RF Industries
Annual Report 2013

Plain-text annual report

Fiscal 2013 Annual Report July 25, 2014 Fellow Shareholders, Fiscal 2013 was a year of growth and change for our company. We significantly grew our revenue and profitability, divested non-core assets, maintained our strong balance sheet and returned capital to shareholders. That said, the growth that we saw from Cable Unlimited’s (CU) OptiFlex cabling solution slowed significantly at the end of the year. This contraction in sales has created challenges, but we have stayed focused on our customers’ needs and managed expenses to maintain profitability—a top priority for RF Industries. Some highlights from Fiscal 2013: - Annual revenues increased 32% to $36.6 million - Divested unprofitable RF Neulink and RadioMobile divisions - Balance sheet remained strong with $11.9 million in cash and no debt - Paid four regular quarterly dividend payments of $0.07 per share - 20th straight year of profitability During the majority of the year, we saw strong demand for our product offerings in each of our operating segments resulting in solid annual revenue growth, led by CU’s OptiFlex cabling solution. OptiFlex cables were specifically developed for wireless providers engaged in upgrading cell towers to 4G technologies. Demand for that product decreased in late fiscal 2013 as the major carriers began to wrap up their 4G upgrades, resulting in a decline in revenue. CU has a wide range of capabilities and products and is actively engaged in the development of innovative fiber connectivity solutions. CU is well known in the industry for its ability to provide customized solutions, and that reputation has opened many doors for us. However, it takes time for any new product to get from development to market. That being said, we have a solid, longstanding customer base who we are continuing to work with to provide “the wires for wireless,” and we remain optimistic about our outlook for the future. During fiscal 2013 we divested RF Neulink and RadioMobile, the businesses which comprised our RF Wireless division. These non-core businesses generally operated at a loss and neither business performed according to our expectations over the past few years. Hence, these divestitures enhance our profitability and enable us to invest our full resources to develop custom interconnect solutions for the wireless infrastructure industry. Demand for wireless connectivity is rapidly changing and expanding, with consumers expecting full connectivity in every location. Our focus is on providing our customers with products that allow our customers to remain competitive in this space. While 2013 financial results were strong, we experienced a 38% decline in revenues for the first six months of fiscal 2014 to $11.6 million, mostly as a result of the decrease in sales of Optiflex cables by CU. Operating income was $1.1 million in the first six months of fiscal 2014 and we recorded income from continuing operations of $0.7 million or $0.09 per basic and $0.08 per diluted share. We remained profitable and our balance sheet is robust, but we are well aware that we need to drive revenue growth organically or through careful acquisitions. We are confident that we can capitalize on the changing demands of the rapidly growing wireless market. We have dealt before with ebbs and flows in our business as new products are created, and while we’re not pleased with the recent revenue decline, we are concentrating our efforts to execute on our ability to provide key connectivity products and customized innovations to meet the needs of the marketplace. We remain committed to creating long-term shareholder value. We have continued to grow our strong cash position and maintain zero debt, so the cash generated from operations allows us to return capital to our shareholders through dividends, and/or stock repurchases, while also allowing us to consider strategic transactions. I would like to thank our employees for their hard work and dedication as well as our shareholders for your continued support. We look forward to sharing with you our future success. Sincerely, Howard F. Hill President and Chief Executive Officer Abridged and Edited Copy of Annual Report  (Form 10-K) Annual Report Under Section 13 or 15(d) of  The Securities Exchange Act of 1934  For the fiscal year ended October 31, 2013  Commission File Number 0‐13301  RF INDUSTRIES, LTD. 7610 Miramar Road, Bldg. 6000, San Diego, California 92126‐4202  (Address of principal executive offices) (Zip Code)  (858) 549‐6340   The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $37.6 million. On January 10, 2014, the Registrant had 8,153,658 outstanding shares of Common Stock, $.01 par value. Forward-Looking Statements: Certain statements in this abridged Annual Report on Form 10-K, and other oral and written statements made by the Company from time to time are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including those that discuss strategies, goals, outlook or other non-historical matters, or projected revenues, income, returns or other financial measures. In some cases forward-looking statements can be identified 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 forward-looking statements are subject to numerous risks and uncertainties that may cause actual results to differ materially from those contained in such statements. Among the most important of these risks and uncertainties are the ability of the Company to continue to source its raw materials and products from its suppliers and manufacturers, the market demand for its products, which market demand is dependent to a large part on the state of the telecommunications industry, the Company’s dependence on the success of its largest division, and competition. Important factors which may cause actual results to differ materially from the forward looking statements are described in the Section entitled “Risk Factors” contained in the Form 10-K on file with the Securities and Exchange Commission, and other risks identified from time to time in the Company’s filings with the Securities and Exchange Commission, press releases and other communications. The Company assumes no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward- looking statements. 1             PART I ITEM 1. BUSINESS General RF Industries, Ltd., together with its wholly-owned subsidiary (collectively, hereinafter the “Company”), primarily engages in the design, manufacture, and marketing of interconnect products and systems, including coaxial and specialty cables, fiber optic cables and connectors, and electrical and electronic specialty cables. For internal operational purposes, and for marketing purposes, the Company currently classifies its operations into the following four divisions: (i) The Connector and Cable Assembly Division designs, manufactures and distributes coaxial connectors and cable assemblies that are integrated with coaxial connectors; (ii) the Aviel Electronics Division designs, manufactures and distributes specialty and custom RF connectors primarily for aerospace and military customers, (iii) the Bioconnect Division manufactures and distributes cabling and interconnect products to the medical monitoring market; and (iv) the Cables Unlimited Division manufactures custom and standard cable assemblies, complex hybrid fiber optic power solution cables, adapters, and electromechanical wiring harnesses for communication, computer, LAN, automotive and medical equipment. The Cables Unlimited Division is a Corning Cables Systems CAH Connections SM Gold Program member, authorized to manufacture fiber optic cable assemblies that are backed by Corning Cables Systems’ extended warranty. During 2013, the Company sold and discontinued its two wireless divisions consisting of the RF Neulink Division and RadioMobile Division. In addition, effective November 1, 2013, the Oddcables Division was integrated with the Connector and Cable Division. The Company’s principal executive office is currently located at 7610 Miramar Road, Building #6000, San Diego, California. The Company was incorporated in the State of Nevada on November 1, 1979, completed its initial public offering in March 1984 under the name Celltronics, Inc., and changed its name to RF Industries, Ltd. in November 1990. Unless the context requires otherwise, references to the “Company” in this report include RF Industries, Ltd. and Cables Unlimited, Inc., a New York company and a wholly-owned subsidiary, and the divisions of RF Industries, Ltd. The Company’s principal Internet website is located at http://www.rfindustries.com. The Company’s annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and other information related to the Company, are available, free of charge, on that website as soon as we electronically file those documents with, or otherwise furnish them to, the Securities and Exchange Commission. The Company’s Internet website and the information contained therein, or connected thereto, are not and are not intended to be incorporated into this Annual Report on Form 10-K. Operating Divisions Connector and Cable Assembly Division The Connector and Cable Assembly Division is engaged in the design, manufacture and distribution of coaxial connector solutions for companies that design, build, operate, maintain and use wireless voice, data, messaging, and location tracking systems. Coaxial connector products consist primarily of connectors which, when attached to a coaxial cable, facilitate the transmission of analog and digital signals in various frequencies. Although most of the connectors are designed to fit standard products, the Company also sells custom connectors specifically designed and manufactured to suit its customers’ requirements such as the Wi-Fi and broadband wireless markets. The Company’s Connector and Cable Assembly Division typically carries over 1,500 different types of connectors, adapters, tools, and test and measurements kits. The Company’s RF connectors are used in thousands of different devices, products and types of equipment. While the models and types of devices, products and equipment may change from year to year, the demand for the types of connectors used in such products and offered by the Company does not fluctuate with the changes in the end product incorporating the connectors. In addition, since the Company’s standard connectors can be used in a number of different products and 2  devices, the discontinuation of one product does not make the Company’s connectors obsolete. Accordingly, most connectors carried by the Company can be marketed for a number of years and are only gradually phased out. Furthermore, because the Company’s connector products are not dependent on any line of products or any market segment, the Company’s overall sales of connectors do not fluctuate materially when there are changes to any product line or market segment. Sales of the Company’s connector products are, however, dependent upon the overall economy, infrastructure build out by large telecommunications firms and on the Company’s ability to market its products. The Company designs its connectors at its headquarters in San Diego, California. However, most of the RF connectors are manufactured by third party foreign manufacturers located in Asia. The Company has been designing, producing and selling coaxial connectors since 1987 and the Connector and Cable Assembly Division therefore represents the Company’s oldest and most established division. The Connector and Cable Assembly Division has historically generated the majority of the Company’s net sales and net income. However, as a result of the acquisition of Cables Unlimited and growth of that division, the Connector and Cable Assembly Division no longer represents a majority of the Company’s revenues and no longer generates a majority of the Company’s net income. Cable assembly products consist of various types of coaxial cables that are attached to connectors (usually the Company’s connectors) for use in a variety of communications applications. Cable assemblies manufactured for the Connector and Cable Assembly Division are manufactured at the Company’s California facilities using state of the art automation equipment and are sold through distributors or directly to major OEM accounts. Cable assemblies consist of both standard cable assemblies and assemblies that are custom manufactured for the Company’s clients. The Company offers a line of cable assemblies with over 100,000 cable product combinations. The Company launched its cable assembly operations in 2000. Aviel Electronics Division The Aviel Electronics Division is primarily engaged in the design, manufacture and sale of custom, specialty or precision connectors and cable systems for specialized purposes, such as commercial aerospace and military systems. Aviel has a 50 year history of serving the microwave transmission industries, and is an approved vendor to leading aerospace, electronics, OEM’s and government agencies in the United States and abroad. Aviel complements the Company’s Connector and Cable Assembly Division’s capabilities by providing additional custom design and manufacturing capabilities, thereby expanding the Company’s products in the military and commercial aerospace markets, and expanding the Company’s overall client base. Aviel’s operations, including its manufacturing facilities, are based in Las Vegas, Nevada. Cables Unlimited Division.OnJune 15, 2011, RF Industries, Ltd. acquired all of the issued and outstanding capital stock of Cables Unlimited, Inc. (Cables Unlimited), a New York corporation. The Cables Unlimited division is an established custom cable manufacturer based in Yaphank, New York. Cables Unlimited is a Corning Cable Systems CAH Connections SM Gold Program member, authorized to manufacture fiber optic products that are backed by Corning Cable Systems' extended warranty. Cables Unlimited designs, develops and manufactures custom connectivity solutions for the wireless market. The products sold by Cables Unlimited include custom and standard fiber optic cable assemblies, adapters and electromechanical wiring harnesses for communications, computer, LAN, automotive fiber optic and medical equipment. During 2012, Cables Unlimited introduced a new custom cabling solution known as OptiFlex. The OptiFlex cable is a hybrid power and communications cable designed and built for wireless service providers who are updating their networks to 4G technologies such as WiMAX, LTE and other technologies. Bioconnect Division The Bioconnect Division is engaged in product development, design, manufacture and sale of high-end or specialty cables and interconnects for medical monitoring applications, such as ECG cables, EEG leads and connecting wires. Bioconnect’s products typically do not directly compete against the mass-produced, lower priced standard medical cables used by medical facilities. The Company acquired the Bioconnect operations in 2000. infant and sleep apnea monitors in hospitals, patient leads, snap leads, For financial reporting purposes, the Company aggregates its operations into three segments. (1) Connector and Cable Assembly and Aviel Electronics divisions are aggregated into one reporting segment (the RF Connector and Cables Assembly segment) because they have similar economic characteristics. (2) Bioconnect makes up the 3  Company’s Medical Cabling and Interconnector segment. (3) The Cables Unlimited division constitutes the Company’s newest fiber optic and power/electronic cabling segment, which we refer to as the Cables Unlimited segment. Product Description The Company produces a broad range of interconnect products and assemblies. The products that are offered and sold by the Company’s various divisions consist of the following: Connector and Cable Products The Company’s Connector and Cable Assembly Division designs, manufactures and markets a broad range of coaxial connectors and coaxial cable assemblies for the numerous products with applications in commercial, industrial, automotive, transportation, scientific, aerospace and military markets. Various types of connectors are offered by the RF Connector Division including 2.4mm and 3.5mm, 7-16 DIN, BNC, MCX, MHV, Mini-UHF, MMCX, N, SMA, SMB, TNC, QMA and UHF. These connectors are offered in several configurations and cable attachment methods for customer applications. There are numerous applications for these connectors, some of which include digital applications, 2.5G, 3G, 4G, Wi-MAX, LTE and other broadband wireless infrastructure, GPS (Global Positioning Systems), mobile radio products, aircraft, video surveillance systems, cable assemblies and test equipment. Users of telecommunications companies, circuit board manufacturers, OEM, consumer electronics manufacturers, audio and video product manufacturers and installers, and satellite companies. The Connector Division markets over 1,500 types of connectors, adapters, tools, assembly, test and measurement kits, which range in price from under $1 to over $1,000 per unit. The kits satisfy a variety of applications including, but not limited to, lab operations, site requirements and adapter needs. the Company’s connectors include The Connector Division designs and sells a variety of connector tools and hand tools that are assembled into kits used by lab and field technicians, R&D technicians and engineers. The Company also designs and offers some of its own tools, which differ from those offered elsewhere in the market. These tools are manufactured for the Company by outside contractors. Tool products are carried as an accommodation to the Company’s customers and have not materially contributed to the Company’s revenues. The Cable Assembly component of the Connector and Cable Assembly Division markets and manufactures cable assemblies in a variety of sizes and combinations of RF coaxial connectors and coax cabling. Cabling is purchased from a variety of major unaffiliated suppliers and is assembled predominately with the Company’s connectors or other brands of connectors as complete cable assemblies. Coaxial cable assemblies have numerous applications including wireless and wireless local area networks, wide area networks, Internet systems, PCS/cellular systems including 2.5G, 3G, 4G, Wi-MAX, LTE wireless infrastructure, Distributed Antenna Systems (DAS), TV/dish network systems, test equipment, military/aerospace (mil-standard and COTS (Commercial Off The Shelf)) and entertainment systems. Cable assemblies are manufactured to customer requirements. Aviel Electronics Products The Aviel Electronics Division designs, manufactures and sells specialized and custom designed RF coaxial connectors. Aviel’s standard configuration and custom connectors include connectors ranging from standard, miniature, sub-miniature and unique interfaces. Aviel also specializes in the design and manufacture of custom and non-standard configurations required for specific applications as well as hard to locate and discontinued connectors for commercial, aerospace, military and other unique applications. Cables Unlimited Products Cables Unlimited is an International Standards Organization (ISO) approved factory that manufactures custom cable assemblies. Cables Unlimited is also a Corning Cable Systems CAH Connections SM Gold Program member, authorized to manufacture fiber optic products that are backed by Corning Cable Systems' extended warranty. Products manufactured by Cables Unlimited include custom fiber optic cable assemblies, adapters and electromechanical wiring harnesses for telecommunications, computer, LAN, automotive and medical equipment companies. Cables Unlimited also provides fiber optic and cable installation services in the New York regional area. 4  During April 2012, Cables Unlimited commercially released a cabling solution for wireless service providers engaged in upgrading their cell towers for 4G technologies. The custom hybrid cable, called OptiFlex, is significantly lighter and possesses greater flexibility than cables previously used for wireless service.Most of the products that Cables Unlimited develops and sells are built for special projects. The acquisition of Cables Unlimited in 2011 gives the Company the ability to offer a broad range of interconnect products and systems that the Company’s largest customers had sought, but that the Company previously was unable to provide. These interconnect systems have the ability to combine radio frequency and fiber optic interconnect components, with various connectors and power cables through customized solutions for these customers. The Company continues to actively market its ability to provide these fiber optic interconnect solutions to its larger customers. Bioconnect Products Bioconnect designs, manufactures, sells and provides product development services to OEMs for standard and custom cable assemblies, adapters and electromechanical wiring harnesses for the medical market. These products consist primarily of patient monitoring cables, ECG cables, snap leads, and molded safety leads for neonatal monitoring electrodes. The products, which are used in hospitals, clinics, doctor offices, ambulances and at home are frequently replaced in order to ensure maximum performance of medical diagnostic equipment. Foreign Sales Direct export sales by the Company to foreign customers accounted for $1.5 million or approximately 4% of Company’s sales for the fiscal year ended October 31, 2013. Foreign sales accounted for $1.6 million or approximately 6% of Company’s sales for the fiscal year ended October 31, 2012. The majority of the export sales during these periods were to Canada, Israel and Mexico. The Company does not own, or directly operate any manufacturing operations or sales offices in foreign countries. Distribution, Marketing and Customers Sales methods vary greatly between the Company’s divisions. The Connector and Cable Assembly Division and the Cables Unlimited Division currently sell their products primarily through warehousing distributors and OEM customers who utilize coaxial connectors and cable assemblies in the manufacture of their products. The Aviel Division sells its products to its own customers and to customers referred through the Connector and Cable Assembly Division. The Aviel and Connector and Cable Assembly divisions sell to similar customer market segments and combine marketing efforts where economically advantageous. The Bioconnect group markets its products to the medical market through major hospital suppliers, dealers and distributors. The Bioconnect Division also sells its products to OEMs who incorporate the leads and cables into their product offerings. Manufacturing The Company contracts with outside third parties for the manufacture of a significant portion of its coaxial connectors. However, virtually all of the RF cable assemblies sold by the Connector and Cable Assembly Division during the fiscal year ended October 31, 2013 were assembled by that division at the Company’s facilities in California. The Connector and Cable Assembly Division has its cables manufactured at numerous ISO approved factories with plants in the United States, China and Taiwan. The Company is dependent on a few manufacturers for its coaxial connectors and cable assemblies. Although the Company does not have manufacturing agreements with these manufacturers for its connectors and cable products, the Company does have long-term purchasing relationships with these manufacturers. The Company has in-house design engineers who create the engineering drawings for fabrication and assembly of connectors and cable assemblies. Accordingly, the manufacturers are not primarily responsible for design work related to the manufacture of the connectors and cable assemblies. 5  The Bioconnect Division has designed and manufactured its own products for over 24 years (including as an unaffiliated company before being acquired by the Company in 2000). Bioconnect products are manufactured by the Company at its own California facilities. The manufacturing process for the Bioconnect medical cables includes all aspects of the product, from the design to mold design, mold fabrication, assembly and testing. The Bioconnect product line produces its medical interconnect products in both high volume manufacturing and for custom or low volume uses. The Aviel Electronics Division manufactures connectors at its Las Vegas, Nevada manufacturing facility. The Aviel Electronics Division has designed and manufactured its own products for over 50 years (including as an unaffiliated company before being acquired by the Company in August 2004). The manufacturing process for the Aviel connectors includes all aspects of the product from design, tooling, fabrication, assembly and testing. The Aviel Electronics product line produces its connector products for low volume custom manufacturing uses, for the military, aerospace, communications and other unique applications. Cables Unlimited manufactures its custom cable assemblies, adapters and electromechanical wiring harnesses and other products in its Yaphank, New York manufacturing facility. Cables Unlimited is an ISO approved factory, as well as a Corning Cable Systems CAH Connections SM Gold Program member, authorized to manufacture fiber optic products and assemblies that are backed by Corning Cable Systems' extended warranty. Cables Unlimited outsources the assembly of a portion of its new OptiFlex cable to a third party manufacturer. The final assembly and termination of the OptiFlex cable is completed by Cables Unlimited at its Yaphank, New York facilities. There are certain risks associated with the Company’s dependence on third party manufacturers for some of its products, including reduced control over delivery schedules, quality assurance, manufacturing costs, and the potential lack of adequate capacity during periods of excess demand and increases in prices. See “Risk Factors” below. Raw Materials Connector materials are typically made of commodity metals such as copper, brass and zinc and include small applications of precious materials, including silver and gold. The Connector and Cable Division purchases most of its connector products from contract manufacturers located in Asia and the United States. The Company believes that the raw materials used in its products are readily available and that the Company is not currently dependent on any supplier for its raw materials. The Company does not currently have any long-term purchase or supply agreements with its connector or suppliers. The RF Connector and Cable Assembly Division obtains coaxial connectors from RF Connector. The Company believes there are numerous domestic and international suppliers of coaxial connectors. Aviel connector materials are typically made of commodity metals and include some application of precious materials, including silver and gold. The Aviel Electronic Division purchases almost all of its connector materials and products from vendors in Asia and the United States. The Company believes the connector materials used in the manufacturing of its connector products are readily available from a number of foreign and domestic suppliers. Bioconnect cable assembly materials are typically made of commodity materials such as plastics, rubber, resins and wire. The Company believes materials and components used in these products are readily available from a number of domestic suppliers and from other foreign suppliers. The Cables Unlimited Division purchases all of its products from manufacturers located in the United States. Fiber optic cables are available from various manufacturers located throughout the United States; however, Cables Unlimited purchases most of its fiber optic cables from Corning Cables Systems LLC. The Company believes that the raw materials used by Cables Unlimited in its products are readily available and that Cables Unlimited is not currently dependent on any supplier for its raw materials. Cables Unlimited does not currently have any long-term purchase or supply agreements with its connector and cable suppliers. 6  Employees As of October 31, 2013, the Company employed 145 full-time employees, of whom 43 were in accounting, administration, sales and management, 99 were in manufacturing, distribution and assembly, and 3 were engineers engaged in design, engineering and research and development. The employees are based at the Company’s offices in San Diego, California (87 employees), Las Vegas, Nevada (7 employees), and Yaphank, New York (51 employees). The Company also occasionally hires part-time employees. The Company believes that it has a good relationship with its employees. The Cables Unlimited Division employs five cable installers who are currently represented by a union. Other than the foregoing installers that belong to a union, none of the Company’s other employees are unionized. Research and Development Research and development costs are expensed as incurred. The Company’s research and development expenses relate to its engineering activities, which consist of the design and development of new products for specific customers, as well as the design and engineering of new or redesigned products for the industry in general. During the years ended October 31, 2013 and 2012, the Company recognized $1.4 million and $1.1 million in engineering expenses, respectively. Patents, Trademarks and Licenses The Company does not own any patents on any of its products, nor has it registered any product trademarks. The Company uses “OptiFlex™” as a trademark for its hybrid cable wireless tower cable solution. Because the Company carries thousands of separate types of connectors and other products, most of which are available to the Company’s customers from other sources, the Company does not believe that its business or competitive position is dependent on patent protection. Under its agreement with Corning Cables Systems LLC, Cables Unlimited is permitted to advertise that it is a Corning Cables System CAH Connections Gold Program member. Warranties and Terms The Company warrants its products to be free from defects in material and workmanship for varying warranty periods, depending upon the product. Products are generally warranted to the dealer for one year, with the dealer responsible for any additional warranty it may make. The RF Connector products are warranted for the useful life of the connectors. Although the Company has not experienced any significant warranty claims to date, there can be no assurance that it will not be subjected to such claims in the future. The Company usually sells to customers on 30-day terms pursuant to invoices and does not generally grant extended payment terms. Sales to most foreign customers are made on cash terms at time of shipment. Customers may delay, cancel, reduce, or return products after shipment subject to a restocking charge. Under its agreement with Corning Cables Systems LLC, Cables Unlimited is authorized to manufacture optic cable assemblies that are backed by Corning Cables Systems’ extended warranty (referred to as the “Gold Certified Warranty”). Competition The Company and industry analysts estimate worldwide sales of interconnect products of approximately $49 billion in 2013. The Company believes that the worldwide industry for interconnect products and systems is highly fragmented, with no one competitor having over a 20% share of the total market. Many of the competitors of the Connector and Cable Assembly Division have significantly greater financial resources and broader product lines. The Connector and Cable Assembly Division competes on the basis of product quality, product availability, price, service, delivery time and value-added support to its distributors and OEM customers. Since the Company’s strategy is to provide a broad selection of products in the areas in which it competes and to have a ready supply of those products available at all times, the Company normally carries a significant amount of inventory of its connector products. 7  The Bioconnect division competes with numerous other companies in all areas of its operations, including the manufacture of OEM custom products and medical cable products. Most of the competitors of Bioconnect are larger and have significantly greater financial resources than Bioconnect. Aviel Electronics has specialized in microwave and radio frequency (RF) custom connectors which lowers the number of its direct competitors. Because Aviel Electronics is an approved vendor of leading aerospace, electronics, OEM and government agencies in the United States and abroad, competition is limited to those manufacturers who have received formal certification or approval. Cables Unlimited competes on the basis of product quality, custom design, service, delivery time and value-added support to its customers. Since Cables Unlimited is a Corning Cables System CAH Connections Gold Program member, it is one of 14 other companies permitted to manufacture fiber optic cable assemblies that are backed by Corning Cables Systems’ extended warranty. The Company is aware of other competing products that have recently been introduced that compete with this product line. Government Regulations The Company’s products are designed to meet all known existing or proposed governmental regulations. Management believes that the Company currently meets existing standards for approvals by government regulatory agencies for its principal products. Because the products designed and sold by the Aviel Electronics Division are used in commercial and military aerospace products, its products are regulated by various government agencies in the United States and abroad. Bioconnect products are subject to the regulations of the U.S. Food and Drug Administration. The Company’s products are Restriction on Hazardous Substances (“RoHS”) compliant. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. ITEM 2. DESCRIPTION OF PROPERTY The Company leases its corporate headquarters building at 7610 Miramar Road, Building 6000, San Diego, California. The building consists of approximately 22,000 square feet which houses its corporate administration, sales and marketing, and engineering plus production and warehousing for the Company’s Connector and Cable Assembly and Bioconnect Divisions. The lease for this facility expires on March 31, 2014. In addition to the foregoing building, the Company also leases the following facilities: (i) (ii) (iii) The cable assembly manufacturing portion of the Connector and Cable Assembly Division operates in a separate 3,180 square foot facility that is located adjacent to the Company’s corporate headquarters. The lease for this space expires on March 31, 2014. Prior to the sale by the Company of the RadioMobile division in October 2013, the RadioMobile division operated from a separate building that is located near the Company’s corporate headquarters at 7606 Miramar Road, Building 7200. In connection with the sale of this division, the Company permitted the buyer of the RadioMobile division to continue to use this space, rent- free, through the end of the lease. The lease for this space expires on March 31, 2014. During fiscal 2009, Aviel entered into a facility lease agreement for approximately 4,500 square feet at 3060 Post Road, Suite 100 Las Vegas Nevada. The lease term commenced September 1, 2009 and will expire March 31, 2015. 8  (iv) (v) The Oddcables Division leased an approximately 4,000 square foot facility located at 7642 Clairemont Mesa Boulevard Suite 211, San Diego, California. The lease for this space expired December 31, 2013, and the Company has integrated the Oddcables Division into the Connector and Cable Assembly Division and, accordingly, has relocated those operations to the Connector and Cable Assembly facilities. The Cables Unlimited Division leases an approximately 12,000 square foot facility located at 3 Old Dock Road, Yaphank, New York. The lease for this space expires June 30, 2016. However, Cables Unlimited has a one-time option to extend the term of the lease for an additional five (5) year term. Cables Unlimited’s monthly rent expense under the lease is $13,000 per month, plus payments of all utilities, janitorial expenses, routine maintenance costs, and costs of insurance for Cables Unlimited’s business operations and equipment. The landlord is a company controlled by Darren Clark, the former owner of Cables Unlimited and a current director of the Company. In addition to the foregoing facilities, in October 2012 Cables Unlimited leased an additional approximately 2,000 square foot facility in Yaphank from a third party under a month to month arrangement. This additional space is used by Cables Unlimited as additional warehouse space and for pre-manufacturing activities. The monthly rent payable for this additional space is $1,250. The aggregate monthly rental for all of the Company’s facilities was approximately $49,000 per month, plus utilities, maintenance and insurance as of October 31, 2013. The Company is in discussions with its current landlord regarding renewing the leases for the various buildings the Company currently leases at 7610 Miramar, San Diego, California. In addition, the Company is in discussions regarding leases for other facilities in the San Diego area. The Company believes that alternate facilities are available in the San Diego area if the Company elects not to renew, or is unable to renew, its current leases by March 31, 2014. ITEM 3. LEGAL PROCEEDINGS From time to time, the Company is involved in legal proceedings that are related to its business and operations. On May 24, 2013, a former employee of the Company filed a complaint with the San Diego, California office of the U.S. Department of Labor-OSHA alleging retaliatory employment practices in violation of the whistleblower provisions of the Sarbanes-Oxley Act (Peter Wyndham vs. RF Industries, Ltd., Case No. 9-3290-13- 087). The complaint alleges that Mr. Wyndham was terminated in November 2012 in retaliation for making disclosures relating to alleged fraudulent accounting practices and lack of compliance with U.S. GAAP; violations of multiple Securities and Exchange Commission rules and regulations; and fraud against the shareholders. The complaint does not seek any specified amount of damages, but does seek various forms of relief, including the following: Reinstatement of the former employee’s employment, or in the alternative, an award for lost future wages, benefits and pension; back pay and bonuses; compensatory monetary damages in an amount to be determined; reasonable attorney’s fees; and all costs of litigation.The Company disputes the retaliation claim and has notified its employment practices liability insurance carrier of the demand. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 9  PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock is listed and trades on the NASDAQ Global Market under the symbol “RFIL.” For the periods indicated, the following tables set forth the high and low closing prices per share of Common Stock. These prices represent inter-dealer quotations without retail mark-up, markdown or commission and may not necessarily represent actual transactions. Quarter Fiscal 2013 November 1, 2012 - January 31, 2013 February 1, 2013 - April 30, 2013 May 1, 2013 - July 31, 2013 August 1, 2013 - October 31, 2013 Fiscal 2012 November 1, 2011 - January 31, 2012 February 1, 2012 - April 30, 2012 May 1, 2012 - July 31, 2012 August 1, 2012 - October 31, 2012 High Low $ $ 6.40 $ 7.10 7.35 10.86 3.82 $ 3.92 4.15 4.49 4.04 5.17 5.50 5.64 3.05 3.27 3.31 3.91 Stockholders . As of October 31, 2013 there were 387 holders of the Company’s Common Stock according to the records of the Company’s transfer agent, Continental Stock Transfer & Trust Company, New York, New York, not including holders who hold their stock in “street name.” Dividends .The Company paid a total of $2.3 million of dividends during the fiscal year ended October 31, 2013. The dividends consisted of a $0.10 dividend, a special dividend of $0.07 and two quarterly dividend payments of $0.07 per share. The Company paid four quarterly dividends of $0.05 per share totaling $1.4 million during the fiscal year ended October 31, 2012. The Board of Directors currently expects to continue to declare and pay dividends on a quarterly basis during the current fiscal year ending October 31, 2014, but may change the dividend rate, or may cease paying dividends at any time, depending on the Company’s financial condition and its financial needs. Repurchase of Securities. The Company did not repurchase any shares of its common stock during the fiscal year ended October 31, 2013. Recent Sales of Unregistered Securities . There were no previously unreported sales of equity securities by the Company that were not registered under the Securities Act during fiscal 2013. 10  Plan Category Equity Compensation Plans Approved by Stockholders (1) Equity Compensation Plans Not Approved by Stockholders (2) Total (1) (2) EQUITY COMPENSATION PLAN INFORMATION The following table provides information as of October 31, 2013 with respect to the shares of Company common stock that may be issued under the Company’s existing equity compensation plans. A B Number of Securities to Weighted Average be Issued Upon Exercise Exercise Price of of Outstanding Options Outstanding Options ($) C Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column A) 439,750 $ 3.72 548,465 $ 988,215 $ 1.22 2.24 439,750 - 439,750 Consists of options granted under the R.F. Industries, Ltd. (i) 2010 Stock Option Plan and (ii) 2000 Stock Option. The 2000 Stock Option Plan has expired, and no additional options can be granted under this plan. Accordingly, all 525,768 shares remaining available for issuance represent shares under the 2010 Stock Option Plan. Consists of options granted to six officers and/or key employees of the Company under employment agreements entered into by the Company with each of these officers and employees. ITEM 6. SELECTED FINANCIAL DATA Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K. ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these 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 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. One of the accounting policies that involves significant judgments and estimates concerns our inventory valuation. Inventories are valued at their weighted average cost. 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-third 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. 11  Another accounting policy that involves significant judgments and estimates is our accounts receivable allowance, which requires us to make estimates about matters that are inherently uncertain. The Company routinely assesses the financial strength of its customers and maintains an allowance for doubtful accounts that management believes will adequately provide for credit losses. Another critical accounting policy that involves significant judgments and estimates is management’s assessment of non-amortizable intangible assets for impairments. We review our non-amortizable intangible asset for impairment annually in the fourth quarter at the reporting unit level. We also analyze each quarter whether any indicators of impairment exist. Another critical accounting policy that involves significant judgments and estimates is management’s assessment of goodwill for impairment, which requires the Company to make assumptions and judgments regarding expected future cash flows. We review our goodwill for impairment annually in the fourth quarter at the reporting unit level. We also analyze each quarter whether any indicators of impairment exist. The Company uses the Black-Scholes model to value the stock option grants. This valuation is affected by the Company’s 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. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS For recently issued accounting pronouncements that may affect us, see Note 1 of Notes to Consolidated Financial Statements. OVERVIEW The Company markets connectors and cables to numerous industries for use in thousands of products, primarily for the wireless market. The Company aggregates operating divisions into operating segments which have similar economic characteristics and divisions 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; (5) if applicable, the nature of the regulatory environment. The Company has three segments - the “RF Connector and Cable Assembly” segment; the “Medical Cabling and Interconnector” segment; and the “Cables Unlimited” segment-based upon this evaluation. The RF Connector and Cable Assembly segment is comprised of two divisions; the Medical Cabling and Interconnector segment is comprised of one division, and the Cables Unlimited segment is comprised of one division. The three divisions that meet the quantitative thresholds for segment reporting are Connector and Cable Assembly, Bioconnect, and Cables Unlimited. Each of the other divisions aggregated into these segments have similar products that are marketed to their respective customer base and production and product development processes that are similar in nature. The specific customers are different for each division; however, there is some overlapping of product sales to them. The methods used to distribute products are similar within each division aggregated. Management identifies the Company’s 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 Company aggregates the Connector and Cable Assembly and Aviel Electronics divisions into the RF Connector Cable Assembly segment. Effective November 1, 2013, the Oddcables Division was integrated with the Connector and Cable Division.The Bioconnect division makes up the Company’s Medical Cabling and Interconnector segment, while the Cables Unlimited division is the Cables Unlimited segment. Historically, most of the Company’s revenues were generated from the sale of RF connector products and connector cable assemblies (the Connector and Cable Assembly division accounted for approximately 33% of the Company’s total sales for the fiscal year ended October 31, 2013, and 47% of net sales for the prior fiscal year). While the RF Connector and Cable Assembly segment has historically generated most of the Company’s revenues, 12  the Cables Unlimited segment has grown significantly (sales at Cables Unlimited represented 53% of total sales for the year ended October 31, 2013) because of the revenues it generated from its OptiFlex cabling solution that it commercially introduced in April 2012. Because the gross margins at the RF Connector and Cable Assembly segment are higher than those at the Cables Unlimited segment, the proportionate increase in sales by Cables Unlimited has reduced the Company’s overall gross margins and will continue to do so in the future. The net income in fiscal 2013 represented the 20th consecutive year that the Company has been profitable. In addition to its core cable and connector operations, the Company has historically operated a small RF Wireless segment that consisted of two divisions, the RF Neulink division and the RadioMobile division. During the past few years, the RF Wireless segment has not lived up to the Company’s expectations. This segment generally operated at a loss, was a significant drain on management, and did not produce any synergies with the Company’s core operations. Accordingly, in 2013 the Company decided to discontinue the RF Wireless segment and dispose of the two divisions. The disposition of the two divisions occurred in two unrelated transactions. Effective July 31, 2013, the Company sold all of the assets of its RF Neulink division, primarily consisting of inventory, certain intellectual property and licenses, customer lists and trademarks, to a third party wireless company. The Company did not receive any purchase price payment at the closing of the sale. Rather, the purchase price for the RF Neulink business will consist of cash payments made by the buyer to the Company under the following circumstances: (i) for each RF Neulink inventory item that the buyer sells, the buyer will have to pay the Company the assigned value of that inventory item. This arrangement will continue until the earlier of three years from the closing date or the date all inventory items are sold; and (ii) the buyer is required to pay the Company a royalty based on the buyer’s use of RF Neulink’s tradename or trademark, its customer list or its intellectual property. The royalty, which ranges from 5% to 10% of the buyer’s sales of such RF Neulink-related products, may not exceed $450,000 in the aggregate, and will not be payable on sales of inventory items. For the year ended October 31, 2013, the Company recognized approximately $20,000 of royalty income, which amount has been included within discontinued operations. Effective October 29, 2013, the Company sold all of the assets of the Company’s RadioMobile division, primarily consisting of inventory, certain equipment, certain intellectual property and licenses, customer lists and trademarks, to a new company formed by the former manager of this division. In return for the assets, the purchaser agreed to pay the Company 10.0% of all net revenues for the next three years (but not to exceedan aggregate total of $2.0 million). Additionally, as part of the sale of the RadioMobile division, all former RadioMobile employees were terminated by the Company and re-hired by the purchaser. Other closing costs amounted to approximately $0.2 million. For the fiscal year ended October 31, 2013, the RF Wireless segment generated $1.2 million of revenues and incurred an operating loss of $1.8 million. Financial Condition The following table presents certain key measures of financial condition as of October 31, 2013 and 2012 (in thousands, except percentages): Cash and cash equivalents Current assets Current liablities Working capital Property and equipment, net Total assets Stockholders' equity Liquidity and Capital Resources 2013 2012 Amount % Total Assets Amount % Total Assets $ 11,881 22,910 2,584 20,326 1,053 28,953 25,419 41.0% 79.1% 8.9% 70.2% 3.6% 100.0% 87.8% $ 5,492 19,044 4,141 14,903 1,204 25,463 20,230 21.6% 74.8% 16.3% 58.5% 4.7% 100.0% 79.4% Management believes that its existing current assets and the amount of cash it anticipates it will generate from current operations will be sufficient to fund the anticipated liquidity and capital resource needs of the Company for the fiscal year ending October 31, 2014 (“fiscal 2014”). The Company does not, however, currently have any commercial banking arrangements providing for loans or credit facilities should the Company need to obtain additional capital. Management believes that its existing assets and the cash it expects to generate from operations will be sufficient during the current fiscal year based on the following: 13  · As of October 31, 2013, the amount of cash and cash equivalents was equal to $11.9 million. Accordingly, the Company believes that it has sufficient cash available to operate its current business and fund its anticipated capital expenditures for the upcoming year. · As of October 31, 2013, the Company had $22.9 million in current assets and $2.6 million in current liabilities for total working capital of $20.3 million. Management believes that based on the Company’s financial condition at October 31, 2013, and its recent operating results, there are sufficient capital resources to fund its operations and potential future acquisitions for at least the next 12 months. Should the Company need to obtain additional funds for unexpected capital improvements or other expansion activities, based on its balance sheet and its history of profitability, the Company believes that it would be able to obtain financing to fund these expenditures. However, there can be no assurance any financing would be obtainable, or if obtained, would be on favorable terms or conditions. The Company is not a party to off-balance sheet arrangements and does not engage in trading activities involving non-exchange traded contracts. In addition, the Company has no financial guarantees or lease agreements or other arrangements that could trigger a requirement for an early payment or that could impact the value of the Company’s assets. Cables Unlimited, the subsidiary that the Company purchased in June 2011, was the guarantor of a second mortgage on the Cables Unlimited property in New York. Cables Unlimited was released as guarantor on the second mortgage, which was refinanced in January 2012. As a result, the Company deconsolidated the operations of its variable interest entity as of January 2012. As part of its business strategy, and because of its offshore manufacturing arrangements, the Company normally maintains a significant level of inventory. As described elsewhere in this Annual Report, one of the Company’s competitive advantages and strategies is to maintain customer satisfaction by having sufficient inventory on hand to fulfill most customer orders on short notice. Accordingly, the Company maintains a significant amount of inventory, which increases or decreases to reflect the Company’s sales and lead times for products. The Company continuously monitors its inventory levels and product costs. For inventory purchase pricing purposes, the Company may, however, increase its inventory levels from time to time to protect against anticipated future increases in raw material costs or to obtain volume discounts. The Company generated cash from operating activities of $5.5 million during the year ended October 31, 2013 primarily due to consolidated net income of $3.8 million. Consolidated net income for the period was reduced by non-cash charges of $2.4 million, including $1.2 million for the write-off of inventory mostly as a result of the disposition of the RF Wireless segmentoffset by the excess tax benefit from stock-based compensation expense of $717,000. For the fiscal year ended October 31, 2012, net cash provided by operating activities was $2.3 million. During the year ended October 31, 2013, net cash used in investing activities was $281,000 related to purchases of capital equipment primarily at Cables Unlimited. During the year ended October 31, 2012, net cash provided by investing activities was $3.5 million due to proceeds received by the Company upon the maturity of its certificate of deposit in the amount of $4.1 million offset by capital expenditures of $590,000. Net cash provided by financing activities during the year ended October 31, 2013 was $1.1 million primarily due toproceeds from the exercise of stock options in the amount of $2.8 million and $717,000 of excess tax benefits from stock option exercises offset by dividends paid of $2.3 million. For the year ended October 31, 2012, cash used in financing activities was $2.1 million primarily due to dividends paid during the year and the repurchase of common stock. The Company does not believe that inflation has had a material impact on its business or operations. 14  Results of Operations The following summarizes the key components of the results of operations for the fiscal years ended October 31, 2013 and 2012 (in thousands, except percentages): Net sales Cost of sales Gross profit Engineering expenses Selling and general expenses Operating income Other income - interest/dividends Income from continuing operations before provision for income taxes Provision for income taxes Income from continuing operations Income (loss) from discontinued operations, net of tax Consolidated net income 2013 % of Net Sales Amount 2012 % of Net Sales Amount $ 36,625 20,660 15,965 1,377 7,810 6,778 20 6,798 1,830 4,968 (1,140) 3,828 100% 56% 44% 4% 21% 19% 0% 19% 5% 14% -3% 11% $ 27,687 15,554 12,133 1,134 6,930 4,069 38 4,107 1,499 2,608 4 2,612 100% 56% 44% 4% 25% 15% 0% 15% 5% 9% 0% 9% Net sales for the year ended October 31, 2013 (“fiscal 2013”) increased by 32% or $8.9 million to $36.6 million from $27.7 million during the year ended October 31, 2012 (“fiscal 2012”) primarily due to a significant increase in net sales at the Company’s Cables Unlimited subsidiary. The Cables Unlimited segment generated $19.3 million of sales in fiscal 2013, an increase of $8.4 million or 77%, over the prior year comparable period, which contributed to most of the $8.9 million increase in the Company’s net sales during the period. The increase in net sales at Cables Unlimited is solely due to the release of a new custom cabling solution designed by Cables Unlimited for use with cell towers. Cables Unlimited commercially released its custom product line in April 2012 and generated $5.6 million sales during the remaining six months of fiscal 2012. For fiscal 2013, the sale of this new cabling solution generated $14.0 million of net sales for Cables Unlimited. However, net sales by Cables Unlimited of this new product are expected to decrease in the future as the need for this product decreases and, to a lesser extent, as competing products are developed and commercially released by other companies. Also contributing to the overall increase in the Company’s net sales was the Medical Cabling and Interconnector segment, which had revenues of $3.0 million during fiscal 2013, an increase of $444,000 or 17% over fiscal 2012. The increase in sales at this segment was due to increased sales to its existing customers. Net sales at the RF Connector and Cable Assembly segment during fiscal 2013 remained relatively unchanged at $14.3 million, increasing by $78,000 or 1%, compared to $14.2 million during fiscal 2012. The Company’s gross profit increased by $3.8 million or by 32% to $16.0 million in fiscal 2013 from $12.1 million in fiscal 2012 due to the increase in net sales. As a percentage of net sales, the Company’s overall gross profit remained consistent at 44% in both fiscal 2013 and fiscal 2012. Engineering expenses represent costs incurred related to the ongoing development of new products. Engineering expenses increased $243,000 or 21% in fiscal 2013 to $1.4 million compared to $1.1 million in fiscal 2012. The increase in engineering expenses was primarily attributable to increased salary expense in connection with efforts devoted to the development of new products. Selling and general expenses increased by $880,000 or 13% to $7.8 million during fiscal 2013 from $6.9 million in fiscal 2012. The increase in selling and general expenses was due to lump-sum bonus payments to senior management that were not made last year, increased sales commissions at the Cables Unlimited segment driven by the increase in net sales, an increase in wages and benefits related to an increase in pay rates and headcount and an increase in certain legal and consulting fees in connection with the termination and replacement of an employee. However, as a percentage of sales, selling and general expenses decreased to 21% in fiscal 2013 from 25% in fiscal 2012 as sales in fiscal 2013 increased by a higher percentage than the increase in selling and general expenses. 15  The provision for income taxes during fiscal 2013 was $1.8 million (or an effective tax rate of approximately 27%), compared to $1.5 million in fiscal 2012 (or an effective tax rate of approximately 36%). Despite the fact that the effective tax rate is significantly lower during fiscal 2013, the increase in the provision for tax is due to the significantly higher income from continuing operations before provision for income taxes. The reduction in the effective tax rate is attributable to the impact of the tax benefit to the Company of disqualifying dispositions of incentive stock options (ISO) during fiscal 2013, which resulted in a tax deduction to the Company. As a result of the Company’s increase in stock price during 2013, many employees exercised their ISOs and thereafter sold their shares, which resulted in a significant number of ISO disqualifying dispositions during the current year. Management believes that this trend may not continue into fiscal 2014 and, accordingly, anticipates that the effective tax rate likely will increase. As a result of the 32% increase in net sales and the proportional decrease in selling and general expenses (which decreased to 21% of net sales in fiscal 2013 from 25% of net sales in fiscal 2012), the Company generated income from continuing operations of $5.0 million in fiscal 2013 compared to income from continuing operations of $2.6 million in fiscal 2012. However, income from continuing operations in fiscal 2013 was reduced by the loss from the sale of the two RF Wireless divisions in fiscal 2013, which sales resulted in a loss from discontinued operations, net of tax, of $1.1 million (in fiscal 2012, these two RF Wireless divisions generated $4,000 of income from their discontinued operations, net of tax). Loss from discontinued operations, net of tax, during fiscal 2013 was $1.1 million compared to income from discontinued operations, net of tax, of $4,000 during fiscal 2012. During fiscal 2013, the Company sold the RF Neulink and RadioMobile divisions and accordingly, the results of these divisions are included in discontinued operations for all periods presented. In connection with the sale of RF Neulink, the Company recognized an inventory write-off of $297,000 during the third quarter of 2013. Additionally, in connection with the sale of RadioMobile, the Company recognized an inventory write-off of $471,000 during the fourth quarter of 2013. During fiscal 2012, the operations of RF Neulink and RadioMobile were close to break even. 16  RF INDUSTRIES, LTD. AND SUBSIDIARY Index To Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets October 31, 2013 and 2012 Consolidated Statements of Income Years Ended October 31, 2013 and 2012 Consolidated Statements of Equity Years Ended October 31, 2013 and 2012 Consolidated Statements of Cash Flows Years Ended October 31, 2013 and 2012 Notes to Consolidated Financial Statements * * * Page 15 16 – 17 18 19 20 21 – 31 17  Report of Independent Registered Public Accounting Firm To the Stockholders RF Industries, Ltd. We have audited the accompanying consolidated balance sheets of RF Industries, Ltd. and Subsidiary as of October 31, 2013 and 2012, and the related consolidated statements of income, equity and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of RF Industries, Ltd. and Subsidiary as of October 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ CohnReznick LLP San Diego, California January 17, 2014 18  RF INDUSTRIES, LTD. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS OCTOBER 31, 2013 AND 2012 (In thousands, except share and per share amounts) ASSETS CURRENT ASSETS Cash and cash equivalents Trade accounts receivable, net of allowance for doubtful accounts of $103 and $96 Inventories Other current assets Deferred tax assets TOTAL CURRENT ASSETS Property and equipment: Equipment and tooling Furniture and office equipment Less accumulated depreciation Total property and equipment Goodwill Amortizable intangible assets, net Non-amortizable intangible assets Note receivable from stockholder Other assets TOTAL ASSETS 2013 2012 $ 11,881 $ 5,492 3,160 5,995 1,552 322 22,910 2,500 759 3,259 2,206 1,053 3,076 1,407 410 67 30 5,167 6,984 640 761 19,044 2,349 655 3,004 1,800 1,204 3,076 1,627 410 67 35 $ 28,953 $ 25,463 19  RF INDUSTRIES, LTD. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS OCTOBER 31, 2013 AND 2012 (In thousands, except share and per share amounts) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable Accrued expenses Customer deposit Income taxes payable TOTAL CURRENT LIABILITIES Deferred tax liabilities Other long-term liabilities TOTAL LIABILITIES COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY Common stock - authorized 20,000,000 shares of $0.01 par value; 8,075,124 and 6,978,374 shares issued and outstanding at October 31, 2013 and 2012, respectively Additional paid-in capital Retained earnings TOTAL STOCKHOLDERS' EQUITY 2013 2012 $ 792 $ 1,429 1,741 51 - 2,584 950 - 3,534 81 15,706 9,632 25,419 2,102 - 610 4,141 1,077 15 5,233 70 12,007 8,153 20,230 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,953 $ 25,463 See Notes to Consolidated Financial Statements. 20  RF INDUSTRIES, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED OCTOBER 31, 2013 AND 2012 (In thousands, except share and per share amounts) Net sales Cost of sales Gross profit Operating expenses: Engineering Selling and general Totals Operating income Other income – interest/dividends Income from continuing operations before provision for income taxes Provision for income taxes Income from continuing operations Income (loss) from discontinued operations, net of tax Consolidated net income Net income attributable to noncontrolling interest 2013 2012 $ 36,625 20,660 15,965 $ 27,687 15,554 12,133 1,377 7,810 9,187 6,778 20 6,798 1,830 4,968 (1,140) 3,828 - 1,134 6,930 8,064 4,069 38 4,107 1,499 2,608 4 2,612 2 Net income attributable to RF Industries, Ltd. and Subsidiary $ 3,828 $ 2,610 $ $ 0.65 (0.15) 0.50 $ $ 0.59 (0.13) 0.46 $ $ 0.38 - 0.38 $ $ 0.34 - 0.34 7,600,029 8,455,631 6,908,890 7,680,743 Earnings per share Basic Continuing operations Discontinued operations Net income per share Earnings per share Diluted Continuing operations Discontinued operations Net income per share Weighted average shares outstanding Basic Diluted See Notes to Consolidated Financial Statements. 21  RF INDUSTRIES, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF EQUITY YEARS ENDED OCTOBER 31, 2013 AND 2012 (In thousands, except share amounts) Balance, November 1, 2011 Common Stock Shares 7,110,507 Amount $ 71 Additional Paid-In Capital $ 11,382 Retained Earnings $ 8,011 Industries, Ltd and Subsidiary $ 19,464 Noncontrolling Interest $ 214 Total Equity $ 19,678 Exercise of stock options 192,738 2 Excess tax benefit from exercise of stock options Stock-based compensation expense Dividends - - - Treasury stock purchased and retired (324,871) Deconsoliation of VIE Net income Balance, October 31, 2012 Exercise of stock options Excess tax benefit from exercise of stock options Stock-based compensation expense Dividends Net income - - 6,978,374 1,096,750 - - - - - - - - - 70 11 - - - - 352 87 264 - - - 354 87 264 (1,387) (1,387) (3) (78) (1,062) (1,143) - - - - - 354 87 264 (1,387) (1,143) - - 12,007 2,750 717 232 - - (19) (19) (216) (235) 2,610 8,153 - - - 2,610 20,230 2,761 717 232 (2,349) (2,349) 3,828 3,828 2 2,612 - - - - - - 20,230 2,761 717 232 (2,349) 3,828 Balance, October 31, 2013 8,075,124 $ 81 $ 15,706 $ 9,632 $ 25,419 $ - $ 25,419 See Notes to Consolidated Financial Statements. 22  RF INDUSTRIES, LTD. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED OCTOBER 31, 2013 AND 2012 (In thousands) OPERATING ACTIVITIES: Consolidated net income Adjustments to reconcile consolidated net income to net cash provided by operating activities: Bad debt expense Accounts receivable write-off Depreciation and amortization Inventory write-downs Stock-based compensation expense Deferred income taxes Excess tax benefit from stock-based compensation Changes in operating assets and liabilities (net of effects of deconsolidation of VIE on January 25, 2012): Restricted cash Trade accounts receivable Inventories Other current assets Other long-term assets Accounts payable Customer deposit Income taxes prepaid Accrued expenses Other long-term liabilities Net cash provided by operating activities INVESTING ACTIVITIES: Maturity of certificates of deposit Capital expenditures Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Proceeds from exercise of stock options Purchases of treasury stock Excess tax benefit from exercise of stock options Principal payments on long-term debt Dividends paid Net cash provided by (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 2013 2012 $ 3,828 $ 2,612 29 44 652 1,170 232 312 (717) - 1,934 (181) (912) 5 (637) 51 107 (361) (15) 5,541 - (281) (281) 2,761 - 717 - (2,349) 1,129 6,389 5,492 24 - 600 - 264 (145) (87) 5 (2,585) (795) (152) (2) 908 - 1,269 536 (117) 2,335 4,095 (590) 3,505 354 (1,143) 87 (20) (1,387) (2,109) 3,731 1,761 $ 11,881 $ 5,492 Supplemental cash flow information – income taxes paid $ 1,845 $ 955 Supplemental schedule of noncash investing and financing activities: Retirement of treasury stock Write off of fully depreciated property and equipment Assets and liabilities of VIE as of January 25, 2012: Restricted cash Other current assets Property and equipment, net Other assets, net Mortgages payable Net equity See Notes to Consolidated Financial Statements. 23  $ - $ 26 $ $ 1,143 1,109 $ - $ - $ - - $ $ - $ - $ $ $ $ $ $ 62 24 1,468 70 1,408 215 RF INDUSTRIES, LTD. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 –Business activities and summary of significant accounting policies Business activities The Company’s business is comprised of the design, manufacture and/or sale of communications equipment primarily to the radio and other professional communications related industries. As of October 31, 2013, the Company conducted its operations through four related business divisions: (i) Connector and Cable Assembly Division is engaged in the design, manufacture and distribution of coaxial connectors and cable assemblies used primarily in radio and other professional communications applications; (ii) Aviel Division is engaged in the design, manufacture and sales of radio frequency, microwave and specialized connectors and connector assemblies for aerospace, original electronics manufacturers and military electronics applications; (iii) Bioconnect Division is engaged in the design, manufacture and sales of cable interconnects for medical monitoring applications; and (iv) the Cables Unlimited Division manufactures custom and standard cable assemblies, adapters, and electromechanical wiring harnesses for communication, computer, LAN, automotive and medical equipment. During 2013, the Company sold and discontinued its operations of the RF Neulink and RadioMobile divisions (see Note 2). In addition, effective November 1, 2013, the Oddcables Division was integrated with the Connector and Cable Division. Use of estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results may differ from those estimates. Principles of consolidation The accompanying consolidated financial statements include the accounts of RF Industries, Ltd. and its wholly owned subsidiary, Cables Unlimited, Inc. (“Cables Unlimited”), collectively (the “Company”). K&K Unlimited (“K&K”), a variable interest entity (“VIE”) of the Company was deconsolidated in the first quarter of 2012. All intercompany balances and transactions have been eliminated in consolidation. Cash equivalents The Company considers all highly-liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Revenue recognition Four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and determinable; and (4) collectability is reasonably assured. The Company recognizes revenue from product sales after purchase orders are received which contain a fixed price and the products are shipped. Most of the Company’s products are sold to continuing customers with established credit histories. Inventories Inventories, consisting of materials, labor and manufacturing overhead, are stated at the lower of cost or market. Cost has been determined using the weighted average cost method. 24     Property and equipment Equipment, tooling and furniture are recorded at cost and depreciated over their estimated useful lives (generally 3 to 5 years) using the straight-line method. Expenditures for repairs and maintenance are charged to operations in the period incurred.  Variable interest entity Management analyzes if the Company has any variable interests in VIE’s. This analysis includes a qualitative review based on an evaluation of the design of the entity, its organizational structure, including decision making ability and financial agreements, as well as a quantitative review. Accounting principles generally accepted in the United States of America require a reporting entity to consolidate a VIE when the reporting entity has a variable interest that provides it with a controlling financial interest in the VIE. The entity that consolidates a VIE is referred to as the primary beneficiary of the VIE. See Note 11 for further discussion. Goodwill Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. Goodwill is not amortized, but is subject to impairment analysis at least once annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit’s carrying amount is greater than its fair value. At October 31, 2013, the Company performed a qualitative assessment of factors to determine whether it was necessary to perform impairment testing. Based on the results of the work performed, the Company concluded that no impairment loss was warranted at October 31, 2013. Qualitative factors considered in this assessment include industry and market considerations, overall financial performance and other relevant events, management expertise and stability at key positions. Additional impairment analyses at future dates may be performed to determine if indicators of impairment are present, and if so, such amount will be determined and the associated charge will be recorded to the Consolidated Statement of Income. On June 15, 2011, the Company completed its acquisition of Cables Unlimited. Goodwill related to this acquisition is included within the Cables Unlimited reporting unit. As of October 31, 2013, the goodwill balance related solely to the Cables Unlimited acquisition. No goodwill impairment occurred in 2013 or 2012. Long-lived assets The Company assesses potential impairments to its long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. An impairment loss is recognized when the undiscounted cash flows expected to be generated by an asset (or group of assets) is less than its carrying amount. Any required impairment loss is measured as the amount by which the assets carrying value exceeds its fair value, and is recorded as a reduction in the carrying value of the related asset and a charge to operations. 25  Intangible assets Intangible assets consist of the following as of October 31 (in thousands): Amortizable intangible assets: Non-compete agreements (estimated life 5 years) Accumulated amortization Customer relationships (estimated life 9.6 years) Accumulated amortization 2013 2012 $ 200 (95) 105 $ 200 (55) 145 1,730 (428) 1,302 1,730 (248) 1,482 Totals $ 1,407 $ 1,627 Non-amortizable intangible assets: Trademarks $ 410 $ 410 Amortization expense for the years ended October 31, 2013 and 2012 was $220,000 and $239,000, respectively. Estimated amortization expense related to finite lived intangible assets are as follows (in thousands): Year ending October 31, 2014 2015 2016 2017 2018 Thereafter Total Advertising Amount $ 220 220 206 180 180 401 1,407 $ The Company expenses the cost of advertising and promotions as incurred. Advertising costs charged to operations were approximately $195,000 and $242,000 in 2013 and 2012, respectively. Research and development Research and development costs are expensed as incurred. The Company’s research and development expenses relate to its engineering activities, which consists of the design and development of new products for specific customers, as well as the design and engineering of new or redesigned products for the industry in general. During the years ended October 31, 2013 and 2012, the Company recognized $1.4 million and $1.1 million in engineering expenses, respectively. 26  Income taxes The Company accounts for income taxes under the asset and liability method, based on the income tax laws and rates in the jurisdictions in which operations are conducted and income is earned. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Developing the provision for income taxes requires significant judgment and expertise in federal, international and state income tax laws, regulations and strategies, including the determination of deferred tax assets and liabilities and, if necessary, any valuation allowances that may be required for deferred tax assets. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Management’s judgments and tax strategies are subject to audit by various taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Stock options For stock option grants to employees, the Company recognizes compensation expense based on the estimated fair value of the options at the date of grant. Stock-based employee compensation expense is recognized on a straight-line basis over the requisite service period. The Company issues previously unissued common shares upon the exercise of stock options. For the fiscal years ended October 31, 2013 and 2012, charges related to stock-based compensation amounted to approximately $232,000 and $264,000, respectively. For the fiscal years ended October 31, 2013 and 2012, stock-based compensation classified in cost of sales amounted to $58,000 and $53,000 and stock-based compensation classified in selling, general and engineering expense amounted to $174,000 and $211,000, respectively. Earnings per share Basic earnings per share is calculated by dividing net income applicable to common stockholders by the weighted average number of common shares outstanding during the period. The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, principally those issuable upon the exercise of stock options, were issued and the treasury stock method had been applied during the period. The greatest number of shares potentially issuable by the Company upon the exercise of stock options in any period for the years ended October 31, 2013 and 2012, that were not included in the computation because they were anti-dilutive, totaled 21,177 and 755,568, respectively. The following table summarizes the computation of basic and diluted earnings per share: Numerators: Consolidated net income (A) 2013 2012 $ 3,828,000 $ 2,612,000 Denominators: Weighted average shares outstanding for basic earnings per share (B) Add effects of potentially dilutive securities - assumed exercise of stock options 7,600,029 855,602 6,908,890 771,853 Weighted average shares outstanding for diluted earnings per share (C) 8,455,631 7,680,743 Basic earnings per share (A)/(B) $ 0.50 $ 0.38 Diluted earnings per share (A)/(C) $ 0.46 $ 0.34 27  Reclassification Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported consolidated net income. Recent accounting standards In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. The Company intends to adopt this guidance at the beginning of its first quarter of fiscal year 2015, and is currently evaluating the impact on its consolidated financial statements and disclosures. Note 2 - Discontinued operations During 2013, the Company sold its RF Neulink and RadioMobile divisions, which together use to comprise the Company’s RF Wireless segment, as discussed below. As part of the RF Wireless segment, RF Neulink was engaged in the sale of wireless data products, such as transmitter and receiver modules and standard or smart programmable modems, for use in certain high-speed wireless connection markets, and RadioMobile was engaged in the sale of complete hardware and software solutions for wireless mobile data management applications. Given the Company’s focus on the higher growth and higher margin components of its business, the Company decided to sell RF Neulink and RadioMobile in order to reduce operating costs and focus its resources on more profitable divisions. Accordingly, during 2013, the RF Neulink and RadioMobile divisions had met the criteria to be accounted for as discontinued operations. The operations of both RF Neulink and RadioMobile have been reclassified from the ongoing operations of the Company as a result of the sale of these businesses, and the Company will not have any continuing involvement in the operations of RF Neulink and RadioMobile after the disposal transactions, as detailed in the subsequent paragraphs. Effective July 31, 2013, the Company closed an Asset Purchase Agreement (the “RF Neulink Agreement”) with Raveon Technologies Corporation (“Raveon”), whereby Raveon acquired the assets related to the RF Neulink business, primarily consisting of inventory, certain intellectual property and licenses, customer lists and trademarks. Pursuant to the RF Neulink Agreement, no purchase price was paid at the closing. Rather, the purchase price for the RF Neulink business will consist of cash payments made by Raveon to the Company under the following circumstances: (i) for each RF Neulink inventory item that Raveon sells, Raveon is required to pay the Company the assigned value of that inventory item. This arrangement continues until the earlier of three years from the closing date or the date all inventory items are sold; and (ii) Raveon is required to pay the Company a royalty based on Raveon’s use of RF Neulink’s tradename or trademark, its customer list or its intellectual property. The royalty, which ranges from 5% to 10% of Raveon’s sales of such RF Neulink-related products, may not exceed $450,000 in the aggregate, and will not be payable on sales of inventory items. For the year ended October 31, 2013, the Company recognized approximately $20,000 of royalty income, which amount has been included within discontinued operations. Effective October 29, 2013, the Company closed an Asset Purchase Agreement (the “RadioMobile Agreement”) with RadioMobile, Inc. (“Purchaser”), a new company formed by the former manager of the Company’s RadioMobile division, whereby the Purchaser acquired the assets related to the RadioMobile business, primarily consisting of inventory, certain equipment, certain intellectual property and licenses, customer lists and trademarks, in return for the Purchaser’s three-year agreement to pay the Company 10.0% of all net revenues up to $2.0 million. Additionally, as part of the RadioMobile Agreement, all former RadioMobile employees were terminated by the Company and re-hired by the Purchaser, and the Company permitted Purchaser to continue to use its office space, rent-free, through the end of the lease, which expires on March 31, 2014. There is no obligation from Purchaser if inventory is never sold. Other closing costs amounted to approximately $0.2 million. For the year ended October 31, 2013, the Company has not recognized any royalty income in connection with the sale of the RadioMobile division. 28  The following summarized financial information related to the RF Neulink and RadioMobile divisions is segregated from continuing operations and reported as discontinued operations for the years ended October 31, 2013 and 2012 (in thousands): Net sales Cost of sales Gross profit (loss) Operating expenses Operating income (loss) Provision (benefit) for income taxes Income (loss) from discontinued operations, net of tax 2013 2012 $ 1,230 1,609 (379) 1,400 (1,779) (639) (1,140) $ $ 2,545 1,444 1,101 1,095 6 2 $ 4 Given the nature of the inventory at RF Neulink and RadioMobile, the Company assessed that the inventory had a fair value of zero, and recorded a charge of $768,000 in the aggregate during 2013, which has been classified within discontinued operations, in connection with the sales of these divisions. The inventory at both RF Neulink and RadioMobile is highly specialized and not easily transferrable to other products. Additionally, certain components require programming and engineering expertise, which is unique to these products, in order to become fully functional. Note 3 - Concentrations of credit risk and sales to major customers Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with high-credit quality financial institutions. At October 31, 2013, the Company had cash and cash equivalent balances in excess of federally insured limits in the amount of approximately $12.0 million. Accounts receivable are financial instruments that also expose the Company to concentration of credit risk. Such exposure is limited by the large number of customers comprising the Company's customer base and their dispersion across different geographic areas. In addition, the Company routinely assesses the financial strength of its customers and maintains an allowance for doubtful accounts that management believes will adequately provide for credit losses. Sales to one customer represented 50% and 33% of total sales in 2013 and 2012, respectively, and 27% and 49% of total accounts receivable as of October 31, 2013 and 2012, respectively. Although this customer has been an on-going major customer of the Company continuously during the past 15 years, the written agreements with this customer do not have any minimum purchase obligations and the customer could stop buying the Company’s products at any time and for any reason. A reduction, delay or cancellation of orders from this customer or the loss of this customer could significantly reduce the Company’s revenues and profits. Sales of one product line accounted for $14.0 million or 38% of total sales and $5.6 million or 18% of total salesto a single customer for the years ended October 31, 2013 and 2012, respectively. The Company sells this product line to this customer under a written purchase order when this customer places orders. This customer does not have any minimum purchase obligations and could stop buying the product at any time. A reduction, delay or cancellation of orders for this product or the loss of this customer could significantly reduce the Company’s revenues and profits. 29  Note 4 - Inventories and major vendors Inventories consist of the following as of October 31 (in thousands): Raw materials and supplies Work in process Finished goods Totals 2013 2012 $ 1,913 15 4,067 $ 2,519 3 4,462 $ 5,995 $ 6,984 Purchases of inventory from two major vendors during2013 represented 20% and 17% of total inventory purchases compared to two major vendors who represented 20% and 14% of total inventory purchases in 2012. The Company has arrangements with these vendors to purchase product based on purchase orders periodically issued by the Company. Note 5 - Accrued expenses and other long-term liabilities Accrued expenses consist of the following as of October 31 (in thousands): Wages payable Accrued receipts Other current liabilities Totals 2013 2012 $ 1,188 376 177 $ 1,032 864 206 $ 1,741 $ 2,102 Accrued receipts represent purchased inventory for which invoices have not been received. Other long-term liabilities of $15,000 as of October 31, 2012 consist of deferred lease liabilities. Deferred lease liabilities represent the excess of recognized rent expense over scheduled lease payments. Note 6 - Segment information The Company aggregates operating divisions into operating segments which have similar economic characteristics and divisions 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; (5) if applicable, the nature of the regulatory environment. The Company has three segments - RF Connector and Cable Assembly, Medical Cabling and Interconnector, and Cables Unlimited based upon this evaluation. The RF Connector and Cable Assembly segment is comprised of two divisions, whereas the Cables Unlimited segment and the Medical Cabling and Interconnector segment are each comprised of one division. The three divisions that meet the quantitative thresholds for segment reporting are Connector and Cable Assembly, Cables Unlimited, and Bioconnect. The other division aggregated into the RF Connector and Cable Assembly segment has similar products that are marketed to their respective customer base and production and product development processes that are similar in nature. The specific customers are different for each division; however, there is some overlapping of product sales to them. The methods used to distribute products are similar within each division aggregated. Management identifies the Company’s 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 Company aggregates the Connector and 30  Cable Assembly and Aviel divisions into the RF Connector and Cable Assembly segment, while the Cables Unlimited division constitutes the Cables Unlimited segment. The Bioconnect Division comprises the Medical Cabling and Interconnector segment. As reviewed by the Company’s chief operating decision maker, the Company evaluates the performance of each segment based on income or loss before income taxes. The Company charges depreciation and amortization directly to each division within the segment. Effective beginning with the second quarter of 2013, the Company changed its measurement of segment profit or loss whereby certain corporate costs, previously attributed to the RF Connector and Cable Assembly segment, have been allocated to each of the segments. Certain amounts in the 2012 segment tables have been reclassified to conform to the 2013 presentation to reflect all segment information on a comparable basis. Additionally, with the sale and discontinuation of the RF Neulink and RadioMobile divisions during 2013, the segment information has been adjusted as these divisions are reflected within discontinued operations. Accounts receivable, inventory, property and equipment, goodwill and intangible assets are the only assets identified by segment. Except as discussed above, the accounting policies for segment reporting are the same as for the Company as a whole. Substantially all of the Company’s operations are conducted in the United States; however, the Company derives a portion of its revenue from export sales. The Company attributes sales to geographic areas based on the location of the customers. The following table presents the sales of the Company by geographic area for the years ended October 31, 2013 and 2012 (in thousands): United States Foreign Countries: Canada Israel Mexico All Other 2013 2012 $ 35,115 $ 26,076 638 289 413 170 1,510 830 257 397 127 1,611 Totals $ 36,625 $ 27,687 Net sales, income from continuing operations before provision for income taxes and other related segment information as of October 31, 2013 and for the years then ended are as follows (in thousands): 2013 Net sales Income from continuing operations before provision for income taxes Depreciation and amortization Total assets 2012 Net sales Income from continuing operations before provision for income taxes Depreciation and amortization Total assets RF Connectors and Cable Assembly $ 14,254 Cables Unlimited $ 19,329 Medical Cabling and Interconnector $ 3,042 Corporate $ - Total $ 36,625 2,105 232 6,463 3,964 357 7,715 723 44 813 6 19 13,962 6,798 652 28,953 $ 14,176 $ 10,913 $ 2,598 $ - $ 27,687 2,140 216 7,072 1,399 340 9,409 553 40 784 15 4 8,198 4,107 600 25,463 31  Note 7 - Income taxes The provision for income taxes for the fiscal years ended October 31, 2013 and 2012 consists of the following (in thousands): Current: Federal State Deferred: Federal State 2013 2012 $ 1,365 153 1,518 $ 1,329 315 1,644 285 27 312 (142) (3) (145) $ 1,830 $ 1,499 Income tax at the federal statutory rate is reconciled to the Company’s actual net provision for income taxes as follows (in thousands, except percentages): Income tax at Federal statutory rate State tax provision, net of Federal tax benefit Nondeductible differences: ISO stock options, net Qualified domestic production activities deduction Other Uncertain tax positions R&D credit Other Provision for income taxes \ 2013 % of Pretax Income 34.0% 3.4% -7.4% -1.3% 0.6% - -1.3% -1.1% 26.9% Amount $ 2,315 232 (509) (87) 40 - (87) (74) 1,830 $ 2012 % of Pretax Income 34.0% 5.6% 0.2% -1.1% 0.9% -1.9% - -1.2% 36.5% Amount $ 1,396 230 7 (46) 36 (79) - (45) 1,499 $ 32  The Company’s total deferred tax assets and deferred tax liabilities at October 31, 2013 and 2012 are as follows (in thousands): Current Assets: Allowance for doubtful accounts Inventory obsolescence Accrued vacation State income taxes Stock based compensation awards Section 263A costs Other Total current assets Long-Term Assets: Amortization / intangible assets Long-Term Liabilities: Amortization / intangible assets Depreciation / equipment and furnishings Net long-term deferred tax liabilities 2013 2012 40 $ - 144 27 - 104 7 322 90 (708) (332) (950) $ 37 66 154 118 236 129 21 761 103 (799) (381) (1,077) Total deferred tax liabilities $ (628) $ (316) A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): Balance at November 1, 2011 Lapse of statute of limitations - tax positions in prior period Balance at October 31, 2012 Lapse of statute of limitations - tax positions in prior period Balance at October 31, 2013 $ 79 (79) - - $ - The Company had no gross liability for unrecognized tax benefits at October 31, 2013 and 2012. During the year ended October 31, 2012, a reduction of $19,000 of interest was a result of the expiration of the statute of limitations. As of October 31, 2013 and 2012, no accrued interest or penalties were included in other long-term liabilities on the balance sheet. The Company is currently not undergoing any tax examinations. Tax fiscal years ended October 31, 2009 through October 31, 2013 remain subject to examination. Note 8- Stock options Incentive and non-qualified stock option plans In May 2000, the Board of Directors adopted the Company’s 2000 Stock Option Plan (the “2000 Option Plan”). Under the 2000 Option Plan, the Company was authorized to grant options to purchase shares of common stock to officers, directors, key employees and others providing services to the Company. The 2000 Option Plan expired in May2010. At the time of expiration, the 2000 Plan had authorized the Company to grant options to 33  purchase a total of 1,320,000 shares. Upon the expiration of the 2000 Plan, the Company was no longer able to grant any stock options to its employees, officers and directors. Accordingly, as of October 31, 2013, no shares are available for future grant under the 2000 Option Plan. On March 9, 2010, the Company’s Board of Directors adopted the RF Industries, Ltd. 2010 Stock Incentive Plan (the “2010 Plan”). In June 2010, the Company’s stockholders approved the 2010 Plan by vote as required by the NASDAQ Capital Market listing standards. An aggregate of 1,000,000 shares of common stock was set aside and reserved for issuance under the 2010 Plan. As of October 31, 2013, 439,750 shares of common stock were remaining for future grants of stock options under the 2010 Plan. Additional disclosures related to stock option plans The fair value of each option granted in 2013 and 2012 was estimated on the grant date using the Black- Scholes option pricing model with the following assumptions: Weighted average volatility Expected dividends Expected term (in years) Risk-free interest rate Weighted average fair value of options granted during the year Weighted average fair value of options vested during the year 2013 42.9% 4.2% 3.5 0.36% $ 1.12 $ 1.06 2012 57.7% 3.0% - 5.0% 3.5 - 4.2 0.3%-0.4% $ 1.19 $ 1.02 Expected volatilities are based on historical volatility of the Company’s stock price and other factors. The Company used the historical method to calculate the expected life of the 2013 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. Additional information regarding all of the Company's outstanding stock options at October 31, 2013 and 2012 and changes in outstanding stock options in 2013 and 2012 follows: Options outstanding at beginning of year Options granted Options exercised Options forfeited Options outstanding at end of year 2013 2012 Shares or Price Per Share 2,004,781 176,267 (1,096,750) (96,083) 988,215 Weighted Average Exercise Price $ 2.25 $ 4.80 $ 2.52 $ 4.01 $ 2.24 Shares or Price Per Share 2,099,672 114,815 (192,738) (16,968) 2,004,781 Weighted Average Exercise Price $ 2.13 $ 3.86 $ 1.82 $ 3.05 $ 2.25 Options exercisable at end of year 743,169 $ 1.96 1,650,289 $ 2.16 Options vested and expected to vest at end of year 972,015 $ 2.21 1,987,333 $ 2.25 Option price range at end of year $0.05 - $6.42 Aggregate intrinsic value of options exercised during year $ 4,137,000 $0.05 - $4.12 $ 397,000 Weighted average remaining contractual life of options outstanding as of October 31, 2013: 3.11 years Weighted average remaining contractual life of options exercisable as of October 31, 2013: 2.67years 34  Weighted average remaining contractual life of options vested and expected to vest as of October 31, 2013: 3.08 years Aggregate intrinsic value of options outstanding at October 31, 2013: $6.9 million Aggregate intrinsic value of options exercisable at October 31, 2013: $5.4 million Aggregate intrinsic value of options vested and expected to vest at October 31, 2013: $5.4 million As of October 31, 2013, $208,000 of expense with respect to nonvested share-based arrangements has yet to be recognized which is expected to be recognized over a weighted average period of 3.26 years. Note 9- Retirement plan The Company sponsors a deferred savings and profit sharing plan under Section 401(k) of the Internal Revenue Code. Substantially all of its employees may participate in and make voluntary contributions to this defined contribution plan after they meet certain eligibility requirements. The Board of Directors of the Company can authorize discretionary contributions by the Company. The Company did not make contributions to the plan in 2013 and 2012. Note 10 - Related party transactions The note receivable from stockholder of $67,000 at October 31, 2013 and 2012 is due from the Chief Executive Officer of the Company, bears interest at 6%, payable annually, and has no specific due date. The note is collateralized by personal property owned by the Chief Executive Officer. A former director of the Company is an employee of a public relations firm used by the Company. For the fiscal years ended October 31, 2013 and 2012, the Company paid the firm $6,000 and $43,000, respectively, for services rendered by that firm. The Company no longer utilizes the services of this firm. Note 11 - Variable interest entity The Company’s former variable interest entity, K&K Unlimited, LLC (“K&K”), was formed on August 14, 2009 for the purpose of establishing a separation of legal ownership of the building where Cables Unlimited conducts its operations. Cables Unlimited’s former sole stockholder is the sole member of K&K. Cables Unlimited was deemed the primary beneficiary of K&K even though it has no direct ownership in K&K as it had the power to direct the activities of K&K that most significantly impacted its economic performance and provided significant financial support through a lease agreement between Cables Unlimited and K&K. Cables Unlimited was also guarantor of K&K’s mortgage notes payable to Teacher’s Federal Credit Union and Small Business Administration establishing a direct obligation to absorb any losses of K&K. In November 2011 and on January 25, 2012 the mortgages noted above were repaid and refinanced, respectively, at which time Cables Unlimited was released as a guarantor. Based on these factors, it was determined that Cables Unlimited was no longer the primary beneficiary and the operations of K&K were deconsolidated as of January 25, 2012. As a result, the Company’s consolidated balance sheet at October 31, 2012 reflects a reduction in total assets of approximately $1.6 million with a reduction in liabilities of approximately $1.4 million. The effect of the deconsolidation did not have a material impact on the Company’s consolidated results of operations for the year ended October 31, 2012. There were no variable interest entities as of October 31, 2013. Note 12-Dividends declaration The Company paid a total of $2.3 million of dividends during the fiscal year ended October 31, 2013. The dividends consisted of a $0.10 dividend, a special dividend of $0.07 and two quarterly dividend payments of $0.07 per share. The Company paid four quarterly dividends of $0.05 per share for a total of $1.4 million during the fiscal year ended October 31, 2012. 35  Note 13 - Commitments The Company leases its facilities in San Diego, California, Yaphank, New York and Las Vegas, Nevada under non-cancelable operating leases. The Company amended its San Diego lease in March 2009 extending the term of the lease and again in September 2009 adding additional square feet. The amended lease expires in March 2014 and requires minimum annual rental payments that are subject to fixed annual increases. The minimum annual rentals under this lease are being charged to expense on the straight-line basis over the lease term. Deferred rents, included in accrued expenses and other long-term liabilities, were $15,000 as of October 31, 2013 and $54,000 as of October 31, 2012. The San Diego lease also requires the payment of the Company's pro rata share of the real estate taxes and insurance, maintenance and other operating expenses related to the facilities. The Company also leases certain automobiles under operating leases which expire at various dates through June 2015. Rent expense under all operating leases totaled approximately $652,000 and $624,000 in 2013 and 2012, respectively. Minimum lease payments under these non-cancelable operating leases in each of the years subsequent to October 31, 2013 are as follows (in thousands): Year ending October 31, 2014 2015 2016 2017 Total Amount $ $ 388 197 116 2 703 Note 14 - Legal proceedings On May 24, 2013, a former employee of the Company filed a complaint with the San Diego, California office of the U.S. Department of Labor-OSHA alleging retaliatory employment practices in violation of the whistleblower provisions of the Sarbanes-Oxley Act. The complaint alleges that the former employee was terminated in November 2012 in retaliation for making disclosures relating to fraudulent accounting practices and lack of compliance with U.S. GAAP; violations of multiple Securities and Exchange Commission rules and regulations; and fraud against the shareholders. The complaint does not seek any specified amount of damages, but does seek various forms of relief, including the following: Reinstatement of the former employee’s employment, or in the alternative, an award for lost future wages, benefits and pension; back pay and bonuses; compensatory monetary damages in an amount to be determined; reasonable attorney’s fees; and all costs of litigation.The Company disputes the employee’s claims. The lawsuit is currently on-going and is being defended by the Company’s insurance carrier’s appointed law firm under the Company’s employment practices liability insurance policy. Note 15- Subsequent events At its December5, 2013 meeting, the Board of Directors of the Company declared a quarterly cash dividend of $0.07 per share to be paid on January15, 2014 to stockholders of record on December 31, 2013. 36  Board of Directors Corporate Staff Service Providers Richard “Joe” LaFay President/General Manager RF Connectors Division Conrad Neri COO Bioconnect Division RF Cable Assembly Division Robert Macias VP Product Assurance RF Industries President/General Manager Aviel Electronics division Manny Gutsche VP Sales and Marketing RF Industries Angela Sutton Human Resources RF Industries Marvin H. Fink Chairman Howard F. Hill Director, President and CEO Darren Clark Director President of Cables Unlimited Division William L. Reynolds Director Joseph Benoit Director Executive Officers Howard F. Hill President and CEO Darren Clark President of Cables Unlimited Division Mark Turfler CFO and Corporate Secretary Independent Auditors CohnReznick LLP 9255 Towne Centre Dr, Ste 250 San Diego, CA 92121 Securities Counsel TroyGould PC 1801 Century Park East, 16th Floor Los Angeles, CA 90067 Transfer Agent and Registrar Continental Stock Transfer & Trust Co. 17 Battery Place South, 8th Floor New York, NY 10004 Public Relations Jacobs Consulting Corporation 1622 S. Durango Ave Los Angeles, CA 90065 Common Stock NASDAQ Global Market Exchange Symbol: RFIL Annual Meeting September 5, 2014 10 a.m. PDST Offices of TroyGould PC 1801 Century Park East, 16th Floor Los Angeles, CA 90067 Annual Reports, 10Ks, 10Qs and news releases are available at www.rfindustries.com, rfi@rfindustries.com or by contacting Howard Hill at (858) 549-6340 or (800) 233-1728 RF IndustRIes, Ltd.7610 MiraMar roadSan diego, Ca 92126(858) 549-6340 or (800) 233-1728fax: (858) 549-6345eMail: rfi@rfindustries.comweb: www.rfindustries.com

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