RFIL 10-Q Quarter ended April 30, 2025

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.

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:

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):

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.

Note 4 – Other current assets

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

Note 5 – Accrued expenses and other current liabilities

Accrued expenses consist of the following (in thousands):

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:

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.

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:

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:

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

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):

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):

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):