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	December 31, 2013
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from              to             .

Commission File Number 0-10843

CSP Inc.

(Exact name of Registrant as specified in its Charter)

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

43 Manning Road

Billerica, Massachusetts 01821-3901

(978) 663-7598

(Address and telephone number of principal executive offices)

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

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

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

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

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

As of February 12, 2014, the registrant had 3,571,041 shares of common stock issued and outstanding.

1

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets (unaudited) as of December 31, 2013 and September 30, 2013	3
	Consolidated Statements of Operations (unaudited) for the three months ended December 31, 2013 and 2012	4
	Consolidated Statements of Comprehensive Income (unaudited) for the three months ended December 31, 2013 and 2012	5
	Consolidated Statement of Shareholders’ Equity (unaudited) for the three months ended December 31, 2013	6
	Consolidated Statements of Cash Flows (unaudited) for the three months ended December 31, 2013 and 2012	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 4.	Controls and Procedures	22
PART II. OTHER INFORMATION
Item 6.	Exhibits	23

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CSP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except par value)

	December 31, 2013			September 30, 2013
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	13,942		$	18,619
Accounts receivable, net of allowances of $292 and $242	16,963			13,529
Inventories	6,599			4,791
Refundable income taxes	565			624
Deferred income taxes	1,350			1,313
Other current assets	2,852			2,042
Total current assets	42,271			40,918
Property, equipment and improvements, net	1,510			1,420
Other assets:
Intangibles, net	642			410
Deferred income taxes	1,779			1,771
Cash surrender value of life insurance	2,520			2,481
Other assets	156			225
Total other assets	5,097			4,887
Total assets	$	48,878		$	47,225
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	11,942		$	10,503
Deferred revenue	3,548			3,816
Pension and retirement plans	757			746
Deferred income taxes	149			—
Income taxes payable	—			60
Total current liabilities	16,396			15,125
Pension and retirement plans	8,714			8,660
Deferred income taxes	103			—
Other long term liabilities	415			405
Total liabilities	25,628			24,190
Commitments and contingencies
Shareholders’ equity:
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 3,571 and 3,496 shares, respectively	36			35
Additional paid-in capital	11,212			11,137
Retained earnings	17,717			17,728
Accumulated other comprehensive loss	(5,715		)	(5,865		)
Total shareholders’ equity	23,250			23,035
Total liabilities and shareholders’ equity	$	48,878		$	47,225

See accompanying notes to unaudited consolidated financial statements.

3

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except for per share data)

	For the three months ended
	December 31, 2013			December 31, 2012
Sales:
Product	$	14,749		$	15,305
Services	6,583			5,565
Total sales	21,332			20,870
Cost of sales:
Product	12,583			13,224
Services	4,078			3,469
Amortization of inventory step-up and intangibles	138			—
Total cost of sales	16,799			16,693
Gross profit	4,533			4,177
Operating expenses:
Engineering and development	635			444
Selling, general and administrative	4,020			3,560
Total operating expenses	4,655			4,004
Bargain purchase gain on acquisition	462			—
Operating income	340			173
Other income (expense):
Foreign exchange gain (loss)	(26		)	13
Other income (expense), net	—			46
Total other income (expense), net	(26		)	59
Income before income taxes	314			232
Income tax expense (benefit)	(32		)	117
Net income	$	346		$	115
Net income attributable to common stockholders	$	335		$	113
Net income per share – basic	$	0.10		$	0.03
Weighted average shares outstanding – basic	3,431			3,363
Net income per share – diluted	$	0.10		$	0.03
Weighted average shares outstanding – diluted	3,474			3,407

See accompanying notes to unaudited consolidated financial statements.

4

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

	For the three months ended
	December 31, 2013		December 31, 2012
Net income	$	346	$	115
Other comprehensive income:
Foreign currency translation gain adjustments	150		56
Other comprehensive income	150		56
Total comprehensive income	$	496	$	171

See accompanying notes to unaudited consolidated financial statements.

5

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

For the three Months Ended December 31, 2013:

(Amounts in thousands)

	Shares	Amount		Additional Paid-in Capital		Retained Earnings			Accumulated other comprehensive loss			Total Shareholders’ Equity
Balance as of September 30, 2013	3,496	$	35	$	11,137	$	17,728		$	(5,865	)	$	23,035
Net income	—	—		—		346			—			346
Other comprehensive income	—	—		—		—			150			150
Exercise of stock options	1	—		6		—			—			6
Stock-based compensation	—	—		69		—			—			69
Restricted stock issuance	74	1		—		—			—			1
Cash dividends on common stock ($0.10 per share)	—	—		—		(357		)	—			(357		)
Balance as of December 31, 2013	3,571	$	36	$	11,212	$	17,717		$	(5,715	)	$	23,250

See accompanying notes to unaudited consolidated financial statements.

6

CSP INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	For the three months ended
	December 31, 2013			December 31, 2012
Cash flows from operating activities:
Net income	$	346		$	115
Adjustments to reconcile net income to net cash used in operating activities:
Bargain purchase gain	(462		)	—
Depreciation and amortization	210			102
Amortization of intangibles	29			21
Gain on sale of fixed assets, net	—			(17		)
Foreign exchange (gain) loss	26			(13		)
Non-cash changes in accounts receivable	50			(49		)
Non-cash changes in inventory	75			12
Stock-based compensation expense on stock options and restricted stock awards	69			30
Deferred income taxes	(160		)	(42		)
Increase in cash surrender value of life insurance	(37		)	(26		)
Changes in operating assets and liabilities:
Increase in accounts receivable	(3,366		)	(4,101		)
Decrease in officer life insurance receivable	—			2,172
(Increase) decrease in inventories	(835		)	561
(Increase) decrease in refundable income taxes	62			16
Increase in other current assets	(655		)	(691		)
(Increase) decrease in other assets	69			(135		)
Increase in accounts payable and accrued expenses	1,289			150
Decrease in deferred revenue	(309		)	(28		)
Decrease in pension and retirement plans liability	(71		)	(66		)
Decrease in income taxes payable	(60		)	(134		)
Increase in other long term liabilities	10			10
Net cash used in operating activities	(3,720		)	(2,113		)
Cash flows from investing activities:
Life insurance premiums paid	(2		)	(2		)
Proceeds from the sale of fixed assets	—			17
Cash paid to acquire business	(500		)	—
Purchases of property, equipment and improvements	(273		)	(135		)
Net cash used in investing activities	(775		)	(120		)
Cash flows from financing activities:
Dividends accrued	(357		)	(689		)
Proceeds from issuance of shares from exercise of employee stock options	6			—
Net cash used in financing activities	(351		)	(689		)
Effects of exchange rate on cash	169			144
Net decrease in cash and cash equivalents	(4,677		)	(2,778		)
Cash and cash equivalents, beginning of period	18,619			20,493
Cash and cash equivalents, end of period	$	13,942		$	17,715
Supplementary cash flow information:
Cash paid for income taxes	$	89		$	303
Cash paid for interest	$	85		$	85
Non-cash acquisition of assets	$	1,214		$	—
Non-cash accrual of dividend payable	$	357		$	—

See accompanying notes to unaudited consolidated financial statements.

7

CSP INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED DECEMBER 31, 2013 AND 2012

Organization and Business

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

1.        Basis of Presentation

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

2.        Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates under different assumptions or conditions.

3.  Acquired Business

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

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

The purchase price was allocated as follows:

8

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

Management's estimates and assumptions are subject to change upon the finalization of the valuation and may be adjusted. The purchase price allocation from which the inventory, property and intangible assets were derived has not been finalized. The preliminary allocation of the purchase price for accounting purposes was based upon preliminary estimates and assumptions that are subject to change upon the finalization of the valuations.

The results of operations of Myricom for the period November 4 - December 31, 2013, are included in the Company’s consolidated statement of operations for the three months ended December 31, 2013.

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

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

	For the three months ended
	December 31, 2013		December 31, 2012
	(Amounts in thousands except per share data)
Revenue	$	21,951	$	22,747
Net income (loss)	$	35	$	(834	)
Net income (loss) per share – basic	$	0.01	$	(0.24	)
Net income (loss) per share – diluted	$	0.01	$	(0.24	)

4.        Earnings Per Share of Common Stock

Basic net income per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income by the assumed weighted average number of common shares outstanding.

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

9

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

	For the three months ended
	December 31, 2013		December 31, 2012
	(Amounts in thousands except per share data)
Net income	$	346	$	115
Less: Net income attributable to nonvested common stock	11		2
Net income attributable to common stockholders	$	335	$	113
Weighted average total shares outstanding – basic	3,545		3,426
Less: weighted average non-vested shares outstanding	114		63
Weighted average number of common shares outstanding – basic	3,431		3,363
Potential common shares from non-vested stock awards and the assumed exercise of stock options	43		44
Weighted average common shares outstanding – diluted	3,474		3,407
Net income per share – basic	$	0.10	$	0.03
Net income per share – diluted	$	0.10	$	0.03

All anti-dilutive securities, including certain stock options, are excluded from the diluted income per share computation. For the three months ended December 31, 2013 and 2012, 49,000 and 197,000 options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive.

5.         Inventories

Inventories consist of the following:

	December 31, 2013		September 30, 2013
	(Amounts in thousands)
Raw materials	$	2,379	$	1,587
Work-in-process	1,204		404
Finished goods	3,016		2,800
Total	$	6,599	$	4,791

Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met, of approximately $0.3 million and $0.5 million as of December 31, 2013 and September 30, 2013, respectively.

Total inventory balances in the table above are shown net of reserves for obsolescence of approximately $4.5 million and $4.6 million as of December 31, 2013 and September 30, 2013, respectively.

6.        Accumulated Other Comprehensive Loss

 The components of accumulated other comprehensive loss are as follows:

10

	December 31, 2013			September 30, 2013
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(2,006	)	$	(2,156	)
Additional minimum pension liability	(3,709		)	(3,709		)
Accumulated other comprehensive loss	$	(5,715	)	$	(5,865	)

7.         Pension and Retirement Plans

The Company has defined benefit and defined contribution plans in the United Kingdom, Germany and the U.S. In the United Kingdom and Germany, the Company provides defined benefit pension plans and defined contribution plans for the majority of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain current and former employees. The domestic supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. Domestically, the Company also provides for officer death benefits through post-retirement plans to certain officers.  All of the Company’s defined benefit plans are closed to newly hired employees and have been for the two years ended September 30, 2013 and for the three months ended December 31, 2013.

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

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

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

	For the Three Months Ended December 31,
	2013									2012
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	11		$	—		$	11		$	15		$	—		$	15
Interest cost	190			17			207			173			16			189
Expected return on plan assets	(115		)	—			(115		)	(104		)	—			(104		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	23			(2		)	21			36			6			42
Net periodic benefit cost	$	109		$	15		$	124		$	120		$	22		$	142
Post Retirement:
Service cost	$	—		$	3		$	3		$	—		$	—		$	—
Interest cost	—			11			11			—			9			9
Amortization of net gain	—			(36		)	(36		)	—			(46		)	(46		)
Net periodic benefit cost	$	—		$	(22	)	$	(22	)	$	—		$	(37	)	$	(37	)

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8.       Segment Information

The following table presents certain operating segment information.

				Service and System Integration Segment
For the Three Months Ended December 31,	Systems Segment			Germany			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2013
Sales:
Product	$	1,006		$	1,401		$	647	$	11,695	$	13,743	$	14,749
Service	1,283			4,188			328		784		5,300		6,583
Total sales	2,289			5,589			975		12,479		19,043		21,332
Profit (loss) from operations	142			(81		)	31		248		198		340
Assets	15,304			13,134			3,379		17,061		33,574		48,878
Capital expenditures	61			87			23		102		212		273
Depreciation and amortization	52			46			4		137		187		239
2012
Sales:
Product	$	96		$	2,064		$	154	$	12,991	$	15,209	$	15,305
Service	957			3,204			302		1,102		4,608		5,565
Total sales	1,053			5,268			456		14,093		19,817		20,870
Profit (loss) from operations	(373		)	(147		)	—		693		546		173
Assets	16,914			13,527			3,524		16,849		33,900		50,814
Capital expenditures	41			55			3		36		94		135
Depreciation and amortization	37			42			5		39		86		123

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

The following table lists customers from which the Company derived revenues in excess of 10% of total revenues for the three-month periods ended December 31, 2013, and 2012.

		For the three months ended,
		December 31, 2013				December 31, 2012
		Amount		% of Revenues		Amount		% of Revenues
	(dollars in millions)
Customer A		$	6.1	29	%	$	5.1	24	%
Customer B		$	3.3	15	%	$	2.6	12	%

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9.       Fair Value Measures

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

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total Balance
	As of December 31, 2013
	(Amounts in thousands)
Assets:
Money Market funds	$	1,255	$	—	$	—	$	1,255
Total assets measured at fair value	$	1,255	$	—	$	—	$	1,255

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

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

The Company had no liabilities measured at fair value as of December 31, 2013 or September 30, 2013. The Company had no assets or liabilities measured at fair value on a non recurring basis as of December 31, 2013 or September 30, 2013.

10.Dividend

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

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

Forward-Looking Statements

The discussion below contains certain forward-looking statements related to, among others, but not limited to, statements concerning future revenues and future business plans. In addition, forward-looking statements include statements in which we use words such as “expect,” “believe,” “anticipate,” “intend,” or similar expressions. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, we cannot assure you that these expectations will prove to have been correct, and  actual results may vary from those contained in such forward-looking statements.

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

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, income taxes, deferred compensation and retirement plans, estimated selling prices used for revenue recognition and contingencies. We base our estimates on historical performance and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A description of our critical accounting policies is contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013 in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Overview of the three months ended December 31, 2013 Results of Operations

Overview:

 Revenue increased by approximately $0.5 million, or 2%, to $21.3 million for the three months ended December 31, 2013 versus $20.9 million for the three months ended December 31, 2012. Our gross profit margin increased overall, from 20% for the three months ended December 31, 2012 to 21% for the three months ended December 31, 2013. Operating income also increased to approximately $0.3 million for the three-month period ended December 31, 2013 versus $0.2 million for the three months ended December 31, 2012. This increase in operating income was due to an increase in gross profit of approximately $0.3 million, a bargain purchase gain of $0.5 million on the acquisition of Myricom, Inc during the three months ended December 31, 2013 and was partially offset by an increase in operating expenses of approximately $0.6 million, due in large part to the operating expenses of Myricom. Net income was $0.3 million for three-month period ended December 31, 2013 versus $0.1 million for the three months ended December 31, 2012.

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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 December 31, 2013 and 2012:

	December 31, 2013			% of sales		December 31, 2012		% of sales
	(Dollar amounts in thousands)
Sales	$	21,332		100	%	$	20,870	100	%
Costs and expenses:
Cost of sales	16,799			79	%	16,693		80	%
Engineering and development	635			3	%	444		2	%
Selling, general and administrative	4,020			19	%	3,560		17	%
Total costs and expenses	21,454			101	%	20,697		99	%
Bargain purchase gain	462			2	%	—		—	%
Operating income	340			2	%	173		1	%
Other income (expense)	(26		)	—	%	59		—	%
Income before income taxes	314			2	%	232		1	%
Income tax expense (benefit)	(32		)	—	%	117		—	%
Net income	$	346		2	%	$	115	1	%

Sales

The following table details our sales by operating segment for the three months ended December 31, 2013 and 2012:

	Systems			Service and System Integration			Total			% of Total
	(Dollar amounts in thousands)
For the three Months Ended December 31, 2013:
Product	$	1,006		$	13,743		$	14,749		69	%
Services	1,283			5,300			6,583			31	%
Total	$	2,289		$	19,043		$	21,332		100	%
% of Total	11		%	89		%	100		%

	Systems			Service and System Integration			Total			% of Total
For the three Months Ended December 31, 2012:
Product	$	96		$	15,209		$	15,305		73	%
Services	957			4,608			5,565			27	%
Total	$	1,053		$	19,817		$	20,870		100	%
% of Total	5		%	95		%	100		%

15

	Systems			Service and System Integration			Total			% increase (decrease)
Increase (Decrease)
Product	$	910		$	(1,466	)	$	(556	)	(4	)%
Services	326			692			1,018			18	%
Total	$	1,236		$	(774	)	$	462		2	%
% increase (decrease)	117		%	(4		)%	2		%

Total revenues increased by approximately $0.5 million, or 2%, for the three months ended December 31, 2013 compared to the three months ended December 31, 2012.  Revenue in the Systems segment increased for the current year three- month period versus the prior year three-month period by approximately $1.2 million, while revenues in the Service and System Integration segment decreased by approximately $0.8 million.

Product revenues decreased by approximately $0.6 million, or 4%, for the three months ended December 31, 2013 compared to the comparable period of the prior fiscal year. Product revenues in the Service and System Integration segment decreased by approximately $1.5 million while in the Systems segment, product revenue increased by approximately $0.9 million for the three-month period ended December 31, 2013 versus the three month period ended December 31, 2012.

The increase in product revenues in the Systems segment of approximately $0.9 million was due substantially to revenues from the acquisition of Myricom, Inc., which the Company acquired during the three months ended December 31, 2013. Myricom revenues for the period were in excess of $0.8 million.

In the US and German divisions of the Service and System Integration segment, product sales decreased by approximately $1.3 million, and approximately $0.7 million, respectively, while in the UK division product sales increased by approximately $0.5 million.

In the US division's existing customer base, product sales in the IT Hosting and Healthcare verticals decreased by approximately $0.5 million and $1.0 million, respectively, while product sales in all other verticals combined decreased by an aggregate of approximately $0.4 million. These decreases were partially offset by new customer sales of approximately $0.6 million.

In Germany, the $0.7 milliondecrease in product revenue was driven by decreased sales in the division’s telecommunications vertical, while in the UK, the increase in product sales of approximately $0.5 million is attributable to the hiring of increased sales resources focused on increasing product sales in that region.

Service revenues increased by approximately $1.0 million, or 18%.  This increase was made up of an increase in the Systems segment of $0.3 million and an increase in the Service and System Integration segment of approximately $0.7 million. The increase in the Systems segment service revenue was due to higher royalty income recorded in the three months ended December 31, 2013 which was approximately $1.1 million versus $0.7 million for the three months ended December 31, 2012.

The increase in service revenues in the Service and System Integration segment was due to an increase in the German division, where service revenue increased by approximately $1.0 million, partially offset by a decrease in service revenues of approximately $0.3 million in the US division. In Germany, the increase in service sales was driven by increased service revenues in the division's telecommunications vertical. The decrease in service revenue in the US division of the segment was primarily from lower professional service project revenue of approximately $0.2 million and lower third party maintenance revenue of approximately $0.1 million for the three months endedDecember 31, 2013 versus the three months endedDecember 31, 2012.

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

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	For the three months ended,
	December 31, 2013		%		December 31, 2012		%		$ Increase (Decrease)			% Increase (Decrease)
	(Dollar amounts in thousands)
Americas	$	14,444	68	%	$	14,942	72	%	$	(498	)	(3	)%
Europe	6,594		31	%	5,743		27	%	851			15	%
Asia	294		1	%	185		1	%	109			59	%
Totals	$	21,332	100	%	$	20,870	100	%	$	462		2	%

The decrease in Americas revenue for the three months ended December 31, 2013 versus the three months ended December 31, 2012 was primarily the result of the an overall decrease in sales to the Americas in the Service and System Integration segment where combined product and service sales to US customers decreased by an aggregate $1.3 million, while in the Systems segment, sales to US customers to the Americas increased by approximately $0.8 million, which was driven by Myricom sales to US customers of approximately $0.5 million and the royalty sales increase of approximately $0.4 million. The change in sales into Europe was from an increase of approximately $0.3 million from the Systems segment, attributable to Myricom sales and an increase in sales from the European divisions of the Service and System Integration segment of approximately $0.6 million of which $0.3 million was from favorable foreign exchange rate fluctuation in the Euro versus the US dollar.

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Cost of Sales and Gross Margins

The following table details our cost of sales and gross profit margins by operating segment for the three months ended December 31, 2013 and 2012:

	Systems			Service and System Integration			Total			% of Total
	(Dollar amounts in thousands)
For the three Months Ended December 31, 2013:
Product	$	756		$	11,827		$	12,583		75	%
Services	47			4,031			4,078			24	%
Amortization of inventory step-up and intangibles	138			—			138			1	%
Total	$	941		$	15,858		$	16,799		100	%
% of Total	6		%	94		%	100		%
% of Sales	41		%	83		%	79		%
Gross Margins:
Product	25		%	14		%	15		%
Services	96		%	24		%	38		%
Total	59		%	17		%	21		%
For the three Months Ended December 31, 2012:
Product	$	17		$	13,207		$	13,224		79	%
Services	87			3,382			3,469			21	%
Amortization of inventory step-up and intangibles	—			—			—			—	%
Total	$	104		$	16,589		$	16,693		100	%
% of Total	1		%	99		%	100		%
% of Sales	10		%	84		%	80		%
Gross Margins:
Product	82		%	13		%	14		%
Services	91		%	27		%	38		%
Total	90		%	16		%	20		%
Increase (decrease)
Product	$	739		$	(1,380	)	$	(641	)	(5	)%
Services	$	(40	)	$	649		$	609		18	%
Amortization of inventory step-up and intangibles	$	138		$	—		$	138		—	%
Total	$	837		$	(731	)	$	106		1	%
% Increase (decrease)	805		%	(4		)%	1		%
% of Sales	31		%	(1		)%	(1		)%
Gross Margins:
Product	(57		)%	1		%	1		%
Services	5		%	(3		)%	—		%
Total	(31		)%	1		%	1		%

Total cost of sales increased by approximately $0.1 million when comparing the three months ended December 31, 2013 versus the three months ended December 31, 2012.   This increase in cost of sales was due to amortization expenses in the three months ended December 31, 2013 related to a step-up in inventory value and purchased intangibles in connection with the acquisition of Myricom. The gross profit margin ("GPM") for the three months ended December 31, 2013 excluding the

18

amortization expense was 22%. While sales increased by 2% , cost of sales increased by 1%, and would not have increased at all, had it not been for the amortization expense described herein. The more favorable GPM of 21% for the three months ended December 31, 2013 versus 20% for 2012 was attributable to a greater proportion of Systems segment revenue (11%) for the three months ended December 31, 2013 versus the three months ended December 31, 2012 (5%) and higher GPM in the Service and System Integration segment of 17% in the current year quarter versus 16% in the corresponding prior year quarter.

In the Service and System Integration segment, the overall GPM was 17% for the three months ended December 31, 2013 and 16% for the prior year three-month period. The increase in GPM in the Service and System Integration segment was due primarily to higher utilization of in-house service engineers in providing billable services and more favorable product mix in Germany.

In the Systems segment, the overall GPM decreased from 90% to 59% as shown in the table above.  This was due to two primary factors; (i) the aforementioned amortization expense negatively impacted the GPM in the segment by six percentage points (that is, without this expense, the GPM would've been 65% for the three months ended December 31, 2013), and (ii) royalty revenue, which carries a 100% GPM, made up a much lower percentage (49%) of total Systems segment revenue whereas in the prior year three-month period, royalty revenue was 71% of total Systems segment revenue.

Engineering and Development Expenses

The following table details our engineering and development expenses by operating segment for the three months ended December 31, 2013 and 2012:

	For the three months ended,
	December 31, 2013		% of Total		December 31, 2012		% of Total		$ Increase		% Increase
	(Dollar amounts in thousands)
By Operating Segment:
Systems	$	635	100	%	$	444	100	%	$	191	43	%
Service and System Integration	—		—		—		—		—		—
Total	$	635	100	%	$	444	100	%	$	191	43	%

The increase shown in the table above was due to engineering expenses of Myricom, which the Company acquired during the three months ended December 31, 2013.

Selling, General and Administrative

The following table details our selling, general and administrative (“SG&A”) expense by operating segment for the three months ended December 31, 2013 and 2012:

	For the three months ended,
	December 31, 2013		% of Total		December 31, 2012		% of Total		$ Increase		% Increase
	(Dollar amounts in thousands)
By Operating Segment:
Systems	$	1,033	26	%	$	878	25	%	$	155	18	%
Service and System Integration	2,987		74	%	2,682		75	%	305		11	%
Total	$	4,020	100	%	$	3,560	100	%	$	460	13	%

SG&A expenses increased in the Systems segment due to the acquisition of Myricom. The increase in the Service and System Integration segment was due primarily from the US division of the segment due to higher compensation expense of approximately $0.1 million due to headcount increases, and approximately $0.1 million in increased

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bad debt expense.

Other Income/Expenses

The following table details our other income (expense) for the three months ended December 31, 2013 and 2013:

	For the three months ended,
	December 31, 2013			December 31, 2012			Increase (decrease)
	(Amounts in thousands)
Interest expense	$	(21	)	$	(21	)	$	—
Interest income	2			13			(11		)
Foreign exchange gain (loss)	(26		)	13			(39		)
Gain on sale of fixed assets	—			17			(17		)
Other income (expense), net	19			37			(18		)
Total other income (expense), net	$	(26	)	$	59		$	(85	)

Other income (expense), net, for the three month periods ended December 31, 2013 and 2013 was not significant.

Income Taxes

Income Tax Provision

The Company recorded an income tax benefit of approximately $32 thousand for the quarter ended December 31, 2013, reflecting an effective income tax benefit rate of 10% for the period compared to income tax expense of approximately $0.1 million for the quarter ended December 31, 2012, which reflected an effective tax rate of 50%. The tax benefit on book income for the quarter ended December 31, 2013, was because the bargain purchase gain related to the Myriom acquisition gave rise to a deferred tax charge which is netted against the gain for book purposes, as opposed to showing as income tax expense.

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

Liquidity and Capital Resources

Our primary source of liquidity is our cash and cash equivalents, which decreased by $4.7 million to $13.9 million as of December 31, 2013 from $18.6 million as of September 30, 2013. At December 31, 2013, cash equivalents consisted of money market funds which totaled $1.3 million.

Significant uses of cash for the three months ended December 31, 2013 included an increase in accounts receivable of approximately $3.4 million, an increase in inventories of approximately $0.8 million, a bargain purchase gain in connection with the acquisition of Myricom of approximately $0.5 million, an increase in other current assets of approximately $0.7 million, cash paid to acquire Myricom of $0.5 million and dividends of approximately $0.4 million. Significant sources of cash included net income of approximately $0.3 million and an increase in accounts payable and accrued expenses of approximately $1.3 million.

Cash held by our foreign subsidiaries located in Germany and the United Kingdom totaled approximately $5.2 million as of December 31, 2013 and $6.6 million as of September 30, 2013. This cash is included in our total cash and cash equivalents reported above. We consider this cash to be permanently reinvested into these foreign locations because repatriating it would result in unfavorable tax consequences.  Consequently, it is not available for activities that would require it to be repatriated to the U.S.

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If cash generated from operations is insufficient to satisfy working capital requirements, we may need to access funds through bank loans or other means. There is no assurance that we will be able to raise any such capital on terms acceptable to us, on a timely basis or at all. If we are unable to secure additional financing, we may not be able to complete development or enhancement of products, take advantage of future opportunities, respond to competition or continue to effectively operate our business.

Based on our current plans and business conditions, management believes that the Company’s available cash and cash equivalents, the cash generated from operations and availability on our lines of credit will be sufficient to provide for the Company’s working capital and capital expenditure requirements for the foreseeable future.

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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 December 31, 2013. Our chief executive officer, our chief financial officer, and other members of our senior management team supervised and participated in this evaluation. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or  the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2013, the Company’s chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Controls over Financial Reporting

During the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.   OTHER INFORMATION

Item 6.          Exhibits

Number	Description
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	Interactive Data Files regarding (a) our Consolidated Balance Sheets as of December 31, 2013 and September 30, 2013, (b) our Consolidated Statements of Operations for the three months ended December 31, 2013 and 2012, (c) our Consolidated Statements of Comprehensive Income for the three months ended December 31, 2013 and 2012, (d) our Consolidated Statement of Shareholders’ Equity for the three months ended December 31, 2013, (e) our Consolidated Statements of Cash Flows for the three months ended December 31, 2013 and 2012 and (f) the Notes to such Consolidated Financial Statements.

*Filed Herewith

23

SIGNATURES

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

	CSP INC.
Date: February 14, 2014	By:	/s/ Victor Dellovo
		Victor Dellovo
		Chief Executive Officer,
		President and Director
Date: February 14, 2014	By:	/s/ Gary W. Levine
		Gary W. Levine
		Chief Financial Officer

24

Exhibit Index

Number	Description
31.1*	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	Interactive Data Files regarding (a) our Consolidated Balance Sheets as of December 31, 2013 and September 30, 2013, (b) our Consolidated Statements of Operations for the three months ended December 31, 2013 and 2012, (c) our Consolidated Statements of Comprehensive Income for the three months ended December 31, 2013 and 2012, (d) our Consolidated Statement of Shareholders’ Equity for the three months ended December 31, 2013, (e) our Consolidated Statements of Cash Flows for the three months ended December 31, 2013 and 2012 and (f) the Notes to such Consolidated Financial Statements.

*Filed Herewith

25

EX-31.1

Exhibit 31.1 

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

I, Victor Dellovo, certify that: 

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

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

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

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

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

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

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

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

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

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

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

Date: February 14, 2014

 /s/ Victor Dellovo

Victor Dellovo

Chief Executive Officer;

President and Director

EX-31.2

Exhibit 31.2 

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

I, Gary W. Levine, certify that: 

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

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

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

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

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

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

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

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

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

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

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

Date: February 14, 2014

 /s/Gary W. Levine

Gary W. Levine

Chief Financial Officer

EX-32.1

Exhibit 32.1 

18 U.S.C. Section 1350, 

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

In connection with the Quarterly Report on Form 10-Q of CSP Inc. (the “Company”) for the three and three months ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned Chief Executive Officer, President and Chairman and Chief Financial Officer of the Company, certifies, to the best knowledge and belief of the signatory, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 

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

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

Date: February 14, 2014	By:	/s/ Victor Dellovo
		Victor Dellovo
		Chief Executive Officer;
		President and Director
Date: February 14, 2014	By:	/s/ Gary W. Levine
		Gary W. Levine
		Chief Financial Officer

XML

Dividend (Detail) (USD $)	1 Months Ended	3 Months Ended
	Dec. 17, 2013	Dec. 31, 2013
Equity [Abstract]
Dividends per share	$ 0.10	$ 0.10

XML

Accumulated Other Comprehensive Loss (Detail) - Components of Accumulated Other Comprehensive Loss (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Equity [Abstract]
Cumulative effect of foreign currency translation	$ (2,006)	$ (2,156)
Additional minimum pension liability	(3,709)	(3,709)
Accumulated other comprehensive loss	$ (5,715)	$ (5,865)

XML

Fair Value Measures (Tables)

3 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

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

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

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total Balance
	As of December 31, 2013
	(Amounts in thousands)
Assets:
Money Market funds	$	1,255	$	—	$	—	$	1,255
Total assets measured at fair value	$	1,255	$	—	$	—	$	1,255

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

XML

Segment Information (Detail) - Major customers (USD $) In Millions, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Customer A
Segment Reporting Information [Line Items]
Amount (in Dollars)	$ 6.1	$ 5.1
% of Revenues	29.00%	24.00%
Customer B
Segment Reporting Information [Line Items]
Amount (in Dollars)	$ 3.3	$ 2.6
% of Revenues	15.00%	12.00%

XML

Basis of Presentation

3 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

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

XML

Earnings Per Share of Common Stock (Detail) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Anti-dilutive securities excluded from diluted income per share calculation	49	197

XML

Acquisition Condensed Pro Forma Combined Financial Information (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Business Combinations [Abstract]
Business Acquisition, Pro Forma Revenue	$ 21,951	$ 22,747
Business Acquisition, Pro Forma Net Income (Loss)	$ 35	$ (834)
Business Acquisition, Pro Forma Earnings Per Share, Basic	$ 0.01	$ (0.24)
Business Acquisition, Pro Forma Earnings Per Share, Diluted	$ 0.01	$ (0.24)

XML

Earnings Per Share of Common Stock (Detail) - Basic and diluted earnings per share computations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Earnings Per Share [Abstract]
Net income	$ 346	$ 115
Less: Net income attributable to nonvested common stock (in Dollars)	11	2
Net income attributable to common stockholders (in Dollars)	$ 335	$ 113
Weighted average total shares outstanding – basic	3,545	3,426
Less: weighted average non-vested shares outstanding	114	63
Weighted average number of common shares outstanding – basic	3,431	3,363
Potential common shares from non-vested stock awards and the assumed exercise of stock options	43	44
Weighted average common shares outstanding – diluted	3,474	3,407
Net income (loss) per share – basic (in Dollars per share)	$ 0.10	$ 0.03
Net income (loss) per share – diluted (in Dollars per share)	$ 0.10	$ 0.03

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Inventories (Detail) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Inventory Disclosure [Abstract]
Finished goods inventory that has been shipped, but for which all revenue recognition criteria has not been met	$ 0.3	$ 0.5
Reservce for obsolescence	$ 4.5	$ 4.6

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Unaudited Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Cash flows from operating activities:
Net income	$ 346	$ 115
Adjustments to reconcile net income to net cash used in operating activities:
Business Combination, Bargain Purchase, Gain Recognized, Amount	(462)	0
Depreciation and amortization	210	102
Amortization of intangibles	29	21
Gain on sale of fixed assets, net	0	(17)
Foreign exchange (gain) loss	26	(13)
Non-cash changes in accounts receivable	50	(49)
Inventory Write-down	75	12
Stock-based compensation expense on stock options and restricted stock awards	69	30
Deferred income taxes	(160)	(42)
Increase in cash surrender value of life insurance	(37)	(26)
Changes in operating assets and liabilities:
Increase in accounts receivable	(3,366)	(4,101)
Decrease in officer life insurance receivable	0	2,172
Increase (decrease) in inventories	(835)	561
(Increase) decrease in refundable income taxes	62	16
Increase in other current assets	(655)	(691)
(Increase) decrease in other assets	69	(135)
Increase in accounts payable and accrued expenses	1,289	150
Decrease in deferred revenue	(309)	(28)
Decrease in pension and retirement plans liability	(71)	(66)
Decrease in income taxes payable	(60)	(134)
Increase in other long term liabilities	10	10
Net cash used in operating activities	(3,720)	(2,113)
Cash flows from investing activities:
Life insurance premiums paid	(2)	(2)
Proceeds from the sale of fixed assets	0	17
Payments to Acquire Businesses, Net of Cash Acquired	(500)	0
Purchases of property, equipment and improvements	(273)	(135)
Net cash used in investing activities	(775)	(120)
Cash flows from financing activities:
Dividends, Cash	(357)	(689)
Proceeds from issuance of shares from exercise of employee stock options	6	0
Net cash used in financing activities	(351)	(689)
Effects of exchange rate on cash	169	144
Net decrease in cash and cash equivalents	(4,677)	(2,778)
Cash and cash equivalents, beginning of period	18,619
Cash and cash equivalents, end of period	13,942
Supplementary cash flow information:
Cash paid for income taxes	89	303
Cash paid for interest	85	85
Noncash or Part Noncash Acquisition, Value of Assets Acquired	1,214	0
Dividends Accrued	$ 357	$ 0

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Inventories (Detail) - Inventories (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Inventory Disclosure [Abstract]
Raw materials	$ 2,379	$ 1,587
Work-in-process	1,204	404
Finished goods	3,016	2,800
Total	$ 6,599	$ 4,791

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Current assets:
Cash and cash equivalents	$ 13,942	$ 18,619
Accounts receivable, net of allowances of $292 and $242	16,963	13,529
Inventories	6,599	4,791
Refundable income taxes	565	624
Deferred income taxes	1,350	1,313
Other current assets	2,852	2,042
Total current assets	42,271	40,918
Property, equipment and improvements, net	1,510	1,420
Other assets:
Intangibles, net	642	410
Deferred income taxes	1,779	1,771
Cash surrender value of life insurance	2,520	2,481
Other assets	156	225
Total other assets	5,097	4,887
Total assets	48,878	47,225
Current liabilities:
Accounts payable and accrued expenses	11,942	10,503
Deferred revenue	3,548	3,816
Pension and retirement plans	757	746
Deferred Income Taxes	149	0
Income taxes payable	0	60
Total current liabilities	16,396	15,125
Pension and retirement plans	8,714	8,660
Deferred Income Taxes	103	0
Other long term liabilities	415	405
Total liabilities	25,628	24,190
Commitments and contingencies
Shareholders’ equity:
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 3,571 and 3,496 shares, respectively	36	35
Additional paid-in capital	11,212	11,137
Retained earnings	17,717	17,728
Accumulated other comprehensive loss	(5,715)	(5,865)
Total shareholders’ equity	23,250	23,035
Total liabilities and shareholders’ equity	$ 48,878	$ 47,225

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Unaudited Consolidated Statement of Shareholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]
Balance at Sep. 30, 2013	$ 23,035	$ 35	$ 11,137	$ 17,728	$ (5,865)
Balance (in Shares) at Sep. 30, 2013	3,496	3,496
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	346			346
Other comprehensive income	150				150
Exercise of stock options, shares		1
Exercise of stock options	6		6
Stock-based compensation	69		69
Restricted stock issuance	1	1	0
Restricted stock issuance (in Shares)		74
Cash dividends on common stock ($0.10 per share)	(357)			(357)
Balance at Dec. 31, 2013	$ 23,250	$ 36	$ 11,212	$ 17,717	$ (5,715)
Balance (in Shares) at Dec. 31, 2013	3,571	3,571

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Pension and Retirement Plans (Detail) - Components of net periodic benefit costs (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Pension:
Pension:
Service cost	$ 11	$ 15
Interest cost	207	189
Expected return on plan assets	(115)	(104)
Amortization of:
Prior service gain	0	0
Amortization of net gain	21	42
Net periodic benefit cost	124	142
Post Retirement:
Pension:
Service cost	3	0
Interest cost	11	9
Amortization of:
Amortization of net gain	(36)	(46)
Net periodic benefit cost	(22)	(37)
Foreign | Pension:
Pension:
Service cost	11	15
Interest cost	190	173
Expected return on plan assets	(115)	(104)
Amortization of:
Prior service gain	0	0
Amortization of net gain	23	36
Net periodic benefit cost	109	120
Foreign | Post Retirement:
Pension:
Service cost	0	0
Interest cost	0	0
Amortization of:
Amortization of net gain	0	0
Net periodic benefit cost	0	0
U.S. | Pension:
Pension:
Service cost	0	0
Interest cost	17	16
Expected return on plan assets	0	0
Amortization of:
Prior service gain	0	0
Amortization of net gain	(2)	6
Net periodic benefit cost	15	22
U.S. | Post Retirement:
Pension:
Service cost	3	0
Interest cost	11	9
Amortization of:
Amortization of net gain	(36)	(46)
Net periodic benefit cost	$ (22)	$ (37)

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Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Dec. 31, 2013

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive loss are as follows:

	December 31, 2013			September 30, 2013
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(2,006	)	$	(2,156	)
Additional minimum pension liability	(3,709		)	(3,709		)
Accumulated other comprehensive loss	$	(5,715	)	$	(5,865	)

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Segment Information (Detail) - The following table presents certain operating segment information (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Sep. 30, 2013
Sales:
Product	$ 14,749	$ 15,305
Service	6,583	5,565
Total sales	21,332	20,870
Profit (loss) from operations	340	173
Assets	48,878	50,814	47,225
Capital expenditures	273	135
Depreciation and amortization	239	123
Systems Segment
Sales:
Product	1,006	96
Service	1,283	957
Total sales	2,289	1,053
Profit (loss) from operations	142	(373)
Assets	15,304	16,914
Capital expenditures	61	41
Depreciation and amortization	52	37
Germany
Sales:
Product	1,401	2,064
Service	4,188	3,204
Total sales	5,589	5,268
Profit (loss) from operations	(81)	(147)
Assets	13,134	13,527
Capital expenditures	87	55
Depreciation and amortization	46	42
United Kingdom
Sales:
Product	647	154
Service	328	302
Total sales	975	456
Profit (loss) from operations	31	0
Assets	3,379	3,524
Capital expenditures	23	3
Depreciation and amortization	4	5
U.S.
Sales:
Product	11,695	12,991
Service	784	1,102
Total sales	12,479	14,093
Profit (loss) from operations	248	693
Assets	17,061	16,849
Capital expenditures	102	36
Depreciation and amortization	137	39
Total
Sales:
Product	13,743	15,209
Service	5,300	4,608
Total sales	19,043	19,817
Profit (loss) from operations	198	546
Assets	33,574	33,900
Capital expenditures	212	94
Depreciation and amortization	$ 187	$ 86

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Segment Information (Tables)

3 Months Ended

Dec. 31, 2013

Operating Segment Information

Segment Reporting Information [Line Items]

Schedule of Revenue by Major Customers by Reporting Segments

The following table presents certain operating segment information.

				Service and System Integration Segment
For the Three Months Ended December 31,	Systems Segment			Germany			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2013
Sales:
Product	$	1,006		$	1,401		$	647	$	11,695	$	13,743	$	14,749
Service	1,283			4,188			328		784		5,300		6,583
Total sales	2,289			5,589			975		12,479		19,043		21,332
Profit (loss) from operations	142			(81		)	31		248		198		340
Assets	15,304			13,134			3,379		17,061		33,574		48,878
Capital expenditures	61			87			23		102		212		273
Depreciation and amortization	52			46			4		137		187		239
2012
Sales:
Product	$	96		$	2,064		$	154	$	12,991	$	15,209	$	15,305
Service	957			3,204			302		1,102		4,608		5,565
Total sales	1,053			5,268			456		14,093		19,817		20,870
Profit (loss) from operations	(373		)	(147		)	—		693		546		173
Assets	16,914			13,527			3,524		16,849		33,900		50,814
Capital expenditures	41			55			3		36		94		135
Depreciation and amortization	37			42			5		39		86		123

Revenues in Excess of 10 Percent of Total Revenues

Segment Reporting Information [Line Items]

Schedule of Revenue by Major Customers by Reporting Segments

The following table lists customers from which the Company derived revenues in excess of 10% of total revenues for the three-month periods ended December 31, 2013, and 2012.

		For the three months ended,
		December 31, 2013				December 31, 2012
		Amount		% of Revenues		Amount		% of Revenues
	(dollars in millions)
Customer A		$	6.1	29	%	$	5.1	24	%
Customer B		$	3.3	15	%	$	2.6	12	%

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Unaudited Consolidated Statement of Shareholders' Equity (Parentheticals) (USD $)	1 Months Ended	3 Months Ended
	Dec. 17, 2013	Dec. 31, 2013
Statement of Stockholders' Equity [Abstract]
Dividends per share	$ 0.10	$ 0.10

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Consolidated Balance Sheets (Parentheticals) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Allowances (in Dollars)	$ 292	$ 242
Common stock par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	7,500	7,500
Common stock, shares issued	3,571	3,496
Common stock, shares outstanding	3,571	3,496

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Fair Value Measures

3 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Measures

Fair Value Measures

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

	Fair Value Measurements Using
	Level 1		Level 2		Level 3		Total Balance
	As of December 31, 2013
	(Amounts in thousands)
Assets:
Money Market funds	$	1,255	$	—	$	—	$	1,255
Total assets measured at fair value	$	1,255	$	—	$	—	$	1,255

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

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

The Company had no liabilities measured at fair value as of December 31, 2013 or September 30, 2013. The Company had no assets or liabilities measured at fair value on a non recurring basis as of December 31, 2013 or September 30, 2013.

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Document And Entity Information	3 Months Ended
	Dec. 31, 2013	Feb. 10, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	CSP INC /MA/
Document Type	10-Q
Current Fiscal Year End Date	--09-30
Entity Common Stock, Shares Outstanding		3,571,041
Amendment Flag	false
Entity Central Index Key	0000356037
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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Dividend

3 Months Ended

Dec. 31, 2013

Equity [Abstract]

Dividend

Dividend

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

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Unaudited Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Sales:
Product	$ 14,749	$ 15,305
Services	6,583	5,565
Total sales	21,332	20,870
Cost of sales:
Product	12,583	13,224
Services	4,078	3,469
Amortization of inventory step up and intangibles	138	0
Total cost of sales	16,799	16,693
Gross profit	4,533	4,177
Operating expenses:
Engineering and development	635	444
Selling, general and administrative	4,020	3,560
Total operating expenses	4,655	4,004
Business Combination, Bargain Purchase, Gain Recognized, Amount	462	0
Operating income	340	173
Other income (expense):
Foreign exchange gain (loss)	(26)	13
Other income (expense), net	0	46
Total other income (expense), net	(26)	59
Income before income taxes	314	232
Income tax expense (benefit)	(32)	117
Net income	346	115
Net income attributable to common stockholders	$ 335	$ 113
Net income (loss) per share – basic (in Dollars per share)	$ 0.10	$ 0.03
Weighted average shares outstanding – basic (in Shares)	3,431	3,363
Net income (loss) per share – diluted (in Dollars per share)	$ 0.10	$ 0.03
Weighted average shares outstanding – diluted (in Shares)	3,474	3,407

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Earnings Per Share of Common Stock

3 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share of Common Stock

Earnings Per Share of Common Stock

Basic net income per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income by the assumed weighted average number of common shares outstanding.

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

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

	For the three months ended
	December 31, 2013		December 31, 2012
	(Amounts in thousands except per share data)
Net income	$	346	$	115
Less: Net income attributable to nonvested common stock	11		2
Net income attributable to common stockholders	$	335	$	113
Weighted average total shares outstanding – basic	3,545		3,426
Less: weighted average non-vested shares outstanding	114		63
Weighted average number of common shares outstanding – basic	3,431		3,363
Potential common shares from non-vested stock awards and the assumed exercise of stock options	43		44
Weighted average common shares outstanding – diluted	3,474		3,407
Net income per share – basic	$	0.10	$	0.03
Net income per share – diluted	$	0.10	$	0.03

All anti-dilutive securities, including certain stock options, are excluded from the diluted income per share computation. For the three months ended December 31, 2013 and 2012, 49,000 and 197,000 options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive.

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Acquisition (Notes)

3 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Acquisitions

Acquired Business

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

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

The purchase price was allocated as follows:

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

Management's estimates and assumptions are subject to change upon the finalization of the valuation and may be adjusted. The purchase price allocation from which the inventory, property and intangible assets were derived has not been finalized. The preliminary allocation of the purchase price for accounting purposes was based upon preliminary estimates and assumptions that are subject to change upon the finalization of the valuations.

The results of operations of Myricom for the period November 4 - December 31, 2013, are included in the Company’s consolidated statement of operations for the three months ended December 31, 2013.

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

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

	For the three months ended
	December 31, 2013		December 31, 2012
	(Amounts in thousands except per share data)
Revenue	$	21,951	$	22,747
Net income (loss)	$	35	$	(834	)
Net income (loss) per share – basic	$	0.01	$	(0.24	)
Net income (loss) per share – diluted	$	0.01	$	(0.24	)

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Pension and Retirement Plans (Tables)

3 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

Schedule of Net Benefit Costs

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

	For the Three Months Ended December 31,
	2013									2012
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	11		$	—		$	11		$	15		$	—		$	15
Interest cost	190			17			207			173			16			189
Expected return on plan assets	(115		)	—			(115		)	(104		)	—			(104		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	23			(2		)	21			36			6			42
Net periodic benefit cost	$	109		$	15		$	124		$	120		$	22		$	142
Post Retirement:
Service cost	$	—		$	3		$	3		$	—		$	—		$	—
Interest cost	—			11			11			—			9			9
Amortization of net gain	—			(36		)	(36		)	—			(46		)	(46		)
Net periodic benefit cost	$	—		$	(22	)	$	(22	)	$	—		$	(37	)	$	(37	)

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Acquisition (Tables)

3 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Schedule of Purchase Price Allocation

The purchase price was allocated as follows:

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

Business Acquisition, Pro Forma Information

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

	For the three months ended
	December 31, 2013		December 31, 2012
	(Amounts in thousands except per share data)
Revenue	$	21,951	$	22,747
Net income (loss)	$	35	$	(834	)
Net income (loss) per share – basic	$	0.01	$	(0.24	)
Net income (loss) per share – diluted	$	0.01	$	(0.24	)

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Pension and Retirement Plans

3 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

Pension and Retirement Plans

Pension and Retirement Plans

The Company has defined benefit and defined contribution plans in the United Kingdom, Germany and the U.S. In the United Kingdom and Germany, the Company provides defined benefit pension plans and defined contribution plans for the majority of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain current and former employees. The domestic supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. Domestically, the Company also provides for officer death benefits through post-retirement plans to certain officers.  All of the Company’s defined benefit plans are closed to newly hired employees and have been for the two years ended September 30, 2013 and for the three months ended December 31, 2013.

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

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

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

	For the Three Months Ended December 31,
	2013									2012
	Foreign			U.S.			Total			Foreign			U.S.			Total
	(Amounts in thousands)
Pension:
Service cost	$	11		$	—		$	11		$	15		$	—		$	15
Interest cost	190			17			207			173			16			189
Expected return on plan assets	(115		)	—			(115		)	(104		)	—			(104		)
Amortization of:
Prior service gain	—			—			—			—			—			—
Amortization of net gain	23			(2		)	21			36			6			42
Net periodic benefit cost	$	109		$	15		$	124		$	120		$	22		$	142
Post Retirement:
Service cost	$	—		$	3		$	3		$	—		$	—		$	—
Interest cost	—			11			11			—			9			9
Amortization of net gain	—			(36		)	(36		)	—			(46		)	(46		)
Net periodic benefit cost	$	—		$	(22	)	$	(22	)	$	—		$	(37	)	$	(37	)

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Inventories

3 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Inventories

Inventories

Inventories consist of the following:

	December 31, 2013		September 30, 2013
	(Amounts in thousands)
Raw materials	$	2,379	$	1,587
Work-in-process	1,204		404
Finished goods	3,016		2,800
Total	$	6,599	$	4,791

Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met, of approximately $0.3 million and $0.5 million as of December 31, 2013 and September 30, 2013, respectively.

Total inventory balances in the table above are shown net of reserves for obsolescence of approximately $4.5 million and $4.6 million as of December 31, 2013 and September 30, 2013, respectively.

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Accumulated Other Comprehensive Loss

3 Months Ended

Dec. 31, 2013

Equity [Abstract]

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

 The components of accumulated other comprehensive loss are as follows:

	December 31, 2013			September 30, 2013
	(Amounts in thousands)
Cumulative effect of foreign currency translation	$	(2,006	)	$	(2,156	)
Additional minimum pension liability	(3,709		)	(3,709		)
Accumulated other comprehensive loss	$	(5,715	)	$	(5,865	)

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Segment Information

3 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Information

Segment Information

The following table presents certain operating segment information.

				Service and System Integration Segment
For the Three Months Ended December 31,	Systems Segment			Germany			United Kingdom		U.S.		Total		Consolidated Total
	(Amounts in thousands)
2013
Sales:
Product	$	1,006		$	1,401		$	647	$	11,695	$	13,743	$	14,749
Service	1,283			4,188			328		784		5,300		6,583
Total sales	2,289			5,589			975		12,479		19,043		21,332
Profit (loss) from operations	142			(81		)	31		248		198		340
Assets	15,304			13,134			3,379		17,061		33,574		48,878
Capital expenditures	61			87			23		102		212		273
Depreciation and amortization	52			46			4		137		187		239
2012
Sales:
Product	$	96		$	2,064		$	154	$	12,991	$	15,209	$	15,305
Service	957			3,204			302		1,102		4,608		5,565
Total sales	1,053			5,268			456		14,093		19,817		20,870
Profit (loss) from operations	(373		)	(147		)	—		693		546		173
Assets	16,914			13,527			3,524		16,849		33,900		50,814
Capital expenditures	41			55			3		36		94		135
Depreciation and amortization	37			42			5		39		86		123

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

The following table lists customers from which the Company derived revenues in excess of 10% of total revenues for the three-month periods ended December 31, 2013, and 2012.

		For the three months ended,
		December 31, 2013				December 31, 2012
		Amount		% of Revenues		Amount		% of Revenues
	(dollars in millions)
Customer A		$	6.1	29	%	$	5.1	24	%
Customer B		$	3.3	15	%	$	2.6	12	%

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Pension and Retirement Plans (Detail)	3 Months Ended
	Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]
Number of years defined benefit plans are closed to newly hired employees	2 years

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Inventories (Tables)

3 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current

Inventories consist of the following:

	December 31, 2013		September 30, 2013
	(Amounts in thousands)
Raw materials	$	2,379	$	1,587
Work-in-process	1,204		404
Finished goods	3,016		2,800
Total	$	6,599	$	4,791

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Acquisition (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Nov. 04, 2013
Business Combinations [Abstract]
Payments to Acquire Businesses, Net of Cash Acquired	$ 500	$ 0
Business Acquisition, Purchase Price Allocation, Liabilities Assumed			(93)
Business Combination, Bargain Purchase, Gain Recognized, Amount	$ 462	$ 0

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Unaudited Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Net income	$ 346	$ 115
Other comprehensive income:
Foreign currency translation gain adjustments	150	56
Other comprehensive income	150	56
Total comprehensive income	$ 496	$ 171

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Use of Estimates

3 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates under different assumptions or conditions.

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Acquisition Purchase Price Allocation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Nov. 04, 2013
Business Combinations [Abstract]
Business Acquisition, Purchase Price Allocation, Current Assets, Inventory			$ 1,030
Business Acquisition, Purchase Price Allocation, Property, Plant and Equipment			17
Business Acquisition, Purchase Price Allocation, Intangible Assets Other than Goodwill			260
Business Acquisition, Purchase Price Allocation, Assets Acquired			1,307
Business Acquisition, Purchase Price Allocation, Liabilities Assumed			(93)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net			1,214
Payments to Acquire Businesses, Net of Cash Acquired	500	0
Bargain purchase gain before tax	714
Deferred tax on bargain purchase gain	(252)
Business Combination, Bargain Purchase, Gain Recognized, Amount	$ 462	$ 0

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Fair Value Measures (Detail) - Assets and Liabilities measured at fair value on a recurring basis (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Sep. 30, 2013
Assets:
Money Market funds	$ 1,255	$ 3,503
Total assets measured at fair value	1,255	3,503
Level 1
Assets:
Money Market funds	1,255	3,503
Total assets measured at fair value	$ 1,255	$ 3,503

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Earnings Per Share of Common Stock (Tables)

3 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

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

	For the three months ended
	December 31, 2013		December 31, 2012
	(Amounts in thousands except per share data)
Net income	$	346	$	115
Less: Net income attributable to nonvested common stock	11		2
Net income attributable to common stockholders	$	335	$	113
Weighted average total shares outstanding – basic	3,545		3,426
Less: weighted average non-vested shares outstanding	114		63
Weighted average number of common shares outstanding – basic	3,431		3,363
Potential common shares from non-vested stock awards and the assumed exercise of stock options	43		44
Weighted average common shares outstanding – diluted	3,474		3,407
Net income per share – basic	$	0.10	$	0.03
Net income per share – diluted	$	0.10	$	0.03