What changed in this filing

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Item 1. Financial Statements

2024-06-10 compared with 2024-03-13 · 213 added, 134 removed, 427 unchanged (45% of the section changed)

3 unchanged sentences

Current assets:

Trade accounts receivable, net of allowance for credit losses of $ 59,215 at January 31, 2024 and $ 71,189 at October 31, 2023

Trade accounts receivable, net of allowance for credit losses of $ 54,261 at April 30, 2024 and $ 71,189 at October 31, 2023

Income taxes refundable - current

20 unchanged sentences

Common stock, no par value, authorized 50,000,000 shares;

issued and outstanding 7,853,357 shares at January 31, 2024 and 7,893,681 shares at October 31, 2023

issued and outstanding 7,852,515 shares at April 30, 2024 and 7,893,681 shares at October 31, 2023

Retained earnings

6 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

5 unchanged sentences

Interest expense, net

Other expense, net

Gain on insurance proceeds, net

Other income (expense), net

Income (loss) before income taxes

6 unchanged sentences

Condensed Consolidated Statements of Shareholders’ Equity

Three Months Ended January 31, 2024

Six Months Ended April 30, 2024

Shareholders’

2 unchanged sentences

Balances at January 31, 2024

Three Months Ended January 31, 2023

Share-based compensation, net

Balances at April 30, 2024

Six Months Ended April 30, 2023

Shareholders’

2 unchanged sentences

Balances at January 31, 2023

Share-based compensation, net

Balances at April 30, 2023

See accompanying condensed notes to condensed consolidated financial statements.

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization

Bad debt recovery

Bad debt expense (recovery)

Share-based compensation expense

10 unchanged sentences

Other noncurrent liabilities

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Purchase of and deposits for the purchase of property and equipment

Insurance proceeds, net

Investment in intangible assets

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Payroll taxes withheld and remitted on share-based payments

Proceeds from note payable, revolver

4 unchanged sentences

Net cash provided by (used in) financing activities

Net decrease in cash

Net increase (decrease) in cash

Cash at beginning of period

3 unchanged sentences

Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

Six Months Ended April 30, 2024

The accompanying unaudited condensed consolidated financial statements of Optical Cable Corporation and its subsidiaries (collectively, the “Company” or “OCC ® ”) have been prepared in accordance with U.S.

3 unchanged sentences

In the opinion of management, all material adjustments considered necessary for a fair presentation have been included.

Operating results for the three months ended January 31, 2024 are not necessarily indicative of the results for the fiscal year ending October 31, 2024 because the following items, among other things, may impact those results:

Operating results for the six months ended April 30, 2024 are not necessarily indicative of the results for the fiscal year ending October 31, 2024 because the following items, among other things, may impact those results:

changing macroeconomic conditions in various markets, supply chain and labor constraints impacting production volumes, any increased costs related to government and private industry mandates in the areas of the world in which we operate, changes in market conditions, seasonality, inflation and interest rates, changes in technology, competitive conditions, timing of certain projects and purchases by key customers, significant variations in sales resulting from high volatility and timing of large sales orders among a limited number of customers in certain markets, ability of management to execute its business plans, continued ability to maintain and/or secure future debt and/or equity financing to adequately finance ongoing operations;

2 unchanged sentences

For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10‑K for the fiscal year ended October 31, 2023.

Stock Incentive Plans and Other Share ‑ Based Compensation

As of January 31, 2024, there were approximately 396,000 remaining shares available for grant under the Optical Cable Corporation Stock Incentive Plan (“2017 Plan”).

Share-based compensation expense for employees, a consultant and non-employee Directors recognized in the condensed consolidated statements of operations for the three months ended January 31, 2024 and 2023 was $ 159,151 and $ 135,041 , respectively.

Stock Incentive Plan and Other Share ‑ Based Compensation

As of April 30, 2024, there were approximately 397,000 remaining shares available for grant under the Optical Cable Corporation Stock Incentive Plan (“2017 Plan”).

Share-based compensation expense for employees, a consultant and non-employee Directors recognized in the condensed consolidated statements of operations for the three months and six months ended April 30, 2024 was $ 91,641 and $ 250,792 , respectively.

Share-based compensation expense for employees, a consultant and non-employee Directors recognized in the condensed consolidated statements of operations for the three months and six months ended April 30, 2023 was $ 154,639 and $ 289,680 , respectively.

Share-based compensation expense is entirely related to expense recognized in connection with the vesting of restricted stock awards or other stock awards.

4 unchanged sentences

Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

Restricted stock award activity during the three months ended January 31, 2024 consisted of restricted shares withheld for taxes in connection with the vesting of restricted shares totaling 40,324 shares.

Six Months Ended April 30, 2024

Restricted stock award activity during the six months ended April 30, 2024 consisted of restricted shares forfeited totaling 842 shares and restricted shares withheld for taxes in connection with the vesting of restricted shares totaling 40,324 shares.

OCC restricted stock grants provide the participant with the option to surrender shares to pay for withholding tax obligations resulting from any vesting restricted shares, or to pay cash to the Company or taxing authorities in the amount of the withholding taxes owed on the value of any vesting restricted shares in order to avoid surrendering shares.

The Company accrued $ 107,661 as of January 31, 2024 related to the surrender of shares by participants to pay for withholding taxes on shares that vested on January 31, 2024.

As of January 31, 2024, the estimated amount of compensation cost related to unvested equity-based compensation awards in the form of service-based and operational performance-based shares that the Company will recognize over a 1.2 year weighted-average period is approximately $ 356,000 .

As of April 30, 2024, the estimated amount of compensation cost related to unvested equity-based compensation awards in the form of service-based and operational performance-based shares that the Company will recognize over a 1 year weighted-average period is approximately $ 262,000 .

On May 17, 2024, subsequent to the Company’s fiscal quarter end, the Company granted restricted stock awards totaling 39,960 shares to non-employee Directors under the 2017 Plan.

The shares are subject to a one-year vesting period and are part of the non-employee Directors’ annual compensation for service on the Board of Directors.

Allowance for Credit Losses for Trade Accounts Receivable

A summary of changes in the allowance for credit losses for trade accounts receivable for the three months ended January 31, 2024 and 2023 follows:

Three Months Ended

A summary of changes in the allowance for credit losses for trade accounts receivable for the six months ended April 30, 2024 and 2023 follows:

Six Months Ended

Balance at beginning of period

Bad debt recovery

Bad debt expense (recovery)

Balance at end of period

Inventories as of January 31, 2024 and October 31, 2023 consist of the following:

Inventories as of April 30, 2024 and October 31, 2023 consist of the following:

Finished goods

3 unchanged sentences

Product Warranties

As of January 31, 2024 and October 31, 2023, the Company’s accrual for estimated product warranty claims totaled $ 75,000 and $ 80,000 , respectively, and is included in accounts payable and accrued expenses.

Warranty claims expense for the three months ended January 31, 2024 and 2023 totaled $ 5,188 and $ 16,574 , respectively.

As of April 30, 2024 and October 31, 2023, the Company’s accrual for estimated product warranty claims totaled $ 75,000 and $ 80,000 , respectively, and is included in accounts payable and accrued expenses.

Warranty claims expense for the three months and six months ended April 30, 2024 totaled $ 39,078 and $ 44,266 , respectively.

Warranty claims expense for the three months and six months ended April 30, 2023 totaled $ 13,078 and $ 29,652 , respectively.

OPTICAL CABLE CORPORATION

Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

The following table summarizes the changes in the Company’s accrual for product warranties during the three months ended January 31, 2024 and 2023:

Three Months Ended

Six Months Ended April 30, 2024

The following table summarizes the changes in the Company’s accrual for product warranties during the six months ended April 30, 2024 and 2023:

Six Months Ended

April 30, 2024

Balance at beginning of period

8 unchanged sentences

Interest is computed on the aggregate principal balance outstanding at a rate equal to the Prime Rate, adjusted monthly on the fifth day of each calendar month in accordance with changes to the Prime Rate, provided, however, that the interest rate is never less than 8.5 % per annum on the basis of a 360-day year times the actual number of days elapsed.

The maturity date is May 5, 2026.

The Prime Rate was 8.5 % per annum at April 30, 2024 and October 31, 2023.

The maturity date of the Virginia Real Estate Loan is May 5, 2026.

The Loan remains generally secured by a first lien deed of trust on the land and buildings at the Company’s headquarters and manufacturing facilities located in Roanoke, Virginia.

All other terms of the Virginia Real Estate Loan remain unaltered and remain in full force and effect.

The Company had an outstanding balance on its Virginia Real Estate Loan of $ 2.7 million, as of January 31, 2024 and October 31, 2023.

The Company had an outstanding balance on its Virginia Real Estate Loan of $ 2.7 million, as of April 30, 2024 and October 31, 2023.

The Revolver with North Mill Capital LLC (now doing business as SLR Business Credit, “SLR”) provides the Company with one or more advances in an amount up to:

4 unchanged sentences

Interest accrues on the daily balance at the per annum rate of 1.5 % above the Prime Rate in effect from time to time, but not less than 4.75 % (the “Applicable Rate”).

As a result, the Revolver accrued interest at a 10.0 % rate at April 30, 2024 and October 31, 2023.

In the event of a default, interest may become 6.0 % above the Applicable Rate.

As of January 31, 2024, the Revolver accrued interest at the prime lending rate plus 1.5 % (resulting in a 10.0 % rate at January 31, 2024).

The termination date of the Revolver is July 24, 2025 and the loan may be extended in one year periods subject to the agreement of SLR.

1 unchanged sentence

Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

Six Months Ended April 30, 2024

The Revolver is secured by all of the following assets:

4 unchanged sentences

and any other assets of the Company which may be subject to a lien in favor of SLR as security for the obligations under the Loan Agreement.

As of January 31, 2024, the Company had $ 7.5 million of outstanding borrowings on its Revolver and $ 2.3 million in available credit.

As of April 30, 2024, the Company had $ 8.0 million of outstanding borrowings on its Revolver and $ 2.0 million in available credit.

As of October 31, 2023, the Company had $ 8.3 million of outstanding borrowings on its Revolver and $ 2.6 million in available credit.

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Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

Operating lease right-of-use assets of $ 502,998 and $ 596,578 were included in other assets at January 31, 2024 and October 31, 2023, respectively.

Operating lease liabilities of $ 378,805 and $ 163,099 , respectively, were included in accounts payable and accrued expenses, and other noncurrent liabilities, at January 31, 2024.

Six Months Ended April 30, 2024

Operating lease right-of-use assets of $ 407,796 and $ 596,578 were included in other assets at April 30, 2024 and October 31, 2023, respectively.

Operating lease liabilities of $ 318,225 and $ 121,294 , respectively, were included in accounts payable and accrued expenses , and other noncurrent liabilities , at April 30, 2024.

Operating lease liabilities of $ 414,159 and $ 227,925 , respectively, were included in accounts payable and accrued expenses , and other noncurrent liabilities at October 31, 2023.

Operating lease expense recognized during the three months ended January 31, 2024 and 2023 totaled $ 109,144 and $ 103,333 , respectively.

The weighted average remaining lease term was 18.6 months and the weighted average discount rate was 7.4 % as of January 31, 2024.

For the three months ended January 31, 2024 and 2023, cash paid for operating lease liabilities totaled $ 111,188 and $ 109,815 , respectively.

For the three months ended January 31, 2024, there were no right-of-use assets obtained in exchange for new operating lease liabilities.

For the three months ended January 31, 2023, right-of-use assets obtained in exchange for new operating lease liabilities totaled $ 316,028 and there was a reduction in right-of-use assets for modified operating lease liabilities totaling $ 15,719 .

Finance lease right-of-use assets of $ 133,968 and $ 141,342 were included in other assets at January 31, 2024 and October 31, 2023, respectively.

Finance lease liabilities of $ 37,905 and $ 83,806 , respectively, were included in accounts payable and accrued expenses, and other noncurrent liabilities at January 31, 2024.

Operating lease expense recognized during the three months and six months ended April 30, 2024 totaled $ 109,144 and $ 218,288 , respectively.

Operating lease expense recognized during the three months and six months ended April 30, 2023 totaled $ 109,144 and $ 212,477 , respectively.

The weighted average remaining lease term was 16.5 months and the weighted average discount rate was 7.6 % as of April 30, 2024.

For the three months ended April 30, 2024 and 2023, cash paid for operating lease liabilities totaled $ 111,770 and $ 109,151 , respectively.

For the three months ended April 30, 2024 and 2023, there were no right-of-use assets obtained in exchange for new operating lease liabilities.

Finance lease right-of-use assets of $ 126,593 and $ 141,342 were included in other assets at April 30, 2024 and October 31, 2023, respectively.

Finance lease liabilities of $ 38,357 and $ 74,046 , respectively, were included in accounts payable and accrued expenses , and other noncurrent liabilities at April 30, 2024.

Finance lease liabilities of $ 37,459 and $ 93,451 , respectively, were included in accounts payable and accrued expenses , and other noncurrent liabilities at October 31, 2023.

Interest expense related to the finance lease totaled $ 1,518 and $ 1,944 , respectively, for the three months ended January 31, 2024 and 2023.

For the three months ended January 31, 2024 and 2023, amortization expense related to the finance lease totaled $ 7,374 .

The remaining lease term for the finance lease is 31 months and the discount rate is 4.75 % as of January 31, 2024.

For the three months ended January 31, 2024, cash paid for the finance lease liability totaled $ 1,518 for interest and $ 9,199 for principal.

For the three months ended January 31, 2023, cash paid for the finance lease liability totaled $ 1,944 for interest and $ 8,773 for principal.

Interest expense related to the finance lease totaled $ 1,409 and $ 2,927 , respectively, for the three months and six months ended April 30, 2024.

Interest expense related to the finance lease totaled $ 1,840 and $ 3,784 , respectively, for the three months and six months ended April 30, 2023.

For the three months ended April 30, 2024 and 2023, amortization expense related to the finance lease totaled $ 7,374 .

For the six months ended April 30, 2024 and 2023, amortization expense related to the finance lease totaled $ 14,749 .

The remaining lease term for the finance lease is 28 months and the discount rate is 4.75 % as of April 30, 2024.

For the three months ended April 30, 2024, cash paid for the finance lease liability totaled $ 1,409 for interest and $ 9,309 for principal.

For the six months ended April 30, 2024, cash paid for the finance lease liability totaled $ 2,927 for interest and $ 18,507 for principal.

For the three months ended April 30, 2023, cash paid for the finance lease liability totaled $ 1,840 for interest and $ 8,878 for principal.

For the six months ended April 30, 2023, cash paid for the finance lease liability totaled $ 3,784 for interest and $ 17,652 for principal.

OPTICAL CABLE CORPORATION

Condensed Notes to Condensed Consolidated Financial Statements

Six Months Ended April 30, 2024

The Company’s future payments due under leases reconciled to the lease liabilities are as follows:

2 unchanged sentences

Total lease liability

(1) Remaining nine months of fiscal year 2024.

OPTICAL CABLE CORPORATION

Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

(1) Remaining six months of fiscal year 2024.

Fair Value Measurements

The carrying amounts reported in the condensed consolidated balance sheets as of January 31, 2024 and October 31, 2023 for cash, trade accounts receivable, income taxes refundable – current, other receivables, current installments of long-term debt, accounts payable and accrued expenses, accrued compensation and payroll taxes, and income taxes payable approximate fair value because of the short maturity of these instruments.

The carrying amounts reported in the condensed consolidated balance sheets as of April 30, 2024 and October 31, 2023 for cash, trade accounts receivable, income taxes refundable – current, other receivables, current installments of long-term debt, accounts payable and accrued expenses, accrued compensation and payroll taxes, and income taxes payable approximate fair value because of the short maturity of these instruments.

The carrying value of the Company’s note payable, revolver – noncurrent, and long-term debt, excluding current installments, approximates fair value because the interest rates vary with the market.

5 unchanged sentences

Three months ended

Six months ended

Net income (loss) (numerator)

1 unchanged sentence

Basic and diluted net income (loss) per share

Weighted average unvested shares for the three months ended January 31, 2024 totaling 142,565 , while issued and outstanding, were not included in the computation of basic and diluted net loss per share for the three months ended January 31, 2024 (because to include such shares would have been antidilutive, or in other words, to do so would have reduced the net loss per share for that period).

Weighted average unvested shares for the three months and six months ended April 30, 2024 totaling 141,723 , while issued and outstanding, were not included in the computation of basic and diluted net loss per share for the three months and six months ended April 30, 2024 (because to include such shares would have been anti-dilutive, or in other words, to do so would have reduced the net loss per share for those periods).

OPTICAL CABLE CORPORATION

Condensed Notes to Condensed Consolidated Financial Statements

Six Months Ended April 30, 2024

Segment Information and Business and Credit Concentrations

2 unchanged sentences

The Company also manages exposure to credit risk through credit approvals, credit limits and monitoring procedures.

Management believes that credit risks as of January 31, 2024 have been adequately provided for in the condensed consolidated financial statements.

Management believes that credit risks as of April 30, 2024 have been adequately provided for in the condensed consolidated financial statements.

The Company includes all entities under common ownership for the purpose of calculating business concentrations.

For the three months ended January 31, 2024 and 2023, 15.5 % and 14.8 %, respectively, of consolidated net sales were attributable to one national distributor customer.

For the three months and six months ended April 30, 2024, 16.3 % and 15.9 %, respectively, of consolidated net sales were attributable to one national distributor customer.

For the three months and six months ended April 30, 2023, 17.7 % and 16.3 %, respectively, of consolidated net sales were attributable to the same national distributor customer.

The Company has a single reportable segment for purposes of segment reporting.

OPTICAL CABLE CORPORATION

Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

Revenue Recognition

9 unchanged sentences

The Company’s contract liability represents advance consideration received from customers prior to transfer of the product.

This liability was $ 89,325 as of January 31, 2024 and $ 110,336 as of October 31, 2023.

This liability was $ 180,431 as of April 30, 2024 and $ 110,336 as of October 31, 2023.

Sales to certain customers are made pursuant to agreements that provide price adjustments and limited return rights with respect to the Company’s products.

The Company maintains a reserve for estimated future price adjustment claims, rebates and returns as a refund liability.

The Company’s refund liability was $ 291,823 as of January 31, 2024 and $ 252,264 as of October 31, 2023.

The Company’s refund liability was $ 133,201 as of April 30, 2024 and $ 252,264 as of October 31, 2023.

OPTICAL CABLE CORPORATION

Condensed Notes to Condensed Consolidated Financial Statements

Six Months Ended April 30, 2024

The Company offers standard product warranty coverage which provides assurance that its products will conform to contractually agreed-upon specifications for a limited period from the date of shipment.

5 unchanged sentences

The commissions are expensed as selling expenses during the period that the related products are transferred to customers.

OPTICAL CABLE CORPORATION

Condensed Notes to Condensed Consolidated Financial Statements

Three Months Ended January 31, 2024

Disaggregation of Revenue

The following table presents net sales attributable to the United States and all other countries in total for the three months ended January 31, 2024 and 2023:

The following table presents net sales attributable to the United States and all other countries in total for the three months and six months ended April 30, 2024 and 2023:

Three months ended

Six months ended

United States

35 unchanged sentences

the loss of or conflict with one or more key suppliers or customers;

an adverse outcome in any litigation, claims and other actions, and potential litigation, claims and other actions against us;

an adverse outcome in any litigation, claims, and other actions or disputes, and potential litigation, claims, and other actions or disputes against us or with us;

an adverse outcome in any regulatory reviews and audits and potential regulatory reviews and audits;

9 unchanged sentences

changes in the mix of products sold during any given period (due to, among other things, seasonality or varying strength or weaknesses in particular markets in which we participate) which may impact gross profits and gross profit margins or net sales;

variations in orders and production volumes affecting fixed-costs coverage and production efficiencies which may impact gross profits and gross profit margins;

variations in orders and production volumes of hybrid cables (fiber and copper) with high copper content, which tend to have lower gross profit margins;

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Optical Cable Corporation™, OCC ® , Procyon ® , Superior Modular Products™, SMP Data Communications™, Applied Optical Systems™, Centric Solutions™ and associated logos are trademarks of Optical Cable Corporation.

Summary of Company Performance for First Quarter of Fiscal Year 2024

Consolidated net sales for the first quarter of fiscal year 2024 decreased 18.8% to $14.9 million, compared to $18.3 million for the same period last year, which we believe is consistent with weakness being experienced in our industry generally and in certain of our target markets.

Gross profit decreased 43.1% to $3.7 million in the first quarter of fiscal year 2024, compared to $6.5 million for the first quarter of fiscal year 2023.

Gross profit margin (gross profit as a percentage of net sales) was 25.0% during the first quarter of fiscal year 2024, compared to 35.7% for the first quarter of fiscal year 2023.

SG&A expenses were $5.1 million during the first quarter of fiscal year 2024, compared to $5.5 million for the same period last year.

SG&A expenses as a percentage of net sales were 34.3% during the first quarter of fiscal year 2024, compared to 29.8% during the same period in fiscal year 2023.

Net loss was $1.4 million, or $0.18 per share, during the first quarter of fiscal year 2024, compared to net income of $810,000, or $0.10 per share, for the comparable period last year.

Summary of Company Performance for Second Quarter of Fiscal Year 2024

Consolidated net sales for the second quarter of fiscal year 2024 decreased 17.9% to $16.1 million, compared to $19.6 million for the same period last year, which we believe is consistent with weakness being experienced in our industry generally and in certain of our target markets.

Net sales for the second quarter of fiscal year 2024 increased 8.5% compared to $14.9 million for the first quarter of fiscal year 2024.

Gross profit decreased 40.5% to $4.0 million in the second quarter of fiscal year 2024, compared to $6.8 million for the second quarter of fiscal year 2023, while gross profit increased 8.8% compared to $3.7 million for the first quarter of fiscal year 2024.

Gross profit margin (gross profit as a percentage of net sales) was 25.1% during the second quarter of fiscal year 2024, compared to 34.6% for the second quarter of fiscal year 2023 and compared to 25.0% for the first quarter of fiscal year 2024.

SG&A expenses were $5.3 million during the second quarter of fiscal year 2024, compared to $5.7 million for the same period last year.

SG&A expenses as a percentage of net sales were 33.0% during the second quarter of fiscal year 2024, compared to 28.9% during the same period in fiscal year 2023 and compared to 34.3% during the first quarter of fiscal year 2024.

Net loss was $1.6 million, or $0.21 per share, during the second quarter of fiscal year 2024, compared to net income of $2.4 million, or $0.31 per share, for the comparable period last year.

Results of Operations

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Three Months Ended

Six Months Ended

SG&A expenses

1 unchanged sentence

Net income (loss)

Three Months Ended January 31, 2024 and 2023

Consolidated net sales for the first quarter of fiscal year 2024 decreased 18.8% to $14.9 million, compared to net sales of $18.3 million for the same period last year.

We experienced a decrease in net sales primarily in our enterprise and wireless carrier markets in the first quarter of fiscal year 2024, compared to the same period last year.

Three Months Ended April 30, 2024 and 2023

Consolidated net sales for the second quarter of fiscal year 2024 decreased 17.9% to $16.1 million, compared to net sales of $19.6 million for the same period last year, and increased 8.5% compared to net sales of $14.9 million during the first quarter of fiscal year 2024.

We experienced a decrease in net sales in both our enterprise and specialty markets, including the wireless carrier market, in the second quarter of fiscal year 2024, compared to the same period last year.

We believe this is consistent with weakness being experienced in our industry generally and in certain of our target markets.

Net sales to customers in the United States decreased 17.9% and net sales to customers outside of the United States decreased 22.1% in the first quarter of fiscal year 2024, compared to the same period last year.

Net sales to customers in the United States decreased 17.7% and net sales to customers outside of the United States decreased 18.5% in the second quarter of fiscal year 2024, compared to the same period last year.

We can experience fluctuations in sales from quarter to quarter in the various markets (both industries and geographies) in which we operate for various reasons.

The first quarter of fiscal year 2023 was positively impacted by our higher than typical sales order backlog/forward load of more than $12.0 million that existed at the end of fiscal year 2022, while our sales order backlog/forward load at the end of fiscal year 2023 had returned to more normal levels at approximately $5.4 million.

At the end of the first quarter of fiscal year 2024, our sales order backlog/forward load remains at a more typical level of approximately $5.0 million.

Additionally, net sales for the first quarter of fiscal year 2024 were negatively impacted by various macroeconomic pressures, risks and uncertainties in our industry.

The second quarter of fiscal year 2023 was positively impacted by our higher-than-typical sales order backlog/forward load of more than $11.0 million that existed at the end of the first quarter of fiscal year 2023, while our sales order backlog/forward load at the end of the first quarter of fiscal year 2024 had returned to more normal levels at approximately $5.0 million.

At the end of the second quarter of fiscal year 2024, our sales order backlog/forward load remains at a more typical level of approximately $5.6 million.

Additionally, net sales for the second quarter of fiscal year 2024 were negatively impacted by various macroeconomic pressures, risks and uncertainties in our industry—which we believe is consistent with weakness being experienced in our industry generally.

While certain of our markets continue to show signs of softness (including our enterprise and wireless carrier markets), we believe there are positive indicators in certain of our other markets.

Overall, we expect our net sales to begin to grow compared to the first quarter of fiscal year 2024 during fiscal year 2024.

Our gross profit was $3.7 million in the first quarter of fiscal year 2024, a decrease of 43.1% compared to gross profit of $6.5 million in the first quarter of fiscal year 2023.

Gross profit margin, or gross profit as a percentage of net sales, was 25.0% in the first quarter of fiscal year 2024 compared to 35.7% in the first quarter of fiscal year 2023.

Gross profit margin for the first quarter of fiscal 2024 was negatively impacted by lower volumes, as fixed charges were spread over lower sales, as well as decreased plant efficiency, as fewer sales and lower backlog impacted the flow of products through our manufacturing facilities—the impact of operating leverage.

Overall, we expect our net sales to begin to grow compared to the first half of fiscal year 2024.

Our gross profit was $4.0 million in the second quarter of fiscal year 2024, a decrease of 40.5% compared to gross profit of $6.8 million in the second quarter of fiscal year 2023, while gross profit during the second quarter of fiscal year 2024 increased 8.8% compared to $3.7 million for the first quarter of fiscal year 2024.

Gross profit margin, or gross profit as a percentage of net sales, was 25.1% in the second quarter of fiscal year 2024 compared to 34.6% in the second quarter of fiscal year 2023 and compared to 25.0% for the first quarter of fiscal year 2024.

Gross profit margin for the second quarter of fiscal 2024 when compared to the same period last year was negatively impacted by lower volumes, as fixed charges were spread over lower sales, as well as decreased plant efficiency, as fewer sales and lower backlog impacted the flow of products through our manufacturing facilities—the impact of operating leverage.

Additionally, our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix.

While production volume decreased during the first quarter of fiscal year 2024 compared to the same period last year, we have not implemented reductions in production personnel like others in our industry have done—including manufacturers and distributors.

While production volume decreased during the second quarter of fiscal year 2024 compared to the same period last year, we have not implemented reductions in production personnel like others in our industry have done—with various personnel reductions at manufacturers and distributors.

Our planned restraint in this regard is consistent with our view of expected opportunities as we continue fiscal year 2024, as well as considering the time it takes to train new production personnel in certain areas of our production operations.

Selling, General, and Administrative Expenses

SG&A expenses decreased to $5.1 million during the first quarter of fiscal year 2024, compared to $5.5 million during the first quarter of fiscal year 2023.

SG&A expenses as a percentage of net sales were 34.3% in the first quarter of fiscal year 2024, compared to 29.8% in the first quarter of fiscal year 2023, as fixed SG&A expenses were spread over lower net sales.

The decrease in SG&A expenses during the first quarter of fiscal year 2024 compared to the same period last year was primarily the result of decreases in employee and contracted sales personnel related costs totaling $210,000 and shipping costs totaling $107,000.

Included in employee and contracted sales personnel related costs are employee incentives and commissions which decreased due to decreased net sales and the financial results during the first quarter of fiscal year 2024.

SG&A expenses decreased to $5.3 million during the second quarter of fiscal year 2024, compared to $5.7 million during the second quarter of fiscal year 2023.

SG&A expenses as a percentage of net sales were 33.0% in the second quarter of fiscal year 2024, compared to 28.9% in the second quarter of fiscal year 2023, as fixed SG&A expenses were spread over lower net sales.

By comparison, SG&A expenses as a percentage of net sales were 34.3% during the first quarter of fiscal year 2024.

The decrease in SG&A expenses during the second quarter of fiscal year 2024 compared to the same period last year was primarily the result of decreases in employee and contracted sales personnel-related costs totaling $248,000 and shipping costs totaling $108,000.

Included in employee and contracted sales personnel-related costs are employee incentives and commissions which decreased due to decreased net sales and the financial results during the second quarter of fiscal year 2024.

Shipping costs decreased primarily due to the decrease in net sales.

Royalty Income (Expense), Net

We recognized royalty expense, net of royalty income, totaling $7,000 during the first quarter of fiscal years 2024 and 2023.

We recognized royalty expense, net of royalty income, totaling $7,000 during the second quarter of fiscal years 2024 and 2023.

Royalty expense and/or income may fluctuate based on sales of related licensed products and estimates of amounts for non-licensed product sales, if any.

Amortization of Intangible Assets

We recognized $14,000 of amortization expense, associated with intangible assets, during the first quarter of fiscal year 2024, compared to $13,000 for the first quarter of fiscal year 2023.

We recognized $14,000 of amortization expense, associated with intangible assets, during the second quarter of fiscal years 2024 and 2023.

Income (loss) from operations

We reported a loss from operations of $1.4 million for the first quarter of fiscal year 2024, compared to income from operations of $1.0 million for the first quarter of fiscal year 2023.

We reported a loss from operations of $1.3 million for the second quarter of fiscal year 2024, compared to income from operations of $1.1 million for the second quarter of fiscal year 2023, and compared to a net loss from operations of $1.4 million for the first quarter of fiscal year 2024.

Other Income (Expense), Net

We recognized other expense, net in the first quarter of fiscal year 2024 of $19,000, compared to $203,000 in the first quarter of fiscal year 2023.

Other expense, net for the fiscal quarter ended January 31, 2024 is comprised primarily of interest expense and other miscellaneous items, partially offset by gain on insurance proceeds for damage to property and equipment totaling $235,000.

The decrease in other expense, net during the first quarter of fiscal year 2024 compared to the same period last year was primarily due to the gain on insurance proceeds.

We recognized other expense, net in the second quarter of fiscal year 2024 of $293,000, compared to other income, net of $1.4 million in the second quarter of fiscal year 2023.

Other expense, net for the second quarter of fiscal year 2024 is comprised primarily of interest expense and other miscellaneous items.

The change in other expense, net during the second quarter of fiscal year 2024 compared to the same period last year was primarily due to gain on insurance proceeds received in the second quarter of fiscal year 2023 for damage to property and equipment totaling $1.7 million, partially offset by interest expense and other miscellaneous items, that did not recur in fiscal year 2024.

Income (Loss) Before Income Taxes

We reported a loss before income taxes of $1.4 million for the first quarter of fiscal year 2024, compared to income before income taxes of $842,000 for the first quarter of fiscal year 2023.

The change was primarily due to the decrease in gross profit of $2.8 million, partially offset by the decrease in SG&A expenses of $362,000 and the gain on insurance proceeds for damage to property and equipment of $235,000.

We reported a loss before income taxes of $1.6 million for the second quarter of fiscal year 2024, compared to income before income taxes of $2.5 million for the second quarter of fiscal year 2023.

The change was primarily due to the decrease in gross profit of $2.7 million and gain on insurance proceeds received in the second quarter of fiscal year 2023 for damage to property and equipment of $1.7 million, partially offset by the decrease in SG&A expenses of $343,000.

Income Tax Expense

Income tax expense totaled $7,000 in the first quarter of fiscal year 2024, compared to $32,000 in the first quarter of fiscal year 2023.

Our effective tax rate was less than negative one percent for the first quarter of fiscal year 2024 and 3.9% for the first quarter of fiscal year 2023.

Income tax expense totaled $7,000 in the second quarter of fiscal year 2024, compared to $75,000 in the second quarter of fiscal year 2023.

Our effective tax rate was less than negative one percent for the second quarter of fiscal year 2024 and 3.0% for the second quarter of fiscal year 2023.

Fluctuations in our effective tax rates are primarily due to permanent differences in U.S.

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Net Income (Loss)

Net loss for the first quarter of fiscal year 2024 was $1.4 million, or $0.18 per share, compared to net income of $810,000, or $0.10 per share, for the first quarter of fiscal year 2023.

This change was primarily due to the decrease in income before income taxes of $2.3 million.

Net loss for the second quarter of fiscal year 2024 was $1.6 million, or $0.21 per share, compared to net income of $2.4 million, or $0.31 per share, for the second quarter of fiscal year 2023.

This change was primarily due to the decrease in income before income taxes of $4.1 million, which includes a $1.7 million decrease in gain on insurance proceeds, net.

Six Months Ended April 30, 2024 and 2023

Consolidated net sales for the first half of fiscal year 2024 were $31.0 million, a decrease of 18.3% compared to net sales of $37.9 million for the same period last year.

We experienced a decrease in net sales in both our enterprise and specialty markets, including the wireless carrier market, in the first half of fiscal year 2024, compared to the same period last year.

We believe this is consistent with weakness being experienced in our industry generally and in certain of our target markets.

Net sales to customers in the United States decreased 17.8% and net sales to customers outside of the United States decreased 20.3% in the first half of fiscal year 2024, compared to the same period last year.

We can experience fluctuations in sales from quarter to quarter in the various markets (both industries and geographies) in which we operate for various reasons.

The first half of fiscal year 2023 was positively impacted by our higher-than-typical sales order backlog/forward load of more than $12.0 million that existed at the end of fiscal year 2022, while our sales order backlog/forward load at the end of fiscal year 2023 had returned to more normal levels at approximately $5.4 million.

At the end of the first half of fiscal year 2024, our sales order backlog/forward load remains at a more typical level of approximately $5.6 million.

Additionally, net sales for the first half of fiscal year 2024 were negatively impacted by various macroeconomic pressures, risks and uncertainties in our industry—which we believe is consistent with weakness being experienced in our industry generally.

While certain of our markets continue to show signs of softness (including our enterprise and wireless carrier markets), we believe there are positive indicators in certain of our other markets.

Overall, we expect our net sales to begin to grow compared to the first half of fiscal year 2024.

Our gross profit was $7.8 million in the first half of fiscal year 2024, a decrease of 41.7% compared to gross profit of $13.3 million in the first half of fiscal year 2023.

Gross profit margin was 25.0% in the first half of fiscal year 2024 compared to 35.1% in the first half of fiscal year 2023.

Gross profit margin for the first half of fiscal 2024 was negatively impacted by lower volumes, as fixed charges were spread over lower sales, as well as decreased plant efficiency, as fewer sales and lower backlog impacted the flow of products through our manufacturing facilities—the impact of operating leverage.

Additionally, our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix.

While production volume decreased during the first half of fiscal year 2024 compared to the same period last year, we have not implemented reductions in production personnel like others in our industry have done—with various personnel reductions at manufacturers and distributors.

Selling, General, and Administrative Expenses

SG&A expenses decreased 6.3% to $10.4 million during the first half of fiscal year 2024, compared to $11.1 million for the same period last year.

SG&A expenses as a percentage of net sales were 33.6% in the first half of fiscal year 2024, compared to 29.3% in the first half of fiscal year 2023, as fixed SG&A expenses were spread over lower net sales.

The decrease in SG&A expenses during the first half of fiscal year 2024 compared to the same period last year was primarily the result of decreases in employee and contracted sales personnel-related costs totaling $459,000 and shipping costs totaling $215,000.

Shipping costs decreased primarily due to the decrease in net sales.

Royalty Income (Expense), Net

We recognized royalty expense, net of royalty income, totaling $13,000 during the first half of fiscal years 2024 and 2023.

Royalty income and/or expense may fluctuate based on sales of related licensed products and estimates of amounts for non-licensed product sales, if any.

Amortization of Intangible Assets

We recognized $27,000 of amortization expense, associated with intangible assets, during the first half of fiscal years 2024 and 2023.

Income (loss) from operations

We reported a loss from operations of $2.7 million for the first half of fiscal year 2024, compared to income from operations of $2.1 million for the first half of fiscal year 2023.

Other Income (Expense), Net

We recognized other expense, net in the first half of fiscal year 2024 of $311,000, compared to other income, net of $1.2 million in the first half of fiscal year 2023.

Other expense, net for the first half of fiscal year 2024 is comprised of gain on insurance proceeds totaling $219,000, partially offset by interest expense and other miscellaneous items.

The change in other expense, net during the first half of fiscal year 2024 compared to the same period last year was primarily due to a decrease in gain on insurance proceeds received in the first half of fiscal year 2023 for damage to property and equipment totaling $1.5 million.

Income (Loss) Before Income Taxes

We reported a loss before income taxes of $3.0 million for the first half of fiscal year 2024, compared to income before income taxes of $3.3 million for the first half of fiscal year 2023.

The change was primarily due to the decrease in gross profit of $5.6 million and the decrease in gain on insurance proceeds, net of $1.5 million, partially offset by the decrease in SG&A expenses of $705,000.

Income Tax Expense (Benefit)

Income tax expense totaled $14,000 in the first half of fiscal year 2024, compared to $107,000 in the first half of fiscal year 2023.

Our effective tax rate was less than negative one percent for the first half of fiscal year 2024 and 3.2% for the first half of fiscal year 2023.

Fluctuations in our effective tax rates are primarily due to permanent differences in U.S.

GAAP and tax accounting for various tax deductions and benefits, but can also be significantly different from the statutory tax rate when income or loss before taxes is at a level such that permanent differences in U.S.

GAAP and tax accounting treatment have a disproportional impact on the projected effective tax rate.

We previously established a valuation allowance against all of our net deferred tax assets.

As a result of establishing a full valuation allowance against our net deferred tax assets, if we generate sufficient taxable income in subsequent periods to realize a portion or all of our net deferred tax assets, our effective income tax rate could be unusually low due to the tax benefit attributable to the necessary decrease in our valuation allowance.

Further, if we generate losses before taxes in subsequent periods, our effective income tax rate could also be unusually low as any increase in our net deferred tax asset from such a net operating loss for tax purposes would be offset by a corresponding increase to our valuation allowance against our net deferred tax assets.

If we generate sufficient income before taxes in subsequent periods such that U.S.

GAAP would permit us to conclude that the removal of any valuation allowance against our net deferred tax asset is appropriate, then during the period in which such determination is made, we will recognize the non-cash benefit of such removal of the valuation allowance in income tax expense on our consolidated statement of operations, which will increase net income and will also increase the net deferred tax asset on our consolidated balance sheet.

If we do not generate sufficient income before taxes in subsequent periods such that U.S.

GAAP would permit us to conclude that the reduction or removal of any valuation allowance against our net deferred tax asset is appropriate, then no such non-cash benefit would be realized.

There can be no assurance regarding any future realization of the benefit by us of all or part of our net deferred tax assets.

As of October 31, 2023, the valuation allowance against our total gross deferred tax assets totaled $4.0 million.

Net Income (Loss)

Net loss for the first half of fiscal year 2024 was $3.0 million, or $0.39 per share, compared to net income of $3.2 million, or $0.41 per share, for the first half of fiscal year 2023.

This change was primarily due to the decrease in income before income taxes of $6.4 million, which includes the $1.5 million decrease in gain on insurance proceeds, net.

Financial Condition

Total assets decreased $3.4 million, or 7.7%, to $40.5 million at January 31, 2024, from $43.9 million at October 31, 2023.

This decrease was primarily due to a $1.2 million decrease in cash, a $1.3 million decrease in trade accounts receivable, net, and a $744,000 decrease in inventories.

Further detail regarding the decrease in cash is provided in our discussion of “Liquidity and Capital Resources.” The decrease in trade accounts receivable, net resulted from the decrease in net sales in the first quarter of fiscal year 2024 when compared to the fourth quarter of fiscal year 2023.

Inventories decreased largely as the result of the timing of certain raw material purchases and decreases in work in process levels related to lower levels of open orders at the end of the first quarter of fiscal year 2024 when compared to the fourth quarter of fiscal year 2023.

Total liabilities decreased $2.0 million, or 10.5%, to $17.1 million at January 31, 2024, from $19.2 million at October 31, 2023.

The decrease in total liabilities was primarily due to a decrease in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $1.0 million, primarily resulting from the timing of certain vendor and payroll related payments, and net repayments on our Revolver totaling $864,000.

Total shareholders’ equity at January 31, 2024 decreased $1.4 million in the first quarter of fiscal year 2024 resulting from a net loss of $1.4 million.

Total assets decreased $4.0 million, or 9.1%, to $39.9 million at April 30, 2024, from $43.9 million at October 31, 2023.

This decrease was primarily due to a $430,000 decrease in trade accounts receivable, net, and a $2.3 million decrease in inventories.

The decrease in trade accounts receivable, net resulted from the decrease in net sales in the second quarter of fiscal year 2024 when compared to the fourth quarter of fiscal year 2023.

Inventories decreased largely as the result of the timing of certain raw material purchases as well as lower replenishment rates due to lower sales and the timing of sales of stock inventory.

Total liabilities decreased $1.1 million, or 5.8%, to $18.0 million at April 30, 2024, from $19.2 million at October 31, 2023.

The decrease in total liabilities was primarily due to a decrease in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $649,000, primarily resulting from the timing of certain vendor and payroll related payments, and net repayments on our Revolver totaling $278,000.

Total shareholders’ equity at April 30, 2024 decreased $2.9 million in the first half of fiscal year 2024 resulting primarily from a net loss of $3.0 million.

Liquidity and Capital Resources

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Our primary source of capital for these purposes has been existing cash, cash provided by operations and borrowings under our Revolver (see “Credit Facilities” below).

Our cash totaled $221,000 as of January 31, 2024, a decrease of $1.2 million compared to $1.5 million as of October 31, 2023.

The decrease in cash for the three months ended January 31, 2024 primarily resulted from net cash used in operating activities of $261,000, capital expenditures of $80,000 and cash used in financing activities of $906,000 (including an $864,000 net reduction in our Revolver).

Our total cash of $1.5 million at October 31, 2023 was higher than is typically the case due to a short-term timing difference between the borrowings under our Revolver and expenditures as of October 31, 2023.

Under the terms of our Revolver, cash receipts are swept daily to reduce the Revolver balance outstanding.

On January 31, 2024, we had working capital of $25.1 million compared to $27.3 million on October 31, 2023.

The ratio of current assets to current liabilities as of January 31, 2024 was 4.7 to 1.0 compared to 4.5 to 1.0 as of October 31, 2023.

The decrease in working capital was primarily due to the decrease in cash of $1.2 million, the decrease in trade accounts receivable, net of $1.3 million and the decrease in inventories of $744,000, partially offset by the decrease in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $1.0 million.

The increase in the current ratio was primarily due to the fact that current assets decreased 9.1% while current liabilities decreased 13.4%.

As of January 31, 2024 and October 31, 2023, we had outstanding loan balances under our Revolver totaling $7.5 million and $8.3 million, respectively.

As of January 31, 2024 and October 31, 2023, we had other outstanding bank loan balances, excluding our Revolver, totaling $2.7 million.

Net cash used in operating activities was $261,000 in the first quarter of fiscal year 2024, compared to $630,000 for the first quarter of fiscal year 2023.

Net cash used in operating activities during the first quarter of fiscal year 2024 primarily resulted from the cash flow impact of decreases in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $1.2 million and adjustments to reconcile a net loss of $1.4 million to net cash used in operating activities for the gain on insurance proceeds totaling $235,000, partially offset by decreases in the cash flow impact of trade accounts receivable, net totaling $1.3 million, decreases in inventories totaling $744,000 and certain other adjustments to reconcile a net loss of $1.4 million to net cash used in operating activities including depreciation and amortization of $213,000 and share-based compensation expense of $159,000.

Net cash used in operating activities during the first quarter of fiscal year 2023 primarily resulted from an increase in inventories totaling $2.8 million, partially offset by certain adjustments to reconcile net income of $810,000 to net cash used in operating activities including depreciation and amortization of $248,000 and share-based compensation expense of $135,000.

Additionally, the cash flow impact of decreases in trade accounts receivable, net of $1.1 million and increases in accounts payable and accrued expenses of $120,000 further contributed to offset net cash used in operating activities.

Net cash used in investing activities totaled $80,000 in the first quarter of fiscal year 2024, compared to $106,000 in the first quarter of fiscal year 2023.

Net cash used in investing activities during the first quarter of fiscal years 2024 and 2023 resulted primarily from purchases of property and equipment and deposits for the purchase of property and equipment.

Net cash used in financing activities totaled $906,000 for the first quarter of fiscal year 2024, compared to net cash provided by financing activities of $707,000 in the first quarter of fiscal year 2023.

Net cash used in financing activities in the first quarter of fiscal year 2024 resulted primarily from net repayments on our revolving line of credit totaling $864,000.

Net cash provided by financing activities in the first quarter of fiscal year 2023 resulted primarily from net proceeds on our revolving line of credit totaling $823,000, partially offset by principal payments on long-term debt totaling $83,000.

Our cash totaled $1.1 million as of April 30, 2024, a decrease of $379,000 compared to $1.5 million as of October 31, 2023.

The decrease in cash for the six months ended April 30, 2024 primarily resulted from net cash used in financing activities of $474,000 (including a $278,000 net reduction in our Revolver) and capital expenditures of $236,000, partially offset by cash provided by operating activities of $113,000 and insurance proceeds, net totaling $219,000.

On April 30, 2024, we had working capital of $24.3 million compared to $27.3 million on October 31, 2023.

The ratio of current assets to current liabilities as of April 30, 2024 was 4.4 to 1.0, compared to 4.5 to 1.0 as of October 31, 2023.

The decrease in working capital and in the current ratio was primarily due to the decrease in cash of $379,000, the decrease in trade accounts receivable, net of $430,000, and the decrease in inventories of $2.3 million, partially offset by the decrease in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $649,000.

As of April 30, 2024 and October 31, 2023, we had outstanding loan balances under our Revolver totaling $8.0 million and $8.3 million, respectively.

As of April 30, 2024 and October 31, 2023, we had other outstanding bank loan balances, excluding our Revolver, totaling $2.7 million.

Net cash provided by operating activities was $113,000 in the first half of fiscal year 2024, compared to net cash used in operating activities of $1.5 million for the first half of fiscal year 2023.

Net cash provided by operating activities during the first half of fiscal year 2024 primarily resulted from certain adjustments to reconcile a net loss of $3.0 million to net cash provided by operating activities including depreciation and amortization of $431,000 and share-based compensation expense of $251,000.

Additionally, the cash flow impact of decreases in accounts receivable, net of $447,000 and decreases in inventories of $2.3 million further contributed to net cash provided by operating activities.

All of the aforementioned factors positively affecting cash provided by operating activities were partially offset by the cash flow impact of decreases in accounts payable and accrued expenses, including accrued compensation and payroll taxes, of $639,000 and an adjustment to reconcile a net loss of $3.0 million to net cash provided by operating activities for gain on insurance proceeds, net totaling $219,000.

Net cash used in operating activities during the first half of fiscal year 2023 primarily resulted from an increase in inventories totaling $3.7 million, the cash flow impact of increases in trade accounts receivable, net totaling $358,000, and an adjustment to reconcile net income of $3.2 million to net cash used in operating activities for the gain on insurance proceeds received for damage to property and equipment totaling $1.7 million, partially offset by certain other adjustments to reconcile net income of $3.2 million to net cash used in operating activities including depreciation and amortization of $497,000 and share-based compensation expense of $290,000.

Net cash used in investing activities totaled $17,000 in the first half of fiscal year 2024, compared to net cash provided by investing activities of $1.5 million in the first half of fiscal year 2023.

Net cash used in investing activities during the first half of fiscal year 2024 resulted primarily from purchases of property and equipment and deposits for the purchase of property and equipment totaling $236,000, partially offset by net insurance proceeds of $219,000.

Net cash provided by investing activities during the first half of fiscal year 2023 resulted primarily from the net insurance proceeds received for damage to property and equipment totaling $1.7 million, partially offset by purchases of property and equipment and deposits for the purchase of property and equipment totaling $230,000.

Net cash used in financing activities totaled $474,000 for the first half of fiscal year 2024, compared to net cash provided by financing activities of $1.7 million in the first half of fiscal year 2023.

Net cash used in financing activities in the first half of fiscal year 2024 resulted primarily from net repayments on our revolving line of credit totaling $278,000.

Net cash provided by financing activities in the first half of fiscal year 2023 resulted primarily from net proceeds on our revolving line of credit totaling $2.0 million, partially offset by principal payments on long-term debt totaling $168,000.

Credit Facilities

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Interest is computed on the aggregate principal balance outstanding at a rate equal to the Prime Rate, adjusted monthly on the fifth day of each calendar month in accordance with changes to the Prime Rate, provided, however, that the interest rate is never less than 8.5% per annum on the basis of a 360-day year times the actual number of days elapsed.

The maturity date is May 5, 2026.

The Prime Rate was 8.5% per annum at April 30, 2024 and October 31, 2023.

The maturity date of the Virginia Real Estate Loan is May 5, 2026.

The Loan remains generally secured by a first lien deed of trust on the land and buildings at our headquarters and manufacturing facilities located in Roanoke, Virginia.

All other terms of the Virginia Real Estate Loan remain unaltered and remain in full force and effect.

The Company had an outstanding balance on its Virginia Real Estate Loan of $2.7 million, as of January 31, 2024.

The Company had an outstanding balance on its Virginia Real Estate Loan of $2.7 million, as of April 30, 2024.

The Revolver with North Mill Capital LLC (doing business as SLR Business Credit, “SLR”) provides us with one or more advances in an amount up to:

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Interest accrues on the daily balance at the per annum rate of 1.5% above the Prime Rate in effect from time to time, but not less than 4.75% (the “Applicable Rate”).

As a result, the Revolver accrued interest at a 10.0% rate at April 30, 2024 and October 31, 2023.

In the event of a default, interest may become 6.0% above the Applicable Rate.

As of January 31, 2024, the Revolver accrued interest at the prime lending rate plus 1.5% (resulting in a 10.0% rate at January 31, 2024).

The termination date of the Revolver is July 24, 2025 and the loan may be extended in one year periods subject to the agreement of SLR.

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and any other assets of the Company which may be subject to a lien in favor of SLR as security for the obligations under the Loan Agreement.

As of January 31, 2024, we had $7.5 million of outstanding borrowings on our Revolver and $2.3 million in available credit.

As of April 30, 2024, we had $8.0 million of outstanding borrowings on our Revolver and $2.0 million in available credit.

Capital Expenditures

We did not have any material commitments for capital expenditures as of January 31, 2024.

We did not have any material commitments for capital expenditures as of April 30, 2024.

During our 2024 fiscal year budgeting process, we included an estimate for capital expenditures of $1.0 million for the fiscal year.

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Note 1 to the consolidated financial statements filed with our Annual Report on Form 10-K for fiscal year 2023 provides a summary of our significant accounting policies.

Those significant accounting policies detailed in our fiscal year 2023 Form 10-K did not change during the period from November 1, 2023 through January 31, 2024.

Those significant accounting policies detailed in our fiscal year 2023 Form 10-K did not change during the period from November 1, 2023 through April 30, 2024.

New Accounting Standards

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements