What changed in this filing

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Item 1. Financial Statements

2023-02-09 compared with 2022-08-10 · 123 added, 245 removed, 417 unchanged (47% of the section changed)

17 unchanged sentences

Cash surrender value of life insurance

Pension benefits assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

26 unchanged sentences

Three months ended

Nine months ended

Cost of sales:

6 unchanged sentences

Other income (expense):

Foreign exchange gain (loss)

Foreign exchange loss

Interest expense

Interest income

Gain on forgiveness of debt

Other income (expense), net

Total other income (expense), net

Other (expense) income, net

Total other (expense) income, net

Income (loss) before income taxes

11 unchanged sentences

Three months ended

Nine months ended

Net income (loss)

Foreign currency translation (loss) gain adjustments, net

Foreign currency translation gain adjustments, net

Total comprehensive income (loss)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

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

(Amounts in thousands, except per share data)

comprehensive

Shareholders’

Three Months Ended June 30, 2022:

Balance as of March 31, 2022

Other comprehensive loss

Stock-based compensation

Restricted stock cancellation

Restricted stock issuance

Purchase of common stock

Balance as of June 30, 2022

comprehensive

Shareholders’

Three Months Ended June 30, 2021:

Balance as of March 31, 2021

Other comprehensive income

Stock-based compensation

Restricted stock cancellation

Balance as of June 30, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

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

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

(Amounts in thousands, except per share data)

1 unchanged sentence

Shareholders’

Nine months ended June 30, 2022:

Three months ended December 31, 2022:

Balance as of September 30, 2022

Other comprehensive loss

Other comprehensive income

Stock-based compensation

Restricted stock cancellation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Purchase of common stock

Balance as of June 30, 2022

Cash dividends declared on common stock ($ 0.03 per share)

Balance as of December 31, 2022

comprehensive

Shareholders’

Nine months ended June 30, 2021:

Three months ended December 31, 2021:

Balance as of September 30, 2021

2 unchanged sentences

Restricted stock cancellation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Balance as of June 30, 2021

Balance as of December 31, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Nine months ended

Three months ended

Operating activities

Net income (loss)

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

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Amortization of intangibles

Loss on sale of fixed assets, net

Foreign exchange (gain) loss

Foreign exchange loss

Provision for losses on accounts receivable

2 unchanged sentences

Stock-based compensation expense on stock options and restricted stock awards

Deferred income taxes

Increase in cash surrender value of life insurance

Adjustment for financing activities recognized in net income - Gain on forgiveness of debt

Changes in operating assets and liabilities:

Decrease (increase) in accounts receivable

(Increase) decrease in inventories

Decrease (increase) in refundable income taxes

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

Increase in other assets

Decrease in investment in lease

Decrease (increase) in long-term receivable

(Decrease) increase in accounts payable and accrued expenses

(Decrease) increase in interest payable

Decrease (increase) in inventories

Decrease in refundable income taxes

Increase in operating lease right-of-use assets

Decrease (increase) in other assets

(Increase) decrease in investment in lease

Decrease in long-term receivable

Decrease in accounts payable and accrued expenses

Increase in interest payable

Decrease in operating lease liabilities

Increase in deferred revenue

(Decrease) increase in deferred revenue

Decrease in pension and retirement plans liabilities

Decrease in income taxes payable

(Decrease) increase in other long-term liabilities

Net cash provided by operating activities

Decrease in other long-term liabilities

Net cash used in operating activities

Investing activities

Life insurance premiums paid

Proceeds from corporate life insurance owned policy

Proceeds from sales of property, equipment, and improvements

Additions of intangible assets

Purchases of property, equipment and improvements

Net cash provided by (used in) investing activities

Net cash used in investing activities

Financing activities

Net payments under line-of-credit agreement

Repayments on debt

Net borrowing under line-of-credit agreement

Repayments on notes payable

Principal payments on finance leases

Purchase of common stock

Proceeds from issuance of shares under equity compensation plans

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effects of exchange rate on cash

Net increase in cash and cash equivalents

Cash and cash equivalents beginning of period

Cash and cash equivalents end of period

Net decrease in cash and cash equivalents

Cash and cash equivalents beginning of year

Cash and cash equivalents end of year

Supplementary cash flow information:

Cash (received) paid for income taxes

Cash paid for interest

Dividend declared during period

Supplementary non-cash financing activities:

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 NINE MONTHS ENDED JUNE 30, 2022

FOR THE THREE MONTHS ENDED DECEMBER 31, 2022

Organization and Business

7 unchanged sentences

Basis of Presentation

The accompanying interim condensed consolidated financial statements have been prepared by the Company, without audit, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented.

The accompanying interim condensed consolidated financial statements have been prepared by the Company and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented.

All adjustments were of a normal recurring nature.

6 unchanged sentences

Recent Accounting Pronouncements

New accounting standards not adopted as of June 30, 2022

New accounting standards not adopted as of December 31, 2022

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

31 unchanged sentences

HPP Segment Revenue

HPP segment revenue is derived from the sale of integrated hardware and software, maintenance, and other services through the Multicomputer, Myricom, and ARIA product lines.

HPP segment revenue is derived from the sale of integrated hardware and software, maintenance, and other services through the Myricom, Multicomputer, and ARIA product lines.

Myricom revenue is derived from the sale of products, which are comprised of both hardware and embedded software which is essential to the products’ functionality, and post contract maintenance and support.

1 unchanged sentence

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 June 30,

(Amounts in thousands)

Technology Solutions Segment

Three months ended June 30,

(Amounts in thousands)

See disaggregated revenues below by products/services and divisions/segments.

Technology Solutions Segment

Nine months ended June 30,

Three months ended December 31,

(Amounts in thousands)

Technology Solutions Segment

Nine months ended June 30,

Three months ended December 31,

(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.

23 unchanged sentences

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

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

Current contract assets were $ 3.7 million and $ 4.4 million as of December 31, 2022 and September 30, 2022, respectively.

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

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

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

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 $ 4.7 million and $ 1.9 million as of June 30, 2022 and September 30, 2021, respectively.

Current contract liabilities were $ 3.8 million and $ 1.9 million as of December 31, 2022 and September 30, 2022, 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 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 nine months ended June 30, 2022 that was included in contract liabilities as of September 30, 2021 was $ 0.9 million.

There was no long-term contract liabilities as of December 31, 2022 and September 30, 2022, respectively.

Revenue recognized for the three months ended December 31, 2022 that was included in contract liabilities as of September 30, 2022 was $ 1.2 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 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.

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

The portion of current capitalized costs were $ 88 thousand and $ 128 thousand as of December 31, 2022 and September 30, 2022, 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 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.

The amount of incremental costs amortized for the three months ended December 31, 2022 and 2021 were $ 98 thousand and $ 90 thousand, respectively.

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

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

There was no impairment related to incremental costs capitalized during the nine months ended December 31, 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 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.

The portion of current capitalized costs were $ 6 thousand as of December 31, 2022 and $ 9 thousand as of September 30, 2022.

The were no noncurrent capitalized costs as of December 31, 2022 and September 30, 2022, respectively.

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

These costs amortized were recorded in cost of sales.

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

There was no impairment related to fulfillment costs capitalized for the three months ended December 31, 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 June 30, 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 December 31, 2022 is set forth in the table below:

(Amounts in thousands)

5 unchanged sentences

Three months ended

Nine months ended

(Amounts in thousands except per share data)

Net income (loss)

8 unchanged sentences

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.

Anti-dilutive securities include restricted stock, which are excluded from the diluted income (loss) per share computation.

Non-vested restricted stock awards of 194 thousand were excluded from the diluted loss per share calculation for the three months ended December 31, 2021.

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 $ 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 $ 8.7 million and $ 6.9 million as of December 31, 2022.

These receivables are included in Accounts receivable and Long-term receivable in the amount of $ 8.9 million and $ 7.4 million as of September 30, 2022, 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 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 accounts have no past amounts due as of December 31, 2022 and September 30, 2022.

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

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

2 unchanged sentences

The unearned income represents a rate similar to market at the inception of the agreement.

The amount of interest income earned from sales whose payment terms exceed one year for the three months ended December 31, 2022 and 2021 was $ 182 thousand and $ 139 thousand, respectively.

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

There was one new agreement effective in the first quarter of fiscal year 2023 causing an increase in Accounts and Long-term receivable.

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

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 $ 3.0 million of payments to be received over the next

2 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.

The revenue for this transaction was recorded net during the first quarter of fiscal year 2023.

Receivables whose payment terms exceed one year are placed on non-accrual status, meaning interest income stops being recorded, when the customer has a past due amount in excess of 30 days or reasonable doubt exists in collecting all interest and principal.

19 unchanged sentences

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

Several components used in our HPP segment products are obtained from sole-source suppliers.

We are dependent on key vendors such as ADP, NXP, and BCRM for a variety of processors for certain products.

We are dependent on NVIDIA for our high-speed interconnect components and Marvel for Myricom components.

Despite our dependence on these sole-source suppliers, based on our current forecast and our projected sales obligations, we believe we have adequate inventory on hand and our current near-term requirements can be met in the existing supply chain.

COVID-19 has adversely affected the distribution channel leading to significantly longer lead times when ordering product.

Manufacturers are not producing as much product as prior to the pandemic due to disruptions, resulting in supply shortages.

Additionally, recent global shipping delays have exacerbated this problem.

The TS segment has many vendors it transacts with and supply shortages are pervasive with many of them.

Information related to both lessee and lessor

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

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

Three months ended

Condensed Consolidated Statements of Operations Location

June 30, 2022

June 30, 2021

(Amounts in thousands)

Finance Lease:

Interest on lease liabilities

Interest expense

Operating Lease:

Operating lease cost

Selling, general, and administrative

Short-term lease cost

Selling, general, and administrative

Total lease costs

Less sublease interest income

Total lease costs, net of sublease interest income

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

June 30, 2022

June 30, 2021

December 31, 2022

December 31, 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 June 30, 2022 and 2021 is below:

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

Three months ended

June 30, 2022

June 30, 2021

(Amounts in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from short-term leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Lease assets obtained in exchange for new lease liabilities

Operating leases

Cash received from subleases

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

December 31, 2022

December 31, 2021

(Amounts in thousands)

4 unchanged sentences

Financing cash flows from finance leases

Lease assets obtained in exchange for new lease liabilities

Operating leases

Cash received from subleases

Accounts payable and other noncurrent liabilities

Accounts payable and accrued expenses, and Other noncurrent liabilities

The Company enters into certain multi-year agreements with vendors when also entering into some of the multi-year contracts the Company enters into with customers.

4 unchanged sentences

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 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.

Interest expense related to these agreements for the three months ended December 31, 2022 and 2021 was $ 56 thousand and $ 74 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:

June 30, 2022

June 30, 2021

December 31, 2022

September 30, 2022

(Amounts in thousands)

1 unchanged sentence

Other noncurrent liabilities

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

The Company had a total of approximately $ 8.3 million due (net of interest) to one of these vendors as of December 31, 2022.

This is approximately 46 % of Accounts payable and other noncurrent liabilities.

The Company had a total of approximately $ 16.1 million due (net of interest) to one of these vendors as of September 30, 2022.

This is approximately 63 % of Accounts payable and other noncurrent liabilities.

The TS segment has many vendors it transacts with and does not have any specific agreement with this vendor that it must purchase certain products from the vendor.

4 unchanged sentences

In October 2019, the Company borrowed $ 2.0 million with a 5.1 % rate of interest related to a multi-year agreement with a customer.

On April 17, 2020, CSP, Inc.

and Modcomp, Inc., its wholly owned subsidiary (collectively, the “Borrowers”) each received a loan in the form of a promissory note from Paragon Bank (“Lender”) in the amounts of $ 827,000 and $ 1,353,600 , respectively (the “SBA Loans”) under the Paycheck Protection Program (“PPP”), which was established under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S.

Small Business Administration (“SBA”).

The SBA Loans have a two-year term and carry an annual fixed interest rate of 1 %.

The SBA Loans provided for customary events of default, including, among others, those relating to failure to make payment, bankruptcy, materially false or misleading representations to Lender or SBA, and adverse changes in the financial condition or business operations that Lender believed could materially affect Borrowers’ ability to pay the SBA Loans.

The Borrowers did not provide any collateral or guarantees for the SBA Loans and the Borrowers could prepay the principal of the SBA Loans at any time without penalty.

The Borrowers applied to the Lender for forgiveness of an amount due on the SBA Loans in an amount equal to the sum of certain costs during the 24 week period beginning on the date of the first disbursement of the SBA Loans.

The amount of SBA Loans forgiveness was calculated in accordance with the requirements of the PPP, including provisions of Section 1106 of the CARES Act.

We used the SBA Loans proceeds in accordance with the applicable SBA guidelines.

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 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

Interest expense related to the notes for the three months ended December 31, 2022 and 2021 was $ 5 thousand and $ 14 thousand, respectively.

December 31, 2022

September 30, 2022

4 unchanged sentences

Notes payable - noncurrent portion

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.

As of December 31, 2022 and September 30, 2022, 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 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.

As of December 31, 2022 and September 30, 2022, Company borrowings, all from the TS segment, under the inventory line of credit were $ 3.4 million and $ 3.1 million, respectively, and the Company was in compliance with all financial covenants.

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

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

Pension and Retirement Plans

4 unchanged sentences

supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan.

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

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.

7 unchanged sentences

plans are as follows:

Three Months Ended June 30,

(Amounts in thousands)

Interest cost

Expected return on plan assets

Amortization of past service costs

Amortization of net loss

Net periodic (benefit) cost

Post Retirement:

Interest cost

Amortization of net gain

Net periodic cost (benefit)

Nine Months Ended June 30,

Three Months Ended December 31,

(Amounts in thousands)

2 unchanged sentences

Amortization of past service costs

Amortization of net loss

Amortization of net (gain) loss

Net periodic (benefit) cost

1 unchanged sentence

Interest cost

Amortization of net gain

Net periodic cost

Amortization of net (gain) loss

Net periodic benefit

The fair value of the assets held by the U.K.

1 unchanged sentence

Fair Values as of

June 30, 2022

December 31, 2022

September 30, 2022

5 unchanged sentences

Total plan assets

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.

An income tax expense of $ 133 thousand was recorded for the three months ended December 31, 2022 compared to an income tax expense of $ 12 thousand in the same period of fiscal year 2022.

The income tax expense for three months ended December 31, 2022 is primarily driven by minimum state tax expenses and the required capitalization of R&D expenses under IRC Section 174, offset by the use of federal NOL and R&D credits.

The Company continues to maintain

a full valuation allowance on their operations but will continue to evaluate this need going forward.

The income tax expense for the three months ended December 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 (PPP).

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.

However, we used a discrete effective tax rate method to calculate income taxes for the three months ended December 31, 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 June 30, 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 June 30, 2022

As of December 31, 2022

As of September 30, 2022

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 June 30, 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 December 31, 2022 and September 30, 2022.

Segment Information

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 June 30,

(Amounts in thousands)

(Loss) income from operations

Capital expenditures

Depreciation and amortization

(Loss) income from operations

Capital expenditures

Depreciation and amortization

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

Technology Solutions Segment

Nine months ended June 30,

Three months ended December 31,

(Amounts in thousands)

(Loss) income from operations

Operating (loss) income

Interest income

Interest expense

Capital expenditures

Depreciation and amortization

(Loss) income from operations

Operating (loss) income

Interest income

Interest expense

Capital expenditures

3 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 nine months ended June 30, 2022 and 2021.

Three months ended June 30,

Nine months ended June 30,

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

Three months ended December 31,

(in millions)

(Amounts in millions)

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

On February 8, 2011, the Board of Directors authorized the Company to purchase up to 250 thousand additional shares of the Company's outstanding common stock at market price.

The plan does not expire.

As of May 14, 2020, we suspended our stock repurchase program until further economic clarity.

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

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.

Customer A had a balance of $ 13.6 million, or 47 %, of total consolidated accounts receivable and long-term receivable as of December 31, 2022.

Customer A had a balance of $ 16.2 million, or 52 %, of total consolidated accounts

receivable and long-term receivable as of September 30, 2022.

There were no other customers with more than 10% of total consolidated accounts receivable and long-term receivable as of September 30, 2022 and December 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 December 31, 2022.

On December 6, 2022, the Company’s board of directors declared a cash dividend of $ 0.03 per share which was paid on January 6, 2023 to shareholders of record as of December 21, 2022, the record date.

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