10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 30, 2020

Commission file number: 000-13301

RF INDUSTRIES, LTD.

(Exact name of registrant as specified in its charter)

Nevada	88-0168936
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7610 Miramar Road, Building 6000 San Diego, California	92126
(Address of principal executive offices)	(Zip Code)
(858) 549-6340
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	RFIL	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐	Accelerated filer  ☐	Non-accelerated filer  ☒	Smaller reporting company ☒
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes  ☐ No  ☒

The number of shares of the issuer’s Common Stock, par value $0.01 per share, outstanding as of May 29, 2020 was 9,758,062.

1

Part I. FINANCIAL INFORMATION

Item 1: Financial Statements

RF INDUSTRIES, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	April 30,		October 31,
	2020		2019
	(Unaudited)		(Note 1)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	14,076	$	12,540
Trade accounts receivable, net of allowance for doubtful accounts of $38 and $23, respectively		4,950		12,190
Inventories		9,100		8,245
Other current assets		1,121		685
TOTAL CURRENT ASSETS		29,247		33,660
Property and equipment:
Equipment and tooling		3,654		3,602
Furniture and office equipment		1,066		998
		4,720		4,600
Less accumulated depreciation		3,923		3,761
Total property and equipment, net		797		839
Operating lease right of use assets, net		1,901		-
Goodwill		2,697		1,340
Amortizable intangible assets, net		3,527		1,092
Non-amortizable intangible assets		1,174		657
Other assets		69		112
TOTAL ASSETS	$	39,412	$	37,700

See Notes to Unaudited Condensed Consolidated Financial Statements.

2

Item 1: Financial Statements (continued)

RF INDUSTRIES, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

	April 30,		October 31,
	2020		2019
	(Unaudited)		(Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,454	$	2,406
Accrued expenses		3,305		3,653
Income taxes payable		-		21
Other current liabilities		977		-
TOTAL CURRENT LIABILITIES		5,736		6,080
Deferred tax liabilities		91		-
Operating lease liabilities		1,023		-
Other long-term liabilities		869		87
TOTAL LIABILITIES		7,719		6,167
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock - authorized 20,000,000 shares of $0.01 par value; 9,758,062 and 9,462,267 shares issued and outstanding at April 30, 2020 and October 31, 2019, respectively		98		95
Additional paid-in capital		22,652		21,949
Retained earnings		8,943		9,489
TOTAL STOCKHOLDERS' EQUITY		31,693		31,533
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	39,412	$	37,700

See Notes to Unaudited Condensed Consolidated Financial Statements.

3

Item 1: Financial Statements (continued)

RF INDUSTRIES, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(In thousands, except share and per share amounts)

	Three Months Ended April 30,					Six Months Ended April 30,
	2020			2019		2020			2019
Net sales	$	10,390		$	13,626	$	22,804		$	24,273
Cost of sales		7,804			9,532		16,965			17,033
Gross profit		2,586			4,094		5,839			7,240
Operating expenses:
Engineering		528			332		1,124			652
Selling and general		2,246			2,400		4,902			4,439
Total operating expenses		2,774			2,732		6,026			5,091
Operating (loss) income		(188	)		1,362		(187	)		2,149
Other income		7			14		18			35
(Loss) income before provision (benefit) for income taxes		(181	)		1,376		(169	)		2,184
Provision (benefit) for income taxes		3			315		(11	)		483
Consolidated net (loss) income	$	(184	)	$	1,061	$	(158	)	$	1,701
(Loss) earnings per share
Basic	$	(0.02	)	$	0.11	$	(0.02	)	$	0.18
Diluted	$	(0.02	)	$	0.11	$	(0.02	)	$	0.17
Weighted average shares outstanding
Basic		9,704,880			9,356,660		9,633,935			9,332,665
Diluted		9,704,880			9,837,964		9,633,935			9,837,718

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

Item 1: Financial Statements (continued)

RF INDUSTRIES, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share amounts)

	For the Three Months ended April 30, 2020
					Additional
	Common Stock				Paid-In		Retained
	Shares		Amount		Capital		Earnings			Total
Balance, January 31, 2020		9,745,135	$	98	$	22,524	$	9,322		$	31,944
Exercise of stock options		12,927		-		32		-			32
Stock-based compensation expense		-		-		96		-			96
Dividends		-		-		-		(195	)		(195	)
Consolidated net loss		-		-		-		(184	)		(184	)
Balance, April 30, 2020		9,758,062	$	98	$	22,652	$	8,943		$	31,693

	For the Six Months ended April 30, 2020
					Additional
	Common Stock				Paid-In			Retained
	Shares		Amount		Capital			Earnings			Total
Balance, November 1, 2019		9,462,267	$	95	$	21,949		$	9,489		$	31,533
Exercise of stock options		228,870		2		421			-			423
Stock-based compensation expense		-		-		206			-			206
Issuance of restricted stock		54,850		1		(1	)		-			-
Issuance of common shares		12,075		-		77			-			77
Dividends		-		-		-			(388	)		(388	)
Consolidated net loss		-		-		-			(158	)		(158	)
Balance, April 30, 2020		9,758,062	$	98	$	22,652		$	8,943		$	31,693

See Notes to Unaudited Condensed Consolidated Financial Statements.

5

Item 1: Financial Statements (continued)

RF INDUSTRIES, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(In thousands, except share amounts)

	For the Three Months ended April 30, 2019
					Additional
	Common Stock				Paid-In		Retained
	Shares		Amount		Capital		Earnings			Total
Balance, January 31, 2019		9,356,935	$	94	$	21,429	$	7,170		$	28,693
Exercise of stock options		3,416		-		15		-			15
Stock-based compensation expense		-		-		78		-			78
Dividends		-		-		-		(187	)		(187	)
Consolidated net income		-		-		-		1,061			1,061
Balance, April 30, 2019		9,360,351	$	94	$	21,522	$	8,044		$	29,660

	For the Six Months ended April 30, 2019
					Additional
	Common Stock				Paid-In		Retained
	Shares		Amount		Capital		Earnings			Total
Balance, November 1, 2018		9,291,201	$	93	$	20,974	$	6,716		$	27,783
Exercise of stock options		69,150		1		356		-			357
Stock-based compensation expense		-		-		192		-			192
Dividends		-		-		-		(373	)		(373	)
Consolidated net income		-		-		-		1,701			1,701
Balance, April 30, 2019		9,360,351	$	94	$	21,522	$	8,044		$	29,660

See Notes to Unaudited Condensed Consolidated Financial Statements.

6

Item 1: Financial Statements (continued)

RF INDUSTRIES, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	Six Months Ended April 30,
	2020			2019
OPERATING ACTIVITIES:
Consolidated net (loss) income	$	(158	)	$	1,701
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Bad debt expense		12			7
Depreciation and amortization		508			278
Stock-based compensation expense		283			192
Deferred income taxes		136			-
Changes in operating assets and liabilities:
Trade accounts receivable		7,499			(2,375	)
Inventories		(72	)		(345	)
Other current assets		(420	)		167
Right of use assets		99			-
Other long-term assets		(2	)		-
Accounts payable		(1,060	)		(721	)
Accrued expenses		(872	)		(786	)
Income tax payable		(21	)		-
Other long-term liabilities		(467	)		76
Net cash provided by (used in) operating activities		5,465			(1,806	)
INVESTING ACTIVITIES:
Capital expenditures		(63	)		(199	)
Purchase of C Enterprises, net of cash acquired ($143)		-			(457	)
Purchase of Schrofftech, net of cash acquired ($99)		(3,901	)		-
Net cash used in investing activities		(3,964	)		(656	)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options		423			357
Dividends paid		(388	)		(373	)
Net cash provided by (used in) financing activities		35			(16	)
Net increase (decrease) in cash and cash equivalents		1,536			(2,478	)
Cash and cash equivalents of continuing operations, beginning of period		12,540			16,334
Cash and cash equivalents, end of period	$	14,076		$	13,856
Supplemental cash flow information – income taxes paid	$	395		$	255

See Notes to Unaudited Condensed Consolidated Financial Statements.

7

RF INDUSTRIES, LTD. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Unaudited interim condensed consolidated financial statements

Our accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, which are normal and recurring, have been included in order to make the information not misleading. Information included in the consolidated balance sheet as of October 31, 2019 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, 2019 included in our Annual Report on Form 10-K (“Form 10-K”) for the year ended October 31, 2019 that was previously filed with the Securities and Exchange Commission (“SEC”). Operating results for the six months ended April 30, 2020 are not necessarily indicative of the results that may be expected for the year ending October 31, 2020. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended October 31, 2019.

Principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of RF Industries, Ltd. and our four wholly-owned subsidiaries, Cables Unlimited, Inc. (“Cables Unlimited”), Rel-Tech Electronics, Inc. (“Rel-Tech”), C Enterprises, Inc. (“C Enterprises”), and Schroff Technologies International, Inc. (“Schrofftech”). C Enterprises is a wholly-owned subsidiary that RF Industries, Ltd. acquired effective March 15, 2019. For periods on or before January 31, 2019, references herein to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, and Rel-Tech, and periods between January 31, 2019 and October 31, 2019, references to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, Rel-Tech, and C Enterprises. Schrofftech is a wholly-owned subsidiary that RF Industries, Ltd. acquired effective November 1, 2019. For periods after October 31, 2019, references to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, Rel-Tech, C Enterprises, and Schrofftech. All intercompany balances and transactions have been eliminated in consolidation.

Risks and uncertainties

In March 2020, the World Health Organization (the “WHO”) declared coronavirus (COVID-19) a pandemic emergency. The COVID-19 pandemic has negatively impacted regional and global economies, disrupted global supply chains, and created significant volatility and disruption of financial markets. The global impact of the outbreak has been rapidly evolving and certain jurisdictions, including those where we have operations, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, social distancing protocols and restrictions on types of business that may continue to operate. While we have been deemed an “essential” business, and therefore have been permitted to continue our operations, the impact of the COVID-19 pandemic has affected both our operations and those of our customers. Our operations have been negatively affected by partial shutdowns of our facilities (particularly in the Northeast), by changes that we had to make on our operating methods and procedures, and by our reduced workforce as many of our employees stayed at home. Many of our customers and vendors have likewise had temporary closures of their facilities and have otherwise been impacted by changes in their industries. As a result, overall demand for our products has been reduced, and certain costs have increased. We have taken measures to protect the health and safety of our employees, and we continue to work with our customers and vendors to minimize potential disruptions in addressing the challenges posed by this global pandemic.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by domestic and international jurisdictions to prevent disease spread, all of which are uncertain and cannot be predicted. The outbreak impacted our performance for the three and six months ended April 30, 2020. We currently expect the decline caused by the economic slowdown to persist through the remainder of 2020. The operations of our Cables Unlimited, Inc. subsidiary in Long Island, New York, was particularly affected as many employees stayed at home and as local customers shut down or otherwise delayed, deferred or cancelled orders for our products. Because of the severe impact that COVID-19 has on our Northeastern operations, in May 2020 we applied for and received a $2.8 million of loans (the “PPP Loans”) under the Paycheck Protection Program of the CARES Act. The funds from the PPP Loans are being used to retain employees, maintain payroll and benefits, and make lease and utility payments. Without the PPP Loans, we would have made material reductions in our workforce (particularly at Cables Unlimited). We anticipate that most of the PPP Loans will be eligible for forgiveness in accordance with the provisions of the CARES Act. To the extent not forgiven, the PPP Loans have a two-year term, a fixed interest rate of 1%, and principal and interest payments are deferred for six months.

8

Fair value measurement

We measure at fair value certain financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs have created the following fair-value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets;

Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

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

As of April 30, 2020 and October 31, 2019, the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximated their carrying value due to their short-term nature. See Note 5 for discussion on the fair value of other long-term liabilities.

Revenue recognition

In accordance with Accounting Standards Update ASU No. 2014-09, Revenue from Contacts with Customers (Topic 606) (“ASC 606”), we recognize revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. We follow a five-step model to: (1) identify the contract with our customer; (2) identify our performance obligations in our contract; (3) determine the transaction price for our contract; (4) allocate the transaction price to our performance obligations; and (5) recognize revenue when (or as) each performance obligation is satisfied. In accordance with this accounting principle, we recognize revenue using the output method at a point in time when finished goods have been transferred to the customer and there are no other obligations to customers after the control of the goods have transferred. Control of goods are transferred based on shipping terms for each customer – for shipments with terms of FOB Shipping Point, control is transferred upon shipment; for shipments with terms of FOB Destination, control is transferred upon delivery.

Leases

In accordance with ASU No. 2016-02, Leases, we determine if an arrangement is a lease at inception. Operating leases are included in our consolidated balance sheet as operating lease right of use (“ROU”) assets, other current liabilities, and operating lease liabilities. Finance leases are included in finance ROU assets, other current liabilities, and finance lease liabilities on our consolidated balance sheet. ROU assets represent our right to use an underlying asset for the duration of the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term and is recognized on the consolidated statements of operations.

Recent accounting standards

Recently issued accounting pronouncements not yet adopted:

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other, which simplifies the accounting for goodwill impairments by eliminating step 2 from the goodwill impairment test. Instead, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” The guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses, which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

Recently issued accounting pronouncements adopted:

In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU requires lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under the current GAAP. Under ASU 2016-02, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients. We adopted the standard as of November 1, 2019, the beginning of our fiscal 2020, applying the modified retrospective method. We elected the package of practical expedients permitted under the transition guidance with the new standard, which among other things, allows us to carryforward the historical lease classification. We elected the policy which allows us to combine the nonlease components with its related lease components rather than separating, and the policy election to keep leases with an initial term of 12 months or less off of the balance sheet. We have recognized those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. The adoption of the standard resulted in a material recognition of additional right of use assets and lease liabilities of approximately $2.3 million and $2.4 million, respectively, as of November 1, 2019, but did not materially affect our consolidated net income.

9

Note 2 – Business Acquisition

C Enterprises, Inc.

On March 15, 2019, through C Enterprises, Inc. (“C Enterprises”), its newly formed subsidiary, we purchased the business and assets of C Enterprises L.P., a California based designer and manufacturer of quality connectivity solutions to telecommunications and data communications distributors. In consideration for the C Enterprises business and assets, we paid $600,000 in cash and assumed certain liabilities. The acquisition was determined not to be material and was accounted for in accordance with the acquisition method of accounting. The acquired assets and assumed liabilities were recorded at their estimated fair values in accordance with ASC 805, Business Combinations. There were no intangible assets identified as part of the acquisition.

The results of C Enterprises’ operations subsequent to March 15, 2019 have been included in the results of the Custom Cabling Manufacturing and Assembly segment (“Custom Cabling segment”) as well as in the consolidated statements of operations. Costs related to the acquisition of C Enterprises were approximately $100,000 and have been expensed as incurred and categorized in selling and general expenses.

The following table summarizes the components of the purchase price at fair value at March 15, 2019:

Cash consideration paid	$	600,000
Total purchase price	$	600,000

The following table summarizes the allocation of the estimated purchase price at fair value at March 15, 2019:

Current assets	$	2,008,000
Fixed assets		30,000
Other assets		18,000
Non-interest bearing liabilities		(1,456,000	)
Net assets	$	600,000

Schroff Technologies International, Inc.

On November 4, 2019, we purchased the business of Schroff Technologies International, Inc. (“Schrofftech”), a Rhode Island-based manufacturer and marketer of intelligent thermal control systems used by telecommunications companies across the U.S. and Canada, and shrouds for small cell integration and installation. At the closing, in consideration for the Schrofftech business, we paid the sellers $4 million in cash, and, if certain financial targets are met by Schrofftech over a two-year period, agreed to pay additional cash earn-out payments of up to $2.4 million.

The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting. The acquired assets and assumed liabilities have been recorded at their estimated fair values. We determined the estimated fair values with the assistance of appraisals or valuations performed by an independent third-party specialist. Schrofftech serves the high growth wireless, telecom and cable markets. All manufacturing operations are performed at Schrofftech’s facilities in Rhode Island. The Schrofftech business allows us to diversify the types of services provided for our customers in the cable industry.

Although the closing occurred on November 4, 2019, the acquisition of Schrofftech is deemed to have become effective for financial accounting purposes as of November 1, 2019. Accordingly, Schrofftech’s financial results have been included in the results of the Custom Cabling segment for the three and six months ended April 30, 2020 as well as in the consolidated statements of operations. Total costs related to the acquisition of Schrofftech were approximately $151,000, of which $108,000 was incurred in fiscal 2019 and $43,000 was incurred in the six months ended April 30, 2020. All acquisition-related costs have been expensed as incurred and categorized in selling and general expenses. For the three months ended April 30, 2020, Schrofftech contributed revenue and pretax loss of $1.1 million and $95,000, respectively. For the six months ended April 30, 2020, Schrofftech contributed revenue and pretax loss of $2.3 million and $13,000, respectively.

The following table summarizes the components of the purchase price at fair values at November 1, 2019:

Cash consideration paid	$	4,000,000
Earn-out liability		1,249,000
Total purchase price	$	5,249,000

10

The following table summarizes the allocation of the purchase price at fair value at November 1, 2019:

Current assets	$	1,168,000
Fixed assets		58,000
Intangible assets		3,299,000
Goodwill		1,356,000
Non-interest bearing liabilities		(632,000	)
Net assets	$	5,249,000

The following unaudited pro forma financial information presents the combined operating results of the Company, C Enterprises, and Schrofftech as if both acquisitions had occurred as of the beginning of the earliest period presented. Pro forma data is subject to various assumptions and estimates and is presented for informational purposes only. This pro forma data does not purport to represent or be indicative of the consolidated operating results that would have been reported had the transaction been completed as described herein, and the data should not be taken as indicative of future consolidated operating results.

Unaudited pro forma financial information assuming the acquisition of C Enterprises and Schrofftech as of November 1, 2018 is presented in the following table:

	Three Months Ended April 30,					Six Months Ended April 30,
	2020			2019		2020			2019
Revenue	$	10,390		$	18,901	$	22,804		$	35,100
Net (loss) income		(184	)		1,371		(158	)		2,744
(Loss) earnings per share
Basic	$	(0.02	)	$	0.15	$	(0.02	)	$	0.29
Diluted	$	(0.02	)	$	0.14	$	(0.02	)	$	0.28

Note 3 – Inventories and major vendors

Inventories, consisting of materials, labor and manufacturing overhead, are stated at the lower of cost or net realizable value. Cost has been determined using the weighted average cost method. Inventories consist of the following (in thousands): 

	April 30, 2020		October 31, 2019
Raw materials and supplies	$	4,289	$	3,576
Work in process		434		791
Finished goods		4,377		3,878
Totals	$	9,100	$	8,245

No vendors accounted for more than 10% of inventory purchases for the three or six months ended April 30, 2020. For the three months ended April 30, 2019, two vendors accounted for 11% and 10% of inventory purchases. One of these vendors accounted for 14% of inventory purchases for the six months ended April 30, 2019, while a different vendor accounted for 13% 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): 

	April 30, 2020		October 31, 2019
Prepaid taxes	$	522	$	-
Prepaid expense		436		346
Other		163		339
Totals	$	1,121	$	685

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Note 5 – Accrued expenses and other long-term liabilities

Accrued expenses consist of the following (in thousands):

	April 30, 2020		October 31, 2019
Wages payable	$	1,069	$	1,591
Accrued receipts		1,562		1,683
Warranty liability		210		-
Deferred revenue		258		-
Other accrued expenses		206		379
Totals	$	3,305	$	3,653

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

We recognize an accrued warranty liability for the estimated claims to remedy potential deficiencies of quality or performance of our products in the Schrofftech division within the Custom Cabling segment. The product warranties extend over various periods, depending upon the product subject to the warranty. We record a provision for estimated future warranty claims based upon the historical relationship of warranty claims to sales, any specifically identified warranty issues and current trends and knowledge. We base our estimates in part on historical experience and on assumptions that are believed to be reasonable under the circumstances and revise our estimates, as appropriate, when events or changes in circumstances indicate that revisions may be necessary. Although these estimates are based on management’s knowledge of and experience with past and current events and on management’s assumptions about future events, it is reasonably possible that they may ultimately differ materially from actual results, including in the case of a significant product failure. Warranty related expenses have not been material and were not material for the three and six months ended April 30, 2020. Warranty liabilities were $210,000 as of April 30, 2020.

The purchase agreement for the Schrofftech acquisition provides for earn-out payments of up to $2,400,000, which is earned through October 31, 2022. The initial earn-out liability was valued at its fair value using an option pricing based approach with a risk-neutral framework using Black Scholes due to the option-like nature of the earn-out payout structure. The earn-out was and will continue to be revalued quarterly using a present value approach and any resulting increase or decrease will be recorded into selling and general expenses. Any changes in the amount of the actual results and forecasted scenarios could impact the fair value. Significant judgment is employed in determining the appropriateness of the assumptions used in calculating the fair value of the earn-out as of the acquisition date. Accordingly, significant variances between actual and forecasted results or changes in the assumptions can materially impact the amount of contingent consideration expense we record in future periods.

The contingent consideration liability represents future earn-out liability that we may be required to pay in conjunction with the acquisition of Schrofftech. We estimate the fair value of the earn-out liability using an option pricing based approach with a risk-neutral framework using Black Scholes related to Schrofftech calculated at net present value (level 3 of the fair value hierarchy).

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of April 30, 2020 (in thousands):

Description	Level 1		Level 2		Level 3
Earn-out liability	$	-	$	-	$	869

There were no financial assets or liabilities measured at fair value as of October 31, 2019.

The following table summarizes the Level 3 transactions for the three months ended April 30, 2020 and January 31, 2020 (in thousands):

	Level 3
	April 30, 2020			January 31, 2020			October 31, 2019
Beginning balance	$	1,215		$	1,249		$	-
Payments		-			-			-
Change in value		(346	)		(34	)		-
Ending Balance	$	869		$	1,215		$	-

As of April 30, 2020, the full amount of the $0.9 million earn-out was classified as other long-term liabilities.

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Note 6 – Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) 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. Potentially issuable securities totaling 392,838 and 121,015 shares for the three months ended April 30, 2020 and 2019, respectively, and 392,838 and 121,015 shares for the six months ended April 30, 2020 and 2019, respectively, were excluded from the calculation of diluted per share amounts because of their anti-dilutive effect.

The following table summarizes the computation of basic and diluted weighted average shares outstanding:

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
Weighted average shares outstanding for basic (loss) earnings per share		9,704,880		9,356,660		9,633,935		9,332,665
Add effects of potentially dilutive securities-assumed exercise of stock options		-		481,304		-		505,053
Weighted average shares outstanding for diluted (loss) earnings per share		9,704,880		9,837,964		9,633,935		9,837,718

Note 7 – Stock-based compensation and equity transactions

On December 3, 2018, two employees were each granted 25,000 incentive stock options. These options vested 5,000 each on the date of grant, and the balance vests as to 5,000 shares each per year thereafter on each of the next four anniversaries of December 3, 2018, and expire ten years from the date of grant. Also on December 3, 2018, one employee was granted 10,000 incentive stock options. These options vested 2,000 shares on the date of grant, and the balance vests as to 2,000 shares per year thereafter on each of the next four anniversaries of December 3, 2018, and expire ten years from the date of grant.

On March 8, 2019, one employee was granted 25,000 incentive stock options. These options vested 5,000 on the date of grant, and the balance vests as to 5,000 shares per year thereafter on each of the next four anniversaries of March 8, 2019, and expire ten years from the date of grant.

On December 6, 2019, one employee was granted 50,000 incentive stock options. These options vested 10,000 on the date of grant, and the balance vests as to 10,000 shares per year thereafter on each of the next four anniversaries of December 6, 2019, and expire ten years from the date of grant.

On January 9, 2020, we granted the following equity awards to our managers and officers:

● Stock grants for a total of 12,075 common shares to three employees. We accounted for these shares as stock-based compensation totaling $77,000;

● A total of 3,241 incentive stock options to two employees, all of which vested immediately on the date of grant; and

● A total of 38,500 shares of restricted stock and 77,000 incentive stock options to five employees. 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 9, 2021; and (ii) the remaining restricted shares and options shall vest in twelve equal quarterly installments over the next three years, commencing with the first quarter following January 9, 2021. All incentive stock options expire ten years from the date of grant.

No other shares or options were granted to company employees during the three and six months ended April 30, 2020 and 2019.

The weighted average fair value of employee stock options that were granted during the six months ended April 30, 2020 and 2019 was estimated to be $3.13 and $4.00, respectively, per share, using the Black-Scholes option pricing model with the following assumptions:

	Six Months Ended April 30,
	2020			2019
Risk-free interest rate		1.57	%		2.88	%
Dividend yield		1.23	%		0.98	%
Expected life of the option (in years)		6.47			5.96
Volatility factor		49.14	%		55.25	%

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 2020 and 2019 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.

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Company stock option plans

Descriptions of our stock option plans are included in Note 10 of our Annual Report on Form 10-K for the year ended October 31, 2019. A summary of the status of the options granted under our stock option plans as of April 30, 2020 and the changes in options outstanding during the six months then ended is presented in the table that follows:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at November 1, 2019		890,147		$	3.62
Options granted		130,241		$	6.53
Options exercised		(228,870	)	$	1.85
Options outstanding at April 30, 2020		791,518		$	4.61
Options exercisable at April 30, 2020		419,352		$	4.37
Options vested and expected to vest at April 30, 2020		790,482		$	4.62

Weighted average remaining contractual life of options outstanding as of April 30, 2020: 5.53 years

Weighted average remaining contractual life of options exercisable as of April 30, 2020: 3.58 years

Weighted average remaining contractual life of options vested and expected to vest as of April 30, 2020: 5.52 years

Aggregate intrinsic value of options outstanding at April 30, 2020: $1,224,000

Aggregate intrinsic value of options exercisable at April 30, 2020: $719,000

Aggregate intrinsic value of options vested and expected to vest at April 30, 2020: $1,216,000

As of April 30, 2020, $713,000 and $284,000 of expenses with respect to nonvested stock options and restricted shares, respectively, has yet to be recognized but is expected to be recognized over a weighted average period of 4.42 and 1.40 years, respectively.

Non-employee directors receive a compensation package of $50,000 annually, which is paid one-half in cash and one-half through the grant of non-qualified awards. For fiscal 2020, compensation payable to non-employee directors will be prorated from November 1, 2019 through August 31, 2020. On November 4, 2019, we granted each of our five non-employee directors 3,270 shares of restricted stock. The number of restricted shares granted to each director was determined by prorating $25,000 for the 10 months ending August 31, 2020 and dividing by the 20-day average RFIL stock price ($6.36). These restricted shares vest ratably through August 31, 2020.

Stock option expense

During the three months ended April 30, 2020 and 2019, stock-based compensation expense totaled $96,000 and $78,000, respectively, and was classified in selling and general expense. During the six months ended April 30, 2020 and 2019, stock-based compensation expense totaled $283,000 and $192,000, respectively, and was classified in selling and general expenses.

Note 8 – 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, 2020, we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $12.5 million.

For the three months ending April 30, 2020, two customers, both distributors, accounted for approximately 11% and 17% of net sales. These same two distributors accounted for 11% and 14%, respectively, of net sales for the six months ending April 30, 2020, while in the same six-month period another customer, a wireless carrier, accounted for 11% of net sales. The two distributors had accounts receivable balances that accounted for 14% and 19%, respectively, of the total net accounts receivable balance at April 30, 2020. For the three months ending April 30, 2019, one of the aforementioned distributors and the wireless carrier accounted for approximately 28% and 14%, respectively, of net sales. This same distributor and a different wireless carrier accounted for approximately 32% and 10%, respectively, of net sales for the six months ending April 30, 2019. At April 30, 2019, the two wireless carrier customers had accounts receivable balances that accounted for approximately 10% and 21% of the total net accounts receivable balance, while the two distributors accounted for 18% and 15% of the total net accounts receivable balance. Although these customers have been on-going major customers of 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.

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Note 9 – 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; (5) if applicable, the nature of the regulatory environment. Based upon this evaluation, as of April 30, 2020, we had two segments – RF Connector and Cable Assembly (“RF Connector segment”) and Custom Cabling Manufacturing and Assembly (“Custom Cabling segment”).

The RF Connector segment consisted of one division and the Custom Cabling segment was composed of four divisions. The five 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, and Schrofftech. 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 product and services for the RF Connector segment were primarily through the distribution channel, while the Custom Cabling segment sales were through a combination of distribution and direct to the end customer.

Management identifies segments based on strategic business units that are, in turn, based along market lines. These strategic business units offer products and services to different markets in accordance with their customer base and product usage. For segment reporting purposes, the RF Connector division constitutes the RF Connector segment, and the Cables Unlimited, Rel-Tech, C Enterprises, and Schrofftech divisions constitute the Custom Cabling segment.

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.

Substantially 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, 2020 and 2019 (in thousands):

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
United States	$	9,982	$	13,451	$	22,155	$	23,921
Foreign Countries:
Canada		290		113		407		278
Mexico		7		-		12		-
All Other		111		62		230		74
		408		175		649		352
Totals	$	10,390	$	13,626	$	22,804	$	24,273

Net sales, income (loss) before provision for income taxes and other related segment information for the three months ended April 30, 2020 and 2019 are as follows (in thousands): 

	RF Connector and Cable Assembly		Custom Cabling Manufacturing and Assembly			Corporate		Total
2020
Net sales	$	3,768	$	6,622		$	-	$	10,390
Income (loss) before provision for income taxes		697		(885	)		7		(181	)
Depreciation and amortization		41		212			-		253
Total assets		8,126		16,021			15,265		39,412
2019
Net sales	$	3,341	$	10,285		$	-	$	13,626
Income before provision for income taxes		257		1,105			14		1,376
Depreciation and amortization		45		96			-		141
Total assets		6,972		12,773			14,660		34,405

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Net sales, income (loss) before provision (benefit) for income taxes and other related segment information for the six months ended April 30, 2020 and 2019 are as follows (in thousands):

	RF Connector and Cable Assembly		Custom Cabling Manufacturing and Assembly			Corporate		Total
2020
Net sales	$	6,957	$	15,847		$	-	$	22,804
Income (loss) before benefit for income taxes		979		(1,166	)		18		(169	)
Depreciation and amortization		83		425			-		508
Total assets		8,126		16,021			15,265		39,412
2019
Net sales	$	6,599	$	17,674		$	-	$	24,273
Income before provision for income taxes		537		1,611			36		2,184
Depreciation and amortization		90		188			-		278
Total assets		6,972		12,773			14,660		34,405

Note 10 – Income taxes

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effects of the COVID-19 pandemic. The CARES Act includes several provisions that provide economic relief for individuals and businesses. The Company continues to evaluate the impact the CARES Act will have on the Company’s tax obligations, but has concluded it will not materially impact the Company’s income taxes for the three and six months ended April 30, 2020.

We use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate, to determine its quarterly provision (benefit) for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

The provision (benefit) for income taxes was 1% and 23% of income before income taxes for the three months ended April 30, 2020 (the “fiscal 2020 quarter”) and 2019 (the “fiscal 2019 quarter”), respectively, and (7%) and 22% of income before income taxes for the six months ended April 30, 2020 and 2019, respectively. The change in the effective tax rate from the fiscal 2019 period to fiscal 2020 period was primarily driven by the disproportionate impact of various permanent book-tax differences with respect to the Company’s forecasted book income in each period.

We had $118,000 and $80,000 of unrecognized tax benefits, inclusive of interest and penalties, as of April 30, 2020 and October 31, 2019, respectively. The unrecognized tax benefits, if recognized, would result in a net tax benefit of $30,000 as of April 30, 2020.

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Note 11 – Intangible assets

Intangible assets consist of the following (in thousands): 

	April 30, 2020			October 31, 2019
Amortizable intangible assets:
Non-compete agreement (estimated life 5 years)	$	423		$	200
Accumulated amortization		(222	)		(200	)
		201			-
Customer relationships (estimated lives 7 - 15 years)	$	5,058		$	2,879
Accumulated amortization		(2,126	)		(1,884	)
		2,932			995
Backlog (estimated life 1 - 2 years)		287			134
Accumulated amortization		(200	)		(134	)
		87			-
Patents (estimated life 10 - 14 years)		368			142
Accumulated amortization		(61	)		(45	)
		307			97
Totals	$	3,527		$	1,092
Non-amortizable intangible assets:
Trademarks	$	1,174		$	657

Amortization expense for the six months ended April 30, 2020 and the year ended October 31, 2019 was $346,000 and $275,000, respectively. As of April 30, 2020, the weighted-average amortization period for the amortizable intangible assets is 8.39 years.

Note 12 – Commitments

We adopted ASU 2016-02 on November 1, 2019, and elected the practical expedient modified retrospective method whereby the lease qualification and classification was carried over from the accounting for leases under ASC 840. The lease contracts for the corporate headquarters, RF Connector division manufacturing facilities, Cables Unlimited, Rel-Tech, and C Enterprises commenced prior to the effective date of November 1, 2019, and were determined to be operating leases. All other new contracts have been assessed for the existence of a lease and for the proper classification into operating leases. The rate implicit in the leases was undeterminable, and therefore, the discount rate used in all lease contracts is our incremental borrowing rate.

We have operating leases for corporate offices, manufacturing facilities, and certain storage units. Our leases have remaining lease terms of 1 year to 3 years, some of which include options to extend the leases for up to 5 years. A portion of our operating leases are leased from K&K Unlimited, a company controlled by Darren Clark, the former owner and current President of Cables Unlimited, whom we make rent payments totaling $14,000 per month.

We also have other operating leases for certain equipment. The components of our facilities and equipment operating lease expenses for the period ending April 30, 2020 were as follows (in thousands):

	Three Months Ended		Six Months Ended
	April 30, 2020		April 30, 2020
Operating lease cost	$	250	$	504

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

	April 30, 2020
Supplemental Cash Flows Information
Right of use assets obtained in exchange for lease obligations:
Operating leases	$	1,904
Weighted Average Remaining Lease Term
Operating leases (in months)		30.31
Weighted Average Discount Rate
Operating leases		3.54	%

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Future minimum lease payments under non-cancellable leases as of April 30, 2020 were as follows:

Year ended October 31,	Operating Leases
2020 (excluding six months ended April 30, 2020)	$	507
2021		919
2022		532
2023		166
2024		-
Thereafter		-
Total future minimum lease payments		2,124
Less imputed interest		(124	)
Total	$	2,000

Reported as of April 30, 2020	Operating Leases
Other current liabilities	$	977
Operating lease liabilities		1,023
Finance lease liabilities		-
Total	$	2,000

As of April 30, 2020, operating lease ROU asset was $1.9 million and operating lease liability totaled $2.0 million, of which $977,000 is classified as current. There were no finance leases as of April 30, 2020.

Note 13 – Line of credit

In November 2019, we entered into an agreement for a revolving line of credit (“LOC”) in the amount of $5.0 million. Amounts outstanding under the LOC shall bear interest at a rate of 2.0% plus LIBOR Daily Floating Rate (“base interest rate”), with interest payable on the first day of each month. Borrowings under the LOC are secured by a security interest in certain assets of the Company. The LOC contains certain loan covenants. Failure to maintain the loan covenants may constitute an event of default, resulting in all outstanding amounts of principal and interest becoming immediately due and payable. All outstanding principal and interest is due and payable on December 1, 2021. As of April 30, 2020, we are in compliance with all loan covenants. Additionally, as of April 30, 2020, no amounts were outstanding under the line of credit.

Note 14 – Cash dividend and declared dividends

During the three months ended April 30, 2020 and 2019, we paid dividends of $0.02 per share for a total of $195,000 and $187,000, respectively.  During the six months ended April 30, 2020 and 2019, we paid dividends of $0.02 per share for a total of $388,000 and $373,000, respectively.

Note 15 – Subsequent event

On May 5, 2020, as part of the Paycheck Protection Program (“PPP”) of the CARES Act, we received PPP loans in the aggregate totaling approximately $2.8 million (“PPP Loan”).  The funds from the PPP Loan will be used to retain employees, maintain payroll and benefits, and make lease and utility payments during the eight-week period following the receipt of the loan, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act. To the extent not forgiven, the loan has a two-year term, a fixed interest rate of 1%, and principal and interest payments are deferred for six months. 

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations 

This report contains forward-looking statements. These statements relate to future events or the Company’s 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 the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company 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. The Company is 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 the Company’s 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 the Company’s 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 the Company’s Annual Report filed on Form 10-K for the year ended October 31, 2019 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 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 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 requires 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.

19

Warranty Reserve

We recognize an accrued warranty liability for the estimated claims to remedy potential deficiencies of quality or performance of our products in the Schrofftech division within the Custom Cabling and Manufacturing Assembly segment. The product warranties extend over various periods, depending upon the product subject to the warranty. We record a provision for estimated future warranty claims based upon the historical relationship of warranty claims to sales, any specifically identified warranty issues and current trends and knowledge. We base our estimates in part on historical experience and on assumptions that are believed to be reasonable under the circumstances and revise our estimates, as appropriate, when events or changes in circumstances indicate that revisions may be necessary. Although these estimates are based on management’s knowledge of and experience with past and current events and on management’s assumptions about future events, it is reasonably possible that they may ultimately differ materially from actual results, including in the case of a significant product failure.

Earn-out liability

The purchase agreement for the acquisition of Schroff Technologies International, Inc. (“Schrofftech”) provides for an earn-out payment of up to $2,400,000, which amount is earned through October 31, 2022. The initial earn-out liability was valued at its fair value using an option pricing based approach with a risk-neutral framework using Black Scholes due to the option-like nature of the earn-out payout structure. The earn-out was and will continue to be revalued quarterly using a present value approach, and any resulting increase or decrease will be recorded into selling and general expenses. Any changes in the amount of the actual results and forecasted scenarios could impact the fair value. Significant judgment is employed in determining the appropriateness of the assumptions used in calculating the fair value of the earn-out as of the acquisition date. Accordingly, significant variances between actual and forecasted results or changes in the assumptions can materially impact the amount of contingent consideration expense we record in future periods.

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 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 coaxial and specialty cables and connectors, fiber optic cables and connectors, and electrical and electronic specialty cables and components. 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. Since the acquisition of Schrofftech in November 2019, we also 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 connector and cable products, including coaxial connectors and cable assemblies that are integrated with coaxial connectors, 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 5G small cell integrated enclosures. The two segments were determined based on the aggregation of operating divisions 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.

For the six months ended April 30, 2020, most of our revenues were generated from the Custom Cabling segment from the sale of fiber optics cable, copper cabling, custom patch cord assemblies, and wiring harnesses, which accounted for 69% of total sales. Revenues from the RF Connector segment were generated from the sales of RF connector products and cable assemblies and accounted for 31% of total sales for the six months ended April 30, 2020.

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In March 2020, the World Health Organization (the “WHO”) declared coronavirus (COVID-19) a pandemic emergency. The COVID-19 pandemic has negatively impacted regional and global economies, disrupted global supply chains, and created significant volatility and disruption of financial markets. The global impact of the outbreak has been rapidly evolving and certain jurisdictions, including those where we have operations, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, social distancing protocols and restrictions on types of business that may continue to operate. While we have been deemed an “essential” business, and therefore have been permitted to continue our operations, the impact of the COVID-19 pandemic has affected both our operations and those of our customers. Our operations have been negatively affected by partial shutdowns of our facilities (particularly in the Northeast), by changes that we had to make on our operating methods and procedures, and by our reduced workforce as many of our employees stayed at home. Many of our customers and vendors have likewise had temporary closures of their facilities and have otherwise been impacted by changes in their industries. As a result, overall demand for our products has been reduced, and certain costs have increased. We have taken measures to protect the health and safety of our employees, and we continue to work with our customers and vendors to minimize potential disruptions in addressing the challenges posed by this global pandemic.

The extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by domestic and international jurisdictions to prevent disease spread, all of which are uncertain and cannot be predicted. The outbreak impacted our performance for the three and six months ended April 30, 2020. We currently expect the decline caused by the economic slowdown to persist through the remainder of 2020. The operations of our Cables Unlimited, Inc. subsidiary in Long Island, New York, was particularly affected as many employees stayed at home and as local customers shut down or otherwise delayed, deferred or cancelled orders for our products.  Because of the severe impact that COVID-19 has on our Northeastern operations, in May 2020 we applied for and received a $2.8 million of loans (the “PPP Loans”) under the Paycheck Protection Program of the CARES Act. The funds from the PPP Loans are being used to retain employees, maintain payroll and benefits, and make lease and utility payments. Without the PPP Loans, we would have made material reductions in our workforce (particularly at Cables Unlimited). We anticipate that most of the PPP Loans will be eligible for forgiveness in accordance with the provisions of the CARES Act.  To the extent not forgiven, the PPP Loans have a two-year term, a fixed interest rate of 1%, and principal and interest payments are deferred for six months.

We considered the impact of the COVID-19 related economic slowdown on our evaluation of goodwill impairment indicators as of April 30, 2020. Although no goodwill impairment indicators were identified, it is possible that impairments could emerge as the impact of the crisis becomes clearer and those losses could be material.

Liquidity and Capital Resources

Historically, we have been able to fund our liquidity and other capital requirements from funds we generated from operations. While we still believe that our existing current assets, the amount of cash we anticipate will be generated from on-going operations, and funds we received from the PPP Loans collectively will be sufficient to fund our anticipated liquidity and capital resource needs for at least twelve months from the date of this filing, there is some uncertainty because of the unknown future impact of COVID-19 pandemic on our business. Our existing assets and the cash expected to be generated from operations, including its current backlog of unfulfilled orders, will be sufficient during the current fiscal year based on the following:

As of April 30, 2020, we had a total of $14.1 million of cash and cash equivalents compared to a total of $12.5 million of cash and cash equivalents as of October 31, 2019. As of April 30, 2020, we had working capital of $23.5 million and a current ratio of approximately 5.1:1. Despite a decrease in sales as a result of the COVID-19 pandemic, our cash and cash equivalents increased from October 31, 2019 due to the timing of prior sales and the collection of outstanding accounts receivables, resulting in a decrease in the accounts receivable balance by $7.2 million, from $12.2 million as of October 31, 2019 to $5.0 million as of April 30, 2020. As of April 30, 2020, we had $29.2 million in current assets and $5.7 million in current liabilities. As mentioned above, since April 30, 2020 we have received $2.8 million in PPP Loans, which funds will provide us with additional liquidity.

As of April 30, 2020, we had $5.7 million of backlog, compared to $6.1 million as of October 31, 2019. 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.

We generated cash of $1.5 million during the six months ended April 30, 2020 due largely to the collection of accounts receivables ($7.5 million) that was outstanding as of October 31, 2019. The cash collected from our accounts receivables and the increase in cash from noncash credits from depreciation and amortization ($0.5 million) and from stock-based compensation expense ($0.3 million) was partially offset by the net cash used in the purchase of Schrofftech ($3.9 million), net loss of $158,000, and a decrease in accounts payable ($1.1 million) and accrued expenses ($0.9 million) primarily due to the payout of prior year bonuses. In addition, during the six months ended April 30, 2020, we received $0.4 million from the exercise of stock options and paid out $0.4 million in dividends. The dividends were declared before the full impact of the COVID-19 pandemic was realized.

We do not anticipate needing material additional capital equipment in the next twelve months. In the past, we have financed some of our equipment and furnishings requirements through capital leases. No additional capital equipment purchases have been currently identified that would require significant additional leasing or capital expenditures during the next twelve months.

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In November 2019, we entered into an agreement for a revolving line of credit (“LOC”) in the amount of $5.0 million. Amounts outstanding under the LOC shall bear interest at a rate of 2.0% plus LIBOR Daily Floating Rate (“base interest rate”), with interest payable on the first day of each month. Borrowings under the LOC are secured by a security interest in certain assets of the Company. The LOC contains certain loan covenants. Failure to maintain the loan covenants may constitute an event of default, which could result in all outstanding amounts of principal and interest becoming immediately due and payable. All outstanding principal and interest is due and payable on December 1, 2021. As of April 30, 2020, we were in compliance with all loan covenants. Additionally, as of the date of this report, we have not used the LOC and accordingly, the entire amount of the LOC is currently available.

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. On November 4, 2019, we purchased the business of Schroff Technologies International, Inc., a Rhode Island-based manufacturer and marketer of intelligent thermal control systems used by telecommunications companies across the U.S. and Canada, and shrouds for small cell integration and installation. At the closing, in consideration for Schrofftech, we paid the sellers $4 million in cash, and, if certain financial targets are met by Schrofftech over a two-year period, agreed to pay an additional cash earn-out payment of up to $2.4 million.

Results of Operations

Three Months Ended April 30, 2020 vs. Three Months Ended April 30, 2019

Net sales of $10.4 million decreased by 24%, or $3.2 million, for the three months ended April 30, 2020 (the “fiscal 2020 quarter”) compared to the three months ended April 30, 2019 (the “fiscal 2019 quarter”). Net sales for the fiscal 2020 quarter at the Custom Cabling segment decreased by $3.7 million, or 36%, to $6.6 million, compared to $10.3 million in the fiscal 2019 quarter. The decrease was primarily in our project-based business resulting from the slowdown in carrier spending. This decrease was partially offset by additional sales contributed by the newly acquired Schrofftech and C Enterprises, Inc. subsidiaries (we did not own Schrofftech in the fiscal 2019 quarter, and only owned C Enterprises for six weeks in the 2019 quarter). Net sales for the fiscal 2020 quarter at the RF Connector segment increased by $0.5 million, or 15%, to $3.8 million as compared to $3.3 million in the fiscal 2019 quarter.

Gross profit for the fiscal 2020 quarter decreased by $1.5 million to $2.6 million and gross margins decreased to 24.9% of sales from 30.0% of sales in the fiscal 2019 quarter. The decrease in gross profit and gross margins was primarily due to lower sales in the project-based business that resulted in lower coverage of fixed production costs, product mix at the Custom Cabling segment, and increased sales at the C Enterprises subsidiary, whose gross margins are lower than the blended margin of our other divisions.

Engineering expenses increased $0.2 million to $0.5 million for the fiscal 2020 quarter compared to $0.3 million in the fiscal 2019 quarter primarily due to the absorption of the engineering costs of the newly acquired Schrofftech, a company that we did not own in fiscal 2019, and the expenses for a full quarter of C Enterprises, a company that we acquired on March 15, 2019. Engineering expenses represent costs incurred relating to the ongoing research and development of new products.

Selling and general expenses decreased $0.2 million to $2.2 million (22% of sales) compared to $2.4 million (18% of sales) in the second quarter last year primarily due to the decrease in valuation of Schrofftech’s earn-out liability, partially offset with (i) the selling and general expenses of the Schrofftech subsidiary and (ii) a full quarter of selling and general expenses of the C Enterprises subsidiary (last year, we only owned C Enterprises for part of the fiscal quarter). Additionally, total selling and general expenses in the current quarter included $0.2 million of amortization expense, an increase of $0.1 million over last year as a result of the acquisition of Schrofftech, and $0.1 million in stock-based compensation expense.

For the fiscal 2020 quarter, pretax income (loss) for the Custom Cabling segment and the RF Connector segment was $(0.9) million and $0.7 million, respectively, as compared to $1.1 million and $0.3 million for the comparable second quarter last year. The pretax loss at the Custom Cabling segment in the second quarter of fiscal 2020 was primarily due to the lower sales in the project-based business resulting from the slowdown in carrier spending.

The provision for income taxes was 1% and 23% of income before income taxes for the fiscal 2020 quarter and the fiscal 2019 quarter, respectively. The change in the effective tax rate from the fiscal 2019 quarter to fiscal 2020 quarter was primarily driven by the disproportionate impact of various permanent book-tax differences with respect to the Company’s forecasted book income in each period.

For the fiscal 2020 quarter, net loss was $0.2 million and fully diluted loss per share was $0.02 per share as compared to a net income of $1.1 million and fully diluted earnings per share of $0.11 per share for the fiscal 2019 quarter. For the fiscal 2020 quarter, the diluted weighted average shares outstanding was 9,704,880 as compared to 9,837,964 for the fiscal 2019 quarter.

Six Months Ended April 30, 2020 vs. Six Months Ended April 30, 2019

Net sales of $22.8 million decreased by 6%, or $1.5 million, for the six months ended April 30, 2020 (the “fiscal 2020 six-month period”) compared to the six months ended April 30, 2019 (the “fiscal 2019 six-month period”). The decrease in net sales is attributable to a decrease in net sales at the Custom Cabling segment, which decreased by $1.8 million, or 10%, to $15.8 million compared to $17.7 million in the fiscal 2019 six-month period. The decrease was primarily in our project-based business which resulted from the slowdown in carrier spending. This decrease was partially offset by increased sales from the newly acquired Schrofftech and C Enterprises. Net sales for the fiscal 2020 six-month period at the RF Connector segment increased by $0.4 million, or 5%, to $7.0 million compared to $6.6 million in the fiscal 2019 six-month period.

22

Gross profit for the fiscal 2020 six-month period decreased by $1.4 million to $5.8 million and gross margins decreased to 25.6% of sales from 29.8% of sales in the fiscal 2019 six-month period. The decrease in gross profit and gross margins was primarily due to lower sales in the project-based business that resulted in lower coverage of fixed production costs, product mix at the Custom Cabling segment, and increased sales at the C Enterprises subsidiary, whose gross margins are lower than the blended margins of our other divisions.

Engineering expenses increased $0.4 million to $1.1 million for the fiscal 2020 six-month period compared to $0.7 million in the fiscal 2019 six-month period primarily due to the absorption of the engineering costs of the newly acquired Schrofftech, which we did not own in fiscal 2019, and a full six months of engineering costs at C Enterprises (whose expenses were only included in 2019 for the six-week period following the acquisition of this subsidiary on March 15, 2019). Engineering expenses represent costs incurred relating to the ongoing research and development of new products.

Selling and general expenses increased $0.5 million to $4.9 million (22% of sales) compared to $4.4 million (18% of sales) in the six-month period last year largely due to the absorption of the additional selling and general expenses of the Schrofftech and C Enterprises subsidiaries. Additionally, total selling and general expenses in the current quarter included $0.3 million of amortization expense, an increase of $0.2 million over last year as a result of the acquisition of Schrofftech, and $0.3 million in stock-based compensation expense, an increase of $0.1 million over last year due in part to a new officer hired by the Company. These costs were partially offset with a $0.3 million valuation decrease in the Schrofftech earn-out liability.

For the fiscal 2020 six-month period, pretax income (loss) for the Custom Cabling segment and the RF Connector segment was $(1.2) million and $1.0 million, respectively, as compared to $1.6 million and $0.5 million for the comparable six-month period last year. The pretax loss at the Custom Cabling segment in the six-month period of fiscal 2020 was primarily due to the decrease in project-based businesses resulting from the slowdown in carrier spending.

The provision (benefit) for income taxes was (7%) and 22% of income before income taxes for the six months ended April 30, 2020 and 2019, respectively. The change in the effective tax rate from the fiscal 2019 six-month period to fiscal 2020 six-month period was primarily driven by the disproportionate impact of various permanent book-tax differences with respect to the Company’s forecasted book income in each period.

For the fiscal 2020 six-month period, net loss was $0.2 million and fully diluted loss per share was $0.02 per share as compared to a net income of $1.7 million and fully diluted earnings per share of $0.17 per share for the fiscal 2019 six-month period. For the fiscal 2020 six-month period, the diluted weighted average shares outstanding was 9,633,935 as compared to 9,837,718 for the fiscal 2019 six-month period.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Nothing to report.

Item 4. Controls and Procedures

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 weighting 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.

As described throughout our quarterly report, during the quarter ended January 31, 2020, we acquired Schrofftech, which is now a wholly-owned subsidiary of RF Industries. We are currently integrating policies, processes, technology, and operations for the consolidated company and will continue to evaluate our internal control over financial reporting as we develop and execute our integration plans. Until we are fully integrated, we will maintain the operational integrity of each division’s internal control over financial reporting.

Other than as described above, there has been no changes in our internal control over financial reporting during the quarter ended April 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. As of the date of this report, we are not subject to any proceeding that is not in the ordinary course of business or that is material to the financial condition of our business.

Item 1A. Risk Factors

The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended October 31, 2019 filed with the SEC, which describe various risks and uncertainties to which we are or may become subject. Further, the current coronavirus (“COVID-19”) pandemic and actions taken to address the pandemic may exacerbate the risks described in our SEC reports. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.

The COVID-19 pandemic has adversely impacted, and poses risks to, our business, the nature and extent of which are highly uncertain and unpredictable. In March 2020, the WHO characterized COVID-19 as a pandemic. This pandemic has resulted in a global health crisis that is adversely affecting broader economies, financial markets, and the business environment worldwide. We are monitoring the global impact of the COVID-19 pandemic and taking steps to mitigate the accompanying impact on our business by working with our employees, customers, suppliers, and other stakeholders. The pandemic is adversely affecting, and is expected to continue to adversely affect, certain elements of our business. Portions of our workforce may be unable to work effectively due to illness and containment measures, including quarantines, illness precautions, travel restrictions, and other restrictions. We experienced volatility in customer demand as their businesses were impacted by the pandemic. If the pandemic continues and conditions worsen, we may experience additional adverse impacts on our operational and commercial activities, including rising costs, volatility in customer orders and purchases and declines in our collections of accounts receivable. Furthermore, the pandemic has impacted and may further impact the broader U.S. economy, including negatively impacting economic growth, the proper functioning of financial and capital markets and interest rates, all of which could lead to a decline in our net sales. Due to the speed with which the situation is developing, the breadth of its spread and the range of governmental and community reactions thereto, there is uncertainty around its duration, ultimate impact and the timing of recovery. Therefore, the pandemic could lead to an extended disruption of economic activity and the impact on our stock price, access to capital, consolidated results of operations, financial position and cash flows could be material.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Nothing to report.

Item 3. Defaults upon Senior Securities

Nothing to report.

Item 4. Mine Safety Disclosures

Nothing to report.

Item 5. Other Information

Nothing to report.

Item 6. Exhibits

Exhibit Number
31.1:	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2:	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1:	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2:	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Schema.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	XBRL Taxonomy Extension Definition Linkbase.
101.LAB	XBRL Taxonomy Extension Label Linkbase.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.

24

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RF INDUSTRIES, LTD.
Date: June 11, 2020	By:	/s/ Robert Dawson
		Robert Dawson President and Chief Executive Officer (Principal Executive Officer)

Date: June 11, 2020	By:	/s/ Mark Turfler
		Mark Turfler Chief Financial Officer (Principal Financial and Accounting Officer)

25

EX-31.1

Exhibit 31.1

CERTIFICATIONS PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Robert Dawson, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended April 30, 2020 of RF Industries, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period for which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  June 11, 2020	/s/ Robert Dawson
	Robert Dawson
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Mark Turfler, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended April 30, 2020 of RF Industries, Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period for which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 11, 2020	/s/ Mark Turfler
	Mark Turfler
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. § 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RF Industries, Ltd. (the “Company”) on Form 10-Q for the quarter ended April 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), I, Robert Dawson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 11, 2020	/s/ Robert Dawson
	Robert Dawson
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. § 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of RF Industries, Ltd. (the “Company”) on Form 10-Q for the quarter ended April 30, 2020, as filed with the Securities and Exchange Commission (the “Report”), I, Mark Turfler, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 11, 2020	/s/ Mark Turfler
	Mark Turfler
	Chief Financial Officer

XML

Note 4 - Other Current Assets - Other Current Assets (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Prepaid taxes	$ 522
Prepaid expense	436	346
Other	163	339
Totals	$ 1,121	$ 685

XML

Note 5 - Accrued Expenses and Other Long-term Liabilities - Level 3 Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Apr. 30, 2020	Jan. 31, 2020	Oct. 31, 2019
Beginning balance	$ 1,215	$ 1,249
Payments
Change in value	(346)	(34)
Ending Balance	$ 869	$ 1,215

XML

Note 1 - Unaudited Interim Condensed Consolidated Financial Statements

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

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 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, which are normal and recurring, have been included in order to make the information

not

misleading. Information included in the consolidated balance sheet as of

October 31, 2019

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, 2019

included in our Annual Report on Form

10

-K (“Form

10

-K”) for the year ended

October 31, 2019

that was previously filed with the Securities and Exchange Commission (“SEC”). Operating results for the

six

months ended

April 30, 2020

are

not

necessarily indicative of the results that

may

be expected for the year ending

October 31, 2020.

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form

10

-K for the year ended

October 31, 2019.

Principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of RF Industries, Ltd. and our

four

wholly-owned subsidiaries, Cables Unlimited, Inc. (“Cables Unlimited”), Rel-Tech Electronics, Inc. (“Rel-Tech”), C Enterprises, Inc. (“C Enterprises”), and Schroff Technologies International, Inc. (“Schrofftech”). C Enterprises is a wholly-owned subsidiary that RF Industries, Ltd. acquired effective

March 15, 2019.

For periods on or before

January 31, 2019,

references herein to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, and Rel-Tech, and periods between

January 31, 2019

and

October 31, 2019,

references to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, Rel-Tech, and C Enterprises. Schrofftech is a wholly-owned subsidiary that RF Industries, Ltd. acquired effective

November 1, 2019.

For periods after

October 31, 2019,

references to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, Rel-Tech, C Enterprises, and Schrofftech. All intercompany balances and transactions have been eliminated in consolidation.

Risks and uncertainties

In

March 2020,

the World Health Organization (the “WHO”) declared coronavirus (COVID-

19

) a pandemic emergency. The COVID-

19

pandemic has negatively impacted regional and global economies, disrupted global supply chains, and created significant volatility and disruption of financial markets. The global impact of the outbreak has been rapidly evolving and certain jurisdictions, including those where we have operations, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, social distancing protocols and restrictions on types of business that

may

continue to operate. While we have been deemed an “essential” business, and therefore have been permitted to continue our operations, the impact of the COVID-

19

pandemic has affected both our operations and those of our customers. Our operations have been negatively affected by partial shutdowns of our facilities (particularly in the Northeast), by changes that we had to make on our operating methods and procedures, and by our reduced workforce as many of our employees stayed at home. Many of our customers and vendors have likewise had temporary closures of their facilities and have otherwise been impacted by changes in their industries. As a result, overall demand for our products has been reduced, and certain costs have increased. We have taken measures to protect the health and safety of our employees, and we continue to work with our customers and vendors to minimize potential disruptions in addressing the challenges posed by this global pandemic.

The extent of the impact of the COVID-

19

pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by domestic and international jurisdictions to prevent disease spread, all of which are uncertain and cannot be predicted. The outbreak impacted our performance for the

three

and

six

months ended

April 30, 2020.

We currently expect the decline caused by the economic slowdown to persist through the remainder of

2020.

The operations of our Cables Unlimited, Inc. subsidiary in Long Island, New York, was particularly affected as many employees stayed at home and as local customers shut down or otherwise delayed, deferred or cancelled orders for our products. Because of the severe impact that COVID-

19

has on our Northeastern operations, in

May 2020

we applied for and received a

$2.8

million of loans (the “PPP Loans”) under the Paycheck Protection Program of the CARES Act. The funds from the PPP Loans are being used to retain employees, maintain payroll and benefits, and make lease and utility payments. Without the PPP Loans, we would have made material reductions in our workforce (particularly at Cables Unlimited). We anticipate that most of the PPP Loans will be eligible for forgiveness in accordance with the provisions of the CARES Act. To the extent

not

forgiven, the PPP Loans have a

two

-year term, a fixed interest rate of

1%,

and principal and interest payments are deferred for

six

months.

Fair value measurement

We measure at fair value certain financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These

two

types of inputs have created the following fair-value hierarchy:

Level 

1

– Quoted prices for identical instruments in active markets;

Level 

2

– Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are

not

active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

Level 

3

– Valuations derived from valuation techniques in which

one

or more significant inputs or significant value drivers are unobservable.

As of

April 30, 2020

and

October 31, 2019,

the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximated their carrying value due to their short-term nature. See Note

5

for discussion on the fair value of other long-term liabilities.

Revenue recognition

In accordance with Accounting Standards Update ASU

No.

2014

-

09,

Revenue from Contacts with Customers (Topic

606

) (“ASC

606”

), we recognize revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. We follow a

five

-step model to: (

1

) identify the contract with our customer; (

2

) identify our performance obligations in our contract; (

3

) determine the transaction price for our contract; (

4

) allocate the transaction price to our performance obligations; and (

5

) recognize revenue when (or as) each performance obligation is satisfied. In accordance with this accounting principle, we recognize revenue using the output method at a point in time when finished goods have been transferred to the customer and there are

no

other obligations to customers after the control of the goods have transferred. Control of goods are transferred based on shipping terms for each customer – for shipments with terms of FOB Shipping Point, control is transferred upon shipment; for shipments with terms of FOB Destination, control is transferred upon delivery.

Leases

In accordance with ASU

No.

2016

-

02,

Leases, we determine if an arrangement is a lease at inception. Operating leases are included in our consolidated balance sheet as operating lease right of use (“ROU”) assets, other current liabilities, and operating lease liabilities. Finance leases are included in finance ROU assets, other current liabilities, and finance lease liabilities on our consolidated balance sheet. ROU assets represent our right to use an underlying asset for the duration of the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms

may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term and is recognized on the consolidated statements of operations.

Recent accounting standards

Recently issued accounting pronouncements

not

yet adopted:

In

January 2017,

the FASB issued ASU

No.

2017

-

04,

Intangibles—Goodwill and Other, which simplifies the accounting for goodwill impairments by eliminating step

2

from the goodwill impairment test. Instead, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” The guidance is effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments—Credit Losses, which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The guidance is effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

Recently issued accounting pronouncements adopted:

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases. This ASU requires lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under the current GAAP. Under ASU

2016

-

02,

lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients. We adopted the standard as of

November 1, 2019,

the beginning of our fiscal

2020,

applying the modified retrospective method. We elected the package of practical expedients permitted under the transition guidance with the new standard, which among other things, allows us to carryforward the historical lease classification. We elected the policy which allows us to combine the nonlease components with its related lease components rather than separating, and the policy election to keep leases with an initial term of

12

months or less off of the balance sheet. We have recognized those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. The adoption of the standard resulted in a material recognition of additional right of use assets and lease liabilities of approximately

$2.3

million and

$2.4

million, respectively, as of

November 1, 2019,

but did

not

materially affect our consolidated net income.

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Net sales	$ 10,390	$ 13,626	$ 22,804	$ 24,273
Cost of sales	7,804	9,532	16,965	17,033
Gross profit	2,586	4,094	5,839	7,240
Operating expenses:
Engineering	528	332	1,124	652
Selling and general	2,246	2,400	4,902	4,439
Total operating expenses	2,774	2,732	6,026	5,091
Operating (loss) income	(188)	1,362	(187)	2,149
Other income	7	14	18	35
(Loss) income before provision (benefit) for income taxes	(181)	1,376	(169)	2,184
Provision (benefit) for income taxes	3	315	(11)	483
Consolidated net (loss) income	$ (184)	$ 1,061	$ (158)	$ 1,701
(Loss) earnings per share
Basic (in dollars per share)	$ (0.02)	$ 0.11	$ (0.02)	$ 0.18
Diluted (in dollars per share)	$ (0.02)	$ 0.11	$ (0.02)	$ 0.17
Weighted average shares outstanding
Basic (in shares)	9,704,880	9,356,660	9,633,935	9,332,665
Diluted (in shares)	9,704,880	9,837,964	9,633,935	9,837,718

XML

Note 14 - Cash Dividend and Declared Dividends (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Common Stock, Dividends, Per Share, Cash Paid (in dollars per share)	$ 0.02	$ 0.02	$ 0.02	$ 0.02
Payments of Ordinary Dividends, Common Stock	$ 195,000	$ 187,000	$ 388,000	$ 373,000

XML

Note 12 - Commitments - Operating Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Apr. 30, 2020	Apr. 30, 2020
Operating lease cost	$ 250	$ 504

XML

Note 5 - Accrued Expenses and Other Long-term Liabilities (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	April 30, 2020		October 31, 2019
Wages payable	$	1,069	$	1,591
Accrued receipts		1,562		1,683
Warranty liability		210		-
Deferred revenue		258		-
Other accrued expenses		206		379
Totals	$	3,305	$	3,653

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

Description	Level 1		Level 2		Level 3
Earn-out liability	$	-	$	-	$	869

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Level 3
	April 30, 2020			January 31, 2020			October 31, 2019
Beginning balance	$	1,215		$	1,249		$	-
Payments		-			-			-
Change in value		(346	)		(34	)		-
Ending Balance	$	869		$	1,215		$	-

XML

Significant Accounting Policies (Policies)

6 Months Ended

Apr. 30, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Our accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America 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 accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments, which are normal and recurring, have been included in order to make the information

not

misleading. Information included in the consolidated balance sheet as of

October 31, 2019

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, 2019

included in our Annual Report on Form

10

-K (“Form

10

-K”) for the year ended

October 31, 2019

that was previously filed with the Securities and Exchange Commission (“SEC”). Operating results for the

six

months ended

April 30, 2020

are

not

necessarily indicative of the results that

may

be expected for the year ending

October 31, 2020.

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in our Annual Report on Form

10

-K for the year ended

October 31, 2019.

Consolidation, Policy [Policy Text Block]

Principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of RF Industries, Ltd. and our

four

wholly-owned subsidiaries, Cables Unlimited, Inc. (“Cables Unlimited”), Rel-Tech Electronics, Inc. (“Rel-Tech”), C Enterprises, Inc. (“C Enterprises”), and Schroff Technologies International, Inc. (“Schrofftech”). C Enterprises is a wholly-owned subsidiary that RF Industries, Ltd. acquired effective

March 15, 2019.

For periods on or before

January 31, 2019,

references herein to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, and Rel-Tech, and periods between

January 31, 2019

and

October 31, 2019,

references to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, Rel-Tech, and C Enterprises. Schrofftech is a wholly-owned subsidiary that RF Industries, Ltd. acquired effective

November 1, 2019.

For periods after

October 31, 2019,

references to the “Company” shall refer to RF Industries, Ltd., Cables Unlimited, Rel-Tech, C Enterprises, and Schrofftech. All intercompany balances and transactions have been eliminated in consolidation.

Risks and Uncertainties [Policy Text Block]

Risks and uncertainties

In

March 2020,

the World Health Organization (the “WHO”) declared coronavirus (COVID-

19

) a pandemic emergency. The COVID-

19

pandemic has negatively impacted regional and global economies, disrupted global supply chains, and created significant volatility and disruption of financial markets. The global impact of the outbreak has been rapidly evolving and certain jurisdictions, including those where we have operations, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, social distancing protocols and restrictions on types of business that

may

continue to operate. While we have been deemed an “essential” business, and therefore have been permitted to continue our operations, the impact of the COVID-

19

pandemic has affected both our operations and those of our customers. Our operations have been negatively affected by partial shutdowns of our facilities (particularly in the Northeast), by changes that we had to make on our operating methods and procedures, and by our reduced workforce as many of our employees stayed at home. Many of our customers and vendors have likewise had temporary closures of their facilities and have otherwise been impacted by changes in their industries. As a result, overall demand for our products has been reduced, and certain costs have increased. We have taken measures to protect the health and safety of our employees, and we continue to work with our customers and vendors to minimize potential disruptions in addressing the challenges posed by this global pandemic.

The extent of the impact of the COVID-

19

pandemic on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by domestic and international jurisdictions to prevent disease spread, all of which are uncertain and cannot be predicted. The outbreak impacted our performance for the

three

and

six

months ended

April 30, 2020.

We currently expect the decline caused by the economic slowdown to persist through the remainder of

2020.

The operations of our Cables Unlimited, Inc. subsidiary in Long Island, New York, was particularly affected as many employees stayed at home and as local customers shut down or otherwise delayed, deferred or cancelled orders for our products. Because of the severe impact that COVID-

19

has on our Northeastern operations, in

May 2020

we applied for and received a

$2.8

million of loans (the “PPP Loans”) under the Paycheck Protection Program of the CARES Act. The funds from the PPP Loans are being used to retain employees, maintain payroll and benefits, and make lease and utility payments. Without the PPP Loans, we would have made material reductions in our workforce (particularly at Cables Unlimited). We anticipate that most of the PPP Loans will be eligible for forgiveness in accordance with the provisions of the CARES Act. To the extent

not

forgiven, the PPP Loans have a

two

-year term, a fixed interest rate of

1%,

and principal and interest payments are deferred for

six

months.

Fair Value Measurement, Policy [Policy Text Block]

Fair value measurement

We measure at fair value certain financial assets and liabilities. Fair value is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These

two

types of inputs have created the following fair-value hierarchy:

Level 

1

– Quoted prices for identical instruments in active markets;

Level 

2

– Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are

not

active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

Level 

3

– Valuations derived from valuation techniques in which

one

or more significant inputs or significant value drivers are unobservable.

As of

April 30, 2020

and

October 31, 2019,

the carrying amounts reflected in the accompanying condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, and accounts payable approximated their carrying value due to their short-term nature. See Note

5

for discussion on the fair value of other long-term liabilities.

Revenue from Contract with Customer [Policy Text Block]

Revenue recognition

In accordance with Accounting Standards Update ASU

No.

2014

-

09,

Revenue from Contacts with Customers (Topic

606

) (“ASC

606”

), we recognize revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for goods or services promised to customers. We follow a

five

-step model to: (

1

) identify the contract with our customer; (

2

) identify our performance obligations in our contract; (

3

) determine the transaction price for our contract; (

4

) allocate the transaction price to our performance obligations; and (

5

) recognize revenue when (or as) each performance obligation is satisfied. In accordance with this accounting principle, we recognize revenue using the output method at a point in time when finished goods have been transferred to the customer and there are

no

other obligations to customers after the control of the goods have transferred. Control of goods are transferred based on shipping terms for each customer – for shipments with terms of FOB Shipping Point, control is transferred upon shipment; for shipments with terms of FOB Destination, control is transferred upon delivery.

Lessee, Leases [Policy Text Block]

Leases

In accordance with ASU

No.

2016

-

02,

Leases, we determine if an arrangement is a lease at inception. Operating leases are included in our consolidated balance sheet as operating lease right of use (“ROU”) assets, other current liabilities, and operating lease liabilities. Finance leases are included in finance ROU assets, other current liabilities, and finance lease liabilities on our consolidated balance sheet. ROU assets represent our right to use an underlying asset for the duration of the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do

not

provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms

may

include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term and is recognized on the consolidated statements of operations.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent accounting standards

Recently issued accounting pronouncements

not

yet adopted:

In

January 2017,

the FASB issued ASU

No.

2017

-

04,

Intangibles—Goodwill and Other, which simplifies the accounting for goodwill impairments by eliminating step

2

from the goodwill impairment test. Instead, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” The guidance is effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

In

June 2016,

the FASB issued ASU

2016

-

13,

Financial Instruments—Credit Losses, which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The guidance is effective for fiscal years beginning after

December 15, 2019.

Early adoption is permitted. We are currently evaluating the impact the adoption of this new standard will have on our consolidated financial statements.

Recently issued accounting pronouncements adopted:

In

February 2016,

the FASB issued ASU

No.

2016

-

02,

Leases. This ASU requires lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under the current GAAP. Under ASU

2016

-

02,

lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients. We adopted the standard as of

November 1, 2019,

the beginning of our fiscal

2020,

applying the modified retrospective method. We elected the package of practical expedients permitted under the transition guidance with the new standard, which among other things, allows us to carryforward the historical lease classification. We elected the policy which allows us to combine the nonlease components with its related lease components rather than separating, and the policy election to keep leases with an initial term of

12

months or less off of the balance sheet. We have recognized those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. The adoption of the standard resulted in a material recognition of additional right of use assets and lease liabilities of approximately

$2.3

million and

$2.4

million, respectively, as of

November 1, 2019,

but did

not

materially affect our consolidated net income.

XML

Note 8 - Concentrations of Credit Risk

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

Note

8

–

Con

centrations of credit r

isk

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, 2020,

we had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately

$12.5

million.

For the

three

months ending

April 30, 2020,

two

customers, both distributors, accounted for approximately

11%

and

17%

of net sales. These same

two

distributors accounted for

11%

and

14%,

respectively, of net sales for the

six

months ending

April 30, 2020,

while in the same

six

-month period another customer, a wireless carrier, accounted for

11%

of net sales. The

two

distributors had accounts receivable balances that accounted for

14%

and

19%,

respectively, of the total net accounts receivable balance at

April 30, 2020.

For the

three

months ending

April 30, 2019,

one

of the aforementioned distributors and the wireless carrier accounted for approximately

28%

and

14%,

respectively, of net sales. This same distributor and a different wireless carrier accounted for approximately

32%

and

10%,

respectively, of net sales for the

six

months ending

April 30, 2019.

At

April 30, 2019,

the

two

wireless carrier customers had accounts receivable balances that accounted for approximately

10%

and

21%

of the total net accounts receivable balance, while the

two

distributors accounted for

18%

and

15%

of the total net accounts receivable balance. Although these customers have been on-going major customers of 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.

XML

Note 4 - Other Current Assets

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Other Current Assets [Text Block]

Note

4

– Other current assets

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

	April 30, 2020		October 31, 2019
Prepaid taxes	$	522	$	-
Prepaid expense		436		346
Other		163		339
Totals	$	1,121	$	685

XML

Note 12 - Commitments

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Commitments Disclosure [Text Block]

Note

1

2

–

Commitments

We adopted ASU

2016

-

02

on

November 1, 2019,

and elected the practical expedient modified retrospective method whereby the lease qualification and classification was carried over from the accounting for leases under ASC

840.

The lease contracts for the corporate headquarters, RF Connector division manufacturing facilities, Cables Unlimited, Rel-Tech, and C Enterprises commenced prior to the effective date of

November 1, 2019,

and were determined to be operating leases. All other new contracts have been assessed for the existence of a lease and for the proper classification into operating leases. The rate implicit in the leases was undeterminable, and therefore, the discount rate used in all lease contracts is our incremental borrowing rate.

We have operating leases for corporate offices, manufacturing facilities, and certain storage units. Our leases have remaining lease terms of

1

year to

3

years, some of which include options to extend the leases for up to

5

years. A portion of our operating leases are leased from K&K Unlimited, a company controlled by Darren Clark, the former owner and current President of Cables Unlimited, whom we make rent payments totaling

$14,000

per month.

We also have other operating leases for certain equipment. The components of our facilities and equipment operating lease expenses for the period ending

April 30, 2020

were as follows (in thousands):

	Three Months Ended		Six Months Ended
	April 30, 2020		April 30, 2020
Operating lease cost	$	250	$	504

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

	April 30, 2020
Supplemental Cash Flows Information
Right of use assets obtained in exchange for lease obligations:
Operating leases	$	1,904
Weighted Average Remaining Lease Term
Operating leases (in months)		30.31
Weighted Average Discount Rate
Operating leases		3.54	%

Future minimum lease payments under non-cancellable leases as of

April 30, 2020

were as follows:

Year ended October 31,	Operating Leases
2020 (excluding six months ended April 30, 2020)	$	507
2021		919
2022		532
2023		166
2024		-
Thereafter		-
Total future minimum lease payments		2,124
Less imputed interest		(124	)
Total	$	2,000

Reported as of April 30, 2020	Operating Leases
Other current liabilities	$	977
Operating lease liabilities		1,023
Finance lease liabilities		-
Total	$	2,000

As of

April 30, 2020,

operating lease ROU asset was

$1.9

million and operating lease liability totaled

$2.0

million, of which

$977,000

is classified as current. There were

no

finance leases as of

April 30, 2020.

XML

Note 12 - Commitments (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Lease, Cost [Table Text Block]

	Three Months Ended		Six Months Ended
	April 30, 2020		April 30, 2020
Operating lease cost	$	250	$	504

Lessee, Leases, Other Information [Table Text Block]

	April 30, 2020
Supplemental Cash Flows Information
Right of use assets obtained in exchange for lease obligations:
Operating leases	$	1,904
Weighted Average Remaining Lease Term
Operating leases (in months)		30.31
Weighted Average Discount Rate
Operating leases		3.54	%

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

Year ended October 31,	Operating Leases
2020 (excluding six months ended April 30, 2020)	$	507
2021		919
2022		532
2023		166
2024		-
Thereafter		-
Total future minimum lease payments		2,124
Less imputed interest		(124	)
Total	$	2,000

Reported as of April 30, 2020	Operating Leases
Other current liabilities	$	977
Operating lease liabilities		1,023
Finance lease liabilities		-
Total	$	2,000

XML

Note 2 - Business Acquisition - Allocation of Estimated Purchase Price of C Enterprises, Inc. (Details) - C Enterprises [Member]	Mar. 15, 2019 USD ($)
Current assets	$ 2,008,000
Fixed assets	30,000
Other assets	18,000
Non-interest bearing liabilities	(1,456,000)
Net assets	$ 600,000

XML

Note 11 - Intangible Assets (Details Textual) - USD ($)	6 Months Ended	12 Months Ended
	Apr. 30, 2020	Oct. 31, 2019
Amortization of Intangible Assets, Total	$ 346,000	$ 275,000
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life (Year)	8 years 142 days

XML

Note 9 - Segment Information (Details Textual)	6 Months Ended
	Apr. 30, 2020
Number of Reportable Segments	2

XML

Note 11 - Intangible Assets

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

Note

1

1

–

Intangible assets

Intangible assets consist of the following (in thousands): 

	April 30, 2020			October 31, 2019
Amortizable intangible assets:
Non-compete agreement (estimated life 5 years)	$	423		$	200
Accumulated amortization		(222	)		(200	)
		201			-
Customer relationships (estimated lives 7 - 15 years)	$	5,058		$	2,879
Accumulated amortization		(2,126	)		(1,884	)
		2,932			995
Backlog (estimated life 1 - 2 years)		287			134
Accumulated amortization		(200	)		(134	)
		87			-
Patents (estimated life 10 - 14 years)		368			142
Accumulated amortization		(61	)		(45	)
		307			97
Totals	$	3,527		$	1,092
Non-amortizable intangible assets:
Trademarks	$	1,174		$	657

Amortization expense for the

six

months ended

April 30, 2020

and the year ended

October 31, 2019

was

$346,000

and

$275,000,

respectively. As of

April 30, 2020,

the weighted-average amortization period for the amortizable intangible assets is

8.39

years.

XML

Note 7 - Stock-based Compensation and Equity Transactions

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

Note

7

–

Stock-based compensation and equity transactions

On

December 3, 2018,

two

employees were each granted

25,000

incentive stock options. These options vested

5,000

each on the date of grant, and the balance vests as to

5,000

shares each per year thereafter on each of the next

four

anniversaries of

December 3, 2018,

and expire

ten

years from the date of grant. Also on

December 3, 2018,

one

employee was granted

10,000

incentive stock options. These options vested

2,000

shares on the date of grant, and the balance vests as to

2,000

shares per year thereafter on each of the next

four

anniversaries of

December 3, 2018,

and expire

ten

years from the date of grant.

On

March 8, 2019,

one

employee was granted

25,000

incentive stock options. These options vested

5,000

on the date of grant, and the balance vests as to

5,000

shares per year thereafter on each of the next

four

anniversaries of

March 8, 2019,

and expire

ten

years from the date of grant.

On

December 6, 2019,

one

employee was granted

50,000

incentive stock options. These options vested

10,000

on the date of grant, and the balance vests as to

10,000

shares per year thereafter on each of the next

four

anniversaries of

December 6, 2019,

and expire

ten

years from the date of grant.

On

January 9, 2020,

we granted the following equity awards to our managers and officers:

● Stock grants for a total of 12,075 common shares to three employees. We accounted for these shares as stock-based compensation totaling $77,000;

● A total of 3,241 incentive stock options to two employees, all of which vested immediately on the date of grant; and

● A total of 38,500 shares of restricted stock and 77,000 incentive stock options to five employees. 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 9, 2021; and (ii) the remaining restricted shares and options shall vest in twelve equal quarterly installments over the next three years, commencing with the first quarter following January 9, 2021. All incentive stock options expire ten years from the date of grant.

No

other shares or options were granted to company employees during the

three

and

six

months ended

April 30, 2020

and

2019.

The weighted average fair value of employee stock options that were granted during the

six

months ended

April 30, 2020

and

2019

was estimated to be

$3.13

and

$4.00,

respectively, per share, using the Black-Scholes option pricing model with the following assumptions:

	Six Months Ended April 30,
	2020			2019
Risk-free interest rate		1.57	%		2.88	%
Dividend yield		1.23	%		0.98	%
Expected life of the option (in years)		6.47			5.96
Volatility factor		49.14	%		55.25	%

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

2020

and

2019

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

10

of our Annual Report on Form

10

-K for the year ended

October 31, 2019.

A summary of the status of the options granted under our stock option plans as of

April 30, 2020

and the changes in options outstanding during the

six

months then ended is presented in the table that follows:

				Weighted
				Average
	Shares			Exercise Price
Outstanding at November 1, 2019		890,147		$	3.62
Options granted		130,241		$	6.53
Options exercised		(228,870	)	$	1.85
Options outstanding at April 30, 2020		791,518		$	4.61
Options exercisable at April 30, 2020		419,352		$	4.37
Options vested and expected to vest at April 30, 2020		790,482		$	4.62

Weighted average remaining contractual life of options outstanding as of

April 30, 2020:

5.53

years

Weighted average remaining contractual life of options exercisable as of

April 30, 2020:

3.58

years

Weighted average remaining contractual life of options vested and expected to vest as of

April 30, 2020:

5.52

years

Aggregate intrinsic value of options outstanding at

April 30, 2020:

$1,224,000

Aggregate intrinsic value of options exercisable at

April 30, 2020:

$719,000

Aggregate intrinsic value of options vested and expected to vest at

April 30, 2020:

$1,216,000

As of

April 30, 2020,

$713,000

and

$284,000

of expenses with respect to nonvested stock options and restricted shares, respectively, has yet to be recognized but is expected to be recognized over a weighted average period of

4.42

and

1.40

years, respectively.

Non-employee directors receive a compensation package of

$50,000

annually, which is paid

one

-half in cash and

one

-half through the grant of non-qualified awards. For fiscal

2020,

compensation payable to non-employee directors will be prorated from

November 1, 2019

through

August 31, 2020.

On

November 4, 2019,

we granted each of our

five

non-employee directors

3,270

shares of restricted stock. The number of restricted shares granted to each director was determined by prorating

$25,000

for the

10

months ending

August 31, 2020

and dividing by the

20

-day average RFIL stock price (

$6.36

). These restricted shares vest ratably through

August 31, 2020.

Stock option expense

During the

three

months ended

April 30, 2020

and

2019,

stock-based compensation expense totaled

$96,000

and

$78,000,

respectively, and was classified in selling and general expense. During the

six

months ended

April 30, 2020

and

2019,

stock-based compensation expense totaled

$283,000

and

$192,000,

respectively, and was classified in selling and general expenses.

XML

Note 3 - Inventories and Major Vendors

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

3

–

Inventories and major vendors

Inventories, consisting of materials, labor and manufacturing overhead, are stated at the lower of cost or net realizable value. Cost has been determined using the weighted average cost method. Inventories consist of the following (in thousands): 

	April 30, 2020		October 31, 2019
Raw materials and supplies	$	4,289	$	3,576
Work in process		434		791
Finished goods		4,377		3,878
Totals	$	9,100	$	8,245

No

vendors accounted for more than

10%

of inventory purchases for the

three

or

six

months ended

April 30, 2020.

For the

three

months ended

April 30, 2019,

two

vendors accounted for

11%

and

10%

of inventory purchases. One of these vendors accounted for

14%

of inventory purchases for the

six

months ended

April 30, 2019,

while a different vendor accounted for

13%

of inventory purchases. We have arrangements with these vendors to purchase products based on purchase orders that we periodically issue.

XML

Note 1 - Unaudited Interim Condensed Consolidated Financial Statements (Details Textual) - USD ($)		1 Months Ended
	May 05, 2020	May 31, 2020	Apr. 30, 2020	Nov. 01, 2019	Oct. 31, 2019
Operating Lease, Right-of-Use Asset			$ 1,901,000
Operating Lease, Liability, Total			$ 2,000,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset				$ 2,300,000
Operating Lease, Liability, Total				$ 2,400,000
Subsequent Event [Member]
Proceeds from Paycheck Protection Program Under CARES Act	$ 2,800,000	$ 2,800,000

XML

Note 2 - Business Acquisition - Components of the Purchase Price of Schroff Technologies International, Inc. (Details) - Schrofftech [Member]	Nov. 01, 2019 USD ($)
Cash consideration paid	$ 4,000,000
Earn-out liability	1,249,000
Total purchase price	$ 5,249,000

XML

Note 10 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Oct. 31, 2019
Effective Income Tax Rate Reconciliation, Percent, Total	1.00%	23.00%	(7.00%)	22.00%
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total	$ 118,000		$ 118,000		$ 80,000
Unrecognized Tax Benefits, Ending Balance	$ 30,000		$ 30,000

XML

Note 8 - Concentrations of Credit Risk (Details Textual) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Cash, Uninsured Amount	$ 12.5		$ 12.5
Revenue from Contract with Customer Benchmark [Member] | Customer Concentration Risk [Member] | Distributors One [Member]
Concentration Risk, Percentage	11.00%	28.00%	11.00%	32.00%
Revenue from Contract with Customer Benchmark [Member] | Customer Concentration Risk [Member] | Distributors Two [Member]
Concentration Risk, Percentage	17.00%		14.00%
Revenue from Contract with Customer Benchmark [Member] | Customer Concentration Risk [Member] | Wireless Carrier One [Member]
Concentration Risk, Percentage		14.00%	11.00%
Revenue from Contract with Customer Benchmark [Member] | Customer Concentration Risk [Member] | Wireless Carrier [Member]
Concentration Risk, Percentage				10.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Distributors One [Member]
Concentration Risk, Percentage			14.00%	18.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Distributors Two [Member]
Concentration Risk, Percentage			19.00%	15.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Wireless Carrier One [Member]
Concentration Risk, Percentage				10.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member] | Wireless Carrier Two [Member]
Concentration Risk, Percentage				21.00%

XML

Document And Entity Information - shares	6 Months Ended
	Apr. 30, 2020	May 29, 2020
Document Information [Line Items]
Entity Registrant Name	R F INDUSTRIES LTD
Entity Central Index Key	0000740664
Trading Symbol	rfil
Current Fiscal Year End Date	--10-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		9,758,062
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	Apr. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock, $0.01 par value per share

XML

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance (in shares) at Oct. 31, 2018	9,291,201
Balance at Oct. 31, 2018	$ 93	$ 20,974	$ 6,716	$ 27,783
Exercise of stock options (in shares)	69,150
Exercise of stock options	$ 1	356		357
Stock-based compensation expense		192		192
Dividends			(373)	(373)
Consolidated net income (loss)			1,701	1,701
Balance (in shares) at Apr. 30, 2019	9,360,351
Balance at Apr. 30, 2019	$ 94	21,522	8,044	29,660
Balance (in shares) at Jan. 31, 2019	9,356,935
Balance at Jan. 31, 2019	$ 94	21,429	7,170	28,693
Exercise of stock options (in shares)	3,416
Exercise of stock options		15		15
Stock-based compensation expense		78		78
Dividends			(187)	(187)
Consolidated net income (loss)			1,061	1,061
Balance (in shares) at Apr. 30, 2019	9,360,351
Balance at Apr. 30, 2019	$ 94	21,522	8,044	29,660
Balance (in shares) at Oct. 31, 2019	9,462,267
Balance at Oct. 31, 2019	$ 95	21,949	9,489	$ 31,533
Exercise of stock options (in shares)	228,870			228,870
Exercise of stock options	$ 2	421		$ 423
Stock-based compensation expense		206		206
Dividends			(388)	(388)
Consolidated net income (loss)			(158)	(158)
Balance (in shares) at Apr. 30, 2020	9,758,062
Balance at Apr. 30, 2020	$ 98	22,652	8,943	31,693
Issuance of restricted stock (in shares)	54,850
Issuance of restricted stock	$ 1	(1)
Issuance of common shares (in shares)	12,075
Issuance of common shares		77		77
Balance (in shares) at Jan. 31, 2020	9,745,135
Balance at Jan. 31, 2020	$ 98	22,524	9,322	31,944
Exercise of stock options (in shares)	12,927
Exercise of stock options		32		32
Stock-based compensation expense		96		96
Dividends			(195)	(195)
Consolidated net income (loss)			(184)	(184)
Balance (in shares) at Apr. 30, 2020	9,758,062
Balance at Apr. 30, 2020	$ 98	$ 22,652	$ 8,943	$ 31,693

XML

Note 5 - Accrued Expenses and Other Long-term Liabilities (Details Textual) - USD ($)	Apr. 30, 2020	Nov. 04, 2019	Oct. 31, 2019
Product Warranty Accrual, Current	$ 210,000
Financial Liabilities Fair Value Disclosure, Total			0
Assets, Fair Value Disclosure			$ 0
Other Noncurrent Liabilities [Member]
Business Combination, Contingent Consideration, Liability, Noncurrent	$ 900,000
Schrofftech [Member]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High		$ 2,400,000

XML

Note 6 - Earnings (Loss) Per Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)	392,838	121,015	392,838	121,015

XML

Note 2 - Business Acquisition

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note

2

– Bu

s

iness Acquisition

C Enterprises, Inc.

On

March 15, 2019,

through C Enterprises, Inc. (“C Enterprises”), its newly formed subsidiary, we purchased the business and assets of C Enterprises L.P., a California based designer and manufacturer of quality connectivity solutions to telecommunications and data communications distributors. In consideration for the C Enterprises business and assets, we paid

$600,000

in cash and assumed certain liabilities. The acquisition was determined

not

to be material and was accounted for in accordance with the acquisition method of accounting. The acquired assets and assumed liabilities were recorded at their estimated fair values in accordance with ASC

805,

Business Combinations. There were

no

intangible assets identified as part of the acquisition.

The results of C Enterprises’ operations subsequent to

March 15, 2019

have been included in the results of the Custom Cabling Manufacturing and Assembly segment (“Custom Cabling segment”) as well as in the consolidated statements of operations. Costs related to the acquisition of C Enterprises were approximately

$100,000

and have been expensed as incurred and categorized in selling and general expenses.

The following table summarizes the components of the purchase price at fair value at

March 15, 2019:

Cash consideration paid	$	600,000
Total purchase price	$	600,000

The following table summarizes the allocation of the estimated purchase price at fair value at

March 15, 2019:

Current assets	$	2,008,000
Fixed assets		30,000
Other assets		18,000
Non-interest bearing liabilities		(1,456,000	)
Net assets	$	600,000

Schroff

Technologies

International, Inc.

On

November 4, 2019,

we purchased the business of Schroff Technologies International, Inc. (“Schrofftech”), a Rhode Island-based manufacturer and marketer of intelligent thermal control systems used by telecommunications companies across the U.S. and Canada, and shrouds for small cell integration and installation. At the closing, in consideration for the Schrofftech business, we paid the sellers

$4

million in cash, and, if certain financial targets are met by Schrofftech over a

two

-year period, agreed to pay additional cash earn-out payments of up to

$2.4

million.

The acquisition was accounted for as an acquisition of a business in accordance with the acquisition method of accounting. The acquired assets and assumed liabilities have been recorded at their estimated fair values. We determined the estimated fair values with the assistance of appraisals or valuations performed by an independent

third

-party specialist. Schrofftech serves the high growth wireless, telecom and cable markets. All manufacturing operations are performed at Schrofftech’s facilities in Rhode Island. The Schrofftech business allows us to diversify the types of services provided for our customers in the cable industry.

Although the closing occurred on

November 4, 2019,

the acquisition of Schrofftech is deemed to have become effective for financial accounting purposes as of

November 1, 2019.

Accordingly, Schrofftech’s financial results have been included in the results of the Custom Cabling segment for the

three

and

six

months ended

April 30, 2020

as well as in the consolidated statements of operations. Total costs related to the acquisition of Schrofftech were approximately

$151,000,

of which

$108,000

was incurred in fiscal

2019

and

$43,000

was incurred in the

six

months ended

April 30, 2020.

All acquisition-related costs have been expensed as incurred and categorized in selling and general expenses. For the

three

months ended

April 30, 2020,

Schrofftech contributed revenue and pretax loss of

$1.1

million and

$95,000,

respectively. For the

six

months ended

April 30, 2020,

Schrofftech contributed revenue and pretax loss of

$2.3

million and

$13,000,

respectively.

The following table summarizes the components of the purchase price at fair values at

November 1, 2019:

Cash consideration paid	$	4,000,000
Earn-out liability		1,249,000
Total purchase price	$	5,249,000

The following table summarizes the allocation of the purchase price at fair value at

November 1, 2019:

Current assets	$	1,168,000
Fixed assets		58,000
Intangible assets		3,299,000
Goodwill		1,356,000
Non-interest bearing liabilities		(632,000	)
Net assets	$	5,249,000

The following unaudited pro forma financial information presents the combined operating results of the Company, C Enterprises, and Schrofftech as if both acquisitions had occurred as of the beginning of the earliest period presented. Pro forma data is subject to various assumptions and estimates and is presented for informational purposes only. This pro forma data does

not

purport to represent or be indicative of the consolidated operating results that would have been reported had the transaction been completed as described herein, and the data should

not

be taken as indicative of future consolidated operating results.

Unaudited pro forma financial information assuming the acquisition of C Enterprises and Schrofftech as of

November 1, 2018

is presented in the following table:

	Three Months Ended April 30,					Six Months Ended April 30,
	2020			2019		2020			2019
Revenue	$	10,390		$	18,901	$	22,804		$	35,100
Net (loss) income		(184	)		1,371		(158	)		2,744
(Loss) earnings per share
Basic	$	(0.02	)	$	0.15	$	(0.02	)	$	0.29
Diluted	$	(0.02	)	$	0.14	$	(0.02	)	$	0.28

XML

Note 13 - Line of Credit (Details Textual) - Revolving Credit Facility [Member] - USD ($) $ in Thousands	1 Months Ended
	Nov. 30, 2019	Apr. 30, 2020
Line of Credit Facility, Maximum Borrowing Capacity	$ 5,000
Long-term Line of Credit, Total		$ 0
LIBOR Daily Floating Rate [Member]
Debt Instrument, Basis Spread on Variable Rate	2.00%

XML

Note 12 - Commitments (Details Textual) - USD ($)	Apr. 30, 2020	Oct. 31, 2019
Lessee, Operating Lease, Renewal Term (Year)	5 years
Operating Lease, Right-of-Use Asset	$ 1,901,000
Operating Lease, Liability, Total	2,000,000
Operating Lease, Liability, Current	977,000
K and K Unlimited [Member]
Lessee, Operating Lease, Monthly Rent	$ 14,000
Minimum [Member]
Lessee, Operating Lease, Remaining Lease Term (Year)	1 year
Maximum [Member]
Lessee, Operating Lease, Remaining Lease Term (Year)	3 years

XML

Note 4 - Other Current Assets (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Schedule of Other Current Assets [Table Text Block]

	April 30, 2020		October 31, 2019
Prepaid taxes	$	522	$	-
Prepaid expense		436		346
Other		163		339
Totals	$	1,121	$	685

XML

Note 15 - Subsequent Events

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

Note

1

5

–

Subsequent event

On

May 5, 2020,

as part of the Paycheck Protection Program (“PPP”) of the CARES Act, we received PPP loans in the aggregate totaling approximately

$2.8

million (“PPP Loan”).  The funds from the PPP Loan will be used to retain employees, maintain payroll and benefits, and make lease and utility payments during the

eight

-week period following the receipt of the loan, which amounts are intended to be eligible for forgiveness, subject to the provisions of the CARES Act. To the extent

not

forgiven, the loan has a

two

-year term, a fixed interest rate of

1%,

and principal and interest payments are deferred for

six

months. 

XML

Note 2 - Business Acquisition - Unaudited Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Revenue	$ 10,390	$ 18,901	$ 22,804	$ 35,100
Net (loss) income	$ (184)	$ 1,371	$ (158)	$ 2,744
Basic (in dollars per share)	$ (0.02)	$ 0.15	$ (0.02)	$ 0.29
Diluted (in dollars per share)	$ (0.02)	$ 0.14	$ (0.02)	$ 0.28

XML

Note 11 - Intangible Assets (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Schedule of Finite-lived and Indefinite-lived Intangible Assets [Table Text Block]

	April 30, 2020			October 31, 2019
Amortizable intangible assets:
Non-compete agreement (estimated life 5 years)	$	423		$	200
Accumulated amortization		(222	)		(200	)
		201			-
Customer relationships (estimated lives 7 - 15 years)	$	5,058		$	2,879
Accumulated amortization		(2,126	)		(1,884	)
		2,932			995
Backlog (estimated life 1 - 2 years)		287			134
Accumulated amortization		(200	)		(134	)
		87			-
Patents (estimated life 10 - 14 years)		368			142
Accumulated amortization		(61	)		(45	)
		307			97
Totals	$	3,527		$	1,092
Non-amortizable intangible assets:
Trademarks	$	1,174		$	657

XML

Note 2 - Business Acquisition - Components of the Purchase Price of C Enterprises, Inc. (Details) - C Enterprises [Member]	Mar. 15, 2019 USD ($)
Cash consideration paid	$ 600,000
Total purchase price	$ 600,000

XML

Note 9 - Segment Information

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

9

–

Segment i

nformation

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; (

5

) if applicable, the nature of the regulatory environment. Based upon this evaluation, as of

April 30, 2020,

we had

two

segments – RF Connector and Cable Assembly (“RF Connector segment”) and Custom Cabling Manufacturing and Assembly (“Custom Cabling segment”).

The RF Connector segment consisted of

one

division and the Custom Cabling segment was composed of

four

divisions. The

five

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

Management identifies segments based on strategic business units that are, in turn, based along market lines. These strategic business units offer products and services to different markets in accordance with their customer base and product usage. For segment reporting purposes, the RF Connector division constitutes the RF Connector segment, and the Cables Unlimited, Rel-Tech, C Enterprises, and Schrofftech divisions constitute the Custom Cabling segment.

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.

Substantially 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, 2020

and

2019

(in thousands):

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
United States	$	9,982	$	13,451	$	22,155	$	23,921
Foreign Countries:
Canada		290		113		407		278
Mexico		7		-		12		-
All Other		111		62		230		74
		408		175		649		352
Totals	$	10,390	$	13,626	$	22,804	$	24,273

Net sales, income (loss) before provision for income taxes and other related segment information for the

three

months ended

April 30, 2020

and

2019

are as follows (in thousands): 

	RF Connector and Cable Assembly		Custom Cabling Manufacturing and Assembly			Corporate		Total
2020
Net sales	$	3,768	$	6,622		$	-	$	10,390
Income (loss) before provision for income taxes		697		(885	)		7		(181	)
Depreciation and amortization		41		212			-		253
Total assets		8,126		16,021			15,265		39,412
2019
Net sales	$	3,341	$	10,285		$	-	$	13,626
Income before provision for income taxes		257		1,105			14		1,376
Depreciation and amortization		45		96			-		141
Total assets		6,972		12,773			14,660		34,405

Net sales, income (loss) before provision (benefit) for income taxes and other related segment information for the

six

months ended

April 30, 2020

and

2019

are as follows (in thousands):

	RF Connector and Cable Assembly		Custom Cabling Manufacturing and Assembly			Corporate		Total
2020
Net sales	$	6,957	$	15,847		$	-	$	22,804
Income (loss) before benefit for income taxes		979		(1,166	)		18		(169	)
Depreciation and amortization		83		425			-		508
Total assets		8,126		16,021			15,265		39,412
2019
Net sales	$	6,599	$	17,674		$	-	$	24,273
Income before provision for income taxes		537		1,611			36		2,184
Depreciation and amortization		90		188			-		278
Total assets		6,972		12,773			14,660		34,405

XML

Note 5 - Accrued Expenses and Other Long-term Liabilities

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Noncurrent [Text Block]

Note

5

–

Accrued expenses

and other long-term liabilities

Accrued expenses consist of the following (in thousands):

	April 30, 2020		October 31, 2019
Wages payable	$	1,069	$	1,591
Accrued receipts		1,562		1,683
Warranty liability		210		-
Deferred revenue		258		-
Other accrued expenses		206		379
Totals	$	3,305	$	3,653

 Accrued receipts represent purchased inventory for which invoices have

not

been received.

We recognize an accrued warranty liability for the estimated claims to remedy potential deficiencies of quality or performance of our products in the Schrofftech division within the Custom Cabling segment. The product warranties extend over various periods, depending upon the product subject to the warranty. We record a provision for estimated future warranty claims based upon the historical relationship of warranty claims to sales, any specifically identified warranty issues and current trends and knowledge. We base our estimates in part on historical experience and on assumptions that are believed to be reasonable under the circumstances and revise our estimates, as appropriate, when events or changes in circumstances indicate that revisions

may

be necessary. Although these estimates are based on management’s knowledge of and experience with past and current events and on management’s assumptions about future events, it is reasonably possible that they

may

ultimately differ materially from actual results, including in the case of a significant product failure. Warranty related expenses have

not

been material and were

not

material for the

three

and

six

months ended

April 30, 2020.

Warranty liabilities were

$210,000

as of

April 30, 2020.

The purchase agreement for the Schrofftech acquisition provides for earn-out payments of up to

$2,400,000,

which is earned through

October 31, 2022.

The initial earn-out liability was valued at its fair value using an option pricing based approach with a risk-neutral framework using Black Scholes due to the option-like nature of the earn-out payout structure. The earn-out was and will continue to be revalued quarterly using a present value approach and any resulting increase or decrease will be recorded into selling and general expenses. Any changes in the amount of the actual results and forecasted scenarios could impact the fair value. Significant judgment is employed in determining the appropriateness of the assumptions used in calculating the fair value of the earn-out as of the acquisition date. Accordingly, significant variances between actual and forecasted results or changes in the assumptions can materially impact the amount of contingent consideration expense we record in future periods.

The contingent consideration liability represents future earn-out liability that we

may

be required to pay in conjunction with the acquisition of Schrofftech. We estimate the fair value of the earn-out liability using an option pricing based approach with a risk-neutral framework using Black Scholes related to Schrofftech calculated at net present value (level

3

of the fair value hierarchy).

The following table summarizes our financial assets and liabilities measured at fair value on a recurring basis as of

April 30, 2020 (

in thousands):

Description	Level 1		Level 2		Level 3
Earn-out liability	$	-	$	-	$	869

There were

no

financial assets or liabilities measured at fair value as of

October 31, 2019.

The following table summarizes the Level

3

transactions for the

three

months ended

April 30, 2020

and

January 31, 2020 (

in thousands):

	Level 3
	April 30, 2020			January 31, 2020			October 31, 2019
Beginning balance	$	1,215		$	1,249		$	-
Payments		-			-			-
Change in value		(346	)		(34	)		-
Ending Balance	$	869		$	1,215		$	-

As of

April 30, 2020,

the full amount of the

$0.9

 million earn-out was classified as other long-term liabilities.

XML

Note 9 - Segment Information - Sales by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Net sales	$ 10,390	$ 13,626	$ 22,804	$ 24,273
UNITED STATES
Net sales	9,982	13,451	22,155	23,921
CANADA
Net sales	290	113	407	278
MEXICO
Net sales	7		12
All Other Foreign Countries [Member]
Net sales	111	62	230	74
Non-US [Member]
Net sales	$ 408	$ 175	$ 649	$ 352

XML

Note 7 - Stock-based Compensation and Equity Transactions - Assumptions (Details)	6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
Risk-free interest rate	1.57%	2.88%
Dividend yield	1.23%	0.98%
Expected life of the option (in years) (Year)	6 years 171 days	5 years 350 days
Volatility factor	49.14%	55.25%

XML

Note 11 - Intangible Assets - Intangible Assets (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Amortizable intangible assets, net	$ 3,527	$ 1,092
Non-amortizable intangible assets, trademarks	1,174	657
Noncompete Agreements [Member]
Amortizable intangible assets, gross	423	200
Accumulated amortization	(222)	(200)
Amortizable intangible assets, net	201
Customer Relationships [Member]
Amortizable intangible assets, gross	5,058	2,879
Accumulated amortization	(2,126)	(1,884)
Amortizable intangible assets, net	2,932	995
Order or Production Backlog [Member]
Amortizable intangible assets, gross	287	134
Accumulated amortization	(200)	(134)
Amortizable intangible assets, net	87
Patents [Member]
Amortizable intangible assets, gross	368	142
Accumulated amortization	(61)	(45)
Amortizable intangible assets, net	$ 307	$ 97

XML

Note 15 - Subsequent Events (Details Textual) - USD ($) $ in Millions		1 Months Ended
	May 05, 2020	May 31, 2020
Subsequent Event [Member]
Proceeds from Paycheck Protection Program Under CARES Act	$ 2.8	$ 2.8

XML

Note 12 - Commitments - Other Information Related to Leases (Details) $ in Thousands	6 Months Ended
	Apr. 30, 2020 USD ($)
Right of use assets obtained in exchange for lease obligations operating leases	$ 1,904
Weighted Average Remaining Lease Term, Operating leases (months) (Month)	2 years 189 days
Weighted Average Discount Rate, Operating leases	3.54%

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Trade accounts receivable, allowance for doubtful accounts	$ 38	$ 23
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	9,758,062	9,462,267
Common stock, shares outstanding (in shares)	9,758,062	9,462,267

XML

Note 7 - Stock-based Compensation and Equity Transactions (Details Textual) - USD ($)						3 Months Ended		6 Months Ended
	Jan. 09, 2020	Dec. 06, 2019	Nov. 04, 2019	Mar. 08, 2019	Dec. 03, 2018	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term (Year)								5 years 193 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term (Year)								3 years 211 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Remaining Contractual Term (Year)								5 years 189 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value						$ 1,224,000		$ 1,224,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value						719,000		719,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value						1,216,000		1,216,000
Selling, General and Administrative Expenses [Member]
Share-based Payment Arrangement, Expense						96,000	$ 78,000	283,000	$ 192,000
Share-based Payment Arrangement, Nonemployee [Member]
Nonemployee Director, Annual Compensation						50,000		$ 50,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Value			$ 25,000
Share Price, 20 Day Average (in dollars per share)			$ 6.36
Incentive Stock Options [Member]
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in dollars per share)								$ 3.13	$ 4
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total						713,000		$ 713,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)								4 years 153 days
Restricted Stock [Member]
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total						$ 284,000		$ 284,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition (Year)								1 year 146 days
Restricted Stock [Member] | Share-based Payment Arrangement, Nonemployee [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)			3,270
Two Employees [Member] | Incentive Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)	3,241				25,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares (in shares)					5,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Number to Vest Each Year (in shares)					5,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)					4 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)					10 years
One Employee [Member] | Incentive Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)		50,000		25,000	10,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares (in shares)		10,000		5,000	2,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Number to Vest Each Year (in shares)		10,000		5,000	2,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)		4 years		4 years	4 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)		10 years		10 years	10 years
Three Employees [Member]
Shares Issued, Shares, Share-based Payment Arrangement, after Forfeiture, Total (in shares)	12,075
Share-based Payment Arrangement, Expense	$ 77,000
Five Employees [Member] | Incentive Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in shares)	77,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period (Year)	10 years
Five Employees [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period (in shares)	38,500
Five Employees [Member] | Restricted Stock and Incentive Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	4 years
Five Employees [Member] | Restricted Stock and Incentive Stock Options [Member] | Vesting on January 9, 2021 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	25.00%

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) (Parentheticals) $ in Thousands	6 Months Ended
	Apr. 30, 2020 USD ($)
C Enterprises [Member]
Purchase of Schrofftech, cash acquired	$ 143
Schrofftech [Member]
Purchase of Schrofftech, cash acquired	$ 99

XML

Note 3 - - Inventories and Major Vendors - Inventories (Details) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
Raw materials and supplies	$ 4,289	$ 3,576
Work in process	434	791
Finished goods	4,377	3,878
Totals	$ 9,100	$ 8,245

XML

Note 5 - Accrued Expenses and Other Long-term Liabilities - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - Fair Value, Recurring [Member] $ in Thousands	Apr. 30, 2020 USD ($)
Fair Value, Inputs, Level 1 [Member]
Earn-out liability
Fair Value, Inputs, Level 2 [Member]
Earn-out liability
Fair Value, Inputs, Level 3 [Member]
Earn-out liability	$ 869

XML

Note 2 - Business Acquisition (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Business Acquisition, Pro Forma Information [Table Text Block]

	Three Months Ended April 30,					Six Months Ended April 30,
	2020			2019		2020			2019
Revenue	$	10,390		$	18,901	$	22,804		$	35,100
Net (loss) income		(184	)		1,371		(158	)		2,744
(Loss) earnings per share
Basic	$	(0.02	)	$	0.15	$	(0.02	)	$	0.29
Diluted	$	(0.02	)	$	0.14	$	(0.02	)	$	0.28

Schrofftech [Member]

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Cash consideration paid	$	4,000,000
Earn-out liability		1,249,000
Total purchase price	$	5,249,000

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Current assets	$	1,168,000
Fixed assets		58,000
Intangible assets		3,299,000
Goodwill		1,356,000
Non-interest bearing liabilities		(632,000	)
Net assets	$	5,249,000

C Enterprises [Member]

Notes Tables

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

Cash consideration paid	$	600,000
Total purchase price	$	600,000

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Current assets	$	2,008,000
Fixed assets		30,000
Other assets		18,000
Non-interest bearing liabilities		(1,456,000	)
Net assets	$	600,000

XML

Note 13 - Line of Credit

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

13

– Line of credit

In

November 2019,

we entered into an agreement for a revolving line of credit (“LOC”) in the amount of

$5.0

million. Amounts outstanding under the LOC shall bear interest at a rate of

2.0%

plus LIBOR Daily Floating Rate (“base interest rate”), with interest payable on the

first

day of each month. Borrowings under the LOC are secured by a security interest in certain assets of the Company. The LOC contains certain loan covenants. Failure to maintain the loan covenants

may

constitute an event of default, resulting in all outstanding amounts of principal and interest becoming immediately due and payable. All outstanding principal and interest is due and payable on

December 1, 2021.

As of

April 30, 2020,

we are in compliance with all loan covenants. Additionally, as of

April 30, 2020,

no

amounts were outstanding under the line of credit.

XML

Note 6 - Earnings (Loss) Per Share (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Schedule of Weighted Average Number of Shares [Table Text Block]

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
Weighted average shares outstanding for basic (loss) earnings per share		9,704,880		9,356,660		9,633,935		9,332,665
Add effects of potentially dilutive securities-assumed exercise of stock options		-		481,304		-		505,053
Weighted average shares outstanding for diluted (loss) earnings per share		9,704,880		9,837,964		9,633,935		9,837,718

XML

Note 12 - Commitments - Future Minimum Lease Payments (Details) - USD ($)	Apr. 30, 2020	Oct. 31, 2019
2020 (excluding six months ended April 30, 2020)	$ 507,000
2021	919,000
2022	532,000
2023	166,000
2024
Thereafter
Total future minimum lease payments	2,124,000
Less imputed interest	(124,000)
Total	2,000,000
Other current liabilities	977,000
Operating lease liabilities	1,023,000
Finance lease liabilities
Total	$ 2,000,000

XML

Note 3 - Inventories and Major Vendors (Details Textual) - Cost of Goods and Service Benchmark [Member] - Supplier Concentration Risk [Member]	3 Months Ended	6 Months Ended
	Apr. 30, 2019	Apr. 30, 2019
Vendors One [Member]
Concentration Risk, Percentage	11.00%	14.00%
Vendors Two [Member]
Concentration Risk, Percentage	10.00%
Vendors Three [Member]
Concentration Risk, Percentage		13.00%

XML

Note 5 - Accrued Expenses and Other Long-term Liabilities - Accrued Expenses (Details) - USD ($)	Apr. 30, 2020	Oct. 31, 2019
Wages payable	$ 1,069,000	$ 1,591,000
Accrued receipts	1,562,000	1,683,000
Warranty liability	210,000
Deferred revenue	258,000
Other accrued expenses	206,000	379,000
Totals	$ 3,305,000	$ 3,653,000

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Apr. 30, 2020	Oct. 31, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 14,076	$ 12,540
Trade accounts receivable, net of allowance for doubtful accounts of $38 and $23, respectively	4,950	12,190
Inventories	9,100	8,245
Other current assets	1,121	685
TOTAL CURRENT ASSETS	29,247	33,660
Property and equipment:
Equipment and tooling	3,654	3,602
Furniture and office equipment	1,066	998
Property, Plant and Equipment, Gross, Ending Balance	4,720	4,600
Less accumulated depreciation	3,923	3,761
Total property and equipment, net	797	839
Operating lease right of use assets, net	1,901
Goodwill	2,697	1,340
Amortizable intangible assets, net	3,527	1,092
Non-amortizable intangible assets	1,174	657
Other assets	69	112
TOTAL ASSETS	39,412	37,700
CURRENT LIABILITIES
Accounts payable	1,454	2,406
Accrued expenses	3,305	3,653
Income taxes payable		21
Other current liabilities	977
TOTAL CURRENT LIABILITIES	5,736	6,080
Deferred tax liabilities	91
Operating lease liabilities	1,023
Other long-term liabilities	869	87
TOTAL LIABILITIES	7,719	6,167
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock - authorized 20,000,000 shares of $0.01 par value; 9,758,062 and 9,462,267 shares issued and outstanding at April 30, 2020 and October 31, 2019, respectively	98	95
Additional paid-in capital	22,652	21,949
Retained earnings	8,943	9,489
TOTAL STOCKHOLDERS' EQUITY	31,693	31,533
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 39,412	$ 37,700

XML

Note 6 - Earnings (Loss) Per Share - Computation of Basic and Diluted Weighted Average Shares Outstanding (Details) - shares	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019
Basic (in shares)	9,704,880	9,356,660	9,633,935	9,332,665
Add effects of potentially dilutive securities-assumed exercise of stock options (in shares)		481,304		505,053
Weighted average shares outstanding for diluted (loss) earnings per share (in shares)	9,704,880	9,837,964	9,633,935	9,837,718

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019
OPERATING ACTIVITIES:
Consolidated net (loss) income	$ (158,000)	$ 1,701,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Bad debt expense	12,000	7,000
Depreciation and amortization	508,000	278,000
Stock-based compensation expense	283,000	192,000
Deferred income taxes	136,000
Changes in operating assets and liabilities:
Trade accounts receivable	7,499,000	(2,375,000)
Inventories	(72,000)	(345,000)
Other current assets	(420,000)	167,000
Right of use assets	99,000
Other long-term assets	(2,000)
Accounts payable	(1,060,000)	(721,000)
Accrued expenses	(872,000)	(786,000)
Income tax payable	(21,000)
Other long-term liabilities	(467,000)	76,000
Net cash provided by (used in) operating activities	5,465,000	(1,806,000)
INVESTING ACTIVITIES:
Capital expenditures	(63,000)	(199,000)
Net cash used in investing activities	(3,964,000)	(656,000)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options	423,000	357,000
Dividends paid	(388,000)	(373,000)
Net cash provided by (used in) financing activities	35,000	(16,000)
Net increase (decrease) in cash and cash equivalents	1,536,000	(2,478,000)
Cash and cash equivalents of continuing operations, beginning of period	12,540,000	16,334,000
Cash and cash equivalents, end of period	14,076,000	13,856,000
Supplemental cash flow information – income taxes paid	395,000	255,000
C Enterprises [Member]
INVESTING ACTIVITIES:
Purchase of company, net of cash acquired		(457,000)
Schrofftech [Member]
INVESTING ACTIVITIES:
Purchase of company, net of cash acquired	$ (3,901,000)

XML

Note 7 - Stock-based Compensation and Equity Transactions (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Six Months Ended April 30,
	2020			2019
Risk-free interest rate		1.57	%		2.88	%
Dividend yield		1.23	%		0.98	%
Expected life of the option (in years)		6.47			5.96
Volatility factor		49.14	%		55.25	%

Share-based Payment Arrangement, Option, Activity [Table Text Block]

				Weighted
				Average
	Shares			Exercise Price
Outstanding at November 1, 2019		890,147		$	3.62
Options granted		130,241		$	6.53
Options exercised		(228,870	)	$	1.85
Options outstanding at April 30, 2020		791,518		$	4.61
Options exercisable at April 30, 2020		419,352		$	4.37
Options vested and expected to vest at April 30, 2020		790,482		$	4.62

XML

Note 3 - Inventories and Major Vendors (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	April 30, 2020		October 31, 2019
Raw materials and supplies	$	4,289	$	3,576
Work in process		434		791
Finished goods		4,377		3,878
Totals	$	9,100	$	8,245

XML

Note 14 - Cash Dividend and Declared Dividends

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Cash Dividend and Declared Dividends [Text Block]

Note

1

4

–

Cash dividend and declared dividends

During the

three

months ended

April 30, 2020

and

2019,

we paid dividends of

$0.02

per share for a total of

$195,000

and

$187,000,

respectively.  During the

six

months ended

April 30, 2020

and

2019,

we paid dividends of

$0.02

per share for a total of

$388,000

and

$373,000,

respectively.

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Note 9 - Segment Information (Tables)

6 Months Ended

Apr. 30, 2020

Notes Tables

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
United States	$	9,982	$	13,451	$	22,155	$	23,921
Foreign Countries:
Canada		290		113		407		278
Mexico		7		-		12		-
All Other		111		62		230		74
		408		175		649		352
Totals	$	10,390	$	13,626	$	22,804	$	24,273

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	RF Connector and Cable Assembly		Custom Cabling Manufacturing and Assembly			Corporate		Total
2020
Net sales	$	3,768	$	6,622		$	-	$	10,390
Income (loss) before provision for income taxes		697		(885	)		7		(181	)
Depreciation and amortization		41		212			-		253
Total assets		8,126		16,021			15,265		39,412
2019
Net sales	$	3,341	$	10,285		$	-	$	13,626
Income before provision for income taxes		257		1,105			14		1,376
Depreciation and amortization		45		96			-		141
Total assets		6,972		12,773			14,660		34,405

	RF Connector and Cable Assembly		Custom Cabling Manufacturing and Assembly			Corporate		Total
2020
Net sales	$	6,957	$	15,847		$	-	$	22,804
Income (loss) before benefit for income taxes		979		(1,166	)		18		(169	)
Depreciation and amortization		83		425			-		508
Total assets		8,126		16,021			15,265		39,412
2019
Net sales	$	6,599	$	17,674		$	-	$	24,273
Income before provision for income taxes		537		1,611			36		2,184
Depreciation and amortization		90		188			-		278
Total assets		6,972		12,773			14,660		34,405

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Note 2 - Business Acquisition (Details Textual) - USD ($)				3 Months Ended	6 Months Ended	12 Months Ended	18 Months Ended
	Nov. 04, 2019	Nov. 01, 2019	Mar. 15, 2019	Apr. 30, 2020	Apr. 30, 2020	Oct. 31, 2019	Apr. 30, 2020
C Enterprises [Member]
Payments to Acquire Businesses, Gross			$ 600,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total			0
C Enterprises [Member] | Selling, General and Administrative Expenses [Member]
Business Combination, Acquisition Related Costs			$ 100,000
Schrofftech [Member]
Payments to Acquire Businesses, Gross		$ 4,000,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill, Total		$ 3,299,000
Business Combination, Contingent Consideration Arrangements, Target Period (Year)	2 years
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 2,400,000
Business Combination, Pro Forma Information, Revenue of Acquiree since Acquisition Date, Actual				$ 1,100,000	$ 2,300,000
Business Combination, Pro Forma Information, Earnings or Loss of Acquiree since Acquisition Date, Actual				$ (95,000)	(13,000)
Schrofftech [Member] | Selling, General and Administrative Expenses [Member]
Business Combination, Acquisition Related Costs					$ 43,000	$ 108,000	$ 151,000

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Note 2 - Business Acquisition - Allocation of Estimated Purchase Price of Schroff Technologies International, Inc. (Details) - USD ($)	Apr. 30, 2020	Nov. 01, 2019	Oct. 31, 2019
Goodwill	$ 2,697,000		$ 1,340,000
Schrofftech [Member]
Current assets		$ 1,168,000
Fixed assets		58,000
Intangible assets		3,299,000
Goodwill		1,356,000
Non-interest bearing liabilities		(632,000)
Net assets		$ 5,249,000

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Note 10 - Income Taxes

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

1

0

–

Income tax

es

On

March 27, 2020,

the United States enacted the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act"). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effects of the COVID-

19

pandemic. The CARES Act includes several provisions that provide economic relief for individuals and businesses. The Company continues to evaluate the impact the CARES Act will have on the Company’s tax obligations, but has concluded it will

not

materially impact the Company’s income taxes for the

three

and

six

months ended

April 30, 2020.

We use an estimated annual effective tax rate, which is based on expected annual income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate, to determine its quarterly provision (benefit) for income taxes. Certain significant or unusual items are separately recognized in the quarter in which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

The provision (benefit) for income taxes was

1%

and

23%

of income before income taxes for the

three

months ended

April 30, 2020 (

the “fiscal

2020

quarter”) and

2019

(the “fiscal

2019

quarter”), respectively, and (

7%

) and

22%

of income before income taxes for the

six

months ended

April 30, 2020

and

2019,

respectively. The change in the effective tax rate from the fiscal

2019

period to fiscal

2020

period was primarily driven by the disproportionate impact of various permanent book-tax differences with respect to the Company’s forecasted book income in each period.

We had

$118,000

and

$80,000

of unrecognized tax benefits, inclusive of interest and penalties, as of

April 30, 2020

and

October 31, 2019,

respectively. The unrecognized tax benefits, if recognized, would result in a net tax benefit of

$30,000

as of

April 30, 2020.

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Note 6 - Earnings (Loss) Per Share

6 Months Ended

Apr. 30, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

Note

6

–

Earnings

(loss)

per share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) 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. Potentially issuable securities totaling

392,838

and

121,015

shares for the

three

months ended

April 30, 2020

and

2019,

respectively, and

392,838

and

121,015

shares for the

six

months ended

April 30, 2020

and

2019,

respectively, were excluded from the calculation of diluted per share amounts because of their anti-dilutive effect.

The following table summarizes the computation of basic and diluted weighted average shares outstanding:

	Three Months Ended April 30,				Six Months Ended April 30,
	2020		2019		2020		2019
Weighted average shares outstanding for basic (loss) earnings per share		9,704,880		9,356,660		9,633,935		9,332,665
Add effects of potentially dilutive securities-assumed exercise of stock options		-		481,304		-		505,053
Weighted average shares outstanding for diluted (loss) earnings per share		9,704,880		9,837,964		9,633,935		9,837,718

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Note 11 - Intangible Assets - Intangible Assets (Details) (Parentheticals)	6 Months Ended	12 Months Ended
	Apr. 30, 2020	Oct. 31, 2019
Noncompete Agreements [Member]
Estimated life (Year)	5 years	5 years
Customer Relationships [Member] | Minimum [Member]
Estimated life (Year)	7 years	7 years
Customer Relationships [Member] | Maximum [Member]
Estimated life (Year)	15 years	15 years
Order or Production Backlog [Member] | Minimum [Member]
Estimated life (Year)	1 year	1 year
Order or Production Backlog [Member] | Maximum [Member]
Estimated life (Year)	2 years	2 years
Patents [Member] | Minimum [Member]
Estimated life (Year)	10 years	10 years
Patents [Member] | Maximum [Member]
Estimated life (Year)	14 years	14 years

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Note 9 - Segment Information - Net Sales, Income Before Provision for Income Taxes and Other Related Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Apr. 30, 2020	Apr. 30, 2019	Apr. 30, 2020	Apr. 30, 2019	Oct. 31, 2019
Net sales	$ 10,390	$ 13,626	$ 22,804	$ 24,273
Income (loss) before provision for income taxes	(181)	1,376	(169)	2,184
Depreciation and amortization	253	141	508	278
Total assets	39,412	34,405	39,412	34,405	$ 37,700
Corporate, Non-Segment [Member]
Net sales
Income (loss) before provision for income taxes	7	14	18	36
Depreciation and amortization
Total assets	15,265	14,660	15,265	14,660
RF Connector and Cable Assembly [Member] | Operating Segments [Member]
Net sales	3,768	3,341	6,957	6,599
Income (loss) before provision for income taxes	697	257	979	537
Depreciation and amortization	41	45	83	90
Total assets	8,126	6,972	8,126	6,972
Custom Cabling Manufacturing and Assembly [Member] | Operating Segments [Member]
Net sales	6,622	10,285	15,847	17,674
Income (loss) before provision for income taxes	(885)	1,105	(1,166)	1,611
Depreciation and amortization	212	96	425	188
Total assets	$ 16,021	$ 12,773	$ 16,021	$ 12,773

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Note 7 - Stock-based Compensation and Equity Transactions - Options Outstanding (Details) - $ / shares	6 Months Ended
	Apr. 30, 2020
Outstanding, shares (in shares)	890,147
Outstanding, weighted average exercise price (in dollars per share)	$ 3.62
Options granted, shares (in shares)	130,241
Options granted, weighted average exercise price (in dollars per share)	$ 6.53
Options exercised, shares (in shares)	(228,870)
Options exercised, weighted average exercise price (in dollars per share)	$ 1.85
Options outstanding, shares (in shares)	791,518
Options outstanding, weighted average exercise price (in dollars per share)	$ 4.61
Options exercisable, shares (in shares)	419,352
Options exercisable, weighted average exercise price (in dollars per share)	$ 4.37
Options vested and expected to vest, shares (in shares)	790,482
Options vested and expected to vest, weighted average exercise price (in dollars per share)	$ 4.62