What changed in this filing

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Item 1. Financial Statements

2022-08-10 compared with 2022-05-11 · 152 added, 132 removed, 510 unchanged (36% of the section changed)

45 unchanged sentences

Three months ended

Six months ended

Nine months ended

Cost of sales:

4 unchanged sentences

Total operating expenses

Operating loss

Operating income (loss)

Other income (expense):

9 unchanged sentences

Net income (loss) attributable to common shareholders

Net income (loss) per share - basic

Weighted average shares outstanding – basic

Net income (loss) per share - diluted

Weighted average shares outstanding – diluted

Net income (loss) per common share - basic

Weighted average common shares outstanding – basic

Net income (loss) per common share - diluted

Weighted average common shares outstanding – diluted

See accompanying notes to unaudited condensed consolidated financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

Three months ended

Six months ended

Nine months ended

Net income (loss)

Foreign currency translation (loss) gain adjustments, net

Total comprehensive (loss) income

Total comprehensive income (loss)

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the three months ended March 31, 2022 and 2021:

For the three months ended June 30, 2022 and 2021:

(Amounts in thousands, except per share data)

1 unchanged sentence

Shareholders’

Three Months Ended March 31, 2022:

Balance as of December 31, 2021

Three Months Ended June 30, 2022:

Balance as of March 31, 2022

Other comprehensive loss

Stock-based compensation

Restricted stock cancellation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Purchase of common stock

Balance as of March 31, 2022

Balance as of June 30, 2022

comprehensive

Shareholders’

Three Months Ended March 31, 2021:

Balance as of December 31, 2020

Three Months Ended June 30, 2021:

Balance as of March 31, 2021

Other comprehensive income

Stock-based compensation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Balance as of March 31, 2021

Restricted stock cancellation

Balance as of June 30, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the six months ended March 31, 2022 and 2021:

For the nine months ended June 30, 2022 and 2021:

(Amounts in thousands, except per share data)

1 unchanged sentence

Shareholders’

Six months ended March 31, 2022:

Nine months ended June 30, 2022:

Balance as of September 30, 2021

5 unchanged sentences

Purchase of common stock

Balance as of March 31, 2022

Balance as of June 30, 2022

comprehensive

Shareholders’

Six months ended March 31, 2021:

Nine months ended June 30, 2021:

Balance as of September 30, 2020

1 unchanged sentence

Stock-based compensation

Restricted stock cancellation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Balance as of March 31, 2021

Balance as of June 30, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Six months ended

Nine months ended

Operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Amortization of intangibles

10 unchanged sentences

(Decrease) increase in accounts receivable

Increase in life insurance receivable

(Increase) decrease in inventories

Increase in refundable income taxes

Decrease (increase) in refundable income taxes

(Increase) decrease in operating lease right-of-use assets

Decrease (increase) in other assets

Increase in other assets

Decrease in investment in lease

1 unchanged sentence

(Decrease) increase in accounts payable and accrued expenses

Increase in interest payable

(Decrease) increase in interest payable

Decrease in operating lease liabilities

Increase in deferred revenue

(Decrease) increase in pension and retirement plans liabilities

Decrease in pension and retirement plans liabilities

Decrease in income taxes payable

(Decrease) increase in other long-term liabilities

2 unchanged sentences

Life insurance premiums paid

Proceeds from corporate life insurance owned policy

Proceeds from sales of property, equipment, and improvements

Purchases of property, equipment and improvements

Net cash used in investing activities

Net cash provided by (used in) investing activities

Financing activities

4 unchanged sentences

Proceeds from issuance of shares under equity compensation plans

Net cash used in financing activities

Net cash provided by (used in) financing activities

Effects of exchange rate on cash

3 unchanged sentences

Supplementary cash flow information:

Cash paid for income taxes

Cash (received) paid for income taxes

Cash paid for interest

1 unchanged sentence

Gain on forgiveness of debt

Obtaining a right-of-use asset in exchange for a lease liability

Customer financing for inventory sold (see Note 6 Accounts and Long-Term Receivable for details)

2 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2022

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2022

Organization and Business

16 unchanged sentences

Recent Accounting Pronouncements

New accounting standards not adopted as of March 31, 2022

New accounting standards not adopted as of June 30, 2022

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) , an amendment of the FASB Accounting Standards Codification.

34 unchanged sentences

Post contract maintenance and support is considered immaterial in the context of the contract and therefore is not a separate performance obligation.

Multicomputer revenue is derived from the sale of hardware, software, extended warranties, royalties, and repair services.

See disaggregated revenues below by products/services and geography.

Technology Solutions Segment

Three months ended March 31,

Three months ended June 30,

(Amounts in thousands)

Technology Solutions Segment

Three months ended March 31,

Three months ended June 30,

(Amounts in thousands)

Technology Solutions Segment

Six months ended March 31,

Nine months ended June 30,

(Amounts in thousands)

Technology Solutions Segment

Six months ended March 31,

Nine months ended June 30,

(Amounts in thousands)

2 unchanged sentences

The input method using labor hours expended relative to the total expected hours is used to recognize revenue for professional services.

Only the hours that depict our performance toward satisfying a performance obligation are used to measure progress.

Only the hours that depict our performance toward satisfying a performance obligation are used to

measure progress.

An estimate of hours for each professional service agreement is made at the beginning of each contract based on prior experience and monitored throughout the performance of the services.

19 unchanged sentences

When we are the principal, revenue is recognized over the contract term.

We have concluded we are the agent in sales of third-party maintenance, software or hardware support, and certain security software that is sold with integral third-party delivered software maintenance that include critical updates.

Contract Assets and Liabilities

1 unchanged sentence

When we have the right to bill a customer, accounts receivable is recorded as an unconditional right exists.

Current contract assets were $ 1.7 million and $ 2.7 million as of March 31, 2022 and September 30, 2021, respectively.

Current contract assets were $ 1.5 million and $ 2.7 million as of June 30, 2022 and September 30, 2021, respectively.

The current portion is recorded in other current assets on the condensed consolidated balance sheets.

There were no noncurrent contract assets as of March 31, 2022 and September 30, 2021.

There were no noncurrent contract assets as of June 30, 2022 and September 30, 2021.

The difference in the balances is due to regular timing differences between when work is performed and having an unconditional right to payment.

Contract liabilities arise when payment is received before we transfer a good or service to the customer.

Current contract liabilities were $ 2.7 million and $ 1.9 million as of March 31, 2022 and September 30, 2021, respectively.

Current contract liabilities were $ 4.7 million and $ 1.9 million as of June 30, 2022 and September 30, 2021, respectively.

The current portion of contract liabilities is recorded in deferred revenue on the condensed consolidated balance sheets.

The long-term portion of contract liabilities were $ 0.1 million and $ 0.4 million as of March 31, 2022 and September 30, 2021, respectively.

The long-term portion of contract liabilities were $ 0.1 million and $ 0.4 million as of June 30, 2022 and September 30, 2021, respectively.

These noncurrent liabilities are recorded in other noncurrent liabilities on the condensed consolidated balance sheets.

Revenue recognized for the six months ended March 31, 2022 that was included in contract liabilities as of September 30, 2021 was $ 0.7 million.

Revenue recognized for the nine months ended June 30, 2022 that was included in contract liabilities as of September 30, 2021 was $ 0.9 million.

Contract Costs

Incremental costs of obtaining a contract involving customer transactions where the revenue and the related transfer of goods and services are equal to or less than a one year period, are expensed as incurred, utilizing the practical expedient in ASC 340-40-25-4 .

For a period greater than one year, incremental contract costs are capitalized if we expect to recover these costs.

For a period greater than one year, incremental contract costs are capitalized if we expect

to recover these costs.

The costs are amortized over the contract term and expected renewal periods.

1 unchanged sentence

Incremental costs are related to commissions in the TS portion of the business.

Current capitalized contract costs are within the other current assets on the condensed consolidated balance sheets as of March 31, 2022 and September 30, 2021.

The portion of current capitalized costs were $ 121 thousand and $ 137 thousand as of March 31, 2022 and September 30, 2021, respectively.

Current capitalized contract costs are within the other current assets on the condensed consolidated balance sheets as of June 30, 2022 and September 30, 2021.

The portion of current capitalized costs were $ 112 thousand and $ 137 thousand as of June 30, 2022 and September 30, 2021, respectively.

There are no noncurrent capitalized costs on the condensed consolidated balance sheets as these commissions are paid annually even when the contract extends beyond a one year period.

The amount of incremental costs amortized for the three months ended March 31, 2022 and 2021 were $ 91 thousand and $ 84 thousand, respectively.

The amount of incremental costs amortized for the six months ended March 31, 2022 and 2021 were $ 181 thousand and $ 171 thousand, respectively.

The amount of incremental costs amortized for the three months ended June 30, 2022 and 2021 were $ 91 thousand and $ 89 thousand, respectively.

The amount of incremental costs amortized for the nine months ended June 30, 2022 and 2021 were $ 272 thousand and $ 260 thousand, respectively.

This is recorded in selling, general, and administrative expenses.

There was no impairment related to incremental costs capitalized during the three months ended March 31, 2022.

There was no impairment related to incremental costs capitalized during the nine months ended June 30, 2022 and 2021.

Costs to fulfill a contract are capitalized when the costs are related to a contract or anticipated contract, generate or enhance resources that will be used in satisfying performance obligations in the future, and costs are recoverable.

1 unchanged sentence

Current capitalized fulfillment costs are in the other current assets and noncurrent costs are in other assets on the condensed consolidated balance sheets.

The portion of current capitalized costs were $ 13 thousand as of March 31, 2022 and $ 13 thousand as of September 30, 2021.

The portion of noncurrent capitalized costs were $ 3 thousand and $ 9 thousand as of March 31, 2022 and September 30, 2021, respectively.

The amount of fulfillment costs amortized for the three months ended March 31, 2022 and 2021 were $ 3 thousand and $ 3 thousand, respectively.

The amount of fulfillment costs amortized for the six months ended March 31, 2022 and 2021 were $ 6 thousand and $ 6 thousand, respectively.

The portion of current capitalized costs were $ 13 thousand as of June 30, 2022 and $ 13 thousand as of September 30, 2021.

The portion of noncurrent capitalized costs were $ 0 thousand and $ 9 thousand as of June 30, 2022 and September 30, 2021, respectively.

The amount of fulfillment costs amortized for the three months ended June 30, 2022 and 2021 were $ 3 thousand and $ 3 thousand, respectively.

The amount of fulfillment costs amortized for the nine months ended June 30, 2022 and 2021 were $ 9 thousand and $ 9 thousand, respectively.

These costs amortized were recorded in cost of sales.

There was no impairment related to fulfillment costs capitalized as of March 31, 2022 or September 30, 2021.

There was no impairment related to fulfillment costs capitalized for the nine months ended June 30, 2022 and 2021.

Projects are typically billed upon completion or at certain milestones.

10 unchanged sentences

Managed service contracts are generally longer than one year.

For these contracts the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2022 is set forth in the table below:

For these contracts the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of June 30, 2022 is set forth in the table below:

(Amounts in thousands)

1 unchanged sentence

Basic net income (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) per

common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income (loss) by the assumed weighted average number of common shares outstanding.

Diluted net income (loss) per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income (loss) by the assumed weighted average number of common shares outstanding.

We are required to present earnings per share (“EPS”), utilizing the two class method because we had outstanding, non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, which are considered participating securities.

1 unchanged sentence

Three months ended

Six months ended

Nine months ended

(Amounts in thousands except per share data)

7 unchanged sentences

Weighted average common shares outstanding – diluted

Net income (loss) per share - basic

Net income (loss) per share - diluted

There are no outstanding stock options as of March 31, 2022 as they expired in the second quarter of fiscal year 2022.

Non-vested restricted stock awards of 218 thousand shares were excluded from the diluted loss per share calculation for the three months ended March 31, 2021.

Non-vested restricted stock awards of 218 thousand shares were excluded from the diluted loss per share calculation for the six months ended March 31, 2022.

Net income (loss) per common share - basic

Net income (loss) per common share - diluted

All anti-dilutive securities, including certain stock options, are excluded from the diluted income (loss) per share computation.

There are no outstanding stock options as of June 30, 2022 as they expired in the second quarter of fiscal year 2022.

Non-vested restricted stock awards of 208 thousand and 209 thousand were excluded from the diluted loss per share calculation for the three and nine months ended June 30, 2021, respectively.

These awards were excluded because there was a net loss for this period and their inclusion would have been anti-dilutive.

2 unchanged sentences

This financing is separate from agreements with a leasing component, see Note 8, “Leases” for financing through leases.

These receivables are included in Accounts receivable and Long-term receivable in the amount of $ 5.5 million and $ 5.3 million as of March 31, 2022.

These receivables are included in Accounts receivable and Long-term receivable in the amount of $ 4.9 million and $ 5.3 million as of June 30, 2022.

These receivables are included in Accounts receivable and Long-term receivable in the amount of $ 6.5 million and $ 7.5 million as of September 30, 2021, respectively.

1 unchanged sentence

There is not an allowance for credit losses nor impairments for Accounts and Long-term receivables with a contractual maturity of over one year.

All accounts have no past amounts due as of March 31, 2022 or September 30, 2021.

There was no activity in the allowance for credit losses of these receivables for the six months ended March 31, 2022 and 2021, respectively.

All accounts have no past amounts due as of June 30, 2022 or September 30, 2021.

There was no activity in the allowance for credit losses of these receivables for the nine months ended June 30, 2022 and 2021, respectively.

All these agreements are looked at as one portfolio in determining credit losses.

4 unchanged sentences

This agreement included approximately $ 0.5 million of payments to be received over the next 2 years from the effective date of the agreement.

It was determined we were acting as the agent in the transactions and recorded net revenue of approximately $ 0.1 million during the first quarter of fiscal year 2022.

The amount of interest income earned from sales whose payment terms exceed one year for the three months ended March 31, 2022 and 2021 was $ 122 thousand and $ 126 thousand, respectively.

The amount of interest income earned from sales whose payment terms exceed one year for the six months ended March 31, 2022 and 2021 was $ 261 thousand and $ 218 thousand, respectively.

The net revenue from this transaction was approximately $ 0.1 million during the first quarter of fiscal year 2022.

There was one new agreement effective in the third quarter of fiscal year 2022 causing an increase in Accounts and Long-term receivable.

This agreement included approximately $ 0.8 million of payments to be received over the next

3 years from the effective date of the agreement.

The net revenue from this transaction was approximately $ 0.3 million during the third quarter of fiscal year 2022.

The amount of interest income earned from sales whose payment terms exceed one year for the three months ended June 30, 2022 and 2021 was $ 108 thousand and $ 169 thousand, respectively.

The amount of interest income earned from sales whose payment terms exceed one year for the nine months ended June 30, 2022 and 2021 was $ 369 thousand and $ 387 thousand, respectively.

Interest income from these agreements is recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations.

15 unchanged sentences

Finished goods

We evaluate inventory for obsolescence on at least a quarterly basis or more frequently if needed.

Our HPP segment has a multi-faceted approach in determining obsolescence including reviewing inventory by product line, program, and individual part.

In the TS segment, we seek to minimize obsolete inventory by having nearly all of our inventory purchased in conjunction with a sales agreement.

From time to time, we do purchase certain inventory in bulk to receive discounts, but only when we anticipate selling this inventory.

The inventory we purchase at the TS segment is in high demand, especially in the current environment, and has a limited risk of obsolescence.

Information related to both lessee and lessor

The components of lease costs for the three months ended March 31, 2022 and 2021 are as follows:

The components of lease costs for the three months ended June 30, 2022 and 2021 are as follows:

Three months ended

Condensed Consolidated Statements of Operations Location

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

(Amounts in thousands)

10 unchanged sentences

Total lease costs, net of sublease interest income

The components of lease costs for the six months ended March 31, 2022 and 2021 are as follows:

Six months ended

The components of lease costs for the nine months ended June 30, 2022 and 2021 are as follows:

Nine months ended

Condensed Consolidated Statements of Operations Location

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

(Amounts in thousands)

10 unchanged sentences

Total lease costs, net of sublease interest income

Supplemental cash flow information related to leases for three months ended March 31, 2022 and 2021 is below:

Supplemental cash flow information related to leases for three months ended June 30, 2022 and 2021 is below:

Three months ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

(Amounts in thousands)

7 unchanged sentences

Cash received from subleases

Supplemental cash flow information related to leases for six months ended March 31, 2022 and 2021 is below:

Six months ended

March 31, 2022

March 31, 2021

Supplemental cash flow information related to leases for nine months ended June 30, 2022 and 2021 is below:

Nine months ended

June 30, 2022

June 30, 2021

(Amounts in thousands)

5 unchanged sentences

Lease assets obtained in exchange for new lease liabilities

Operating leases

Cash received from subleases

4 unchanged sentences

principal and interest.

The imputed interest rate for both agreements was determined to be 5.0 %.

The imputed interest rate for the agreements was determined to be 5.0 %.

The rate was determined primarily based on the rate the Company could obtain by financing from other sources at the date of the transaction.

Interest expense related to these agreements for the three months ended March 31, 2022 and 2021 was $ 72 thousand and $ 28 thousand, respectively.

Interest expense related to these agreements for the six months ended March 31, 2022 and 2021 was $ 146 thousand and $ 28 thousand, respectively.

Interest expense related to these agreements for the three months ended June 30, 2022 and 2021 was $ 57 thousand and $ 92 thousand, respectively.

Interest expense related to these agreements for the nine months ended June 30, 2022 and 2021 was $ 203 thousand and $ 121 thousand, respectively.

The amounts owed for these agreements are in Accounts payable and Other noncurrent liabilities because they are owed to vendors rather than banks or financial institutions for borrowings.

1 unchanged sentence

Below are details of the agreements with the vendors that contain imputed interest:

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

(Amounts in thousands)

1 unchanged sentence

Other noncurrent liabilities

The Company had a total of approximately $ 6.6 million due to one of these vendors as of March 31, 2022.

The Company had a total of approximately $ 6.5 million due to one of these vendors as of June 30, 2022.

This is approximately 38 % of Accounts payable and other noncurrent liabilities.

15 unchanged sentences

In November 2020, the SBA Loans were formally forgiven.

The $ 2.2 million gain is presented on the Condensed Consolidated Statement of Operations as Gain on forgiveness of debt for the six months ended March 31, 2021.

Interest expense related to the notes for the three months ended March 31, 2022 and 2021 was $ 13 thousand and $ 23 thousand, respectively.

Interest expense related to the notes for the six months ended March 31, 2022 and 2021 was $ 27 thousand and $ 46 thousand, respectively.

March 31, 2022

The $ 2.2 million gain is presented on the Condensed Consolidated Statement of Operations as Gain on forgiveness of debt for the nine months ended June 30, 2021.

Interest expense related to the notes for the three months ended June 30, 2022 and 2021 was $ 12 thousand and $ 21 thousand, respectively.

Interest expense related to the notes for the nine months ended June 30, 2022 and 2021 was $ 39 thousand and $ 67 thousand, respectively.

June 30, 2022

September 30, 2021

4 unchanged sentences

Notes payable - noncurrent portion

As of March 31, 2022 and September 30, 2021, the Company maintained an inventory line of credit with a borrowing capacity of $ 15.0 million.

As of June 30, 2022 and September 30, 2021, the Company maintained an inventory line of credit with a borrowing capacity of $ 15.0 million.

It may be used by the TS and HPP segments in the U.S.

3 unchanged sentences

(1) a minimum current ratio of 1.2 , (2) tangible net worth of no less than $ 4.0 million, and (3) a maximum ratio of total liabilities to total net worth of less than 5.0 :1.

As of March 31, 2022 and September 30, 2021, Company borrowings, all from the TS segment, under the inventory line of credit were $ 0.9 million and $ 0.9 million, respectively, and the Company was in compliance with all financial covenants.

As of March 31, 2022 and September 30, 2021, this line of credit also includes availability of a limited cash withdrawal of up to $ 1.0 million.

As of March 31, 2022 and September 30, 2021 there were no cash withdrawals outstanding.

As of June 30, 2022 and September 30, 2021, Company borrowings, all from the TS segment, under the inventory line of credit were $ 3.0 million and $ 0.9 million, respectively, and the Company was in compliance with all financial covenants.

As of June 30, 2022 and September 30, 2021, this line of credit also includes availability of a limited cash withdrawal of up to $ 1.0 million.

As of June 30, 2022 and September 30, 2021 there were no cash withdrawals outstanding.

Pension and Retirement Plans

5 unchanged sentences

A gain on a life insurance policy of $ 0.1 million occurred during the second quarter of fiscal year 2022.

The life insurance policy was not a current employee at time of expiration.

The Company is due $ 322 thousand from the life insurance policy, which will be paid during Q3 of fiscal year 2022.

This receivable is on the Condensed Consolidated Balance Sheet in the financial statement line item Accounts receivable, net.

The Company also provides for officer death benefits through post-retirement plans to certain officers of the Company in the U.S.

The gain on this life insurance policy was not related to a current employee at time of expiration.

The Company received $ 322 thousand from the life insurance policy during Q3 of fiscal year 2022.

Additionally, during

the fiscal third quarter management made the decision to pay back approximately $ 0.9 million of insurance policy loans.

The Company also provides for officer death benefits through post-retirement plans to certain current officers of the Company in the U.S.

All the Company’s defined benefit plans are closed to newly hired employees and have been since September 2009.

6 unchanged sentences

plans are as follows:

Three Months Ended March 31,

Three Months Ended June 30,

(Amounts in thousands)

6 unchanged sentences

Interest cost

Amortization of net (gain) loss

Net periodic cost

Six Months Ended March 31,

Amortization of net gain

Net periodic cost (benefit)

Nine Months Ended June 30,

(Amounts in thousands)

6 unchanged sentences

Interest cost

Amortization of net (gain) loss

Amortization of net gain

Net periodic cost

2 unchanged sentences

Fair Values as of

March 31, 2022

June 30, 2022

September 30, 2021

5 unchanged sentences

Total plan assets

An income tax expense of $ 5 thousand was recorded for the three months ended March 31, 2022 compared to an income tax expense of $ 723 thousand in the same period of 2021.

An income tax expense of $ 17 thousand was recorded for the six months ended March 31, 2022 compared to an income tax expense of $ 833 thousand in the same period of 2021.

The income tax expense for the three and six months ended March 31, 2022 is primarily driven by minimum state tax expenses, as the Company continues to maintain a full valuation allowance on its operations.

The income tax expense for the three and six months ended March 31, 2021 was driven by an increase in the valuation allowance against deferred tax assets in the period, offset by a benefit recorded for a change in tax law, allowing for the immediate deduction of covered expenses incurred through the Paycheck Protection Program.

We have historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full calendar year to ordinary income or loss for the reporting period.

However, we used a discrete effective tax rate method to calculate income taxes for the quarter ended March 31, 2022 because we have determined that our ordinary income or loss cannot be reliably estimated and small changes in estimated ordinary income would result in significant changes in the estimated annual effective tax rates.

An income tax expense of $ 11 thousand was recorded for the three months ended June 30, 2022 compared to an income tax expense of $ 35 thousand for the same period of 2021.

An income tax expense of $ 28 thousand was recorded for the nine months ended June 30, 2022 compared to an income tax expense of $ 868 thousand for the same period of 2021.

The income tax expense for the three and nine months ended June 30, 2022 is primarily driven by minimum state tax expenses, as the Company continues to maintain a full valuation allowance on their operations.

The income tax expense for the three and nine months ended June 30, 2021 was driven by an increase in the valuation allowance against deferred tax assets in the period, offset by a benefit recorded for a change in tax law, allowing for the immediate deduction of covered expenses incurred through the Paycheck Protection Program.

We have in general historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full calendar year to ordinary income or loss for the reporting period.

However, we used a discrete effective tax rate method to calculate income taxes for the quarter ended June 30, 2022 because we determined that our ordinary income or loss cannot be reliably estimated and small changes in estimated ordinary income would result in significant changes in the estimated annual effective tax rates.

Accumulated Other Comprehensive Loss

12 unchanged sentences

unobservable inputs (e.g., a reporting entity’s or other entity’s own data)

The Company had no assets or liabilities measured at fair value on a recurring (except our pension plan assets and whole life insurance policies, see Note 11 for pension plan assets) or non-recurring basis as of March 31, 2022 or September 30, 2021.

To estimate fair value of the financial instruments below, quoted market prices are used when available and classified within Level 1.

1 unchanged sentence

If the preceding information is unavailable, we use internally generated data to estimate fair value which is classified within Level 3.

As of March 31, 2022

As of June 30, 2022

As of September 30, 2021

20 unchanged sentences

Fair value was estimated by discounting future cash flows based on the current rate the Company could get in another transaction with similar terms based on historical information.

Fair value of accounts receivable with an original maturity of one year or less and accounts payable was not materially different from their carrying values as of March 31, 2022 and September 30, 2021.

Fair value of accounts receivable with an original maturity of one year or less and accounts payable was not materially different from their carrying values as of June 30, 2022 and September 30, 2021.

Segment Information

The following tables present certain operating segment information for the three and six months ended March 31, 2022 and 2021.

The following tables present certain operating segment information for the three and nine months ended June 30, 2022 and 2021.

Technology Solutions Segment

Three months ended March 31,

Three months ended June 30,

(Amounts in thousands)

6 unchanged sentences

Technology Solutions Segment

Six months ended March 31,

Nine months ended June 30,

(Amounts in thousands)

8 unchanged sentences

All intercompany transactions have been eliminated.

The following table lists customers from which the Company derived revenues of 10% or more of total revenues for the three and six months ended March 31, 2022 and 2021.

Three months ended March 31,

Six months ended March 31,

The following table lists customers from which the Company derived revenues of 10% or more of total revenues for the three and nine months ended June 30, 2022 and 2021.

Three months ended June 30,

Nine months ended June 30,

(in millions)

1 unchanged sentence

(Amounts in millions)

Customer A had a balance of $ 9.9 million, or 44 %, of total consolidated accounts receivable and long-term receivable as of March 31, 2022.

There were no other customers with more than 10% of total consolidated accounts receivable and long-term receivable as of March 31, 2022.

We believe that the Company is not exposed to any significant credit risk with respect to the accounts receivable with any customers as of March 31, 2022.

Customer A had a balance of $ 9.2 million, or 38 %, of total consolidated accounts receivable and long-term receivable as of June 30, 2022.

There were no other customers with more than 10% of total consolidated accounts receivable and long-term receivable as of June 30, 2022.

We believe that the Company is not exposed to any significant credit risk with respect to the accounts receivable with any customers as of June 30, 2022.

Repurchase of Common Stock

3 unchanged sentences

The Board of Directors approved the activation of the suspended stock repurchase program on December 29, 2021.

The Company repurchased 13 thousand shares of its outstanding common stock on the open market during the three months ended March 31, 2022.

As of March 31, 2022, approximately 181 thousand shares remain authorized to repurchase under the stock repurchase program.

The Company repurchased 19,498 thousand shares of its outstanding common stock on the open market during the nine months ended June 30, 2022.

As of June 30, 2022, approximately 174,627 shares remain authorized to repurchase under the stock repurchase program.

Subsequent Event

Subsequent to the quarter ended June 30, 2022, we entered into a $ 12.8 m sales agreement with a financing component, which includes receiving three payments with the final payment due in fiscal year 2024.

We will receive the first payment during the fourth fiscal quarter of 2022.

Our cost for this agreement will be paid in full in the fiscal fourth quarter of 2022.

The revenue for this transaction will be recorded net during the fourth quarter of fiscal year 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements