CSPI

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How CSPI rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

Text kept

69%

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Length

−431

words, now 5,306

New in FY2025

For the fiscal years ended September 30, 2025 and 2024, no one customer accounted for 10% or more of our total revenues.
If any of our products or third-party components used in our products contain defects or bugs, or have reliability, quality or compatibility problems, we may not be able to successfully design workarounds or corrections.
Foreign-based revenue is determined based on the location to which the product is shipped or services are rendered and represented 10% and 12% of our total revenue for the fiscal years ended September 30, 2025 and 2024, respectively.
In particular, it is possible activity in the United Kingdom and the rest of Europe will be adversely impacted and that we will face increased regulatory and legal complexities, including those related to tax, trade, data protection, and employee relations as a result of Brexit and evolving international regulations.
Pandemics, epidemics or disease outbreaks may materially adversely affect our business, results of operations, cash flows and financial condition.
Pandemics, epidemics, or disease outbreaks, may cause harm to us, our employees, our clients, our vendors and supply chain partners, and financial institutions, which could have a material adverse effect on our business, results of operations, cash flows, and financial condition.
The impact of a pandemic, epidemic, or other disease outbreak may include, but would not be limited to: (i) disruption to operations due to the unavailability of employees due to illness, quarantines, risk of illness, travel restrictions or factors that limit our existing or potential workforce; (ii) volatility in the demand for or availability of our products and services, (iii) inability to meet our customers’ needs due to disruptions in the manufacture, sourcing and distribution of our products and services, or (iv) failure of third parties on which we rely, including our suppliers, clients, and external business partners, to meet their obligations to us, or significant disruptions in their ability to do so.
Because these customers may use our products and services in connection with other projects with different sizes and durations, a customer’s orders for one quarter generally do not indicate a trend for future orders by that customer.
If we experience a local or regional disaster or other business continuity problem, such as a hurricane, earthquake, terrorist attack, pandemic or other natural or human-made disaster, our continued success will depend, in part, on the availability of our personnel, our office facilities, and the proper functioning of our computer, telecommunication and other related systems and operations.
As we grow our operations, the potential for particular types of natural or human-made disasters, political, economic or infrastructure instabilities, or other country- or region-specific business continuity risks increases.
The effects of the ongoing conflict could heighten many of our known risks described in these "Risk Factors.” Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the conflict between Israel and Hamas.
Violation of the peace process may lead to to renewed military conflict and/or escalation of the Israel and Hamas conflict and geopolitical tensions related to such military conflict and/or escalation, including increased trade barriers or restrictions on global trade, could result in, among other things, cyber attacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business, financial condition and results of operations.
The effects of the ongoing conflict could heighten many of our known risks described in these "Risk Factors.” Significant political, trade, regulatory developments, and other circumstances beyond our control, could have a material adverse effect on our financial condition or results of operations. Significant political, trade, or regulatory developments in the jurisdictions in which we sell or purchase our products, including country of origin of such products, are difficult to predict and may create periods of volatility in such markets which may have a material adverse effect on us.
Recent changes in U.S. federal policy that affect the geopolitical landscape could give rise to circumstances outside our control that could have negative impacts on our business operations.
Beginning in the second quarter of 2025, new U.S.
Tariffs were announced, including additional tariffs on imports from China, India, Japan, South Korea, Taiwan, Vietnam and the EU, among others.
In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S. and other retaliatory measures.
Various modifications and delays to the U.S.
Tariffs have been announced and further changes are expected to be made in the future, which may include additional sector-based tariffs or other measures.
Department of Commerce has initiated an investigation under Section 232 of the Trade Expansion Act of 1962, as amended, into, among other things, imports of semiconductors, semiconductor manufacturing equipment, and their derivative products, including downstream products that contain semiconductors.
These tariffs do not currently include software, services, intangibles, and other digital services; however, we cannot predict future trade policy or tariffs, including the impact or timing thereof, or whether such services will be subject to any form of tariffs or other restrictions in the future.
The ultimate impact remains uncertain and will depend on several factors, including whether additional or incremental U.S.
Tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and the overall magnitude and duration of these measures.
If disputes and conflicts further escalate, actions by governments in response could be significantly more severe and restrictive.
Any of the foregoing could materially adversely affect the Company’s business, results of operations, financial condition and stock price. Legal and Regulatory Risks Changes in regulations could materially adversely affect us.
Our management concluded that our internal control over financial reporting was effective as of September 30, 2025.
If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business.
Failure to maintain our accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.

Gone since FY2024

For the fiscal year ended September 30, 2024 and 2023 no one customer accounted for 10% or more of our total revenues for the fiscal year.
If any of our products or third-party components used in our products contain defects or bugs, or have reliability, quality or compatibility problems, we may not be able to successfully design workarounds.
Foreign-based revenue is determined based on the location to which the product is shipped or services are rendered and represented 3% and 3% of our total revenue for the fiscal years ended September 30, 2024 and 2023, respectively.
In particular, it is possible activity in the United Kingdom and the rest of Europe will be adversely impacted and that we will face increased regulatory and legal complexities, including those related to tax, trade, and employee relations as a result of Brexit.
Pandemics, epidemics or disease outbreaks, such as the novel coronavirus (“COVID-19”), may materially adversely affect our business, results of operations, cash flows and financial condition.
Pandemics, epidemics, or disease outbreaks, such as COVID-19 may cause harm to us, our employees, our clients, our vendors and supply chain partners, and financial institutions, which could have a material adverse effect on our business, results of operations, cash flows, and financial condition.
The impact of a pandemic, epidemic, or other disease outbreak, such as COVID-19, may include, but would not be limited to: (i) disruption to operations due to the unavailability of employees due to illness, quarantines, risk of illness, travel restrictions or factors that limit our existing or potential workforce; (ii) volatility in the demand for or availability of our products and services, (iii) inability to meet our customers’ needs due to disruptions in the manufacture, sourcing and distribution of our products and services, or (iv) failure of third parties on which we rely, including our suppliers, clients, and external business partners, to meet their obligations to us, or significant disruptions in their ability to do so.
Government Contracting Risks During certain fiscal years, we may depend on contracts with the federal government, primarily with the Department of Defense ("DoD"), for a portion of our revenue, and our business could be seriously harmed if the government significantly decreased or ceased doing business with us.
We derived below 1% of our total revenue in fiscal year 2024 and 5% of our total revenue in fiscal year 2023 from the DoD as a subcontractor.
Although we only derived 1% of our total revenue in fiscal year 2024, we expect that the DoD contracts to continue to be important to our business for the foreseeable future.
If we were suspended or debarred from contracting with the federal government generally, the General Services Administration, or any significant agency in the intelligence community or the DoD, if our reputation or relationship with government agencies were to be impaired, or if the government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business, prospects, financial condition and operating results would be materially and adversely affected.
Our business could be adversely affected by changes in budgetary priorities of the federal government.
Because we derive a significant percentage of our revenue from contracts with the federal government, changes in federal government budgetary priorities could directly affect our financial performance.
A significant decline in government expenditures, a shift of expenditures away from programs that we support or a change in federal government contracting policies could cause federal government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty or not to exercise options to renew contracts.
In years when Congress does not complete its budget process before the end of its fiscal year (September 30), government operations are funded through a continuing resolution ("CR") that temporarily funds federal agencies.
Recent CRs have generally provided funding at the levels provided in the previous fiscal year and have not authorized new spending initiatives.
When the federal government operates under a CR, delays can occur in the procurement of products and services.
Historically, such delays have not had a material effect on our business; however, should funding of the federal government by CR be prolonged or extended, it could have significant consequences for our business and our industry.
Additionally, our business could be seriously affected if changes in DoD priorities reduces the demand for our services on contracts supporting some operations and maintenance activities or if we experience an increase in set-asides for small businesses, which could result in our inability to compete directly for contracts.
Federal government contracts contain numerous provisions that are unfavorable to us.
Federal government contracts contain provisions and are subject to laws and regulations that give the government rights and remedies, some of which are not typically found in commercial contracts, including allowing the government to: ● cancel multi-year contracts and related orders if funds for contract performance for any subsequent year become unavailable; ● claim rights in systems and software developed by us; ● suspend or debar us from doing business with the federal government or with a governmental agency; ● impose fines and penalties and subject us to criminal prosecution; and ● control or prohibit the export of our data and technology.
If the government terminates a contract for convenience, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination.
If the government terminates a contract for default, we may be unable to recover even those amounts, and instead may be liable for excess costs incurred by the government in procuring undelivered items and services from another source.
Depending on the value of a contract, such termination could cause our actual results to differ materially and adversely from those anticipated.
As is common with government contractors, we have experienced and continue to experience occasional performance issues under certain of our contracts.
Depending upon the value of the matters affected, a performance problem that impacts our performance of a program or contract could cause our actual results to differ materially and adversely from those anticipated.
Because these customers may use our products and services in connection with a variety of defense programs or other projects with different sizes and durations, a customer’s orders for one quarter generally do not indicate a trend for future orders by that customer.
If we experience a local or regional disaster or other business continuity problem, such as a hurricane, earthquake, terrorist attack, pandemic or other natural or man-made disaster, our continued success will depend, in part, on the availability of our personnel, our office facilities, and the proper functioning of our computer, telecommunication and other related systems and operations.
As we grow our operations, the potential for particular types of natural or man-made disasters, political, economic or infrastructure instabilities, or other country- or region-specific business continuity risks increases.
The effects of the ongoing conflict could heighten many of our known risks described in these "Risk Factors.” Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Israel and Hamas.
There could be an expansion of the countries involved, which could lead to significant detrimental effects to the global economy.
Further escalation of the Israel and Hamas conflict and geopolitical tensions related to such military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyber attacks, supply disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business, financial condition and results of operations.
The effects of the ongoing conflict could heighten many of our known risks described in these "Risk Factors.” Legal and Regulatory Risks.
Changes in regulations could materially adversely affect us.
Our management concluded that our internal control over financial reporting was ineffective as of September 30, 2024, and identified certain material weaknesses in our internal controls.
While management is working to remediate the material weaknesses, there is no assurance that such changes will remediate the identified material weaknesses or that the controls will prevent or detect future material weaknesses.
If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business Failure to maintain our accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.
As of September 30, 2024, we discovered material weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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