CSP INC /MA/ 10-Q

Item 1. Financial Statements CSP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except par value) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, ​ 2023 2023 ​ ​ (unaudited) ​ ​ ​ ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 25,611 ​ $ 25,217 Accounts receivable, net of allowances of $ 61 and $ 100 ​ 11,722 ​ 12,955 Financing receivables, net of allowances of $ 22 and $ 0 ​ 7,497 ​ 7,171 Inventories ​ 6,963 ​ 2,542 Other current assets ​ 1,824 ​ 2,479 Total current assets ​ 53,617 ​ 50,364 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Property, equipment and improvements, net ​ 569 ​ 525 Operating lease right-of-use assets ​ ​ 845 ​ ​ 966 Intangibles, net ​ 49 ​ 46 Financing receivables due after one year, net of allowances of $ 55 and $ 0 ​ ​ 2,453 ​ 4,224 Deferred income taxes, net ​ 2,346 ​ 2,346 Cash surrender value of life insurance ​ 5,390 ​ 5,356 Pension benefits assets ​ ​ 2,041 ​ ​ 1,958 Other assets ​ 117 ​ 119 Total assets ​ $ 67,427 ​ $ 65,904 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ ​ Current liabilities: ​ ​ Accounts payable and accrued expenses ​ $ 13,954 ​ $ 10,785 Line of credit ​ ​ 760 ​ ​ 1,515 Note payable ​ ​ — ​ ​ 449 Deferred revenue ​ 1,252 ​ 1,898 Pension and retirement plans ​ 89 ​ 98 Income taxes payable ​ 927 ​ 914 Total current liabilities ​ 16,982 ​ 15,659 Pension and retirement plans ​ 1,227 ​ 1,251 Operating lease liabilities - noncurrent portion ​ ​ 353 ​ ​ 482 Income taxes payable ​ 513 ​ 513 Other noncurrent liabilities ​ 1,878 ​ 1,851 Total liabilities ​ 20,953 ​ 19,756 ​ ​ ​ ​ ​ ​ ​ Shareholders’ equity: ​ ​ Common stock, $ .01 par value per share; authorized, 7,500 shares; issued and outstanding 4,728 and 4,728 shares, respectively ​ 48 ​ 48 Additional paid-in capital ​ 21,179 ​ 20,883 Retained earnings ​ 31,034 ​ 31,311 Accumulated other comprehensive loss ​ ( 5,787 ) ​ ( 6,094 ) Total shareholders’ equity ​ 46,474 ​ 46,148 Total liabilities and shareholders’ equity ​ $ 67,427 ​ $ 65,904 ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ 3 Table of Contents CSP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except for per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ December 31, ​ December 31, ​ ​ 2023 2022 ​ Sales: ​ ​ ​ Product ​ $ 11,407 ​ $ 14,221 ​ Services ​ 3,968 ​ 4,123 ​ Total sales ​ 15,375 ​ 18,344 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales: ​ ​ ​ Product ​ 9,228 ​ 10,771 ​ Services ​ 2,052 ​ 1,756 ​ Total cost of sales ​ 11,280 ​ 12,527 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 4,095 ​ 5,817 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ Engineering and development ​ 700 ​ 836 ​ Selling, general and administrative ​ 3,738 ​ 3,617 ​ Total operating expenses ​ 4,438 ​ 4,453 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating (loss) income ​ ( 343 ) ​ 1,364 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ Foreign exchange loss ​ ( 174 ) ​ ( 501 ) ​ Interest expense ​ ( 49 ) ​ ( 64 ) ​ Interest income ​ 496 ​ 261 ​ Other income, net ​ 10 ​ 34 ​ Total other income (expense), net ​ 283 ​ ( 270 ) ​ (Loss) income before income taxes ​ ​ ( 60 ) ​ 1,094 ​ Income tax expense ​ ​ 13 ​ 133 ​ Net (loss) income ​ $ ( 73 ) ​ $ 961 ​ Net (loss) income attributable to common shareholders ​ $ ( 73 ) ​ $ 906 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income per common share - basic ​ $ ( 0.02 ) ​ $ 0.21 ​ Weighted average common shares outstanding – basic ​ 4,432 ​ 4,295 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income per common share - diluted ​ $ ( 0.02 ) ​ $ 0.21 ​ Weighted average common shares outstanding – diluted ​ ​ 4,432 ​ ​ 4,328 ​ ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ 4 Table of Contents CSP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ December 31, ​ December 31, ​ ​ 2023 2022 ​ Net (loss) income ​ $ ( 73 ) $ 961 ​ Foreign currency translation gain adjustments, net ​ 307 ​ 664 ​ Total comprehensive income ​ $ 234 $ 1,625 ​ ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ 5 Table of Contents CSP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY For the three months ended December 31, 2023 and 2022: (Amounts in thousands, except per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ other ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Retained ​ comprehensive ​ Shareholders’ Three months ended December 31, 2023: Shares Amount Capital Earnings loss Equity Balance as of September 30, 2023 4,728 ​ $ 48 ​ $ 20,883 ​ $ 31,311 ​ $ ( 6,094 ) ​ $ 46,148 Adoption of Accounting Standards Update 2016-13 ​ — ​ ​ — ​ ​ — ​ ​ ( 15 ) ​ ​ — ​ ​ ( 15 ) Net loss — ​ — ​ — ​ ( 73 ) ​ — ​ ( 73 ) Other comprehensive income — ​ ​ — ​ ​ — ​ ​ — ​ 307 ​ 307 Stock-based compensation — ​ ​ — ​ ​ 296 ​ ​ — ​ — ​ 296 Dividends declared ($ 0.04 per share) — ​ ​ — ​ ​ — ​ ​ ( 189 ) ​ — ​ ( 189 ) Balance as of December 31, 2023 4,728 ​ $ 48 ​ $ 21,179 ​ $ 31,034 ​ $ ( 5,787 ) ​ $ 46,474 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ other ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Retained ​ comprehensive ​ Shareholders’ Three months ended December 31, 2022: Shares Amount Capital Earnings loss Equity Balance as of September 30, 2022 4,554 ​ $ 46 ​ $ 19,476 ​ $ 26,769 ​ $ ( 7,328 ) ​ $ 38,963 Net income — ​ — ​ — ​ 961 ​ — ​ 961 Other comprehensive income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 664 ​ 664 Stock-based compensation — ​ ​ — ​ ​ 253 ​ ​ — ​ ​ — ​ 253 Restricted stock issuance 1 ​ ​ — ​ ​ 6 ​ ​ — ​ ​ — ​ 6 Dividends declared ($ 0.03 per share) — ​ ​ — ​ ​ — ​ ​ ( 137 ) ​ ​ — ​ ( 137 ) Balance as of December 31, 2022 4,555 ​ $ 46 ​ $ 19,735 ​ $ 27,593 ​ $ ( 6,664 ) ​ $ 40,710 ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ 6 Table of Contents CSP INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ December 31, ​ December 31, ​ 2023 2022 Operating activities ​ ​ Net (loss) income ​ $ ( 73 ) ​ $ 961 ​ ​ ​ ​ ​ ​ ​ Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: ​ ​ Depreciation ​ 76 ​ 86 Amortization of intangibles ​ 3 ​ 4 Foreign exchange loss ​ 174 ​ 501 Provision for credit losses ​ 23 ​ 25 Provision for obsolete inventory ​ 32 ​ 48 Amortization of lease right-of-use assets ​ ​ 121 ​ ​ 149 Stock-based compensation expense on restricted stock awards ​ 296 ​ 259 Increase in cash surrender value of life insurance ​ ( 34 ) ​ ( 31 ) ​ ​ ​ ​ ​ ​ ​ Changes in operating assets and liabilities: ​ ​ Decrease in accounts receivable ​ 1,283 ​ 424 Decrease in financing receivable ​ ​ 1,375 ​ ​ 774 (Increase) decrease in inventories ​ ( 4,448 ) ​ 208 Decrease in refundable income taxes ​ — ​ 133 Decrease in other assets ​ ​ 659 ​ ​ 276 Increase (decrease) in accounts payable and accrued expenses ​ 2,931 ​ ( 7,233 ) Increase in interest payable ​ ​ 16 ​ ​ 18 Decrease in operating lease liabilities ​ ​ ( 123 ) ​ ​ ( 144 ) Decrease in deferred revenue ​ ( 645 ) ​ ( 284 ) Decrease in pension and retirement plans liabilities ​ ( 32 ) ​ ( 267 ) Increase in income taxes payable ​ 13 ​ — Increase (decrease) in other long-term liabilities ​ 26 ​ ( 134 ) Net cash provided by (used in) operating activities ​ 1,673 ​ ( 4,227 ) ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ Additions of intangible assets ​ ​ ( 6 ) ​ ​ ( 51 ) Purchases of property, equipment and improvements ​ ( 120 ) ​ ( 44 ) Net cash used in investing activities ​ ( 126 ) ​ ( 95 ) ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ Net borrowing under line-of-credit agreement ​ ​ ( 755 ) ​ ​ 325 Repayments on note payable ​ ​ ( 427 ) ​ ​ ( 449 ) Principal payments on finance leases ​ — ​ ( 1 ) Net cash used in financing activities ​ ( 1,182 ) ​ ( 125 ) Effects of exchange rate on cash, net ​ 29 ​ 50 Net increase (decrease) in cash and cash equivalents ​ 394 ​ ( 4,397 ) Cash and cash equivalents beginning of period ​ ​ 25,217 ​ 23,982 Cash and cash equivalents end of period ​ $ 25,611 ​ $ 19,585 ​ ​ ​ ​ ​ ​ ​ Supplementary cash flow information: ​ ​ Cash paid for income taxes ​ $ — ​ $ 70 Cash paid for interest ​ $ 21 ​ $ — ​ ​ ​ ​ ​ ​ ​ Supplementary non-cash financing activities: ​ ​ ​ ​ ​ ​ 7 Table of Contents Dividend declared during period ​ $ 189 ​ $ 137 Customer financing for inventory sold (see Note 5 Financing receivables for details) ​ $ 1,657 ​ $ 2,852 ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8 Table of Contents CSP INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ Organization and Business CSP Inc. ("CSPi" or "CSPI" or "the Company" or "we" or "our") was incorporated in 1968 and is based in Lowell, Massachusetts. CSPi and its subsidiaries develop and market IT integration solutions, advanced security products, managed IT services, purpose built network adapters, and high-performance cluster computer systems to meet the diverse requirements of its commercial and defense customers worldwide. The Company operates in two segments, its Technology Solutions (“TS”) segment and High Performance Products (“HPP”) segment. 1. Summary of Significant Accounting Policies Basis of presentation 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. Certain information and footnote disclosures normally included in the annual consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, have been omitted. Accordingly, the Company believes that although the disclosures are adequate to make the information presented not misleading, the unaudited condensed consolidated financial statements should be read in conjunction with the notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023. Presentation - sales whose payment terms exceed one year Effective as of December 31, 2023 sales whose payment terms exceed one year is now presented as “Finance receivables, net of allowance” on the Consolidated Balance Sheets rather than being combined with Accounts receivable. The financial statement line item Long-term receivable is now labeled as “Financing receivables due after one year, net of allowances.” These changes are reflected retrospectively as of September 30, 2023. This change was made to provide more detail on the balance sheet related to these receivables and align with our footnotes. Use of estimates The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates and assumptions are related to the allowance for credit losses for accounts receivable and financing receivables, reserves for inventory obsolescence, the impairment assessment of intangible assets, right-of-use assets and lease liabilities, and the calculation of standalone selling price for revenue recognition, the calculation of liabilities related to deferred compensation and retirement plans and the calculation of income tax liabilities. Actual results may differ from those estimates under different assumptions or conditions. Significant Accounting Policies Except for the change in certain accounting policies upon adoption of the accounting standard described below, there have been no significant changes to the Company's significant accounting policies described in PART II, Item 8, Note 1, "Summary of Significant Accounting Policies", of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2023. 9 Table of Contents Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326) , an amendment of the FASB Accounting Standards Codification. Additional updates were issued in 2018-2020. The amended guidance replaces the current incurred loss impairment methodology for measurement of credit losses on financial instruments with a methodology (the “current expected credit losses model,” or “CECL model”) that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Under the CECL model, the allowance for losses on financial assets, measured at amortized cost, reflects management’s estimate of credit losses over the remaining expected life of such assets. The Company adopted ASU 2016-13 (the “new CECL standard”) as of October 1, 2023 using the modified retrospective method, with a cumulative-effect adjustment to the opening balance of Shareholders’ equity as of October 1, 2023. The adoption primarily impacted the estimation of our Allowance for credit losses for Accounts receivable and Financing receivables. Additionally, it affected allowance for credit losses of contract assets and investment in lease, net with effects being immaterial. The total impact recorded on our initial adoption of ASU 2016-13 as of October 1, 2023 included an increase of Accounts receivable, net of $ 67 k and a decrease of Financing receivables, net in the amount of $ 82 k with the total adjustment decreasing retained earnings of $ 15 k. For the accounting policies adopted and details of impacts from adoption refer to Note 4 - Accounts receivable, net and Note 5 - Financing receivables, net . ​ 2 . Revenue We derive revenue from the sale of integrated hardware and software, third-party service contracts, professional services, managed services, financing of hardware and software, and other services. We recognize revenue from hardware upon transfer of control, which is at a point in time typically upon shipment when title transfers. Revenue from software is recognized at a point in time when the license is granted. Professional services generally include implementation, installation, and training services. Professional services are considered a series of distinct services that form one performance obligation and revenue is recognized over time as services are performed. Revenue generated from managed services is recognized over the term of the contract. Certain managed services contracts include financing of hardware and software. Revenues from arrangements which include financing are allocated considering relative standalone selling prices of lease and non-lease components within the agreement. The lease component includes hardware, which is subject to ASC 842, Leases . The non-lease components are subject to ASC 606, Revenue from Contracts with Customers . Other services generally include revenue generated through our royalty, extended warranty, multicomputer repair, and maintenance contracts. 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. Multicomputer repair services revenue is recognized upon control transfer when the customer takes possession of the computer at time of shipping. Revenue generated from maintenance services is recognized evenly over the term of the contract. The right of return risk lies with the original manufacturer of the product. Managed service contracts contain the right to refund if canceled within 30 days of inception. Any products with a standard warranty are treated as a warranty obligation under ASC 460, Guarantees. 10 Table of Contents The following policies are applicable to our major categories of segment revenue transactions: TS Segment Revenue TS Segment revenue is derived from the sale of hardware, software, professional services, third-party service contracts, maintenance contracts, managed services, and financing of hardware and software. Financing revenue pertaining to the portion of an arrangement containing a lease is recognized in accordance with ASC 842. Financing revenue related to the lease is recorded in revenue as equipment leasing is part of our operations. Third-party service contracts are evaluated to determine whether such service revenue should be recorded as gross or net sales and whether over time or at point in time. HPP Segment Revenue 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. ARIA revenue is derived from sale of hardware, software, and managed services. 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. 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 divisions/segments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Technology Solutions Segment ​ ​ ​ ​ High ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ United ​ ​ ​ ​ ​ ​ ​ Consolidated Three months ended December 31. Segment Kingdom U.S. Total Total ​ ​ (Amounts in thousands) 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 472 ​ $ 312 ​ $ 10,622 ​ $ 10,934 ​ $ 11,406 Service ​ ​ 240 ​ ​ 69 ​ ​ 3,659 ​ ​ 3,728 ​ ​ 3,968 Finance * ​ ​ — ​ ​ — ​ ​ 1 ​ ​ 1 ​ ​ 1 Total sales ​ $ 712 ​ $ 381 ​ $ 14,282 ​ $ 14,663 ​ $ 15,375 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Technology Solutions Segment ​ ​ ​ ​ High ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ United ​ ​ ​ ​ ​ ​ ​ Consolidated Three months ended December 31. Segment Kingdom U.S. Total Total ​ ​ (Amounts in thousands) 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 2,162 ​ $ 191 ​ $ 11,867 ​ $ 12,058 ​ $ 14,220 Service ​ ​ 327 ​ ​ 87 ​ ​ 3,709 ​ ​ 3,796 ​ ​ 4,123 Finance * ​ ​ — ​ ​ — ​ ​ 1 ​ ​ 1 ​ ​ 1 Total sales ​ $ 2,489 ​ $ 278 ​ $ 15,577 ​ $ 15,855 ​ $ 18,344 * Finance revenue is related to equipment leasing and is not subject to the guidance on revenue from contracts with customers (ASC 606). 11 Table of Contents Significant Judgments 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. This method is most appropriate as it depicts the measure of progress towards satisfaction of the performance obligation. A financing component exists when at contract inception the period between the transfer of a promised good and/or service to the customer differs from when the customer pays for the good and/or service. As a practical expedient, we have elected not to adjust the amount of consideration for effects of a significant financing component when it is anticipated the promised good or service will be transferred and the subsequent payment will be one year or less. Certain contracts contain a financing component including managed services contracts with financing of hardware and software. The interest rate used reflects the approximate interest rate consistent with a separate financing transaction with the customer at the inception of the agreement. Revenues from arrangements which include financing are allocated considering relative standalone selling prices of lease and non-lease components within the agreement. The lease component includes hardware, which is subject to ASC 842, Leases . The non-lease components are subject to ASC 606, Revenue from Contracts with Customers . When product and non-managed services are sold together, the allocation of the transaction price to each performance obligation is calculated based on the estimated relative selling price or a budgeted cost-plus margin approach, as appropriate. Due to the complex nature of these contracts, there is significant judgment in allocating the transaction price. These estimates are periodically reviewed by project managers, engineers, and other staff involved to ensure estimates remain appropriate. For items sold separately, including hardware, software, professional services, maintenance contracts, other services, and third-party service contracts, there is no allocation as there is one performance obligation. We recognize revenue from third-party service contracts as either gross sales or net sales depending on whether we are acting as a principal party to the transaction or simply acting as an agent or broker based on control and timing. We are a principal if we control the good or service before that good or service is transferred to the customer. We record revenue as gross when we are a principal party to the arrangement and net of cost when we are acting as a broker or agent for a third party. Under gross sales recognition, the entire selling price is recorded in revenue and our cost to the third-party service provider or vendor is recorded in cost of sales. Under net sales recognition, the cost to the third-party service provider or vendor is recorded as a reduction to revenue resulting in net sales equal to the gross profit on the transaction. Third-party service contracts are sold in different combinations with hardware, software, and services. When we are an agent, revenue is typically recorded at a point in time. 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 includes critical updates. Contract Assets and Liabilities When we have performed work but do not have an unconditional right to payment, a contract asset is recorded. When we have the right to bill a customer, accounts receivable is recorded as an unconditional right exists. Current contract assets were $ 0.6 million and $ 0.9 million as of December 31, 2023 and September 30, 2023, respectively. The current portion is recorded in other current assets on the condensed consolidated balance sheets. There were no noncurrent contract assets as of December 31, 2023 and September 30, 2023. 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 $ 1.3 million and $ 1.9 million as of December 31, 2023 and September 30, 2023, 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 December 31, 2023 and September 30, 2023, respectively. Revenue recognized for the three months ended December 31, 2023 that was included in contract liabilities as of September 30, 2023 was $ 0.9 million. 12 Table of Contents 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. The costs are amortized over the contract term and expected renewal periods. The period of amortization is generally three to six years . 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 December 31, 2023 and September 30, 2023. The portion of current capitalized costs were $ 159 thousand and $ 172 thousand as of December 31, 2023 and September 30, 2023, 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 December 31, 2023 and 2022 were $ 108 thousand and $ 98 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 December 31, 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. Costs to fulfill a contract are related to the TS portion of the business and involve activities performed before managed services can be completed. Current capitalized fulfillment costs are in the other current assets and noncurrent costs are in other assets on the condensed consolidated balance sheets. The were no current capitalized costs as of December 31, 2023 and September 30, 2023. The were no noncurrent capitalized costs as of December 31, 2023 and September 30, 2023, respectively. The were no fulfillment costs amortized for the three months ended December 31, 2023. The amount of fulfillment costs amortized for the three months ended December 31, 2022 was $ 3 thousand. These costs amortized were recorded in Cost of sales. There was no impairment related to fulfillment costs capitalized for the three months ended December 31, 2023 and 2022. Other Projects are typically billed upon completion or at certain milestones. Product and services are typically billed when shipped or as services are being performed. Payment terms are typically 30 days to pay in full except in Europe where it could be up to 90 days . Most of our contracts are less than one year. There are certain contracts that contain a financing component. See Note 5 Financing receivables to the condensed consolidated financial statements for additional information. 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 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. We have certain contracts that have an original term of more than one year. The royalty agreement is longer than one year, but not included in the table below as the royalties are sales-based. 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 December 31, 2023 is set forth in the table below: ​ ​ ​ ​ ​ ​ (Amounts in thousands) Fiscal 2024 ​ $ 483 Fiscal 2025 ​ ​ 415 Fiscal 2026 ​ ​ 92 Fiscal 2027 ​ ​ 1 ​ ​ $ 991 ​ 13 Table of Contents 3 . Earnings Per Share of Common Stock Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per share includes the dilutive effect of restricted stock, if any, calculated using the treasury stock method. For unvested restricted stock, assumed proceeds under the treasury stock method would include unamortized compensation cost. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ December 31, ​ December 31, ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Net (loss) income $ ( 73 ) $ 961 Less: net income attributable to nonvested common stock ​ — ​ ( 55 ) Net (loss) income attributable to common shareholders ​ $ ( 73 ) $ 906 ​ ​ ​ ​ ​ ​ ​ Weighted average total shares outstanding – basic ​ ​ 4,432 ​ ​ 4,554 Less: weighted average non–vested shares outstanding ​ ​ — ​ ​ ( 259 ) Weighted average number of common shares outstanding – basic ​ ​ 4,432 ​ 4,295 Add: potential common shares from non–vested stock awards ​ ​ — ​ 33 Weighted average common shares outstanding – diluted ​ $ 4,432 ​ 4,328 ​ ​ ​ ​ ​ ​ ​ Net (loss) income per common share - basic ​ $ ( 0.02 ) ​ $ 0.21 Net (loss) income per common share - diluted ​ $ ( 0.02 ) ​ $ 0.21 ​ Anti-dilutive securities include restricted stock, which are excluded from the diluted income (loss) per common share computation. Non-vested restricted stock awards of 207 thousand were excluded from the diluted loss per common share calculation for the three months ended December 31, 2023 because there was a net loss for this period and their inclusion would have been anti-dilutive. ​ 4 . Accounts receivable, net Upon adoption of the new CECL standard as described in Note 1, the Company recognizes an allowance for losses on accounts receivable in an amount equal to the current expected credit losses. The estimation of the allowance is based on an analysis of historical loss experience, management’s assessment of current conditions and reasonable and supportable expectation of future conditions as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible including reviewing the current receivables aging. This results in a general reserve and a specific reserve. The Company assesses collectability by pooling receivables where similar characteristics exist and evaluates receivables individually when specific customer balances no longer share those risk characteristics and are considered at risk or uncollectible. The expense associated with the allowance for expected credit losses is recognized in Selling, general, and administrative expenses in the Consolidated Statements of Operations. Amounts disclosed below for the three months ended December 31, 2023 reflect adoption of the new CECL standard and the amounts disclosed for the three months ended December 31, 2022 reflect superseded guidance. 14 Table of Contents The following table presents the components of the Company’s accounts receivable for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ (Amounts in thousands) Allowance for credit losses for accounts receivable: ​ ​ ​ ​ ​ ​ Balances at beginning of the period ​ $ 100 ​ $ 88 Adjustment for adoption of new CECL standard ​ ​ ( 67 ) ​ ​ - Charge-offs ​ ​ - ​ ​ - Provision for credit losses ​ ​ 28 ​ ​ 27 Balances at end of the period ​ $ 61 ​ $ 115 ​ ​ 5 . Financing receivables, net In the TS U.S. division financing of goods and services is offered to certain customers. This involves amounts due reflecting sales whose payment terms exceed one year. This financing is separate from agreements with a leasing component, see Note 7 Leases for financing through leases. Determining whether to offer financing involves looking at the customer’s payment history, economic conditions, and capacity to pay. The Company assigns an internal risk rating to each customer at inception, which groups customers into a portfolio based off this risk rating. A risk rating is assigned by analyzing a customer’s financial statements and the latest Fitch rating if publicly available as well as recent payment activity. The credit quality of customers is continually monitored by these items. Accounts rated low risk have the equivalent of a Fitch rating of BBB– or higher, while accounts rated moderate risk have the equivalent of BB. The Company does not offer financing for customers where the risk is classified as higher, which would be lower than the equivalent of a BB Fitch rating. Financing receivables, net carry an average weighted interest rate of 6.5 %, which reflects the approximate interest rate consistent with a separate financing transaction with the customer 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, 2023 and 2022 was $ 193 thousand and $ 182 thousand, respectively. Interest income from these agreements is recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations. Amounts disclosed below as of December 31, 2023 reflect adoption of the new CECL standard and the amounts disclosed as of September 30, 2023 reflect superseded guidance. The following table presents the components of the Company’s Financing receivables, net segregated by portfolio (risk rating) for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ As of September 30, 2023 ​ ​ Risk Rating ​ ​ ​ ​ Risk Rating ​ ​ ​ ​ ​ ​ Low ​ ​ Moderate ​ ​ Total ​ ​ Low ​ ​ Moderate ​ ​ Total ​ ​ (Amounts in thousands) ​ (Amounts in thousands) Financing receivables, net: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financing receivables, gross ​ $ 7,481 ​ $ 3,304 ​ $ 10,785 ​ $ 8,893 ​ $ 3,361 ​ $ 12,254 Unearned interest income ​ ​ ( 292 ) ​ ​ ( 466 ) ​ ​ ( 758 ) ​ ​ ( 325 ) ​ ​ ( 534 ) ​ ​ ( 859 ) Allowance for credit losses ​ ​ ( 16 ) ​ ​ ( 61 ) ​ ​ ( 77 ) ​ ​ - ​ ​ - ​ ​ - Financing receivables, net ​ $ 7,173 ​ $ 2,777 ​ $ 9,950 ​ $ 8,568 ​ $ 2,827 ​ $ 11,395 Short-term ​ $ 6,594 ​ $ 903 ​ $ 7,497 ​ $ 6,281 ​ $ 890 ​ $ 7,171 Long-term ​ $ 579 ​ $ 1,874 ​ $ 2,453 ​ $ 2,287 ​ $ 1,937 ​ $ 4,224 ​ 15 Table of Contents Amounts disclosed below for the three months ended December 31, 2023 reflect adoption of the new CECL standard and the amounts disclosed for the three months ended December 31, 2022 reflect superseded guidance. The following table presents the changes in Allowance for credit losses for Financing receivables, net for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ Risk Rating ​ ​ ​ ​ Risk Rating ​ ​ ​ ​ Low Moderate Total Low Moderate Total ​ ​ (Amounts in thousands) ​ (Amounts in thousands) Allowance for credit losses for financing receivables: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balances at beginning of the period ​ $ - ​ $ - ​ $ - ​ $ - ​ $ - ​ $ - Adjustment for adoption of new CECL standard ​ ​ 27 ​ ​ 55 ​ ​ 82 ​ ​ - ​ ​ - ​ ​ - Charge-offs ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ ​ - ​ ​ - Provision charged to Consolidated Statements of Operations ​ ​ ( 11 ) ​ ​ 6 ​ ​ ( 5 ) ​ ​ - ​ ​ - ​ ​ - Balances at end of the period ​ $ 16 ​ $ 61 ​ $ 77 ​ $ - ​ $ - ​ $ - ​ Upon adoption of the new CECL standard as described in Note 1, the Company recognizes an allowance for credit losses for financing receivables in an amount equal to the probable losses net of recoveries. A probability method for calculating credit losses is used based on historical data of defaults of Fitch ratings and length of time. Various factors are also assessed in the allowance for credit losses including internal historical data as well as macroeconomic forecast assumptions and management judgments applicable to and through the expected life of the portfolios. Macroeconomic conditions include the level of gross domestic product (“GDP”) growth and unemployment rates, which directly correlate with our historical credit losses. The expense associated with the allowance for expected credit losses is recognized in Selling, general, and administrative expenses in the Consolidated Statements of Operations. Financing 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. A payment due in excess of 30 days is considered delinquent. If a payment is received for a receivable on non-accrual status the payment is first applied to interest and then principal. Recording interest income resumes once no reasonable doubt exists regarding collecting all interest and principal. There were no financing receivables placed on non-accrual status as of December 31, 2023 or September 30, 2023. The following table presents Financing receivables, gross, including accrued interest, by credit quality indicator segregated by risk rating and year of origination as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Fiscal year of origination ​ ​ ​ Risk Rating 2024 2023 2022 2021 Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Moderate $ — ​ 3,026 ​ 278 ​ — ​ 3,304 Low 592 ​ $ 753 ​ $ 4,267 ​ $ 1,869 ​ $ 7,481 Total $ 592 ​ $ 3,779 ​ $ 4,545 ​ $ 1,869 ​ $ 10,785 ​ 16 Table of Contents Contractual maturities of outstanding financing receivables are as follows: ​ ​ ​ ​ Fiscal year ending September 30: (Amounts in thousands) 2024 ​ $ 5,653 2025 ​ ​ 3,466 2026 ​ ​ 1,038 2027 ​ ​ 628 Total payments ​ $ 10,785 Less: unearned interest income ​ ​ ( 758 ) Less: allowance for credit losses ​ ​ ( 77 ) Total, net of unearned interest income and allowance for credit losses ​ $ 9,950 ​ ​ 6 . Inventories Inventories consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, ​ 2023 2023 ​ ​ (Amounts in thousands) Raw materials ​ $ 227 ​ $ 247 Work-in-process ​ 279 ​ ​ 36 Finished goods ​ 6,457 ​ ​ 2,259 Total ​ $ 6,963 ​ $ 2,542 ​ 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. 17 Table of Contents 7 . Leases Information related to both lessee and lessor The components of lease costs for the three months ended December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended ​ Condensed Consolidated Statements of Operations Location ​ December 31, 2023 ​ December 31, 2022 ​ ​ ​ (Amounts in thousands) Operating Lease: ​ ​ ​ ​ ​ Operating lease cost Selling, general, and administrative ​ $ 132 ​ $ 162 Short-term lease cost Selling, general, and administrative ​ ​ 9 ​ ​ 10 Total lease costs ​ ​ $ 141 ​ $ 172 Less sublease interest income Revenue ​ ​ — ​ ​ ( 1 ) Total lease costs, net of sublease interest income ​ ​ $ 141 ​ $ 171 ​ Supplemental cash flow information related to leases for three months ended December 31, 2023 and 2022 is below: ​ ​ ​ ​ ​ ​ Three months ended ​ December 31, 2023 December 31, 2022 ​ (Amounts in thousands) Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ ​ Operating cash flows paid for operating leases $ 134 $ 166 Operating cash flows paid for short-term leases ​ 9 ​ 10 Financing cash flows paid for finance leases ​ — ​ 1 Cash received from subleases ​ ( 5 ) ​ ( 5 ) ​ ​ 8 . 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 financing contracts the Company enters into with customers. See Note 5 Financing receivables, net for further information related to the multi-year agreements with customers. There was not an interest rate stated in the agreements and therefore interest was imputed under ASC 835 Interest as the payments in the exchange represented two elements: principal and interest. The imputed interest rate for the agreements was determined to be 5.5 %. 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 December 31, 2023 and 2022 was $ 45 thousand and $ 56 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. See Note 9 Note Payable and Line of Credit for amounts due to banks and other financial institutions for borrowings. 18 Table of Contents Below are details of the agreements with the vendors that contain imputed interest: ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ September 30, 2023 ​ (Amounts in thousands) Current $ 1,547 ​ $ 1,718 Less: discount ​ ( 121 ) ​ ​ ( 140 ) Accounts payable and accrued expenses $ 1,426 ​ $ 1,578 ​ ​ ​ ​ ​ ​ Noncurrent $ 1,967 ​ $ 1,967 Less: discount ​ ( 89 ) ​ ​ ( 116 ) Other noncurrent liabilities $ 1,878 ​ $ 1,851 ​ The Company had a total of approximately $ 2.8 million due (net of interest) to one of these vendors as of December 31, 2023. This is approximately 24 % of Accounts payable and other noncurrent liabilities. The Company had a total of approximately $ 3.3 million due (net of interest) to one of these vendors as of September 30, 2023. This is approximately 26 % 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. Management believes other suppliers could provide similar products on comparable terms. ​ 9. Note Payable and Line of Credit 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. The final payment on this note payable was made in the three months ended December 31, 2023. There was no interest expense related to the note payable for the three months ended December 31, 2023. Interest expense related to the note for the three months ended December 31, 2022 was $ 5 thousand. ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ September 30, 2023 ​ (Amounts in thousands) Current $ — ​ $ 449 Less: notes discount ​ — ​ — Note payable - current portion $ — ​ $ 449 ​ As of December 31, 2023 and September 30, 2023, 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. to purchase inventory from approved vendors with payment terms which exceed those offered by the vendors. No interest accrues under the inventory line of credit when advances are paid within terms, however, late payments are subject to an interest charge of Prime plus 5 %. The credit agreement for the inventory line of credit contains financial covenants which require the Company to maintain the following TS segment-specific financial ratios: (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 December 31, 2023 and September 30, 2023, Company borrowings, all from the TS segment, under the inventory line of credit were $ 0.8 million and $ 1.5 million, respectively, and the Company was in compliance with all financial covenants. As of December 31, 2023 and September 30, 2023, this line of credit also includes availability of a limited cash withdrawal of up to $ 1.0 million. As of December 31, 2023 and September 30, 2023 there were no cash withdrawals outstanding. 10. Pension and Retirement Plans The Company’s operations have defined benefit and defined contribution plans in the U.K. and in the U.S. In the U.K., the Company provides defined benefit pension plans and defined contribution plans for some of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain former employees. The U.S. supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company 19 Table of Contents as a vehicle to fund the costs of the plan. 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. The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the condensed consolidated balance sheets. The Company’s pension plan in the U.K. is the only plan with plan assets. The plan assets consist of an investment in a commingled fund which in turn comprises a diversified mix of assets including corporate equity securities, government securities and corporate debt securities. The components of net periodic benefit costs related to the U.S. and U.K. plans are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended December 31, ​ ​ 2023 ​ 2022 ​ U.K. U.S. Total U.K. U.S. Total ​ ​ (Amounts in thousands) Pension: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest cost ​ $ 112 ​ $ 3 ​ $ 115 ​ $ 106 ​ $ 4 ​ $ 110 Expected return on plan assets ​ ( 150 ) ​ — ​ ( 150 ) ​ ( 142 ) ​ — ​ ( 142 ) Amortization of past service costs ​ ​ 2 ​ ​ — ​ ​ 2 ​ ​ 2 ​ ​ — ​ ​ 2 Amortization of net gain ​ — ​ ( 1 ) ​ ( 1 ) ​ — ​ ( 1 ) ​ ( 1 ) Net periodic (benefit) cost ​ $ ( 36 ) ​ $ 2 ​ $ ( 34 ) ​ $ ( 34 ) ​ $ 3 ​ $ ( 31 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Post Retirement: ​ ​ ​ ​ ​ ​ Service cost ​ $ — ​ $ 6 ​ $ 6 ​ $ — ​ $ 6 ​ $ 6 Interest cost ​ — ​ 16 ​ 16 ​ — ​ 15 ​ 15 Amortization of net gain ​ — ​ ( 43 ) ​ ( 43 ) ​ — ​ ( 49 ) ​ ( 49 ) Net periodic benefit ​ $ — ​ $ ( 21 ) ​ $ ( 21 ) ​ $ — ​ $ ( 28 ) ​ $ ( 28 ) ​ The fair value of the assets held by the U.K. pension plan by asset category are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Values as of ​ ​ December 31, 2023 ​ September 30, 2023 ​ ​ Fair Value Measurements Using Inputs Considered as ​ Fair Value Measurements Using Inputs Considered as Asset Category Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 ​ ​ (Amounts in thousands) Cash on deposit ​ $ 302 ​ $ 302 ​ $ — ​ $ — ​ $ 428 ​ $ 428 ​ $ — ​ $ — Fixed income ​ ​ 9,564 ​ ​ 8,063 ​ ​ 1,501 ​ ​ — ​ ​ 8,703 ​ ​ 7,251 ​ ​ 1,452 ​ ​ — Equity ​ 957 ​ 275 ​ ​ 682 ​ ​ — ​ 903 ​ 266 ​ ​ 637 ​ ​ — Total plan assets ​ $ 10,823 ​ $ 8,640 ​ $ 2,183 ​ $ — ​ $ 10,034 ​ $ 7,945 ​ $ 2,089 ​ $ — ​ ​ 11. Income Taxes An income tax expense of $ 13 thousand was recorded for the three months ended December 31, 2023 compared to an income tax expense of $ 133 thousand in the same period of 2022. The estimated annualized effective income tax rate for the three months ended December 31, 2023 was 23 %, excluding the impacts of the UK entity which continues to experience losses and maintains a full valuation allowance. The difference between our effective income tax rate and the U.S. federal statutory rate is the impact of state taxes and tax credits that we expect to be able to utilize against federal and state taxes. ​ 20 Table of Contents The effective tax rate for the three months ended December 31, 2023 was also 23 %, excluding the UK as previously mentioned, as there were no discrete tax items recorded during the period. The income tax expense for the three months ended December 31, 2022 was 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. For the three months ended December 31, 2022, we used the discrete method to arrive at tax expense due to the full valuation allowance against our deferred tax assets and cumulative loss position. While the Company had maintained a full valuation allowance, we had been using the discrete effective tax rate method to calculate income taxes for the purposes of quarterly reporting. Now that the valuation allowance has been reduced, the Company has resumed using the annualized effective tax rate method to calculate income taxes as prescribed under ASC 740 and has done so for the period ending December 31, 2023. 12. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ September 30, ​ 2023 2023 ​ ​ (Amounts in thousands) Cumulative effect of foreign currency translation, net ​ $ ( 4,522 ) ​ $ ( 4,829 ) Cumulative unrealized loss on pension liability ​ ( 1,265 ) ​ ( 1,265 ) Accumulated other comprehensive loss, net ​ $ ( 5,787 ) ​ $ ( 6,094 ) ​ ​ 13. Fair Value of Financial Assets and Liabilities Under the fair value standards fair value is based on the exit price and defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement should reflect all the assumptions that market participants would use in pricing an asset or liability. A fair value hierarchy is established in the authoritative guidance outlined in three levels ranking from Level 1 to Level 3 with Level 1 being the highest priority. Level 1: observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets ​ Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly ​ Level 3: 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 10 Pension and retirement plans for pension plan assets) or non-recurring basis as of December 31, 2023 or September 30, 2023. 21 Table of Contents To estimate the 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 the preceding information is unavailable, we use internally generated data to estimate fair value which is classified within Level 3. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ As of September 30, 2023 ​ ​ ​ ​ ​ ​ Carrying Amount ​ ​ Fair Value ​ ​ Carrying Amount ​ ​ Fair Value ​ Fair Value Level ​ Reference ​ ​ (Amounts in thousands) ​ ​ ​ ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents $ 25,611 ​ $ 25,611 ​ $ 25,217 ​ $ 25,217 ​ 1 ​ Condensed Consolidated Balance Sheets Accounts receivable ​ 11,722 ​ ​ 11,722 ​ ​ 12,955 ​ ​ 12,955 ​ 2 ​ Condensed Consolidated Balance Sheets Financing receivables ​ 9,950 ​ ​ 9,950 ​ ​ 11,395 ​ ​ 11,395 ​ 3 ​ Note 5 Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable and accrued expenses and other long-term liabilities* ​ 3,304 ​ ​ 3,304 ​ ​ 3,429 ​ ​ 3,429 ​ 3 ​ Note 8 Line of Credit ​ 760 ​ ​ 760 ​ ​ 1,515 ​ ​ 1,515 ​ 2 ​ Note 9 Note payable ​ — ​ ​ — ​ ​ 449 ​ ​ 449 ​ 3 ​ Note 9 ​ ​ Cash and cash equivalents Carrying amount approximated fair value. ​ Financing receivables with original maturity over one year Fair value was estimated by discounting future cash flows based on the current rate with similar terms. ​ Line of credit The fair value of our line of credit is based on borrowing rates currently available to a market participant for loans with similar terms or maturity. The carrying amount of our outstanding revolving line of credit approximates fair value because the base interest rate charged varies with market conditions and the credit spread is commensurate with current market spreads for issuers of similar risk. No interest accrues under the inventory line of credit when advances are paid within terms. ​ Note Payable 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 December 31, 2023 and September 30, 2023. ​ 22 Table of Contents 14. Segment Information The following tables present certain operating segment information for the three months ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Technology Solutions Segment ​ ​ ​ ​ ​ High ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ United ​ ​ ​ ​ ​ ​ ​ Consolidated Three months ended December 31, Segment Kingdom U.S. Total Total ​ ​ (Amounts in thousands) 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 472 ​ $ 312 ​ $ 10,623 ​ $ 10,935 ​ $ 11,407 Service ​ 240 ​ 69 ​ 3,659 ​ 3,728 ​ 3,968 Total sales ​ $ 712 ​ $ 381 ​ $ 14,282 ​ $ 14,663 ​ $ 15,375 Operating (loss) income ​ $ ( 1,345 ) ​ $ 3 ​ $ 999 ​ $ 1,002 ​ $ ( 343 ) Interest expense ​ $ ( 4 ) ​ $ — ​ $ ( 45 ) ​ $ ( 45 ) ​ $ ( 49 ) Interest income ​ $ 6 ​ $ 54 ​ $ 436 ​ $ 490 ​ $ 496 Total assets ​ $ 9,417 ​ $ 7,595 ​ $ 50,415 ​ $ 58,010 ​ $ 67,427 Capital expenditures ​ $ ( 106 ) ​ $ — ​ $ ( 14 ) ​ $ ( 14 ) ​ $ ( 120 ) Depreciation and amortization ​ $ ( 28 ) ​ $ — ​ $ ( 51 ) ​ $ ( 51 ) ​ $ ( 79 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ Product ​ $ 2,162 ​ $ 191 ​ $ 11,868 ​ $ 12,059 ​ $ 14,221 Service ​ 327 ​ 87 ​ 3,709 ​ 3,796 ​ 4,123 Total sales ​ $ 2,489 ​ $ 278 ​ $ 15,577 ​ $ 15,855 ​ $ 18,344 Operating (loss) income ​ $ ( 98 ) ​ $ 14 ​ $ 1,448 ​ $ 1,462 ​ $ 1,364 Interest expense ​ $ ( 3 ) ​ $ — ​ $ ( 61 ) ​ $ ( 61 ) ​ $ ( 64 ) Interest income ​ $ 1 ​ $ 35 ​ $ 225 ​ $ 260 ​ $ 261 Total assets ​ $ 9,973 ​ $ 6,713 ​ $ 52,288 ​ $ 59,001 ​ $ 68,974 Capital expenditures ​ $ ( 16 ) ​ $ — ​ $ ( 28 ) ​ $ ( 28 ) ​ $ ( 44 ) Depreciation and amortization ​ $ ( 29 ) ​ $ — ​ $ ( 61 ) ​ $ ( 61 ) ​ $ ( 90 ) ​ Operating income (loss) from operations consists of sales less cost of sales, engineering and development expenses, and Selling, general and administrative expenses but is not affected by either other income/expense or by income taxes expense (benefit). Non-operating expenses/income consists principally of interest income from transactions with payment terms exceeding one year (see Note 5, Financing receivables, net for details), interest income from cash and cash equivalents, and interest expense. 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 months ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended December 31, ​ ​ ​ 2023 ​ ​ 2022 ​ ​ ​ (in millions) ​ ​ (in millions) ​ ​ ​ Customer ​ % of Total ​ ​ Customer ​ % of Total ​ ​ Revenues Revenues ​ Revenues Revenues ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer A ​ $ 0.9 ​ 6 % ​ $ 1.8 ​ 10 % Customer B ​ $ 1.3 ​ 8 % ​ $ 2.1 ​ 12 % Customer C ​ $ — ​ - % ​ $ 1.8 ​ 10 % Customer D ​ $ 2.6 ​ 17 % ​ $ 0.6 ​ 3 % ​ 23 Table of Contents One customer as of December 31, 2023 had a balance of $ 1.2 million, or 10 %, of accounts receivable. There was no customer with 10% or more of accounts receivable as of September 30, 2023. Customer D had a balance of $ 1.3 million, or 13 %, of financing receivables and $ 1.5 million, or 13 %, as of December 31, 2023 and September 30, 2023, respectively. Another customer had a balance of $ 6.1 million, or 61 %, of financing receivables and $ 7.4 million, or 65 %, as of December 31, 2023 and September 30, 2023, respectively. Another customer had a balance of $ 2.5 million, or 25 %, of financing receivables and $ 2.5 million, or 13 %, as of December 31, 2023 and September 30, 2023, respectively. There was no other customer with 10% or more of financing receivables as of December 31, 2023 or September 30, 2023. 15. Dividend On December 12, 2023, the Company’s board of directors declared a dividend of $ 0.04 per share payable January 9, 2024, to shareholders of record on the close of business on December 22, 2023.