# R F Industries Ltd: Form 10-Q for the period ended Jul 31, 2023

- Company: [R F Industries Ltd](/companies/rfil.md) (CIK 740664)
- Form: 10-Q
- Filed: 2023-09-14
- Accepted by EDGAR: Sep 14, 2023, 20:08 ET
- Period: 2023-07-31
- Accession: 0001437749-23-025902
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/740664/000143774923025902/rfil20230731_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/740664/000143774923025902/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-07-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-05-01 to 2023-07-31 | $15.7m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2022-11-01 to 2023-07-31 | $56.3m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2023-05-01 to 2023-07-31 | $11.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-11-01 to 2023-07-31 | $41.3m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-05-01 to 2023-07-31 | $3.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-11-01 to 2023-07-31 | $15.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2023-05-01 to 2023-07-31 | $690.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-11-01 to 2023-07-31 | $2.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-05-01 to 2023-07-31 | $5.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-11-01 to 2023-07-31 | $15.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-05-01 to 2023-07-31 | −$2.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-11-01 to 2023-07-31 | −$2.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-05-01 to 2023-07-31 | −$482.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-11-01 to 2023-07-31 | −$806.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-05-01 to 2023-07-31 | −$1.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-11-01 to 2023-07-31 | −$2.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-05-01 to 2023-07-31 | −$0.16 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2022-11-01 to 2023-07-31 | −$0.22 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-05-01 to 2023-07-31 | −$0.16 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-11-01 to 2023-07-31 | −$0.22 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-05-01 to 2023-07-31 | 10,290,265 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2022-11-01 to 2023-07-31 | 10,267,652 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2022-11-01 to 2023-07-31 | $2.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-11-01 to 2023-07-31 | $2.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-05-01 to 2023-07-31 | $0 | us-gaap:PaymentsOfDividendsCommonStock |
| Dividends paid | 9 months, 2022-11-01 to 2023-07-31 | $0 | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-07-31 | $4.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-07-31 | $34.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-07-31 | $78.1m | us-gaap:Assets |
| Current liabilities | at 2023-07-31 | $12.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-07-31 | $37.7m | us-gaap:Liabilities |
| Long-term debt | at 2023-07-31 | $11.3m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-07-31 | $2.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-07-31 | $40.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,481 characters.

*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, 2022 and other reports and filings made with the Securities and Exchange Commission.*

### Critical Accounting Policies

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to bad debts, inventory reserves, earn-out liabilities, and contingencies on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

#### Inventories

Inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average cost method of accounting. Certain items in inventory may be considered obsolete or excess and, as such, we periodically review our inventories for excess and slow-moving items and make provisions as necessary to properly reflect inventory value. Because inventories have, during the past few years, represented up to one-fourth of our total assets, any reduction in the value of our inventories would require us to take write-offs that would affect our net worth and future earnings.

#### Allowance for Doubtful Accounts

We record an allowance for doubtful accounts based upon our assessment of various factors. We consider historical experience, the age of the accounts receivable balance, credit quality of our customers, current economic conditions and other factors that may affect a customer’s ability to pay.

#### Long-Lived Assets Including Goodwill

We assess property, plant and equipment and intangible assets, which are considered definite-lived assets, for impairment. Definite-lived assets are reviewed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If property and equipment and intangible assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value.

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

We test our goodwill and trademarks and indefinite-lived assets for impairment at least annually or more frequently if events or changes in circumstances indicate these assets may be impaired. These events or circumstances require significant judgment and could include a significant change in the business climate, legal factors, operating performance indicators, competition and sale or disposition of all or a portion of a division. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital.

As of July 31, 2023, we performed an impairment test analysis for Schrofftech. As noted above, we test our goodwill, trademarks, and indefinite-lived intangible assets for impairment at least annually, which we have traditionally done in the fourth quarter, or on an interim basis when events or changes in circumstances suggest these assets may be impaired. Impairment is measured as the excess of the carrying value of the goodwill or indefinite-lived intangible asset over its fair value.

Impairment may result from a number of factors, including performance deterioration, negative cash flows from operations and/or changes in anticipated future cash flows, changes in business plans, adverse economic or market conditions, or other factors beyond our control. The amount of any impairment must be expensed as a charge to operations. Schrofftech’s three and nine-months results ended July 31, 2023 triggered an impairment analysis. Schrofftech was acquired on November 4, 2019 for a total purchase price of $5.3 million, consisting of cash consideration of $4.0 million and $1.3 million in earn-out, of which none was earned. As of July 31, 2023, Schrofftech has a carrying value of $3.2 million, of which includes $1.1 million in goodwill, $0.5 million in non-amortizable intangible assets and $1.6 million in net amortizable intangible assets. The analysis performed included a blend of the income approach (discounted cash flow method) and market approach (guideline public company method) to reach a fair value of equity in excess of the fair value to the carrying amount.

The analysis performed in blending the income approach and the market approach incorporates several significant judgments and assumptions about projected revenue growth, future operating margins and discount rates. There are inherent uncertainties related to these assumptions and our judgment in applying them to the impairment analysis. Changes in certain events or circumstances could result in changes to our estimated fair values, and may result in future write-downs to the carrying values of these assets. Impairment charges could adversely affect our financial results, financial ratios and could limit our ability to obtain financing in the future.

#### Income Taxes

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

The calculation of the tax provision involves significant judgment in estimating the impact of uncertainties in the application of GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with management’s expectations could have a material impact on our financial condition and operating results.

#### Stock-based Compensation

We use the Black-Scholes model to value the stock option grants. This valuation is affected by our stock price as well as assumptions regarding a number of inputs which involve significant judgments and estimates. These inputs include the expected term of employee stock options, the expected volatility of the stock price, the risk-free interest rate and expected dividends.

### 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, wiring harnesses for a broad range of applications in a diverse set of end markets, energy-efficient cooling systems for wireless base stations and remote equipment shelters and custom designed, pole-ready 4G and 5G small cell integrated enclosures.

For the nine months ended July 31, 2023, revenues from the Custom Cabling segment were generated from the sale of fiber optics cable, copper cabling, custom patch cord assemblies, and wiring harnesses, which collectively accounted for 55% of the Company’s total sales. Revenues from the RF Connector segment were generated from the sales of RF connector products and cable assemblies and accounted for 45% of total sales for the nine months ended July 31, 2023. 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. However, we have incurred operating losses during the three and nine months ended July 31, 2023. During the period, we have implemented certain cost-cutting measures to reduce our operating expenses and to help drive positive operating cash flow and increase liquidity. Our plan includes 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 July 31, 2023, we had a total of $4.1 million of cash and cash equivalents compared to a total of $4.5 million of cash and cash equivalents as of October 31, 2022. As of July 31, 2023, we had working capital of $22.8 million and a current ratio of approximately 2.9:1 with current assets of $34.8 million and current liabilities of $12.1 million. We believe that the amount of cash remaining, plus the amount available to us under the Revolving Credit Facility, will be sufficient to fund our anticipated liquidity needs.

As of July 31, 2023, we had $17.2 million of backlog, compared to $27.8 million as of October 31, 2022. The decrease in backlog relates primarily to shipments made against orders for our hybrid fiber cables. Since purchase orders are submitted from customers based on the timing of their requirements, our ability to predict orders in future periods or trends in future periods is limited. Furthermore, purchase orders may be subject to cancellation from customers, although we have not historically experienced material cancellations of purchase orders.

In the nine months ended July 31, 2023, we generated $2.6 million of cash in our operating activities. This net inflow of cash is primarily related to an increase in other current assets of $4.6 million, the collections of accounts receivable of $5.4 million, $1.8 million from depreciation and amortization, and $0.7 million from stock-based compensation expense. The cash usage was primarily due to accrued expenses of $4.3 million and our net loss of $2.2 million. The cash generated by other current assets represents $4.6 million, which primarily consists of $2.8 million of reimbursement for tenant improvements and $1.5 million received from ERC.

During the nine months ended July 31, 2023, we also spent $2.3 million on capital expenditures, and $1.8 million in Term Loan payments. The cash used in operating activities and the amounts spent on capital expenditures were partially offset by $0.1 million of proceeds received from the exercise of stock options. As noted above, we also drew $1.0 million from the Revolving Credit Facility as of July 31, 2023, primarily to fund leasehold improvements to the new corporate headquarters.

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 July 31, 2023 vs. Three Months Ended July 31, 2022

Net sales for the three months ended July 31, 2023 (the “fiscal 2023 quarter”) decreased by 34%, or $8.1 million, to $15.7 million as compared to the three months ended July 31, 2022 (the “fiscal 2022 quarter”). Net sales for the fiscal 2023 quarter at the Custom Cabling segment decreased by $5.4 million, or 40.6%, to $7.9 million, compared to $13.3 million in the fiscal 2022 quarter. The decrease was primarily the result of a decrease in sales of hybrid fiber cables to wireless carrier customers and a decrease in sales of small cell products and systems to customers in the Tier-1 wireless ecosystem. Net sales for the fiscal 2023 quarter at the RF Connector segment decreased by $2.7 million, or 25.7%, to $7.8 million as compared to $10.5 million in the fiscal 2022 quarter, primarily due to a decrease in sales related to carrier projects involving approved RF components.

Gross profit for the fiscal 2023 quarter decreased by $3.4 million to $3.8 million, and gross margins decreased to 24.4% of sales compared to 30.4% of sales in the fiscal 2022 quarter. The decreases in gross profit and gross margins were primarily related to the overall decrease in sales.

Engineering expenses decreased by $0.1 million to $0.7 million in the fiscal 2023 quarter compared to $0.8 million in the fiscal 2022 quarter. Engineering expenses represent costs incurred relating to the ongoing research and development of current and new products.

Selling and general expenses decreased by $0.3 million to $5.1 million (32.9% of sales) compared to $5.4 million (22.5% of sales) in the third quarter last year primarily due to a decrease in variable compensation related to commissions and bonuses as a result of the lower sales. We also incurred a one-time charge of $194,000 (related to the move of our C Enterprises and Microlab divisions, and including system implementation charges and severance) compared to acquisition-related expenses and a one-time charge of $114,000 (including professional fees, system implementation charges and severance).

For the fiscal 2023 quarter, the Custom Cabling segment had pretax loss of $0.7 million and the RF Connector segment had a pretax loss of $1.1 million, as compared to $0.6 million income and $1 million income, respectively, for the comparable quarter last year. The pretax loss at the Custom Cabling segment was due to the decrease in sales of hybrid fiber cables to wireless carrier customers and a decrease in sales of small cell products and systems to customers in the Tier-1 wireless ecosystem. The decrease in the pretax net income at the RF Connector segment was primarily due to the decrease in Microlab sales related to carrier projects involving approved RF components.

For fiscal 2023 and 2022 quarters, we recorded income tax (benefit) provision of ($482,000) and $140,000, respectively. The effective tax rate was 22.7% for the fiscal 2023 quarter, compared to 15.4% for the fiscal 2022 quarter. The change in the effective tax rate from the fiscal 2022 quarter to fiscal 2023 quarter was primarily driven by the increased benefit from research and development credits and the Company's full year forecasted financial loss.

For the fiscal 2023 quarter, net loss was $1.6 million and fully diluted loss per share was $0.16, compared to a net income of $0.8 million and fully diluted earnings per share of $0.08 for the fiscal 2022 quarter. For the fiscal 2023 quarter, the diluted weighted average shares outstanding was 10,290,265 as compared to 10,238,932 for the fiscal 2022 quarter.

### Nine Months Ended July 31, 2023 vs. Nine Months Ended July 31, 2022

Net sales for the nine months ended July 31, 2023 (the “fiscal 2023 nine-month period”) of $56.3 million decreased by 9.6%, or $6.0 million, compared to the nine months ended July 31, 2022 (the “fiscal 2022 nine-month period”). The decrease in net sales is attributable to the Custom Cabling segment, which decreased by $9.5 million, or 23.6%, to $30.8 million compared to $40.3 million in the fiscal 2022 nine-month period, primarily related to wireless carrier network deployment slowdowns across the industry in 2023 impacting both our hybrid fiber sales and our small cell and direct air cooling products. Net sales for the fiscal 2023 nine-month period at the RF Connector segment increased by $3.6 million, or 16.4%, to $25.5 million compared to $21.9 million in the fiscal 2022 nine-month period. The increase was primarily the result of the Microlab acquisition on March 1, 2022.

Gross profit for the fiscal 2023 nine-month period decreased by $2.4 million to $15.0 million and gross margins decreased to 26.7% of sales from 28.0% of sales in the fiscal 2022 nine-month period. The decreases in gross profit and gross margins were primarily related to the overall decrease in sales.

Engineering expenses increased by $0.4 million to $2.5 million for the fiscal 2023 nine-month period compared to $2.1 million in the fiscal 2022 nine-month period. The increase was primarily due to additional engineering expenses during the fiscal 2023 nine-month period related to the engineering efforts associated with our integrated systems products and three full quarters of Microlab. Engineering expenses represent costs incurred relating to the ongoing research and development of new products.

Selling and general expenses increased by $1.4 million to $15.2 million (27.0% of sales) compared to $13.8 million (22.2% of sales) in the nine-month period last year. Microlab, which was acquired on March 1, 2022, accounted for $3.6 million of the selling and general expenses, as compared to $2.0 million for the same period last fiscal year. The increase at Microlab was offset by decreases in variable compensation related to commissions and bonus as a result of the lower sales overall. We also incurred one-time charges totaling $0.8 million related to an additional rent expense of $444,000 (of which $387,000 was non-cash) related to lease accounting, $213,000 in facility move expenses, severance of $75,000 and $45,000 in ERP system implementations in the fiscal 2023 nine-month period compared to acquisition related expenses and other one-time charges (including attorney fees, due diligence and broker fees) which accounted for $1.6 million for the fiscal 2022 nine-month period.

For the fiscal 2023 nine-month period, we recorded a pretax loss for the Custom Cabling segment of $0.8 million and a pretax loss for the RF Connector segment of $1.2 million, as compared to $1.7 million and $1.6 million of income, respectively, for the comparable nine-month period last year. The pretax loss at the Custom Cabling segment was primarily due to the decrease in sales of hybrid fiber cables to our wireless carrier customers and a decrease in sales of small cell products and systems to customers in the Tier-1 wireless ecosystem. The decrease in the pretax net income at the RF Connector segment was primarily due to the decrease in sales related to carrier projects involving approved RF components.

For the fiscal 2023 and 2022 nine-month periods, we recorded income tax (benefit) provision of ($806,000) and $196,000, respectively. The effective tax rate was 26.6% for the fiscal 2023 nine-month period, compared to 16.4% for the fiscal 2022 nine-month period. The change in effective tax rate for the fiscal 2023 and 2022 nine-month periods was primarily driven by stock-based compensation windfall/shortfalls and the Company’s full year forecasted financial loss.

For the fiscal 2023 nine-month period, net loss was $2.2 million and fully diluted loss per share was $0.22 as compared to a net income of $1.0 million and fully diluted earnings per share of $0.10 for the fiscal 2022 nine-month period. For the fiscal 2023 nine-month period, the diluted weighted average shares outstanding was 10,267,652 as compared to 10,223,209 for the fiscal 2022 nine-month period.

## Controls and procedures

As filed, 2,303 characters.

#### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide reasonable assurance only of achieving the desired control objectives, and we necessarily are required to apply our judgment in weighing the costs and benefits of possible new or different controls and procedures. Limitations are inherent in all control systems, so no evaluation of controls can provide absolute assurance that all control issues and any fraud have been detected. Because of the inherent limitations, we regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, and to maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report, we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, we concluded that our disclosure controls and procedures were effective as of that date.

#### Changes in Internal Control Over Financial Reporting

During the third quarter of fiscal 2023, there were no changes in the internal control over financial reporting as such term is defined in Rule 13a-15(f) of the Exchange Act, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 1,771 characters.

Our business, financial condition and operating results are affected by a number of factors, whether currently known or unknown, including risks specific to us or our industry, as well as risks that affect businesses in general. In addition to the information and risk factors set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, filed with the SEC on January 24, 2023. The risks disclosed in such Annual Report and in this Quarterly Report could materially adversely affect our business, financial condition, cash flows, or results of operations and thus our stock price. We believe there have been no material changes in our risk factors from those disclosed in the Annual Report. However, additional risks and uncertainties not currently known or which we currently deem to be immaterial may also materially adversely affect our business, financial condition, or results of operations.

These risk factors may be important to understanding other statements in this Quarterly Report and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. Because of such risk factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Filed Sep 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001437749-23-025902. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.