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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of the major elements of our consolidated financial statements. You should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and other detailed information appearing elsewhere in this Annual Report on Form 10-K, including under the heading “Risk Factors.” The discussion of our financial condition and results of operations includes various forward-looking statements about our markets, the demand for our products and services and our future plans and results. These statements are based on assumptions that we consider to be reasonable, but that could prove to be incorrect. For more information regarding our assumptions, you should refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements and Assumptions” below.

Cautionary Note Regarding Forward-Looking Statements and Assumptions

This Annual Report on Form 10-K and the documents incorporated by reference herein, if any, contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating” or similar words. Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for PRM systems, future demand for OBX rental equipment, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for our channels of our GCL system, the fulfillment of customer payment obligations, the impact of the current armed conflict between Russia and Ukraine, our ability to manage changes and the continued health or availability of management personnel, volatility and direction of oil prices, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves. These forward-looking statements reflect our current judgment about future events and trends based on the information currently available to us. However, there will likely be events in the future that we are not able to predict or control. The factors listed under the caption “Risk Factors”, as well as cautionary language in this Annual Report on Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such examples include, but are not limited to, the failure of the Quantum or OptoSeis® or Aquana technology transactions to yield positive operating results and decreases in commodity price levels which could reduce demand for our products, the failure of our products to achieve market acceptance (despite substantial investment by us) our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, bad debt write-offs associated with customer accounts, inability to collect on promissory notes, lack of further orders for our OBX rental equipment, failure of our Quantum products to be adopted by the border and perimeter security market, or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property. The occurrence of the events described in these risk factors and elsewhere in this Annual Report on Form 10-K could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.

Background

We design and manufacture seismic instruments and equipment and primarily market these products to the oil and gas industry to locate, characterize and monitor hydrocarbon producing reservoirs. We also market our seismic products to other industries for vibration monitoring, border and perimeter security and various geotechnical applications. We design and manufacture other products of a non-seismic nature, including water meter products, imaging equipment and provide contract manufacturing services. For further information on the nature of our operations, see the information under the heading “Business” in this Annual Report on Form 10-K.

Consolidated Results of Operations

As we have reported in the past, our revenue and operating profits have varied significantly from quarter-to-quarter, and even year-to-year, and are expected to continue that trend in the future, especially when our quarterly or annual financial results are impacted by the presence or absence of relatively large, but somewhat unpredictable, sales of our oil and gas PRM systems and/or wireless seismic data acquisition systems for land and marine applications.

We report and evaluate financial information for three segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets. Summary financial data by business segment follows (in thousands):

YEAR ENDED SEPTEMBER 30,

Oil and Gas Markets

Traditional exploration product revenue $ 9,812 $ 12,183

Reservoir product revenue 584 962

Adjacent Markets

Emerging Markets

Corporate

Consolidated Totals

Overview

As further discussed below, revenue increased for all of our business segments for fiscal year 2024, confirming increased momentum in our diversification strategy. We have embarked on a diversification strategy to grow our non-Oil and Gas businesses through organic means or through acquisition. As a result of these efforts, we have experienced steady year over year revenue growth in our Adjacent Markets segment.

Our Oil and Gas Markets segment saw a shift from rentals of our OBX marine wireless nodes to purchases of the equipment. This shift signifies our customer’s recognition of future backlog to justify ownership versus renting the nodes. Additionally, we experienced year over year growth in oil and gas revenue, mostly due to growing demand for wireless marine nodes for ocean bottom seismic surveys. We do not expect significant expansion of the ocean bottom nodal market, for we expect the market is saturable and future rental fleet use will come from our customer’s need to temporarily expand their nodal fleet. We expect our Oil and Gas Markets segment to provide the majority of our revenue for years to come, but in diminishing portion to our other segments.

Growing industry acceptance of our water meter cables and connectors provides a strong enabler for additional revenue from our Adjacent Markets segment. Automatic meter reading efficiencies in operations and improved customer service has begun to be understood by the municipalities of the United States. We expect this portion of our business to continue to grow for the foreseeable future. Additionally, we anticipate this segment to see substantial revenue contributions from our Aquana smart water valve and IoT technology products as market traction and increased sales backlog continues to gather. Given the well-known and often extreme volatility experienced in our Oil and Gas segment, careful expansion of products and market diversity in our Adjacent Markets segment has been a longstanding part of our strategic vision and reflects our on-going diversification efforts.

We continue to maintain a strong balance sheet with no debt. Our current liquidity enables our ability to seek out business acquisitions, allows us to continue investments in capital assets and product research and development, which have historically driven revenue growth.

Fiscal Year 2024 Compared to Fiscal Year 2023

Consolidated revenue for fiscal year 2024 was $135.6 million, an increase of $11.1 million, or 8.9%, from fiscal year 2023. The increase in revenue was driven by increases in demand across all three of our business segments. Revenue from our Oil and Gas Markets segment increased $3.5 million, which was largely driven by a $30.0 million sale of our MarinerTM shallow water ocean bottom nodes and a $10.5 million sale of our shallow water OBX 750E nodes, both of which replaced rental contracts with the customers. This increase was largely offset by a decrease in utilization of our OBX rental fleet and decreased demand for our traditional seismic exploration products. Revenue from our Adjacent Markets segment increased $6.6 million primarily due to an increase in demand from our industrial products. Revenue from our Emerging Markets segment increased $1.0 million primarily due to the completion of a government contract.

Consolidated gross profit for fiscal year 2024 was $52.6 million, an increase of $0.9 million, or 1.7%, from fiscal year 2023. Gross profit from our Adjacent Markets segment increased $4.4 million, attributable to (i) the increase in revenue and (ii) margins improvements from fully absorbing our fixed overhead. This increase was offset by a $3.3 million decrease in gross profit from our Oil and Gas Markets segment as a result of the lower utilization of our OBX rental fleet, of which cost is primarily fixed depreciation.

Consolidated operating expenses for fiscal year 2024 were $45.5 million, an increase of $3.8 million, or 9.1%, from fiscal year 2023. The increase was largely due to a $2.8 million non-cash impairment of intangible assets from our Emerging Markets segment. The increase was also attributable to (i) higher selling and marketing expenses resulting from increased revenue and (ii) increased research and development expense caused by an increase in project expenditures and personnel costs.

In February 2023, we sold our real property located at 7310 Langfield Road in Houston, Texas for a cash sales price of $3.7 million, net of closing costs of $0.3 million. We recognized a gain of $1.3 million from the sale of this property which is included as a component of our income from operations in the accompanying statement of operations.

In August 2024, we sold our oil and gas product manufacturing operations based in the Russian Federation to a group of former employees ("Buyer"). We recorded a loss of $14.5 million in connection with the transaction, of which $13.1 million was related to the impact of cumulative foreign currency translation losses previously included in accumulated comprehensive loss. The loss on sale of this subsidiary is included as a component of other income (loss) in the accompanying statement of operations.

We have determined that the Buyer's legal entity is a variable interest entity ("VIE") due to the nature of the financing for the transaction. While the debt represents a direct obligation to absorb significant losses of the VIE, the debt does not establish the right and power to direct activities that most significantly impact the economic performance of the entity. We retained no equity or voting interest, have no employees that are directors or advisors of the new ownership group, and have no direct influence on the day-to-day decisions in operations or affect their ability to generate profits or losses. As such, we have determined we are not the primary beneficiary of the entity.

The sale had no material reduction to our consolidated net assets and is not expected to have a material effect on future revenue, profits or losses.

Segment Results of Operations

Fiscal Year 2024 Compared to Fiscal Year 2023

Oil and Gas Markets

Revenue

Revenue from our Oil and Gas Markets products for fiscal year 2024 increased $3.5 million, or 4.7%, from fiscal year 2023. The components of this increase were as follows:

Operating Income

Operating income associated with our Oil and Gas Markets products for fiscal year 2024 was $13.1 million, a decrease of $2.6 million, or 16.7%, from the prior fiscal year. The decrease in operating income was primarily due to lower utilization of our OBX rental fleet, of which its cost is primarily fixed depreciation. This decrease was partially offset by lower research and development costs.

Adjacent Markets

Revenue

Revenue from our Adjacent Markets products for fiscal year 2024 increased $6.6 million, or 13.4%, from the prior fiscal year. The components of this increase were as follows:

Operating Income

Operating income from our Adjacent Markets products for fiscal year 2024 was $14.2 million, an increase of $2.7 million, or 23.2%, from the prior fiscal year. The increase in operating income was primarily due to the increase in revenue and gross margin improvements. The increase was partially offset by (i) an increase in operating expenses resulting from the increased revenue and (ii) higher research and development expense.

Emerging Markets

Revenue

Revenue from our Emerging Markets products for fiscal year 2024 was $2.2 million, compared to $1.2 million from the prior fiscal year. The increase in revenue was primarily due to revenue recognized on $1.5 million government contract completed in third quarter of fiscal year 2024.

Operating Loss

Operating loss from our Emerging Markets products for fiscal year 2024 was $6.2 million, compared to $4.0 million from the prior fiscal year. The increase in operating loss for fiscal year 2024 was primarily due a $2.8 million non-cash impairment of intangible assets.

Liquidity and Capital Resources

At September 30, 2024, we had approximately $37.1 million in cash and cash equivalents and short-term investments. For the fiscal year ended September 30, 2024, we used $9.1 million of cash from operating activities. Our net loss of $6.6 million was offset by net non-cash charges of $18.8 million resulting from deferred income taxes, depreciation, amortization, impairment, accretion, inventory obsolescence, stock-based compensation and provision for credit losses. Other uses of cash included a (i) $11.0 million increase in inventories for the strategic purchase of long lead components needed for use in wireless products, valves and contract manufacturing and (ii) $3.0 million decrease in other liabilities due to the return of customer deposits on rental contracts, partially offset by an increase in our product warranty accrual and (iii) $0.3 million increase in other assets. These uses of cash were partially offset by a (i) $6.6 million decrease in trade accounts and notes receivable primarily due to the timing of collections from customers and (ii) $2.7 million increase in accounts payable due to timing of payments to our suppliers.

For the fiscal year ended September 30, 2024, we generated cash of $3.8 million in investing activities. Source of cash was proceeds of $32.0 million from the sale of used rental equipment. This source of cash was partially offset by (i) $3.9 million for additions to our property, plant and equipment, (ii) $8.3 million for additions to our equipment rental fleet, (iii) net disbursements of $14.7 million for purchases of short-term investments and (iv) $1.2 million for cash disposed on sale of our subsidiary. We expect fiscal year 2025 cash investments into our rental fleet will be approximately $3 million. We expect fiscal year 2025 cash investments in our property, plant and equipment will be approximately $8 million. Our capital expenditures are expected to be funded from our cash on hand, internal cash flows, cash flows from our rental contracts or, if necessary, borrowings under our new credit agreement.

For the fiscal year ended September 30, 2024, we used cash of $6.4 million from financing activities for the purchase of treasury stock pursuant to a stock buy-back program authorized by our Board of Directors. The program authorizes us to repurchase up to $7.0 million of our common stock in open market transactions. At September 30, 2024, $0.6 million of our common stock remains available for repurchases under the program.

In July 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender. The Agreement refinanced our credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender. The Agreement provides a revolving credit facility with a maximum availability of $15 million. Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) 80% of eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments. Interest shall accrue on outstanding borrowings at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25% per annum. We are required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of our assets, except for certain excluded property. The Agreement requires us to maintain a minimum (i) consolidated tangible net worth of $100 million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to 1.00, in each case tested quarterly. The Agreement also requires us to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance. The Agreement expires in July 2025.

At September 30, 2024, we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $14.9 million after consideration of a $0.1 million outstanding letter of credit. We were in compliance with all covenants under the Agreement. We do not currently anticipate the need to borrow under the Agreement; however, we may decide to do so in the future, if needed.

Our available cash, cash equivalents and short-term investments was $37.1 million at September 30, 2024, which included $1.1 million of cash and cash equivalents held by our foreign subsidiaries and branch offices. In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under the Agreement through its expiration in July 2025, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us. We currently believe that our cash and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

We do not have any obligations which meet the definition of an off-balance sheet arrangement, and which have or are reasonably likely to have a current or future effect on our financial statements or the items contained therein that are material to investors.

Contractual Obligations

Contingent Compensation Costs

In connection with the acquisition of Aquana in 2021, we are subject to additional contingent cash payments to the former members of Aquana over a six-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The merger agreement with Aquana requires the continued employment of a certain key employee and former member of Aquana for the first four years of the six year earn-out period for any of Aquana’s former members to be eligible to receive any earn-out payments. In accordance with ASC 805, Business Combinations, due to the continued employment requirement, no liability has been recorded for the estimated fair value of contingent earn-out payments for this transaction. Earn-outs achieved are recorded as compensation expense when incurred.

See Note 18 to our consolidated financial statements in this Annual Report on Form 10-K for more information on our contractual contingencies.

Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We consider many factors in selecting appropriate operational and financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these financial statements. We continually evaluate our estimates, including those related to revenue recognition, bad debt reserves, inventory obsolescence reserves, goodwill and long-lived asset impairment. We base our estimates on historical experience and various other factors, including the impact from the current economic conditions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions.

Our normal credit terms for trade receivables are 30 days. In certain situations, credit terms for trade receivables may be extended to 60 days or longer and such receivables generally do not require collateral. Additionally, we provide long-term financing in the form of promissory notes and sales-type leases when competitive conditions require such financing and, in such cases, we may require collateral. We perform ongoing credit evaluations of our accounts and financing receivables, and allowances are recognized for potential credit losses.

Our long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value.

We conduct our evaluation of goodwill at the reporting unit level on an annual basis as of September 30 and more frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. The guidance on the testing of goodwill for impairment provides the option to first assess qualitative factors to determine if the fair value of a reporting unit exceeds its carrying amount. If, based on the qualitative assessment of events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit is more than its carrying amount, then it is not necessary to perform a quantitative assessment. However, if an entity concludes otherwise, then a quantitative assessment must be performed. If, based on the quantitative assessment, we determine that the fair value of a reporting unit is less that its carrying amount, a goodwill impairment is recognized equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of the goodwill.

We record a write-down of our inventories when the cost basis of any manufactured product, including any estimated future costs to complete the manufacturing process, exceeds its net realizable value. Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out method, except that our subsidiary in the United Kingdom uses an average cost method to value their inventories.

We periodically review the composition of our inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder our ability to recover our investment in such inventories. Management’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of our inventory investment will not be realized in our operating activities.

The value of our inventories not expected to be realized in cash, sold or consumed during our next operating cycle are classified as non-current assets in our consolidated balance sheets.

We recognize revenue from product sales and services in accordance with ASC Topic 606, Revenue from Contracts with Customers. This standard applies to contracts for the sale of products and services and does not apply to contracts for the rental or lease of products. Under this standard, we recognize revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services. Revenue from product sales is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is reasonably assured. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. Our products are generally sold without any customer acceptance provisions, and our standard terms of sale do not allow customers to return products for credit. Most of our products do not require installation assistance or sophisticated instruction. We offer a standard product warranty, which obligates us to repair or replace our products having manufacturing defects. We maintain a reserve for future warranty costs based on historical experience or, in the absence of historical experience, management estimates. Revenue from engineering services is recognized as services are rendered over the duration of a project or as billed on a per hour basis. Field service revenue is recognized when services are rendered and is generally priced on a per day rate. We recognize rental revenue as earned over the rental period. Rentals of our equipment generally range from daily rentals to rental periods of up to six months or longer.

We recognize rental revenue in accordance with ASC Topic 842, Leases. In the event collectability of lease payments is not probable at the lease commencement date, we recognize revenue when payments are received. We regularly evaluate the collectability of our lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. We suspend the recognition of rental revenue when the collectability of amounts due are no longer probable and record a direct write-off of the lease receivable to rental revenue.

Recent Accounting Pronouncements

Please refer to Note 1 to our consolidated financial statements contained in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.

Management’s Current Outlook and Assumptions

Regarding our Oil and Gas Markets business segment, demand for our products are subject to volatile fluctuations in crude oil prices. As a result of substantial declines in crude oil prices in recent years, oil and gas exploration and production companies experienced a significant reduction in cash flows resulting in sharp reductions in their capital spending budgets for oil and gas exploration-focused activities including seismic data acquisition activities. While we experienced stronger marine nodal product sales in fiscal year 2024, the need for new seismic equipment, particularly land-based equipment, remains restrained due to our customers’ (i) limited capital resources, (ii) lack of visibility into future demand for their seismic services and (iii) in some cases, under-utilized legacy equipment. Crude oil prices have rebounded; however, lasting higher levels of oil and gas commodity pricing may not stabilize in the long term, thus continuing the challenging industry conditions we have experienced in previous fiscal years.

The vast majority of our oil and gas revenue in fiscal year 2024 was derived from wireless product sales and rentals. We believe our wireless product sales and rentals will increase in fiscal year 2025, over 2024 levels, primarily driven by our recent introduction of our MarinerTM marine wireless system and our PioneerTM land based wireless system, but we can make no assurance in this regard.

Many of our land-based traditional seismic products can be damaged, destroyed or otherwise consumed during our customer’s field operations. We expect fiscal year 2025 demand for our land-based traditional seismic products to remain flat over fiscal year 2024 levels.

We expect that fiscal year 2025 revenue from our oil and gas reservoir products, and principally our borehole tools and services, will increase slightly over fiscal year 2024 levels. In July 2024, we received requests for bids on Front-End Engineering and Design studies from a major oil and gas producer issued ahead of PRM tenders that may follow. These are multistage, large-scale opportunities. If a large scale PRM order were received in fiscal year 2025, revenue would likely not be recognized until fiscal year 2026 and 2027.

We expect fiscal year 2025 revenue from our Adjacent Markets products to increase over fiscal year 2024 levels due to our acquisition of Aquana and integration of Aquana's products into our business and optimism that demand for our industrial, imaging products and contract manufacturing services will continue to increase in fiscal year 2025.

We are aggressively marketing our SADAR technologies to security and oil and gas industry customers. While marked acceptance of SADAR as an effective analytical tool for categorizing seismic data, we continue to believe acceptance will occur. Fiscal year 2025 revenue from our Emerging Markets products is expected to be flat or modesty increase compared to fiscal year 2024 .

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not required.

Item 8. Financial Statements and Supplementary Data

Our consolidated financial statements, including the reports thereon, the notes thereto and supplementary data begin at page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, we conducted an evaluation, under supervision and with the participation of management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective at a reasonable assurance level. Disclosure controls and procedures are defined by Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC 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 us in reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control Integrated Framework (2013). Based on this assessment, our management concluded that, as of September 30, 2024, our internal control over financial reporting is effective based on those criteria.

Our independent registered public accounting firm, RSM US LLP, has audited the effectiveness of our internal controls over financial reporting, as stated in their attestation report included in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

In the fourth quarter of fiscal year 2024, management determined that during the first two quarters of the fiscal year there was a material weakness in the design of its internal controls over financial reporting related to segregation of duties which had the potential to materially impact substantially all account balances and transactions, which management believes did not result in a material misstatement of its financial statements. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. As of July 1, 2024, management implemented system configuration changes to address this segregation of duties issue. We believe this measure remediated the material weakness identified and has strengthened the internal controls over financial reporting.

There have not been any other changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of September 30, 2024, in connection with our 2025 Annual Meeting of Stockholders under the captions “Election of Directors,” “Executive Officers and Compensation,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” and is incorporated herein by reference.

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of September 30, 2024, in connection with our 2025 Annual Meeting of Stockholders under the caption “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference, and in Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” contained in Part II hereof.

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

PART IV

Item 15. Exhibits

Financial Statements

The financial statements listed on the accompanying Index to Financial Statements (see page F-1) are filed as part of this Annual Report on Form 10-K.

Exhibits

Exhibit Number Description of Documents

19.1 Insider Trading Policy for Employees, Officers and Directors.**

21.1 Subsidiaries of the Registrant.**

23.1 Consent of RSM US LLP.**

97.1 Executive Compensation Clawback Policy.**

* This exhibit is a management contract or a compensatory plan or arrangement.

** Filed herewith.

Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GEOSPACE TECHNOLOGIES CORPORATION

By: /s/ WALTER R. WHEELER

Walter R. Wheeler, Director and Principal Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ WALTER R. WHEELER Director and Principal Executive Officer November 22, 2024

Walter R. Wheeler

Robert L. Curda (Principal Financial Officer and Principal Accounting Officer)

/s/ GARY D. OWENS Chairman of the Board November 22, 2024

Gary D. Owens

/s/ MARGARET S. ASHWORTH Director November 22, 2024

Margaret S. Ashworth

/s/ THOMAS L. DAVIS Director November 22, 2024

Thomas L. Davis

/s/ EDGAR R. GIESINGER, JR. Director November 22, 2024

Edgar R. Giesinger, Jr.

/s/ STEPHEN C. JUMPER Director November 22, 2024

Stephen C. Jumper

/s/ RICHARD F. MILES Director November 22, 2024

Richard F. Miles

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets as of September 30, 2024 and 2023 F-4

Notes to Consolidated Financial Statements F-9

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Geospace Technologies Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Geospace Technologies Corporation and its subsidiaries (the Company) as of September 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows for each of the two years in the period ended September 30, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated November 22, 2024 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical AuditMatters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventory Valuation

As described in Note 1 to the consolidated financial statements, the Company’s consolidated inventories balance, which is stated at lower of cost or net realizable value, was $44.2 million as of September 30, 2024. The valuation of inventories is based on the Company’s periodic review of the composition of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder its ability to recover its investment in such inventories. The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s investment will not be realized in its operating activities.

We identified the valuation of inventories at the lower of cost or net realizable value as a critical audit matter due to the significant judgment and estimates required by management. Determining whether a decline in value has occurred requires management to make complex judgments related to (i) historical and estimated future product demand in relation to quantities on hand and (ii) obsolescence of certain products based on changes in technology and demand. Auditing these judgments is especially challenging and involved significant auditor judgment due to fluctuations in sales trends and evolving customer demands.

Our audit procedures related to the Company’s valuation of inventory included the following, among others:

Recoverability of Long-lived Assets—Emerging Markets Asset Group

As discussed in Note 11 to the consolidated financial statements, at September 30, 2024 the Company performed a recoverability assessment on the long-lived assets of its Emerging Markets asset group. In performing the recoverability assessment, the Company first compared the carrying value of the asset group to the estimated undiscounted cash flows to be generated over the remaining useful life of the asset group's primary asset, its developed technology. Because the carrying value of the asset group exceeded the estimated undiscounted cash flows, the Company then estimated the fair value of the asset group and recorded an impairment charge of $2.8 million.

We identified the recoverability assessment of long-lived assets for the Emerging Market’s asset group as a critical audit matter because of the significant assumptions management used in estimating the undiscounted cash flows expected to be generated by the asset group over the remaining life of the primary asset, including revenue growth rates and projected gross margins, among others. Auditing management’s assumptions involved a high degree of auditor judgment and increased audit effort due to the impact these assumptions could have on the recoverability conclusion of the Emerging Market’s asset group and the resulting impairment recorded.

Our audit procedures related to the Company’s recoverability assessment of long-lived assets for the Emerging Markets asset group included the following, among others:

/s/ RSM US LLP

We have served as the Company's auditor since 2018.

Houston, Texas

November 22, 2024

F-2

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Geospace Technologies Corporation

Opinion on the Internal Control Over Financial Reporting

We have audited Geospace Technologies Corporation and its subsidiaries (the Company) internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated November 22, 2024, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ RSM US LLP

Houston, Texas

November 22, 2024

F-3

Geospace Technologies Corporation and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share amounts)

AS OF SEPTEMBER 30,

ASSETS

Current assets:

Trade accounts and notes receivable, net 21,868 21,373

Assets held for sale 1,841 —

Prepaid expenses and other current assets 2,313 2,251

Non-current trade accounts and note receivable, net 6,375 —

Operating right-of-use assets 464 714

Other non-current assets 304 486

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Operating lease liabilities 173 257

Non-current operating lease liabilities 339 512

Deferred tax liabilities, net 34 16

Commitments and contingencies (See Note 18)

Stockholders’ equity:

Accumulated other comprehensive loss (4,257 ) (17,824 )

Total liabilities and stockholders’ equity $ 152,194 $ 153,042

The accompanying notes are an integral part of the consolidated financial statements.

F-4

Geospace Technologies Corporation and Subsidiaries

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

YEAR ENDED SEPTEMBER 30,

Revenue:

Cost of revenue:

Operating expenses:

Other intangible asset impairment 2,761 —

Provision for (recovery of) credit losses (110 ) (138 )

Gain on disposal of property — 1,315

Other income (expense):

Loss on sale of subsidiary (14,539 ) —

Foreign currency transaction gains (losses), net (270 ) 994

Total other income (expense), net (13,581 ) 1,241

Income (loss) before income taxes (6,464 ) 12,569

Income (loss) per common share:

Weighted average common shares outstanding:

The accompanying notes are an integral part of the consolidated financial statements.

F-5

Geospace Technologies Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(In thousands)

YEAR ENDED SEPTEMBER 30,

Other comprehensive income (loss):

Foreign currency translation adjustments 417 (2,515 )

Change in unrealized gains on available-for-sale securities, net of tax 67 4

Total other comprehensive income (loss), net 13,567 (2,511 )

Total comprehensive income $ 6,989 $ 9,695

The accompanying notes are an integral part of the consolidated financial statements.

F-6

Geospace Technologies Corporation and Subsidiaries

Consolidated Statements of Stockholders’ Equity

For the years ended September 30, 2024 and 2023

(In thousands, except share amounts)

Common Stock Accumulated

Other comprehensive loss — — — — (2,511 ) — (2,511 )

Stock-based compensation — — 1,374 — — — 1,374

Stock-based compensation — — 1,304 — — — 1,304

The accompanying notes are an integral part of the consolidated financial statements.

F-7

Geospace Technologies Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

YEAR ENDED SEPTEMBER 30,

Cash flows from operating activities:

Deferred income tax expense 18 3

Property, plant and equipment depreciation 3,512 3,704

Amortization of intangible assets 395 768

Intangible assets impairment expense 2,761 —

Accretion of discounts on short-term investments (566 ) (144 )

Stock-based compensation expense 1,304 1,374

Provision for (recovery of) credit losses (110 ) (138 )

Inventory obsolescence expense 589 2,229

Loss on sale of subsidiary 14,539 —

Gross profit from sale of rental equipment (30,998 ) (4,424 )

Loss on disposal of equipment 16 244

Gain on disposal of property — (1,315 )

Effects of changes in operating assets and liabilities:

Trade accounts and notes receivable 6,593 (5,561 )

Accounts payable trade 2,746 41

Net cash provided by (used in) operating activities (9,083 ) 15,558

Cash flows from investing activities:

Purchase of property, plant and equipment (3,857 ) (3,964 )

Investment in rental equipment (8,321 ) (9,920 )

Proceeds from the sale of property, plant and equipment 9 4,406

Proceeds from the sale of rental equipment 31,964 11,478

Purchase of short-term investments (32,078 ) (24,782 )

Proceeds from the sale of short-term investments 17,338 10,900

Cash disposed from sale of subsidiary (1,231 ) —

Net cash provided by (used in) investing activities 3,824 (11,882 )

Cash flows from financing activities:

Payments of contingent consideration — (175 )

Debt issuance costs — (350 )

Purchase of treasury stock (6,385 ) —

Net cash used in financing activities (6,385 ) (525 )

Effect of exchange rate changes on cash (264 ) (457 )

Increase (decrease) in cash and cash equivalents (11,908 ) 2,694

Cash and cash equivalents, beginning of fiscal year 18,803 16,109

Cash and cash equivalents, end of fiscal year $ 6,895 $ 18,803

The accompanying notes are an integral part of the consolidated financial statements.

F-8

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies:

The Company

Geospace Technologies Corporation (“Geospace”) designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. Geospace also designs and manufactures Adjacent Markets products including industrial products, imaging equipment, and provides contract manufacturing services, and Emerging Market products consisting of border and perimeter security products. Geospace and its subsidiaries are referred to collectively as the “Company”.

Basis of Presentation

The accompanying financial statements present the consolidated financial position, results of operations and cash flows of the Company in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually evaluates its estimates, including those related to revenue recognition, credit loss, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets, impairment of goodwill and other intangible assets and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. While management believes current estimates are reasonable and appropriate, actual results may differ from these estimates under different conditions or assumptions.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity at the time of purchase of three months or less to be cash equivalents. At September 30, 2024, cash and cash equivalents included $1.1 million held by the Company’s foreign subsidiaries and branch offices.

Concentrations of Risk

Credit

The Company maintains its cash in bank deposit accounts that, at times, exceed federally insured limits. Management of the Company believes that the financial strength of the financial institutions holding such deposits minimizes the credit risk of such deposits.

The Company sells products to customers throughout the United States and various foreign countries. The Company’s normal credit terms for trade receivables are 30 days. In certain situations, credit terms may be extended to 60 days or longer. The Company performs ongoing credit evaluations of its customers and generally does not require collateral for its trade receivables. Additionally, the Company provides long-term financing in the form of promissory notes and sales-type leases when competitive conditions require such financing. In such cases, the Company may require collateral. Allowances are recognized for immediately for expected credit losses. The Company determines the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its customers. Receivables are charged off against the allowance whenever it is probable that the balance will not be recoverable.

Two customers each comprised 27.4% and 16.0% of the Company’s revenue during fiscal year 2024. At September 30, 2024, the Company had trade accounts and notes receivable from these customers of $ 4.1 million and $9.5 million, respectively. Two customers each comprised 26.7% and 11.7% of the Company’s revenue during fiscal year 2023. At September 30, 2023, the Company had trade accounts and notes receivable from these customers of $3.5 million and $4.8 million, respectively.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Supplier

Certain models of the Company’s oil and gas marine wireless products require a timing device it purchases from a United States of America manufacturer. The Company currently does not possess the ability to manufacture this component and has no other reliable source for this device. If this manufacturer were to discontinue its production of this timing device, were to become unwilling to contract with the Company on competitive terms or were unable to supply the component in sufficient quantities to meet its requirements, the Company’s ability to compete in the marine wireless marketplace could be impaired, which could adversely affect its financial performance. The device is used in certain models of the Company’s rental equipment. The Company had no product sales in fiscal year 2024 requiring this device. Product sales requiring this device in fiscal year 2023 represented approximately 4% of the Company's revenue.

The Company purchases all of its thermal film from one manufacturer for its imaging products. Except for the film sold to the Company by this manufacturer, the Company knows of no other source for thermal film that performs as well in its imaging equipment. If the manufacturer were to discontinue producing thermal film, were to become unwilling to contract with the Company on competitive terms or were unable to supply thermal film in sufficient quantities to meet its requirements, the Company’s ability to compete in the direct thermal imaging marketplace could be impaired, which could adversely affect its financial performance. Thermal film sales represented approximately 5% of the Company’s revenue in each of fiscal years 2024 and 2023.

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in generally accepted accounting principles. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments. For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The Company adopted this standard on October 1, 2023. The adoption of this standard did not have any material impact on its consolidated financial statements.

Short-term Investments

The Company classifies its short-term investments as available-for-sale debt securities which have maturities of less than one year. These securities are carried at fair market value with net unrealized gains and losses reported as a component of accumulated other comprehensive loss in stockholders’ equity. Credit losses are recorded as an allowance rather than a reduction of the amortized cost basis for debt securities determined to be impaired for which there is neither an intent nor a more-likely-than-not requirement to sell. Reversals of credit losses are recorded in current period income as they occur.

Inventories

The Company records a write-down of its inventories when the cost basis of any manufactured product, including any estimated future costs to complete the manufacturing process, exceeds its net realizable value. Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first-in, first-out method, except that certain of the Company’s foreign subsidiaries use an average cost method to value their inventories.

The Company periodically reviews the composition of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder our ability to recover its investment in such inventories. The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s inventory investment will not be realized in its operating activities.

The Company reviews it inventories for classification purposes. The value of inventories not expected to be realized in cash, sold or consumed during its next operating cycle are classified as non-current assets.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Property, Plant and Equipment and Rental Equipment

Property, plant and equipment and rental equipment are stated at cost. Depreciation expense is calculated using the straight-line method over the following estimated useful lives:

Years

Rental equipment 2 - 5

Property, plant and equipment:

Machinery and equipment 3 - 15

Buildings and building improvements 10 - 50

Expenditures for renewals and betterments are capitalized. Repairs and maintenance expenditures are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any gain or loss thereon is reflected in the statements of operations.

Impairment of Long-lived Assets

The Company’s long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value.

At September 30, 2024, in light of the Company's historical losses and continued delays in obtaining additional contracts from the U.S. Customs and Border Protection and other customers on its Emerging Markets segment, the Company performed a recoverability assessment on the long-lived assets of its Emerging Markets asset group in which its carrying value was compared to estimated undiscounted cash flows over the remaining useful life of the asset group's primary asset, its developed technology. The carrying value of the asset group was in excess of the estimated undiscounted future cash flows. Accordingly, a fair value analysis was performed. Based on the assessment, the Company determined the fair value of the asset was less than its carrying value. The Company used an excess earnings approach to value the asset. Key assumptions used in the analysis include revenue, gross margin and cash flow projections. As a result of the assessment, the Company recorded an impairment charge of $2.8 million on this asset group, which impaired its developed technology intangible asset in its entirety.

Goodwill

The Company conducts its evaluation of goodwill at the reporting unit level on an annual basis as of September 30 and more frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. The Company first assesses qualitative factors to determine if the fair value of a reporting unit exceeds its carrying amount. If, based on the qualitative assessment of events or circumstances, the Company determines it is more likely than not that the fair value of a reporting unit is more than its carrying amount then it does not perform a quantitative assessment. However, if the Company concludes otherwise, then a it performs a quantitative assessment. If, based on the quantitative assessment, the Company determines that the fair value of a reporting unit is less that its carrying amount, a goodwill impairment is recognized equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of the goodwill.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Other Intangible Assets

Intangible assets are carried at cost, net of accumulated amortization. The estimated useful life of the Company’s other intangible assets are evaluated each reporting period to determine whether events or circumstances warrant a revision to the remaining amortization period. If the estimate of an intangible asset’s remaining useful life is changed, the amortization period should be changed prospectively. Amortization expense is calculated using the straight-line method over the following estimated useful lives:

Years

Developed technology 18

Trade names 5

Customer relationships 4

Non-compete agreements 4

Revenue Recognition

See Note 2 to these consolidated financial statements.

Research and Development Costs

The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, department supplies, direct project costs and other related costs.

Product Warranties

Most of the Company’s products do not require installation assistance or sophisticated instructions. The Company offers a standard product warranty obligating it to repair or replace equipment with manufacturing defects. The Company maintains a reserve for future warranty costs based on historical experience or, in the absence of historical product experience, management’s estimates. Reserves for future warranty costs are included within other current liabilities on the consolidated balance sheets.

Changes in the product warranty reserve are reflected in the following table (in thousands):

Accruals for warranties issued during the year 1,655

Settlements made (in cash or in kind) during the year (1,521 )

Accruals for warranties issued during the year 2,331

Settlements made (in cash or in kind) during the year (1,738 )

Stock-Based Compensation

The Company accounts for stock-based compensation, including grants of restricted awards and unqualified stock options in accordance with Accounting Standards Codification Topic 718, which requires that all share-based payments (to the extent that they are compensatory) be recognized as an expense in the Company’s consolidated statements of operations based on their fair values on the award date and the estimated number of shares it ultimately expects to vest.

The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award. The Company’s stock-based compensation plan and awards are more fully described in Note 15 to these consolidated financial statements.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Foreign Currency Gains and Losses

The assets and liabilities of the Company’s foreign subsidiaries and branch offices that have a foreign currency as their functional currency have been translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations have been translated using the average exchange rates during the year. Resulting translation adjustments have been recorded as a component of accumulated other comprehensive loss in stockholders’ equity. Foreign currency transaction gains and losses are included in the statements of operations as they occur. Transaction gains and losses on intra-entity foreign currency transactions and balances, including advances and demand notes payable on which settlement is not planned or anticipated in the foreseeable future, are recorded in “accumulated other comprehensive loss” on our consolidated balance sheets.

Fair Value

Fair value is the price that would be received to sell an asset or the amount paid to transfer a liability in an orderly transaction between market participants (an exit price) at the measurement date. U.S. GAAP has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Level 1 represents unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 represents quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly. Level 3 represents valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Also see Note 5 to these consolidated financial statements.

Income Taxes

Income taxes are presented in accordance with the Accounting Standards Codification Topic 740 (“Topic 740”) guidance for accounting for income taxes. The estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carrybacks and carryforwards are recorded. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities (temporary differences) and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company periodically reviews the recoverability of tax assets recorded on the balance sheet and provides valuation allowances if it is more likely than not that such assets will not be realized.

The Company follows the guidance of Topic 740 to analyze all tax positions that are less than certain. Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In accordance with Topic 740, the Company recognizes in its financial statements the impact of a tax position if that position is “more likely than not” to be sustained on audit, based on the technical merits of the position. The Company’s estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company classifies interest and penalties associated with the payment of income taxes, if any, in the Other Income (Expense) section of its consolidated statements of operations.

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued guidance which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance shall be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the provisions of this guidance and the impact on its consolidated financial statements.

In December 2023, the FASB issued guidance regarding improvements in income tax disclosure which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The guidance will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. The Company will adopt this guidance in its fourth quarter of fiscal year 2026. The guidance allows for adoption using either a prospective or retrospective transition method. The adoption of this guidance is not expected to have any material impact on its consolidation financial statements.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

2. Revenue Recognition

In accordance with ASC Topic 606,Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

The Company primarily derives product revenue from the sale of its manufactured products. Revenue from these product sales, including the sale of used rental equipment, is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is probable. The Company records deferred revenue when customer funds are received prior to shipment or delivery or performance has not yet occurred. The Company assesses collectability during the contract assessment phase. In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or when non-refundable cash is received from its customers and there is not a significant right of return. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. The Company’s products are generally sold without any customer acceptance provisions, and the Company’s standard terms of sale do not allow customers to return products for credit.

Revenue from engineering services is recognized as services are rendered over the duration of a project, or as billed on a per hour basis. Field service revenue is recognized when services are rendered and is generally priced on a per day rate.

The Company also generates revenue from short-term rentals under operating leases of its manufactured products. Rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured. Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to one year. The Company has determined that ASC 606 does not apply to rental contracts, which are within the scope of ASC Topic 842,Leases.

As permissible under ASC 606, sales taxes and transaction-based taxes are excluded from revenue. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expenses.

The Company has elected to treat shipping and handling activities in a sales transaction after the customer obtains control of the goods as a fulfillment cost and not as a promised service. Accordingly, fulfillment costs related to the shipping and handling of goods are accrued at the time of shipment. Amounts billed to a customer in a sales transaction related to reimbursable shipping and handling costs are included in revenue, and the associated costs incurred by the Company for reimbursable shipping and handling expenses are reported in cost of revenue. The Company incurred shipping and handling expenses of $0.3 million and $0.5 million, respectively, for the fiscal years ended September 30, 2024 and 2023, respectively.

At September 30, 2024, the Company had no deferred contract liabilities and no deferred contract costs. At September 30, 2023, the Company had deferred contract liabilities of $0.7 million and no deferred contract cost. At October 1, 2022, the Company had no deferred contract liabilities and no deferred contract costs. At October 1, 2022, the Company had accounts receivable from contracts with customers of $13.2 million. For the fiscal year ended September 30, 2024, revenue of $0.7 million was recognized from deferred contract liabilities. For the fiscal year ended September 30, 2023, no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs. At September 30, 2024, all contracts had an original duration of one year or less.

For the fiscal years ended September 30, 2024 and 2023, revenue recognized from contracts with customers satisfied over-time was $1.3 million and $0.2 million, respectively. All other revenue from contracts with customers was recognized at a point-in-time. Revenue satisfied over-time for the fiscal years ended September 30, 2024 and 2023 over-time was from the Company's Emerging Markets operating segment.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

For each of the Company’s operating segments, the following table presents revenue only from the sale of products and the performance of services under contracts with customers (in thousands). Therefore, the table excludes all revenue earned from rental contracts.

YEAR ENDED SEPTEMBER 30,

Oil and Gas Markets

Traditional exploration product revenue $ 9,666 $ 12,081

Reservoir product revenue 596 962

Adjacent Markets

Emerging Markets

See Note 20 for more information on the Company’s operating segments.

For each of the geographic areas where the Company operates, the following table presents revenue from the sale of products and performance of services under contracts with customers (in thousands). Therefore, the table excludes all revenue earned from rental contracts.

YEAR ENDED SEPTEMBER 30,

Asia (including Russian Federation) $ 43,831 $ 13,006

Revenue is attributable to countries based on the ultimate destination of the product sold, if known. If the ultimate destination is not known, revenue is attributable to countries based on the geographic location of the initial shipment.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

3. Sale of Subsidiary

On August 30, 2024, the Company sold its oil and gas product manufacturing operations based in the Russian Federation. The sale was consummated pursuant to a stock purchase agreement between the Company and a group of former employees based in the Russian Federation ("the Buyer"). Consideration to the Company consists of a $1.0 million cash payment due from the buyer within 90 days of the sale and a $3.5 million promissory note. The note is for a 10-year term and bears interest at 5% per annum. Principal and interest installments of $37,000 are due monthly. The Company recorded a loss on sale in connection with the transaction of $14.5 million, of which $13.1 million was related to the impact of cumulative foreign currency translation losses previously included in accumulated comprehensive loss. Based on a fair value analysis performed on the promissory note as of the sale date, the Company recorded a $0.9 million discount to fair value on the note receivable. The note receivable is included as components of current and non-current trade accounts and notes receivable, net, on the consolidated balance sheet as of September 30, 2024. The sale did not have a material effect on the Company's consolidated net assets and is not expected to have a material effect on the Company's future revenue, profits or losses. Also see Note 5.

The Company has determined that the Buyer's legal entity is a variable interest entity ("VIE") due to the nature of the financing for the transaction. A VIE is an entity in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIEs are consolidated by the primary beneficiary, which is the party who has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity. The Company determines whether it is the primary beneficiary of a VIE upon initial involvement with a VIE and reassesses whether it is the primary beneficiary of a VIE on an ongoing basis. The determination of whether an entity is a VIE and whether it is primary beneficiary of a VIE is based upon the facts and circumstances for the VIE and requires significant judgments such as whether the entity's interest in a VIE is a variable interest, whether it controls the activities that most significantly impact the economic performance of the VIE, and whether it has the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the VIE. A VIE is consolidated if management determines it is the primary beneficiary of the VIE.

While the debt represents a direct obligation to absorb significant losses of the VIE, the debt does not establish the right and power to direct activities that most significantly impact the economic performance of the entity. The Company retained no equity or voting interest, has no employees that are directors or advisors of the new ownership group, and has no direct influence on the day-to-day decisions in operations or affect the VIE's ability to generate profits or losses. As such, the Company has determined it is not the primary beneficiary of the VIE. The Company's maximum exposure to loss at September 30, 2024 due to its involvement with the VIE is the carrying value of our account and note receivable from the sale of our former subsidiary, which is $3.6 million.

4. Short-term Investments

The Company classifies its short-term investments as available-for-sale debt securities. These securities are carried at fair market value with net unrealized gains and losses reported as a component of accumulated other comprehensive loss in stockholders’ equity. The Company’s short-term investments were composed of the following (in thousands):

Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value

Short-term investments:

Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value

Short-term investments:

At September 30, 2024 and 2023, accrued interest receivable related to these investments of $0.3 million and $0.1 million, respectively, are included as a component of prepaid expenses and other current assets.

The Company has no debt securities in a material unrealized loss position at September 30, 2024 and 2023 and does not believe the unrealized losses associated with these debt securities represent credit losses based on the evaluation of evidence, which includes an assessment of whether it is more likely than not it will be required to sell or intend to sell the investment before recovery of the investments amortized cost basis. No gains or losses were realized from the sale of short-term investments for the fiscal years ended September 30, 2024 and 2023.

The Company’s short-term investments have contractual maturities ranging from October 2024 to September 2025.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

5. Fair Value of Financial Instruments

The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts, notes receivable and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts and notes receivable and accounts payable, the carrying amounts approximate fair value on the respective balance sheet dates.

The Company measures its short-term investments at fair value on a recurring basis.

The following tables present the fair value of the Company’s short-term investments and note receivable on sale of subsidiary by valuation hierarchy and input (in thousands):

(Level 1) (Level 2) (Level 3) Totals

Recurring:

Short-term investments .

Nonrecurring:

Note receivable on sale of subsidiary $ — $ — $ 2,600 $ 2,600

(Level 1) (Level 2) (Level 3) Totals

Short-term investments:

Assets and Liabilities Measured on a Nonrecurring Basis

The Company performed a fair value analysis of the $3.5 million promissory note obtained in connection with its subsidiary sale as of the August 2024 transaction date. The measurements utilized to determine the implied fair value of the note receivable obtained represented significant unobservable inputs (Level 3). The derivation of discount rate utilized in the analysis was based on comparable market yields. Based on the analysis, the Company recorded a $0.9 million discount to fair value on this note receivable. Also see Note 3 to these consolidated financial statements.

The measurements utilized to determine the implied fair value of the Company's Emerging Markets asset group as of September 30, 2024 represented significant unobservable inputs (Level 3). The Company determined the fair value of this asset group to be approximately zero. See Note 11 for more information.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

6. Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consisted of the following (in thousands):

Other comprehensive income (loss) 4 (2,515 ) (2,511 )

7. Trade Accounts and Notes Receivable

Trade accounts receivable, net (excluding notes receivable) are reflected in the following table (in thousands):

AS OF SEPTEMBER 30,

Allowance for credit losses (4 ) (125 )

Non-current trade accounts receivable $ 1,510 $ —

Allowances for credit losses related to trade accounts receivable are reflected in the following table (in thousands):

AS OF SEPTEMBER 30,

Allowance for credit losses:

Provision for credit losses 65 428

Currency translation — (25 )

End of period $ 4 $ 125

Trade accounts receivable at September 30, 2024, included $1.5 million classified as non-current, which is due in December 2025. Trade accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.

Notes receivable are reflected in the following table (in thousands):

AS OF SEPTEMBER 30,

Discount to fair value (900 ) —

Non-current notes receivable $ 4,865 $ —

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

In August 2024, the Company entered into a $9.4 million promissory note with a customer related to a product sale. The note bears interest at 9.5% per annum and matures in December 2025. Principal and interest installments of $0.9 million are due monthly beginning in January 2025. The note is collateralized by the product sold.

In August 2024, the Company entered into a $3.5 million promissory note with the buyer of its Russian subsidiary. The note is bears interest at 5% per annum and is for a 10-year term. Principal and interest installments of $37,000 are due monthly beginning in November 2024. Based on a fair value analysis performed at the date of sale, a discount to fair value of $0.9 million was placed on the note. Interest income on the amortization of the discount will recognized under the effective interest method.

Credit quality indicators used for the non-current portion of trade accounts and notes receivable consisted of historical collection experience, internal credit risk grades and collateral. The Company determines the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its customers.

8. Inventories

Inventories consisted of the following (in thousands):

AS OF SEPTEMBER 30,

Obsolescence reserve (net realizable value adjustment) (8,413 ) (14,061 )

Inventory obsolescence expense totaled $0.6 million and $2.2 million during fiscal years 2024 and 2023, respectively. Raw materials include semi-finished goods and component parts that totaled approximately $8.6 million and $10.6 million at September 30, 2024 and 2023, respectively.

9. Leases

As Lessee

The Company has elected not to record operating right-of-use assets or operating lease liabilities on its consolidated balance sheet for leases having a minimum term of 12 months or less. Such leases are expensed on a straight-line basis over the lease term. Variable lease payments are excluded from the measurement of operating right-of-use assets and operating liabilities and recognized in the period in which the obligation for those payments is incurred. As of September 30, 2024, the Company has two operating right-of use assets related to leased facilities in Austin, Texas and Melbourne, Florida.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Maturities of the operating lease liabilities as of September 30, 2024 were as follows (in thousands):

For fiscal years ending September 30,

Future minimum lease payments $ 543

Less interest (31 )

Present value of minimum lease payments $ 512

Less current portion (173 )

Long-term portion $ 339

Lease costs recognized in the consolidated statements of operations for the fiscal years ended September 30, 2024 and 2023 is as follows (in thousands):

YEAR ENDED SEPTEMBER 30,

Right-of-use operating lease costs $ 271 $ 272

Right-of-use operating lease costs and short-term lease costs are included as a component of total operating expenses.

Other information related to operating leases is as follows (in thousands):

YEAR ENDED SEPTEMBER 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases $ 278 $ 270

Weighted average remaining lease term 3.4 years 3.9 years

Weighted average discount rate 3.25 % 3.25 %

The discount rate used on the operating right-of-use assets represented the Company’s incremental borrowing rate at lease inception.

As Lessor

Equipment

The Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to one year. All of the Company's current leasing arrangements, with the Company acting as lessor, are classified as operating leases. The majority of the Company’s rental revenue is generated from its marine-based wireless seismic data acquisition system.

The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. The Company suspends revenue recognition when the collectability of amounts due are no longer probable and concurrently records a direct write-off of the lease receivable to rental revenue to limit rental revenue recognized to the cash collections received. As of September 30, 2024, the Company’s trade accounts receivables included lease receivables of $1.0 million.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Rental revenue related to leased equipment for fiscal years 2024 and 2023 was $19.3 million and $51.0 million, respectively.

Future minimum lease obligations due from the Company's leasing customers as of September 30, 2024 were $15.2 million, the majority of which is due within the next 12 months.

Rental equipment consisted of the following (in thousands):

AS OF SEPTEMBER 30,

Rental equipment, primarily wireless recording equipment $ 63,111 $ 82,926

Accumulated depreciation and impairment (48,925 ) (61,339 )

Rental equipment depreciation expense was $10.8 million and $11.8 million in fiscal years 2024 and 2023, respectively.

Property

During the first quarter of fiscal year 2022, the Company leased a portion of its property located in Calgary, Alberta, Canada and fully leased its warehouse in Bogotá, Colombia. The lease in Canada commenced in November 2021 and is for a five-year term. The lease on the warehouse in Bogotá commenced in December 2021 and is currently on a month-to-month basis.

Rental revenue related to these two properties was $0.3 million and $0.2 million in fiscal years 2024 and 2023, respectively.

Future minimum lease payments due to the Company as of September 30, 2024 were as follows (in thousands):

For fiscal years ending September 30,

10. Property, Plant and Equipment

At September 30, 2024, the Company’s property located adjacent to its main campus at 7007 Pinemont Drive in Houston, Texas was classified as assets held for sale on the consolidated balance sheet. The 17.3-acre property serves as additional parking for the main campus and contains legacy structures used to support the Company's manufacturing and warehousing operations. The carrying value of the property was $1.8 million at September 30, 2024. The Company believes the fair market value of the property exceeds its carrying value.

In February 2023, the Company sold its satellite property located at 6410 Langfield Road in Houston, Texas for a cash price of $3.7 million, net of closing costs of $0.3 million, and realized a gain on disposal of $1.3 million. The satellite property provided additional warehousing and maintenance and repair capacity for the Company’s marine rental equipment operations. The Company has relocated the operations of this facility to its main campus at 7007 Pinemont Drive in Houston, Texas.

Property, plant and equipment consisted of the following (in thousands):

AS OF SEPTEMBER 30,

Land and land improvements $ 4,869 $ 7,069

Transportation equipment 75 74

Accumulated depreciation and impairment (60,523 ) (62,020 )

Property, plant and equipment depreciation expense was $3.5 million and $3.7 million for the fiscal years ended September 30, 2024 and 2023.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

11. Goodwill and Other Intangible Assets

At September 30, 2024, the Company had goodwill of $0.7 million and other intangible assets, net of $0.5 million attributable to its Adjacent Markets reporting unit and other intangible assets, net of $1.2 million attributable to its Oil and Gas Markets reporting unit. Goodwill represents the excess cost of a business acquired over the fair market value of identifiable net assets at the date of acquisition.

At September 30, 2024, in light of the Company's historical losses and continued delays in obtaining additional contracts from the U.S. Customs and Border Protection and other customers on its Emerging Markets segment, the Company performed a recoverability assessment on the long-lived assets of its Emerging Markets asset group in which its carrying value was compared to estimated undiscounted cash flows over the remaining useful life of the asset group's primary asset, its developed technology. Accordingly, a fair value analysis was performed. Based on the assessment, the Company determined the fair value of the asset was less than its carrying value. The Company used an excess earnings approach to value the asset. Key assumptions used in the analysis include revenue, gross margin and cash flow projections. As a result of the assessment, the Company recorded an impairment charge of $2.8 million on this asset group, which impaired its intangible assets in their entirety.

Also see Note 1 to these consolidated financial statements.

The Company’s consolidated goodwill and other intangible assets consisted of the following (in thousands):

Weighted-Average Remaining Useful Lives (in years) AS OF SEPTEMBER 30,

Goodwill:

Emerging Markets reporting unit $ 4,336 $ 4,336

Adjacent Markets reporting unit 736 736

Accumulated impairment losses (4,336 ) (4,336 )

Other intangible assets:

Accumulated amortization (6,734 ) (7,778 )

Other intangible assets amortization expense for fiscal years 2024 and 2023 was $0.4 million and $0.8 million, respectively.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

As of September 30, 2024, fiscal year future estimated amortization expense of other intangible assets is as follows (in thousands):

12. Long-Term Debt

The Company had no long-term debt outstanding at September 30, 2024 or 2023.

On July 26, 2023, the Company entered into a credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender. The Agreement refinanced the Company's credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender. The Agreement provides a revolving credit facility with a maximum availability of $15 million. Availability under the Agreement is determined based upon a borrowing base comprised of certain of the Company’s domestic assets which include (i) 80% of eligible accounts, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments. Interest shall accrue on outstanding borrowings at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25% per annum. The Company is required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all the Company's assets, except for certain excluded property. The Agreement requires the Company to maintain a minimum (i) consolidated tangible net worth of $100 million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to 1.00, in each case tested quarterly. The Agreement also requires the Company to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance. The Agreement expires in July 2025. At September 30, 2024, the Company's borrowing availability under the Agreement was $14.9 million after consideration of a $0.1 million outstanding letter of credit. At September 30, 2024, the Company was in compliance with all covenants under the Agreement.

Debt issuance costs of $0.4 million were incurred in connection with the Agreement in fiscal year 2023. These costs were capitalized in other non-current assets on the consolidated balance sheet and are being amortized to interest expense over the term of the Agreement.

13. Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

AS OF SEPTEMBER 30,

Legal and professional fees 355 616

The Company is self-insured for certain losses related to employee medical claims. The Company has purchased stop-loss coverage for individual claims in excess of $0.2 million per claimant per year in order to limit its exposure to any significant levels of employee medical claims. Self-insured losses are accrued based on the Company’s historical experience and on estimates of aggregate liability for uninsured claims incurred using certain actuarial assumptions followed in the insurance industry.

14. Employee Benefits

The Company’s United States employees are participants in the Geospace Technologies Corporation’s Employee’s 401(k) Retirement Plan (the “Plan”), which covers substantially all eligible employees in the United States. The Plan is a qualified salary reduction plan in which all eligible participants may elect to have a percentage of their compensation contributed to the Plan, subject to certain guidelines issued by the Internal Revenue Service. The Company’s share of discretionary matching contributions was $1.1 million and $1.3 million in fiscal years 2024 and 2023, respectively.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

The Company’s stock incentive plans in which key employees may participate are discussed in Note 15 to these consolidated financial statements.

15. Stockholders’ Equity

In February 2014, the board of directors and stockholders approved the 2014 Long Term Incentive Plan, as amended (the “2014 Plan”). Under the 2014 Plan, an aggregate of 3,000,000 shares of common stock may be issued. The Company is authorized to issue nonqualified and incentive stock options to purchase common stock, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) to key employees, directors and consultants under the 2014 Plan. Options have a term not to exceed ten years, with the exception of incentive stock options granted to employees owning ten percent or more of the outstanding shares of common stock, which have a term not to exceed five years. The exercise price of any option may not be less than the fair market value of the common stock on the date of grant. In the case of incentive stock options granted to an employee owning ten percent or more of the outstanding shares of common stock, the exercise price of such option may not be less than 110% of the fair market value of the common stock on the date of grant. An RSU represents a contingent right to receive one share of the common stock upon vesting. Under the 2014 Plan, the Company may issue RSAs and RSUs to employees for no payment by the employee or for a payment below the fair market value on the date of grant. The RSAs and RSUs are subject to certain restrictions described in the 2014 Plan.

At September 30, 2024, an aggregate of 827,088 shares of common stock were available for issuance under the 2014 Plan.

The following table summarizes the combined activity under the equity incentive plans for the indicated periods:

During fiscal years 2024 and 2023, the Company issued 233,200 and 228,250 RSUs, respectively, to certain of its employees, executive officers and directors under the 2014 Plan. The RSUs issued include both time-based and performance-based vesting provisions. The weighted average grant date fair value of each RSU issued for fiscal years 2024 and 2023 was $12.26 and $4.70 per unit, respectively. The total grant date fair value of all RSUs issued for fiscal years 2024 and 2023 was $2.9 million and $1.1 million, respectively, which will be charged to expense over the next 1-4 years as the restrictions lapse. Compensation expense for RSUs was determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of units that are anticipated to fully vest. All RSUs outstanding at September 30, 2024 and 2023 were issued from the 2014 Plan.

No RSAs have been issued since fiscal year 2019 and none were outstanding at September 30, 2024.

Stock-based compensation expense recognized for the fiscal years ended September 30, 2024 and 2023 was $1.3 million and $1.4 million, respectively. The Company accounts for forfeitures as they occur and records compensation costs under the assumption that the holder will complete the requisite service period. As of September 30, 2024, the Company had unrecognized compensation expense of $1.9 million relating to RSUs which is expected to be recognized over a weighted average period of 2.3 years.

F-

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

16. Income Taxes:

Components of income (loss) before income taxes were as follows (in thousands):

YEAR ENDED SEPTEMBER 30,

GEOS US Equity

GEOS · 10-K · period ended 2024-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits

Item 16. Form 10-K Summary

GEOS US Equity☆

GEOS · 10-K · period ended 2024-09-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions and Director Independence

Item 14. Principal Accountant Fees and Services

Item 15. Exhibits

Item 16. Form 10-K Summary

GEOS US Equity