[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements and management's analysis, revealing a significant decline in profitability and sales [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited financial statements for the nine months ended July 31, 2019, indicate a significant net loss due to declining sales [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet reflects decreased total assets and shareholders' equity, contrasted by a significant rise in total liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | July 31, 2019 | October 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$41,518** | **$43,098** | | Total Current Assets | $30,351 | $31,047 | | **Total Liabilities** | **$19,662** | **$16,288** | | Total Current Liabilities | $14,136 | $7,028 | | **Total Shareholders' Equity** | **$21,856** | **$26,811** | - The increase in current liabilities is significantly impacted by the reclassification of **$5.65 million** of 'Note payable to bank' to current, as the revolver matures in June 2020[12](index=12&type=chunk)[49](index=49&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company's performance shifted from a net income to a significant net loss, driven by a sharp decline in net sales Key Performance Indicators (in thousands) | Metric | Q3 2019 | Q3 2018 | 9M 2019 | 9M 2018 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $17,367 | $23,117 | $53,075 | $67,555 | | **Gross Profit** | $4,491 | $7,027 | $13,363 | $21,212 | | **Income (Loss) from Operations** | ($937) | $660 | ($4,633) | $1,887 | | **Net Income (Loss)** | **($1,085)** | **$438** | **($5,013)** | **$1,419** | | **EPS (Basic and Diluted)** | **($0.15)** | **$0.06** | **($0.68)** | **$0.19** | [Condensed Consolidated Statement of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statement%20of%20Shareholders'%20Equity) Shareholders' equity declined substantially, primarily as a direct result of the net loss incurred during the period Changes in Shareholders' Equity (Nine Months Ended July 31, 2019) | Description | Amount | | :--- | :--- | | Balance at October 31, 2018 | $26,810,837 | | Adoption of ASC 606 | $61,763 | | Share-based compensation, net | ($1,282) | | Repurchase and retirement of common stock | ($1,333) | | Net loss | ($5,012,739) | | **Balance at July 31, 2019** | **$21,856,426** | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash from operations turned negative due to the net loss, though the overall cash position improved via financing activities Net Cash Flow Summary (Nine Months Ended July 31, in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | ($47) | $1,046 | | Net cash used in investing activities | ($541) | ($545) | | Net cash provided by (used in) financing activities | $1,510 | ($355) | | **Net increase in cash** | **$922** | **$146** | [Condensed Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the adoption of Topic 606, debt covenant issues, and significant customer concentration - The company adopted the new revenue recognition standard, **Topic 606**, on November 1, 2018, using the modified retrospective method, which did not materially impact results[22](index=22&type=chunk)[23](index=23&type=chunk) - The company's credit facilities require compliance with financial covenants, but as of July 31, 2019, the **current ratio was 2.1 to 1.0, below the required 3.0 to 1.0**, leading to a subsequent loan modification[48](index=48&type=chunk)[49](index=49&type=chunk)[156](index=156&type=chunk) - **Significant customer concentration** exists, with two customers accounting for **14.5% and 14.1%** of consolidated net sales in the first nine months of fiscal 2019[57](index=57&type=chunk) Net Sales by Geography (Nine Months Ended July 31) | Region | 2019 | 2018 | | :--- | :--- | :--- | | United States | $43,460,603 | $58,013,199 | | Outside the United States | $9,614,308 | $9,542,114 | | **Total Net Sales** | **$53,074,911** | **$67,555,313** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the sales decline to non-recurring prior-year orders and discusses cost controls and debt covenant challenges [Results of Operations](index=19&type=section&id=Results%20of%20Operations) Operational results worsened significantly due to the non-recurrence of large domestic customer orders from the previous year Financial Performance Summary (in thousands) | Metric | Q3 2019 | Q3 2018 | % Change | 9M 2019 | 9M 2018 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net sales | $17,367 | $23,117 | (24.9)% | $53,075 | $67,555 | (21.4)% | | Gross profit | $4,491 | $7,027 | (36.1)% | $13,363 | $21,212 | (37.0)% | | SG&A expenses | $5,418 | $6,370 | (14.9)% | $17,969 | $19,329 | (7.0)% | | Net income (loss) | ($1,085) | $438 | (347.6)% | ($5,013) | $1,419 | (453.2)% | - The decrease in net sales is primarily due to **large, non-recurring orders from one domestic customer in fiscal 2018**; excluding this customer, sales to all other customers increased[100](index=100&type=chunk)[119](index=119&type=chunk) - The company is actively focused on **cost control and correcting manufacturing inefficiencies**, with benefits not expected to be fully realized until after Q4 2019[103](index=103&type=chunk)[122](index=122&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=23&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) The company's financial condition weakened, marked by a significant drop in working capital and potential debt covenant non-compliance - **Working capital decreased from $24.0 million to $16.2 million**, and the current ratio fell from 4.4 to 1.0 to 2.1 to 1.0, primarily due to the reclassification of revolver debt[141](index=141&type=chunk) - Management believes it is **possible the company will not comply with the fixed charge coverage ratio covenant** at the fiscal year-end[159](index=159&type=chunk)[167](index=167&type=chunk) - Subsequent to the quarter end, the company entered into a **Seventh Loan Modification Agreement** which suspended the current ratio financial covenant for the quarter[155](index=155&type=chunk)[156](index=156&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were concluded to be effective with no material changes to internal controls - Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures and **concluded they were effective** as of July 31, 2019[181](index=181&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section details a subsequent loan modification agreement and lists all exhibits filed with the report [Item 5. Other Information](index=28&type=section&id=Item%205.%20Other%20Information) The company entered into a loan modification agreement subsequent to the quarter's end to address a financial covenant breach - The company entered into a **Seventh Loan Modification Agreement** with its lender, Pinnacle Bank, on September 11, 2019[182](index=182&type=chunk) - Key terms include **reducing the credit line from $7.0 million to $6.5 million**, requiring a $500,000 principal reduction, and changing the revolver interest rate[183](index=183&type=chunk) - In exchange, the lender agreed to **suspend the current ratio financial covenant** for the fiscal quarter ended July 31, 2019[184](index=184&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) This section lists key filed documents, including the loan modification agreement and Sarbanes-Oxley certifications - The **Seventh Loan Modification Agreement** dated September 11, 2019, is filed as Exhibit 4.22[196](index=196&type=chunk) - **Certifications by the CEO and CFO** under Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[203](index=203&type=chunk)

Optical Cable Corporation (NASDAQ:OCC) Q3 2019 Results Conference Call September 16, 2019 12:00 PM ET Company Participants Aaron Palash - IR Neil Wilkin - President and CEO Tracy Smith - SVP and CFO Conference Call Participants Operator Good morning. My name is Maria, and I'll be your conference operator today. At this time, I would like to welcome you to the Optical Cable Corporation Third Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the s ...

Optical Cable Corporation (NASDAQ:OCC) Q2 2019 Results Earnings Conference Call June 11, 2019 10:00 AM ET Company Participants Aaron Palash - IR Neil Wilkin - President and CEO Tracy Smith - SVP and CFO Conference Call Participants Operator Good morning. My name is Lorrie, and I'll be your conference operator today. At this time, I would like to welcome you to the Optical Cable Corporation Second Quarter 2019 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to Aaron Palash to be ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______________ Commission file number 0-27022 OPTICAL CABLE CORPORATION (Exact name of registrant as specified in its charter) ( ...

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2019 were $16.8 million, a decrease of 4.6% compared to $17.6 million in Q1 2018 [13] - Gross profit was $3.6 million in Q1 2019, with a gross profit margin of 21.3%, down from 29.8% in Q1 2018 [15][16] - The company recorded a net loss of $3.3 million or $0.44 per share for Q1 2019, compared to a net loss of $410,000 or $0.06 per share in Q1 2018 [20] Business Line Data and Key Metrics Changes - The decrease in net sales was observed in both specialty and enterprise markets, with a notable decline in specialty markets due to a $1.2 million military project that did not recur [13][14] - Sales order backlog was $10 million at the end of Q1 2019, higher than the $8 million backlog at the end of the previous fiscal year [10][11] Market Data and Key Metrics Changes - Net sales to U.S. customers decreased by 2% in Q1 2019, while sales to international customers decreased by 14.1% [14] - The company noted strength in demand for its products, particularly in specialty markets, despite the overall sales decline [8] Company Strategy and Development Direction - The company is focused on increasing throughput and efficiency at its Roanoke facility to meet rising product demand [7][9] - OCC is optimistic about future growth opportunities and is committed to executing its growth strategies in targeted markets [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the first half of the fiscal year tends to be slower, with expectations for stronger performance in the second half [27][30] - The company views 5G as a significant opportunity and is positioning itself to capitalize on this market [33] Other Important Information - SG&A expenses increased by 21.9% to $6.8 million in Q1 2019, primarily due to higher employee-related costs [17][18] - The company had outstanding borrowings of $4.8 million on its revolving credit note and $6.4 million under its real estate term loan as of January 31, 2019 [21] Q&A Session Summary Question: What is driving the optimism in specialty markets? - Management noted strength in diverse customer bases and highlighted a significant military order that did not recur, impacting comparisons [26] Question: What drives the seasonality in sales? - The first quarter typically experiences lower sales due to winter and holiday months, with stronger sales expected in the second half of the year [30] Question: What interest is OCC seeing in 5G? - Management believes 5G presents a significant opportunity and is taking steps to participate in this market [33] Question: Has the company received any unsolicited acquisition proposals? - Management declined to comment on any M&A strategies or proposals, emphasizing a focus on long-term shareholder value [37] Question: Why was cash lower at quarter-end compared to the prior quarter? - Management indicated that initiatives in place are reflected in cost of goods sold, with SG&A reflecting additional charges related to high growth [39] Question: What are the plans for future stock-based compensation? - Management stated that stock compensation aligns leadership with shareholder interests, and no shares were granted in January 2019 due to ongoing initiatives [41] Question: Can the company disclose backlog figures going forward? - Management confirmed the backlog at the end of Q1 2019 was $10 million and expressed a commitment to meaningful disclosures [46] Question: Who are OCC's peer companies? - Management noted that OCC competes with larger companies like Corning and CommScope, but emphasized its unique position in various markets [50]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ______________ Commission file number 0-27022 OPTICAL CABLE CORPORATION (Exact name of registrant as specified in its charter) ...