Csp Inc 10-Q for FY2022 Q3

Csp Inc (CSPI)

10-Q 2022-08-10 For: 2022-06-30

Added on April 11, 2026

About this 10-Q

Csp Inc filed this 10-Q on August 10, 2022, covering the quarter ended June 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $13.33M; down 2.9% from $13.72M a year earlier
Net income: $684K; compared with a net loss of $423K a year earlier
Diluted EPS: $0.15; compared with -$0.10 a year earlier

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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)



Large accelerated filer	◻	Accelerated filer	◻

Non-accelerated filer	⌧	Smaller reporting company	⌧

Emerging growth company	☐


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

		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and September 30, 2021	3

	Condensed Consolidated Statements of Operations for the three months and nine months ended June 30, 2022 and 2021 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended June 30, 2022 and 2021 (unaudited)	5

	Condensed Consolidated Statement of Shareholders’ Equity for the three and nine months ended June 30, 2022 and 2021 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2022 and 2021 (unaudited)	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION

Item 1A.	Risk Factors	35
Item 2.	Purchases of equity securities	36

Item 6.	Exhibits	36


	June 30,		September 30,
	2022		2021
	Unaudited			Audited
ASSETS
Current assets:
Cash and cash equivalents	$	21,415	$	20,007
Accounts receivable, net of allowances of $115 and $142		18,648		18,698
Investment in lease, net-current portion		25		68
Inventories		5,607		3,989
Refundable income taxes		1,126		1,656
Other current assets		5,473		4,616
Total current assets		52,294		49,034


Property, equipment and improvements, net		722		764
Operating lease right-of-use assets		944		1,358
Intangibles, net		12		19
Investment in lease, net-less current portion		6		15
Long-term receivable		5,345		7,522
Cash surrender value of life insurance		5,131		4,194
Other assets		62		68
Total assets	$	64,516	$	62,974

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	13,402	$	13,928
Line of credit		2,999		941
Notes payable - current portion		511		757
Deferred revenue		4,669		1,893
Pension and retirement plans		404		308
Total current liabilities		21,985		17,827
Pension and retirement plans		3,559		4,097
Notes payable - noncurrent portion		443		876
Operating lease liabilities - noncurrent portion		479		821
Income taxes payable		524		524
Other noncurrent liabilities		3,050		4,783
Total liabilities		30,040		28,928

Shareholders’ equity:
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 4,536 and 4,394 shares, respectively		46		45
Additional paid-in capital		19,074		18,258
Retained earnings		25,514		25,191
Accumulated other comprehensive loss		(10,158)		(9,448)
Total shareholders’ equity		34,476		34,046
Total liabilities and shareholders’ equity	$	64,516	$	62,974


	Three months ended				Nine months ended
	June 30,		June 30,		June 30,		June 30,
	2022		2021		2022		2021
Sales:
Product	$	8,438	$	10,142	$	25,375	$	29,526
Services		4,888		3,579		12,301		9,671
Total sales		13,326		13,721		37,676		39,197

Cost of sales:
Product		6,548		8,176		20,090		23,678
Services		1,804		1,316		4,798		3,544
Total cost of sales		8,352		9,492		24,888		27,222

Gross profit		4,974		4,229		12,788		11,975

Operating expenses:
Engineering and development		884		700		2,228		2,191
Selling, general and administrative		4,071		3,886		10,961		10,799
Total operating expenses		4,955		4,586		13,189		12,990
Operating income (loss)		19		(357)		(401)		(1,015)

Other income (expense):
Foreign exchange gain (loss)		618		(110)		777		(731)
Interest expense		(80)		(131)		(286)		(244)
Interest income		158		175		429		406
Gain on forgiveness of debt		—		—		—		2,196
Other income (expense), net		(20)		35		(17)		137
Total other income (expense), net		676		(31)		903		1,764
Income (loss) before income taxes		695		(388)		502		749
Income tax expense		11		35		28		868
Net income (loss)	$	684	$	(423)	$	474	$	(119)
Net income (loss) attributable to common shareholders	$	646	$	(423)	$	450	$	(119)

Net income (loss) per common share - basic	$	0.15	$	(0.10)	$	0.11	$	(0.03)
Weighted average common shares outstanding – basic		4,280		4,179		4,251		4,137

Net income (loss) per common share - diluted	$	0.15	$	(0.10)	$	0.11	$	(0.03)
Weighted average common shares outstanding – diluted		4,283		4,179		4,265		4,137




								Accumulated
				Additional				other		Total
				Paid-in		Retained		comprehensive		Shareholders’
Three Months Ended June 30, 2022:	Shares	Amount		Capital		Earnings		loss		Equity
Balance as of March 31, 2022	4,533	$	46	$	18,820	$	24,881	$	(9,600)	$	34,147
Net income	—		—		—		684		—		684
Other comprehensive loss	—		—		—		—		(558)		(558)
Stock-based compensation	—		—		254		—		—		254
Restricted stock cancellation	(1)		—		—		—		—		—
Restricted stock issuance	10		—		—		—		—		—
Purchase of common stock	(6)		—		—		(51)		—		(51)
Balance as of June 30, 2022	4,536	$	46	$	19,074	$	25,514	$	(10,158)	$	34,476

								Accumulated
				Additional				other		Total
				Paid-in		Retained		comprehensive		Shareholders’
Three Months Ended June 30, 2021:	Shares	Amount		Capital		Earnings		loss		Equity
Balance as of March 31, 2021	4,394	$	44	$	17,605	$	24,796	$	(11,644)	$	30,801
Net loss	—		—		—		(423)		—		(423)
Other comprehensive income	—		—		—		—		32		32
Stock-based compensation	—		—		243		—		—		243
Restricted stock cancellation	(17)		—		—		—		—		—
Balance as of June 30, 2021	4,377	$	44	$	17,848	$	24,373	$	(11,612)	$	30,653


			Technology Solutions Segment
	High
	Performance
	Products		United						Consolidated
Three months ended June 30,	Segment		Kingdom		U.S.		Total		Total

	(Amounts in thousands)
2022
Sales:
Product	$	427	$	128	$	7,883	$	8,011	$	8,438
Service		311		83		4,494		4,577		4,888
Finance *		—		—		—		—		—
Total sales	$	738	$	211	$	12,377	$	12,588	$	13,326

			Technology Solutions Segment
	High
	Performance
	Products		United						Consolidated
Three months ended June 30,	Segment		Kingdom		U.S.		Total		Total

	(Amounts in thousands)
2021
Sales:
Product	$	602	$	130	$	9,408	$	9,538	$	10,140
Service		356		83		3,140		3,223		3,579
Finance *		—		—		2		2		2
Total sales	$	958	$	213	$	12,550	$	12,763	$	13,721


	(Amounts in thousands)
Fiscal 2022	$	261
Fiscal 2023		662
Fiscal 2024		31
	$	954


Fiscal year ending September 30:	(Amounts in thousands)
2022	$	2,182
2023		5,108
2024		1,839
2025		1,560
Total payments		10,689
Less: unearned interest income		(454)
Total, net of unearned interest income	$	10,235


		Three months ended
	Condensed Consolidated Statements of Operations Location	June 30, 2022		June 30, 2021
		(Amounts in thousands)
Finance Lease:
Interest on lease liabilities	Interest expense	$	1	$	2
Operating Lease:
Operating lease cost	Selling, general, and administrative		130		170
Short-term lease cost	Selling, general, and administrative		62		23
Total lease costs		$	193	$	195
Less sublease interest income	Revenue		—		(2)
Total lease costs, net of sublease interest income		$	193	$	193


	June 30, 2022		September 30, 2021
	(Amounts in thousands)
Current	$	538	$	808
Less: notes discount		27		51
Notes payable - current portion	$	511	$	757

Noncurrent	$	449	$	897
Less: notes discount		6		21
Notes payable - noncurrent portion	$	443	$	876


	Nine Months Ended June 30,
	2022						2021
	U.K.		U.S.		Total		U.K.		U.S.		Total

	(Amounts in thousands)
Pension:
Interest cost	$	206	$	7	$	213	$	182	$	8	$	190
Expected return on plan assets		(354)		—		(354)		(299)		—		(299)
Amortization of past service costs		6		—		6		6		—		6
Amortization of net loss		73		1		74		136		3		139
Net periodic (benefit) cost	$	(69)	$	8	$	(61)	$	25	$	11	$	36

Post Retirement:
Service cost	$	—	$	31	$	31	$	—	$	31	$	31
Interest cost		—		35		35		—		35		35
Amortization of net gain		—		(14)		(14)		—		(14)		(14)
Net periodic cost	$	—	$	52	$	52	$	—	$	52	$	52


	Fair Values as of
	June 30, 2022								September 30, 2021
	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	$	146	$	146	$	—	$	—	$	93	$	93	$	—	$	—
Pooled funds		9,916		9,916		—		—		11,828		11,828		—		—
Total plan assets	$	10,062	$	10,062	$	—	$	—	$	11,921	$	11,921	$	—	$	—


		As of June 30, 2022				As of September 30, 2021
		Carrying Amount		Fair Value		Carrying Amount		Fair Value	Fair Value Level	Reference

		(Amounts in thousands)
Assets:
Cash and cash equivalents	$	21,415	$	21,415	$	20,007	$	20,007	1	Condensed Consolidated Balance Sheets
Accounts and long-term receivable*		10,235		10,235		13,968		13,968	3	Note 6
Liabilities:
Accounts payable and accrued expenses and other long-term liabilities*		5,830		5,830		5,747		5,747	3	Note 9
Line of Credit		2,999		2,999		941		941	2	Note 10
Notes payable		954		954		1,633		1,633	3	Note 10


	Nine months ended
	June 30,		June 30,
	2022		2021
Operating activities
Net income (loss)	$	474	$	(119)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		250		286
Amortization of intangibles		9		7
Loss on sale of fixed assets, net		15		1
Foreign exchange (gain) loss		(777)		731
Provision for losses on accounts receivable		(27)		51
Provision for obsolete inventory		17		29
Amortization of lease right-of-use assets		478		483
Stock-based compensation expense on stock options and restricted stock awards		726		748
Deferred income taxes		—		1,149
Increase in cash surrender value of life insurance		(1,189)		(143)

Adjustment for financing activities recognized in net income - Gain on forgiveness of debt		—		(2,196)

Changes in operating assets and liabilities:
(Decrease) increase in accounts receivable		50		(2,974)
(Increase) decrease in inventories		(1,643)		82
Decrease (increase) in refundable income taxes		530		(338)
(Increase) decrease in operating lease right-of-use assets		(63)		9
Increase in other assets		(860)		(825)
Decrease in investment in lease		50		318
Decrease (increase) in long-term receivable		2,178		(4,475)
(Decrease) increase in accounts payable and accrued expenses		(322)		3,843
(Decrease) increase in interest payable		(71)		82
Decrease in operating lease liabilities		(420)		(352)
Increase in deferred revenue		2,775		499
Decrease in pension and retirement plans liabilities		(226)		(402)
Decrease in income taxes payable		—		(62)
(Decrease) increase in other long-term liabilities		(1,734)		4,445
Net cash provided by operating activities		220		877

Investing activities
Life insurance premiums paid		(70)		(70)


			Technology Solutions Segment
	High
	Performance
	Products		United						Consolidated
Nine months ended June 30,	Segment		Kingdom		U.S.		Total		Total

	(Amounts in thousands)
2022
Sales:
Product	$	2,109	$	402	$	22,864	$	23,266	$	25,375
Service		836		280		11,185		11,465		12,301
Total sales	$	2,945	$	682	$	34,049	$	34,731	$	37,676
(Loss) income from operations	$	(3,477)	$	(120)	$	3,196	$	3,076	$	(401)
Total assets	$	8,862	$	9,057	$	46,597	$	55,654	$	64,516
Capital expenditures	$	87	$	—	$	136	$	136	$	223
Depreciation and amortization	$	91	$	—	$	168	$	168	$	259

2021
Sales:
Product	$	2,494	$	1,774	$	25,258	$	27,032	$	29,526
Service		908		260		8,503		8,763		9,671
Total sales	$	3,402	$	2,034	$	33,761	$	35,795	$	39,197
(Loss) income from operations	$	(3,565)	$	(130)	$	2,680	$	2,550	$	(1,015)
Total assets	$	8,501	$	9,942	$	42,113	$	52,055	$	60,556
Capital expenditures	$	18	$	—	$	66	$	66	$	84
Depreciation and amortization	$	134	$	—	$	159	$	159	$	293


	Three months ended June 30,								Nine months ended June 30,
	2022				2021				2022				2021
									(in millions)				(in millions)
	Customer		% of Total		Customer		% of Total		Customer		% of Total		Customer		% of Total
	Revenues		Revenues		Revenues		Revenues		Revenues		Revenues		Revenues		Revenues

	(Amounts in millions)
Customer A	$	2.1	15	%	$	0.5	4	%	$	6.4	17	%	$	2.3	6	%
Customer B	$	0.2	1	%	$	1.4	11	%	$	0.7	2	%	$	2.2	6	%


	June 30,								Increase (decrease)
	2022		%		2021		%		$		%

	(Dollar amounts in thousands)
Americas	$	13,020	98	%	$	12,764	93	%	$	256	2	%
Europe		189	1	%		747	5	%		(558)	(75)	%
Asia		117	1	%		210	2	%		(93)	(44)	%
Totals	$	13,326	100	%	$	13,721	100	%	$	(395)	(3)	%


			%				%
	June 30, 2022		of sales		June 30, 2021		of sales

	(Dollar amounts in thousands)
Sales	$	13,326	100	%	$	13,721	100	%
Costs and expenses:
Cost of sales		8,352	63	%		9,492	69	%
Engineering and development		884	7	%		700	6	%
Selling, general and administrative		4,071	31	%		3,886	28	%
Total costs and expenses		13,307	100	%		14,078	103	%
Operating income (loss)		19	—	%		(357)	(3)	%
Other income, (expense) net		676	5	%		(31)	—	%
Income (loss) before income taxes		695	5	%		(388)	(3)	%
Income tax expense		11	—	%		35	—	%
Net income (loss)	$	684	5	%	$	(423)	(3)	%


	June 30,				Decrease
	2022		2021		$		%

	(Dollar amounts in thousands)
Products	$	427	$	602	$	(175)	(29)	%
Services		311		356		(45)	(13)	%
Total	$	738	$	958	$	(220)	(23)	%


	Three months ended June 30									$	%
			% of				% of			Increase	Increase
	2022		Total		2021		Total			(Decrease)	(Decrease)

	(Dollar amounts in thousands)
By Operating Segment:
TS segment	$	3,223	79	%	$	2,649	68	%	$	574	22	%
HPP segment		848	21	%		1,237	32	%		(389)	(31)	%
Total	$	4,071	100	%	$	3,886	100	%	$	185	5	%


Period	Total number of shares purchased	Average price paid per share		Total number of shares purchased as part of publicly announced plans (1)	Maximum number that may yet be purchased under the repurchase plan
April 1-30, 2022	4,500	$	7.46	4,500	176,827
May 1-31, 2022	1,300	$	7.44	1,300	175,527
June 1-30, 2022	900	$	9.03	900	174,627


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*		The following financial statements for the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 formatted in eXtensible Business Reporting Language (XBRL) (a) our Condensed Consolidated Balance Sheets as of June 30, 2022 and September 30, 2021, (b) our Condensed Consolidated Statements of Income (Loss) for the three and nine months ended June 30, 2022 and 2021, (c) our Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended June 30, 2022 and 2021, (d) our Condensed Consolidated Statement of Shareholders’ Equity for the three and nine months ended June 30, 2022 and 2021, (e) our Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 2022 and 2021 and (f) the Notes to such Condensed Consolidated Financial Statements.
104*		The cover page from this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in inline XBRL.

	CSP INC.

August 10, 2022	By:	/s/ Victor Dellovo
		Victor Dellovo
		Chief Executive Officer,
		President and Director

August 10, 2022	By:	/s/ Gary W. Levine
		Gary W. Levine
		Chief Financial Officer