What changed in this filing

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Item 1. Financial Statements

2025-03-17 compared with 2024-09-16 · 136 added, 288 removed, 225 unchanged (65% of the section changed)

4 unchanged sentences

(In thousands)

Nine Months Ended July 31,

Three Months Ended January 31,

OPERATING ACTIVITIES:

1 unchanged sentence

Adjustments to reconcile consolidated net loss to net cash provided by operating activities:

Allowance for credit losses

Bad debt expense

Depreciation and amortization

3 unchanged sentences

Deferred income taxes

Extinguishment of debt issuance cost

Changes in operating assets and liabilities:

2 unchanged sentences

Right-of-use assets

Other long-term assets

Accounts payable

Accrued expenses

Income taxes payable

Net cash provided by operating activities

3 unchanged sentences

FINANCING ACTIVITIES:

Line of credit payments

Proceeds from exercise of stock options

Debt issuance cost

Line of credit

Term Loan payments

Net cash used in financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

8 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In the opinion of management, all adjustments, which are normal and recurring and other items of gain (loss) and expense required in our view under Accounting Standards Codification (“ASC”) 270, Interim Reporting, have been included for a fair statement of the financial position.

In the opinion of management, all adjustments, which are normal and recurring, and other items of gain (loss) and expense required in our view under ASC 270, Interim Reporting , have been included for a fair statement of the financial position.

Information included in the condensed consolidated balance sheet as of October 31, 2024 has been derived from, and certain terms used herein are defined in, the audited consolidated financial statements of RF Industries, Ltd.

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

as of October 31, 2024 included in our Annual Report on Form 10-K (the “Form 10-K”) for the year ended October 31, 2024 that was previously filed with the Securities and Exchange Commission (“SEC”).

Operating results for the three months ended January 31, 2025 are not necessarily indicative of the results that may be expected for the year ended October 31, 2025.

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.

Our accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the ordinary course of business.

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 and nine months ended July 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.

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 with Eclipse Business Capital (“EBC”) to meet its obligations as they become due.

Although we have incurred operating losses during the three months ended January 31, 2025, 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.

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.

On March 15, 2024, the Company entered into the loan and security agreement with EBC, as administrative agent, 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, N.A.

was terminated upon entry into the loan and security agreement with EBC.

Principles of consolidation

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

As of July 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 January 31, 2025 and October 31, 2024, the fair value 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.

Recent accounting standards

Recently issued accounting pronouncements adopted:

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-13, Financial Instruments — Credit Losses , which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

The guidance is effective for fiscal years beginning after December 15, 2019.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments — Credit Losses (Topic 326), which pushes back the effective date for public business entities that are smaller reporting companies, as defined by the SEC, to fiscal years beginning after December 15, 2022.

The guidance was effective for the Company beginning on November 1, 2023 and the adoption of this standard had no material impact on the Company’s condensed consolidated financial statements or related disclosures.

Recently issued accounting pronouncements not yet adopted:

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Improvements to Reportable Segment Disclosures , which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our annual periods beginning November 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures for the year ending October 31, 2025.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , to expand the disclosure requirements for income taxes, specifically related to the effective tax rate reconciliation and income taxes paid.

ASU 2023-09 is effective for our annual periods beginning November 1, 2025, with early adoption permitted.

ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

2 unchanged sentences

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

At July 31, 2024, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $ 1.4 million.

At January 31, 2025, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $ 1.3 million.

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

Three Months Ended July 31,

Nine Months Ended July 31,

Wireless provider A

Wireless provider B

Distributor A

Distributor B

For the three months ended July 31, 2024, one wireless carrier and one distributor customer accounted for 11% and 13% or more of net sales, and accounted for 18 % and 10 % of total net accounts receivable balance, respectively.

For the nine months ended July 31, 2024, no customer accounted for 10 % or more of net sales, but the aforementioned wireless carrier and the same distributor customer accounted for 18 % and 10 % of total net accounts receivable balance, respectively.

For the three months ended July 31, 2023, a distributor customer accounted for 12 % of net sales and 12 % of total net accounts receivable balance, while another distributor whose sales were less than 10% of total net sales, accounted for 11% of total net accounts receivable balance.

For the nine months ended July 31, 2023, a wireless carrier accounted for 13 % of net sales and less than 10 % of total net accounts receivable balance.

Three Months Ended January 31,

Wireless provider

For the three months ended January 31, 2025, one wireless carrier accounted for 21 % of net sales and 21 % of net accounts receivable.

For the three months ended January 31, 2024, no customers accounted for 10% or more of net sales, and two distributor customers accounted for 10 % each of total net accounts receivable.

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):

July 31, 2024

January 31, 2025

October 31, 2024

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Finished goods

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

For the three months ended July 31, 2023, one vendor accounted for 10 % of inventory purchases.

For the nine months ended July, 2024, no single vendor accounted for 10% or more of inventory purchases and one vendor accounted for 17 % of inventory purchases for the nine months ended July 31, 2023.

For the three months ended January 31, 2025, one vendor accounted for 10 % of inventory purchases.

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

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):

July 31, 2024

January 31, 2025

October 31, 2024

3 unchanged sentences

Accrued expenses consist of the following (in thousands):

July 31, 2024

January 31, 2025

October 31, 2024

3 unchanged sentences

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

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.

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.

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 months ended July 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 846,889 and 814,154 shares for the three months ended July 31, 2024 and 2023, respectively, and 846,889 and 750,967 shares for the nine months ended July 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 January 31, 2025, 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 345,556 and 1,068,022 shares for the three months ended January 31, 2025 and 2024, 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 July 31,

Nine Months Ended July 31,

Three Months Ended January 31,

Weighted average shares outstanding for basic earnings per share

2 unchanged sentences

Note 7 – Stock-based compensation and equity transactions

On January 11, 2023, we granted a total of 54,092 shares of restricted stock and 108,181 incentive stock options to one manager and three officers, respectively.

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

(i) one -quarter of the restricted shares and options vested on January 10, 2024 and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years.

Also on January 11, 2023, we granted another manager 50,000 incentive stock options.

As of October 31, 2023, the 50,000 incentive stock options granted to the manager were cancelled and forfeited as the manager was no longer employed.

All incentive stock options expire 10 years from the date of grant.

On August 29, 2023, we granted one employee 10,000 incentive stock options.

These options vested with respect to 2,500 shares on the date of grant, and the remaining shares vests in equal installments thereafter on each of the next three anniversaries of August 29, 2023.

The options expire 10 years from the date of grant.

On November 1, 2023, we granted 15,202 shares of restricted stock to one officer in lieu of cash compensation.

The shares of restricted stock vest over one year as follows:

(i) one -quarter of the restricted shares on January 31, 2024 and (ii) the remaining restricted shares shall vest in three equal quarterly installments.

On January 11, 2024, we granted a total of 110,099 shares of restricted stock and 220,001 incentive stock options to one manager and three officers, respectively.

On December 2, 2024, we granted 47,500 incentive stock options to seven managers.

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

(i) one -quarter of the options shall vest on December 2, 2025 and (ii) the remaining options shall vest in three equal annual installments over the next three years.

On January 13, 2025, we granted a total of 82,500 shares of restricted stock and 165,000 incentive stock options to two managers and three officers.

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

(i) one -quarter of the restricted shares and options shall vest on January 13, 2026 and (ii) the remaining restricted shares and options shall vest in 12 equal quarterly installments over the next three years.

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 nine months ended July 31, 2024 and 2023.

The weighted average fair value of employee stock options that were granted during the nine months ended July 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:

Nine Months Ended July 31,

No other shares or options were granted to Company employees during the three months ended January 31, 2025 and 2024.

The fair value of each option granted during the three months ended January 31, 2025 and 2024 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions:

Three Months Ended January 31,

Weighted average volatility

Expected dividends

Expected term (in years)

Risk-free interest rate

Dividend yield

Expected life of the option (years)

Volatility factor

Weighted average fair value of options granted during the year

Weighted average fair value of options vested during the year

Expected volatilities are based on historical volatility of our stock price and other factors.

We used the historical method to calculate the expected life of the 2024 and 2023 option grants.

We used the historical method to calculate the expected life of the 2025 and 2024 options granted.

The expected life represents the period of time that options granted are expected to be outstanding.

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Descriptions of our stock option plans are included in Note 8 to our audited financial statements included in our Annual Report on Form 10-K for the year ended October 31, 2024.

A summary of the status of the options granted under our stock option plans as of July 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 January 31, 2025 and the changes in options outstanding during the three months then ended is presented in the table that follows:

Exercise Price

Outstanding at November 1, 2023

Outstanding at beginning of November 1, 2024

Options granted

Options exercised

Options cancelled

Options outstanding at July 31, 2024

Options exercisable at July 31, 2024

Options vested and expected to vest at July 31, 2024

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

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

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

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

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

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

As of July 31, 2024, $ 913,175 and $ 703,899 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 2.6 years, respectively.

Options canceled or expired

Options outstanding at January 31, 2025

Options exercisable at January 31, 2025

Options vested and expected to vest at January 31, 2025

Option price range at January 31, 2025

Aggregate intrinsic value of options exercised during year

Weighted average remaining contractual life of options outstanding as of January 31, 2025:

Weighted average remaining contractual life of options exercisable as of January 31, 2025:

Weighted average remaining contractual life of options vested and expected to vest as of January 31, 2025:

Aggregate intrinsic value of options outstanding at January 31, 2025:

Aggregate intrinsic value of options exercisable at January 31, 2025:

Aggregate intrinsic value of options vested and expected to vest at January 31, 2025:

As of January 31, 2025, $ 994,000 and $ 888,000 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 1.8 and 1.5 years, respectively.

Stock option expense

During the three months ended July 31, 2024 and 2023, stock-based compensation expense totaled $ 241,000 and $ 246,000 , respectively, and was classified in selling and general expense.

During the nine months ended July 31, 2024 and 2023, stock-based compensation expense totaled $ 744,000 and $ 687,000 , respectively, and was classified in selling and general expense.

During the three months ended January 31, 2025 and 2024, stock-based compensation expense totaled $ 195,000 and $ 255,000 , respectively, and was classified in selling and general expense.

Note 8 – Segment information

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

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

Management identifies segments based on strategic business units that are, in turn, based along market lines.

These strategic business units offer products and services to different markets in accordance with their customer base and product usage.

For segment reporting purposes, the RF Connector, C Enterprises and Microlab divisions constitute the RF Connector segment, and the Cables Unlimited, Rel-Tech, and Schrofftech divisions constitute the Custom Cabling segment.

Based upon this evaluation, as of January 31, 2025, 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.

1 unchanged sentence

Further, since the acquisition of C Enterprises in 2019, the customer base for the division has shifted more towards distribution as opposed to direct to end customer which is more aligned with the RF Connector segment.

The segment change of including C Enterprise as part of the RF Connector segment was made retroactive to the beginning of our fiscal year starting November 1, 2022 and reclassified for fiscal 2022 for comparative purposes.

In annual and interim periods reported prior to the transition on August 1, 2023, C Enterprises was included in the Custom Cabling segment.

The RF Connector segment consists of three divisions and the Custom Cabling segment consists of three divisions.

In annual and interim periods prior to the transition on August 1, 2023, C Enterprises was included in the Custom Cabling segment.

The RF Connector segment consists of three divisions and the Custom Cabling segment also consists of three divisions.

The six divisions that met the quantitative thresholds for segment reporting are the RF Connector and Cable Assembly division (“RF Connector division”), Cables Unlimited, Rel-Tech, C Enterprises, Schrofftech, and Microlab.

1 unchanged sentence

The biggest difference in segments is in the channels of sales;

sales or product and services for the RF Connector segment were primarily through the distribution channel, while the Custom Cabling segment sales were through a combination of distribution and direct to the end customer.

sales or products and services for the RF Connector segment were primarily through the distribution channel, while the Custom Cabling segment sales were through a combination of distribution and direct to end customer.

As reviewed by our chief operating decision maker, we evaluate the performance of each segment based on income or loss before income taxes.

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

Three Months Ended July 31,

Nine Months Ended July 31,

The following table presents the sales by geographic area for the three months ended January 31, 2025 and 2024 (in thousands):

Three Months Ended January 31,

United States

Foreign Countries:

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

Net sales to external customers, income (loss) before provision (benefit) for income taxes and other related segment information for the three months ended January 31, 2025 and 2024 are as follows (in thousands):

Custom Cabling

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Depreciation and amortization

(Loss) income before benefit for income taxes

Depreciation and amortization

Net sales to external customers, income (loss) before provision (benefit) for income taxes and other related segment information for the nine months ended July 31, 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

Expenditures for Segment Assets

Loss before benefit for income taxes

Depreciation and amortization

Expenditures for Segment Assets

Note 9 – Income taxes

We use an estimated annual effective tax rate, which is based on expected annual taxable income (loss), 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.

We use an estimated annual effective tax rate, which is based on expected annual taxable income (loss), statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate, to determine our 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.

We recorded income tax provisions benefits of $ 52,000 and $ 482,000 for the three months ended July 31, 2024 and 2023, respectively.

The effective tax rate was 6.9 % for the three months ended July 31, 2024, compared to 22.7 % for the three months ended July 31, 2023.

For the nine months ended July 31, 2024 and 2023, we recorded income tax provisions (benefits) of $ 2,766,000 and ($ 806,000 ), respectively.

The effective tax rate was ( 76.9 %) for the nine months ended July 31, 2024, compared to 26.6 % for the nine months ended July 31, 2023.

The change in effective tax rate for the nine months ended July 31, 2024 compared to the nine months ended July 31, 2023 was primarily driven by the recording of a valuation allowance of $ 3.6 million on deferred tax assets during the quarter ended April 30, 2024.

We had $ 226,000 and $ 178,000 of unrecognized tax benefits, as of July 31, 2024 and October 31, 2023, respectively.

The unrecognized tax benefits, if recognized, would result in a net tax benefit of $ 203,000 as of July 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 July 31, 2024.

We recorded income tax provisions (benefits) of $ 36,000 and ($ 831,000 ) for the three months ended January 31, 2025 and 2024, respectively.

The effective tax rate was ( 17.2 %) for the three months ended January 31, 2025, compared to 37.9 % for the three months ended January 31, 2024.

The change in effective tax rate for the three months ended January 31, 2025 compared to the three months ended January 31, 2024 was primarily driven by the valuation allowance.

We had $ 205,000 and $ 186,000 of unrecognized tax benefits as of January 31, 2025 and October 31, 2024, respectively.

The unrecognized tax benefits, if recognized, would result in a net tax benefit of $ 123,000 as of January 31, 2025.

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 continued 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 partial valuation allowance against its deferred tax assets.

The Company's valuation allowance was $ 3,573,000 and $ 124,000 as of July 31, 2024 and October 31, 2023, respectively.

In making such judgments, 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 a partial valuation allowance against its deferred tax assets.

The Company's valuation allowance was $ 4,075,000 and $ 3,962,000 as of January 31, 2025 and October 31, 2024, respectively.

Note 10 – Intangible assets

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

July 31, 2024

Intangible assets consist of the following as of January 31, 2025 and October 31, 2024 (in thousands):

January 31, 2025

October 31, 2024

Amortizable intangible assets:

Non-compete agreement (estimated life 5 years)

Non-compete agreement (estimated life five years)

Accumulated amortization

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Accumulated amortization

Backlog (estimated life 1 - 2 years)

Backlog (estimated life one - two years)

Accumulated amortization

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Non-amortizable intangible assets:

Amortization expense for the nine months ended July 31, 2024 and the year ended October 31, 2023 was $ 1,266,000 and $ 1,701,000 , respectively.

As of July 31, 2024, the weighted-average amortization period for the amortizable intangible assets is 7.85 years.

Amortization expense for the three months ended January 31, 2025 and the year ended October 31, 2024 was $ 411,000 and $ 1,688,000 , respectively.

As of January 31, 2025, the weighted-average amortization period for the amortizable intangible assets is 7.38 years.

Note 11 – Commitments

We adopted ASU 2016-02 on November 1, 2019, and elected the practical expedient modified retrospective method whereby the lease qualification and classification was carried over from the accounting for leases under ASC 840.

The lease contracts for the corporate headquarters, RF Connector division manufacturing facilities, Cables Unlimited, Rel-Tech, and C Enterprises commenced prior to the effective date of November 1, 2019, and were determined to be operating leases.

The lease contracts for Cables Unlimited and Rel-Tech commenced prior to the effective date of November 1, 2019, and were determined to be operating leases.

All other new contracts have been assessed for the existence of a lease and for the proper classification into operating leases.

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We also have other operating leases for certain equipment.

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

Three Months Ended July 31,

Nine Months Ended July 31,

The components of our facilities and equipment operating lease expenses for the periods ending January 31, 2025 and 2024 were as follows (in thousands):

Three Months Ended January 31,

Operating lease cost

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

July 31, 2024

October 31, 2023

Supplemental Cash Flows Information

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

Operating leases

Weighted Average Remaining Lease Term

Operating leases (in months)

Weighted Average Discount Rate

Operating leases

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

Year ending October 31,

Operating Leases

2024 (excluding nine months ended July 31, 2024)

Total future minimum lease payments

Less imputed interest

Reported as of July 31, 2024

Operating Leases

Current portion of operating lease liabilities

Operating lease liabilities

As of July 31, 2024, operating lease right-of-use asset was $ 15.3 million and operating lease liability totaled $ 20.6 million, of which $ 1.5 million is classified as current.

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

As of January 31, 2025, operating lease right-of-use assets were $ 14.9 million and operating lease liabilities totaled $ 20.1 million, of which $ 1.9 million is classified as current.

There were no finance leases as of January 31, 2025.

Future minimum lease payments under non-cancellable leases as of January 31, 2025 are a total of $26.7 million.

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

under a lease that was renewed effective February 1, 2025, for one year expiring January 31, 2026.

The aggregate monthly rental payment under the new lease currently is $ 4,607 per month.

Note 12 – Term Loan and Line of credit

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 BofACredit 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”);

(ii) consolidated fixed charge coverage ratio of at least 1.25 to 1.00 (the “FCCR Test”);

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

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 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 also waived testing for compliance with the Debt Test and FCCR Test for the quarterly periods ending October 31, 2023, January 31, 2024, April 30, 2024 and July 31, 2024.

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 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 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 BofA Revolving Credit Facility was lowered from $ 3.0 million to $ 500,000 .

Further, Loan Amendment No.

2 required that we maintain from September 22, 2023 and thereafter, liquidity of at least $ 2.0 million, rather than the greater of $ 4.0 million or 80 % of the forecast liquidity as was required under Loan Amendment No.

Under Loan Amendment No.

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

Loan Amendment No.

2 was considered a modification under ASC 470, Debt.

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

3 to the BofALoan 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 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 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 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.

Loan Amendment No.

3 was considered a modification under ASC 470, Debt .

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.

On March 15, 2024, we entered into a loan and security agreement (the “EBC Credit Agreement”) with EBC, as administrative agent, 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 we had entered into in February 2022 with Bank of America, N.A.

(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.

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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 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 accrues 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 accrues 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 of 0.50 % per annum for the unused portion of the EBC Revolving Loan Facility.

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;

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 12 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 Expenditure (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 and First Amendment.

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 the First Amendment is filed as Exhibit 10.1 to this Quarterly Report on Form 10-Q for the quarter ended July 31, 2024 and each is incorporated by reference herein.

Debt issuance costs related to the EBC Credit Agreement totaled $ 455,000 and were included as part of our other long term assets balance.

As of July 31, 2024, our outstanding borrowings under the EBC Credit Agreement were $ 8,704,000 .

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 or nine months ended July 31, 2024, nor during the three or nine months ended July 31, 2023.

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 the First Amendment as Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended July 31, 2024.

Debt issuance costs related to the EBC Credit Agreement totaled $ 368,000 and were included as part of our other long-term assets balance in the condensed consolidated balance sheet.

As of January 31, 2025, our outstanding borrowings under the EBC Credit Agreement were $ 8,053,000 .

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

Note 13 – Cash dividends and declared dividends

We did not pay any dividends during the three months ended January 31, 2025, nor during the three months ended January 31, 2024.

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

Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements.

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Critical Accounting Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of these unaudited condensed consolidated financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities.

We evaluate our estimates, including those related to credit losses, inventory reserves, earn-out liabilities, and contingencies on an ongoing basis.

We base our estimates on historical experience and on various other assumptions that are believed to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

Inventories - allowance for excess and slow moving items

Inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average cost method of accounting.

Certain items in inventory may be considered obsolete or excess and, as such, we periodically review our inventories for excess and slow moving items and make provisions as necessary to properly reflect inventory value.

Because inventories have, during the past few years, represented up to one-fourth of our total assets, any reduction in the value of our inventories would require us to take write-offs that would affect our net worth and future earnings.

Allowance for Credit Losses

Our accounts receivable arise primarily from sales on credit to customers.

We establish an allowance for credit losses to present the net amount of accounts receivable expected to be collected.

The allowance is determined by using the loss-rate method, which requires an estimation of loss rates based upon historical loss experience adjusted for factors that are relevant to determining the expected collectability of accounts receivable.

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 July 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 July 31, 2024 relative to October 31, 2023.

Impairment testing on Long-Lived Assets Including Goodwill

We assess property, plant and equipment and intangible assets, which are considered definite-lived assets, for impairment.

Definite-lived assets are reviewed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate.

If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.

We amortize our intangible assets with definite useful lives over their estimated useful lives and review these assets for impairment.

We test our goodwill and trademarks and indefinite-lived assets for impairment at least annually or more frequently if events or changes in circumstances indicate these assets may be impaired.

These events or circumstances require significant judgment and could include a significant change in the business climate, legal factors, operating performance indicators, competition and sale or disposition of all or a portion of a division.

This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.

Valuation Allowance on Deferred Income Taxes

We record a tax provision (benefit) for the anticipated tax consequences of the reported results of operations.

Income taxes are accounted for under the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards.

Deferred tax assets and liabilities are measured using the currently enacted tax rates as of the date of the financial statements that apply to taxable income in effect for the years in which those tax assets are expected to be realized or settled.

We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Stock-based Compensation

We use the Black-Scholes model to value the stock option grants.

This valuation is affected by our stock price as well as assumptions regarding a number of inputs which involve significant judgments and estimates.

These inputs include the expected term of employee stock options, the expected volatility of the stock price, the risk-free interest rate and expected dividends.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is based on our Consolidated Condensed Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent liabilities.

Management believes that there have been no material changes during the three months ended January 31, 2025 to the items that we disclosed as our critical accounting estimates in the MD&A in our Annual Report on Form10-K for the fiscal year ended October 31, 2024.

RF Industries, Ltd.

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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 nine months ended July 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 39% 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 61% of total sales for the nine months ended July 31, 2024.

For the three months ended January 31, 2025, 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 55% 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 45% of total sales for the three months ended January 31, 2025.

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

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Liquidity and Capital Resources

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 nine months ended July 31, 2024.

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

However, we have incurred an operating loss during the three months ended January 31, 2025.

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 July 31, 2024, we had a total of $1.8 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 July 31, 2024, we had working capital of $11.0 million and a current ratio of approximately 1.6:1 with current assets of $29.4 million and current liabilities of $18.4 million.

As of January 31, 2025, we had a total of $1.3 million of cash and cash equivalents compared to a total of $0.8 million of cash and cash equivalents as of October 31, 2024.

As of January 31, 2025, we had working capital of $11.7 million and a current ratio of approximately 1.7:1 with current assets of $29.5 million and current liabilities of $17.8 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 July 31, 2024, we had $20.1 million of backlog, compared to $16.1 million as of October 31, 2023.

As of January 31, 2025, we had $15.2 million of backlog, compared to $19.5 million as of October 31, 2024.

The decrease in backlog relates primarily to completion of a large tier one carrier project.

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 nine months ended July 31, 2024, we generated $3.4 million of cash in our operating activities.

This net inflow of cash is primarily related to $3.7 million from inventories, $1.9 million from depreciation and amortization, $0.7 million from stock-based compensation expense, $0.4 million from right-of-use assets, $0.5 million from accrued expenses, $0.2 million from other current assets, $68,000 from debt issuance amortization and $14,000 from extinguishment of debt issuance costs.

The cash usage was primarily due to the net loss of $6.4 million, change in accounts receivable of $0.4 million and payments of accounts payable of $52,000.

We also recorded a non-cash item of $2.7 million from deferred income taxes.

During the nine months ended July 31, 2024, we also spent $0.6 million on capital expenditures, $13.2 million in BofA Term Loan payments, $0.5 million of debt issuance cost and drew $7.7 million on the EBC Revolving Loan Facility (used to pay down the BofATerm Loan).

In the three months ended January 31, 2025, we generated $0.6 million of cash in our operating activities.

This net inflow of cash is primarily related to a decrease in inventories of $1.3 million as a result of better inventory management and supply chain conditions improving allowing us to carry less inventory on hand, $0.6 million from depreciation and amortization, $0.2 million from stock-based compensation expense, $0.3 million from the change in accrued expenses, $0.1 million from bad debt expense, $43,000 from amortization of debt issuance costs and $6,000 from deferred income taxes.

The cash usage was primarily due to the net loss of $0.2 million, the change in accounts receivable of $0.7 million, the change in other current assets of $0.4 million, the change in accounts payable of $0.4 million, right-of-use assets of $0.1 million and $29,000 tax payments on cancelled shares of restricted stock.

During the three months ended January 31, 2025, we also spent $27,000 on capital expenditures, repaid $0.1 million on the revolving credit facility with EBC and received $4,000 in proceeds from the exercise of stock options.

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 July 31, 2024 vs.

Three Months Ended July 31, 2023

Net sales for the three months ended July 31, 2024 (the “fiscal 2024 quarter”) increased by 7.6%, or $1.1 million, to $16.8 million as compared to the three months ended July 31, 2023 (the “fiscal 2023 quarter”).

Three Months Ended January 31, 2025 vs.

Three Months Ended January 31, 2024

Net sales for the three months ended January 31, 2025 (the “fiscal 2025 quarter”) increased by 42.2%, or $5.7 million, to $19.2 million as compared to the three months ended January 31, 2024 (the “fiscal 2024 quarter”).

Net sales for the fiscal 2025 quarter at the Custom Cabling segment increased by $5.8 million, or 123.4%, to $10.5 million, compared to $4.7 million in the fiscal 2024 quarter.

The increase was primarily the result of an increase in sales of thermal cooling and small cell enclosures at Schrofftech and hybrid fiber cables to wireless customers.

Net sales for the fiscal 2024 quarter at the RF Connector segment decreased by $0.8 million, or 7.6%, to $9.7 million as compared to $10.5 million in the fiscal 2023 quarter.

This was primarily due to a decrease in sales to some of our distributor customers related to seasonality, lower levels of inventory kept on hand in the channel, and the significantly lower carrier capital expenditure environment, leading to fewer carrier projects involving approved RF components.

The increase was primarily driven by tier one carrier applications for our direct air cooling offering.

Net sales for the fiscal 2025 quarter at the RF Connector segment decreased by $0.1 million, or 1.1%, to $8.7 million as compared to $8.8 million in the fiscal 2024 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 2025 quarter increased by $2.4 million to $5.7 million, and gross margins increased to 29.8% of sales compared to 24.5% of sales in the fiscal 2024 quarter.

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

Engineering expenses decreased by $36,000 to $0.7 million in the fiscal 2024 quarter compared to $0.7 million in the fiscal 2023 quarter.

The decrease was the result of more concentrated engineering activities coupled with other cost-savings initiatives.

The increases in gross profit and gross margins were primarily related to the overall increase in sales and direct air cooling product mix.

Engineering expenses decreased by $0.1 million to $0.7 million in the fiscal 2025 quarter compared to $0.8 million in the fiscal 2024 quarter.

The decrease was the result of more forward looking product development and cost savings initiatives.

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

Selling and general expenses decreased by $0.4 million to $4.7 million (28.1% of sales) compared to $5.1 million (32.9% of sales) in the third quarter last year, primarily due to restructuring of sales and marketing activities along with related cost savings initiatives.

We did not incur any one-time charges in the fiscal 2024 quarter.

Selling and general expenses increased by $0.4 million to $5.0 million (25.9% of sales) compared to $4.6 million (34.3% of sales) in the first quarter last year primarily due to an increase variable compensation related to commissions and bonuses as a result of the higher sales.

We did not incur one-time charges in the fiscal 2025 quarter.

For the fiscal 2025 quarter, the Custom Cabling segment had pretax income of $1.6 million and the RF Connector segment had a pretax loss of $1.5 million, as compared to $0.3 million loss and $1.7 million loss, 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 decreased sales to some of our distributor customers based on lower levels of inventory kept on hand in the channel, and the lower carrier capital expenditure environment, leading to fewer carrier projects involving approved RF components.

For fiscal 2024 and 2023 quarters, we recorded income tax benefit of $52,000 and $482,000, respectively.

The increase in pretax income at the Custom Cabling segment was due to the increase in sales of direct air cooling to wireless carriers.

The improvement in pretax loss at the RF Connector segment was primarily due to cost savings initiatives and operating efficiencies.

For the fiscal 2025 and 2024 quarters, we recorded income tax provisions (benefits) of $36,000 and ($831,000), respectively.

The effective tax rate was (17.2%) for the fiscal 2025 quarter, compared to 37.9% for the fiscal 2024 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 of $3.6 million on our deferred tax asset.

The change in effective tax from fiscal quarter 2025 to fiscal 2024 quarter was primarily driven by the valuation allowance.

For the fiscal 2025 quarter, net loss was $0.2 million and fully diluted loss per share was $0.02, compared to a net loss of $1.4 million and fully diluted loss per share of $0.13 for the fiscal 2024 quarter.

For the fiscal 2025 quarter, the diluted weighted average shares outstanding were 10,560,922 as compared to 10,410,580 for the fiscal 2024 quarter.

Nine Months Ended July 31, 2024 vs.

Nine Months Ended July 31, 2023

Net sales for the nine months ended July 31, 2024 (the “fiscal 2024 nine-month period”) of $46.4 million decreased by 17.6%, or $9.9 million, compared to the nine months ended July 31, 2023 (the “fiscal 2023 nine-month period”).

The decrease in net sales is attributable mainly to the RF Connector segment, which decreased by $6.5 million, or 18.6%, to $28.4 million compared to $34.9 million in the fiscal 2023 nine-month period, primarily due to decreased sales to some of our distributor customers based on lower levels of inventory kept on hand in the channel, and the lower carrier capital expenditure environment, leading to fewer carrier projects involving approved RF components.

The Net sales for the fiscal 2024 nine-month period at the Custom Cabling segment decreased by $3.4 million, or 15.9%, to $18.0 million compared to $21.4 million in the fiscal 2023 nine-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 nine-month period decreased by $1.9 million to $13.1 million while gross margins increased to 28.2% of sales compared to 26.7% of sales in the fiscal 2023 nine-month period.

The decrease in gross profit was primarily a result of the decrease in sales while gross margins remained relatively consistent due to product mix and other cost-savings initiatives.

Engineering expenses decreased $0.4 million to $2.1 million for the fiscal 2024 nine-month period compared to $2.5 million in the fiscal 2023 nine-month period.

The decrease was primarily the result of headcount reduction, more concentrated engineering activities 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 $1.3 million to $13.9 million (30.0% of sales) compared to $15.2 million (27.0% of sales) in the nine-month period last year primarily due to a decrease in variable compensation related to commissions and bonuses, resulting from lower sales.

We also realized cost savings from restructuring, coupled with reduced general office and IT expenses.

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

For the fiscal 2024 nine-month period, pretax income for the Custom Cabling segment was $0.4 million and the pretax loss for the RF Connector segment was $3.1 million, as compared to $1.0 million loss and $1.0 million loss, respectively, for the comparable nine-month period last year.

For the fiscal 2024 and 2023 nine-month periods, we recorded income tax provision (benefit) of $2,766,000 and ($806,000), respectively.

The effective tax rate was (76.9%) for the fiscal 2024 nine-month period, compared to 26.6% for the fiscal 2023 nine-month period.

The change in effective tax rate for the fiscal 2024 and 2023 nine-month periods was primarily driven by the recording of a valuation allowance of $3.6 million on our deferred tax asset.

For the fiscal 2024 nine-month period, net loss was $6.4 million and fully diluted loss per share was ($0.61) per share as compared to a net loss of $2.2 million and fully diluted loss per share of $0.22 per share for the fiscal 2023 nine-month period.

For the fiscal 2024 nine-month period, the diluted weighted average shares outstanding were 10,466,862 as compared to 10,267,652 for the fiscal 2023 nine-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