R F INDUSTRIES LTD 10-Q

Item 1: Financial Statements (continued) RF INDUSTRIES, LTD. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Six Months Ended April 30, 2025 2024 OPERATING ACTIVITIES: Consolidated net loss $ ( 490 ) $ ( 5,656 ) Adjustments to reconcile consolidated net loss to net cash provided by operating activities: Bad debt expense (recovery) 112 ( 8 ) Depreciation and amortization 1,231 1,266 Gain on disposal of fixed assets ( 12 ) - Stock-based compensation expense 421 503 Amortization of debt issuance cost 87 25 Tax payments related to shares cancelled for vested restricted stock awards ( 34 ) - Deferred income taxes ( 3 ) 2,675 Extinguishment of debt issuance cost - 14 Changes in operating assets and liabilities: Trade accounts receivable ( 2,994 ) ( 267 ) Inventories 2,151 2,351 Other current assets ( 131 ) 241 Right-of-use assets ( 174 ) 291 Accounts payable 986 ( 45 ) Accrued expenses 1,642 ( 353 ) Net cash provided by operating activities 2,792 1,037 INVESTING ACTIVITIES: Proceeds from sale of fixed assets 12 - Capital expenditures ( 61 ) ( 312 ) Net cash used in investing activities ( 49 ) ( 312 ) FINANCING ACTIVITIES: Line of credit proceeds (payments) ( 203 ) 9,460 Debt issuance cost - ( 520 ) Proceeds from exercise of stock options 207 - Term Loan payments - ( 13,162 ) Net cash provided by (used in) financing activities 4 ( 4,222 ) Net increase (decrease) in cash and cash equivalents 2,747 ( 3,497 ) Cash and cash equivalents, beginning of period 839 4,897 Cash and cash equivalents, end of period $ 3,586 $ 1,400 Supplemental cash flow information – income taxes paid $ 144 $ 55 See Notes to Unaudited Condensed Consolidated Financial Statements. 7 RF INDUSTRIES, LTD. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Unaudited interim condensed consolidated financial statements Our accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q. 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 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, 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 six months ended April 30, 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 condensed 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 with Eclipse Business Capital (“EBC”) to meet its obligations as they become due. For the three and six months ended April 30, 2025, we generated operating income of $ 106,000 and $ 162,000 , respectively, compared to an operating loss of $ 415,000 and $ 2,499,000 for the same periods last year. This is a result of an increase in sales, as well as certain cost-cutting measures we took to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity. Efforts to reduce expenses included 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 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 The accompanying unaudited condensed consolidated financial statements include the accounts of RF Industries, Ltd., Cables Unlimited, Inc. (“Cables Unlimited”), Rel-Tech Electronics, Inc. (“Rel-Tech”), C Enterprises, Inc. (“C Enterprises”), Schroff Technologies International, Ltd. (“Schrofftech”), and Microlab/FXR LLC (“Microlab”), wholly-owned subsidiaries of RF Industries, Ltd. All intercompany balances and transactions have been eliminated in consolidation. Fair value measurement We measure at fair value certain financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the following fair-value hierarchy: Level 1— Quoted prices for identical instruments in active markets; Level 2— Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and Level 3— Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. As of April 30, 2025 and October 31, 2024, the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximated their carrying value due to their short-term nature. 8 Recent accounting standards Recently issued accounting pronouncements not yet adopted: In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): 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 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 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. Note 2 – Concentrations of credit risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We maintain our cash and cash equivalents with high-credit quality financial institutions. At April 30, 2025, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $ 3.3 million. Sales from each customer that were 10% or greater of net sales were as follows: Three Months Ended April 30, Six Months Ended April 30, 2025 2024 2025 2024 Wireless provider A 11 % - - - Wireless provider B - - 11 % - For the three months ended April 30, 2025, one wireless provider accounted for 11 % of net sales and 16 % of total net accounts receivable balance. One distributor with less than 10% of total net sales, accounted for 10 % of total net accounts receivable balance. For the six months ended April 30, 2025, a different wireless provider accounted for 11% of net sales and less than 10% of total net accounts receivable balance, and a wireless provider and the same distributor, whose sales were both less than 10% of total net sales, accounted for 16 % and 10 % of total net accounts receivable balance, respectively. For the three months ended April 30, 2024, no customers accounted for 10% or more of net sales, and one wireless provider 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 two distributor customers, whose sales were both less than 10% of total net sales, accounted for 15 % and 10 % of total net accounts receivable balance, respectively. 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. A reduction, delay or cancellation of orders from these customers or the loss of these customers could significantly reduce our future revenues and profits. Note 3 – Inventories and major vendors Inventories, consisting of materials, labor and manufacturing overhead, are stated at the lower of cost or net realizable value. Cost has been determined using the weighted average cost method. Inventories consist of the following (in thousands): April 30, 2025 October 31, 2024 Raw materials and supplies $ 8,629 $ 10,886 Work in process 537 530 Finished goods 3,408 3,309 Totals $ 12,574 $ 14,725 For the three months ended April 30, 2025 and 2024, no single vendor accounted for 10% or more of inventory purchases. For the six months ended April 30, 2025 and 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. 9 Note 4 – Other current assets Other current assets consist of the following (in thousands): April 30, 2025 October 31, 2024 Prepaid taxes $ 202 $ 262 Prepaid expense 887 699 Deposits 446 329 Other 26 140 Totals $ 1,561 $ 1,430 Note 5 – Accrued expenses and other current liabilities Accrued expenses consist of the following (in thousands): April 30, 2025 October 31, 2024 Wages payable $ 2,638 $ 2,357 Accrued receipts 962 762 Deferred revenue 957 - Other accrued expenses 1,332 1,128 Totals $ 5,889 $ 4,247 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. 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 April 30, 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 405,056 and 1,152,513 shares for the three months ended April 30, 2025 and 2024, respectively, and 405,056 and 1,152,513 shares for the six months ended April 30, 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 April 30, Six Months Ended April 30, 2025 2024 2025 2024 Weighted average shares outstanding for basic earnings per share 10,669,608 10,495,548 10,614,364 10,452,597 Add effects of potentially dilutive securities-assumed exercise of stock options - - - - Weighted average shares outstanding for diluted earnings per share 10,669,608 10,495,548 10,614,364 10,452,597 Note 7 – Stock-based compensation and equity transactions 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. 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 11, 2025 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. 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. 10 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. No other shares or options were granted to Company employees during the three and six months ended April 30, 2025 and 2024. The fair value of each option granted during the six months ended April 30, 2025 and 2024 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: Six Months Ended April 30, 2025 2024 Weighted average volatility 44.37 % 51.80 % Expected dividends 0.00 % 0.00 % Expected term (in years) 6.14 7.00 Risk-free interest rate 4.54 % 4.00 % Weighted average fair value of options granted during the year $ 1.85 $ 1.76 Weighted average fair value of options vested during the year $ 2.39 $ 5.09 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 2025 and 2024 option grants. The expected life represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on the U.S. Treasury rate with a maturity date corresponding to the options’ expected life. The dividend yield is based upon the historical dividend yield. Company stock option plans 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 April 30, 2025 and the changes in options outstanding during the three months then ended is presented in the table that follows: 2025 Shares or Weighted Price Per Average Share Exercise Price Outstanding at beginning of November 1, 2024 874,816 $ 5.10 Options granted 212,500 $ 3.97 Options exercised ( 50,623 ) $ 4.07 Options canceled or expired ( 25,000 ) $ 8.69 Options outstanding at April 30, 2025 1,011,693 $ 4.82 Options exercisable at April 30, 2025 543,807 $ 5.58 Options vested and expected to vest at April 30, 2025 1,011,693 $ 4.82 Option price range at April 30, 2025 $ 1.90 - $ 8.69 Aggregate intrinsic value of options exercised during year $ 43,756 Weighted average remaining contractual life of options outstanding as of April 30, 2025: 7.16 years Weighted average remaining contractual life of options exercisable as of April 30, 2025: 5.84 years Weighted average remaining contractual life of options vested and expected to vest as of April 30, 2025: 7.16 years Aggregate intrinsic value of options outstanding at April 30, 2025: $ 312,000 Aggregate intrinsic value of options exercisable at April 30, 2025: $ 162,000 Aggregate intrinsic value of options vested and expected to vest at April 30, 2025: $ 312,000 11 As of April 30, 2025, $ 961,000 and $ 787,000 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 1.6 and 1.4 years, respectively. Stock option expense During the three months ended April 30, 2025 and 2024, stock-based compensation expense totaled $ 227,000 and $ 248,000 , respectively, and was classified in selling and general expense. During the six months ended April 30, 2025 and 2024, stock-based compensation expense totaled $ 421,000 and $ 503,000 , respectively, and was classified in selling and general expense. Note 8 – Segment information We aggregate operating divisions into two reporting segments that have similar economic characteristics primarily in the following areas: (1) the nature of the product and services; (2) the nature of the production process; (3) the type or class of customer for their products and services; (4) the methods used to distribute their products or services; and (5) if applicable, the nature of the regulatory environment. Based upon this evaluation, as of April 30, 2025, we had two reportable segments – RF Connector and Cable Assembly (“RF Connector”) segment and Custom Cabling Manufacturing and Assembly (“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. While each segment has similar products and services, there was little overlapping of these services to their customer base. The biggest difference in segments is in the channels of sales; 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. We charge depreciation and amortization directly to each division within the segment. Accounts receivable, inventory, property and equipment, right-of-use assets, goodwill and intangible assets are the only assets identified by segment. Except as discussed above, the accounting policies for segment reporting are the same for the Company as a whole. All of our operations are conducted in the United States; however, we derive a portion of our revenue from export sales. We attribute sales to geographic areas based on the location of the customers. The following table presents the sales by geographic area for the three and six months ended April 30, 2025 and 2024 (in thousands): Three Months Ended April 30, Six Months Ended April 30, 2025 2024 2025 2024 United States $ 16,461 $ 14,415 $ 34,520 $ 26,475 Foreign Countries: Canada 1,990 949 2,626 1,830 Germany 107 46 167 95 Netherlands 92 42 124 71 United Kingdom 90 211 127 267 All Other 170 447 546 830 2,449 1,695 3,590 3,093 Totals $ 18,910 $ 16,110 $ 38,110 $ 29,568 12 Net sales, (loss) income before provision for income taxes and other related segment information for the three months ended April 30, 2025 and 2024 are as follows (in thousands): RF Connector Custom Cabling and Manufacturing and Cable Assembly Assembly Corporate Total 2025 Net sales $ 9,357 $ 9,553 $ - $ 18,910 (Loss) income before provision for income taxes ( 1,282 ) 1,562 ( 390 ) ( 110 ) Depreciation and amortization 518 97 - 615 Total assets 45,668 21,262 5,749 72,679 Expenditures for Segment Assets 14 20 - 34 2024 Net sales $ 9,902 $ 6,208 $ - $ 16,110 (Loss) income before provision for income taxes ( 660 ) 350 ( 335 ) ( 645 ) Depreciation and amortization 572 61 - 633 Total assets 51,007 17,746 4,070 72,823 Expenditures for Segment Assets 167 2 - 169 Net sales, (loss) income before benefit for income taxes and other related segment information for the six months ended April 30, 2025 and 2024 are as follows (in thousands): RF Connector Custom Cabling and Manufacturing and Cable Assembly Assembly Corporate Total 2025 Net sales $ 18,081 $ 20,029 $ - $ 38,110 (Loss) income before provision from income taxes ( 2,786 ) 3,121 ( 654 ) ( 319 ) Depreciation and amortization 1,036 195 - 1,231 Total assets 45,668 21,262 5,749 72,679 Expenditures for Segment Assets 23 38 - 61 2024 Net sales $ 18,709 $ 10,859 $ - $ 29,568 (Loss) income before provision for income taxes ( 2,388 ) 89 ( 539 ) ( 2,838 ) Depreciation and amortization 1,085 181 - 1,266 Total assets 51,007 17,746 4,070 72,823 Expenditures for Segment Assets 295 17 - 312 Note 9 – Income taxes In accordance with applicable accounting guidance, the Company is required to use an estimated annual effective tax rate to compute its tax provision during an interim period. However, there is an exception to the use of this method when a reliable estimate of the annual effective tax rate cannot be made due to the sensitivity of changes in estimates of ordinary income (loss). In that case, an entity may report the actual tax provision or benefit applicable when annual income (loss) cannot be estimated as a discrete item in the interim period. This exception was used in determining the tax provision for the six months ended April 30, 2025. We recorded income tax provisions of $ 135,000 and $ 3,649,000 for the three months ended April 30, 2025 and 2024, respectively. The effective tax rate for the three months ended April 30, 2025 and 2024 was ( 122.7 %) and ( 564.7 %), respectively. For the six months ended April 30, 2025 and 2024, we recorded income tax provisions of $ 171,000 and $ 2,818,000 , respectively. The effective tax rate for the six months ended April 30, 2025 and 2024 was ( 53.6 %) and ( 99.3 %), respectively. The effective tax rate for the three months and six months ended April 30, 2025 differed from the U.S. statutory tax rate of 21% primarily due to state taxes, various permanent differences, research and development tax credits, unrecognized tax benefits and change in valuation allowance. We had $ 224,000 and $ 186,000 of unrecognized tax benefits as of April 30, 2025 and October 31, 2024, respectively. The unrecognized tax benefits, if recognized, would result in a net tax benefit of $ 144,000 as of April 30, 2025. 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 April 30, 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 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 $ 4,040,000 and $ 3,962,000 as of April 30, 2025 and October 31, 2024, respectively. 13 Note 10 – Intangible assets Intangible assets consist of the following as of April 30, 2025 and October 31, 2024 (in thousands): April 30, 2025 October 31, 2024 Amortizable intangible assets: Non-compete agreement (estimated life five years) $ 423 $ 423 Accumulated amortization ( 423 ) ( 423 ) - - Customer relationships (estimated lives 7 - 15 years) 6,058 6,058 Accumulated amortization ( 4,042 ) ( 3,848 ) 2,016 2,210 Backlog (estimated life one - two years) 327 327 Accumulated amortization ( 327 ) ( 327 ) - - Patents (estimated life 10 - 14 years) 368 368 Accumulated amortization ( 225 ) ( 208 ) 143 160 Tradename (estimated life 15 years) 1,700 1,700 Accumulated amortization ( 358 ) ( 302 ) 1,342 1,398 Proprietary technology (estimated life 10 years) 11,100 11,100 Accumulated amortization ( 3,515 ) ( 2,960 ) 7,585 8,140 Totals $ 11,086 $ 11,908 Non-amortizable intangible assets: Trademarks $ 1,174 $ 1,174 Amortization expense for the six months ended April 30, 2025 and the year ended October 31, 2024 was $ 822,000 and $ 1,688,000 , respectively. As of April 30, 2025, the weighted-average amortization period for the amortizable intangible assets is 7.14 years. Note 11 – Commitments We have operating leases for corporate offices, manufacturing facilities, and certain storage units. Our leases have remaining lease terms of one year to 10 years. A portion of our operating leases are leased from K&K Unlimited, a company controlled by Darren Clark, the former owner and current President of Cables Unlimited, to whom we make rent payments totaling $ 18,000 per month. 14 We also have other operating leases for certain equipment. The components of our facilities and equipment operating lease expenses for the periods ending April 30, 2025 and 2024 were as follows (in thousands): Three Months Ended April 30, Six Months Ended April 30, 2025 2024 2025 2024 Operating lease cost $ 739 $ 731 $ 1,478 $ 1,468 As of April 30, 2025, operating lease right-of-use assets were $ 14.5 million and operating lease liabilities totaled $ 19.6 million, of which $ 1.9 million is classified as current. There were no finance leases as of April 30, 2025. Future minimum lease payments under non-cancellable leases as of April 30, 2025 are a total of $ 25.9 million. Note 12 – Term Loan and Line of credit 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. 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). On June 14, 2024, the parties entered into a First Amendment to the EBC Credit Agreement (the “First Amendment”) providing for a modified EBC Additional Line of $ 1.0 million through July 12, 2024, $ 666,667 from July 13, 2024 through August 11, 2024 and $ 333,333 from August 12, 2024 through September 10, 2024. 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 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 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. 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 have been capitalized and the remaining balance, which is included as part of our other long-term assets balance, totaled $ 325,000 as of April 30, 2025. As of April 30, 2025, our outstanding borrowings under the EBC Credit Agreement were $ 7,994,000 . 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 dividend and declared dividends We did not pay any dividends during the three or six months ended April 30, 2025, nor during the three or six months ended April 30, 2024. 15 Item 2: Management ’ s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “ may, ” “ will, ” “ should, ” “ except, ” “ plan, ” “ anticipate, ” “ believe, ” “ estimate, ” “ predict, ” “ potential ” or “ continue, ” the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company, nor any other person, assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no obligation to update any of the forward-looking statements after the filing of this Quarterly Report on Form 10-Q to conform such statements to actual results or to changes in its expectations. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes and other financial information appearing elsewhere in this Form 10-Q. Readers are also urged to carefully review and consider the various disclosures made by the Company which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations, ” under the caption “ Risk Factors, ” and the audited consolidated financial statements and related notes included in our Annual Report filed on Form 10-K for the year ended October 31, 2024 and other reports and filings made with the Securities and Exchange Commission ( “ SEC ” ). Critical Accounting Estimates 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 April 30, 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. Overview RF Industries, Ltd. (together with subsidiaries, the “Company,” “we”, “us”, or “our”) is a national manufacturer and marketer of interconnect products and systems, including high-performance components such as RF connectors and adapters, dividers, directional couplers and filters, coaxial cables, data cables, wire harnesses, fiber optic cables, custom cabling, energy-efficient cooling systems and integrated small cell enclosures. Through our manufacturing and production facilities, we provide a wide selection of interconnect products and solutions primarily to telecommunications carriers and equipment manufacturers, wireless and network infrastructure carriers and manufacturers and to various original equipment manufacturers (“OEMs”) in several market segments. We also design, engineer, manufacture and sell energy-efficient cooling systems and integrated small cell solutions and related components. We operate through two reporting segments: (i) the RF Connector and Cable Assembly (“RF Connector”) segment, and (ii) the Custom Cabling Manufacturing and Assembly (“Custom Cabling”) segment. The RF Connector segment primarily designs, manufactures, markets and distributes a broad range of RF connector, adapter, coupler, divider, and cable products, including coaxial passives and cable assemblies that are used in telecommunications and information technology, OEM markets and other end markets. 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 six months ended April 30, 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 53% 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 47% of total sales for the six months ended April 30, 2025. The RF Connector segment mostly sells standardized products regularly used by customers and, therefore, has a more stable revenue stream. On the other hand, the Custom Cabling segment mostly designs, manufactures, and sells customized cabling and wireless-related equipment under larger purchase orders. Accordingly, the Custom Cabling segment is more dependent upon larger orders and its revenues can therefore be more volatile than the revenues of the RF Connector segment. Our corporate headquarters are located at 16868 Via Del Campo Court, Suite 200, San Diego, CA 92127. Our phone number is (858) 549-6340. Liquidity and Capital Resources Historically, we have been able to fund our liquidity and other capital requirements from funds we generated from operations. We generated operating income during the six months ended April 30, 2025, as we saw sales continue to recover during the current period. Further, the cost-cutting measures that were implemented to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity have started to be realized. These cost-cutting efforts included consolidating facilities and recognizing the related operating efficiencies and synergies in our production operations. We intend to continue to pursue additional continuous improvement and cost reduction measures, as well as organic growth in revenue and profitability. 16 As of April 30, 2025, we had a total of $3.6 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 April 30, 2025, we had working capital of $12.1 million and a current ratio of approximately 1.6:1 with current assets of $32.7 million and current liabilities of $20.6 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, 2025, we had $15.0 million of backlog, compared to $19.5 million as of October 31, 2024, due primarily to shipments against our backlog and timing of orders. 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 six months ended April 30, 2025, we generated $2.8 million of cash in our operating activities. This net inflow of cash is primarily related to a decrease in inventories of $2.2 million as a result of better inventory management and supply chain conditions improving allowing us to carry less inventory on hand, $1.2 million from depreciation and amortization, $1.0 million from the change in accounts payable, $0.4 million from stock-based compensation expense, $1.6 million from the change in accrued expenses, $0.1 million from bad debt expense and $87,000 from amortization of debt issuance costs. The cash usage was primarily due to the net loss of $0.5 million, the change in accounts receivable of $3.0 million, the change in other current assets of $0.1 million, right-of-use assets of $0.2 million, $34,000 tax payments on cancelled shares of restricted stock and $3,000 from deferred income taxes. During the six months ended April 30, 2025, we also spent $61,000 on capital expenditures, repaid $0.2 million on the revolving credit facility with EBC and received $0.2 million 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. In the past, we have purchased all additional equipment, or financed some of our equipment and furnishings requirements through capital leases. At this time, we have not identified any additional capital equipment purchases that would require significant additional leasing or capital expenditures during the next 12 months. We also believe that based on our current financial condition, our current backlog of unfulfilled orders, and our anticipated future operations, we would be able to finance our expansion, if necessary. From time to time, we may undertake acquisitions of other companies or product lines in order to diversify our product and solutions offerings and customer base. Conversely, we may undertake the disposition of a division or product line due to changes in our business strategy or market conditions. Acquisitions may require the outlay of cash, which may reduce our liquidity and capital resources while dispositions may increase our cash position, liquidity and capital resources. Since our goal is to continue to expand our operations and accelerate our growth through future acquisitions, we may use some of our current capital resources to fund acquisitions we may undertake in the future. Results of Operations Three Months Ended April 30, 2025 vs. Three Months Ended April 30, 2024 Net sales for the three months ended April 30, 2025 (the “fiscal 2025 quarter”) increased by 17.4%, or $2.8 million, to $18.9 million as compared to the three months ended April 30, 2024 (the “fiscal 2024 quarter”). Net sales for the fiscal 2025 quarter at the Custom Cabling segment increased by $3.4 million, or 54.8%, to $9.6 million, compared to $6.2 million in the fiscal 2024 quarter. The increase was primarily driven by tier one carrier applications for our direct air cooling offering and new market penetration in our Custom Cabling segment. Net sales for the fiscal 2025 quarter at the RF Connector segment decreased by $0.5 million, or 5.1%, to $9.4 million as compared to $9.9 million in the fiscal 2024 quarter, primarily due to timing of small cell applications and deployment. Gross profit for the fiscal 2025 quarter increased by $1.2 million to $6.0 million, and gross margins increased to 31.5% of sales compared to 29.9% of sales in the fiscal 2024 quarter. The increases in gross profit and gross margins were primarily related to the overall increase in sales, direct air cooling product mix and new market penetration. Engineering expenses increased by $0.1 million to $0.7 million in the fiscal 2025 quarter compared to $0.6 million in the fiscal 2024 quarter. The increase was the result of new product development. Engineering expenses represent costs incurred relating to the ongoing research and development of current and new products. Selling and general expenses increased by $0.6 million to $5.2 million (27.3% of sales) compared to $4.6 million (28.6% of sales) in the second quarter last year primarily due to an increase in variable compensation related to commissions and bonuses as a result of the higher sales and investment in additional resources. We incurred one-time charges of $0.2 million relating to severance and related legal expenses 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 $1.3 million, as compared to $0.4 million income and $0.7 million loss, respectively, for the comparable quarter last year. The increase in pretax income at the Custom Cabling segment was due to the increase in sales of direct air cooling to wireless carriers and penetrating new market segments. The increase in pretax loss at the RF Connector segment was primarily due to a decrease in sales relating to timing of orders. 17 For the fiscal 2025 and 2024 quarters, we recorded income tax provision of $135,000 and $3,649,000, respectively. The effective tax rate was (122.7%) for the fiscal 2025 quarter, compared to (564.7%) for the fiscal 2024 quarter. The change in the effective tax rate from the fiscal 2025 quarter to fiscal 2024 quarter was primarily driven by the effects of the change in valuation allowance, research and development credits, state income taxes, and other expected permanent differences. 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 $4.3 million and fully diluted loss per share of $0.41 for the fiscal 2024 quarter. For the fiscal 2025 quarter, the diluted weighted average shares outstanding were 10,669,608 as compared to 10,495,548 for the fiscal 2024 quarter. Six Months Ended April 30, 2025 vs. Six Months Ended April 30, 2024 Net sales for the six months ended April 30, 2025 (the “fiscal 2025 six-month period”) of $38.1 million increased by 28.7%, or $8.5 million, compared to the six months ended April 30, 2024 (the “fiscal 2024 six-month period”). The increase in net sales is attributable mainly to the Custom Cabling segment, which increased by $9.1 million, or 83.5%, to $20.0 million compared to $10.9 million in the fiscal 2024 six-month period, primarily driven by tier one carrier applications for our direct air cooling offering and new market penetration through our Cables Unlimited business division. Net sales for the fiscal 2025 six-month period at the RF Connector segment decreased by $0.6 million, or 3.2%, to $18.1 million compared to $18.7 million in the fiscal 2024 six-month period, primarily due to timing of small cell applications and deployment. Gross profit for the fiscal 2025 six-month period increased by $3.6 million to $11.7 million while gross margins increased to 30.6% of sales compared to 27.5% of sales in the fiscal 2024 six-month period. The increases in gross profit and gross margins were primarily related to the overall increase in sales, direct air cooling product mix and new market penetration. Engineering expenses remained consistent at $1.4 million for the fiscal 2025 six-month period compared to the fiscal 2024 six-month period. Engineering expenses represent costs incurred relating to the ongoing research and development of new products. Selling and general expenses increased by $0.9 million to $10.1 million (26.6% of sales) compared to $9.2 million (31.3% of sales) in the six-month period last year primarily due to an increase in variable compensation related to commissions as a result of the higher sales, bonuses and investment in additional resources. We incurred one-time charges of $0.2 million relating to severance and related legal expenses in fiscal 2025. For the fiscal 2025 six-month period, pretax income for the Custom Cabling segment was $3.1 million and the pretax loss for the RF Connector segment was $2.8 million, as compared to $0.1 million income and $2.4 million loss, respectively, for the comparable six-month period last year. For the fiscal 2025 and 2024 six-month periods, we recorded income tax provision of $171,000 and $2,818,000, respectively. The effective tax rate was (53.6%) for the fiscal 2025 six-month period, compared to (99.3%) for the fiscal 2024 six-month period. The change in effective tax rate for the fiscal 2025 and 2024 six-month periods was primarily driven by the effects of the change in valuation allowance, research and development credits, state income taxes, and other expected permanent differences. For the fiscal 2025 six-month period, net loss was $0.5 million and fully diluted loss per share was ($0.05) per share as compared to a net loss of $5.7 million and fully diluted loss per share of ($0.54) per share for the fiscal 2024 six-month period. For the fiscal 2025 six-month period, the diluted weighted average shares outstanding were 10,614,364 as compared to 10,452,597 for the fiscal 2024 six-month period. Item 3. Quantitative and Qualitative Disclosures about Market Risk As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required under this Item.