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	March 31, 2019
		or
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 or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
175 Cabot Street - Suite 210, Lowell, MA	01854
(Address of principle executive offices)	(Zip Code)
(978)-954-5038
(Registrant's telephone number, including area code)

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 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CSPI	Nasdaq Global Market

As of May 6, 2019, the registrant had 4,137,831 shares of common stock issued and outstanding.

1

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited) as of March 31, 2019 and September 30, 2018	3
	Consolidated Statements of Operations (unaudited) for the three and six months ended March 31, 2019 and 2018	4
	Consolidated Statements of Comprehensive Loss (unaudited) for the three and six months ended March 31, 2019 and 2018	5
	Consolidated Statement of Shareholders’ Equity (unaudited) for the three and six months ended March 31, 2019 and 2018	6
	Consolidated Statements of Cash Flows (unaudited) for the six months ended March 31, 2019 and 2018	8
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION
Item 6.	Exhibits	33

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CSP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value)

	March 31, 2019			September 30, 2018
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	18,188		$	25,107
Accounts receivable, net of allowances of $90 and $87	16,456			11,980
Unbilled accounts receivable	—			1,166
Investment in lease, net-current portion	288			246
Inventories	5,857			7,558
Refundable income taxes	660			480
Other current assets	3,023			1,878
Total current assets	44,472			48,415
Property, equipment and improvements, net	916			847
Other assets:
Intangibles, net	41			48
Investment in lease, net-less current portion	477			564
Long term receivable	956			—
Deferred income taxes	1,837			1,895
Cash surrender value of life insurance	3,565			3,441
Other assets	66			65
Total other assets	6,942			6,013
Total assets	$	52,330		$	55,275
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	9,292		$	12,524
Deferred revenue	3,111			1,197
Pension and retirement plans	340			340
Total current liabilities	12,743			14,061
Pension and retirement plans	5,634			6,168
Income taxes payable	694			709
Other noncurrent liabilities	584			535
Total liabilities	19,655			21,473
Commitments and contingencies
Shareholders’ equity:
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 4,137 and 4,017 shares, respectively	42			40
Additional paid-in capital	15,165			14,661
Retained earnings	28,291			29,926
Accumulated other comprehensive loss	(10,823		)	(10,825		)
Total shareholders’ equity	32,675			33,802
Total liabilities and shareholders’ equity	$	52,330		$	55,275

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 six months ended
	March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
Sales:
Product	$	13,603		$	14,049		$	29,314		$	27,718
Services	2,747			2,555			6,016			5,516
Total sales	16,350			16,604			35,330			33,234
Cost of sales:
Product	11,371			11,667			24,583			22,947
Services	1,233			954			2,652			1,941
Total cost of sales	12,604			12,621			27,235			24,888
Gross profit	3,746			3,983			8,095			8,346
Operating expenses:
Engineering and development	781			759			1,526			1,457
Selling, general and administrative	3,736			4,088			7,325			7,588
Total operating expenses	4,517			4,847			8,851			9,045
Operating loss	(771		)	(864		)	(756		)	(699		)
Other income (expense):
Foreign exchange loss	(37		)	(44		)	(30		)	(112		)
Other income (expense), net	47			6			77			67
Total other income (expense)	10			(38		)	47			(45		)
Loss before income taxes	(761		)	(902		)	(709		)	(744		)
Income tax expense (benefit)	(142		)	(160		)	(140		)	993
Net loss from continuing operations	(619		)	(742		)	(569		)	(1,737		)
Net income (loss) from discontinued operations, net of tax	—			148			—			(57		)
Net loss	$	(619	)	$	(594	)	$	(569	)	$	(1,794	)
Net loss attributable to common stockholders	$	(619	)	$	(594	)	$	(569	)	$	(1,794	)
Net loss from continuing operations per share – basic	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – basic	$	—		$	0.04		$	—		$	(0.01	)
Net loss per share - basic	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)
Weighted average shares outstanding – basic	4,015			3,823			3,898			3,795
Net loss from continuing operations per share – diluted	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – diluted	$	—		$	0.04		$	—		$	(0.01	)
Net loss per share - diluted	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)
Weighted average shares outstanding – diluted	4,015			3,823			3,898			3,795

See accompanying notes to unaudited consolidated financial statements.

4

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Amounts in thousands)

	For the three months ended						For the six months ended
	March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
Net loss	$	(619	)	$	(594	)	$	(569	)	$	(1,794	)
Other comprehensive loss:
Foreign currency translation gain (loss) adjustments	172			(86		)	2			(90		)
Other comprehensive income (loss)	172			(86		)	2			(90		)
Total comprehensive loss	$	(447	)	$	(680	)	$	(567	)	$	(1,884	)

See accompanying notes to unaudited consolidated financial statements.

5

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the three and six months ended March 31, 2019 and March 31, 2018:

(Amounts in thousands, except per share data)

For the Three Months Ended March 31, 2019:	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated other comprehensive loss			Total Shareholders’ Equity
Balance as of December 31, 2018	4,018	$	41	$	14,842	$	29,531		$	(10,995	)	$	33,419
Net loss	—	—		—		(619		)	—			(619		)
Other comprehensive income	—	—		—		—			172			172
Stock-based compensation	—	—		206		—			—			206
Restricted stock issuance	106	1		—		—			—			1
Issuance of shares under employee stock purchase plan	13	—		117		—			—			117
Cash dividends paid on common stock ($0.15 per share)	—	—		—		(621		)	—			(621		)
Balance as of March 31, 2019	4,137	$	42	$	15,165	$	28,291		$	(10,823	)	$	32,675

For the Three Months Ended March 31, 2018:	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated other comprehensive loss			Total Shareholders’ Equity
Balance as of December 31, 2017	3,974	$	40	$	13,847	$	15,770		$	(10,167	)	$	19,490
Net loss	—	—		—		(594		)	—			(594		)
Other comprehensive loss	—	—		—		—			(86		)	(86		)
Exercise of stock options	4	—		13		—			—			13
Stock-based compensation	—	—		178		—			—			178
Restricted stock issuance	20	1		—		—			—			1
Issuance of shares under employee stock purchase plan	8	—		78		—			—			78
Cash dividends paid on common stock ($0.11 per share)	—	—		—		(441		)	—			(441		)
Balance as of March 31, 2018	4,006	$	41	$	14,116	$	14,735		$	(10,253	)	$	18,639

See accompanying notes to unaudited consolidated financial statements.

6

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the three and six months ended March 31, 2019 and March 31, 2018:

(Amounts in thousands, except per share data)

For the six months ended March 31, 2019:	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated other comprehensive loss			Total Shareholders’ Equity
Balance as of September 30, 2018	4,017	$	40	$	14,661	$	29,926		$	(10,825	)	$	33,802
Adoption of ASU 2014-09 (see note 11)	—	—		—		158			—			158
Net loss	—	—		—		(569		)	—			(569		)
Other comprehensive income	—	—		—		—			2			2
Exercise of stock options	1	1		3		—			—			4
Stock-based compensation	—	—		384		—			—			384
Restricted stock issuance	106	1		—		—			—			1
Issuance of shares under employee stock purchase plan	13	—		117		—			—			117
Cash dividends paid on common stock ($0.30 per share)	—	—		—		(1,224		)	—			(1,224		)
Balance as of March 31, 2019	4,137	$	42	$	15,165	$	28,291		$	(10,823	)	$	32,675

For the six months ended March 31, 2018:	Shares		Amount		Additional Paid-in Capital		Retained Earnings			Accumulated other comprehensive loss			Total Shareholders’ Equity
Balance as of September 30, 2017	3,935		$	40	$	13,717	$	17,407		$	(10,163	)	$	21,001
Net loss	—		—		—		(1,794		)	—			(1,794		)
Other comprehensive loss	—		—		—		—			(90		)	(90		)
Exercise of stock options	5		—		22		—			—			22
Stock-based compensation	—		—		299		—			—			299
Restricted stock cancellation	(13	)	—		—		—			—			—
Restricted stock issuance	71		1		—		—			—			1
Issuance of shares under employee stock purchase plan	8		—		78		—			—			78
Cash dividends paid on common stock ($0.22 per share)	—		—		—		(878		)	—			(878		)
Balance as of March 31, 2018	4,006		$	41	$	14,116	$	14,735		$	(10,253	)	$	18,639

See accompanying notes to unaudited consolidated financial statements.

7

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	For the six months ended
	March 31, 2019			March 31, 2018
Cash flows used in operating activities:
Net loss	$	(569	)	$	(1,794	)
Loss from discontinued operations, net of income tax benefit	—			(57		)
Net loss from continuing operations	(569		)	(1,737		)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	199			192
Amortization of intangibles	7			59
Loss on sale of fixed assets, net	—			4
Foreign exchange (gain) loss	30			112
Non-cash changes in accounts receivable	3			(8		)
Non-cash changes in inventories	234			260
Stock-based compensation expense on stock options and restricted stock awards	384			300
Deferred income taxes	(99		)	490
Increase in cash surrender value of life insurance	(54		)	(34		)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(3,319		)	6,242
Decrease in life insurance receivable	256			—
Decrease in inventories	1,464			1,162
Increase in deferred costs	—			(225		)
Increase in refundable income taxes	(75		)	(598		)
Increase in other current assets	(1,402		)	(628		)
Decrease in investment in lease	46			—
Increase in long term receivable	(956		)	—
Decrease in accounts payable and accrued expenses	(3,214		)	(6,353		)
Increase in deferred revenue	2,124			486
Decrease in pension and retirement plans liabilities	(531		)	(55		)
Increase (decrease) in income taxes payable	(15		)	328
Increase in other long term liabilities	184			4
Net cash provided by (used in) operating activities of continuing operations	(5,303		)	1
Net cash used in operating activities of discontinued operations	—			(735		)
Net cash used in operating activities	(5,303		)	(734		)
Cash flows used in investing activities:
Life insurance premiums paid	(70		)	(150		)
Purchases of property, equipment and improvements	(268		)	(176		)
Net cash used in investing activities of continuing operations	(338		)	(326		)
Net cash used in investing activities of discontinued operations	—			(129		)
Net cash used in investing activities	(338		)	(455		)
Cash flows used in financing activities:
Dividends paid	(1,224		)	(878		)
Principal payments on capital leases	(136		)	—
Proceeds from issuance of shares under equity compensation plans	120			100
Net cash used in financing activities	(1,240		)	(778		)
Effects of exchange rate on cash	(38		)	49
Net decrease in cash and cash equivalents	(6,919		)	(1,918		)
Cash and cash equivalents of continuing operations, beginning of period	25,107			10,421
Cash and cash equivalents of discontinued operations, beginning of period	—			3,464
Cash and cash equivalents, beginning of period	25,107			13,885
Cash and cash equivalents, end of period	18,188			11,967
Less: Cash and cash equivalents of discontinued operations at end of period	—			2,801
Cash and cash equivalents of continuing operations at end of period	$	18,188		$	9,166
Supplementary cash flow information:
Cash paid for income taxes	$	40		$	880
Cash paid for interest	$	67		$	72
Supplementary non-cash financing and investing activities:
Non-cash purchases of property and equipment	$	15		$	—

See accompanying notes to unaudited consolidated financial statements.

8

CSP INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED MARCH 31, 2019 AND 2018

Organization and Business

CSP Inc. ("CSPi" or "CSPI" or "the Company" or "we" or "our") was incorporated in 1968 and is based in Lowell, Massachusetts. CSPi and its subsidiaries develop and market IT integration solutions, advanced security products, managed IT services, purpose built network adapters, and high-performance cluster computer systems to meet the diverse requirements of its commercial and defense customers worldwide. The Company operates in two segments, its High Performance Products (“HPP”) segment and its Technology Solutions (“TS”) 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 consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, have been omitted.

Accordingly, the Company believes that although the disclosures are adequate to make the information presented not misleading, the unaudited consolidated 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, 2018.

Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to continuing operations. Refer to Note 12 for additional information on discontinued operations.

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. These estimates and assumptions are related to reserves for bad debt, reserves for inventory obsolescence, the impairment assessment of intangible assets, and the calculation of standalone selling price for revenue recognition, the calculation of liabilities related to deferred compensation and retirement plans and the calculation of income tax liabilities. Actual results may differ from those estimates under different assumptions or conditions.

3.Revenue

Effective October 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. See Note 11 for effects of initial adoption. The following reflects the accounting policy change for revenue starting on the date of adoption:

We derive revenue from the sale of integrated hardware and software, third-party service contracts, professional services, managed services, financing of hardware and software, and other services.

We recognize revenue from hardware upon transfer of control, which is at a point in time typically upon shipment when title transfers. Revenue from software is recognized at a point in time when the license is granted.

We recognize revenue from third-party service contracts as either gross sales or net sales depending on whether the Company is acting as a principal party to the transaction or simply acting as an agent or broker based on control and timing. The Company is a principal if it controls the good or service before that good or service is transferred to the customer. We record revenue as gross when the Company is a principal party to the arrangement and net of cost when we are acting as a broker or agent. Under gross sales recognition, the entire selling price is recorded in revenue and our cost to the third-party service provider or vendor is recorded in cost of goods sold. Under net sales recognition, the cost to the third-party service provider or vendor is recorded as a reduction to revenue resulting in net sales equal to the gross profit on the transaction. Third-party service contracts are sold in different combinations with hardware, software, and services. We have determined the third-party services contracts

9

are a single performance obligation in each sale. When the Company is an agent, revenue is typically recorded at a point in time. When the Company is the principal, revenue is recognized over the contract term.

Professional services generally include implementation, installation, and training services. Professional services are considered a series of distinct services that form one performance obligation and revenue is recognized over time as services are performed.

Revenue generated from managed services is recognized over the term of the contract. Certain managed services contracts include financing of hardware and software. Revenues from arrangements which include financing are allocated considering relative standalone selling prices of lease and non-lease components within the agreement. The lease components include the hardware and software, which are subject to ASC 840. The non-lease component includes the managed services and is subject to ASC 606.

Other services generally include revenue generated through our royalty, extended warranty, multicomputer repair, and maintenance contracts. Royalty revenue is sales-based and recognized on date of subsequent sale of the product, which occurs on the date of customer shipment. Revenue from extended warranty contracts is recognized evenly over the period of the warranty. Multicomputer repair services revenue is recognized upon control transfer when the customer takes possession of the computer at time of shipping.Revenue generated from maintenance services is recognized evenly over the term of the contract.

Variable consideration is immaterial. Any products sold with right to return exists with the manufacturer. Managed service contracts contain the right to refund if canceled within 30 days of inception. Any products with a standard warranty are treated as a warranty obligation under ASC 460, Guarantees.

The following policies are applicable to our major categories of segment revenue transactions:

HPP Segment Revenue

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

Myricom revenue is derived from the sale of products, which are comprised of both hardware and embedded software which is essential to the products functionality, and post contract maintenance and support. Post contract maintenance and support is considered immaterial in the context of the contract and therefore is not a separate performance obligation.

TS Segment Revenue

TS Segment revenue is derived from the sale of hardware, software, professional services, third-party service contracts, maintenance contracts, managed services, and financing of hardware and software. Financing revenue is recognized in accordance with ASC 840, Leases. Financing revenue is recorded in revenue as equipment leasing and is part of the Company's operations.

Third-party service contracts are evaluated to determine whether such service revenue should be recorded as gross sales or net and whether over time or at point in time.

10

See disaggregated revenues below by products/services and geography.

			Technology Solutions Segment
For the three months ended March 31,	High Performance Products Segment			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	1,375		$	1,888	$	10,303	$	12,191	$	13,566
Service	239			95		2,413		2,508		2,747
Finance *	—			—		37		37		37
Total sales	$	1,614		$	1,983	$	12,753	$	14,736	$	16,350

			Technology Solutions Segment
For the six months ended March 31,	High Performance Products Segment			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	3,108		$	3,620	$	22,513	$	26,133	$	29,241
Service	532			165		5,319		5,484		6,016
Finance *	—			—		73		73		73
Total sales	$	3,640		$	3,785	$	27,905	$	31,690	$	35,330

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

Significant Judgments

The input method using labor hours expended relative to the total expected hours is used to recognize revenue for professional services. Only the hours that depict the Company’s performance toward satisfying a performance obligation are used for progress. An estimate for professional services is made at the beginning of each contract based on prior experience and monitored throughout the services. This method is most appropriate as it depicts the measure of progress towards satisfaction of the performance obligation.

When product and services are sold together, the allocation of the transaction price to each performance obligation is calculated using a budgeted cost-plus margin approach. Due to the complex nature of these contracts, there is significant judgment in allocating the transaction price. These estimates are periodically reviewed by project managers, engineers, and other staff involved to ensure estimates are appropriate. For items sold separately, including hardware, software, professional services, maintenance contracts, other services, and third-party service contracts, there is no allocation performed as there is one performance obligation.

Contract Assets and Liabilities

When the Company has performed work but does not have an unconditional right to payment, a contract asset is recorded. When the Company has the right to bill a customer, accounts receivable is recorded as an unconditional right exists. Current contract assets were $708 thousand and $1.1 million as of March 31, 2019 and October 1, 2018, respectively. The current portion is recorded in other current assets on the consolidated balance sheets. There were no non-current contract assets as of March 31, 2019 and October 1, 2018. The difference in the balances is due to regular timing differences between when work is performed and having an unconditional right to payment.

11

Contract liabilities arise when payment is received before the Company transfers a good or service to the customer. Current contract liabilities were $3.1 million and $0.9 million as of March 31, 2019 and October 1, 2018, respectively. The primary reason for the increase is due to one large non-cancelable contract that was effective as of March 31, 2019. The current portion of contract liabilities is recorded in deferred revenue on the consolidated balance sheets. There were no non-current contract liabilities as of March 31, 2019 and October 1, 2018, respectively. Revenue recognized for the six months ended March 31, 2019 that was included in contract liabilities as of the beginning of the period was $0.5 million.

Contract Costs

Incremental costs of obtaining a contract involving customer transactions where the revenue and the related transfer of goods and services are less than a one-year period, are expensed as incurred, utilizing the practical expedient in ASC 340-40-25-4. For a period greater than one year, incremental contract costs are capitalized if the Company expects to recover these costs. These costs are only capitalized if the contract is obtained. The costs are amortized over the contract term and expected renewal periods. The period of amortization is generally three to six years. Incremental costs are related to commissions in the TS portion of the business. Current capitalized contract costs are within the account other current assets on the consolidated balance sheets for the periods ended March 31, 2019 and September 30, 2018. The portion of current capitalized costs was $79 thousand and $71 thousand as of March 31, 2019 and October 1, 2018, respectively. There are no non-current capitalized costs on the consolidated balance sheets. The amount of incremental costs amortized for the three and six months ended March 31, 2019 was $56 thousand and $108 thousand, which is recorded in selling, general, and administrative expenses. There was no impairment related to incremental costs capitalized during the three and six months ended March 31, 2019.

Costs to fulfill a contract are capitalized when the costs are related to a contract or anticipated contract, generate or enhance resources that will be used in satisfying performance obligations in the future, and costs are recoverable. Costs to fulfill a contract are related to the TS portion of the business and involve activities performed before managed services can be completed. Current capitalized fulfillment costs are in the account other current assets on the consolidated balance sheets. The portion of current capitalized costs was $52 thousand and $60 thousand as of March 31, 2019 and October 1, 2018, respectively. There are no non-current capitalized fulfillment costs on the consolidated balance sheets. The amount of fulfillment costs amortized for the three and six months ended March 31, 2019 was $5 thousand and $8 thousand, respectively, which is recorded in cost of sales. There was no impairment related to fulfillment costs capitalized.

Other

Projects are typically billed upon completion or at certain milestones. Product and services are typically billed when shipped or as services are being performed. Payment terms are typically 30 days to pay in full except in Europe where it could be up to 90 days. Most of the Company’s contracts are less than one year. As a practical expedient, the Company has elected not to adjust the amount of consideration for effects of a significant financing component when it is anticipated the promised good or service will be transferred and the subsequent payment will be one year or less. The Company elected to use the optional exemption to not disclose the aggregate amount of the transaction price allocated to performance obligations that have an original expected duration of one year or less. This is due to a low amount of performance obligations less than one year being unsatisfied at each period end. Most of these contracts are related to product sales.

The Company has certain contracts that have an original term of more than one year. The royalty agreement is longer than one year and managed service contracts are generally longer than one year. For these contracts the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2019 is mainly related to managed service contracts and is set forth in the table below:

	(Amounts in thousands)
Remainder of fiscal 2019	$	1,115
Fiscal 2020	1,964
Fiscal 2021	1,426
Fiscal 2022	65
Fiscal 2023 and after	48
	$	4,618

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4.    Earnings Per Share of Common Stock

Basic net income (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) 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 (loss) 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 (loss) attributable to common stockholders are as follows:

	For the three months ended						For the six months ended
	March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
	(Amounts in thousands except per share data)
Loss from continuing operations	$	(619	)	$	(742	)	$	(569	)	$	(1,737	)
Income (loss) from discontinued operations	—			148			—			(57		)
Net loss	(619		)	(594		)	(569		)	(1,794		)
Less: net income attributable to nonvested common stock	—			—			—			—
Net loss attributable to common stockholders	$	(619	)	$	(594	)	$	(569	)	$	(1,794	)
Weighted average total shares outstanding – basic	4,015			3,823			3,898			3,795
Less: weighted average non-vested shares outstanding	—			—			—			—
Weighted average number of common shares outstanding – basic	4,015			3,823			3,898			3,795
Potential common shares from non-vested stock awards and the assumed exercise of stock options	—			—			—			—
Weighted average common shares outstanding – diluted	4,015			3,823			3,898			3,795
Net loss from continuing operations per share – basic	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – basic	$	—		$	0.04		$	—		$	(0.01	)
Net loss share – basic	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)
Net loss from continuing operations per share – diluted	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – diluted	$	—		$	0.04		$	—		$	(0.01	)
Net loss per share – diluted	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)

Non-vested restricted stock awards of 184,000 and 167,000shares were excluded from the diluted loss per share calculation for the three and six months ended March 31, 2019, as there was a net loss and their inclusion would have been anti-dilutive. Non-vested restricted stock awards of 168,000 and 169,000 shares were excluded from the diluted loss per share calculation for the three and six months ended March 31, 2018, as there was a net loss and their inclusion would have been anti-dilutive.

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5.    Inventories

Inventories consist of the following:

	March 31, 2019		September 30, 2018
	(Amounts in thousands)
Raw materials	$	1,053	$	1,098
Work-in-process	219		226
Finished goods	4,585		6,234
Total	$	5,857	$	7,558

Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met, of approximately $1.1 million and $0.7 million as of March 31, 2019 and September 30, 2018, respectively.

Total inventory balances in the table above are shown net of reserves for obsolescence of approximately $3.5 million and $3.3 million as of March 31, 2019 and September 30, 2018, respectively.

6.    Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:

	March 31, 2019			September 30, 2018
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(4,344	)	$	(4,346	)
Cumulative unrealized loss on pension liability	(6,479		)	(6,479		)
Accumulated other comprehensive loss	$	(10,823	)	$	(10,825	)

7.Income Taxes

Income tax expense was $142 thousand for the three months ended March 31, 2019 compared to income tax benefit of $160 thousand in the same period of 2018 based on the loss for the periods. The income tax benefit for the six months ended March 31, 2019 was $140 thousand and tax expense for the same period of the prior year was $993 thousand due primarily to the enactment of the Tax Cuts and Jobs Act. The U.K. did not have any tax expense in the three months or six-months periods of fiscal year 2019 due to benefits from the pension contribution and utilization of a small portion of its net tax operating loss.

The provisions above are estimates, and accordingly, changes to these estimates will be recorded in subsequent periods as more information and guidance becomes available.

8.Pension and Retirement Plans

The Company's continuing operations has defined benefit and defined contribution plans in the U.K. and in the U.S. The Company's discontinued operations had a defined benefit and defined contribution plan in Germany, which was assumed by Reply AG in its acquisition of the Company's operations in Germany (see Note 12 below). In the U.K., the Company provides defined benefit pension plans and defined contribution plans for some of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain former employees. The U.S. supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. The Company also provides for officer death benefits through post-retirement plans to certain officers of the Company in the U.S.  All of the Company’s defined benefit plans are closed to newly hired employees and have been since September 2009.

The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the consolidated balance sheets.

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The Company's pension plan in the U.K. is the only plan with plan assets. The plan assets consist of an investment in a commingled fund which in turn comprises a diversified mix of assets including corporate equity securities, government securities and corporate debt securities. 

15

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

	For the Three Months Ended March 31,
	2019									2018
	U.K.			U.S.			Total			U.K.			U.S.			Total
	(Amounts in thousands)
Pension:
Interest cost	$	92		$	6		$	98		$	96		$	7		$	103
Expected return on plan assets	(78		)	—			(78		)	(79		)	—			(79		)
Amortization of:
Amortization of net gain (loss)	38			(1		)	37			46			(1		)	45
Net periodic benefit cost from continuing operations	52			5			57			63			6			69
Net periodic benefit cost from discontinued operations	—			—			—			53			—			53
Net periodic benefit cost	$	52		$	5		$	57		$	116		$	6		$	122
Post Retirement:
Service cost	$	—		$	9		$	9		$	—		$	10		$	10
Interest cost	—			13			13			—			12			12
Amortization of net loss	—			(5		)	(5		)	—			(4		)	(4		)
Net periodic cost	$	—		$	17		$	17		$	—		$	18		$	18
	For the Six Months Ended March 31,
	2019									2018
	U.K.			U.S.			Total			U.K.			U.S.			Total
	(Amounts in thousands)
Pension:
Interest cost	$	183		$	12		$	195		$	187		$	13		$	200
Expected return on plan assets	(155		)	—			(155		)	(154		)	—			(154		)
Amortization of net gain (loss)	76			(2		)	74			89			(1		)	88
Net periodic benefit cost from continuing operations	104			10			114			122			12			134
Net periodic benefit cost from discontinued operations	—			—			—			106			—			106
Net periodic benefit cost	$	104		$	10		$	114		$	228		$	12		$	240
Post Retirement:
Service cost	$	—		$	17		$	17		$	—		$	21		$	21
Interest cost	—			26			26			—			24			24
Amortization of net loss	—			(9		)	(9		)	—			(10		)	(10		)
Net periodic cost	$	—		$	34		$	34		$	—		$	35		$	35

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

	Fair Values as of
	March 31, 2019								September 30, 2018
	Fair Value Measurements Using Inputs Considered as								Fair Value Measurements Using Inputs Considered as
Asset Category	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(Amounts in thousands)
Cash on deposit	$	467	$	467	$	—	$	—	$	36	$	36	$	—	$	—
Pooled funds	8,290		8,290		—		—		8,234		8,234		—		—
Total plan assets	$	8,757	$	8,757	$	—	$	—	$	8,270	$	8,270	$	—	$	—

9.    Segment Information

The following tables present certain operating segment information for the three and six months endedMarch 31, 2019 and March 31, 2018.

				Technology Solutions Segment
For the three months ended March 31,	High Performance Products Segment			United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	1,375		$	1,888		$	10,340	$	12,228	$	13,603
Service	239			95			2,413		2,508		2,747
Total sales	1,614			1,983			12,753		14,736		16,350
Income (loss) from operations	(1,093		)	106			216		322		(771		)
Total assets	12,583			13,222			26,525		39,747		52,330
Capital expenditures	37			—			—		—		37
Depreciation and amortization	55			1			44		45		100
2018
Sales:
Product	$	1,480		$	756		$	11,813	$	12,569	$	14,049
Service	315			115			2,125		2,240		2,555
Total sales	1,795			871			13,938		14,809		16,604
Income (loss) from operations	(1,057		)	(233		)	426		193		(864		)
Assets from continuing operations	15,036			2,792			16,338		19,130		34,166
Assets from discontinued operations	—			—			—		—		21,172
Total assets	15,036			2,792			16,338		19,130		55,338
Capital expenditures	36			—			96		96		132
Depreciation and amortization	57			1			69		70		127

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				Technology Solutions Segment
For the six months ended March 31,	High Performance Products Segment				United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	3,108			$	3,620		$	22,586	$	26,206	$	29,314
Service	532				165			5,319		5,484		6,016
Total sales	3,640				3,785			27,905		31,690		35,330
Income (loss) from operations	(1,920		)		132			1,032		1,164		(756		)
Total assets	12,583				13,222			26,525		39,747		52,330
Capital expenditures	240				—			28		28		268
Depreciation and amortization	108				3			95		98		206
2018
Sales:
Product	$	3,087			$	3,298		$	21,333	$	24,631	$	27,718
Service	1,178				280			4,058		4,338		5,516
Total sales	4,265				3,578			25,391		28,969		33,234
Income (loss) from operations	(1,440		)		(91		)	832		741		(699		)
Assets from continuing operations	15,036				2,792			16,338		19,130		34,166
Assets from discontinued operations	—				—			—		—		21,172
Total assets	15,036				2,792			16,338		19,130		55,338
Capital expenditures	46				—			130		130		176
Depreciation and amortization	113				2			136		138		251

Income (loss) from operations consists of sales less cost of sales, engineering and development expenses, and selling, general and administrative expenses but is not affected by either other income/expense or by income taxes expense. 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 from continuing operations for the three and six months endedMarch 31, 2019, and 2018.

		For the three months ended March 31,								For the six months ended March 31,
		2019				2018				2019				2018
		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues
	(Dollar amounts in millions)
Customer A		$	1.1	7	%	$	2.7	16	%	$	1.5	4	%	$	3.9	12	%
Customer B		$	1.7	11	%	$	—	—	%	$	3.0	9	%	$	—	—	%
Customer C		$	1.7	10	%	$	0.3	2	%	$	3.3	9	%	$	0.6	2	%

Accounts receivable from Customers A and B were less than 10% of total consolidated accounts receivable as of March 31, 2019 and September 30, 2018. Accounts receivable from Customer C totaled approximately $3.3 million, or 20%, and approximately $0.2 million, or 3%, of total consolidated accounts receivable as of March 31, 2019 and September 30, 2018, respectively. Two additional customers, Customers D and E, accounted for accounts receivable of 10% or more as of March 31, 2019, but did not account for revenue of 10% or more for the three and six months ended March 31, 2019. Accounts receivable

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from Customer D totaled approximately $2.1 million, or 13%, of total consolidated accounts receivable as of March 31, 2019. Accounts receivable from Customer E totaled approximately $1.7 million, or 10% of total consolidated accounts receivable as of March 31, 2019. We believe that the Company is not exposed to any significant credit risk with respect to the accounts receivable with these customers as of March 31, 2019.

10.Dividends

On December 27, 2018, the Company's board of directors declared a cash dividend of $0.15 per share which was paid on January 22, 2019 to shareholders of record as of January 7, 2019, the record date.

On February 12, 2019, the Company's board of directors declared a cash dividend of $0.15 per share which was paid on March 14, 2019 to shareholders of record as of February 28, 2019, the record date.

11.    Recent Accounting Pronouncements

Accounting standards recently adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. The standard also requires new, expanded disclosures regarding revenue recognition. The ASU replaces most existing revenue recognition guidance in GAAP. The new standard was adopted by the Company effective October 1, 2018 using the modified retrospective approach only to contracts that were not completed as of adoption date. The Company recognized the cumulative effect of initial application as an adjustment to the opening balance of retained earnings. This resulted in an increase of $158 thousand to retained earnings as of October 1, 2018. This was primarily due to revenue related to customer support in the HPP segment no longer being deferred, which resulted in a decrease of deferred revenue as part of the cumulative effect. Additionally, revenue from software sales is no longer being deferred under ASC 606 as recognition is now when control transfers to the customer. There were no previous period financial statement adjustments.

The effects of ASC 606 adoption for the Company for the condensed consolidated statements of operations and balance sheet are as follows:

	Three months ended March 31, 2019
	(Amounts in thousands, except per share amounts)
	As Reported			Balances without adoption of ASC 606			Effect of change Higher/(Lower)
Total sales	$	16,350		$	16,357		$	(7	)
Total cost of sales	12,604			12,603			1
Gross profit	3,746			3,754			(8		)
Operating loss	(771		)	(763		)	(8		)
Income tax benefit	(142		)	(136		)	(6		)
Net loss	(619		)	(617		)	(2		)
Net loss attributable to common stockholders	$	(619	)	$	(617	)	$	(2	)
Basic earnings per share	$	(0.15	)	$	(0.15	)	$	—
Diluted earnings per share	$	(0.15	)	$	(0.15	)	$	—

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	Six months ended March 31, 2019
	(Amounts in thousands, except per share amounts)
	As Reported			Balances without adoption of ASC 606			Effect of change Higher/(Lower)
Total sales	$	35,330		$	35,231		$	99
Total cost of sales	27,235			27,103			132
Gross profit	8,095			8,128			(33		)
Operating loss	(756		)	(723		)	(33		)
Income tax benefit	(140		)	(133		)	(7		)
Net loss	(569		)	(543		)	(26		)
Net loss attributable to common stockholders	$	(569	)	$	(543	)	$	(26	)
Basic earnings per share	$	(0.15	)	$	(0.14	)	$	(0.01	)
Diluted earnings per share	$	(0.15	)	$	(0.14	)	$	(0.01	)

	As of March 31, 2019
	(Amounts in thousands)
	As Reported		Balances without adoption of ASC 606		Effect of change Higher/(Lower)
Assets:
Accounts receivable	$	16,456	$	16,274	$	182
Unbilled accounts receivable	—		782		(782		)
Inventories	5,857		6,178		(321		)
Other current assets	3,023		2,235		788
Deferred tax asset	1,837		1,903		(66		)
Liabilities:
Deferred revenue	$	3,111	$	3,442	$	(331	)
Shareholders' Equity:
Retained Earnings	$	28,291	$	28,159	$	132

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, an amendment of the FASB Accounting Standards Codification. This ASU will reduce diversity in practice for classifying cash payments and receipts in the statement of cash flows for a number of common transactions. It will also clarify when identifiable cash flows should be separated versus classified based on their predominant source or use. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, an amendment of the FASB Accounting Standards Codification. This ASU requires the seller and buyer to recognize at the transaction date the current and deferred income tax consequences of intercompany asset transfers (except transfers of inventory). Under current GAAP, the seller and buyer defer the consolidated tax consequences of an intercompany asset transfer from the period of the transfer to a future period when the asset is transferred out of the consolidated group, or otherwise affects consolidated earnings.

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This standard will cause volatility in companies’ effective tax rates, particularly for those that transfer intangible assets to foreign subsidiaries. For public entities, the new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2017. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

In January 2017, FASB issued ASU No. 2017-01, BusinessCombinations Clarifying the Definition of a Business (Topic 805) (“ASU No. 2017-01”). ASU 2017-01 provides a framework to use in determining when a set of assets and activities is a business. ASU 2017-01 provides more consistency in applying the business combination guidance, reduces the costs of application, and makes the definition of a business more operable. ASU 2017-01 is effective for interim and annual periods within those annual periods beginning after December 15, 2017. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, an amendment of the FASB Accounting Standards Codification. This ASU requires employers that sponsor defined benefit pension and/or other post-retirement benefit plans to report the service cost component of net benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. Employers are required to present the other components of net benefit costs in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component of net periodic pension cost will be eligible for asset capitalization. For public entities, the new standard is effective for annual periods beginning after December 15, 2017, including interim periods within that annual period. This ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

New accounting standards not adopted as of March 31, 2019

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), an amendment of the FASB Accounting Standards Codification. This ASU requires lessees to recognize a right-of-use asset and lease liability for most lease arrangements. The new standard is effective for the Company on October 1, 2019. The standard mandates a modified retrospective transition method for all entities and early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allow a reclassification from accumulated other comprehensive income (loss) (“AOCI”) to retained earnings for stranded tax effects resulting from the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts at the date of enactment of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effect that ASU 2018-02 will have on its consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, an amendment of the FASB Accounting Standards Codification. Under this ASU companies will no longer be required to value non-employee awards differently from employee awards, but the accounting remains different for attribution and a contractual term election for valuing nonemployee equity share options. Equity-classified awards to nonemployees will now be measured at the grant date using fair value of the equity instruments the company is obligated to issue and recognition is associated with the probable outcome. Awards are subsequently measured using stock compensation guidance unless they are modified after the nonemployee stops providing goods or services. Existing disclosure requirements within the stock compensation guidance also apply to nonemployee awards. For public entities, the new standard is effective for annual periods beginning after December 15, 2018, including interim periods within that fiscal year. The Company is evaluating the effect that ASU 2018-07 will have on its consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, an amendment of the FASB Accounting Standards Codification. Under this ASU existing disclosures not considered cost beneficial are removed, disclosures identified as relevant are added, and there is added clarification regarding specific existing disclosures.

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For public entities, the new standard is effective for annual periods beginning after December 15, 2020. The Company is evaluating the effect that ASU 2018-14 will have on its consolidated financial statements and related disclosures.

12.Discontinued Operations of TS Segment

On July 31, 2018, CSPi LTD, a wholly owned indirect subsidiary of the Company, completed its sale of all of the outstanding stock of Modcomp GmbH, to Reply AG, an affiliate of Reply SpA, a holding company for a worldwide group of companies, pursuant to the terms of a Share Purchase and Assignment Agreement dated June 27, 2018. Modcomp GmbH, dba CSPI GmbH, through itself and its wholly owned subsidiaries, provided managed security services to customers primarily in Germany.

Upon the closing of the Share Purchase Agreement, Reply AG paid to CSPI total cash at closing of approximately $14.4 million, which consisted of the original purchase price of $11.7 million plus an adjustment at closing for Net Cash (as defined in the Share Purchase Agreement) of approximately $2.7 million. An additional €400 thousand is included in escrow and will be recorded if and when received by the Company. Accordingly, CSPi determined that the assets and liabilities of this reportable segment met the discontinued operations criteria in U.S. GAAP in the year ended September 30, 2018. The gain recorded due to the sale of all the stock of Modcomp GmbH was approximately $16.8 million. No income taxes were provided as the transaction was a tax-free exchange in the U.K. As such, Modcomp GmbH's results have been recorded as discontinued operations in the accompanying consolidated balance sheets and consolidated statements of operations for all periods presented.

Summarized Discontinued Operations Financial Information

The following table summarizes the results of discontinued operations for the three and six months ended March 31, 2019, and March 31, 2018:

	For the three months ended				For the six months ended
	March 31, 2019		March 31, 2018		March 31, 2019		March 31, 2018
	(Amounts in thousands)
Sales	$	—	$	5,378	$	—	$	10,747
Cost of sales	—		4,431		—		9,030
Gross profit	—		947		—		1,717
Selling, general and administrative expenses	—		806		—		1,734
Operating income (loss)	—		141		—		(17		)
Other income (expenses)	—		39		—		(59		)
Income (loss) before income taxes	—		180		—		(76		)
Income tax expense (benefit)	—		32		—		(19		)
Income (loss) from discontinued operations, net of tax	$	—	$	148	$	—	$	(57	)

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The discussion below contains certain forward-looking statements including, but not limited to, among others, statements concerning future revenues and future business plans. Forward-looking statements include statements in which we use words such as “expect”, “believe”, “anticipate”, “intend”, “project”, “estimate”, “should”, “could”, “may”, “plan”, “potential”, “predict”, “project”, “will”, “would” and similar expressions. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, the forward-looking statements are subject to significant risks and uncertainties, and thus we cannot assure you that these expectations will prove to have been correct, and actual results may vary from those contained in such forward-looking statements. We discuss many of these risks and uncertainties in Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018. Factors that may cause such variances include, but are not limited to, our dependence on a small number of customers for a significant portion of our revenue, our high dependence on contracts with the U.S. federal government, our reliance in certain circumstances on single sources for supply of key product components, intense competition in the market segments in which we operate, the recent sale of our German operations in our TS segment, and the recent changes in the U.S. Tax laws. Given these uncertainties, you should not place undue

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reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this document. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this filing and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

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, impairment assessment of intangibles, income taxes, deferred compensation and retirement plans, as well as estimated selling prices used for revenue recognition and contingencies. We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A description of our critical accounting policies is contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018 in the “Critical Accounting Policies” section contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations. Due to adoption of ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606), our revenue recognition policy has changed effective October 1, 2018 and is included in Note 3 of our unaudited consolidated financial statements included in Item 1 to the Quarterly Report on Form 10-Q. See Note 11 of our unaudited consolidated financial statements included in Item 1 for effects of initial adoption and Note 3 of our unaudited consolidated financial statements included in Item 1 for further details on our revenue recognition policy.

Discontinued Operations

On July 31, 2018, we completed the sale of all of the outstanding stock of our Germany division of our TS segment. The one time gain recorded due to the sale of all the stock of Modcomp GmbH was approximately $16.8 million. No income taxes were provided as the transaction was a tax-free exchange in the U.K. The Modcomp GmbH's results have been recorded as discontinued operations in the accompanying consolidated statements of operations for all periods presented.

Results of Continuing Operations

Overview of the three months ended March 31, 2019

     Our revenues decreased by approximately $0.3 million, or 2%, to $16.3 million for the three months ended March 31, 2019 as compared to $16.6 million for the three months ended March 31, 2018. The decrease in revenue is the result of a decrease of $0.1 million in our TS segment, combined with a $0.2 milliondecrease in our HPP segment. Our gross margin percentage decreased to 23% of revenues for the three months ended March 31, 2019 from 24% for the three months ended March 31, 2018. Operating loss decreased by approximately $0.1 million from an operating loss of $0.9 million for the three months ended March 31, 2018 to an operating loss of $0.8 million for the three months ended March 31, 2019, primarily as a result of a decrease of $0.3 million in operating expenses partially offset by a $0.2 million decrease in gross profit. The decrease in operating expenses was primarily the result of $0.3 million decrease in our TS segment. Our provision for income tax was a tax benefit of $142 thousand for the three months ended March 31, 2019 as compared to a tax benefit of $160 thousand for the three months ended March 31, 2018. The effective tax rate for the current quarter is 18.7%.

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

	March 31, 2019			% of sales		March 31, 2018			% of sales
	(Dollar amounts in thousands)
Sales	$	16,350		100	%	$	16,604		100	%
Costs and expenses:
Cost of sales	12,604			77	%	12,621			76	%
Engineering and development	781			6	%	759			5	%
Selling, general and administrative	3,736			23	%	4,088			25	%
Total costs and expenses	17,121			106	%	17,468			106	%
Operating loss	(771		)	(5	)%	(864		)	(5	)%
Other income (expense)	10			—	%	(38		)	—	%
Loss before income taxes	(761		)	(5	)%	(902		)	(5	)%
Income tax benefit	(142		)	(1	)%	(160		)	(1	)%
Net loss from continuing operations	(619		)	(4	)%	(742		)	(4	)%
Net income from discontinued operations	—			—	%	148			1	%
Net loss	$	(619	)	(4	)%	$	(594	)	(3	)%

Revenues

     Our revenues decreased by approximately $0.3 million to $16.3 million for the three months ended March 31, 2019 as compared to $16.6 million of revenues for the three months ended March 31, 2018. TS segment revenues decreased by $0.1 million, and HPP segment revenues decreased by $0.2 million.

HPP segment revenue change was as follows for the three months ended March 31, 2019 and March 31, 2018:

					Decrease
	2019		2018		$			%
	(Dollar amounts in thousands)
Products	$	1,375	$	1,480	$	(105	)	(7	)%
Services	239		315		(76		)	(24	)%
Total	$	1,614	$	1,795	$	(181	)	(10	)%

The HPP product revenues for the three months ended March 31, 2019 of $1.4 million, decreased by $0.1 million from $1.5 million for the three months ended March 31, 2018, primarily as a result of a decrease in Myricom product sales. The decrease in HPP services revenues of $0.1 million is primarily attributed to a $0.1 million decrease in royalties on high-speed processing boards related to the E2D program shipped for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018.

TS segment revenue change was as follows for the three months ended March 31, 2019 and March 31, 2018:

					Increase (decrease)
	2019		2018		$			%
	(Dollar amounts in thousands)
Products	$	12,228	$	12,569	$	(341	)	(3	)%
Services	2,508		2,240		268			12	%
Total	$	14,736	$	14,809	$	(73	)	—	%

The decrease in TS segment product revenues of $0.3 million during the period was primarily the result of a decrease in product revenues of $1.5 million in our U.S. division, partially offset by an increase of product revenue of $1.1 million in our U.K. division. The $1.5 million decrease in the U.S. division was primarily the result of product sales to a major customer in the

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prior year that were not repeated in the current year. The $1.1 million increase in the U.K. division product revenues was primarily the result of increased product shipments to one major customer. The decrease in TS segment product revenues was partially offset by an increase in TS segment service revenues of $0.3 million during the period. The $0.3 million increase in the U.S. division service revenues was substantially the result of a $0.2 million increase in managed service contracts, an increase in third party maintenance and services revenues of $0.5 million, partially offset by a $0.4 million decrease in internal services.

      Our revenues by geographic area, which is based on the customer location to which the products were shipped or services rendered, were as follows for the three months ended March 31, 2019 and March 31, 2018:

									Increase (Decrease)
	2019		%		2018		%		$			%
	(Dollar amounts in thousands)
Americas	$	14,429	88	%	$	15,207	92	%	$	(778	)	(5	)%
Europe	1,088		7	%	1,183		7	%	(95		)	(8	)%
Asia	833		5	%	214		1	%	619			289	%
Totals	$	16,350	100	%	$	16,604	100	%	$	(254	)	(2	)%

The $0.8 million decrease in revenue to the Americas is primarily the result of decreased sales by our HPP segment of $0.6 million combined with decreased sales by our TS segment of $0.2 million. The $0.1 million decrease in revenue to Europe is primarily the result of decreased sales by our HPP segment of $0.2 million, partially offset by increased sales by our TS segment of $0.1 million. The $0.6 million increase in revenue to Asia is primarily the result of increased sales by our HPP segment of Myricom product to a major customer.

Gross Margins

     Our gross margin ("GM") decreased by $0.2 million to $3.7 million for the three months ended March 31, 2019 as compared to a gross margin of approximately $4.0 million for the three months ended March 31, 2018. The GM as a percentage of revenue decreased to 23% for the three months ended March 31, 2019, from 24% for the three months ended March 31, 2018.

	2019				2018				Increase (Decrease)
	GM$		GM%		GM$		GM%		GM$			GM%
	(Dollar amounts in thousands)
HPP	$	770	48	%	$	839	47	%	$	(69	)	1	%
TS	2,976		20	%	3,144		21	%	(168		)	(1	)%
Total	$	3,746	23	%	$	3,983	24	%	$	(237	)	(1	)%

The impact of product mix within our HPP segment on gross margin for the period was as follows:

	2019				2018				Increase (Decrease)
	GM$		GM%		GM$		GM%		GM$			GM%
	(Dollar amounts in thousands)
Products	$	555	40	%	$	547	37	%	$	8		3	%
Services	215		90	%	292		93	%	(77		)	(3	)%
Total	$	770	48	%	$	839	47	%	$	(69	)	1	%

The overall HPP segment gross margin as a percentage of sales increased to 48% for the three months ended March 31, 2019 from 47% for the three months ended March 31, 2018. The 1% increase in gross margin as a percentage of sales in the HPP segment was primarily attributed to an increase in higher margin multicomputer products within the overall product mix.

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The impact of product mix within our TS segment on gross margin for the three months ended March 31, 2019 and 2018 was as follows:

	2019				2018				Increase (Decrease)
	GM$		GM%		GM$		GM%		GM$			GM%
	(Dollar amounts in thousands)
Products	$	1,677	14	%	$	1,835	15	%	$	(158	)	(1	)%
Services	1,299		52	%	1,309		58	%	(10		)	(6	)%
Total	$	2,976	20	%	$	3,144	21	%	$	(168	)	(1	)%

     The overall TS segment gross margin as a percentage of sales decreased to 20% for the three month period ended March 31, 2019 from 21% for the three month period ended March 31, 2018. The overall TS segment gross margin as a percentage of sales decrease was primarily due to decreased margin as a percentage of sales in both products and services in the U.S. division partially offset by higher product margin in the U.K. division.

Operating Expenses

Engineering and Development Expenses

The engineering and development expenses incurred by our HPP segment were relatively unchanged at $0.8 million for the three months ended March 31, 2019 and 2018. The current period expenses were primarily for product engineering expenses incurred in connection with the development of the new ARIA SDS cyber security products.

Selling, General and Administrative Expenses

The following table details our selling, general and administrative (“SG&A”) expense by operating segment for the three months ended March 31, 2019 and 2018:

	For the three months ended March 31,
	2019		% of Total		2018		% of Total		$ Decrease			% Decrease
	(Dollar amounts in thousands)
By Operating Segment:
HPP segment	$	1,082	29	%	$	1,137	28	%	$	(55	)	(5	)%
TS segment	2,654		71	%	2,951		72	%	(297		)	(10	)%
Total	$	3,736	100	%	$	4,088	100	%	$	(352	)	(9	)%

SG&A expenses decreased by $0.4 million, or 9%, for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018. The decrease in HPP segment SG&A expenses of $0.1 million was primarily due to decreases in headcount and consulting related expenses. The $0.3 million decrease in TS segment SG&A expenses was primarily the result of a decreased headcount in the U.K. division resulting in a decrease of $0.2 million payroll expense and a decrease in variable compensation of $0.1 million in the U.S. division.

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Other Income/Expenses

The following table details other income (expense) for the three months ended March 31, 2019 and 2018:

	For the three months ended,
	March 31, 2019			March 31, 2018			Increase (Decrease)
	(Amounts in thousands)
Interest expense	$	(22	)	$	(18	)	$	(4	)
Interest income	66			4			62
Foreign exchange gain (loss)	(37		)	(44		)	7
Other income, net	3			20			(17		)
Total other income, net	$	10		$	(38	)	$	48

The net change to other income (expense) of $48 thousand for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018 was primarily driven by an increase in interest income of approximately $62 thousand, partially offset by a decrease in other income of approximately $17 thousand.

Income Taxes

Our provision for income tax was a tax benefit of $142 thousand for the three months ended March 31, 2019 as compared to a tax benefit of $160 thousand for the three months ended March 31, 2018. The effective tax rate for the current quarter was 18.7%.

Results of Discontinued Operations

The following table is a summary of the operating results of the Germany division of our TS segment which have been reflected as discontinued operations. See Note 12 for additional information.

	For the three months ended
	March 31, 2019		March 31, 2018
	(Amounts in thousands)
Revenues	$	—	$	5,378
Income from discontinued operations, net of tax	$	—	$	148

Overview of the six months ended March 31, 2019

Our revenues increased by approximately $2.1 million, or 6%, to $35.3 million for the six months ended March 31, 2019 as compared to $33.2 million for the six months ended March 31, 2018. The increase in overall revenue for the six month period ended March 31, 2019 as compared to the prior fiscal year six month period was substantially the result of an approximately $2.7 million increase in our TS segment revenue, partially offset by an approximately $0.6 million decrease in our HPP segment revenue. The TS segment revenue for the six month period ended March 31, 2019 was primarily impacted bythe fulfillment of several large product orders in the U.S. division and increased volume in services revenue. The HPP segment revenue for the six month period ended March 31, 2019 was primarily impacted by lower royalties recognized of approximately $0.6 million on high-speed processing boards during the six months ended March 31, 2019 as compared to the six month period ended March 31, 2018. Our overall gross margin percentage decreased to 23% of revenue for the six month period ended March 31, 2019 from 25% of revenues for the six months ended March 31, 2018. Our operating loss increased by approximately $0.1 million resulting in an operating loss of $0.8 million for the six month period ended March 31, 2019 as compared to operating loss of $0.7 million for the six months ended March 31, 2018, primarily as a result of decreased gross margin and increased engineering expenses of approximately $0.1 million, partially offset by a decrease in selling and marketing expenses of $0.3 million for the six month period ended March 31, 2019. Our income tax expense decreased by approximately $1.1 million to an income tax benefit of $0.1 million for the six months ended March 31, 2019. The income tax provision for the six months period is not comparable to the same period of the prior year due to the impact of the Tax Cuts and Jobs Act in the prior year.

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The following table details our results of operations in dollars and as a percentage of sales for the six months ended:

	March 31, 2019			% of sales		March 31, 2018			% of sales
	(Dollar amounts in thousands)
Sales	$	35,330		100	%	$	33,234		100	%
Costs and expenses:
Cost of sales	27,235			77	%	24,888			75	%
Engineering and development	1,526			4	%	1,457			4	%
Selling, general and administrative	7,325			21	%	7,588			23	%
Total costs and expenses	36,086			102	%	33,933			102	%
Operating loss	(756		)	(2	)%	(699		)	(2	)%
Other income (expense)	47			—	%	(45		)	—	%
Loss before income taxes	(709		)	(2	)%	(744		)	(2	)%
Income tax expense (benefit)	(140		)	—	%	993			3	%
Net loss from continuing operations	(569		)	(2	)%	(1,737		)	(5	)%
Net loss from discontinued operations	—			—	%	(57		)	—	%
Net loss	$	(569	)	(2	)%	$	(1,794	)	(5	)%

Revenues

     Our total revenues increased by approximately $2.1 million to $35.3 million for the six months ended March 31, 2019 as compared to $33.2 million of revenues for the six months ended March 31, 2018.

HPP segment revenue was as follows for the six months ended March 31, 2019 and 2018:

					Increase (Decrease)
	2019		2018		$			%
	(Dollar amounts in thousands)
Products	$	3,108	$	3,087	$	21		1	%
Services	532		1,178		(646		)	(55	)%
Total	$	3,640	$	4,265	$	(625	)	(15	)%

The HPP product revenues were relatively unchanged at $3.1 million for the six month periods ended March 31, 2019 and 2018. The decrease in HPP services revenues of $0.6 million for the period was primarily the result of a decrease in royalty revenues on high-speed processing boards related to the E2D program during the six months ended March 31, 2019 as compared to the six months ended March 31, 2018.

TS segment revenue was as follows for the six months ended March 31, 2019 and 2018:

					Increase
	2019		2018		$		%
	(Dollar amounts in thousands)
Products	$	26,206	$	24,631	$	1,575	6	%
Services	5,484		4,338		1,146		26	%
Total	$	31,690	$	28,969	$	2,721	9	%

The increase in TS segment product revenues of $1.6 million during the period was the result of an increase in product revenues of $1.3 million in our U.S. division and $0.3 million in our U.K division. The $1.3 million increase in the U.S. division product revenues was the result of several completed large product orders and the $0.3 million increase in the U.K. was due to sales to one major customer. The increase in TS segment service revenues of $1.1 million during the period was

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primarily the result of an increase of $1.3 million in our U.S. division, comprised of a $0.8 million increase in third party service revenues, a $0.5 million increase in third party maintenance revenues, and a $0.3 million increase in managed service contract revenues, partially offset by a decrease of $0.3 million in internal services. The U.S. segment increase in service revenue was also partially offset by a $0.1 million decrease in the U.K. division.

      Our revenues by geographic area, which is based on the customer location to which the products were shipped or services rendered, were as follows for the six months ended March 31, 2019 and 2018:

	For the six months ended March 31,								Increase (Decrease)
	2019		%		2018		%		$			%
	(Dollar amounts in thousands)
Americas	$	31,836	90	%	$	28,440	86	%	$	3,396		12	%
Europe	2,243		6	%	4,132		12	%	(1,889		)	(46	)%
Asia	1,251		4	%	662		2	%	589			89	%
Totals	$	35,330	100	%	$	33,234	100	%	$	2,096		6	%

The $2.1 million increase in total revenues is primarily attributed to a $2.7 million increase by our TS segment partially offset by a $0.6 million decrease by our HPP segment. The $3.4 million increase in the Americas revenues for the six months ended March 31, 2019 as compared to the six months ended March 31, 2018 is primarily due to increased revenues by our TS segment of approximately $4.3 million, partially offset by decreased sales by our HPP segment of approximately $0.9 million. The $1.9 million decrease in Europe revenue is primarily due to decreased sales by our TS segment of $1.6 million for the six month period ended March 31, 2019 as compared to the prior fiscal year period. The $0.6 million increase in Asia is primarily the result of increased product sales by our HPP segment of approximately $0.6 million.

Gross Margins

     Our gross margin decreased by $251 thousand for the six months ended March 31, 2019 as compared to the six months ended March 31, 2018 as follows:

	2019				2018				Increase (Decrease)
	(Dollar amounts in thousands)
	GM$		GM%		GM$		GM%		GM$			GM%
HPP	$	1,739	48	%	$	2,301	54	%	$	(562	)	(6	)%
TS	6,356		20	%	6,045		21	%	311			(1	)%
Total	$	8,095	23	%	$	8,346	25	%	$	(251	)	(2	)%

The impact of product mix within our HPP segment on gross margin was as follows for the six months ended March 31, 2019 and 2018:

	2019				2018				Increase (Decrease)
	(Dollar amounts in thousands)
	GM$		GM%		GM$		GM%		GM$			GM%
Products	$	1,246	40	%	$	1,163	38	%	$	83		2	%
Services	493		93	%	1,138		97	%	(645		)	(4	)%
Total	$	1,739	48	%	$	2,301	54	%	$	(562	)	(6	)%

The overall HPP segment gross margin as a percentage of sales decreased to 48% for the period from 54% in the same prior year period. The 6% decrease in gross margin as a percentage of sales in the HPP segment was primarily attributed to a decrease in Multicomputer high margin royalty revenues.

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The impact of product mix within our TS segment on gross margin was as follows for the six months ended March 31, 2019 and 2018:

	2019				2018				Increase (Decrease)
	GM$		GM%		GM$		GM%		GM$			GM%
	(Dollar amounts in thousands)
Products	$	3,485	13	%	$	3,608	15	%	$	(123	)	(2	)%
Services	2,871		52	%	2,437		56	%	434			(4	)%
Total	$	6,356	20	%	$	6,045	21	%	$	311		(1	)%

     The gross margin as a percentage of sales for TS segment product revenues decreased by 2% for the period primarily as a result of a decrease in gross margin sales for both our U.S. and U.K. divisions. The 4% decrease of gross margin as a percentage of the TS segment services sales is the result of decreased service margins in our U.S. division related to the mix of services provided.

Engineering and Development Expenses

Engineering and development expenses increased by $0.1 million to $1.53 million for the six months ended March 31, 2019 as compared to $1.46 million for the six months ended March 31, 2018. The current period expenses were primarily for product engineering expenses incurred in connection with the development of the new ARIA SDS cyber security products. The increased engineering and development expenses for the six month period ended March 31, 2019 as compared to the six month period ended March 31, 2018 is primarily attributed to an increase in engineering headcount related expenses.

Selling, General and Administrative Expenses

The following table details our SG&A expense by operating segment for the six months ended March 31, 2019 and 2018:

	For the six months ended March 31,
	2019		% of Total		2018		% of Total		$ Decrease			% Decrease
	(Dollar amounts in thousands)
By Operating Segment:
HPP segment	$	2,133	29	%	$	2,283	30	%	$	(150	)	(7	)%
TS segment	5,192		71	%	5,305		70	%	(113		)	(2	)%
Total	$	7,325	100	%	$	7,588	100	%	$	(263	)	(3	)%

SG&A expenses decreased by $0.3 million, or 3%, for the six months ended March 31, 2019 as compared to the six months ended March 31, 2018. The $0.2 million, or 7%, decrease in HPP segment expenses is primarily attributed to decreases in consulting and headcount related costs. The $0.1 million, or 2%, decrease in TS segment expenses is primarily attributed to a reduction in headcount in the U.K. division, partially offset by an increase in payroll expense the U.S. division.

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Other Income/Expenses

The following table details other income (expense) for the six months ended March 31, 2019 and 2018:

	For the six months ended
	March 31, 2019			March 31, 2018			Increase (Decrease)
	(Amounts in thousands)
Interest expense	$	(48	)	$	(36	)	$	(12	)
Interest income	121			8			113
Foreign exchange gain (loss)	(30		)	(112		)	82
Other income, net	4			95			(91		)
Total other income (expense), net	$	47		$	(45	)	$	92

The increase to other income (expense) for the six months ended March 31, 2019 as compared to the six months ended March 31, 2018 was primarily driven by the increase in interest income of approximately $113 thousand combined with the net change of approximately $82 thousand in the foreign exchange gain (loss) on foreign currency holdings, partially offset by a decrease in other income of approximately $91 thousand.

Income Taxes

The income tax benefit was $0.1 million for the six months ended March 31, 2018 compared to income tax expense of $1.0 million in the same period of 2018. The U.K. division did not have any tax expense in the second quarter of fiscal year 2019 due to its pension contribution and the utilization of a portion of its net tax operating loss.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (H.R.1) (the “Tax Act”) was enacted into law. In accordance with ASC 740, Income Taxes, the Company was required to recognize the effect of the Tax Act in the period of enactment, which was in the Company’s first quarter of fiscal 2018 that ended on December 31, 2017. The many changes in the Tax Act include a permanent reduction in the maximum federal corporate income tax rate from 35% to 21% effective as of January 1, 2018. The statutory federal income tax rate applicable for the Company's fiscal year ending September 30, 2018 was 24.3% based on a fiscal year blended rate calculation.

The income tax provision for the six months period is not comparable to the same period of the prior year due to the impact of the Tax Cuts and Jobs Act in the prior year, changes in pretax income over many jurisdictions, and the impact of discrete items. Generally, fluctuations in the effective tax rate are primarily due to changes in our geographic pretax income resulting from our business mix and changes in the tax impact of permanent differences, other special items, and other discrete tax items, which may have unique tax implications depending on the nature of the item.

Results of Discontinued Operations

The following table is a summary of the operating results of the Germany division of our TS segment which was sold in the fourth quarter of fiscal year 2018 and have been reflected as discontinued operations. See Note 12 of our Consolidated Financial Statements included in Item 1 for additional information.

	For the six months ended
	March 31, 2019		March 31, 2018
	(Amounts in thousands)
Revenues	$	—	$	10,747
Net loss from discontinued operations, net of tax	$	—	$	(57	)

31

Liquidity and Capital Resources

Our primary source of liquidity is our cash and cash equivalents, which decreased by $6.9 million to $18.2 million as of March 31, 2019 from $25.1 million as of September 30, 2018.

Our significant sources of cash for the six months ended March 31, 2019 included an increase in deferred revenue of $2.1 million, a decrease in inventories of $1.5 million, and a decrease in officer's life insurance receivable of $0.3 million.

Our significant uses of cash for the six months ended March 31, 2019 included an increase in accounts receivable of $3.3 million, a decrease in accounts payable and accrued expenses of $3.2 million, an increase in other current assets of $1.4 million, dividends paid of $1.2 million, and in increase in long term receivables of $0.9 million.

Cash held by our foreign subsidiary in the United Kingdom totaled approximately $10.8 million as of March 31, 2019 as compared to $9.9 million as of September 30, 2018. This cash is included in our total cash and cash equivalents reported above.

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

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 March 31, 2019. Our Chief Executive Officer, our Chief Financial Officer and other members of our senior management team supervised and participated in this evaluation. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the 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 its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2019, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting.

During the three months ended March 31, 2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

32

PART II.   OTHER INFORMATION

Item 6.          Exhibits

Number	Description
31.1*	Rule 13(a)-14(a) / 15d-14(a) Certification of Chief Executive Officer
31.2*	Rule 13(a)-14(a) / 15d-14(a) Certification of Chief Financial Officer
32.1*	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
101*	Interactive Data Files regarding (a) our Consolidated Balance Sheets as of March 31, 2019 and September 30, 2018, (b) our Consolidated Statements of Income for the three and six months ended March 31, 2019 and 2018, (c) our Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2019 and 2018, (d) our Consolidated Statement of Shareholders’ Equity for the three and six months ended March 31, 2019 and 2018, (e) our Consolidated Statements of Cash Flows for the six months ended March 31, 2019 and 2018 and (f) the Notes to such Consolidated Financial Statements.

*Filed Herewith

33

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.
May 8, 2019	By:	/s/ Victor Dellovo
		Victor Dellovo
		Chief Executive Officer,
		President and Director
May 8, 2019	By:	/s/ Gary W. Levine
		Gary W. Levine
		Chief Financial Officer

34

Exhibit Index

Number	Description
31.1*	Rule 13(a)-14(a) / 15d-14(a) Certification of Chief Executive Officer
31.2*	Rule 13(a)-14(a) / 15d-14(a) Certification of Chief Financial Officer
32.1*	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
101*	Interactive Data Files regarding (a) our Consolidated Balance Sheets as of March 31, 2019 and September 30, 2018, (b) our Consolidated Statements of Income for the three and six months ended March 31, 2019 and 2018, (c) our Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2019 and 2018, (d) our Consolidated Statement of Shareholders’ Equity for the three and six months ended March 31, 2019 and 2018 (e) our Consolidated Statements of Cash Flows for the six months ended March 31, 2019 and 2018 and (f) the Notes to such Consolidated Financial Statements.

*Filed Herewith

35

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.

May 8, 2019

 /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.

May 8, 2019

 /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 six months ended March 31, 2019, 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.

May 8, 2019	By:	/s/ Victor Dellovo
		Victor Dellovo
		Chief Executive Officer;
		President and Director
May 8, 2019	By:	/s/ Gary W. Levine
		Gary W. Levine
		Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	Mar. 31, 2019	May 06, 2019
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		4,137,831
Amendment Flag	false
Entity Central Index Key	0000356037
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2019	Sep. 30, 2018
Current assets:
Cash and cash equivalents	$ 18,188	$ 25,107
Accounts receivable, net of allowances of $90 and $87	16,456	11,980
Unbilled accounts receivable	0	1,166
Net Investment in Lease, Current	288	246
Inventories	5,857	7,558
Refundable income taxes	660	480
Other current assets	3,023	1,878
Total current assets	44,472	48,415
Property, equipment and improvements, net	916	847
Other assets:
Intangibles, net	41	48
Deferred income taxes	1,837	1,895
Cash surrender value of life insurance	3,565	3,441
Other assets	66	65
Total other assets	6,942	6,013
Total assets	52,330	55,275
Current liabilities:
Accounts payable and accrued expenses	9,292	12,524
Deferred revenue	3,111	1,197
Pension and retirement plans	340	340
Total current liabilities	12,743	14,061
Pension and retirement plans	5,634	6,168
Income taxes payable	694	709
Other noncurrent liabilities	584	535
Total liabilities	19,655	21,473
Commitments and contingencies
Shareholders’ equity:
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 4,137 and 4,017 shares, respectively	42	40
Additional paid-in capital	15,165	14,661
Retained earnings	28,291	29,926
Accumulated other comprehensive loss	(10,823)	(10,825)
Total shareholders’ equity	32,675	33,802
Total liabilities and shareholders’ equity	52,330	55,275
Net Investment in Lease, Noncurrent	477	564
Receivables, Long-term Contracts or Programs	$ 956	$ 0

XML

Consolidated Balance Sheets (Parentheticals) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2019	Sep. 30, 2018
Statement of Financial Position [Abstract]
Allowances (in Dollars)	$ 90	$ 87
Common stock par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	7,500	7,500
Common stock, shares issued	4,137	4,017
Common stock, shares outstanding	4,137	4,017

XML

Unaudited Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Sales:
Product	$ 13,603	$ 14,049	$ 29,314	$ 27,718
Services	2,747	2,555	6,016	5,516
Total sales	16,350	16,604	35,330	33,234
Cost of sales:
Product	11,371	11,667	24,583	22,947
Services	1,233	954	2,652	1,941
Total cost of sales	12,604	12,621	27,235	24,888
Gross profit	3,746	3,983	8,095	8,346
Operating expenses:
Engineering and development	781	759	1,526	1,457
Selling, general and administrative	3,736	4,088	7,325	7,588
Total operating expenses	4,517	4,847	8,851	9,045
Operating loss	(771)	(864)	(756)	(699)
Other income (expense):
Foreign exchange loss	(37)	(44)	(30)	(112)
Other income (expense), net	47	6	77	67
Total other income (expense)	10	(38)	47	(45)
Loss before income taxes	(761)	(902)	(709)	(744)
Income tax expense (benefit)	(142)	(200)	(140)	993
Net loss from continuing operations	(619)	(742)	(569)	(1,737)
Loss from discontinued operations, net of income tax benefit	0	148	0	(57)
Net loss from continuing operations	(619)	(594)	(569)	(1,794)
Net loss attributable to common stockholders	$ (619)	$ (594)	$ (569)	$ (1,794)
Income (Loss) from Continuing Operations, Per Basic Share	$ (0.15)	$ (0.20)	$ (0.15)	$ (0.46)
Discontinued Operation, Income (Loss) from Discontinued Operation, Net of Tax, Per Basic Share	0.00	0.04	0.00	(0.01)
Earnings Per Share, Basic	$ (0.15)	$ (0.16)	$ (0.15)	$ (0.47)
Weighted average shares outstanding – basic (in Shares)	4,015	3,823	3,898	3,795
Income (Loss) from Continuing Operations, Per Diluted Share	$ (0.15)	$ (0.20)	$ (0.15)	$ (0.46)
Discontinued Operation, Income (Loss) from Discontinued Operation, Net of Tax, Per Diluted Share	0.00	0.04	0.00	(0.01)
Earnings Per Share, Diluted	$ (0.15)	$ (0.16)	$ (0.15)	$ (0.47)
Weighted average shares outstanding – diluted (in Shares)	4,015	3,823	3,898	3,795

XML

Unaudited Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Statement of Comprehensive Income [Abstract]
Net loss	$ (619)	$ (594)	$ (569)	$ (1,794)
Other comprehensive loss:
Foreign currency translation gain (loss) adjustments	172	(86)	2	(90)
Other comprehensive income (loss)	172	(86)	2	(90)
Total comprehensive loss	$ (447)	$ (680)	$ (567)	$ (1,884)

XML

Unaudited Consolidated Statement of Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Capital Units [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance (in Shares) at Sep. 30, 2017		3,935
Beginning Balance at Sep. 30, 2017	$ 21,001	$ 40		$ 13,717	$ 17,407	$ (10,163)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(1,794)				(1,794)
Other comprehensive income	(90)					(90)
Exercise of stock options (in shares)		5
Exercise of stock options	22			22
Stock-based compensation	299			299
Restricted stock cancellation (in shares)		(13)
Restricted stock issuance (in shares)		71
Restricted stock issuance	1	$ 1
Issuance of shares under employee stock purchase plan (in shares)		8
Issuance of shares under employee stock purchase plan	78			78
Cash dividends paid on common stock	(878)				(878)
Ending Balance (in Shares) at Mar. 31, 2018		4,006
Ending Balance at Mar. 31, 2018	18,639	$ 41		14,116	14,735	(10,253)
Beginning Balance (in Shares) at Dec. 31, 2017		3,974
Beginning Balance at Dec. 31, 2017	19,490	$ 40		13,847	15,770	(10,167)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(594)				(594)
Other comprehensive income	(86)					(86)
Exercise of stock options (in shares)		4
Exercise of stock options	13			13
Stock-based compensation	178			178
Restricted stock issuance (in shares)		20
Restricted stock issuance	1	$ 1
Issuance of shares under employee stock purchase plan (in shares)		8
Issuance of shares under employee stock purchase plan	78			78
Cash dividends paid on common stock	(441)				(441)
Ending Balance (in Shares) at Mar. 31, 2018		4,006
Ending Balance at Mar. 31, 2018	$ 18,639	$ 41		14,116	14,735	(10,253)
Beginning Balance (in Shares) at Sep. 30, 2018	4,017	4,017
Beginning Balance at Sep. 30, 2018	$ 33,802	$ 40		14,661	29,926	(10,825)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(569)				(569)
Other comprehensive income	2					2
Exercise of stock options (in shares)		1
Exercise of stock options	4		$ 1	3
Stock-based compensation	384			384
Restricted stock issuance (in shares)		106
Restricted stock issuance	1	$ 1
Issuance of shares under employee stock purchase plan (in shares)		13
Issuance of shares under employee stock purchase plan	117			117
Cash dividends paid on common stock	$ (1,224)				(1,224)
Ending Balance (in Shares) at Mar. 31, 2019	4,137	4,137
Ending Balance at Mar. 31, 2019	$ 32,675	$ 42		15,165	28,291	(10,823)
Beginning Balance (in Shares) at Dec. 31, 2018		4,018
Beginning Balance at Dec. 31, 2018	33,419	$ 41		14,842	29,531	(10,995)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(619)				(619)
Other comprehensive income	172					172
Stock-based compensation	206			206
Restricted stock issuance (in shares)		106
Restricted stock issuance	1	$ 1
Issuance of shares under employee stock purchase plan (in shares)		13
Issuance of shares under employee stock purchase plan	117			117
Cash dividends paid on common stock	$ (621)				(621)
Ending Balance (in Shares) at Mar. 31, 2019	4,137	4,137
Ending Balance at Mar. 31, 2019	$ 32,675	$ 42		$ 15,165	$ 28,291	$ (10,823)

XML

Unaudited Consolidated Statement of Shareholders' Equity (Parentheticals) - $ / shares	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividends per share	$ 0.15	$ 0.11	$ 0.30	$ 0.22

XML

Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Cash flows used in operating activities:
Net loss	$ (569)	$ (1,794)
Loss from discontinued operations, net of income tax benefit	0	(57)
Net loss from continuing operations	(569)	(1,737)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	199	192
Amortization of intangibles	7	59
Loss on sale of fixed assets, net	0	(4)
Foreign exchange (gain) loss	30	112
Non-cash changes in accounts receivable	3	(8)
Non-cash changes in inventories	234	260
Stock-based compensation expense on stock options and restricted stock awards	384	300
Deferred income taxes	(99)	490
Increase in cash surrender value of life insurance	(54)	(34)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(3,319)	6,242
Decrease in life insurance receivable	256	0
Decrease in inventories	1,464	1,162
Increase in deferred costs	0	(225)
Increase in refundable income taxes	(75)	(598)
Increase in other current assets	(1,402)	(628)
Decrease in investment in lease	(46)	0
Increase in long term receivable	(956)	0
Decrease in accounts payable and accrued expenses	(3,214)	(6,353)
Increase in deferred revenue	2,124	486
Decrease in pension and retirement plans liabilities	(531)	(55)
Increase (decrease) in income taxes payable	(15)	328
Increase in other long term liabilities	184	4
Net cash provided by (used in) operating activities of continuing operations	(5,303)	1
Net cash used in operating activities of discontinued operations	0	(735)
Net cash used in operating activities	(5,303)	(734)
Cash flows used in investing activities:
Life insurance premiums paid	(70)	(150)
Purchases of property, equipment and improvements	(268)	(176)
Net Cash Provided by (Used in) Investing Activities, Continuing Operations	(338)	(326)
Cash Provided by (Used in) Investing Activities, Discontinued Operations	0	(129)
Net cash used in investing activities	(338)	(455)
Cash flows used in financing activities:
Dividends paid	(1,224)	(878)
Principal payments on capital leases	(136)	0
Proceeds from Issuance of Shares under Incentive and Share-based Compensation Plans, Including Stock Options	120	100
Net cash used in financing activities	(1,240)	(778)
Effects of exchange rate on cash	(38)	49
Net decrease in cash and cash equivalents	(6,919)	(1,918)
Cash and cash equivalents of continuing operations, beginning of period	25,107	10,421
Cash and cash equivalents of discontinued operations, beginning of period	0	3,464
Cash and cash equivalents, beginning of period	25,107	13,885
Cash and cash equivalents, end of period	18,188	11,967
Less: Cash and cash equivalents of discontinued operations at end of period	0	2,801
Cash and cash equivalents of continuing operations at end of period	18,188	9,166
Supplementary cash flow information:
Cash paid for income taxes	40	880
Cash paid for interest	67	72
Non-cash purchases of property and equipment	$ 15	$ 0

XML

Basis of Presentation

6 Months Ended

Mar. 31, 2019

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 consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, have been omitted.

Accordingly, the Company believes that although the disclosures are adequate to make the information presented not misleading, the unaudited consolidated 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, 2018.

Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to continuing operations. Refer to Note 12 for additional information on discontinued operations.

XML

Use of Estimates

6 Months Ended

Mar. 31, 2019

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. These estimates and assumptions are related to reserves for bad debt, reserves for inventory obsolescence, the impairment assessment of intangible assets, and the calculation of standalone selling price for revenue recognition, the calculation of liabilities related to deferred compensation and retirement plans and the calculation of income tax liabilities. Actual results may differ from those estimates under different assumptions or conditions.

XML

Revenue

6 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

Effective October 1, 2018, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. See Note 11 for effects of initial adoption. The following reflects the accounting policy change for revenue starting on the date of adoption:

We derive revenue from the sale of integrated hardware and software, third-party service contracts, professional services, managed services, financing of hardware and software, and other services.

We recognize revenue from hardware upon transfer of control, which is at a point in time typically upon shipment when title transfers. Revenue from software is recognized at a point in time when the license is granted.

We recognize revenue from third-party service contracts as either gross sales or net sales depending on whether the Company is acting as a principal party to the transaction or simply acting as an agent or broker based on control and timing. The Company is a principal if it controls the good or service before that good or service is transferred to the customer. We record revenue as gross when the Company is a principal party to the arrangement and net of cost when we are acting as a broker or agent. Under gross sales recognition, the entire selling price is recorded in revenue and our cost to the third-party service provider or vendor is recorded in cost of goods sold. Under net sales recognition, the cost to the third-party service provider or vendor is recorded as a reduction to revenue resulting in net sales equal to the gross profit on the transaction. Third-party service contracts are sold in different combinations with hardware, software, and services. We have determined the third-party services contracts are a single performance obligation in each sale. When the Company is an agent, revenue is typically recorded at a point in time. When the Company is the principal, revenue is recognized over the contract term.

Professional services generally include implementation, installation, and training services. Professional services are considered a series of distinct services that form one performance obligation and revenue is recognized over time as services are performed.

Revenue generated from managed services is recognized over the term of the contract. Certain managed services contracts include financing of hardware and software. Revenues from arrangements which include financing are allocated considering relative standalone selling prices of lease and non-lease components within the agreement. The lease components include the hardware and software, which are subject to ASC 840. The non-lease component includes the managed services and is subject to ASC 606.

Other services generally include revenue generated through our royalty, extended warranty, multicomputer repair, and maintenance contracts. Royalty revenue is sales-based and recognized on date of subsequent sale of the product, which occurs on the date of customer shipment. Revenue from extended warranty contracts is recognized evenly over the period of the warranty. Multicomputer repair services revenue is recognized upon control transfer when the customer takes possession of the computer at time of shipping.Revenue generated from maintenance services is recognized evenly over the term of the contract.

Variable consideration is immaterial. Any products sold with right to return exists with the manufacturer. Managed service contracts contain the right to refund if canceled within 30 days of inception. Any products with a standard warranty are treated as a warranty obligation under ASC 460, Guarantees.

The following policies are applicable to our major categories of segment revenue transactions:

HPP Segment Revenue

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

Myricom revenue is derived from the sale of products, which are comprised of both hardware and embedded software which is essential to the products functionality, and post contract maintenance and support. Post contract maintenance and support is considered immaterial in the context of the contract and therefore is not a separate performance obligation.

TS Segment Revenue

TS Segment revenue is derived from the sale of hardware, software, professional services, third-party service contracts, maintenance contracts, managed services, and financing of hardware and software. Financing revenue is recognized in accordance with ASC 840, Leases. Financing revenue is recorded in revenue as equipment leasing and is part of the Company's operations.

Third-party service contracts are evaluated to determine whether such service revenue should be recorded as gross sales or net and whether over time or at point in time.

See disaggregated revenues below by products/services and geography.

			Technology Solutions Segment
For the three months ended March 31,	High Performance Products Segment			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	1,375		$	1,888	$	10,303	$	12,191	$	13,566
Service	239			95		2,413		2,508		2,747
Finance *	—			—		37		37		37
Total sales	$	1,614		$	1,983	$	12,753	$	14,736	$	16,350

			Technology Solutions Segment
For the six months ended March 31,	High Performance Products Segment			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	3,108		$	3,620	$	22,513	$	26,133	$	29,241
Service	532			165		5,319		5,484		6,016
Finance *	—			—		73		73		73
Total sales	$	3,640		$	3,785	$	27,905	$	31,690	$	35,330

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

Significant Judgments

The input method using labor hours expended relative to the total expected hours is used to recognize revenue for professional services. Only the hours that depict the Company’s performance toward satisfying a performance obligation are used for progress. An estimate for professional services is made at the beginning of each contract based on prior experience and monitored throughout the services. This method is most appropriate as it depicts the measure of progress towards satisfaction of the performance obligation.

When product and services are sold together, the allocation of the transaction price to each performance obligation is calculated using a budgeted cost-plus margin approach. Due to the complex nature of these contracts, there is significant judgment in allocating the transaction price. These estimates are periodically reviewed by project managers, engineers, and other staff involved to ensure estimates are appropriate. For items sold separately, including hardware, software, professional services, maintenance contracts, other services, and third-party service contracts, there is no allocation performed as there is one performance obligation.

Contract Assets and Liabilities

When the Company has performed work but does not have an unconditional right to payment, a contract asset is recorded. When the Company has the right to bill a customer, accounts receivable is recorded as an unconditional right exists. Current contract assets were $708 thousand and $1.1 million as of March 31, 2019 and October 1, 2018, respectively. The current portion is recorded in other current assets on the consolidated balance sheets. There were no non-current contract assets as of March 31, 2019 and October 1, 2018. The difference in the balances is due to regular timing differences between when work is performed and having an unconditional right to payment.

Contract liabilities arise when payment is received before the Company transfers a good or service to the customer. Current contract liabilities were $3.1 million and $0.9 million as of March 31, 2019 and October 1, 2018, respectively. The primary reason for the increase is due to one large non-cancelable contract that was effective as of March 31, 2019. The current portion of contract liabilities is recorded in deferred revenue on the consolidated balance sheets. There were no non-current contract liabilities as of March 31, 2019 and October 1, 2018, respectively. Revenue recognized for the six months ended March 31, 2019 that was included in contract liabilities as of the beginning of the period was $0.5 million.

Contract Costs

Incremental costs of obtaining a contract involving customer transactions where the revenue and the related transfer of goods and services are less than a one-year period, are expensed as incurred, utilizing the practical expedient in ASC 340-40-25-4. For a period greater than one year, incremental contract costs are capitalized if the Company expects to recover these costs. These costs are only capitalized if the contract is obtained. The costs are amortized over the contract term and expected renewal periods. The period of amortization is generally three to six years. Incremental costs are related to commissions in the TS portion of the business. Current capitalized contract costs are within the account other current assets on the consolidated balance sheets for the periods ended March 31, 2019 and September 30, 2018. The portion of current capitalized costs was $79 thousand and $71 thousand as of March 31, 2019 and October 1, 2018, respectively. There are no non-current capitalized costs on the consolidated balance sheets. The amount of incremental costs amortized for the three and six months ended March 31, 2019 was $56 thousand and $108 thousand, which is recorded in selling, general, and administrative expenses. There was no impairment related to incremental costs capitalized during the three and six months ended March 31, 2019.

Costs to fulfill a contract are capitalized when the costs are related to a contract or anticipated contract, generate or enhance resources that will be used in satisfying performance obligations in the future, and costs are recoverable. Costs to fulfill a contract are related to the TS portion of the business and involve activities performed before managed services can be completed. Current capitalized fulfillment costs are in the account other current assets on the consolidated balance sheets. The portion of current capitalized costs was $52 thousand and $60 thousand as of March 31, 2019 and October 1, 2018, respectively. There are no non-current capitalized fulfillment costs on the consolidated balance sheets. The amount of fulfillment costs amortized for the three and six months ended March 31, 2019 was $5 thousand and $8 thousand, respectively, which is recorded in cost of sales. There was no impairment related to fulfillment costs capitalized.

Other

Projects are typically billed upon completion or at certain milestones. Product and services are typically billed when shipped or as services are being performed. Payment terms are typically 30 days to pay in full except in Europe where it could be up to 90 days. Most of the Company’s contracts are less than one year. As a practical expedient, the Company has elected not to adjust the amount of consideration for effects of a significant financing component when it is anticipated the promised good or service will be transferred and the subsequent payment will be one year or less. The Company elected to use the optional exemption to not disclose the aggregate amount of the transaction price allocated to performance obligations that have an original expected duration of one year or less. This is due to a low amount of performance obligations less than one year being unsatisfied at each period end. Most of these contracts are related to product sales.

The Company has certain contracts that have an original term of more than one year. The royalty agreement is longer than one year and managed service contracts are generally longer than one year. For these contracts the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2019 is mainly related to managed service contracts and is set forth in the table below:

	(Amounts in thousands)
Remainder of fiscal 2019	$	1,115
Fiscal 2020	1,964
Fiscal 2021	1,426
Fiscal 2022	65
Fiscal 2023 and after	48
	$	4,618

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Earnings Per Share of Common Stock

6 Months Ended

Mar. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

Basic net income (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) 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 (loss) 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 (loss) attributable to common stockholders are as follows:

	For the three months ended						For the six months ended
	March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
	(Amounts in thousands except per share data)
Loss from continuing operations	$	(619	)	$	(742	)	$	(569	)	$	(1,737	)
Income (loss) from discontinued operations	—			148			—			(57		)
Net loss	(619		)	(594		)	(569		)	(1,794		)
Less: net income attributable to nonvested common stock	—			—			—			—
Net loss attributable to common stockholders	$	(619	)	$	(594	)	$	(569	)	$	(1,794	)
Weighted average total shares outstanding – basic	4,015			3,823			3,898			3,795
Less: weighted average non-vested shares outstanding	—			—			—			—
Weighted average number of common shares outstanding – basic	4,015			3,823			3,898			3,795
Potential common shares from non-vested stock awards and the assumed exercise of stock options	—			—			—			—
Weighted average common shares outstanding – diluted	4,015			3,823			3,898			3,795
Net loss from continuing operations per share – basic	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – basic	$	—		$	0.04		$	—		$	(0.01	)
Net loss share – basic	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)
Net loss from continuing operations per share – diluted	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – diluted	$	—		$	0.04		$	—		$	(0.01	)
Net loss per share – diluted	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)

Non-vested restricted stock awards of 184,000 and 167,000shares were excluded from the diluted loss per share calculation for the three and six months ended March 31, 2019, as there was a net loss and their inclusion would have been anti-dilutive. Non-vested restricted stock awards of 168,000 and 169,000 shares were excluded from the diluted loss per share calculation for the three and six months ended March 31, 2018, as there was a net loss and their inclusion would have been anti-dilutive.

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Inventories

6 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consist of the following:

	March 31, 2019		September 30, 2018
	(Amounts in thousands)
Raw materials	$	1,053	$	1,098
Work-in-process	219		226
Finished goods	4,585		6,234
Total	$	5,857	$	7,558

Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met, of approximately $1.1 million and $0.7 million as of March 31, 2019 and September 30, 2018, respectively.

Total inventory balances in the table above are shown net of reserves for obsolescence of approximately $3.5 million and $3.3 million as of March 31, 2019 and September 30, 2018, respectively.

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Accumulated Other Comprehensive Loss

6 Months Ended

Mar. 31, 2019

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:

	March 31, 2019			September 30, 2018
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(4,344	)	$	(4,346	)
Cumulative unrealized loss on pension liability	(6,479		)	(6,479		)
Accumulated other comprehensive loss	$	(10,823	)	$	(10,825	)

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Income Taxes (Notes)

6 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense was $142 thousand for the three months ended March 31, 2019 compared to income tax benefit of $160 thousand in the same period of 2018 based on the loss for the periods. The income tax benefit for the six months ended March 31, 2019 was $140 thousand and tax expense for the same period of the prior year was $993 thousand due primarily to the enactment of the Tax Cuts and Jobs Act. The U.K. did not have any tax expense in the three months or six-months periods of fiscal year 2019 due to benefits from the pension contribution and utilization of a small portion of its net tax operating loss.

The provisions above are estimates, and accordingly, changes to these estimates will be recorded in subsequent periods as more information and guidance becomes available.

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Pension and Retirement Plans

6 Months Ended

Mar. 31, 2019

Retirement Benefits [Abstract]

Pension and Retirement Plans

Pension and Retirement Plans

The Company's continuing operations has defined benefit and defined contribution plans in the U.K. and in the U.S. The Company's discontinued operations had a defined benefit and defined contribution plan in Germany, which was assumed by Reply AG in its acquisition of the Company's operations in Germany (see Note 12 below). In the U.K., the Company provides defined benefit pension plans and defined contribution plans for some of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain former employees. The U.S. supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. The Company also provides for officer death benefits through post-retirement plans to certain officers of the Company in the U.S.  All of the Company’s defined benefit plans are closed to newly hired employees and have been since September 2009.

The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the consolidated balance sheets.

The Company's pension plan in the U.K. is the only plan with plan assets. The plan assets consist of an investment in a commingled fund which in turn comprises a diversified mix of assets including corporate equity securities, government securities and corporate debt securities. 

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

	For the Three Months Ended March 31,
	2019									2018
	U.K.			U.S.			Total			U.K.			U.S.			Total
	(Amounts in thousands)
Pension:
Interest cost	$	92		$	6		$	98		$	96		$	7		$	103
Expected return on plan assets	(78		)	—			(78		)	(79		)	—			(79		)
Amortization of:
Amortization of net gain (loss)	38			(1		)	37			46			(1		)	45
Net periodic benefit cost from continuing operations	52			5			57			63			6			69
Net periodic benefit cost from discontinued operations	—			—			—			53			—			53
Net periodic benefit cost	$	52		$	5		$	57		$	116		$	6		$	122
Post Retirement:
Service cost	$	—		$	9		$	9		$	—		$	10		$	10
Interest cost	—			13			13			—			12			12
Amortization of net loss	—			(5		)	(5		)	—			(4		)	(4		)
Net periodic cost	$	—		$	17		$	17		$	—		$	18		$	18
	For the Six Months Ended March 31,
	2019									2018
	U.K.			U.S.			Total			U.K.			U.S.			Total
	(Amounts in thousands)
Pension:
Interest cost	$	183		$	12		$	195		$	187		$	13		$	200
Expected return on plan assets	(155		)	—			(155		)	(154		)	—			(154		)
Amortization of net gain (loss)	76			(2		)	74			89			(1		)	88
Net periodic benefit cost from continuing operations	104			10			114			122			12			134
Net periodic benefit cost from discontinued operations	—			—			—			106			—			106
Net periodic benefit cost	$	104		$	10		$	114		$	228		$	12		$	240
Post Retirement:
Service cost	$	—		$	17		$	17		$	—		$	21		$	21
Interest cost	—			26			26			—			24			24
Amortization of net loss	—			(9		)	(9		)	—			(10		)	(10		)
Net periodic cost	$	—		$	34		$	34		$	—		$	35		$	35

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

	Fair Values as of
	March 31, 2019								September 30, 2018
	Fair Value Measurements Using Inputs Considered as								Fair Value Measurements Using Inputs Considered as
Asset Category	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(Amounts in thousands)
Cash on deposit	$	467	$	467	$	—	$	—	$	36	$	36	$	—	$	—
Pooled funds	8,290		8,290		—		—		8,234		8,234		—		—
Total plan assets	$	8,757	$	8,757	$	—	$	—	$	8,270	$	8,270	$	—	$	—

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Segment Information

6 Months Ended

Mar. 31, 2019

Segment Reporting [Abstract]

Segment Information

Segment Information

The following tables present certain operating segment information for the three and six months endedMarch 31, 2019 and March 31, 2018.

				Technology Solutions Segment
For the three months ended March 31,	High Performance Products Segment			United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	1,375		$	1,888		$	10,340	$	12,228	$	13,603
Service	239			95			2,413		2,508		2,747
Total sales	1,614			1,983			12,753		14,736		16,350
Income (loss) from operations	(1,093		)	106			216		322		(771		)
Total assets	12,583			13,222			26,525		39,747		52,330
Capital expenditures	37			—			—		—		37
Depreciation and amortization	55			1			44		45		100
2018
Sales:
Product	$	1,480		$	756		$	11,813	$	12,569	$	14,049
Service	315			115			2,125		2,240		2,555
Total sales	1,795			871			13,938		14,809		16,604
Income (loss) from operations	(1,057		)	(233		)	426		193		(864		)
Assets from continuing operations	15,036			2,792			16,338		19,130		34,166
Assets from discontinued operations	—			—			—		—		21,172
Total assets	15,036			2,792			16,338		19,130		55,338
Capital expenditures	36			—			96		96		132
Depreciation and amortization	57			1			69		70		127

				Technology Solutions Segment
For the six months ended March 31,	High Performance Products Segment				United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	3,108			$	3,620		$	22,586	$	26,206	$	29,314
Service	532				165			5,319		5,484		6,016
Total sales	3,640				3,785			27,905		31,690		35,330
Income (loss) from operations	(1,920		)		132			1,032		1,164		(756		)
Total assets	12,583				13,222			26,525		39,747		52,330
Capital expenditures	240				—			28		28		268
Depreciation and amortization	108				3			95		98		206
2018
Sales:
Product	$	3,087			$	3,298		$	21,333	$	24,631	$	27,718
Service	1,178				280			4,058		4,338		5,516
Total sales	4,265				3,578			25,391		28,969		33,234
Income (loss) from operations	(1,440		)		(91		)	832		741		(699		)
Assets from continuing operations	15,036				2,792			16,338		19,130		34,166
Assets from discontinued operations	—				—			—		—		21,172
Total assets	15,036				2,792			16,338		19,130		55,338
Capital expenditures	46				—			130		130		176
Depreciation and amortization	113				2			136		138		251

Income (loss) from operations consists of sales less cost of sales, engineering and development expenses, and selling, general and administrative expenses but is not affected by either other income/expense or by income taxes expense. 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 from continuing operations for the three and six months endedMarch 31, 2019, and 2018.

		For the three months ended March 31,								For the six months ended March 31,
		2019				2018				2019				2018
		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues
	(Dollar amounts in millions)
Customer A		$	1.1	7	%	$	2.7	16	%	$	1.5	4	%	$	3.9	12	%
Customer B		$	1.7	11	%	$	—	—	%	$	3.0	9	%	$	—	—	%
Customer C		$	1.7	10	%	$	0.3	2	%	$	3.3	9	%	$	0.6	2	%

Accounts receivable from Customers A and B were less than 10% of total consolidated accounts receivable as of March 31, 2019 and September 30, 2018. Accounts receivable from Customer C totaled approximately $3.3 million, or 20%, and approximately $0.2 million, or 3%, of total consolidated accounts receivable as of March 31, 2019 and September 30, 2018, respectively. Two additional customers, Customers D and E, accounted for accounts receivable of 10% or more as of March 31, 2019, but did not account for revenue of 10% or more for the three and six months ended March 31, 2019. Accounts receivable from Customer D totaled approximately $2.1 million, or 13%, of total consolidated accounts receivable as of March 31, 2019. Accounts receivable from Customer E totaled approximately $1.7 million, or 10% of total consolidated accounts receivable as of March 31, 2019. We believe that the Company is not exposed to any significant credit risk with respect to the accounts receivable with these customers as of March 31, 2019.

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Dividend

6 Months Ended

Mar. 31, 2019

Equity [Abstract]

Dividend

Dividends

On December 27, 2018, the Company's board of directors declared a cash dividend of $0.15 per share which was paid on January 22, 2019 to shareholders of record as of January 7, 2019, the record date.

On February 12, 2019, the Company's board of directors declared a cash dividend of $0.15 per share which was paid on March 14, 2019 to shareholders of record as of February 28, 2019, the record date.

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Recent Accounting Pronouncements

6 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Accounting standards recently adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. The standard also requires new, expanded disclosures regarding revenue recognition. The ASU replaces most existing revenue recognition guidance in GAAP. The new standard was adopted by the Company effective October 1, 2018 using the modified retrospective approach only to contracts that were not completed as of adoption date. The Company recognized the cumulative effect of initial application as an adjustment to the opening balance of retained earnings. This resulted in an increase of $158 thousand to retained earnings as of October 1, 2018. This was primarily due to revenue related to customer support in the HPP segment no longer being deferred, which resulted in a decrease of deferred revenue as part of the cumulative effect. Additionally, revenue from software sales is no longer being deferred under ASC 606 as recognition is now when control transfers to the customer. There were no previous period financial statement adjustments.

The effects of ASC 606 adoption for the Company for the condensed consolidated statements of operations and balance sheet are as follows:

	Three months ended March 31, 2019
	(Amounts in thousands, except per share amounts)
	As Reported			Balances without adoption of ASC 606			Effect of change Higher/(Lower)
Total sales	$	16,350		$	16,357		$	(7	)
Total cost of sales	12,604			12,603			1
Gross profit	3,746			3,754			(8		)
Operating loss	(771		)	(763		)	(8		)
Income tax benefit	(142		)	(136		)	(6		)
Net loss	(619		)	(617		)	(2		)
Net loss attributable to common stockholders	$	(619	)	$	(617	)	$	(2	)
Basic earnings per share	$	(0.15	)	$	(0.15	)	$	—
Diluted earnings per share	$	(0.15	)	$	(0.15	)	$	—

	Six months ended March 31, 2019
	(Amounts in thousands, except per share amounts)
	As Reported			Balances without adoption of ASC 606			Effect of change Higher/(Lower)
Total sales	$	35,330		$	35,231		$	99
Total cost of sales	27,235			27,103			132
Gross profit	8,095			8,128			(33		)
Operating loss	(756		)	(723		)	(33		)
Income tax benefit	(140		)	(133		)	(7		)
Net loss	(569		)	(543		)	(26		)
Net loss attributable to common stockholders	$	(569	)	$	(543	)	$	(26	)
Basic earnings per share	$	(0.15	)	$	(0.14	)	$	(0.01	)
Diluted earnings per share	$	(0.15	)	$	(0.14	)	$	(0.01	)

	As of March 31, 2019
	(Amounts in thousands)
	As Reported		Balances without adoption of ASC 606		Effect of change Higher/(Lower)
Assets:
Accounts receivable	$	16,456	$	16,274	$	182
Unbilled accounts receivable	—		782		(782		)
Inventories	5,857		6,178		(321		)
Other current assets	3,023		2,235		788
Deferred tax asset	1,837		1,903		(66		)
Liabilities:
Deferred revenue	$	3,111	$	3,442	$	(331	)
Shareholders' Equity:
Retained Earnings	$	28,291	$	28,159	$	132

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, an amendment of the FASB Accounting Standards Codification. This ASU will reduce diversity in practice for classifying cash payments and receipts in the statement of cash flows for a number of common transactions. It will also clarify when identifiable cash flows should be separated versus classified based on their predominant source or use. This ASU is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No. 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, an amendment of the FASB Accounting Standards Codification. This ASU requires the seller and buyer to recognize at the transaction date the current and deferred income tax consequences of intercompany asset transfers (except transfers of inventory). Under current GAAP, the seller and buyer defer the consolidated tax consequences of an intercompany asset transfer from the period of the transfer to a future period when the asset is transferred out of the consolidated group, or otherwise affects consolidated earnings. This standard will cause volatility in companies’ effective tax rates, particularly for those that transfer intangible assets to foreign subsidiaries. For public entities, the new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2017. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

In January 2017, FASB issued ASU No. 2017-01, BusinessCombinations Clarifying the Definition of a Business (Topic 805) (“ASU No. 2017-01”). ASU 2017-01 provides a framework to use in determining when a set of assets and activities is a business. ASU 2017-01 provides more consistency in applying the business combination guidance, reduces the costs of application, and makes the definition of a business more operable. ASU 2017-01 is effective for interim and annual periods within those annual periods beginning after December 15, 2017. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, Compensation Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, an amendment of the FASB Accounting Standards Codification. This ASU requires employers that sponsor defined benefit pension and/or other post-retirement benefit plans to report the service cost component of net benefit cost in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. Employers are required to present the other components of net benefit costs in the income statement separately from the service cost component and outside a subtotal of income from operations. Additionally, only the service cost component of net periodic pension cost will be eligible for asset capitalization. For public entities, the new standard is effective for annual periods beginning after December 15, 2017, including interim periods within that annual period. This ASU should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. Beginning October 1, 2018, the Company adopted the ASU and it did not have a material impact on our consolidated financial statements.

New accounting standards not adopted as of March 31, 2019

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), an amendment of the FASB Accounting Standards Codification. This ASU requires lessees to recognize a right-of-use asset and lease liability for most lease arrangements. The new standard is effective for the Company on October 1, 2019. The standard mandates a modified retrospective transition method for all entities and early adoption is permitted. The Company is evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which allow a reclassification from accumulated other comprehensive income (loss) (“AOCI”) to retained earnings for stranded tax effects resulting from the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts at the date of enactment of the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is evaluating the effect that ASU 2018-02 will have on its consolidated financial statements and related disclosures.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, an amendment of the FASB Accounting Standards Codification. Under this ASU companies will no longer be required to value non-employee awards differently from employee awards, but the accounting remains different for attribution and a contractual term election for valuing nonemployee equity share options. Equity-classified awards to nonemployees will now be measured at the grant date using fair value of the equity instruments the company is obligated to issue and recognition is associated with the probable outcome. Awards are subsequently measured using stock compensation guidance unless they are modified after the nonemployee stops providing goods or services. Existing disclosure requirements within the stock compensation guidance also apply to nonemployee awards. For public entities, the new standard is effective for annual periods beginning after December 15, 2018, including interim periods within that fiscal year. The Company is evaluating the effect that ASU 2018-07 will have on its consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20), Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, an amendment of the FASB Accounting Standards Codification. Under this ASU existing disclosures not considered cost beneficial are removed, disclosures identified as relevant are added, and there is added clarification regarding specific existing disclosures. For public entities, the new standard is effective for annual periods beginning after December 15, 2020. The Company is evaluating the effect that ASU 2018-14 will have on its consolidated financial statements and related disclosures.

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Discontinued Operations of TS Segment (Notes)

6 Months Ended

Mar. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations of TS Segment

Discontinued Operations of TS Segment

On July 31, 2018, CSPi LTD, a wholly owned indirect subsidiary of the Company, completed its sale of all of the outstanding stock of Modcomp GmbH, to Reply AG, an affiliate of Reply SpA, a holding company for a worldwide group of companies, pursuant to the terms of a Share Purchase and Assignment Agreement dated June 27, 2018. Modcomp GmbH, dba CSPI GmbH, through itself and its wholly owned subsidiaries, provided managed security services to customers primarily in Germany.

Upon the closing of the Share Purchase Agreement, Reply AG paid to CSPI total cash at closing of approximately $14.4 million, which consisted of the original purchase price of $11.7 million plus an adjustment at closing for Net Cash (as defined in the Share Purchase Agreement) of approximately $2.7 million. An additional €400 thousand is included in escrow and will be recorded if and when received by the Company. Accordingly, CSPi determined that the assets and liabilities of this reportable segment met the discontinued operations criteria in U.S. GAAP in the year ended September 30, 2018. The gain recorded due to the sale of all the stock of Modcomp GmbH was approximately $16.8 million. No income taxes were provided as the transaction was a tax-free exchange in the U.K. As such, Modcomp GmbH's results have been recorded as discontinued operations in the accompanying consolidated balance sheets and consolidated statements of operations for all periods presented.

Summarized Discontinued Operations Financial Information

The following table summarizes the results of discontinued operations for the three and six months ended March 31, 2019, and March 31, 2018:

	For the three months ended				For the six months ended
	March 31, 2019		March 31, 2018		March 31, 2019		March 31, 2018
	(Amounts in thousands)
Sales	$	—	$	5,378	$	—	$	10,747
Cost of sales	—		4,431		—		9,030
Gross profit	—		947		—		1,717
Selling, general and administrative expenses	—		806		—		1,734
Operating income (loss)	—		141		—		(17		)
Other income (expenses)	—		39		—		(59		)
Income (loss) before income taxes	—		180		—		(76		)
Income tax expense (benefit)	—		32		—		(19		)
Income (loss) from discontinued operations, net of tax	$	—	$	148	$	—	$	(57	)

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Revenue (Tables)

6 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregated Revenue

See disaggregated revenues below by products/services and geography.

			Technology Solutions Segment
For the three months ended March 31,	High Performance Products Segment			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	1,375		$	1,888	$	10,303	$	12,191	$	13,566
Service	239			95		2,413		2,508		2,747
Finance *	—			—		37		37		37
Total sales	$	1,614		$	1,983	$	12,753	$	14,736	$	16,350

			Technology Solutions Segment
For the six months ended March 31,	High Performance Products Segment			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	3,108		$	3,620	$	22,513	$	26,133	$	29,241
Service	532			165		5,319		5,484		6,016
Finance *	—			—		73		73		73
Total sales	$	3,640		$	3,785	$	27,905	$	31,690	$	35,330

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction

For these contracts the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied or partially unsatisfied as of March 31, 2019 is mainly related to managed service contracts and is set forth in the table below:

	(Amounts in thousands)
Remainder of fiscal 2019	$	1,115
Fiscal 2020	1,964
Fiscal 2021	1,426
Fiscal 2022	65
Fiscal 2023 and after	48
	$	4,618

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Earnings Per Share of Common Stock (Tables)

6 Months Ended

Mar. 31, 2019

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 (loss) attributable to common stockholders are as follows:

	For the three months ended						For the six months ended
	March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
	(Amounts in thousands except per share data)
Loss from continuing operations	$	(619	)	$	(742	)	$	(569	)	$	(1,737	)
Income (loss) from discontinued operations	—			148			—			(57		)
Net loss	(619		)	(594		)	(569		)	(1,794		)
Less: net income attributable to nonvested common stock	—			—			—			—
Net loss attributable to common stockholders	$	(619	)	$	(594	)	$	(569	)	$	(1,794	)
Weighted average total shares outstanding – basic	4,015			3,823			3,898			3,795
Less: weighted average non-vested shares outstanding	—			—			—			—
Weighted average number of common shares outstanding – basic	4,015			3,823			3,898			3,795
Potential common shares from non-vested stock awards and the assumed exercise of stock options	—			—			—			—
Weighted average common shares outstanding – diluted	4,015			3,823			3,898			3,795
Net loss from continuing operations per share – basic	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – basic	$	—		$	0.04		$	—		$	(0.01	)
Net loss share – basic	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)
Net loss from continuing operations per share – diluted	$	(0.15	)	$	(0.20	)	$	(0.15	)	$	(0.46	)
Net income (loss) from discontinued operations per share – diluted	$	—		$	0.04		$	—		$	(0.01	)
Net loss per share – diluted	$	(0.15	)	$	(0.16	)	$	(0.15	)	$	(0.47	)

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Inventories (Tables)

6 Months Ended

Mar. 31, 2019

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Inventories consist of the following:

	March 31, 2019		September 30, 2018
	(Amounts in thousands)
Raw materials	$	1,053	$	1,098
Work-in-process	219		226
Finished goods	4,585		6,234
Total	$	5,857	$	7,558

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Mar. 31, 2019

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive loss are as follows:

	March 31, 2019			September 30, 2018
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(4,344	)	$	(4,346	)
Cumulative unrealized loss on pension liability	(6,479		)	(6,479		)
Accumulated other comprehensive loss	$	(10,823	)	$	(10,825	)

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Pension and Retirement Plans (Tables)

6 Months Ended

Mar. 31, 2019

Retirement Benefits [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

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

	Fair Values as of
	March 31, 2019								September 30, 2018
	Fair Value Measurements Using Inputs Considered as								Fair Value Measurements Using Inputs Considered as
Asset Category	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
	(Amounts in thousands)
Cash on deposit	$	467	$	467	$	—	$	—	$	36	$	36	$	—	$	—
Pooled funds	8,290		8,290		—		—		8,234		8,234		—		—
Total plan assets	$	8,757	$	8,757	$	—	$	—	$	8,270	$	8,270	$	—	$	—

Schedule of Net Benefit Costs

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

	For the Three Months Ended March 31,
	2019									2018
	U.K.			U.S.			Total			U.K.			U.S.			Total
	(Amounts in thousands)
Pension:
Interest cost	$	92		$	6		$	98		$	96		$	7		$	103
Expected return on plan assets	(78		)	—			(78		)	(79		)	—			(79		)
Amortization of:
Amortization of net gain (loss)	38			(1		)	37			46			(1		)	45
Net periodic benefit cost from continuing operations	52			5			57			63			6			69
Net periodic benefit cost from discontinued operations	—			—			—			53			—			53
Net periodic benefit cost	$	52		$	5		$	57		$	116		$	6		$	122
Post Retirement:
Service cost	$	—		$	9		$	9		$	—		$	10		$	10
Interest cost	—			13			13			—			12			12
Amortization of net loss	—			(5		)	(5		)	—			(4		)	(4		)
Net periodic cost	$	—		$	17		$	17		$	—		$	18		$	18
	For the Six Months Ended March 31,
	2019									2018
	U.K.			U.S.			Total			U.K.			U.S.			Total
	(Amounts in thousands)
Pension:
Interest cost	$	183		$	12		$	195		$	187		$	13		$	200
Expected return on plan assets	(155		)	—			(155		)	(154		)	—			(154		)
Amortization of net gain (loss)	76			(2		)	74			89			(1		)	88
Net periodic benefit cost from continuing operations	104			10			114			122			12			134
Net periodic benefit cost from discontinued operations	—			—			—			106			—			106
Net periodic benefit cost	$	104		$	10		$	114		$	228		$	12		$	240
Post Retirement:
Service cost	$	—		$	17		$	17		$	—		$	21		$	21
Interest cost	—			26			26			—			24			24
Amortization of net loss	—			(9		)	(9		)	—			(10		)	(10		)
Net periodic cost	$	—		$	34		$	34		$	—		$	35		$	35

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Segment Information (Tables)

6 Months Ended

Mar. 31, 2019

Operating Segment Information

Segment Reporting Information [Line Items]

Schedule of Revenue by Major Customers by Reporting Segments

The following tables present certain operating segment information for the three and six months endedMarch 31, 2019 and March 31, 2018.

				Technology Solutions Segment
For the three months ended March 31,	High Performance Products Segment			United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	1,375		$	1,888		$	10,340	$	12,228	$	13,603
Service	239			95			2,413		2,508		2,747
Total sales	1,614			1,983			12,753		14,736		16,350
Income (loss) from operations	(1,093		)	106			216		322		(771		)
Total assets	12,583			13,222			26,525		39,747		52,330
Capital expenditures	37			—			—		—		37
Depreciation and amortization	55			1			44		45		100
2018
Sales:
Product	$	1,480		$	756		$	11,813	$	12,569	$	14,049
Service	315			115			2,125		2,240		2,555
Total sales	1,795			871			13,938		14,809		16,604
Income (loss) from operations	(1,057		)	(233		)	426		193		(864		)
Assets from continuing operations	15,036			2,792			16,338		19,130		34,166
Assets from discontinued operations	—			—			—		—		21,172
Total assets	15,036			2,792			16,338		19,130		55,338
Capital expenditures	36			—			96		96		132
Depreciation and amortization	57			1			69		70		127

				Technology Solutions Segment
For the six months ended March 31,	High Performance Products Segment				United Kingdom			U.S.		Total		Consolidated Total
	(Amounts in thousands)
2019
Sales:
Product	$	3,108			$	3,620		$	22,586	$	26,206	$	29,314
Service	532				165			5,319		5,484		6,016
Total sales	3,640				3,785			27,905		31,690		35,330
Income (loss) from operations	(1,920		)		132			1,032		1,164		(756		)
Total assets	12,583				13,222			26,525		39,747		52,330
Capital expenditures	240				—			28		28		268
Depreciation and amortization	108				3			95		98		206
2018
Sales:
Product	$	3,087			$	3,298		$	21,333	$	24,631	$	27,718
Service	1,178				280			4,058		4,338		5,516
Total sales	4,265				3,578			25,391		28,969		33,234
Income (loss) from operations	(1,440		)		(91		)	832		741		(699		)
Assets from continuing operations	15,036				2,792			16,338		19,130		34,166
Assets from discontinued operations	—				—			—		—		21,172
Total assets	15,036				2,792			16,338		19,130		55,338
Capital expenditures	46				—			130		130		176
Depreciation and amortization	113				2			136		138		251

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 from continuing operations for the three and six months endedMarch 31, 2019, and 2018.

		For the three months ended March 31,								For the six months ended March 31,
		2019				2018				2019				2018
		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues		Customer Revenues		% of Total Revenues
	(Dollar amounts in millions)
Customer A		$	1.1	7	%	$	2.7	16	%	$	1.5	4	%	$	3.9	12	%
Customer B		$	1.7	11	%	$	—	—	%	$	3.0	9	%	$	—	—	%
Customer C		$	1.7	10	%	$	0.3	2	%	$	3.3	9	%	$	0.6	2	%

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Recent Accounting Pronouncements (Tables)

6 Months Ended

Mar. 31, 2019

Accounting Policies [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The effects of ASC 606 adoption for the Company for the condensed consolidated statements of operations and balance sheet are as follows:

	Three months ended March 31, 2019
	(Amounts in thousands, except per share amounts)
	As Reported			Balances without adoption of ASC 606			Effect of change Higher/(Lower)
Total sales	$	16,350		$	16,357		$	(7	)
Total cost of sales	12,604			12,603			1
Gross profit	3,746			3,754			(8		)
Operating loss	(771		)	(763		)	(8		)
Income tax benefit	(142		)	(136		)	(6		)
Net loss	(619		)	(617		)	(2		)
Net loss attributable to common stockholders	$	(619	)	$	(617	)	$	(2	)
Basic earnings per share	$	(0.15	)	$	(0.15	)	$	—
Diluted earnings per share	$	(0.15	)	$	(0.15	)	$	—

	Six months ended March 31, 2019
	(Amounts in thousands, except per share amounts)
	As Reported			Balances without adoption of ASC 606			Effect of change Higher/(Lower)
Total sales	$	35,330		$	35,231		$	99
Total cost of sales	27,235			27,103			132
Gross profit	8,095			8,128			(33		)
Operating loss	(756		)	(723		)	(33		)
Income tax benefit	(140		)	(133		)	(7		)
Net loss	(569		)	(543		)	(26		)
Net loss attributable to common stockholders	$	(569	)	$	(543	)	$	(26	)
Basic earnings per share	$	(0.15	)	$	(0.14	)	$	(0.01	)
Diluted earnings per share	$	(0.15	)	$	(0.14	)	$	(0.01	)

	As of March 31, 2019
	(Amounts in thousands)
	As Reported		Balances without adoption of ASC 606		Effect of change Higher/(Lower)
Assets:
Accounts receivable	$	16,456	$	16,274	$	182
Unbilled accounts receivable	—		782		(782		)
Inventories	5,857		6,178		(321		)
Other current assets	3,023		2,235		788
Deferred tax asset	1,837		1,903		(66		)
Liabilities:
Deferred revenue	$	3,111	$	3,442	$	(331	)
Shareholders' Equity:
Retained Earnings	$	28,291	$	28,159	$	132

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Discontinued Operations of TS Segment (Tables)

6 Months Ended

Mar. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations

The following table summarizes the results of discontinued operations for the three and six months ended March 31, 2019, and March 31, 2018:

	For the three months ended				For the six months ended
	March 31, 2019		March 31, 2018		March 31, 2019		March 31, 2018
	(Amounts in thousands)
Sales	$	—	$	5,378	$	—	$	10,747
Cost of sales	—		4,431		—		9,030
Gross profit	—		947		—		1,717
Selling, general and administrative expenses	—		806		—		1,734
Operating income (loss)	—		141		—		(17		)
Other income (expenses)	—		39		—		(59		)
Income (loss) before income taxes	—		180		—		(76		)
Income tax expense (benefit)	—		32		—		(19		)
Income (loss) from discontinued operations, net of tax	$	—	$	148	$	—	$	(57	)

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Revenue - Narrative (Details) - USD ($)		6 Months Ended
	Oct. 01, 2018	Mar. 31, 2019	Sep. 30, 2018
Capitalized Contract Cost [Line Items]
Managed service contracts, right to refund, period		30 days
Current contract assets	$ 1,100,000	$ 708,000
Current contract liabilities	900,000	3,100,000
Revenue recognized included in contract liabilities		500,000
Non-current contract liabilities	0	0
Current capitalized costs	71,000		$ 79,000
Incremental costs amortized	108,000	56,000
Impairment related to incremental costs capitalized		$ 0
Payments terms		30 days
Europe
Capitalized Contract Cost [Line Items]
Payments terms		90 days
Total
Capitalized Contract Cost [Line Items]
Current capitalized costs	60,000	$ 52,000
Incremental costs amortized	$ 8,000	5,000
Impairment related to incremental costs capitalized		$ 0

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Revenue - Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2019	Mar. 31, 2019
Revenue from External Customer [Line Items]
Sales	$ 16,350	$ 35,330
Product
Revenue from External Customer [Line Items]
Sales	13,566	29,241
Service
Revenue from External Customer [Line Items]
Sales	2,747	6,016
Finance
Revenue from External Customer [Line Items]
Sales	37	73
High Performance Products Segment
Revenue from External Customer [Line Items]
Sales	1,614	3,640
High Performance Products Segment | Product
Revenue from External Customer [Line Items]
Sales	1,375	3,108
High Performance Products Segment | Service
Revenue from External Customer [Line Items]
Sales	239	532
High Performance Products Segment | Finance
Revenue from External Customer [Line Items]
Sales	0	0
United Kingdom
Revenue from External Customer [Line Items]
Sales	1,983	3,785
United Kingdom | Product
Revenue from External Customer [Line Items]
Sales	1,888	3,620
United Kingdom | Service
Revenue from External Customer [Line Items]
Sales	95	165
United Kingdom | Finance
Revenue from External Customer [Line Items]
Sales	0	0
U.S.
Revenue from External Customer [Line Items]
Sales	12,753	27,905
U.S. | Product
Revenue from External Customer [Line Items]
Sales	10,303	22,513
U.S. | Service
Revenue from External Customer [Line Items]
Sales	2,413	5,319
U.S. | Finance
Revenue from External Customer [Line Items]
Sales	37	73
Total
Revenue from External Customer [Line Items]
Sales	14,736	31,690
Total | Product
Revenue from External Customer [Line Items]
Sales	12,191	26,133
Total | Service
Revenue from External Customer [Line Items]
Sales	2,508	5,484
Total | Finance
Revenue from External Customer [Line Items]
Sales	$ 37	$ 73

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Revenue - Performance Obligations (Details) $ in Thousands	6 Months Ended
	Mar. 31, 2019 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation amount	$ 4,618
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-04-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation amount	$ 1,115
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation amount	$ 1,964
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation amount	$ 1,426
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	2 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-10-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation amount	$ 65
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	3 years
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-10-01
Revenue from Contract with Customer [Abstract]
Remaining performance obligation amount	$ 48
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	4 years

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Earnings Per Share of Common Stock (Detail) - shares	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Weighted Average Number Diluted Shares Outstanding Adjustment	184,000	168,000	167,000	169,000

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Earnings Per Share of Common Stock (Detail) - Basic and diluted earnings per share computations - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Earnings Per Share [Abstract]
Weighted Average Number Diluted Shares Outstanding Adjustment	184,000	168,000	167,000	169,000
Net loss from continuing operations	$ (619)	$ (594)	$ (569)	$ (1,794)
Net loss from continuing operations	(619)	(742)	(569)	(1,737)
Loss from discontinued operations, net of income tax benefit	0	148	0	(57)
Less: Net income attributable to nonvested common stock (in Dollars)	0	0	0	0
Net income attributable to common stockholders (in Dollars)	$ (619)	$ (594)	$ (569)	$ (1,794)
Weighted average total shares outstanding – basic	4,015,000	3,823,000	3,898,000	3,795,000
Less: weighted average non-vested shares outstanding	0	0	0	0
Weighted average number of common shares outstanding – basic	4,015,000	3,823,000	3,898,000	3,795,000
Potential common shares from non-vested stock awards and the assumed exercise of stock options	0	0	0	0
Weighted average common shares outstanding – diluted	4,015,000	3,823,000	3,898,000	3,795,000
Income (Loss) from Continuing Operations, Per Basic Share	$ (0.15)	$ (0.20)	$ (0.15)	$ (0.46)
Discontinued Operation, Income (Loss) from Discontinued Operation, Net of Tax, Per Basic Share	0.00	0.04	0.00	(0.01)
Earnings Per Share, Basic	(0.15)	(0.16)	(0.15)	(0.47)
Income (Loss) from Continuing Operations, Per Diluted Share	(0.15)	(0.20)	(0.15)	(0.46)
Discontinued Operation, Income (Loss) from Discontinued Operation, Net of Tax, Per Diluted Share	0.00	0.04	0.00	(0.01)
Earnings Per Share, Diluted	$ (0.15)	$ (0.16)	$ (0.15)	$ (0.47)

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Inventories (Detail) - USD ($) $ in Millions	Mar. 31, 2019	Sep. 30, 2018
Inventory Disclosure [Abstract]
Finished goods inventory that has been shipped, but for which all revenue recognition criteria has not been met	$ 1.1	$ 0.7
Reservce for obsolescence	$ 3.5	$ 3.3

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Inventories (Detail) - Inventories - USD ($) $ in Thousands	Mar. 31, 2019	Sep. 30, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 1,053	$ 1,098
Work-in-process	219	226
Finished goods	4,585	6,234
Total	$ 5,857	$ 7,558

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Accumulated Other Comprehensive Loss (Detail) - Components of Accumulated Other Comprehensive Loss - USD ($) $ in Thousands	Mar. 31, 2019	Sep. 30, 2018
Equity [Abstract]
Cumulative effect of foreign currency translation	$ (4,344)	$ (4,346)
Cumulative unrealized loss on pension liability	(6,479)	(6,479)
Accumulated other comprehensive loss	$ (10,823)	$ (10,825)

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Income Tax Disclosure [Abstract]
Income tax expense	$ (142)	$ (200)	$ (140)	$ 993

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Pension and Retirement Plans (Detail) - Components of net periodic benefit costs - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Pension:
Pension:
Interest cost	$ 98	$ 103	$ 195	$ 200
Expected return on plan assets	(78)	(79)	(155)	(154)
Amortization of:
Amortization of net gain (loss)	(37)	(45)	74	88
Net periodic benefit cost from continuing operations	57	122	114	240
Post Retirement:
Pension:
Service cost	9	10	17	21
Interest cost	13	12	26	24
Amortization of:
Amortization of net gain (loss)	(5)	(4)	(9)	(10)
Net periodic benefit cost from continuing operations	17	18	34	35
U.K. | Pension:
Pension:
Interest cost	92	96	183	187
Expected return on plan assets	(78)	(79)	(155)	(154)
Amortization of:
Amortization of net gain (loss)	(38)	(46)	76	89
Net periodic benefit cost from continuing operations	52	116	104	228
U.K. | Post Retirement:
Pension:
Service cost	0	0	0	0
Interest cost	0	0	0	0
Amortization of:
Amortization of net gain (loss)	0	0	0	0
Net periodic benefit cost from continuing operations	0	0	0	0
U.S. | Pension:
Pension:
Interest cost	6	7	12	13
Expected return on plan assets	0	0	0	0
Amortization of:
Amortization of net gain (loss)	1	1	(2)	(1)
Net periodic benefit cost from continuing operations	5	6	10	12
U.S. | Post Retirement:
Pension:
Service cost	9	10	17	21
Interest cost	13	12	26	24
Amortization of:
Amortization of net gain (loss)	(5)	(4)	(9)	(10)
Net periodic benefit cost from continuing operations	17	18	34	35
Continuing Operations | Pension:
Amortization of:
Net periodic benefit cost from continuing operations	57	69	114	134
Continuing Operations | U.K. | Pension:
Amortization of:
Net periodic benefit cost from continuing operations	52	63	104	122
Continuing Operations | U.S. | Pension:
Amortization of:
Net periodic benefit cost from continuing operations	5	6	10	12
Discontinued Operations | Pension:
Amortization of:
Net periodic benefit cost from continuing operations	0	53	0	106
Discontinued Operations | U.K. | Pension:
Amortization of:
Net periodic benefit cost from continuing operations	0	53	0	106
Discontinued Operations | U.S. | Pension:
Amortization of:
Net periodic benefit cost from continuing operations	$ 0	$ 0	$ 0	$ 0

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Pension and Retirement Plans Fair value of the assets held by the UK pension plan by asset catagory (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Sep. 30, 2018
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 8,757	$ 8,270
Cash On Deposit [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	467	36
Pooled Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	8,290	8,234
Level 1
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	8,757	8,270
Level 1 | Cash On Deposit [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	467	36
Level 1 | Pooled Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	8,290	8,234
Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 2 [Member] | Cash On Deposit [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 2 [Member] | Pooled Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Cash On Deposit [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	0	0
Fair Value, Inputs, Level 3 [Member] | Pooled Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Fair Value of Plan Assets	$ 0	$ 0

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Segment Information (Detail) - The following table presents certain operating segment information - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018	Sep. 30, 2018
Segment Reporting Information [Line Items]
Product	$ 13,603	$ 14,049	$ 29,314	$ 27,718
Services	2,747	2,555	6,016	5,516
Total sales	16,350	16,604	35,330	33,234
Sales:
Income (loss) from operations	(771)	(864)	(756)	(699)
Assets from continuing operations	52,330	55,338	52,330	55,338	$ 55,275
Disposal Group, Including Discontinued Operation, Assets		21,172		21,172
Capital expenditures	37	132	268	176
Depreciation and amortization	100	127	206	251
High Performance Products Segment
Segment Reporting Information [Line Items]
Product	1,375	1,480	3,108	3,087
Services	239	315	532	1,178
Total sales	1,614	1,795	3,640	4,265
Sales:
Income (loss) from operations	(1,093)	(1,057)	(1,920)	(1,440)
Assets from continuing operations	12,583	15,036	12,583	15,036
Capital expenditures	37	36	240	46
Depreciation and amortization	55	57	108	113
United Kingdom
Segment Reporting Information [Line Items]
Product	1,888	756	3,620	3,298
Services	95	115	165	280
Total sales	1,983	871	3,785	3,578
Sales:
Income (loss) from operations	106	(233)	132	(91)
Assets from continuing operations	13,222	2,792	13,222	2,792
Capital expenditures	0	0	0	0
Depreciation and amortization	1	1	3	2
U.S.
Segment Reporting Information [Line Items]
Product	10,340	11,813	22,586	21,333
Services	2,413	2,125	5,319	4,058
Total sales	12,753	13,938	27,905	25,391
Sales:
Income (loss) from operations	216	426	1,032	832
Assets from continuing operations	26,525	16,338	26,525	16,338
Capital expenditures	0	96	28	130
Depreciation and amortization	44	69	95	136
Total
Segment Reporting Information [Line Items]
Product	12,228	12,569	26,206	24,631
Services	2,508	2,240	5,484	4,338
Total sales	14,736	14,809	31,690	28,969
Sales:
Income (loss) from operations	322	193	1,164	741
Assets from continuing operations	39,747	19,130	39,747	19,130
Capital expenditures	0	96	28	130
Depreciation and amortization	$ 45	70	$ 98	138
Continuing Operations
Sales:
Assets from continuing operations		34,166		34,166
Continuing Operations | High Performance Products Segment
Sales:
Assets from continuing operations		15,036		15,036
Continuing Operations | United Kingdom
Sales:
Assets from continuing operations		2,792		2,792
Continuing Operations | U.S.
Sales:
Assets from continuing operations		16,338		16,338
Continuing Operations | Total
Sales:
Assets from continuing operations		$ 19,130		$ 19,130

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Segment Information (Detail) - Major customers - Customer Concentration Risk - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018	Sep. 30, 2018
Customer A | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Customer Revenues	$ 1.1	$ 2.7	$ 1.5	$ 3.9
% of Total Revenues	7.00%	16.00%	4.00%	12.00%
Customer B | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Customer Revenues	$ 1.7	$ 0.0	$ 3.0	$ 0.0
% of Total Revenues	11.00%	0.00%	9.00%	0.00%
Customer C | Sales Revenue, Net [Member]
Segment Reporting Information [Line Items]
Customer Revenues	$ 1.7	$ 0.3	$ 3.3	$ 0.6
% of Total Revenues	10.00%	2.00%	9.00%	2.00%
Customer C | Accounts Receivable
Segment Reporting Information [Line Items]
% of Total Revenues			20.00%		3.00%
Accounts receivable, gross	$ 3.3		$ 3.3		$ 0.2
Customer D | Accounts Receivable
Segment Reporting Information [Line Items]
% of Total Revenues			13.00%
Accounts receivable, gross	2.1		$ 2.1
Customer E | Accounts Receivable
Segment Reporting Information [Line Items]
% of Total Revenues			10.00%
Accounts receivable, gross	$ 1.7		$ 1.7

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Dividend (Detail) - $ / shares	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018
Equity [Abstract]
Common Stock, Dividends, Per Share, Cash Paid	$ 0.15
Dividends per share	$ 0.15	$ 0.11	$ 0.30	$ 0.22

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Recent Accounting Pronouncements - Condensed Consolidated Statements of Operations and Balance Sheets (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Mar. 31, 2019	Mar. 31, 2018	Oct. 01, 2018	Sep. 30, 2018
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Cumulative effect of initial application					$ 158
Income Statement [Abstract]
Total sales	$ 16,350		$ 35,330
Total cost of sales	12,604	$ 12,621	27,235	$ 24,888
Gross profit	3,746	3,983	8,095	8,346
Operating loss	(771)	(864)	(756)	(699)
Income tax expense (benefit)	(142)	(200)	(140)	993
Net loss	(619)	(742)	(569)	(1,737)
Net loss attributable to common stockholders	$ (619)	$ (594)	$ (569)	$ (1,794)
Basic earnings per share (usd per share)	$ (0.15)	$ (0.16)	$ (0.15)	$ (0.47)
Diluted earnings per share (usd per share)	$ (0.15)	$ (0.16)	$ (0.15)	$ (0.47)
Assets:
Accounts receivable	$ 16,456		$ 16,456			$ 11,980
Unbilled accounts receivable	0		0			1,166
Inventories	5,857		5,857			7,558
Other current assets	3,023		3,023			1,878
Deferred tax asset	1,837		1,837			1,895
Liabilities:
Deferred revenue	3,111		3,111
Shareholders' Equity:
Retained earnings	28,291		28,291			$ 29,926
Balances without adoption of ASC 606
Income Statement [Abstract]
Total sales	16,357		35,231
Total cost of sales	12,603		27,103
Gross profit	3,754		8,128
Operating loss	(763)		(723)
Income tax expense (benefit)	(136)		(133)
Net loss	(617)		(543)
Net loss attributable to common stockholders	$ (617)		$ (543)
Basic earnings per share (usd per share)	$ 0		$ 0
Diluted earnings per share (usd per share)	$ 0		$ 0
Assets:
Accounts receivable	$ 16,274		$ 16,274
Unbilled accounts receivable	782		782
Inventories	6,178		6,178
Other current assets	2,235		2,235
Deferred tax asset	1,903		1,903
Liabilities:
Deferred revenue	3,442		3,442
Shareholders' Equity:
Retained earnings	28,159		28,159
Effect of change Higher/(Lower) | Accounting Standards Update 2014-09
Income Statement [Abstract]
Total sales	(7)		99
Total cost of sales	1		132
Gross profit	(8)		(33)
Operating loss	(8)		(33)
Income tax expense (benefit)	(6)		(7)
Net loss	(2)		(26)
Net loss attributable to common stockholders	$ (2)		$ (26)
Basic earnings per share (usd per share)	$ 0		$ 0
Diluted earnings per share (usd per share)	$ 0		$ 0
Assets:
Accounts receivable	$ 182		$ 182
Unbilled accounts receivable	(782)		(782)
Inventories	(321)		(321)
Other current assets	788		788
Deferred tax asset	(66)		(66)
Liabilities:
Deferred revenue	(331)		(331)
Shareholders' Equity:
Retained earnings	$ 132		$ 132
Retained Earnings | Accounting Standards Update 2014-09
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Cumulative effect of initial application					$ 158

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Discontinued Operations of TS Segment (Details) - Modcom GmbH € in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
	Jul. 31, 2018 USD ($)	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Jul. 31, 2018 EUR (€)
Disposal Group, Not Discontinued Operations
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Cash at closing	$ 0
Original purchase price	11,700
Adjustment at closing	2,700
Amount in escrow | €						€ 400
Gain recorded due to sale of stock	$ 16,800
Discontinued Operations, Held-for-sale
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract]
Sales		$ 0	$ 5,378	$ 0	$ 10,747
Cost of sales		0	4,431	0	9,030
Gross profit		0	947	0	1,717
Selling, general and administrative expenses		0	806	0	1,734
Operating income (loss)		0	141	0	(17)
Other income (expenses)		0		0	(59)
Disposal Group, Including Discontinued Operation, Other Income			39
Income (loss) before income taxes		0	180	0	(76)
Income tax expense (benefit)		0	32	0	(19)
Income (loss) from discontinued operations, net of tax		$ 0	$ 148	$ 0	$ (57)