SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
Securities Exchange Act of 1934
for Quarter ended July 31, 2002
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)
(858) 549-6340 FAX (858) 549-6345
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None.
Check whether the issuer (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
---
State the number of shares outstanding of each of the issuer's classes of common
stock at the latest practicable date.
As of September 13, 2002, the registrant had 3,409,354 shares of Common Stock,
$.01 par value, outstanding.
Transitional small business disclosure format
Yes No X
---
Part I. FINANCIAL INFORMATION
RF INDUSTRIES, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31 October 31
2002 2001
----------- -----------
(Unaudited)
Item 1: Financial Statements
CURRENT ASSETS
Cash and cash equivalents ............................ $3,525,813 $ 915,538
Investments in available-for-sale securities ......... 0 1,744,851
Trade accounts receivable, net of allowance
for doubtful accounts of $78,696 and $42,000 ......... 833,406 981,803
Notes receivable ..................................... 12,000 12,000
Income tax refund receivable ......................... 117,192 216,192
Inventories .......................................... 4,306,630 4,746,125
Other current assets ................................. 277,968 111,214
Deferred tax assets .................................. 150,596 155,700
---------- ----------
TOTAL CURRENT ASSETS ............................ 9,223,605 8,883,423
---------- ----------
PROPERTY AND EQUIPMENT
Equipment and tooling ................................ 1,068,803 1,050,922
Furniture and office equipment ....................... 248,826 243,357
---------- ----------
Fixed assets, at cost ........................... 1,317,629 1,294,279
Less accumulated depreciation ................... 859,739 737,279
---------- ----------
NET FIXED ASSETS ................................ 457,890 557,000
---------- ----------
Intangible assets .................................... 174,698 174,698
Less accumulated amortization ........................ 11,646 11,646
---------- ----------
NET INTANGIBLE ASSETS ........................... 163,052 163,052
Note receivable from stockholder ..................... 70,000 70,000
Other assets ......................................... 11,471 11,471
---------- ----------
TOTAL ASSETS
$9,926,018 $9,684,946
========== ==========
See Notes to Condensed Consolidated Unaudited Financial Statements.
RF INDUSTRIES, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31 October 31
LIABILITIES AND 2002 2001
STOCKHOLDERS' EQUITY ----------- -----------
------------------------- (Unaudited)
CURRENT LIABILITIES
Accounts payable ............................... $ 92,179 $ 107,145
Notes payable .................................. 41,663 50,000
Accrued expenses ............................... 266,115 278,407
----------- -----------
Total current liabilities ................. 399,957 435,552
Notes payable, net of current portion .......... 0 39,163
25,700 25,700
Deferred tax liabilities ....................... ----------- -----------
425,657 500,415
TOTAL LIABILITIES ......................... ----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock - authorized 10,000,000 shares
of $.01 par value; 3,441,054 shares issued ... 34,410 34,410
Additional paid-in capital ..................... 4,695,147 4,695,147
Retained earnings .............................. 4,827,730 4,543,376
Unearned compensation .......................... 0 (23,490)
Accumulated other comprehensive income (loss) .. 0 (7,986)
Receivables from sale of stock ................. (1,715) (1,715)
Treasury stock, at cost - 31,700 shares ........ (55,211) (55,211)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ................ 9,500,361 9,184,531
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................... $ 9,926,018 $ 9,684,946
=========== ===========
See Notes to Condensed Consolidated Unaudited Financial Statements.
Item 1: Financial Statements (continued)
RF INDUSTRIES, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF
INCOME AND COMPREHENSIVE INCOME
Three Months Ended Nine Months Ended
July 31 July 31
------------------------ -------------------------
(Unaudited) (Unaudited)
2002 2001 2002 2001
--------- --------- ---------- ---------
INCOME
Net sales .................................. $ 2,161,127 $ 2,596,391 $ 6,437,033 $ 7,348,531
Cost of sales .............................. 1,186,038 1,275,342 3,292,714 3,633,569
---------- ---------- ---------- ----------
Gross profit .......................... 975,089 1,321,049 3,144,319 3,714,962
---------- ---------- ---------- ----------
Operating expenses:
Engineering ........................... 169,784 134,661 476,011 376,064
Selling and general ................... 760,430 749,107 2,266,041 2,192,742
---------- ---------- ---------- ----------
Totals ............................ 930,214 883,768 2,742,052 2,568,806
---------- ---------- ---------- ----------
Operating income ...................... 44,875 437,281 402,267 1,146,156
---------- ---------- ---------- ----------
Other income (expenses):
Realized loss on sale of investments... (8,192) 0 (8,192) 0
Commissions ........................... 14,886 91,691 23,101 152,548
Interest .............................. 17,175 15,393 57,178 70,314
---------- ---------- ---------- ----------
Totals ............................ 23,869 107,084 72,087 222,862
---------- ---------- ---------- ----------
Income before provision
for income tax ......................... 68,744 544,365 474,354 1,369,018
Provision for income tax ................... 28,000 218,000 190,000 548,000
---------- ---------- ---------- ----------
Net income ................................. $ 40,744 $ 326,365 $ 284,354 $ 821,018
========= ========= ========= =========
Basic earnings per share ................... $ 0.01 $ 0.10 $ 0.08 $ 0.24
========= ========= ========= =========
Diluted earnings per share ................. $ 0.01 $ 0.08 $ 0.07 $ 0.21
========= ========= ========= =========
Basic weighted average
shares outstanding ..................... 3,409,354 3,415,721 3,409,354 3,407,146
========= ========= ========= =========
Diluted weighted average
shares outstanding ..................... 3,738,371 3,938,595 3,814,647 3,943,982
========= ========= ========= =========
COMPREHENSIVE INCOME
Net income ................................. $ 40,744 $ 326,365 $ 284,354 $ 821,018
Unrealized gain (loss) on available-
for-sale securities, net of deferred tax... (723) (5,966) (7,986) (22,709)
---------- ---------- ---------- ----------
Total comprehensive income ............... $ 40,021 $ 320,399 $ 292,340 $ 798,309
========= ========= ========= =========
See Notes to Condensed Consolidated Unaudited Financial Statements
Item 1: Financial Statements (continued)
RF INDUSTRIES, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended July 31
-------------------------------------
OPERATING ACTIVITIES 2002 2001
---------- ----------
Net income ................................................ $ 284,354 $ 821,018
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for bad debts .............................. 70,000 28,320
Inventory deposit write-offs ......................... 0 30,294
Depreciation and amortization ........................ 123,090 102,937
Amortization of unearned compensation ................ 23,490 70,542
Realized loss on available-for-sale securities ....... 8,192
Changes in operating assets and liabilities, net of
acquisition payment in 2001:
Trade accounts receivable ....................... 78,397 394,758
Inventories ..................................... 439,495 (805,569)
Other assets .................................... (67,754) 71,647
Accounts payable ................................ (14,966) (261,021)
Accrued expenses ................................ (12,292) (210,656)
----------- -----------
Net cash provided by operating activities ........... 932,006 242,270
----------- -----------
INVESTING ACTIVITIES
Proceeds from sale of available-for-sale securities.. 1,780,659 445,889
Investments in securities ........................... (30,910) 0
Capital expenditures ................................ (23,980) (165,741)
Payment for acquisition, net of cash acquired ....... 0 (147,078)
----------- -----------
Net cash provided by investing activities ........... 1,725,769 133,070
----------- -----------
FINANCING ACTIVITIES
Payments on loans payable ........................... (47,500) (220,371)
Proceeds from exercise of stock options ............. 0 9,375
----------- -----------
Net cash used in financing activities .............. (47,500) (210,996)
----------- -----------
Net increase in cash and cash equivalents.................. 2,610,275 164,344
Cash and cash equivalents at the beginning of the period .. 915,538 557,923
----------- -----------
Cash and cash equivalents at the end of the period ........ $ 3,525,813 $ 722,267
=========== ===========
SUPPLEMENTARY CASH FLOW DATA:
Income taxes paid .................................... $ 91,000 $ 255,000
=========== ===========
Noncash investing and financing activities:
Fair value of assets acquired ........................ $ 496,504
Liabilities assumed .................................. (207,341)
Seller financing ..................................... (139,163)
-----------
Cash paid ............................................ $ 150,000
===========
See Notes to Condensed Consolidated Unaudited Financial Statements
RF INDUSTRIES, LTD. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Unaudited interim financial statements:
The accompanying unaudited condensed consolidated financial statements have
been prepared in conformity with accounting principles generally accepted
in the United States of America for interim financial information and with
the instructions to Form 10-QSB. Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine months ended July 31,
2002 are not necessarily indicative of the results that may be expected for
the year ending October 31, 2002. The unaudited condensed consolidated
financial statements should be read in conjunction with the financial
statements and footnotes thereto included in the Company's annual report on
Form 10-KSB for the year ended October 31, 2001.
Note 2 - Components of inventory:
July 31 October 31
2002 2001
----------- -----------
(Unaudited) (Audited)
Raw material and suppllies.... $ 712,030 $ 822,180
Finished goods 3,594,600 3,923,945
---------- ---------
Totals $ 4,306,630 $ 4,746,125
========== =========
Note 3 - Earnings per share:
The Company follows the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings per Share", which requires the presentation of
"basic" and "diluted" earnings per common share, as further explained in
Note 1 of the notes to the audited financial statements of the Company,
included in Form 10-KSB for the fiscal year ended October 31, 2001.
Basic earnings per share is computed by dividing net earnings by the
weighted average number of common stock outstanding during the period.
Diluted earnings per share is computed by dividing net earnings by the
weighted average number of shares of common stock increased by the effects
of assuming that other potentially dilutive securities (such as stock
options) outstanding during the period had been exercised.
The following table summarizes basic and diluted shares:
Three Months Ended Nine Months Ended
July 31 July 31
-------------------- --------------------
2002 2001 2002 2001
--------- -------- -------- --------
Weighted average shares outstanding for
basic net earnings per share .............. 3,409,354 3,415,721 3,409,354 3,407,146
Add effects of potentially dilutive securities-
assumed exercised of stock options ........ 329,017 522,874 405,293 536.836
--------- --------- --------- ---------
Weighted average shares for diluted net
earnings per share ....................... 3,738,371 3,938,595 3,814,647 3,943,982
========= ========= ========= =========
Note 4 - Segment Information
Net sales and income (loss) before provision for income taxes for the three
months ended July 31, 2002 and 2001 follows:
Common/ Intercompany
Connector Neulink Bioconnect Corporate Sales Total
--------- --------- ----------- ---------- ---------- ---------
2002
-----------
Net sales ........... $ 1,954,540 $ 105,617 $ 101,403 $ (433) $ 2,161,127
Income (loss) before
provision for income
taxes ........... 309,100 (63,586) (193,945) $ 17,175 68,744
Depreciation and
amortization ..... 21,840 4,847 13,682 40,369
Total assets ........ 8,340,003 1,089,256 496,759 9,926,018
Additions to property
and equipment .... 0 0 6,389 6,389
2001
-----------
Net sales ............ $ 2,305,096 $ 184,434 $ 151,168 $ (44,307) $ 2,596,391
Income (loss) before
provision for income
taxes ............ 580,226 83,312 (131,713) $ 12,540 544,365
Depreciation and
amortization ...... 17,400 3,272 19,677 40,349
Total assets ......... 7,781,590 1,370,810 473,041 9,625,441
Additions to property
and equipment ..... 41,442 0 13,954 55,396
Net sales and income (loss) before provision for income taxes for the nine
months ended July 31, 2002 and 2001 follows:
Common/ Intercompany
Connector Neulink Bioconnect Corporate Sales Total
--------- --------- ----------- ---------- ---------- ---------
2002
-----------
Net sales ............ $ 5,513,261 $ 658,763 $ 556,322 $ (291,313) $ 6,437,033
Income (loss) before
provision for income
taxes ............ 767,897 (19,792) (330,929) $ 57,178 474,354
Depreciation and
amortization ...... 67,450 15,890 39,750 123,090
Total assets ......... 8,340,003 1,089,256 496,759 9,926,018
Additions to property
and equipment ..... 10,945 0 13,035 23,980
2001
-----------
Net sales ............ $ 6,534,643 $ 587,377 $ 291,517 $ (65,006) $ 7,348,531
Income (loss) before
provision for income
taxes ............ 1,669,881 (27,234) (343,943) $ 70,314 1,369,018
Depreciation and
amortization ...... 58,385 9,815 34,737 102,937
Total assets ......... 7,781,590 1,370,810 473,041 9,625,441
Additions to property
and equipment ..... 151,787 13,954 165,741
Note 5 - Change in accounting policy
The Company follows SFAS No. 142, "Goodwill and Other Intangible Assets",
which requires that goodwill and certain intangible assets, including those
recorded in past business combinations, no longer be amortized against
earnings, but instead be tested for impairment at least annually. The
Company will test for impairment of goodwill at the fiscal year end of
2002.
Note 6 - Comprehensive Income
The following table summarizes reclassification adjustments made to
unrealized gain (loss) on available-for-sale securities, net of deferred
tax:
Three months ended Nine months ended
July 31 July 31
------------------- ------------------
2002 2001 2002 2001
------- ------- -------- -------
Accumulated other comprehen-
sive income (loss) ........... $(5,638) 0 $ 3,071 0
Reclassification adjustment for
realized loss ................ 4,915 0 4,915 0
------- ------- ------- -------
Net gain (loss) recognized
in comprehensive income .... $ (723) 0 $ 7,986 0
======= ======= ======= =======
Item 2: Management's discussion and analysis of financial condition and results
of operations
This report contains forward-looking statements. These statements relate to
future events or the Company's future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "except," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially.
Although the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot guarantee future
results, levels of activity, performance or achievements. Moreover, neither the
Company, nor any other person, assumes responsibility for the accuracy and
completeness of the forward-looking statements. The Company is under no
obligation to update any of the forward-looking statements after the filing of
this Quarterly Report on Form 10-QSB to conform such statements to actual
results or to changes in its expectations.
The following discussion should be read in conjunction with the Company's
financial statements and the related notes and other financial information
appearing elsewhere in this Form 10-QSB. Readers are also urged to carefully
review and consider the various disclosures made by the Company which attempt to
advise interested parties of the factors which affect the Company's business,
including without limitation the disclosures made under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," under the caption "Risk Factors," and the audited financial
statements and related notes included in the Company's Annual Report filed on
Form 10-KSB for the year ended October 31, 2002 and other reports and filings
made with the Securities and Exchange Commission.
Liquidity and Capital Resources
Management believes that existing current assets and the amount of cash it
anticipates it will generate from current operations will be sufficient to fund
the anticipated liquidity and capital resource needs of the Company for at least
twelve months. The Company does not, however, currently have any commercial
banking arrangements providing for loans, credit facilities or similar matters
should the Company need to obtain additional capital. Management believes that
its existing assets and the cash expected to be generated from operations will
be sufficient during the current fiscal year are based on the following:
o As of July 31, 2002, the amount of cash and cash equivalents was equal to
$3,525,813 in the aggregate.
o As of July 31, 2002, the Company had $9,223,605 in current assets, and
$399,957 of current liabilities.
o As of July 31, 2002, the Company had only $41,663 of outstanding
indebtedness (other than accounts payable and accrued expenses).
The Company does not believe it will need material additional capital equipment
in the next twelve months. In the past, the Company has financed some of its
property and equipment requirements through capitalleases. No additional capital
equipment purchases have been currently identified that would require
significant additional leasing or capital obligations during the next twelve
months. Management also believes that based on the Company's financial condition
at July 31, 2002, the absence of outstanding bank debt and recent operating
results, the Company would be able to obtain bank loans to finance its
expansion, if necessary, although there can be no assurance any bank loan would
be obtainable, or if obtained, would be on favorable terms or conditions.
As of July 31, 2002, the Company had a total of $3,525,813 of cash and cash
equivalents compared to a total of $2,660,389 of cash, cash equivalents and
investments in available-for-sale securities on October 31, 2001. The increase
in liquid assets is the result of (i) net income earned by the Company during
the nine-month period following October 31, 2001, (ii) a decrease in the amount
of inventories held by the Company (the Company sold some of its excess
inventory that it did not need to replenish), (iii) the receipt of a tax refund,
and(iv) additional collections of accounts receivable. The Company used a
portion of the additional cash on hand to reduce its current liabilities from
$435,552 on October 31, 2001 to $399,957 on July 31, 2002.
Net cash provided by investing activities was $1,725,769 for the first nine
months ended July 31, 2002, and resulted from the sale of investments in
securities of $ 1,780,659, net of investment in securities of $30,910 and
capital expenditures of $ 23,980. The $1,780,659 investment in securities
represented cash invested by the Company in mutual funds and other similar
investments. The Company sold the mutual funds during the July 31, 2002 fiscal
quarter, which resulted in an increase in the Company's cash balances. The
Company has not yet determined how it will invest these excess cash funds on
hand.
Net cash used in financing activities was $ 47,500 for the nine months ended
July 31, 2002, which was attributable to the payment on a loan incurred in
connection with the purchase of Bioconnect.
As of July 31, 2002 the Company had $3,525,813 in cash and cash equivalents and
no balance in investments, as compared to $915,538 in cash and cash equivalents
and $1,744,851 in investments at October 31, 2001. As a result, as of July 31,
2002, the Company had working capital of $ 8,823,648 and a current ratio of 23
to 1.
Three Months 2002 vs. Three Months 2001
----------------------------------------
Net sales decreased 17%, or $435,300, to $2,161,100 from $2,596,400 in the three
months ended July 31, 2002. The decrease was the result of declining sales at
the Company's RF Connectors and Neulink divisions. The RF Connectors
manufactures and sells connectors used in radio communications applications,
such as cellular and PCS telephones, cellular and PCS base stations, GPS
products, and cable and dish radio/TV systems. Net sales at the RF Connector
division decreased by 15% during the fiscal quarter ended July 31, 2002 compared
to the same fiscal quarter last year because of decreased demand for wireless
application products.
Sales at the Company's RF Neulink division decreased by 43% to $105,600 compared
to $184,400 in the fiscal quarter ended July 31, 2002. The decrease in sales can
be attributed to the current state of the economy. Many customers who normally
purchase this time of the year have been holding off purchases, apparantly
cautious of the current market. While overseas inquiries have increased,
continental US sales in the larger gas, oil and irrigation markets have been
slow.
Net sales at the Company's Bioconnect division decreased in the fiscal quarter
ended July 31, 2002 from $106,900 to $101,400. The Company acquired Bioconnect
in December 2000 as a strategic acquisition to support the Company's plan to
increase sales of completed cable assemblies (assemblies that contain the
Company's connectors and an attached cable) and, because of Bioconnect's medical
monitoring product line. During the fiscal quarter ended July 31, 2002, the
decline in cable assemblies sales reduced revenue for the Bioconnect division.
The RF Connector division currently anticipates that sales of cable assemblies
will decrease somewhat in the near term, further reducing Bioconnect's revenues.
Bioconnect is completing the development of additional interconnect products for
medical monitoring applications, which are expected to contribute to increased
Bioconnect medical interconnect sales.
Cost of sales, for the Company, decreased 7% during the fiscal quarter ended
July 31, 2002, or $89,300 to $1,186,000 from $1,275,300 last year. The decrease
is due to 17% decline in the Company's net sales. Overall gross margins as a
percentage of sales decreased 6% compared to the third quarter last year. Gross
margins typically fluctuate as a percentage of sales due to normal fluctuations
in the mix of products sold by the Company.
Engineering expenses increased $35,100, or 26%, from $134,700 in the third
quarter last year. Engineering expenses during both the three and nine-month
periods ending July 31, 2002 increased as a result of the additional expenses
incurred by the Company to develop a new high-speed wireless radio modem that
the Company expects to release later this year. The new modem will replace an
existing product and technology that is currently sold by both the Company and
its competitors. The Company intends to file a patent on its newly developed
product. Since the development of the new product is substantially complete,
engineering expenses are expected to return to lower annual rate.
Selling and general expenses increased 2% or $11,300, to $760,400 from $749,100
for the quarter ended July 31, 2001. The increase in selling and general
expenses is due in large part to the additional marketing efforts undertaken by
the Company in order to increase sales in response to the industry-wide decrease
in the demand for wireless products.
Net interest income increased $1,800 to $17,200 from $15,400 during the previous
quarter ended July 31, 2002 due to higher investment account balances.
The $14,900 of commissions that the Company received during the July 31, 2002
fiscal quarter represents the last such commission payment that the Company
expects to receive. For the past two years, the Company has been receiving
commissions under an agreement with a third party relating to sales made by that
party. The Company believes that this agreement has been substantially completed
and that no material payments will be received in the future. During last year's
fiscal quarter ending July 31, 2001, the Company received payments totaling
$91,700.
Nine Months 2002 vs Nine Months 2001
---------------------------------------
Net sales decreased by $911,500, or 12%, to $6,437,000 for the nine month period
ended July 31, 2002 from $7,348,500 in the previous year. As discussed above,
the decrease was the result of declining sales at the Company's RF Connectors
division, which is attributable to an industry-wide slowdown in the
telecommunications industry. RF Connectors division decreased 16% to $5,513,300
from $6,534,600 last year.
Sales in the Company's RF Neulink division increased during the nine-month
period ending July 31, 2002 by 12% to $658,800 from $587,400 for the comparable
nine-month period last year. The increase can be attributed to stronger sales
for new wireless application in the second quarter.
Bioconnect's sales during the nine-month period ending July 31, 2002 were
$556,300, compared to $226,500 for the same nine months last year. The two
fiscal periods are not comparable since the Bioconnect division was acquired in
December 2000 and did not have nine months of operations during the prior year's
period. In addition, Bioconnect's sales during the nine-month period ending July
31, 2002 included intercompany sales of $291,300, representing cable assemblies
that Bioconnect sold to the RF Connector division. No similar intercompany sales
were effected last year.
Cost of sales decreased $340,900, or 9%, to $3,292,700 from $3,633,600 last year
due to the 12% decrease in sales. Overall, gross profits as a percent of sales,
remained relatively unchanged at 49% during the current nine-month period
compared to 51% last year.
Engineering expenses increased $100,000, or 27%, to $476,000 from $376,000 last
year. The increase during the nine-month period ending July 31, 2002 is the
result of the additional expenses incurred by the Company in developing a new,
proprietary high-speed wireless radio modem that the Company expects to release
later this year.
Selling and general expenses increased $73,300, or 3%, to $2,266,000 compared to
$2,192,700 last year, and as a percent of sales increased to 35% from 30% of
sales last year. The increase is due to the added expenses incurred primarily
during the first three months of the period. The increases in selling and
general expenses include the additional expenses associated with the Bioconnect
acquisition and higher expenses for legal fees, increased travel, advertising,
and marketing expenses.
Net interest income decreased $13,100 to $57,200 from $70,300 the previous year
primarily due to lower interest rates earned on cash and cash equivalents.
Commissions for the Neulink division's sales were $23,100, most of which were
received during the first three months of the nine month fiscal period, compared
to $152,500 in commissions the previous year as sales under the third party
agreement have begun to wind down.
MATERIAL CHANGES IN FINANCIAL CONDITION:
Cash and cash equivalents increased by $2,610,275 to $3,525,813 compared to the
October 31, 2001 fiscal year-end balance of $915,538. The increase in the
Company's cash position is due to the decrease in inventory levels and the
proceeds from the sale of available-for-sale investments.
Trade accounts receivable decreased $148,397, or 15% to $833,406 compared to the
October 31, 2001 balance of $981,803. The decrease is due to a decrease in net
sales and the Company's increased attempts to reduce its outstanding accounts
receivable.
Inventories, as of July 31, 2002, decreased to $4,306,630, a $439,495 decrease
from $4,746,125 on October 31, 2001. As part of its business strategy, and
because of its off-shore manufacturing arrangements, the Company normally
maintains a high level of inventory. Due to an overall slow-down in the demand
for the Company's connectors, the Company has been reducing its inventory
levels.
Other current assets, including prepaid expenses and deposits, increased
$166,800 to $278,000, from $111,200 on October 31, 2001. This increase is part
of the normal operating cycle of the Company and is due to the annual invoices
received early each year for prepaid cargo insurance, prepaid property and
liability insurance, audit fees, computer maintenance agreement, and
miscellaneous expenses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Not applicable
Item 3. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 10, 2002.
The matters voted upon at the annual meeting were as follows: (i) the election
of six members of the Company's Board of Directors for the ensuing year; and
(ii) the ratification of the appointment of J.H. Cohn LLP as the independent
accountants of the Company for the fiscal year ending October 31, 2002.
The voting on each proposal was set forth in the table below.
1. Election of directors:
NAME FOR WITHHOLD AUTHORITY
------ ------- ------------------
John R. Ehret 3,149,521 22,420
Marvin Fink 3,149,721 22,220
Howard F. Hill 3,139,221 32,720
Henry E. Hooper 3,148,021 23,920
Robert Jacobs 3,149,821 22,120
Linde Kester 3,149,621 22,320
2. Ratify the appointment of J.H. Cohn LLP as the independent accountants of
the Company for the fiscal year ending October 31, 2002.
FOR AGAINST ABSTENTIONS(a)
---------- --------- ---------------
Common shares
voted: 3,147,087 13,095 11,759
(a) Does not include "broker non-votes", which are abstentions by nominee
holders on behalf of beneficial owners who have given no instructions to the
nominee holder. When such nominee has no authority to vote absent such
instructions, the nominee is required to abstain from voting, even though
present or represented at the meeting. Such "broker non-votes" are not
considered present and entitled to vote with respect to the referenced proposals
and therefore have no effect on the outcome of the vote.
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification of Chief Executive Officer
Pursuant to 18 U.S.C.ss. 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
99.2 Certification of Chief Financial Officer
Pursuant to 18 U.S.C.ss.1350, as Adopted
Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RF INDUSTRIES, LTD.
Dated: September 16, 2002 By: Howard F. Hill
----------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: September 16, 2002 By: Terrie A. Gross
----------------------------
Terrie A. Gross
Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Howard F. Hill, certify that:
1.
I have reviewed this quarterly report on Form 10-QSB of RF Industries,
Inc.;
2.
Based on my knowledge, this quarterly report does not contain any
untrue statement or a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report; and
3.
Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material aspects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
Date: September 16, 2002
/s/ Howard F. Hill
-----------------------
Howard F. Hill
Chief Executive Officer
RF Industries, Ltd.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Terrie A. Gross, certify that:
1.
I have reviewed this quarterly report on Form 10-QSB of RF Industries,
Inc.;
2.
Based on my knowledge, this quarterly report does not contain any
untrue statement or a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report; and
3.
Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material aspects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
Date: September 16, 2002
/s/ Terrie A. Gross
-----------------------
Terrie A. Gross
Chief Executive Officer
RF Industries, Ltd.