacturing costs. The manufacturing of the Company's products is an
extremely complex process that is sensitive to a wide variety of factors, which
can and have adversely effected yield and productivity in the first quarter. The
Company's management is focused on returning the manufacturing process to
historical productivity levels and long term cost reduction. There can be no
assurance when or if this focus will result in lower manufacturing costs.
The third factor decreasing gross margins was the continuing decline in
per-unit selling prices, for the Company's Low Power Component and Virtual
Wire(R) short-range radio device systems due to competitive pressures. The
Company expects this trend in reduced sales prices to continue in both of these
product lines. The decrease in selling prices causes the need to produce more
units to reach the same sales dollars. The Company has added equipment and other
manufacturing overhead costs to increase the capacity in each of its facilities.
If additional sales dollars are not obtained in future periods, increased per-
unit manufacturing costs could occur. It is not certain if the Company can
reduce per unit manufacturing costs in future periods to the same extent as the
decrease in selling prices. If sufficient cost reductions are not made, gross
margins would be adversely impacted in a material way. The Company is
attempting to reduce the impact of turns orders on average selling prices by
greatly diminishing the practice of offering inducements for turns business. The
Company understands the result of this decision caused a decrease in turns
business and therefore overall sales levels in the current and the next quarter.
However, it is believed that the long-term benefits of this decision will allow
for more predictable manufacturing costs and result in improved gross margins.
The Company may not be able to increase or maintain its sales levels without a
significant portion of turns business.
Another factor decreasing margins in the current quarter were $1.2 million
in special charges that the Company took in Cost of Sales. This primarily
related to the transition to new products, including continuing product
introduction costs for the transceiver and costs related to the conversion to
second Virtual Wire(R) short-range radio module products. As of the end of the
current quarter, the Company had completed the development of 15 of the 20
products currently planned in this product family.
A final factor was the fact that the Company has experienced a significant
change in the mix of its product sales. In the current quarter, low-power
Virtual Wire(R) short-range radio module product sales increased to 16% of total
sales, while all of the other product lines declined as a percentage of total
sales. This shift in product sales mix from a historically higher margin product
to a currently lower margin product has produced an overall reduction in gross
profit. The Company expects the change in mix to continue but also believes
that the negative impact on gross margins will be reduced significantly as the
second generation of the transceiver and related low-power Virtual Wire(R)
short-range radio products represent the majority of total production later in
fiscal 2000. The second-generation products are designed to be more cost
effective than first generation products. Because of the uncertainty of volume
and the new product introduction process, the Company may not be able to
manufacture these future generation products at a cost low enough to produce an
improved gross profit margin result.
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<PAGE>
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 over the post few years to increase capacity and
improve its manufacturing processes. The Company may not be able to continue to
increase its manufacturing capacity and improve its manufacturing processes in a
timely manner so as to take advantage of any 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 $87,000, or 8%, from the comparable quarter of the prior year,
primarily due to increased personnel costs. The Company believes that the
continued development of its technology and new products is essential to its
success and is committed to continue to devote significant resources to research
and development. The Company expects that research and development expenses may
increase, or stay approximately the same in absolute dollars in future periods.
Sales and Marketing
Current quarter sales and marketing expenses increased approximately
$200,000. Increased sales and marketing expenses related primarily to increased
sales commission expenses related to the completion of the Company's sales
program to increase coverage around the world. 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 $610,000, or 93%, from the prior comparable period. This increase
mainly resulted from severance costs related to work force reductions. The
Company expects general and administrative expenses will return to more normal
levels in future periods.
Income (Loss) from Operations
Loss from operations was ($5.4 million), or (58%) of total sales in the
current quarter, compared to income from operations of $1.4 million or 11% of
sales in the comparable quarter of the prior. The decrease in income from
operations as a percent of sales reflects a decrease in sales and the increase
in cost of sales.
Income Tax (Benefit) Expense
The Company's income tax benefit was $1,694,000 in the current quarter,
compared to income tax expense of $507,000 in the comparable quarter of the
prior year, reflecting the comparable income before income taxes for the
respective periods. The company's effective tax benefit rate was approximately
31% in the current quarter, compared to approximately 36% in the prior year
reflecting increased benefit from a Foreign Sales Corporation. The tax benefit
was due to the Company's loss in the current quarter.
Net (Loss) Income
Net (loss) income was ($3,859,000), or ($.68) per diluted share, in the
current quarter, compared to net income of $923,000, or $.16 per diluted share,
for the comparable quarter of the prior year. As a result, the Company does not
expect to overcome this loss this year and anticipates reporting a loss for
fiscal year 2000.
-10-
<PAGE>
Liquidity and Capital Resources
The principal sources of liquidity at November 30, 1999, consisted of $5.0
million of cash and short-term investments and $4.4 million of unused credit
facilities. These credit facilities include $0.9 million unused under a line of
credit agreement with a commercial bank, available until December 31, 2000, and
$3.5 million in an equipment lease facility with a commercial bank, available
until December 31, 2000. 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,
1999, the Company was in violation of certain covenants. The Company has
negotiated a revised agreement, in which the bank has waived the covenant
violation for the period ended November 30, 1999, and modified the terms and
conditions of the agreement, resulting in covenants that the Company does not
expect will result in a covenants violation during the balance of the fiscal
year. In addition, the structure of the loan has been modified to tie amounts
borrowed under the agreement to a borrowing base consisting of certain
receivables, inventory fixed assets and marketable securities, all of which are
pledged as collateral. Additionally, the expiration date of the line of credit
was changed to December 31, 2000. The Company plans to negotiate an extension
of the credit facility beyond that date.
Net cash used in operating activities was $1.1 million in the first quarter
of fiscal 2000 as compared to net cash provided from operation of $3.2 million
for the first quarter of fiscal 1999. The decrease in cash available from
operations was due to the net loss in the quarter and was partially offset by
depreciation and changes in working capital, mainly a reduction in accounts
receivable.
Cash used in investing activities was $8,000 and $2.6 million for the first
quarter of fiscal 2000 and 1999, respectively, primarily as a result of capital
expenditures offset by reductions in short-term investments. The Company expects
to acquire a total of approximately $1 million to $3 million of capital
equipment by the end of fiscal 2000, consisting primarily for 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 $1.4 million and $0.3
million for the first quarter of fiscal 2000 and 1999, respectively. These
activities primarily related to the borrowings in support of the capital
equipment and operations, offset by payments on these borrowings and 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 $5.0 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 or operating 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. Should that occur, there could be significant adverse impact
on Company operations.
Year 2000 Readiness Disclosure
The Year 2000 issue involves potential inability of information or other
data dependent systems to properly distinguish year references as of the turn of
the century. The Company believes the Year 2000 issue represents a material
risk to the Company.
The Company itself is heavily dependent upon the proper functioning of its
own computer systems, including (1) computers and related software for its
financial and manufacturing information systems, (2)
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<PAGE>
computers, programmable logic controllers and other data dependent equipment in
its manufacturing processes, and (3) computers, scientific equipment and related
software for its engineering, research and development activities. Any failure
or malfunctioning on the part of these or other systems could cause disruptions
of operations, including a temporary inability to process financial
transactions, manufacture products or engage in ordinary business activities in
ways that are not currently known, discernible, quantifiable or otherwise
anticipated by the Company.
The Company has formed a team to evaluate and deal with the impact of the
Year 2000 issue. It has developed a plan (the "Plan") for the Company to become
Year 2000 compliant in a timely manner. The Plan covers both systems such as
networked computers and software that are commonly called information technology
("IT") systems and those such as embedded technology in manufacturing equipment
("non-IT") systems. The Plan also covers Year 2000 readiness of customers and
vendors.
The Company's Plan consists of five phases. The first phase is Year 2000
awareness and project planning. The second is the inventory of systems and
prioritization of potential problems. The third phase is initial contingency
planning and testing of prioritized material items for assessment of Year 2000
compliance. The fourth phase is the remediation of any noted problems. The
fifth phase is the refinement of contingency plans.
All phases of the plan were completed by December 31, 1999 and no
significant problems have been encountered as of January 13, 2000. Most of the
Company's business information systems have been recently replaced by Glovia(TM)
and Oracle(R) software, which are represented by providers to be Year 2000
compliant.
The Company's suppliers (particularly sole-source and long lead-time
suppliers) and key customers may be adversely affected by their respective
failures to address the Year 2000 issue. If the Company's suppliers are unable
to provide goods or services, the Company's operations could be materially
adversely effected. Key customers who encounter Year 2000 difficulties could
fail to order or take delivery of the Company's products, or could fail to make
or delay payments to the Company. Such failure or delay could have a material
adverse effect on the Company's business and results of operations. While some
of these risks are outside the control of the Company, the Company's Plan
included communications with suppliers and customers to ascertain the state of
their Year 2000 compliance program. As of January 13, 2000, no significant
problems had yet been encountered
The total cost of the purchase and implementation of Year 2000 Remediation
solutions was approximately $2 million. The remediation costs for the other IT
and non-IT systems were less than $500,000. Such costs were funded either from
operating cash flows or by utilizing existing Company credit facilities. Time
spent by implementation team members was not included in the above estimates but
are included in the Company's normal operating budget. The Year 2000
implementation program did not cause material delays in non-Year 2000 related IT
projects.
The Company has determined that its products are not effected by calendar
dating. Therefore, there is no known or anticipated Year 2000 impact on its
product offering.
The Company believes its Year 2000 Plan has significantly reduced the
probability of significant interruptions of normal operations resulting from
Year 2000 issues. However, the Company may not have properly identified and
assessed all Year 2000 issues, or it may not have remediated and tested all its
IT and non-IT systems in a timely or adequate manner. In addition, its key
suppliers or customers could experience Year 2000 problems. If any of these
potential situations occur, the Company's contingency plans may not be adequate
to protect the Company from the adverse effects of such problems. The worst
case scenario resulting from Year 2000 issues would be a material adverse impact
on the Company's results of operations, an interruption in normal business
operations, or an adverse impact on the Company's relationships with customers,
suppliers or others.
-12-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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, 1999.
(b) On November 19, 1999, the Company filed a report on Form 8-K with the
Commission in connection with (i) the appointment of Michael R. Bernique to
the newly created position of Chairman of the Board, (ii) the retirement of
Sam L. Densmore as President, Chief Executive Officer and a member of the
Board of Directors effective as of November 11, 1999, and (iii) the naming
of David M. Kirk as President and Chief Executive Officer and the
appointment of him to the Board of Directors, assuming the responsibilities
previously performed by Mr. Densmore.
(c) Exhibit Number Description
-------------- -----------
10.28 Promissory Note between the Company and James P. Farley
dated November 30, 1999
10.29 Promissory Note between the Company and Darrell Ash
dated November 30, 1999
10.30 Separation Agreement between the Company and Sam L.
Densmore
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.
-13-
<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, 2000 By: /s/ David Kirk
-------------------------------
David Kirk
CEO, President and Director
By: /s/ James P. Farley
-------------------------------
James P. Farley
VP Finance, Controller
-14-
<PAGE>
Exhibit 10.28
PROMISSORY NOTE
$21,461.54 November 30, 1999
Dallas, Texas
FOR VALUE RECEIVED, James P. Farley, ("Borrower"), hereby unconditionally
promises to pay to the order of RF Monolithics, Inc., a Delaware corporation
("Lender"), in lawful money of the United States of America and in immediately
available funds, the principal sum of Twenty-one Thousand, Four Hundred
Sixty-one Dollars and Fifty-four Cents ($21,461.54) (the "Loan") together with
accrued and unpaid interest thereon, payable on the dates and in the manner set
forth below.
1. Principal Repayment. The outstanding principal amount of the Loan
shall be due and payable on November 30, 2002.
2. Interest Rate. Borrower further promises to pay interest on the
outstanding principal amount hereof from the date hereof until payment in full,
which interest shall be payable at the rate of Four and Ninety/One Hundredths
percent (4.90%) per annum or the maximum rate permissible by law (which under
the laws of the State of Texas shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less. Interest
shall be payable quarterly in arrears not later than the first day of each
calendar quarter for the preceding quarter and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
3. Place of Payment. All amounts payable hereunder shall be payable at
the office of Lender, unless another place of payment shall be specified in
writing by Lender.
4. Application of Payments. Payment on this Note shall be applied first
to accrued interest, and thereafter to the outstanding principal balance
thereof.
5. Secured Note. The full amount of this Note is secured by the
Collateral identified and described below. As collateral security for prompt and
complete payment and performance of all obligations of Borrower under this Note
and to induce lender to extend credit, Borrower hereby assigns, conveys, grants,
pledges, and transfers to and creates in favor of Lender a security interest in
all goods and personal property of Borrower whether tangible or intangible and
whether now or hereafter owned by Borrower ("Collateral").
6. Default. Each of the following events shall be an "Event of Default"
hereunder:
(a) Borrower fails to pay timely any of the principal amount due
under this Note on the date the same becomes due and payable or any accrued
interest or other amounts due under this Note on the date the same becomes due
and payable or within five (5) calendar days thereafter;
(b) Borrower files any petition or action for relief under any
bankruptcy, reorganization, insolvency, or moratorium law, or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors, or takes any corporate action in
furtherance of any of the foregoing; or
(c) An involuntary petition is filed against Borrower (unless such
petition is dismissed or discharged within sixty (60) days), under any
bankruptcy statute now or hereafter in effect, or a custodian,
<PAGE>
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody, or control of any property
of Borrower.
Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder shall, at the option of
Lender, be immediately collectible by Lender pursuant to applicable law.
7. Waiver. Borrower waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note, and shall pay all costs of
collection when incurred, including, without limitation, reasonable attorneys'
fees, costs, and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
8. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas, excluding conflict
of laws principles that would cause the application of laws of any other
jurisdiction.
9. Successors and Assigns. The provisions of this Note shall inure to the
benefit of and be binding on any successor to Borrower and shall extend to any
holder hereof.
Borrower RF Monolithics, Inc.
/s/ James P. Farley /s/ David M. Kirk
- ---------------------- ---------------------------------
James P. Farley David M. Kirk
President and CEO
<PAGE>
Exhibit 10.29
PROMISSORY NOTE
$71,491.22 November 30, 1999
Dallas, Texas
FOR VALUE RECEIVED, Darrell Ash, ("Borrower"), hereby unconditionally
promises to pay to the order of RF Monolithics, Inc., a Delaware corporation
("Lender"), in lawful money of the United States of America and in immediately
available funds, the principal sum of Seventy-one Thousand, Four Hundred Ninety-
one Dollars and Twenty-two Cents ($71,491.22) (the "Loan") together with
accrued and unpaid interest thereon, payable on the dates and in the manner set
forth below.
1. Principal Repayment. The outstanding principal amount of the Loan
shall be due and payable on November 30, 2002.
2. Interest Rate. Borrower further promises to pay interest on the
outstanding principal amount hereof from the date hereof until payment in full,
which interest shall be payable at the rate of Four and Ninety/One Hundredths
percent (4.90%) per annum or the maximum rate permissible by law (which under
the laws of the State of Texas shall be deemed to be the laws relating to
permissible rates of interest on commercial loans), whichever is less. Interest
shall be payable quarterly in arrears not later than the first day of each
calendar quarter for the preceding quarter and shall be calculated on the basis
of a 360-day year for the actual number of days elapsed.
3. Place of Payment. All amounts payable hereunder shall be payable at
the office of Lender, unless another place of payment shall be specified in
writing by Lender.
4. Application of Payments. Payment on this Note shall be applied first
to accrued interest, and thereafter to the outstanding principal balance
thereof.
5. Secured Note. The full amount of this Note is secured by the
Collateral identified and described below. As collateral security for prompt
and complete payment and performance of all obligations of Borrower under this
Note and to induce lender to extend credit, Borrower hereby assigns, conveys,
grants, pledges, and transfers to and creates in favor of Lender a security
interest in all goods and personal property of Borrower whether tangible or
intangible and whether now or hereafter owned by Borrower ("Collateral").
6. Default. Each of the following events shall be an "Event of Default"
hereunder:
(a) Borrower fails to pay timely any of the principal amount due under
this Note on the date the same becomes due and payable or any accrued interest
or other amounts due under this Note on the date the same becomes due and
payable or within five (5) calendar days thereafter;
(b) Borrower files any petition or action for relief under any
bankruptcy, reorganization, insolvency, or moratorium law, or any other law for
the relief of, or relating to, debtors, now or hereafter in effect, or makes any
assignment for the benefit of creditors, or takes any corporate action in
furtherance of any of the foregoing; or
(c) An involuntary petition is filed against Borrower (unless such
petition is dismissed or discharged within sixty (60) days), under any
bankruptcy statute now or hereafter in effect, or a custodian,
<PAGE>
receiver, trustee, assignee for the benefit of creditors (or other similar
official) is appointed to take possession, custody, or control of any property
of Borrower.
Upon the occurrence of an Event of Default hereunder, all unpaid principal,
accrued interest and other amounts owing hereunder shall, at the option of
Lender, be immediately collectible by Lender pursuant to applicable law.
7. Waiver. Borrower waives presentment and demand for payment, notice of
dishonor, protest and notice of protest of this Note, and shall pay all costs of
collection when incurred, including, without limitation, reasonable attorneys'
fees, costs, and other expenses.
The right to plead any and all statutes of limitations as a defense to any
demands hereunder is hereby waived to the full extent permitted by law.
8. Governing Law. This Note shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas, excluding conflict
of laws principles that would cause the application of laws of any other
jurisdiction.
9. Successors and Assigns. The provisions of this Note shall inure to
the benefit of and be binding on any successor to Borrower and shall extend to
any holder hereof.
Borrower RF Monolithics, Inc.
/s/ Darrell Ash /s/ David M. Kirk
- ----------------------- -----------------------------
Darrell Ash David M. Kirk
President and CEO
<PAGE>
Exhibit 10.30
TO: Board of Directors RF Monolithics, Inc.
FROM: Sam Densmore
DATE: November 11, 1999
RE: Resignation from Position of Director, President and Chief Executive
Office and Continuation of Employee Status
By this Memorandum, I hereby offer to resign from my current positions of
Director, President and Chief Executive Officer, effective immediately, in
exchange for RFM's agreement to the following terms, consistent with the general
framework set forth in RFM's agreement with Gary A. Anderson dated August 13,
1996 (attached), with the following modification to those paragraphs indicated
below :
1. My employment status will continue for nine (9) months from
November 11, 1999, as provided below. RFM will continue to pay my
salary as due, in the gross amount of $18,750.00 per month, reported
on a W-2, and will also continue to provide full benefits, during this
nine-month period.
2. I will serve as a consultant to RFM for an additional nine (9) months,
without reduction in gross monthly compensation. My benefits will
continue to the extent permissible under the applicable benefit plans,
or pursuant to federal COBRA law if I so elect.
3. My duties during the next eighteen (18) months shall be those
reasonable requested or assigned by the Company's new CEO, David Kirk,
provided that the Company acknowledges that it will make reasonable
attempts to accommodate my schedule to permit my pursuit of consulting
opportunities. If I accept "regular and on-going employment" with a
different employer, then my status with RFM will also continue, but my
compensation from RFM will be reduced from $18,750.00 per month to
$1.00 per month for the balance of the eighteen month total term.
4. I agree to the terms of non-competition and non-solicitation for the
eighteen-month period described above, plus one year thereafter.
5. At the Company's option (and with notice to me), amounts for my health
care benefits may be deducted from my salary or I will pay the same
directly.
6. During the period of the next eighteen months, my stock options and
other equity interest will be governed by the terms of the applicable
Plan.
7. Not applicable.
8. Not applicable.
9. Not applicable.
<PAGE>
The parties agree to the foregoing terms. The complete agreement between
the parties regarding this matter shall be set forth in a subsequent
comprehensive agreement.
By: /s/ Sam L. Densmore
Date: 11/11/99
By: /s/ Michael Bernique
Chairman of the Board
Position
Date: 11/11/99
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