GEOSPACE TECHNOLOGIES CORP 10-K

Item 9A. Controls and Procedures   Evaluation of Disclosure Controls and Procedures   Our management is responsible for establishing and maintaining a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to report material information otherwise required to be set forth in our reports.   In connection with the preparation of this Annual Report on Form 10-K, we carried out an evaluation under the supervision and with the participation of our management, including the CEO and CFO, as of September 30, 2023 of the effectiveness of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. 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   Our management is responsible for establishing and maintaining effective internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.   Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2023. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control Integrated Framework (2013) . Based on this assessment, our management concluded that, as of September 30, 2023, our internal control over financial reporting is effective based on those criteria.   29     Changes in Internal Control Over Financial Reporting   There have not been any changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   Item 9B. Other Information   None.   30       PART III   Item 10. Directors, Executive Officers and Corporate Governance   The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of September 30, 2023 in connection with our 2024 Annual Meeting of Stockholders under the captions “Election of Directors,” “Executive Officers and Compensation,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Ethics” and is incorporated herein by reference.   Item 11. Executive Compensation   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 caption “Executive Officers and Compensation” and is incorporated herein by reference.   Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   The information required by this Item is contained in our definitive Proxy Statement to be distributed within 120 days of September 30, 2023 in connection with our 2024 Annual Meeting of Stockholders under the caption “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference, and in Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities,” contained in Part II hereof.   Item 13. Certain Relationships and Related Transactions and Director Independence   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 caption “Certain Relationships and Related Transactions” and is incorporated herein by reference.   Item 14. Principal Accountant Fees and Services   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 caption “Independent Public Accountants” and is incorporated herein by reference.     31       PART IV   Item 15. Exhibits and Financial Statement Schedules   Financial Statements and Financial Statement Schedules   The financial statements and financial statement schedules listed on the accompanying Index to Financial Statements (see page F-1) are filed as part of this Annual Report on Form 10-K.     Exhibits   Exhibit Number    Description of Documents         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).       10.1    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)).*         10.2   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).*       10.3   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).*       10.4   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).*       10.5    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).*       10.6   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).*       10.7   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).*       10.8   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).*       10.9   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).*       10.10   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).*       10.11   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).*       10.12   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).*       10.13   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).*       10.14   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).*   32     10.15   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).*       10.16    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).*       10.17   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).*       10.18   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).*         10.19   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).       10.20   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).       10.21   Employment Termination and Consulting Agreement dated June 30, 2023 between the Company and Michael J. Sheen. **       14.1   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).       21.1    Subsidiaries of the Registrant.**       23.1    Consent of RSM US LLP.**       31.1    Certification of the Company ’ s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**       31.2    Certification of the Company ’ s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.**       32.1    Certification of the Company ’ s Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**       32.2    Certification of the Company ’ s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**       101    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, 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.**       104   The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023 formatted in iXBRL. **   * This exhibit is a management contract or a compensatory plan or arrangement. ** Filed herewith.     Item 16. Form 10-K Summary   None.   33     SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     GEOSPACE TECHNOLOGIES CORPORATION         By: /s/ WALTER R. WHEELER     Walter R. Wheeler, Director, President and Chief Executive Officer     November 17, 2023   Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.   Signature   Title   Date           /s/ WALTER R. WHEELER   Director, President and Chief Executive Officer   November 17, 2023 Walter R. Wheeler   (Principal Executive Officer)               /s/ ROBERT L. CURDA   Vice President, Chief Financial Officer and Secretary   November 17, 2023 Robert L. Curda   (Principal Financial Officer and Principal Accounting Officer)               /s/ GARY D. OWENS   Chairman of the Board   November 17, 2023 Gary D. Owens                   /s/ MARGARET S. ASHWORTH   Director   November 17, 2023 Margaret S. Ashworth                   /s/ THOMAS L. DAVIS   Director   November 17, 2023 Thomas L. Davis                   /s/ EDGAR R. GIESINGER, JR.   Director   November 17, 2023 Edgar R. Giesinger, Jr.                   /s/ RICHARD F. MILES   Director   November 17, 2023 Richard F. Miles     34       GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES   Reports of Independent Registered Public Accounting Firm              F-2       Consolidated Balance Sheets as of September 30, 2023 and 2022    F-5       Consolidated Statements of Operations for the Years Ended September 30, 2023 and 2022    F-6       Consolidated Statements of Comprehensive Income (Loss) for the Years Ended September 30, 2023 and 2022    F-7       Consolidated Statements of Stockholders ’  Equity for the Years Ended September 30, 2023 and 2022    F-8       Consolidated Statements of Cash Flows for the Years Ended September 30, 2023 and 2022    F-9       Notes to Consolidated Financial Statements              F-10       Schedule II — Valuation and Qualifying Accounts              F-32     F-1     Report of Independent Registered Public Accounting Firm     To the Stockholders and the Board of Directors of Geospace Technologies Corporation     Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Geospace Technologies Corporation and its subsidiaries (the Company) as of September 30, 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). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the 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.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F-2       Inventory Valuation As described in Note 1 to the consolidated financial statements, the Company’s consolidated inventories balance, which is stated at lower of cost or net realizable value, was $43.3 million as of September 30, 2023. The valuation of inventories is based on the Company’s periodic review of the composition of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder its ability to recover its investment in such inventories. The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s investment will not be realized in its operating activities.   We identified the valuation of inventories at the lower of cost or net realizable value as a critical audit matter due to the significant judgment and estimates required by management. Determining whether a decline in value has occurred requires management to make complex judgments related to (i) historical and estimated future product demand in relation to quantities on hand and (ii) obsolescence of certain products based on changes in technology and demand. Auditing these judgments is especially challenging and involved significant auditor judgment due to fluctuations in sales trends and evolving customer demands.   Our audit procedures related to the Company’s valuation of inventory included the following, among others:     ● We evaluated management’s calculation of the inventory valuation reserve by testing the mathematical accuracy of the calculation.     ● 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 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 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.     Houston, Texas November 17, 2023         F-3     Report of Independent Registered Public Accounting Firm     To the Stockholders and the Board of Directors of Geospace Technologies Corporation     Our audits of the consolidated financial statements referred to in our report dated November 17, 2023, (included elsewhere in this Annual Report on Form 10-K) also included the financial statement schedule of Geospace Technologies Corporation and its subsidiaries, listed in Item 15(a) of this Form 10-K. This schedule is the responsibility of Geospace Technologies Corporation's management. Our responsibility is to express an opinion based on our audits of the consolidated financial statements.   In our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.       Houston, Texas November 17, 2023   F-4       Geospace Technologies Corporation and Subsidiaries Consolidated Balance Sheets (In thousands, except share amounts)       AS OF SEPTEMBER 30,       2023     2022   ASSETS                 Current assets:                 Cash and cash equivalents   $ 18,803     $ 16,109   Short-term investments     14,921       894   Trade accounts and notes receivable, net     21,373       20,886   Inventories, net     18,430       19,995   Prepaid expenses and other current assets     2,251       2,077   Total current assets     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     714       957   Goodwill     736       736   Other intangible assets, net     4,805       5,573   Other non-current assets     486       506   Total assets   $ 153,042     $ 135,056                     LIABILITIES AND STOCKHOLDERS’ EQUITY                 Current liabilities:                 Accounts payable trade   $ 6,659     $ 5,595   Contingent consideration     —       175   Operating lease liabilities     257       241   Other current liabilities     12,882       6,616   Total current liabilities     19,798       12,627                     Non-current operating lease liabilities     512       769   Deferred tax liabilities, net     16       13   Total liabilities     20,326       13,409                     Commitments and contingencies (Note 17)                                       Stockholders’ equity:                 Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding     —       —   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     140       139   Additional paid-in capital     96,040       94,667   Retained earnings     61,860       49,654   Accumulated other comprehensive loss     ( 17,824 )     ( 15,313 ) Treasury stock, at cost, 841,992 shares     ( 7,500 )     ( 7,500 ) Total stockholders’ equity     132,716       121,647   Total liabilities and stockholders’ equity   $ 153,042     $ 135,056     The accompanying notes are an integral part of the consolidated financial statements.   F-5       Geospace Technologies Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except share and per share amounts)       YEAR ENDED SEPTEMBER 30,       2023     2022   Revenue:                 Products   $ 73,333     $ 64,109   Rental equipment     51,176       25,144   Total revenue     124,509       89,253   Cost of revenue:                 Products     55,136       51,649   Rental equipment     17,683       19,561   Total cost of revenue     72,819       71,210                     Gross profit     51,690       18,043                     Operating expenses:                 Selling, general and administrative     25,952       23,482   Research and development     15,863       18,104   Goodwill impairment     —       4,336   Change in estimated fair value of contingent consideration     —       ( 5,035 ) Bad debt expense (recovery)     ( 138 )     292   Total operating expenses     41,677       41,179                     Gain on disposal of property     1,315       —                     Income (loss) from operations     11,328       ( 23,136 )                   Other income (expense):                 Interest expense     ( 134 )     ( 65 ) Interest income     539       976   Foreign currency transaction gains (losses), net     994       ( 397 ) Other, net     ( 158 )     ( 61 ) Total other income, net     1,241       453                     Income (loss) before income taxes     12,569       ( 22,683 ) Income tax expense     363       173   Net income (loss)   $ 12,206     $ ( 22,856 )                   Income (loss) per common share:                 Basic   $ 0.93     $ ( 1.76 ) Diluted   $ 0.92     $ ( 1.76 )                   Weighted average common shares outstanding:                 Basic     13,146,085       12,987,996   Diluted     13,215,066       12,987,996     The accompanying notes are an integral part of the consolidated financial statements.   F-6       Geospace Technologies Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) (In thousands)       YEAR ENDED SEPTEMBER 30,       2023     2022   Net income (loss)   $ 12,206     $ ( 22,856 ) Other comprehensive income (loss):                 Change in unrealized gains on available-for-sale securities, net of tax     4       —   Foreign currency translation adjustments     ( 2,515 )     1,007   Total other comprehensive income (loss), net     ( 2,511 )     1,007   Total comprehensive income (loss)   $ 9,695     $ ( 21,849 )   The accompanying notes are an integral part of the consolidated financial statements.   F-7       Geospace Technologies Corporation and Subsidiaries Consolidated Statements of Stockholders ’ Equity For the years ended September 30, 2023 and 2022 (In thousands, except share amounts)       Common Stock                     Accumulated                       Shares     Amount     Additional Paid-In Capital     Retained Earnings     Other Comprehensive Loss     Treasury Stock     Total   Balance at October 1, 2021     12,969,542     $ 137     $ 92,935     $ 72,510     $ ( 16,320 )   $ ( 6,805 )   $ 142,457                                                             Net loss     —       —       —       ( 22,856 )     —       —       ( 22,856 ) Other comprehensive income     —       —       —       —       1,007       —       1,007   Issuance of common stock pursuant to the vesting of restricted stock units     124,262       2       ( 2 )     —       —       —       —   Purchase of treasury stock     ( 72,563 )                             ( 695 )     ( 695 ) Stock-based compensation     —       —       1,734       —       —       —       1,734   Balance at September 30, 2022     13,021,241       139       94,667       49,654       ( 15,313 )     ( 7,500 )     121,647                                                             Net income     —       —       —       12,206       —       —       12,206   Other comprehensive loss     —       —       —       —       ( 2,511 )     —       ( 2,511 ) Issuance of common stock pursuant to the vesting of restricted stock units     167,248       1       ( 1 )     —       —       —       —   Stock-based compensation     —       —       1,374       —       —       —       1,374   Balance at September 30, 2023     13,188,489     $ 140     $ 96,040     $ 61,860     $ ( 17,824 )   $ ( 7,500 )   $ 132,716     The accompanying notes are an integral part of the consolidated financial statements.   F-8       Geospace Technologies Corporation and Subsidiaries Consolidated Statements of Cash Flows (In thousands)       YEAR ENDED SEPTEMBER 30,       2023     2022   Cash flows from operating activities:                 Net income (loss)   $ 12,206     $ ( 22,856 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:                 Deferred income tax expense (benefit)     3       ( 17 ) Rental equipment depreciation     11,766       13,740   Property, plant and equipment depreciation     3,704       4,143   Amortization of intangible assets     768       1,677   Goodwill impairment expense     —       4,336   Property, plant and equipment impairment expense     —       401   Amortization of premiums (accretion of discounts) on short-term investments     ( 144 )     96   Stock-based compensation expense     1,374       1,734   Bad debt expense (recovery)     ( 138 )     292   Inventory obsolescence expense     2,229       3,222   Change in estimated fair value of contingent consideration     —       ( 5,035 ) Gross profit from sale of used rental equipment     ( 4,424 )     ( 11,061 ) Loss (gain) on disposal of equipment     244       ( 54 ) Gain on disposal of property     ( 1,315 )     —   Realized loss on short-term investments     —       22   Realized foreign currency translation loss from dissolution of foreign subsidiary     38       —   Effects of changes in operating assets and liabilities:                 Trade accounts and notes receivable     ( 5,561 )     1,751   Unbilled receivables     —       1,051   Inventories     ( 11,026 )     ( 2,357 ) Other assets     442       349   Accounts payable trade     41       ( 786 ) Other liabilities     5,351       ( 683 ) Net cash used provided by (used in) operating activities     15,558       ( 10,035 )                   Cash flows from investing activities:                 Purchase of property, plant and equipment     ( 3,964 )     ( 1,130 ) Investment in rental equipment     ( 9,920 )     ( 4,832 ) Proceeds from the sale of equipment     724       54   Proceeds from the sale of property     3,682       —   Proceeds from the sale of used rental equipment     11,478       11,583   Purchase of short-term investments     ( 24,782 )     ( 450 ) Proceeds from the sale of short-term investments     10,900       8,924   Net cash provided by (used in) investing activities     ( 11,882 )     14,149                     Cash flows from financing activities:                 Payments of contingent consideration     ( 175 )     ( 807 ) Debt issuance costs     ( 350 )     ( 211 ) Purchase of treasury stock     —       ( 695 ) Net cash used in financing activities     ( 525 )     ( 1,713 )                   Effect of exchange rate changes on cash     ( 457 )     ( 358 ) Increase in cash and cash equivalents     2,694       2,043   Cash and cash equivalents, beginning of fiscal year     16,109       14,066   Cash and cash equivalents, end of fiscal year   $ 18,803     $ 16,109     The accompanying notes are an integral part of the consolidated financial statements.   F-9     Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements       1. Summary of Significant Accounting Policies:   The Company   Geospace Technologies Corporation (“Geospace”) designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. Geospace also designs and manufactures Adjacent Markets products including industrial products, imaging equipment, and provides contract manufacturing services, and Emerging Market products consisting of border and perimeter security products. Geospace and its subsidiaries are referred to collectively as the “Company”.   Basis of Presentation   The accompanying financial statements present the consolidated financial position, results of operations and cash flows of the Company in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). All significant intercompany balances and transactions have been eliminated.   Use of Estimates   The preparation of financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually evaluates its estimates, including those related to revenue recognition, bad debt reserves, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets, impairment of goodwill and other intangible assets, contingent consideration and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. While management believes current estimates are reasonable and appropriate, actual results may differ from these estimates under different conditions or assumptions.   Cash and Cash Equivalents   The Company considers all highly liquid investments purchased with an original or remaining maturity at the time of purchase of three months or less to be cash equivalents.  At September 30, 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 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   Credit   The Company maintains its cash in bank deposit accounts that, at times, exceed federally insured limits. Management of the Company believes that the financial strength of the financial institutions holding such deposits minimizes the credit risk of such deposits.   The Company sells products to customers throughout the United States and various foreign countries. The Company’s normal credit terms for trade receivables are 30 days. In certain situations, credit terms may be extended to 60 days or longer. The Company performs ongoing credit evaluations of its customers and generally does not require collateral for its trade receivables. Additionally, the Company provides long-term financing in the form of promissory notes and sales-type leases when competitive conditions require such financing. In such cases, the Company may require collateral. Allowances are recognized for 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.     F- 10 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     Supplier   Certain models of the Company’s oil and gas marine wireless products require a timing device it purchases from a United States manufacturer. The Company currently does not possess the ability to manufacture this component and has no other reliable source for this device. If this manufacturer were to discontinue its production of this timing device, were to become unwilling to contract with the Company on competitive terms or were unable to supply the component in sufficient quantities to meet its requirements, the Company’s ability to compete in the marine wireless marketplace could be impaired, which could adversely affect its financial performance. The device is used in certain models of the Company’s rental equipment. 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. Except for the film sold to the Company by this manufacturer, the Company knows of no other source for thermal film that performs as well in its imaging equipment. If the manufacturer were to discontinue producing thermal film, were to become unwilling to contract with the Company on competitive terms or were unable to supply thermal film in sufficient quantities to meet its requirements, the Company’s ability to compete in the direct thermal imaging marketplace could be impaired, which could adversely affect its financial performance. Thermal film sales represented approximately 5 % and 8 % of the Company’s revenue in fiscal year 2023 and 2022 , respectively.   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, ("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. 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 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 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. The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and the Company's business for an unknown period of time.   Inventories   The Company records a write-down of its inventories when the cost basis of any manufactured product, including any estimated future costs to complete the manufacturing process, exceeds its net realizable value. Inventories are stated at the lower of cost or net realizable value. Cost is determined on the first -in, first -out method, except that certain of the Company’s foreign subsidiaries use an average cost method to value their inventories.   The Company periodically reviews the composition of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder our ability to recover its investment in such inventories. The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s inventory investment will not be realized in its operating activities.   The Company reviews it inventories for classification purposes. The value of inventories not expected to be realized in cash, sold or consumed during its next operating cycle are classified as non-current assets.   F- 11 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     Property, Plant and Equipment and Rental Equipment   Property, plant and equipment and rental equipment are stated at cost. Depreciation expense is calculated using the straight-line method over the following estimated useful lives:       Years   Rental equipment     2 - 5   Property, plant and equipment:         Machinery and equipment     3 - 15   Buildings and building improvements     10 - 50   Other     5 - 10     Expenditures for renewals and betterments are capitalized. Repairs and maintenance expenditures are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and any gain or loss thereon is reflected in the statements of operations.   Impairment of Long-lived Assets   The Company’s long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value.   At September 30, 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.   Goodwill   The Company conducts its evaluation of goodwill at the reporting unit level on an annual basis as of September 30 and more frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value. The guidance on the testing of goodwill for impairment provides the option to first assess qualitative factors to determine if the fair value of a reporting unit exceeds its carrying amount. If, based on the qualitative assessment of events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit is more than its carrying amount then it is not necessary to perform a quantitative assessment. However, if an entity concludes otherwise, then a quantitative assessment must be performed. If, based on the quantitative assessment, the Company determines that the fair value of a reporting unit is less that its carrying amount, a goodwill impairment is recognized equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of the goodwill.   F- 12 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     Other Intangible Assets   Intangible assets are carried at cost, net of accumulated amortization. The estimated useful life of the Company’s other intangible assets are evaluated each reporting period to determine whether events or circumstances warrant a revision to the remaining amortization period. If the estimate of an intangible asset’s remaining useful life is changed, the amortization period should be changed prospectively. Amortization expense is calculated using the straight-line method over the following estimated useful lives:       Years   Developed technology     18   Trade names     5   Customer relationships     4   Non-compete agreements     4     Revenue Recognition   See Note 2 to these consolidated financial statements.   Research and Development Costs   The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, department supplies, direct project costs and other related costs.   Product Warranties   Most of the Company’s products do not require installation assistance or sophisticated instructions. The Company offers a standard product warranty obligating it to repair or replace equipment with manufacturing defects. The Company maintains a reserve for future warranty costs based on historical experience or, in the absence of historical product experience, management’s estimates. Reserves for future warranty costs are included within other current liabilities on the consolidated balance sheets.   Changes in the product warranty reserve are reflected in the following table (in thousands):   Balance at October 1, 2021   $ 379   Accruals for warranties issued during the year     1,431   Settlements made (in cash or in kind) during the year     ( 1,286 ) Balance at September 30, 2022     524   Accruals for warranties issued during the year     1,655   Settlements made (in cash or in kind) during the year     ( 1,521 ) Balance at September 30, 2023   $ 658     Stock-Based Compensation   The Company accounts for stock-based compensation, including grants of restricted awards and unqualified stock options in accordance with Accounting Standards Codification Topic 718, which requires that all share-based payments (to the extent that they are compensatory) be recognized as an expense in the Company’s consolidated statements of operations based on their fair values on the award date and the estimated number of shares it ultimately expects to vest.   The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award. The Company’s stock-based compensation plan and awards are more fully described in Note 14 to these consolidated financial statements.   F- 13 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     Foreign Currency Gains and Losses   The assets and liabilities of the Company’s foreign subsidiaries and branch offices that have a foreign currency as their functional currency have been translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations have been translated using the average exchange rates during the year. Resulting translation adjustments have been recorded as a component of accumulated other comprehensive loss in stockholders’ equity. Foreign currency transaction gains and losses are included in the statements of operations as they occur. Transaction gains and losses on intra-entity foreign currency transactions and balances, including advances and demand notes payable on which settlement is not planned or anticipated in the foreseeable future, are recorded in “accumulated other comprehensive loss” on our consolidated balance sheets.   Fair Value   Fair value is the price that would be received to sell an asset or the amount paid to transfer a liability in an orderly transaction between market participants (an exit price) at the measurement date. U.S. GAAP has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest level input that is significant to the fair value measurement. Level 1 represents unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 represents quoted prices for similar assets and liabilities in active markets (other than those included in Level 1 ) which are observable, either directly or indirectly. Level 3 represents valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Also see Note 4 to these consolidated financial statements.   Income Taxes   Income taxes are presented in accordance with the Accounting Standards Codification Topic 740 (“Topic 740” ) guidance for accounting for income taxes. The estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carrybacks and carryforwards are recorded. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities (temporary differences) and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company periodically reviews the recoverability of tax assets recorded on the balance sheet and provides valuation allowances if it is more likely than not that such assets will not be realized.   The Company follows the guidance of Topic 740 to analyze all tax positions that are less than certain. Topic 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In accordance with Topic 740, the Company recognizes in its financial statements the impact of a tax position if that position is “more likely than not” to be sustained on audit, based on the technical merits of the position. The Company’s estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time.  The Company classifies interest and penalties associated with the payment of income taxes, if any, in the Other Income (Expense) section of its consolidated statements of operations.   Recently Issued Accounting Pronouncements   In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in U.S. GAAP.  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 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 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.   F- 14 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)       2. Revenue Recognition   In accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606” ), the Company recognizes revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.   The Company primarily derives product revenue from the sale of its manufactured products. Revenue from these product sales, including the sale of used rental equipment, is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is probable. The Company records deferred revenue when customer funds are received prior to shipment or delivery or performance has not yet occurred. The Company assesses collectability during the contract assessment phase. In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or when non-refundable cash is received from its customers and there is not a significant right of return. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. The Company’s products are generally sold without any customer acceptance provisions, and the Company’s standard terms of sale do not allow customers to return products for credit.   Revenue from engineering services is recognized as services are rendered over the duration of a project, or as billed on a per hour basis. Field service revenue is recognized when services are rendered and is generally priced on a per day rate.   The Company also generates revenue from short-term rentals under operating leases of its manufactured products. Rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured. Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to one year. The Company has determined that ASC 606 does not apply to rental contracts, which are within the scope of ASC Topic 842, Leases .   As permissible under ASC 606, sales taxes and transaction-based taxes are excluded from revenue. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expenses.   The Company has elected to treat shipping and handling activities in a sales transaction after the customer obtains control of the goods as a fulfillment cost and not as a promised service. Accordingly, fulfillment costs related to the shipping and handling of goods are accrued at the time of shipment. Amounts billed to a customer in a sales transaction related to reimbursable shipping and handling costs are included in revenue, and the associated costs incurred by the Company for reimbursable shipping and handling expenses are reported in cost of revenue. The Company incurred shipping and handling expenses of $ 0.5 million and $ 0.6 million, respectively, for the fiscal years ended September 30, 2023 and 2022 , respectively.   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.   F- 15 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     For each of the Company’s operating segments, the following table presents revenue only from the sale of products and the performance of services under contracts with customers (in thousands). Therefore, the table excludes all revenue earned from rental contracts.       YEAR ENDED SEPTEMBER 30,       2023     2022   Oil and Gas Markets                 Traditional exploration product revenue   $ 12,081     $ 6,558   Wireless exploration product revenue     10,168       15,822   Reservoir product revenue     962       1,968   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                 Revenue     1,234       711                     Corporate                 Revenue     —       50                     Total   $ 73,333     $ 64,109     See Note 19 for more information on the Company’s operating segments.   For each of the geographic areas where the Company operates, the following table presents revenue from the sale of products and performance of services under contracts with customers (in thousands). Therefore, the table excludes all revenue earned from rental contracts.       YEAR ENDED SEPTEMBER 30,       2023     2022   Asia (including Russian Federation)   $ 13,006     $ 10,978   Canada     1,032       890   Europe     5,976       15,705   South America     448       719   United States     49,828       33,778   Other     3,043       2,039       $ 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.   F- 16 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)       3. Investments   Short-term Investments   The Company classifies its short-term investments as available-for-sale securities. 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’ equity. 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   U.S. treasury securities and securities of U.S. government-sponsored agency     3,622       4       —       3,626   Total   $ 14,932     $ 4     $ ( 15 )   $ 14,921           AS OF SEPTEMBER 30, 2022       Amortized Cost     Unrealized Gains     Unrealized Losses     Estimated Fair Value   Short-term investments:                                 Corporate bonds   $ 909     $ —     $ ( 15 )   $ 894   Total   $ 909     $ —     $ ( 15 )   $ 894     The Company’s short-term investments have contractual maturities ranging from January 2024 to September 2024.     F- 17 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)       4. Fair Value of Financial Instruments   The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts, financing receivables and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts receivable, financing receivables and accounts payable, the carrying amounts approximate fair value on the respective balance sheet dates. The valuation technique used to measure the fair value of the contingent consideration was derived from models utilizing market observable inputs.   The Company measures its short-term investments and contingent consideration at fair value on a recurring basis.   The following tables present the fair value of the Company’s short-term investments and contingent consideration by valuation hierarchy and input (in thousands):       AS OF SEPTEMBER 30, 2023       Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Unobservable (Level 2)     Significant Unobservable (Level 3)     Totals   Short-term investments:             .                   Corporate bonds   $ —     $ 11,295     $ —     $ 11,295   U.S. treasury securities and securities of U.S. government-sponsored agency             3,626               3,626   Total assets   $ —     $ 14,921     $ —     $ 14,921         AS OF SEPTEMBER 30, 2022       Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Unobservable (Level 2)     Significant Unobservable (Level 3)     Totals   Short-term investments:                                 Corporate bonds   $ —     $ 894     $ —     $ 894   Total assets   $ —     $ 894     $ —     $ 894                                     Contingent consideration liabilities:                                 Contingent consideration liabilities     —       —       175       175   Total liabilities   $ —     $ —     $ 175     $ 175     Assets and Liabilities Measured on a Nonrecurring Basis   The measurements utilized to determine the implied fair value of the Company's Emerging Markets reporting unit as of September 30, 2022 represented significant unobservable inputs (Level 3 ). See Note 10 for discussion of these inputs.   The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the fiscal years ended September 30, 2023 and 2022 :   Contingent Consideration balance at October 1, 2021   $ 6,017   Fair value adjustments     ( 5,035 ) Payment of contingent consideration     ( 807 ) Balance at September 30, 2022     175   Fair value adjustments     —   Payment of contingent consideration     ( 175 ) Balance at September 30, 2023   $ —     F- 18 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     Adjustments to the fair value of the contingent consideration are based on internal estimates and management assessments regarding potential future scenarios. The Company believes its estimates and assumptions are reasonable; however, there is significant judgment involved. Also see Note 17.     5. Accumulated Other Comprehensive Loss   Accumulated other comprehensive loss consisted of the following (in thousands):       Unrealized Losses on Available-for-Sale Securities     Foreign Currency Translation Adjustments     Total   Balance at October 1, 2021   $ ( 15 )   $ ( 16,305 )   $ ( 16,320 ) Other comprehensive income     —       1,007       1,007   Balance at September 30, 2022   $ ( 15 )     ( 15,298 )     ( 15,313 ) Other comprehensive income (loss)     4       ( 2,515 )     ( 2,511 ) Balance at September 30, 2023   $ ( 11 )   $ ( 17,813 )   $ ( 17,824 )     6. Trade Accounts and Financing Receivables   Trade accounts receivable, net (excluding financing receivables) are reflected in the following table (in thousands):       AS OF SEPTEMBER 30,       2023     2022   Trade accounts receivable   $ 20,282     $ 13,252   Allowance for doubtful accounts     ( 125 )     ( 591 )     $ 20,157     $ 12,661     The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses. The Company determines the allowance based upon historical experience and a current review of its accounts receivable balances. Accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.   Financing receivables are reflected in the following table (in thousands):       AS OF SEPTEMBER 30,       2023     2022   Notes receivable   $ 1,216     $ 8,225   Less current portion     ( 1,216 )     ( 8,225 ) Non-current notes receivable   $ —     $ —     F- 19 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.     7. Inventories   Inventories consisted of the following (in thousands):       AS OF SEPTEMBER 30,       2023     2022   Finished goods   $ 18,555     $ 14,653   Work in process     11,992       6,230   Raw materials     26,832       25,609   Obsolescence reserve (net realizable value adjustment)     ( 14,061 )     ( 13,971 )       43,318       32,521   Less current portion     18,430       19,995   Non-current portion   $ 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.     8. Leases   As Lessee   The Company has elected not to record operating right-of-use assets or operating lease liabilities on its consolidated balance sheet for leases having a minimum term of 12 months or less. Such leases are expensed on a straight-line basis over the lease term. Variable lease payments are excluded from the measurement of operating right-of-use assets and operating liabilities and recognized in the period in which the obligation for those payments is incurred. As of September 30, 2023 , the Company has two operating right-of use assets related to leased facilities in Austin, Texas and Melbourne, Florida.   F- 20 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):   For fiscal years ending September 30,         2024     278   2025     186   2026     130   2027     134   2028     91   Future minimum lease payments   $ 819   Less interest     ( 50 ) Present value of minimum lease payments   $ 769   Less current portion     ( 257 ) Long-term portion   $ 512     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,       2023     2022   Right-of-use operating lease costs   $ 272     $ 272   Short-term lease costs     220       190   Total   $ 492     $ 462     Right-of-use operating lease costs and short-term lease costs are included as a component of total operating expenses.   Other information related to operating leases is as follows (in thousands):       YEAR ENDED SEPTEMBER 30,       2023     2022   Cash paid for amounts included in the measurement of lease liabilities:                 Operating cash flows from operating leases   $ 270     $ 262                     Weighted average remaining lease term   3.9 years     4.7 years   Weighted average discount rate     3.25 %     3.25 %   The discount rate used on the operating right-of-use assets represented the Company’s incremental borrowing rate at lease inception.   As Lessor   Equipment   The Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to one year. All of the Company's current leasing arrangements, with the Company acting as lessor, are classified as operating leases. The majority of the Company’s rental revenue is generated from its marine-based wireless seismic data acquisition system.   The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. The Company suspends revenue recognition when the collectability of amounts due are no longer probable and concurrently records a direct write-off of the lease receivable to rental revenue to limit rental revenue recognized to the cash collections received. As of September 30, 2023 , the Company’s trade accounts receivables included lease receivables of $ 9.0 million.   F- 21 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, 2023 were $ 29.6 million, the majority of which is due within the next 12 months.   Rental equipment consisted of the following (in thousands):       AS OF SEPTEMBER 30,       2023     2022   Rental equipment, primarily wireless recording equipment   $ 82,926     $ 83,153   Accumulated depreciation and impairment     ( 61,339 )     ( 54,954 )     $ 21,587     $ 28,199     Rental equipment depreciation expense was $ 11.8 million and $ 13.7 million in fiscal years 2023 and 2022 , respectively.   Property   During the first quarter of fiscal year 2022, the Company leased a portion of its property located in Calgary, Alberta, Canada and fully leased its warehouse in Bogotá, Colombia. The lease in Canada commenced in November 2021 and is for a five -year term. The lease on the warehouse in Bogotá commenced in December 2021 and is currently on a month-to-month basis.   Rental revenue related to these two properties was $ 0.2 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,         2024     128   2025     131   2026     132   2027     11       $ 402       9. 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):       AS OF SEPTEMBER 30,       2023     2022   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     1,487       1,434   Tools and molds     3,287       3,243   Construction in progress     3,343       341   Transportation equipment     74       74         86,068       96,928   Accumulated depreciation and impairment     ( 62,020 )     ( 70,330 )     $ 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 . Impairment expense of $ 0.4 million was incurred on certain manufacturing equipment in fiscal year 2022 . The impairment expense is included as a component of cost of revenue in the consolidated statement of operations.   F- 22 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)       10. Goodwill and Other Intangible Assets   At September 30, 2023 , the Company had goodwill of $ 0.7 million and other intangible assets, net of $ 0.5 million attributable to its Adjacent Markets reporting unit; other intangible assets, net of $ 3.0 million attributable to its Emerging Markets reporting unit; and other intangible assets, net of $ 1.3 million attributable to its Oil and Gas Markets reporting unit. Goodwill represents the excess cost of a business acquired over the fair market value of identifiable net assets at the date of acquisition.   At September 30, 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. 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.   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,             2023     2022   Goodwill:                       Emerging Markets reporting unit         $ 4,336     $ 4,336   Adjacent Markets reporting unit           736       736   Total goodwill           5,072       5,072   Accumulated impairment losses           ( 4,336 )     ( 4,336 )           $ 736     $ 736   Other intangible assets:                       Developed technology   13.2     $ 6,475     $ 6,475   Customer relationships   —       3,900       3,900   Trade names   0.2       2,022       2,022   Non-compete agreements   0.2       186       186   Total other intangible assets   6.8       12,583       12,583   Accumulated amortization           ( 7,778 )     ( 7,010 )           $ 4,805     $ 5,573     Other intangible assets amortization expense for fiscal years  2023 and  2022 was $ 0.8 million and $ 1.7 million, respectively.   F- 23 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     As of September 30, 2023 , future estimated amortization expense of other intangible assets is as follows (in thousands):   For fiscal years ending September 30,         2024     395   2025     381   2026     374   2027     360   2028     360   Thereafter     2,935       $ 4,805        11. Long-Term Debt   The Company had no long-term debt outstanding at September 30, 2023 or 2022 .   On July 26, 2023, the Company entered into a credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender.  The Agreement refinanced the Company's credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender.  The Agreement provides a revolving credit facility with a maximum availability of $ 15 million.  Availability under the Agreement is determined based upon a borrowing base comprised of certain of the Company’s domestic assets which include (i) 80 % of eligible accounts, plus (ii) 90 % of eligible foreign insured accounts, plus (iii) 25 % of eligible inventory plus (iv) 50 % of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments.  Interest shall accrue on outstanding borrowings at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25 % per annum.  The Company is required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all 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.   12. Other Current Liabilities   Other current liabilities consisted of the following (in thousands):       AS OF SEPTEMBER 30,       2023     2022   Deferred revenue   $ 4,368     $ 629   Employee bonuses     1,665       35   Compensated absences     1,746       1,849   Payroll     940       769   Property and sales taxes     974       991   Legal and professional fees     616       346   Medical claims     641       590   Agent commissions     211       142   Product warranty     658       524   Income taxes     117       56   Other     946       685       $ 12,882     $ 6,616     The Company is self-insured for certain losses related to employee medical claims. The Company has purchased stop-loss coverage for individual claims in excess of $ 175,000 per claimant per year in order to limit its exposure to any significant levels of employee medical claims. Self-insured losses are accrued based on the Company’s historical experience and on estimates of aggregate liability for uninsured claims incurred using certain actuarial assumptions followed in the insurance industry.     13. Employee Benefits   The Company’s United States employees are participants in the Geospace Technologies Corporation’s Employee’s 401 (k) Retirement Plan (the “Plan”), which covers substantially all eligible employees in the United States. The Plan is a qualified salary reduction plan in which all eligible participants may elect to have a percentage of their compensation contributed to the Plan, subject to certain guidelines issued by the Internal Revenue Service. The Company’s share of discretionary matching contributions was $ 1.3 million and $ 1.0 million in fiscal years 2023 and 2022 , respectively.   F- 24 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.     14. Stockholders ’ Equity   In February 2014, the board of directors and stockholders approved the 2014 Long Term Incentive Plan, as amended (the “2014 Plan”). Under the 2014 Plan, an aggregate of 3,000,000 shares of common stock may be issued. The Company is authorized to issue nonqualified and incentive stock options to purchase common stock, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) to key employees, directors and consultants under the 2014 Plan. Options have a term not to exceed ten years, with the exception of incentive stock options granted to employees owning ten percent or more of the outstanding shares of common stock, which have a term not to exceed five years. The exercise price of any option may not be less than the fair market value of the common stock on the date of grant. In the case of incentive stock options granted to an employee owning ten percent or more of the outstanding shares of common stock, the exercise price of such option may not be less than 110 % of the fair market value of the common stock on the date of grant. An RSU represents a contingent right to receive one share of the common stock upon vesting. Under the 2014 Plan, the Company may issue RSAs and RSUs to employees for no payment by the employee or for a payment below the fair market value on the date of grant. The RSAs and RSUs are subject to certain restrictions described in the 2014 Plan.   At September 30, 2023 , an aggregate of 1,137,509 shares of common stock were available for issuance under the 2014 Plan.   The following table summarizes the combined activity under the equity incentive plans for the indicated periods:       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   Granted     —       —       —       —       200,350       8.49   Exercised     —       —       —       —       —       —   Forfeited     ( 38,800 )     21.42       —       —       ( 51,603 )     9.17   Vested     —       —       ( 41,097 )     14.67       ( 124,262 )     11.20   Outstanding at September 30, 2022     —       —       1,000     $ 14.59       323,859     $ 9.54   Granted     —       —       —       —       228,250       4.70   Exercised     —       —       —       —       —       —   Forfeited     —       —       —       —       ( 7,312 )     8.44   Vested     —       —       ( 1,000 )     14.59       ( 167,248 )     9.94   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. The RSUs issued include both time-based and performance-based vesting provisions. The weighted average grant date fair value of each RSU issued for fiscal years 2023 and 2022 was $ 4.70 and $ 8.49 per unit, respectively. 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.   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.     F- 25 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)       15. Income Taxes:   Components of income (loss) before income taxes were as follows (in thousands):       YEAR ENDED SEPTEMBER 30,       2023     2022   United States   $ 11,190     $ ( 19,425 ) Foreign     1,379       ( 3,258 )     $ 12,569     $ ( 22,683 )   The provision for income taxes consisted of the following (in thousands):       YEAR ENDED SEPTEMBER 30,       2023     2022   Current                 Federal   $ 63     $ ( 12 ) Foreign     244       202   State     59       —         366       190   Deferred:                 Federal     —       —   Foreign     ( 3 )     ( 17 )       ( 3 )     ( 17 )     $ 363     $ 173     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     YEAR ENDED SEPTEMBER 30, 2022       Amount     Percent     Amount     Percent   Expense (benefit) for U.S. federal income tax at statutory rate   $ 2,639       21.0 %   $ ( 4,763 )     21.0 % Research and experimentation tax credit     ( 480 )     ( 3.9 )%     6       ( 0.1 )% State income taxes, net of federal income tax benefit     302       2.5 %     ( 265 )     1.2 % Nondeductible goodwill     —       —       911       ( 4.0 )% Change in valuation allowance     ( 2,459 )     ( 19.6 )%     3,768       ( 16.6 )% Change in fair value of contingent consideration     —       —       ( 278 )     1.2 % Disallowed stock compensation     171       1.4 %     217       ( 1.0 )% Impact due to foreign currency translation     51       0.4 %     460       ( 2.0 )% Other items     139       1.1 %     117       ( 0.5 )% Total tax expense and effective tax rate   $ 363       2.9 %   $ 173       ( 0.8 )%   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.   F- 26 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):       YEAR ENDED SEPTEMBER 30,       2023     2022   Deferred income tax assets:                 Inventories   $ 8,269     $ 8,513   Loss and tax credit carry-forwards     29,581       34,643   Accrued compensation     870       609   R&D expenditure capitalization     1,538       —   Property and equipment     504       578   Other reserves     590       359   Subtotal deferred income tax assets     41,352       44,702   Valuation allowance     ( 38,917 )     ( 41,376 ) Net deferred income tax assets     2,435       3,326                     Deferred income tax liabilities:                 Intangible assets     ( 292 )     ( 356 ) Property and equipment     ( 2,153 )     ( 2,874 ) Other     ( 6 )     ( 109 ) Total deferred income tax liabilities     ( 2,451 )     ( 3,339 ) Net deferred income tax liabilities   $ ( 16 )   $ ( 13 )   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 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 $ 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. GAAP. On  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. On  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. On  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.     F- 27 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)       16. 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,       2023     2022   Net income (loss)   $ 12,206     $ ( 22,856 ) Less: Income allocable to unvested restricted stock     —       —   Income (loss) attributable to common shareholders for diluted earnings (loss) per share   $ 12,206     $ ( 22,856 ) Weighted average number of common share equivalents:                 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:                 Basic   $ 0.93     $ ( 1.76 ) Diluted   $ 0.92     $ ( 1.76 )   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.       F-28 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)       17. Commitments and Contingencies   Contingent Compensation Costs   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. 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.  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   The Company is involved in various pending legal actions in the ordinary course of its business. Management is unable to predict the ultimate outcome of these actions, because of the inherent uncertainty of such actions. However, management believes that the most probable, ultimate resolution of current pending matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.     18. Supplemental Cash Flow Information   Supplemental cash flow information is as follows (in thousands):       YEAR ENDED SEPTEMBER 30,       2023     2022   Cash paid for income taxes   $ 151     $ 169   Non-cash investing and financing activities:                 Inventory transferred to rental equipment     587       1,148   Inventory transferred to property, plant and equipment     —       172   Issuance of notes receivables related to sale of used rental equipment     —       11,745     F- 29 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)         19 . Segment and Geographic Information   The Company reports and evaluates financial information for three operating business segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets. The Oil and Gas Markets segment’s products include wireless seismic data acquisition systems, reservoir characterization products and services, and traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, cables, marine streamer retrieval and steering devices and various other seismic products. The Adjacent Markets segment’s products include imaging equipment, water meter products, remote shut-off valves and IoT platform, as well as seismic sensors used for vibration monitoring and geotechnical applications such as mine safety applications and earthquake detection. The Emerging Markets segment designs and markets seismic products targeted at the border and perimeter security markets.   The following tables summarize the Company’s segment information:       YEAR ENDED SEPTEMBER 30,       2023     2022   Revenue:                 Oil and Gas Markets   $ 73,993     $ 49,141   Adjacent Markets     49,039       39,171   Emerging Markets     1,234       711   Corporate     243       230   Total     124,509       89,253   Income (loss) from operations:                 Oil and Gas Markets     15,759       ( 7,539 ) Adjacent Markets     11,490       6,021   Emerging Markets     ( 4,003 )     ( 9,128 ) Corporate     ( 11,918 )     ( 12,490 ) Total     11,328       ( 23,136 ) Depreciation and amortization expenses:                 Oil and Gas Markets     14,428       16,947   Adjacent Markets     703       743   Emerging Markets     565       1,068   Corporate     542       802   Total     16,238       19,560   Impairment, inventory obsolescence and stock-based compensation expenses:                 Oil and Gas Markets     2,329       3,612   Adjacent Markets     656       932   Emerging Markets     52       4,423   Corporate     566       727   Total     3,603       9,694   Interest income:                 Oil and Gas Markets     352       850   Adjacent Markets     —       —   Emerging Markets     —       —   Corporate     187       126   Total     539       976   Interest expense:                 Oil and Gas Markets     105       65   Adjacent Markets     —       —   Emerging Markets     —       —   Corporate     29       —   Total     134       65       The Company’s manufacturing operations for its business segments are combined. Therefore, the Company does not segregate and report separate balance sheet accounts for each of its segments and, therefore, no such segment balance sheet information is presented in the table above.   “Corporate” loss from operations primarily consists of the Company’s Houston headquarters general and administrative expenses.   F- 30 Geospace Technologies Corporation and Subsidiaries Notes to Consolidated Financial Statements—(Continued)     The Company generates revenue from product sales, product rentals and services from its subsidiaries located in the United States, Canada, Colombia, the Russian Federation and the United Kingdom. Revenue generated by the Company’s subsidiaries is as follows (in thousands):       YEAR ENDED SEPTEMBER 30,       2023     2022   United States   $ 118,017     $ 82,332   Canada     1,924       1,615   Russian Federation     1,850       1,922   United Kingdom     2,718       3,384       $ 124,509     $ 89,253     A summary of revenue by geographic area is as follows (in thousands):       YEAR ENDED SEPTEMBER 30,       2023     2022   Asia (including Russian Federation)   $ 26,685     $ 13,823   Canada     2,703       1,225   Europe     20,826       28,381   South America     8,166       7,547   United States     62,611       35,171   Other     3,518       3,106       $ 124,509     $ 89,253     Revenue is attributed to countries based on the ultimate destination of the product sold, if known. If the ultimate destination is not known, revenue is attributed to countries based on the geographic location of the initial shipment.   Long-lived assets were as follows (in thousands):       AS OF SEPTEMBER 30,       2023     2022   United States   $ 75,321     $ 71,742   Canada     575       1,459   Colombia     442       449   Russian Federation     543       1,010   United Kingdom     383       422   China     —       13       $ 77,264     $ 75,095     F- 31         Note 20. 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.     Schedule II   Geospace Technologies Corporation and Subsidiaries Valuation and Qualifying Accounts (In thousands)       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 trade accounts and notes receivable   $ 591     $ ( 138 )   $ —     $ ( 328 )   $ 125   Year ended September 30, 2022                                         Allowance for doubtful accounts on trade accounts and notes receivable   $ 428     $ 292     $ —     $ ( 129 )   $ 591         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     F-32