What changed in this filing

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Item 9A. Controls and Procedures

2023-11-17 compared with 2022-11-18 · 566 added, 399 removed, 698 unchanged (58% of the section changed)

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Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures are effective as of September 30, 2023.

Management’s Report on Internal Control Over Financial Reporting

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).

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Other Information

Directors, Executive Of ficers 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, 2022 in connection with our 2023 Annual Meeting of Stockholders under the captions “Election of Directors,”

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, 2023 in connection with our 2024 Annual Meeting of Stockholders under the captions “Election of Directors,”

“Executive Officers and Compensation,”

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and is incorporated herein by reference.

Executi ve Compensation

Executive Compensation

and is incorporated herein by reference.

Security Ownership of Certain Beneficial Ow ners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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.

Certain Relationships and Relate d Transactions and Director Independence

Certain Relationships and Related Transactions and Director Independence

and is incorporated herein by reference.

Principal Accou ntant Fees and Services

Principal Accountant Fees and Services

and is incorporated herein by reference.

Exhibits and Fina ncial Statement Schedules

Exhibits and Financial Statement Schedules

Financial Statements and Financial Statement Schedules

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Description of Documents

Amended and Restated Certificate of Formation of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 8, 2015).

Amended and Restated Bylaws of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed August 8, 2019).

  3.1

Amended and Restated Certificate of Formation of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.1 to the Registrant ’

s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 8, 2015).

  3.2

Amended and Restated Bylaws of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.2 to the Registrant ’

s Current Report on Form 8-K filed August 8, 2019).

Employment Agreement dated as of August 1, 1997, between the Company and Michael J.

Sheen (incorporated by reference to the Registrant’s Registration Statement on Form S-1 filed September 30, 1997 (Registration No.

333-36727)).*

Sheen (incorporated by reference to the Registrant ’

s Registration Statement on Form S-1 filed September 30, 1997 (Registration No.

333-36727)).*  

Employment Agreement effective as of January 1, 2012, by and between OYO Geospace Corporation and Walter R.

Wheeler (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed December 9, 2011).*

Wheeler (incorporated by reference to Exhibit 99.1 to the Registrant ’

s Current Report on Form 8-K filed December 9, 2011).*

Employment Agreement effective as of January 1, 2012, by and between OYO Geospace Corporation and Robbin B.

Adams (incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed December 9, 2011).*

Employment Agreement effective as of January 1, 2012, by and between OYO Geospace Corporation and Thomas T.

McEntire (incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed December 9, 2011).*

Geospace Technologies Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A filed December 11, 2013).*

First Amendment to the Geospace Technologies Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A filed December 30, 2020).*

Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form S-8 filed May 21, 2014).*

Form of Employee Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 26, 2018).*

Form of Employee Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Form S-8 filed May 21, 2014).*

Form of Employee Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant’s Form S-8 filed May 21, 2014).*

Form of Performance Option Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 20, 2015).*

Form of Consultant Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 to the Registrant’s Form S-8 filed May 21, 2014).*

Form of Consultant Stock Option Award Agreement (incorporated by reference to Exhibit 10.5 to the Registrant’s Form S-8 filed May 21, 2014).*

Form of Director Stock Option Award Agreement (incorporated by reference to Exhibit 10.6 to the Registrant’s Form S-8 filed May 21, 2014).*

Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.7 to the Registrant’s Form S-8 filed May 21, 2014).*

Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed May 3, 2019).*

Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 26, 2018).*

Form of Amended and Restated Indemnity Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 26, 2015).*

Geospace Technologies Corporation Annual Bonus Program (incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 2017 filed December 1, 2017).*

First Amendment effective October 1, 2008 to Employment Agreement dated as of August 1, 1997, between the Company and Michael J.

Sheen (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2009, filed February 5, 2010).*

Second Amendment effective November 17, 2020 to Employment Agreement dated as of August 1, 1997, between the Company and Michael J.

Sheen (incorporated by reference to the Registrant’s Current Report on Form 8-K filed November 23, 2020, File No.:

Revolving Loan and Security Agreement dated May 6, 2022 among Geospace Technologies Corporation and GTC, Inc., as borrowers, Amerisource Funding, Inc.

and Woodforest National Bank, as lenders, and Amerisource Funding, Inc., as administrative agent for lenders (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed May 10, 2022).

Adams (incorporated by reference to Exhibit 99.2 to the Registrant ’

s Current Report on Form 8-K filed December 9, 2011).*

Geospace Technologies Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company ’

s Proxy Statement on Schedule 14A filed December 11, 2013).*

First Amendment to the Geospace Technologies Corporation 2014 Long-Term Incentive Plan (incorporated by reference to Appendix A to the Company ’

s Proxy Statement on Schedule 14A filed December 30, 2020).*

Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant ’

s Form S-8 filed May 21, 2014).*

Form of Employee Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant ’

s Current Report on Form 8-K filed November 26, 2018).*

Form of Employee Incentive Stock Option Award Agreement (incorporated by reference to Exhibit 10.2 to the Registrant ’

s Form S-8 filed May 21, 2014).*

Form of Employee Non-Qualified Stock Option Award Agreement (incorporated by reference to Exhibit 10.3 to the Registrant ’

s Form S-8 filed May 21, 2014).*

Form of Performance Option Agreement (incorporated by reference to Exhibit 10.1 to the Registrant ’

s Current Report on Form 8-K filed November 20, 2015).*

Form of Consultant Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.4 to the Registrant ’

s Form S-8 filed May 21, 2014).*

Form of Consultant Stock Option Award Agreement (incorporated by reference to Exhibit 10.5 to the Registrant ’

s Form S-8 filed May 21, 2014).*

Form of Director Stock Option Award Agreement (incorporated by reference to Exhibit 10.6 to the Registrant ’

s Form S-8 filed May 21, 2014).*

Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.7 to the Registrant ’

s Form S-8 filed May 21, 2014).*

Form of Director Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant ’

s Form 10-Q filed May 3, 2019).*

Form of Employee Restricted Stock Award Agreement (incorporated by reference to Exhibit 10.1 to the Registrant ’

s Current Report on Form 8-K filed November 26, 2018).*

Form of Amended and Restated Indemnity Agreement (incorporated by reference to Exhibit 10.1 to the Registrant ’

s Current Report on Form 8-K filed May 26, 2015).*

Geospace Technologies Corporation Annual Bonus Program (incorporated by reference to Exhibit 10.23 to the Registrant ’

s Annual Report on Form 10-K for the year ended September 30, 2017 filed December 1, 2017).*  

Credit Agreement dated July 26, 2023 among the Company, and each other person from time to time party thereto as a borrower, and Woodforest National Bank, as lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed August 1, 2023).

Commercial Contract –

Improved Property, dated June 3, 2019 by and between GTC, Inc.

and Harmony Public Schools (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed June 3, 2019).

Consulting Agreement dated November 21, 2019 between Geospace Technologies Corporation and Thomas T.

McEntire (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed November 22, 2019, File No.:

General Code of Business Conduct and Supplemental Code of Ethics for CEO and Senior Financial Officers (incorporated by reference to Exhibit 14.1 to the Registrant’s Current Report on Form 8-K filed February 6, 2019).

 Improved Property, dated June 3, 2019 by and between GTC, Inc.

and Harmony Public Schools (incorporated by reference to Exhibit 10.1 to the Registrant ’

s Current Report on Form 8-K filed June 3, 2019).

Employment Termination and Consulting Agreement dated June 30, 2023 between the Company and Michael J.

General Code of Business Conduct and Supplemental Code of Ethics for CEO and Senior Financial Officers (incorporated by reference to Exhibit 14.1 to the Registrant ’

s Current Report on Form 8-K filed February 6, 2019).

Subsidiaries of the Registrant.**

Consent of RSM US LLP.**

Certification of the Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification of the Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification of the Company’s Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

Certification of the Company’s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

Certification of the Company ’

s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification of the Company ’

s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**

Certification of the Company ’

s Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

Certification of the Company ’

s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

The following financial information from the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL):

(i) the Consolidated Balance Sheets as of September 30, 2022 and September 30, 2021, (ii) the Consolidated Statements of Operations for the years ended September 30, 2022 and 2021, (iii) the Consolidated Statements of Comprehensive Loss for the years ended September 30, 2022 and 2021 , (iv) the Consolidated Statements of Stockholders’

Equity for the years ended September 30, 2022 and 2021, (v) the Consolidated Statements of Cash Flows for the years ended September 30, 2022 and 2021 and (vi) Notes to Consolidated Financial Statements.**

(i) the Consolidated Balance Sheets as of September 30, 2023 and September 30, 2022, (ii) the Consolidated Statements of Operations for the years ended September 30, 2023 and 2022, (iii) the Consolidated Statements of Comprehensive Loss for the years ended September 30, 2023 and 2022, (iv) the Consolidated Statements of Stockholders’ Equity for the years ended September 30, 2023 and 2022, (v) the Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022 and (vi) Notes to Consolidated Financial Statements.**

The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 formatted in iXBRL.

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Giesinger, Jr.

November 18, 2022

/s/ RICHARD F.

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INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of September 30, 2023 and 2022

Consolidated Statements of Operations for the Years Ended September 30, 2023 and 2022

Consolidated Statements of Comprehensive Loss for the Years Ended September 30, 2022 and 2021

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended September 30, 2023 and 2022

Consolidated Statements of Stockholders ’

Equity for the Years Ended September 30, 2022 and 2021

 Equity for the Years Ended September 30, 2023 and 2022

Consolidated Statements of Cash Flows for the Years Ended September 30, 2023 and 2022

Notes to Consolidated Financial Statements

Schedule II—Valuation and Qualifying Accounts

Report of Independent Regist ered Public Accounting Firm

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

Notes to Consolidated Financial Statements          

Schedule II —

Valuation and Qualifying Accounts          

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, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’

We have audited the accompanying consolidated balance sheets of Geospace Technologies Corporation and its subsidiaries (the Company) as of September 30, 2023 and 2022, the related consolidated statements of operations, comprehensive income, stockholders’

equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

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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 Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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.

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We tested the completeness, accuracy, and relevance of the reports and inputs used in the Company’s analysis.

We evaluated the appropriateness and consistency of management's methods and assumptions used in developing their estimate of the inventory valuation reserve, which included consideration of recent changes in historical usage information.

We evaluated the appropriateness and consistency of management’s methods and assumptions used in developing their estimate of the inventory valuation reserve, which included consideration of recent changes in historical usage information.

We evaluated management’s process for subsequent adjustments to net realizable value by performing a retrospective review on an individual item basis to test for subsequent changes in the inventory values after the net realizable value had been established.

We compared actual purchases and sales data on an individual item basis for all inventory items and aggregated to perform an independent assessment of the net realizable value of inventory.

Valuation of Goodwill—Emerging Markets Reporting Unit

As discussed in Note 11 to the consolidated financial statements, the Company assessed $4.3 million of goodwill and $3.5 million of other intangible assets associated with its Emerging Markets reporting unit, which was also determined to be an asset group for purposes of its long-lived asset recoverability assessment, for impairment.

The Company performed a quantitative assessment on the goodwill at its Emerging Markets reporting unit.

As part of this quantitative assessment, the Company determines the fair value of the reporting unit using a discounted cash flow model.

The Company also performed a recoverability assessment on the long-lived assets of the 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.

Key assumptions in the analyses include revenue and cash flow projections.

Discount rates, long-term growth rates, and the effective tax rate are also key assumptions for the goodwill impairment assessment.

Estimated future cash flows of the Company’s Emerging Markets reporting unit include the Company’s ability to obtain an additional contract with its significant customer.

We identified the valuation of goodwill and long-lived assets for the Emerging Market's reporting unit as a critical audit matter because of the significant assumptions management makes in determining the estimate, including revenue and cash flow projections and the discount rate utilized.

Auditing management’s assumptions of revenue and cash flow projections and the discount rate involved a high degree of auditor judgment and increased audit effort, including the use of valuation specialists, as management’s assumptions are subjective, and changes in these assumptions could have a significant impact on the fair value of the Emerging Market's reporting unit and potential impairment charges.

Our audit procedures related to the Company’s valuation of goodwill and long-lived assets for the Emerging Markets reporting unit included the following, among others:

We evaluated the reasonableness of management’s revenue and cash flow projections by comparing management’s prior forecasts to historical results for the Company.

We evaluated management’s cash flow projections by comparing to historical results, inquiry of management of the reporting unit regarding additional contracts with its significant customer, review of publicly available industry information, and testing the completeness and accuracy of the data used in the projections.

With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s valuation methodology and the discount rates utilized by comparing them to comparable companies and market data.

Valuation of Long-lived Assets for impairment –

Emerging Markets Asset Group

As discussed in Note 10 to the consolidated financial statements, the Company assessed $3.3 million of long-lived assets associated with its Emerging Markets asset group for recoverability.

As part of their quantitative assessment, the Company performed a recoverability assessment 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.

Key assumptions in the analyses include revenue projections, including the probability of obtaining new contracts, and cash flow projections.

Estimated future cash flows of the Company’s Emerging Markets asset group include the Company’s ability to obtain an additional contract with its significant customer.

We identified the valuation of long-lived assets for the Emerging Market’s asset group as a critical audit matter because of the significant assumptions management makes in determining the estimate, including revenue and cash flow projections.

Auditing management’s assumptions of revenue and cash flow projections involved a high degree of auditor judgment and increased audit effort, and changes in these assumptions could have a significant impact on the fair value of the Emerging Market’s asset group and potential impairment charges.

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

We evaluated the reasonableness of management’s revenue and cash flow projections by comparing to historical results, inquiry of management of the asset group regarding additional contracts with its significant customer, review of publicly available industry information, and testing the completeness and accuracy of the data used in the projections.

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

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Geospace Technologies Corporation and Subsidiaries

Consolidated B alance Sheets

Consolidated Balance Sheets

(In thousands, except share amounts)

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Cash and cash equivalents

$ 18,803  

$ 16,109  

Short-term investments

Trade accounts and financing receivables, net

Unbilled receivables

14,921  

Trade accounts and notes receivable, net

21,373  

20,886  

Inventories, net

18,430  

19,995  

Prepaid expenses and other current assets

Total current assets

Non-current financing receivables

75,778  

59,961  

Non-current inventories, net

24,888  

12,526  

Rental equipment, net

21,587  

28,199  

Property, plant and equipment, net

24,048  

26,598  

Operating right-of-use assets

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Other non-current assets

$ 153,042  

$ 135,056  

LIABILITIES AND STOCKHOLDERS’

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Accounts payable trade

$ 6,659  

$ 5,595  

Contingent consideration

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Other current liabilities

12,882  

Total current liabilities

Non-current contingent consideration

19,798  

12,627  

Non-current operating lease liabilities

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Total liabilities

20,326  

13,409  

Commitments and contingencies (Note 17)

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Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding

Common stock, $ .01 par value, 20,000,000 shares authorized, 13,863,233 and

13,738,971 shares issued, respectively;

Common stock, $.01 par value, 20,000,000 shares authorized, 14,030,481 and 13,863,233 shares issued, respectively;

and 13,188,489 and 13,021,241 shares outstanding, respectively

Additional paid-in capital

96,040  

94,667  

Retained earnings

61,860  

49,654  

Accumulated other comprehensive loss

Treasury stock, at cost, 841,992 and 769,429 shares, respectively

( 17,824 )  

Treasury stock, at cost, 841,992 shares

( 7,500 )  

Total stockholders’

132,716  

121,647  

Total liabilities and stockholders’

$ 153,042  

$ 135,056  

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

Geospace Technologies Corporation and Subsidiaries

Consolidated Statem ents of Operations

Consolidated Statements of Operations

(In thousands, except share and per share amounts)

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Total operating expenses

Loss from operations

Gain on disposal of property

Income (loss) from operations

Other income (expense):

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Interest income

Gain (loss) on investments, net

Foreign exchange losses, net

Foreign currency transaction gains (losses), net

Total other income, net

Loss before income taxes

Income (loss) before income taxes

Income tax expense

Loss per common share:

Net income (loss)

Income (loss) per common share:

Weighted average common shares outstanding:

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Geospace Technologies Corporation and Subsidiaries

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

YEAR ENDED SEPTEMBER 30,

Net income (loss)

Other comprehensive income (loss):

Change in unrealized losses on available-for-sale securities, net of tax

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

Foreign currency translation adjustments

Total other comprehensive income, net

Total comprehensive loss

Total other comprehensive income (loss), net

Total comprehensive income (loss)

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

Geospace Technologies Corporation and Subsidiaries

Consolidated Statements o f Stockholders’

Consolidated Statements of Stockholders ’

For the years ended September 30, 2023 and 2022

(In thousands, except share amounts)

Comprehensive

Additional Paid-In Capital

Retained Earnings

Other Comprehensive Loss

Treasury Stock

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Issuance of common stock pursuant to the vesting of restricted stock units

Forfeiture of restricted stock

Purchase of treasury stock

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Balance at September 30, 2022

Other comprehensive income

Other comprehensive loss

Issuance of common stock pursuant to the vesting of restricted stock units

Purchase of treasury stock

Stock-based compensation

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Geospace Technologies Corporation and Subsidiaries

Consolidated Statem ents of Cash Flows

Consolidated Statements of Cash Flows

(In thousands)

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Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Deferred income tax expense (benefit)

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Property, plant and equipment impairment expense

Accretion of discounts on short-term investments

Amortization of premiums (accretion of discounts) on short-term investments

Stock-based compensation expense

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Gross profit from sale of used rental equipment

Gain on disposal of property, plant and equipment

Realized loss (gain) on sale of investments, net

Loss (gain) on disposal of equipment

Gain on disposal of property

Realized loss on short-term investments

Realized foreign currency translation loss from dissolution of foreign subsidiary

Effects of changes in operating assets and liabilities:

Trade accounts and notes receivables

Trade accounts and notes receivable

Unbilled receivables

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Other liabilities

Net cash used in operating activities

Net cash used provided by (used in) operating activities

Cash flows from investing activities:

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Investment in rental equipment

Proceeds from the sale of property, plant and equipment

Proceeds from the sale of equipment

Proceeds from the sale of property

Proceeds from the sale of used rental equipment

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Proceeds from the sale of short-term investments

Business acquisition, net of acquired cash

Proceeds from sale of investment in debt security

Net cash provided by (used in) investing activities

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Effect of exchange rate changes on cash

Increase (decrease) in cash and cash equivalents

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of fiscal year

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Notes to Consolidated Financial Statements

Summary of Significan t Accounting Policies:

Summary of Significant Accounting Policies:

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.

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Basis of Presentation

The accompanying financial statements present the consolidated financial position, results of operations and cash flows of the Company in accordance with U.S.

generally accepted accounting principles ("GAAP').

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.

All significant intercompany balances and transactions have been eliminated.

Use of 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.

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.

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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, 2022, the Company had restricted cash of $ 0.2 million on deposit with a bank which serves as collateral on employee issued credit cards.

The Company had no restricted cash at September 30, 2021.

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, 2023 and 2022, the Company had restricted cash of $ 0.2 million on deposit with a bank, which serves as collateral on employee issued credit cards.

At September 30, 2023, cash and cash equivalents included $ 3.8 million held by the Company’s foreign subsidiaries and branch offices, including $ 2.5 million held by its subsidiary in the Russian Federation.

In response to sanctions imposed by the U.S.

and others on Russia, the Russian government has imposed restrictions on companies’

abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia.

In response to sanctions imposed by the United States and others on Russia, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia.

As a result, this cash can be used in our Russian operations, but the Company may be unable to transfer it out of Russia without incurring substantial costs, if at all.

In addition, if the Company were to repatriate the cash held by its Russian subsidiary, it would be required to accrue and pay taxes on any amount repatriated.

During fiscal year 2023, in light of recent volatility in the financial markets, the Company entered into an IntraFi Cash Service ("ICS") Deposit Placement Agreement with IntraFi Network LLC through its primary bank, Woodforest National Bank. 

The ICS program offers access to unlimited Federal Deposit Insurance Corporation ("FDIC') insurance on the Company's domestically held cash in excess of $ 5.0 million, thereby mitigating its risk of falling outside of FDIC coverage limits.

Concentrations of Risk

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Allowances are recognized for potential credit losses.

Two customers 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 financing receivables from these customers of $ 3.5 million and $ 4.8 million, respectively. 

One customer comprised 29.3 % of the Company’s revenue during fiscal year 2022 .

At September 30, 2022 , the Company had trade accounts and financing receivables from this customer of $ 5.5 million.

Three customers comprised 19.8 %, 16.4 % and 10.6 %, of the Company’s revenue during fiscal year 2021.

At September 30, 2021, the Company had trade accounts and financing receivables from these customers of $ 4.9 million, $ 7.4 million and $ 1.1 million, respectively.

Geospace Technologies Corporation and Subsidiaries

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The device is used in certain models of the Company’s rental equipment.

Product sales requiring this device represented approximately 11 % of the Company's revenue in fiscal year 2022.

There were no product sales requiring this device in fiscal year 2021.

Product sales requiring this device represented approximately 4 % and 11 % of the Company's revenue in fiscal year 2023 and 

2022 , respectively.

The Company purchases all of its thermal film from one manufacturer for its imaging products.

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Armed Conflict Between Russia and Ukraine

A portion of the Company's oil and gas product manufacturing is conducted through its wholly-owned subsidiary Geospace Technologies Eurasia LLC, which is based in the Russian Federation.

A portion of the Company's oil and gas product manufacturing is conducted through its wholly-owned subsidiary Geospace Technologies Eurasia LLC, ("GTE") which is based in the Russian Federation.

In February 2022, the Russian Federation launched a full-scale military invasion of Ukraine.

Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions in addition to any direct impact on the Company's operations in Russia.

The United States, the United Kingdom, the EU and other countries have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in and associated with Russia, and additional sanction packages to constrain Russia have been and continue to be proposed and adopted.

United States sanctions against Russia have been expanded to preclude the export of oil and gas equipment anywhere in the world that involve persons designated under the sanctions and to include projects in which persons subject to the sanctions have a 33 % ownership interest or a majority of voting interests.

As a result of the invasion, the governments of several western nations, including the United States, Canada, the United Kingdom, the European Union, implemented new and/or expanded economic sanctions and export restrictions against Russia, Russian-backed separatist regions in Ukraine, certain banks, companies, government officials, and other individuals in Russia and Belarus. 

The implementation of theses sanctions and exports restrictions, in combinations with the withdrawal of numerous private companies from the Russian market, which has had, and is likely to continue to have, a negative impact on the Company's business in the region. 

The rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to serious delays in getting goods to or from Russia as port authorities struggle to keep up with the changing environment.

If imports of these products from the Russian Federation are restricted by government regulation, the Company may be forced to find other sources for the manufacturing of these products at potentially higher costs.

Likewise, restrictions on the Company's ability to send products to our subsidiary in Russia, may force our subsidiary to have to find other sources for the manufacturing of these products at potentially higher costs;

however, the Company's exports to Geospace Technologies Eurasia LLC have historically been limited.

Likewise, restrictions on the Company's ability to send products to GTE, may force our subsidiary to have to find other sources for the manufacturing of these products at potentially higher costs. 

However, the Company's exports to GTE have historically been limited.

The risk of doing business in the Russian Federation and other economically or politically volatile areas could adversely affect the Company's operations and earnings.

The Company is actively monitoring the situation in Ukraine and Russia and assessing its impact on its business, including its wholly-owned subsidiary Geospace Technologies Eurasia LLC.

The net carrying value of this subsidiary on the Company's consolidated balance sheet at September 30, 2022 was $ 6.0 million.

The subsidiary generated $ 1.9 million in revenue from domestic sales and the Company imported $ 1.9 million of products from the subsidiary in fiscal year 2022.

The Company is actively monitoring the situation in Ukraine and Russia and assessing its impact on its business, including GTE.

The net carrying value of GTE on the Company's consolidated balance sheet at September 30, 2023 was $ 5.8 million.

GTE generated $ 1.8 million in revenue from domestic sales and the Company imported $ 3.8 million of products from GTE in fiscal year 2023 .

The Company has no way to predict the duration, progress or outcome of the military conflict in Ukraine.

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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 noncurrent assets.

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.

Geospace Technologies Corporation and Subsidiaries

6 unchanged sentences

Machinery and equipment

3 - 15  

Buildings and building improvements

10 - 50  

5 - 10  

Expenditures for renewals and betterments are capitalized.

5 unchanged sentences

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 March 31, 2022, in light of the Company’s losses from operations for the six months ended March 31, 2022 and for fiscal year 2021 and the current war between Russia and Ukraine, management reviewed the recoverability of the carrying value of certain asset groups based on future undiscounted cash flows and determined that their expected future cash flows exceeded their carrying value.

No additional indicators of impairment related to this asset group were observed at September 30, 2022.

At September 30, 2022, in light of the Company's impairment of its goodwill associated with its Emerging Markets reporting unit, the Company reviewed the recoverability of the carrying value of the long-lived assets of this reporting unit and determined that their undiscounted cash flows exceeded their carrying value.

As a result, no impairment charges were necessary to the Company's long-lived assets associated with its Emerging Markets reporting unit.

At September 30, 2022, in light of the Company's decision to dispose of certain manufacturing cabling equipment, the Company reviewed the recoverability of the carrying value of these assets and determined that their carrying value exceeded their fair value.

As a result of the fair value analysis, an impairment charge of $ 0.4 million was recorded in the fourth quarter of fiscal year 2022 related to the equipment.

The impairment charge is included as a component of cost of revenue in the Company’s consolidated statements of operations.

At September 30, 2023 , in light of the Company's historical operating losses on its Emerging Markets reporting unit, the Company assessed the carrying value of the long-lived assets of its Emerging Markets asset group and determined that the undiscounted cash flows exceeded the carrying value.

As a result, no impairment charges were necessary to the Company's long-lived assets of this asset group.

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.

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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.

At September 30, 2022, the Company impaired its goodwill associated with its Emerging Markets reporting unit.

See Note 11 for more information.

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

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.

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See Note 2 to these consolidated financial statements.

Contingent Consideration

The Company established earn-out liabilities in connection with its business acquisitions in fiscal year 2018 and 2019.

The Company engaged the services of a valuation firm to measure the initial fair value of the earn-out liabilities as of the acquisition date for each business.

The valuation technique used to measure the fair value of the liability was derived from models utilizing market observable inputs, internal estimates and the use of internal projections of future revenue and/or gross profits.

The Company reviews the fair value of its contingent earn-out liabilities on a quarterly basis.

Adjustments to the liabilities are included as a component of earnings in the consolidated statements of operations.

See Note 18 to these consolidated financial statements for additional information.

Research and Development Costs

35 unchanged sentences

Also see Note 4 to these consolidated financial statements.

Income taxes are presented in accordance with the Accounting Standards Codification Topic 740 (“Topic 740”) guidance for accounting for 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.

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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.

The Company incurred no interest or penalties for the fiscal years ended September 30, 2022 and 2021.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (the “FASB”) issued guidance on simplifying the accounting for income taxes.

The guidance eliminates certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance to improve consistent application.

This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020.

The Company adopted this standard during the first quarter of fiscal year 2022 .

The adoption of this guidance did not have any impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in generally accepted accounting principles.

In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in U.S.

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.

As a smaller reporting company, the Company must adopt this standard no later than the first quarter of its fiscal year ending September 30, 2024, although early adoption is permitted.

As a smaller reporting company, the Company must adopt this standard on October 1, 2023.

The standard’s provisions will be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period.

The Company intends to adopt this standard during the

The Company will adopt this standard on October 1, 2023 and does not expect the adoption of this standard to have a material impact on the Company's consolidated financial statements.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

first quarter of its fiscal year ending September 30, 2024 and is continuing to evaluate the impact of this new guidance on its consolidated financial statements.

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.

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.

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The Company incurred shipping and handling expenses of $ 0.5 million and $ 0.6 million, respectively, for the fiscal years ended September 30, 2023 and 2022 , respectively.

During the third quarter of fiscal year 2020, the Company was awarded an approximate $ 10.5 million contract (inclusive of a subsequent contract amendment of $ 0.3 million) with the U.S.

Customs and Border Protection (the “CBP”) to provide a technology solution to the Department of Homeland Security.

Revenue recognized under the contract for the fiscal years ended September 30, 2022 and 2021 was $ 0.3 million and $ 9.9 million, respectively.

The Company has recognized revenue on the entire amount of the contract and no performance obligations remain under the contract except for on-going service and maintenance.

Unsatisfied performance obligations on all other contracts held by the Company at September 30, 2022 had an original duration of one year or less.

At September 30, 2022 and September 30, 2021, the Company had no deferred contract costs or deferred contract liabilities.

During the fiscal years ended September 30, 2022 and 2021, no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs.

During the second quarter of fiscal year 2020, the Company partially financed a $ 12.5 million product sale by entering into a $ 10.0 million promissory note with the customer.

The note has a three-year term with monthly principal and interest payments of $ 0.3 million.

Due to the financial condition of the customer, the Company had concerns over the probable collectability of the promissory note.

As a result, the Company did no t recognize any revenue or cost of revenue on the product sale through its first quarter of fiscal year 2021.

During the second quarter of fiscal year 2021, as a result of new information received from the customer, management determined that it was probable that the customer would satisfy its remaining payment obligations on the promissory note with the Company and recognized revenue of $ 12.5 million on the product sale.

During the fourth quarter of fiscal year 2021, the Company granted the customer a six-month principal payment forbearance.

The customer recommenced its monthly payments to the Company in the second quarter of fiscal year 2022.

In October 2022, the Company granted the customer an additional six-month payment forbearance.

The customer has made payments totaling $ 9.5 million (exclusive of interest) as of September 30, 2022 related to the product sale, and the

At September 30, 2023 , the Company had deferred contract liabilities of $ 0.7 million and no deferred contract costs. 

At September 30, 2022 , the Company had no deferred contract liabilities or deferred contract cost. 

During the fiscal years ended September 30, 2023 and 2022 , no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs. 

At September 30, 2023 , all contracts had an original duration of one year or less.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

balance outstanding on the promissory note at September 30, 2022 was $ 3.0 million.

Deferred contract costs associated with this sale were recognized in the second quarter of fiscal year 2021.

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).

3 unchanged sentences

Traditional exploration product revenue

$ 12,081  

$ 6,558  

Wireless exploration product revenue

10,168  

15,822  

Reservoir product revenue

Total revenue

23,211  

24,348  

Adjacent Markets

Industrial product revenue

36,859  

25,640  

Imaging product revenue

12,029  

13,360  

Total revenue

48,888  

39,000  

Emerging Markets

$ 73,333  

$ 64,109  

See Note 19 for more information on the Company’s operating segments.

2 unchanged sentences

YEAR ENDED SEPTEMBER 30,

Asia (including Russian Federation)

$ 13,006  

$ 10,978  

15,705  

South America

United States

49,828  

33,778  

$ 73,333  

$ 64,109  

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.

Business Acquisition

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

On July 2, 2021 , we acquired 100 percent of the outstanding membership interest in Aquana, LLC ("Aquana") a comprehensive wireless water monitoring and control system provider.

Aquana operates as a wholly-owned subsidiary of the Company and resides in the Company’s Adjacent Markets business segment.

The acquisition purchase price consisted of an initial cash down payment at closing of approximately $ 1.4 million and additional contingent cash payments over a six year earn-out period.

The contingent earn-out 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 in order for any of Aquana’s former members to be eligible to 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, if any, will be recorded as compensation expense when incurred.

In connection with the Aquana acquisition, the Company recorded goodwill of $ 0.7 million, and other intangible assets of $ 0.7 million.

Current assets and current liabilities acquired in the transaction were nominal.

Legal and professional costs of $ 0.2 million related to the Aquana acquisition are included in selling, general and administrative expenses for the fiscal year ended September 30, 2021.

The Aquana acquisition represents the Company’s strategy to expand its product revenues, as well as its engineering and manufacturing competencies, to markets outside the oil and gas industry.

Short-term Investments

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Available-for-sale securities are carried at fair market value with net unrealized gains and losses reported as a component of accumulated other comprehensive loss in stockholders’

For the fiscal years ended September 30, 2022 and 2021, the Company realized losses of $ 22,000 and $ 4,000 , respectively, from the sale of short-term investments.

No gains or losses were realized from the sale of short-term investments for the fiscal year ended September 30, 2023. 

The Company realized losses of $ 22,000 from the sale of short-term investments for the fiscal year ended September 30, 2022.

The Company’s short-term investments were composed of the following (in thousands):

AS OF SEPTEMBER 30, 2023

Amortized Cost  

Unrealized Gains  

Unrealized Losses  

Estimated Fair Value  

Short-term investments:

Corporate bonds

$ 11,310  

$ ( 15 )  

$ 11,295  

treasury securities and securities of U.S.

government-sponsored agency

$ 14,932  

$ ( 15 )  

$ 14,921  

AS OF SEPTEMBER 30, 2022

Amortized Cost  

Unrealized Gains  

Unrealized Losses  

Estimated Fair Value  

Short-term investments:

Corporate bonds

The Company’s short-term investments have contractual maturities ranging from February 2023 to March 2023.

Investment in Debt Security

During the fiscal year ended September 30, 2021, the Company recognized a gain of $ 2.0 million in connection with the sale of its interest in a senior secured bond originally issued from an international seismic marine customer.

$ ( 15 )  

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

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Fair Value of Financial Instruments

2 unchanged sentences

The valuation technique used to measure the fair value of the contingent consideration was derived from models utilizing market observable inputs.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

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

1 unchanged sentence

AS OF SEPTEMBER 30, 2023

Quoted Prices

Identical Assets

Other Unobservable

Quoted Prices in Active Markets for Identical Assets (Level 1)  

Significant Other Unobservable (Level 2)  

Significant Unobservable (Level 3)  

Short-term investments:

Corporate bonds

Contingent consideration liabilities

Total liabilities

$ 11,295  

treasury securities and securities of U.S.

government-sponsored agency

$ 14,921  

AS OF SEPTEMBER 30, 2022

Quoted Prices

Identical Assets

Significant Other

Quoted Prices in Active Markets for Identical Assets (Level 1)  

Significant Other Unobservable (Level 2)  

Significant Unobservable (Level 3)  

Short-term investments:

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Contingent consideration liabilities:

Current portion

Non-current portion

Contingent consideration liabilities

Total liabilities

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Contingent Consideration balance at October 1, 2021

$ 6,017  

Fair value adjustments

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

Available-for-Sale

Unrealized Losses on Available-for-Sale Securities

Foreign Currency Translation Adjustments

Balance at October 1, 2021

Other comprehensive income (loss)

Balance at September 30, 2021

$ ( 15 )  

$ ( 16,305 )  

Other comprehensive income

Balance at September 30, 2022

$ ( 15 )  

( 15,298 )  

Other comprehensive income (loss)

( 2,515 )  

Balance at September 30, 2023

$ ( 11 )  

$ ( 17,813 )  

Trade Accounts and Financing Receivables

2 unchanged sentences

Trade accounts receivable

$ 20,282  

$ 13,252  

Allowance for doubtful accounts

( 125 )  

$ 20,157  

$ 12,661  

The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses.

1 unchanged sentence

Accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Financing receivables are reflected in the following table (in thousands):

AS OF SEPTEMBER 30,

Promissory notes

Sales-type lease

Total financing receivables

Unearned income:

Sales-type lease

Total unearned income

Total financing receivables, net of unearned income

Notes receivable

$ 1,216  

$ 8,225  

Less current portion

( 1,216 )  

Non-current notes receivable

Promissory notes receivable are generally collateralized by the products sold, and bear interest at rates ranging from 7.0 % to 9.5 % per year.

After consideration of the forbearance discussed in Note 2, the promissory notes receivable mature at various times through January 2024 .

The Company has, on occasion, extended or renewed notes receivable as they mature, but there is no obligation to do so.

During the first quarter of fiscal year 2022, the Company financed a sale of rental equipment by entering into a $ 3.7 million promissory note with a customer.

The note has a term of nine months , with principal and interest payments due monthly until maturity.

During the second quarter of fiscal year 2022, the Company partially financed a $ 10.0 million sale of rental equipment by entering into an $ 8.0 million promissory note with a customer.

The note has a one-year term, with principal and interest payments due quarterly until maturity.

During the third quarter of fiscal year 2021, the Company entered into a sales-type lease with a customer for rental equipment.

The lease, which had a term of six months , was paid during the second quarter of fiscal year 2022.

During the second quarter of fiscal year 2020, the Company partially financed a $ 12.5 million product sale by entering into a $ 10.0 million promissory note with the customer.

The note has a three-year term with monthly principal and interest payments of $ 0.3 million.

Due to the financial condition of the customer, the Company had concerns over the probable collectability of the promissory note.

As a result, the promissory note was not reflected on the Company’s consolidated balance sheet through its first quarter of fiscal year 2021.

During the second quarter of fiscal year 2021, as a result of new information received from the customer, management determined that it was probable that the customer would satisfy its remaining payment obligations to the Company and, therefore, the Company recognized the promissory note on its consolidated balance sheet as of March 31, 2021.

See Note 2 for more information on this matter.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Promissory notes receivable are generally collateralized by the products sold. At September 30, 2023, the Company had one promissory note outstanding from a customer with a face amount of $ 10.0 million. 

The note originated during the second quarter of fiscal year 2020 in connection with a $ 12.5 million product sale with the customer.

The note bears interest at 7.0 % per year and has a three -year term with monthly principal and interest payments of $ 0.3 million.

During the fourth quarter of fiscal year 2021, the Company granted the customer a six -month principal payment forbearance.

The customer recommenced its monthly payments to the Company in the second quarter of fiscal year 2022.

In October 2022, the Company granted the customer an additional six -month principal payment forbearance.

The customer recommenced its monthly payments to the Company in the third quarter of fiscal year 2023.

The customer has made payments totaling $ 11.3 million (exclusive of interest) as of September 30, 2023 related to the product sale, and the balance outstanding on the promissory note at September 30, 2023 was $ 1.2 million. 

The note matures in January 2024.

Inventories consisted of the following (in thousands):

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Finished goods

$ 18,555  

$ 14,653  

Work in process

11,992  

Raw materials

26,832  

25,609  

Obsolescence reserve (net realizable value adjustment)

( 14,061 )  

43,318  

32,521  

Less current portion

18,430  

19,995  

Non-current portion

Inventory obsolescence expense totaled approximately $ 3.2 million and $ 3.0 million during fiscal years 2022 and 2021, respectively.

Raw materials include semi-finished goods and component parts that totaled approximately $ 20.7 million and $ 22.7 million at September 30, 2022 and 2021, respectively.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

$ 24,888  

$ 12,526  

Inventory obsolescence expense totaled approximately $ 2.2 million and $ 3.2 million during fiscal years 

2023 and 2022 , respectively.

Raw materials include semi-finished goods and component parts that totaled approximately $ 10.6 million and $ 9.4 million at September 30, 2023 and 2022 , respectively. 

At September 30, 2023, non-current inventories included raw materials and work in process totaling $ 3.2 million that will be transferred to rental equipment during the first quarter of fiscal year 2024.

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.

2 unchanged sentences

As of September 30, 2023 , the Company has two operating right-of use assets related to leased facilities in Austin, Texas and Melbourne, Florida.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Maturities of the operating lease liabilities as of September 30, 2023 were as follows (in thousands):

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Long-term portion

Lease costs recognized in the consolidated statements of operations for the fiscal years ended September 30, 2022 and 2021 is as follows (in thousands):

Lease costs recognized in the consolidated statements of operations for the fiscal years ended 

September 30, 2023 and 2022 is as follows (in thousands):

YEAR ENDED SEPTEMBER 30,

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Operating cash flows from operating leases

Operating lease assets obtained in exchange for new lease liabilities

Weighted average remaining lease term

Weighted average discount rate

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

3.25 %  

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

6 unchanged sentences

As of September 30, 2023 , the Company’s trade accounts receivables included lease receivables of $ 9.0 million.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Rental revenue related to leased equipment for fiscal years 2023 and 2022 was $ 51.0 million and $ 24.9 million, respectively.

Future minimum lease obligations due from the Company's leasing customers as of September 30, 2022 were $ 24.6 million, all of which is expected to be due within the next 12 months.

Future minimum lease obligations due from the Company's leasing customers as of September 30, 2023 were $ 29.6 million, the majority of which is due within the next 12 months.

Rental equipment consisted of the following (in thousands):

1 unchanged sentence

Rental equipment, primarily wireless recording equipment

$ 82,926  

$ 83,153  

Accumulated depreciation and impairment

( 61,339 )  

$ 21,587  

$ 28,199  

Rental equipment depreciation expense was $ 11.8 million and $ 13.7 million in fiscal years 2023 and 2022 , respectively.

2 unchanged sentences

The lease on the warehouse in Bogotá

commenced in December 2021 and is for a one-year term.

Rental revenue related to these two properties for fiscal year 2022 was $ 0.2 million.

commenced in December 2021 and is currently on a month-to-month basis.

Rental revenue related to these two properties was $ 0.2 million for each of fiscal years 

2023 and 2022 .

Future minimum lease payments due to the Company as of September 30, 2023 were as follows (in thousands):

For fiscal years ending September 30,

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Property, Plant and Equipment

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. 

The sale was part of the Company’s plan to streamline operations and reduce costs. 

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

1 unchanged sentence

Land and land improvements

$ 7,069  

$ 7,855  

Building and building improvements

21,931  

24,588  

Machinery and equipment

48,877  

59,393  

Furniture and fixtures

2 unchanged sentences

Transportation equipment

86,068  

96,928  

Accumulated depreciation and impairment

( 62,020 )  

$ 24,048  

$ 26,598  

Property, plant and equipment depreciation expense was $ 3.7 and $ 4.1 million for the fiscal years ended September 30, 2023 and 2022 .

1 unchanged sentence

The impairment expense is included as a component of cost of revenue in the consolidated statement of operations.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Goodwill and Other Intangible Assets

3 unchanged sentences

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, 2023 , in light of the Company's historical losses on its Emerging Markets reporting unit, the Company preformed 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 Company determined that no impairment was necessary as the future undiscounted cash flows exceeded the carrying value.

Key assumptions used in the analysis include revenue, gross margin and cash flow projections. 

The estimated cash flows include obtaining additional contracts with CBP and other current customers. 

The Emerging Markets asset group could incur impairment charges in the future to its other intangible assets if it is unable to obtain additional contracts from the CBP or other customers.

At September 30, 2022, the Company assessed the goodwill associated with both its Adjacent Markets and Emerging Markets reporting units for impairment.

The fair value of the reporting units were estimated using the expected present value of future cash flows, market data and using estimates, judgments and other assumptions that management believes were appropriate under the circumstances.

The estimates and judgments used in the assessment included consideration of market participant rates of return and the terminal value of the reporting units.

The Company determined future cash flows provided the best estimate of the fair value of its reporting units.

Key assumptions in determining the fair value in the impairment analysis include revenue and cash flow projections, discount rates, long-term growth rates, and the effective tax rate the Company determined to be appropriate.

In determining fair value for the Company's Emerging Markets reporting unit, cash flow projections included obtaining additional contracts from the CBP and considered competition in the marketplace.

These estimates and projections can be unpredictable, particularly for Quantum Technology Sciences, Inc.

("Quantum") as an emerging business.

The total Company’s estimate of reporting unit fair values was reconciled to its then market capitalization (based upon the stock market price) plus an implied control premium.

As a result of the assessment, the Company determined that the fair value its Emerging Markets reporting unit was less than its carrying amount and recorded an impairment charge of $ 4.3 million for the entire goodwill associated with this reporting unit for the fiscal year ended September 30, 2022.

The primary factors impacting the decrease in the fair value of the Emerging Markets reporting unit was historical operating losses and the current outlook for sales and operating performance.

The carrying value of the reporting unit exceeded the fair value by approximately $ 8 million as a result of the assessment.

In measuring sensitivity, changes to key assumptions, each of which would cause an approximate $ 1.0 million change in the fair value of the reporting unit include (i) a 3 % change in the discount rate, (ii) a 4 % change in revenue, (iii) a 10 % change in cost of revenue or (iv) a 13 % change in research and development expense.

No impairment charge to the Emerging Markets asset group was necessary as its future undiscounted cash flows exceeded the carrying value.

The Emerging Markets asset group could incur future impairment charges to its other intangible assets if it is unable to obtain additional contracts from the CBP or other customers.

No impairment charge was necessary on the Company's Adjacent Markets reporting unit as a result of the assessment.

As a result of the assessment, the Company determined that the fair value of its Emerging Markets reporting unit was less than its carrying amount and recorded an impairment charge of $ 4.3 million for the entire goodwill associated with this reporting unit for the fiscal year ended September 30, 2022. 

No impairment charge to the Adjacent Markets asset group was necessary for the fiscal year ended September 30, 2022 as its future undiscounted cash flows exceeded the carrying value. 

Also see Note 1 to these consolidated financial statements.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

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,

Emerging Markets reporting unit

$ 4,336  

Adjacent Markets reporting unit

1 unchanged sentence

Accumulated impairment losses

( 4,336 )  

Other intangible assets:

Developed technology

$ 6,475  

Customer relationships

1 unchanged sentence

Total other intangible assets

12,583  

Accumulated amortization

Other intangible assets amortization expense was $ 1.7 million for each of the fiscal years ended September 30, 2022 and 2021.

( 7,778 )  

$ 4,805  

$ 5,573  

Other intangible assets amortization expense for fiscal years 

2023 and 

2022 was $ 0.8 million and $ 1.7 million, respectively.

Geospace Technologies Corporation and Subsidiaries

2 unchanged sentences

For fiscal years ending September 30,

$ 4,805  

Long-Term Debt

The Company had no long-term debt outstanding at September 30, 2023 or 2022 .

In May 2022, the Company entered into a credit agreement (the “Agreement”) with Amerisource Funding, Inc, as administrative agent and as a lender, and Woodforest National Bank, as a lender.

Available borrowings under the Agreement are determined by a borrowing base with a maximum availability of $ 10 million.

The borrowing base is determined based upon certain of the Company's domestic assets which include (i) 70 % loan to value of the Company's property located at 6410 Langfield Road in Houston, Texas (the “Property”), (ii) 50 % of forced liquidation value of equipment, (iii) 80 % of certain accounts receivable and (iv) 50 % of forced liquidation value of certain inventory (inventory borrowing base limited to 100 % of borrowing base credit given toward accounts receivable).

The Agreement is for a two-year term with all funds borrowed due at the expiration of the term.

The interest rate on borrowed funds is the Wall Street prime rate (with a minimum of 3.25 %) plus 4.00 %.

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.

Borrowings under the Agreement will be principally secured by the Property and the Company's domestic equipment, inventory and accounts receivables.

In addition, certain domestic subsidiaries of the Company have guaranteed the obligations of the Company under the Agreement and such subsidiaries have secured the obligations by pledging certain assets.

The Agreement requires the Company to maintain a minimum consolidated tangible net worth of $ 100 million.

At September 30, 2022, the Company was compliant with all covenants under the Agreement and its borrowing availability was $ 8.5 million.

The Agreement is secured by substantially all of 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, 2023 , the Company's borrowing availability under the Agreement was $ 13.1 million after consideration of a $ 0.1 million outstanding letter of credit. 

At September 30, 2023, 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.

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.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Other Current Liabilities

2 unchanged sentences

Deferred revenue

$ 4,368  

Employee bonuses

Compensated absences

2 unchanged sentences

Medical claims

Agent commissions

Product warranty

$ 12,882  

$ 6,616  

The Company is self-insured for certain losses related to employee medical claims.

2 unchanged sentences

Employee Benefits

The Company’s U.S.

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 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 approximately $ 1.0 million and $ 0.9 million in fiscal years 2022 and 2021, respectively.

The Company’s share of discretionary matching contributions was $ 1.3 million and $ 1.0 million in fiscal years 2023 and 2022 , respectively.

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 14 to these consolidated financial statements.

10 unchanged sentences

At September 30, 2023 , an aggregate of 1,137,509 shares of common stock were available for issuance under the 2014 Plan.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

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

Number of Nonqualified Options Outstanding  

Weighted Average Exercise Price per Share  

Number of RSAs  

Weighted Average Grant-date Fair Value per Share  

Number of RSUs  

Weighted Average Grant-date Fair Value per Unit  

Outstanding at October 1, 2021

38,800  

$ 21.42  

42,097  

$ 15.95  

299,374  

$ 10.97  

200,350  

( 38,800 )  

( 51,603 )  

( 41,097 )  

( 124,262 )  

Outstanding at September 30, 2022

$ 14.59  

323,859  

$ 9.54  

228,250  

( 7,312 )  

( 1,000 )  

( 167,248 )  

Outstanding at September 30, 2023

377,549  

$ 6.46  

During fiscal years 2023 and 2022 , the Company issued 228,250 and 200,350 RSUs to certain of its employees, executive officers and directors under the 2014 Plan.

2 unchanged sentences

The total grant date fair value of all RSUs issued for fiscal years 2023 and 2022 was $ 1.1 million and $ 1.7 million, respectively, which will be charged to expense over the next one to four 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.

No RSAs have been issued since fiscal year 2019.

All RSAs and RSUs outstanding at September 30, 2022 and 2021 were issued from the 2014 Plan.

Stock-based compensation expense recognized for the fiscal years ended September 30, 2022 and 2021 was $ 1.7 million and $ 2.0 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, 2022, the Company had unrecognized compensation expense of $ 2,000 relating to RSAs which is expected to be recognized in the first quarter of fiscal year 2023.

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, 2023 and 2022 were issued from the 2014 Plan.

No RSAs have been issued since fiscal year 2019 and none were outstanding at September 30, 2023 .

Stock-based compensation expense recognized for the fiscal years ended 

September 30, 2023 and 2022 was $ 1.4 million and $ 1.7 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, 2023 , the Company had unrecognized compensation expense of $ 1.5 million relating to RSUs which is expected to be recognized over a weighted average period of 2.4 years.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Income Taxes:

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

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

YEAR ENDED SEPTEMBER 30,

United States

$ 11,190  

$ 12,569  

The provision for income taxes consisted of the following (in thousands):

YEAR ENDED SEPTEMBER 30,  

The difference between the effective tax rate reflected in the provision for income taxes and the U.S.

federal statutory rate were as follows (in thousands):

YEAR ENDED SEPTEMBER 30, 2023

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Actual income tax expense differs from income tax expense computed by applying the U.S.

statutory federal tax rate of 21 % for each of the fiscal years ended September 30, 2022 and 2021 as follows (in thousands):

YEAR ENDED SEPTEMBER 30, 2022

Expense (benefit) for U.S federal income tax at statutory rate

Effect of foreign income taxes

Expense (benefit) for U.S.

federal income tax at statutory rate

$ 2,639  

21.0 %  

$ ( 4,763 )  

Research and experimentation tax credit

( 480 )  

( 3.9 )%  

State income taxes, net of federal income tax benefit

Nondeductible expenses

( 265 )  

Nondeductible goodwill

Change in valuation allowance

Impact on deferred taxes due to change in tax rate

( 2,459 )  

( 19.6 )%  

Change in fair value of contingent consideration

Foreign income tax withholding

Disallowance of stock compensation adjustments in excess of book

Effective tax rate

The income tax expense for fiscal years 2022 and 2021 primarily reflects withholding tax on rental income earned in foreign jurisdictions.

The Company is currently unable to record any tax benefits for its tax losses in the U.S., Canada and the Russian Federation due to the uncertainty surrounding its ability to utilize such losses in the future to offset taxable income.

( 278 )  

Disallowed stock compensation

Impact due to foreign currency translation

Total tax expense and effective tax rate

The income tax expense for fiscal year 2023 primarily reflects tax accrual for U.S.

state and Russian income tax. 

The income tax expense for fiscal year 2022 primarily reflects withholding tax on rental income earned in foreign jurisdictions.

The Company is currently unable to record any tax benefits for its tax losses in the United States and Canada due to the uncertainty surrounding its ability to utilize such losses in the future to offset taxable income.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s net deferred income tax assets (liabilities) were as follows (in thousands):

AS OF SEPTEMBER 30, 2022

AS OF SEPTEMBER 30, 2021

YEAR ENDED SEPTEMBER 30,

Deferred income tax assets:

Allowance for doubtful accounts

$ 8,269  

$ 8,513  

Loss and tax credit carry-forwards

Stock-based compensation

Accrued product warranty

Contingent earn-out consideration

Accrued compensated absences

29,581  

34,643  

Accrued compensation

R&D expenditure capitalization

Property and equipment

Prepaid income taxes

Other reserves

Subtotal deferred income tax assets

41,352  

44,702  

Valuation allowance

( 38,917 )  

Net deferred income tax assets

Deferred income tax liabilities:

Allowance for doubtful accounts

Right-of-use assets

Intangible assets

Property, plant and equipment and other

( 292 )  

Property and equipment

( 2,153 )  

Total deferred income tax liabilities

( 2,451 )  

Net deferred income tax liabilities

$ ( 16 )  

The financial reporting basis of investments in foreign subsidiaries exceed their tax basis.

A deferred tax liability is not recorded for this temporary difference because the investment is deemed to be permanent.

A reversal of the Company’s plans to permanently invest

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

in these foreign operations would cause the excess to become taxable.

At September 30, 2022, the Company had $ 2.6 million of cash and cash equivalents held by its foreign subsidiaries.

At September 30, 2022 and 2021, the temporary difference related to undistributed earnings for which no deferred taxes have been provided was approximately $ 6.9 million and $ 6.5 million, respectively.

Tax return filings which are subject to review by local tax authorities by major jurisdiction are as follows:

United States—fiscal years ended September 30, 2019 through 2022

State of Texas—fiscal years ended September 30, 2019 through 2022

State of New York—fiscal year ended September 30, 2020

State of California –

fiscal years ended September 30, 2019 through 2022

State of Pennsylvania –

fiscal year ended September 30, 2019

Russian Federation—calendar years 2020 through 2022

Canada—fiscal years ended September 30, 2019 through 2022

United Kingdom—fiscal years ended September 30, 2021 through 2022

Colombia—calendar years 2020 through 2022

The Company had no unrecognized tax liabilities as of September 30, 2022 and 2021.

A reversal of the Company’s plans to permanently invest in these foreign operations would cause the excess to become taxable.

On September 30, 2023 , the Company had $ 3.8 million of cash and cash equivalents held by its foreign subsidiaries.

On September 30, 2023 and 2022 , the temporary difference related to undistributed earnings for which no deferred taxes have been provided was approximately $ 8.2 million and $ 6.9 million, respectively.

The Company is subject to taxation in the United States as well as various states and foreign jurisdictions.

Tax years that remain subject to examination by significant tax jurisdictions are the United States for tax years ending after 2016, Russia for tax years ending after 2020, the United Kingdom for tax years ending after 2021, and Canada for tax years ending after 2019.

As of September 30, 2023 , the Company had net operating loss (“NOL”) carry-forwards of approximately $ 78.2 million in the United States, $ 18.9 million in Canada and $ 0.7 million in Russia which are available to offset future taxable income in those jurisdictions.

The NOL carry-forwards for Canada and Russia begin to expire in 2033 and 2026, respectively.

The NOL carry-forward for the United States which originated prior to the 2017 Tax Act of $ 28.0 million begins to expire in 2028 .

The Company’s NOLs originating after the 2017 Tax Act of $ 77.9 million do not expire.

The Company has not completed a Section 382 limitation study which may prevent it from using its NOLs in the future.

Management of the Company has concluded that it is more-likely-than-not that its U.S., Canadian and Russian net deferred tax assets will not be realized in accordance with GAAP.

At September 30, 2022 and 2021, the Company had a valuation allowance against its U.S.

The NOL carry-forward for the United States which originated prior to the 2017 Tax Act of $ 32.6 million begins to expire in 2029 and those originating after the 2017 Tax Act of $ 45.6 million do not expire.

Management of the Company has concluded that it was not more-likely-than- not that its U.S., Canadian and Russian net deferred tax assets will be realized in accordance with U.S.

September 30, 2023 and September 30, 2022 , the Company had a valuation allowance against its U.S.

net deferred tax assets of $ 33.7 million and $ 35.5 million, respectively.

At September 30, 2022 and 2021, the Company had a valuation allowance against Canadian net deferred tax assets of $ 5.2 million, and $ 5.4 million, respectively.

At September 30, 2022 and 2021, the Company had a valuation allowance against its Russian net deferred tax assets of $ 0.7 million and $ 0.3 million, respectively.

Loss Per Common Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares used in basic loss per share during the period.

Diluted loss per share is determined on the assumption that outstanding RSUs have been exchanged for common stock and outstanding dilutive stock options have been exercised and the aggregate proceeds as defined were used to reacquire common stock using the average price of such common stock for the period.

September 30, 2023 and September 30, 2022 , the Company had a valuation allowance against its Canadian net deferred tax assets of $ 4.8 million and $ 5.2 million, respectively.

September 30, 2023 and September 30, 2022 , the Company had a valuation allowance against its Russian net deferred tax assets of $ 0.4 million and $ 0.7 million, respectively.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

The following table summarizes the calculation of net loss and weighted average common shares and common equivalent shares outstanding for purposes of the computation of loss per share (in thousands, except share and per share amounts):

Income (Loss) Per Common Share

Basic earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares used in basic earnings (loss) per share during the period.

Diluted earnings (loss) per share is determined on the assumption that outstanding RSUs have been exchanged for common stock and outstanding dilutive stock options have been exercised and the aggregate proceeds as defined were used to reacquire common stock using the average price of such common stock for the period.

The following table summarizes the calculation of net income (loss) and weighted average common shares and common equivalent shares outstanding for purposes of the computation of earnings (loss) per share (in thousands, except share and per share amounts):

YEAR ENDED SEPTEMBER 30,

Loss allocable to unvested restricted stock

Loss attributable to common shareholders

for diluted earnings per share

Net income (loss)

$ 12,206  

Income allocable to unvested restricted stock

Income (loss) attributable to common shareholders for diluted earnings (loss) per share

$ 12,206  

Weighted average number of common share equivalents:

Common shares used in basic loss per share

Common share equivalents outstanding related to

stock options and RSUs

Total weighted average common shares and common share

equivalents used in diluted loss per share

Loss per shares:

For the calculation of diluted loss per share for fiscal years 2022 and 2021, stock options of zero and 38,800 , respectively, and RSUs of 323,859 and 299,374 , respectively, were excluded in the calculation of weighted average shares outstanding as a result of their impact being antidilutive.

Commitments and Contingencies

Contingent Consideration

In connection with its acquisitions of Quantum and the OptoSeis ® fiber optic sensing technology business, the Company recorded contingent purchase price payments, or contingent consideration, that may be owed in the future.

For both acquisitions, the contingent payments are based on future receipt of contract awards and the resulting revenue derived from such contracts.

The Company reviews and assesses the fair value of its contingent consideration on a quarterly basis.

The determination of fair value is inherently unpredictable since it requires estimates and projections of future revenue, including the size, length, timing and, in the case of Quantum, the extent of gross profits earned under its future contracts.

As a result, the Company anticipates fair value adjustments to these liabilities over the respective earn-out periods, and these adjustments will result in either charges or credits to the Company’s operating expenses when the fair value of the contingent consideration increases or decreases, respectively.

The Company recorded an initial contingent consideration liability of $ 7.7 million in connection with its July 2018 acquisition of Quantum.

Contingent payments, if any, may be paid in the form of cash or Company stock and will be derived from eligible revenue generated during a four-year earn-out period, which ended in July 2022 .

The maximum amount of contingent payments was $ 23.5 million over the four-year earn-out period.

In fiscal year 2020, the Company made cash contingent consideration payments of $ 0.1 million to the former shareholders of Quantum.

In September 2021 and October 2021, the Company made additional cash earn-out payments of $ 1.4 million and $ 0.8 million, respectively, to the former shareholders of Quantum.

The payments were primarily attributable to revenue earned on Quantum’s $ 10.5 million contract with the CBP to provide a technology solution to the Department of Homeland Security.

At September 30, 2021, the contingent consideration liability was valued at $ 0.8 million related to projected future eligible revenue.

During the fiscal year ended September 30, 2022, the Company recorded an adjustment of $ 0.6 million to decrease the liability to $ 0.2 million.

The decrease for the fiscal year ended September 30, 2022 was primarily the result of timing in securing a potential second contract with the CBP caused by federal budget delays.

In November 2022, the Company made a final payment of $ 0.2 million to the former shareholders of Quantum and has no further earn-out obligations related to this acquisition.

The Company recorded an initial contingent consideration liability of $ 4.3 million in connection with its November 2018 acquisition of all the intellectual property and related assets of the OptoSeis ® fiber optic sensing technology.

Contingent cash payments, if any, will be derived from eligible revenue generated during a five-and-a-half year earn-out period ending in May 2024 .

In order for revenue to be considered eligible, sales contracts must be entered into during the first four years of the earn-out period ending November 13, 2022.

The maximum amount of contingent payments is $ 23.2 million over the five-and-a-half year earn-out period.

At September 30, 2021, the contingent consideration liability was valued at $ 4.4 million.

During the fiscal year ended September 30, 2022, the Company recorded an adjustment of $ 4.4 million to decrease the liability to zero .

The decrease for the fiscal year ended September 30, 2022 was

Common shares used in basic earnings (loss) per share

13,146,085  

12,987,996  

Common share equivalents outstanding related to RSUs

68,981  

Total weighted average common shares and common share equivalents used in diluted earnings (loss) per share

13,215,066  

12,987,996  

Earnings (loss) per share:

$ 0.93  

$ 0.92  

For the calculation of diluted earnings (loss) per share for fiscal years 2023 and 2022 , RSUs of 308,568 and 323,859 , respectively, were excluded in the calculation of weighted average shares outstanding as a result of their impact being antidilutive.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

the result of the unlikelihood of entering into a sales contract prior to the eligibility date.

No sales contracts were entered into by the November 13, 2022 eligibility date.

The Company had no further earn-out obligations related to this acquisition.

Commitments and Contingencies

Contingent Compensation Costs

In connection with the acquisition of Aquana in July 2021, the Company is subject to additional contingent cash payments to the former members of Aquana over a six-year earn-out period.

In connection with the acquisition of Aquana, LLC ("Aquana") in July 2021, the Company is 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.

As discussed in Note 3, 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, if any, will be recorded as compensation expense when incurred.

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, if any, will be recorded as compensation expense when incurred. 

No eligible revenue has been generated to date.

Legal Proceedings

9 unchanged sentences

Inventory transferred to property, plant and equipment

Issuance of notes receivables in connection with sale of used rental equipment

Issuance of notes receivables related to sale of used rental equipment

11,745  

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

Segment and Geographic Information

4 unchanged sentences

The Emerging Markets segment designs and markets seismic products targeted at the border and perimeter security markets.

Geospace Technologies Corporation and Subsidiaries

Notes to Consolidated Financial Statements—(Continued)

The following tables summarize the Company’s segment information:

1 unchanged sentence

Oil and Gas Markets

$ 73,993  

$ 49,141  

Adjacent Markets

49,039  

39,171  

Emerging Markets

124,509  

89,253  

Income (loss) from operations:

Oil and Gas Markets

15,759  

Adjacent Markets

11,490  

Emerging Markets

( 4,003 )  

( 11,918 )  

11,328  

Depreciation and amortization expenses:

Oil and Gas Markets

14,428  

16,947  

Adjacent Markets

Emerging Markets

16,238  

19,560  

Impairment, inventory obsolescence and stock-based compensation expenses:

20 unchanged sentences

United States

$ 118,017  

$ 82,332  

Russian Federation

United Kingdom

$ 124,509  

$ 89,253  

A summary of revenue by geographic area is as follows (in thousands):

YEAR ENDED SEPTEMBER 30,

Asia (including Russian Federation)

$ 26,685  

$ 13,823  

20,826  

28,381  

South America

United States

62,611  

35,171  

$ 124,509  

$ 89,253  

Revenue is attributed to countries based on the ultimate destination of the product sold, if known.

3 unchanged sentences

United States

$ 75,321  

$ 71,742  

Russian Federation

United Kingdom

$ 77,264  

$ 75,095  

Exit and Disposal Activities

During the first quarter of fiscal year 2023, the Company implemented a plan to discontinue the manufacture of certain low margin, low revenue products and reconfigure our production facilities to lower our costs and raise efficiencies.

As part of the plan, reductions were made to the Company's workforce which are expected to yield an annual savings of more than $ 2 million.

In connection with the plan, the Company incurred costs of $ 0.6 million in the first quarter of fiscal year 2023, primarily termination costs related to the workforce reduction.

The costs were recorded both to cost of revenue and operating expenses in the consolidated statement of operations. 

No significant future costs are expected. 

As of September 30, 2023 , no liabilities were outstanding related to this plan.

Geospace Technologies Corporation and Subsidiaries

1 unchanged sentence

(In thousands)

Expenses, net of Recoveries

Balance at Beginning of Period  

Charged to Costs and Expenses, net of Recoveries  

Charged to Other Assets  

(Deductions) and Additions  

Balance at End of Period  

Year ended September 30, 2023

Allowance for doubtful accounts on accounts and financing

Allowance for doubtful accounts on trade accounts and notes receivable

$ ( 138 )  

$ ( 328 )  

Year ended September 30, 2022

Allowance for doubtful accounts on accounts and financing

Allowance for doubtful accounts on trade accounts and notes receivable

$ ( 129 )  

Balance at Beginning of Period  

Charged to Costs and Expenses  

Charged to Other Assets  

(Deductions) and Additions  

Balance at End of Period  

Year ended September 30, 2023

Inventory obsolescence reserve

$ 13,971  

$ 2,229  

$ ( 2,139 )  

$ 14,061  

Year ended September 30, 2022

Inventory obsolescence reserve

$ 13,636  

$ 3,222  

$ ( 2,887 )  

$ 13,971  

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures