What changed in this filing

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Item 1A. Risk Factors

2025-11-21 compared with 2024-11-22 · 42 added, 49 removed, 209 unchanged (30% of the section changed)

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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.

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The Ongoing Armed Conflict Between Russia and Ukraine Could Adversely Affect Our Business and Results of Operations.

In February 2022, the Russian Federation launched a full-scale military invasion of Ukraine, and Russia and Ukraine and continue to engage in active and armed conflict as of November 2024.

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 as of November 2024.

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.

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Increases in Tariffs, Trade Restrictions or Taxes on our Products Could Have an Adverse Impact on our Operations.

In fiscal year 2024, customers outside the United States accounted for approximately 53% of our revenues.

Approximately 37% of our revenue for fiscal year 2025 was generated from customers outside of the U.S.

We also purchase a portion of our raw materials from suppliers in China and other foreign countries.

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and Canada, Mexico, and other countries have been escalating in recent years.

Trade tensions have led to a series of tariffs imposed by the U.S.

In addition, the current presidential administration is utilizing tariffs to fortify domestic tax revenue which could further impact our business and operations, due to potential trade wars as a result of the implementation of tariffs or otherwise.

Historically, trade tensions have led to a series of tariffs imposed by the U.S.

on imports from China, as well as retaliatory tariffs imposed by China on imports from the U.S.

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trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials including rare earth minerals, may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials, which could have a material adverse effect on our business, results of operations or financial conditions.

It remains unclear as to the tariff related impact of the future geopolitical climate will bring to our operations.

Climate Change and Legislation Designed to Reduce Climate Change

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Congress, and there has been a wide-ranging policy debate, both in the United States and internationally, regarding the impact of these gases and possible means for their regulation.

These efforts have included consideration of cap-and-trade programs, carbon taxes, GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources.

These efforts have included consideration of cap-and-trade programs, carbon taxes, and GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources.

Some of the proposals would require industries to meet stringent new standards that would require substantial reductions in carbon emissions.

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In April 2016, the United States signed the Paris Agreement, which requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years.

Under the Paris Agreement, the Biden Administration has committed the United States to reducing its greenhouse gas emissions by 50-52% from 2005 levels by 2030.

In November 2021, the Unites States and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including, but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.

Under the Paris Agreement, the United States has committed to reducing its greenhouse gas emissions by 50-52% by 2030 from its 2005 levels.

However, the United States is currently scheduled to end its participation in the Paris Agreement in January 2026.

In November 2021, the Unites States and other countries entered the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.

Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of the Paris Agreement.

Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States.

President Biden and Congress have identified climate change as a priority, and it is likely that additional executive orders, regulatory action, and/or legislation targeting greenhouse gas emissions, or prohibiting or restricting oil and gas development activities in certain areas, will be proposed and/or promulgated during the Biden Administration.

President Biden issued an executive order imposing a moratorium on new oil and gas leasing on federal lands and offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.

President Biden’s order also establishes climate change as a primary foreign policy and national security consideration, affirms that achieving net-zero greenhouse gas emissions by or before midcentury is a critical priority, affirms the Biden Administration’s desire to establish the United States as a leader in addressing climate change, generally further integrates climate change and environmental justice considerations into government agencies’ decision-making, and eliminates fossil fuel subsidies, among other measures.

Other actions impacting oil and natural gas production activities that could be pursued by the Biden administration may include more restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquified natural gas export facilities.

It is not possible at this time to predict the timing and effects of climate change or whether additional climate-related legislation, regulations or other measures will be adopted at the local, state, regional, national and international levels.

However, continued efforts by governments and non-governmental organizations to reduce GHG emissions appear likely, and additional legislation, regulation or other measures that control or limit GHG emissions or otherwise seek to address climate change could adversely affect our customers and our business.

Because our business depends on the level of oil exploration, existing or future laws or regulations related to GHGs and climate change, including incentives to conserve energy or use alternative energy sources, our business could be negatively impacted if such laws or regulations reduce demand for our customers’ products and, accordingly, our services.

These political, litigation, and financial risks may result in our customers restricting or cancelling exploration or production activities which also could reduce demand for our products and services.

In addition to regulatory impacts, the occurrence of weather events caused or exacerbated by climate change could impact local, national or global commodity demand or availability in ways that could be material to our business and/or the business of our customers.

Because our business depends on the level of oil exploration, existing or future laws or regulations related to GHGs and climate change, including incentives to conserve energy or use alternative energy sources, could negatively impacted our business if such laws or regulations reduce demand for our customers’ products and, accordingly, our services.

These risks may result in our customers restricting or cancelling exploration or production activities which also could reduce demand for our products and services.

We Operate in Highly Competitive Markets, and Our Competitors May Be Able to Provide Newer or Better Products Than We Are Able to Provide.

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To the extent these factors adversely affect other companies in the industries we serve, there could be an oversupply of products and services and downward pressure on pricing for our products and services, which could adversely affect us.

Additionally, bankruptcies or financial difficulties among our oil and gas customers could reduce our cash flows and adversely impact our liquidity and profitability.

Additionally, bankruptcies or financial difficulties among our oil and gas customers could reduce our cash flow and adversely impact our liquidity and profitability.

For a discussion of the customers of our oil and gas products, see “The Limited Market for Our Oil and Gas Products Can Affect Our Revenue,” below.

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In recent years, we have incurred significant expenditures to fund our research and development efforts, and we intend to continue those expenditures in the future.

However, research and development is by its nature speculative, and we cannot assure that these expenditures will result in the development of new products or services or that any new products and services we have developed recently or may develop in the future will be commercially marketable or profitable to us.

In particular, we have incurred substantial expenditures to develop our oil and gas nodal seismic data acquisition systems, as well as other products for PRM applications.

In addition, we try to use some of our capabilities to supply products to new adjacent and emerging markets.

We cannot assure that we will realize our expectations regarding acceptance of and revenue generated by our new products and services in existing or new markets.

However, research and development is by its nature speculative, and we cannot assure you that these expenditures will result in the development of new products or services or that any new products and services we have developed recently or may develop in the future will be commercially marketable or profitable to us.

In particular, we have incurred substantial expenditures to develop our ocean bottom nodal seismic data acquisition systems, as well as other products for PRM applications.

In addition, we try to use some of our capabilities to supply products to smart water and intelligent industrial products.

We cannot assure you that we will realize our expectations regarding acceptance of and revenue generated by our new products and services in existing or new markets.

The Short-Term Nature of Our Order Backlog for Sales of Our Oil and Gas Products and Delayed or Canceled Customer Orders May Cause Us to Experience Fluctuations in Quarterly Results of Operations.

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In such case, we would be required to impair the value of such inventories on our balance sheet.

The Limited Market for Our Oil and Gas Markets and Emerging Markets' Products Can Affect Our Revenue.

In our Oil and Gas Markets segment, we generally market many of our products to seismic service contractors.

The Limited Market for Oil and Gas Products and Border and Perimeter Security Products Can Affect Our Revenue.

We generally market many of our oil and gas products to seismic service contractors.

We estimate that fewer than 30 oil and gas seismic contracting companies are currently operating in countries other than those operating in the Russian Federation and the former Soviet Union, India, the People’s Republic of China and certain Eastern European countries, where such information is difficult to verify.

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We market our seabed PRM systems' products to large oil and gas companies.

Since this product’s introduction in 2002, we have received system orders from three offshore oil and gas operators:

BP, Shell and Equinor, which have accounted for a significant portion of our revenue in fiscal year 2014 and prior fiscal years.

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

Our emerging markets segment primarily sells its products to a small number of agencies within the U.S.

During the third quarter of fiscal year 2025, we entered into large-scale seabed PRM system contract, our first since 2014.

Our border and perimeter products are sold to a small number of agencies within the U.S.

The loss of a small number of these customers, and particularly our oil and gas customers, could materially and adversely impact our future revenues.

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In addition, rental contracts may not be renewed for equipment in our rental fleet.

Significant technology improvements by our competitors could have an adverse effect on our results of operations and earnings.

Significant technological improvements by our competitors could have an adverse effect on our results of operations and earnings.

Our equipment rental business has high fixed costs, which primarily consist of depreciation expenses.

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As a result, any significant decline in rental revenue caused by reduced demand could adversely affect our results of operations.

Our Expansion into the Border and Perimeter Security Market May Not Be Successful.

We have not previously operated in the border and perimeter security marketplace prior to our 2018 acquisition of Quantum.

Quantum is also a relatively recent entrant into this marketplace, and Quantum was not cash-flow positive when we acquired it.

In fiscal year 2021, we completed our first contract with the U.S.

Customs and Border Protection (“CBP”), except for on-going service and maintenance.

While we will continue to devote management time and resources, financial and otherwise, to develop our business in this marketplace, our lack of experience in this market makes it difficult to estimate our financial returns from this business.

In addition, some of the customers for this business will be governmental entities and contracting with those entities can be difficult, costly, and unpredictable.

We do not have extensive experience in government contracting, and so we may not win, retain, or perform under such future contracts in a manner that is profitable.

If we are not successful in this emerging market segment, it will negatively impact our financial performance and could negatively impact our reputation and harm our other business segments.

Our Diversification Strategy Using both Organic Expansion and Acquisitions May Not Be Successful.

We seek to grow our business through a combination of organic initiatives and strategic acquisitions.

Our ability to achieve organic growth depends on factors such as customer retention, market demand, product innovation, and our ability to attract and retain key personnel.

There can be no assurance that our efforts will result in increased revenues or profitability.

In addition, we may pursue acquisitions to expand our market presence, product offerings, or geographic reach.

Acquisitions involve numerous risks, including difficulties in identifying suitable targets, integrating operations, realizing anticipated synergies, retaining key employees, and managing increased operational complexity.

We may also face unforeseen liabilities or costs associated with acquired businesses.

If we are unable to successfully execute our organic growth initiatives or effectively integrate and manage acquired businesses, our business, financial condition, and results of operations could be adversely affected.

We Rely on Key Suppliers for Certain Components Used in Our Products.

Certain models of our oil and gas marine wireless products require a timing device we purchase from a United States manufacturer.

We currently do not possess the ability to manufacture this component and have no other reliable source for this device.

If this manufacturer were to discontinue its production of this timing device, were to become unwilling to contract with us on competitive terms or were unable to supply the component in sufficient quantities to meet our requirements, our ability to compete in the marine wireless marketplace could be impaired, which could adversely affect our financial performance.

Certain electronic components used in our land and marine wireless products are purchased from two single source suppliers.

In the event a change in one or both suppliers is necessary, significant engineering efforts would be required by us, which could adversely affect our financial performance.

For our imaging products, we purchase all of our thermal film from one manufacturer.

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These batteries are known to pose significant fire hazards.

Should a fire occur, it could result in personal injuries, damage to our facility and likely interrupt our manufacturing operations.

Should a fire occur, it could result in personal injuries, damage to our facility and likely interruptions to our manufacturing operations.

Such an event could materially and adversely affect our business operations.

We currently evaluating our fire suppression system in an effort further to mitigate this risk.

We currently are evaluating our fire suppression system in an effort further to mitigate this risk.

Our Credit Agreement Imposes Restrictions on Our Business.

We and several of our subsidiaries domiciled in the United States are parties to a credit agreement.

Amounts available for borrowing under the credit agreement are determined by a borrowing base, which is determined based upon certain of our domestic assets.

Borrowings under the credit agreement will be secured by substantially all of our domestic assets, except for certain excluded property.

The credit agreement limits the incurrence of additional indebtedness, contains a covenant that requires us to maintain a certain amount of consolidated tangible net worth and liquidity, and contains other covenants customary in agreements of this type.

The credit agreement limits the incurrence of additional indebtedness, contains covenants that require us to maintain (i) a certain amount of consolidated tangible net worth and liquidity and (ii) minimum asset and interest coverage ratios.

The credit agreement also contains other covenants customary in agreements of this type.

Our ability to comply with these restrictions may be affected by events beyond our control, including, but not limited to, prevailing economic, financial and industry conditions and continuing declines in our product revenue.

The breach of any of these covenants or restrictions, as well as any failure to make a payment of interest or principal when due, could result in a default under the credit agreement.

Such a default would permit our lender to declare any amounts borrowed from it to be due and payable, together with accrued and unpaid interest, and our ability to borrow under the credit agreement could be terminated.

Such a default would permit our lender to declare any amount borrowed from it to be due and payable, together with accrued and unpaid interest, and our ability to borrow under the credit agreement could be terminated.

If we are unable to repay any debts owed to our lender, the lender could proceed against the collateral securing such debt.

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export law restrictions that limit the destinations and types of customers to which our products may be sold, or require an export license in connection with revenue transactions outside the United States.

Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently breached, for example through the negligent or the unauthorized intentional behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise.

Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently breached, for examples through the negligent or the unauthorized intentional behavior of individual employees, or our failure to comply with certain formal documentation requirements or otherwise.

Additionally, we may be held liable for actions taken by our local dealers and partners.

Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business.

Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brands, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.

Because We Have No Plans to Pay Any Dividends for the Foreseeable Future, Investors Must Look Solely to Stock Appreciation for a Return on Their Investment in Us.

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Any payment of cash dividends in the future will be dependent on the amount of funds legally available, our financial condition, capital requirements, loan covenants and other factors that our Board of Directors may deem relevant.

Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

We Have a Relatively Small Public Float, and Our Stock Price May be Volatile.

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We periodically assess our long-lived assets for impairment.

Significant sustained future decreases in crude oil and natural gas prices may require us to write down the value of our long-lived assets in our Oil and Gas Markets business segment, including our manufacturing facilities, manufacturing equipment and rental equipment if future cash flows anticipated to be generated from these assets fall below the asset’s net book value.

Furthermore, we may be required to write down the value of other intangible assets related to our acquisition of the OptoSeis® fiber optic sensing technology or the goodwill and other intangible assets related to our Aquana acquisition if sufficient cash flows are not generated to recover the carrying value of such assets.

Significant sustained future decreases in crude oil and natural gas prices may require us to write down the value of our long-lived assets in our Energy Solutions business segment, including our manufacturing facilities, manufacturing equipment and rental equipment if future cash flows anticipated to be generated from these assets fall below the asset’s net book value.

Furthermore, we may be required to write down the value of other intangible assets related to our acquisition of the OptoSeis® fiber optic sensing technology or the goodwill and other intangible assets related to our Aquana or Geovox acquisitions if sufficient cash flows are not generated to recover the carrying value of such assets.

If we are forced to write down the value of our long-lived assets, these non-cash asset impairments could adversely affect our results of operations.

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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-K

Item 1A. Risk Factors