UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Materials Under Rule 14a-12
RF INDUSTRIES, LTD.
------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
RF INDUSTRIES, LTD.
7610 MIRAMAR ROAD
SAN DIEGO, CALIFORNIA 92126-4202
NOTICE IS HEREBY GIVEN THAT THE ANNUAL MEETING OF
STOCKHOLDERS
WILL BE HELD ON JUNE 9, 2006
An Annual Meeting of Stockholders of RF Industries, Ltd., a Nevada
corporation (the "Company"), will be held at the Company's corporate office at
7610 Miramar Road, Suite 6000, San Diego, California 92126-4202 on Friday June
9, 2006, at 1:30 p.m., Pacific Standard Time, for the following purposes:
1. To elect six directors of the Company who shall serve until the 2007
Annual Meeting of Stockholders (and until the election and
qualification of their successors).
2. To authorize an amendment to the Company's 2000 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 250,000 shares.
3. To ratify the selection of J.H. Cohn LLP as the Company's
independent registered public accounting firm for the fiscal year
ending October 31, 2006.
4. To transact such other business as may properly come before the
Annual Meeting of Stockholders or any adjournment thereof.
The Board of Directors has fixed the close of business on April 21, 2006
as the record date for determination of stockholders entitled to notice of and
to vote at the Annual Meeting of Stockholders or any adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting of
Stockholders in person. Regardless of whether you plan to attend the meeting,
please sign and date the enclosed Proxy and return it promptly in the
accompanying envelope, postage for which has been provided if mailed in the
United States. The prompt return of Proxies will ensure a quorum and save the
Company the expense of further solicitation. Any stockholder returning the
enclosed Proxy may revoke it prior to its exercise by voting in person at the
meeting or by filing with the Secretary of the Company a written revocation or a
duly executed Proxy bearing a later date.
By Order of the Board of Directors
Victor H. Powers,
CFO and Corporate Secretary
San Diego, California
April 26, 2006
2
RF INDUSTRIES, LTD.
7610 MIRAMAR ROAD
SAN DIEGO, CALIFORNIA 92126-4202
--------------------------------
PROXY STATEMENT
-------------------------------
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of RF
Industries, Ltd., a Nevada corporation (the "Company"), for use at the Annual
Meeting of Stockholders ("Annual Meeting") to be held on Friday, June 9, 2006,
at 1:30 p.m., local time, or at any adjournment or postponement thereof. The
Annual Meeting will be held at the corporate office at 7610 Miramar Road, Suite
6000, San Diego, California 92126-4202. The Company mailed this Proxy Statement
and the accompanying Proxy and Annual Report to all stockholders entitled to
vote at the Annual Meeting on or about April 26, 2006.
VOTING
Only stockholders of record at the close of business on April 21, 2006,
will be entitled to notice of and to vote at the Annual Meeting. On April 21,
2006, there were 3,209,484 shares of Common Stock outstanding. The Company is
incorporated in Nevada, and is not required by Nevada corporation law or its
Articles of Incorporation to permit cumulative voting in the election of
directors.
With regard to the election of directors, the six nominees receiving the
greatest number of votes cast will be elected provided a quorum is present. On
each other matter properly presented and submitted to a vote at the Annual
Meeting, each share will have one vote and an affirmative vote of a majority of
the shares represented at the Annual Meeting and entitled to vote will be
necessary to approve the matter. Shares represented by proxies that reflect
abstentions or broker non-votes (that is, shares held by a broker or nominee
which are represented at the meeting, but with respect to which such broker or
nominee is not empowered to vote on a particular proposal) will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. Abstentions will be counted towards the tabulation of
votes cast on matters properly presented to the stockholders (except the
election of directors) and will have the same effect as negative votes. Broker
non-votes will not be counted as votes cast and, therefore, will have no effect
on the outcome of the matters presented at the Annual Meeting. If the enclosed
proxy is properly executed and returned to, and received by, the Company prior
to voting at the Annual Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. In the absence of instructions,
the shares will be voted "FOR" (i) the nominees of the Board of Directors in the
election of the six directors whose terms of office will extend until the 2007
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualified, (ii) amendment to the Company's 2000 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance thereunder
by 250,000 shares, and (iii) the approval of the re-appointment of J.H. Cohn LLP
as the Company's independent registered public accounting firm for the 2006
fiscal year.
1
REVOCABILITY OF PROXIES
When the enclosed Proxy is properly executed and returned, the shares it
represents will be voted at the Annual Meeting in accordance with any directions
noted thereon, and if no directions are indicated, the shares it represents will
be voted in favor of the proposals set forth in the notice attached hereto. Any
person giving a Proxy in the form accompanying this Proxy Statement has the
power to revoke it any time before its exercise. It may be revoked by filing
with the Secretary of the Company's principal executive office, 7610 Miramar
Road, San Diego, California 92126-4202, an instrument of revocation or a duly
executed Proxy bearing a later date, or it may be revoked by attending the
Annual Meeting and voting in person. Please note, however, that if your shares
are held of record by a broker, bank or other nominee and you wish to vote in
person at the Annual Meeting, you must obtain from the record holder a proxy
issued in your name.
SOLICITATION
The Company will bear the entire cost of solicitation of Proxies,
including the preparation, assembly, printing, and mailing of this Proxy
Statement, the Proxy, and any additional material furnished to stockholders.
Copies of solicitation material will be furnished to brokerage houses,
fiduciaries, and custodians holding shares in their names that are beneficially
owned by others to forward to such beneficial owners. In addition, the Company
may reimburse such persons for their cost of forwarding the solicitation
material to such beneficial owners. The solicitation of Proxies by mail may be
supplemented by telephone, telegram, and/or personal solicitation by directors,
officers, or employees of the Company. No additional compensation will be paid
for any such services. Except as described above, the Company does not intend to
solicit Proxies other than by mail.
PROPOSAL 1:
NOMINATION AND ELECTION OF DIRECTORS
Each director to be elected will hold office until the next Annual Meeting
and until his or her successor is elected and has qualified, or until his or her
death, resignation, or removal. Six directors are to be elected at the Annual
Meeting. All six nominees are currently members of the Board of Directors. All
six nominees are currently members of the Board of Directors.
The six candidates receiving the highest number of affirmative votes cast
at the Annual Meeting shall be elected as directors of the Company. Each
nominees listed below has agreed to serve if elected. If any of such nominees
shall become unavailable or refuse to serve as a director (an event that is not
anticipated), the Proxy holders will vote for substitute nominees at their
discretion. Unless otherwise instructed, the Proxy holders will vote the Proxies
received by them for the six nominees named below.
2
NOMINEES
A majority of the Directors are "independent directors" as defined by the
listing standards of The Nasdaq Stock Market, and the Board of Directors has
determined that such independent directors have no relationship with the Company
that would interfere with the exercise of their independent judgment in carrying
out the responsibilities of a director. The independent Director nominees are
Messrs. Ehret, Fink, Jacobs, Kester and Reynolds.
Set forth below is information regarding the nominees, including
information furnished by them as to their principal occupations for the last
five years, and their ages as of October 31, 2004, the end of the Company's last
fiscal year.
Name Age Director Since
---- --- --------------
John R. Ehret 68 1991
Marvin H. Fink 69 2001
Howard F. Hill 65 1979
Robert Jacobs 54 1997
Linde Kester 60 2001
William L. Reynolds 69 2005
John R. Ehret has been the President of TPL Electronics of Los Angeles,
California, since 1982. He holds a B.S. degree in Industrial Management from the
University of Baltimore. He has been in the electronics industry for over 33
years.
Marvin H. Fink served as the Chief Executive Officer, President and
Chairman of the Board of Recom Managed Systems, Inc. from October 2002 to March
2005. Prior thereto, Mr. Fink was President of Teledyne's Electronics Group. Mr.
Fink was employed at Teledyne for 39 years. He holds a B.E.E. degree from the
City College of New York, a M.S.E.E. degree from the University of Southern
California and a J.D. degree from the University of San Fernando Valley. He is a
member of the California Bar.
Howard F. Hill, a founder of the Company in 1979, has credits in
Manufacturing Engineering, Quality Engineering and Industrial Management. He has
been the President of the Company since July 1993. He has held various positions
in the electronics industry over the past 40 years.
Robert Jacobs has been an Account Executive at Neil Berkman Associates
since 1988. Neil Berkman Associates is the Company's investor relations firm,
and Mr. Jacobs is the Account Executive for the Company. He holds an MBA from
the University of Southern California and has been in the investor relations
industry for over 21 years.
Linde Kester has been the Proprietor of Oregon's Chateau Lorane Winery
since 1992. He was formerly Chairman and CEO of Xentek, an electronics power
conversion manufacturer that he co-founded in 1972. Mr. Kester was also a
co-founder of Hidden Valley National Bank in Escondido, California. He holds an
A.A. in Electron-Mechanical Design from Fullerton College and has over two
decades of experience in the electronics industry.
3
William Reynolds joined the Board of Directors on April 26, 2005. He was
the former VP of Finance and Administration for Teledyne Controls from 1994
until his retirement in 1997. Prior thereto, for 22 years he was the
Vice-President of Finance and Administration of Teledyne Microelectronics. Mr.
Reynolds also was a program finance administrator of Teledyne Systems Company
for five years. He has a B.B.A. degree in Accounting from Woodbury University.
MANAGEMENT
Howard F. Hill is the President and Chief Executive Officer of the
Company. He co-founded the Company in 1979. Mr. Hill has credits in
Manufacturing Engineering, Quality Engineering and Industrial Management. He has
been the President of the Company since July 1993. He has held various positions
in the electronics industry over the past 40 years. (see "Nominees," above)
Victor H. Powers joined the Company as Chief Financial Officer and
Corporate Secretary on September 19, 2005. Before joining RF Industries he was a
contract CFO for RHMR from July 2003 to August 2005. Prior to this Mr. Powers
was CFO for Vantra Group from September 1999 to January 2003 an ASP and
enterprise software developer for on-line securities trading before it was
acquired by ADP in 2003. He has also served as VP Finance and CFO for Dot Hill,
Navigation Technologies (NavTech), Centex TMS, Teradyne/Zehntel and Corporate
Controller for U.S. Sprint. Mr. Powers has a B.S in Economics (Accounting major)
from Villanova University, completed his MBA studies with Pepperdine University
and done advanced management studies at Stanford University.
BOARD OF DIRECTOR MEETINGS
All members of the Board of Directors hold office until the next Annual
Meeting of Stockholders or the election and qualification of their successors.
Executive officers serve at the discretion of the Board of Directors.
During the fiscal year ended October 31, 2005, the Board of Directors held
four meetings. During the fiscal year ended October 31, 2005, each director
attended at least 75% of the meetings of the Board of Directors and at least 75%
of the meetings of the committees on which he served.
DIRECTOR ATTENDANCE AT ANNUAL MEETINGS
Although the Company does not have a formal policy regarding attendance by
Board members at the annual meeting of stockholders, directors are strongly
encouraged to attend annual meetings of the Company's stockholders. All of the
directors attended the 2005 annual meeting of the Company's stockholders, and
all directors are expected to attend the 2006 Annual Meeting.
4
BOARD COMMITTEES
During fiscal 2005, the Board of Directors maintained two committees --
the Compensation Committee and the Audit Committee. Each of these committees is
described as follows:
Audit Committee. The Audit Committee meets periodically with the Company's
management and independent auditors to, among other things, review the results
of the annual audit and quarterly reviews and discuss the financial statements.
The audit committee also hires the independent registered public accounting
firm, and receives and considers that firm's comments as to controls, adequacy
of staff and management performance and procedures. The Audit Committee is also
authorized to review related party transactions for potential conflicts of
interest. As of the date of this Proxy Statement, the Audit Committee consists
of Mr. Ehret, Mr. Kester and Mr. Reynolds. Accordingly, assuming that all of the
nominees listed herein are elected, the Audit Committee after the Annual Meeting
will consist of Mr. Ehret, Mr. Kester and Mr. Reynolds. Each of these
individuals is a non-employee director and is independent as defined under The
Nasdaq Stock Market's listing standards and each has significant knowledge of
financial matters (two of the members have received a Masters of Business
Administration degree, and one member has a B.B.A. degree in accounting), Mr.
Reynolds has been designated by the Board as the "audit committee financial
expert" as defined under Item 401(e) (2) of Regulation S-B of the Securities
Exchange Act of 1934, as amended. The Audit Committee met five times during
fiscal 2006. The Audit Committee operates under a formal charter that governs
its duties and conduct.
Compensation Committee. The Compensation Committee currently consists of
Messrs. Jacobs, Fink, and Kester, each of whom is a non-employee director and is
independent as defined under The Nasdaq Stock Market's listing standards. The
Compensation Committee is responsible for considering and authorizing
remuneration arrangements for senior management. The Compensation Committee held
one formal meetings during fiscal 2005, of which all committee members attended.
NOMINATING DIRECTORS
To date, all six of the Company's directors (five of whom are independent
directors) have participated in identifying qualified director nominees. As a
result, the Board of Directors has not found it necessary to have a separate
Nominating Committee. However, the Board of Directors is considering forming a
Nominating Committee for the purpose of nominating future director candidates.
If such a committee is formed, each member of the Nominating Committee will be
"independent" as defined in the Nasdaq Stock Market's listing standards. The
functions of the Nominating Committee will be to assist the Board of Directors
by identifying individuals qualified to become members, and to recommend to the
Board of Directors the director nominees for the next annual meeting of
stockholders, and to recommend to the Board of Directors corporate governance
guidelines and changes thereto.
5
The Board of Directors has not established any specific minimum
qualifications for director candidates or any specific qualities or skills that
a candidate must possess in order to be considered qualified to be nominated as
a director. Qualifications for consideration as a director nominee may vary
according to the particular areas of expertise being sought as a complement to
the existing board composition. In making its nominations, the Board of
Directors generally will consider, among other things, an individual's business
experience, industry experience, financial background, breadth of knowledge
about issues affecting our company, time available for meetings and consultation
regarding company matters and other particular skills and experience possessed
by the individual.
Stockholder Recommendations of Director Candidates The Board of Directors
will consider Board nominees recommended by stockholders. In order for a
stockholder to nominate a candidate for director, timely notice of the
nomination must be given in writing to the Corporate Secretary of the Company.
To be timely, the notice must be received at the principal executive offices of
the Company as set forth under "Stockholder Proposals" below. Notice of a
nomination must include your name, address and number of shares you own; the
name, age, business address, residence address and principal occupation of the
nominee; and the number of shares beneficially owned by the nominee. It must
also include the information that would be required to be disclosed in the
solicitation of proxies for election of directors under the federal securities
laws, as well as whether the individual can understand basic financial
statements and the candidate's other board memberships (if any). You must submit
the nominee's consent to be elected and to serve. The Board of Directors may
require any nominee to furnish any other information that may be needed to
determine the eligibility and qualifications of the nominee.
Any recommendations in proper form received from stockholders will be
evaluated in the same manner that potential nominees recommended by our Board
members or management are evaluated.
Stockholder Communication with Board Members Stockholders who wish to
communicate with our Board members may contact us at our principal executive
office at 7610 Miramar Road, Suite 6000, San Diego, California 92126-4202.
Written communications specifically marked as a communication for our Board of
Directors, or a particular director, except those that are clearly marketing or
soliciting materials, will be forwarded unopened to the Chairman of our Board,
or to the particular director to whom they are addressed, or presented to the
full Board or the particular director at the next regularly scheduled Board
meeting.
CODE OF BUSINESS CONDUCT AND ETHICS
The Company has adopted a Code of Business Conduct and Ethics (the "Code")
that applies to all of the Company's Directors, officers and employees,
including its principal executive officer and principal financial officer.
Stockholders can obtain a copy of the Code, without charge, by writing to the
Company's Corporate Secretary at RF Industries, Ltd., 7610 Miramar Road, Suite
6000, San Diego, California 92126-4202. In addition, any waivers of the Code for
Directors or executive officers of the Company will be disclosed in a report on
Form 8-K.
6
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation. The following table sets forth
compensation for services rendered in all capacities to the Company for each
person who served as the Company's Chief Executive Officer during the fiscal
year ended October 31, 2005 (the "Named Executive Officer"). No other executive
officer of the Company received salary and bonus, which exceeded $100,000 in the
aggregate during the fiscal year, ended October 31, 2005.
Annual Compensation Long-Term Compensation Awards
------------------- -----------------------------
Securities
----------
Underlying Any Other
---------- ---------
Name and Principal Year Salary Bonus Options/ Compensation
------------------ ---- ------ ----- -------- ------------
Position ($) ($) SARs (#)
-------- --- --- --------
Howard F. Hill, President 2005 175,000 50,000 2,000 $551,000*
Chief Executive Officer,
Director
2004 165,000 50,000 6,000
2003 140,000 25,000 6,000
* One-time compensation of $551,000 for the Company's purchase and
retirement of 100,000 options. As permitted by rules established by the SEC, no
other annual compensation is shown because perquisites and other non-cash
benefits provided by the Company do not exceed the lesser of 10% of bonus plus
salary or $50,000 for the last three fiscal years.
Option Grants. The following table contains information concerning the
stock option grants to the Company's Named Executive Officer for the fiscal year
ended October 31, 2005.
Option Grants in Last Fiscal Year
---------------------------------
Securities % of Total
---------- ----------
Underlying Options Base Expiration
---------- ------- ---- ----------
Name Options Granted to Price Date
---- ------- ---------- ----- ----
Granted (#) Employees in ($/Share)
----------- ------------ ---------
Fiscal Year
-----------
Howard F. Hill,
President
Incentive Stock Option 2,000 3.2% $4.94 October
2015
7
Option Exercises and Holdings. Mr. Hill, the Named Executive Officer,
exercised 14,000 options during the fiscal year ended October 31, 2005. The
following table sets forth information concerning option exercises and option
holdings and the value, at October 31, 2005, of unexercised options held by the
Named Executive Officer:
Aggregated Options/SAR Exercises in Last Fiscal Year
----------------------------------------------------
and Fiscal Year-End Option/SAR Values
-------------------------------------
Value of
--------
Unexercised In-
---------------
Value Realized Number of Unexercised the-Money/SARs
-------------- --------------------- --------------
Shares Market Price at Options/SARs at Fiscal at Fiscal
------ --------------- ---------------------- ---------
Acquired Exercise Less Year-End (#) Year-End ($)
-------- ------------- ------------ ------------
Name Exercise # Exercise Price ($) Exercisable Unexercisable Exercisable (1)
---- ---------- ------------------ ----------- ------------- ---------------
Howard F. Hill, 14,000 $98,620 346,000 2,000 $1,709,240/
President $9,880
(1) Represents the closing price per share of the underlying shares on the
last day of the fiscal year less the option exercise price multiplied by
the number of shares. The closing value per share was $4.94 on the last
trading day of the fiscal year as reported on The Nasdaq Capital Market.
During the fiscal year ended October 31, 2005, the Company did not adjust
or amend the exercise price of stock options awarded to the Named Executive
Officer.
EMPLOYMENT AGREEMENT
The Company has no employment or severance agreements with any of its
executive officers for payments of more than $100,000, other than with the
President/Chief Executive Officer. Mr. Hill has been the President/Chief
Executive Officer of the Company since 1994. On June 20, 2005 the Company
entered into a new employment agreement with Mr. Hill. Under the new employment
agreement, Mr. Hill agreed to serve as the Company's President and Chief
Executive Officer for up to three one-year periods. The new employment agreement
provides for an annual salary of $175,000. Either Mr. Hill or the Company can
terminate the employment agreement at each of the first and second anniversaries
of the agreement. The employment agreement, if still in effect, will expire on
June 20, 2008. On June 10, 2005, the Company's Board of Directors also approved
a $50,000 bonus for Mr. Hill for his services rendered during the prior year.
COMPENSATION OF DIRECTORS
The Company compensates its directors with an annual grant of options to
purchase 2,000 shares of common stock. The exercise price of the options is set
at the closing price of the common stock on the last day of the fiscal year.
During the fiscal year ended October 31, 2005, options to purchase 2,000 shares
of common stock were granted to each of the following directors: Messrs. Ehret,
Mr. Fink, Hooper, and Mr. Jacobs. Mr. Hill and Mr. Kester each received a grant
for 4,000 shares. All options granted were $4.94 per share. The directors are
also eligible for reimbursement of expenses incurred in connection with
attendance at Board meetings and Board committee meetings. For the fiscal years
ending after October 31, 2005, the Board has voted to compensate all
non-employee directors, in addition to the foregoing options, with an annual
cash payment of $5,000 per director, and to pay the non-employee Chairman of the
Board an additional annual payment of $10,000.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of October 31, 2005 by: (i ) each director and
nominee for director; (ii) the executive officer named in the Summary
Compensation Table in Executive Compensation; (iii) all executive officers and
directors of the Company as a group; and (iv) all those known by the Company to
be beneficial owners of more than 5% of the Common Stock.
Name and Address of Number of Shares (1) Percentage (1)
Beneficial Owner 2)Beneficially Owned Beneficially Owned
------------------ -------------------- ------------------
Howard H. Hill 346,000(2) 10.2%
7610 Miramar Road, Ste. 6000
San Diego, CA 92126-4202
John R. Ehret 24,000(3) *
7610 Miramar Road, Ste. 6000
San Diego, CA 92126-4202
Robert Jacobs 4,000(4) *
7610 Miramar Road, Ste. 6000
San Diego, CA 92126-4202
Marvin Fink 29,165(5) *
7610 Miramar Rd., Ste. 6000
San Diego, CA 92126-4202
Linde Kester 73,367(6) 2.3%
7610 Miramar Rd., Ste. 6000
San Diego, CA 92126-4202
William L. Reynolds -0-(7) *
7610 Miramar Rd. Ste. 6000
San Diego, CA 92126-4202
Walrus Partners, LLC 294,416(8) 9.6%
8014 Olson Memorial, #232
Golden Valley, MN 55427
All Directors and Officers as
a Group (8 Persons) 476,532(9) 13.3%
(1) Shares of Common Stock, which were not outstanding but which could be
acquired upon exercise of an option within 60 days, are considered
outstanding for the purpose of computing the percentage of outstanding
shares beneficially owned. However, such shares are not considered to be
outstanding for any other purpose.
(2) Consists of 346,000 shares, which Mr. Hill has the right to acquire upon
exercise of options exercisable within 60 days.
9
(3) Includes 14,000 shares, which Mr. Ehret has the right to acquire upon
exercise of options exercisable within 60 days plus 10,000 purchased on
the open market..
(4) Consists of 4,000 shares, which Mr. Jacobs has the right to acquire upon
exercise of options exercisable within 60 days.
(5) Includes 21,165 shares, which Mr. Fink has the right to acquire upon
exercise of options exercisable within 60 days plus 8,000 purchased on the
open market.
(6) Includes 19,165 shares, which Mr. Kester has the right to acquire upon
exercise of options exercisable within 60 days plus 54,202, purchased on
the open market.
(7) Mr. Reynolds options vest on October 31, 2006, thus are not exercisable
within 60 days.
(8) Represents shares owned by clients of Walrus Partners, LLC, is an
investment adviser. Walrus Partners, LLC is deemed to possess sole voting
and dispositive power over securities held by its clients. Walrus
Partners, LLC disclaims beneficial ownership of these securities held by
these clients
(9) Includes 404,330 shares, which the directors and officers have the right
to acquire upon exercise of options exercisable within 60 days.
* Represents less than 1% of the outstanding shares.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of October 31, 2005 with respect to
the shares of Company common stock that may be issued under the Company's
existing equity compensation plans.
A B C
-------------------- ----------------- -------------------------
Number of Securities
Remaining Available for
Number of Securities Weighted Average Future Issuance Under
to be Issued Upon Exercise Price of Equity Compensation Plans
Exercise of Outstanding (Excluding Securities
Plan Category Outstanding Options Options ($) Reflected in Column A)
------------- -------------------- ----------------- -------------------------
Equity Compensation Plans
Approved by
Stockholders (1) 213,134 $4.41 3,867
Equity Compensation Plans
Not Approved by
Stockholders (2) 692,963 $1.23 -0-
Total 906,097 $1.99 3,867
(1) Consists of options granted under the R.F. Industries, Ltd. (i) 2000 Stock
Option Plan, (ii) the 1990 Incentive Stock Option Plan, and (iii) the 1990
Non-qualified Stock Option Plan. The 1990 Incentive Stock Option Plan and
Non-qualified Stock Option Plan have expired, and no additional options
can be granted under these plans. Accordingly, the 3,867 shares remaining
available for issuance represent shares under the 2000 Stock Option Plan.
10
(2) Consists of options granted to six officers and/or key employees of the
Company under employment agreements entered into by the Company with each
of these officers and employees.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors and greater than 10% stockholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of reporting forms received by
the Company, the Company believes that during its most recent fiscal year ended
October 31, 2005, that its officers and directors complied with the filing
requirements under Section 16(a) except that (i) the Forms 4 for the directors
were not timely filed in connection with the annual grant of director options,
and (ii) the Form 4 was not timely filed in connection with the retirement of a
portion of Mr. Hill's outstanding stock options.
PROPOSAL 2:
AMENDMENT OF 2000 STOCK OPTION PLAN
The Company's 2000 Stock Option Plan (the "2000 Plan") was adopted by the
Board of Directors and approved by the stockholders in 2000. The purpose of the
2000 Plan is to promote the long-term success of the Company and the creation of
stockholder value by (a) encouraging employees, outside directors and
consultants to focus on critical long-range objectives, (b) encouraging the
attraction and retention of employees, outside directors and consultants with
exceptional qualifications and (c) linking employees, outside directors and
consultants directly to stockholder interests through increased stock ownership.
The 2000 Plan seeks to achieve this purpose by providing for awards in the form
of options which may constitute incentive stock options or nonstatutory stock
options.
The Company does not believe that the shares remaining available for
future grant pursuant to the 2000 Plan are sufficient to attract new employees
or retain existing employees. Therefore, at the Annual Meeting, stockholders are
being asked to approve an amendment to the 2000 Plan that would increase the
shares reserved for issuance thereunder by 250,000 shares of Common Stock.
Pertinent features of the 2000 Plan are summarized below.
11
SHARE RESERVE
The Company had initially reserved 300,000 shares of common stock for
issuance under the 2000 Plan. In 2003 the Board of Directors and the
stockholders approved an increase in the number of stock options by 100,000
options. Accordingly, as October 31, 2005, the total number of shares that had
been reserved for issuance under the 2000 Plan was 400,000 shares, plus the
annual automatic adjustment. Under the 2000 Plan, on January 1 of each year, the
number of shares in the reserve automatically increases by 4% of the total
number of shares of common stock of the Company that are outstanding at that
time or by 10,000 shares, whichever is less. Accordingly, as of October 31,
2005, a total of 450,000 shares had been reserved (the initial 300,000 shares,
plus 100,000 share increase approved in 2003, and five annual 10,000 share
increases since 2000) of which the Company had granted options for 446,133
shares. Therefore, as of October 31, 2005, the Company could only grant options
for a total of 3,867 additional shares. Because the Company does not believe
that 3,867 shares are sufficient to fulfill the amount of options the Company
believes it has to grant to its employees during fiscal 2006 and thereafter, the
Company has proposed to increase the number of shares that it can issue upon the
exercise of options under the 2000 Plan by 250,000 shares.
ADMINISTRATION
The Compensation Committee of the Board of Directors ("Committee")
administers the 2000 Plan. The Committee has the complete discretion to make all
decisions relating to the interpretation and operation of the 2000 Plan. The
Committee has the discretion to determine who will receive an option, what type
of option it will be, how many shares will be covered by the option, what the
vesting requirements will be (if any), and what the other features and
conditions of each option will be. The Committee may also reprice outstanding
options and modify outstanding options in other ways.
ELIGIBILITY
Employees, outside directors and independent consultants and advisors to
the Company and it subsidiaries (whether now existing or subsequently
established) will be eligible to participate in the 2000 Plan.
TYPES OF AWARD
The 2000 Plan provides incentive stock options to purchase shares of
common stock of the Company and nonstatutory stock options to purchase shares of
common stock of the Company.
12
EXERCISE PRICE, PAYMENT AND TRANSFERABILITY
An optionee who exercises an incentive stock option may qualify for
favorable tax treatment under Section 422 of the Internal Revenue Code of 1986.
Nonstatutory stock options, however, do not qualify for such favorable tax
treatment. The exercise price for incentive stock options granted under the 2000
Plan may not be less than 100% of the fair market value of the common stock of
the Company on the option grant date. In the case of nonstatutory options, the
minimum exercise price is 85% of the fair market value of the common stock of
the Company on the option grant date. Optionees may pay the exercise price by
using the following methods of payment as determined by the Committee: cash;
shares of common stock that the optionee already owns; a full-recourse
promissory note, except that the par value of newly issued shares must be paid
in cash; an immediate sale of the option shares through a broker designated by
the Company; or a loan from a broker designated by the Company, secured by the
option shares.
Options are generally not assignable or transferable other than by will or
the laws of inheritance and, during the optionee's lifetime, the option may be
exercised only by such optionee.
VESTING OF OPTIONS AND TERMINATION OF SERVICE
The options will vest at the time or times determined by the Committee.
Options generally expire 10 years after they are granted, except that they
generally expire earlier if the optionee's service terminates earlier. Upon the
optionee's cessation of employment or service, the optionee will have a limited
period of time in which to exercise his or her outstanding options for any
shares in which the optionee is vested at that time. However, at any time while
the options remain outstanding, the Committee will generally have discretion to
extend the period following the optionee's cessation of employment or service
during which his or her outstanding options may be exercised. The Committee will
also have discretion to accelerate the exercisability or vesting of those
options in whole or in part at any time.
CHANGE IN CONTROL
If a change in control of the Company occurs, an option under the 2000
Plan may become fully vested and exercisable as determined by the Committee. A
change in control includes: (i) a merger of the Company after which the
Company's stockholders own 50% or less of the surviving corporation (or its
parent company); (ii) a sale of all or substantially all of the Company's
assets; (iii) a change in the composition of the Board that results in the
replacement of more than one-half of the Company's incumbent directors over a
24-month period; or (iv) an acquisition of 20% or more of the Company's
outstanding stock by any person or group, other than a person related to the
Company (such as a holding company owned by the Company's stockholders).
AMENDMENTS
The Board may amend or terminate the 2000 Plan at any time. If the Board
amends the 2000 Plan, it does not need to ask for stockholder approval of the
amendment unless required. Stockholder approval of any amendment of the 2000
Plan may be required to be obtained if the Board determines it is otherwise
required by the Internal Revenue Code or any rules promulgated thereunder (in
order to allow for incentive stock options to be granted under the 2000 Plan),
by the quotation or listing requirements of The Nasdaq Stock Market or any
principal securities exchange or market on which shares of Common Stock are then
traded (in order to maintain the listing of the shares thereon) or any other
applicable law.
13
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the 2000 Plan may be either incentive stock options
that satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options that are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
INCENTIVE OPTIONS No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For Federal income tax purposes, dispositions
are divided into two categories: qualifying dispositions and disqualifying
dispositions. A qualifying disposition occurs if the sale or other disposition
is made after the optionee has held the shares for more than two (2) years after
the option grant date and more than one (1) year after the exercise date. If
either of these two holding periods is not satisfied, then a disqualifying
disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the
exercise date over (ii) the exercise price paid for the shares will be taxable
as ordinary income to the optionee. Any additional gain or loss recognized upon
the disposition will be recognized as a capital gain or loss by the optionee.
NON-STATUTORY OPTIONS No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
The Company will be entitled to an income tax deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
INTERNAL REVENUE CODE SECTION 409A Section 409A of the Internal Revenue
Code imposes restrictions on nonqualified deferred compensation arrangements
that do not meet specified criteria as set forth in the statute and guidance
promulgated thereunder. If any of the arrangements provided under the 2000 Plan
fail to meet the criteria specified in Section 409A, or if the 2000 Plan is not
operated by the Company in accordance with such criteria, then a participant
will recognize ordinary income equal to the value of the awards when such awards
are no longer subject to a substantial risk of forfeiture even though the
participant has not received the award in cash or stock. Additionally, the
participant will be liable for a 20% tax on such amounts in addition to income
taxes otherwise due on such amounts.
14
OPTION GRANTS
The following table sets forth with respect to the Named Executive
Officers and the various indicated groups, the number of shares of Common Stock
subject to the stock options granted under the 2000 Plan from November 1, 2004
through October 31, 2005 and the weighted average exercise price payable per
share.
WEIGHTED AVERAGE
NUMBER OF EXERCISE PRICE OF
NAME AND POSITION OPTION SHARES GRANTED OPTIONS
----------------- ------------- -----------------
Howard F. Hill, President, Chief Executive 2,000 $5.34
Officer and Director
John R. Ehret, Director 2,000 $5.34
Marvin Fink, Director 2,000 $5.34
William L. Reynolds, Director 2,000 $5.34
Robert Jacobs, Director 2,000 $5.34
Linde Kester, Director 4,000 $5.34
Summary:
All current executive officers as a group (2 2,000 $5.34
persons)
All current non-employee directors as a group 12,000 $5.34
(5 persons)
All employees, including current officers who 46,705 $5.34
are not executive officers, as a group (65
persons)
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Common Stock
present or represented at the Annual Meeting is required to approve the
amendments to the 2000 Plan. Should such stockholder approval not be obtained,
then the increase in the 2000 Plan options will not be implemented.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
RATIFICATION OF PROPOSAL 2
15
PROPOSAL 3:
SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board has selected J.H. Cohn LLP to continue as
the Company's independent registered public accounting firm for the fiscal year
ending October 31, 2006. A representative of J.H. Cohn LLP is expected to be
present at the Annual Meeting. The representative will have an opportunity to
make a statement and will be available to respond to appropriate questions from
stockholders.
Stockholder ratification of the selection of J.H. Cohn LLP as the
Company's independent registered public accounting firm is not required by the
Company's Bylaws or otherwise. However, the Board is submitting the selection of
J.H. Cohn LLP to the stockholders for ratification as a matter of good corporate
practice. If the stockholders fail to ratify the selection, the Board will
request the Audit Committee to reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee of the Board in its
discretion may direct the appointment of a different independent registered
public accounting firm at any time during the year if the Audit Committee of the
Board determines that such a change would be in the best interests of the
Company and its stockholders.
The affirmative vote of the holders of a majority of the shares
represented and voting at the meeting will be required to ratify the selection
of J.H. Cohn LLP.
AUDIT FEES
The following is a summary of the fees billed to the Company by J.H. Cohn
LLP for professional services for rendered for the fiscal years ended October
31, 2005 and 2004:
FEE CATEGORY FISCAL 2005 FEES FISCAL 2004 FEES
------------------------ ------------------------- ----------------------
Audit Fees $147,041 $120,849
Audit-Related Fees 22,304 22,677
Tax Fees 7,420 14,815
TOTAL FEES $176,765 $158,341
Audit Fees. Consists of fees billed for professional services rendered for
the audit of RF Industries, Ltd. financial statements and review of the interim
financial statements included in quarterly reports and services that are
normally provided by J.H. Cohn LLP in connection with statutory and regulatory
filings or engagements.
16
Audit-Related Fees. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit and review
of RF Industries' financial statements and are not reported under "Audit Fees."
These services include professional services requested by RF Industries in
connection with its preparation for compliance with Section 404 of the
Sarbanes-Oxley Act of 2002, accounting consultations in connection with
acquisitions, and consultations concerning financial accounting and reporting
standards.
Tax Fees. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal and state tax compliance and assistance with tax reporting.
The Audit Committee has determined that the provision of services, in
addition to audit services, rendered by J.H. Cohn LLP and the fees billed
therefore in fiscal 2005 and 2004 were compatible with maintaining J.H. Cohn
LLP's independence.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
PROPOSAL 3
REPORT OF THE AUDIT COMMITTEE
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act or the Securities Exchange
Act that might incorporate by reference previous or future filings, including
this Proxy Statement, in whole or in part, the following report shall not be
incorporated by reference into any of such filings.
The responsibilities of the Audit Committee include providing oversight to
the financial reporting process of the Company through periodic meetings with
the Company's independent registered public accounting firm and management to
review accounting, auditing, internal controls, and financial reporting matters.
The Company's management is responsible for the preparation and integrity of the
financial reporting information and related systems of internal controls. The
Audit Committee, in carrying out its role, relies on senior management,
including senior financial management, and its independent registered public
accounting firm.
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended October 31,
2005.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with the management. The Audit Committee has discussed with
J.H. Cohn LLP, the Company's independent registered public accounting firm, the
matters required to be discussed by Statement of Auditing Standards No. 61
(Communication with Audit Committees) which includes, among other items, matters
related to the conduct of the audit of the Company's financial statements. The
Audit Committee has also received written disclosures and the letter from J.H.
Cohn LLP required by Independence Standards Board Standard No. 1, which relates
to the auditor's independence from the Company and its related entities, and has
discussed with J. H. Cohn LLP their independence from the Company.
17
Based on the review and discussions referred to above, the Audit Committee
recommended to the Company's Board of Directors that the Company's audited
financial statements be included in the Company Annual Report on Form 10-KSB for
the fiscal year ended October 31, 2005.
The Audit Committee has retained J.H. Cohn LLP as the Company's
independent registered public accounting firm for the fiscal year ending October
31, 2006.
It is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements are complete and accurate and
in accordance with accounting principles generally accepted in the United
States. That is the responsibility of management and the Company's independent
registered public accounting firm. In giving its recommendation to the Board of
Directors, the Audit Committee has relied on (i) management's representation
that such financial statements have been prepared with integrity and objectivity
and in conformity with accounting principles generally accepted in the United
States and (ii) the report of the Company's independent registered public
accounting firm with respect to such financial statements.
AUDIT COMMITTEE
John Ehret
Linde Kester
William Reynolds
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return for the Company,
the NASDAQ US Stock Index and the NASDAQ Electronic Components Stock Index
during the last five fiscal years. The graph shows the value, at the end of each
calendar month, of $100 invested in the Common Stock or the indices on October
31, 2001. Historic stock price performance is not necessarily indicative of
future stock price performance.
18
Comparison of Monthly Returns
[LINE GRAPH]
o The monthly return on investment for each of the periods for the
Company is based on the closing price on the last trading day of
each month. The Indices are based on their respective values on the
final trading day of each month.
Notwithstanding anything contained herein or in any other materials filed
by the Company with the SEC, neither the audit committee report nor the stock
performance graph shall be deemed to be "filed" with the SEC, and may not
therefore be incorporated by reference in any filing of the Company under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, whether made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
CERTAIN TRANSACTIONS
On April 1, 1997, the Company loaned to Howard Hill, its President and
Chief Executive Officer, $70,000 pursuant to a Promissory Note which provides
for interest at the rate of 6% per annum and which has no specific due date for
principal. Interest on the loan is paid annually. The loan is evidenced by a
promissory note that is secured by a lien on certain of Mr. Hill's personal
property. Current outstanding balance is $66,980.
Mr. Jacobs, a director of the Company, is an employee of Neil Berkman
Associates, the Company's public relations firm. For the fiscal years ended
October 31, 2005 and 2004, the Company paid to Neil Berkman Associates $39,645
and $43,050, respectively, for services rendered.
19
STOCKHOLDERS' PROPOSALS
Stockholders who intend to submit proposals at the 2007 Annual Meeting
must submit such proposals to the Company no later than December 26, 2006 in
order for them to be included in the Proxy Statement and the form of Proxy to be
distributed by the Board of Directors in connection with that meeting.
Stockholders proposals should be submitted to Corporate Secretary, RF
Industries, Ltd., 7610 Miramar Road, San Diego, CA 92126-4202.
FORM 10-KSB
The Company will furnish without charge to each person whose proxy is
being solicited, upon request of any such person, a copy of the Annual Report of
the Company on Form 10-KSB for the fiscal year ended October 31, 2005, as filed
with the Securities and Exchange Commission, including financial statements and
schedules thereto. Such report was filed with the Securities and Exchange
Commission on or about February 13, 2006. Requests for copies of such report
should be directed to the Chief Financial Officer, RF Industries, Ltd., 7610
Miramar Road, San Diego, CA 92126-4202. The Form 10-KSB may also be accessed
electronically by means of the SEC's home page on the Internet at
http://www.sec.gov.
ANNUAL REPORTS
The Company's 2005 Annual Report, which includes audited financial
statements for the Company's fiscal year ended October 31, 2005, is being mailed
with along with this Proxy Statement.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Annual Meeting. However, if any other matter properly comes before
the Annual Meeting of any adjournment thereof, it is intended that the persons
named in the enclosed form of Proxy will vote on such matters in accordance with
their best judgment.
Victor H. Powers
CFO and Corporate Secretary
San Diego, California
April 26, 2006
20