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 April 30, 2003
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 June 6, 2003, the registrant had 2,643,087 shares of Common Stock, $.01
par value, outstanding.
Transitional small business disclosure format
Yes No X
Part I. FINANCIAL INFORMATION
Item 1: Financial Statements
RF INDUSTRIES, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30 October 31
2003 2002
----------- -----------
(Unaudited)
ASSETS
-----------
CURRENT ASSETS
Cash and cash equivalents ........................ $ 4,402,309 $ 3,939,299
Trade accounts receivable, net of allowance
for doubtful accounts of $99,022 and $84,806 ..... 1,029,933 1,146,439
Notes receivable ................................. 12,000 12,000
Inventories ...................................... 3,923,622 4,143,617
Other current assets ............................. 290,717 169,396
Deferred tax assets .............................. 162,600 162,600
----------- -----------
TOTAL CURRENT ASSETS ........................ 9,821,181 9,573,351
----------- -----------
PROPERTY AND EQUIPMENT
Equipment and tooling ............................ 1,119,993 1,082,813
Furniture and office equipment ................... 251,514 251,514
----------- -----------
1,371,507 1,334,327
Less accumulated depreciation ............... 980,637 899,504
----------- -----------
Total ....................................... 390,870 434,823
Notes receivable from related parties ............ 50,340 56,505
Note receivable from stockholder ................. 70,000 70,000
Other assets ..................................... 14,171 11,471
----------- -----------
TOTAL ASSETS $10,346,562 $10,146,150
=========== ===========
See Notes to Condensed Consolidated Unaudited Financial Statements.
Item 1: Financial Statements (continued)
RF INDUSTRIES, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
April 30 October 31
2003 2002
----------- -----------
(Unaudited)
LIABILITIES AND
STOCKHOLDERS' EQUITY
-----------------------
CURRENT LIABILITIES
Accounts payable ............................... $ 218,860 $ 70,806
Notes payable .................................. 0 44,582
Accrued expenses ............................... 241,132 327,271
------------ ------------
Total current liabilities 459,992 442,659
Deferred tax liabilities ....................... 107,800 107,800
------------ ------------
TOTAL LIABILITIES ......................... 567,792 550,459
------------ ------------
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 .............................. 5,136,899 4,923,060
Receivables from sales of stock ................ (1,715) (1,715)
Treasury stock, at cost - 43,800 and
31,700 shares ............................... (85,971) (55,211)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ................ 9,778,770 9,595,691
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,346,562 $ 10,146,150
============ ============
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 Six Months Ended
April 30 April 30
----------------------- -----------------------
(Unaudited) (Unaudited)
2003 2002 2003 2002
--------- --------- ---------- ----------
Net sales .......................... $2,166,024 $2,090,989 $4,492,900 $4,275,906
Cost of sales ...................... 1,071,487 956,996 2,263,645 2,106,676
---------- ---------- ---------- ----------
Gross profit .................. 1,094,537 1,133,993 2,229,255 2,169,230
---------- ---------- ---------- ----------
Operating expenses:
Engineering ................... 187,718 142,192 386,298 306,227
Selling and general ........... 772,384 735,628 1,496,223 1,505,611
---------- ---------- ---------- ----------
Totals .................... 960,102 877,820 1,882,521 1,811,838
---------- ---------- ---------- ----------
Operating income ................... 134,435 256,173 346,734 357,392
---------- ---------- ---------- ----------
Other income:
Commissions ................... 0 0 0 8,215
Interest ...................... 4,608 16,249 16,105 40,003
---------- ---------- ---------- ----------
Totals .................... 4,608 16,249 16,105 48,218
---------- ---------- ---------- ----------
Income before provision
for income tax ................. 139,043 272,422 362,839 405,610
Provision for income tax ........... 60,000 111,000 149,000 162,000
---------- ---------- ---------- ----------
Net income ......................... $ 79,043 $ 161,422 $ 213,839 $ 243,610
========== ========== ========== ==========
Basic earnings per share ........... $ 0.02 $ 0.05 $ 0.06 $ 0.07
========== ========== ========== ==========
Diluted earnings per share ......... $ 0.02 $ 0.04 $ 0.06 $ 0.06
========== ========== ========== ==========
Basic weighted average
shares outstanding ............. 3,398,014 3,409,354 3,399,146 3,409,354
========== ========== ========== ==========
Diluted weighted average
shares outstanding ............. 3,709,455 3,851,303 3,680,993 3,848,809
========== ========== ========== ==========
COMPREHENSIVE INCOME:
Net income ......................... $ 79,043 $ 161,422 $ 213,839 $ 243,610
Unrealized gain on available-
for-sale securities, net of deferred
tax ............................... 0 1,613 0 8,709
---------- ---------- ---------- ----------
Total comprehensive income .... $ 79,043 $ 163,035 $ 213,839 $ 252,319
========== ========== ========== ==========
See Notes to Condensed Consolidated Unaudited Financial Statements.
Item 1: Financial Statements (continued)
RF INDUSTRIES, LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
Six months ended April 30
---------------------------
(Unaudited)
OPERATING ACTIVITIES 2003 2002
-------- --------
Net income ....................................... $ 213,839 $ 243,610
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for bad debts ..................... 24,000 50,000
Depreciation and amortization ............... 81,133 82,721
Amortization of unearned compensation ....... 23,490
Changes in operating assets and liabilities:
Trade accounts receivable ................... 92,506 (256,017)
Inventories ................................ 219,994 473,495
Other assets ............................... (124,021) 6,329
Accounts payable ........................... 148,054 25,865
Accrued expenses ........................... (86,139) (75,458)
----------- -----------
Net cash provided by operating activities .. 569,366 574,035
----------- -----------
INVESTING ACTIVITIES
Investment in available-for-sale securities (30,910)
Capital expenditures ....................... (37,179) (17,591)
Repayments of related party notes .......... 6,165
----------- -----------
Net cash used in investing activities ...... (31,014) (48,501)
----------- -----------
FINANCING ACTIVITIES
Payments on loans payable .................. (44,582) (47,500)
Purchase of treasury stock ................. (30,760)
----------- -----------
Net cash used in financing activities ..... (75,342) (47,500)
----------- -----------
Net increase in cash and cash equivalents 463,010 478,034
Cash and cash equivalents at the beginning of the
period .......................................... 3,939,299 915,538
----------- -----------
Cash and cash equivalents at the end of the period $ 4,402,309 $ 1,393,572
=========== ===========
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 six month periods ended April
30, 2003 are not necessarily indicative of the results that may be expected
for the year ending October 31, 2003. 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, 2002.
Note 2 - Components of inventory
April 30 October 31
2003 2002
------------ ------------
(Unaudited)
Raw material and supplies $ 553,600 $ 655,746
Finished goods .......... 3,370,022 3,487,871
---------- ----------
Totals ................. $3,923,622 $4,143,617
========== ==========
Note 3 - Earnings per 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, 2002, 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 and the
treasury stock method had been applied.
The following table summarizes the computation of basic and diluted
weighted average shares:
Three Months Ended Six Months Ended
January 31 April 30
2003 2002 2003 2002
--------- -------- -------- --------
Weighted average shares outstanding for
basic net earnings per share ............. 3,398,014 3,409,354 3,399,146 3,409,354
Add effects of potentially dilutive securities-
assumed exercised of stock options ........ 311,441 441,949 281,847 439,455
--------- --------- --------- ---------
Weighted average shares for diluted net
earnings per share ........................ 3,709,455 3,851,303 3,680,993 3,848,809
========= ========= ========= =========
Note 4 - Segment Information
The Company's segments are described in Note 6 of the notes to the audited
financial statements of the Company included in Form 10-KSB for the fiscal
year ended October 31, 2002.
The Company had reported segment information in its previous filings for
the operations associated with its Connector, Neulink and Bioconnect
business units in the same format as reviewed by the Company's management.
The sales, operating income and assets of the Bioconnect segment no longer
meet the thresholds that require separate disclosures and the product line
of Bioconnect is comparable with the Connector business unit. Accordingly,
the Company discontinued reporting segment information on the Bioconnect
segment separately and included this information in the Connector business
unit in the second quarter for the year ending October 31, 2003. The
comparable segment information for the second quarter year ending October
31, 2002 has been restated to conform with the 2003 presentation.
Substantially all of the Company's operations are conducted in the United
States; however, the Company derives a portion of its revenue from export
sales.
Net sales and income (loss) before provision for income taxes for the three
months ended April 30, 2003 and 2002 follows:
Common/
Connector Neulink Corporate Total
------------ ----------- ----------- -----------
2003
-------
Net sales ........... $ 1,926,928 $ 239,096 $ 2,166,024
Income (loss) before
provision for income
taxes ............... 212,629 (78,194) 4,608 139,043
Depreciation and
amortization ..... 35,855 4,612 40,467
Total assets ........ 9,556,926 789,636 10,346,562
Additions to property
and equipment .... 31,245 31,245
2002
-------
Net sales ............ $ 1,887,075 $ 203,914 $ 2,090,989
Income (loss) before
provision for income
taxes ............ 276,859 (20,686) $ 16,249 272,422
Depreciation and
amortization ...... 35,494 6,042 41,536
Total assets ......... 8,758,307 1,105,355 9,863,662
Additions to property
and equipment ..... 13,040 13,040
Net sales and income (loss) before provision for income taxes for the six months
ended April 30, 2003 and 2002 follows:
Common/
Connector Neulink Corporate Total
------------ ----------- ----------- -----------
2003
--------
Net sales ............. $ 3,786,575 $ 706,325 $ 4,492,900
Income (loss) before
provision for income
taxes ............. 385,752 (39,018) 16,105 362,839
Depreciation and
amortization ......... 71,954 9,179 81,133
Total assets .......... 9,556,926 789,636 10,346,562
Additions to property
and equipment ....... 37,179 37,179
2002
--------
Net sales ............. $ 3,722,760 $ 553,146 $ 4,275,906
Income (loss) before
provision for income
taxes ............. 321,813 43,794 $40,003 405,610
Depreciation and
amortization ......... 71,678 11,043 82,721
Total assets .......... 8,758,307 1,105,355 9,863,662
Additions to property
and equipment ....... 17,591 17,591
Note 5- Stock Option Plan
A description of the Company's 1990 and 2000 Stock Option Plans and other
information related to stock options are included in Note 8 in its Annual Report
on Form 10-KSB for the year ended October 31, 2002.
The Company continues to measure compensation cost related to stock options
issued to employees using the intrinsic value method of accounting prescribed by
Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting For Stock
Issued to Employees. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Principles No. 123 ("SFAS 123"), Accounting
for Stock-Based Compensation. Accordingly, no earned or unearned compensation
cost was recognized in the accompanying condensed consolidated financial
statements for the stock options granted by the Company to its employees since
all of those options have been granted at exercise prices that equaled or
exceeded the market value at the date of grant. The Company's historical net
income and earnings per common share and pro forma net income and earnings per
share assuming compensation cost had been determined based on the fair value at
the grant date for all awards by the Company consistent with the provisions of
SFAS 123 are set forth below:
Three Months Ended Six Months Ended
April 30 April 30
2003 2002 2003 2002
------ ------ ------ ------
Net income - as reported ................. $ 79,043 $ 161,422 $ 213,839 $ 243,610
Deduct total stock-based employee
compensation expense determined
under fair value-based method for
all awards .......................... (20,000) (20,000) (40,000) (40,000)
--------- --------- ---------- ----------
Net income - pro forma ................... $ 59,043 $ 141,422 $ 173,839 $ 203,610
========= ========= ========== ==========
Basic earnings per share - as reported ... $ 0.02 $ 0.05 $ 0.06 $ 0.07
Basic earnings per share - pro forma ..... $ 0.02 $ 0.04 $ 0.05 $ 0.06
Diluted earnings per share - as reported.. $ 0.02 $ 0.04 $ 0.06 $ 0.06
Diluted earnings per share - pro forma ... $ 0.02 $ 0.04 $ 0.05 $ 0.05
Note 6 - Subsequent Events
On May 22, 2003, the Company announced the repurchase, for $3.00 per share, in a
single private transaction, of a 752,167 share block of its common stock. These
shares represent 22% of the total shares outstanding immediately prior to the
purchase and were owned by a single, unaffiliated shareholder. With the
retirement of these shares, the total number of RFI common shares outstanding
has been reduced to approximately 2,645,000 shares.
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.
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.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements of RF Industries and Subsidiary are
prepared in conformity with accounting principles generally accepted in the
United States of America ("GAAP"). The preparation of these financial statements
requires our management to make estimates and assumptions about future events
that affect the amounts reported in the financial statements and related notes.
Future events and their effects cannot be determined with absolute certainty.
Therefore, the determination of estimates requires the exercise of judgment. The
Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of financial
statements.
REVENUE RECOGNITION
The Company recognizes revenue from the sale of products at the time of shipment
of the product. In addition, the Company has a strategic alliance with a
supplier where the Company recognizes commission income when payment is
received.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company maintains an allowance for doubtful accounts based on historical
collections of accounts receivable. The Company monitors its accounts receivable
balances on a continual basis. If the financial condition of customers
deteriorates, additional allowances may be required.
INCOME TAXES
The Company accounts for income taxes pursuant to the asset and liability method
which requires deferred income tax assets and liabilities to be computed for
temporary differences between the financial statement and tax bases of assets
and liabilities that will result in taxable, or deductible amounts in future
periods based on enacted laws and rates applicable to the periods in which the
temporary differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. The income tax provision is the tax payable or
refundable for the period plus or minus the change during the period in deferred
tax assets and liabilities.
INVENTORY VALUATION
Inventories are valued at the weighted average cost value. Certain items in the
inventory may be considered obsolete or excess and, as such, the Company may
establish an allowance to reduce the carrying value of these items to their net
realizable value. Based on estimates, assumptions and judgments made from the
information available at the time, the Company determines the amounts of these
allowances. If these estimates and related assumptions or the market change, we
may be required to record additional reserves.
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 April 30, 2003, the amount of cash and cash equivalents was equal to
$4,402,309 in the aggregate.
o As of April 30, 2003, the Company had $ 9,821,181 in current assets, and
only $459,992 of current liabilities.
o As of April 30, 2003, the Company had no outstanding indebtedness (other
than accounts payable and accrued expenses).
In May 2003, the Company used $2,265,500 of its cash to repurchase and retire
752,167 of its then outstanding shares of common stock. Notwithstanding the
foregoing repurchase, following the repurchase the Company still had over
$2,000,000 of cash and cash equivalents, working capital of approximately
$7,000,000, and a current ratio of approximately 16 to 1. Accordingly, 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 capital leases. 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 current financial
condition, 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 April 30, 2003, the Company had a total of $ 4,402,309 of cash and cash
equivalents compared to a total of $ 3,939,299 of cash and cash equivalents on
October 31, 2002. The increase in liquid assets is the result of (i) net income
earned by the Company during the six-month period following October 31, 2002,
(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) and (iii)
additional collections of accounts receivable.
Net cash used in investing activities was $ 31,014 for the six months ended
April 30, 2003, and was attributable to $ 37,179 in capital expenditures and
$6,165 representing repayments of notes.
Net cash used in financing activities was $ 75,342 for the six months ended
April 30, 2003, and was attributable to $30,760 used to purchase treasury stock
and payment on a loan incurred in connection with the purchase of Bioconnect for
$44,582 (last payment).
As a result of the foregoing factors, the Company generated net cash of $463,010
during the past six months.
Three Months 2003 vs. Three Months 2002
Net sales increased 3.6%, or $75,000, to $2,166,000 from $2,091,000 in the
second fiscal quarter last year, due to increased sales at the Company's Neulink
division.
Net sales at the RF Connector division, which now includes the Bioconnect
product line, increased 2.1%, to $1,927,000 compared to $1,887,000 for the same
quarter last year, due to an increase in sales of Bioconnect products in the
second quarter.
Net sales at the RF Neulink division increased by 17% to $239,000 compared to
$204,000 in the second quarter last year. The increase in sales can be
attributed primarily to an increase in the number of RF9600 tranceivers sold.
Cost of sales increased 12% or $114,500, to $1,071,500 from $957,000 in the same
quarter last year. The increase is primarily due to increased freight, duty and
sales in the second quarter. Overall gross margins, as a percentage of sales,
decreased 3.7% compared to the second quarter of last year primarily related to
the Neulink and Bioconnect product mix during the quarter.
Engineering expenses increased 32%, or $45,500, to $187,700 from $142,200 in the
second quarter last year. Engineering expenses increased primarily as a result
of the additional expenses incurred to develop a new high-speed wireless radio
modem, to upgrade and replace an existing product line.
Selling and general expenses increased 5% or $36,800, to $772,400 from $735,600
in the same quarter last year. Selling and general expenses were higher in the
second quarter this year due primarily to increased marketing, sales,
advertising, legal and accouting expenses.
Net interest income decreased to $4,600 from $16,300 in the second quarter last
year due to lower interest rates and reduced investments in mutual funds.
Six Months 2003 vs. Six Months 2002
Net sales increased 5.1%, or $217,000, to $4,493,000 from $4,276,000 for the six
month period of 2002, primarily due to increased sales at the Neulink Division.
Net sales at the RF Connector division, which now includes the Bioconnect
product line, increased 1.7%, to $3,786,600 compared to $3,722,800 for the same
six months last year, due to a general increase in the demand for
connectors,cable assemblies.
Net sales at the RF Neulink division increased by 27.7% to $706,300 compared to
$553,000 in the second quarter last year. The increase in sales can be
attributed to expanded sales of Neulink wireless tranceivers.
Cost of sales increased 7.5% or $157,000, to $2,264,000 from $2,107,000 in the
six month period last year. The increase is primarily due to increased freight
costs, duty and sales year to date. Overall gross margins, as a percentage of
sales, decreased 1.1% compared to the last year primarily because of the Neulink
and Bioconnect product mix during the six months. Engineering expenses increased
26%, or $80,000, to $386,000 from $306,000 in the first half of last year.
Engineering expenses increased primarily as a result of the additional expenses
incurred by Neulink to develop a new high-speed wireless radio modem.
Selling and general expenses decreased 6.6% or $10,000, to $1,496,000 from
$1,506,000 in the same six months last year. Selling and general expenses were
higher in the six month period last year due primarily to additional catalog
expense.
Net interest income decreased to $16,000 from $40,000 in the first six months
last year due to lower interest rates and reduced investments in mutual funds
since July of 2002.
MATERIAL CHANGES IN FINANCIAL CONDITION:
Cash and cash equivalents increased by $463,010 to $4,402,309 at April 30, 2003
compared to $3,939,299 at October 31, 2002. The increase is due primarily to
lower inventory levels, net income of $213,839 for the first two quarters of
2003, and the collection of accounts receivable.
Trade accounts receivable decreased 10%, or $116,500 to $1,030,000 compared to
the October 31, 2002 balance of $1,146,500. The decrease is due primarily to
timing of collections and the Company's increased efforts to reduce its
outstanding accounts receivable.
Inventories decreased 5%, or $220,000, to $3,923,600, compared to $4,143,600 on
October 31, 2002. As part of its business strategy, and because of its off-shore
manufacturing arrangements, the Company normally maintains a high level of
inventory. For the past year, the Company has been steadily reducing its
inventory levels, to a sufficient amount to meet customer demand. However, based
on the recent increases in customer demand, the Company does not believe that it
will further significantly reduce its inventory.
Other current assets, including prepaid expenses and deposits, increased
$121,300 to $291,700, from $169,400 on October 31, 2002. This increase is a
seasonal factor associated with annual invoices for prepaid cargo insurance,
prepaid property and liability insurance, audit fees, computer maintenance
agreements and other miscellaneous expenses.
Subsequent Events
On May 22, 2003, the Company announced the repurchase, for $3.00 per share, in a
single private transaction, of a 752,167 share block of its common stock. These
shares represent 22% of the total shares outstanding immediately prior to the
purchase and were owned by a single, unaffiliated shareholder. With the
retirement of these shares, the total number of RFI common shares outstanding
has been reduced to approximately 2,645,000 shares. Consequently, the Company's
cash position was reduced by $2,256,501.
Item 3. Controls and Procedures.
Within 90 days prior to the date of this quarterly report on Form 10-QSB
for the second quarter ended April 30, 2003, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Chief Executive Officer and President, the
principal executive officer and the Company's Chief Financial Officer, our
principal financial officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934. Based upon that evaluation, the principal
executive officer and the principal financial officer concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company's periodic SEC filings.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect those controls subsequent to the date of
our most recent evaluation.
PART II. OTHER INFORMATION
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: June 12, 2003 By: /s/ Howard F. Hill
-----------------------------
Howard F. Hill, President
Chief Executive Officer
Dated: June 13, 2003 By: /s/ Terrie A. Gross
-----------------------------
Terrie A. Gross
Chief Financial Officer
CERTIFICATIONS
I, Howard F. Hill, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of RF Industries, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of 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;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4.The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a)designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 12, 2003
/s/ Howard F. Hill
-------------------------
Howard F. Hill
Chief Executive Officer
I, Terrie A. Gross, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RF Industries, Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of 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;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 12, 2003
/s/ Terrie A. Gross
-----------------------------
Terrie A. Gross
Chief Financial Officer