CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. 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 the weighted average cost value. Certain items in the inventory may be considered obsolete or excess and, as such, we establish an allowance to reduce the carrying value of these items to their net realizable value. Based on estimates, assumptions and judgments made from the information available at the time, we determine the amounts of these allowances. Because inventories have, during the past few years, represented over 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.

Another accounting policy that involves significant judgments and estimates is our accounts receivable allowance valuation. 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.

The Company uses the Black-Scholes model to value the stock option grants which involves significant judgments and estimates.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

For recently issued accounting pronouncements that may affect us, see Note 1 of Notes to Financial Statements.

OVERVIEW

The Company markets connectors and cables to numerous industries for use in thousands of products, primarily for the wireless market. The largest business unit consists of the Connector and Cable Assembly Division which, together with the Aviel Electronics Division and the Worswick Industries Division, markets and sells RF cables and connectors. The Bioconnect Division operates in the medical connector product market, while the Neulink and RadioMobile Divisions operate in the high-speed wireless data connection market. During fiscal year 2008 ended October 31, 2008 the RF cable and connector products represented 79% of the Company's sales, while the medical connector division and the wireless data connection operations represented 9% and 12%, respectively, of the Company's total sales.

Historically, over 79% of the Company's revenues are generated from the sale of RF connector products and connector cable assemblies. Sales of connectors are expected to continue to be the largest portion of revenues in the future, despite the purchase of the RadioMobile wireless division in September 2007. Accordingly, Company revenues are heavily dependent upon sales of RF connectors and cable assemblies. However, the Company sells thousands of connector products for uses in thousands of end products and sales are not dependent upon any one industry sector or any single product. As a result, the Company's revenues and expenses are typically not subject to major fluctuations. During the fiscal year ended October 31, 2008, net sales increased by 19% over the net sales in the prior year.

The net income generated by the Company for the fiscal year ended October 31, 2008 represented the 15th consecutive year that the Company has been profitable.

The Company generated cash from operations of $1,144,000, used $691,000 in financing activities, and used $461,000 for capital expenditures. The amount of cash and cash equivalents, and investments in available-for-sale securities held by the Company as of October 31, 2008 remained substantially unchanged at $7,925,000, compared to $7,932,000 in the prior year. Since the Company has no debt other than normal accounts payable, accrued expenses, and other long-term liabilities, the Company will continue to have sufficient cash to fund all of its anticipated financing and liquidity needs for the foreseeable future.

Financial Condition

The following table presents certain key measures of financial condition as of
October 31, 2008 and 2007:

                                                         2008                                  2007
                                              Amount         % Total Assets         Amount         % Total Assets
Cash and cash equivalents and
investments available for sale             $  7,924,549                 44.6 %   $  7,932,246                 49.2 %
Current assets                               16,705,149                 94.0 %     15,351,272                 95.2 %
Current liabilities                           1,323,198                  7.5 %      1,069,700                  6.6 %
Working capital                              15,381,951                 86.5 %     14,281,572                 89.0 %
Property and equipment - net                    565,860                  3.2 %        255,693                  1.6 %
Total assets                                 17,767,773                100.0 %     16,128,158                100.0 %
Stockholders' equity                         16,121,690                 90.7 %     14,940,793                 92.6 %

Liquidity and Capital Resources

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, 2009. The Company does not, however, currently have any commercial banking arrangements providing for loans, credit facilities or similar matters 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:

· As of October 31, 2008, the amount of cash and cash equivalents and short-term investments available-for-sale was equal to $7,924,549 in the aggregate. Accordingly, the Company believes that it has sufficient cash available to operate its current business and fund its currently anticipated capital expenditure for the upcoming year.

· As of October 31, 2008, the Company had $16,705,149 in current assets, and only $1,323,198 in current liabilities.

Management believes that based on the Company's financial condition at October 31, 2008, the absence of outstanding bank debt, and its recent operating results there are sufficient capital resources to fund its operations and future acquisitions for at least the next twelve months. Should the Company need to obtain additional funds for its unexpected acquisitions of assets or other expansion activities, based on its balance sheet and its history of profitability, the Company believes that it would be able to obtain bank loans to finance these expenditures. However, there can be no assurance any bank loan 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, debt or lease agreements or other arrangements that could trigger a requirement for an early payment or that could change the value of the Company's assets.

As part of its business strategy, and because of its offshore manufacturing arrangements, the Company normally maintains a high 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. Because sales increased by 19% during fiscal 2008, the Company increased its inventories 20% compared to the prior year inventory balance. The Company continuously monitors its inventory levels and product costs, and because of continued increases in sales or raw material costs, may continue increasing its inventory levels.

Net cash provided by operating activities for the year ended October 31, 2008 was $1,144,000. The Company's net cash from operations was less than its net income of $1,559,000 due to $994,000 increase in inventory, which reduction of net cash was partially offset by noncash stock-based compensation expense of $500,000 and noncash depreciation and amortization of $211,000. In fiscal year ended October 31 2007, net cash provided by operating activities was $1,733,000 primarily due to net income of $1,135,000, plus noncash stock-based compensation expense of $572,000, and non cash depreciation and amortization of $269,000.

During fiscal 2008, net cash used in investing activities was $2,793,000, of which $2,332,000 was for the purchase of treasury bills and other available-for-sale securities. The balance represents $461,000 invested in additional capital equipment (primarily for the Aviel division). During fiscal 2007, net cash used in investing activities was $2,545,000 of which $2,284,000 was used for the purchase of treasury bills and other available-for-sale securities. The balance represented $94,000 invested in additional capital equipment and $167,000 used for the acquisition of the RadioMobile division.

In fiscal 2008, financing activities decreased the Company's net cash by $691,000 due to dividends paid of $394,000, $533,000 used to repurchase 100,000 shares of its own common stock of which expenditures were partially offset by the receipt of $190,000 from the exercise of stock options, and $46,041 of excess tax benefits from stock-based compensation. In fiscal 2007, financing activities decreased the Company's net cash by $401,000 due to dividends paid of $196,000 and $600,000 used to repurchase 103,308 shares of its own common stock, which expenditures were partially offset by the receipt of $198,000 from the exercise of stock options, and $198,000 of excess tax benefits from stock-based compensation.

Results of Operations

The following summarizes the key components of the results of operations for the fiscal years ended October 31, 2008 and 2007:

                                                         2008                                  2007
                                              Amount         % of Net Sales         Amount         % of Net Sales
Net sales                                  $ 17,695,146                  100 %   $ 14,853,039                  100 %
Cost of sales                                 8,789,604                   50 %      7,937,251                   53 %
Gross profit                                  8,905,542                   50 %      6,915,788                   47 %
Engineering expenses                          1,050,574                    6 %        571,237                    4 %
Selling and general expenses                  5,341,576                   30 %      4,625,065                   31 %
Operating income                              2,513,392                   14 %      1,719,486                   12 %
Other income                                    258,381                    1 %        359,113                    2 %
Income before income taxes                    2,771,773                   16 %      2,078,599                   14 %
Income taxes                                  1,212,540                    7 %        943,376                    6 %
Net income                                    1,559,233                    9 %      1,135,223                    8 %

Net sales of the Company increased by approximately $2,842,000 or 19%, for the fiscal year ended October 31, 2008 ("fiscal 2008") compared to the fiscal year ended October 31, 2007 ("fiscal 2007"). Net sales increased in fiscal 2008 due to increases in net sales at all three of the Company's financial reporting segments. Net sales at the Connector and Cable Assembly segment increased from fiscal 2007 by approximately $1,123,000. The Company believes that the increase was primarily due to an increase in infrastructure projects that commenced during the second half of fiscal 2007 and continued on throughout fiscal 2008. Approximately $744,000 of the total increase in net sales related to an increase in net sales at the Medical Cabling and Interconnector segment, which increase was due to increased orders from its primary customer. The remaining approximate $975,000 increase in total fiscal 2008 net sales related to an increase in net sales at the RF Wireless segment, and was attributable to sales generated during the entire fiscal year by the Radiomobile Division. Since RadioMobile was acquired in the fourth quarter of fiscal 2007, only two months of Radiomobile sales were included in total net sales in fiscal 2007.

The Company's gross profit increased $1,990,000 or by 29% to $8,906,000 in 2008 from $6,916,000 in 2007 due to the increase in net sales and higher gross margins attributable to economies of scale. As a percentage of net sales, gross profit increased to 50% in fiscal 2008, up from 47% in fiscal 2007. At the Connector and Cable Assembly segment, gross profit as a percentage of net sales increased by 4% to 53% in fiscal 2008 from 49% in fiscal 2007. This decrease in costs was attributable to economies of scale as certain fixed costs were spread over a greater amount of sales. At the Medical Cabling & Interconnector segment, gross profit as a percentage of net sales increased by 20% to 35% in fiscal 2008 from 15% in fiscal 2007 as a result of an increase in sales and the segment's ability to reduce its fixed labor costs. At the RF Wireless segment, gross profit as a percentage of net sales remained substantially unchanged with an increase of 1% to 47% in fiscal 2008 from 46% in fiscal 2007.

Engineering expenses, which include research and development expenses, incurred at the Company's three segments and relating to the design, re-design or development of products for specific customers increased substantially by $480,000 to $1,051,000 in fiscal 2008 from $571,000 in fiscal 2007. As a percentage of net sales, engineering expenses increased to 6% in fiscal 2008 from 4% in fiscal 2007. Most of the increase in engineering expenses was attributable to the RF Wireless segment. Engineering expense (including research and development) during fiscal 2008 increased as a result of the acquisition of the Radiomobile division at the end of fiscal 2007 and the increased expenses related to the development of new wireless products that are expected to be commercially released by the end of the current fiscal year. RadioMobile and Neulink, which constitute the RF Wireless segment, collectively incurred approximately $256,000 of research and development expenses in fiscal 2008 in the development of new products; the entire Company only incurred $61,000 of research and development expenses in fiscal 2007.

Selling and general expenses increased by $717,000 or 15%, to $5,342,000 during fiscal 2008 from $4,625,000 in fiscal 2007. The increase is the result of the 19% increase in revenues. Stock based compensation expense decreased by $72,000 to $500,000 in fiscal 2008 from $572,000 in fiscal 2007 primarily due to fewer options being expensed in fiscal 2008 compared to fiscal 2007. Sales commission expense increased by $44,000 to $141,000 in fiscal 2008 from $97,000 in fiscal 2007 due to the significant increase in sales from fiscal 2007. Accounting and legal fees increased by $215,000 to $550,000 in fiscal 2008 from $335,000 in fiscal 2007 primarily due to fees related to management's assessment and testing on internal controls over financial reporting incurred in fiscal 2008 but not incurred in fiscal 2007. Advertising costs increased by $26,000 to $198,000 in fiscal 2008 from $172,000 in fiscal 2007 due to an increase in marketing efforts in fiscal 2008 compared to prior year.

Despite the increase in sales and the increase of $1,990,000 in gross profit, operating income only increased 46% or by $794,000 to $2,513,000 in fiscal 2008 as a result of the $1,196,000 increase in total operating expenses from prior year of which $717,000 related to selling and general administrative expenses and $479,000 related to engineering expenses.

Interest income decreased by approximately $101,000 from prior year due to decreasing interest rates on the funds held by the Company in its interest bearing accounts as a result of investing primarily in CD's and money market funds during fiscal 2008 as compared to investing primarily in auction rate securities during fiscal 2007.

Income before taxes in fiscal 2008 increased by 33% or by $693,000 to $2,772,000 compared to income before taxes of $2,079,000 in fiscal 2007. Net income for fiscal year ended October 31, 2008 increased 37% or by $424,000 to $1,559,000 compared to $1,135,000 in fiscal year ended October 31, 2007 for the reasons discussed above.