10-Q

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended	June 30, 2014
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from              to             .

Commission File Number 0-10843

CSP Inc.

(Exact name of Registrant as specified in its Charter)

Massachusetts	04-2441294
(State of incorporation)	(I.R.S. Employer Identification No.)

43 Manning Road

Billerica, Massachusetts 01821-3901

(978) 663-7598

(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

As of August 6, 2014, the registrant had 3,609,648 shares of common stock issued and outstanding.

1

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited) as of June 30, 2014 and September 30, 2013	3
	Consolidated Statements of Operations (unaudited) for the three and nine months ended June 30, 2014 and 2013	4
	Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended June 30, 2014 and 2013	5
	Consolidated Statement of Shareholders’ Equity (unaudited) for the nine months ended June 30, 2014	6
	Consolidated Statements of Cash Flows (unaudited) for the nine months ended June 30, 2014 and 2013	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 4.	Controls and Procedures	30
PART II. OTHER INFORMATION
Item 6.	Exhibits	31

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CSP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value)

	June 30, 2014			September 30, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	16,450		$	18,619
Accounts receivable, net of allowances of $226 and $242	15,775			13,529
Inventories, net	6,868			4,791
Refundable income taxes	254			624
Deferred income taxes	1,144			1,313
Other current assets	2,561			2,042
Total current assets	43,052			40,918
Property, equipment and improvements, net	1,446			1,420
Other assets:
Intangibles, net	578			410
Deferred income taxes	1,674			1,771
Cash surrender value of life insurance	2,763			2,481
Other assets	226			225
Total other assets	5,241			4,887
Total assets	$	49,739		$	47,225
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	11,073		$	10,503
Deferred revenue	5,523			3,816
Pension and retirement plans	768			746
Income taxes payable	—			60
Total current liabilities	17,364			15,125
Pension and retirement plans	8,680			8,660
Other long term liabilities	67			405
Total liabilities	26,111			24,190
Commitments and contingencies
Shareholders’ equity:
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 3,597 and 3,496 shares, respectively	36			35
Additional paid-in capital	11,402			11,137
Retained earnings	17,993			17,728
Accumulated other comprehensive loss	(5,803		)	(5,865		)
Total shareholders’ equity	23,628			23,035
Total liabilities and shareholders’ equity	$	49,739		$	47,225

See accompanying notes to unaudited consolidated financial statements.

3

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except for per share data)

	For the three months ended						For the nine months ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Sales:
Product	$	15,677		$	14,783		$	44,745		$	49,625
Services	6,959			4,250			20,126			16,101
Total sales	22,636			19,033			64,871			65,726
Cost of sales:
Product	13,048			12,284			37,270			41,184
Services	3,474			2,914			11,705			10,763
Amortization of inventory step-up and intangibles	10			—			177			—
Total cost of sales	16,532			15,198			49,152			51,947
Gross profit	6,104			3,835			15,719			13,779
Operating expenses:
Engineering and development	945			437			2,372			1,261
Selling, general and administrative	4,192			4,065			12,169			11,790
Total operating expenses	5,137			4,502			14,541			13,051
Bargain purchase gain on acquisition, net of tax	—			—			462			—
Operating income (loss)	967			(667		)	1,640			728
Other income (expense):
Foreign exchange gain (loss)	(67		)	13			(120		)	18
Other income (expense), net	(37		)	(11		)	(58		)	18
Total other income (expense), net	(104		)	2			(178		)	36
Income (loss) before income taxes	863			(665		)	1,462			764
Income tax expense (benefit)	(36		)	(187		)	50			387
Net income (loss)	$	899		$	(478	)	$	1,412		$	377
Net income (loss) attributable to common stockholders	$	863		$	(468	)	$	1,361		$	369
Net income (loss) per share – basic	$	0.25		$	(0.14	)	$	0.40		$	0.11
Weighted average shares outstanding – basic	3,451			3,396			3,442			3,378
Net income (loss) per share – diluted	$	0.25		$	(0.14	)	$	0.39		$	0.11
Weighted average shares outstanding – diluted	3,499			3,396			3,488			3,432

See accompanying notes to unaudited consolidated financial statements.

4

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

	For the three months ended						For the nine months ended
	June 30, 2014			June 30, 2013			June 30, 2014		June 30, 2013
Net income (loss)	$	899		$	(478	)	$	1,412	$	377
Other comprehensive income (loss):
Foreign currency translation gain (loss) adjustments	(92		)	15			62		(1		)
Other comprehensive income (loss)	(92		)	15			62		(1		)
Total comprehensive income (loss)	$	807		$	(463	)	$	1,474	$	376

See accompanying notes to unaudited consolidated financial statements.

5

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the nine Months Ended June 30, 2014:

(Amounts in thousands, except per share data)

	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated other comprehensive loss			Total Shareholders’ Equity
Balance as of September 30, 2013	3,496	$	35	$	11,137	$	17,728		$	(5,865	)	$	23,035
Net income	—	—		—		1,412			—			1,412
Other comprehensive income	—	—		—		—			62			62
Exercise of stock options	1	—		6		—			—			6
Stock-based compensation	—	—		259		—			—			259
Restricted stock issuance	100	1		—		—			—			1
Cash dividends on common stock ($0.32 per share)	—	—		—		(1,147		)	—			(1,147		)
Balance as of June 30, 2014	3,597	$	36	$	11,402	$	17,993		$	(5,803	)	$	23,628

See accompanying notes to unaudited consolidated financial statements.

6

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	For the nine months ended
	June 30, 2014			June 30, 2013
Cash flows from operating activities:
Net income	$	1,412		$	377
Adjustments to reconcile net income to net cash used in operating activities:
Bargain purchase gain	(462		)	—
Depreciation and amortization	364			324
Amortization of intangibles	92			62
Loss (gain) on sale of fixed assets, net	2			(17		)
Foreign exchange (gain) loss	120			(18		)
Non-cash changes in accounts receivable	(17		)	27
Non-cash changes in inventory	146			—
Stock-based compensation expense on stock options and restricted stock awards	260			112
Deferred income taxes	273			334
Increase in cash surrender value of life insurance	(114		)	(73		)
Changes in operating assets and liabilities:
Increase in accounts receivable	(2,110		)	(354		)
Decrease in officer life insurance receivable	—			2,172
(Increase) decrease in inventories	(1,160		)	1,060
(Increase) decrease in refundable income taxes	373			(158		)
Increase in other current assets	(485		)	(276		)
Increase in other assets	—			(81		)
Increase (decrease) in accounts payable and accrued expenses	425			(1,955		)
Increase in deferred revenue	1,662			307
Decrease in pension and retirement plans liability	(168		)	(175		)
Decrease in income taxes payable	(311		)	(136		)
Increase (decrease) in other long term liabilities	(338		)	73
Net cash provided by (used in) operating activities	(36		)	1,605
Cash flows from investing activities:
Life insurance premiums paid	(167		)	(198		)
Proceeds from the sale of fixed assets	6			17
Cash paid to acquire business	(500		)	—
Purchases of property, equipment and improvements	(370		)	(675		)
Net cash used in investing activities	(1,031		)	(856		)
Cash flows from financing activities:
Dividends paid	(1,148		)	(1,034		)
Proceeds from issuance of shares from exercise of employee stock options	6			114
Net cash used in financing activities	(1,142		)	(920		)
Effects of exchange rate on cash	40			(76		)
Net decrease in cash and cash equivalents	(2,169		)	(247		)
Cash and cash equivalents, beginning of period	18,619			20,493
Cash and cash equivalents, end of period	$	16,450		$	20,246
Supplementary cash flow information:
Cash paid for income taxes	$	96		$	383
Cash paid for interest	$	85		$	85

See accompanying notes to unaudited consolidated financial statements.

7

CSP INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND NINE MONTHS ENDED JUNE 30, 2014 AND 2013

Organization and Business

CSP Inc. was founded in 1968 and is based in Billerica, Massachusetts. To meet the diverse requirements of its industrial, commercial and defense customers worldwide, CSP Inc. and its subsidiaries (collectively “CSPI” or the “Company”) develop and market IT integration solutions and high-performance cluster computer systems. The Company operates in two segments, its High Performance Products and Solutions segment and its Information Technology Solutions segment.

1.        Basis of Presentation

The accompanying consolidated financial statements have been prepared by the Company, without audit, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in the annual financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted. Accordingly, the Company believes that although the disclosures are adequate to make the information presented not misleading, the unaudited financial statements should be read in conjunction with the footnotes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013.

2.        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 period. Actual results may differ from those estimates under different assumptions or conditions.

3.  Acquired Business

On November 4, 2013 the Company acquired substantially all of the assets of Myricom, Inc. ("Myricom").  Myricom has been integrated into the High Performance Products and Solutions business segment.  Prior to our acquisition, Myricom was a manufacturer of high performance interconnect computing devices and software.  The Company acquired Myricom in order to obtain (i) Myricom’s interconnect technology, which is critical to our latest MultiComputer products and (ii) a strong base of new customers in commercial growth markets.  The Company also retained key Myricom technical personnel.  Myricom was a key supplier to CSPI’s MultiComputer Division.  Its interconnect technology is an important component of the latest generation MultiComputer products that we currently supply to our customers.

Although Myricom was an established business prior to our acquisition, it had previously sold off a significant portion of its business and was faced with the likelihood of having to shut down operations if it could not find a buyer to purchase its remaining assets.  This was because the revenue that Myricom was able to generate from these remaining assets was not sufficient to support its cost structure so as to enable Myricom to operate at a profit.  These factors contributed to a purchase price that resulted in the recognition of a bargain purchase gain.  The Company paid total cash consideration of approximately $0.5 million to acquire substantially all of the assets of Myricom and incurred approximately $0.1 million for the assumption of certain other liabilities.  The purchase of Myricom resulted in the recognition of a bargain purchase gain of approximately $0.5 million.  The bargain purchase gain is shown net of the federal and state tax effect.

The purchase price was allocated as follows:

8

	(Amounts in Thousands)
Inventory	$	1,030
Property & equipment	17
Intangibles	260
Gross assets acquired	1,307
Product warranty liability assumed	(93		)
Net assets acquired	1,214
Less: asset purchase price	500
Bargain purchase gain before tax	714
Deferred tax on bargain purchase gain	(252		)
Bargain purchase gain, net of tax effect	$	462

The results of operations of Myricom for the the three months ended June 30, 2014 and for the period November 4, 2013 - June 30, 2014 are included in the Company’s consolidated statement of operations for the three and nine months ended June 30, 2014, respectively.

The following proforma condensed combined financial information gives effect to the acquisition of Myricom as if it were consummated on October 1, 2012 (the beginning of the comparable prior reporting period), and includes proforma adjustments related to the bargain purchase gain, amortization of inventory step-up and acquired intangible assets. The proforma condensed combined financial information is presented for informational purposes only. The proforma condensed combined financial information is not intended to represent or be indicative of the results of operations that would have been reported had the acquisition occurred on October 1, 2012 and should not be taken as representative of future results of operations of the combined company.

The following table presents the proforma condensed combined financial information (in thousands, except per share amounts):

	For the three months ended					For the nine months ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
	(Amounts in thousands except per share data)
Revenue	$	22,636	$	20,942		$	65,489	$	71,166
Net income (loss)	$	903	$	(649	)	$	1,127	$	(1,514	)
Net income (loss) attributable to common stockholders	$	868	$	(636	)	$	1,087	$	(1,484	)
Net income (loss) per share – basic	$	0.25	$	(0.19	)	$	0.32	$	(0.44	)
Net income (loss) per share – diluted	$	0.25	$	(0.19	)	$	0.31	$	(0.44	)

The proforma condensed combined financial information shown above includes proforma adjustments to eliminate certain items directly relating to the business combination which reduced net income by approximately $0.3 million for the nine month period ended June 30, 2014.

4.        Earnings Per Share of Common Stock

Basic net 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 stock options and is computed by dividing net income by the assumed weighted average number of common shares outstanding.

We are required to present earnings per share, or 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.

9

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

	For the three months ended					For the nine months ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
	(Amounts in thousands except per share data)
Net income (loss)	$	899	$	(478	)	$	1,412	$	377
Less: net income (loss) attributable to nonvested common stock	36		(10		)	51		8
Net income (loss) attributable to common stockholders	$	863	$	(468	)	$	1,361	$	369
Weighted average total shares outstanding – basic	3,593		3,468			3,572		3,447
Less: weighted average non-vested shares outstanding	142		72			130		69
Weighted average number of common shares outstanding – basic	3,451		3,396			3,442		3,378
Potential common shares from non-vested stock awards and the assumed exercise of stock options	48		—			46		54
Weighted average common shares outstanding – diluted	3,499		3,396			3,488		3,432
Net income per share – basic	$	0.25	$	(0.14	)	$	0.40	$	0.11
Net income per share – diluted	$	0.25	$	(0.14	)	$	0.39	$	0.11

All anti-dilutive securities, including certain stock options, are excluded from the diluted income per share computation. For the three months ended June 30, 2014 and 2013, 58,000 and 173,000 options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive as their exercise price exceeded fair value. For the nine months ended June 30, 2014 and 2013, 52,000 and 162,000 options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive as their exercise price exceeded fair value.

5.         Inventories

Inventories consist of the following:

	June 30, 2014		September 30, 2013
	(Amounts in thousands)
Raw materials	$	2,327	$	1,587
Work-in-process	824		404
Finished goods	3,717		2,800
Total	$	6,868	$	4,791

Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met, of approximately $0.2 million and $0.5 million as of June 30, 2014 and September 30, 2013, respectively.

Total inventory balances in the table above are shown net of reserves for obsolescence of approximately $4.6 million as of June 30, 2014 and September 30, 2013.

6.        Accumulated Other Comprehensive Loss

 The components of accumulated other comprehensive loss are as follows:

10

	June 30, 2014			September 30, 2013
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(2,094	)	$	(2,156	)
Cumulative unrealized loss on pension liability	(3,709		)	(3,709		)
Accumulated other comprehensive loss	$	(5,803	)	$	(5,865	)

7.         Pension and Retirement Plans

The Company has defined benefit and defined contribution plans in the United Kingdom, Germany and the U.S. In the United Kingdom and Germany, the Company provides defined benefit pension plans and defined contribution plans for the majority of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain current and former employees. The domestic supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. Domestically, the Company also provides for officer death benefits through post-retirement plans to certain officers.  All of the Company’s defined benefit plans are closed to newly hired employees and have been for the two years ended September 30, 2013 and for the nine months ended June 30, 2014.

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.

Our pension plan in the United Kingdom is the only plan with plan assets. The plan assets consist of an investment in a commingled fund which in turn comprises a diversified mix of assets including corporate equity securities, government securities and corporate debt securities.

The components of net periodic benefit costs related to the U.S. and international plans are as follows:

	For the Three Months Ended June 30,
	2014									2013
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	10		$	—		$	10		$	15		$	—		$	15
Interest cost	196			17			213			163			16			179
Expected return on plan assets	(120		)	—			(120		)	(96		)	—			(96		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	24			(3		)	21			35			6			41
Net periodic benefit cost	$	110		$	14		$	124		$	117		$	22		$	139
Post Retirement:
Service cost	$	—		$	3		$	3		$	—		$	—		$	—
Interest cost	—			10			10			—			8			8
Amortization of net gain	—			(35		)	(35		)	—			(44		)	(44		)
Net periodic benefit cost	$	—		$	(22	)	$	(22	)	$	—		$	(36	)	$	(36	)

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	For the nine Months Ended June 30,
	2014									2013
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	34		$	—		$	34		$	45		$	—		$	45
Interest cost	579			51			630			509			48			557
Expected return on plan assets	(352		)	—			(352		)	(304		)	—			(304		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	70			(7		)	63			107			18			125
Net periodic benefit cost	$	331		$	44		$	375		$	357		$	66		$	423
Post Retirement:
Service cost	$	—		$	8		$	8		$	—		$	—		$	—
Interest cost	—			32			32			—			26			26
Amortization of net gain	—			(107		)	(107		)	—			(136		)	(136		)
Net periodic benefit cost	$	—		$	(67	)	$	(67	)	$	—		$	(110	)	$	(110	)

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8.       Segment Information

Beginning in the period ended March 31, 2014, we have renamed our segments. We have renamed the segment that was formerly known as the Systems segment to the High Performance Products and Solutions segment. We have also renamed the segment that was formerly known as the Service and System Integration segment to the Information Technology Solutions segment.

The following table presents certain operating segment information.

				Information Technology Solutions Segment
For the Three Months Ended June 30,	High Performance Products and Solutions Segment			Germany			United Kingdom			U.S.			Total			Consolidated Total
	(Amounts in thousands)
2014
Sales:
Product	$	2,697		$	3,323		$	368		$	9,289		$	12,980		$	15,677
Service	2,137			3,546			402			874			4,822			6,959
Total sales	4,834			6,869			770			10,163			17,802			22,636
Income (loss) from operations	999			43			(20		)	(55		)	(32		)	967
Assets	15,932			15,271			3,595			14,941			33,807			49,739
Capital expenditures	57			17			—			1			18			75
Depreciation and amortization	53			46			4			48			98			151
2013
Sales:
Product	$	454		$	1,471		$	45		$	12,813		$	14,329		$	14,783
Service	159			3,064			328			699			4,091			4,250
Total sales	613			4,535			373			13,512			18,420			19,033
Income (loss) from operations	(1,093		)	(96		)	(58		)	580			426			(667		)
Assets	15,340			13,046			3,457			17,427			33,930			49,270
Capital expenditures	108			52			1			38			91			199
Depreciation and amortization	40			47			2			43			92			132

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				Information Technology Solutions Segment
For the nine Months Ended June 30,	High Performance Products and Solutions Segment			Germany		United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2014
Sales:
Product	$	5,873		$	8,176	$	1,351		$	29,345	$	38,872	$	44,745
Service	4,485			12,220		1,034			2,387		15,641		20,126
Total sales	10,358			20,396		2,385			31,732		54,513		64,871
Income (loss) from operations	1,254			256		(19		)	149		386		1,640
Assets	15,932			15,271		3,595			14,941		33,807		49,739
Capital expenditures	159			118		45			48		211		370
Depreciation and amortization	159			141		12			144		297		456
2013
Sales:
Product	$	3,044		$	7,329	$	309		$	38,943	$	46,581	$	49,625
Service	1,259			10,839		1,059			2,944		14,842		16,101
Total sales	4,303			18,168		1,368			41,887		61,423		65,726
Income (loss) from operations	(1,317		)	125		(73		)	1,993		2,045		728
Assets	15,340			13,046		3,457			17,427		33,930		49,270
Capital expenditures	247			179		7			242		428		675
Depreciation and amortization	116			135		9			126		270		386

Income (loss) from operations consists of sales less cost of sales, engineering and development, selling, general and administrative expenses but is not affected by either other income/expense or by income taxes expense/benefit. Non-operating charges/income consists principally of investment income and interest expense.  All intercompany transactions have been eliminated.

The following table lists customers from which the Company derived revenues in excess of 10% of total revenues for the three and nine months endedJune 30, 2014, and 2013.

		For the three months ended,								For the nine months ended,
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
		Amount		% of Revenues		Amount		% of Revenues		Amount		% of Revenues		Amount		% of Revenues
	(dollars in millions)
Customer A		$	3.7	17	%	$	1.3	7	%	$	11.8	18	%	$	12.2	19	%
Customer B		$	3.6	16	%	$	2.6	14	%	$	12.5	19	%	$	9.9	15	%
Customer C		$	—	—	%	$	3.8	20	%	$	—	—	%	$	8.0	12	%

Accounts receivable from Customer B totaled approximately $3.2 million, which comprised 20% of total consolidated accounts receivable as of June 30, 2014, and $3.5 million, which comprised 26% of total consolidated accounts receivable as of September 30, 2013. We believe that the Company is not exposed to any particular credit risk with respect to the accounts receivable with this customer.

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9.       Fair Value Measures

Assets and Liabilities measured at fair value on a recurring basis are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total Balance
	As of June 30, 2014
	(Amounts in thousands)
Assets:
Money Market funds	$	1,006	$	—	$	—	$	1,006
Total assets measured at fair value	$	1,006	$	—	$	—	$	1,006

	As of September 30, 2013
	(Amounts in thousands)
Assets:
Money Market funds	$	3,503	$	—	$	—	$	3,503
Total assets measured at fair value	$	3,503	$	—	$	—	$	3,503

These assets are included in cash and cash equivalents in the accompanying consolidated balance sheets.  All other monetary assets and liabilities are short-term in nature and approximate their fair value. The Company did not have any transfers between Level 1, Level 2 or Level 3 measurements.

The Company had no liabilities measured at fair value as of June 30, 2014 or September 30, 2013. The Company had no assets or liabilities measured at fair value on a non recurring basis as of June 30, 2014 or September 30, 2013.

10.Dividend

On December 17, 2013, our board of directors declared a cash dividend of $0.10 per share which was paid on January 7, 2014 to shareholders of record as of December 27, 2013, the record date.

On February 11, 2014, our board of directors declared a cash dividend of $0.11 per share which was paid on March 11, 2014 to shareholders of record as of February 27, 2014, the record date.

On May 14, 2014, our board of directors declared a cash dividend of $0.11 per share which was paid on June 10, 2014 to shareholders of record as of May 30, 2014, the record date.

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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 related to, among others, but not limited to, statements concerning future revenues and future business plans. In addition, forward-looking statements include statements in which we use words such as “expect,” “believe,” “anticipate,” “intend,” or similar expressions. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, 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.

Markets for our products and services are characterized by rapidly changing technology, new product introductions and short product life cycles. These changes can adversely affect our business and operating results. Our success will depend on our ability to enhance our existing products and services and to develop and introduce, on a timely and cost effective basis, new products that keep pace with technological developments and address increasing customer requirements. The inability to meet these demands could adversely affect our business and operating results.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our 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 on-going basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, income taxes, deferred compensation and retirement plans, estimated selling prices used for revenue recognition and contingencies. We base our estimates on historical performance and on various other assumptions that are believed 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, 2013 in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Explanatory note

Beginning in the period ending and as of March 31, 2014, we have renamed our segments. We have renamed the segment that was formerly known as the Systems segment to the High Performance Products and Solutions ("HPPS") segment. We have also renamed the segment that was formerly known as the Service and System Integration segment to the Information Technology Solutions ("ITS") segment.

Overview of the nine months ended June 30, 2014 Results of Operations

Overview:

 Revenue decreased by approximately $0.9 million, or 1%, to $64.9 million for the nine months ended June 30, 2014 versus $65.7 million for the nine months ended June 30, 2013. Our gross profit margin percentage increased overall, from 21% for the nine months ended June 30, 2013 to 24% for the nine months ended June 30, 2014. The increase in the gross profit margin resulted from a higher percentage of revenue having been derived from the HPPS segment and higher royalty revenue in the nine months ended June 30, 2014 versus the prior year nine-month period. The percentage of revenue from the HPPS segment for the nine months ended June 30, 2014 was 16% with royalty revenue of approximately $3.8 million versus 7% and $0.8 million in royalty revenue for the prior year nine-month period. Operating incomeincreased by $0.9 million to approximately $1.6 million for the nine-month period ended June 30, 2014 versus $0.7 million for the nine months ended June 30, 2013. This increase in operating income was due to an increase in gross profit of approximately $1.9 million, a bargain purchase gain of $0.5 million on the acquisition of Myricom, Inc. during the nine months ended June 30, 2014, partially offset by an increase in operating expenses of approximately $1.5 million, due in large part to the operating expenses of Myricom. Net income was $1.4 million for nine-month period ended June 30, 2014 versus $0.4 million for the nine months ended June 30, 2013.

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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, 2014 and 2013:

	June 30, 2014			% of sales		June 30, 2013		% of sales
	(Dollar amounts in thousands)
Sales	$	64,871		100	%	$	65,726	100	%
Costs and expenses:
Cost of sales	49,152			76	%	51,947		79	%
Engineering and development	2,372			4	%	1,261		2	%
Selling, general and administrative	12,169			19	%	11,790		18	%
Total costs and expenses	63,693			99	%	64,998		99	%
Bargain purchase gain, net of tax	462			1	%	—		—	%
Operating income	1,640			2	%	728		1	%
Other income (expense)	(178		)	—	%	36		—	%
Income before income taxes	1,462			2	%	764		1	%
Income tax expense	50			—	%	387		—	%
Net income	$	1,412		2	%	$	377	1	%

Sales

The following table details our sales by operating segment for the nine months ended June 30, 2014 and 2013:

	HPPS			ITS			Total			% of Total
	(Dollar amounts in thousands)
For the nine Months Ended June 30, 2014:
Product	$	5,873		$	38,872		$	44,745		69	%
Services	4,485			15,641			20,126			31	%
Total	$	10,358		$	54,513		$	64,871		100	%
% of Total	16		%	84		%	100		%

	HPPS			ITS			Total			% of Total
For the nine Months Ended June 30, 2013:
Product	$	3,044		$	46,581		$	49,625		76	%
Services	1,259			14,842			16,101			24	%
Total	$	4,303		$	61,423		$	65,726		100	%
% of Total	7		%	93		%	100		%

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	HPPS			ITS			Total			% increase (decrease)
Increase (Decrease)
Product	$	2,829		$	(7,709	)	$	(4,880	)	(10	)%
Services	3,226			799			4,025			25	%
Total	$	6,055		$	(6,910	)	$	(855	)	(1	)%
% increase (decrease)	141		%	(11		)%	(1		)%

Total revenues decreased by approximately $0.9 million, or 1%, for the nine months ended June 30, 2014 compared to the nine months ended June 30, 2013.  Revenue in the HPPS segment increased for the current year nine-month period versus the prior year nine-month period by approximately $6.1 million, while revenues in the ITS segment decreased by approximately $6.9 million.

Product revenues decreased by approximately $4.9 million, or 10%, for the nine months ended June 30, 2014 compared to the comparable period of the prior fiscal year. Product revenues in the ITS segment decreased by approximately $7.7 million while in the HPPS segment, product revenue increased by approximately $2.8 million for the nine-month period ended June 30, 2014 versus the nine month period ended June 30, 2013.

The increase in product revenues in the HPPS segment of approximately $2.8 million was due substantially to revenues from the acquisition of Myricom, Inc., which the Company acquired during the nine months ended June 30, 2014. Myricom revenues for the period were approximately $4.7 million. Partially offsetting this increase, revenues from our Japanese defense customer, US defense customer and sales from the US PCDA division decreased by approximately $1.4 million, $0.4 million and $0.1 million, respectively.

In the US division of the ITS segment, product sales decreased by approximately $9.6 million, while product sales in the German and UK divisions of the segment increased by approximately $0.8 million, and $1.0 million, respectively.

In the US division's existing customer base, product sales to major customers in the IT Hosting vertical and the Education vertical decreased by approximately $8.0 million and $1.3 million, respectively. The decrease in the IT hosting vertical was due to the loss of a major customer in this vertical. The decrease in the Education vertical reflected a non-recurring large project in the prior year.

In Germany, the $0.8 millionincrease in product revenue was the result of increased sales in the division’s telecommunications vertical of approximately $0.9 million, favorable foreign exchange rate fluctuation and $0.4 million, partially offset by decreased sales of $0.5 million in all other verticals. In the UK, the increase in product sales of approximately $1.0 million is attributable to increased sales resources focused on increasing product sales in that region.

Service revenues increased by approximately $4.0 million, or 25%.  This increase was made up of an increase in the HPPS segment of $3.2 million and an increase in the ITS segment of approximately $0.8 million. The increase in the HPPS segment service revenue was due to higher royalty income recorded in the nine months ended June 30, 2014 which was approximately $3.8 million versus $0.8 million for the nine months ended June 30, 2013. In addition revenue from maintenance contracts increased by approximately $0.2 million for the nine months ended June 30, 2014 versus the nine months ended June 30, 2013.

The increase in service revenues in the ITS segment was due to an increase in the German division, where service revenue increased by approximately $1.4 million, partially offset by a decrease in service revenues of approximately $0.6 million in the US division. In Germany, the increase in service sales was made up of approximately $0.5 million from favorable foreign exchange, and increased service revenues in the division's telecommunications vertical of approximately $1.4 million. These increases were partially offset by decreased sales in the industrial and IT Services verticals of approximately $0.4 million and $0.1 million, respectively. The decrease in service revenue in the US division of the segment was primarily from lower professional service project revenue of approximately $0.3 million and lower third party maintenance revenue of approximately $0.3 million for the nine months endedJune 30, 2014 versus the nine months endedJune 30, 2013.

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Our sales by geographic area, based on the location to which the products were shipped or services rendered, are as follows:

	For the nine months ended,
	June 30, 2014		%		June 30, 2013		%		$ Increase (Decrease)			% Increase (Decrease)
	(Dollar amounts in thousands)
Americas	$	40,846	63	%	$	43,699	66	%	$	(2,853	)	(7	)%
Europe	22,548		35	%	19,590		30	%	2,958			15	%
Asia	1,477		2	%	2,437		4	%	(960		)	(39	)%
Totals	$	64,871	100	%	$	65,726	100	%	$	(855	)	(1	)%

The decrease in Americas revenue for the nine months ended June 30, 2014 versus the nine months ended June 30, 2013 was primarily the result of an overall decrease in sales to the Americas in the ITS segment where combined product and service sales to US customers decreased by an aggregate $9.3 million where the IT Hosting vertical and the Education vertical decreased by approximately $8.0 million and $1.3 million, respectively. The decrease in the IT hosting vertical was due to the loss of a major customer in this vertical. The decrease in the Education vertical reflected a non-recurring large project in the prior year. This decrease was partially offset by an increase in sales to US customers in the HPPS segment of approximately $6.4 million, which was driven by Myricom sales to US customers of approximately $3.8 million and increased sales in the US defense vertical of the HPPS segment of approximately $2.6 million. The change in sales in Europe was from an increase of approximately $0.7 million from the HPPS segment, attributable to Myricom sales, and an increase in sales from the European divisions of the ITS segment of approximately $2.2 million. The decrease in Asia sales was the result of $1.2 million in lower sales from the HPPS segment to our customer which supplies the Japanese Department of Defense partially offset by increased sales of approximately $0.2 million to commercial Asian customers of Myricom products.

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Cost of Sales and Gross Margins

The following table details our cost of sales and gross profit margins by operating segment for the nine months ended June 30, 2014 and 2013:

	HPPS			ITS			Total			% of Total
	(Dollar amounts in thousands)
For the nine Months Ended June 30, 2014:
Product	$	3,474		$	33,796		$	37,270		76	%
Services	110			11,595			11,705			24	%
Amortization of inventory step-up and intangibles	177			—			177			—	%
Total	$	3,761		$	45,391		$	49,152		100	%
% of Total	8		%	92		%	100		%
% of Sales	36		%	83		%	76		%
Gross Margins:
Product	41		%	13		%	17		%
Services	98		%	26		%	42		%
Total	64		%	17		%	24		%
For the nine Months Ended June 30, 2013:
Product	$	1,295		$	39,889		$	41,184		79	%
Services	222			10,541			10,763			21	%
Amortization of inventory step-up and intangibles	—			—			—			—	%
Total	$	1,517		$	50,430		$	51,947		100	%
% of Total	3		%	97		%	100		%
% of Sales	35		%	82		%	79		%
Gross Margins:
Product	57		%	14		%	17		%
Services	82		%	29		%	33		%
Total	65		%	18		%	21		%
Increase (decrease)
Product	$	2,179		$	(6,093	)	$	(3,914	)	(10	)%
Services	(112		)	$	1,054		942			9	%
Amortization of inventory step-up and intangibles	177			$	—		177			—	%
Total	$	2,244		$	(5,039	)	$	(2,795	)	(5	)%
% Increase (decrease)	148		%	(10		)%	(5		)%
% of Sales	1		%	1		%	(3		)%
Gross Margins:
Product	(16		)%	(1		)%	—		%
Services	16		%	(3		)%	9		%
Total	(1		)%	(1		)%	3		%

Total cost of sales decreased by approximately $2.8 million, or 5% when comparing the nine months ended June 30, 2014 versus the nine months ended June 30, 2013. This proportionally greater decrease in cost of sales of 5% despite only a 1% decrease in sales, which resulted in a more favorable GPM of 24% for the nine months ended June 30, 2014 versus 21% for

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2013, was attributable to a greater proportion of HPPS segment revenue; 16% for the nine months ended June 30, 2014 versus 7% for the nine months ended June 30, 2013 with higher royalty revenues for the nine months ended June 30, 2014 versus the prior year nine-month period.

In the ITS segment, the overall GPM decreased from 18% for the nine months ended June 30, 2013 versus 17% for nine month periods ended June 30, 2014. This decrease was due to lower GPM in both the US and German locations. In the US we saw lower GPM due mainly to the loss of a significant customer, which made up a significant portion of prior year revenues with high-margin business. The GPM in Germany decreased significantly in the current year quarter, due to increased headcount in service delivery operation with low utilization and lower-GPM product sales mix.

In the HPPS segment, the overall GPM decreased from 65% to 64%.  This was due to two primary factors; (i) amortization of inventory step-up valuation and intangibles expense associated with the Myricom acquisition negatively impacted the GPM in the segment by one percentage point (that is, without this expense, the GPM would have been 65% for the nine months ended June 30, 2014) and (ii) the impact of the Myricom sales as part of the revenue mix for the nine months ended June 30, 2014. The GPM on Myricom products was 44% whereas, in the legacy multicomputer business the GPM was 82% with the higher royalty revenue for the nine months ended June 30, 2014 versus the nine months ended June 30, 2013. The blended GPM of Myricom and legacy Multicomputer GPM resulted in the 64% GPM for the nine months ended June 30, 2014.

Engineering and Development Expenses

The following table details our engineering and development expenses by operating segment for the nine months ended June 30, 2014 and 2013:

	For the nine months ended,
	June 30, 2014		% of Total		June 30, 2013		% of Total		$ Increase		% Increase
	(Dollar amounts in thousands)
By Operating Segment:
High Performance Products and Solutions	$	2,372	100	%	$	1,261	100	%	$	1,111	88	%
Information Technology Solutions	—		—		—		—		—		—
Total	$	2,372	100	%	$	1,261	100	%	$	1,111	88	%

The increase shown in the table above was due primarily to engineering expenses of Myricom, which the Company acquired during the nine months ended June 30, 2014. R&D expenses associated with the added headcount of Myricom were approximately $1.0M and Multicomputer R&D expenses increased by approximately $0.1M due to increased headcount and higher materials expenses.

Selling, General and Administrative

The following table details our selling, general and administrative (“SG&A”) expense by operating segment for the nine months ended June 30, 2014 and 2013:

	For the nine months ended,
	June 30, 2014		% of Total		June 30, 2013		% of Total		$ Increase (decrease)			% Increase (decrease)
	(Dollar amounts in thousands)
By Operating Segment:
High Performance Products and Solutions	$	3,433	28	%	$	2,842	24	%	$	591		21	%
Information Technology Solutions	8,736		72	%	8,948		76	%	(212		)	(2	)%
Total	$	12,169	100	%	$	11,790	100	%	$	379		3	%

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SG&A expenses increased in the HPPS segment due to expenses associated with Myricom which were approximately $0.8 million, partially offset by lower legal expenses which decreased by approximately $0.2 million due to a proxy matter in the prior year, which was non-recurring. The decrease in the ITS segment was due primarily to lower commissions expense of approximately $0.2 million in the US division due to lower revenue and gross profit in that division.

Other Income/Expenses

The following table details our other income (expense) for the nine months ended June 30, 2014 and 2013:

	For the nine months ended,
	June 30, 2014			June 30, 2013			Decrease
	(Amounts in thousands)
Interest expense	$	(64	)	$	(64	)	$	—
Interest income	4			23			(19		)
Foreign exchange gain (loss)	(120		)	18			(138		)
Gain (loss) on sale of fixed assets	(2		)	17			(19		)
Other income, net	4			42			(38		)
Total other income (expense), net	$	(178	)	$	36		$	(214	)

The unfavorable variance in the foreign exchange gain (loss) for the nine month periods ended June 30, 2014 versus the comparable period of 2013 was due to losses on foreign currency holdings where those currencies weakened against the functional currencies in those countries, mainly US dollar holdings in the UK.

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Overview of the three months ended June 30, 2014 Results of Operations

Overview:

 Revenue increased by approximately $3.6 million, or 18.9%, to $22.6 million for the three months ended June 30, 2014 versus $19.0 million for the three months ended June 30, 2013. Our gross profit margin percentage for the three months ended June 30, 2014 was 27% compared to the gross profit margin percentage for the three months ended June 30, 2013 which was 20%. The increase in the gross profit margin resulted from a higher percentage of revenue having been derived from the HPPS segment and higher royalty revenue in the three months ended June 30, 2014 versus the prior year three-month period. The percentage of revenue from the HPPS segment for the three months ended June 30, 2014 was 21% with royalty revenue of approximately $1.9 million versus 3% and and no royalty revenue for the prior year three-month period. Operating incomeincreased to approximately $1.0 million for the three-month period ended June 30, 2014 versus an operating loss of $0.7 million for the three months ended June 30, 2013. This increase in operating income was due to an increase in gross profit of approximately $2.3 million due to the higher revenue and gross profit margin, partially offset by an increase in operating expenses of approximately $0.6 million, due in large part to the operating expenses of Myricom. Net income was $0.9 million for the three-month period ended June 30, 2014 versus a net loss of $0.5 million for the three months ended June 30, 2013.

The following table details our results of operations in dollars and as a percentage of sales for the three months ended June 30, 2014 and 2013:

	June 30, 2014			% of sales		June 30, 2013			% of sales
	(Dollar amounts in thousands)
Sales	$	22,636		100	%	$	19,033		100	%
Costs and expenses:
Cost of sales	16,532			73	%	15,198			80	%
Engineering and development	945			4	%	437			2	%
Selling, general and administrative	4,192			19	%	4,065			22	%
Total costs and expenses	21,669			96	%	19,700			104	%
Operating income (loss)	967			4	%	(667		)	(4	)%
Other income (expense)	(104		)	—	%	2			—	%
Income (loss) before income taxes	863			4	%	(665		)	(4	)%
Income tax benefit	(36		)	—	%	(187		)	(1	)%
Net income (loss)	$	899		4	%	$	(478	)	(3	)%

Sales

The following table details our sales by operating segment for the three months ended June 30, 2014 and 2013

	HPPS			ITS			Total			% of Total
	(Dollar amounts in thousands)
For the Three Months Ended June 30, 2014:
Product	$	2,697		$	12,980		$	15,677		69	%
Services	2,137			4,822			6,959			31	%
Total	$	4,834		$	17,802		$	22,636		100	%
% of Total	21		%	79		%	100		%

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	HPPS			ITS			Total			% of Total
For the Three Months Ended June 30, 2013:
Product	$	454		$	14,329		$	14,783		78	%
Services	159			4,091			4,250			22	%
Total	$	613		$	18,420		$	19,033		100	%
% of Total	3		%	97		%	100		%

	HPPS			ITS			Total			% Increase
Increase (Decrease)
Product	$	2,243		$	(1,349	)	$	894		6	%
Services	1,978			731			2,709			64	%
Total	$	4,221		$	(618	)	$	3,603		19	%
% Increase (decrease)	689		%	(3		)%	19		%

The increase in sales shown and described above was due to several factors:

The increase in product sales in the HPPS segment was driven by Myricom product sales of approximately $2.2 million.

The decrease in product sales in the ITS segment was driven by decreased sales volume of approximately $3.5 million from our US location partially offset by an increase of approximately $1.9 million in the German location of the segment, and by an increase of $0.3 million in our UK location. The decrease in the US was from decreased product sales into the IT Hosting vertical, due to the loss of a major customer in this vertical. In Germany, product sales increased due to favorable currency fluctuation which impacted product sales by approximately $0.2 million and increased sales in the division's telecommunications vertical of approximately $1.9 million. The increase in the UK was attributable to the hiring of increased sales resources focused on increasing product sales in that region.

The increase in services revenue in the HPPS segment was due to an increase in royalty revenue of approximately $1.9 million and an increase of approximately $0.1 million in maintenance revenue for existing programs. The decrease in services revenue in the ITS segment included a $0.2 millionincrease in service revenue in the US division of the segment from a larger number of managed service contracts and professional service project revenue for the three months ended June 30, 2014 versus the three months ended June 30, 2013. Service revenues in our German location also increased by $0.5 million from favorable currency movement which accounts for an increase of $0.2 million and increased service revenues in the telecommunications vertical of approximately $0.3 million.

Our sales by geographic area, based on the location to which the products were shipped or services rendered, are as follows:

	For the three months ended,
	June 30, 2014		%		June 30, 2013		%		$ Increase		% Increase
	(Dollar amounts in thousands)
Americas	$	14,421	64	%	$	14,009	74	%	$	412	3	%
Europe	7,728		34	%	4,925		26	%	2,803		57	%
Asia	487		2	%	99		—	%	388		392	%
Totals	$	22,636	100	%	$	19,033	100	%	$	3,603	19	%

The increase in Americas revenue for the three months ended June 30, 2014 versus the three months ended June 30, 2013 was primarily the result of an overall increase in sales to the Americas in the HPPS segment. Sales to US customers in the

24

segment increased by approximately $3.5 million, which was driven by Myricom sales to US customers of approximately $1.8 million and the royalty sales increase of approximately $1.9 million, partially offset by lower product sales in the HPPS segment to other US customers. In the ITS segment combined product and service sales to US customers decreased by an aggregate $3.0 million. The increase in sales in Europe was from an increase in sales from the European divisions of the ITS segment of approximately $2.6 million and an increase of approximately $0.2 million from the HPPS segment, attributable to Myricom sales. The increase in Asia sales was the result of (i) higher sales in the HPPS segment to our customer which supplies the Japanese Department of Defense, which accounted for approximately $0.2 million of the increase and (ii) Myricom sales into Asia of approximately $0.2 million.

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Cost of Sales and Gross Margins

The following table details our cost of sales and gross profit margins by operating segment for the three months ended June 30, 2014 and 2013:

	HPPS			ITS			Total			% of Total
For the Three Months Ended June 30, 2014:
Product	$	1,555		$	11,493		$	13,048		79	%
Services	16			3,458			3,474			21	%
Amortization of inventory step-up and intangibles	10			—			10			—	%
Total	$	1,581		$	14,951		$	16,532		100	%
% of Total	10		%	90		%	100		%
% of Sales	33		%	84		%	73		%
Gross Margins:
Product	42		%	11		%	17		%
Services	99		%	28		%	50		%
Total	67		%	16		%	27		%
For the Three Months Ended June 30, 2013:
Product	$	316		$	11,968		$	12,284		81	%
Services	95			2,819			2,914			19	%
Amortization of inventory step-up and intangibles	—			—			—			—	%
Total	$	411		$	14,787		$	15,198		100	%
% of Total	3		%	97		%	100		%
% of Sales	67		%	80		%	80		%
Gross Margins:
Product	30		%	16		%	17		%
Services	40		%	31		%	31		%
Total	33		%	20		%	20		%
Increase (decrease)
Product	$	1,239		$	(475	)	$	764		6	%
Services	(79		)	639			560			19	%
Amortization of inventory step-up and intangibles	10			—			10			—	%
Total	$	1,170		$	164		$	1,334		9	%
% increase (decease)	285		%	1		%	9		%
% of Sales	(34		)%	4		%	(7		)%
Gross Margins:
Product	12		%	(5		)%	—		%
Services	59		%	(3		)%	19		%
Total	34		%	(4		)%	7		%

Cost of sales increased due to the increase in sales as described above. The overall gross profit margin ("GPM") was 27% for the current year three-month period versus 20% for the prior year.

26

The HPPS GPM increased to 67% versus the prior year GPM of 33% for the quarter due primarily to the royalty revenue of $1.9M in the three months ended June 30, 2014, versus zero in the prior year quarter.

The lower GPM in the ITS segment for the three months ended June 30, 2014 was due to lower GPM both the US and German locations. In the US we saw lower GPM due mainly to the loss of a significant customer, which made up a significant portion of prior year revenues with high-margin business. The GPM in Germany decreased significantly in the current year quarter, due to increased headcount in service delivery operation with low utilization lower-GPM product sales mix.

Engineering and Development Expenses

The following table details our engineering and development expenses by operating segment for the three months ended June 30, 2014 and 2013:

	For the three months ended,
	June 30, 2014		% of Total		June 30, 2013		% of Total		$ Increase		% Increase
By Operating Segment:
High Performance Products and Solutions	$	945	100	%	$	437	100	%	$	508	116	%
Information Technology Solutions	—		—		—		—	%	—		—	%
Total	$	945	100	%	$	437	100	%	$	508	116	%

The increase shown in the table above was due primarily to engineering expenses of Myricom, which the Company acquired during the nine months ended June 30, 2014. R&D expenses associated with the added headcount of Myricom were approximately $0.5M.

Selling, General and Administrative

The following table details our selling, general and administrative (“SG&A”) expense by operating segment for the three months ended June 30, 2014 and 2013:

	For the three months ended,
	June 30, 2014		% of Total		June 30, 2013		% of Total		$ Increase (decrease)			% Increase (decrease)
By Operating Segment:
High Performance Products and Solutions	$	1,309	31	%	$	858	21	%	$	451		53	%
Information Technology Solutions	2,883		69	%	3,207		79	%	(324		)	(10	)%
Total	$	4,192	100	%	$	4,065	100	%	$	127		3	%

In the HPPS segment SG&A expenses increased due to Myricom's SG&A expense which was approximately $0.3 million for the quarter, and higher commission expense in CSPI of approximately $0.1 million from the higher revenues versus the prior year quarter. Partially offsetting these increases were lower SG&A expenses in the US division of the ITS segment which decreased by approximately $0.3 million due to lower commissions expense resulting from the lower revenue and gross profit.

Other Income/Expenses

The following table details our other income (expense) for the three months ended June 30, 2014 and 2013

27

	For the three months ended,
	June 30, 2014			June 30, 2013			Decrease
	(Amounts in thousands)
Interest expense	$	(21	)	$	(21	)	$	—
Interest income	1			4			(3		)
Foreign exchange loss	(67		)	13			(80		)
Other income expense, net	(17		)	6			(23		)
Total other expense, net	$	(104	)	$	2		$	(106	)

Other income (expense) increased primarily as the result of foreign exchange losses on US dollar account holdings in our European subsidiaries.

Income Taxes

Income Tax Provision

The Company recorded income tax benefit of approximately $36 thousand for the quarter ended June 30, 2014, reflecting an effective income tax rate of 4% for the period compared to income tax benefit of approximately $0.2 million for the quarter ended June 30, 2013, which reflected an effective tax rate of 28%. For the nine months ended June 30, 2014 the Company recorded income tax expense of $50 thousand, reflecting an effective income tax rate of 3%, compared to income tax expense of $387 thousand, reflecting an effective income tax rate of 51% for the nine months ended June 30, 2013. The tax benefit for the quarter ended June 30, 2014, and lower tax rate for the nine months ended June 30, 2014, was due to (i) the bargain purchase gain related to the Myricom acquisition gave rise to a deferred tax charge which is netted against the gain for book purposes, as opposed to showing as income tax expense and (ii) we reversed $0.3 million in uncertain tax positions which offset tax expense for the three months ended June 30, 2014, due to the statute of limitations on these uncertain tax positions expiring.

In assessing the realizability of deferred tax assets, we considered our taxable future earnings and the expected timing of the reversal of temporary differences. Accordingly, we have recorded a valuation allowance which reduces the gross deferred tax asset to an amount that we believe will more likely than not be realized. We maintained a substantial valuation allowance against our United Kingdom deferred tax assets as we have experienced cumulative losses and do not have any indication that the operation will be profitable in the future to an extent that will allow us to utilize much of our net operating loss carryforwards. To the extent that actual experience deviates from our assumptions, our projections would be affected and hence our assessment of realizability of our deferred tax assets may change.

Liquidity and Capital Resources

Our primary source of liquidity is our cash and cash equivalents, which decreased by $2.2 million to $16.5 million as of June 30, 2014 from $18.6 million as of September 30, 2013. At June 30, 2014, cash equivalents consisted of money market funds which totaled $1.0 million.

Significant uses of cash for the nine months ended June 30, 2014 included an increase in accounts receivable of approximately $2.1 million, an increase in inventories of approximately $1.2 million, an increase in other current assets of approximately $0.5 million, cash paid to acquire Myricom of $0.5 million and dividends of approximately $1.1 million. Significant sources of cash included net income of approximately $1.4 million, an increase in accounts payable and accrued expenses of approximately $0.4 million, an increase in deferred revenue of approximately $1.7 million and depreciation and amortization of approximately $0.5 million.

Cash held by our foreign subsidiaries located in Germany and the United Kingdom totaled approximately $7.5 million as of June 30, 2014 and $6.6 million as of September 30, 2013. This cash is included in our total cash and cash equivalents reported above. We consider this cash to be permanently reinvested into these foreign locations because repatriating it would result in unfavorable tax consequences.

If cash generated from operations is insufficient to satisfy working capital requirements, we may need to access funds through bank loans or other means. There is no assurance that we will be able to raise any such capital on terms acceptable to

28

us, on a timely basis or at all. 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 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 lines of credit will be sufficient to provide for the Company’s working capital and capital expenditure requirements for the foreseeable future.

29

Item 4.         Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2014. 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 Securities Exchange Act of 1934, as amended, or  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 SEC’s 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 our 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 June 30, 2014, the Company’s chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective, due to the fact that we are not yet able to conclude that the material weakness described in this Item 4 has been remediated by the changes we made in response to that material weakness.

Internal Controls over Financial Reporting

As we have previously reported, management identified a material weakness as of March 31, 2014. 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.

The material weakness was in connection with our determination that we did not sufficiently assess and apply certain aspects of ASC 605-45-45, Revenue Recognition − Principal Agent Considerations, to the particular facts and circumstances of certain of our revenue arrangements.  This ASC (formerly contained in EITF 99-19), includes indicators of gross versus net revenue arrangements. We therefore determined that this failure to accurately assess an accounting principle amounted to a material weakness in our controls over financial reporting. As a result, we had concluded that the Company’s internal control over financial reporting was not effective as of March 31, 2014. Although we have implemented changes to our internal controls over financial reporting as described below, at this time we cannot conclude that the material weakness has been remediated.

Changes in Internal Controls over Financial Reporting

During the quarter ended June 30, 2014, in response to the identification of the material weakness referred to above, management assessed various alternatives to modify our existing internal control processes and systems to remediate this material weakness. We have implemented enhanced internal auditing procedures whereby revenue transactions are being put through a more rigorous review process at the corporate level to ensure the correct accounting methodology is applied to all revenue transactions. We incorporated this process into our existing internal control structure to insure that we applied the appropriate accounting for these transactions beginning with the quarter ended June 30, 2014.

30

PART II.   OTHER INFORMATION

Item 6.          Exhibits

Number	Description
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	Interactive Data Files regarding (a) our Consolidated Balance Sheets as of June 30, 2014 and September 30, 2013, (b) our Consolidated Statements of Operations for the three and nine months ended June 30, 2014 and 2013, (c) our Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2014 and 2013, (d) our Consolidated Statement of Shareholders’ Equity for the nine months ended June 30 2014, (e) our Consolidated Statements of Cash Flows for the nine months ended June 30, 2014 and 2013 and (f) the Notes to such Consolidated Financial Statements.

*Filed Herewith

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CSP INC.
Date: August 13, 2014	By:	/s/ Victor Dellovo
		Victor Dellovo
		Chief Executive Officer,
		President and Director
Date: August 13, 2014	By:	/s/ Gary W. Levine
		Gary W. Levine
		Chief Financial Officer

32

Exhibit Index

Number	Description
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	Interactive Data Files regarding (a) our Consolidated Balance Sheets as of June 30, 2014 and September 30, 2013, (b) our Consolidated Statements of Operations for the three and nine months ended June 30, 2014 and 2013, (c) our Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2014 and 2013, (d) our Consolidated Statement of Shareholders’ Equity for the nine months ended June 30 2014, (e) our Consolidated Statements of Cash Flows for the nine months ended June 30, 2014 and 2013 and (f) the Notes to such Consolidated Financial Statements.

*Filed Herewith

33

EX-31.1

Exhibit 31.1 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 

I, Victor Dellovo, certify that: 

1.I have reviewed this quarterly report on Form 10-Q of CSP Inc.; 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2014

 /s/ Victor Dellovo

Victor Dellovo

Chief Executive Officer;

President and Director

EX-31.2

Exhibit 31.2 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 

I, Gary W. Levine, certify that: 

1.I have reviewed this quarterly report on Form 10-Q of CSP Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2014

 /s/Gary W. Levine

Gary W. Levine

Chief Financial Officer

EX-32.1

Exhibit 32.1 

18 U.S.C. Section 1350, 

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

In connection with the Quarterly Report on Form 10-Q of CSP Inc. (the “Company”) for the three and nine months ended June 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned Chief Executive Officer, President and Chairman and Chief Financial Officer of the Company, certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2014	By:	/s/ Victor Dellovo
		Victor Dellovo
		Chief Executive Officer;
		President and Director
Date: August 13, 2014	By:	/s/ Gary W. Levine
		Gary W. Levine
		Chief Financial Officer

XML

Dividend (Detail) (USD $)	0 Months Ended		1 Months Ended	9 Months Ended
	May 14, 2014	Feb. 11, 2014	Dec. 17, 2013	Jun. 30, 2014
Equity [Abstract]
Dividends per share	$ 0.11	$ 0.11	$ 0.10	$ 0.21

XML

Accumulated Other Comprehensive Loss (Detail) - Components of Accumulated Other Comprehensive Loss (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Sep. 30, 2013
Equity [Abstract]
Cumulative effect of foreign currency translation	$ (2,094)	$ (2,156)
Cumulative unrealized loss on pension liability	(3,709)	(3,709)
Accumulated other comprehensive loss	$ (5,803)	$ (5,865)

XML

Fair Value Measures (Tables)

9 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Assets and Liabilities measured at fair value on a recurring basis are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total Balance
	As of June 30, 2014
	(Amounts in thousands)
Assets:
Money Market funds	$	1,006	$	—	$	—	$	1,006
Total assets measured at fair value	$	1,006	$	—	$	—	$	1,006

	As of September 30, 2013
	(Amounts in thousands)
Assets:
Money Market funds	$	3,503	$	—	$	—	$	3,503
Total assets measured at fair value	$	3,503	$	—	$	—	$	3,503

XML

Segment Information (Detail) - Major customers (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Sep. 30, 2013
Segment Reporting Information [Line Items]
Segment Reporting, Disclosure of Major Customers			0.1
Customer A
Segment Reporting Information [Line Items]
Amount (in Dollars)	$ 3.7	$ 1.3	$ 11.8	$ 12.2
% of Revenues	17.00%	7.00%	18.00%	19.00%
Customer B
Segment Reporting Information [Line Items]
Accounts Receivable, Gross	3		3		4
Amount (in Dollars)	3.6	2.6	12.5	9.9
% of Revenues	16.00%	14.00%	19.00%	15.00%
concentration risk, percentage, accounts receivable	20.00%		20.00%		26.00%
Customer C
Segment Reporting Information [Line Items]
Amount (in Dollars)	$ 0	$ 3.8	$ 0	$ 8.0
% of Revenues	0.00%	20.00%	0.00%	12.00%

XML

Basis of Presentation

9 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared by the Company, without audit, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in the annual financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted. Accordingly, the Company believes that although the disclosures are adequate to make the information presented not misleading, the unaudited financial statements should be read in conjunction with the footnotes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013.

XML

Earnings Per Share of Common Stock (Detail) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Anti-dilutive securities excluded from diluted income per share calculation	58	173	52	162

XML

Acquisition Condensed Pro Forma Combined Financial Information (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Business Combinations [Abstract]
Business Acquisition, Pro Forma Revenue	$ 22,636	$ 20,942	$ 65,489	$ 71,166
Business Acquisition, Pro Forma Net Income (Loss)	$ 903	$ (649)	$ 1,127	$ (1,514)
Business Acquisition, Pro Forma Earnings Per Share, Basic	$ 0.25	$ (0.19)	$ 0.32	$ (0.44)
Business Acquisition, Pro Forma Earnings Per Share, Diluted	$ 0.25	$ (0.19)	$ 0.31	$ (0.44)

XML

Earnings Per Share of Common Stock (Detail) - Basic and diluted earnings per share computations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Net income (loss)	$ 899	$ (478)	$ 1,412	$ 377
Less: Net income attributable to nonvested common stock (in Dollars)	36	(10)	51	8
Net income attributable to common stockholders (in Dollars)	$ 863	$ (468)	$ 1,361	$ 369
Weighted average total shares outstanding – basic	3,593	3,468	3,572	3,447
Less: weighted average non-vested shares outstanding	142	72	130	69
Weighted average number of common shares outstanding – basic	3,451	3,396	3,442	3,378
Potential common shares from non-vested stock awards and the assumed exercise of stock options	48	0	46	54
Weighted average common shares outstanding – diluted	3,499	3,396	3,488	3,432
Net income (loss) per share – basic (in Dollars per share)	$ 0.25	$ (0.14)	$ 0.40	$ 0.11
Net income (loss) per share – diluted (in Dollars per share)	$ 0.25	$ (0.14)	$ 0.39	$ 0.11

XML

Inventories (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2014	Sep. 30, 2013
Inventory Disclosure [Abstract]
Finished goods inventory that has been shipped, but for which all revenue recognition criteria has not been met	$ 0.2	$ 0.5
Reservce for obsolescence	$ 4.6	$ 4.6

XML

Unaudited Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income (loss)	$ 1,412	$ 377
Adjustments to reconcile net income to net cash used in operating activities:
Business Combination, Bargain Purchase, Gain Recognized, Amount	(462)	0
Depreciation and amortization	364	324
Amortization of intangibles	92	62
Loss (gain) on sale of fixed assets, net	2	(17)
Foreign exchange (gain) loss	120	(18)
Non-cash changes in accounts receivable	(17)	27
Inventory Write-down	146	0
Stock-based compensation expense on stock options and restricted stock awards	260	112
Deferred income taxes	273	334
Increase in cash surrender value of life insurance	(114)	(73)
Changes in operating assets and liabilities:
Increase in accounts receivable	(2,110)	(354)
Decrease in officer life insurance receivable	0	2,172
(Increase) decrease in inventories	(1,160)	1,060
(Increase) decrease in refundable income taxes	373	(158)
Increase in other current assets	(485)	(276)
Increase in other assets	0	(81)
Increase (decrease) in accounts payable and accrued expenses	425	(1,955)
Increase in deferred revenue	1,662	307
Decrease in pension and retirement plans liability	(168)	(175)
Decrease in income taxes payable	(311)	(136)
Increase (decrease) in other long term liabilities	(338)	73
Net cash provided by (used in) operating activities	(36)	1,605
Cash flows from investing activities:
Life insurance premiums paid	(167)	(198)
Proceeds from the sale of fixed assets	6	17
Payments to Acquire Businesses, Net of Cash Acquired	(500)	0
Purchases of property, equipment and improvements	(370)	(675)
Net cash used in investing activities	(1,031)	(856)
Cash flows from financing activities:
Dividends, Cash	(1,148)	(1,034)
Proceeds from issuance of shares from exercise of employee stock options	6	114
Net cash used in financing activities	(1,142)	(920)
Effects of exchange rate on cash	40	(76)
Net decrease in cash and cash equivalents	(2,169)	(247)
Cash and cash equivalents, beginning of period	18,619	20,493
Cash and cash equivalents, end of period	16,450	20,246
Supplementary cash flow information:
Cash paid for income taxes	96	383
Cash paid for interest	$ 85	$ 85

XML

Inventories (Detail) - Inventories (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Sep. 30, 2013
Inventory Disclosure [Abstract]
Raw materials	$ 2,327	$ 1,587
Work-in-process	824	404
Finished goods	3,717	2,800
Total	$ 6,868	$ 4,791

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Sep. 30, 2013
Current assets:
Cash and cash equivalents	$ 16,450	$ 18,619
Accounts receivable, net of allowances of $226 and $242	15,775	13,529
Inventories, net	6,868	4,791
Refundable income taxes	254	624
Deferred income taxes	1,144	1,313
Other current assets	2,561	2,042
Total current assets	43,052	40,918
Property, equipment and improvements, net	1,446	1,420
Other assets:
Intangibles, net	578	410
Deferred income taxes	1,674	1,771
Cash surrender value of life insurance	2,763	2,481
Other assets	226	225
Total other assets	5,241	4,887
Total assets	49,739	47,225
Current liabilities:
Accounts payable and accrued expenses	11,073	10,503
Deferred revenue	5,523	3,816
Pension and retirement plans	768	746
Income taxes payable	0	60
Total current liabilities	17,364	15,125
Pension and retirement plans	8,680	8,660
Other long term liabilities	67	405
Total liabilities	26,111	24,190
Commitments and contingencies
Shareholders’ equity:
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 3,597 and 3,496 shares, respectively	36	35
Additional paid-in capital	11,402	11,137
Retained earnings	17,993	17,728
Accumulated other comprehensive loss	(5,803)	(5,865)
Total shareholders’ equity	23,628	23,035
Total liabilities and shareholders’ equity	$ 49,739	$ 47,225

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Unaudited Consolidated Statement of Shareholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Sep. 30, 2013	$ 23,035	$ 35	$ 11,137	$ 17,728	$ (5,865)
Balance (in Shares) at Sep. 30, 2013	3,496	3,496
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)	1,412			1,412
Other comprehensive income	62				62
Exercise of stock options, shares		1
Exercise of stock options	6		6
Stock-based compensation	259		259
Restricted stock issuance	1	1
Restricted stock issuance (in Shares)		100
Cash dividends on common stock ($0.32 per share)	(1,147)			(1,147)
Balance at Jun. 30, 2014	$ 23,628	$ 36	$ 11,402	$ 17,993	$ (5,803)
Balance (in Shares) at Jun. 30, 2014	3,589	3,597

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Pension and Retirement Plans (Detail) - Components of net periodic benefit costs (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Pension:
Pension:
Service cost	$ 10	$ 15	$ 34	$ 45
Interest cost	213	179	630	557
Expected return on plan assets	(120)	(96)	(352)	(304)
Amortization of:
Prior service gain	0	0	0	0
Amortization of net gain	21	41	63	125
Net periodic benefit cost	124	139	375	423
Post Retirement:
Pension:
Service cost	3	0	8	0
Interest cost	10	8	32	26
Amortization of:
Amortization of net gain	(35)	(44)	(107)	(136)
Net periodic benefit cost	(22)	(36)	(67)	(110)
Foreign | Pension:
Pension:
Service cost	10	15	34	45
Interest cost	196	163	579	509
Expected return on plan assets	(120)	(96)	(352)	(304)
Amortization of:
Prior service gain	0	0	0	0
Amortization of net gain	24	35	70	107
Net periodic benefit cost	110	117	331	357
Foreign | Post Retirement:
Pension:
Service cost	0	0	0	0
Interest cost	0	0	0	0
Amortization of:
Amortization of net gain	0	0	0	0
Net periodic benefit cost	0	0	0	0
U.S. | Pension:
Pension:
Service cost	0	0	0	0
Interest cost	17	16	51	48
Expected return on plan assets	0	0	0	0
Amortization of:
Prior service gain	0	0	0	0
Amortization of net gain	(3)	6	(7)	18
Net periodic benefit cost	14	22	44	66
U.S. | Post Retirement:
Pension:
Service cost	3	0	8	0
Interest cost	10	8	32	26
Amortization of:
Amortization of net gain	(35)	(44)	(107)	(136)
Net periodic benefit cost	$ (22)	$ (36)	$ (67)	$ (110)

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Accumulated Other Comprehensive Loss (Tables)

9 Months Ended

Jun. 30, 2014

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive loss are as follows:

	June 30, 2014			September 30, 2013
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(2,094	)	$	(2,156	)
Cumulative unrealized loss on pension liability	(3,709		)	(3,709		)
Accumulated other comprehensive loss	$	(5,803	)	$	(5,865	)

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Segment Information (Detail) - The following table presents certain operating segment information (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Sep. 30, 2013
Sales:
Product	$ 15,677	$ 14,783	$ 44,745	$ 49,625
Service	6,959	4,250	20,126	16,101
Total sales	22,636	19,033	64,871	65,726
Income (loss) from operations	967	(667)	1,640	728
Assets	49,739	49,270	49,739	49,270	47,225
Capital expenditures	75	199	370	675
Depreciation and amortization	151	132	456	386
High Performance Products and Solutions Segment
Sales:
Product	2,697	454	5,873	3,044
Service	2,137	159	4,485	1,259
Total sales	4,834	613	10,358	4,303
Income (loss) from operations	999	(1,093)	1,254	(1,317)
Assets	15,932	15,340	15,932	15,340
Capital expenditures	57	108	159	247
Depreciation and amortization	53	40	159	116
Germany
Sales:
Product	3,323	1,471	8,176	7,329
Service	3,546	3,064	12,220	10,839
Total sales	6,869	4,535	20,396	18,168
Income (loss) from operations	43	(96)	256	125
Assets	15,271	13,046	15,271	13,046
Capital expenditures	17	52	118	179
Depreciation and amortization	46	47	141	135
United Kingdom
Sales:
Product	368	45	1,351	309
Service	402	328	1,034	1,059
Total sales	770	373	2,385	1,368
Income (loss) from operations	(20)	(58)	(19)	(73)
Assets	3,595	3,457	3,595	3,457
Capital expenditures	0	1	45	7
Depreciation and amortization	4	2	12	9
U.S.
Sales:
Product	9,289	12,813	29,345	38,943
Service	874	699	2,387	2,944
Total sales	10,163	13,512	31,732	41,887
Income (loss) from operations	(55)	580	149	1,993
Assets	14,941	17,427	14,941	17,427
Capital expenditures	1	38	48	242
Depreciation and amortization	48	43	144	126
Total
Sales:
Product	12,980	14,329	38,872	46,581
Service	4,822	4,091	15,641	14,842
Total sales	17,802	18,420	54,513	61,423
Income (loss) from operations	(32)	426	386	2,045
Assets	33,807	33,930	33,807	33,930
Capital expenditures	18	91	211	428
Depreciation and amortization	$ 98	$ 92	$ 297	$ 270

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Segment Information (Tables)

9 Months Ended

Jun. 30, 2014

Operating Segment Information

Segment Reporting Information [Line Items]

Schedule of Revenue by Major Customers by Reporting Segments

The following table presents certain operating segment information.

				Information Technology Solutions Segment
For the Three Months Ended June 30,	High Performance Products and Solutions Segment			Germany			United Kingdom			U.S.			Total			Consolidated Total
	(Amounts in thousands)
2014
Sales:
Product	$	2,697		$	3,323		$	368		$	9,289		$	12,980		$	15,677
Service	2,137			3,546			402			874			4,822			6,959
Total sales	4,834			6,869			770			10,163			17,802			22,636
Income (loss) from operations	999			43			(20		)	(55		)	(32		)	967
Assets	15,932			15,271			3,595			14,941			33,807			49,739
Capital expenditures	57			17			—			1			18			75
Depreciation and amortization	53			46			4			48			98			151
2013
Sales:
Product	$	454		$	1,471		$	45		$	12,813		$	14,329		$	14,783
Service	159			3,064			328			699			4,091			4,250
Total sales	613			4,535			373			13,512			18,420			19,033
Income (loss) from operations	(1,093		)	(96		)	(58		)	580			426			(667		)
Assets	15,340			13,046			3,457			17,427			33,930			49,270
Capital expenditures	108			52			1			38			91			199
Depreciation and amortization	40			47			2			43			92			132

				Information Technology Solutions Segment
For the nine Months Ended June 30,	High Performance Products and Solutions Segment			Germany		United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2014
Sales:
Product	$	5,873		$	8,176	$	1,351		$	29,345	$	38,872	$	44,745
Service	4,485			12,220		1,034			2,387		15,641		20,126
Total sales	10,358			20,396		2,385			31,732		54,513		64,871
Income (loss) from operations	1,254			256		(19		)	149		386		1,640
Assets	15,932			15,271		3,595			14,941		33,807		49,739
Capital expenditures	159			118		45			48		211		370
Depreciation and amortization	159			141		12			144		297		456
2013
Sales:
Product	$	3,044		$	7,329	$	309		$	38,943	$	46,581	$	49,625
Service	1,259			10,839		1,059			2,944		14,842		16,101
Total sales	4,303			18,168		1,368			41,887		61,423		65,726
Income (loss) from operations	(1,317		)	125		(73		)	1,993		2,045		728
Assets	15,340			13,046		3,457			17,427		33,930		49,270
Capital expenditures	247			179		7			242		428		675
Depreciation and amortization	116			135		9			126		270		386

Revenues in Excess of 10 Percent of Total Revenues

Segment Reporting Information [Line Items]

Schedule of Revenue by Major Customers by Reporting Segments

The following table lists customers from which the Company derived revenues in excess of 10% of total revenues for the three and nine months endedJune 30, 2014, and 2013.

		For the three months ended,								For the nine months ended,
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
		Amount		% of Revenues		Amount		% of Revenues		Amount		% of Revenues		Amount		% of Revenues
	(dollars in millions)
Customer A		$	3.7	17	%	$	1.3	7	%	$	11.8	18	%	$	12.2	19	%
Customer B		$	3.6	16	%	$	2.6	14	%	$	12.5	19	%	$	9.9	15	%
Customer C		$	—	—	%	$	3.8	20	%	$	—	—	%	$	8.0	12	%

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Unaudited Consolidated Statement of Shareholders' Equity (Parentheticals) (USD $)	0 Months Ended		1 Months Ended	9 Months Ended
	May 14, 2014	Feb. 11, 2014	Dec. 17, 2013	Jun. 30, 2014
Statement of Stockholders' Equity [Abstract]
Dividends per share	$ 0.11	$ 0.11	$ 0.10	$ 0.21

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Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Per Share data, unless otherwise specified	Jun. 30, 2014	Sep. 30, 2013
Allowances (in Dollars)	$ 309	$ 242
Common stock par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	7,500	7,500
Common stock, shares issued	3,589	3,496
Common stock, shares outstanding	3,589	3,496

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Fair Value Measures

9 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Measures

Fair Value Measures

Assets and Liabilities measured at fair value on a recurring basis are as follows:

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total Balance
	As of June 30, 2014
	(Amounts in thousands)
Assets:
Money Market funds	$	1,006	$	—	$	—	$	1,006
Total assets measured at fair value	$	1,006	$	—	$	—	$	1,006

	As of September 30, 2013
	(Amounts in thousands)
Assets:
Money Market funds	$	3,503	$	—	$	—	$	3,503
Total assets measured at fair value	$	3,503	$	—	$	—	$	3,503

These assets are included in cash and cash equivalents in the accompanying consolidated balance sheets.  All other monetary assets and liabilities are short-term in nature and approximate their fair value. The Company did not have any transfers between Level 1, Level 2 or Level 3 measurements.

The Company had no liabilities measured at fair value as of June 30, 2014 or September 30, 2013. The Company had no assets or liabilities measured at fair value on a non recurring basis as of June 30, 2014 or September 30, 2013.

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Document And Entity Information	9 Months Ended
	Jun. 30, 2014	Aug. 06, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	CSP INC /MA/
Document Type	10-Q
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding		3,609,648
Amendment Flag	false
Entity Central Index Key	0000356037
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3

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Dividend

9 Months Ended

Jun. 30, 2014

Equity [Abstract]

Dividend

Dividend

On December 17, 2013, our board of directors declared a cash dividend of $0.10 per share which was paid on January 7, 2014 to shareholders of record as of December 27, 2013, the record date.

On February 11, 2014, our board of directors declared a cash dividend of $0.11 per share which was paid on March 11, 2014 to shareholders of record as of February 27, 2014, the record date.

On May 14, 2014, our board of directors declared a cash dividend of $0.11 per share which was paid on June 10, 2014 to shareholders of record as of May 30, 2014, the record date.

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Unaudited Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Sales:
Product	$ 15,677	$ 14,783	$ 44,745	$ 49,625
Services	6,959	4,250	20,126	16,101
Total sales	22,636	19,033	64,871	65,726
Cost of sales:
Product	13,048	12,284	37,270	41,184
Services	3,474	2,914	11,705	10,763
Amortization of inventory step up and intangibles	10		177
Total cost of sales	16,532	15,198	49,152	51,947
Gross profit	6,104	3,835	15,719	13,779
Operating expenses:
Engineering and development	945	437	2,372	1,261
Selling, general and administrative	4,192	4,065	12,169	11,790
Total operating expenses	5,137	4,502	14,541	13,051
Business Combination, Bargain Purchase, Gain Recognized, Amount	0		462	0
Operating income (loss)	967	(667)	1,640	728
Other income (expense):
Foreign exchange gain (loss)	(67)	13	(120)	18
Other income (expense), net	(37)	(11)	(58)	18
Total other income (expense), net	(104)	2	(178)	36
Income (loss) before income taxes	863	(665)	1,462	764
Income tax expense (benefit)	(36)	(187)	50	387
Net income (loss)	899	(478)	1,412	377
Net income (loss) attributable to common stockholders	$ 863	$ (468)	$ 1,361	$ 369
Net income (loss) per share – basic (in Dollars per share)	$ 0.25	$ (0.14)	$ 0.40	$ 0.11
Weighted average shares outstanding – basic (in Shares)	3,451	3,396	3,442	3,378
Net income (loss) per share – diluted (in Dollars per share)	$ 0.25	$ (0.14)	$ 0.39	$ 0.11
Weighted average shares outstanding – diluted (in Shares)	3,499	3,396	3,488	3,432

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Earnings Per Share of Common Stock

9 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

Basic net 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 stock options and is computed by dividing net income by the assumed weighted average number of common shares outstanding.

We are required to present earnings per share, or EPS, utilizing the two class method because we had outstanding, non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, which are considered participating securities.

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

	For the three months ended					For the nine months ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
	(Amounts in thousands except per share data)
Net income (loss)	$	899	$	(478	)	$	1,412	$	377
Less: net income (loss) attributable to nonvested common stock	36		(10		)	51		8
Net income (loss) attributable to common stockholders	$	863	$	(468	)	$	1,361	$	369
Weighted average total shares outstanding – basic	3,593		3,468			3,572		3,447
Less: weighted average non-vested shares outstanding	142		72			130		69
Weighted average number of common shares outstanding – basic	3,451		3,396			3,442		3,378
Potential common shares from non-vested stock awards and the assumed exercise of stock options	48		—			46		54
Weighted average common shares outstanding – diluted	3,499		3,396			3,488		3,432
Net income per share – basic	$	0.25	$	(0.14	)	$	0.40	$	0.11
Net income per share – diluted	$	0.25	$	(0.14	)	$	0.39	$	0.11

All anti-dilutive securities, including certain stock options, are excluded from the diluted income per share computation. For the three months ended June 30, 2014 and 2013, 58,000 and 173,000 options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive as their exercise price exceeded fair value. For the nine months ended June 30, 2014 and 2013, 52,000 and 162,000 options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive as their exercise price exceeded fair value.

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Acquisition (Notes)

9 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Acquisitions

Acquired Business

On November 4, 2013 the Company acquired substantially all of the assets of Myricom, Inc. ("Myricom").  Myricom has been integrated into the High Performance Products and Solutions business segment.  Prior to our acquisition, Myricom was a manufacturer of high performance interconnect computing devices and software.  The Company acquired Myricom in order to obtain (i) Myricom’s interconnect technology, which is critical to our latest MultiComputer products and (ii) a strong base of new customers in commercial growth markets.  The Company also retained key Myricom technical personnel.  Myricom was a key supplier to CSPI’s MultiComputer Division.  Its interconnect technology is an important component of the latest generation MultiComputer products that we currently supply to our customers.

Although Myricom was an established business prior to our acquisition, it had previously sold off a significant portion of its business and was faced with the likelihood of having to shut down operations if it could not find a buyer to purchase its remaining assets.  This was because the revenue that Myricom was able to generate from these remaining assets was not sufficient to support its cost structure so as to enable Myricom to operate at a profit.  These factors contributed to a purchase price that resulted in the recognition of a bargain purchase gain.  The Company paid total cash consideration of approximately $0.5 million to acquire substantially all of the assets of Myricom and incurred approximately $0.1 million for the assumption of certain other liabilities.  The purchase of Myricom resulted in the recognition of a bargain purchase gain of approximately $0.5 million.  The bargain purchase gain is shown net of the federal and state tax effect.

The purchase price was allocated as follows:

	(Amounts in Thousands)
Inventory	$	1,030
Property & equipment	17
Intangibles	260
Gross assets acquired	1,307
Product warranty liability assumed	(93		)
Net assets acquired	1,214
Less: asset purchase price	500
Bargain purchase gain before tax	714
Deferred tax on bargain purchase gain	(252		)
Bargain purchase gain, net of tax effect	$	462

The results of operations of Myricom for the the three months ended June 30, 2014 and for the period November 4, 2013 - June 30, 2014 are included in the Company’s consolidated statement of operations for the three and nine months ended June 30, 2014, respectively.

The following proforma condensed combined financial information gives effect to the acquisition of Myricom as if it were consummated on October 1, 2012 (the beginning of the comparable prior reporting period), and includes proforma adjustments related to the bargain purchase gain, amortization of inventory step-up and acquired intangible assets. The proforma condensed combined financial information is presented for informational purposes only. The proforma condensed combined financial information is not intended to represent or be indicative of the results of operations that would have been reported had the acquisition occurred on October 1, 2012 and should not be taken as representative of future results of operations of the combined company.

The following table presents the proforma condensed combined financial information (in thousands, except per share amounts):

	For the three months ended					For the nine months ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
	(Amounts in thousands except per share data)
Revenue	$	22,636	$	20,942		$	65,489	$	71,166
Net income (loss)	$	903	$	(649	)	$	1,127	$	(1,514	)
Net income (loss) attributable to common stockholders	$	868	$	(636	)	$	1,087	$	(1,484	)
Net income (loss) per share – basic	$	0.25	$	(0.19	)	$	0.32	$	(0.44	)
Net income (loss) per share – diluted	$	0.25	$	(0.19	)	$	0.31	$	(0.44	)

The proforma condensed combined financial information shown above includes proforma adjustments to eliminate certain items directly relating to the business combination which reduced net income by approximately $0.3 million for the nine month period ended June 30, 2014.

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Pension and Retirement Plans (Tables)

9 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs

The components of net periodic benefit costs related to the U.S. and international plans are as follows:

	For the Three Months Ended June 30,
	2014									2013
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	10		$	—		$	10		$	15		$	—		$	15
Interest cost	196			17			213			163			16			179
Expected return on plan assets	(120		)	—			(120		)	(96		)	—			(96		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	24			(3		)	21			35			6			41
Net periodic benefit cost	$	110		$	14		$	124		$	117		$	22		$	139
Post Retirement:
Service cost	$	—		$	3		$	3		$	—		$	—		$	—
Interest cost	—			10			10			—			8			8
Amortization of net gain	—			(35		)	(35		)	—			(44		)	(44		)
Net periodic benefit cost	$	—		$	(22	)	$	(22	)	$	—		$	(36	)	$	(36	)

	For the nine Months Ended June 30,
	2014									2013
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	34		$	—		$	34		$	45		$	—		$	45
Interest cost	579			51			630			509			48			557
Expected return on plan assets	(352		)	—			(352		)	(304		)	—			(304		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	70			(7		)	63			107			18			125
Net periodic benefit cost	$	331		$	44		$	375		$	357		$	66		$	423
Post Retirement:
Service cost	$	—		$	8		$	8		$	—		$	—		$	—
Interest cost	—			32			32			—			26			26
Amortization of net gain	—			(107		)	(107		)	—			(136		)	(136		)
Net periodic benefit cost	$	—		$	(67	)	$	(67	)	$	—		$	(110	)	$	(110	)

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Acquisition (Tables)

9 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Schedule of Purchase Price Allocation

The purchase price was allocated as follows:

	(Amounts in Thousands)
Inventory	$	1,030
Property & equipment	17
Intangibles	260
Gross assets acquired	1,307
Product warranty liability assumed	(93		)
Net assets acquired	1,214
Less: asset purchase price	500
Bargain purchase gain before tax	714
Deferred tax on bargain purchase gain	(252		)
Bargain purchase gain, net of tax effect	$	462

Business Acquisition, Pro Forma Information

The following table presents the proforma condensed combined financial information (in thousands, except per share amounts):

	For the three months ended					For the nine months ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
	(Amounts in thousands except per share data)
Revenue	$	22,636	$	20,942		$	65,489	$	71,166
Net income (loss)	$	903	$	(649	)	$	1,127	$	(1,514	)
Net income (loss) attributable to common stockholders	$	868	$	(636	)	$	1,087	$	(1,484	)
Net income (loss) per share – basic	$	0.25	$	(0.19	)	$	0.32	$	(0.44	)
Net income (loss) per share – diluted	$	0.25	$	(0.19	)	$	0.31	$	(0.44	)

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Pension and Retirement Plans

9 Months Ended

Jun. 30, 2014

Compensation and Retirement Disclosure [Abstract]

Pension and Retirement Plans

Pension and Retirement Plans

The Company has defined benefit and defined contribution plans in the United Kingdom, Germany and the U.S. In the United Kingdom and Germany, the Company provides defined benefit pension plans and defined contribution plans for the majority of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain current and former employees. The domestic supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. Domestically, the Company also provides for officer death benefits through post-retirement plans to certain officers.  All of the Company’s defined benefit plans are closed to newly hired employees and have been for the two years ended September 30, 2013 and for the nine months ended June 30, 2014.

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.

Our pension plan in the United Kingdom is the only plan with plan assets. The plan assets consist of an investment in a commingled fund which in turn comprises a diversified mix of assets including corporate equity securities, government securities and corporate debt securities.

The components of net periodic benefit costs related to the U.S. and international plans are as follows:

	For the Three Months Ended June 30,
	2014									2013
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	10		$	—		$	10		$	15		$	—		$	15
Interest cost	196			17			213			163			16			179
Expected return on plan assets	(120		)	—			(120		)	(96		)	—			(96		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	24			(3		)	21			35			6			41
Net periodic benefit cost	$	110		$	14		$	124		$	117		$	22		$	139
Post Retirement:
Service cost	$	—		$	3		$	3		$	—		$	—		$	—
Interest cost	—			10			10			—			8			8
Amortization of net gain	—			(35		)	(35		)	—			(44		)	(44		)
Net periodic benefit cost	$	—		$	(22	)	$	(22	)	$	—		$	(36	)	$	(36	)

	For the nine Months Ended June 30,
	2014									2013
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	34		$	—		$	34		$	45		$	—		$	45
Interest cost	579			51			630			509			48			557
Expected return on plan assets	(352		)	—			(352		)	(304		)	—			(304		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	70			(7		)	63			107			18			125
Net periodic benefit cost	$	331		$	44		$	375		$	357		$	66		$	423
Post Retirement:
Service cost	$	—		$	8		$	8		$	—		$	—		$	—
Interest cost	—			32			32			—			26			26
Amortization of net gain	—			(107		)	(107		)	—			(136		)	(136		)
Net periodic benefit cost	$	—		$	(67	)	$	(67	)	$	—		$	(110	)	$	(110	)

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Inventories

9 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consist of the following:

	June 30, 2014		September 30, 2013
	(Amounts in thousands)
Raw materials	$	2,327	$	1,587
Work-in-process	824		404
Finished goods	3,717		2,800
Total	$	6,868	$	4,791

Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met, of approximately $0.2 million and $0.5 million as of June 30, 2014 and September 30, 2013, respectively.

Total inventory balances in the table above are shown net of reserves for obsolescence of approximately $4.6 million as of June 30, 2014 and September 30, 2013.

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Accumulated Other Comprehensive Loss

9 Months Ended

Jun. 30, 2014

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

 The components of accumulated other comprehensive loss are as follows:

	June 30, 2014			September 30, 2013
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(2,094	)	$	(2,156	)
Cumulative unrealized loss on pension liability	(3,709		)	(3,709		)
Accumulated other comprehensive loss	$	(5,803	)	$	(5,865	)

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Segment Information

9 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information

Beginning in the period ended March 31, 2014, we have renamed our segments. We have renamed the segment that was formerly known as the Systems segment to the High Performance Products and Solutions segment. We have also renamed the segment that was formerly known as the Service and System Integration segment to the Information Technology Solutions segment.

The following table presents certain operating segment information.

				Information Technology Solutions Segment
For the Three Months Ended June 30,	High Performance Products and Solutions Segment			Germany			United Kingdom			U.S.			Total			Consolidated Total
	(Amounts in thousands)
2014
Sales:
Product	$	2,697		$	3,323		$	368		$	9,289		$	12,980		$	15,677
Service	2,137			3,546			402			874			4,822			6,959
Total sales	4,834			6,869			770			10,163			17,802			22,636
Income (loss) from operations	999			43			(20		)	(55		)	(32		)	967
Assets	15,932			15,271			3,595			14,941			33,807			49,739
Capital expenditures	57			17			—			1			18			75
Depreciation and amortization	53			46			4			48			98			151
2013
Sales:
Product	$	454		$	1,471		$	45		$	12,813		$	14,329		$	14,783
Service	159			3,064			328			699			4,091			4,250
Total sales	613			4,535			373			13,512			18,420			19,033
Income (loss) from operations	(1,093		)	(96		)	(58		)	580			426			(667		)
Assets	15,340			13,046			3,457			17,427			33,930			49,270
Capital expenditures	108			52			1			38			91			199
Depreciation and amortization	40			47			2			43			92			132

				Information Technology Solutions Segment
For the nine Months Ended June 30,	High Performance Products and Solutions Segment			Germany		United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2014
Sales:
Product	$	5,873		$	8,176	$	1,351		$	29,345	$	38,872	$	44,745
Service	4,485			12,220		1,034			2,387		15,641		20,126
Total sales	10,358			20,396		2,385			31,732		54,513		64,871
Income (loss) from operations	1,254			256		(19		)	149		386		1,640
Assets	15,932			15,271		3,595			14,941		33,807		49,739
Capital expenditures	159			118		45			48		211		370
Depreciation and amortization	159			141		12			144		297		456
2013
Sales:
Product	$	3,044		$	7,329	$	309		$	38,943	$	46,581	$	49,625
Service	1,259			10,839		1,059			2,944		14,842		16,101
Total sales	4,303			18,168		1,368			41,887		61,423		65,726
Income (loss) from operations	(1,317		)	125		(73		)	1,993		2,045		728
Assets	15,340			13,046		3,457			17,427		33,930		49,270
Capital expenditures	247			179		7			242		428		675
Depreciation and amortization	116			135		9			126		270		386

Income (loss) from operations consists of sales less cost of sales, engineering and development, selling, general and administrative expenses but is not affected by either other income/expense or by income taxes expense/benefit. Non-operating charges/income consists principally of investment income and interest expense.  All intercompany transactions have been eliminated.

The following table lists customers from which the Company derived revenues in excess of 10% of total revenues for the three and nine months endedJune 30, 2014, and 2013.

		For the three months ended,								For the nine months ended,
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
		Amount		% of Revenues		Amount		% of Revenues		Amount		% of Revenues		Amount		% of Revenues
	(dollars in millions)
Customer A		$	3.7	17	%	$	1.3	7	%	$	11.8	18	%	$	12.2	19	%
Customer B		$	3.6	16	%	$	2.6	14	%	$	12.5	19	%	$	9.9	15	%
Customer C		$	—	—	%	$	3.8	20	%	$	—	—	%	$	8.0	12	%

Accounts receivable from Customer B totaled approximately $3.2 million, which comprised 20% of total consolidated accounts receivable as of June 30, 2014, and $3.5 million, which comprised 26% of total consolidated accounts receivable as of September 30, 2013. We believe that the Company is not exposed to any particular credit risk with respect to the accounts receivable with this customer.

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Pension and Retirement Plans (Detail)	9 Months Ended
	Jun. 30, 2014
Compensation and Retirement Disclosure [Abstract]
Number of years defined benefit plans are closed to newly hired employees	2 years

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Inventories (Tables)

9 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Inventories consist of the following:

	June 30, 2014		September 30, 2013
	(Amounts in thousands)
Raw materials	$	2,327	$	1,587
Work-in-process	824		404
Finished goods	3,717		2,800
Total	$	6,868	$	4,791

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Acquisition (Details) (USD $)	3 Months Ended	9 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Nov. 04, 2013
Business Combinations [Abstract]
Payments to Acquire Businesses, Net of Cash Acquired		$ 500,000	$ 0
Business Acquisition, Purchase Price Allocation, Liabilities Assumed				(93,000)
Business Combination, Bargain Purchase, Gain Recognized, Amount	0	462,000	0
Business Acquisition pro forma Adjustments		$ 0

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Unaudited Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net income (loss)	$ 899	$ (478)	$ 1,412	$ 377
Other comprehensive income (loss):
Foreign currency translation gain (loss) adjustments	(92)	15	62	(1)
Other comprehensive income (loss)	(92)	15	62	(1)
Total comprehensive income (loss)	$ 807	$ (463)	$ 1,474	$ 376

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Use of Estimates

9 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Use of Estimates

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 period. Actual results may differ from those estimates under different assumptions or conditions.

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Acquisition Purchase Price Allocation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Nov. 04, 2013
Business Combinations [Abstract]
Business Acquisition, Purchase Price Allocation, Current Assets, Inventory				$ 1,030
Business Acquisition, Purchase Price Allocation, Property, Plant and Equipment				17
Business Acquisition, Purchase Price Allocation, Intangible Assets Other than Goodwill				260
Business Acquisition, Purchase Price Allocation, Assets Acquired				1,307
Business Acquisition, Purchase Price Allocation, Liabilities Assumed				(93)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net				1,214
Payments to Acquire Businesses, Net of Cash Acquired		500	0
Bargain purchase gain before tax		714
Deferred tax on bargain purchase gain		(252)
Business Combination, Bargain Purchase, Gain Recognized, Amount	$ 0	$ 462	$ 0

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Fair Value Measures (Detail) - Assets and Liabilities measured at fair value on a recurring basis (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Sep. 30, 2013
Assets:
Money Market funds	$ 1,006	$ 3,503
Total assets measured at fair value	1,006	3,503
Level 1
Assets:
Money Market funds	1,006	3,503
Total assets measured at fair value	$ 1,006	$ 3,503

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Earnings Per Share of Common Stock (Tables)

9 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

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

	For the three months ended					For the nine months ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
	(Amounts in thousands except per share data)
Net income (loss)	$	899	$	(478	)	$	1,412	$	377
Less: net income (loss) attributable to nonvested common stock	36		(10		)	51		8
Net income (loss) attributable to common stockholders	$	863	$	(468	)	$	1,361	$	369
Weighted average total shares outstanding – basic	3,593		3,468			3,572		3,447
Less: weighted average non-vested shares outstanding	142		72			130		69
Weighted average number of common shares outstanding – basic	3,451		3,396			3,442		3,378
Potential common shares from non-vested stock awards and the assumed exercise of stock options	48		—			46		54
Weighted average common shares outstanding – diluted	3,499		3,396			3,488		3,432
Net income per share – basic	$	0.25	$	(0.14	)	$	0.40	$	0.11
Net income per share – diluted	$	0.25	$	(0.14	)	$	0.39	$	0.11