What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-10 · 166 added, 143 removed, 501 unchanged (38% of the section changed)

17 unchanged sentences

Long-term receivable

Deferred income taxes

Cash surrender value of life insurance

28 unchanged sentences

Three months ended

Six months ended

Nine Months Ended

Cost of sales:

11 unchanged sentences

Total other income (expense), net

Income (loss) before income taxes

Income tax expense

Net income (loss)

Net income (loss) attributable to common shareholders

Net income (loss) per common share - basic

Income before income taxes

Income tax (benefit) expense

Net income attributable to common shareholders

Net income per common share - basic

Weighted average common shares outstanding – basic

Net income (loss) per common share - diluted

Net income per common share - diluted

Weighted average common shares outstanding – diluted

4 unchanged sentences

Three months ended

Six months ended

Net income (loss)

Nine Months Ended

Foreign currency translation gain (loss) adjustments, net

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the three months ended March 31, 2023 and 2022:

For the three months ended June 30, 2023 and 2022:

(Amounts in thousands, except per share data)

1 unchanged sentence

Shareholders’

Three Months Ended March 31, 2023:

Balance as of December 31, 2022

Three Months Ended June 30, 2023:

Balance as of March 31, 2023

Other comprehensive income

Stock-based compensation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Purchase of common stock

Cash dividends paid on common stock ($ 0.04 per share)

Balance as of March 31, 2023

Balance as of June 30, 2023

comprehensive

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

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, 2023 and 2022:

For the nine months ended June 30, 2023 and 2022:

(Amounts in thousands, except per share data)

1 unchanged sentence

Shareholders’

Six months ended March 31, 2023:

Nine months ended June 30, 2023:

Balance as of September 30, 2022

3 unchanged sentences

Issuance of shares under employee stock purchase plan

Purchase of common stock

Cash dividends paid on common stock ($ 0.10 per share)

Balance as of March 31, 2023

Balance as of June 30, 2023

comprehensive

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

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Six months ended

Nine Months Ended

Operating activities

Net income (loss)

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

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

Amortization of intangibles

5 unchanged sentences

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

(Decrease) increase in cash surrender value of life insurance

Deferred income taxes

Decrease in cash surrender value of life insurance

Changes in operating assets and liabilities:

Decrease in accounts receivable

Increase in life insurance receivable

Increase in inventories

Decrease (increase) in refundable income taxes

(Increase) decrease in accounts receivable

Decrease (increase) in inventories

Decrease in refundable income taxes

Increase in operating lease right-of-use assets

Decrease in other assets

(Increase) decrease in investment in lease

Decrease in long-term receivable

Decrease (increase) in other assets

Decrease in investment in lease

(Increase) decrease in long-term receivable

Decrease in accounts payable and accrued expenses

Increase in interest payable

Decrease in interest payable

Decrease in operating lease liabilities

6 unchanged sentences

Purchase of held-to-maturity investments

Proceeds from maturities of held-to-maturity investments

Proceeds from corporate life insurance owned policy

Proceeds from sales of property, equipment, and improvements

1 unchanged sentence

Purchases of property, equipment and improvements

Net cash used in investing activities

Net cash (used in) provided by investing activities

Financing activities

5 unchanged sentences

Proceeds from issuance of shares under equity compensation plans

Net cash used in financing activities

Effects of exchange rate on cash

Net cash (used in) provided by financing activities

Effects of exchange rate on cash, net

Net (decrease) increase in cash and cash equivalents

2 unchanged sentences

Supplementary cash flow information:

Cash paid for income taxes

Cash paid (received) for income taxes

Cash paid for interest

Supplementary non-cash financing activities:

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, 2023

FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2023

Organization and Business

13 unchanged sentences

New Significant Accounting Policy – Held-to-maturity investment securities

Our held-to-maturity investments consist of treasury bills, which mature at different intervals with the last maturity date in August of 2023.

Our investment securities are classified as held-to-maturity investments and consists of treasury bills, which mature at different intervals with the last maturity date in August of 2023.

These investments are stated at amortized cost.

The carrying value of these investments as of March 31, 2023 was $3.5 million and we did not have any outstanding investments as of September 30, 2022.

We did not record any gains or losses on these securities during the six months ended March 31, 2023.

The estimated fair value of these investments approximated their carrying values of March 31, 2023.

The carrying value of these investments as of June 30, 2023 was $2.4 million and we did not have any outstanding investments as of September 30, 2022.

We did not record any gains or losses on these securities during the nine months ended June 30, 2023.

The estimated fair value of these investments approximated their carrying values of June 30, 2023.

We do not intend to sell these investments.

4 unchanged sentences

Recent Accounting Pronouncements

New accounting standards not adopted as of March 31, 2023

New accounting standards not adopted as of June 30, 2023

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

1 unchanged sentence

For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses.

For available-for-sale debt securities, entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset.

For available-for-sale debt securities (if any), entities will be required to recognize an allowance for credit losses rather than a reduction to the carrying value of the asset.

Additionally, there will be a significant increase in the amount of disclosures by year of origination for certain financing receivables.

For public entities classified as a smaller reporting company, the new standard is effective for annual periods beginning after

December 15, 2022 (ASU 2019-10 Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

For public entities classified as a smaller reporting company, the new standard is effective for annual periods beginning after December 15, 2022 (ASU 2019-10 Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates ), including interim periods within that annual period.

11 unchanged sentences

Other services generally include revenue generated through our royalty, extended warranty, multicomputer repair, and maintenance contracts.

Royalty revenue is sales-based and recognized on date of subsequent sale of the product, which occurs on the date of customer shipment.

Royalty revenue is sales-based and recognized on the date of subsequent sale of the product, which occurs on the date of customer shipment.

Revenue from extended warranty contracts is recognized ratably over the warranty period.

17 unchanged sentences

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.

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.

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.

This method is most appropriate as it depicts the measure of progress towards satisfaction of the performance obligation.

22 unchanged sentences

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

Current contract assets were $ 2.3 million and $ 4.4 million as of March 31, 2023 and September 30, 2022, respectively.

Current contract assets were $ 2.1 million and $ 4.4 million as of June 30, 2023 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 March 31, 2023 and September 30, 2022.

There were no noncurrent contract assets as of June 30, 2023 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 $ 3.7 million and $ 4.1 million as of March 31, 2023 and September 30, 2022, respectively.

Current contract liabilities were $ 3.5 million and $ 4.1 million as of June 30, 2023 and September 30, 2022, respectively.

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

There were no long-term contract liabilities as of March 31, 2023 and September 30, 2022, respectively.

Revenue recognized for the six months ended March 31, 2023 that was included in contract liabilities as of September 30, 2022 was $ 1.9 million.

There were no long-term contract liabilities as of June 30, 2023 and September 30, 2022, respectively.

Revenue recognized for the three and nine months ended June 30, 2023 that was included in contract liabilities as of September 30, 2022 was $ 0.5 million and $ 2.4 million, respectively.

Contract Costs

4 unchanged sentences

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, 2023 and September 30, 2022.

The portion of current capitalized costs were $ 155 thousand and $ 128 thousand as of March 31, 2023 and September 30, 2022, respectively.

Current capitalized contract costs are within the other current assets on the condensed consolidated balance sheets as of June 30, 2023 and September 30, 2022.

The portion of current capitalized costs were $ 149 thousand and $ 128 thousand as of June 30, 2023 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 March 31, 2023 and 2022 were $ 98 thousand and $ 91 thousand, respectively.

The amount of incremental costs amortized for the six months ended March 31, 2023 and 2022 were $ 199 thousand and $ 181 thousand, respectively.

The amount of incremental costs amortized for the three months ended June 30, 2023 and 2022 were $ 103 thousand and $ 91 thousand, respectively.

The amount of incremental costs amortized for the nine months ended June 30, 2023 and 2022 were $ 302 thousand and $ 272 thousand, respectively.

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

There was no impairment related to incremental costs capitalized during the six months ended March 31, 2023 and 2022.

There was no impairment related to incremental costs capitalized during the nine months ended June 30, 2023 and 2022.

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 $ 3 thousand as of March 31, 2023 and $ 9 thousand as of September 30, 2022.

The were no noncurrent capitalized costs as of March 31, 2023 and September 30, 2022, respectively.

The amount of fulfillment costs amortized for the three months ended March 31, 2023 and 2022 were $ 3 thousand and $ 3 thousand, respectively.

The amount of fulfillment costs amortized for the six months ended March 31, 2023 and 2022 were $ 6 thousand and $ 6 thousand, respectively.

The were no current capitalized costs as of June 30, 2023 and $ 9 thousand as of September 30, 2022.

The were no noncurrent capitalized costs as of June 30, 2023 and September 30, 2022, respectively.

The amount of fulfillment costs amortized for the three months ended June 30, 2023 and 2022 were $ 3 thousand and $ 3 thousand, respectively.

The amount of fulfillment costs amortized for the nine months ended June 30, 2023 and 2022 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 for the six months ended March 31, 2023 and 2022.

There was no impairment related to fulfillment costs capitalized for the nine months ended June 30, 2023 and 2022.

Projects are typically billed upon completion or at certain milestones.

5 unchanged sentences

We elected to use the optional exemption to not disclose the aggregate amount of the transaction price allocated to performance obligations that have an original expected duration of one year or less.

This is due to a low amount of performance obligations, which are less than one year from being unsatisfied at each period end.

This is due to a low number of performance obligations, which are less than one year from being unsatisfied at each period end.

Most of these contracts are related to product sales.

2 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, 2023 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, 2023 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 restricted stock awards 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 restricted stock awards and is computed by dividing net income 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.

Basic and diluted earnings per share computations for the Company’s reported net loss attributable to common stockholders are as follows:

Basic and diluted earnings per share computations for the Company’s reported net income attributable to common stockholders are as follows:

Three months ended

Six months ended

Nine months ended

(Amounts in thousands except per share data)

Net income (loss)

net income attributable to nonvested common stock

Net income (loss) attributable to common shareholders

Net income attributable to common shareholders

Weighted average total shares outstanding – basic

3 unchanged sentences

Weighted average common shares outstanding – diluted

Net income (loss) per common share - basic

Net income (loss) per common share - diluted

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

Non-vested restricted stock awards of 26 thousand and 101 thousand were excluded from the diluted net income per share calculation for the three and six months ended March 31, 2023, respectively.

Non-vested restricted stock awards of 238 thousand and 175 thousand were excluded from the diluted net income per share calculation for the three and six months ended March 31, 2022, respectively.

Net income per common share - basic

Net income per common share - diluted

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

Non-vested restricted stock awards of 16 thousand and 98 thousand shares were excluded from the diluted net income per share calculation for the three and nine months ended June 30, 2023, respectively.

Non-vested restricted stock awards of 231 thousand and 194 thousand shares were excluded from the diluted net income per share calculation for the three and nine months ended June 30, 2022, respectively.

Accounts and Long-Term Receivable

1 unchanged sentence

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 $ 8.7 million and $ 6.7 million as of March 31, 2023.

These receivables are included in Accounts receivable and Long-term receivable in the amount of approximately $ 8.2 million and $ 8.4 million as of June 30, 2023, respectively.

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 March 31, 2023 and September 30, 2022.

There was no activity in the allowance for credit losses of these receivables for the three and six months ended March 31, 2023 and 2022, respectively.

All accounts have no past amounts due as of June 30, 2023 and September 30, 2022.

There was no activity in the allowance for credit losses of these receivables for the three and nine months ended June 30, 2023 and 2022, 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 March 31, 2023 and 2022 was $ 189 thousand and $ 122 thousand, respectively.

The amount of interest income earned from sales whose payment terms exceed one year for the six months ended March 31, 2023 and 2022 was $ 371 thousand and $ 261 thousand, respectively.

The amount of interest income earned from sales whose payment terms exceed one year for the three months ended June 30, 2023 and 2022 was $ 234 thousand and $ 108 thousand, respectively.

The amount of interest income earned from sales whose payment terms exceed one year for the nine months ended June 30, 2023 and 2022 was $ 605 thousand and $ 369 thousand, respectively.

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

2 unchanged sentences

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

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

This agreement included approximately $ 3.1 million of payments to be received over the next 4 years from the effective date of the agreement.

The revenue for this transaction was recorded net during the third 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.

21 unchanged sentences

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.

We are dependent on NVIDIA for our high-speed interconnect 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.

1 unchanged sentence

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.

The TS segment has many vendors it transacts with and supply shortages only remain with a few of our vendors.

Information related to both lessee and lessor

The components of lease costs for the three months ended March 31, 2023 and 2022 are as follows:

The components of lease costs for the three months ended June 30, 2023 and 2022 are as follows:

Three months ended

Condensed Consolidated Statements of Operations Location

March 31, 2023

March 31, 2022

June 30, 2023

June 30, 2022

(Amounts in thousands)

8 unchanged sentences

Total lease costs

Less sublease interest income

Total lease costs, net of sublease interest income

The components of lease costs for the six months ended March 31, 2023 and 2022 are as follows:

Six months ended

The components of lease costs for the nine months ended June 30, 2023 and 2022 are as follows:

Nine months ended

Condensed Consolidated Statements of Operations Location

March 31, 2023

March 31, 2022

June 30, 2023

June 30, 2022

(Amounts in thousands)

10 unchanged sentences

Total lease costs, net of sublease interest income

Supplemental cash flow information related to leases for the six months ended March 31, 2023 and 2022 is below:

Six months ended

March 31, 2023

March 31, 2022

Supplemental cash flow information related to leases for the nine months ended June 30, 2023 and 2022 is below:

Nine months ended

June 30, 2023

June 30, 2022

(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

6 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 March 31, 2023 and 2022 was $ 53 thousand and $ 72 thousand, respectively.

Interest expense related to these agreements for the six months ended March 31, 2023 and 2022 was $ 109 thousand and $ 146 thousand, respectively.

Interest expense related to these agreements for the three months ended June 30, 2023 and 2022 was $ 74 thousand and $ 57 thousand, respectively.

Interest expense related to these agreements for the nine months ended June 30, 2023 and 2022 was $ 185 thousand and $ 203 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, 2023

June 30, 2023

September 30, 2022

2 unchanged sentences

Other noncurrent liabilities

The Company had a total of approximately $ 7.3 million due (net of interest) to one of these vendors as of March 31, 2023.

The Company had a total of approximately $ 3.3 million due (net of interest) to one of these vendors as of June 30, 2023.

This is approximately 21 % of Accounts payable and other noncurrent liabilities.

1 unchanged sentence

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

It was the same vendor as of March 31, 2023 and September 30, 2022 that only transacts with the U.S.

It was the same vendor as of June 30, 2023 and September 30, 2022 that only transacts with the U.S.

division of the TS segment.

5 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.

Interest expense related to the notes for the three months ended March 31, 2023 and 2022 was $ 6 thousand and $ 13 thousand, respectively.

Interest expense related to the notes for the six months ended March 31, 2023 and 2022 was $ 11 thousand and $ 27 thousand, respectively.

March 31, 2023

Interest expense related to the notes for the three months ended June 30, 2023 and 2022 was $ 5 thousand and $ 12 thousand, respectively.

Interest expense related to the notes for the nine months ended June 30, 2023 and 2022 was $ 16 thousand and $ 39 thousand, respectively.

June 30, 2023

September 30, 2022

4 unchanged sentences

Notes payable - noncurrent portion

As of March 31, 2023 and September 30, 2022, the Company maintained an inventory line of credit with a borrowing capacity of $ 15.0 million.

As of June 30, 2023 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 March 31, 2023 and September 30, 2022, Company borrowings, all from the TS segment, under the inventory line of credit were $ 1.3 million and $ 3.1 million, respectively, and the Company was in compliance with all financial covenants.

As of March 31, 2023 and September 30, 2022, this line of credit also includes availability of a limited cash withdrawal of up to $ 1.0 million.

As of March 31, 2023 and September 30, 2022 there were no cash withdrawals outstanding.

As of June 30, 2023 and September 30, 2022, Company borrowings, all from the TS segment, under the inventory line of credit were $ 1.3 million and $ 3.1 million, respectively, and the Company was in compliance with all financial covenants.

As of June 30, 2023 and September 30, 2022, this line of credit also includes availability of a limited cash withdrawal of up to $ 1.0 million.

As of June 30, 2023 and September 30, 2022 there were no cash withdrawals outstanding.

Pension and Retirement Plans

13 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

Net periodic (benefit) cost

Six Months Ended March 31,

Amortization of net loss (gain)

Net periodic cost

Nine months ended June 30,

(Amounts in thousands)

7 unchanged sentences

Amortization of net gain

Net periodic (benefit) cost

Net periodic cost

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

1 unchanged sentence

Fair Values as of

March 31, 2023

June 30, 2023

September 30, 2022

5 unchanged sentences

Total plan assets

An income tax expense of $ 71 thousand was recorded for the three months ended March 31, 2023 compared to an income tax expense of $ 5 thousand in the same period in the prior year.

An income tax expense of $ 204 thousand was recorded for the six months ended March 31, 2023 compared to an income tax expense of $ 17 thousand in the same period in the prior year.

The income tax expense for the for the three and six months ended March 31, 2023 was primarily driven by minimum state tax expenses and the required capitalization of R&D expenses under IRC Section 174, partially offset by the use of federal NOL and R&D credits.

The Company continues to maintain a full valuation allowance on our operations but will continue to evaluate this need going forward.

The income tax expense for the three and six months ended March 31, 2022 was primarily driven by minimum state tax expenses due to the full valuation allowance in place during the period.

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 March 31, 2023 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.

An income tax benefit of $ 1.7 million was recorded for the three months ended June 30, 2023 compared to an income tax expense of $ 11 thousand in the same prior year period.

An income tax benefit of $ 1.5 million was recorded for the nine months ended June 30, 2023 compared to an income tax expense of $ 28 thousand in the same prior year period.

The Company undertakes a review of its valuation allowance at each financial statement period, reviewing the positive and negative evidence to help determine whether it is more likely than not that the Company will realize the future tax benefits from its deferred tax balances.

In the year ended September 30, 2020, the Company established a partial valuation allowance against its deferred tax assets in light of results at the time, the COVID-19 pandemic, and the resulting economic fallout, and established a full valuation during the year ended September 30, 2021.

Since that time, the COVID-19 pandemic has ended, and the Company’s Technology Solutions business has grown in fiscal years 2022 and 2023, which provided strong financial results including growth in product and software sales, third party maintenance sales, and recurring managed services and cloud software sales.

The backlog continues to be strong as of June 30, 2023.

As a result, the Company has determined that it is more likely than not that substantially all of its net deferred tax assets in the U.S.

jurisdiction will be utilized and that associated valuation allowances should be reversed during the three months ended June 30, 2023.

The valuation reversed during the period resulted in a $ 1.8 million benefit.

The Company separately analyzed the realizability of its federal and state credits and determined $ 731 thousand (net of federal benefit) of state credits are expected to expire unutilized and kept a valuation allowance against these credits.

The Company will continue to maintain a valuation allowance against certain state tax credits in the U.S.

and a full valuation allowance against the net deferred tax assets in the U.K.

jurisdiction.

The income tax provision for interim periods is generally determined based upon the expected effective income tax rate for the full year and the tax rate applicable to certain discrete transactions in the interim period.

To determine the annual effective income tax rate, we must estimate both the total income (loss) before income tax for the full year and the jurisdictions in which that income (loss) is subject to tax.

The actual effective income tax rate for the full year may differ from these estimates if income (loss) before income tax is greater than or less than what was estimated or if the

allocation of income (loss) to jurisdictions in which it is taxed is different from the estimated allocations.

With the economic uncertainty surrounding the Company’s business settling since previous quarters, we have been able to produce more accurate forecasts of our full year earnings and small changes in ordinary income no longer result in significant changes to the annualized effective tax rates.

As a result, the Company has resumed using the annualized effective tax rate method to calculate income taxes as prescribed under ASC 740 for the three months ended June 30, 2023.

The estimated annualized effective income tax rate for the nine months ended June 30, 2023 was 21.99 %.

Other differences between our effective income tax rate and the U.S.

federal statutory rate are the impact of state taxes and tax credits that we expect to be able utilize against federal and state taxes.

The effective tax rate for the three and nine months ended June 30, 2023 was a benefit of ( 205.8 %) and ( 64.5 %), respectively, which was primarily driven by the release of the valuation against the Company's deferred tax assets.

The income tax expense for the three and nine months ended June 30, 2022 was primarily driven by minimum state tax expenses due to the full valuation allowance in place during the period.

As of June 30, 2023, management assessed the balances of its deferred tax assets and liabilities to determine if any uncertain tax positions existed that would require a reserve under ASC 740-10.

It determined that a reserve was required against federal and state research and development credits of $ 117 thousand and $ 118 thousand, respectively.

Management will continue to evaluate the need for reserves under ASC 740-10 in future reporting periods.

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, 2023 or September 30, 2022.

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

If this data is not available, we use observable market-based inputs to estimate fair value, which are classified within Level 2.

If this data is not available, we use observable market-based inputs to estimate fair value, which

are classified within Level 2.

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, 2023

As of June 30, 2023

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 March 31, 2023 and September 30, 2022.

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, 2023 and September 30, 2022.

Segment Information

The following tables present certain operating segment information for the three and six months ended March 31, 2023 and 2022.

The following tables present certain operating segment information for the three and nine months ended June 30, 2023 and 2022.

Technology Solutions Segment

Three months ended March 31,

Three months ended June 30,

(Amounts in thousands)

10 unchanged sentences

Technology Solutions Segment

Six months ended March 31,

Nine months ended June 30,

(Amounts in thousands)

12 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, 2023 and 2022.

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, 2023 and 2022.

Three months ended June 30,

Nine months ended June 30,

(in millions)

1 unchanged sentence

(Amounts in millions)

One customer, not listed above, had a balance of $ 14.1 million, or 49 %, of total consolidated accounts receivable and long-term receivable as of March 31, 2023 and a balance of $ 15.8 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 March 31, 2023.

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, 2023.

One customer, not listed above, had a balance of $ 12.2 million, or 38 %, of total consolidated accounts receivable and long-term receivable as of June 30, 2023 and a balance of $ 15.8 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 June 30, 2023.

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, 2023.

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.

On February 8, 2023, the Company’s board of directors declared a cash dividend of $ 0.03 per share which was paid on March 14, 2023 to shareholders of record as of February 24, 2023, the record date.

On May 10, 2023, the Company’s board of directors declared a cash dividend of $ 0.04 per share which was paid on June 13, 2023 to shareholders of record as of May 25, 2023, 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