What changed in this filing

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Item 1. Financial Statements

2024-06-13 compared with 2024-03-18 · 176 added, 135 removed, 327 unchanged (49% of the section changed)

4 unchanged sentences

(In thousands)

Three Months Ended January 31,

Six Months Ended April 30,

OPERATING ACTIVITIES:

7 unchanged sentences

Deferred income taxes

Extinguishment of debt issuance cost

Changes in operating assets and liabilities:

5 unchanged sentences

Income taxes payable

Other current liabilities

Net cash provided by operating activities

4 unchanged sentences

Proceeds from exercise of stock options

Line of credit payments

Debt issuance cost

Line of credit

Term Loan payments

14 unchanged sentences

as of October 31, 2023 included in our Annual Report on Form 10-K (“Form 10-K”) for the year ended October 31, 2023 that was previously filed with the Securities and Exchange Commission (“SEC”).

Operating results for the three months ended January 31, 2024 are not necessarily indicative of the results that may be expected for the year ended October 31, 2024.

Operating results for the six months ended April 30, 2024 are not necessarily indicative of the results that may be expected for the year ended October 31, 2024.

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.

1 unchanged sentence

The propriety of using the going-concern basis is dependent upon, among other things, the achievement of future profitable operations, the ability to generate sufficient cash from operations and potential other funding sources, in addition to cash on-hand along with the current Credit Facility (as defined below), to meet its obligations as they become due.

Although we have incurred operating losses during the three months ended January 31, 2024, we have implemented certain cost-cutting measures to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity.

Although we have incurred operating losses during the three and six months ended April 30, 2024, we have implemented certain cost-cutting measures to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity.

Our plan includes consolidating facilities and recognizing the related operating efficiencies and synergies in our production operations.

The Company intends to continue to pursue additional continuous improvement and cost reduction measures, as well as organic growth in revenue and profitability.

As of January 31, 2024, the Company was in compliance with the covenants contained in the Loan Agreement, dated as of February 25, 2022 (as amended, the “Loan Agreement”), between the Company and Bank of America, N.A.

(the “Bank”), under which the Bank had provided the Company with a $ 17 million term loan (the “Term Loan”) and a $ 3 million revolving credit facility (the “Revolving Credit Facility” and together with the Term Loan, the “Credit Facility”).

In January 2024, given the economic conditions and the associated impact on earnings, the Company entered into Amendment No.2 to the Loan Agreement to modify the financial covenants in order to avoid a potential covenant violation during the fiscal quarter ending January 31, 2024.

In February 2024, the Company entered into Amendment No.

3 to the Loan Agreement to further modify certain financial covenants in order to avoid potential violations.

The amendments effect changes to certain provisions and covenants in the Loan Agreement as noted in Note 12.

On March 15, 2024, the Company entered into the EBC Credit Agreement (as defined below), pursuant to which proceeds from initial drawings under the EBC Credit Facilities (as defined below) were used to repay in full outstanding obligations under the Loan Agreement.

The Loan Agreement was terminated upon entry into the EBC Credit Agreement.

On March 15, 2024, the Company entered into the loan and security agreement with Eclipse Business Capital, as administrative agent (“EBC”), pursuant to which proceeds from initial drawings under the credit facility with EBC were used to repay in full the outstanding obligations under the prior revolving credit facility and term loan that we had with Bank of America, N.A, which such credit facility with Bank of America was terminated upon entry into the loan and security agreement with EBC.

Principles of consolidation

14 unchanged sentences

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

As of January 31, 2024 and October 31, 2023, the carrying amounts reflected in the accompanying 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 April 30, 2024 and October 31, 2023, the carrying amounts reflected in the accompanying consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximated their carrying value due to their short-term nature.

Recent accounting standards

17 unchanged sentences

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

At January 31, 2024, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $ 3.7 million.

At April 30, 2024, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $ 0.9 million.

Sales from each customer that were 10% or greater of net sales were as follows:

Three Months Ended January 31,

Three Months Ended April 30,

Six Months Ended April 30,

Wireless provider

For the three months ended January 31, 2024, no customers accounted for 10% or more of net sales.

For the three months ended January 31, 2023, one wireless carrier customer accounted for 15 % of net sales and 16 % of total net accounts receivable balance.

For the three months ended January 31, 2024, we had two distributor customers whose sales were less than 10 % of our net sales but for which we had 10 % each of total net accounts receivable balance for both customers;

for the three months ended January 31, 2023, both customers accounted for less than 10 % of net sales and 7 % each of total net account receivable balance.

For the three months ended April 30, 2024, no customers accounted for 10% or more of net sales, and one wireless carrier and one distributor, whose sales were both less than 10% of total net sales, accounted for 15 % and 10 % of total net accounts receivable balance, respectively.

For the six months ended April 30, 2024, no customers accounted for 10 % or more of net sales, and the same wireless carrier and the same distributor, whose sales were both less than 10 % of total net sales, accounted for 15 % and 10 % of total net accounts receivable balance, respectively.

For the three months ended April 30, 2023, a different wireless carrier customer accounted for 20 % of net sales and 24 % of total net accounts receivable balance;

for the six months ended April 30, 2023, the same wireless carrier accounted for 18 % of net sales and 24 % of total net accounts receivable balance.

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

4 unchanged sentences

Inventories consist of the following (in thousands):

January 31, 2024

April 30, 2024

October 31, 2023

2 unchanged sentences

Finished goods

For the three months ended January 31, 2024, no single vendor accounted for 10% or more of inventory purchases.

For the three months ended January 31, 2023, two vendors accounted for 12 % and 10 % of inventory purchases.

We have arrangements with this vendor to purchase products based on purchase orders that we periodically issue.

For the three months ended April 30, 2024, no single vendor accounted for 10% or more of inventory purchases.

For the three months ended April 30, 2023, two vendors accounted for 27 % and 12 % of inventory purchases.

For the six months ended April 30, 2024, no single vendor accounted for 10% or more of inventory purchases and one vendor accounted for 20 % of inventory purchases for the six months ended April 30, 2023.

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

Note 4 – Other current assets

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

January 31, 2024

April 30, 2024

October 31, 2023

3 unchanged sentences

Accrued expenses consist of the following (in thousands):

January 31, 2024

April 30, 2024

October 31, 2023

3 unchanged sentences

Accrued receipts represent purchased inventory for which invoices have not been received.

Note 6 – Loss per share

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

Note 6 – Income (Loss) per share

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

Diluted earnings per share is computed by dividing net 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.

During the three ended January 31, 2024, we reported a net loss, and in periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation due to their anti-dilutive effect.

Potentially issuable securities that are out-of-the-money totaled 1,068,022 and 749,488 shares for the three months ended January 31, 2024 and 2023, respectively, and were excluded from the calculation of diluted per share amounts because of their anti-dilutive effect.

During the three months ended April 30, 2024, we reported a net loss and, in periods with a net loss, the basic loss per share equals the diluted loss per share as all common stock equivalents are excluded from the per share calculation due to their anti-dilutive effect.

Potentially issuable securities that are out-of-the-money totaled 1,152,513 and 755,229 shares for the three months ended April 30, 2024 and 2023, respectively, and 1,152,513 and 745,229 shares for the six months ended April 30, 2024 and 2023, respectively, and 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 January 31,

Three Months Ended April 30,

Six Months Ended April 30,

Weighted average shares outstanding for basic earnings per share

17 unchanged sentences

(i) one -quarter of the restricted shares and options shall vest on January 11, 2025 and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years.

No other shares or options were granted to Company employees during the three months ended January 31, 2024 and 2023.

The weighted average fair value of employee stock options that were granted during the three months ended January 31, 2024 and 2023 was estimated to be $ 1.76 and $ 3.21 , respectively, per share, using the Black-Scholes option pricing model with the following assumptions:

On April 16, 2024, we granted a total of 25,000 incentive stock options to three managers.

The shares of incentive stock options vest over four years as follows:

(i) one -quarter of the restricted shares and options shall vest on April 16, 2025 and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years.

No other shares or options were granted to Company employees during the three and six months ended April 30, 2024 and 2023.

The weighted average fair value of employee stock options that were granted during the six months ended April 30, 2024 and 2023 was estimated to be $ 1.76 and $ 3.21 , respectively, per share, using the Black-Scholes option pricing model with the following assumptions:

Six Months Ended April 30,

Risk-free interest rate

10 unchanged sentences

Descriptions of our stock option plans are included in Note 9 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2023.

A summary of the status of the options granted under our stock option plans as of January 31, 2024 and the changes in options outstanding during the three 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 April 30, 2024 and the changes in options outstanding during the three months then ended is presented in the table that follows:

Exercise Price

3 unchanged sentences

Options cancelled

Options outstanding at January 31, 2024

Options exercisable at January 31, 2024

Options vested and expected to vest at January 31, 2024

Weighted average remaining contractual life of options outstanding as of January 31, 2024:

Weighted average remaining contractual life of options exercisable as of January 31, 2024:

Weighted average remaining contractual life of options vested and expected to vest as of January 31, 2024:

Aggregate intrinsic value of options outstanding at January 31, 2024:

Aggregate intrinsic value of options exercisable at January 31, 2024:

Aggregate intrinsic value of options vested and expected to vest at January 31, 2024:

As of January 31, 2024, $ 929,464 and $ 913,226 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 3.0 and 1.3 years, respectively.

Options outstanding at April 30, 2024

Options exercisable at April 30, 2024

Options vested and expected to vest at April 30, 2024

Weighted average remaining contractual life of options outstanding as of April 30, 2024:

Weighted average remaining contractual life of options exercisable as of April 30, 2024:

Weighted average remaining contractual life of options vested and expected to vest as of April 30, 2024:

Aggregate intrinsic value of options outstanding at April 30, 2024:

Aggregate intrinsic value of options exercisable at April 30, 2024:

Aggregate intrinsic value of options vested and expected to vest at April 30, 2024:

As of April 30, 2024, $ 1,005,945 and $ 852,384 of expenses with respect to nonvested stock options and restricted shares, respectively, have yet to be recognized but are expected to be recognized over a weighted average period of 3.0 and 1.0 years, respectively.

Stock option expense

During the three months ended January 31, 2024 and 2023, stock-based compensation expense totaled $ 255,000 and $ 212,000 , respectively, and was classified in selling and general expense.

During the three months ended April 30, 2024 and 2023, stock-based compensation expense totaled $ 248,000 and $ 229,000 , respectively, and was classified in selling and general expense.

During the six months ended April 30, 2024 and 2023, stock-based compensation expense totaled $ 503,000 and $ 441,000 , respectively, and was classified in selling and general expense.

Note 8 – Segment information

5 unchanged sentences

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

Based upon this evaluation, as of January 31, 2024, we had two reportable segments – RF Connector and Cable Assembly (“RF Connector”) segment and Custom Cabling Manufacturing and Assembly (“Custom Cabling”) segment.

Based upon this evaluation, as of April 30, 2024, we had two reportable segments – RF Connector and Cable Assembly (“RF Connector”) segment and Custom Cabling Manufacturing and Assembly (“Custom Cabling”) segment.

On August 1, 2023, C Enterprises moved and transitioned its physical operations into the RF Connector office in San Diego, CA.

18 unchanged sentences

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 months ended January 31, 2024 and 2023 (in thousands):

Three Months Ended January 31,

The following table presents the sales by geographic area for the three and six months ended April 30, 2024 and 2023 (in thousands):

Three Months Ended April 30,

Six Months Ended April 30,

United States

Foreign Countries:

Net sales, income (loss) before provision (benefit) for income taxes and other related segment information for the three months ended January 31, 2024 and 2023 are as follows (in thousands):

Net sales, (loss) income before provision (benefit) for income taxes and other related segment information for the three months ended April 30, 2024 and 2023 are as follows (in thousands):

Custom Cabling

1 unchanged sentence

Cable Assembly

Loss before benefit for income taxes

(Loss) income before benefit for income taxes

Depreciation and amortization

Income (loss) before provision for income taxes

(Loss) income before benefit for income taxes

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, 2024 and 2023 are as follows (in thousands):

Custom Cabling

Manufacturing and

Cable Assembly

(Loss) income before benefit from income taxes

Depreciation and amortization

(Loss) income before benefit for income taxes

Depreciation and amortization

Note 9 – Income taxes

1 unchanged sentence

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.

We recorded income tax benefits of $ 831,000 and $ 160,000 for the three months ended January 31, 2024 and 2023, respectively.

The effective tax rate was 37.6 % for the three months ended January 31, 2024, compared to 12.3 % for the three months ended January 31, 2023.

The change in the effective tax rate is primarily due to the Company's full year forecasted financial loss.

We had $ 245,000 and $ 178,000 of unrecognized tax benefits, as of January 31, 2024 and October 31, 2023, respectively.

The unrecognized tax benefits, if recognized, would result in a net tax benefit of $ 226,000 as of January 31, 2024.

The Company assesses all positive and negative evidence in determining if, based on the weight of such evidence, a valuation allowance is required to be recorded against the deferred tax assets as of January 31, 2024.

The Company has concluded that the positive evidence of indefinite lived nature of certain tax attributes on hand, and cumulative pre-tax book income on a rolling twelve-quarter basis outweigh the negative evidence of recent losses.

Accordingly, the Company has not provided for additional valuation allowance as of January 31, 2024.

The realization of the deferred tax assets is contingent upon the Company’s ability to generate sufficient future taxable income.

In the event that negative evidence outweighs positive evidence in future periods, the Company may need to record additional valuation allowance, which could have a material impact on our financial position.

We recorded income tax provision (benefit) of $ 3,649,000 and ($ 164,000 ) for the three months ended April 30, 2024 and 2023, respectively.

The effective tax rate was ( 564.7 %) for the three months ended April 30, 2024, compared to ( 39.3 %) for the three months ended April 30, 2023.

For the six months ended April 30, 2024 and 2023, we recorded income tax provision (benefit) of $ 2,818,000 and ($ 324,000 ), respectively.

The effective tax rate was ( 99.3 %) for the six months ended April 30, 2024, compared to 35.8 % for the six months ended April 30, 2023.

The change in effective tax rate for the six months ended April 30, 2024 compared to the six months ended April 30, 2023 was primarily driven by the recording of a valuation allowance.

We had $ 211,000 and $ 178,000 of unrecognized tax benefits, as of April 30, 2024 and October 31, 2023, respectively.

The unrecognized tax benefits, if recognized, would result in a net tax benefit of $ 186,000 as of April 30, 2024.

The Company has evaluated future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

In making such judgements, significant weight is given to evidence that can be objectively verified.

After analyzing all available evidence, including the recent trend of losses, the Company has determined that it is not more likely than not that all of its deferred tax assets will be realized, and therefore, has recorded a valuation allowance of $ 3,526,000 against its deferred tax assets as of April 30, 2024.

Note 10 – Intangible assets

Intangible assets consist of the following as of January 31, 2024 and 2023 (in thousands):

January 31, 2024

Intangible assets consist of the following as of April 30, 2024 and October 31, 2023 (in thousands):

April 30, 2024

October 31, 2023

13 unchanged sentences

Non-amortizable intangible assets:

Amortization expense for the three months ended January 31, 2024 and the year ended October 31, 2023 was $ 422,000 and $ 1,701,000 , respectively.

As of January 31, 2024, the weighted-average amortization period for the amortizable intangible assets is 8.05 years.

Amortization expense for the six months ended April 30, 2024 and the year ended October 31, 2023 was $ 844,000 and $ 1,701,000 , respectively.

As of April 30, 2024, the weighted-average amortization period for the amortizable intangible assets is 8.08 years.

Note 11 – Commitments

7 unchanged sentences

We also have other operating leases for certain equipment.

The components of our facilities and equipment operating lease expenses for the periods ending January 31, 2024 and 2023 were as follows (in thousands):

Three Months Ended January 31,

The components of our facilities and equipment operating lease expenses for the periods ending April 30, 2024 and 2023 were as follows (in thousands):

Three Months Ended April 30,

Six Months Ended April 30,

Operating lease cost

1 unchanged sentence

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

January 31, 2024

April 30, 2024

October 31, 2023

Supplemental Cash Flows Information

ROU assets obtained in exchange for lease obligations:

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

3 unchanged sentences

Operating leases

Future minimum lease payments under non-cancellable leases as of January 31, 2024 were as follows:

Future minimum lease payments under non-cancellable leases as of April 30, 2024 were as follows:

Year ending October 31,

Operating Leases

2024 (excluding three months ended January 31, 2024)

2024 (excluding three months ended April 30, 2024)

Total future minimum lease payments

Less imputed interest

Reported as of January 31, 2024

Reported as of April 30, 2024

Operating Leases

Other current liabilities

Current portion of operating lease liabilities

Operating lease liabilities

As of January 31, 2024, operating lease right-of-use asset was $ 15.3 million and operating lease liability totaled $ 20.4 million, of which $ 1.3 million is classified as current.

There were no finance leases as of January 31, 2024.

The Schrofftech facilities, consisting of one building for a total of 7,000 square feet, is leased by RF Industries, Ltd.

under a lease that was renewed effective February 1, 2024, for one year expiring January 31, 2025.

As of April 30, 2024, operating lease right-of-use asset was $ 15.0 million and operating lease liability totaled $ 20.2 million, of which $ 1.4 million is classified as current.

There were no finance leases as of April 30, 2024.

One of the two buildings consisting of the Cables Unlimited facilities, for a total of 7,500 square feet, is leased by RF Industries, Ltd.

under a lease that was renewed effective May 1, 2024, for one year expiring April 30, 2025.

The aggregate monthly rental payment under the new lease currently is $ 7,725 per month.

Note 12 – Term Loan and Line of credit

In February 2022, we entered into a loan agreement (the “Loan Agreement”) providing for a revolving line of credit (the “Revolving Credit Facility”) in the amount of $ 3.0 million and a $ 17.0 million term loan (the “Term Loan”, and together with the Revolving Credit Facility, the “Credit Facility”) with Bank of America, N.A.

(the “Bank”).

Amounts outstanding under the Revolving Credit Facility shall bear interest at a rate of 2.0 % plus the Bloomberg Short-Term Bank Yield Index Rate.

The maturity date of the Revolving Credit Facility is March 1, 2024.

The Company drew down the entire amount of the Term Loan on March 1, 2022.

The primary interest rate for Term Loan is 3.76 % per annum.

The maturity date of the Term Loan is March 1, 2027.

Borrowings under the Credit Facility are secured by a security interest in certain assets of the Company and are subject to certain loan covenants.

The Credit Facility requires the maintenance of certain financial covenants, including:

In February 2022, we entered into a loan agreement (the “BofA Loan Agreement”) providing for a revolving line of credit (the “BofA Revolving Credit Facility”) in the amount of $ 3.0 million and a $ 17.0 million term loan (the “BofA Term Loan”, and together with the BofA Revolving Credit Facility, the “BofA Credit Facility”) with Bank of America, N.A.

(the “BofA”).

Amounts outstanding under the BofA Revolving Credit Facility bore interest at a rate of 2.0 % plus the Bloomberg Short-Term Bank Yield Index Rate.

All amounts outstanding pursuant to the BofA Credit Facility were repaid by us and the BofA Loan Agreement was terminated in connection with us entering into a new loan and security agreement (the “EBC Credit Agreement”) with Eclipse Business Capital, as administrative agent (“EBC”) on March 15, 2024.

Borrowings under the BofA Credit Facility were secured by a security interest in certain assets of the Company and were subject to certain loan covenants.

The BofA Credit Facility required the maintenance of certain financial covenants, including:

(i) consolidated debt to EBITDA ratio not to exceed 3.00 to 1.00 (the “Debt Test”);

1 unchanged sentence

and (iii) consolidated minimum EBITDA of at least $ 600,000 for the discrete quarter ended January 31, 2022.

In addition, the Credit Facility contains customary affirmative and negative covenants.

In addition, the BofA Credit Facility contained customary affirmative and negative covenants.

On September 12, 2023, we entered into Amendment No.

1 and Waiver to the Loan Agreement (“Loan Amendment No.

1”) with the Bank, which, among other matters, provided for a one-time waiver of our failure to comply with (i) the Debt Test for the period ended July 31, 2023 and (ii) the FCCR Test for the period ended July 31, 2023.

1 and Waiver to the BofA Loan Agreement (“Loan Amendment No.

1”) with BofA, which, among other matters, provided for a one-time waiver of our failure to comply with (i) the Debt Test for the period ended July 31, 2023 and (ii) the FCCR Test for the period ended July 31, 2023.

Loan Amendment No.

1 unchanged sentence

Further, pursuant to Loan Amendment No.

1, we were required to maintain (i) (a) until September 21, 2023, minimum liquidity (week-end cash balance plus availability from the Revolving Credit Facility) of $ 4.0 million, and (b) from September 22, 2023 and thereafter, liquidity equal to the greater of (1) $ 4.0 million or (2) 80 % of the liquidity that had been forecast for this date at the fourth week of the forecast and (ii) minimum EBITDA of ($ 400,000 ), $ 500,000 , $ 1.0 million, and $ 1.0 million for the quarters ending October 31, 2023, January 31, 2024, April 30, 2024, and July 31, 2024, respectively.

1, we were required to maintain (i) (a) until September 21, 2023, minimum liquidity (week-end cash balance plus availability from the BofA Revolving Credit Facility) of $ 4.0 million, and (b) from September 22, 2023 and thereafter, liquidity equal to the greater of (1) $ 4.0 million or (2) 80 % of the liquidity that had been forecast for this date at the fourth week of the forecast and (ii) minimum EBITDA of ($ 400,000 ), $ 500,000 , $ 1.0 million, and $ 1.0 million for the quarters ending October 31, 2023, January 31, 2024, April 30, 2024, and July 31, 2024, respectively.

On January 26, 2024, we entered into Amendment No.

2 to the Loan Agreement (“Loan Amendment No.

2”) with the Bank, which, among other matters, eliminated the requirement to maintain minimum EBITDA of $500,000 for the quarter ending January 31, 2024.

2 to the BofA Loan Agreement (“Loan Amendment No.

2”) with BofA, which, among other matters, eliminated the requirement to maintain minimum EBITDA of $500,000 for the quarter ending January 31, 2024.

Under Loan Amendment No.

2, the line of credit available to the Company under the Revolving Credit Facility was lowered from $ 3.0 million to $ 500,000 .

2, the line of credit available to the Company under the BofA Revolving Credit Facility was lowered from $ 3.0 million to $ 500,000 .

Further, Loan Amendment No.

1 unchanged sentence

Under Loan Amendment No.

2, the Company was required to pay an additional fee equal to 1 % of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan if the Credit Facility was not repaid in full on or before March 1, 2024.

This additional fee, if applicable, would be due on March 2, 2024.

2, the Company would have been required to pay an additional fee equal to 1 % of the collective outstanding principal balances of the BofA Revolving Credit Facility and BofA Term Loan if the BofA Credit Facility was not repaid in full on or before March 1, 2024.

This additional fee, if applicable, would have been due on March 2, 2024.

Further, Loan Amendment No.

2 required that the Company make an additional principal payment of $ 1.0 million on the Term Loan on March 1, 2024, in addition to the existing monthly payments due on the Term Loan.

2 required that the Company make an additional principal payment of $ 1.0 million on the BofA Term Loan on March 1, 2024, in addition to the existing monthly payments due on the BofA Term Loan.

In connection with Loan Amendment No.

2, we paid the Bank a $ 500,000 paydown on the Revolving Credit Facility, thereby reducing the outstanding balance from $ 1.0 million to $ 500,000 .

2, we paid BofA a $ 500,000 paydown on the BofA Revolving Credit Facility, thereby reducing the outstanding balance from $ 1.0 million to $ 500,000 .

On February 29, 2024, we entered into Amendment No.

3 to the Loan Agreement (“Loan Amendment No.

3”) with the Bank, which, among other matters, defers the requirement that the Company make an additional principal payment of $ 1.0 million on the Term Loan, from March 1, 2024, as was required under Loan Amendment No.

3 to the BofA Loan Agreement (“Loan Amendment No.

3”) with BofA, which, among other matters, deferred the requirement that the Company make an additional principal payment of $ 1.0 million on the BofA Term Loan, from March 1, 2024, as was required under Loan Amendment No.

2, to April 1, 2024.

Further, Loan Amendment No.

3 reduces the additional fee the Company is required to pay the Bank on March 2, 2024 from 1 % of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan as of March 1, 2024 as required under Loan Amendment No.

2, to 0.50 % of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan as of March 1, 2024.

3 reduced the additional fee the Company was required to pay BofA on March 2, 2024 from 1 % of the collective outstanding principal balances of the BofA Revolving Credit Facility and BofA Term Loan as of March 1, 2024 as required under Loan Amendment No.

2, to 0.50 % of the collective outstanding principal balances of the BofA Revolving Credit Facility and BofA Term Loan as of March 1, 2024.

Additionally, Loan Amendment No.

3 requires the Company to pay the Bank a fee equal to 0.50% of the collective outstanding principal balances of the Revolving Credit Facility and Term Loan as of March 1, 2024, if the Credit Facility is not repaid in full on or before April 2, 2024 (the “April 2024 Fee”).

The April 2024 Fee, if applicable, will be due on April 2, 2024.

3 required the Company to pay BofA a fee equal to 0.50 % of the collective outstanding principal balances of the BofA Revolving Credit Facility and BofA Term Loan as of March 1, 2024, if the BofA Credit Facility was not repaid in full on or before April 2, 2024 (the “April 2024 Fee”).

The April 2024 Fee, if applicable, would have been due on April 2, 2024.

We were not required to pay the April 2024 Fee based on our repayment of the BofA Credit Facility prior to April 2, 2024.

Under Loan Amendment No.

3, the Company must continue to maintain liquidity of at least $ 2.0 million and pay the current remaining outstanding balance of $ 500,000 on the Revolving Credit Facility by March 1, 2024, as required under Loan Amendment No.

As of January 31, 2024, we have borrowed $ 12,556,000 under the Term Loan and $ 500,000 from the Revolving Credit Facility.

On March 15, 2024, we entered into the EBC Credit Agreement (as defined below) and used proceeds from the initial drawings under the EBC Credit Facilities (as defined below) to repay in full outstanding obligations under the Loan Agreement and to pay fees, premiums, costs and expenses, including fees payable in connection with the EBC Credit Agreement.

The Loan Agreement was terminated upon entry into the EBC Credit Agreement.

3, the Company was required to maintain liquidity of at least $ 2.0 million and pay the remaining outstanding balance of $ 500,000 on the BofA Revolving Credit Facility by March 1, 2024, as required under Loan Amendment No.

On March 15, 2024, we entered into the EBC Credit Agreement and used proceeds from the initial drawings under the EBC Credit Facilities (as defined below) to repay in full outstanding obligations under the BofA Loan Agreement and to pay fees, premiums, costs and expenses, including fees payable in connection with the EBC Credit Agreement.

The BofA Loan Agreement was terminated upon entry into the EBC Credit Agreement and is no longer in effect.

The EBC Credit Agreement provides for (i) a senior secured revolving loan facility of up to $ 15.0 million (the “EBC Revolving Loan Facility”) and (ii) a senior secured revolving credit facility of up to $ 1.0 million (the “EBC Additional Line” and, together with the EBC Revolving Loan Facility, the “EBC Credit Facilities”) (with a $ 3.0 million swingline loan sublimit).

Availability of borrowings under the EBC Credit Facilities will be based upon a borrowing base formula and periodic borrowing base certifications valuing certain of our accounts receivable and inventories, as reduced by certain reserves, if any.

In the absence of an Event of Default (as defined in the EBC Credit Agreement) or certain other events (including the inability of EBC to determine the secured overnight financing rate “SOFR”), borrowings under (a) the EBC Revolving Loan Facility accrue interest at a rate of the one-month term SOFR reference rate plus an adjustment of 0.11448 % (“Adjusted Term SOFR”) plus 5.00 %, and (b) the EBC Additional Line accrue interest at a rate of Adjusted Term SOFR plus 6.50 %, in each case subject to a floor of 2.00 % for Adjusted Term SOFR.

We will be required to pay a commitment fee for the unused portion of the EBC Revolving Loan Facility of 0.50 % per annum.

In addition to the foregoing unused commitment fee, we are required to pay certain other administrative fees pursuant to the terms of the EBC Credit Agreement.

Borrowings under the EBC Credit Agreement are secured by a security interest in certain assets of the Company and are subject to certain loan covenants.

The EBC Credit Facilities require the maintenance of certain financial covenants, including (i) Excess Availability (as defined in the EBC Credit Agreement) of at least, as of any date of determination, an amount equal to the greater of (a) $ 1.0 million and (b) 10 % of the Adjusted Borrowing Base (as defined in the EBC Credit Agreement), unless as of the last day of the most recent month for which the monthly financial statements and the related compliance certificate have been or are required to have been delivered to EBC, the Fixed Charge Coverage Ratio (as defined in the EBC Credit Agreement) for the twelve consecutive calendar month period then ended is greater than 1.10 to 1.00;

and (ii) a capital expenditure limitation limiting the aggregate cost of all Capital Expenditures (as defined in the EBC Credit Agreement) to $ 2.5 million during any fiscal year.

In addition, the EBC Credit Facilities contain customary affirmative and negative covenants.

The foregoing description of the EBC Credit Agreement does not purport to be complete and is qualified in its entirety to the full text of the EBC Credit Agreement.

We filed the EBC Credit Agreement as Exhibit 10.3 to our Quarterly Report on Form 10-Q for the quarter ended January 31, 2024 and it is incorporated by reference herein.

Debt issuance costs related to the EBC Credit Agreement totaled $ 520,000 and were included as part of our other long term assets balance.

As of April 30, 2024, our outstanding borrowings under the EBC Credit Agreement were $ 10,460,000 .

In accordance with ASC 470-10-45 Other Presentations Matters - General, we have classified the outstanding borrowings as part of current liabilities.

Note 13 – Cash dividend and declared dividends

We did not pay any dividends during the three months ended January 31, 2024, nor during the three months ended January 31, 2023.

We did not pay any dividends during the three or six months ended April 30, 2024, nor during the three or six months ended April 30, 2023.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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Some of these factors include macroeconomic conditions that correlate with historical loss experience, delinquency trends, aging behavior of receivables and credit and liquidity quality indicators for industry groups, customer classes or individual customers.

During the three months ended January 31, 2024, we considered the current and expected future economic and market conditions and concluded that no material adjustment to Credit Losses was required as of January 31, 2024.

During the three months ended April 30, 2024, we considered the current and expected future economic and market conditions and concluded that no material adjustment to Credit Losses was required as of April 30, 2024.

Long-Lived Assets Including Goodwill

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The Custom Cabling segment designs, manufactures, markets and distributes custom copper and fiber cable assemblies, complex hybrid fiber optic and power solution cables, electromechanical wiring harnesses for a broad range of applications in a diverse set of end markets, energy-efficient cooling systems for wireless base stations and remote equipment shelters and custom designed, pole-ready 4G and 5G small cell integrated enclosures.

For the three months ended January 31, 2024, revenues from the Custom Cabling segment were generated from the sale of fiber optics cable, copper cabling, custom patch cord assemblies, and wiring harnesses, which collectively accounted for 35% of the Company’s total sales.

Revenues from the RF Connector segment were generated from the sales of RF Connector products and cable assemblies and accounted for 65% of total sales for the three months ended January 31, 2024.

For the six months ended April 30, 2024, revenues from the Custom Cabling segment were generated from the sale of fiber optics cable, copper cabling, custom patch cord assemblies, and wiring harnesses, which collectively accounted for 37% of the Company’s total sales.

Revenues from the RF Connector segment were generated from the sales of RF Connector products and cable assemblies and accounted for 63% of total sales for the six months ended April 30, 2024.

The RF Connector segment mostly sells standardized products regularly used by customers and, therefore, has a more stable revenue stream.

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Historically, we have been able to fund our liquidity and other capital requirements from funds we generated from operations.

However, we have incurred an operating loss during the three months ended January 31, 2024.

However, we have incurred an operating loss during the six months ended April 30, 2024.

During the period, we have implemented certain cost-cutting measures to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity.

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We intend to continue to pursue additional continuous improvement and cost reduction measures, as well as organic growth in revenue and profitability.

As of January 31, 2024, we had a total of $4.5 million of cash and cash equivalents compared to a total of $4.9 million of cash and cash equivalents as of October 31, 2023.

As of January 31, 2024, we had working capital of $21.6 million and a current ratio of approximately 2.9:1 with current assets of $32.9 million and current liabilities of $11.3 million.

We believe that the amount of cash remaining will be sufficient to fund our anticipated liquidity needs.

As of January 31, 2024, we had $16.2 million of backlog, compared to $16.1 million as of October 31, 2023.

As of April 30, 2024, we had a total of $1.4 million of cash and cash equivalents compared to a total of $4.9 million of cash and cash equivalents as of October 31, 2023.

As of April 30, 2024, we had working capital of $10.9 million and a current ratio of approximately 1.6:1 with current assets of $30.2 million and current liabilities of $19.3 million.

We believe that the amount of cash remaining, plus the amount available to us under the EBC Revolving Loan Facility, will be sufficient to fund our anticipated liquidity needs.

As of April 30, 2024, we had $18.0 million of backlog, compared to $16.1 million as of October 31, 2023.

Since purchase orders are submitted from customers based on the timing of their requirements, our ability to predict orders in future periods or trends in future periods is limited.

Furthermore, purchase orders may be subject to cancellation from customers, although we have not historically experienced material cancellations of purchase orders.

In the three months ended January 31, 2024, we generated $0.8 million of cash in our operating activities.

This net inflow of cash is primarily related to the collections of accounts receivable of $2.0 million, $0.8 million from inventories, $0.6 million from depreciation and amortization, $0.3 million from stock-based compensation expense and $0.1 million from right of use assets.

The cash usage was primarily due to the net loss of $1.4 million, deferred income taxes of $0.9 million and payments on accounts payable of $0.7 million.

During the three months ended January 31, 2024, we also spent $0.1 million on capital expenditures, $0.6 million in Term Loan payments and $0.5 million payments on the Revolving Credit Facility.

In the six months ended April 30, 2024, we generated $1.0 million of cash in our operating activities.

This net inflow of cash is primarily related to $2.7 million from deferred income taxes, $2.4 million from inventories, $1.3 million from depreciation and amortization, $0.5 million from stock-based compensation expense, $0.3 million from right-of-use assets, $0.2 million from other current assets, $25,000 from debt issuance amortization and $14,000 from extinguishment of debt issuance costs.

The cash usage was primarily due to the net loss of $5.7 million, accrued expenses of $0.4 million, change in accounts receivable of $0.3 million, payments of accounts payable of $45,000 and bad debt expense of $8,000.

During the six months ended April 30, 2024, we also spent $0.3 million on capital expenditures, $13.2 million in BofA Term Loan payments, $0.5 million of debt issuance cost and drew $10.0 million on the EBC Revolving Loan Facility (used to pay down the BofATerm Loan).

Our goal to expand and grow our business both organically and through acquisitions may require material additional capital equipment.

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Results of Operations

Three Months Ended January 31, 2024 vs.

Three Months Ended January 31, 2023

Net sales for the three months ended January 31, 2024 (the “fiscal 2024 quarter”) decreased by 26.2%, or $4.8 million, to $13.5 million as compared to the three months ended January 31, 2023 (the “fiscal 2023 quarter”).

Three Months Ended April 30, 2024 vs.

Three Months Ended April 30, 2023

Net sales for the three months ended April 30, 2024 (the “fiscal 2024 quarter”) decreased by 27.8%, or $6.2 million, to $16.1 million as compared to the three months ended April 30, 2023 (the “fiscal 2023 quarter”).

Net sales for the fiscal 2024 quarter at the Custom Cabling segment decreased by $3.5 million, or 36.1%, to $6.2 million, compared to $9.7 million in the fiscal 2023 quarter.

The decrease was primarily the result of a $2.5 million decrease in sales of hybrid fiber cables to wireless customers at Cables Unlimited.

The decrease was primarily the result of a decrease in sales of hybrid fiber cables to wireless customers.

Net sales for the fiscal 2024 quarter at the RF Connector segment decreased by $2.7 million, or 21.4%, to $9.9 million as compared to $12.6 million in the fiscal 2023 quarter, primarily due to a decrease in sales related to lower levels of inventory being kept on hand at our distributor customers based on seasonality and the lower carrier capital expenditure environment, and fewer carrier projects involving approved RF components.

Gross profit for the fiscal 2024 quarter decreased by $1.8 million to $3.3 million, and gross margins decreased to 24.5% of sales compared to 27.7% of sales in the fiscal 2023 quarter.

The decreases in gross profit and gross margins were primarily related to the overall decrease in sales.

Gross profit for the fiscal 2024 quarter decreased by $1.3 million to $4.8 million, and gross margins increased to 29.9% of sales compared to 27.4% of sales in the fiscal 2023 quarter.

The decrease in gross profit and increase in gross margin was primarily result of increased efficiencies from facility consolidation, cost reduction initiatives and product mix.

Engineering expenses decreased by $0.2 million to $0.6 million in the fiscal 2024 quarter compared to $0.9 million in the fiscal 2023 quarter.

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Engineering expenses represent costs incurred relating to the ongoing research and development of current and new products.

Selling and general expenses decreased by $0.7 million to $4.6 million (34.3% of sales) compared to $5.3 million (28.9% of sales) in the first quarter last year primarily due to a decrease in variable compensation related to commissions and bonuses as a result of the lower sales along with cost savings relating to reduced office and IT.

We also incurred a one-time charge of $0.1 million relating to consulting spend and inventory appraisal in the fiscal 2024 quarter.

For the fiscal 2024 quarter, the Custom Cabling segment had pretax loss of $0.3 million and the RF Connector segment had a pretax loss of $1.7 million, as compared to $0.8 million loss and $0.1 million income, respectively, for the comparable quarter last year.

The pretax loss at the Custom Cabling segment was due to the decrease in sales of hybrid fiber cables to wireless carrier customers.

The decrease in the pretax net income at the RF Connector segment was primarily due to the decrease in sales related to lower levels of inventory being kept on hand at our distributor customers based on seasonality and the lower carrier capital expenditure environment, and fewer carrier projects involving approved RF components.

For fiscal 2024 and 2023 quarters, we recorded income tax benefit of $831,000 and $160,000, respectively.

Selling and general expenses decreased by $0.1 million to $4.6 million (28.7% of sales) compared to $4.7 million (21.3% of sales) in the second quarter last year primarily due to a decrease in variable compensation related to commissions and bonuses as a result of the lower sales along with cost savings relating to reduced office and information technology spend.

We also incurred a one-time charge of $0.1 million relating to consulting spend and severance in the fiscal 2024 quarter.

For the fiscal 2024 quarter, the Custom Cabling segment had pretax income of $0.4 million and the RF Connector segment had a pretax loss of $0.7 million, as compared to $0.3 million income and $0.2 million income, respectively, for the comparable quarter last year.

The increase in pretax income at the Custom Cabling segment was due to a more favorable product mix.

The decrease in the pretax net income at the RF Connector segment was primarily due to the decrease in sales related to lower levels of inventory being kept on hand at our distributor customers and the lower carrier capital expenditure environment, and fewer carrier projects involving approved RF components.

For fiscal 2024 and 2023 quarters, we recorded income tax provision (benefit) of $3,649,000 and ($164,000), respectively.

The effective tax rate was (564.7%) for the fiscal 2024 quarter, compared to (39.3%) for the fiscal 2023 quarter.

The change in the effective tax rate from the fiscal 2024 quarter to fiscal 2023 quarter was primarily driven by the Company’s full year forecasted financial results.

For the fiscal 2024 quarter, net loss was $1.4 million and fully diluted loss per share was $0.13, compared to a net loss of $1.2 million and fully diluted earnings per share of $0.11 for the fiscal 2023 quarter.

For the fiscal 2024 quarter, the diluted weighted average shares outstanding was 10,410,580 as compared to 10,222,540 for the fiscal 2023 quarter.

The change in the effective tax rate from the fiscal 2024 quarter to fiscal 2023 quarter was primarily driven by the recording of a valuation allowance on our deferred tax asset.

For the fiscal 2024 quarter, net loss was $4.3 million and fully diluted loss per share was $0.41, compared to a net income of $0.6 million and fully diluted earnings per share of $0.06 for the fiscal 2023 quarter.

For the fiscal 2024 quarter, the diluted weighted average shares outstanding were 10,495,548 as compared to 10,327,271 for the fiscal 2023 quarter.

Six Months Ended April 30, 2024 vs.

Six Months Ended April 30, 2023

Net sales for the six months ended April 30, 2024 (the “fiscal 2024 six-month period”) of $29.6 million decreased by 27.1%, or $11.0 million, compared to the six months ended April 30, 2023 (the “fiscal 2023 six-month period”).

The decrease in net sales is attributable mainly to the RF Connector segment, which decreased by $5.6 million, or 23%, to $18.7 million compared to $24.3 million in the fiscal 2023 six-month period, primarily due to a decrease in sales related to lower levels of inventory being kept on hand at our distributor customers based on seasonality and the lower carrier capital expenditure environment, and fewer carrier projects involving approved RF components and the Net sales for the fiscal 2024 six-month period at the Custom Cabling segment decreased by $5.4 million, or 33.1%, to $10.9 million compared to $16.3 million in the fiscal 2023 six-month period, primarily due to a decrease in sales of hybrid fiber cables to wireless customers at Cables Unlimited.

Gross profit for the fiscal 2024 six-month period decreased by $3.1 million to $8.1 million while gross margins remained relatively consistent at 27.5% of sales compared to 27.6% of sales in the fiscal 2023 six-month period.

The decrease in gross profit was primarily related to the overall decrease in sales while gross margins remained relatively consistent due to product mix.

Engineering expenses decreased $0.4 million to $1.4 million for the fiscal 2024 six-month period compared to $1.8 million in the fiscal 2023 six-month period.

The decrease was primarily the result of headcount reduction and other cost savings initiatives.

Engineering expenses represent costs incurred relating to the ongoing research and development of new products.

Selling and general expenses decreased by $0.8 million to $9.2 million (31.3% of sales) compared to $10.0 million (24.7% of sales) in the six-month period last year primarily due to a decrease in variable compensation related to commissions and bonuses as a result of the lower sales along with cost savings relating to reduced office and IT.

We also incurred a one-time charges of $0.2 million relating to consulting spend, severance and inventory appraisal in fiscal 2024.

For the fiscal 2024 six-month period, pretax income for the Custom Cabling segment was $0.1 million and the pretax loss for the RF Connector segment was $2.4 million, as compared to $0.5 million loss and $0.4 million income, respectively, for the comparable six-month period last year.

For the fiscal 2024 and 2023 six-month periods, we recorded income tax provision (benefit) of $2,818,000 and ($324,000), respectively.

The effective tax rate was (99.3%) for the fiscal 2024 six-month period, compared to 35.8% for the fiscal 2023 six-month period.

The change in effective tax rate for the fiscal 2024 and 2023 six-month periods was primarily driven by the recording of a valuation allowance on our deferred tax asset.

For the fiscal 2024 six-month period, net loss was $5.7 million and fully diluted loss per share was ($0.54) per share as compared to a net loss of $0.6 million and fully diluted loss per share of $0.06 per share for the fiscal 2023 six-month period.

For the fiscal 2024 six-month period, the diluted weighted average shares outstanding were 10,452,597 as compared to 10,256,158 for the fiscal 2023 six-month period.

Quantitative and Qualitative Disclosures about Market Risk

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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