-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SgNJoUHX40TqGIewKkXcqZ0HRlqPXbjKxRASo7bdAALUYeG1zNuiJzLYTXbhu8vH Y4XbMw5Rm1dFckOL2BkzWA== 0000740664-02-000040.txt : 20020613 0000740664-02-000040.hdr.sgml : 20020613 20020613121340 ACCESSION NUMBER: 0000740664-02-000040 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020430 FILED AS OF DATE: 20020613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: R F INDUSTRIES LTD CENTRAL INDEX KEY: 0000740664 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 880168936 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13301 FILM NUMBER: 02677985 BUSINESS ADDRESS: STREET 1: 7610 MIRAMAR RD STREET 2: BLDG 6000 CITY: SAN DIEGO STATE: CA ZIP: 92126-2313 BUSINESS PHONE: 8585496340 MAIL ADDRESS: STREET 1: 7620 MIRAMAR RD #4100 STREET 2: 7620 MIRAMAR RD #4100 CITY: SAN DIEGO STATE: CA ZIP: 92126-4202 FORMER COMPANY: FORMER CONFORMED NAME: CELLTRONICS INC DATE OF NAME CHANGE: 19910204 10QSB 1 qsbapr2002.txt QUARTERLY REPORT 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, 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 May 31, 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 Item 1: Financial Statements ASSETS April 30 October 31 - ----------- 2002 2001 ---------- ---------- (Unaudited) CURRENT ASSETS Cash and cash equivalents ............................ $1,393,572 $ 915,538 Investments in available-for-sale securities ......... 1,790,040 1,744,851 Trade accounts receivable, net of allowance for doubtful accounts of $90,411 and $42,000 ......... 1,187,820 981,803 Notes receivable ..................................... 12,000 12,000 Income tax refund receivable ......................... 105,192 216,192 Inventories .......................................... 4,272,630 4,746,125 Other current assets ................................. 215,885 111,214 Deferred tax assets .................................. 150,130 155,700 ---------- ---------- TOTAL CURRENT ASSETS ............................ 9,127,269 8,883,423 ---------- ---------- PROPERTY AND EQUIPMENT Equipment and tooling ................................ 1,062,414 1,050,922 Furniture and office equipment ....................... 248,826 243,357 ---------- ---------- Fixed assets, at cost ........................... 1,311,240 1,294,279 Less accumulated depreciation ................... 819,370 737,279 ---------- ---------- NET FIXED ASSETS ................................ 491,870 557,000 ---------- ---------- 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 $9,863,662 $9,684,946 ========== ========== See Notes to Condensed Consolidated Unaudited Financial Statements. 2 RF INDUSTRIES, LTD. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS Item 1: Financial Statements April 30 October 31 2002 2001 ---------- ---------- (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY - -------------------------- CURRENT LIABILITIES Accounts payable ................................. $ 133,010 $ 107,145 Notes payable .................................... 41,663 50,000 Accrued expenses ................................. 202,949 278,407 ----------- ----------- Total current liabilities.................... 377,622 435,552 Notes payable, net of current portion ............ 39,163 Deferred tax liabilities ......................... 25,700 25,700 ----------- ----------- TOTAL LIABILITIES ........................... 403,322 500,415 ----------- ----------- 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 ................................ 4,786,986 4,543,376 Unearned compensation ............................ 0 (23,490) Accumulated other comprehensive gain (loss)....... 723 (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 .................. 9,460,340 9,184,531 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $ 9,863,662 $ 9,684,946 =========== =========== See Notes to Condensed Consolidated Unaudited Financial Statements. 3 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) 2002 2001 2002 2001 --------- --------- --------- --------- Net sales .............................. $ 2,090,989 $ 2,403,539 $ 4,275,906 $ 4,752,140 Cost of sales .......................... 956,996 1,138,063 2,106,676 2,358,227 --------- --------- --------- --------- Gross profit ...................... 1,133,993 1,265,476 2,169,230 2,393,913 --------- --------- --------- --------- Operating expenses: Engineering ....................... 142,192 125,675 306,227 241,404 735,628 792,080 1,505,611 1,443,635 Selling and general ............... --------- --------- --------- --------- Totals ........................ 877,820 917,755 1,811,838 1,685,039 --------- --------- --------- --------- Operating income ....................... 256,173 347,721 357,392 708,874 --------- --------- --------- --------- Other income: Commissions ....................... 0 42,784 8,215 60,857 Interest .......................... 16,249 23,413 40,003 54,921 --------- --------- --------- --------- Totals ........................ 16,249 66,197 48,218 115,778 --------- --------- --------- --------- Income before provision for income tax ..................... 272,422 413,918 405,610 824,652 Provision for income tax ............... 111,000 164,500 162,000 330,000 --------- --------- --------- -------- Net income ............................. $ 161,422 $ 249,418 $ 243,610 $ 494,652 ========= ========= ========= ========= Basic earnings per share ............... $ 0.05 $ 0.07 $ 0.07 $ 0.15 ========= ========= ========= ========= Diluted earnings per share ............. $ 0.04 $ 0.06 $ 0.06 $ 0.13 ========= ========= ========= ========= Basic weighted average ................. 3,409,354 3,403,054 3,409,354 3,402,882 shares outstanding ................. ========= ========= ========= ========= Diluted weighted average ............... 3,851,303 3,876,147 3,848,809 3,949,752 shares outstanding ................. ========= ========= ========= ========= COMPREHENSIVE INCOME: Net income ............................. $ 161,422 $ 249,418 $ 243,610 $ 494,652 Unrealized gain (loss) on available- for-sale securities, net of deferred tax 1,613 4,018 8,709 (16,743) --------- --------- --------- ---------- Total comprehensive income ........ $ 163,035 $ 253,436 $ 252,319 $ 477,909 ========= ========= ========= =========
See Notes to Condensed Consolidated Unaudited Financial Statements. 4 Item 1: Financial Statements (continued)
RF INDUSTRIES, LTD. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six months ended April 30 --------------------------------- 2002 2001 OPERATING ACTIVITIES -------- -------- Net income .............................................. $ 243,610 $ 494,652 Adjustments to reconcile net income to net cash provided by (used in) operating activities Bad debts .......................................... 50,000 28,320 Inventory deposit write-offs ....................... 30,294 Depreciation and amortization ...................... 82,721 62,588 Amortization of unearned compensation .............. 23,490 47,028 Changes in operating assets and liabilities, net of acquisition payment in 2001: Trade accounts receivable ..................... (256,017) 376,293 Inventories ................................... 473,495 (933,463) Other assets .................................. 6,329 11,509 Accounts payable .............................. 25,865 (251,455) Accrued expenses .............................. (75,458) (193,479) ----------- ----------- Net cash provided by (used in) operating activities 574,035 (327,713) ----------- ----------- INVESTING ACTIVITIES Proceeds from sale of (investment in) securities .. (30,910) 461,706 Capital expenditures (17,591) (110,345) Payment for acquisition, net of cash acquired ..... (147,078) ----------- ----------- Net cash provided by (used in) investing activities (48,501) 204,283 ----------- ----------- FINANCING ACTIVITIES Payments on loans payable ......................... (47,500) (220,371) Proceeds from exercise of common stock options .... 1,561 ----------- ----------- Net cash used in financing activities ............ (47,500) (218,810) ----------- ----------- Net increase (decrease) in cash and cash equivalents .... 478,034 (342,240) Cash and cash equivalents at the beginning of the period ........................... 915,538 557,923 ----------- ----------- Cash and cash equivalents at the end of the period ...... $ 1,393,572 $ 215,683 =========== =========== SUPPLEMENTARY CASH FLOW DATA: Income taxes paid .................................. $ 51,000 $ 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. 5 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, 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 April 30, 2002 October 31, 2001 --------------- ------------------ (Unaudited) (Audited) Raw material and supplies ..... $ 781,410 $ 822,180 Finished goods ................ 3,491,220 3,923,945 ---------- ---------- Totals ....................... $ 4,272,630 $ 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. 6 The following table summarizes basic and diluted shares:
Three Months Ended Six Months Ended April 30 April 30 2002 2001 2002 2001 --------- --------- ---------- --------- Weighted average shares outstanding for basic net earnings per share ............. 3,409,354 3,403,054 3,409,354 3,402,882 Add effects of potentially dilutive securities- assumed exercised of stock options ....... 441,949 473,093 439,455 546,870 --------- --------- --------- --------- Weighted average shares for diluted net earnings per share ....................... 3,851,303 3,876,147 3,848,809 3,949,752 ========= ========= ========= =========
Note 4 - Segment Information Net sales and income (loss) before provision for income taxes for the three months ended April 30, 2002 and 2001 follows:
Common/ Intercompany Connector Neulink Bioconnect Corporate Sales Total ----------- ---------- ------------ ----------- ------------ ---------- 2002 -------- Net sales ................. $ 1,787,971 $ 203,914 $ 284,506 $ (185,402) $ 2,090,989 Income (loss) before provision for income taxes ................. 246,708 (20,686) 30,151 16,249 272,422 Depreciation and amortization ........... 22,217 6,042 13,277 41,536 Total assets .............. 8,644,055 1,105,355 114,252 9,863,662 Additions to property and equipment .......... 7,198 5,842 13,040 2001 -------- Net sales ................. $ 2,176,271 $ 157,689 $ 69,579 $ 2,403,539 Income (loss) before provision for income taxes ................. 465,613 30,748 (144,902) $ 62,459 413,918 Depreciation and amortization ........... 17,775 3,225 9,624 30,624 Total assets .............. 7,701,887 1,240,142 358,429 9,300,458 Additions to property and equipment .......... 19,706 19,706
7 Net sales and income (loss) before provision for income taxes for the six months ended April 30, 2002 and 2001 follows:
Common/ Intercompany Connector Neulink Bioconnect Corporate Sales Total ----------- ---------- ------------ ----------- ------------ ---------- 2002 -------- Net sales ................ $ 3,558,721 $ 553,146 $ 454,919 $ (290,880) $ 4,275,906 Income (loss) before provision for income taxes ................ 458,797 43,794 (136,984) $ 40,003 405,610 Depreciation and amortization .......... 45,610 11,043 26,068 82,721 Total assets ............. 8,644,055 1,105,355 114,252 9,863,662 Additions to property and equipment ......... 10,945 6,646 17,591 2001 -------- Net sales ................ $ 4,229,547 $ 402,943 $ 119,650 $ 4,752,140 Income (loss) before provision for income taxes ................. 1,089,655 (110,546) (212,230) $ 57,773 824,652 Depreciation and amortization .......... 40,985 6,543 15,060 62,588 Total assets ............. 7,701,887 1,240,142 358,429 9,300,458 Additions to property and equipment ......... 110,345 110,345
Note 5 - New accounting policy The Company has elected early adoption of 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 believes there is no material impact on the financial statements. 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. 8 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, 2001 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 April 30, 2002, the amount of cash, cash equivalents, and available-for-sale securities was equal to $ 3,183,612 in the aggregate. o As of April 30, 2002, the Company had $9,127,269 in current assets, and only $377,622 of current liabilities o As of April 30, 2002, the Company had only $41,663 of outstanding indebtedness (other than accounts payable and other current liabilities). The Company does not believe it will need material additional capital equipment in fiscal 2002. In the past, the Company has financed some of its fixed asset requirements through capital leases. No additional capital equipment purchases have been currently identified that would require significant additional leasing or capital obligations during fiscal 2002. Management also believes that based on the Company's financial condition at April 30, 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. 9 Net cash provided by operating activities for the first six months of 2002 was $574,035 whereas cash used in operating activities for the first six months of 2001 was $327,713. Non cash outlays for bad debts, inventory deposit write-offs, depreciation and amortization, and amortization of unearned income for the first six months were $ 156,211 compared to $168,230 for the previous year. Trade accounts receivable increased $256,017 compared to an decrease of $376,293 the previous year. The increase is due to some slow paying accounts due to our economy. Accounts payable increased $25,865 compared to a decrease of $251,455 the previous year. Accrued expenses decreased $ 75,458 compared to a decrease of $193,479 the previous year. The Company was able to further reduce its accrued expenses as a result of its good cash position. Net cash used in investing activities was $48,501 for the first six months ended April 30, 2002, and consisted of investments in securities of $30,910 and capital expenditures of $17,591. Net cash used in financing activities was $47,500 for the six months ended April 20, 2002, and consisted of payment on the loan payable to Bioconnect. As of April 30, 2002 the Company had $1,393,572 in cash and cash equivalents and $1,790,040 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 April 30, 2002, the Company had working capital of $8,749,647 and a current ratio of 24.17 to 1. Three Months 2002 vs. Three Months 2001 - --------------------------------------- Net sales decreased 13%, or $309,000, to $2,091,000 from $2,400,000 in the first three months ended April 30, 2002. The decrease was the result of declining sales at the Company's RF Connectors division. 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 18% during the fiscal quarter ended April 30, 2002 compared to the same fiscal quarter last year because of decreased demand for wireless application products. The Company believes that sales for wireless products have decreased in the current year compared to the past year due to an industry-wide slowdown in the demand for wireless products. The decrease in connector sales was partially offset by an increase in cable assembly systems. During the fiscal quarter ended April 30, 2002, net sales of cable assembly systems was $687,500 compared to net cable system sales of $490,400 during the same fiscal quarter last year. Since the acquisition of the Bioconnect division, the RF Connector division has attempted to increase sales of its radio frequency connectors by selling its connectors as part of completed cable assemblies that are manufactured for the RF Connector division by the Bioconnect division. The Company believes that its new marketing strategy of marketing complete cable assemblies has managed to reduce the decline of revenues from the sales of connectors. However, since cable assembly sales are still developing and inconsistent, the Company anticipates that sales of such assemblies will fluctuate in the future. 10 Sales at the Company's RF Neulink division increased by 29% to $204,200 compared to $157,700 in the fiscal quarter ended April 30, 2002. This increase can be attributed to stronger sales in new application areas. However, while RF Neulink's net sales increased during the current fiscal quarter, RF Neulink experienced a net loss before taxes of approximately $21,000 during the current fiscal quarter, compared to income before taxes of approximately $31,000 during the same fiscal quarter in 2001. The loss is attributable to sales of lower margin products. Net sales at the Company's Bioconnect division increased in the fiscal quarter ended April 30. 2002 from $69,600 to $284,500. However, of the increase in Bioconnect's sales, $185,400 resulted from intercompany sales of cable assemblies to the RF Connector division. The RF Connector division currently anticipates that sales of cable assemblies will decrease somewhat in the near term, which will therefore also result in a decrease in Bioconnect's revenues. Bioconnect is completing the development of some additional interconnect products for medical monitoring applications, which new products, when released, are expected to contribute to increased Bioconnect medical interconnect sales. Cost of sales decreased 16%, or $181,100 to $957,000 from $1,138,100 last year. The decrease is due to the 13% decrease in the Company's net sales, and the Company's overall gross margins as a percentage of sales did not materially change during the current fiscal quarter. Engineering expenses increased $16,500, or 13%, from $125,700 in the second quarter last year. Engineering expenses increased during the current year as the Company responded to the rapid changes in the wireless industry for new products and for connectors that are used in new applications. This Company anticipates that engineering expenses will remain above last year's levels while the number of wireless applications continues to increase. Selling and general expenses decreased 7% or $56,400, to $735,600 from $792,000 last year. The decrease is in response to declining net sales, which decreased by 13% during the current period compared to the prior year's quarter. During the current fiscal quarter, the Company attempted to reduce its general expenses by reducing its labor force and taking other cost cutting steps. The Company did not, however, significantly reduced its marketing and advertising expenses. Net interest income decreased $7,200 to $16,200 from $23,400 the previous year due to lower interest rates. No commissions were paid to the Neulink division in current fiscal quarter ending April 30, 2002. For the past two years, the Company has been receiving commissions under an agreement with a third party relating to sales made by that third party. The Company believes that the foregoing agreement has been substantially completed and that, therefore, no material amounts of such payments will be received in the future. During last year's fiscal quarter ending April 30, 2001, the Company still received these payments, which payments totaled $42,800 during last year's quarter. 11 Six Months 2002 vs Six Months 2001 - ----------------------------------- Net sales decreased by $476,200, or 10%, to $4,275,900 for the six month period ended April 30, 2002 from $4,752,100 in the previous year. As discussed above, the decrease was the result of declining sales at the Company's RF Connectors division, which decrease is attributable to an industry-wide decrease in demand for radio frequency connectors. As a result of the decrease in connector sales, net sales made by the RF Connectors division decreased by 16% to $3,558,700 from $4,229,500 last year. Sales in the Company's RF Neulink division increased during the current six-month period ending April 30, 2002 by 37% to $553,150 from $403,000 for the comparable six-month period in the previous year. The increase can be attributed to stronger sales of new application areas. Bioconnect's sales during the six-month period ending April 30, 2002 were $455,000, compared to $119,650 for the same six months last year. The two fiscal periods are not, however, comparable since the Bioconnect division was acquired in December 2000 and, therefore, did not have six months operations during the prior year's period. In addition, Bioconnect's sales during the six-month period ending April 30, 2002 included intercompany sales of $291,000, representing cable assemblies that Bioconnect sold to the RF Connector division. No similar intercompany sales were effected last year. Cost of sales decreased $251,500, or 11%, to $2,106,700 from $2,358,200 last year due to the 10% decrease in sales. Overall, gross profits as a percent of sales, remained relatively unchanged for the Company at 51% during the current six-month period compared to 50% last year. Engineering expenses increased $64,800, or 27%, to $306,200 from $241,400 last year. This increase can be attributed to added personnel and expenses associated with the Bioconnect acquisition and the Company's expansion of its engineering departments to meet the increased business demands. Selling and general expenses increased $62,000, or 4%, to $1,505,600 compared to $1,443,600 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 insurance expenses. Net interest income decreased $14,900 to $40,000 from $54,900 the previous year primarily due to lower interest rates earned on cash and cash equivalents. Commissions for the Neulink division's sales were $8,200, all of which were received during the first three months of the six month fiscal period, compared to $60,850 in commissions the previous year as sales under the third party agreement began to wind down. 12 MATERIAL CHANGES IN FINANCIAL CONDITION: Cash and cash equivalents increased by $478,034 to $1,393,572 compared to the October 31, 2001 fiscal year-end balance of $915,538. As a result, cash and cash equivalents were $3,183,612 at April 30, 2002. The increase in the Company's cash position is due to the decrease in inventory levels and the collection of an income tax refund. Trade accounts receivable increased $206,017, or 21% to $1,187,820 compared to the October 31, 2001 balance of $981,803. The increase is due to a slow-down in payment schedules of a few customers, which the Company attributes to the overall economy. Nevertheless, the Company increased its net allowance for doubtful accounts by approximately $49,000 to reflect the increased difficulties the Company has experienced in receiving timely payments from its customers. Inventories, as of April 30, 2002, decreased to $4,272,630, a $473,495 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 $104,700 to $215,900, 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 2-5 Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Description None (b) Reports on Form 8-K None 13 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 13, 2002 By: /s/ Howard F. Hill ------------------------------- Howard F. Hill, President Chief Executive Officer Dated: June 13, 2002 By: /s/ Terrie A. Gross ------------------------------- Terrie A. Gross Chief Financial Officer 14 -----END PRIVACY-ENHANCED MESSAGE-----