OPTICAL CABLE CORP

Previous wording

This Form 10-Q may contain certain forward-looking information within the meaning of the federal securities laws. The forward-looking information may include, among other information, (i) statements concerning our outlook for the future, (ii) statements of belief, anticipation or expectation, (iii) future plans, strategies or anticipated events, and (iv) similar information and statements concerning matters that are not historical facts. Such forward-looking information is subject to known and unknown variables, uncertainties, contingencies and risks that may cause actual events or results to differ materially from our expectations. Such known and unknown variables, uncertainties, contingencies and risks (collectively, “factors”) may also adversely affect Optical Cable Corporation and its subsidiaries (collectively, the “Company” or “OCC®”), the Company’s future results of operations and future financial condition, and/or the future equity value of the Company. Factors that could cause or contribute to such differences from our expectations or that could adversely affect the Company include, but are not limited to: the level of sales to key customers, including distributors; timing of certain projects and purchases by key customers; the economic conditions affecting network service providers; corporate and/or government spending on information technology; actions by competitors; fluctuations in the price of raw materials (including optical fiber, copper, gold and other precious metals, plastics and other materials); fluctuations in transportation costs; our dependence on customized equipment for the manufacture of certain of our products in certain production facilities; our ability to protect our proprietary manufacturing technology; market conditions influencing prices or pricing in one or more of the markets in which we participate, including the impact of increased competition; our dependence on a limited number of suppliers for certain product components; the loss of or conflict with one or more key suppliers or customers; an adverse outcome in any litigation, claims, and other actions or disputes, and potential litigation, claims, and other actions or disputes against us or with us; an adverse outcome in any regulatory reviews and audits and potential regulatory reviews and audits; adverse changes in state tax laws and/or positions taken by state taxing authorities affecting us; technological changes and introductions of new competing products; changes in end-user preferences for competing technologies relative to our product offering; economic conditions that affect the telecommunications sector, the data communications sector, certain technology sectors and/or certain industry market sectors (for example, commercial/enterprise, military, industrial, broadcast, mining, petrochemical, renewable energy and wireless carrier industry market sectors); economic conditions that affect U.S.-based manufacturers; economic conditions or changes in re…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Form 10-Q may contain certain forward-looking information within the meaning of the federal securities laws. The forward-looking information may include, among other information, (i) statements concerning our outlook for the future, (ii) statements of belief, anticipation or expectation, (iii) future plans, strategies or anticipated events, and (iv) similar information and statements concerning matters that are not historical facts. Such forward-looking information is subject to known and unknown variables, uncertainties, contingencies and risks that may cause actual events or results to differ materially from our expectations. Such known and unknown variables, uncertainties, contingencies and risks (collectively, “factors”) may also adversely affect Optical Cable Corporation and its subsidiaries (collectively, the “Company” or “OCC®”), the Company’s future results of operations and future financial condition, and/or the future equity value of the Company. Factors that could cause or contribute to such differences from our expectations or that could adversely affect the Company include, but are not limited to: the level of sales to key customers, including distributors; timing of certain projects and purchases by key customers; the economic conditions affecting network service providers; corporate and/or government spending on information technology; actions by competitors; fluctuations in the price and/or availability of raw materials (including optical fiber, copper, gold and other precious metals, plastics and other materials); fluctuations in transportation costs; our dependence on customized equipment for the manufacture of certain of our products in certain production facilities; our ability to protect our proprietary manufacturing technology; market conditions influencing prices or pricing in one or more of the markets in which we participate, including the impact of increased competition; our dependence on a limited number of suppliers for certain product components; the loss of or conflict with one or more key suppliers or customers; an adverse outcome in any litigation, claims, and other actions or disputes, and potential litigation, claims, and other actions or disputes against us or with us; an adverse outcome in any regulatory reviews and audits and potential regulatory reviews and audits; adverse changes in state tax laws and/or positions taken by state taxing authorities affecting us; technological changes and introductions of new competing products; changes in end-user preferences for competing technologies relative to our product offering; economic conditions that affect the telecommunications sector, the data communications sector, certain technology sectors and/or certain industry market sectors (for example, commercial/enterprise, military, industrial, broadcast, mining, petrochemical, renewable energy and wireless carrier industry market sectors); economic conditions that affect U.S.-based manufacturers; economic conditi…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Founded in 1983, Optical Cable Corporation is headquartered in Roanoke, Virginia with offices, manufacturing and warehouse facilities located in Roanoke, Virginia, near Asheville, North Carolina, and near Dallas, Texas. We primarily manufacture our fiber optic cables at our Roanoke facility which is ISO 9001:2015 registered and MIL-STD-790G certified, primarily manufacture our enterprise connectivity products at our Asheville facility which is ISO 9001:2015 registered, and primarily manufacture our harsh environment and specialty connectivity products at our Dallas facility which is ISO 9001:2015 registered and MIL-STD-790G certified.

Current wording

Founded in 1983, Optical Cable Corporation is headquartered in Roanoke, Virginia with offices, manufacturing and warehouse facilities located in Roanoke, Virginia, near Asheville, North Carolina, and near Dallas, Texas. We primarily manufacture our fiber optic cables at our Roanoke facility which is ISO 9001:2015 registered, primarily manufacture our enterprise connectivity products at our Asheville facility which is ISO 9001:2015 registered, and primarily manufacture our harsh environment and specialty connectivity products at our Dallas facility which is ISO 9001:2015 registered and MIL-STD-790G certified.

Previous wording

Summary of Company Performance for Third Quarter of Fiscal Year 2024

Current wording

Summary of Company Performance for First Quarter of Fiscal Year 2025

Previous wording

We sell our products internationally and domestically to our customers which include major distributors, various regional and smaller distributors, original equipment manufacturers and value-added resellers. All of our sales to customers outside of the United States are denominated in U.S. dollars. We can experience fluctuations in the percentage of net sales to customers outside of the United States and in the United States from period to period based on the timing of large orders, coupled with the impact of increases and decreases in sales to customers in various regions of the world. Sales outside of the U.S. can also be impacted by fluctuations in the exchange rate of the U.S. dollar compared to other currencies.

Current wording

We sell our products internationally and domestically to our customers which include major distributors, various regional and smaller distributors, original equipment manufacturers and value-added resellers. All of our sales to customers outside of the United States are denominated in U.S. dollars. We can experience fluctuations in the percentage of net sales to customers outside of the United States and in the United States from period to period based on the timing of large orders, coupled with the impact of increases and decreases in sales to customers in various regions of the world. Sales outside of the U.S. can also be impacted by fluctuations in the exchange rate of the U.S. dollar compared to other currencies, as well as import and/or export tariffs imposed by the U.S. and other countries.

Previous wording

Royalty income (expense), net consists of royalty income earned on licenses associated with our patented products, net of royalty and related expenses.

Current wording

Royalty expense, net consists of royalty and related expenses, net of royalty income earned on licenses associated with our patented products, if any.

Previous wording

Consolidated net sales for the first nine months of fiscal year 2024 were $47.2 million, a decrease of 14.0% compared to net sales of $54.8 million for the same period last year. We experienced a decrease in net sales in both our enterprise and specialty markets, including the wireless carrier market, in the first nine months of fiscal year 2024, compared to the same period last year. We believe this is consistent with weakness being experienced in our industry generally and in certain of our target markets, which we began to experience during the third quarter of fiscal year 2023.

Current wording

Consolidated net sales for the first quarter of fiscal year 2025 increased 6.0% to $15.7 million, compared to net sales of $14.9 million for the same period last year. We experienced an increase in net sales in both our enterprise markets and specialty markets, including the wireless carrier market, during the first quarter of fiscal year 2025, compared to the same period last year, as we continue to see general market improvements in our industry and strength in our military markets.

Previous wording

Net sales to customers in the United States decreased 8.0%, while net sales to customers outside of the United States increased 15.6% in the third quarter of fiscal year 2024, compared to the same period last year. We can experience fluctuations in sales from quarter to quarter in the various markets (both industries and geographies) in which we operate for various reasons.

Current wording

Net sales to customers outside of the United States increased 21.3% and net sales to customers in the United States increased 2.3% in the first quarter of fiscal year 2025, compared to the same period last year. We can experience fluctuations in sales from quarter to quarter in the various markets (both industries and geographies) in which we operate for various reasons.

Previous wording

The first nine months of fiscal year 2023 was positively impacted by our higher-than-typical sales order backlog/forward load of more than $12.0 million that existed at the end of fiscal year 2022, while our sales order backlog/forward load at the end of fiscal year 2023 had returned to more normal levels at approximately $5.4 million. At the end of the first nine months of fiscal year 2024, our sales order backlog/forward load has increased to $6.5 million when compared to $5.6 million as of April 30, 2024 and $5.0 million as of January 31, 2024.

Current wording

At the end of the first quarter of fiscal year 2025, our sales order backlog/forward load has increased to $6.6 million when compared to $5.7 million as of October 31, 2024.

Previous wording

We typically expect net sales to be relatively lower in the first half of each fiscal year and relatively higher in the second half of each fiscal year, and excluding other volatility, we would normally expect 48% of total net sales to occur during the first half of a fiscal year and 52% of total net sales to occur during the second half of a fiscal year. We believe this historical seasonality pattern is generally indicative of an overall trend and reflective of the buying patterns and budgetary cycles of our customers. However, this pattern may be altered during any quarter or year by the quarterly and annual volatility of orders received for the wireless carrier market, the timing of larger projects, timing of orders from larger customers, other economic factors impacting our industry or impacting the industries of our customers and end-users, and various macroeconomic conditions. While we believe seasonality may be a factor that impacts our quarterly net sales results, particularly when excluding the volatility of sales in the wireless carrier market, we are not able to reliably predict net sales based on seasonality because these other factors can also, and often do, substantially impact our net sales patterns during the year. Furthermore, while we have seen some improvement in net sales in the third quarter of fiscal year 2024, it is not at a level that we are confident our typical seasonality pattern will materialize for the second half of fiscal year 2024.

Current wording

We typically expect net sales to be relatively lower in the first half of each fiscal year and relatively higher in the second half of each fiscal year, and excluding other volatility, we would normally expect 48% of total net sales to occur during the first half of a fiscal year and 52% of total net sales to occur during the second half of a fiscal year. We believe this historical seasonality pattern is generally indicative of an overall trend and reflective of the buying patterns and budgetary cycles of our customers. However, this pattern may be altered during any quarter or year by the quarterly and annual variability of net sales due to other factors, such as: wireless carrier market order volume, the timing of larger projects, the timing of orders from larger customers, other economic factors impacting our industry or impacting the industries of our customers and end-users, and various macroeconomic conditions. While we believe seasonality may be a factor that impacts our quarterly net sales results, particularly when excluding the volatility of sales in the wireless carrier market, we are not able to reliably predict net sales based on seasonality because net sales variability, due to such other factors, can also, and often does, substantially impact our net sales patterns during the year. During our last two fiscal years, approximately 46% and 53% of our total net sales occurred during the first half of fiscal years 2024 and 2023, respectively, and approximately 54% and 47% of our total net sales occurred during the second half of fiscal years 2024 and 2023, respectively.

Previous wording

Our gross profit was $11.7 million in the first nine months of fiscal year 2024, a decrease of 36.6% compared to gross profit of $18.4 million in the first nine months of fiscal year 2023. Gross profit margin was 24.7% in the first nine months of fiscal year 2024 compared to 33.6% in the first nine months of fiscal year 2023.

Current wording

Our gross profit increased 24.6%, or $913,000, to $4.6 million in the first quarter of fiscal year 2025, compared to gross profit of $3.7 million in the first quarter of fiscal year 2024. Gross profit margin, or gross profit as a percentage of net sales, increased to 29.4% in the first quarter of fiscal year 2025, compared to 25.0% in the first quarter of fiscal year 2024, as we benefited from our operating leverage.

Previous wording

Gross profit margin for the third quarter of fiscal 2024 when compared to the same period last year was negatively impacted by lower volumes, as fixed charges were spread over lower sales, as well as decreased plant efficiency, as fewer sales and lower backlog impacted the flow of products through our manufacturing facilities—the impact of operating leverage. Additionally, our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix.

Current wording

Gross profit margin for the first quarter of fiscal 2025, when compared to the same period last year, was positively impacted by higher volumes, as fixed charges were spread over higher sales—the impact of operating leverage. Additionally, our gross profit margin percentages are heavily dependent upon product mix on a quarterly basis and may vary based on changes in product mix.

Previous wording

SG&A expenses increased to $5.2 million during the third quarter of fiscal year 2024, compared to $5.0 million during the third quarter of fiscal year 2023, with no significant changes when comparing the two periods. SG&A expenses as a percentage of net sales were 32.3% in the third quarter of fiscal year 2024, compared to 29.3% in the third quarter of fiscal year 2023, as fixed SG&A expenses were spread over lower net sales. By comparison, SG&A expenses as a percentage of net sales were 33.0% during the second quarter of fiscal year 2024.

Current wording

SG&A expenses increased to $5.5 million, or 7.2%, during the first quarter of fiscal year 2025, when compared to $5.1 million during the first quarter of fiscal year 2024. SG&A expenses as a percentage of net sales were 34.7% in the first quarter of fiscal year 2025, compared to 34.3% in the first quarter of fiscal year 2024.

Previous wording

The decrease in SG&A expenses during the first nine months of fiscal year 2024 compared to the same period last year was primarily the result of decreases in employee and contracted sales personnel-related costs totaling $410,000 and shipping costs totaling $213,000. Included in employee and contracted sales personnel-related costs are employee incentives and commissions which decreased due to decreased net sales and the financial results during the first nine months of fiscal year 2024. Shipping costs decreased primarily due to the decrease in net sales.

Current wording

The increase in SG&A expenses during the first quarter of fiscal year 2025, compared to the same period last year, was primarily the result of increases in employee and contracted sales personnel-related costs totaling $177,000. Included in employee and contracted sales personnel-related costs are compensation costs and sales incentives. Compensation costs increased due to new hires, net of terminations, and certain rate increases. The increase in sales incentives was due to increased sales during the first quarter of fiscal year 2025.

Previous wording

We recognized royalty expense, net of royalty income, totaling $7,000 during the third quarter of fiscal years 2024 and 2023. Royalty expense and/or income may fluctuate based on sales of related licensed products and estimates of amounts for non-licensed product sales, if any.

Current wording

We recognized royalty expense, net of royalty income, totaling $7,000 during the first quarter of fiscal years 2025 and 2024. Royalty expense and/or income may fluctuate based on sales of related licensed products and estimates of amounts for non-licensed product sales, if any.

Previous wording

We recognized $14,000 of amortization expense, associated with intangible assets, during the third quarter of fiscal years 2024 and 2023.

Current wording

We recognized $14,000 of amortization expense, associated with intangible assets, during the first quarter of fiscal years 2025 and 2024.

Previous wording

We reported a loss from operations of $4.0 million for the first nine months of fiscal year 2024, compared to income from operations of $2.3 million for the first nine months of fiscal year 2023.

Current wording

We reported a loss from operations of $852,000 for the first quarter of fiscal year 2025, compared to $1.4 million for the first quarter of fiscal year 2024.

Previous wording

Other expense, net for the third quarter of fiscal years 2024 and 2023 is comprised primarily of interest expense and other miscellaneous items, partially offset by gain on insurance proceeds received for damage to property and equipment totaling $90,000 and $256,000, respectively.

Current wording

Other expense, net for the first quarter of fiscal year 2024 was comprised primarily of interest expense and other miscellaneous items, partially offset by gain on insurance proceeds received for damage to property and equipment totaling $235,000.

Previous wording

We reported a loss before income taxes of $4.6 million for the first nine months of fiscal year 2024, compared to income before income taxes of $3.4 million for the first nine months of fiscal year 2023. The change was primarily due to the decrease in gross profit of $6.7 million and the decrease in gain on insurance proceeds, net of $1.6 million, partially offset by the decrease in SG&A expenses of $425,000.

Current wording

We reported a loss before income taxes of $1.1 million for the first quarter of fiscal year 2025, compared to $1.4 million for the first quarter of fiscal year 2024. The improvement was primarily due to the increase in gross profit of $913,000, partially offset by the increase in SG&A expenses of $366,000 and the decrease in gain on insurance proceeds for damage to property and equipment of $235,000.

Previous wording

Income tax expense totaled $21,000 in the first nine months of fiscal year 2024, compared to $106,000 in the first nine months of fiscal year 2023. Our effective tax rate was less than negative one percent for the first nine months of fiscal year 2024 and 3.1% for the first nine months of fiscal year 2023.

Current wording

Income tax expense totaled $12,000 in the first quarter of fiscal year 2025, compared to $7,000 in the first quarter of fiscal year 2024. Our effective tax rate was negative 1.1% for the first quarter of fiscal year 2025 and less than negative one percent for the first quarter of fiscal year 2024.

Previous wording

As of October 31, 2023, the valuation allowance against our total gross deferred tax assets totaled $4.0 million.

Current wording

As of October 31, 2024, the valuation allowance against our total gross deferred tax assets totaled $4.9 million.

Previous wording

Net loss for the third quarter of fiscal year 2024 was $1.6 million, or $0.20 per share, compared to net income of $101,000, or $0.01 per share, for the third quarter of fiscal year 2023. This change was primarily due to the decrease in income before income taxes of $1.7 million.

Current wording

Net loss for the first quarter of fiscal year 2025 was $1.1 million, or $0.14 per share, compared to $1.4 million, or $0.18 per share, for the first quarter of fiscal year 2024. This improvement was primarily due to the decrease in loss before income taxes of $323,000.

Previous wording

Total liabilities decreased $1.9 million, or 10.0%, to $17.2 million at July 31, 2024, from $19.2 million at October 31, 2023. The decrease in total liabilities was primarily due to a decrease in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $786,000, primarily resulting from the timing of certain vendor and payroll related payments, and net repayments on our Revolver totaling $1.0 million.

Current wording

Total liabilities decreased $1.4 million, or 7.4%, to $18.1 million at January 31, 2025, from $19.5 million at October 31, 2024. The decrease in total liabilities was primarily due to a decrease in note payable, revolver - current totaling $2.7 million, resulting from net repayments on our Revolver, partially offset by increases in accounts payable and accrued expenses totaling $1.1 million, resulting from the timing of certain vendor payments.

Previous wording

Total shareholders’ equity at July 31, 2024 decreased $4.4 million in the first nine months of fiscal year 2024 resulting primarily from a net loss of $4.6 million.

Current wording

Total shareholders’ equity at January 31, 2025 decreased $1.1 million in the first quarter of fiscal year 2025 resulting primarily from a net loss of $1.1 million.

Previous wording

Our primary capital needs have been to fund working capital requirements through our Revolver. Our primary source of capital for these purposes has been existing cash, cash provided by operations and borrowings under our Revolver (see “Credit Facilities” below).

Current wording

Our primary capital needs have been to fund working capital requirements through our Revolver. Our primary source of capital for this purpose has been existing cash, cash provided by operations, and borrowings under our Revolver (see “Credit Facilities” below).

Previous wording

Our cash totaled $797,000 as of July 31, 2024, a decrease of $672,000 compared to $1.5 million as of October 31, 2023. The decrease in cash for the nine months ended July 31, 2024 primarily resulted from net cash used in financing activities of $1.3 million (including a $1.0 million net reduction in our Revolver) and capital expenditures of $313,000, partially offset by cash provided by operating activities of $665,000 and insurance proceeds, net totaling $271,000.

Current wording

Our cash totaled $128,000 as of January 31, 2025, a decrease of $116,000 compared to $244,000 as of October 31, 2024. The decrease in cash for the three months ended January 31, 2025 primarily resulted from net cash used in financing activities of $2.7 million, resulting primarily from net repayments on our Revolver, and capital expenditures of $72,000, partially offset by cash provided by operating activities of $2.7 million.

Previous wording

On July 31, 2024, we had working capital of $22.2 million compared to $27.3 million on October 31, 2023. The ratio of current assets to current liabilities as of July 31, 2024 was 4.2 to 1.0, compared to 4.5 to 1.0 as of October 31, 2023. The decrease in working capital and in the current ratio was primarily due to the decrease in cash of $672,000 and the decrease in inventories of $4.5 million, partially offset by the decrease in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $786,000.

Current wording

On January 31, 2025, we had working capital of $14.4 million compared to $15.5 million on October 31, 2024. The ratio of current assets to current liabilities as of January 31, 2025 was 2.1 to 1.0, compared to 2.0 to 1.0 as of October 31, 2024. The decrease in working capital was primarily due to the decrease in trade accounts receivable, net of $2.7 million and the increase in accounts payable and accrued expenses totaling $1.1 million, partially offset by the decrease in note payable, revolver – current totaling $2.7 million. The increase in the current ratio was primarily due to the fact that current assets decreased 8.4%, while current liabilities decreased 10.0%.

Previous wording

As of July 31, 2024 and October 31, 2023, we had outstanding loan balances under our Revolver totaling $7.3 million and $8.3 million, respectively. As of July 31, 2024 and October 31, 2023, we had other outstanding bank loan balances, excluding our Revolver, totaling $2.6 million and $2.7 million, respectively.

Current wording

As of January 31, 2025 and October 31, 2024, we had outstanding loan balances under our Revolver totaling $5.7 million and $8.3 million, respectively. As of January 31, 2025 and October 31, 2024, we had other outstanding bank loan balances, excluding our Revolver, totaling $2.6 million.

Previous wording

Net cash provided by operating activities was $665,000 in the first nine months of fiscal year 2024, compared to net cash used in operating activities of $929,000 for the first nine months of fiscal year 2023. Net cash provided by operating activities during the first nine months of fiscal year 2024 primarily resulted from certain adjustments to reconcile a net loss of $4.6 million to net cash provided by operating activities including depreciation and amortization of $644,000 and share-based compensation expense of $329,000. Additionally, decreases in inventories of $4.5 million further contributed to net cash provided by operating activities. All of the aforementioned factors positively affecting cash provided by operating activities were partially offset by the cash flow impact of decreases in accounts payable and accrued expenses, including accrued compensation and payroll taxes, of $790,000, and by an adjustment to reconcile a net loss of $4.6 million to net cash provided by operating activities for gain on insurance proceeds, net totaling $309,000.

Current wording

Net cash provided by operating activities was $2.7 million in the first quarter of fiscal year 2025, compared to net cash used in operating activities of $261,000 for the first quarter of fiscal year 2024. Net cash provided by operating activities during the first quarter of fiscal year 2025 primarily resulted from certain adjustments to reconcile a net loss of $1.1 million to net cash provided by operating activities including depreciation and amortization of $212,000 and share-based compensation expense of $114,000. Additionally, the cash flow impact of decreases in trade accounts receivable, net of $2.8 million and the cash flow impact of increases in accounts payable and accrued expenses of $918,000 further contributed to net cash provided by operating activities. All of the aforementioned factors positively affecting cash provided by operating activities were partially offset by increases in inventories totaling $373,000.

Previous wording

Net cash used in operating activities during the first nine months of fiscal year 2023 primarily resulted from an increase in inventories totaling $5.5 million and an adjustment to reconcile net income of $3.3 million to net cash used in operating activities for the gain on insurance proceeds received for damage to property and equipment totaling $2.0 million, partially offset by the cash flow impact of decreases in trade accounts receivable, net totaling $1.7 million, and by certain other adjustments to reconcile net income of $3.3 million to net cash used in operating activities including depreciation and amortization of $716,000 and share-based compensation expense of $463,000.

Current wording

Net cash used in operating activities during the first quarter of fiscal year 2024 primarily resulted from the cash flow impact of decreases in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $1.2 million and adjustments to reconcile a net loss of $1.4 million to net cash used in operating activities for the gain on insurance proceeds totaling $235,000, partially offset by decreases in the cash flow impact of trade accounts receivable, net totaling $1.3 million, decreases in inventories totaling $744,000 and certain other adjustments to reconcile a net loss of $1.4 million to net cash used in operating activities including depreciation and amortization of $213,000 and share-based compensation expense of $159,000.

Previous wording

Net cash used in investing activities totaled $43,000 in the first nine months of fiscal year 2024, compared to net cash provided by investing activities of $1.6 million in the first nine months of fiscal year 2023. Net cash used in investing activities during the first nine months of fiscal year 2024 resulted primarily from purchases of property and equipment and deposits for the purchase of property and equipment totaling $313,000, partially offset by net insurance proceeds of $271,000. Net cash provided by investing activities during the first nine months of fiscal year 2023 resulted primarily from the net insurance proceeds received for damage to property and equipment totaling $2.0 million, partially offset by purchases of property and equipment and deposits for the purchase of property and equipment totaling $371,000.

Current wording

Net cash used in investing activities totaled $75,000 in the first quarter of fiscal year 2025, compared to $80,000 in the first quarter of fiscal year 2024. Net cash used in investing activities during the first quarter of fiscal years 2025 and 2024 resulted primarily from purchases of property and equipment and deposits for the purchase of property and equipment.

Previous wording

Net cash used in financing activities totaled $1.3 million for the first nine months of fiscal year 2024, compared to net cash provided by financing activities of $845,000 in the first nine months of fiscal year 2023. Net cash used in financing activities in the first nine months of fiscal year 2024 resulted primarily from net repayments on our revolving line of credit totaling $1.0 million. Net cash provided by financing activities in the first nine months of fiscal year 2023 resulted primarily from net proceeds on our revolving line of credit totaling $1.3 million, partially offset by principal payments on long-term debt totaling $253,000.

Current wording

Net cash used in financing activities totaled $2.7 million for the first quarter of fiscal year 2025, compared to $906,000 in the first quarter of fiscal year 2024. Net cash used in financing activities in the first quarter of fiscal year 2025 resulted primarily from net repayments on our revolving line of credit totaling $2.7 million. Net cash used in financing activities in the first quarter of fiscal year 2024 resulted primarily from net repayments on our revolving line of credit totaling $864,000.

Previous wording

The Virginia Real Estate Loan is with Northeast Bank and is payable in monthly installments of principal and interest. Principal is calculated using the unpaid balance of the loan and a two hundred forty (240) month amortization schedule. Interest is computed on the aggregate principal balance outstanding at a rate equal to the Prime Rate, adjusted monthly on the fifth day of each calendar month in accordance with changes to the Prime Rate, provided, however, that the interest rate is never less than 8.5% per annum on the basis of a 360-day year times the actual number of days elapsed. The Prime Rate was 8.5% per annum at July 31, 2024 and October 31, 2023. The maturity date of the Virginia Real Estate Loan is May 5, 2026.

Current wording

The Virginia Real Estate Loan is with Northeast Bank and is payable in monthly installments of principal and interest. Principal is calculated using the unpaid balance of the loan and a two hundred forty (240) month amortization schedule. Interest is computed on the aggregate principal balance outstanding at a rate equal to the Prime Rate, adjusted monthly on the fifth day of each calendar month in accordance with changes to the Prime Rate, provided, however, that the interest rate is never less than 8.5% per annum on the basis of a 360-day year times the actual number of days elapsed. The Prime Rate was 7.5% per annum at January 31, 2025 and 8.0% at October 31, 2024. The maturity date of the Virginia Real Estate Loan is May 5, 2026.

Previous wording

The Company had an outstanding balance on its Virginia Real Estate Loan of $2.6 million, as of July 31, 2024.

Current wording

The Company had an outstanding balance on its Virginia Real Estate Loan of $2.6 million as of January 31, 2025 and October 31, 2024.

Previous wording

The Revolver with SLR provides us with one or more advances in an amount up to: (a) 85% of the aggregate outstanding amount of eligible accounts (the “eligible accounts loan value”); plus (b) the lowest of (i) an amount up to 35% of the aggregate value of eligible inventory, (ii) $7.0 million, and (iii) an amount not to exceed 100% of the then outstanding eligible accounts loan value; minus (c) $1.15 million.

Current wording

The Revolver with North Mill Capital LLC (now doing business as SLR Business Credit, “SLR”) provides us with one or more advances in an amount up to: (a) 85% of the aggregate outstanding amount of eligible accounts (the “eligible accounts loan value”); plus (b) the lowest of (i) an amount up to 35% of the aggregate value of eligible inventory, (ii) $7.0 million, and (iii) an amount not to exceed 100% of the then outstanding eligible accounts loan value; minus (c) $1.15 million.

Previous wording

The maximum aggregate principal amount subject to the Revolver is $18.0 million. Interest accrues on the daily balance at the per annum rate of 1.5% above the Prime Rate in effect from time to time, but not less than 4.75% (the “Applicable Rate”). As a result, the Revolver accrued interest at a 10.0% rate at July 31, 2024 and October 31, 2023. In the event of a default, interest may become 6.0% above the Applicable Rate. The loan may be extended in one year periods subject to the agreement of SLR.

Current wording

The maximum aggregate principal amount subject to the Revolver is $18.0 million. Interest accrues on the daily balance at the per annum rate of 1.5% above the Prime Rate in effect from time to time, but not less than 4.75% (the “Applicable Rate”). As a result, the Revolver accrued interest at a 9.0% rate at January 31, 2025 and 9.5% at October 31, 2024. In the event of a default, interest may become 6.0% above the Applicable Rate. The loan may be extended subject to the agreement of SLR.

Previous wording

As of July 31, 2024, we had $7.3 million of outstanding borrowings on our Revolver and $2.2 million in available credit.

Current wording

As of January 31, 2025, we had $5.7 million of outstanding borrowings on our Revolver and $3.4 million in available credit.

Previous wording

We believe that our future cash flow from operations, our cash on hand and our existing credit facilities will be adequate to fund our operations for at least the next twelve months.

Current wording

We believe that our future cash flow from operations, our cash on hand and our existing Revolver will be adequate to fund our operations for at least the next twelve months.