RFIL 10-K & 10-Q changes, risk factors and insider trading

We have entered into a new credit facility, which replaced a Loan Agreement we previously entered into to fund our acquisition of Microlab, which may expose us to additional risks, including risks associated with the inability to repay the loan on a timely basis.

On March 15, 2024, we entered into a new loan and security agreement (the “EBC Credit Agreement”), with Eclipse Business Capital as administrative agent (“EBC”), which providing 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). Pursuant to the terms of the First Amendment to the EBC Credit Agreement entered into by the parties on June 14, 2024, the EBC Additional Line was modified to provide for $1.0 million through July 12, 2024, $666,666.67 from July 13, 2024 through August 11, 2024 and $333,333.34 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. We used proceeds from the initial drawings under the EBC Credit Facilities to repay in full outstanding obligations under the loan agreement (the “BofA Loan Agreement”) previously entered into by us and Bank of America, N.A. (“BofA”) used to fund our acquisition of Microlab. Additional proceeds from the initial drawings under the EBC Credit Facilities were used 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 The BofA Loan Agreement was terminated upon entry into the EBC Credit Agreement and is no longer in effect.

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 accruesaccrue 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 beare 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.

Substantially all of the RF Connector division’s connector products are manufactured by third-party contract manufacturers. We rely on them to procure components for RF connectors and in certain cases to design, assemble and test the products on a timely and cost-efficient basis. If our contract manufacturers are unable to complete design work on a timely basis, we will experience delays in product development and our ability to compete may be harmed. In addition, because some of our manufacturers have manufacturing facilities in Taiwan and China, their ability to provide us with adequate supplies of high-quality products on a timely and cost-efficient basis is subject to a number of additional risks and uncertainties, including political, social and economic instability and factors that could impact the shipment of supplies. Further, health crises, including epidemics or pandemics, such as the COVID-19 pandemic,pandemics and government and business responses thereto, could affect our manufacturers, including by resulting in quarantines and/or closures, which could result in potential closures and disruptions to our manufacturing needs. If our manufacturers are unable to provide us with adequate supplies of high-quality products on a timely and cost-efficient basis, our operations would be disrupted and our net revenue and profitability would suffer. Moreover, if our third-party contract manufacturers cannot consistently produce high-quality products that are free of defects, we may experience a higher rate of product returns, which would also reduce our profitability and may harm our reputation and brand.

As part of our plan to operate businesses that are profitable and that reflect the changing market, we from time to time sell unprofitable divisions and purchase new businesses. Such recent transactions include the purchase of our new C Enterprises and Schrofftech subsidiaries in 2019 and Microlab in 2022. In addition, we have previously disclosed that, as part of our growth strategy, we intend to make additional acquisitions of businesses in the future. While we believe that restructuring our operations and acquiring other businesses will benefit us in the longer term, these acquisitions have in the short termshort-term caused us to incur additional legal, accounting and administrative expenses, including the cost of integrating the various accounting systems of our new subsidiaries, upgrading our information systems, and the cost of managing various divisions in separate locations and states. We may in the future make additional acquisitions. Accordingly, we will be subject to numerous risks associated with the acquisition of additional businesses, including:

In addition to the normal risks associated with purchasing a new business and operating at a new location, the Company’s acquisition of Microlab in 2022 reduced our cash on hand by over $7.3 million and we took on $17 million of indebtedness and related financial covenants under the BofA Term Loan. In March 2024, we entered into the EBC Credit Agreement, which replaced the BofA Term Loan. The new credit facility requires the maintenance of certain financial covenants, including Excess Availability requirements adand capital expenditure limitations. A breach of any of the covenants could result in a default under the credit facility. Upon the occurrence of an event of default under the credit facility, the commercial bank could terminate all commitments to extend further credit and elect to declare amounts outstanding thereunder to be immediately due and payable. The credit facility is secured by a lien on substantially all personal property of the Company and certain of its subsidiaries.

Our business, financial condition and results of operations could be harmed by the effects of outbreaks of COVID-19 or similar public health crises.

We are subject to risks associated with public health threats, including outbreaksepidemics associatedor with COVID-19 and its variants,pandemics, which have had and may continue tocould have an adverse impact on certain aspects of our business. While most countries have removed or reduced the restrictions initially implemented in response to COVID-19, theThe extent to which the COVID-19 pandemic or anothera public health crisis impactimpacts our business, results of operations, and financial condition will depend on futurea number of developments which are highly uncertain and are difficult to predict. These developments include, but are not limited to, futurethe resurgencesduration, spread and severity of theoutbreaks, virusgovernment and its variants, actions taken to contain the virus or address its impact, the timing, distribution, and efficacy of vaccinesresponses and other treatments,actions to mitigate the spread of and theto impositiontreat ofsuch government lockdowns, quarantineoutbreaks and physicalwhen distancingand requirements.to what extent business, economic and social activity and conditions are disrupted.

We generate much of our revenue from a limited number of customers. For the year ended October 31, 2025, a wireless provider customer accounted for approximately 10% of total sales and approximately 26% of the total net accounts receivable balance, and an aerospace customer accounted for less than 10% of total sales and approximately 18% of the total net accounts receivable balance. For the year ended October 31, 2024, a wireless carrierprovider customer and a distributor customer both accounted for less than 10% of total sales, and accounted for approximately 15% and 10% of the total net accounts receivable balance, respectively. For the year ended October 31, 2023, a different wireless carrier customer accounted for approximately 10% of total sales and had no accounts receivable. The same distributor customer accounted for less than 10% of sales and approximately 10% of total net accounts receivable, while another distributor customer accounted for approximately 10% of total sales and for 11% of the total net accounts receivable balance. Although the distributors have been on-going major customers of the Company and the wireless carrier is a newer customer to the Company, the written agreements with these customers do not have any minimum purchase obligations and they could stop buying our products at any time and for any reason. A reduction, delay, or cancellation of orders from these customers or the loss of these customers could significantly reduce our future revenues and profits. Adverse events affecting our principal customers could also negatively affect our ability to retain their business and obtain new orders, which could adversely affect our revenue and results of operations.

Since sales made to foreign customers have historically been in U.S. dollars, previously we have not been exposed to the risks of foreign currency fluctuations. However, with the acquisition of Microlab, sales made to certain foreign customers were denominated in the currencies of the countries where sales are made and for the fiscal years ended October 31, 20242025 and 2023,2024, we recognized $33,000 in foreign currency exchange gain$19,000 and $0.1 million$33,000 in foreign currency exchange gain at time of collection, respectively.

Businesses have become increasingly dependent on digital technologies to conduct day-to-day operations. Additionally, we may be exposed to increased cybersecurity risks as a result of remote working requirements imposed on us as a result of the COVID-19 pandemic.working. At the same time, cyber incidents, including deliberate attacks or unintentional events, have increased. A cyberattack could include gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption or result in denial of service on websites. We depend on digital technology, including information systems and related infrastructure, to process and record financial and operating data, and communicate with our employees and business partners. Our technologies, systems, networks, and those of our business partners may become the target of cyberattacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, or other disruption of our business operations. Although to date we have not experienced any material losses relating to cyberattacks, there can be no assurance that we will not suffer such losses in the future. Cyberattacks are increasing in their frequency, sophistication and intensity. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities. In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.

We are a “smaller reporting company,” as defined in the Regulation S-K of the Securities Act of 1933, as amended,amended (“Regulation S-K”), which allows us to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. In addition, we are only required to provide two years of audited financial statements in our SEC reports. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until we are no longer a “smaller reporting company”. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal controls in the future.

We test goodwill for impairment at the reporting unit level. The goodwill impairment guidance in US GAAP provides entities an option to perform a qualitative assessment to determine whether further impairment testing is necessary. The qualitative assessment requires significant judgments by management about macro-economic conditions including our operating environment, industry and other market considerations, entity-specific events related to financial performance or loss of key personnel, and other events that could negatively impact the financial results and cash flows of the reporting unit. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative impairment test is performed. The quantitative assessment compares the fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the amount by which the carrying value exceeds the fair value is recognized as an impairment loss.

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 consolidated 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 assess all positive and negative evidence in determining if a valuation allowance is required to be recorded against the deferred tax assets. Further, we 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, which includes the recent trend of losses. As of October 31, 2024,2025, we recorded a valuation allowance of $3.8$4.7 million against itsour federal and combined state deferred tax assets.

During the periods covered by this Annual Report, we marketed a variety of connector products, including connectors and cables, standard and custom cable assemblies, wiring harnesses and fiber optic cable products to numerous industries for use in thousands of products.applications. We aggregatepreviously aggregated our operating divisions into two reportable segments that have similar economic characteristics and are similar in the majority of 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. Our two reportable segments aresegments, the RF Connector and Cable Assembly (“RF Connector”) segment and the Custom Cabling Manufacturing and Assembly (“Custom Cabling”) segmentsegment. –During basedthe uponfourth thisquarter evaluation.of fiscal 2025, we completed changes to the structure of our organization in connection with broader restructuring initiatives, including consolidation of manufacturing operations, headcount reductions, and the transition of our sales organization to a unified, customer‑centric model. As a result of these changes, our previous RF Connector and Custom Cabling operating segments were combined into a single reportable segment.

Revenues generated from theour Custominterconnect Cabling segmentproducts were from the sale of fiber optics cable, copper cabling, custom patch cord assemblies, and wiring harnesses, which collectively accounted for 42%31% of the Company’s total sales,sales for fiscal 2025, revenues from our custom cabling products were 32% of the Company’s total sales for fiscal 2025, and revenues from theour RFintegrated Connector segmentsystems were generated from the sales of RF connector products and cable assemblies and accounted for 58%37% of total sales for fiscal 2024.2025. TheOur RFinterconnect Connectorproducts segmentare mostly sellsprimarily standardized products regularly used by customers and, therefore, hashave a more stable revenue stream when compared to theour Customother Cablingofferings. segment.Our Thecustom Customcabling Cablingproducts segmentare mostly designs, manufactures, and sellsmore customized cabling and wireless-relatedwire-related equipment under larger project-based purchase orders. Accordingly,The theintegrated Customsystems Cablingsolutions segmentare isa blend of a standardized offering where we expect a more dependentstable uponrevenue largerstream projectwith orders,several andmore itscustomized revenues,solutions therefore,that maytend to be morepurchased volatilein thanlarge theproject-based revenues of the RF Connector segment.orders.

Historically, we have been able to fund our cash flow requirements for operationsliquidity and other capital requirements from funds we generated from operations. However,We generated operating income during fiscal 2025, as we havesaw incurredsales operatingcontinue lossesto inrecover fiscalduring 2024.the Duringperiod. thisFurther, period, we have implemented certainthe cost-cutting measures that were implemented to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity.liquidity Ourhave planstarted includesto 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.

As of October 31, 2024,2025, we had a total of $0.8$5.1 million of cash and cash equivalents compared to a total of $4.9$0.8 million of cash and cash equivalents as of October 31, 2023.2024. As of October 31, 2024,2025, we had working capital of $11.0$14.1 million and a current ratio of approximately 1.61.7:1 with current assets of $29.1$35.0 million and current liabilities of $18.1$20.9 million. The $12.5 million decrease in working capital is primarily the result of the change in debt classification resulting from the EBC Revolving Loan Facility. 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 October 31, 2024,2025, we had $19.5$15.5 million of backlog, compared to $16.1$19.5 million as of October 31, 2023.2024. The increasedecrease in backlog relates primarily to theshipments made against orders in our integrated systems products, where we saw an increase in Directsales Airof Coolingapproximately and$8.6 smallmillion cellyear requirements.over year. Our backlog may fluctuate from period to period based on customer demand, general business conditions and, in particular, the timing of project-based orders from large customers, which impacts our integrated systems offer. 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.

As of October 31, 2024,2025, we generated $3.2$4.6 million of cash in our operating activities. This net inflow of cash is primarily related to annet increaseincome of $0.1 million, a decrease in inventories of $4.0$1.0 million as a result of better inventory management and supply chain conditions improving allowing us to carry less inventory on hand, $2.5 million from depreciation and amortization, $0.9 million from stock-based compensation expense, $0.7 million in other current assets, $0.6$3.4 million from the change in accountsaccrued payable,expenses, $0.4$0.3 million from right-of-useincome assetstax andpayable, $0.1$0.2 million from amortization of debt issuance costs.costs, $50,000 from bad debt expense, $0.1 million from the change in other current assets and $37,000 from deferred income taxes. The cash usage was primarily due to the netchange lossin accounts receivable of $6.6$2.8 million, the change in accounts receivablepayable of $1.8 million resulting from a 16% increase in sales in Q4 2024 as compared to Q4 2023 and the change in accrued expenses of $0.3 million. The cash generated by other current assets represents $0.7 million, whichright-of-use primarily consistsassets of $0.4 millionmillion, $54,000 tax payments on cancelled shares of prepaidrestricted taxesstock and $0.3$12,000 milliongain on disposal of prepaidfixed expenses. We also recorded a non-cash item of $2.7 million from deferred income taxes.assets.

As of October 31, 2024,2025, we also spent $0.7$0.2 million on capital expenditures, $13.2repaid $0.4 million on the revolving credit facility with EBC, received $0.2 million in BofAproceeds Termfrom Loanthe payments, $0.5 millionexercise of debtstock issuance cost,options and drewreceived $7.2$12,000 millionin onproceeds EBCfrom Revolvingsales Loanof Facility.fixed assets.

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,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.

Gross profit for fiscal 20242025 decreasedincreased by $0.6$7.8 million to $18.9$26.7 million and gross margins increased to 29.1%33.2% of sales from 27.1%29.1% of sales in fiscal 2023.2024. The decreaseincreases in gross profit was primarily a result of the decrease in sales, whileand gross margins increasedwere dueprimarily todriven by stronger overall revenue and a more favorable mix from our direct air cooling and small cell enclosure offerings and our diverse custom cabling product mixofferings into the aerospace and otherenterprise cost-savings initiatives.market.

Engineering expenses decreasedincreased by $0.4$0.2 million to $3.0 million for fiscal 2025 compared to $2.8 million for fiscal 2024 compared to $3.2 million in fiscal 2023.2024. The decreaseincrease was primarily the result of advancesroutine increases in personnel-related costs and continued investment in product development and other cost-savings initiatives.development. Engineering expenses represent costs incurred relating to the ongoing research and development of new products.

Selling and general expenses decreasedincreased by $1.3$3.1 million to $22.0 million (27.3% of sales) compared to $18.9 million (29.2% of sales) compared to $20.2 million (28.0% of sales) in fiscal 20232024 primarily due to aan decreaseincrease in variable compensation related to commissions andas bonuses,a resultingresult fromof lowerhigher sales.sales, We also realized cost savings from restructuring, coupled with reduced general officebonuses and ITinvestment expenses.in additional resources. We incurred one-time charges of $0.2$1.0 million relating to consulting spend, severance,severance and anrelated inventorylegal appraisalexpenses in fiscal 2024.2025.

The provision (benefit) for income taxes was $0.7 million or 91% and $2.8 million or (73.5% and ($1.2 million) or (27.5%) of income before income taxes for fiscal 20242025 and 2023,2024, respectively. The fiscal 20242025 effective tax rate differed from the statutory federal rate of 21% primarily as a result of the tax benefit from research and development tax credits, the change in valuation allowance and state taxes.

For fiscal 2024,2025, net income was $0.1 million and fully diluted earnings per share was $0.01 as compared to a net loss wasof $6.6 million and fully diluted loss per share wasof $0.63 as compared to a net loss of $3.1 million and fully diluted loss per share of $0.30 for fiscal 2023.2024. For fiscal 2024,2025, the diluted weighted average shares outstanding was 10,481,83510,770,802 as compared to 10,283,44910,481,835 for fiscal 2023.2024.

Certain statements in this Quarterly Report on Form 10-Q (this “Quarterly Report”), and other oral and written statements made by RF Industries, Ltd., together with its five wholly-owned subsidiaries (collectively, hereinafter the “Company”, ”we”, “us”, or “our”), from time to time are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including those that discuss strategies, goals, outlook or other non-historical matters, including the potential for expansion of our business or the completion of acquisitions, or projected revenues, income, returns or other financial measures. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms or other comparable terminology. These forward-looking statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from those contained in such statements. Among the most important of these risks and uncertainties are the ability of the Company to meet customer demand through pricing and product offerings and efficient inventory and distribution channel management, our ability to continue to source our raw materials and products from our suppliers and manufacturers, particularly those in Asia, the impact of enacted and proposed tariffs that may affect the cost or availability of our products or raw materials sourced internationally, the market demand for our products, which market demand is dependent in large part on the state of the telecommunications industry, the Company’s ability to continue as a going concern, the Company’s ability to remain in compliance with its existing capital loan terms and financial covenants andcovenants, whether plans to develop 5G networks accelerate as expected, as well as our ability to meet any such demand, our ability to finance the expansion of our business or complete acquisitions, the effect of future business acquisitions and dispositions, the incurrence of impairment charges, and competition.

Important factors which may cause actual results to differ materially from the forward-looking statements are described in the Sections entitled “Risk Factors” in this Quarterly Report and in our Annual Report filed on Form 10-K for the fiscal year ended October 31, 2025, and other risks identified from time to time in the Company’s filings with the Securities and Exchange Commission.Commission ("SEC"). The Company assumes no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

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 Quarterly Report. 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 fiscal year ended October 31, 2025 and our other reports and filings made with the Securities and Exchange Commission (“SEC”).SEC.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these condensed consolidated 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 AprilJuly 30,31, 2026 to the items that we disclosed as our critical accounting estimates in the MD&A in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, except as set forth below with respect to the valuation allowance on our deferred income taxes.

RF Industries, Ltd. (together with its five wholly-owned subsidiaries, the “Company,” “we”, “us”, or “our”) is a national manufacturer and marketer of interconnect products and systems. We market a variety of connector products, including connectors and cables, standard and custom cable assemblies, wiring harnesses and fiber optic cable products to numerous industries for use in thousands of applications. We previously aggregated our operating divisions into two reportable segments, the RF Connector and Cable Assembly (“RF Connector”) segment and the Custom Cabling Manufacturing and Assembly (“Custom Cabling”) segment. During the fourth quarter of fiscal 2025, we completed changes to the structure of our organization in connection with broader restructuring initiatives, including consolidation of our manufacturing operations, headcount reductions, and the transition of our sales organization to a unified, customer‑centric model. As a result of these changes, our previous RF Connector and Custom Cabling operating segments were combined into a single reportable segment.

For the sixnine months ended AprilJuly 30,31, 2026, revenues generated from our interconnect products were 35%34% of the Company’s total sales, revenues from our custom cabling products were 37%39% of the Company’s total sales and revenues from our integrated systems product offering were 28%27% of total sales. Our interconnect products are primarily standardized products regularly used by customers and, therefore, have a more stable revenue stream whenas compared to our other offerings. Our custom cabling products are more customized cabling and wire-related equipment sold under larger project-based purchase orders. TheOur integrated systems solutionsproduct areoffering is a blend of standardized offeringsofferings, where we expect a more stable revenue streamstream, with several more customized solutions that tend to be purchased in large project-based orders.

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 sixnine months ended AprilJuly 30,31, 2026. The cost-cutting measures that were implemented to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity continue 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.

As of AprilJuly 30,31, 2026, we had a total of $3.4$4.5 million of cash and cash equivalents compared to a total of $5.1 million of cash and cash equivalents as of October 31, 2025. As of AprilJuly 30,31, 2026, we had working capital of $16.5$18.4 million and a current ratio of approximately 1.92.0:1 with current assets of $35.0$36.4 million and current liabilities of $18.6$18.1 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 for at least the next 12 months from the date of filing of this Quarterly Report.

As of AprilJuly 30,31, 2026, we had $20.0$18.6 million of backlog, compared to $15.5 million as of October 31, 2025. The increase in backlog relates primarily to shipments made against orders in our custom cabling and integrated systems product offerings.offering. Our backlog may fluctuate from period to period based on customer demand, general business conditions, and particularly the timing of project-based orders from large customers, which impacts our integrated systems offer.product offering. Since purchase orders are submitted by 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 sixnine months ended AprilJuly 30,31, 2026, we$1.6 usedmillion $47,000was ofprovided cash fromby our operating activities. ThisThe net outflowinflow of cash is primarily related to thenet income of $2.3 million, $1.8 million from depreciation and amortization, $0.8 million from stock-based compensation expense, a $0.6 million decrease in inventories, a change in accounts payable of $1.3$0.2 million, $1.2 million from depreciation and amortization, net income of $0.8 million, $0.5 million from stock-based compensation expense, the change in other current assets of $0.4 million, $47,000$71,000 from amortization of debt issuance costscosts, and$39,000 in deferred income taxestaxes, $20,000 in bad debt expense and a $12,000 loss on disposal of $25,000.fixed assets. The cash usage was primarily due to the change in accounts receivable of $2.2 million, accrued expenses of $1.6 million, income tax receivable of $0.8 million, an increase in inventories of $0.7$0.9 million, the change in accountsother receivable of $0.7 million, right-of-usecurrent assets of $0.2$0.5 million, right of use assets of $0.3 million, income tax payable of $0.3 million and $0.1 million of tax payments on cancelled shares of restricted stock and bad debt expense of $24,000.stock.

During the sixnine months ended AprilJuly 30,31, 2026, we also spent $0.3$0.4 million on capital expenditures, repaid $1.7$2.1 million on the revolving credit facility with EBC, paid $0.1 million in debt issuance cost, and received $0.4 million in proceeds from the exercise of stock options.

Three Months Ended AprilJuly 30,31, 2026 vs. Three Months Ended AprilJuly 30,31, 2025

Net sales for the three months ended AprilJuly 30,31, 2026 (the “fiscal 2026 quarter”) increased by 9.4%,21.1%, or $1.8$4.2 million, to $20.7$24.0 million compared to $18.9$19.8 million in the three months ended AprilJuly 30,31, 2025 (the “fiscal 2025 quarter”). The increase in net sales was primarily attributable to net sales of theour custom cabling product offering,products, which increased by $1.9$2.9 million, or 29.8%,41.6%, to $8.4$10.1 million in the fiscal 2026 quarter compared to $6.5$7.2 million in the fiscal 2025 quarter, primarily driven by increasedorganic growth in industrial market penetration in the aerospacesegments and industrialincreased industries.demand from a tier one carrier. Net sales of the interconnect product offeringproducts also increased by $0.9$1.6 million, or 15.9%,26.1%, to $6.9$7.8 million in fiscal 2026 quarter compared to $6.0$6.2 million in the fiscal 2025 quarter, primarily driven by higher customer demand for fiber applications andmore wireless infrastructure deployments. Net sales of the integrated systems product offering decreased by $1.1$0.4 million, or 17.2%,6.7%, to $5.3$6.0 million in the fiscal 2026 quarter compared to $6.4 million in the fiscal 2025 quarter, primarily driven by a decrease in sales of small cell solutions to our wireless carrier customers due to the timing of orders and shipments based on budget cycles.cycles, offset by an increase in thermal cooling within the same ecosystem.

Gross profit increased by $1.3$1.8 million to $7.3$8.5 million in the fiscal 2026 quarter compared to $6.0$6.7 million in the fiscal 2025 quarter, and gross margin increased to 35.1%35.6% of sales in the fiscal 2026 quarter compared to 31.5%34.0% of sales in the fiscal 2025 quarter. The increase in gross profit and gross margin werewas primarily related to the overall product mix and improved operational efficiencies across the organization. In addition, we received a $0.3 million refund of previously paid tariffs on imported components, which was recognized as a reduction to cost of goods sold during the fiscal 2026 quarter. Excluding the impact of this one-time tariff refund, normalized gross margin would have been 34.2% for the fiscal 2026 quarter.

Engineering expenses increased by $0.2$0.3 million to $0.9$1.1 million in the fiscal 2026 quarter compared to $0.7$0.8 million in the fiscal 2025 quarter. The increase was the result of resource allocation associated with new product development.development in addition to an increase in variable compensation. Engineering expenses represent costs incurred relating to the ongoing research and development of current and new products.

Selling and general expenses increased by $0.1$0.5 million to $5.3$5.7 million (25.4%23.8% of sales) in the fiscal 2026 quarter compared to $5.2 million (27.3%26.5% of sales) in the fiscal 2025 quarter primarily due to an increase in variable compensation related to commissions and bonuses as a result of higher salessales, an increase in public company fees and investmentan increase in additionalstock-based resources.compensation.

For the fiscal 2026 and 2025 quarters, we recorded income tax provision of $60,000$84,000 and $135,000,$88,000, respectively. The effective tax rate was 6.4%5.5% for the fiscal 2026 quarter, compared to (122.7%)18.3% for the fiscal 2025 quarter. The change in the effective tax rate from the fiscal 2026 quarter to fiscal 2025 quarter was primarily driven by the change in valuation allowance, research and development credits, unrecognized tax benefits, state income taxes, and other expected permanent differences.

For the fiscal 2026 quarter, net income was $0.9$1.4 million and fully diluted income per share was $0.08,$0.12, compared to a net lossincome of $0.2$0.4 million and fully diluted lossincome per share of $0.02$0.04 for the fiscal 2025 quarter. For the fiscal 2026 quarter, the diluted weighted average shares outstanding were 11,424,57211,600,299 as compared to 10,669,60810,774,304 for the fiscal 2025 quarter.

SixNine Months Ended AprilJuly 30,31, 2026 vs. SixNine Months Ended AprilJuly 30,31, 2025

Net sales for the sixnine months ended AprilJuly 30,31, 2026 (the “fiscal 2026 six-monthnine-month period”) increased by 4.1%,9.9%, or $1.6$5.7 million, to $39.7$63.6 million compared to $38.1$57.9 million in the sixnine months ended AprilJuly 30,31, 2025 (the “fiscal 2025 six-monthnine-month period”). The increase in net sales was primarily attributable to net sales of theour custom cabling product offering,products, which increased by $3.6$6.6 million, or 32.2%,35.9%, to $14.8$25.0 million in the fiscal 2026 six-monthnine-month period compared to $11.2$18.4 million in the fiscal 2025 six-monthnine-month period, primarily driven by increased aerospace demand and organic growth within ourindustrial existingmarket customer base and product portfolio.segments. Net sales of the interconnect product offeringproducts also increased by $2.4$4.0 million, or 21.2%22.9% to $13.8$21.6 million in the fiscal 2026 six-monthnine-month period compared to $11.4$17.6 million in the fiscal 2025 six-monthnine-month period, primarily driven by highermore customerwireless demandinfrastructure for fiber optic and general connectivity solutions.deployments. Net sales of the integrated systems product offering decreased by $4.5$4.9 million, or 28.9%,22.4%, to $11.0$17.0 million in the fiscal 2026 six-monthnine-month period compared to $15.5$21.9 million in fiscal 2025 six-monthnine-month period, primarily driven by the timing ofdelays in small cell deployments within tier one wireless carriers, resulting in delayed orders and shipmentsdeferred to our wireless carrier customers based on longer system design approval and budget cycles.shipments.

Gross profit increased by $1.7$3.5 million to $13.4$21.9 million for the fiscal 2026 six-monthnine-month period compared to $11.7$18.4 million in the fiscal 2025 six-monthnine-month period, and gross margin increased to 33.8%34.5% of sales in the fiscal 2026 six-monthnine-month period compared to 30.6%31.8% of sales in the fiscal 2025 six-monthnine-month period. The increases in gross profit and gross margin were primarily related to the overall increase in sales, product mix and continued operational efficiencies. In addition, we received a $0.3 million refund of previously paid tariffs on imported components, which was recognized as a reduction to cost of goods sold during the fiscal 2026 nine-month period. Excluding the impact of this one-time tariff refund, normalized gross margin would have been 33.9% for the fiscal 2026 nine-month period.

Engineering expenses increased by $0.4$0.7 million to $1.8$2.8 million in the fiscal 2026 six-monthnine-month period compared to $1.4$2.1 million in the fiscal 2025 six-monthnine-month period. The increase was the result of resource allocation associated with new product development.development in addition to an increase in variable compensation. Engineering expenses represent costs incurred relating to the ongoing research and development of new products.

Selling and general expenses increased by $0.2$0.6 million to $10.3$16.0 million (26.1%25.2% of sales) in the fiscal 2026 six-monthnine-month period compared to $10.1$15.4 million (26.6% of sales) in the fiscal 2025 six-monthnine-month period primarily due to an increase in stock-basedvariable compensation expenserelated to commissions and bonuses as a result of higher sales, an increase in public company fees.fees and an increase in stock-based compensation.

For the fiscal 2026 and 2025 six-monthnine-month periods, we recorded income tax provision of $94,000$178,000 and $171,000,$259,000, respectively. The effective tax rate was 10.2%7.3% for the fiscal 2026 six-monthnine-month period, compared to (53.6%)160.9% for the fiscal 2025 six-monthnine-month period. The change in effective tax rate for the fiscal 2026 and 2025 six-monthnine-month periods was primarily driven by the effects of the change in valuation allowance, research and development credits, state income taxes, unrecognized tax benefits, and other expected permanent differences.

For the fiscal 2026 six-monthnine-month period, net income was $0.8$2.3 million and fully diluted income per share was $0.07$0.20 per share as compared to a net loss of $0.5$(0.1) million and fully diluted loss per share of $($0.050.01) per share for the fiscal 2025 six-monthnine-month period. For the fiscal 2026 six-monthnine-month period, the diluted weighted average shares outstanding were 11,221,54211,397,571 as compared to 10,614,36410,632,566 for the fiscal 2025 six-monthnine-month period.