Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The discussion below contains certain forward-looking statements including, but not limited to, among others, statements concerning future revenues and future business plans. Forward-looking statements include statements in which we use words such as “expect”, “believe”, “anticipate”, “intend”, “project”, “estimate”, “should”, “could”, “may”, “plan”, “potential”, “predict”, “will”, “would” and similar expressions. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, the forward-looking statements are subject to significant risks and uncertainties, and thus we cannot assure you that these expectations will prove to have been correct, and actual results may vary from those contained in such forward-looking statements. We discuss many of these risks and uncertainties in Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025. Factors that may cause such variances include, but are not limited to, our dependence on a small number of customers for a significant portion of our revenue, intense competition in the market segments in which we operate, changes in the U.S. Tax laws, the impact of the Ukrainian-Russian military and Israeli-Hamas conflict on global trade and financial markets, the impact of tariffs or trade policies, and the impact of pandemics on our business, results of operations and financial condition. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this document. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this filing and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to the allowance for credit losses for accounts receivable and financing receivables, inventory valuation, impairment assessment of intangibles, income taxes, deferred compensation and retirement plans, as well as estimated selling prices used for revenue recognition and contingencies. We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A description of our critical accounting policies is contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025 in the “Critical Accounting Policies” section contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Management believes there have been no significant changes for the nine months ended June 30, 2026 to the items that we disclosed as our critical accounting estimates in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
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Results of Operations
Overview of the three months ended June 30, 2026
Our sales decreased by $1.0 million, or 6%, to $14.4 million for the three months ended June 30, 2026 compared to $15.4 million for the three months ended June 30, 2025. Our gross margin percentage increased to 30% for the three months ended June 30, 2026 compared to 29% for the same prior year period. For the three months ended June 30, 2026 we had an operating loss of $1.5 million compared to an operating loss of $1.2 million for the three months ended June 30, 2025. Other income, net increased $0.1 million to $0.3 million for the three months ended June 30, 2026 compared to $0.2 million for the same prior year period. An income tax benefit of $0.4 million was recorded for the three months ended June 30, 2026 compared to an income tax benefit of $0.8 million in the same period in the prior year.
The following table details our results of operations in dollars and as a percentage of sales for the three months ended June 30, 2026 and 2025:
%
%
June 30, 2026
of sales
June 30, 2025
of sales
(Dollar amounts in thousands)
Sales
$
14,398
100
%
$
15,448
100
%
Costs and expenses:
Cost of sales
10,065
70
%
10,995
71
%
Research and development
832
6
%
791
5
%
Selling, general and administrative
5,043
35
%
4,885
32
%
Total costs and expenses
15,940
111
%
16,671
108
%
Operating loss
(1,542)
(11)
%
(1,223)
(8)
%
Other income, net
330
2
%
208
1
%
Loss before income taxes
(1,212)
(9)
%
(1,015)
(7)
%
Income tax benefit
(366)
(3)
%
(751)
(5)
%
Net (loss)
$
(846)
(6)
%
$
(264)
(2)
%
Sales
TS segment sales change was as follows for the three months ended June 30, 2026 and 2025:
June 30,
Increase (decrease)
2026
2025
$
%
(Dollar amounts in thousands)
Products
$
9,795
$
10,138
$
(343)
(3)
%
Services
4,180
4,926
(746)
(15)
%
Total
$
13,975
$
15,064
$
(1,089)
(7)
%
The decrease in TS segment product sales of $0.3 million is primarily due to decreased sales to one existing customer of $1.9 million offset with increased sales to several existing major customers in the US division of $1.6 million. Service sales for the three months ended June 30, 2026 decreased $0.7 million from the same prior year period, which was attributable to the US division. The decrease consisted of a decrease in third-party maintenance sales of $0.4 million and a $0.5 million decrease from internal and third-party services offset by an increase in managed services of $0.2 million
HPP segment sales change was as follows for the three months ended June 30, 2026 and 2025:
June 30,
Increase (decrease)
2026
2025
$
%
(Dollar amounts in thousands)
Products
$
148
$
12
$
136
1,133
%
Services
275
372
(97)
(26)
%
Total
$
423
$
384
$
39
10
%
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The HPP product sales increased $0.1 million for the three months ended June 30, 2026 compared to the same prior year period primarily due to increased ARIA AZT revenue. The HPP service sales decreased $0.1 million due to one nonrecurring customer support sale.
Our sales by geographic area, which are based on the customer location to which the products were shipped or services rendered, were as follows for the three months ended June 30, 2026 and 2025:
June 30,
Increase (decrease)
2026
%
2025
%
$
%
(Dollar amounts in thousands)
Americas
$
14,338
100
%
$
15,285
99
%
$
(947)
(6)
%
Europe
41
—
%
140
1
%
(99)
(71)
%
APAC and Africa
19
—
%
23
—
%
(4)
(17)
%
Totals
$
14,398
100
%
$
15,448
100
%
$
(1,050)
(7)
%
The $0.9 million decrease in sales to the Americas was primarily the result of a decrease in the TS-US division of $1.1 million, partially offset by an increase of $0.1 million in the HPP segment. The $0.1 million decrease in sales to Europe was primarily the result of decreased sales by our TS-UK division. The sales to APAC and Africa decreased $4 thousand for the three months ended June 30, 2026 compared to the same prior year period due to the HPP segment.
Gross Margins
Our gross margin (“GM”) decreased $0.1 million for the three months ended June 30, 2026 as compared to the same prior year period. The GM as a percentage of sales increased to 30% for the three months ended June 30, 2026 compared to the same prior year period of 29%.
June 30,
2026
2025
Increase (decrease)
GM$
GM%
GM$
GM%
GM$
GM%
(Dollar amounts in thousands)
TS
$
4,117
29
%
$
4,329
29
%
$
(212)
—
%
HPP
216
51
%
124
32
%
92
19
%
Total
$
4,333
30
%
$
4,453
29
%
$
(120)
1
%
The impact of product mix within our TS segment on gross margin for the three months ended June 30, 2026 and 2025 was as follows:
June 30,
2026
2025
Increase (decrease)
GM$
GM%
GM$
GM%
GM$
GM%
(Dollar amounts in thousands)
Products
$
1,945
20
%
$
1,629
16
%
$
316
4
%
Services
2,172
52
%
2,700
55
%
(528)
(3)
%
Total
$
4,117
29
%
$
4,329
29
%
$
(212)
—
%
The overall TS segment GM as a percentage of sales was 29% for the three month period ended June 30, 2026 compared to 29% for the same prior year period. Product GM as a percentage of revenue increased 4% due to a higher volume of sales with higher margins compared to the same prior year period. The service GM as a percentage of revenue decreased 3% from the prior year primarily due to decreased third-party maintenance sales, which are recorded “net” which means that the revenue, net of the associated cost, is recorded in the Services revenue financial statement line item causing an increase in GM as a percentage of sales.
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The impact of product mix within our HPP segment on gross margin for the three months ended June 30, 2026 and 2025 was as follows:
June 30,
2026
2025
Increase (decrease)
GM$
GM%
GM$
GM%
GM$
GM%
(Dollar amounts in thousands)
Products
$
108
73
%
$
(32)
(267)
%
$
140
340
%
Services
108
39
%
156
42
%
(48)
(3)
%
Total
$
216
51
%
$
124
32
%
$
92
19
%
The overall HPP segment GM as a percentage of sales increased to 51% for the three months ended June 30, 2026 from the 32% for the three months ended June 30, 2025. The increase in product GM as a percentage of product revenue for the three months ended June 30, 2026 compared to the same prior year period was primarily attributed to the current period’s product mix primarily consisting of software sales, which were nearly all GM. The service GM as a percentage of services revenue from the same prior year period decreased 3% to 39% for the three months ended June 30, 2026 compared to 42% for the three months ended June 30, 2025 due to one high GM customer support contract which did not recur in the current period.
Research and Development Expenses
The research and development expenses incurred by our HPP segment remained relatively flat at $0.8 million for three months ended June 30, 2026 compared to the same prior year period without any significant change in specific types of expenses. The current period expenses were primarily for product engineering expenses incurred in connection with the continued development of the ARIA Zero Trust Gateway cyber security products.
Selling, General and Administrative Expenses
The following table details our selling, general and administrative (“SG&A”) expense by operating segment for the three months ended June 30, 2026 and 2025:
Three months ended June 30,
$
%
% of
% of
Increase
Increase
2026
Total
2025
Total
(Decrease)
(Decrease)
(Dollar amounts in thousands)
By Operating Segment:
TS segment
$
3,981
79
%
$
3,722
76
%
$
259
7
%
HPP segment
1,062
21
%
1,163
24
%
(101)
(9)
%
Total
$
5,043
100
%
$
4,885
100
%
$
158
3
%
SG&A expenses increased $0.2 million to $5.0 million for the three months ended June 30, 2026 compared to the same prior year period of $4.9 million. The $0.3 million increase in TS segment SG&A expenses compared to the same prior year period is primarily the result of increased variable compensation. The HPP segment SG&A expenses decreased $0.1 million for the three months ended June 30, 2026 as compared to the prior year period primarily due to decreased consulting expenses.
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Other Income/Expenses
The following table details other income, net for the three months ended June 30, 2026 and 2025:
Three months ended
June 30, 2026
June 30, 2025
$ Change
(Amounts in thousands)
Foreign exchange loss
$
(23)
$
(200)
$
177
Interest expense
(182)
(105)
(77)
Interest income
524
440
84
Other income (expense), net
11
73
(62)
Total other income, net
$
330
$
208
$
122
Total other income (expense), net for the three months ended June 30, 2026 increased $0.1 million to $0.3 million compared to $0.2 million for the same prior year period.
The $0.2 million decreased foreign exchange loss for the three months ended June 30, 2026 was primarily due to the US Dollar strengthening in the current period compared to the same prior year period in which it strengthened relative to the British Pound. In consolidation, US dollars are remeasured into the functional currency, British Pounds, of our UK subsidiary. This non-cash remeasurement is included in the Foreign exchange gain (loss) in the Consolidated Statements of Operations. The foreign exchange loss was primarily from the US Dollar balance in our TS UK division.
Interest income increased $84 thousand for the three months ended June 30, 2026 compared to the same prior year period primarily due to increased interest income from agreements that have payment terms in excess of one year (see Note 5 Financing receivables, net in Item 1 to this Quarterly Report on Form 10-Q for details), partially offset by a reduction in interest rates related to our Cash and cash equivalents combined with a decreased average balance. All of these agreements are in the TS-US division.
The interest expense increase of $77 thousand for the three months ended June 30, 2026 compared to the same prior year period was related to the TS US division entering into additional multi-year vendor contracts related to sales agreements that have payment terms in excess of one year. Not all sales agreements that have payments in excess of one year have related multi-year vendor contracts.
Income Taxes
The Company recorded an income tax benefit of $366 thousand and $751 thousand for the three months ended June 30, 2026 and 2025, respectively. For these periods, the difference between our effective income tax rate and the U.S. federal statutory rate was the impact of tax credits that we expect to be able to utilize against federal and state taxes, the change in valuation allowance maintained against certain state tax credits, and the excess tax benefits on restricted stock awards that vested during the period.
Overview of the nine months ended June 30, 2026
Our sales decreased by approximately $1.8 million, or 4%, to $42.4 million for the nine months ended June 30, 2026 as compared to $44.3 million for the nine months ended June 30, 2025. The decrease in sales is the result of a decrease of $2.0 million in the TS segment, partially offset by an increase of $0.2 million in our HPP segment. Our gross margin percentage increased 2% to 32% of sales for the nine months ended June 30, 2026 compared to 30% for the nine months ended June 30, 2025. For the nine months ended June 30, 2026 operating loss was $2.5 million compared to operating loss of $2.6 million for the same prior year period. Other income, net increased $0.2 million for the nine months ended June 30, 2026 compared to same prior year period. An income tax benefit of $0.7 million was recorded for the nine months ended June 30, 2026 compared to an income tax benefit of $1.5 million in the same prior year period.
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The following table details our results of operations in dollars and as a percentage of sales for the nine months ended June 30, 2026 and 2025:
%
%
June 30, 2026
of sales
June 30, 2025
of sales
(Dollar amounts in thousands)
Sales
$
42,446
100
%
$
44,265
100
%
Costs and expenses:
Cost of sales
28,906
68
%
31,041
70
%
Research and development
2,508
6
%
2,340
5
%
Selling, general and administrative
13,537
32
%
13,455
30
%
Total costs and expenses
44,951
106
%
46,836
105
%
Operating loss
(2,505)
(6)
%
(2,571)
(5)
%
Other income, net
1,360
3
%
1,122
3
%
Loss before income taxes
(1,145)
(3)
%
(1,449)
(2)
%
Income tax benefit
(654)
(2)
%
(1,549)
(2)
%
Net income (loss)
$
(491)
(1)
%
$
100
—
%
Sales
TS segment sales change was as follows for the nine months ended June 30, 2026 and 2025:
June 30,
Increase (decrease)
2026
2025
$
%
(Dollar amounts in thousands)
Products
$
27,336
$
29,350
$
(2,014)
(7)
%
Services
13,486
13,454
32
—
%
Total
$
40,822
$
42,804
$
(1,982)
(5)
%
The decrease in TS segment product sales of $2.0 million during the period as compared to the prior year period is primarily attributable to decreased sales of $1.6 million in the US division to existing major customers combined with a decrease in sales of $0.4 million in the UK division to three existing major customers. Service sales for the nine months ended June 30, 2026 were relatively flat from the prior year period. In the U.S. division there was a $0.3 million increase in third-party maintenance sales and an increase in managed services of $0.7 million, partially offset by a decrease from internal and third-party services of $0.7 million. There was a $0.1 million decrease in the UK service sales due to a decrease in maintenance sales.
HPP segment sales change was as follows for the nine months ended June 30, 2026 and 2025:
June 30,
Increase (decrease)
2026
2025
$
%
(Dollar amounts in thousands)
Products
$
421
$
367
$
54
15
%
Services
1,203
1,094
109
10
%
Total
$
1,624
$
1,461
$
163
11
%
HPP product sales increased by $0.1 million for the nine months ended June 30, 2026 as compared to the prior year period primarily as a result of legacy sales. The HPP service sales increased $0.1 million for the nine months ended June 30, 2026 compared to the prior year period due to increased revenue from Multicomputer repair services of $0.3 million, partially offset with decreased customer support revenue of $0.2 million.
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Our sales by geographic area, which are based on the customer location to which the products were shipped or services rendered, were as follows for the nine months ended June 30, 2026 and 2025:
June 30,
Increase (decrease)
2026
%
2025
%
$
%
(Dollar amounts in thousands)
Americas
$
41,792
99
%
$
43,112
98
%
$
(1,320)
(3)
%
Europe
169
—
%
976
2
%
(807)
(83)
%
APAC and Africa
485
1
%
177
—
%
308
174
%
Totals
$
42,446
100
%
$
44,265
100
%
$
(1,819)
(4)
%
The $1.3 million decrease in sales to the Americas was the result of a decrease of $1.1 million in the TS-US division, and a decrease in the TS-UK division of $0.1 million, partially offset with a decrease in the HPP segment of $0.1 million. The sales to Europe decreased $0.8 million from the prior year due to a decrease of $0.6 million in the TS-UK division combined with a decrease in the TS-US division of $0.2 million. The sales to APAC and Africa increased $0.3 million due to the HPP segment.
Gross Margins
Our gross margin (“GM”) increased $0.3 million for the nine months ended June 30, 2026 compared to the same prior year period. The GM as a percentage of total sales increased to 32% for the nine months ended June 30, 2026 as compared to the same prior year period of 30%.
June 30,
2026
2025
Increase (decrease)
(Dollar amounts in thousands)
GM$
GM%
GM$
GM%
GM$
GM%
TS
$
12,532
31
%
$
12,514
29
%
$
18
2
%
HPP
1,008
62
%
710
49
%
298
13
%
Total
$
13,540
32
%
$
13,224
30
%
$
316
2
%
The impact of product mix within our TS segment on gross margin for the nine months ended June 30, 2026 and 2025 was as follows:
June 30,
2026
2025
Increase (decrease)
GM$
GM%
GM$
GM%
GM$
GM%
(Dollar amounts in thousands)
Products
$
4,822
18
%
$
4,965
17
%
$
(143)
1
%
Services
7,710
57
%
7,549
56
%
161
1
%
Total
$
12,532
31
%
$
12,514
29
%
$
18
2
%
The overall TS segment GM as a percentage of total sales increased to 31% for the nine month period ended June 30, 2026 compared to 29% from the same prior year period. Product GM as a percentage of revenue for the nine months ended June 30, 2026 increased 1% from the prior year period due to product mix. Service GM as a percentage of total sales increased to 57% for the nine months ended June 30, 2026 compared to 56% from the prior year period. This was primarily due to increased third-party maintenance sales, which are recorded “net” which means that the revenue, net of the associated cost, is recorded in the Services revenue financial statement line item causing an increase in GM as a percentage of sales.
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The impact of product mix within our HPP segment on gross margin for the nine months ended June 30, 2026 and 2025 was as follows:
June 30,
2026
2025
Increase (decrease)
(Dollar amounts in thousands)
GM$
GM%
GM$
GM%
GM$
GM%
Products
$
365
87
%
$
201
55
%
$
164
32
%
Services
643
53
%
509
47
%
134
6
%
Total
$
1,008
62
%
$
710
49
%
$
298
13
%
The overall HPP segment GM as a percentage of sales increased to 62% for the nine months ended June 30, 2026 from 49% for the nine months ended June 30, 2025. The 32% increase in product GM as a percentage of product revenue compared to the same prior year period was primarily attributed to the product mix primarily consisting of software sales, which were nearly all GM. The 6% increase in service GM as a percentage of service revenue for the nine months ended June 30, 2026 compared to the same prior year period was due to increased Multicomputer repair services, which are relatively high margin compared to other services.
Research and Development Expenses
The research and development expenses incurred by our HPP segment increased to $2.5 million for the nine months ended June 30, 2026 compared to the same prior year period of $2.3 million due to increased salaries. The current period expenses were primarily for product engineering expenses incurred in connection with the continued development of the ARIA Zero Trust Gateway cyber security products.
Selling, General and Administrative Expenses
The following table details our selling, general and administrative (“SG&A”) expense by operating segment for the nine months ended June 30, 2026 and 2025:
Nine months ended June 30,
$
%
% of
% of
Increase
Increase
2026
Total
2025
Total
(Decrease)
(Decrease)
(Dollar amounts in thousands)
By Operating Segment:
TS segment
$
10,398
77
%
$
10,016
74
%
$
382
4
%
HPP segment
3,139
23
%
3,439
26
%
(300)
(9)
%
Total
$
13,537
100
%
$
13,455
100
%
$
82
1
%
SG&A expenses increased $0.1 million for the nine months ended June 30, 2026 compared to the same prior year period. The $0.4 million increase in TS segment SG&A expenses compared to the same prior year period is primarily the result of increased salaries and variable compensation. The HPP segment SG&A expenses decreased $0.3 million for the nine months ended June 30, 2026 as compared to the same prior year period primarily due to a reduction in consulting expenses.
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Other Income/Expenses
The following table details other income, net for the nine months ended June 30, 2026 and 2025:
Nine months ended
June 30, 2026
June 30, 2025
$ Change
(Amounts in thousands)
Foreign exchange gain (loss)
$
40
$
(37)
$
77
Interest expense
(477)
(259)
(218)
Interest income
1,652
1,343
309
Other income, net
145
75
70
Total other income, net
$
1,360
$
1,122
$
238
Total other income, net for the nine months ended June 30, 2026 increased $0.3 million to income of $1.4 million compared to income of $1.1 million in the same prior year period.
The $0.1 million increased foreign exchange gain for the nine months ended June 30, 2026 was due to primarily remeasurement of U.S. dollar-denominated balances held by the Company’s U.K. subsidiary during the current period. In consolidation, U.S. dollars are remeasured into the functional currency, British Pounds, of our U.K. subsidiary. This non-cash remeasurement is included in the Foreign exchange gain in the Consolidated Statements of Operations. The foreign exchange gain in the current period was primarily from the U.S. Dollar balance in our TS U.K. division.
Interest income increased $309 thousand for the nine months ended June 30, 2026 compared to the same prior year period primarily due to increased interest income from agreements that have payment terms in excess of one year (see Note 5 Financing receivables, net in Item 1 to this Quarterly Report on Form 10-Q for details), partially offset with decreased interest rates related to our Cash and cash equivalents and a decreased average balance. All of these agreements are in the TS-US division.
The interest expense increase of $218 thousand for the nine months ended June 30, 2026 compared to the same prior year period was primarily related to the TS US division entering into additional multi-year vendor contracts related to sales agreements in fiscal year 2026 and 2025 that have payment terms in excess of one year. Not all sales agreements that have payments in excess of one year have related multi-year vendor contracts.
Income Taxes
The Company recorded an income tax benefit of $654 thousand and $1.5 million for the nine months ended June 30, 2026 and 2025, respectively. For these periods, the difference between our effective income tax rate and the U.S. federal statutory rate was the impact of tax credits that we expect to be able to utilize against federal and state taxes, the change in valuation allowance maintained against certain state tax credits, and the excess tax benefits on restricted stock awards that vested during the period.
Liquidity and Capital Resources
Our primary source of liquidity is our Cash and cash equivalents and our line of credit.
Cash and cash equivalents decreased by $2.8 million to $24.7 million as of June 30, 2026 from $27.4 million as of September 30, 2025.
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The following is a summary of our cash flows for the nine months ended June 30, 2026 and 2025:
Nine months ended June 30,
2026
2025
(Dollar amounts in thousands)
Net cash (used in) provided by:
Operating activities
$
(2,962)
$
370
Investing activities
(173)
(174)
Financing activities
440
(4,454)
Effect of exchange rate changes on cash
(57)
(19)
Decrease in Cash and cash equivalents
$
(2,752)
$
(4,277)
Operating Activities
Cash used in operating activities was $3.0 million for the nine months ended June 30, 2026 compared to $0.4 million provided by operating activities in the prior year. Our largest source of cash provided by our operations is receipts from our customers. Net cash provided by operating activities can be impacted by factors such as timing of when we invoice the customer and receive payment, when we receive vendor invoices and make payments as well as vendor payment terms, and inventory fluctuations are dependent on when orders are received and shipped.
The operating cash used during the period primarily reflects the payment of Accounts payable and accrued expenses outstanding as of September 30, 2025 and continued investment in ARIA Zero Trust Gateway cyber security products.
Investing Activities
Cash used in investing activities was relatively flat for the nine months ended June 30, 2026 compared to the same prior year period.
Financing Activities
Cash provided in financing activities was $0.4 million for the nine months ended June 30, 2026 compared to $4.5 million used in the same prior year period. The increase from the prior year was primarily due to decreased net repayments on our line-of-credit of approximately $4.5 million from the prior year and repurchases of common stock of $0.4 million. The line-of-credit payment changes are due to the timing of sales and related vendor invoices.
Other Liquidity and Capital Resources Items
Our cash held by our foreign subsidiary in the United Kingdom totaled approximately $5.1 million as of June 30, 2026 and consisted of 1.2 million Euros, 0.2 million British Pounds, and 3.7 million US Dollars. This cash is included in our total Cash and cash equivalents reported on the Condensed Consolidated Balance Sheets.
As of June 30, 2026 and September 30, 2025, the Company maintained a line of credit with a capacity of up to $15.0 million for inventory accessible to both the HPP and TS segments. This line of credit also includes availability of a limited cash withdrawal of up to $1.0 million. Amounts of $12.6 million and $14.1 million were available as of June 30, 2026 and September 30, 2025, respectively. As of June 30, 2026 and September 30, 2025 there were no cash withdrawals outstanding. For further discussion of the Company’s line of credit, including its financial covenants, see Item 1, Note 9 Line of Credit.
In the TS U.S. division, financing of goods and services is offered to certain customers. This involves amounts due reflecting sales whose payment terms exceed one year. As of June 30, 2026 and September 30, 2025 there were $16.5
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million and $14.9 million of Financing receivables, net outstanding, respectively. Of these amounts, $8.3 million and $8.9 million were current assets as of June 30, 2026 and September 30, 2025, respectively.
Related to the Financing Receivables, net there was a balance of $8.1 million and $4.8 million of multi-year contracts with financing due to our vendors. Of these amounts $4.5 million and $3.2 million were current liabilities as of June 30, 2026 and September 30, 2025, respectively. The current portion of these vendor financing arrangements is within Accounts payable and accrued expenses. The noncurrent portion is within Other noncurrent liabilities. Not every financing arrangement with our customers has a related vendor financing arrangement. Some vendors do not offer financing for agreements and if offered, management determines whether to use vendor financing due to various factors including interest rates and cash flow projections. Refer to Note 5 – Financing receivables, net and Note 8 Accounts payable and accrued expenses, and Other noncurrent liabilities for more information.
If cash generated from operations is insufficient to satisfy working capital requirements, we may need to access funds through bank loans or other means. If we are unable to secure additional financing, we may not be able to complete development or enhancement of products, take advantage of future opportunities, respond to competition, retain key employees, or continue to effectively operate our business.
Based on our current plans and business conditions, management believes that the Company’s available Cash and cash equivalents, the cash generated from operations, and availability on our line of credit will be sufficient to provide for the Company’s working capital and capital expenditure requirements for at least 12 months from the date of this filing.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.