CSP INC /MA/ 10-K

Item 9A. Controls and Procedures Evaluation of Controls and Procedures ​ Disclosure Controls and Procedures. The Company evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of September 30, 2024. Our Chief Executive Officer, our Chief Financial Officer and other members of our senior management team supervised and participated in this evaluation. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s ("SEC") rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were not effective. This is due to the fact that we have identified material weaknesses described in this Item 9A and we are not yet able to conclude that such material weaknesses have been remediated by the changes we made in response to those material weaknesses. ​ ​ Management’s Report on Internal Control over Financial Reporting. ​ The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by or under the supervision of a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. It includes those policies and procedures that: ​ ● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company ​ ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of a company; and ​ ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on its financial statements. ​ Management has assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2024. ​ “In making its assessment of internal control, management used the criteria described in “Internal Control Integrated Framework” under the 2013 Framework issued by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission.” As a result of its assessment, management has concluded that the Company’s internal control over financial reporting was not effective as of September 30, 2024. 31 Table of Contents ​ Material Weaknesses ​ As of September 30, 2024, management has identified material weaknesses. As defined in Rule 12b-2 under the Exchange Act, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected in a timely basis. ​ In August 2024 during its fiscal 2024 third quarter review the Company identified certain control deficiencies related to its business expense reimbursement and selected purchases policy and application of a legacy credit card program for Company credit cards. The control deficiencies arose out of a lack of adequate review and incomplete supporting documentation related to certain business expenses including those for reimbursement for Company credit card charges from a C level Company executive as well as undocumented compensation agreement with regards to the use of credit card points which resulted in undisclosed compensation. The Audit Committee engaged a third party to investigate and analyze certain transactions made on the corporate credit card and it was not led by management. As of September 30, 2024, the C-level executive returned to the Company approximately $20,000 in aggregate related to the portion of the undisclosed compensation in excess of the intended compensation agreement ​ In response to these control deficiencies, the Company performed additional analysis and reconciliation around all the credit card activity, including reimbursement, purchases and review of the credit card use policies, assessed various alternatives to remediate this material weakness and implemented changes to our internal controls including implementation of additional review and confirmation process by designated employees and the termination of the legacy benefit program identified above. ​ During the preparation of the Company’s annual financial statement, the Company performed further analysis and testing of these controls including the newly implemented controls. These identified control deficiencies could have resulted in a material misstatement of the Company’s financial statements that would not have been prevented or detected, although no such misstatements occurred. ​ During the preparation of our annual financial statements, we determined that the controls over the credit card process were not operating effectively, and the resulting control gap amounted to a material weakness in our controls over financial reporting. As a result, we concluded that the Company’s internal control over financial reporting was not effective as of September 30, 2024. The COSO principles of Exercises oversight responsibility and develops control activities were not properly followed in our internal controls. Although we have implemented changes to our internal controls over financial reporting as described herein, at this time we cannot conclude that the material weakness has been remediated. Accordingly, management concluded that the control deficiencies were a material weakness in the Company’s internal control over financial reporting. ​ Remediation of Material Weaknesses ​ We are committed to maintaining a strong internal control environment and implementing measures designed to help ensure that the material weaknesses are remediated as soon as possible. We believe we have made progress towards remediation and continue to implement our remediation plan for the material weakness, which includes the following steps. ● All points earned on the Company credit cards will accrue only to the benefit of the .Company. ● The Company will further update its Credit Card purchase and Reimbursement Policy and take steps to ensure the Expense Policy is followed with documentation and proper approvals. ● In fiscal year 2025, internal audit will test a reasonable number of selections from all corporate credit card expenses monthly and report findings directly to the Company’s CFO. If there is an exception, this will be reported to the Audit Committee ● Quarterly a summary report of Credit card internal audit results will be reported to the Audit Committee. ​ 32 Table of Contents They consider the material weakness remediated after the applicable controls operate for a sufficient period of time, and management has concluded, through testing, that the controls are operating effectively. ​ The process of designing and implementing an effective accounting and financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain an accounting and financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may determine to take additional actions to address control deficiencies or determine to modify certain of the remediation measures described above. ​ Income Tax ​ Management identified another material weakness in our internal controls over financial reporting for income taxes relating to current/non-current taxes payable, certain deferred tax assets and liabilities, and current and deferred tax expenses. We use a third-party provider to prepare our tax provision and related disclosures on a quarterly basis. The company reviews the provision and disclosures. We believe the material weakness occurred due to a lack of competency of the third-party provider and management needs to perform a more comprehensive review with the third-party preparer. Management put in place a remediation plan to address the material weakness as described below however, as a result, we concluded that the Company’s internal control over financial reporting was not effective as of September 30, 2024. ​ Remediation of Material Weaknesses ​ With oversight from the Audit Committee, management designed and began implementing changes in processes and controls to remediate the material weakness relating to income taxes identified and has enhanced the Company's internal control over financial reporting as follows: ​ o Hire a new accounting firm with global expertise as our new third-party tax provider to prepare tax provisions and corporate income tax returns. We intend to use this firm to assist with enhancing internal controls over financial reporting for income taxes and developing and implementing a remediation plan. ​ o Hold quarterly meetings with our new third-party tax provider to discuss changes in tax law, key aspects of our quarterly/annual provisions and required updates to provisions, deciding a course of action and documenting such actions, review and approval of the tax data by senior members of our finance team and final discussion, review and approval of the third-party provider prepared provisions and returns. ​ o Provide income tax accounting training to those involved in the review of the tax data from our third-party tax provider. ​ ​ Attestation Report ​ This Annual Report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of September 30, 2024, was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the SEC that call for the Company to provide only management’s report in this Annual Report on Form 10-K. ​ ​ ​ ​ ​ 33 Table of Contents Changes in Internal Control over Financial Reporting During the year ended September 30, 2024, the Company began implementing the remediation efforts described above for both material weaknesses. There were no other changes in our internal control over financial reporting during the year ended September 30, 2024, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ​ Item 9B. Other Information During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated any “ Rule 10b5-1 trading arrangement” or “ non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections Not applicable PART III Item 10. Directors, Executive Officers and Corporate Governance We incorporate the information required by this item by reference to the sections captioned “Nominees for Election”, “Our Board of Directors”, “Our Executive Officers”, “Delinquent Section 16(a) reports” and “Corporate Governance” in our Schedule 14A Proxy Statement for our 2025 Annual Meeting of Stockholders, to be filed with the SEC within 120 days after the end of our fiscal year ended September 30, 2024. Item 11. Executive Compensation We incorporate the information required by this item by reference to the sections captioned “Compensation of Executive Officers” and “Compensation of Non-Employee Directors” in our Schedule 14A Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended September 30, 2024. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Securities Authorized for Issuance Under Equity Compensation Plans. The equity compensation plans approved by our stockholders consist of the CSP Inc. 2014 Employee Stock Purchase Plan (the "ESPP") and the 2015 Stock Incentive Plan. In fiscal 2024 and 2023, the Company granted certain key employees, certain officers including its Chief Executive Officer and non-employee directors’ shares of non-vested common stock instead of stock options. The non-vested common stock has a four-year vesting period for key employees and officers including the Chief Executive Officer. There is a one-year vesting period for the non-employee directors. The following table sets forth information as of September 30, 2024 regarding the total number of securities outstanding under these equity compensation plans. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of securities ​ ​ Number of securities to be ​ Weighted-average ​ remaining available for future ​ ​ issued upon exercise ​ exercise price of ​ issuance under equity ​ ​ of outstanding options, ​ outstanding options, ​ compensation plans (excluding ​ ​ warrants and rights ​ warrants and rights ​ securities reflected in column (a)) ​ Plan Category ​ (a) ​ (b) ​ (c) ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity plans approved by security holders 651,350 (1) ​ $ — (2) ​ 701,811 (3) ​ (1) Includes only non-vested restricted stock awards issued under the 2015 Stock Incentive Plan. 34 Table of Contents (2) There are only non-vested restricted awards outstanding, which do not require the holder to give any consideration for the awards. (3) Includes 191,434 shares under the 2015 Stock Incentive Plan and 509,377 shares under the 2014 Employee Stock Purchase Plan. We incorporate additional information required by this Item by reference to the section captioned “Security Ownership of Certain Beneficial Owners and Management” in our Schedule 14A Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended September 30, 2024. Item 13. Certain Relationships and Related Transactions and Director Independence We incorporate the information required by this item by reference to the section captioned “Corporate Governance” in our Schedule 14A Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended September 30, 2024. Item 14. Principal Accountant Fees and Services We incorporate the information required by this item by reference to the sections captioned “Fees for Professional Services” and “Pre-approval Policies and Procedures” in our Schedule 14A Proxy Statement for our 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of our fiscal year ended September 30, 2024. PART IV Item 15. Exhibits and Financial Statement Schedules (a) (1) Financial statements filed as part of this report: Consolidated Balance Sheets as of September 30, 2024 and 2023 Consolidated Statements of Operations for the years ended September 30, 2024 and 2023 Consolidated Statements of Comprehensive Income for the years ended September 30, 2024 and 2023 Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2024 and 2023 Consolidated Statements of Cash Flows for the years ended September 30, 2024 and 2023 Notes to Consolidated Financial Statements (2) Financial statement schedules All other financial statements and schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto included in Item 8, or is not applicable, material or required. ​ ​ ​ 35 Table of Contents (3) Exhibits ​ ​ ​ ​ ​ ​ Incorporated by Reference Exhibit No. Description Filed with this Form 10-K ​ Form Filing Date Exhibit No. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3.1 ​ Articles of Organization and amendments thereto ​ ​ ​ 10-K ​ December 26, 2007 ​ 3.1 3.2 ​ Articles of Amendment to the Company's Articles of Organization, adopted February 21, 2024 ​ ​ ​ 8-K ​ February 22, 2024 ​ 3.1 3.3 ​ Articles of Amendment to the Company's Articles of Organization, adopted June 26, 2024 ​ ​ ​ 8-K ​ June 27, 2024 ​ 3.1 3.4 ​ By-laws, as amended December 13, 2012 ​ ​ ​ 10-K ​ December 20, 2012 ​ 3.2 4.1 ​ Description of Securities ​ X ​ ​ ​ ​ ​ ​ 10.1 ​ Form of Employee Invention and Non-Disclosure Agreement ​ ​ ​ 10-K ​ November 22, 1996 ​ 10.3 10.2 ​ CSPI Supplemental Retirement Income Plan ​ ​ ​ 10-K ​ December 29, 2008 ​ 10.2 10.3* ​ 2014 Variable Compensation (Executive Bonus) and Base Programs dated November 12, 2013 ​ ​ ​ 10-K ​ December 23, 2014 ​ 10.10 10.4* ​ Death Benefit and Retirement Benefit Agreement between the Company and Victor Dellovo dated September 13, 2013 ​ ​ ​ 10-K ​ December 24, 2013 ​ 10.11 10.5* ​ Form of Change of Control Agreement with Gary W. Levine dated January 11, 2008 ​ ​ ​ 10-K ​ December 23, 2010 ​ 10.11 10.6* ​ 2014 Employee Stock Purchase Plan ​ ​ ​ DEF 14A ​ January 6, 2014 ​ A 10.7* ​ 2015 Stock Incentive Plan ​ ​ ​ DEF 14RA ​ January 25, 2019 ​ A 10.8 ​ 2015 Lowell, MA Lease ​ ​ ​ 10-K ​ December 24, 2015 ​ 10.21 10.9 ​ 2015 Deerfield Beach, FL Lease ​ ​ ​ 10-K ​ December 24, 2015 ​ 10.20 10.10* ​ Executive Retention and Service Agreement with Victor Dellovo, dated September 4, 2012 ​ ​ ​ 10-Q ​ February 14, 2018 ​ 10.1 10.11* ​ Forms of Employee Restricted Stock Award Agreement ​ ​ ​ 10-Q ​ February 14, 2018 ​ 10.2 19.1 ​ Insider Trading Policy ​ X ​ ​ ​ ​ ​ ​ 21.1 ​ Subsidiaries ​ X ​ ​ ​ ​ ​ ​ 23.1 ​ Consent of RSM LLP, Independent Registered Public Accounting Firm ​ X ​ ​ ​ ​ ​ ​ 31.1 ​ Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ​ X ​ ​ ​ ​ ​ ​ 31.2 ​ Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ​ X ​ ​ ​ ​ ​ ​ 32.1 ​ Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ​ X ​ ​ ​ ​ ​ ​ 97.1 ​ Policy relating to recovery of erroneously awarded compensation ​ ​ ​ 10-K ​ December 13, 2023 ​ 97.1 101.INS ​ XBRL Instance ​ ​ ​ ​ ​ ​ ​ ​ 101.SCH ​ XBRL Taxonomy Schema ​ ​ ​ ​ ​ ​ ​ ​ 101.CAL ​ XBRL Taxonomy Extension Calculation ​ ​ ​ ​ ​ ​ ​ ​ 101.DEF ​ XBRL Taxonomy Extension Definition ​ ​ ​ ​ ​ ​ ​ ​ 101.LAB ​ XBRL Taxonomy Extension Labels ​ ​ ​ ​ ​ ​ ​ ​ 36 Table of Contents 101.PRE ​ XBRL Taxonomy Extension Presentation ​ ​ ​ ​ ​ ​ ​ ​ * Management contract or compensatory plan. Item 16. Form 10-K Summary None. ​ 37 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ​ CSP INC. ​ ​ ​ ​ By: /s/ Victor Dellovo ​ ​ Victor Dellovo Chief Executive Officer and President ​ Date: December 20, 2024 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Title Date ​ ​ ​ ​ ​ /s/ Victor Dellovo ​ Chief Executive Officer, President and Director ​ December 20, 2024 Victor Dellovo ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Gary W. Levine ​ Chief Financial Officer (Principal Financial Officer) ​ December 20, 2024 Gary W. Levine ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Mike Newbanks ​ Vice President of Finance (Chief Accounting Officer) ​ December 20, 2024 Mike Newbanks ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ C. Shelton James ​ Director ​ December 20, 2024 C. Shelton James ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Raymond Charles Blackmon ​ Director ​ December 20, 2024 Raymond Charles Blackmon ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Marilyn T. Smith ​ Director ​ December 20, 2024 Marilyn T. Smith ​ ​ ​ ​ ​ ​ ​ ​ ​ /s/ Izzy Azeri ​ Director ​ December 20, 2024 Izzy Azeri ​ ​ ​ ​ ​ ​ ​ 38 Table of Contents ​ Report of Independent Registered Public Accounting Firm ​ Shareholders and the Board of Directors CSP Inc. and Subsidiaries Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of CSP Inc. and Subsidiaries (the Company) as of September 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, shareholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion ​ These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. ​ Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter ​ The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements, and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ Revenue Recognition - Gross Versus Net Presentation ​ As described in Note 1 to the financial statements, the Company recognizes revenue from third-party service contracts as either gross sales or net sales depending on whether the Company is acting as a principal party to the transaction or simply acting as an agent or broker. The Company records revenue as gross when the 39 Table of Contents Company is a principal party to the arrangement and net of cost when they are acting as a broker or agent. The Company has concluded that it is the agent in sales of third-party maintenance, software or hardware support, and certain security software that is sold with integral third-party delivered software maintenance that include critical updates. ​ We identified the Company’s accounting for revenue from third-party service contracts described above to be a critical audit matter due to the significant judgments used by management related to the evaluation of the principal versus agent considerations. Auditing management’s assumptions and conclusions involved a high degree of auditor judgment. ​ Our audit procedures related to these contracts included the following, among others: ​ ● We evaluated management’s significant accounting policies related to these third-party contracts for consistency with accounting standards. ● For a selection of contracts, we performed the following procedures: o Inspected the customer invoice and purchase order to determine whether the sale represented a valid and enforceable transaction with a customer. o Compared the cost per the Company’s records to the cost per the vendor invoice. o For third-party service contracts, we assessed the terms in the customer purchase order, customer invoice and vendor invoice and evaluated the Company’s determination of principal versus agent presentation. For those contracts where the Company is acting as an agent or broker, we: • Compared the description of the transaction per the customer invoice to management’s summary file of gross vs. net transactions. • Assessed the reasonableness of the revenue allocation of third-party service contracts and the related vendor costs. • Evaluated the accuracy of the summary file through inspection of customer and vendor invoices, purchase orders and information on vendor websites accessed through third-party search engines and through inquiries with management. ​ /s/ RSM US LLP We have served as the Company's auditor since 2007. Coral Gables, Florida December 20, 2024 ​ ​ 40 Table of Contents CSP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except par value) ​ ​ ​ ​ ​ ​ ​ September 30, ​ September 30, ​ 2024 2023 ​ ​ ​ ​ ​ ASSETS ​ ​ Current assets: ​ ​ Cash and cash equivalents $ 30,585 ​ $ 25,217 Accounts receivable, net of allowances of $ 147 and $ 100 14,494 ​ 12,955 Financing receivables, net of allowances of $ 12 and $ 0 4,384 ​ 7,171 Inventories 2,293 ​ 2,542 Other current assets 3,093 ​ 2,479 Total current assets 54,849 ​ 50,364 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Property, equipment and improvements, net 429 ​ 525 Operating lease right-of-use assets ​ 489 ​ ​ 966 Intangibles, net 50 ​ 46 Financing receivables due after one year, net of allowances of $ 25 and $ 0 ​ 2,922 ​ 4,224 Deferred income taxes, net 2,734 ​ 2,346 Cash surrender value of life insurance 5,589 ​ 5,356 Pension benefits assets ​ 2,201 ​ ​ 1,958 Other assets 173 ​ 119 Total assets $ 69,436 ​ $ 65,904 ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS’ EQUITY ​ Current liabilities: ​ Accounts payable and accrued expenses $ 12,084 ​ $ 10,785 Line of credit ​ 4,169 ​ ​ 1,515 Note payable ​ — ​ ​ 449 Deferred revenue and contract liabilities 2,171 ​ 1,898 Pension and retirement plans 76 ​ 98 Income taxes payable 182 ​ 914 Total current liabilities 18,682 ​ 15,659 Pension and retirement plans 1,306 ​ 1,251 Operating lease liabilities - noncurrent portion ​ 117 ​ ​ 482 Income taxes payable 447 ​ 513 Other noncurrent liabilities 1,614 ​ 1,851 Total liabilities 22,166 ​ 19,756 ​ ​ ​ ​ ​ ​ Shareholders’ equity: ​ Common stock, $ .01 par value per share; authorized, 20,000 shares; issued and outstanding 9,776 and 9,456 (1) shares, respectively 98 ​ 94 Additional paid-in capital (1) 22,689 ​ 20,837 Retained earnings 29,848 ​ 31,311 Accumulated other comprehensive loss ( 5,365 ) ​ ( 6,094 ) Total shareholders’ equity 47,270 ​ 46,148 Total liabilities and shareholders’ equity $ 69,436 ​ $ 65,904 ​ ​ ​ ​ ​ ​ (1) Retroactively adjusted for the effects of a two for one stock split effected in the form of a 100 % stock dividend for fiscal year 2023 (see Note 1) ​ ​ ​ ​ ​ ​ See accompanying notes to consolidated financial statements. 41 Table of Contents CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except for per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2024 2023 ​ Sales: ​ ​ ​ Product ​ $ 36,793 ​ $ 47,149 ​ Services ​ 18,426 ​ 17,498 ​ Total sales ​ 55,219 ​ 64,647 ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales: ​ ​ ​ Product ​ 28,800 ​ 35,524 ​ Services ​ 7,564 ​ 7,203 ​ Total cost of sales ​ 36,364 ​ 42,727 ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross profit ​ 18,855 ​ 21,920 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ Engineering and development ​ 2,956 ​ 3,140 ​ Selling, general and administrative ​ 17,771 ​ 16,910 ​ Total operating expenses ​ 20,727 ​ 20,050 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating (loss) income ​ ( 1,872 ) ​ 1,870 ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ Foreign exchange loss ​ ( 438 ) ​ ( 581 ) ​ Interest expense ​ ( 235 ) ​ ( 262 ) ​ Interest income ​ 2,047 ​ 1,460 ​ Employee Retention Tax Credit, net of costs to collect ​ ​ — ​ ​ 2,136 ​ Other income, net ​ 79 ​ 112 ​ Total other income, net ​ 1,453 ​ 2,865 ​ (Loss) income before income taxes ​ ​ ( 419 ) ​ 4,735 ​ Income tax benefit ​ ​ ( 93 ) ​ ( 469 ) ​ Net (loss) income ​ $ ( 326 ) ​ $ 5,204 ​ Net (loss) income attributable to common shareholders ​ $ ( 326 ) ​ $ 4,884 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income per common share - basic (1) ​ $ ( 0.04 ) ​ $ 0.56 ​ Weighted average common shares outstanding - basic (1) ​ 9,041 ​ 8,762 ​ ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income per common share - diluted (1) ​ $ ( 0.04 ) ​ $ 0.55 ​ Weighted average common shares outstanding - diluted (1) ​ ​ 9,041 ​ ​ 8,941 ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Retroactively adjusted for the effects of a two for one stock split effected in the form of a 100 % stock dividend for fiscal year 2023 (see Note 1) ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to consolidated financial statements. 42 Table of Contents CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ September 30, ​ September 30, ​ ​ 2024 2023 ​ Net (loss) income ​ $ ( 326 ) $ 5,204 ​ Other comprehensive income: ​ ​ ​ Unrealized actuarial gain on minimum pension liability, net of tax effect ​ 6 ​ 272 ​ Foreign currency translation gain adjustments, net of tax effect ​ 723 ​ 962 ​ Other comprehensive income ​ 729 ​ 1,234 ​ Total comprehensive income ​ $ 403 $ 6,438 ​ ​ See accompanying notes to consolidated financial statements. 43 Table of Contents CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For the Years Ended September 30, 2024 and 2023: (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ other ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Retained ​ comprehensive ​ Shareholders’ Year ended September 30, 2024: Shares (1) Amount (1) Capital (1) Earnings loss Equity Balance as of September 30, 2023 9,456 ​ $ 94 ​ $ 20,837 ​ $ 31,311 ​ $ ( 6,094 ) ​ $ 46,148 Adoption of Accounting Standards Update 2016-13 ​ — ​ ​ — ​ ​ — ​ ​ ( 15 ) ​ ​ — ​ ​ ( 15 ) Net loss — ​ — ​ — ​ ( 326 ) ​ — ​ ( 326 ) Other comprehensive income — ​ ​ — ​ ​ — ​ ​ — ​ 729 ​ 729 Stock-based compensation — ​ ​ — ​ ​ 1,579 ​ ​ — ​ — ​ 1,579 Restricted stock cancellation ​ ( 7 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock issuance 305 ​ ​ 3 ​ ​ — ​ ​ — ​ — ​ 3 Issuance of shares under employee stock purchase plan 30 ​ ​ 1 ​ ​ 273 ​ ​ — ​ — ​ 274 Purchase of common stock ​ ( 8 ) ​ ​ — ​ ​ — ​ ​ ( 104 ) ​ ​ — ​ ​ ( 104 ) Cash dividends paid on common stock ($ 0.105 per share) (1) — ​ ​ — ​ ​ — ​ ​ ( 1,018 ) ​ — ​ ( 1,018 ) Balance as of September 30, 2024 9,776 ​ $ 98 ​ $ 22,689 ​ $ 29,848 ​ $ ( 5,365 ) ​ $ 47,270 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ other ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Retained ​ comprehensive ​ Shareholders’ Year ended September 30, 2023: Shares (1) Amount (1) Capital (1) Earnings loss Equity Balance as of September 30, 2022 9,108 ​ $ 91 ​ $ 19,431 ​ $ 26,769 ​ $ ( 7,328 ) ​ $ 38,963 Net income — ​ — ​ — ​ 5,204 ​ — ​ 5,204 Other comprehensive income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,234 ​ 1,234 Stock-based compensation — ​ ​ — ​ ​ 1,126 ​ ​ — ​ ​ — ​ 1,126 Restricted stock issuance 286 ​ ​ 3 ​ ​ — ​ ​ — ​ ​ — ​ 3 Issuance of shares under employee stock purchase plan 64 ​ ​ — ​ ​ 280 ​ ​ — ​ ​ — ​ 280 Purchase of common stock ​ ( 2 ) ​ ​ — ​ ​ — ​ ​ ( 6 ) ​ ​ — ​ ​ ( 6 ) Cash dividends paid on common stock ($ 0.07 per share) (1) — ​ ​ — ​ ​ — ​ ​ ( 656 ) ​ ​ — ​ ( 656 ) Balance as of September 30, 2023 9,456 ​ $ 94 ​ $ 20,837 ​ $ 31,311 ​ $ ( 6,094 ) ​ $ 46,148 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Retroactively adjusted for the effects of a two for one stock split effected in the form of a 100 % stock dividend for fiscal year 2023 (see Note 1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to consolidated financial statements. 44 Table of Contents CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ September 30, ​ September 30, ​ 2024 2023 Operating activities ​ ​ Net (loss) income ​ $ ( 326 ) ​ $ 5,204 ​ ​ ​ ​ ​ ​ ​ Adjustments to reconcile net (loss) income to net cash provided by operating activities: ​ ​ Depreciation ​ 292 ​ 343 Amortization of intangibles ​ 6 ​ 15 Loss on disposal of fixed assets, net ​ ​ 1 ​ ​ 4 Foreign exchange loss ​ 438 ​ 581 Provision for credit losses - financing receivables ​ ( 45 ) ​ — Provision for credit losses - accounts receivable ​ ​ 114 ​ ​ 26 Provision for obsolete inventory ​ 354 ​ 274 Amortization of lease right-of-use assets ​ ​ 496 ​ ​ 573 Stock-based compensation expense on restricted stock awards ​ 1,579 ​ 1,126 Deferred income taxes ​ ( 387 ) ​ ( 2,346 ) Increase in cash surrender value of life insurance ​ ( 180 ) ​ ( 130 ) ​ ​ ​ ​ ​ ​ ​ Changes in operating assets and liabilities: ​ ​ (Increase) decrease in accounts receivable ​ ( 1,573 ) ​ 1,080 Decrease in financing receivables ​ ​ 4,058 ​ ​ 4,961 (Increase) decrease in inventories ​ ( 95 ) ​ 1,557 Decrease in refundable income taxes ​ — ​ 1,048 (Increase) decrease in other assets ​ ​ ( 681 ) ​ ​ 4,207 Increase (decrease) in accounts payable and accrued expenses ​ 1,383 ​ ( 11,646 ) Decrease in operating lease liabilities ​ ​ ( 485 ) ​ ​ ( 190 ) Increase (decrease) in deferred revenue and contract liabilities ​ 273 ​ ( 2,161 ) Increase (decrease) in pension and retirement plans liabilities ​ 27 ​ ( 391 ) (Decrease) increase in income taxes payable ​ ( 798 ) ​ 967 Decrease in other noncurrent liabilities ​ ( 238 ) ​ ( 1,195 ) Net cash provided by operating activities ​ 4,213 ​ 3,907 ​ ​ ​ ​ ​ ​ ​ Investing activities ​ ​ Life insurance premiums paid ​ ( 50 ) ​ ( 64 ) Purchase of held-to-maturity investments ​ ​ — ​ ​ ( 3,533 ) Proceeds from maturities of held-to-maturity investments ​ ​ — ​ ​ 3,533 Additions of intangible assets ​ ​ ( 10 ) ​ ​ ( 51 ) Purchases of property, equipment and improvements ​ ( 196 ) ​ ( 226 ) Net cash used in investing activities ​ ( 256 ) ​ ( 341 ) ​ ​ ​ ​ ​ ​ ​ Financing activities ​ ​ Dividends paid ​ ( 1,018 ) ​ ( 656 ) Net borrowing under line-of-credit agreement ​ ​ 2,654 ​ ​ ( 1,609 ) Repayments on note payable ​ ​ ( 427 ) ​ ​ ( 406 ) Principal payments on finance leases ​ — ​ ( 4 ) Purchase of common stock ​ ​ ( 104 ) ​ ​ ( 6 ) Proceeds from issuance of shares under equity compensation plans ​ 274 ​ 280 Net cash provided by (used in) financing activities ​ 1,379 ​ ( 2,401 ) Effects of exchange rate on cash, net ​ 32 ​ 70 45 Table of Contents Net increase in cash and cash equivalents ​ 5,368 ​ 1,235 Cash and cash equivalents beginning of period ​ ​ 25,217 ​ 23,982 Cash and cash equivalents end of period ​ $ 30,585 ​ $ 25,217 ​ ​ ​ ​ ​ ​ ​ Supplementary cash flow information: ​ ​ Cash paid for income taxes ​ $ 1,601 ​ $ 246 Cash paid for interest ​ $ 206 ​ $ 313 ​ ​ ​ ​ ​ ​ ​ Supplementary non-cash financing activities: ​ ​ ​ ​ ​ ​ Obtaining a right-of-use asset in exchange for a lease liability ​ $ 19 ​ $ 392 Customer financing for inventory sold (see Note 3 Financing receivables, net for details) ​ $ 5,240 ​ $ 6,032 Vendor financing for inventory purchased (see Note 9 Accounts payable and accrued expenses, and Other noncurrent liabilities for details) ​ $ 2,995 ​ $ 2,321 ​ See accompanying notes to consolidated financial statements. ​ ​ 46 Table of Contents ​ CSP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED SEPTEMBER 30, 2024 AND 2023 Organization and Business CSP Inc. ("CSPi" or "CSPI" or "the Company" or "we" or "our") was founded in 1968 and is based in Lowell, Massachusetts. To meet the diverse requirements of commercial and defense customers worldwide, 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. The Company operates in two segments, its Technology Solutions ("TS") segment and its High Performance Products ("HPP") segment. 1. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying audited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America and the rules and regulations of the Securities and Exchange Commission. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. Presentation – sales whose payment terms exceed one year 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 notes to the 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 , specifically ASC 505-20-25-3 through ASC 505-20-25-6 , 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 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 . 47 Table of Contents On June 26, 2024, the stockholders of CSP, Inc. approved an amendment to the Company's Articles of Organization, as amended (the "Articles of Organization"), to increase the number of authorized shares of Common Stock from 9,753,900 to 20,000,000 (the "Amendment"). On June 26, 2024, the Company filed an Articles of Amendment to the Articles of Organization with the Secretary of the Commonwealth of Massachusetts to effect the Amendment, which became effective immediately upon such filing. ​ Adopted Accounting Pronouncement in the Year Ended September 30, 2024 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. 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 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 2 - Accounts receivable, net and Note 3 - Financing receivables, net . ​ Accounting Pronouncement Not Yet Adopted as of September 30, 2024 In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, 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. ​ In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU expands existing income tax disclosures primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The ASU is effective for all public entities for annual periods beginning after December 15, 2024, with early adoption permitted. Entities should apply the amendments on a prospective basis, but retrospective application is permitted. The Company is currently evaluating the impact this ASU will have on its disclosures. In November 2024, the FASB issued ASU 2024-04, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires expanded disclosures in the notes to the financial statements about certain costs and expenses. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the effect of this pronouncement on its disclosures. ​ ​ ​ 48 Table of Contents Foreign Currency Translation The U.S. Dollar is the reporting currency for all periods presented. The financial information for entities outside the United States is measured using the local currency as the functional currency. In consolidation, foreign transactions are remeasured into the functional currency, British Pounds, of our U.K. subsidiary. This non-cash remeasurement is included in the foreign exchange gain or loss on the Consolidated Statements of Operations. After this remeasurement, assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenue and expenses are translated at average rates in effect during the period. The resulting translation adjustment is reflected as accumulated other comprehensive loss, a separate component of shareholders’ equity on the consolidated balance sheets. Currency transaction gains and losses are recorded as other income (expense) in the consolidated statements of operations. Cash Equivalents For purposes of the consolidated statements of cash flows, highly liquid investments with original maturities of three months or less at the time of acquisition are considered cash equivalents. The Company maintains its cash and cash equivalents with financial institutions and, at times, the balance may exceed the Federal Deposit Insurance Corporation federally insured limits (United States - $250,000 per depositer) or Financial Services Compensation Scheme (United Kingdom - £85,000 per depositer). The Company has never experienced any losses related to these balances. Employee Retention Tax Credit The Coronavirus Aid, Relief, and Economic Security Act provided an employee retention credit (“ERC”) which is a refundable tax credit against certain employment taxes. The Consolidated Appropriations Act, 2021 extended and expanded the availability of the employee retention credit through December 31, 2021 including amending the employee retention credit to be equal to 70 % of qualified wages paid to employees during the 2021 calendar year. The TS-US division and HPP segment qualified for the ERC beginning in March 2021 for qualified wages through September 2021 and filed a cash refund claim during the fiscal year ended September 30, 2023. An amount of $ 2.8 million, net of costs, was received in the fourth quarter of fiscal year 2023. On the Company’s Consolidated Statements of Operations in Total other income, net the financial statement line item Employee retention tax credit, net of costs to collect for fiscal year ended September 30, 2023 of $ 2.1 million represents the amount we were qualified to receive. There are no other amounts that will be received related to this credit. We accounted for the ERC as a gain contingency in accordance with ASC 450-30 Gain Contingencies. Under this standard, the ERC was recognized only after the contingency was resolved and deemed realizable. Research and Development Expense For the years ended September 30, 2024 and 2023, our expenses for research and development were approximately $ 3.0 million and $ 3.1 million, respectively. Expenditures for research and development are expensed as they are incurred. Impairment of Long-Lived Assets The Company reviews its long-lived assets, including intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Management assesses the recoverability of the long-lived assets (intangibles) by comparing the estimated undiscounted cash flows associated with the related asset or group of assets against their respective carrying amounts. The amount of impairment, if any, is calculated based on the excess of the carrying amount over the fair value of those assets. Intangible assets that are not subject to amortization are also required to be tested annually, or more frequently if events or circumstances indicate that the asset may be impaired. We did not have intangible assets with indefinite lives any time during the two years ended September 30, 2024. 49 Table of Contents Intangible assets subject to amortization are amortized on a straight-line basis over their estimated useful lives, generally three to ten years , and are carried at net book value. The remaining useful lives of intangible assets are evaluated on an annual basis. Intangible assets subject to amortization are also tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. If the fair value of an intangible asset subject to amortization is determined to be less than its carrying value, then an impairment charge is recorded to write down that asset to its fair value. There was no impairment for the years ended September 30, 2024 and 2023. Leases as Lessee At the inception of an arrangement, the Company determines whether the arrangement contains a lease. This includes arrangements with goods and services to determine if there is an embedded lease. An arrangement containing a lease would allow the Company the right to control an implicitly or explicitly identified asset. If there is a lease in an arrangement, the classification is determined at inception of the arrangement. Certain leases may contain transfer of ownership or an option to purchase the underlying asset. The most relevant criterion for our lease classification is transfer of ownership, which if included in the arrangement makes the lease a finance lease rather than an operating lease. The discount rate used to assess classification is the incremental borrowing rate at the commencement date due to the implicit rate not being readily determinable. The incremental borrowing rate is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The lease term includes periods when we are reasonably certain we will exercise the renewal option. The Company has elected not to apply Subtopic ASC 842-25 to short-term leases, which are defined as a lease that has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. Therefore, there are no right-of-use assets or lease liabilities related to short-term leases in the Consolidated Balance Sheets and the lease payments are expensed on a straight-line basis over the lease term. Leases are typically not able to be terminated without penalty. None of our lease arrangements contain residual value guarantees, restrictions, or covenants. None of the Company’s current leases are with related parties. There are no lease arrangements that we have entered into as of September 30, 2024 that have not yet commenced. See Note 10 Leases for additional information. Operating leases The Company has operating leases for office space, data centers, and other information technology equipment under various leases. Operating lease right-of-use assets and liabilities are recognized at the commencement date using the present value of the fixed lease payments over the lease term. We do not have leases with variable consideration. The incremental borrowing rate is used in determining present value. Certain operating leases, primarily office space and IT equipment, have an option to extend the lease. Renewal periods related to certain lease agreements related to office buildings are included in the lease term for lease accounting. The Company has operating lease agreements with lease components (e.g. fixed payments including rent, real estate taxes, and insurance costs) as well as nonlease components (e.g. common-area maintenance, colocation services). The Company has elected to account for lease and nonlease components as one single lease component for all classes of assets. Lease expense is recognized on a straight-line basis over the lease term. Inventories Inventories are stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out method. The recoverability of inventories is based upon the types and levels of inventories held, forecasted demand, pricing, competition and changes in technology. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. As of September 30, 2024, and September 30, 2023, the Company maintained inventory reserves of $ 1.1 million and $ 1.0 million, respectively. 50 Table of Contents Property, Equipment and Improvements The components of property, equipment and improvements are stated at cost. The Company provides for depreciation by use of the straight-line method over the estimated useful lives of the related assets ( three to seven years ). Leasehold improvements are amortized by use of the straight-line method over the lesser of the estimated useful life of the asset or the lease term. Repairs and maintenance costs are expensed as incurred. Accounts Receivable, net of Allowance for Credit Losses Accounts receivable are recorded at the invoiced amount and are non-interest bearing. Accounts receivable are stated at their net realizable value, net of the allowance for credit losses. Allowances for credit losses are recorded for the estimated losses resulting from the inability of our customers to make required payments based on historical data as well as forecasted future conditions. 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. If the financial condition of our customers were to deteriorate, resulting in impairment of their ability to make payments, additional allowances may be required. Accounts receivable are charged off against the reserve when management has determined they are uncollectible. Financing Receivables, net of Allowance for Credit Losses Financing receivables are recorded at the invoiced amount and are interest bearing. Financing receivables are stated at their net realizable value, net of the allowance for credit losses. Allowances for credit losses are recorded for the estimated losses resulting from the inability of our customers to make required payments based on historical data as well as forecasted future conditions. 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 growth and unemployment rates, which directly correlate with our historical credit losses. If the financial condition of our customers were to deteriorate, resulting in impairment of their ability to make payments, additional allowances may be required. Financing receivables are charged off against the reserve when management has determined they are uncollectible. Pension and Retirement Plans The funded status of pension and other postretirement benefit plans is recognized on the consolidated balance sheets. Gains and losses, prior service costs and credits and any remaining transition amounts that have not yet been recognized through pension expense will be recognized in accumulated other comprehensive loss, net of tax, until they are amortized as a component of net periodic pension/postretirement benefits expense. Additionally, plan assets and obligations are measured as of our fiscal year-end balance sheet date (September 30). We have defined benefit and defined contribution plans in the United Kingdom (the “U.K.”) and in the U.S. In the U.K. the Company provides defined benefit pension plans for certain employees and former employees and defined contribution plans for the majority of the employees. The defined benefit plan in the U.K. is closed to newly hired employees and has been for the two year s ended September 30, 2024. In the U.S., the Company also provides defined contribution plans that cover most employees and supplementary retirement plans to certain employees and former employees who are now retired. These supplementary retirement plans are also closed to newly hired employees and have been for the two year s ended September 30, 2024. These supplementary plans are funded through whole life insurance policies. The Company expects to recover all insurance premiums paid under these policies in the future, through the cash surrender value of the policies and any death benefits or portions thereof to be paid upon the death of the participant. These whole life insurance policies are carried on the balance sheet at their cash surrender values as they are owned by the Company and not assets of the defined benefit plans. In the U.S., the Company also provides for officer death benefits and 51 Table of Contents post-retirement health insurance benefits through supplemental post-retirement plans to certain officers. The Company also funds these supplemental plans’ obligations through whole life insurance policies on the officers. Pension expense is based on an actuarial computation of current future benefits using estimates for expected return on assets, expected compensation increases and applicable discount rates. Management has reviewed the discount rates and rates of return with our consulting actuaries and investment advisor and concluded they were reasonable. A decrease in the expected return on pension assets would increase pension expense. Expected compensation increases are estimated based on historical and expected increases in the future. Increases in estimated compensation increases would result in higher pension expense while decreases would lower pension expense. Discount rates are selected based upon rates of return on high quality fixed income investments currently available and expected to be available during the period to maturity of the pension benefit. A decrease in the discount rate would result in greater pension expense while an increase in the discount rate would decrease pension expense. 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 consolidated balance sheets. Segment Information We have two operating segments: (i) Technology Solutions ("TS") and (ii) High Performance Products ("HPP"). In the TS segment, we focus on value added reseller ("VAR") integrated solutions including third party hardware, software and technical computer-related consulting and managed services. In the HPP segment, we design, manufacture and deliver products and services to customers that require specialized cyber security services, networking and signal processing products. The operations and assets of our TS segment are located in the United States and the United Kingdom, which are the two divisions that make up the TS segment. The operations and assets of our HPP segment are located in the United States. Revenue Recognition 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. We recognize revenue from third-party service contracts as either gross sales or net sales depending on whether we are acting as the principal party to the transaction or acting as an agent or broker based on control and timing. We are the principal if we control the good or service before that good or service is transferred to the customer. For each identified performance obligation in a transaction, we evaluate the facts and circumstances present to determine whether or not we control the specified good or service prior to transfer to the customer. This evaluation includes, but is not limited to, assessing indicators such as whether: (i) we are primarily responsible for fulfilling the promise to provide the specified goods or service, (ii) we have inventory risk before the specified good or service has been transferred to a customer and (iii) we have discretion in establishing the price for the specified good or service. When the evaluation indicates we control the specified good or service prior to transfer to the customer, we are acting as a principal. When the evaluation indicates we do not control the specified good or service prior to transfer to the customer, we are acting as an agent. We record revenue as gross when we are the 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 52 Table of Contents critical updates. When CSPi sells goods and services with a financing component the strongest indicator is whether the Company has discretion in selling price as many of the agreements are brought to us at predetermined price by the manufacturer. 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. Some transactions include shipping as part of the contract. The Company records shipping billed to its customers as Product revenue and the related freight costs as Product cost of sales when the underlying product revenue is recognized. For freight not billed to its customers, the Company records the freight costs as Product cst of sales. The Company considers shipping to be a fulfillment activity and not a separate performance obligation. 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. 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 ARIA, Multicomputer, and Myricom product lines. ARIA revenue is derived from sale of hardware, software, and managed 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. 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 53 Table of Contents of the contract and therefore is not a separate performance obligation. Multicomputer revenue is derived from the sale of hardware, software, extended warranties, royalties, and repair services. See disaggregated revenues below by products/services and geography. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Technology Solutions Segment ​ ​ ​ ​ High ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ United ​ ​ ​ ​ ​ ​ ​ Consolidated Year ended September 30, 2024 Segment Kingdom U.S. Total Total ​ ​ (Amounts in thousands) 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 2,599 ​ $ 594 ​ $ 33,598 ​ $ 34,192 ​ $ 36,791 Service ​ ​ 1,555 ​ ​ 260 ​ ​ 16,611 ​ ​ 16,871 ​ ​ 18,426 Finance * ​ ​ — ​ ​ — ​ ​ 2 ​ ​ 2 ​ ​ 2 Total sales ​ $ 4,154 ​ $ 854 ​ $ 50,211 ​ $ 51,065 ​ $ 55,219 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Technology Solutions Segment ​ ​ ​ ​ High ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ United ​ ​ ​ ​ ​ ​ ​ Consolidated Year ended September 30, 2023 Segment Kingdom U.S. Total Total ​ ​ (Amounts in thousands) 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 5,475 ​ $ 734 ​ $ 40,938 ​ $ 41,672 ​ $ 47,147 Service ​ ​ 1,398 ​ ​ 288 ​ ​ 15,812 ​ ​ 16,100 ​ ​ 17,498 Finance * ​ ​ — ​ ​ — ​ ​ 2 ​ ​ 2 ​ ​ 2 Total sales ​ $ 6,873 ​ $ 1,022 ​ $ 56,752 ​ $ 57,774 ​ $ 64,647 ​ * Finance revenue is related to equipment leasing and is not subject to the guidance on revenue from contracts with customers ( ASC 606 ). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 54 Table of Contents See details of timing of revenue recognition and whether CSPi acted as the principal or agent below. Also see geographic areas based on the which the products were shipped or services rendered. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Technology Solutions Segment ​ ​ ​ ​ ​ High ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ United ​ ​ ​ ​ ​ ​ ​ Consolidated Year ended September 30, Segment Kingdom U.S. Total Total ​ ​ (Amounts in thousands) 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Timing of Revenue Recognition ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transferred at a point in time where CSPi is principal ​ $ 3,098 ​ $ 603 ​ $ 33,921 ​ $ 34,524 ​ $ 37,622 Transferred at a point in time where CSPi is agent ​ — ​ 37 ​ 7,070 ​ 7,107 ​ 7,107 Transferred over time where CSPi is principal ​ ​ 1,056 ​ ​ 214 ​ ​ 9,220 ​ ​ 9,434 ​ ​ 10,490 Total Revenue ​ $ 4,154 ​ $ 854 ​ $ 50,211 ​ $ 51,065 ​ $ 55,219 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 3,098 ​ $ 75 ​ $ 45,611 ​ $ 45,686 ​ $ 48,784 Americas (excluding United States) ​ ​ 714 ​ ​ — ​ ​ 3,810 ​ ​ 3,810 ​ ​ 4,524 Europe ​ ​ 6 ​ ​ 775 ​ ​ 344 ​ ​ 1,119 ​ ​ 1,125 Asia-Pacific ​ ​ 336 ​ ​ 4 ​ ​ 446 ​ ​ 450 ​ ​ 786 Total Revenue ​ $ 4,154 ​ $ 854 ​ $ 50,211 ​ $ 51,065 ​ $ 55,219 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ ​ ​ ​ Timing of Revenue Recognition ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transferred at a point in time where CSPi is principal ​ $ 6,259 ​ $ 741 ​ $ 41,136 ​ $ 41,877 ​ $ 48,136 Transferred at a point in time where CSPi is agent ​ — ​ 68 ​ 5,994 ​ 6,062 ​ 6,062 Transferred over time where CSPi is principal ​ ​ 614 ​ ​ 213 ​ ​ 9,621 ​ ​ 9,835 ​ ​ 10,449 Total Revenue ​ $ 6,873 ​ $ 1,022 ​ $ 56,752 ​ $ 57,774 ​ $ 64,647 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Geography ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 6,069 ​ $ 125 ​ $ 51,587 ​ $ 51,712 ​ $ 57,781 Americas (excluding United States) ​ ​ 110 ​ ​ 13 ​ ​ 4,859 ​ ​ 4,872 ​ 4,982 Europe ​ ​ 335 ​ ​ 835 ​ ​ 259 ​ ​ 1,094 ​ ​ 1,429 Asia-Pacific ​ ​ 359 ​ ​ 49 ​ ​ 47 ​ ​ 96 ​ ​ 455 Total Revenue ​ $ 6,873 ​ $ 1,022 ​ $ 56,752 ​ $ 57,774 ​ $ 64,647 ​ 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. See Note 3 Financing Receivables, net for more details. Revenue from these agreements in fiscal year 2024 was $ 2.0 million, which consisted of $ 1.5 million with CSPi acting as the principal and $ 0.5 million with CSPi acting as the agent. Revenue from these agreements in fiscal year 2023 was $ 0.8 million with CSPi acting as the agent. 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 $ 1.7 million and $ 0.9 million as of September 30, 2024 and September 30, 2023, respectively. Current contract assets were $ 4.4 million as of September 30, 2022. The current portion is recorded in other current assets on the consolidated balance sheets. There were no noncurrent contract assets as of September 30, 2024 and September 30, 2023. There were no noncurrent contract assets as of September 30, 2022. The difference in the balances is due to regular timing differences between when work is performed and having an unconditional right to payment. 55 Table of Contents Contract liabilities arise when payment is received before we transfer a good or service to the customer. Current contract liabilities were $ 2.2 million and $ 1.9 million as of September 30, 2024 and September 30, 2023, respectively. Current contract liabilities were $ 4.1 million as of September 30, 2022. The current portion of contract liabilities is recorded in Deferred revenue and contract liabilities on the consolidated balance sheets. There were no long-term contract liabilities as of September 30, 2024 and 2023, respectively. There were no long-term contract liabilities as of September 30, 2022. Revenue recognized for the year ended September 30, 2024 that was included in contract liabilities as of September 30, 2023 was $ 1.3 million. At times, customers delay projects that were supposed to be complete within a year, which is why the full balance of Deferred revenue and contract liabilities as of September 30, 2023 was not recognized in the twelve months ended September 30, 2024. The Company cannot reasonably predict when the customers will make these delays. 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 . 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 consolidated balance sheets as of September 30, 2024 and 2023. The portion of current capitalized costs were $ 177 thousand and $ 172 thousand as of September 30, 2024 and 2023, respectively. There were no noncurrent capitalized costs on the 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 years ended September 30, 2024 and 2023 were $ 477 thousand and $ 436 thousand, respectively. This is recorded in selling, general, and administrative expenses. There was no impairment related to incremental costs capitalized for the years ended September 30, 2024 and 2023, respectively. 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 consolidated balance sheets. There were no current capitalized costs as of September 30, 2024 and $ 9 thousand as of September 30, 2023, respectively. There were no noncurrent capitalized costs as of September 30, 2024 and 2023, respectively. The amount of fulfillment costs amortized year ended September 30, 2024 and 2023 were $ 9 thousand and $ 13 thousand, respectively. These costs amortized were recorded in cost of sales. There was no impairment related to fulfillment costs capitalized for the year ended and 2023. 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 day s to pay in full except in Europe where it could be up to 90 day s. Most of our contracts are less than one year. There are certain contracts that contain a financing component. See Note 1 Summary of Significant Accounting Policies to the 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 amount 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. ​ ​ ​ ​ 56 Table of Contents 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 September 30, 2024 is set forth in the table below: ​ ​ ​ ​ ​ ​ Fiscal Year (Amounts in thousands) 2025 ​ $ 1,327 2026 ​ ​ 999 Thereafter ​ ​ 2,002 ​ ​ $ 4,328 ​ Product Warranty Accrual Our product sales generally include a hardware warranty which ranges from 90 -days to three-years . At time of product shipment, we accrue for the estimated cost including labor and hardware to repair or replace potentially defective products. Estimated warranty costs are based upon prior actual warranty costs for substantially similar products. Engineering and Development Expenses Engineering and development expenses include payroll, employee benefits, stock-based compensation and other headcount-related expenses associated with product development. Engineering and development expenses also include third-party development and programming costs. We consider technological feasibility for our software products to be reached upon the release of the software, accordingly, no internal software development costs have been capitalized. Income Taxes We use the asset and liability method of accounting for income taxes whereby deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in net income in the period that includes the enactment date. We also reduce deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. This methodology requires estimates and judgments in the determination of the recoverability of deferred tax assets and in the calculation of certain tax liabilities. Valuation allowances are recorded against the gross deferred tax assets that management believes, after considering all available positive and negative objective evidence, historical and prospective, with greater weight given to historical evidence, that it is more likely than not that these assets will not be realized. In addition, we are required to recognize in the consolidated financial statements, those tax positions determined to be more-likely-than-not of being sustained upon examination, based on the technical merits of the positions as of the reporting date. If a tax position is not considered more-likely-than-not to be sustained based solely on its technical merits, no benefits of the position are recognized. In addition, the calculation of the Company’s tax liabilities involves estimating uncertainties in the application of complex tax regulations in a multitude of jurisdictions. The Company records liabilities for estimated tax obligations in the U.S. and other tax jurisdictions. These estimated tax liabilities include the provision for taxes that may become payable in the future. 57 Table of Contents Earnings per Share of Common Stock Basic net (loss) income per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive restricted stock awards and is computed by dividing net income available to common shareholders by the assumed weighted average number of common shares outstanding. We are required to present earnings per share ("EPS") utilizing the two-class method because we had outstanding, non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, which are considered participating securities. Basic and diluted (loss) income per share computations for the Company’s reported net (loss) income attributable to common stockholders are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ September 30, ​ September 30, ​ 2024 2023 ​ ​ ​ ​ ​ ​ ​ Net (loss) income $ ( 326 ) $ 5,204 Less: net income attributable to nonvested common stock ​ — ​ ( 320 ) Net (loss) income attributable to common shareholders ​ $ ( 326 ) $ 4,884 ​ ​ ​ ​ ​ ​ ​ Weighted average total shares outstanding - basic (1) ​ ​ 9,041 ​ ​ 9,337 Less: weighted average non–vested shares outstanding (1) ​ ​ — ​ ​ ( 575 ) Weighted average number of common shares outstanding - basic (1) ​ ​ 9,041 ​ 8,762 Add: potential common shares from non-vested stock awards (1) ​ ​ — ​ 179 Weighted average common shares outstanding - diluted (1) ​ $ 9,041 ​ 8,941 ​ ​ ​ ​ ​ ​ ​ Net (loss) income per common share - basic (1) ​ $ ( 0.04 ) ​ $ 0.56 Net (loss) income per common share - diluted (1) ​ $ ( 0.04 ) ​ $ 0.55 ​ ​ ​ ​ ​ ​ ​ (1) Retroactively adjusted for the effects of a two for one stock split effected in the form of a 100 % stock dividend for fiscal year 2023 (see Note 1) ​ ​ ​ ​ ​ ​ ​ All anti-dilutive securities, including restricted stock awards, are excluded from the diluted (loss) income per share computation. Non-vested restricted stock awards of 396 thousand shares were excluded from net loss per share for the year ended September 30, 2024 because their inclusion would have been anti-dilutive as there was a net loss for the period. Non-vested restricted stock awards of 108 thousand shares were excluded from net income per share for the year ended September 30, 2023 because their inclusion would have been anti-dilutive. Use of Estimates The preparation of 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. Actual results may differ from those estimates under different assumptions or conditions. Stock-Based Compensation We measure and recognize compensation expense for nonvested stock-based payment awards made to employees and directors based on the closing market price of our common stock as quoted on the Nasdaq Global Market on the date of grant over the requisite service period. The Company recognizes stock compensation expense, net of actual forfeitures. 58 Table of Contents The Company has no outstanding stock options issued as of September 30, 2024 and did not issue any for the years ended September 30, 2024 and 2023, respectively. Stock-based compensation expense recognized in the consolidated statements of operations for the fiscal years ended September 30, 2024 and 2023 is based on awards ultimately expected to vest and has been reduced for estimated forfeitures and will be revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense recognized for the fiscal years ended September 30, 2024 and 2023 consisted of restricted stock granted pursuant to the Company’s stock incentive and employee stock purchase plans of approximately $ 1.6 million and $ 1.1 million, respectively. Concentrations of Credit Risk There was no customer with 10% or more of accounts receivable as of September 30, 2024 or September 30, 2023. Below are customers with 10% or more of financing receivables as of September 30, 2024 or 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, ​ ​ ​ 2024 ​ ​ 2023 ​ ​ ​ (Amounts in millions) ​ ​ ​ ​ ​ % of Total ​ ​ ​ ​ % of Total ​ ​ Financing Receivables Financing Receivables ​ Financing Receivables Financing Receivables ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer A ​ $ 3.0 ​ 41 % ​ $ 7.4 ​ 65 % Customer B ​ $ 1.9 ​ 25 % ​ $ 2.5 ​ 22 % Customer C ​ $ 1.3 ​ 18 % ​ $ 1.5 ​ 13 % ​ We do not believe we have a significant credit risk with respect to accounts receivable or financing receivables. Subsequent Events The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the statement of financial position, including the estimates inherent in the process of preparing financial statements. The Company has evaluated subsequent events through the date of this filing, see Note 22 Subsequent event. ​ ​ ​ ​ 59 Table of Contents 2. Accounts Receivable, net 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 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. The balance of accounts receivable, net as of September 30, 2022 was $ 14.0 million, adjusted for the change in Presentation – sales whose payment terms exceed one year (see Note 1 for details). Also adjusted, the balance of the current and non-current portion of financing receivables as of September 30, 2022 was $ 9.0 million and $ 7.4 million, respectively. Amounts disclosed below for the year ended September 30, 2024 reflect adoption of the new CECL standard and the amounts disclosed for the year ended September 30, 2023 reflect superseded guidance. The following table presents the changes in the allowance for accounts receivable for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ September 30, 2024 ​ September 30, 2023 ​ ​ (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 ​ ​ - ​ ​ ( 14 ) Provision for credit losses ​ ​ 114 ​ ​ 26 Balances at end of the period ​ $ 147 ​ $ 100 ​ ​ ​ 3 . Financing Receivables, net In the TS-US division financing of goods and services is offered to certain customers within the United States. This involves amounts due reflecting sales whose payment terms exceed one year. This financing is separate from agreements with a leasing component, see Note 10 Leases for financing through leases. Determining whether to offer financing involves looking at the customer’s payment history, economic conditions, and capacity to pay. These financing arrangements do not contain collateral. The Company assigns an internal risk rating to each customer at inception, which groups customers into a portfolio based on 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 due to the likelihood of loss being higher. The risk characteristics of each portfolio are consistent with the Fitch rating or equivalent. According to Fitch Ratings, “'’BB' ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists that supports the servicing of financial commitments.” According to Fitch Ratings, “'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate, but adverse business or economic conditions are more likely to impair this capacity.” 60 Table of Contents The only significant change in factors that influenced the estimate of expected credit losses as of September 30, 2024 was a significant customer having its Fitch Rating upgraded from BB+ to BBB-. This customer had a balance of $ 1.9 million, or 25 %, of financing receivables, net and $ 2.5 million, or 22 %, as of September 30, 2024 and September 30, 2023, respectively. Financing receivables, net carry an average weighted average interest rate of 8.4 %, 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 years ended September 30, 2024 and 2023 was $ 700 thousand and $ 810 thousand, respectively. Interest income from these agreements is recorded in Other income (expense), net on the Consolidated Statements of Operations. Amounts disclosed below as of September 30, 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 September 30, 2024 ​ 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 ​ $ 7,153 ​ $ 874 ​ $ 8,027 ​ $ 8,893 ​ $ 3,361 ​ $ 12,254 Unearned interest income ​ ​ ( 599 ) ​ ​ ( 85 ) ​ ​ ( 684 ) ​ ​ ( 325 ) ​ ​ ( 534 ) ​ ​ ( 859 ) Allowance for credit losses ​ ​ ( 27 ) ​ ​ ( 10 ) ​ ​ ( 37 ) ​ ​ - ​ ​ - ​ ​ - Financing receivables, net ​ $ 6,527 ​ $ 779 ​ $ 7,306 ​ $ 8,568 ​ $ 2,827 ​ $ 11,395 Short-term ​ $ 4,013 ​ $ 371 ​ $ 4,384 ​ $ 6,281 ​ $ 890 ​ $ 7,171 Long-term ​ $ 2,514 ​ $ 408 ​ $ 2,922 ​ $ 2,287 ​ $ 1,937 ​ $ 4,224 ​ Amounts disclosed below for the year ended September 30, 2024 reflect adoption of the new CECL standard and the amounts for the year ended September 30, 2023 reflect superseded guidance. The following table presents the changes in Allowance for credit losses for Financing receivables, net for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ September 30, 2024 ​ September 30, 2023 ​ ​ 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 ​ ​ - ​ ​ - ​ ​ - Recovery charged to Consolidated Statements of Operations ​ ​ - ​ ​ ( 45 ) ​ ​ ( 45 ) ​ ​ - ​ ​ - ​ ​ - Balances at end of the period ​ $ 27 ​ $ 10 ​ $ 37 ​ $ - ​ $ - ​ $ - ​ 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 61 Table of Contents 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 September 30, 2024 or September 30, 2023. The following table presents Financing receivables, gross, including accrued interest and excluding any allowance, by credit quality indicator segregated by risk rating and year of origination as of September 30, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ ​ Fiscal year of origination ​ ​ ​ Risk Rating 2024 2023 2022 2021 Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Moderate $ 531 ​ $ 343 ​ $ — ​ $ — ​ $ 874 Low 2,956 ​ ​ 2,637 ​ ​ — ​ ​ 1,560 ​ ​ 7,153 Total $ 3,487 ​ $ 2,980 ​ $ — ​ $ 1,560 ​ $ 8,027 ​ Contractual maturities of outstanding financing receivables are as follows: ​ ​ ​ ​ Fiscal year ending September 30: (Amounts in thousands) 2025 ​ $ 5,119 2026 ​ ​ 2,042 2027 ​ ​ 808 2028 ​ ​ 58 Total payments ​ $ 8,027 Less: unearned interest income ​ ​ ( 684 ) Less: allowance for credit losses ​ ​ ( 37 ) Total, net of unearned interest income and allowance for credit losses ​ $ 7,306 ​ ​ ​ 4. Inventories, net Inventories, net consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ September 30, ​ 2024 2023 ​ ​ (Amounts in thousands) Raw materials ​ $ 77 ​ $ 247 Work-in-process ​ 315 ​ ​ 36 Finished goods ​ 1,901 ​ ​ 2,259 Total ​ $ 2,293 ​ $ 2,542 ​ 62 Table of Contents 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 in the near-term. The inventory we purchase at the TS segment is in high demand, especially in the current environment, and has a limited risk of obsolescence. The TS US division has many vendors it transacts with and does not have any specific agreement with any vendor that it must purchase certain products. Management believes other suppliers could provide similar products with comparable terms. 5. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of ​ ​ Accumulated ​ ​ Foreign ​ Minimum ​ Other ​ ​ Currency ​ Pension ​ Comprehensive ​ ​ Translation ​ Liability ​ Loss ​ ​ (Amounts in thousands) Balance as of September 30, 2022 ​ $ ( 5,791 ) ​ $ ( 1,537 ) ​ $ ( 7,328 ) Change in period ​ 962 ​ 244 ​ 1,206 Tax effect of change in period ​ — ​ 28 ​ 28 Balance as of September 30, 2023 ​ $ ( 4,829 ) ​ $ ( 1,265 ) ​ $ ( 6,094 ) Change in period ​ 723 ​ ( 60 ) ​ 663 Tax effect of change in period ​ — ​ 66 ​ 66 Balance as of September 30, 2024 ​ $ ( 4,106 ) ​ $ ( 1,259 ) ​ $ ( 5,365 ) ​ The changes in the minimum pension liability are net of an amortization gain of $ 185 thousand in 2024 and a gain of $ 200 thousand in 2023 included in net periodic pension cost. 63 Table of Contents 6. Income Taxes The components of income (loss) before income tax benefit and income tax benefit are comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended ​ ​ September 30, ​ 2024 2023 ​ ​ (Amounts in thousands) Income (loss) before income tax benefit ​ ​ ​ ​ ​ ​ U.S. ​ $ 74 $ 5,202 Foreign ​ ( 493 ) ( 467 ) ​ ​ $ ( 419 ) $ 4,735 Income tax expense: ​ ​ ​ ​ ​ Current: ​ ​ ​ ​ ​ Federal ​ $ 123 $ 1,551 State ​ 172 326 ​ ​ $ 295 $ 1,877 Deferred: ​ ​ ​ ​ ​ Federal ​ $ ( 372 ) $ ( 1,971 ) State ​ ( 15 ) ( 375 ) ​ ​ $ ( 387 ) $ ( 2,346 ) ​ ​ ​ ​ ​ ​ ​ Total income tax benefit ​ $ ( 93 ) $ ( 469 ) ​ ​ The effective income tax rate differed from the statutory federal income tax rate due to the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended September 30, ​ ​ 2024 ​ 2023 ​ ​ (Dollar amounts in thousands) Computed “expected” tax expense $ ( 88 ) 21.0 % $ 994 21.0 % Increases (reductions) in taxes resulting from: ​ ​ ​ State income taxes, net of federal tax benefit ​ ( 87 ) 20.8 % 106 2.2 % Foreign rate differential ​ 10 ( 2.4 ) % 9 0.2 % Employee Retention Credit ​ ​ — ​ — % ​ ( 134 ) ​ ( 2.8 ) % RSA Windfall ​ ​ ( 189 ) ​ 45.1 % ​ ( 16 ) ​ ( 0.3 ) % Permanent differences ​ 19 ( 4.5 ) % 9 0.2 % Change in valuation allowance ​ 180 ( 43.0 ) % ( 1,746 ) ( 36.9 ) % Research and development credit ​ ( 90 ) 21.5 % ( 112 ) ( 2.4 ) % Deferred Tax True Ups ​ ​ 4 ​ ( 1.0 ) % ​ 322 ​ 6.8 % FIN 48 Reserves ​ ​ 89 ​ ( 21.2 ) % ​ 166 ​ 3.5 % Return to Provision Adjustments ​ ​ 39 ​ ( 9.3 ) % ​ ( 64 ) ​ ( 1.4 ) % Other items ​ 20 ( 4.8 ) % ( 3 ) ( 0.1 ) % Income tax benefit ​ $ ( 93 ) 22.2 % $ ( 469 ) ( 9.9 ) % ​ 64 Table of Contents Significant components of the Company's net deferred tax assets and liabilities as of September 30, 2024 and 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ September 30, ​ 2024 2023 ​ ​ (Amounts in thousands) Deferred tax assets: ​ ​ ​ ​ Pension ​ $ 331 ​ $ 321 Capitalized research and development expenses ​ ​ 1,155 ​ ​ 651 Other reserves and accruals ​ 975 ​ 1,118 Inventory reserves and other ​ 303 ​ 278 Federal and state tax credits ​ 829 ​ 771 Federal and state net operating loss carryforwards ​ 4 ​ — Foreign net operating loss carryforwards ​ 2,554 ​ 2,945 Lease Liability ​ ​ 121 ​ ​ 239 Gross deferred tax assets ​ ​ 6,272 ​ ​ 6,323 Less: valuation allowance ​ ( 2,800 ) ​ ( 3,283 ) Realizable deferred tax asset ​ ​ 3,472 ​ ​ 3,040 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ​ ( 69 ) ​ ​ ( 84 ) ROU Asset ​ ​ ( 119 ) ​ ​ ( 235 ) Pension ​ ​ ( 550 ) ​ ​ ( 372 ) Intangibles ​ ​ — ​ ​ ( 3 ) Realizable deferred tax liabilities ​ ​ ( 738 ) ​ ​ ( 694 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net deferred tax assets ​ $ 2,734 ​ $ 2,346 ​ The Company undertakes a review of its valuation allowance at each financial statement period, reviewing the positive and negative evidence to help determine whether it is more likely than not that the Company will realize the future tax benefits from its deferred tax balances. The Company has determined that it is more likely than not that substantially all of its net deferred tax assets in the U.S. jurisdiction will be utilized and that associated valuation allowances should not be reversed at September 30, 2024 or 2023. The Company separately analyzed the realizability of its federal and state credits and determined $ 796 thousand (net of federal benefit) of state credits are expected to expire unutilized and kept a valuation allowance against these credits. The Company will continue to maintain a valuation allowance against certain state tax credits in the U.S. and a full valuation allowance against the net deferred tax assets in the U.K. jurisdiction. As of September 30, 2024, and 2023, the Company had no U.S. net operating loss or tax credit carryforwards for federal purposes. As of September 30, 2024, and 2023, the Company had U.S. net operating loss carryforwards for state purposes of approximately $ 60 thousand and $ 12 thousand, respectively, which are available to offset future taxable income through 2035. As of September 30, 2024, the Company had state tax credit carryforwards of $ 1.1 million available to reduce future state tax expense, of which $ 55 thousand has unlimited carryover status and the remainder of the credits are available through FY 2038. As of September 30, 2024, the Company had U.K. net operating loss carryforwards of approximately $ 10.6 million that have an indefinite life with no expiration. Undistributed earnings of the Company's foreign subsidiaries amounted to approximately $ 10.3 million and $ 4.8 million as of September 30, 2024 and 2023, respectively. The Company is considering cash distribution of undistributed foreign earnings in the future and will continue to assess the potential impact of any future distributions on U.S. taxes. The state tax impact of a distribution of foreign earnings and profits would not be material. 65 Table of Contents In addition, the calculation of the Company's tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions. The Company records liabilities for estimated tax obligations in the U.S. and other tax jurisdictions. These estimated tax liabilities include the provision for taxes that may become payable in the future. As of September 30, 2024, the total amount of uncertain tax liabilities relates to federal and state tax credit carryforwards which are partially recorded net in deferred taxes and partially as a long term tax payable. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows: ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ September 30, 2024 ​ September 30, 2023 ​ ​ (Amounts in thousands) Balance, beginning of year ​ $ 323 ​ $ 502 Additions for tax positions of current year ​ 11 ​ ​ 22 Additions for tax positions of prior years ​ ​ ( 8 ) ​ ​ ( 201 ) Reduction for lapse of the applicable statute of limitations ​ ​ ( 13 ) ​ ​ — Accrued penalties and interest ​ 22 ​ ​ — Balance, end of period ​ $ 335 ​ $ 323 ​ The unrecognized tax benefits of $ 350 thousand as of September 30, 2024, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance. The Company does not expect our unrecognized tax benefits to change significantly over the next 12 months. We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company has reviewed the tax positions taken on returns filed domestically and in its foreign jurisdictions for all open years, generally fiscal 2021 through 2024, and believes that any tax adjustments not currently reserved in any audited year will not be material. 7. Property, Equipment and Improvements, net Property, equipment and improvements, net consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ September 30, September 30, ​ ​ 2024 ​ 2023 ​ ​ (Amounts in thousands) Leasehold improvements ​ $ 224 ​ $ 224 Equipment ​ 8,814 ​ 8,626 Automobiles ​ 194 ​ 194 Property, equipment and improvements, gross ​ 9,232 ​ 9,044 Less accumulated depreciation and amortization ​ ( 8,803 ) ​ ( 8,519 ) Property, equipment and improvements, net ​ $ 429 ​ $ 525 ​ ​ The Company uses the straight-line method over the estimated useful lives of the assets to record depreciation expense. Depreciation expense was $ 292 thousand and $ 343 thousand for the years ended September 30, 2024 and 2023, respectively. 66 Table of Contents 8. Acquired Intangible Assets As of September 30, 2024 and 2023, intangible assets are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ September 30, 2023 ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ ​ ​ ​ Remaining ​ ​ ​ ​ ​ ​ ​ ​ Amortization ​ ​ ​ Accumulated ​ ​ ​ Amortization ​ ​ ​ Accumulated ​ ​ ​ Period Gross Amortization Net Period Gross Amortization Net ​ ​ (Amounts in thousands) Customer list 0 years ​ $ — ​ $ — ​ $ — 1 year ​ $ 90 ​ $ ( 89 ) ​ $ 1 Patent ​ 8 years ​ $ 60 ​ $ ( 10 ) ​ $ 50 9 years ​ $ 51 ​ $ ( 6 ) ​ $ 45 ​ Amortization expense on these intangible assets was $ 6 thousand and $ 15 thousand for the years ended September 30, 2024 and 2023, respectively. There were additions of $ 10 and $ 51 thousand for the years ended Septembe 30, 2024 and 2023. These additions were at our HPP segment related to our ARIA cybersecurity products. Annual amortization expense related to intangible assets for each of the following successive fiscal years is as follows: ​ ​ ​ ​ Fiscal year ending September 30: (Amounts in thousands) 2025 $ 5 2026 ​ ​ 5 2027 ​ ​ 5 2028 ​ ​ 5 2028 ​ ​ 5 Thereafter ​ ​ 25 Total ​ $ 50 ​ ​ ​ 9. Accounts payable and accrued expenses, and Other noncurrent liabilities Accounts payable and accrued expenses consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2024 2023 ​ ​ (Amounts in thousands) Accounts payable ​ $ 6,953 ​ $ 5,141 Vendor financing agreements ​ ​ 2,309 ​ ​ 1,578 Commissions ​ 527 ​ 615 Compensation and fringe benefits ​ 1,342 ​ 1,958 Professional fees ​ ​ 370 ​ ​ 199 Taxes, other than income ​ 170 ​ 130 Director fees ​ 14 ​ — Operating lease liability ​ ​ 382 ​ ​ 502 Employee Retention Tax Credit Payable ​ 11 ​ 640 Product warranty ​ 6 ​ 22 Total ​ $ 12,084 ​ $ 10,785 ​ The TS US division enters into certain multi-year agreements with vendors when also entering into some of the multi-year contracts the Company enters into with customers. The caption “Vendor financing agreements” above represents the interest-bearing amounts due to vendors, which are current. See Note 3 Financing Receivables, net for further information related to the multi-year agreements with customers. 67 Table of Contents There was not an interest rate stated explicitly 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 average weighted imputed interest rate for the agreements was determined to be 7.9 %. 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 was $ 219 thousand and $ 229 thousand for the years ended September 30, 2024 and 2023, respectively. The amounts owed for these agreements are within the Consolidated balance sheets in accounts payable and other noncurrent liabilities because they are owed to a vendor rather than banks or financial institutions for borrowings. See Note 12 Line of Credit and Note 13 Note Payable for amounts due to banks and other financial institutions for borrowings. Below are details of the aforementioned agreements with the vendors that contain imputed interest: ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ September 30, 2023 ​ (Amounts in thousands) Current $ 2,553 ​ $ 1,718 Less: discount ​ ( 244 ) ​ ​ ( 140 ) Accounts payable and accrued expenses $ 2,309 ​ $ 1,578 ​ ​ ​ ​ ​ ​ Noncurrent $ 1,677 ​ $ 1,967 Less: discount ​ ( 146 ) ​ ​ ( 116 ) Other noncurrent liabilities $ 1,531 ​ $ 1,851 ​ The TS US division has many vendors it transacts with and does not have any specific agreement with any vendor that it must purchase certain products. Management believes other suppliers could provide similar products with comparable terms. 10. Leases Information related to both lessee and lessor The following table specifies where the right-of-use assets, lease liabilities, and investment in lease are within the Consolidated Balance Sheets as of September 30, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Consolidated Balance Sheets Location September 30, 2024 September 30, 2023 ​ ​ ​ (Amounts in thousands) Assets ​ ​ ​ ​ ​ ​ ​ Operating leases Operating lease right-of-use assets ​ $ 489 ​ $ 966 ​ ​ ​ ​ ​ ​ ​ ​ Lease receivable - current Other current assets ​ $ 14 ​ $ 8 Lease receivable - noncurrent Other assets ​ ​ 11 ​ ​ 7 Total lease receivable ​ ​ $ 25 ​ $ 15 ​ ​ ​ ​ ​ ​ ​ ​ Liabilities ​ ​ ​ ​ ​ Current operating lease liabilities Accounts payable and accrued expenses ​ $ 382 ​ $ 502 Non-current operating lease liabilities Operating lease liabilities - noncurrent portion ​ ​ 117 ​ ​ 482 Total operating lease liabilities ​ ​ $ 499 ​ $ 984 ​ 68 Table of Contents The components of lease costs for the year ended September 30, 2024 and 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ Consolidated Statements of Operations Location ​ September 30, 2024 ​ September 30, 2023 ​ ​ ​ (Amounts in thousands) Finance Lease: ​ ​ ​ ​ ​ ​ ​ Interest on lease liabilities Interest expense ​ $ — ​ $ 1 Operating Lease: ​ ​ ​ ​ ​ Operating lease cost Selling, general, and administrative ​ ​ 531 ​ ​ 618 Short-term lease cost Selling, general, and administrative ​ ​ 34 ​ ​ 43 Total lease costs ​ ​ $ 565 ​ $ 662 Less sublease interest income Revenue ​ ​ ( 3 ) ​ ​ ( 3 ) Total lease costs, net of sublease interest income ​ ​ $ 562 ​ $ 659 ​ ​ Future lease payments under our non-cancellable leases and payments to be received as a sublessor as of September 30, 2024 are in the following table: ​ ​ ​ ​ ​ ​ ​ Operating lease ​ Sublease Fiscal year ending September 30: costs ​ payments ​ (Amounts in thousands) 2025 $ 395 ​ $ 16 2026 ​ 114 ​ ​ 9 2027 5 ​ 4 Total $ 514 ​ $ 29 Less imputed interest ​ ( 15 ) ​ ​ ( 4 ) Total $ 499 ​ $ 25 ​ Supplemental cash flow information related to leases for the fiscal year ended September 30, 2024 and 2023 is below: ​ ​ ​ ​ ​ ​ Year ended ​ September 30, 2024 September 30, 2023 ​ (Amounts in thousands) Cash paid for amounts included in the measurement of lease liabilities: ​ ​ ​ ​ Operating cash flows paid for operating leases $ 539 $ 628 Operating cash flows paid for short-term leases ​ 34 ​ 43 Operating cash flows paid for finance leases ​ 1 ​ 1 Financing cash flows paid for finance leases ​ — ​ 4 Cash received from subleases ​ ( 15 ) ​ ( 20 ) Lease assets obtained in exchange for new lease liabilities ​ ​ ​ ​ Operating leases ​ 19 ​ 392 ​ 69 Table of Contents Information as a lessee related to weighted averages of lease term and discount rate as of September 30, 2024 is below: ​ ​ Weighted-average remaining lease term (years) September 30, 2024 Operating leases 1.3 ​ ​ Weighted-average discount rate September 30, 2024 Operating leases 7.0 % ​ ​ 11. Product Warranties Product warranty activity for the year ended September 30, 2024 and 2023 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2024 2023 ​ ​ (Amounts in thousands) Balance at the beginning of the year ​ $ 22 ​ $ 44 Usage for warranties for products sold in the period ​ ( 16 ) ​ — Fulfillment of warranty obligations ​ — ​ ( 22 ) Balance at the end of the year ​ $ 6 ​ $ 22 ​ These amounts are within Accounts payable and accrued expenses on the Consolidated Balance Sheets. 12. Line of Credit As of September 30, 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 or HPP segment 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 the rate published in the Wall Street Journal as the “prime rate” plus 5 %. The prime rate was 8.0 % as of September 30, 2024. There is no expiration date or minimum principal payment. However, 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 September 30, 2024 and September 30, 2023, Company borrowings, all from the TS segment, under the inventory line of credit were $ 4.2 million and $ 1.5 million, respectively, and the Company was in compliance with all covenants. There is no unused commitment fee. As of September 30, 2024 and September 30, 2023, this line of credit also included availability of a limited cash withdrawal option of up to $ 1.0 million. As of September 30, 2024 and 2023, there were no cash withdrawals outstanding. 13. Note Payable 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. This note payable was paid in full as of September 30, 2024. ​ ​ ​ ​ ​ 70 Table of Contents There was no interest expense for the year ended September 30, 2024. Interest expense related to the note for the year ended September 30, 2023 was $ 22 thousand. Below are details of the notes payable. ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2024 ​ September 30, 2023 ​ (Amounts in thousands) Current $ — ​ $ 449 Less: note discount ​ — ​ — Note payable - current portion $ — ​ $ 449 ​ ​ ​ 14. Pension and Retirement Plans We 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 for certain employees and former employees and defined contribution plans for the majority of the employees. The defined benefit plan in the U.K. is frozen to newly hired employees and has been for the two years ended September 30, 2024. In the U.S., the Company provides defined contribution plans that cover most employees and supplementary retirement plans to certain employees and former employees who are now retired. These supplementary retirement plans are also closed to newly hired employees and have been for the two years ended September 30, 2024. These supplementary plans are funded through whole life insurance policies. The Company expects to recover all insurance premiums paid under these policies in the future, through the cash surrender value of the policies and any death benefits or portions thereof to be paid upon the death of the participant. These whole life insurance policies are carried on the balance sheet at their cash surrender values as they are owned by the Company and not assets of the defined benefit plans. In the U.S., the Company also provides for officer death benefits and post-retirement health insurance benefits through supplemental post-retirement plans to certain officers. The Company also funds these supplemental plans’ obligations through whole life insurance policies on the officers. Defined Benefit Plans 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 consolidated balance sheets. If the liabilities are below funding levels an asset is recorded. The domestic supplemental retirement plans have life insurance policies which are not considered plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. These insurance policies are included in the balance sheet in the financial statement line item “Cash surrender value of life insurance” at their cash surrender value, net of policy loans aggregating $ 3.8 million and $ 3.7 million as of September 30, 2024 and 2023, respectively. The loans against the policies have been taken out by the Company to pay the premiums. The costs and benefit payments for these plans are paid through operating cash flows of the Company to the extent that they cannot be funded through the use of the cash values in the insurance policies. The Company expects that the recorded value of the insurance policies will be sufficient to fund all of the Company’s obligations under these plans. ​ 71 Table of Contents Assumptions: The following table provides the weighted average actuarial assumptions used to determine the actuarial present value of projected benefit obligations at: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic ​ International ​ ​ September 30, ​ September 30, ​ 2024 2023 2024 2023 Discount rate: 4.86 % 5.62 % 5.0 % 5.4 % Expected return on plan assets: 4.7 % 5.1 % ​ The following table provides the weighted average actuarial assumptions used to determine net periodic benefit cost for years ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Domestic International ​ ​ September 30, ​ September 30, ​ 2024 2023 2024 2023 Discount rate: 5.62 % 5.14 % 5.0 % 5.4 % Expected return on plan assets: 4.7 % 5.1 % ​ For domestic plans, the discount rate was determined by comparison against the FTSE pension liability index for AA rated corporate instruments. The Company monitors other indices to assure that the pension obligations are fairly reported on a consistent basis. The international discount rates were determined by comparison against country specific AA corporate indices, adjusted for duration of the obligation. The periodic benefit cost and the actuarial present value of projected benefit obligations are based on actuarial assumptions that are reviewed on an annual basis. The Company revises these assumptions based on an annual evaluation of long-term trends, as well as market conditions, that may have an impact on the cost of providing retirement benefits. For the supplementary domestic plan, medical benefits are assumed to be increasing based on the Long Term Healthcare Cost Trends Getzen Model commencing with 7.5 % per year with such increase decreasing by 0.5 % per year over the next several years and decreasing in accordance with the model pre 65 and 4.54 % post 65. Life expectancy for medical benefits is based on the PRI-2012 White Collar for Males and Females Pre and Post retirement, Adjusted to 2006 projected using scale MP-2021. 72 Table of Contents The components of net periodic benefit costs related to the U.S. and international plans are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended September 30, ​ ​ 2024 ​ 2023 ​ U.K. U.S. Total U.K. U.S. Total ​ ​ (Amounts in thousands) Pension: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest cost ​ $ 440 ​ $ 11 ​ $ 451 ​ $ 429 ​ $ 13 ​ $ 442 Expected return on plan assets ​ ( 515 ) ​ — ​ ( 515 ) ​ ( 575 ) ​ — ​ ( 575 ) Amortization of past service costs ​ ​ 8 ​ ​ — ​ ​ 8 ​ ​ 7 ​ ​ — ​ ​ 7 Amortization of net gain ​ — ​ ( 5 ) ​ ( 5 ) ​ — ​ ( 4 ) ​ ( 4 ) Net periodic (benefit) cost ​ $ ( 67 ) ​ $ 6 ​ $ ( 61 ) ​ $ ( 139 ) ​ $ 9 ​ $ ( 130 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Post Retirement: ​ ​ ​ ​ ​ ​ Service cost ​ $ — ​ $ 23 ​ $ 23 ​ $ — ​ $ 24 ​ $ 24 Interest cost ​ — ​ 64 ​ 64 ​ — ​ 62 ​ 62 Amortization of net gain ​ — ​ ( 172 ) ​ ( 172 ) ​ — ​ ( 196 ) ​ ( 196 ) Net periodic benefit ​ $ — ​ $ ( 85 ) ​ $ ( 85 ) ​ $ — ​ $ ( 110 ) ​ $ ( 110 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension: ​ ​ ​ ​ ​ ​ (Decrease) increase in minimum liability included in other comprehensive income ​ $ ( 106 ) ​ $ 6 ​ $ ( 100 ) ​ $ ( 313 ) ​ $ ( 1 ) ​ $ ( 314 ) Post Retirement: ​ ​ ​ ​ ​ ​ Increase in minimum liability included in other comprehensive income ​ — ​ 160 ​ 160 ​ — ​ 70 ​ 70 Total: ​ ​ ​ ​ ​ ​ (Decrease) increase in minimum liability included in other comprehensive income ​ $ ( 106 ) ​ $ 166 ​ $ 60 ​ $ ( 313 ) ​ $ 69 ​ $ ( 244 ) ​ ​ 73 Table of Contents The following table presents an analysis of the changes in 2024 and 2023 of the benefit obligation, the plan assets and the funded status of the plans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended September 30 ​ ​ 2024 ​ 2023 ​ Foreign U.S. Total Foreign U.S. Total ​ ​ (Amounts in thousands) Pension: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in projected benefit obligation (“PBO”) ​ ​ ​ ​ ​ ​ Balance beginning of year ​ $ 8,076 ​ $ 202 ​ $ 8,278 ​ $ 7,726 ​ $ 261 ​ $ 7,987 Interest cost ​ 440 ​ 11 ​ 451 ​ 429 ​ 13 ​ 442 Changes in actuarial assumptions ​ 349 ​ 1 ​ 350 ​ ( 317 ) ​ ( 4 ) ​ ( 321 ) Foreign exchange impact ​ 788 ​ — ​ 788 ​ 759 ​ — ​ 759 Benefits paid ​ ( 488 ) ​ ( 54 ) ​ ( 542 ) ​ ( 521 ) ​ ( 68 ) ​ ( 589 ) Projected benefit obligation at end of year ​ $ 9,165 ​ $ 160 ​ $ 9,325 ​ $ 8,076 ​ $ 202 ​ $ 8,278 Changes in fair value of plan assets: ​ ​ ​ ​ ​ ​ Fair value of plan assets at beginning of year ​ $ 10,034 ​ $ — ​ $ 10,034 ​ $ 8,825 ​ $ — ​ $ 8,825 Actual gain (loss) on plan assets ​ 985 ​ — ​ 985 ​ 628 ​ — ​ 628 Company contributions ​ — ​ 54 ​ 54 ​ 239 ​ 68 ​ 307 Foreign exchange impact ​ 978 ​ — ​ 978 ​ 863 ​ — ​ 863 Administrative expenses ​ ​ ( 143 ) ​ — ​ ​ ( 143 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Benefits paid ​ ( 488 ) ​ ( 54 ) ​ ( 542 ) ​ ( 521 ) ​ ( 68 ) ​ ( 589 ) Fair value of plan assets at end of year ​ $ 11,366 ​ $ — ​ $ 11,366 ​ $ 10,034 ​ $ — ​ $ 10,034 Funded status \ net amount recognized ​ $ 2,201 ​ $ ( 160 ) ​ $ 2,041 ​ $ 1,958 ​ $ ( 202 ) ​ $ 1,756 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Post Retirement: ​ ​ ​ ​ ​ ​ Change in projected benefit obligation (“PBO”): ​ ​ ​ ​ ​ ​ Balance beginning of year ​ $ — ​ $ 1,147 ​ $ 1,147 ​ $ — ​ $ 1,186 ​ $ 1,186 Service cost ​ — ​ 23 ​ 23 ​ — ​ 24 ​ 24 Interest cost ​ — ​ 64 ​ 64 ​ — ​ 62 ​ 62 Changes in actuarial assumptions ​ — ​ ( 12 ) ​ ( 12 ) ​ — ​ ( 125 ) ​ ( 125 ) Projected benefit obligation at end of year ​ $ — ​ $ 1,222 ​ $ 1,222 ​ $ — ​ $ 1,147 ​ $ 1,147 Funded status \ net amount recognized ​ $ — ​ $ ( 1,222 ) ​ $ ( 1,222 ) ​ $ — ​ $ ( 1,147 ) ​ $ ( 1,147 ) ​ ​ 74 Table of Contents The amounts recognized in the consolidated balance sheet consist of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended September 30 ​ ​ 2024 ​ 2023 ​ Foreign U.S. Total Foreign U.S. Total ​ ​ (Amounts in thousands) Pension: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accrued benefit asset (liability) ​ $ 2,201 ​ $ ( 160 ) ​ $ 2,041 ​ $ 1,958 ​ $ ( 202 ) ​ $ 1,756 Deferred tax ​ — ​ 23 ​ 23 ​ — ​ 26 ​ 26 Accumulated other comprehensive income ​ 212 ​ 12 ​ 224 ​ 318 ​ 8 ​ 326 Net amount recognized ​ $ 2,413 ​ $ ( 125 ) ​ $ 2,288 ​ $ 2,276 ​ $ ( 168 ) ​ $ 2,108 Post Retirement: ​ ​ ​ ​ ​ ​ ​ ​ Accrued benefit liability ​ $ — ​ $ ( 1,222 ) ​ $ ( 1,222 ) ​ $ — ​ $ ( 1,147 ) ​ $ ( 1,147 ) Deferred tax ​ — ​ 212 ​ 212 ​ — ​ 277 ​ 277 Accumulated other comprehensive loss ​ — ​ ( 144 ) ​ ( 144 ) ​ — ​ ( 240 ) ​ ( 240 ) Net amount recognized ​ $ — ​ $ ( 1,154 ) ​ $ ( 1,154 ) ​ $ — ​ $ ( 1,110 ) ​ $ ( 1,110 ) Total pension and post retirement: ​ ​ ​ ​ ​ ​ Accrued benefit asset (liability) ​ $ 2,201 ​ $ ( 1,382 ) ​ $ 819 ​ $ 1,958 ​ $ ( 1,349 ) ​ $ 609 Deferred tax ​ — ​ 235 ​ 235 ​ — ​ 303 ​ 303 Accumulated other comprehensive income (loss) ​ 212 ​ ( 132 ) ​ 80 ​ 318 ​ ( 232 ) ​ 86 Net amount recognized ​ $ 2,413 ​ $ ( 1,279 ) ​ $ 1,134 ​ $ 2,276 ​ $ ( 1,278 ) ​ $ 998 Accumulated Benefit Obligation: ​ ​ ​ ​ ​ ​ Pension ​ $ ( 9,165 ) ​ $ ( 160 ) ​ $ ( 9,325 ) ​ $ ( 8,076 ) ​ $ ( 202 ) ​ $ ( 8,278 ) Post Retirement ​ — ​ ( 1,222 ) ​ ( 1,222 ) ​ — ​ ( 1,147 ) ​ ( 1,147 ) Total accumulated benefit obligation ​ $ ( 9,165 ) ​ $ ( 1,382 ) ​ $ ( 10,547 ) ​ $ ( 8,076 ) ​ $ ( 1,349 ) ​ $ ( 9,425 ) ​ Plans with projected benefit obligations in excess of plan assets are attributable to unfunded domestic supplemental retirement plans. Accrued benefit assets and liabilities reported as: ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ 2024 2023 ​ ​ (Amounts in thousands) Non-current benefits assets ​ $ 2,201 ​ $ 1,958 ​ ​ ​ ​ ​ ​ ​ Current accrued benefit liability ​ $ 76 ​ $ 98 Non-current accrued benefit liability ​ 1,306 ​ 1,251 Total accrued benefit liability ​ $ 1,382 ​ $ 1,349 ​ As of September 30, 2024 and 2023, the amounts included in accumulated other comprehensive income, consisted of deferred net gains totaling approximately $ 0.1 million and $ 0.1 million, respectively. The amount of net deferred gain expected to be recognized as a component of net periodic benefit cost for the year ending September 30, 2024, is approximately $ 185 thousand. 75 Table of Contents Contributions The Company expects to contribute $ 0.1 million to its pension plans in fiscal 2025. Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (amounts in thousands): ​ ​ ​ ​ Fiscal year ending September 30: (Amounts in thousands) 2025 ​ $ 595 2026 ​ $ 623 2027 ​ $ 660 2028 ​ $ 702 2029 ​ $ 700 Thereafter ​ $ 1,230 ​ Plan Assets As of September 30, 2024, our pension plan in the U.K. was the only plan with assets, holding investments of approximately $ 10.8 million. Pension plan assets are managed by a fiduciary committee. The Company’s investment strategy for pension plan assets is to maximize the long-term rate of return on plan assets within an acceptable level of risk while maintaining adequate funding levels. Local regulations, local funding rules, and local financial and tax considerations are part of the funding and investment process. In deciding on the investments to be held, the trustees take into account the risk of possible fluctuations in income from, and market values of, the assets as well as the risk of departing from an asset profile which broadly matches the liability profile. The committee has invested the plan assets in a single pooled fund with an authorized investment company (the “Fund”). The Fund selected by the trustees is consistent with the plan’s overall investment principles and strategy described herein. There are no specific targets as to asset allocation other than those contained within the Fund that is managed by the authorized investment company. The fair value of the assets held by the U.K. pension plan by asset category are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Values as of ​ ​ September 30, 2024 ​ 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 ​ $ 65 ​ $ 65 ​ $ — ​ $ — ​ $ 428 ​ $ 428 ​ $ — ​ $ — Fixed income ​ ​ 10,388 ​ ​ 8,714 ​ ​ 1,674 ​ ​ — ​ ​ 8,703 ​ ​ 7,251 ​ ​ 1,452 ​ ​ — Equity ​ 913 ​ 263 ​ ​ 650 ​ ​ — ​ 903 ​ 266 ​ ​ 637 ​ ​ — Total plan assets ​ $ 11,366 ​ $ 9,042 ​ $ 2,324 ​ $ — ​ $ 10,034 ​ $ 7,945 ​ $ 2,089 ​ $ — ​ The expected long-term rates of return on plan assets are equal to the yields to maturity of appropriate indices for government and corporate bonds and by adding a premium to the government bond return for equities. The expected rate of return on cash is the Bank of England base rate in force at the effective date. Level 1 investments represent mutual funds for which a quoted market price is available on an active market. These investments primarily hold stocks or bonds, or a combination of stocks and bonds. Level 2 investment represents a mutual fund, which a quoted market price is not available on an active market. Significant observable inputs that reflect quoted prices for similar assets or liabilities in active markets are used. This investment primarily holds stocks within developed global equity markets, excluding the UK. ​ 76 Table of Contents Potential sale of U.K. Pension Subsequent to September 30, 2024 the U.K. pension assets, excluding cash, were all converted into cash to sell the U.K. pension obligation. As of the date of this filing, there is an agreement to sell the pension obligation in full. This agreement has many contingencies and the expected timeframe of the sale occurring is 4 to 16 months from the date of these consolidated financial statements are issued. ​ Defined Contribution Plans The Company has defined contribution plans in domestic and international locations under which the Company matches a portion of the employee’s contributions and may make discretionary contributions to the plans. The Company’s contributions were $ 212 thousand and $ 206 thousand for the years ended September 30, 2024 and 2023, respectively. 15. Stock Based Incentive Compensation In 2015, the Company adopted the 2015 Stock Incentive Plan (the "2015 Plan") and authorized 600,000 (adjusted for stock split in fiscal year 2024, see Note 1 for details) shares of common stock to be reserved for issuance pursuant to the 2015 Plan. During fiscal year 2019 an additional 600,000 (adjusted for stock split in fiscal year 2024, see Note 1 for details) shares of common stock were authorized to be reserved for issuance pursuant to the 2015 Plan. During fiscal year 2023 an additional 800,000 (number of shares adjusted for stock split which occurred in fiscal year 2024, see Note 1 for details) shares of common stock were authorized to be reserved for issuance pursuant to the 2015 Plan. As of September 30, 2024, there were 192,434 shares available to be granted under the 2015 Plan. Under the 2015 Plan, incentive and non-qualified stock options and restricted stock awards may be granted to officers, key employees and other persons providing services to the Company. The 2015 Plan has a ten-year life. Awards issued under the 2015 Plan are not affected by termination of the plan. The Company had no awarded stock options outstanding as of September 30, 2024 or 2023. The Company issues restricted stock awards at their fair value on the date of grant. Vesting of restricted stock awards granted pursuant to the 2015 Plan is determined by the Company’s compensation committee. In fiscal years 2020 through 2024, the Company granted certain officers including its Chief Executive Officer and non-employee directors, and key employees shares of nonvested common stock. The vesting period for the officers’ and the Chief Executive Officer’s restricted stock awards is four years . The vesting for non-employee directors’ restricted stock awards is one year . The vesting period for the key employees’ restricted stock awards is typically four years or immediately in the case of a sales commission for the ARIA cybersecurity products. We measure and recognize compensation expense for nonvested stock-based payment awards made to employees and directors based on the closing market price of our common stock as quoted on the Nasdaq Global Market on the date of grant over the requisite service period. The Company recognizes stock compensation expense, net of actual forfeitures. Stock-based compensation expense incurred and recognized for the years ended September 30, 2024 and 2023 related to nonvested stock granted to employees and non-employee directors under the Company’s stock incentive and employee stock purchase plans totaled approximately $ 1.6 million and $ 1.1 million, respectively. The classification of the cost of stock-based compensation, in the consolidated statements of operations, is consistent with the nature of the services being rendered in exchange for the share-based payment. The following table summarizes stock-based compensation expense in the Company’s consolidated statements of operations: ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended ​ ​ September 30, ​ September 30, ​ 2024 2023 ​ ​ (Amounts in thousands) Cost of sales ​ $ 5 ​ $ 2 Engineering and development ​ 190 ​ 107 Selling, general and administrative ​ 1,384 ​ 1,017 Total ​ $ 1,579 ​ $ 1,126 77 Table of Contents ​ For the year ended September 30, 2024, the Company granted 161,000 nonvested shares to certain key employees, 104,000 nonvested shares to certain officers including 70,000 shares granted to the Chief Executive Officer, and 40,000 nonvested shares to its non-employee directors. For the year ended September 30, 2023, the Company granted 142,344 nonvested shares to certain key employees, 104,000 nonvested shares to certain officers including 70,000 shares granted to the Chief Executive Officer, and 40,000 nonvested shares to its non-employee directors. These numbers for the fiscal year 2023 were retroactively adjusted for the effects of a two for one stock split effected in the form of a 100 % stock dividend (see Note 1 Summary of Significant Accounting Policies ). No cash was used to settle equity instruments granted under share-base payment arrangements in any of the years in the two-year period ended September 30, 2024. The following table provides summary data of nonvested stock award activity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ Average ​ Aggregate ​ ​ ​ ​ Grant Date ​ Remaining ​ Intrinsic ​ ​ ​ ​ Fair ​ Contractual ​ Value ​ Shares Value Term (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonvested shares outstanding at of September 30, 2022 519,576 ​ $ 4.57 2.38 Years ​ $ 1,760 Activity in fiscal year 2023: ​ ​ ​ ​ ​ ​ ​ ​ Granted 286,344 ​ $ 5.05 — ​ — Vested ( 215,770 ) ​ $ 4.68 — ​ — Nonvested shares outstanding as of September 30, 2023 590,150 ​ $ 4.77 2.33 Years ​ $ 5,164 Activity in fiscal year 2024: ​ ​ ​ Granted 305,000 ​ $ 9.75 — ​ — Vested ( 237,175 ) ​ $ 4.95 — ​ — Forfeited ( 6,625 ) ​ $ 6.58 — ​ — Nonvested shares outstanding as of September 30, 2024 651,350 ​ $ 7.01 2.27 Years ​ $ 8,461 ​ As of September 30, 2024, there was $ 3.3 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements (nonvested stock awards) granted under the Company’s stock incentive plans. This cost is expected to be expensed over a weighted average period of approximately 2.72 years. The total fair value of shares vested during the years ended September 30, 2024 and 2023 was $ 1.2 million and $ 1.0 million, respectively. 16. Employee Stock Purchase Plan In December 2013, the Board of Directors of the Company adopted the 2014 Employee Stock Purchase Plan (the "ESPP") covering up to 500,000 shares (all shares adjusted for stock split, see Note 1) of Common Stock, which was ratified by a vote of the Company’s shareholders in February 2014. An additional 600,000 shares of common stock were approved by stockholders in fiscal year 2024. Under the ESPP, the Company’s employees may purchase shares of common stock at a price per share that is currently 95 % of the lesser of the fair value as of the beginning or end of semi-annual option periods. Pursuant to the ESPP, the Company issued 29,693 and 61,770 shares for the years ended September 30, 2024 and September 30, 2023, respectively. As of September 30, 2024, 509,377 shares remain authorized to be issued under the Employee Stock Purchase Plan. 17. Repurchase of Common Stock On February 8, 2011, the Board of Directors authorized the Company to purchase up to 500 thousand (adjusted retrospectively for stock split, see Note 1) additional shares of the Company's outstanding common stock at market price. The plan does not expire. The Company repurchased 7,600 shares of its outstanding common stock on the open market during fiscal year 2024 and this is the total shares of treasury stock owned with a cost basis of $ 104 thousand as of September 30, 2024. As of September 30, 2024, 334,654 shares remain authorized to repurchase under the stock repurchase program. 78 Table of Contents 18. Segment Information Our reporting segments are aligned to how the Chief Operating Decision Maker allocates resources and assesses performance against the Company’s strategies and budgets. It is also consistent with how we manage the business and view the markets we serve. The following table presents certain operating segment information. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Technology Solutions Segment ​ ​ ​ ​ ​ High ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Performance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Products ​ United ​ ​ ​ ​ ​ ​ ​ Consolidated Year ended September 30, Segment Kingdom U.S. Total Total ​ ​ (Amounts in thousands) 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product ​ $ 2,599 ​ $ 594 ​ $ 33,600 ​ $ 34,194 ​ $ 36,793 Service ​ 1,555 ​ 260 ​ 16,611 ​ 16,871 ​ 18,426 Total sales ​ $ 4,154 ​ $ 854 ​ $ 50,211 ​ $ 51,065 ​ $ 55,219 Operating (loss) income ​ $ ( 4,845 ) ​ $ ( 274 ) ​ $ 3,247 ​ $ 2,973 ​ $ ( 1,872 ) Interest expense ​ $ ( 16 ) ​ $ — ​ $ ( 219 ) ​ $ ( 219 ) ​ $ ( 235 ) Interest income ​ $ 38 ​ $ 218 ​ $ 1,791 ​ $ 2,009 ​ $ 2,047 Stock compensation expense ​ $ ( 774 ) ​ $ — ​ $ ( 805 ) ​ $ ( 805 ) ​ $ ( 1,579 ) Total assets ​ $ 9,554 ​ $ 7,880 ​ $ 52,002 ​ $ 59,882 ​ $ 69,436 Capital expenditures ​ $ ( 137 ) ​ $ — ​ $ ( 59 ) ​ $ ( 59 ) ​ $ ( 196 ) Depreciation and amortization ​ $ ( 99 ) ​ $ — ​ $ ( 199 ) ​ $ ( 199 ) ​ $ ( 298 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ ​ Product ​ $ 5,475 ​ $ 734 ​ $ 40,940 ​ $ 41,674 ​ $ 47,149 Service ​ 1,398 ​ 288 ​ 15,812 ​ 16,100 ​ 17,498 Total sales ​ $ 6,873 ​ $ 1,022 ​ $ 56,752 ​ $ 57,774 ​ $ 64,647 Operating (loss) income ​ $ ( 2,708 ) ​ $ ( 64 ) ​ $ 4,642 ​ $ 4,578 ​ $ 1,870 Interest expense ​ $ ( 12 ) ​ $ — ​ $ ( 250 ) ​ $ ( 250 ) ​ $ ( 262 ) Interest income ​ $ 20 ​ $ 177 ​ $ 1,263 ​ $ 1,440 ​ $ 1,460 Stock compensation expense ​ $ ( 463 ) ​ $ — ​ $ ( 663 ) ​ $ ( 663 ) ​ $ ( 1,126 ) Total assets ​ $ 10,467 ​ $ 7,361 ​ $ 48,076 ​ $ 55,437 ​ $ 65,904 Capital expenditures ​ $ ( 75 ) ​ $ — ​ $ ( 151 ) ​ $ ( 151 ) ​ $ ( 226 ) Depreciation and amortization ​ $ ( 112 ) ​ $ — ​ $ ( 246 ) ​ $ ( 246 ) ​ $ ( 358 ) ​ Operating (loss) income from operations is sales less cost of sales, engineering and development, selling, general and administrative expenses but is not affected by either non-operating charges/income or by income taxes. Non-operating charges/income consists principally of foreign exchange gain (loss), investment income, and interest expense. In fiscal year 2023 the Employee Retention Tax Credit was the largest non-operating income item, which did not occur in fiscal year 2023. All intercompany transactions have been eliminated. Our long-lived assets are located in North America. ​ ​ ​ ​ ​ 79 Table of Contents The following table details the Company’s sales by operating segment for fiscal years ended September 30, 2024 and 2023. The Company’s sales by geographic area based on the location of where the products were shipped or services rendered are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of 2024 ​ Americas ​ Europe ​ Asia-Pacific ​ Total ​ Total ​ ​ ​ (Amounts in thousands) TS ​ $ 49,496 ​ $ 1,119 ​ $ 450 ​ $ 51,065 ​ 92 % HPP ​ 3,812 ​ 6 ​ 336 ​ 4,154 8 % Total ​ $ 53,308 ​ $ 1,125 ​ $ 786 ​ $ 55,219 100 % % of Total ​ 97 % 2 % 1 % 100 % ​ 2023 ​ ​ ​ ​ ​ TS ​ $ 56,584 ​ $ 1,094 ​ $ 96 ​ $ 57,774 ​ 89 % HPP ​ 6,179 ​ 335 ​ 359 ​ 6,873 11 % Total ​ $ 62,763 ​ $ 1,429 ​ $ 455 ​ $ 64,647 100 % % of Total ​ 97 % 2 % 1 % 100 % ​ ​ 19. Fair Value Disclosures 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, see Note 14 Pension and Retirement Plan ) or non-recurring basis as of September 30, 2024 or September 30, 2023. 80 Table of Contents 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 September 30, 2024 ​ ​ 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 $ 30,585 ​ $ 30,585 ​ $ 25,217 ​ $ 25,217 ​ 1 ​ Consolidated Balance Sheets Accounts receivable, net ​ 14,494 ​ ​ 14,494 ​ ​ 12,955 ​ ​ 12,955 ​ 2 ​ Note 2 Financing receivables, net ​ 7,306 ​ ​ 7,306 ​ ​ 11,395 ​ ​ 11,395 ​ 3 ​ Note 3 Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts payable and accrued expenses and other long-term liabilities* ​ 3,840 ​ ​ 3,840 ​ ​ 3,429 ​ ​ 3,429 ​ 3 ​ Note 9 Line of Credit ​ 4,169 ​ ​ 4,169 ​ ​ 1,515 ​ ​ 1,515 ​ 2 ​ Note 12 Note payable ​ — ​ ​ — ​ ​ 449 ​ ​ 449 ​ 3 ​ Note 13 *Original maturity over one year ​ Cash and cash equivalents Carrying amount approximated fair value. Accounts receivable and accounts payable with original maturity of less than one year Fair value was not materially different from their carrying values as of September 30, 2024, and 2023 Financing receivables. net 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. 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. 81 Table of Contents 20. Dividend For the fiscal year ended September 30, 2024 the Company paid cash dividends on common stock below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount Paid Fiscal Year ​ Date Declared ​ Record Date ​ Date Paid ​ Per Share 2023 (1) 12/6/2022 ​ 12/21/2022 ​ 1/6/2023 ​ $ 0.015 2023 (1) ​ 2/8/2023 ​ 2/24/2023 ​ 3/14/2023 ​ $ 0.015 2023 (1) ​ 5/10/2023 ​ 5/25/2023 ​ 6/13/2023 ​ $ 0.020 2023 (1) ​ 8/9/2023 ​ 8/23/2023 ​ 9/12/2023 ​ $ 0.020 2024 (1) ​ 12/12/2023 ​ 12/22/2023 ​ 1/9/2024 ​ $ 0.020 2024 (1) ​ 2/14/2024 ​ 2/26/2024 ​ 3/8/2024 ​ $ 0.025 2024 ​ 5/8/2024 ​ 5/24/2024 ​ 6/12/2024 ​ $ 0.030 2024 ​ 8/13/2024 ​ 8/23/2024 ​ 9/10/2024 ​ $ 0.030 ​ ​ (1) Amounts above are retroactively adjusted for the effects of a two for one stock split effected in the form of a 100 % stock dividend February 21, 2024. ​ ​ 21. Related Party Transactions Gary Southwell, Vice President and General Manager of High Performance Products segment, is a minority shareholder in one of our vendors. He has no operational responsibilities. There were $ 324 thousand and $ 316 thousand of purchases from this vendor for the fiscal year ended September 30, 2024 and 2023, respectively. There were no amounts due to the vendor as of September 30, 2024 or 2023. ​ 22. Subsequent Event Subsequent to September 30, 2024, the U.K. pension assets, excluding cash, were all converted into cash to sell the U.K. pension obligation. The value of the converted assets were not materially different from the balances as of September 30, 2024. As of the date of these issued consolidated financial statements, there is an agreement to sell the pension obligation in full. This agreement has many contingencies and the expected timeframe of the sale occurring is 4 to 16 months from the date of these consolidated financial statements are issued. ​ 82