What changed in this filing

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Item 1. Financial Statements

2020-09-10 compared with 2020-06-11 · 120 added, 102 removed, 340 unchanged (40% of the section changed)

4 unchanged sentences

(In thousands)

Six Months Ended April 30,

Nine Months Ended July 31,

OPERATING ACTIVITIES:

Consolidated net (loss) income

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

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

Bad debt expense

20 unchanged sentences

Dividends paid

Proceeds from PPP Loan

Net cash provided by (used in) financing activities

13 unchanged sentences

as of October 31, 2019 included in our Annual Report on Form 10-K (“Form 10-K”) for the year ended October 31, 2019 that was previously filed with the Securities and Exchange Commission (“SEC”).

Operating results for the six months ended April 30, 2020 are not necessarily indicative of the results that may be expected for the year ending October 31, 2020.

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2019.

Operating results for the nine months ended July 31, 2020 are not necessarily indicative of the results that may be expected for the year ending October 31, 2020.

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Form 10-K.

Principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of RF Industries, Ltd.

and our four wholly-owned subsidiaries, Cables Unlimited, Inc.

and our four wholly-owned subsidiaries:

Cables Unlimited, Inc.

(“Cables Unlimited”), Rel-Tech Electronics, Inc.

19 unchanged sentences

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by domestic and international jurisdictions to prevent disease spread, all of which are uncertain and cannot be predicted.

The outbreak impacted our performance for the three and six months ended April 30, 2020.

We currently expect the decline caused by the economic slowdown to persist through the remainder of 2020.

The operations of our Cables Unlimited, Inc.

subsidiary in Long Island, New York, was particularly affected as many employees stayed at home and as local customers shut down or otherwise delayed, deferred or cancelled orders for our products.

Because of the severe impact that COVID-19 has on our Northeastern operations, in May 2020 we applied for and received a $2.8 million of loans (the “PPP Loans”) under the Paycheck Protection Program of the CARES Act.

The funds from the PPP Loans are being used to retain employees, maintain payroll and benefits, and make lease and utility payments.

Without the PPP Loans, we would have made material reductions in our workforce (particularly at Cables Unlimited).

We anticipate that most of the PPP Loans will be eligible for forgiveness in accordance with the provisions of the CARES Act.

To the extent not forgiven, the PPP Loans have a two-year term, a fixed interest rate of 1%, and principal and interest payments are deferred for six months.

The outbreak impacted our performance for the three and nine months ended July 31, 2020.

We currently expect the decline caused by the economic slowdown to persist through at least the remainder of 2020.

During the periods covered by this report, the operations of our three subsidiaries in the Northeast were affected as many of our employees stayed at home and as local customers shut down or otherwise delayed, deferred or cancelled orders for our products.

Because of the impact that COVID-19 had on our Northeastern operations, in May 2020 we applied for and received loans under the Paycheck Protection Program (“PPP”) of the CARES Act totaling approximately $2.8 million (“PPP Loans”).

See Note 13 on discussions of the PPP Loans.

We considered the impact of the COVID-19 related economic slowdown on our evaluation of goodwill impairment indicators as of July 31, 2020.

Although no goodwill impairment indicators were identified, it is possible that impairments could emerge as the impact of the crisis becomes clearer, and those impairment losses could be material.

Fair value measurement

7 unchanged sentences

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

As of April 30, 2020 and October 31, 2019, the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximated their carrying value due to their short-term nature.

As of July 31, 2020 and October 31, 2019, the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, and the current portion of the PPP Loan approximated their carrying value due to their short-term nature.

See Note 5 for discussion on the fair value of other long-term liabilities.

69 unchanged sentences

All manufacturing operations are performed at Schrofftech’s facilities in Rhode Island.

The Schrofftech business allows us to diversify the types of services provided for our customers in the cable industry.

The Schrofftech business allows us to diversify the types of services provided for our customers in these markets.

All manufacturing operations are performed at Schrofftech’s facilities in Rhode Island.

Although the closing occurred on November 4, 2019, the acquisition of Schrofftech is deemed to have become effective for financial accounting purposes as of November 1, 2019.

Accordingly, Schrofftech’s financial results have been included in the results of the Custom Cabling segment for the three and six months ended April 30, 2020 as well as in the consolidated statements of operations.

Total costs related to the acquisition of Schrofftech were approximately $151,000, of which $108,000 was incurred in fiscal 2019 and $43,000 was incurred in the six months ended April 30, 2020.

Accordingly, Schrofftech’s financial results have been included in the results of the Custom Cabling segment for the three and nine months ended July 31, 2020 as well as in the consolidated statements of operations.

Total costs related to the acquisition of Schrofftech were approximately $151,000, of which $108,000 was incurred in fiscal 2019 and $43,000 was incurred in the nine months ended July 31, 2020.

All acquisition-related costs have been expensed as incurred and categorized in selling and general expenses.

For the three months ended April 30, 2020, Schrofftech contributed revenue and pretax loss of $1.1 million and $95,000, respectively.

For the six months ended April 30, 2020, Schrofftech contributed revenue and pretax loss of $2.3 million and $13,000, respectively.

For the three months ended July 31, 2020, Schrofftech contributed revenue and pretax loss of $0.7 million and $254,000, respectively.

For the nine months ended July 31, 2020, Schrofftech contributed revenue and pretax loss of $3.0 million and $266,000, respectively.

The following table summarizes the components of the purchase price at fair values at November 1, 2019:

10 unchanged sentences

Unaudited pro forma financial information assuming the acquisition of C Enterprises and Schrofftech as of November 1, 2018 is presented in the following table:

Three Months Ended April 30,

Six Months Ended April 30,

Three Months Ended July 31,

Nine Months Ended July 31,

Net (loss) income

4 unchanged sentences

Inventories consist of the following (in thousands):

April 30, 2020

July 31, 2020

October 31, 2019

2 unchanged sentences

Finished goods

No vendors accounted for more than 10% of inventory purchases for the three or six months ended April 30, 2020.

For the three months ended April 30, 2019, two vendors accounted for 11% and 10% of inventory purchases.

One of these vendors accounted for 14% of inventory purchases for the six months ended April 30, 2019, while a different vendor accounted for 13% of inventory purchases.

For the three months ended July 31, 2020, two vendors accounted for 12% and 10% of inventory purchases.

No vendors accounted for more than 10% of inventory purchases for the nine months ended July 31, 2020.

For the three months ended July 31, 2019, two vendors accounted for 23% and 14% of inventory purchases.

These same two vendors accounted for 17% and 14% of inventory purchases, respectively, for the nine months ended July 31, 2019.

We have arrangements with these vendors to purchase products based on purchase orders that we periodically issue.

1 unchanged sentence

Other current assets consist of the following (in thousands):

April 30, 2020

July 31, 2020

October 31, 2019

3 unchanged sentences

Accrued expenses consist of the following (in thousands):

April 30, 2020

July 31, 2020

October 31, 2019

10 unchanged sentences

Although these estimates are based on management’s knowledge of and experience with past and current events and on management’s assumptions about future events, it is reasonably possible that they may ultimately differ materially from actual results, including in the case of a significant product failure.

Warranty related expenses have not been material and were not material for the three and six months ended April 30, 2020.

Warranty liabilities were $210,000 as of April 30, 2020.

Warranty related expenses have not been material and were not material for the three and nine months ended July 31, 2020.

Warranty liabilities were $217,000 as of July 31, 2020.

The purchase agreement for the Schrofftech acquisition provides for earn-out payments of up to $2,400,000, which is earned through October 31, 2021.

4 unchanged sentences

Accordingly, significant variances between actual and forecasted results or changes in the assumptions can materially impact the amount of contingent consideration expense we record in future periods.

The contingent consideration liability represents future earn-out liability that we may be required to pay in conjunction with the acquisition of Schrofftech.

The contingent consideration liability represents the future earn-out liability that we may be required to pay in conjunction with the acquisition of Schrofftech.

We estimate the fair value of the earn-out liability using an option pricing based approach with a risk-neutral framework using Black Scholes related to Schrofftech calculated at net present value (level 3 of the fair value hierarchy).

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of April 30, 2020 (in thousands):

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of July 31, 2020 (in thousands):

Earn-out liability

There were no financial assets or liabilities measured at fair value as of October 31, 2019.

The following table summarizes the Level 3 transactions for the three months ended April 30, 2020 and January 31, 2020 (in thousands):

The following table summarizes the changes to the Level 3 liabilities measured at fair value for the three months ended July 31, 2020, April 30, 2020, and January 31, 2020 (in thousands):

July 31, 2020

April 30, 2020

4 unchanged sentences

Ending balance

As of April 30, 2020, the full amount of the $0.9 million earn-out was classified as other long-term liabilities.

Note 6 – Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding increased by the effects of assuming that other potentially dilutive securities (such as stock options) outstanding during the period had been exercised and the treasury stock method had been applied.

Potentially issuable securities totaling 392,838 and 121,015 shares for the three months ended April 30, 2020 and 2019, respectively, and 392,838 and 121,015 shares for the six months ended April 30, 2020 and 2019, respectively, were excluded from the calculation of diluted per share amounts because of their anti-dilutive effect.

As of July 31, 2020, the full amount of the $0.6 million earn-out was classified as other long-term liabilities.

Note 6 – (Loss) e arnings per share

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the period.

Diluted (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of common shares outstanding increased by the effects of assuming that other potentially dilutive securities (such as stock options) outstanding during the period had been exercised and the treasury stock method had been applied.

Potentially issuable securities totaling 402,838 and 124,097 shares for the three months ended July 31, 2020 and 2019, respectively, and 402,838 and 124,097 shares for the nine months ended July 31, 2020 and 2019, respectively, were excluded from the calculation of diluted per share amounts because of their anti-dilutive effect.

The following table summarizes the computation of basic and diluted weighted average shares outstanding:

Three Months Ended April 30,

Six Months Ended April 30,

Three Months Ended July 31,

Nine Months Ended July 31,

Weighted average shares outstanding for basic (loss) earnings per share

19 unchanged sentences

All incentive stock options expire ten years from the date of grant.

No other shares or options were granted to company employees during the three and six months ended April 30, 2020 and 2019.

The weighted average fair value of employee stock options that were granted during the six months ended April 30, 2020 and 2019 was estimated to be $3.13 and $4.00, respectively, per share, using the Black-Scholes option pricing model with the following assumptions:

Six Months Ended April 30,

On June 30, 2020, one employee was granted 10,000 incentive stock options.

These options vested 2,500 on the date of grant, and the balance vests as to 2,500 shares per year thereafter on each of the next three anniversaries of June 30, 2020, and expire ten years from the date of grant.

No other shares or options were granted to company employees during the three and nine months ended July 31, 2020 and 2019.

The weighted average fair value of employee stock options that were granted during the nine months ended July 31, 2020 and 2019 was estimated to be $3.06 and $3.98, respectively, per share, using the Black-Scholes option pricing model with the following assumptions:

Nine Months Ended July 31,

Risk-free interest rate

10 unchanged sentences

Descriptions of our stock option plans are included in Note 10 of our Annual Report on Form 10-K for the year ended October 31, 2019.

A summary of the status of the options granted under our stock option plans as of April 30, 2020 and the changes in options outstanding during the six months then ended is presented in the table that follows:

A summary of the status of the options granted under our stock option plans as of July 31, 2020 and the changes in options outstanding during the nine months then ended is presented in the table that follows:

Exercise Price

2 unchanged sentences

Options exercised

Options outstanding at April 30, 2020

Options exercisable at April 30, 2020

Options vested and expected to vest at April 30, 2020

Weighted average remaining contractual life of options outstanding as of April 30, 2020:

Weighted average remaining contractual life of options exercisable as of April 30, 2020:

Weighted average remaining contractual life of options vested and expected to vest as of April 30, 2020:

Aggregate intrinsic value of options outstanding at April 30, 2020:

Aggregate intrinsic value of options exercisable at April 30, 2020:

Aggregate intrinsic value of options vested and expected to vest at April 30, 2020:

As of April 30, 2020, $713,000 and $284,000 of expenses with respect to nonvested stock options and restricted shares, respectively, has yet to be recognized but is expected to be recognized over a weighted average period of 4.42 and 1.40 years, respectively.

Options outstanding at July 31, 2020

Options exercisable at July 31, 2020

Options vested and expected to vest at July 31, 2020

Weighted average remaining contractual life of options outstanding as of July 31, 2020:

Weighted average remaining contractual life of options exercisable as of July 31, 2020:

Weighted average remaining contractual life of options vested and expected to vest as of July 31, 2020:

Aggregate intrinsic value of options outstanding at July 31, 2020:

Aggregate intrinsic value of options exercisable at July 31, 2020:

Aggregate intrinsic value of options vested and expected to vest at July 31, 2020:

As of July 31, 2020, $619,000 and $255,000 of expenses with respect to nonvested stock options and restricted shares, respectively, has yet to be recognized but is expected to be recognized over a weighted average period of 4.31 and 1.27 years, respectively.

Non-employee directors receive a compensation package of $50,000 annually, which is paid one-half in cash and one-half through the grant of non-qualified awards.

3 unchanged sentences

These restricted shares vest ratably through August 31, 2020.

Non-employee directors who are also a chairperson of a committee of the Board receive additional compensation of $15,000 annually, which is payable in cash.

On June 5, 2020, the Board of Directors revised the committee chair compensation so that all future compensation from July 1, 2020 through the next annual meeting of the stockholders will be payable in shares of common stock rather than cash.

Shares issued as compensation will be valued at the closing RFIL stock price on the last day of each quarter.

Accordingly, on July 31, 2020, each of the four committee chairpersons was awarded 279 shares at $4.47 per share.

Beginning August 1, 2020, the full $15,000 additional compensation will be payable in shares of common stock valued at the closing RFIL stock price on the last day of the quarter.

We account for these shares as stock-based compensation.

Stock option expense

During the three months ended April 30, 2020 and 2019, stock-based compensation expense totaled $96,000 and $78,000, respectively, and was classified in selling and general expense.

During the six months ended April 30, 2020 and 2019, stock-based compensation expense totaled $283,000 and $192,000, respectively, and was classified in selling and general expenses.

During the three months ended July 31, 2020 and 2019, stock-based compensation expense totaled $166,000 and $68,000, respectively, and was classified in selling and general expense.

During the nine months ended July 31, 2020 and 2019, stock-based compensation expense totaled $449,000 and $260,000, respectively, and was classified in selling and general expenses.

Note 8 – Con centrations of credit r isk

1 unchanged sentence

We maintain our cash and cash equivalents with high-credit quality financial institutions.

At April 30, 2020, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $12.5 million.

For the three months ending April 30, 2020, two customers, both distributors, accounted for approximately 11% and 17% of net sales.

These same two distributors accounted for 11% and 14%, respectively, of net sales for the six months ending April 30, 2020, while in the same six-month period another customer, a wireless carrier, accounted for 11% of net sales.

The two distributors had accounts receivable balances that accounted for 14% and 19%, respectively, of the total net accounts receivable balance at April 30, 2020.

For the three months ending April 30, 2019, one of the aforementioned distributors and the wireless carrier accounted for approximately 28% and 14%, respectively, of net sales.

This same distributor and a different wireless carrier accounted for approximately 32% and 10%, respectively, of net sales for the six months ending April 30, 2019.

At April 30, 2019, the two wireless carrier customers had accounts receivable balances that accounted for approximately 10% and 21% of the total net accounts receivable balance, while the two distributors accounted for 18% and 15% of the total net accounts receivable balance.

At July 31, 2020, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $14.0 million.

For the three months ending July 31, 2020, two customers, both distributors, accounted for approximately 18% and 13% of net sales.

These same two distributors accounted for 15% and 12%, respectively, of net sales for the nine months ending July 31, 2020.

The two distributors had accounts receivable balances that accounted for 21% and 14%, respectively, of the total net accounts receivable balance at July 31, 2020.

For the three months ending July 31, 2019, two customers, a wireless carrier and one of the aforementioned distributors, accounted for approximately 35% and 11%, respectively, of net sales.

This same wireless carrier and a different distributor accounted for approximately 19% and 23%, respectively, of net sales for the nine months ending July 31, 2019.

At July 31, 2019, the wireless carrier and one of the distributors had accounts receivable balances that accounted for approximately 47% and 11%, respectively, of the total net accounts receivable balance.

Although these customers have been on-going major customers of the Company, the written agreements with these customers do not have any minimum purchase obligations and they could stop buying our products at any time and for any reason.

6 unchanged sentences

(4) the methods used to distribute their products or services;

(5) if applicable, the nature of the regulatory environment.

Based upon this evaluation, as of April 30, 2020, we had two segments – RF Connector and Cable Assembly (“RF Connector segment”) and Custom Cabling Manufacturing and Assembly (“Custom Cabling segment”).

and (5) if applicable, the nature of the regulatory environment.

Based upon this evaluation, as of July 31, 2020, we had two segments – RF Connector and Cable Assembly (“RF Connector segment”) and Custom Cabling Manufacturing and Assembly (“Custom Cabling segment”).

The RF Connector segment consisted of one division and the Custom Cabling segment was composed of four divisions.

10 unchanged sentences

Except as discussed above, the accounting policies for segment reporting are the same for the Company as a whole.

Substantially all of our operations are conducted in the United States;

All of our operations are conducted in the United States;

however, we derive a portion of our revenue from export sales.

We attribute sales to geographic areas based on the location of the customers.

The following table presents the sales by geographic area for the three and six months ended April 30, 2020 and 2019 (in thousands):

Three Months Ended April 30,

Six Months Ended April 30,

The following table presents the sales by geographic area for the three and nine months ended July 31, 2020 and 2019 (in thousands):

Three Months Ended July 31,

Nine Months Ended July 31,

United States

Foreign Countries:

Net sales, income (loss) before provision for income taxes and other related segment information for the three months ended April 30, 2020 and 2019 are as follows (in thousands):

Cable Assembly

Net sales, income (loss) before provision (benefit) for income taxes and other related segment information for the three months ended July 31, 2020 and 2019 are as follows (in thousands):

Custom Cabling

Manufacturing and

Income (loss) before provision for income taxes

Cable Assembly

Income (loss) before benefit for income taxes

Depreciation and amortization

1 unchanged sentence

Depreciation and amortization

Net sales, income (loss) before provision (benefit) for income taxes and other related segment information for the six months ended April 30, 2020 and 2019 are as follows (in thousands):

Cable Assembly

Net sales, income (loss) before provision (benefit) for income taxes and other related segment information for the nine months ended July 31, 2020 and 2019 are as follows (in thousands):

Custom Cabling

Manufacturing and

Cable Assembly

Income (loss) before benefit for income taxes

6 unchanged sentences

The CARES Act includes several provisions that provide economic relief for individuals and businesses.

The Company continues to evaluate the impact the CARES Act will have on the Company’s tax obligations, but has concluded it will not materially impact the Company’s income taxes for the three and six months ended April 30, 2020.

We continue to evaluate the impact the CARES Act will have on our tax obligations, but have concluded it did not materially impact our income taxes for the three and nine months ended July 31, 2020.

We use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate, to determine its quarterly provision (benefit) for income taxes.

Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

The provision (benefit) for income taxes was 1% and 23% of income before income taxes for the three months ended April 30, 2020 (the “fiscal 2020 quarter”) and 2019 (the “fiscal 2019 quarter”), respectively, and (7%) and 22% of income before income taxes for the six months ended April 30, 2020 and 2019, respectively.

The change in the effective tax rate from the fiscal 2019 period to fiscal 2020 period was primarily driven by the disproportionate impact of various permanent book-tax differences with respect to the Company’s forecasted book income in each period.

We had $118,000 and $80,000 of unrecognized tax benefits, inclusive of interest and penalties, as of April 30, 2020 and October 31, 2019, respectively.

The unrecognized tax benefits, if recognized, would result in a net tax benefit of $30,000 as of April 30, 2020.

The provision or benefit for income taxes was 63% and 21% of (loss) income before income taxes for the three months ended July 31, 2020 (the “fiscal 2020 quarter”) and 2019 (the “fiscal 2019 quarter”), respectively, and 38% and 22% of (loss) income before income taxes for the nine months ended July 31, 2020 (the “fiscal 2020 period”) and 2019 (the “fiscal 2019 period”), respectively.

We had $101,000 and $80,000 of unrecognized tax benefits, inclusive of interest and penalties, as of July 31, 2020 and October 31, 2019, respectively.

The unrecognized tax benefits, if recognized, would result in a net tax benefit of $26,000 as of July 31, 2020.

Note 1 1 – Intangible assets

Intangible assets consist of the following (in thousands):

April 30, 2020

July 31, 2020

October 31, 2019

9 unchanged sentences

Non-amortizable intangible assets:

Amortization expense for the six months ended April 30, 2020 and the year ended October 31, 2019 was $346,000 and $275,000, respectively.

As of April 30, 2020, the weighted-average amortization period for the amortizable intangible assets is 8.39 years.

Amortization expense for the nine months ended July 31, 2020 and the year ended October 31, 2019 was $519,000 and $275,000, respectively.

As of July 31, 2020, the weighted-average amortization period for the amortizable intangible assets is 8.39 years.

Note 1 2 – Commitments

5 unchanged sentences

Our leases have remaining lease terms of 1 year to 3 years, some of which include options to extend the leases for up to 5 years.

A portion of our operating leases are leased from K&K Unlimited, a company controlled by Darren Clark, the former owner and current President of Cables Unlimited, whom we make rent payments totaling $14,000 per month.

A portion of our operating leases are leased from K&K Unlimited, a company controlled by Darren Clark, the former owner and current President of Cables Unlimited, to whom we make rent payments totaling $14,000 per month.

We also have other operating leases for certain equipment.

The components of our facilities and equipment operating lease expenses for the period ending April 30, 2020 were as follows (in thousands):

The components of our facilities and equipment operating lease expenses for the period ending July 31, 2020 were as follows (in thousands):

Three Months Ended

Six Months Ended

April 30, 2020

Nine Months Ended

July 31, 2020

Operating lease cost

Short-term lease cost

Other information related to leases was as follows (in thousands):

April 30, 2020

July 31, 2020

Supplemental Cash Flows Information

5 unchanged sentences

Operating leases

Future minimum lease payments under non-cancellable leases as of April 30, 2020 were as follows:

Future minimum lease payments under non-cancellable leases as of July 31, 2020 were as follows:

Year ended October 31,

Operating Leases

2020 (excluding six months ended April 30, 2020)

2020 (excluding nine months ended July 31, 2020)

Total future minimum lease payments

Less imputed interest

Reported as of April 30, 2020

Reported as of July 31, 2020

Operating Leases

2 unchanged sentences

Finance lease liabilities

As of April 30, 2020, operating lease ROU asset was $1.9 million and operating lease liability totaled $2.0 million, of which $977,000 is classified as current.

There were no finance leases as of April 30, 2020.

Note 13 – Line of credit

As of July 31, 2020, operating lease ROU asset was $1.7 million and operating lease liability totaled $1.8 million, of which $952,000 is classified as current.

There were no finance leases as of July 31, 2020.

Note 13 – Line of credit and PPP loan

In November 2019, we entered into an agreement for a revolving line of credit (“LOC”) in the amount of $5.0 million.

4 unchanged sentences

All outstanding principal and interest is due and payable on December 1, 2021.

As of April 30, 2020, we are in compliance with all loan covenants.

Additionally, as of April 30, 2020, no amounts were outstanding under the line of credit.

As of July 31, 2020, we are in compliance with all loan covenants.

Additionally, as of July 31, 2020, no amounts were outstanding under the line of credit.

In May 2020 we applied for and received loans under the Paycheck Protection Program (“PPP”) of the CARES Act totaling approximately $2.8 million (“PPP Loans”).

The funds from the PPP Loans were used to retain employees, maintain payroll and benefits, and make lease and utility payments.

Without the PPP Loans, we would have made material reductions in our workforce (particularly at our New York facility).

We anticipate that most of the PPP Loans will be eligible for forgiveness in accordance with the provisions of the CARES Act.

To the extent not forgiven, the PPP Loans have a two-year term, a fixed interest rate of 1%, and principal and interest payments are deferred for six months.

Future minimum loan payments as of July 31, 2020 were as follows:

Year ended October 31,

2020 (excluding nine months ended July 31, 2020)

Total future minimum payments

Note 1 4 – Cash dividend and declared dividends

During the three months ended April 30, 2020 and 2019, we paid dividends of $0.02 per share for a total of $195,000 and $187,000, respectively.

During the six months ended April 30, 2020 and 2019, we paid dividends of $0.02 per share for a total of $388,000 and $373,000, respectively.

Note 1 5 – Subsequent event

On May 5, 2020, as part of the Paycheck Protection Program (“PPP”) of the CARES Act, we received PPP loans in the aggregate totaling approximately $2.8 million (“PPP Loan”).

The funds from the PPP Loan will be used to retain employees, maintain payroll and benefits, and make lease and utility payments during the eight-week period following the receipt of the loan, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act.

To the extent not forgiven, the loan has a two-year term, a fixed interest rate of 1%, and principal and interest payments are deferred for six months.

We did not pay any dividends during the three months ended July 31, 2020.

During the three months ended July 31, 2019, we paid dividends of $0.02 per share for a total of $187,000.

During the nine months ended July 31, 2020 and 2019, we paid dividends of $0.02 per share for a total of $388,000 and $560,000, respectively.

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