What changed in this filing

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Item 1. Financial Statements

2025-02-06 compared with 2024-08-09 · 339 added, 443 removed, 399 unchanged (66% of the section changed)

3 unchanged sentences

(in thousands except share amounts)

June 30, 2024

December 31, 2024

September 30, 2024

4 unchanged sentences

20,655 30,227

Trade accounts and note receivable, net

Trade accounts and financing receivables, net

40,645 21,868

1 unchanged sentence

27,921 26,222

Assets held for sale

Prepaid expenses and other current assets

7 unchanged sentences

23,358 21,083

Non-current trade accounts receivable

Non-current trade accounts and financing receivables

Operating right-of-use assets

37 unchanged sentences

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

December 31, 2024

December 31, 2023

$ 32,645 $ 43,714

Total revenue

37,223 50,032

Cost of revenue:

14,269 23,842

Total cost of revenue

17,074 27,796

20,149 22,236

Operating expenses:

3 unchanged sentences

Total operating expenses

Gain on disposal of property

Income (loss) from operations

Income from operations

Other income (expense):

Interest expense

( 44 ) ( 56 )

Interest income

Foreign currency transaction gains (losses), net

Total other income, net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Income (loss) per common share:

( 14 ) ( 163 )

( 33 ) ( 74 )

Total other income (loss), net

Income before income taxes

Income tax expense

$ 8,376 $ 12,679

Income per common share:

$ 0.66 $ 0.96

$ 0.65 $ 0.94

Weighted average common shares outstanding:

12,753,378 13,251,360

12,877,387 13,460,516

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

GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Net income (loss)

December 31, 2024

December 31, 2023

$ 8,376 $ 12,679

Other comprehensive income (loss):

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

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

Foreign currency translation adjustments

Total other comprehensive income (loss)

Total comprehensive income (loss)

Total comprehensive income

$ 7,934 $ 13,185

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

1 unchanged sentence

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

FOR THE nine months ended June 30, 2024 and 2023

FOR THE three months ended December 31, 2024 and 2023

(in thousands, except share amounts)

1 unchanged sentence

Balance at October 1, 2024

12,709,381 $ 142 $ 97,342 $ 55,282 $ ( 4,257 ) $ ( 13,885 ) $ 134,624

— — — 8,376 — — 8,376

Other comprehensive income

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

Stock-based compensation

Balance at December 31, 2023

Other comprehensive loss

— — — — ( 442 ) — ( 442 )

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

Stock-based compensation

Balance at March 31, 2024

Other comprehensive income

109,180 1 ( 1 ) — — — —

Purchase of treasury stock

( 19,664 ) — — — — ( 197 ) ( 197 )

Stock-based compensation

Balance at June 30, 2024

— — 349 — — — 349

Balance at December 31, 2024

12,798,897 $ 143 $ 97,690 $ 63,658 $ ( 4,699 ) $ ( 14,082 ) $ 142,710

Balance at October 1, 2023

13,188,489 $ 140 $ 96,040 $ 61,860 $ ( 17,824 ) $ ( 7,500 ) $ 132,716

— — — 12,679 — — 12,679

Other comprehensive income

— — — — 506 — 506

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

128,601 2 ( 2 ) — — — —

Stock-based compensation

— — 406 — — — 406

Balance at December 31, 2023

Other comprehensive loss

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

Stock-based compensation

Balance at March 31, 2023

Other comprehensive loss

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

Stock-based compensation

Balance at June 30, 2023

13,317,090 $ 142 $ 96,444 $ 74,539 $ ( 17,318 ) $ ( 7,500 ) $ 146,307

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

2 unchanged sentences

(in thousands)

Nine Months Ended

June 30, 2024

June 30, 2023

Three Months Ended

December 31, 2024

December 31, 2023

Cash flows from operating activities:

$ 8,376 $ 12,679

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

3 unchanged sentences

Amortization of intangible assets

Accretion of discounts on short-term investments

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

( 104 ) ( 115 )

Stock-based compensation expense

Recovery of credit losses

Provision for recovery of credit losses

Inventory obsolescence expense

Gross profit from sale of rental equipment

Gain on disposal of property

Loss (gain) on disposal of equipment

Realized foreign currency translation loss from dissolution of foreign subsidiary

( 15,978 ) ( 19,350 )

Gain on disposal of property, plant and equipment

Realized gain on investments

Effects of changes in operating assets and liabilities:

Trade accounts and note receivable

Trade accounts and financing receivables

( 3,622 ) 8,001

( 2,988 ) ( 4,059 )

Accounts payable trade

( 690 ) ( 478 )

Other liabilities

Net cash provided by (used in) operating activities

( 11,509 ) 2,652

Cash flows from investing activities:

Purchase of property, plant and equipment

( 3,199 ) ( 779 )

Proceeds from the sale of property, plant and equipment

Investment in rental equipment

( 373 ) ( 2,558 )

Proceeds from the sale of rental equipment

Purchases of short-term investments

Proceeds from the sale of short-term investments

Net cash provided by investing activities

Payments received on note receivable related to sale of subsidiary

Net cash provided by (used in) investing activities

6,287 ( 2,740 )

Cash flows from financing activities:

Purchase of treasury stock

Payments on contingent consideration

Net cash used in financing activities

1 unchanged sentence

Increase (decrease) in cash and cash equivalents

( 5,485 ) 104

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$ 1,410 $ 18,907

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for income taxes

Accounts and financing receivables related to sale of rental equipment

16,112 30,048

Inventory transferred to rental equipment

5 unchanged sentences

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2024 , was derived from the Company’s audited consolidated financial statements at that date.

The consolidated balance sheet at June 30, 2024 and the consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the three and nine months ended June 30, 2024 and 2023 were prepared by the Company without audit.

The consolidated balance sheet at December 31, 2024 and the consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the three months ended December 31, 2024 and 2023 were prepared by the Company without audit.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made.

All significant intercompany balances and transactions have been eliminated.

The results of operations for the three and nine months ended June 30, 2024 are not necessarily indicative of the operating results for a full year or of future operations.

The results of operations for the three months ended December 31, 2024 , are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America ("U.S.

10 unchanged sentences

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 June 30, 2024 , cash and cash equivalents included $ 3.4 million held by the Company’s foreign subsidiaries and branch offices, including $ 2.0 million held by its subsidiary in the Russian Federation.

In response to sanctions imposed by the U.S.

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

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.

At December 31, 2024 and September 30, 2024, cash and cash equivalents included $ 0.9 million and $ 1.1 million, respectively, held by the Company’s foreign subsidiaries and branch offices.

Concentration of Credit Risk

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 immediately for expected credit losses.

The Company determines the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and financial conditions of its customers.

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

The Company had trade accounts and financing receivables from one customer of $ 22.5 million at December 31, 2024 .

During the three months ended December 31, 2024 and 2023 , the Company recognized revenue from this customer of $ 18.7 million and $ 31.7 million, respectively.

Impairment of Long-lived Assets

2 unchanged sentences

If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value.

During the quarter ended June 30, 2024 , no events or changes in circumstances were identified indicating the carrying value of any of the Company's asset groups may not be recoverable.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in generally accepted accounting principles.

The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments.

For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

The Company adopted this standard on October 1, 2023.

The adoption of this standard did not have any material impact on its consolidated financial statements.

During the quarter ended December 31, 2024 , no events or changes in circumstances were identified indicating the carrying value of any of the Company's asset groups may not be recoverable.

Recently Issued Accounting Pronouncements

9 unchanged sentences

The adoption of this guidance is not expected to have any material impact on its consolidation financial statements.

In November 2024, the FASB, as further amended in January 2025, issued guidance requiring enhanced disclosures in financial statements by requiring detailed disclosures of specific expenses like inventory purchases, employee compensation, depreciation, and intangible asset amortization.

The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the provisions of this guidance and the impact on its consolidated financial statements.

All other new accounting pronouncements that have been issued, but not yet effective, are currently being evaluated and at this time are not expected to have a material impact on the Company's financial position or results of operations.

21 unchanged sentences

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.

At June 30, 2024 , the Company had no deferred contract liabilities and no deferred contract cost.

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

During the three months ended June 30, 2024, revenue of $ 20,000 was recognized from deferred contract liabilities.

During the nine months ended June 30, 2024, revenue $ 0.7 million was recognized from deferred contract liabilities.

During the three and nine months ended June 30, 2024 , no cost of revenue was recognized from deferred contract costs.

During the three and nine months ended June 30, 2023 , no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs.

At June 30, 2024 , all contracts had an original expected duration of one year or less.

For the three months ended June 30, 2024 and 2023, revenue recognized from contracts with customers satisfied over-time was $ 0.3 million and $ 0.1 million, respectively.

For the nine months ended June 30, 2024 and 2023, revenue recognized from contracts with customers satisfied over-time was $ 1.2 million and $ 0.2 million, respectively.

At December 31, 2024 and September 30, 2024 , the Company had no deferred contract liabilities and no deferred contract costs.

During the three months ended December 31, 2024 , no revenue was recognized from deferred contract liabilities and no cost of revenue was recognized from deferred contract costs.

During the three months ended December 31, 2023 , revenue of $ 45,000 was recognized from deferred contract liabilities and no cost of revenue was recorded from deferred contract costs.

At December 31, 2024 , all contracts had an original expected duration of one year or less.

At December 31, 2024 and October 1 2024, the Company had accounts receivable from contracts of $ 12.0 million and $ 13.4 million, respectively.

At December 31, 2023 and October 1, 2023, the Company had accounts receivable from contracts of $ 37.6 million and $ 10.9 million, respectively.

For the three months ended December 31, 2024 , no revenue recognized from contracts with customers satisfied over-time.

For the three months ended December 31, 2023 , revenue from contracts with customers satisfied over-time was $ 45,000 , which was from the Company's Intelligent Industrial segment.

All other revenue from contracts with customers was recognized at a point-in time.

Revenue satisfied over-time for all periods presented was from the Company's Emerging Markets operating segment.

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

1 unchanged sentence

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Oil and Gas Markets

Traditional exploration product revenue

$ 2,005 $ 3,363 $ 7,239 $ 9,414

Wireless exploration product revenue

1,460 907 36,008 8,077

Reservoir product revenue

189 523 303 810

Total revenue

3,654 4,793 43,550 18,301

Adjacent Markets

Industrial product revenue

13,026 11,678 28,492 29,250

Imaging product revenue

2,903 3,147 9,405 9,032

Total revenue

December 31, 2024

December 31, 2023

$ 7,288 $ 4,234

Emerging Markets

Energy Solutions

19,826 33,706

Intelligent Industrial

$ 32,645 $ 43,714

See Note 12 for more information on the Company’s operating segments.

See Note 12 for more information on the Company’s operating business segments.

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

1 unchanged sentence

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

December 31, 2024

December 31, 2023

Asia (including Russian Federation)

$ 18,057 $ 32,216

178 85 2,406 1,179

1,137 1,856 4,022 4,782

United States

$ 32,645 $ 43,714

1,042 1,018 2,003 2,200

$ 20,223 $ 19,727 $ 83,434 $ 56,976

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

2 unchanged sentences

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.

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

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

As of June 30, 2024

As of December 31, 2024

Amortized Cost

21 unchanged sentences

$ 30,170 $ 57 $ — $ 30,227

The Company had no securities in a material unrealized loss position at June 30, 2024 and September 30, 2023 and does not believe the unrealized losses associated with these securities represent credit losses based on the evaluation of evidence, which includes an assessment of whether it is more likely than not it will be required to sell or intend to sell the investment before recovery of the investments amortized cost basis.

No gains or losses were realized during the three and nine months ended June 30, 2024 and 2023 from the sale of short-term investments.

The Company had no securities in a material unrealized loss position at December 31, 2024 and September 30, 2024 and does not believe the unrealized losses associated with these securities represent credit losses based on the evaluation of evidence, which includes an assessment of whether it is more likely than not it will be required to sell or intend to sell the investment before recovery of the investments amortized cost basis.

A gain of $ 10,000 was realized during the three months ended December 31, 2024 from the sale of short-term investments.

No gains or losses were recognized during the three months ended December 31, 2023 from the sale of short-term investments.

Fair Value of Financial Instruments

The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts and notes receivable and accounts payable.

Due to the short-term maturities of cash and cash equivalents, trade accounts and notes receivable and accounts payable, the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates.

The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts and financing receivables and accounts payable.

Due to the short-term maturities of cash and cash equivalents, trade accounts receivable and accounts payable, the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates.

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

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

As of June 30, 2024

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

As of December 31, 2024

Short-term investments:

Corporate bonds

$ — $ 16,906 $ — $ 16,906

treasury securities and securities of U.S.

government-sponsored agency

— 3,749 — 3,749

$ — $ 20,655 $ — $ 20,655

As of September 30, 2024

1 unchanged sentence

Corporate bonds

$ — $ 21,849 $ — $ 21,849

treasury securities and securities of U.S.

government-sponsored agency

Trade Accounts and Notes Receivable

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

June 30, 2024

— 8,378 — 8,378

$ — $ 30,227 $ — $ 30,227

Nonrecurring:

Note receivable on sale of subsidiary

$ — $ — $ 2,600 $ 2,600

Emerging Markets asset group intangible assets

$ — $ — $ 2,600 $ 2,600

Assets and liabilities Measured on a Nonrecurring basis

In August 2024, the Company performed a fair value analysis on its $ 3.5 million promissory note obtained in connection with its subsidiary sale as of the transaction date.

The measurements utilized to determine the implied fair value of the note receivable obtained significant unobservable inputs (Level 3 ).

The derivation of discount rate utilized in the analysis was based on comparable market yields.

Based on the analysis, the Company recorded a $ 0.9 million discount to fair value on this note receivable.

Also see Note 5 for more information.

At September 30, 2024, the Company performed a recoverability assessment on its long-lived assets of it Emerging Markets asset group in which its carrying value was compared to the estimated undiscounted cash flows over the remaining useful life of the asset group's primarily asset, its developed technology.

Accordingly, a fair value analysis was performed.

Based on the assessment, the Company determined the fair value of the asset was less than its carrying value and recorded an impairment charge of $ 2.8 million on this asset group, which impaired its intangible assets in their entirety.

The Company determined the fair value of this asset group to be approximately zero.

The measurements utilized to determine the implied fair value represented significant unobservable inputs (Level 3 ).

Trade Accounts and Financing Receivables

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

December 31, 2024

September 30, 2024

3 unchanged sentences

19,506 16,147

17,674 20,157

Less current portion

1 unchanged sentence

Non-current trade accounts receivable

Trade accounts receivable at June 30, 2024 , included $ 1.5 million classified as non-current which is due in December 2025.

Credit quality indicators used for the non-current portion of this receivable consisted of historical collection experience, internal credit risk grades and collateral.

2 unchanged sentences

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

December 31, 2024

December 31, 2023

Allowance for credit losses:

Beginning of period

67 706 125 591

Provision for credit losses

( 38 ) ( 194 ) ( 144 ) ( 441 )

— ( 321 ) ( 7 ) ( 327 )

Currency translation

End of period

$ 35 $ 208 $ 35 $ 208

The Company had one note receivable from a customer at September 30, 2023, with a balance of $ 1.2 million, which was paid in January 2024.

In November 2024, the Company entered into a sales-type lease with a customer on wireless seismic equipment from its rental fleet.

The lease matures in October 2025.

Future minimum payments required under the lease at December 31, 2024, were $ 16.7 including $ 0.6 million of unearned income.

Interest income of $ 0.1 million was recognized for the three months ended December 31, 2024 .

The ownership of the equipment will transfer to the customer at the end of the lease term.

In August 2024, the Company entered into a $ 9.4 million promissory note with a customer related to a product sale.

The note bears interest at 9.5 % per annum.

Pursuant to an amendment in the first quarter of fiscal year 2025, the maturity of the note was extended from December 2025 to June 2026.

The note bears interest at 9.5 % per annum.

The note is collateralized by the product sold.

In August 2024, the Company entered into a $ 3.5 million promissory note with the buyer of its Russian subsidiary.

The note bears interest at 5 % per annum and is for a 10 -year term.

Principal and interest payments of $ 37,000 are due monthly.

Based on a fair value analysis performed at the date of sale, a discount to fair value of $ 0.9 million was placed on the note.

Interest income on the amortization of the discount is being recognized under the effective interest method.

Credit quality indicators used for the financing receivables consisted of historical collection experience, internal credit risk grades and collateral.

The Company determined the allowance for credit losses through a review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its customers.

Inventories consist of the following (in thousands):

June 30, 2024

December 31, 2024

September 30, 2024

11 unchanged sentences

$ 18,742 $ 18,031

Inventory obsolescence expense for each of the three and nine months ended June 30, 2024 , was $ 0.1 million.

Inventory obsolescence expense for the three and nine months ended June 30, 2023 , was $ 0.3 million and $ 2.1 million, respectively.

Raw materials include semi-finished goods and component parts that totaled approximately $ 8.3 million and $ 10.6 million at June 30, 2024 and September 30, 2023 , respectively.

Inventory obsolescence expense for the three months ended December 31, 2024 and 2023 , was $ 506,000 and $ 20,000 , respectively.

Raw materials include semi-finished goods and component parts that totaled approximately $ 10.6 million and $ 8.6 million at December 31, 2024 and September 30, 2024 , respectively.

Rental 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, which the Company acts as lessor, are classified as operating leases.

All of the Company’s current leasing arrangements for which the Company acts as lessor, are classified as operating leases, except for one sales-type lease.

The majority of the Company’s rental revenue is generated from its marine-based wireless seismic data acquisition systems.

2 unchanged sentences

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 and limits future rental revenue recognition to cash received.

As of June 30, 2024 , the Company’s trade accounts receivable included lease receivables of $ 2.9 million.

Rental revenue related to leased equipment for the three and nine months ended June 30, 2024 , was $ 5.6 million and $ 16.5 million, respectively.

Rental revenue related to leased equipment for the three and nine months ended June 30, 2023 was $ 12.9 million and $ 38.0 million, respectively.

Future minimum lease obligations due from the Company’s leasing customers on operating leases executed as of June 30, 2024 , were $ 3.6 million, all of which is expected to be due within the next 12 months.

As of December 31, 2024 , the Company’s trade accounts receivable included lease receivables of $ 4.7 million.

Rental revenue related to leased equipment for the three months ended December 31, 2024 and 2023 was $ 4.5 million and $ 6.2 million, respectively.

Future minimum lease obligations due from the Company’s leasing customers on operating leases executed as of December 31, 2024 , were $ 0.8 million, all of which is expected to be due within the next 12 months.

Rental equipment consisted of the following (in thousands):

June 30, 2024

December 31, 2024

September 30, 2024

9 unchanged sentences

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.

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 ( 7.75 % at December 31, 2024 ).

The Company is required to make monthly interest payments on borrowed funds.

3 unchanged sentences

The Agreement expires in July 2025.

At June 30, 2024 , the Company's borrowing availability under the Agreement was $ 14.9 million after consideration of a $ 0.1 million outstanding letter of credit.

At June 30, 2024 , the Company was in compliance with all covenants under the Agreement.

The Company had no borrowings outstanding under the Agreement at June 30, 2024 , and September 30, 2023 .

At December 31, 2024 , the Company's borrowing availability under the Agreement was $ 12.1 million after consideration of a $ 0.1 million outstanding letter of credit.

At December 31, 2024 , the Company was in compliance with all covenants under the Agreement.

The Company had no borrowings outstanding under the Agreement at December 31, 2024 , and September 30, 2024 .

Stock-Based Compensation

During the nine months ended June 30, 2024 , the Company issued 233,200 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as amended.

During the three months ended December 31, 2024 , the Company issued 143,500 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as amended.

The RSUs issued include both time-based and performance-based vesting provisions.

3 unchanged sentences

Each RSU represents a contingent right to receive one share of the Company’s common stock upon vesting.

As of June 30, 2024 , there were 412,770 RSUs outstanding.

As of June 30, 2024 , the Company had unrecognized compensation expense of $ 3.0 million relating to RSUs that is expected to be recognized over the next four years.

Earnings (Loss) Per Common Share

The following table summarizes the calculation of net earnings (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 data):

As of December 31, 2024 , there were 359,215 RSUs outstanding.

For the three months ended December 31, 2024 and 2023 , stock-based compensation expense was $ 0.3 million and $ 0.4 million, respectively.

As of December 31, 2024 , the Company had unrecognized compensation expense of $ 3.4 million relating to RSUs that is expected to be recognized over the next four years.

Earnings Per Common Share

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

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Net income (loss)

$ ( 2,070 ) $ 3,228 $ 6,282 $ 7,768

Income allocable to unvested restricted stock

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

December 31, 2024

December 31, 2023

$ 8,376 $ 12,679

Weighted average number of common share equivalents:

Common shares used in basic earnings (loss) per share

Common shares used in basic earnings per share

12,753,378 13,251,360

1 unchanged sentence

124,009 209,156

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

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

12,877,387 13,460,516

Earnings (loss) per share:

Earnings per share:

$ 0.66 $ 0.96

$ 0.65 $ 0.94

For the calculation of diluted earnings (loss) per share for the three months ended June 30, 2024 and 2023, there were 412,770 and 230,322 non-vested RSUs, respectively, excluded from the calculation of weighted average shares outstanding since their impact on diluted earnings (loss) per share were antidilutive.

For the calculation of diluted earnings per share for the nine months ended June 30, 2024 and 2023 , there were 251,500 and 364,188 non-vested RSUs, respectively, excluded from the calculation of weighted average shares outstanding since their impact on diluted earnings per share were antidilutive.

For the calculation of diluted earnings per share for the three months ended December 31, 2024 and 2023 , there were 235,206 and 212,217 non-vested RSUs, respectively, excluded from the calculation of weighted average shares outstanding since their impact on diluted earnings per share were antidilutive.

Commitments and Contingencies

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Due to the continued employment requirement, no liability has been recorded for the estimated fair value of 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.

Earn-outs achieved are recorded as compensation expense when incurred.

Legal Proceedings

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Segment 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 Internet of Things (IoT) platform, as well as and 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.

Effective October 1, 2024, the Company changed the composition of its three operating business segments and changed its methodology for allocating manufacturing costs including overhead and other costs of revenue to the segments.

The Company's business segments are now comprised of:

Smart Water, Energy Solutions and Intelligent Industrial.

The Smart Water segment emphasizes the Company’s targeted approach in the water management industry.

This business segment contains the Hydroconn® smart water connectivity offerings and the Company's Aquana products.

The Energy Solutions segment encompass' the Company’s traditional business in oil and gas land and marine exploration products, reservoir monitoring solutions, and will additionally incorporate emerging energy solutions and microseismic monitoring.

This segment will include energy-related business from Quantum’s SADAR® products and associated analytics.

The Intelligent Industrial segment includes seismic sensor products used for vibration monitoring geotechnical applications such as mine safety applications and earthquake detection, designs seismic products targeted at the border and perimeter security markets, imaging products, as well as providing contract manufacturing services.

The change methodology for allocating manufacturing costs affected each business segment's operating income (loss) but had no effect on consolidated operating income.

The following table summarizes the Company’s segment information (in thousands).

Segment information for the three months ended December 31, 2024 and 2023 , has been recast for comparability.

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Oil and Gas Markets

$ 9,174 $ 17,672 $ 59,930 $ 56,239

Adjacent Markets

15,970 14,862 38,020 38,392

Emerging Markets

December 31, 2024

December 31, 2023

$ 7,288 $ 4,234

Energy Solutions

24,282 39,911

Intelligent Industrial

$ 37,223 $ 50,032

Income (loss) from operations:

Oil and Gas Markets

$ 370 $ 1,095

Adjacent Markets

Energy Solutions

13,282 15,068

Emerging Markets

Intelligent Industrial

( 940 ) ( 191 )

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Therefore, the Company does not segregate and report separate balance sheet accounts for each of its segments and therefore, no total asset information is presented in the table above.

Consolidated income tax expense (benefit) for the three and nine months ended June 30, 2024 was $( 2,000 ) and $ 0.1 million, respectively.

Consolidated income tax expense for the three and nine months ended June 30, 2023 was $ 0.2 million and $ 0.3 million, respectively.

Consolidated income tax expense for the each of the three months ended December 31, 2024 and 2023, was $ 0.1 million.

The primary difference between the Company's effective tax rate and the statutory rate is adjustments to the valuation allowance against deferred tax assets.

Risks and Uncertainties

Concentration of Credit Risk

During the three and nine months ended June 30, 2024 , the Company recognized revenue from one customer of $ 1.3 million and $ 35.0 million, respectively.

During the three and nine months ended June 30, 2023 , revenue recognized from this customer was $ 1.5 million and $ 4.4 million, respectively.

As of June 30, 2024 , the Company had trade accounts receivable from this customer of $ 4.5 million.

COVID- 19 Pandemic

The ongoing COVID- 19 pandemic has negatively impacted worldwide economic activity and continues to create challenges in the Company’s markets.

The COVID- 19 pandemic and the related mitigation measures have disrupted the Company’s supply chain, resulting in longer lead times in materials available from suppliers and extended the shipping time for these materials to reach the Company’s facilities.

The occurrence or a resurgence of global or regional health events such as the COVID–19 pandemic, and the related government responses, could result in a material adverse effect on the Company's business, financial condition, results of operations and liquidity.

As such, we continue to closely monitor COVID- 19 and will continue to reassess our strategy and operational structure on a regular, ongoing basis.

Oil Commodity Price Levels

Demand for many of the Company’s products and the profitability of its operations depend primarily on the level of worldwide oil and gas exploration activity.

Prevailing oil and gas prices, with an emphasis on crude oil prices, and market expectations regarding potential changes in such prices significantly affect the level of worldwide oil and gas exploration activity.

During periods of improved energy commodity prices, the capital spending budgets of oil and natural gas operators tend to expand, which results in increased demand for our customers services leading to increased demand in the Company’s products.

Conversely, in periods when these energy commodity prices deteriorate, capital spending budgets of oil and natural gas operators tend to contract causing demand for the Company’s products to weaken.

Historically, the markets for oil and gas have been volatile and are subject to wide fluctuations in response to changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors that are beyond its control.

These factors include the level of consumer demand, regional and international economic conditions, weather conditions, domestic and foreign governmental regulations (including those related to climate change), price and availability of alternative fuels, political conditions, the war between Russia and Ukraine, instability and hostilities in the Middle East and other significant oil-producing regions, increases and decreases in the supply of oil and gas, the effect of worldwide energy conservation measures and the ability of the Organization of Petroleum Exporting Countries ("OPEC') to set and maintain production levels and prices of foreign imports.

Crude oil prices have stabilized over the past two years, which may result in higher cash flows for exploration and production companies.

Any material changes in oil and gas prices or other market trends, like slowing growth of the global economy, could adversely impact seismic exploration activity and would likely affect the demand for the Company's products and could materially and adversely affect its results of operations and liquidity.

Generally, imbalances in the supply and demand for oil and gas will affect oil and gas prices and, in such circumstances, demand for the Company’s oil and gas products may be adversely affected when world supplies exceed demand.

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, and Russia and Ukraine continue to engage in active and armed conflict.

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 U.S., Canada, the United Kingdom and 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 these sanctions and exports restrictions, in combination with the withdrawal of numerous private companies from the Russian market, has had, and is likely to continue to have, a negative impact on the Company's business in the region.

During fiscal year 2023, the Company imported $ 3.8 million of products from GTE for resale elsewhere in the world and since then has imported $ 2.5 million of products during the first nine months of fiscal year 2024.

The rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to material 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.

Boycotts, protests, unfavorable regulations, additional governmental sanctions and other actions in the region could also adversely affect the Company's ability to operate profitably.

Delays in obtaining governmental approvals can affect the Company's ability to timely deliver its products pursuant to contractual obligations, which could result in the Company being liable to its customers for damages.

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.

It is possible that increasing sanctions, export controls, restrictions on access to financial institutions, supply and transportation challenges, or other circumstances or considerations could necessitate a reduction, or even discontinuation, of operations by GTE or other business in Russia.

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 June 30, 2024 , was $ 6.0 million, including cash of $ 2.0 million.

In response to sanctions imposed by the U.S.

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

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

In addition to the products the Company imported from GTE, the subsidiary generated $ 1.8 million in revenue from domestic sales in fiscal year 2023, and has generated $ 2.6 million from domestic sales during the first nine months of fiscal year 2024.

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.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information.

Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the timing, adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for permanent reservoir monitoring systems, future demand for OBX rental equipment, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for channels of our GCL system, the fulfillment of customer payment obligations, the impact of and the recovery from the impact of the coronavirus (or COVID-19) pandemic, the impact of the current armed conflict between Russia and Ukraine, our ability to manage changes and the continued health or availability of management personnel, volatility and direction of oil prices, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves.

Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the timing, adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for permanent reservoir monitoring systems, future demand for OBX rental equipment, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for channels of our GCL system, the fulfillment of customer payment obligations, the impact of the current armed conflict between Russia and Ukraine, our ability to manage changes and the continued health or availability of management personnel, volatility and direction of oil prices, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves.

These forward-looking statements reflect our current judgment about future events and trends based on the information currently available to us.

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The factors listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, as well as other cautionary language in such Annual Report and this Quarterly Report on Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

Such examples include, but are not limited to, the failure of the Quantum and OptoSeis® or Aquana technology transactions to yield positive operating results, decreases in commodity price levels, the continued adverse impact of COVID-19 which could reduce demand for our products, the failure of our products to achieve market acceptance (despite substantial investment by us), our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, bad debt write-offs associated with customer accounts, inability to collect on promissory notes, lack of further orders for our OBX rental equipment, failure of our Quantum products to be adopted by the border and security perimeter market or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property.

Such examples include, but are not limited to, the failure of the Quantum and OptoSeis® or Aquana technology transactions to yield positive operating results, decreases in commodity price levels, the failure of our products to achieve market acceptance (despite substantial investment by us), our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, credit losses associated with customer accounts, inability to collect on financing receivables, lack of further orders for our OBX rental equipment, failure of our Quantum products to be adopted by the border and security perimeter market or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property.

The occurrence of the events described in these risk factors and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations.

We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.

Business Overview

Unless otherwise specified, the discussion in this Quarterly Report on Form 10-Q refers to Geospace Technologies Corporation and its subsidiaries.

We principally design and manufacture seismic instruments and equipment.

These seismic products are marketed to the oil and gas industry and used to locate, characterize and monitor hydrocarbon producing reservoirs.

We also market our seismic products to other industries for vibration monitoring, border and perimeter security and various geotechnical applications.

We design and manufacture other products of a non-seismic nature, including water meter products, imaging equipment, remote shutoff water valves and Internet of Things ("IoT") platform and provide contract manufacturing services.

We report and categorize our customers and products into three different segments:

Oil and Gas Markets, Adjacent Markets and Emerging Markets.

In recent years, the revenue contribution from our Adjacent Markets segment has grown to represent nearly half of our total revenue, which is reflective of our diversification strategy.

Demand for our seismic products targeted at customers in our Oil and Gas Markets segment has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.

For more information, please refer to the risks discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Available Information

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Please note that information contained on our website, whether currently posted or posted in the future, is not a part of this Quarterly Report on Form 10-Q or the documents incorporated by reference in this Quarterly Report on Form 10-Q.

Unless otherwise specified, the discussion in this Quarterly Report on Form 10-Q refers to Geospace Technologies Corporation and its subsidiaries.

We design and manufacture sophisticated technology solutions for applications in energy exploration, smart water management as well as industrial and Internet of Things.

Our seismic equipment and services are marketed to the energy exploration industry and used to locate, characterize and monitor hydrocarbon producing reservoirs.

We also market our seismic products to other industries for vibration monitoring, border and perimeter security and various geotechnical applications.

We design and manufacture other products of a non-seismic nature, including water meter connector cables, imaging equipment, remote shutoff water valves and Internet of Things ("IoT") platform.

Additionally, the company provides specialized contract manufacturing services.

In recent years, the revenue contribution from our non-energy related products has grown to represent nearly half of our total revenue.

Our business diversification strategy has centered largely on translating expertise in ruggedized engineering and technology manufacturing into expanded customer markets.

The business segments are now comprised of:

Smart Water, Energy Solutions and Intelligent Industrial.

The change methodology for allocating manufacturing costs affected each segment's operating income (loss) but had no effect on consolidated operating income.

Products and Product Development

Oil and Gas Markets

Our Oil and Gas Markets business segment has historically accounted for the majority of our revenue.

Our Smart Water business segment comprises our market dominant water meter connector cable series known as Hydroconn®, and our Aquana branded remote shut-off water valves and cloud-based IoT Platform.

In municipal and utility applications, our smart water products support the global smart meter connectivity water utility market.

These products provide our customers with highly reliable automated meter-reading and automated meter infrastructure with our robust water-proof connectors.

Our highly-ruggedized outdoor valves include the AquaFlex™ and AquaFlow™ remote shut off valves.

In commercial applications for multi-family and real estate property management, our remote sensing water valves offer asset managers the ability to gather accurate usage information, implement occupancy-based billing and submetering as well as guard against costly leak and burst events.

The AquaSense remote disconnect valve and AquaControl smart water IoT platform allow customers that manage multi-family and commercial properties to monitor their properties for leak and burst events, with real-time notifications, complimented with our remote-shut off to stop water damage.

These products also allow water utilities to control and monitor water use remotely, discontinue or limit service without placing its employees in potential harm or danger.

Energy Solutions

Our Energy Solutions business segment has historically accounted for the majority of our revenue.

Geoscientists use seismic data primarily in connection with the exploration, development and production of oil and gas reserves to map potential and known hydrocarbon bearing formations and the geologic structures that surround them.

This 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.

We believe that our Oil and Gas Markets products are among the most technologically advanced instruments and equipment available for seismic data acquisition.

Traditional Products

An energy source and a data recording system are combined to acquire seismic data.

We provide many of the components of seismic data recording systems, including geophones, hydrophones, multi-component sensors, leader wire, geophone strings, connectors, seismic telemetry cables and other seismic related products.

On land, our customers use geophones, leader wire, cables and connectors to receive and measure seismic reflections resulting from an energy source into data recording units, which store the seismic information for subsequent processing and analysis.

In the marine environment, large ocean-going vessels tow long seismic cables known as “streamers” containing hydrophones that are used to detect pressure changes.

Hydrophones transmit electrical impulses back to the vessel’s data recording unit where the seismic data is stored for subsequent processing and analysis.

Our marine seismic products also help steer streamers while being towed and help recover streamers if they become disconnected from the vessel.

Our seismic sensor, cable and connector products are compatible with most major competitive seismic data acquisition systems currently in use.

Revenue from these products results primarily from seismic contractors purchasing our products as components of new seismic data acquisition systems or to repair and replace components of seismic data acquisition systems already in use.

Wireless Products

We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition system.

Rather than utilizing interconnecting cables as required by most traditional land data acquisition systems, each of our wireless stations operate as an independent data collection system, allowing for virtually unlimited channel configurations.

As a result, our wireless systems require less maintenance, which we believe allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight and ease of operation.

Each wireless station is available in a single-channel or three-channel configuration.

We have also developed a marine-based wireless seismic data acquisition system called the OBX, and recently released Mariner™.

We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition system including our most recent launch of the Pioneer™, an ultralight wireless sensor product.

We believe our wireless sensor systems allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight, ease of operation, and which require less maintenance.

We have also developed a marine-based wireless seismic data acquisition system called the OBX, and recently released Mariner® and Mariner Deep™.

Similar to our land-based wireless systems, these marine wireless systems may be deployed in virtually unlimited channel configurations and do not require interconnecting cables between each station.

We have two versions of OBX nodal stations:

a shallow water version that can be used in depths up to 750 meters and a deepwater version that can be deployed in depths of up to 3,450 meters.

Through June 30, 2024, we have sold 14,000 OBX stations and we currently have 27,000 OBX stations in our rental fleet.

The Mariner™ is a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder.

Mariner™ is the next generation node designed for extended duration seabed ocean bottom seismic data acquisition.

The slim profile nodes, which are part of our shallow water stations, are ideally deployed as deep as 750 meters.

The device continuously records for up to 70 days and offers more rapid recharging times.

Its slim profile creates space savings on seismic survey vessels, allowing contractors to fit up to 25% more nodes into a download/charge container.

Through June 30, 2024, we have sold 7,600 Mariner™ nodes.

Reservoir Products

Seismic surveys repeated over selected time intervals show dynamic changes within a producing oil and gas reservoir, and operators can use these surveys to monitor the effects of oil and gas development and production.

This type of reservoir monitoring requires special purpose or custom designed systems in which portability becomes less critical and functional reliability assumes greater importance.

This reliability factor helps assure successful operations in inaccessible locations over a considerable period of time.

Additionally, reservoirs located in deep water or harsh environments require special instrumentation and new techniques to maximize recovery.

Reservoir monitoring also requires high-bandwidth, high-resolution seismic data for engineering project planning and reservoir management.

Utilizing these reservoir monitoring tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.

We have developed permanently installed high-definition reservoir monitoring systems for land and ocean-bottom applications in producing oil and gas fields.

Our electrical reservoir monitoring systems are currently installed on numerous offshore reservoirs in the North Sea and elsewhere.

Through our acquisition of the OptoSeis® fiber optic sensing technology, we now offer both electrical and fiber optic reservoir monitoring systems.

These high-definition seismic data acquisition systems have a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects.

The scalable architecture of these systems enables custom designed configuration for applications ranging from low-channel engineering and environmental-scale surveys requiring a minimum number of recording channels to high-channel surveys required to efficiently conduct permanent reservoir monitoring (“PRM”).

The modular architecture of these products allows virtually unlimited channel expansion for these systems.

In the spring of 2023, we released a derivative of the OptoSeis® technology for high temperature downhole applications.

Through December 31, 2024, we have sold 35,000 OBX stations and we currently have 13,000 OBX stations in our rental fleet.

The Mariner® is a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder designed for extended duration seabed ocean bottom seismic data acquisition.

Through December 31, 2024, we have sold 7,600 Mariner® nodes.

Additionally, we have developed high-definition permanent reservoir monitoring systems ("PRM") for land and ocean-bottom applications in producing oil and gas fields.

Our primary offering, OptoSeis® fiber optic sensing technology, provides high-definition seismic data acquisition systems with a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects.

We are in the process of responding to a large-scale seabed PRM tender from a major oil and gas producer.

The project is expected to be awarded in the third quarter of fiscal year 2025.

We have also entered into a contract for two Front-End Engineering and Design studies with this producer which is expected to be completed in the fourth quarter of fiscal year 2025.

We have not received any orders for a large-scale seabed PRM system since 2012.

We also have a derivative of the OptoSeis® technology for high temperature downhole applications.

The product known as Insight by OptoSeis offers a passive, all-optical downhole sensor network - no electronics downhole - resulting in years long operational lifetime at 150 °C.

In addition, we produce seismic borehole acquisition systems that employ a fiber optic augmented wireline capable of very high data transmission rates.

We also produce a seismic borehole acquisition systems that employ a fiber optic augmented wireline capable of very high data transmission rates.

These systems are used for several reservoir monitoring applications, including an application pioneered by us allowing operators and service companies to monitor and measure the results of hydraulic fracturing operations.

We believe our reservoir characterization products make seismic acquisition a cost-effective and reliable process for reservoir monitoring.

Our multi-component seismic product developments also include an omni-directional geophone for use in reservoir monitoring, a compact marine three-component or four-component gimbaled sensor and special-purpose connectors, connector arrays and cases.

We have maintained active discussions with multiple potential clients for future PRM systems.

In July 2024, we received requests for bids on Front-End Engineering and Design studies from a major oil and gas producer issued ahead of PRM tenders that may follow.

These are multistage, large-scale opportunities.

We have not received any orders for a large-scale seabed PRM system since November 2012.

Adjacent Markets

Our Adjacent Markets businesses leverage upon existing manufacturing facilities and engineering capabilities utilized by our Oil and Gas Markets businesses.

Many of the seismic products in our Oil and Gas Markets segment, with little or no modification, have direct application to other industries.

Our business diversification strategy has centered largely on translating expertise in ruggedized engineering and manufacturing into expanded customer markets.

To bolster the solid market share we have established in the water utility market for water meter cables, in fiscal year 2021, we acquired the smart water IoT company, Aquana.

Industrial Products

Our industrial products include water meter products, remote shut-off water valves and IoT Platform, contract manufacturing services and seismic sensors used for vibration monitoring.

Our water meter products support the global smart meter connectivity water utility market.

Our products provide our customers with highly reliable automated meter-reading and automated meter infrastructure with our robust water-proof connectors.

Our field splice kits allow for accelerated repairs once identified.

Our remote disconnect values and water IoT platform allows customers that manage multi-family and commercial properties to monitor their properties for leak and burst events, with real-time notifications, complimented with our remote-shut off to stop water damage.

These products also allow water utilities to control and monitor water use remotely, discontinue or limit service without placing its employees in potential harm or danger.

Our robust manufacturing capabilities have allowed us to provide specialized contract manufacturing services for printed circuit board manufacturing, cabling and harnesses, machining, injection molding and electronic system assembly.

Lastly, our SADAR® technology provides passive seismic real-time monitoring in emerging energy applications such as Carbon Capture and Storage (CCS) and geothermal energy.

Our customers include various agencies of the U.S.

government including the Department of Defense, Department of Energy, Department of Homeland Security and other agencies as well as energy companies needing real-time monitoring of seismic data.

Intelligent Industrial

Our Intelligent Industrial segment is comprised of diverse software and hardware solutions leveraging decades of sensor technologies for use by the U.S.

Federal government, specialized contractors and academia.

This segment also includes specialized contract manufacturing in the United States along with solutions for industrial screen printers.

For more than a decade our sensor products have been used for national security and homeland defense applications.

More recently our SADAR® technology, has been used for border and perimeter security surveillance, cross-border tunneling detection and other products targeted at movement monitoring, intrusion detection and situational awareness.

Our seismic sensors provide unique high definition, low frequency sensing that allows for vibration monitoring in industrial machinery, mine safety and earthquake detection.

Imaging Products

Our imaging products include electronic pre-press products that employ direct thermal imaging, direct-to-screen printing systems, and digital inkjet printing technologies targeted at the commercial graphics, industrial graphics, textile and flexographic printing industries.

Emerging Markets

Our Emerging Markets business segment consists entirely of our Quantum business.

Quantum’s product line includes a proprietary detection system called SADAR®, which detects, locates and tracks items of interest in real-time.

Using the SADAR® technology, Quantum designs and sells products used for border and perimeter security surveillance, cross-border tunneling detection and other products targeted at movement monitoring, intrusion detection and situational awareness.

SADAR's technology also provides passive seismic real-time monitoring in emerging energy applications such as Carbon Capture and Storage (CCS) and geothermal energy.

Quantum's customers include various agencies of the U.S.

government including the Department of Defense, Department of Energy, Department of Homeland Security and other agencies as well as energy companies needing real-time monitoring of seismic data.

We are certified to the latest revisions of ISO9001, 14001, 13485, and AS9100 standards and are committed to quality manufacturing, document and process control, qualification, non-conformance handling as well as continuous improvement.

We maintain environmentally sound working conditions in all of our facilities.

Consolidated Results of Operations

We report and evaluate financial information for three segments:

Oil and Gas Markets, Adjacent Markets and Emerging Markets.

Smart Water, Energy Solutions, and Intelligent Industrial Markets.

Summary financial data by business segment follows (in thousands):

Three Months Ended

Nine Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Oil and Gas Markets

Traditional exploration product revenue

Wireless exploration product revenue

Reservoir product revenue

Total revenue

Income (loss) from operations

Adjacent Markets

Industrial product revenue

Imaging product revenue

December 31, 2024

December 31, 2023

Product revenue

Income from operations

Energy Solutions

Product revenue

Rental revenue

Total revenue

Income from operations

Emerging Markets

Intelligent Industrial

Product revenue

Rental revenue

Total revenue

Loss from operations

Operating loss

Rental revenue

Loss from operations

Consolidated Totals

Income (loss) from operations

Although in an already depressed oil and gas industry, demand further decreased in February 2020, because of the oversupply of crude oil due to failed OPEC negotiations that led to a dramatic drop in crude oil prices when combined with the impact of the COVID-19 pandemic.

These declines in the demand for oil and gas have caused oil and gas exploration and production companies to experience a significant reduction in cash flows, which have resulted in reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic data acquisition activities.

Crude oil prices have stabilized over the past two years;

however, a lag in time typically occurs between higher oil prices and greater demand for our Oil and Gas Markets segment products.

We believe this lag is the result of exploration and production (“E&P”) companies allocating their cash flow towards shareholder reward initiatives, such as stock buy-back programs and dividend payments, or in debt reduction.

We believe this lag is a short-term trend that will continue until E&P companies decide to reinvest capital into exploration activities.

As this lag persists, we expect the reduced levels of demand for our Oil and Gas Markets segment products.

We also expect our land-based traditional and wireless products will continue to experience low levels of product demand until our customers consume their excess levels of underutilized equipment.

As discussed below, we had a $30 million wireless product sale to a customer in the first quarter of fiscal year 2024.

However, we do not currently anticipate another product sale this large for the remainder of fiscal year 2024.

In light of current market conditions, the inventory balances in our Oil and Gas Markets business segment at June 30, 2024 continued to exceed levels we consider appropriate for the current level of product demand.

We are continuing to work aggressively to reduce these legacy inventory balances;

however, we are also adding new inventories for new wireless product developments and for other product demand in our Adjacent Markets segment.

During periods of excessive inventory levels, our policy has been, and will continue to be, to record obsolescence expense as we experience reduced product demand and as our inventories continue to age.

Although the Oil and Gas Markets segment is seeing a recovery after experiencing difficult market conditions, we have been recording additional expenses for inventory obsolescence and will continue to do so in the future until product demand and/or resulting inventory turnover return to acceptable levels.

Armed Conflict Between Russia and Ukraine

A portion of our oil and gas product manufacturing is conducted by Geospace Technologies Eurasia LLC, our wholly-owned subsidiary based in the Russian Federation.

Consequently, our oil and gas business could be directly affected by the current war between Russia and Ukraine.

See Note 14 in this Quarterly Report on Form 10-Q for more information.

Coronavirus (COVID-19)

The ongoing COVID-19 pandemic has negatively impacted worldwide economic activity and continues to create challenges in our markets.

The COVID-19 pandemic and the related mitigation measures have disrupted our supply chain, resulting in longer lead times in materials available from suppliers and extended shipping time for these materials to reach our facilities.

The occurrence or resurgence of global or regional health events such as the COVID-19 pandemic, and the related government responses, could result in a material adverse effect on our business, financial condition, results of operations and liquidity.

As such, we will continue to closely monitor COVID-19 and will continue to reassess our strategy and operational structure on a regular, ongoing basis.

Three and nine months ended June 30, 2024 compared to the three and nine months ended June 30, 2023

Consolidated revenue for the three months ended June 30, 2024, was $25.9 million, a decrease of $6.9 million, or 21.0%, from the corresponding period of the prior fiscal year.

The decrease was primarily due to a decrease in rental revenue due to lower utilization of our OBX rental fleet.

Consolidated revenue for the nine months ended June 30, 2024, was $100.2 million, an increase of $5.0 million, or 5.2%, from the corresponding period of the prior fiscal year.

The increase was largely due to a $30.0 million sale of our Mariner™ shallow water ocean bottom nodes in the first quarter of fiscal year 2024, which replaced a rental contract with the customer.

We do not expect another product sale this large for the remainder of fiscal year 2024.

The increase was largely offset by a decrease in rental revenue due to lower utilization of our OBX rental fleet.

Consolidated gross profit for the three months ended June 30, 2024,was $8.5 million, a decrease of $5.5 million, or 39.0%, from the corresponding period of the prior fiscal year.

The increase in gross profit was primarily due to decrease in utilization of our OBX rental fleet.

Consolidated gross profit for the nine months ended June 30, 2024,was $36.6 million, a decrease of $0.8 million, or 2.2%, from the corresponding period of the prior fiscal year.

The decrease in gross profit was primarily due to (i) the decrease in utilization of our OBX rental fleet and (ii) a higher warranty accrual, primarily related to the Mariner™ sale.

The decrease was largely offset offset by gross profit on our Mariner™ sale in the first quarter of fiscal year 2024.

Consolidated operating expenses for the three months ended June 30, 2024,were $10.9 million, an increase of $0.1 million, or 0.8%, from the corresponding period of the prior fiscal year.

The increase was primarily due to higher sales and marketing costs, primarily personnel costs.

Consolidated operating expenses for the nine months ended June 30, 2024,were $30.7 million, a decrease of $0.8 million, or 2.6%, from the corresponding period of the prior fiscal year.

The decrease was primarily due to lower personnel costs attributable to our workforce reduction in first quarter of fiscal year 2023, which included $0.4 million in employee termination costs.

In February 2023, we sold our property located at 7310 Langfield in Houston, Texas for a cash sales price of $3.7 million, net of closing costs of $0.3 million.

We recognized a gain of $1.3 million from the sale in the second quarter of fiscal year 2023.

Consolidated other income for each of the three months ended June 30, 2024, and June 30, 2023, was $0.3 million.

Consolidated other income for the nine months ended June 30, 2024 was $0.5 million, compared to $0.8 million from the corresponding period of the prior year.

The decrease for the nine months ended June 30, 2024 was principally due to net foreign currency transaction losses, partially offset by an increase in interest income attributable to short-term investments.

Product revenue

Rental revenue

Total revenue

Income from operations

Business Overview

Growing industry acceptance of our water meter cables and connectors provides a strong enabler for additional revenue from our Smart Water segment.

Automatic meter reading efficiencies in operations and improved customer service has begun to be understood by the municipalities of the United States.

We expect this portion of our business to continue to grow for the foreseeable future.

Additionally, we anticipate this segment to see revenue contributions from our Aquana smart water valve and IoT technology products as market traction and increased sales backlog continues to gather.

Given the well-known and often extreme volatility experienced in our Energy Solutions segment, careful expansion of products and market diversity in our Smart Water and Intelligent Industrial segments has been a longstanding part of our strategic vision and reflects our on-going diversification efforts.

Our Energy Solution segment saw a shift from rentals of our OBX marine wireless nodes to purchases of the equipment in fiscal year 2024, of which trend has continued into fiscal year 2025.

This shift signifies our customer’s recognition of future backlog to justify ownership versus renting the nodes.

We do not expect significant expansion of the ocean bottom nodal market, for we expect the market is saturable and future rental fleet use will come from our customer’s need to temporarily expand their nodal fleet.

We expect our Energy Solutions segment to provide the majority of our revenue for years to come, but in diminishing portion to our other segments.

Demand for our seismic products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.

We continue to maintain a strong balance sheet with no debt.

Our current liquidity enables our ability to seek out business acquisitions, allows us to continue investments in capital assets and product research and development, which have historically driven revenue growth.

Three months ended December 31, 2024, compared to the three months ended December 31, 2023

Consolidated revenue for the three months ended December 31, 2024, was $37.2 million, a decrease of $12.8 million, or 25.6%, from the corresponding period of the prior fiscal year.

The decrease was primarily due to lower revenue from our Energy Solutions segment.

Revenue for the three months ended December 31, 2024, included a $17 million OBX marine wireless product sale structured as a sales-type lease.

However, in comparison, revenue for the first quarter of the prior year included a $30 million sale of our Mariner™ shallow water ocean bottom nodes.

The decrease in revenue from our Energy Solutions segment was partially offset by higher revenue generated from our Smart Water segment attributable to an increase in demand for our water meter products.

Consolidated gross profit for the three months ended December 31, 2024, was $20.1 million, a decrease of $2.1 million, or 9.4%, from the corresponding period of the prior fiscal year.

The decrease in gross profit was primarily due to a decrease in wireless product revenue from our Energy Solutions segment.

This decrease was partially offset by a high gross profit margin on our $16 million wireless product sale in the first quarter of fiscal year 2025 and the increase in revenue from our Smart Water segment.

Consolidated operating expenses for the three months ended December 31, 2024, were $12.3 million, an increase of $2.9 million, or 31.0%, from the corresponding period of the prior fiscal year.

The increase was due to higher personnel costs, including severance costs, higher professional fees and research and development project expenditures.

Consolidated other income was $0.6 million for the three months ended December 31, 2024, compared to a loss of $0.1 million from the corresponding period of the prior fiscal year.

The increase for the three months ended December 31, 2024 was principally due to higher interest income attributable to its short-term investments and financing receivables.

Segment Results of Operations

Oil and Gas Markets

Revenue from our Oil and Gas Markets products for the three months ended June 30, 2024, decreased $8.5 million, or 48.1%, from the corresponding period of the prior fiscal year.

Revenue from our Oil and Gas Markets products for the nine months ended June 30, 2024, increased $3.7 million, or 6.6%, from the corresponding period of the prior fiscal year.

The components of these changes were as follows:

Traditional Exploration Product Revenue – For the three months ended June 30, 2024, revenue from our traditional products decreased $1.4 million, or 40.4%, from the corresponding period of the prior fiscal year.

For the nine months ended June 30, 2024, revenue from our traditional products decreased $2.2 million, or 23.1%, from the corresponding period of the prior fiscal year.

The decrease for both periods was primarily due to a decrease in demand for our sensor and marine products.

Wireless Exploration Product Revenue – For the three months ended June 30, 2024, revenue from our wireless exploration products decreased $6.8 million, or 49.4%, from the corresponding period of the prior fiscal year.

The decrease was primarily due to a decrease in rental revenue due to lower utilization of our OBX rental fleet.

For the nine months ended June 30, 2024, revenue from our wireless exploration products increased $6.4 million, or 13.9%, from the corresponding period of the prior fiscal year.

The increase was primarily due to a $30.0 million sale of our Mariner™ shallow water ocean bottom nodes, in the first quarter of fiscal year 2024, which replaced a rental contract with the customer.

The increase was partially offset by a decrease in rental revenue attributable to lower utilization of our OBX rental fleet.

Operating Income (Loss)

Operating income (loss) associated with our Oil and Gas Markets products for the three months ended June 30, 2024, was $(2.3) million, a decrease of $5.5 million from the corresponding period of the prior fiscal year.

The decrease was primarily due to lower wireless rental revenue and related gross profits due to a decrease in the utilization of our OBX rental fleet.

Operating income associated with our Oil and Gas Markets products for the nine months ended June 30, 2024, was $9.1 million, a decrease of $0.7 million from the corresponding period of the prior fiscal year.

The decrease in operating income for the nine months ended June 30, 2024, was primarily due to lower wireless rental revenue and related gross profits due to a decrease in the utilization of our OBX rental fleet.

The decrease was partially offset by higher gross profits on wireless product sales, primarily related to the Mariner™ sale in the first quarter of fiscal year 2024.

Adjacent Markets

Revenue from our Adjacent Markets products for the three months ended June 30, 2024, increased $1.1 million, or 7.5%, from the corresponding period of the prior fiscal year.

Revenue from our Adjacent Markets products for the nine months ended June 30, 2024, decreased $0.4 million, or 1.0%, from the corresponding period of the prior fiscal year.

The components of these changes was as follows:

Industrial Product Revenue and Services – For the three months ended June 30, 2024, revenue from our industrial products increased $1.3 million, or 11.5%, from the corresponding period of the prior fiscal year.

The increase for the three months ended June 30, 2024, was primarily due to an increase in demand for our water meter products, partially offset by a decrease in demand for our contract manufacturing services.

For the nine months ended June 30, 2024, revenue from our industrial products decreased $0.8 million, or 2.6%, from the corresponding period of the prior fiscal year.

The decrease for the nine months ended June 30, 2024, was primarily due to lower demand for both our water meter products and contract manufacturing services.

Imaging Product Revenue – For the three months ended June 30, 2024, revenue from our imaging products decreased $0.2 million, or 7.5%, from the corresponding period of the prior fiscal year.

The decrease for the three months ended June 30, 2024, was primarily due to lower demand for our imaging equipment, For the nine months ended June 30, 2024, revenue from our imaging products increased $0.4 million, or 4.2%, from the corresponding period of the prior fiscal year.

The increase for the nine months ended June 30, 2024, was primarily due to higher demand for our film products, partially offset by lower demand for our imaging equipment.

Revenue from our Smart Water segment for the three months ended December 31, 2024, increased $3.1 million, or 72.1%, from the corresponding period of the prior fiscal year.

The increase for the three months ended December 31, 2024, was primarily due to an increase in demand for our Hydroconn® cable and connector products.

Operating Income

Operating income from our Adjacent Markets products for the three months ended June 30, 2024, was $4.7 million, an increase of $0.3 million, or 7.2%, from the corresponding period of the prior fiscal year.

The increase for the three months ended June 30, 2024 was primarily due to (i) the increase in revenue and (ii) gross margin improvements from fully absorbing our fixed overhead.

Operating income from our Adjacent Markets products for the nine months ended June 30, 2024 was $9.5 million, an increase of $0.3 million, or 3.7%, from the corresponding period of the prior fiscal year.

The increase in operating income for nine months ended June 30, 2024 was primarily due to the gross margin improvements.

The increase in operating income for both periods was partially offset by higher research and development expense.

Emerging Markets

Revenue from our Emerging Markets products was $0.6 million for three months ended June 30, 2024, compared to $0.1 million from the corresponding period of the prior fiscal year.

Revenue from our Emerging Markets products was $2.0 million for the nine months ended June 30, 2024, compared to $0.4 million from the corresponding period of the prior fiscal year.

The increase in revenue for both the three and nine months ended June 30, 2024, was primarily due to revenue recognized on a $1.5 million government contract.

No further revenue is expected on this contract.

Operating income from our Smart Water segment for the three months ended December 31, 2024 , was $0.4 million, a decrease of $0.7 million, or 66.2% , from the corresponding period of the prior fiscal year.

The decrease for the three months ended December 31, 2024 , was primarily a result of the change in composition of our business segments.

This decrease was largely offset by the increase in revenue.

Energy Solutions

Revenue from our Energy Solutions segment for the three months ended December 31, 2024, decreased $15.6 million, or 39.2%, from the corresponding period of the prior fiscal year.

The components of this decrease were as follows:

Product Revenue – For the three months ended December 31, 2024, product revenue decreased $13.9 million, or 41.2%, from the corresponding period of the prior fiscal year.

The decrease was primarily due to a decrease in demand for our wireless products.

Revenue for the three months ended December 31, 2024 included a $17 million OBX marine wireless product sale structured as a sales-type lease.

However, in comparison, revenue for the first quarter of the prior year included a $30 million sale of our Mariner™ shallow water ocean bottom nodes.

Rental Revenue – For the three months ended December 31, 2024, rental revenue from our wireless exploration products decreased $1.7 million, or 28.2%, from the corresponding period of the prior fiscal year.

The decrease was primarily due lower utilization of our OBX rental fleet.

Operating Income

Operating income associated with our Energy Solutions segment for the three months ended December 31, 2024, was $13.3 million, a decrease of $1.8 million from the corresponding period of the prior fiscal year.

The decrease in operating income for the three months ended December 31, 2024, was primarily due to a decrease in wireless product revenue.

This decrease was largely offset by (i) a high profit margin on our $17 million product sale in the first quarter of fiscal year 2025 and (ii) the change in the composition of our business segments.

Intelligent Industrial

Revenue from our Intelligent Industrial segment for three months ended December 31, 2024, decreased $0.2 million, or 4.1%, from the corresponding period of the prior fiscal year.

The decrease in revenue for the three months ended December 31, 2024, was primarily due to lower demand for our imaging products.

The decrease was partially offset by an increase in demand for our sensor products.

Operating Loss

Operating loss from our Emerging Markets products for the three months ended June 30, 2024, was $1.1 million, an increase of $0.1 million, or 9.6%, from the corresponding period in the prior fiscal year.

The increase in operating loss for the three months June 30, 2024, was primarily due to a decrease in gross profit caused by cost overruns on our $1.5 million government contract.

Operating loss for the nine months ended June 30, 2024, was $2.4 million, a decrease of $0.8 million, or 25.8%, from the corresponding period of the prior fiscal year.

The decrease in operating loss for the nine months ended June 30, 2024, was primarily due to lower personnel costs attributable to our workforce reduction in the first quarter of fiscal year 2023.

Operating loss from our Intelligent Industrial segment for the three months ended December 31, 2024, was $0.9 million, an increase of $0.7 million from the corresponding period of the prior fiscal year.

The increase in operating loss for the three months ended December 31, 2024, was primarily due (i) the decrease in revenue and (ii) the change in composition of our business segments.

Liquidity and Capital Resources

At June 30, 2024, we had $42.5 million in cash and cash equivalents and short-term investments.

For the nine months ended June 30, 2024, we used $7.5 million of cash from operating activities.

These uses of cash included a (i) $5.8 million increase in inventories for the strategic purchase of long lead components needed for use in wireless products, valves and contract manufacturing, (ii) $3.0 million decrease in other liabilities due to the return of customer deposits and lower accrued employee compensation costs, partially offset by an increase in our product warranty accrual and (iii) $1.4 million decrease in accounts payable due to timing of payments to our suppliers.

These uses of cash were partially offset by our net income of $6.3 million and net non-cash charges of $12.1 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for credit losses.

Other sources of cash included a (i) $5.2 million decrease in trade accounts and notes receivable primarily due to the timing of collections from customers and (ii) $0.2 million decrease in other assets.

For the nine months ended June 30, 2024, we generated cash of $3.9 million in investing activities.

Sources of cash primarily consisted of $30.9 million of proceeds from the sale of rental equipment.

Uses of cash included (i) $15.3 million in purchases of short-term investments, net, (ii) $8.2 million for additions to our equipment rental fleet and (iii) $3.6 million for additions to our property, plant and equipment.

We expect cash investments into our rental fleet will be approximately $12 million in fiscal year 2024.

We expect our cash investments in our property, plant and equipment will be approximately $5 million in fiscal year 2024.

Our capital expenditures are expected to be funded from our cash on hand, cash flows, including cash flows from rental contracts or, if necessary, borrowings under our new credit agreement.

For the nine months ended June 30, 2024, we used $3.0 million from financing activities for the purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors.

At December 31, 2024, we had $22.1 million in cash and cash equivalents and short-term investments.

For the three months ended December 31, 2024, we used $11.5 million of cash from operating activities.

Uses of cash included a (i) $3.0 million increase in inventories for the strategic purchase of long lead-time components needed for use in wireless products, valves and contract manufacturing, (ii) $3.6 million increase in trade accounts receivables due to timing of collections from customers and (iii) $0.7 million decrease in trade accounts payable due to timing of payments to our suppliers.

Uses of cash were partially off our net income of $8.4 million and non-cash charges of $3.5 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for recovery of credit losses.

For the three months ended December 31, 2024, we generated cash of $6.3 million in investing activities.

Sources of cash consisted of (i) $9.7 million from the sale of short-term investments and (ii) $0.1 million of proceeds from the sale of rental equipment.

These sources of cash were partially offset by (i) $3.2 million for additions to our property, plant and equipment and (ii) $0.4 million for additions to our equipment rental fleet.

We expect fiscal year 2025 cash investments in property, plant and equipment will be approximately $6 million.

We expect fiscal year 2025 cash investments into our rental fleet will be limited unless we experience an expansion of customer demand of our rental fleet.

Our capital expenditures are expected to be funded from our cash on hand, short-term investments, internal cash flows, cash flows from our rental contracts or, if necessary, borrowings under our new credit agreement.

For the three months ended December 31, 2024, we used million from financing activities for the purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors.

The program authorizes us to repurchase up to $7 million of our common stock in open market transactions.

At June 30, 2024, $2 million of our common stock remains available for repurchases under the program.

Our available cash, cash equivalents and short-term investments was $42.5 million at June 30, 2024, which included $3.4 million of cash and cash equivalents held by our foreign subsidiaries and branch offices, of which $2.0 million was held by our subsidiary in the Russian Federation.

In response to sanctions imposed by the U.S.

and other countries on the Russian Federation, 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 we may be unable to transfer it out of Russia without incurring substantial costs, if at all.

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

On July 26, 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender.

The Agreement refinanced our credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender.

At December 31, 2024, $0.4 million of our common stock remains available for repurchases under the program.

On July 26, 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank ("Woodforest"), as sole lender.

The Agreement refinanced our credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest, as a lender.

The Agreement provides a revolving credit facility with a maximum availability of $15 million.

Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) 80% of eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments.

Interest shall accrue on outstanding borrowings at a rate equal to Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25% per annum.

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 (7.75% at December 31, 2024).

We are required to make monthly interest payments on borrowed funds.

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The Agreement expires in July 2025.

At June 30, 2024 we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $14.9 million after consideration of a $0.1 million outstanding letter of credit.

We intend to begin negotiations with Woodforest for an extension in the second quarter of fiscal year 2025.

At December 31, 2024 we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $12.1 million after consideration of a $0.1 million outstanding letter of credit.

We were in compliance with all covenants under the Agreement.

We do not currently anticipate the need to borrow under the Agreement, however, we may decide to do so in the future, if needed.

Our total available cash, cash equivalents and short-term investments increased $8.8 million during the nine months ended June 30, 2024, largely due to the collection of an account receivable related to our first quarter 2024 Mariner™ sale.

In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under the Agreement through its expiration in July 2025, leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us.

We currently believe that our cash, cash equivalents and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

Our available cash, cash equivalents and short-term investments was $22.1 million at December 31, 2024, which included $0.9 million of cash and cash equivalents held by our foreign subsidiaries and branch offices.

In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under the Agreement through its expiration in July 2025, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us.

We currently believe that our cash and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

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

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In accordance with ASC 805, Business Combination s, 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.

Earn-outs achieved are recorded as compensation expense when incurred.

See Note 11 to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on our contractual contingencies.

Critical Accounting Estimates

During the nine months ended June 30, 2024, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

During the three months ended December 31, 2024, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 1. Financial Statements