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Item 5. Market for Registrant’s Common Equity

2025-11-21 compared with 2024-11-22 · 122 added, 158 removed, 111 unchanged (72% of the section changed)

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Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information with respect to purchases of common stock of the Company made during the three months ended September 30, 2024:

Total Number of Shares Purchased (1)

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Program

Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)

July 1, 2024 through July 31, 2024

August 1, 2024 through August 31, 2024

September 1, 2024 through September 30, 2024

(1) On May 9, 2024, the Company's Board of Directors (the "Board") authorized a stock repurchase program ("the program") under which the Company may repurchase up to $5 million of its outstanding stock.

On August 8, 2024, the Board approved an extension to the Program increasing the dollar amount of shares allowed to be purchased to $7 million, Under the Program, the Company may purchase shares of common stock on a discretionary basis from time to time through open market transactions through block trades, in privately negotiated transactions and pursuant to any trading plan that may be adopted by the Company’s management in accordance with Rule 10b5-1 of the Exchange Act, or otherwise.

The timing and number of shares repurchased will depend on a variety of factors, including stock price, trading volume, and general business and market conditions.

The Program has no time limit, does not obligate the Company to acquire a specified number of shares and may be modified, suspended or discontinued at any time at the Company’s discretion.

The repurchase plan will be funded using existing cash or future cash flow.

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

Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for PRM systems, sales or rentals for ocean bottom nodes, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for channels of our Pioneer™ 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”, as well as cautionary language in this Annual Report on Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

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

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

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

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

We design and manufacture other products of a non-seismic nature, including water meter products, imaging equipment and provide contract manufacturing services.

We design and manufacture Hydroconn® water meter connector products, IoT water values, imaging equipment and provide contract manufacturing services.

For further information on the nature of our operations, see the information under the heading “Business” in this Annual Report on Form 10-K.

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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.

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

YEAR ENDED SEPTEMBER 30,

Oil and Gas Markets

Traditional exploration product revenue

Wireless exploration product revenue

Reservoir product revenue

Product revenue

Income from operations

Energy Solutions

Product revenue

Rental revenue

Total revenue

Operating income

Adjacent Markets

Industrial product revenue

Imaging product revenue

Income from operations

Intelligent Industrial

Product revenue

Rental revenue

Total revenue

Operating income

Emerging Markets

Operating loss

Loss from operations

Consolidated Totals

Operating income

As further discussed below, revenue increased for all of our business segments for fiscal year 2024, confirming increased momentum in our diversification strategy.

We have embarked on a diversification strategy to grow our non-Oil and Gas businesses through organic means or through acquisition.

As a result of these efforts, we have experienced steady year over year revenue growth in our Adjacent Markets segment.

Our Oil and Gas Markets segment saw a shift from rentals of our OBX marine wireless nodes to purchases of the equipment.

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

Additionally, we experienced year over year growth in oil and gas revenue, mostly due to growing demand for wireless marine nodes for ocean bottom seismic surveys.

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

We expect our Oil and Gas Markets segment to provide the majority of our revenue for years to come, but in diminishing portion to our other segments.

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

Income (loss) from operations

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 substantial revenue contributions from our Aquana smart water valve and IoT technology products as market traction and increased sales backlog continues to gather.

Given the well-known and often extreme volatility experienced in our Oil and Gas segment, careful expansion of products and market diversity in our Adjacent Markets segment has been a longstanding part of our strategic vision and reflects our on-going diversification efforts.

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 ocean bottom nodes to purchases of the equipment in fiscal years 2024 and 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, because we expect the market is saturable and future rental fleet use will come from our customers' need to temporarily expand their nodal fleet.

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

During the third quarter of fiscal year 2025, we entered into a PRM contract.

The duration of the contract is expected to be approximately 18 months.

Revenue will be recognized in our Energy Solutions segment over the duration of the contract.

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.

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

Fiscal Year 2025 Compared to Fiscal Year 2024

Consolidated revenue for fiscal year 2024 was $135.6 million, an increase of $11.1 million, or 8.9%, from fiscal year 2023.

The increase in revenue was driven by increases in demand across all three of our business segments.

Revenue from our Oil and Gas Markets segment increased $3.5 million, which was largely driven by a $30.0 million sale of our Mariner™ shallow water ocean bottom nodes and a $10.5 million sale of our shallow water OBX 750E nodes, both of which replaced rental contracts with the customers.

This increase was largely offset by a decrease in utilization of our OBX rental fleet and decreased demand for our traditional seismic exploration products.

Revenue from our Adjacent Markets segment increased $6.6 million primarily due to an increase in demand from our industrial products.

Revenue from our Emerging Markets segment increased $1.0 million primarily due to the completion of a government contract.

Consolidated gross profit for fiscal year 2024 was $52.6 million, an increase of $0.9 million, or 1.7%, from fiscal year 2023.

Gross profit from our Adjacent Markets segment increased $4.4 million, attributable to (i) the increase in revenue and (ii) margins improvements from fully absorbing our fixed overhead.

This increase was offset by a $3.3 million decrease in gross profit from our Oil and Gas Markets segment as a result of the lower utilization of our OBX rental fleet, of which cost is primarily fixed depreciation.

Consolidated revenue for fiscal year 2025 was $110.8 million, a decrease of $24.8 million, or 18.3%, from fiscal year 2024.

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

Revenue for fiscal year 2025 included a $17 million sale of ocean bottom nodes structured as a sales-type lease.

However, in comparison, revenue for fiscal year 2024 included a $30 million sale of our Mariner® shallow water ocean bottom nodes.

The decrease was also attributable to a decrease in our wireless marine rental revenue.

The decrease in consolidated revenue for fiscal year 2025 was partially offset by an increase in demand for our Hydroconn® cable and connector products from our Smart Water segment.

Consolidated gross profit for fiscal year 2025 was $32.9 million, a decrease of $19.7 million, or 37.4%, from fiscal year 2024.

The decrease in gross profit was primarily due to a decrease in ocean bottom nodes product revenue and a lower utilization of our rental fleet, and the operating costs of our rental fleet are primarily depreciation expense, which is not variable with revenue.

The decrease in gross profit was also attributable to low gross margins on sales of our land-based wireless products due to very strong price competition on these products and due to an increase in tariffs on the raw materials we purchase.

Consolidated operating expenses for fiscal year 2025 were $48.8 million, an increase of $3.3 million, or 7.3%, from fiscal year 2024.

The increase was largely due to a $2.8 million non-cash impairment of intangible assets from our Emerging Markets segment.

The increase was also attributable to (i) higher selling and marketing expenses resulting from increased revenue and (ii) increased research and development expense caused by an increase in project expenditures and personnel costs.

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

We recognized a gain of $1.3 million from the sale of this property which is included as a component of our income from operations in the accompanying statement of operations.

In August 2024, we sold our oil and gas product manufacturing operations based in the Russian Federation to a group of former employees ("Buyer").

We recorded a loss of $14.5 million in connection with the transaction, of which $13.1 million was related to the impact of cumulative foreign currency translation losses previously included in accumulated comprehensive loss.

The loss on sale of this subsidiary is included as a component of other income (loss) in the accompanying statement of operations.

We have determined that the Buyer's legal entity is a variable interest entity ("VIE") due to the nature of the financing for the transaction.

While the debt represents a direct obligation to absorb significant losses of the VIE, the debt does not establish the right and power to direct activities that most significantly impact the economic performance of the entity.

We retained no equity or voting interest, have no employees that are directors or advisors of the new ownership group, and have no direct influence on the day-to-day decisions in operations or affect their ability to generate profits or losses.

As such, we have determined we are not the primary beneficiary of the entity.

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

The increase was primarily due to (i) higher personnel costs, including severance costs and acceleration of stock-based compensation expense and (ii) an increase in sales and marketing costs.

The increase was partially offset by a $2.8 million impairment charge on intangible assets in the prior year.

In June 2025, we sold our real property located at 4318 Northfield Lane Houston, Texas.

The 17.3-acre property served as additional property for our main campus and contained legacy structures used to support our manufacturing and warehousing operations We recognized a gain on disposal of property of $4.6 million during the third quarter of fiscal year 2025.

The gain is included as a component of income (loss) from operations in the accompanying statements of operations.

Segment Results of Operations

Fiscal Year 2025 Compared to Fiscal Year 2024

Oil and Gas Markets

Revenue from our Oil and Gas Markets products for fiscal year 2024 increased $3.5 million, or 4.7%, from fiscal year 2023.

The components of this increase were as follows:

Traditional Exploration Product Revenue – Revenue from our traditional products decreased $2.4 million, or 19.5% from the prior fiscal year.

The decrease primarily reflects lower demand for our sensor and marine products.

Wireless Exploration Product Revenue – Revenue from our wireless exploration products increased $6.2 million, or 10.2%, from the prior fiscal year.

This increase was largely due a $30.0 million sale of our Mariner™ shallow water ocean bottom nodes and a $10.5 million sale of our shallow water OBX 750E nodes, both of which replaced rental contracts with the customers.

This increase was largely offset by a decrease in utilization of our OBX rental fleet.

Revenue from our Smart Water products for fiscal year 2025 increased $3.4 million, or 10.4%, from the prior fiscal year.

The increase was primarily due to an increase in demand for our Hydroconn® cable and connector products.

Operating Income

Operating income associated with our Oil and Gas Markets products for fiscal year 2024 was $13.1 million, a decrease of $2.6 million, or 16.7%, from the prior fiscal year.

The decrease in operating income was primarily due to lower utilization of our OBX rental fleet, of which its cost is primarily fixed depreciation.

This decrease was partially offset by lower research and development costs.

Adjacent Markets

Revenue from our Adjacent Markets products for fiscal year 2024 increased $6.6 million, or 13.4%, from the prior fiscal year.

The components of this increase were as follows:

Industrial Product Revenue and Services – Revenue from our industrial products increased $6.2 million, or 16.8%, from the prior fiscal year.

The increase was primarily due to higher demand for our water meter products.

Imaging Product Revenue – Revenue from our imaging products increased $0.4 million, or 3.2%, from the prior fiscal year.

The increase was primarily due to higher demand for our film products, partially offset by a decrease in demand for our imaging equipment.

Operating income from our Smart Water products for fiscal year 2025 decreased $3.6 million, or 38.5%, from the prior fiscal year.

The decrease was primarily due to an increase in sales and marketing and research and development costs associated with our increase in revenue.

The decrease was also attributable to lower gross margins due to changes in the mix of products sold proportionally affecting the allocation of manufacturing overhead and other costs of revenue to our business segments.

Energy Solutions

Revenue from our Energy Solutions products for fiscal year 2025 decreased $27.3 million, or 35.0%, from fiscal year 2024.

The components of this decrease were as follows:

Product Revenue – Product revenue decreased $14.3 million, or 24.3%, from the prior fiscal year.

The decrease was primarily due to lower demand for our ocean bottom nodes.

Revenue for fiscal year 2025 included a $17 million sale of ocean bottom nodes and $11 million in sales of our wireless land-based Pioneer™.

However, in comparison, revenue for fiscal year 2024 included a $30 million sale of our Mariner® shallow water ocean bottom nodes and an $11 million sale of our shallow water OBX 750E nodes.

Rental Revenue – Rental revenue decreased $13.0 million, or 68.0%, from the prior fiscal year.

The decrease was due to lower utilization of our ocean bottom nodes rental fleet.

The decrease for fiscal year 2025 was also attributable to the reversal of a $2.2 million receivable from a rental customer against rental revenue during the second quarter of fiscal year 2025.

We determined the collectability of this receivable was less than probable.

Any future cash received from this customer will be recognized as rental revenue.

Operating Income

Operating income from our Adjacent Markets products for fiscal year 2024 was $14.2 million, an increase of $2.7 million, or 23.2%, from the prior fiscal year.

The increase in operating income was primarily due to the increase in revenue and gross margin improvements.

The increase was partially offset by (i) an increase in operating expenses resulting from the increased revenue and (ii) higher research and development expense.

Emerging Markets

Revenue from our Emerging Markets products for fiscal year 2024 was $2.2 million, compared to $1.2 million from the prior fiscal year.

The increase in revenue was primarily due to revenue recognized on $1.5 million government contract completed in third quarter of fiscal year 2024.

Operating income associated with our Energy Solutions products for fiscal year 2025 decreased $18.2 million, or 97.9%, from the prior fiscal year.

The decrease was primarily due to (i) the decrease in revenues and related gross profits and (ii) higher research and development expenses, primarily personnel costs.

Intelligent Industrial

Revenue from our Intelligent Industrial products for fiscal year 2025 decreased $0.9 million, or 3.7%, from the prior fiscal year.

The decrease was primarily due to (i) revenue recognized for fiscal year 2024 on a government contract completed in the fourth quarter of fiscal year 2024 and (ii) lower demand for our imaging products.

The decrease was partially offset by an increase in demand for our sensor products and contract manufacturing services.

Operating Loss

Operating loss from our Emerging Markets products for fiscal year 2024 was $6.2 million, compared to $4.0 million from the prior fiscal year.

The increase in operating loss for fiscal year 2024 was primarily due a $2.8 million non-cash impairment of intangible assets.

Operating loss from our Intelligent Industrial products for fiscal year 2025 decreased $2.4 million, or 35.3%, from the prior fiscal year.

The decrease in operating loss was primarily due to a $2.8 million non-cash impairment of intangible assets recorded in the prior fiscal year.

The decrease in operating loss for fiscal year 2025 was partially offset by (i) the decrease in revenue and (ii) lower gross margins due to changes in the mix of products sold proportionally affecting the allocation of manufacturing overhead and other costs of revenue to our business segments.

Liquidity and Capital Resources

At September 30, 2024, we had approximately $37.1 million in cash and cash equivalents and short-term investments.

For the fiscal year ended September 30, 2024, we used $9.1 million of cash from operating activities.

Our net loss of $6.6 million was offset by net non-cash charges of $18.8 million resulting from deferred income taxes, depreciation, amortization, impairment, accretion, inventory obsolescence, stock-based compensation and provision for credit losses.

Other uses of cash included a (i) $11.0 million increase in inventories for the strategic purchase of long lead components needed for use in wireless products, valves and contract manufacturing and (ii) $3.0 million decrease in other liabilities due to the return of customer deposits on rental contracts, partially offset by an increase in our product warranty accrual and (iii) $0.3 million increase in other assets.

These uses of cash were partially offset by a (i) $6.6 million decrease in trade accounts and notes receivable primarily due to the timing of collections from customers and (ii) $2.7 million increase in accounts payable due to timing of payments to our suppliers.

For the fiscal year ended September 30, 2024, we generated cash of $3.8 million in investing activities.

Source of cash was proceeds of $32.0 million from the sale of used rental equipment.

This source of cash was partially offset by (i) $3.9 million for additions to our property, plant and equipment, (ii) $8.3 million for additions to our equipment rental fleet, (iii) net disbursements of $14.7 million for purchases of short-term investments and (iv) $1.2 million for cash disposed on sale of our subsidiary.

We expect fiscal year 2025 cash investments into our rental fleet will be approximately $3 million.

We expect fiscal year 2025 cash investments in our property, plant and equipment will be approximately $8 million.

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

For the fiscal year ended September 30, 2024, we used cash of $6.4 million from financing activities for the purchase of treasury stock pursuant to a stock buy-back program authorized by our Board of Directors.

The program authorizes us to repurchase up to $7.0 million of our common stock in open market transactions.

At September 30, 2024, $0.6 million of our common stock remains available for repurchases under the program.

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

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

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

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

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

At September 30, 2025, we had $26.3 in cash and cash equivalents.

For fiscal year 2025, we used $22.2 million of cash from operating activities.

Uses of cash included (i) our net loss of $9.7 million, offset by non-cash charges of $14.6 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for credit losses, (ii) a $7.6 million increase in inventories for the strategic purchase of long lead-time components needed for use in wireless products, valves and contract manufacturing, ( iii) $4.2 million increase in trade accounts and notes receivable due to timing of collections from customers and (iv) $1.3 million increase in other assets, primarily due to prepaid product purchases.

These uses of cash were partially offset b y a i) $4.8 increase in other liabilities primarily related to customer deposits and (ii) $2.4 million increase in trade accounts payable due to timing of payments to our suppliers.

For fiscal year 2025, we generated cash of $42.7 million in investing activities.

Sources of cash consisted of (i) $30.4 million from the sale of short-term investments, (ii) $8.7 million of proceeds from the sale of property, plant and equipment and (iii) $14.2 million in proceeds from the sale of rental equipment.

These sources of cash were partially offset by (i) $8.0 million for additions to our property, plant and equipment, (ii) $1.1 million for additions to our equipment rental fleet and (iii) $1.8 million paid for our Geovox acquisition.

We expect fiscal year 2026 cash investments in property, plant and equipment will be approximately $7 million.

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

For fiscal year 2025, we used $1.0 million from financing activities which consisted of (i) $0.4 million in debt issuance costs related the renewal of our credit agreement and (ii) $0.6 million for the purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors.

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

The program was completed in the second quarter of fiscal year 2025.

On August 29, 2025, we amended our credit agreement (“the Agreement”) with Woodforest National Bank.

The Agreement extended our revolving loan agreement, dated as of July 26, 2023, with Woodforest.

The Agreement is for a three-year term and provides a revolving credit facility with a maximum availability of $25 million.

Interest shall accrue on outstanding borrowings at 30 Day Term SOFR plus a margin equal to 2.75% per annum.

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

The Agreement is secured by substantially all of our assets, except for certain excluded property.

The Agreement requires us to maintain a minimum (i) consolidated tangible net worth of $100 million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to 1.00, in each case tested quarterly.

The Agreement also requires us to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance.

The Agreement expires in July 2025.

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

We were in compliance with all covenants under the Agreement.

The Agreement requires us to maintain (i) a minimum consolidated tangible net worth of $85 million, (ii) minimum liquidity of $10 million, and (iii) a minimum asset coverage ratio of 2.00 to 1.00.

The Agreement also requires us to maintain a springing minimum interest coverage ratio of at least 1.50 to 1.00, tested quarterly whenever (a) there is an outstanding balance on the revolving credit facility or (b) have letter of credit exposure greater than $1 million.

At September 30, 2025, we were in compliance with all covenants under the Agreement.

At September 30, 2025, we could borrow approximately $8 million without violating any debt covenants.

At September 30, 2025, we had no outstanding borrowings under the Agreement.

We do not currently anticipate the need to borrow under the Agreement;

however, we may decide to do so in the future, if needed.

Our available cash, cash equivalents and short-term investments was $37.1 million at September 30, 2024, which included $1.1 million of cash and cash equivalents held by our foreign subsidiaries and branch offices.

Our available cash and cash equivalents was $26.3 million at September 30, 2025, which included $0.8 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 2028, 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 currently believe that our cash will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

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

Contractual Obligations

Contingent Compensation Costs

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

Contingent Consideration

In August 2025, we acquired Geovox.

In connection with the acquisition, we recorded an initial contingent earn-out liability of $2.5 million.

Contingent payments, if any, will be based on eligible revenue generated during a four-year earn-out period.

The maximum amount of contingent payments is $3.3 million.

In July 2021, we acquired Aquana.

Pursuant to the merger agreement with Aquana, as amended ("the Merger Agreement"), the Company is subject to additional contingent cash payments to the former members of Aquana over a seven-year earn-out period.

The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana.

There is no maximum limit to the contingent cash payments that could be made.

The merger agreement with Aquana requires the continued employment of a certain key employee and former member of Aquana for the first four years of the six year earn-out period for any of Aquana’s former members to be eligible to receive any earn-out payments.

In accordance with ASC 805, Business 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.

The Merger Agreement requires the continued employment of a certain key employee and former member of Aquana for the first five years of the seven-year earn-out period in order for any of Aquana’s former members to be eligible for any earn-out payments.

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 are recorded as compensation expense when incurred.

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We consider many factors in selecting appropriate operational and financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these financial statements.

We continually evaluate our estimates, including those related to revenue recognition, bad debt reserves, inventory obsolescence reserves, goodwill and long-lived asset impairment.

We continually evaluate our estimates, including those related to rental revenue recognition, bad debt reserves, inventory obsolescence reserves, business acquisitions and contingent earn-out liabilities.

We base our estimates on historical experience and various other factors, including the impact from the current economic conditions that we believe to be reasonable under the circumstances.

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We perform ongoing credit evaluations of our accounts and financing receivables, and allowances are recognized for potential credit losses.

Our long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable.

The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets.

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

We conduct our evaluation of goodwill at the reporting unit level on an annual basis as of September 30 and more frequently if events or circumstances indicate that the carrying value of a reporting unit exceeds its fair value.

The guidance on the testing of goodwill for impairment provides the option to first assess qualitative factors to determine if the fair value of a reporting unit exceeds its carrying amount.

If, based on the qualitative assessment of events or circumstances, an entity determines it is more likely than not that the fair value of a reporting unit is more than its carrying amount, then it is not necessary to perform a quantitative assessment.

However, if an entity concludes otherwise, then a quantitative assessment must be performed.

If, based on the quantitative assessment, we determine that the fair value of a reporting unit is less that its carrying amount, a goodwill impairment is recognized equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of the goodwill.

We record a write-down of our inventories when the cost basis of any manufactured product, including any estimated future costs to complete the manufacturing process, exceeds its net realizable value.

Inventories are stated at the lower of cost or net realizable value.

Cost is determined on a first-in, first-out method, except that our subsidiary in the United Kingdom uses an average cost method to value their inventories.

Cost is determined on a first-in, first-out method, except that our subsidiary in the United Kingdom uses an average cost method to value its inventories.

We periodically review the composition of our inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder our ability to recover our investment in such inventories.

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

We recognize revenue from product sales and services in accordance with ASC Topic 606, Revenue from Contracts with Customers .

This standard applies to contracts for the sale of products and services and does not apply to contracts for the rental or lease of products.

Under this standard, we recognize revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services.

Revenue from product sales is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is reasonably assured.

Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract.

Our products are generally sold without any customer acceptance provisions, and our standard terms of sale do not allow customers to return products for credit.

Most of our products do not require installation assistance or sophisticated instruction.

We offer a standard product warranty, which obligates us to repair or replace our products having manufacturing defects.

We maintain a reserve for future warranty costs based on historical experience or, in the absence of historical experience, management estimates.

Revenue from engineering services is recognized as services are rendered over the duration of a project or as billed on a per hour basis.

Field service revenue is recognized when services are rendered and is generally priced on a per day rate.

We recognize rental revenue as earned over the rental period.

Rentals of our equipment generally range from daily rentals to rental periods of up to six months or longer.

We accounted for our Geovox acquisition under the acquisition method of accounting.

The total value of the consideration paid was allocated to the underlying net assets acquired, based on their respective estimated fair values.

We utilized the excess earnings method to determine the fair value of assets and liabilities acquired, including discounted cash flows, external market values, valuations on recent transactions or a combination thereof, and believe that we used the most appropriate measure to value each asset or liability.

The Company recognizes measurement-period adjustments in the reporting period in which the adjustment amounts, if any, are determined.

We established an earn-out liability in connection with our acquisition of Geovox in the fourth quarter of fiscal year 2025.

We engaged the services of a valuation firm to measure the fair value of the liability.

The valuation technique used to measure the fair value of the liability was a Monte Carlo simulation.

The primary inputs included revenue forecast, risk free rate, revenue volatility, revenue discount rate and payment discount rate.

We will review and assess the value of the liability on a quarterly basis.

Adjustments, if any, will be included as a component of earnings in the consolidated statements of operations.

We recognize rental revenue in accordance with ASC Topic 842, Leases .

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Recent Accounting Pronouncements

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

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

Management ’ s Current Outlook and Assumptions

Regarding our Oil and Gas Markets business segment, demand for our products are subject to volatile fluctuations in crude oil prices.

Regarding our Energy Solutions business segment, demand for our products is subject to volatile fluctuations in crude oil prices.

As a result of substantial declines in crude oil prices in recent years, oil and gas exploration and production companies experienced a significant reduction in cash flows resulting in sharp reductions in their capital spending budgets for oil and gas exploration-focused activities including seismic data acquisition activities.

While we experienced stronger marine nodal product sales in fiscal year 2024, the need for new seismic equipment, particularly land-based equipment, remains restrained due to our customers’ (i) limited capital resources, (ii) lack of visibility into future demand for their seismic services and (iii) in some cases, under-utilized legacy equipment.

Crude oil prices have rebounded;

however, lasting higher levels of oil and gas commodity pricing may not stabilize in the long term, thus continuing the challenging industry conditions we have experienced in previous fiscal years.

The vast majority of our oil and gas revenue in fiscal year 2024 was derived from wireless product sales and rentals.

We believe our wireless product sales and rentals will increase in fiscal year 2025, over 2024 levels, primarily driven by our recent introduction of our Mariner™ marine wireless system and our Pioneer™ land based wireless system, but we can make no assurance in this regard.

Many of our land-based traditional seismic products can be damaged, destroyed or otherwise consumed during our customer’s field operations.

We expect fiscal year 2025 demand for our land-based traditional seismic products to remain flat over fiscal year 2024 levels.

We expect that fiscal year 2025 revenue from our oil and gas reservoir products, and principally our borehole tools and services, will increase slightly over fiscal year 2024 levels.

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

These are multistage, large-scale opportunities.

If a large scale PRM order were received in fiscal year 2025, revenue would likely not be recognized until fiscal year 2026 and 2027.

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

We are aggressively marketing our SADAR technologies to security and oil and gas industry customers.

While we experienced stronger wireless land product sales in fiscal year 2025, the need for new seismic equipment, particularly traditional land-based equipment, remains restrained due to our customers’ (i) limited capital resources, (ii) lack of visibility into future demand for their seismic services and (iii) in some cases, under-utilized legacy equipment.

The vast majority of our Energy Solutions business segment revenue in fiscal year 2025 was derived from wireless product sales.

We believe our wireless product sales will moderately increase in fiscal year 2026 over 2025 levels, primarily driven by our recent introduction of our Pioneer™ land-based wireless system and our Mariner® wireless system, but we can make no assurance in this regard.

We expect that fiscal year 2026 revenue from our Energy Solutions reservoir products will increase significantly over fiscal year 2025 levels due to the PRM contract we entered into in the third quarter of 2025.

The duration of the contract is expected to be approximately 18 months.

Revenue will be recognized over the duration of the contract.

We expect fiscal year 2026 revenue from our Smart Water business segment products to increase slightly over fiscal year 2025 levels due in part to the continued increase in demand for our Hydroconn® products and growth in market acceptance in our Aquana products.

We expect fiscal year 2026 revenue from our Intelligent Industrial business segment products to increase over fiscal year 2025 levels due to our recent acquisition of Geovox's Heartbeat Detector® as well as optimism that demand for our surveillance and defense products and our contract manufacturing services will increase.

We are aggressively marketing our SADAR® technologies to both our security and oil and gas industry customers.

While marked acceptance of SADAR® as an effective analytical tool for categorizing seismic data, we continue to believe acceptance will occur.

Fiscal year 2025 revenue from our Emerging Markets products is expected to be flat or modesty increase compared to fiscal year 2024 .

Quantitative and Qualitative Disclosures about Market Risk

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What changed 10-K

Item 5. Market for Registrant’s Common Equity