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 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.

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; economic conditions that affect the telecommunications sector, the data communications sector, certain technology sectors and/or certain industry market sectors (for example, including, but not limited to: commercial/enterprise, military, industrial, broadcast, mining, petrochemical, renewable energy, data centers and wireless carrier industry market sectors); 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 U.S.-based manufacturers; economic conditions or changes i…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Optical Cable Corporation (or OCC®) is a leading manufacturer of a broad range of fiber optic and copper data communication cabling and connectivity solutions primarily for the enterprise market and various harsh environment and specialty markets (collectively, the non-carrier markets), and also the wireless carrier market, offering integrated suites of high quality products which operate as a system solution or seamlessly integrate with other components. Our product offerings include designs for uses ranging from enterprise network, data center, residential, campus and Passive Optical LAN (“POL”) installations to customized products for specialty applications and harsh environments, including military, industrial, mining, petrochemical, renewable energy and broadcast applications. Our products include fiber optic and copper cabling, hybrid cabling (which includes fiber optic and copper elements in a single cable), fiber optic and copper connectors, specialty fiber optic, copper and hybrid connectors, fiber optic and copper patch cords, pre-terminated fiber optic and copper cable assemblies, racks, cabinets, datacom enclosures, patch panels, face plates, multimedia boxes, fiber optic reels and accessories and other cable and connectivity management accessories, and are designed to meet the most demanding needs of end-users, delivering a high degree of reliability and outstanding performance characteristics.

Current wording

Optical Cable Corporation (or OCC®) is a leading manufacturer of a broad range of fiber optic and copper data communication cabling and connectivity solutions primarily for the enterprise market and data center markets and various harsh environment and specialty markets (collectively, the non-carrier markets), and also the wireless carrier market, offering integrated suites of high quality products which operate as a system solution or seamlessly integrate with other components. Our product offerings include designs for uses ranging from enterprise networks, data centers, residential, campus and Passive Optical LAN (POL) installations to customized products for specialty applications and harsh environments, including military, industrial, mining, petrochemical, renewable energy and broadcast applications. Our products include fiber optic and copper cabling, hybrid cabling (which includes fiber optic and copper elements in a single cable), fiber optic and copper connectors, specialty fiber optic, copper and hybrid connectors, fiber optic and copper patch cords, pre-terminated fiber optic and copper cable trunks and assemblies, racks, cabinets, data center and datacom enclosures, patch panels, face plates, multimedia boxes, fiber optic reels and accessories and other cable and connectivity management accessories, and are designed to meet the most demanding needs of end-users, delivering a high degree of reliability and outstanding performance characteristics.

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, 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 manufacture enterprise connectivity products 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

OCC designs, develops and manufactures fiber optic and hybrid cables for a broad range of enterprise, harsh environment, wireless carrier and other specialty markets and applications. We refer to these products as our fiber optic cable offering. OCC designs, develops and manufactures fiber and copper connectivity products for the enterprise market, including a broad range of enterprise and residential applications. We refer to these products as our enterprise connectivity product offering. OCC designs, develops and manufactures a broad range of specialty fiber optic connectors and connectivity solutions principally for use in military, harsh environment and other specialty applications. We refer to these products as our harsh environment and specialty connectivity product offering.

Current wording

OCC designs, develops and manufactures, and markets and sells, fiber optic and hybrid cables for a broad range of enterprise, data center, harsh environment, wireless carrier and other specialty markets and applications. We refer to these products as our fiber optic cable offering. OCC designs, develops and manufactures, and markets and sells, fiber and copper connectivity products for a broad range of enterprise, data center, and residential applications. We refer to these products as our enterprise connectivity product offering. OCC designs, develops and manufactures, and markets and sells, a broad range of specialty fiber optic connectors and connectivity solutions principally for use in military, harsh environment and other specialty applications. We refer to these products as our harsh environment and specialty connectivity product offering.

Previous wording

On July 7, 2025, Optical Cable Corporation and Lightera, LLC (“Lightera”) announced that the companies had entered into a strategic collaboration agreement to expand product offerings and solutions—especially for the data center and enterprise sectors. As part of this strategic collaboration, OCC and Lightera have combined portions of the product portfolios of both companies to deliver additional integrated cabling and connectivity solution offerings, which will include certain Lightera products being offered and sold by OCC.

Current wording

Optical Cable Corporation entered into a strategic collaboration agreement with Lightera, LLC (“Lightera”) on July 7, 2025 to expand product offerings and solutions—especially for the data center and enterprise sectors. As part of this strategic collaboration, OCC and Lightera have combined portions of the product portfolios of both companies to deliver additional integrated cabling and connectivity solution offerings, which will include certain Lightera products being offered and sold by OCC. In connection with this strategic collaboration, Lightera purchased 642,199 redeemable restricted shares of common stock from OCC, which represent approximately 7.3% of OCC’s outstanding common shares as of January 31, 2026.

Previous wording

Optical Cable Corporation™, OCC®, Procyon®, Superior Modular Products™, SMP Data Communications™, Applied Optical Systems™, Centric Solutions™ and associated logos are trademarks of Optical Cable Corporation.

Current wording

Optical Cable Corporation™, OCC®, Procyon®, Superior Modular Products™, SMP Data Communications™, Applied Optical Systems™, Centric Solutions™ and associated logos are trademarks of Optical Cable Corporation. Lightera™ and associated logos are trademarks of Lightera, LLC.

Previous wording

Summary of Company Performance for Third Quarter of Fiscal Year 2025

Current wording

Summary of Company Performance for First Quarter of Fiscal Year 2026

Previous wording

Consolidated net sales for the third quarter of fiscal year 2025 increased 22.8% to $19.9 million, compared to net sales of $16.2 million for the same period last year, and increased 13.5% compared to net sales of $17.5 million during the second quarter of fiscal year 2025. We experienced an increase in net sales in both our enterprise and specialty markets during the third quarter of fiscal year 2025, compared to the same period last year. We continue to see general market improvements in our industry and strength in our military and severe duty markets.

Current wording

Consolidated net sales for the first quarter of fiscal year 2026 increased 4.4% to $16.4 million, compared to net sales of $15.7 million for the same period last year. We experienced an increase in net sales in both our enterprise and specialty markets during the first quarter of fiscal year 2026, compared to the same period last year. We continue to see general market improvements in our industry and strength in our severe duty market.

Previous wording

Net sales to customers in the United States increased 22.0% and net sales to customers outside of the United States increased 26.2% in the third 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.

Current wording

Net sales to customers outside of the United States increased 18.0% and net sales to customers in the United States increased less than one percent in the first quarter of fiscal year 2026, 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

At the end of the third quarter of fiscal year 2025, our sales order backlog/forward load was $7.1 million compared to $7.2 million as of April 30, 2025, $6.6 million as of January 31, 2025, and $5.7 million as of October 31, 2024.

Current wording

At the end of the first quarter of fiscal year 2026, our sales order backlog/forward load was $10.4 million compared to $7.3 million as of October 31, 2025.

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 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, 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.

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: 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, 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% of our total net sales occurred during the first half of fiscal years 2025 and 2024 and approximately 54% of our total net sales occurred during the second half of fiscal years 2025 and 2024.

Previous wording

Our gross profit was $16.3 million in the first nine months of fiscal year 2025, an increase of 39.5% compared to gross profit of $11.7 million in the first nine months of fiscal year 2024. Gross profit margin increased to 30.6% in the first nine months of fiscal year 2025 compared to 24.7% in the first nine months of fiscal year 2024.

Current wording

Our gross profit increased 16.1% to $5.4 million in the first quarter of fiscal year 2026, compared to gross profit of $4.6 million in the first quarter of fiscal year 2025. Gross profit margin, or gross profit as a percentage of net sales, increased to 32.7% in the first quarter of fiscal year 2026, compared to 29.4% in the first quarter of fiscal year 2025.

Previous wording

Gross profit margin for the third 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.

Current wording

Gross profit margin for the first quarter of fiscal 2026, 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 our strong manufacturing 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 8.2% to $16.9 million during the first nine months of fiscal year 2025, compared to $15.7 million for the same period last year. SG&A expenses as a percentage of net sales were 31.8% in the first nine months of fiscal year 2025, compared to 33.2% in the first nine months of fiscal year 2024.

Current wording

SG&A expenses increased to $5.6 million, or 1.8%, during the first quarter of fiscal year 2026, when compared to $5.5 million during the first quarter of fiscal year 2025. SG&A expenses as a percentage of net sales were 33.8% in the first quarter of fiscal year 2026, compared to 34.7% in the first quarter of fiscal year 2025.

Previous wording

The increase in SG&A expenses during the third 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 $304,000 and shipping costs totaling $130,000. Both employee and contracted sales personnel-related costs, which include sales incentives, and shipping costs increased due to increases in net sales.

Current wording

The increase in SG&A expenses during the first quarter of fiscal year 2026, compared to the same period last year, was primarily the result of increases in employee and contracted sales personnel-related costs totaling $102,000 and shipping costs totaling $87,000. Both employee and contracted sales personnel-related costs, which include sales incentives, and shipping costs increased due to increases in net sales.

Previous wording

We recognized royalty expense, net of royalty income, totaling $7,000 during the third 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.

Current wording

We recognized royalty expense, net of royalty income, totaling $7,000 during the first quarter of fiscal years 2026 and 2025. 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 2025 and 2024.

Current wording

We recognized $14,000 of amortization expense, associated with intangible assets, during the first quarter of fiscal years 2026 and 2025.

Previous wording

We reported a loss from operations of $719,000 for the first nine months of fiscal year 2025, compared to $4.0 million for the first nine months of fiscal year 2024. The improvement was primarily due to the increase in gross profit of $4.6 million, partially offset by the increase in SG&A expenses of $1.3 million.

Current wording

We reported a loss from operations of $208,000 for the first quarter of fiscal year 2026, compared to $852,000 for the first quarter of fiscal year 2025. The improvement was primarily due to the increase in gross profit of $743,000, partially offset by the increase in SG&A expenses of $99,000.

Previous wording

We recognized other expense, net in the first nine months of fiscal year 2025 of $753,000, compared to $524,000 in the first nine months of fiscal year 2024. Other expense, net for the first nine months of fiscal year 2025 is comprised of interest expense and other miscellaneous items. Other expense, net for the first nine months of fiscal year 2024 is comprised of interest expense and other miscellaneous items, partially offset by gain on insurance proceeds totaling $309,000.

Current wording

We recognized other expense, net in the first quarter of fiscal year 2026 of $211,000, compared to $243,000 in the first quarter of fiscal year 2025. Other expense, net for the first quarter of fiscal years 2026 and 2025 is comprised primarily of interest expense and other miscellaneous items.

Previous wording

We reported income before income taxes of $306,000 for the third quarter of fiscal year 2025, compared to a loss before income taxes of $1.6 million for the third quarter of fiscal year 2024. The improvement was primarily a result of the decrease in loss from operations of $1.9 million.

Current wording

We reported a loss before income taxes of $419,000 for the first quarter of fiscal year 2026, compared to $1.1 million for the first quarter of fiscal year 2025. The improvement was primarily a result of the decrease in loss from operations of $644,000.

Previous wording

Fluctuations in our effective tax rates are primarily due to permanent differences in U.S. GAAP and tax accounting for various tax deductions and benefits, but can also be significantly different from the statutory tax rate when income or loss before taxes is at a level such that permanent differences in U.S. GAAP and tax accounting treatment have a disproportional impact on the projected effective tax rate.

Current wording

Fluctuations in our effective tax rates are primarily due to permanent differences in U.S. generally accepted accounting principles (“U.S. GAAP”) and tax accounting for various tax deductions and benefits, but can also be significantly different from the statutory tax rate when income or loss before taxes is at a level such that permanent differences in U.S. GAAP and tax accounting treatment have a disproportional impact on the projected effective tax rate.

Previous wording

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

Current wording

As of October 31, 2025, the valuation allowance against our total gross deferred tax assets totaled $5.2 million.

Previous wording

Net income for the third quarter of fiscal year 2025 was $302,000, or $0.04 per share, compared to a net loss of $1.6 million, or $0.20 per share, for the third quarter of fiscal year 2024. This improvement was primarily due to the decrease in loss before income taxes of $1.9 million.

Current wording

Net loss for the first quarter of fiscal year 2026 was $398,000, or $0.05 per share, compared to a net loss of $1.1 million, or $0.14 per share, for the first quarter of fiscal year 2025. This improvement was primarily due to the decrease in loss before income taxes of $676,000.

Previous wording

Total liabilities decreased $780,000, or 4.0%, to $18.7 million at July 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 $1.9 million, resulting from net repayments on our Revolver, partially offset by increases in accounts payable and accrued expenses totaling $915,000, resulting from the timing of certain vendor payments.

Current wording

Total liabilities decreased $820,000, or 4.4%, to $17.7 million at January 31, 2026, from $18.5 million at October 31, 2025. The decrease in total liabilities was primarily due to a decrease in note payable, revolver - current totaling $1.1 million, resulting from net repayments on our Revolver, partially offset by an increase in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $401,000, resulting from the timing of certain payments.

Previous wording

Total shareholders’ equity at July 31, 2025 decreased $2.6 million in the first nine months of fiscal year 2025 resulting primarily from a net loss of $1.5 million, issuance costs totaling $92,000 related to the issuance of redeemable restricted common stock and the $1.2 million increase to the aggregate redemption value of the redeemable restricted common stock as of July 31, 2025, partially offset by share-based compensation, net of $186,000.

Current wording

Total shareholders’ equity at January 31, 2026 increased $1.6 million in the first quarter of fiscal year 2026 resulting primarily from the $2.1 million decrease in the aggregate redemption value of the redeemable restricted common stock as of January 31, 2026, partially offset by a net loss of $398,000.

Previous wording

Our cash totaled $421,000 as of July 31, 2025, an increase of $177,000 compared to $244,000 as of October 31, 2024. The increase in cash for the nine months ended July 31, 2025 primarily resulted from net cash provided by operating activities of $617,000, partially offset by capital expenditures of $217,000 and net cash used in financing activities of $206,000.

Current wording

Our cash totaled $126,000 as of January 31, 2026, a decrease of $112,000 compared to $238,000 as of October 31, 2025. The decrease in cash for the three months ended January 31, 2026 primarily resulted from capital expenditures of $138,000 and net cash used in financing activities of $1.1 million, partially offset by net cash provided by operating activities of $1.2 million.

Previous wording

On July 31, 2025, we had working capital of $13.7 million compared to $15.5 million on October 31, 2024. The ratio of current assets to current liabilities as of July 31, 2025 was 1.8 to 1.0, compared to 2.0 to 1.0 as of October 31, 2024. The decrease in working capital and in the current ratio was primarily due to the $2.5 million reclassification of the balance on our real estate term loan from noncurrent liabilities to current liabilities, due to its May 5, 2026 maturity date, and the increase in accounts payable and accrued expenses totaling $915,000, partially offset by the decrease in note payable, revolver – current totaling $1.9 million, resulting from net repayments on our Revolver.

Current wording

On January 31, 2026, we had working capital of $13.5 million compared to $13.9 million on October 31, 2025. The ratio of current assets to current liabilities as of January 31, 2026 and October 31, 2025 was 1.8 to 1.0. The decrease in working capital was primarily due to the decrease in trade accounts receivable, net of $2.2 million and the increase in accounts payable and accrued expenses, including accrued compensation and payroll taxes, totaling $401,000, partially offset by the increase in inventories totaling $1.1 million and the decrease in note payable, revolver – current totaling $1.1 million, resulting from net repayments on our Revolver.

Previous wording

As of July 31, 2025 and October 31, 2024, we had outstanding loan balances under our Revolver totaling $6.5 million and $8.3 million, respectively. As of July 31, 2025 and October 31, 2024, we had other outstanding bank loan balances, excluding our Revolver, totaling $2.6 million.

Current wording

As of January 31, 2026 and October 31, 2025, we had outstanding loan balances under our Revolver totaling $4.6 million and $5.6 million, respectively. As of January 31, 2026 and October 31, 2025, we had other outstanding bank loan balances, excluding our Revolver, totaling $2.6 million.

Previous wording

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 $1.2 million in the first quarter of fiscal year 2026, compared to $2.7 million for the first quarter of fiscal year 2025. Net cash provided by operating activities during the first quarter of fiscal year 2026 primarily resulted from certain adjustments to reconcile a net loss of $398,000 to net cash provided by operating activities including depreciation and amortization of $197,000 and share-based compensation expense of $89,000. Additionally, the cash flow impact of the decrease in trade accounts receivable, net of $2.2 million and the cash flow impact of the increase in accounts payable and accrued expenses, including accrued compensation and payroll taxes, of $275,000 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 the increase in inventories totaling $1.1 million.

Previous wording

Net cash provided by operating activities was $617,000 in the first nine months of fiscal year 2025, compared to $665,000 for the first nine months of fiscal year 2024. Net cash provided by operating activities during the first nine months of fiscal year 2025 primarily resulted from certain adjustments to reconcile a net loss of $1.5 million to net cash provided by operating activities including depreciation and amortization of $608,000 and share-based compensation expense of $293,000. Additionally, the cash flow impact of increases in accounts payable and accrued expenses of $848,000 further contributed to net cash provided by operating activities.

Current wording

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 the decrease in trade accounts receivable, net of $2.8 million and the cash flow impact of the increase 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 the increase in inventories totaling $373,000.

Previous wording

Net cash used in investing activities totaled $234,000 in the first nine months of fiscal year 2025, compared to $43,000 in the first nine months of fiscal year 2024. Net cash used in investing activities during the first nine months of fiscal year 2025 resulted primarily from purchases of property and equipment and deposits for the purchase of property and equipment totaling $217,000. 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.

Current wording

Net cash used in investing activities totaled $164,000 in the first quarter of fiscal year 2026, compared to $75,000 in the first quarter of fiscal year 2025. Net cash used in investing activities during the first quarter of fiscal years 2026 and 2025 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 $206,000 for the first nine months of fiscal year 2025, compared to $1.3 million in the first nine months of fiscal year 2024. Net cash used in financing activities in the first nine months of fiscal years 2025 resulted from the issuance of redeemable restricted common stock, net of $1.9 million, partially offset by repayments on our revolving line of credit totaling $1.9 million and payroll taxes withheld and remitted totaling $107,000 related to the vesting of operational performance-based restricted stock. Net cash used in financing activities in the first nine months of fiscal years 2024 resulted primarily from net repayments on our revolving line of credit totaling $1.0 million.

Current wording

Net cash used in financing activities totaled $1.1 million for the first quarter of fiscal year 2026, compared to $2.7 million in the first quarter of fiscal year 2025. Net cash used in financing activities in the first quarter of fiscal years 2026 resulted from repayments on our revolving line of credit totaling $1.1 million. Net cash used in financing activities in the first quarter of fiscal years 2025 resulted primarily from net repayments on our revolving line of credit totaling $2.7 million.

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 7.5% per annum at July 31, 2025 and 8.0% at October 31, 2024. The maturity date of the Virginia Real Estate Loan is May 5, 2026 and, as such, the balance of the loan was reclassified from a non-current liability to a current liability during the third quarter of fiscal year 2025. The Company intends to refinance the obligation prior to maturity.

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 6.75% per annum at January 31, 2026 and 7.0% at October 31, 2025. The maturity date of the Virginia Real Estate Loan is May 5, 2026. The Company intends to refinance the obligation prior to maturity.

Previous wording

The Loan is secured by a first lien deed of trust on the land and buildings at our headquarters and manufacturing facilities located in Roanoke, Virginia.

Current wording

The Virginia Real Estate Loan is secured by a first lien deed of trust on the land and buildings at our headquarters and manufacturing facilities located in Roanoke, Virginia.

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 9.0% rate at July 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.

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 an 8.25% rate at January 31, 2026 and 8.5% at October 31, 2025. 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

The Revolver requires a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. generally accepted accounting principles) in the Revolver, requires the balance on the Revolver to be classified as a current liability. The “subjective acceleration clause” allows SLR to declare an event of default if there is a material adverse change in our business or financial condition. Upon the occurrence of an event of default, SLR may, among other things, declare all obligations payable in full. We believe that no such material adverse change has occurred. In addition, at July 31, 2025 and through the date of this report, SLR has not informed us that any such event of default has occurred.

Current wording

The Revolver requires a lockbox arrangement, which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. generally accepted accounting principles) in the Revolver, requires the balance on the Revolver to be classified as a current liability. The “subjective acceleration clause” allows SLR to declare an event of default if there is a material adverse change in our business or financial condition. Upon the occurrence of an event of default, SLR may, among other things, declare all obligations payable in full. We believe that no such material adverse change has occurred. In addition, at January 31, 2026 and through the date of this report, SLR has not informed us that any such event of default has occurred. The Revolver has a maturity date of July 24, 2027 and we believe that we will continue to be able to borrow on the Revolver to fund our operations over the remaining term.

Previous wording

As of July 31, 2025, we had $6.5 million of outstanding borrowings on our Revolver and $4.4 million in available credit.

Current wording

As of January 31, 2026, we had $4.6 million of outstanding borrowings on our Revolver and $4.7 million in available credit.

Previous wording

Our discussion and analysis of financial condition and results of operations is based on the condensed consolidated financial statements and accompanying condensed notes that have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and the instructions to Form 10‑Q and Regulation S‑X. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Current wording

Our discussion and analysis of financial condition and results of operations is based on the condensed consolidated financial statements and accompanying condensed notes that have been prepared in accordance with U.S. GAAP for interim financial information and the instructions to Form 10‑Q and Regulation S‑X. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Previous wording

In November 2023, the FASB issued Accounting Standards Update 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires enhanced disclosures about significant segment expenses and enhanced disclosures in interim periods. The guidance in ASU 2023-07 will be applied retrospectively and is effective for annual reporting periods in fiscal years beginning after December 15, 2023 and interim reporting periods in fiscal years beginning after December 31, 2024, with early adoption permitted. We are currently evaluating the impact ASU 2023-07 will have on our financial statement disclosures.

Current wording

In November 2023, the FASB issued Accounting Standards Update 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires public entities to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”), as described in accordance with U.S. GAAP. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosure requirement in ASC 280,Segment Reporting, on an interim and annual basis. The guidance in ASU 2023-07 is effective for annual reporting periods in fiscal years beginning after December 15, 2023 and interim reporting periods in fiscal years beginning after December 31, 2024. We adopted ASU 2023-07 on a retrospective basis for the annual period ended October 31, 2025 and for interim reporting periods beginning with the fiscal quarter ended January 31, 2026. See note 11 for further information regarding the Company’s single reportable segment disclosures.