What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2024-02-14 · 281 added, 149 removed, 426 unchanged (50% of the section changed)

39 unchanged sentences

Total liabilities and shareholders’ equity

(1) Retroactively adjusted for the effects of a stock split effected in the form of a 100 % stock dividend (see Note 1)

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

Three months ended

Six Months Ended

Cost of sales:

4 unchanged sentences

Total operating expenses

Operating (loss) income

Operating income

Other income (expense):

Foreign exchange loss

Foreign exchange gain (loss)

Interest expense

2 unchanged sentences

Total other income (expense), net

(Loss) income before income taxes

Income before income taxes

Income tax expense

Net (loss) income

Net (loss) income attributable to common shareholders

Net (loss) income per common share - basic

Net income attributable to common shareholders

Net income per common share - basic (1)

Weighted average common shares outstanding – basic (1)

Net (loss) income per common share - diluted

Net income per common share - diluted (1)

Weighted average common shares outstanding – diluted (1)

(1) Retroactively adjusted for the effects of a stock split effected in the form of a 100 % stock dividend (see Note 1)

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

Three months ended

Net (loss) income

Foreign currency translation gain adjustments, net

Six Months Ended

Foreign currency translation (loss) gain adjustments, net

Total comprehensive income

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

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

For the three months ended March 31, 2024 and 2023

(Amounts in thousands, except per share data)

1 unchanged sentence

Shareholders’

Three months ended December 31, 2023:

Three Months Ended March 31, 2024:

Balance as of December 31, 2023

Other comprehensive loss

Stock-based compensation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Cash dividends paid on common stock ($ 0.025 per share) (1)

Balance as of March 31, 2024

comprehensive

Shareholders’

Three Months Ended March 31, 2023:

Balance as of December 31, 2022

Other comprehensive income

Stock-based compensation

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Cash dividends paid on common stock ($ 0.015 per share) (1)

Balance as of March 31, 2023

(1) Retroactively adjusted for the effects of a stock split effected in the form of a 100 % stock dividend (see Note 1)

See accompanying notes to unaudited condensed consolidated financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the six months ended March 31, 2024 and 2023

(Amounts in thousands, except per share data)

comprehensive

Shareholders’

Six months ended March 31, 2024:

Balance as of September 30, 2023

2 unchanged sentences

Stock-based compensation

Dividends declared ($ 0.04

Balance as of December 31, 2023

Restricted stock issuance

Issuance of shares under employee stock purchase plan

Cash dividends paid on common stock ($ 0.045 per share) (1)

Balance as of March 31, 2024

comprehensive

Shareholders’

Three months ended December 31, 2022:

Six months ended March 31, 2023:

Balance as of September 30, 2022

2 unchanged sentences

Restricted stock issuance

Dividends declared ($ 0.03

Balance as of December 31, 2022

Issuance of shares under employee stock purchase plan

Cash dividends paid on common stock ($ 0.030 per share) (1)

Balance as of March 31, 2023

(1) Retroactively adjusted for the effects of a stock split effected in the form of a 100 % stock dividend (see Note 1)

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(Amounts in thousands)

Three Months Ended

Six Months Ended

Operating activities

Net (loss) income

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

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

Amortization of intangibles

4 unchanged sentences

Stock-based compensation expense on restricted stock awards

Deferred income taxes

Increase in cash surrender value of life insurance

2 unchanged sentences

Decrease in financing receivable

(Increase) decrease in inventories

Decrease (increase) in inventories

Decrease in refundable income taxes

Increase in operating lease right-of-use assets

Decrease in other assets

Increase (decrease) in accounts payable and accrued expenses

Decrease in accounts payable and accrued expenses

Increase in interest payable

2 unchanged sentences

Decrease in pension and retirement plans liabilities

Increase in income taxes payable

Increase (decrease) in other long-term liabilities

Decrease in income taxes payable

Decrease in other long-term liabilities

Net cash provided by (used in) operating activities

Investing activities

Life insurance premiums paid

Purchase of held-to-maturity investments

Additions of intangible assets

2 unchanged sentences

Financing activities

Dividends paid

Net borrowing under line-of-credit agreement

1 unchanged sentence

Principal payments on finance leases

Proceeds from issuance of shares under equity compensation plans

Net cash used in financing activities

7 unchanged sentences

Supplementary non-cash financing activities:

Dividend declared during period

Customer financing for inventory sold (see Note 5 Financing receivables for details)

6 unchanged sentences

The Company operates in two segments, its Technology Solutions (“TS”) segment and High Performance Products (“HPP”) segment.

Summary of Significant Accounting Policies

Basis of Presentation and New Significant Accounting Policy

Basis of Presentation

4 unchanged sentences

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.

Effective in fiscal year 2024 sales whose payment terms exceed one year is now presented as “Financing receivables, net of allowances” on the Consolidated Balance Sheets rather than being combined with Accounts receivable, net of allowances.

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.

This change was made to provide more detail on the balance sheet related to these receivables and align with our notes to the unaudited condensed consolidated financial statements.

Presentation – two-for-one stock split

On February 21, 2024, the Board of Directors of CSP Inc.

approved an amendment to the Company’s Articles of Organization to increase the total number of its authorized shares of Common Stock, par value $ 0.01 , from 7,500,000 shares to 9,753,900 shares (the “Amendment”).

No shareholder approval was required under the Massachusetts Business Corporation Act with respect to the Amendment.

The Amendment became effective upon filing with the Secretary of the Commonwealth of Massachusetts on February 21, 2024.

On February 21, 2024, the Company announced its Board of Directors approved and declared a two -for-one stock split to be effected in the form of a 100 % stock dividend.

The stock dividend was paid on March 20, 2024 to shareholders of record as of the close of business on March 6, 2024.

In accordance with ASC 505 Equity , we have determined this had a material effect on reducing share market value and therefore was treated this event as a stock split for accounting purposes.

All common shares and per share amounts contained in these condensed interim financial statements and notes have been retrospectively restated to reflect this two -for-one stock split in the form a 100 % dividend in accordance with ASC 260 Earnings Per Share , specifically ASC 260-10-55-12 .

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.

The preparation of condensed consolidated interim 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.

3 unchanged sentences

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.

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

Additional updates were issued in 2018-2020.

3 unchanged sentences

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.

Additionally, it affected allowance for credit losses of contract assets 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 .

Recently Accounting Pronouncements Not Yet Adopted

Improvements to Reportable Segment Disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires disclosure of incremental segment information on an annual and interim basis.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

Early adoption is permitted.

The Company is currently evaluating the effect of this pronouncement on its disclosures.

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.

23 unchanged sentences

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.

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

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

1 unchanged sentence

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

ARIA Zero Trust Gateway (“AZT”) revenue contains two performance obligations:

a software license and post contract support.

The transaction price is generally fixed consideration and allocated based on relative stand-alone selling price.

Software license revenue is recognized at a point in time, generally when the license is made available to the customer.

Post contract support revenue is recognized ratably over the contractual period of generally one year.

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

Technology Solutions Segment

Three months ended December 31.

Three months ended March 31,

(Amounts in thousands)

Technology Solutions Segment

Three months ended December 31.

Three months ended March 31,

(Amounts in thousands)

Technology Solutions Segment

Six months ended March 31,

(Amounts in thousands)

Technology Solutions Segment

Six months ended March 31,

(Amounts in thousands)

* Finance revenue is related to equipment leasing and is not subject to the guidance on revenue from contracts with customers (ASC 606).

27 unchanged sentences

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.

Current contract assets were $ 0.6 million and $ 0.9 million as of March 31, 2024 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.

There were no noncurrent contract assets as of March 31, 2024 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.

Current contract liabilities were $ 1.7 million and $ 1.9 million as of March 31, 2024 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.

There were no long-term contract liabilities as of March 31, 2024 and September 30, 2023, respectively.

Revenue recognized for the three and six months ended March 31, 2024 that was included in contract liabilities as of September 30, 2023 was $ 0.2 million and $ 1.1 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 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.

Current capitalized contract costs are within the other current assets on the condensed consolidated balance sheets as of March 31, 2024 and September 30, 2023.

The portion of current capitalized costs were $ 253 thousand and $ 172 thousand as of March 31, 2024 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.

The amount of incremental costs amortized for the three months ended March 31, 2024 and 2023 were $ 121 thousand and $ 98 thousand, respectively.

The amount of incremental costs amortized for the six months ended March 31, 2024 and 2023 were $ 229 thousand and $ 199 thousand, respectively and is recorded in selling, general, and administrative expenses.

There was no impairment related to incremental costs capitalized during the six months ended March 31, 2024 and 2023.

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.

The were no current capitalized costs as of March 31, 2024 or September 30, 2023.

Projects are typically billed upon completion or at certain milestones.

3 unchanged sentences

There are certain contracts that contain a financing component.

See Note 5 Financing receivables to the condensed consolidated financial statements for additional information.

See Note 5 Financing receivables, net 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.

4 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 December 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 March 31, 2024 is set forth in the table below:

(Amounts in thousands)

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.

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

Diluted net income 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:

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

Three months ended

Net (loss) income

Six Months Ended

(Amounts in thousands except per share data)

net income attributable to nonvested common stock

Net (loss) income attributable to common shareholders

Net income attributable to common shareholders

Weighted average total shares outstanding – basic (1)

3 unchanged sentences

Weighted average common shares outstanding – diluted (1)

Net (loss) income per common share - basic

Net (loss) income per common share - diluted

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.

Net income per common share - basic (1)

Net income per common share - diluted (1)

(1) Retroactively adjusted for the effects of a stock split effected in the form of a 100 % stock dividend (see Note 1)

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

There were no anti-dilutive securities for the three and six months ended March 31, 2024.

Non-vested restricted stock awards of 52 thousand and 202 thousand shares were excluded from the diluted net income per share calculation for the three and six months ended March 31, 2023, respectively.

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.

Upon adoption of the new CECL standard as described in Note 1 Basis of Presentation and New Significant Accounting Policy , 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.

2 unchanged sentences

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.

The following table presents the components of the Company’s accounts receivable for the periods indicated.

Amounts disclosed below for the three and six months ended March 31, 2024 reflect adoption of the new CECL standard and the amounts disclosed for the three and six months ended March 31, 2023 reflect superseded guidance.

The following table presents the changes in the allowance for accounts receivable for the periods indicated.

Three months ended

December 31, 2023

December 31, 2022

March 31, 2024

March 31, 2023

(Amounts in thousands)

4 unchanged sentences

Balances at end of the period

Six months ended

March 31, 2024

March 31, 2023

(Amounts in thousands)

Allowance for credit losses for accounts receivable:

Balances at beginning of the period

Adjustment for adoption of new CECL standard

Provision for credit losses

Balances at end of the period

Financing receivables, net

In the TS U.S.

division financing of goods and services is offered to certain customers.

In the TS US division financing of goods and services is offered to certain customers.

This involves amounts due reflecting sales whose payment terms exceed one year.

7 unchanged sentences

Financing receivables, net carry an average weighted interest rate of 7.1 %, 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.

The amount of interest income earned from sales whose payment terms exceed one year for the three months ended March 31, 2024 and 2023 was $ 158 thousand and $ 189 thousand, respectively.

The amount of interest income earned from sales whose payment terms exceed one year for the six months ended March 31, 2024 and 2023 was $ 351 thousand and $ 371 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.

Amounts disclosed below as of March 31, 2024 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 March 31, 2024

As of September 30, 2023

6 unchanged sentences

Financing receivables, net

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

March 31, 2024

March 31, 2023

(Amounts in thousands)

2 unchanged sentences

Balances at beginning of the period

Provision charged to Consolidated Statements of Operations

Balances at end of the period

Six months ended

March 31, 2024

March 31, 2023

(Amounts in thousands)

Allowance for credit losses for financing receivables:

Balances at beginning of the period

Adjustment for adoption of new CECL standard

1 unchanged sentence

Balances at end of the period

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.

Upon adoption of the new CECL standard as described in Note 1 Basis of Presentation and New Significant Accounting Policy , 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.

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.

4 unchanged sentences

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

There were no financing receivables placed on non-accrual status as of March 31, 2024 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 March 31, 2024:

March 31, 2024

Fiscal year of origination

18 unchanged sentences

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:

The components of lease costs for the three months ended March 31, 2024 and 2023 are as follows:

Three months ended

Condensed Consolidated Statements of Operations Location

December 31, 2023

December 31, 2022

March 31, 2024

March 31, 2023

(Amounts in thousands)

Finance Lease:

Interest on lease liabilities

Interest expense

Operating Lease:

6 unchanged sentences

Total lease costs, net of sublease interest income

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

The components of lease costs for the six months ended March 31, 2024 and 2023 are as follows:

Six months ended

Condensed Consolidated Statements of Operations Location

March 31, 2024

March 31, 2023

(Amounts in thousands)

Finance Lease:

Interest on lease liabilities

Interest expense

Operating Lease:

Operating lease cost

Selling, general, and administrative

Short-term lease cost

Selling, general, and administrative

Total lease costs

Less sublease interest income

Total lease costs, net of sublease interest income

Supplemental cash flow information related to leases for the six months ended March 31, 2024 and 2023 is below:

Six months ended

March 31, 2024

March 31, 2023

(Amounts in thousands)

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

1 unchanged sentence

Operating cash flows paid for short-term leases

Operating cash flows paid for finance leases

Financing cash flows paid for finance leases

Cash received from subleases

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.

Accounts payable and Other noncurrent liabilities

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

See Note 5 Financing receivables, net for further information related to the multi-year agreements with customers.

3 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 December 31, 2023 and 2022 was $ 45 thousand and $ 56 thousand, respectively.

Interest expense related to these agreements for the three months ended March 31, 2024 and 2023 was $ 35 thousand and $ 53 thousand, respectively.

Interest expense related to these agreements for the six months ended March 31, 2024 and 2023 was $ 88 thousand and $ 109 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.

See Note 9 Notes Payable and Line of Credit for amounts due to banks and other financial institutions for borrowings.

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

December 31, 2023

March 31, 2024

September 30, 2023

2 unchanged sentences

Other noncurrent liabilities

The Company had a total of approximately $ 2.8 million due (net of interest) to one of these vendors as of December 31, 2023.

The Company had a total of approximately $ 2.9 million due (net of interest) to one of these vendors as of March 31, 2024.

This is approximately 25 % of Accounts payable and other noncurrent liabilities.

1 unchanged sentence

This is approximately 26 % of Accounts payable and other noncurrent liabilities.

It was the same vendor as of March 31, 2024 and September 30, 2023 that only transacts with the US division of the TS segment.

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.

Note Payable and Line of Credit

Notes 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

There was no interest expense related to the note payable for the six months ended March 31, 2024.

Interest expense related to the notes for the three and six months ended March 31, 2023 was $ 6 thousand and $ 11 thousand, respectively.

March 31, 2024

September 30, 2023

2 unchanged sentences

Note payable - current portion

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.

As of March 31, 2024 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 US 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 %.

1 unchanged sentence

(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.

As of March 31, 2024 and September 30, 2023, Company borrowings, all from the TS segment, under the inventory line of credit were $ 1.0

million and $ 1.5 million, respectively, and the Company was in compliance with all financial covenants.

As of March 31, 2024 and September 30, 2023, this line of credit also includes availability of a limited cash withdrawal of up to $ 1.0 million.

As of March 31, 2024 and September 30, 2023 there were no cash withdrawals outstanding.

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.

supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company

as a vehicle to fund the costs of the plan.

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’s operations have defined benefit and defined contribution plans in the UK and in the US.

In the UK, the Company provides defined benefit pension plans and defined contribution plans for some of its employees.

In the US, the Company provides benefits through supplemental retirement plans to certain former employees.

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

The Company also provides for officer death benefits through post-retirement plans to certain current officers of the Company in the US 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 Company’s pension plan in the UK 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.

plans are as follows:

Three months ended December 31,

The components of net periodic benefit costs related to the US and UK plans are as follows:

Three Months Ended March 31,

(Amounts in thousands)

2 unchanged sentences

Amortization of past service costs

Amortization of net (gain) loss

Net periodic (benefit) cost

Post Retirement:

Interest cost

Amortization of net gain

Net periodic benefit

Six months ended March 31,

(Amounts in thousands)

Interest cost

Expected return on plan assets

Amortization of past service costs

Amortization of net gain

Net periodic (benefit) cost

3 unchanged sentences

Net periodic benefit

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

pension plan by asset category are as follows:

The fair value of the assets held by the UK pension plan by asset category are as follows:

Fair Values as of

December 31, 2023

March 31, 2024

September 30, 2023

5 unchanged sentences

Total plan assets

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.

An income tax expense of $ 135 thousand was recorded for the three months ended March 31, 2024 compared to an income tax expense of $ 71 thousand in the same period of 2023.

The estimated annualized effective income tax rate for the three months ended March 31, 2024 was 18 %, 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.

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.

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

The effective tax rate for the three months ended March 31, 2024 was 8 %, excluding the UK as previously mentioned, driven by excess tax benefits on restricted stock awards vesting during the period.

The income tax expense for the three months ended March 31, 2023 was primarily driven by minimum state tax expenses and the change in valuation allowance for the period.

For the three months ended March 31, 2023, 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.

An income tax expense of $ 148 thousand was recorded for the six months ended March 31, 2024 compared to an income tax expense of $ 204 thousand in the same period of 2023.

The effective tax rate for the six months ended March 31, 2024 was 8%, excluding the UK as previously mentioned, driven by excess tax benefits on restricted stock awards vesting during the period.

The income tax expense for the six months ended March 31, 2023 was primarily driven by minimum state tax expenses and the change in valuation allowance for the period.

For the six months ended March 31, 2023, 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.

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 10 Pension and retirement plans for pension plan assets) or non-recurring basis as of December 31, 2023 or September 30, 2023.

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

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 March 31, 2024 or September 30, 2023.

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 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 March 31, 2024

As of September 30, 2023

5 unchanged sentences

Condensed Consolidated Balance Sheets

Accounts receivable

Condensed Consolidated Balance Sheets

Financing receivables

Accounts receivable, net

Financing receivables, net

Accounts payable and accrued expenses and other long-term liabilities*

Line of Credit

*Original maturity over one year

Cash and cash equivalents

Carrying amount approximated fair value.

Financing receivables with original maturity over one year

Accounts and long-term receivable with original maturity over one year

Fair value was estimated by discounting future cash flows based on the current rate with similar terms.

3 unchanged sentences

No interest accrues under the inventory line of credit when advances are paid within terms.

Notes 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.

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, 2024 and September 30, 2023.

Segment Information

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

The following tables present certain operating segment information for the three and six months ended March 31, 2024 and 2023.

Technology Solutions Segment

Three months ended December 31,

Three months ended March 31,

(Amounts in thousands)

Operating income (loss)

Interest expense

Interest income

Capital expenditures

Depreciation and amortization

Operating (loss) income

3 unchanged sentences

Depreciation and amortization

Technology Solutions Segment

Six months ended March 31,

(Amounts in thousands)

Operating (loss) income

3 unchanged sentences

Depreciation and amortization

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.

Operating (loss) income

Interest expense

Interest income

Capital expenditures

Depreciation and amortization

Operating income (loss) 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 tax 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) and interest income from money market accounts in fiscal year 2024 year as interest rates have increased significantly, and interest expense primarily from multi-year agreements with vendors (see Note 8 Accounts payable and other noncurrent liabilities ).

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,

(in millions)

One customer as of December 31, 2023 had a balance of $ 1.2 million, or 10 %, of accounts receivable.

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, 2024 and 2023.

Three months ended March 31,

Six months ended March 31,

(Amounts in millions)

Customer A above as of March 31, 2024 had a balance of $ 2.4 million, or 19 %, of accounts receivable.

One customer not listed above as of March 31, 2024 had a balance of $ 6.4 million, or 50 %, of accounts receivable.

There was no other customer with 10% or more of accounts receivable as of March 31, 2024.

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.

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.

A customer not listed above had a balance of $ 5.7 million, or 58 %, of financing receivables, net and $ 7.4 million, or 65 %, as of March 31, 2024 and September 30, 2023, respectively.

A customer not listed above had a balance of $ 2.2 million, or 22 %, of financing receivables, net and $ 2.5 million, or 22 %, as of March 31, 2024 and September 30, 2023,

respectively.

A customer not listed above had a balance of $ 1.3 million, or 13 %, of financing receivables and $ 1.5 million, or 13 %, as of March 31, 2024 and September 30, 2023, respectively.

There was no other customer with 10% or more of financing receivables, net as of March 31, 2024 or September 30, 2023.

On December 12, 2023, the Company’s board of directors declared a cash dividend of $ 0.020 per share outstanding which was paid on January 9, 2024 to shareholders of record as of December 22, 2023, the record date.

On February 14, 2024, the Company’s board of directors declared a cash dividend of $ 0.025 per share outstanding which was paid on March 8, 2024 to shareholders of record as of February 26, 2024, the record date.

On February 21, 2024, the Company announced its Board of Directors approved and declared a two -for-one stock split to be effected in the form of a 100 % stock dividend.

The stock dividend was paid on March 20, 2024 to shareholders of record as of the close of business on March 6, 2024 .

Cash dividend amounts per share in this note are adjusted retroactively for this stock split.

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