What changed in this filing

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Item 1. Financial Statements

2021-05-07 compared with 2021-02-04 · 215 added, 132 removed, 352 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands except share amounts)

December 31, 2020

March 31, 2021

September 30, 2020

1 unchanged sentence

Cash and cash equivalents

Short-term investments

Trade accounts and notes receivable, net

1 unchanged sentence

Inventories, net

Asset held for sale

Assets held for sale

Prepaid expenses and other current assets

4 unchanged sentences

Property, plant and equipment, net

Operating right-of-use assets

Other intangible assets, net

4 unchanged sentences

Contingent consideration

Operating lease liabilities

Deferred revenue and other current liabilities

1 unchanged sentence

Non-current contingent consideration

Non-current operating lease liabilities

Non-current deferred revenue and other liabilities

4 unchanged sentences

Common Stock, $ .01 par value, 20,000,000 shares authorized;

13,727,971 and 13,670,639 shares

issued, respectively;

and 13,610,334 and 13,670,639 shares outstanding, respectively

13,741,096 and

13,670,639 shares issued, respectively;

and 13,465,908 and 13,670,639 shares

outstanding, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Treasury stock, at cost, 117,637 shares at December 31, 2020

Treasury stock, at cost, 275,188 shares at March 31, 2021

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

December 31, 2020

December 31, 2019

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Total revenue

12 unchanged sentences

Foreign exchange gains (losses), net

Total other income (loss), net

Total other income, net

Loss before income taxes

7 unchanged sentences

Three Months Ended

December 31, 2020

December 31, 2019

Other comprehensive income:

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Other comprehensive income (loss):

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

Foreign currency translation adjustments

Total other comprehensive income

Total other comprehensive income (loss)

Total comprehensive loss

2 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 AND 2019

FOR THE SIX MONTHS ENDED MARCH 31, 2021 AND 2020

(in thousands, except share amounts)

1 unchanged sentence

Balance at October 1, 2020

Foreign currency translation adjustments

Other comprehensive income

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

2 unchanged sentences

Balance at December 31, 2020

Balance at October 1, 2019

Foreign currency translation adjustments

Other comprehensive income

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

Forfeiture of restricted stock

Purchase of treasury stock

Stock-based compensation

Balance at March 31, 2021

Balance at October 1, 2019

Other comprehensive income

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

Stock-based compensation

Balance at December 31, 2019

Other comprehensive loss

Forfeiture of restricted stock

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

Stock-based compensation

Balance at March 31, 2020

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

2 unchanged sentences

(in thousands)

Three Months Ended

December 31, 2020

December 31, 2019

Six Months Ended

March 31, 2021

March 31, 2020

Cash flows from operating activities:

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

Deferred income tax expense (benefit)

Deferred income tax benefit

Rental equipment depreciation

1 unchanged sentence

Amortization of intangible assets

Accretion of discounts on short-term investments

Stock-based compensation expense

4 unchanged sentences

Gross profit from sale of used rental equipment

Gain on disposal of property, plant and equipment

Loss (gain) on disposal of property, plant and equipment

Gain on transfer of investment in security

Effects of changes in operating assets and liabilities:

Trade accounts and other receivables

Trade accounts and notes receivables

Unbilled receivables

8 unchanged sentences

Proceeds from the sale of used rental equipment

Net cash used in investing activities

Purchases of short-term investments

Proceeds from investment security transaction

Net cash provided by (used in) investing activities

Cash flows from financing activities:

2 unchanged sentences

Effect of exchange rate changes on cash

Increase (decrease) in cash and cash equivalents

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of fiscal year

3 unchanged sentences

Cash paid for income taxes

Note receivable in connection with sale of used rental equipment

Inventory transferred to (from) rental equipment

5 unchanged sentences

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, 2020 was derived from the Company’s audited consolidated financial statements at that date.

The consolidated balance sheet at December 31, 2020 and the consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three months ended December 31, 2020 and 2019 were prepared by the Company without audit.

The consolidated balance sheet at March 31, 2021 and the consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three and six months ended March 31, 2021 and 2020 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 intercompany balances and transactions have been eliminated.

The results of operations for the three months ended December 31, 2020 are not necessarily indicative of the operating results for a full year or of future operations.

The results of operations for the three and six months ended March 31, 2021 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 were omitted pursuant to the rules of the Securities and Exchange Commission.

11 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 December 31, 2020, cash and cash equivalents included $ 5.0 million held by the Company’s foreign subsidiaries and branch offices.

At March 31, 2021, cash and cash equivalents included $ 5.3 million held by the Company’s foreign subsidiaries and branch offices.

If the Company were to repatriate the cash held by its foreign subsidiaries, it could be required to accrue and pay taxes on any amount repatriated.

2 unchanged sentences

Recently Issued Accounting Pronouncements

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

In June 2016, the 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.

2 unchanged sentences

Early adoption is permitted.

The standard’s provisions will be applied as a cumulative-effect adjustment to

retained earnings as of the beginning of the first effective reporting period.

The Company intends to adopt this standard during the first quarter of its fiscal year ending September 30, 2024 and is currently evaluating the impact of this new guidance on its consolidated financial statements.

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

The Company intends to adopt this standard during the first quarter of its fiscal year ending September 30, 2024 and is continuing to evaluat e the impact of this new guidance on its consolidated financial statements.

In December 2019, the FASB issued guidance on simplifying the accounting for income taxes.

8 unchanged sentences

Additionally, an entity that elects early adoption must adopt all the amendments in the same period.

The Company intends to adopt this standard during the first quarter of its fiscal year ending September 30, 2022 and is currently evaluating the new guidance to determine the impact it will have on its condensed consolidated financial statements.

The Company intends to adopt this standard during the first quarter of its fiscal year ending September 30, 2022 and is continuing to evaluate the new guidance to determine the impact it will have on its condensed consolidated financial statements.

Revenue Recognition

3 unchanged sentences

The Company assesses collectability during the contract assessment phase.

In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or non-refundable cash is received from its customers.

In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or when non-refundable cash is received from its customers.

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

13 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.

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

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

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

Revenue recognized under the contract for fiscal year 2020 and for the three months ended December 31, 2020 was $ 0.3 million and $ 8.8 million, respectively.

The Company had unbilled receivables of $ 4.3 million at December 31, 2020 under this contract.

Unrecognized revenue for unsatisfied performance obligations on this contract at December 31, 2020 was approximately $ 1.6 million.

The Company anticipates the majority of the revenue on the remaining performance obligation on this contract will be recognized in the second or third quarter of fiscal year 2021.

Unsatisfied performance obligations on all other contracts held by the Company at December 31, 2020 had an original duration of one year or less.

At December 31, 2020 and September 30, 2020, the Company had deferred contract liabilities of zero dollars and $ 0.2 million, respectively, which are included in current liabilities on the Company’s consolidated balance sheet as a component of deferred revenue and other liabilities.

The Company had no deferred contract costs at December 31, 2020 and September 30, 2020.

During the three months ended December 31, 2020 and 2019, revenue of $ 0.2 million and zero dollars, respectively, was recognized from deferred contract liabilities.

No cost of revenue was recognized from deferred contract costs for the three months ended December 31, 2020 and 2019.

Revenue recognized under the contract for fiscal year 2020 and for the six months ended March 31, 2021 was $ 0.3 million and $ 8.9 million, respectively.

The Company had unbilled receivables of $ 2.7 million at March 31, 2021 under this contract.

Unrecognized revenue for unsatisfied performance obligations on this contract at March 31, 2021 was approximately $ 1.3 million.

The Company anticipates the revenue on the remaining performance obligation on this contract will be recognized in fiscal year 2021.

Unsatisfied performance obligations on all other contracts held by the Company at March 31, 2021 had an original duration of one year or less.

At March 31, 2021, the Company had no deferred contract costs or deferred contract liabilities.

At September 30, 2020, the Company had no deferred contract costs and $ 0.2 million deferred contract liabilities, which are included in current liabilities on the Company’s consolidated balance sheet as a component of deferred revenue and other liabilities.

During the three and six months ended March 31, 2021, no revenue and $ 0.2 million, respectively, was recognized from deferred contract liabilities.

During the three and six months ended March 31, 2020, no revenue was recognized from deferred contract liabilities.

No cost of revenue was recognized from deferred contract costs for the three and six months end March 31, 2021 and 2020.

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

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

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

As a result, the Company has no t recognized any revenue or cost of revenue on the product sale.

The Company has received payments from the customer totaling $ 5.3 million (exclusive of interest) as of December 31, 2020 related to the product sale, which is reflected on the Company’s consolidated balance sheet as non-current deferred revenue.

Management does not intend to recognize revenue and cost of revenue from the product sale until it becomes probable that the customer will satisfy its financial obligation to the Company.

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

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

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

The customer is current on its payment obligations and has made payments totaling $ 6.1 million (exclusive of interest) as of March 31, 2021 related to the product sale.

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

1 unchanged sentence

Three Months Ended

December 31, 2020

December 31, 2019

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Oil and Gas Markets

12 unchanged sentences

Three Months Ended

December 31, 2020

December 31, 2019

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

United States

1 unchanged sentence

If the ultimate destination is not known, revenue is attributable to countries based on the geographic location of the initial shipment.

Short-term Investments

The Company classifies its short-term investments as available-for-sale securities.

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

No realized gains or losses were recognized during the three and six months ended March 31, 2021 and 2020.

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

As of March 31, 2021 (in thousands)

Amortized Cost

Unrealized Gains

Unrealized Losses

Estimated Fair

Short-term investments:

Corporate bonds

The Company had no short-term investments at September 30, 2020.

The Company’s short-term investments had contractual maturities ranging from September 2021 to May 2022 .

Investment in Debt Security

On July 13, 2020, the Company received an interest in a senior secured bond issued from an international seismic marine customer.

The Company’s interest in the bond, which has a face value of $ 13.0 million, was received in exchange for $

13.0 million of unpaid invoices and late fees owed by the customer.

The Company’s interest in the bond, which has a face value of $ 13.0 million, was received in exchange for $ 13.0 million of unpaid invoices and late fees owed by the customer.

The bond is secured by a third in line lien on the assets owned by the customer and has an 8 % interest rate with bi-annual interest and possible principal payments based on available excess cash flows.

4 unchanged sentences

however, the actual marketability of the bond is unknown at this time.

As of September 30, 2020, the Company performed a fair value assessment of the investment to determine the bond’s initial carrying amount.

Upon receipt of the senior secured bond, the Company performed a fair value assessment of the investment to determine the bond’s initial carrying amount.

In accordance with ASC 825, “Fair Value Instruments”, the Company has determined that the investment is a Level 3 financial instrument primarily due to its current unknown marketability.

Because of the distressed financial condition of the customer, the Company believed the fair value of the bond was nominal at September 30, 2020.

In January 2021, the Company sold the bond for $ 0.3 million cash pursuant to a purchase agreement (the “Agreement”) entered with a third party (the “Buyer”).

Pursuant to the Agreement, the Company will also receive additional cash compensation of $ 2.4 million from the Buyer if certain terms and conditions between the Buyer and the Company’s customer are met by December 31, 2021.

In the event these terms and conditions are not met, the Company has the option to repurchase the bond from the Buyer for one dollar ($ 1.00 ).

Because of the distressed financial condition of the customer, the Company believes the fair value of the bond is nominal.

In January 2021, the Company transferred the security pursuant to a purchase agreement (the “Agreement”) entered with a third party (the “Buyer”).

Pursuant to the Agreement, the Company received non-refundable consideration of $ 0.3 million and will receive additional cash compensation of $ 2.4 million from the Buyer if certain terms and conditions between the Buyer and the Company’s customer are met by December 31, 2021.

In the event these terms and conditions are not met, the Company has the option to reacquire the bond from the Buyer for one dollar US ($ 1.00 ).

The Company recognized a gain on investment of $ 0.3 million during the three months ended March 31, 2021 in connection with the transfer of the bond.

Fair Value of Financial Instruments

The Company’s financial instruments generally include cash and cash equivalents, trade accounts, notes receivables and accounts payable.

Due to their short-term maturities, 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, notes receivable and accounts payable.

Due to the short-term maturities of cash and cash equivalents, trade accounts, 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 valuation technique used to measure the fair value of the contingent consideration was derived from models utilizing market observable inputs.

The Company measures its contingent consideration at fair value on a recurring basis.

The following tables present the fair value of the Company’s contingent consideration by valuation hierarchy and input (in thousands):

As of December 31, 2020

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

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

As of March 31, 2021

Quoted Prices in

1 unchanged sentence

Identical Assets

Contingent consideration - current portion

Non-current contingent consideration

Short-term investments:

Corporate bonds

Contingent consideration:

Current portion

Non-current portion

Total liabilities

As of September 30, 2020

3 unchanged sentences

Non-current contingent consideration

Assets and Liabilities Measured on a Nonrecurring Basis

The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the three months ended December 31, 2020:

The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the six months ended March 31, 2021:

Balance at October 1, 2020

1 unchanged sentence

Balance at December 31, 2020

Adjustments to the fair value of the contingent consideration are based on Monte Carlo simulations utilizing inputs which include market comparable information and management assessments regarding potential future scenarios.

The Company believes its estimates and assumptions are reasonable, however, there is significant judgement involved.

Fair value adjustments

Balance at March 31, 2021

Adjustments to the fair value of the contingent consideration are based on Monte Carlo simulations or the probability-weighted expected return method utilizing inputs which include market comparable information and management assessments regarding potential future scenarios.

The Company believes its estimates and assumptions are reasonable, however, there is significant judgment involved.

Trade Accounts and Notes Receivable

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

December 31, 2020

March 31, 2021

September 30, 2020

5 unchanged sentences

Notes receivable are reflected in the following table (in thousands):

December 31, 2020

March 31, 2021

September 30, 2020

3 unchanged sentences

Promissory notes receivable are generally collateralized by the products sold, and bear interest at rates ranging up to 8 % per year.

The promissory notes receivable (including the unrecognized $ 10.0 million promissory note receivable disclosed below) mature at various times through January 2023 .

The promissory notes receivable mature at various times through January 2023 .

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

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

The note has a three-year term and bears interest at 7 % per year.

Principal and interest payments of $ 0.3 million are due monthly until maturity.

Due to the financial condition of the customer, the note receivable is not reflected on the Company’s consolidated balance sheet due to collectability concerns.

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

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

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

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

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

See Note 2 for more information on this matter.

During the first quarter of fiscal year 2021, the Company entered into a $ 13.2 million short-term promissory note with a customer related to the sale of rental equipment and an outstanding receivable balance.

The note bears interest at 8 % per annum and is due on or before March 31, 2021 .

Principal payments due under the note of $ 6.0 million were received from the customer in January 2021.

The note, which bore interest at 8 % per annum, was paid during the three months ended March 31, 2021 .

Inventories consist of the following (in thousands):

December 31, 2020

March 31, 2021

September 30, 2020

5 unchanged sentences

Non-current portion

Raw materials include semi-finished goods and component parts that totaled approximately $ 24.6 million and $ 24.3 million at December 31, 2020 and September 30, 2020, respectively.

Raw materials include semi-finished goods and component parts that totaled approximately $ 28.5 million and $ 24.3 million at March 31, 2021 and September 30, 2020, respectively.

The Company has elected not to record operating right-of-use assets or operating lease liabilities on its consolidated balance sheet for leases having a minimum term of 12 months or less.

Such leases are expensed on a straight-line basis over the lease term.

The Company has one operating right-of use asset related to a leased facility in Austin, Texas.

The lease commenced in May 2019 and is for a two-year term.

The operating right-of-use asset had a balance of $ 40,000 as of December 31, 2020.

Future minimum lease payments related to the operating lease as of December 31, 2020 was $ 42,000 , all of which is due in fiscal year 2021.

Operating lease costs are recorded in a single expense in the consolidated statements of operations and allocated to the right-of-use asset and the related lease liability as amortization expense and interest expense, respectively.

Right-of-use asset operating lease costs of $ 38,000 and $ 38,000 and short-term lease costs of $ 74,000 and $ 76,000 , both included as a component of total operating expenses, were recognized for the three months ended December 30, 2020 and 2019, respectively.

The discount rate used on the operating right-of-use asset was 5 %, which represented the Company’s incremental borrowing rate at the lease’s inception.

Supplemental cash flow information related to the operating right-of-use asset is a follows (in thousands):

As of March 31, 2021, the Company has two operating right-of-use assets related to leased facilities in Austin, Texas and Cocoa Beach, Florida.

Maturities of the operating lease liabilities as of March 31, 2021 were as follows:

(in thousands):

For fiscal years ending September 30,

2021 (remainder)

Future minimum lease payments

Less interest

Present value of minimum lease payments

Less current portion

Long-term portion

Lease costs recognized in the consolidated statements of operations for the three and six months ended March 31, 2021 and 2020 is as follows (in thousands):

Three Months Ended

December 31, 2020

December 31, 2019

Cash paid for amounts included in the measurement of lease liability

The Company has entered into a new operating lease on a facility in Austin, Texas which commences in March 2021.

The Company will record the lease as an operating right-of-use asset in the second quarter of fiscal year 2021.

The lease has a seven-year term with future minimum lease payments of $ 0.9 million.

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Right-of-use operating lease costs

Short-term lease costs

Right-of-use operating lease costs and short-term lease costs are included as a component of total operating expenses.

Other information related to operating leases is as follows (in thousands):

Six Months Ended

March 31, 2021

March 31, 2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating lease assets obtained in exchange for new lease liabilities

Weighted average remaining lease term

Weighted average discount rate

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

The Company leases equipment to customers primarily for terms of six months or less.

4 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 December 31, 2020, the Company had lease receivables from customers, net of reserves, of $ 3.9 million.

Rental revenue for the three months ended December 31, 2020 and 2019 was $ 1.7 million and $ 8.6 million, respectively.

At December 31, 2020, future minimum lease obligations due from the Company’s leasing customers (all in fiscal year 2021) were $ 3.0 million.

As of March 31, 2021, the Company had lease receivables from customers, net of reserves, of approximately $ 1.8 million.

Rental revenue for the three and six months ended March 31, 2021 was $ 2.3 million and $ 4.0 million, respectively.

Rental revenue for the three and six months ended March 31, 2020 was $ 16.4 million and $ 25.0 million, respectively.

At March 31, 2021, future minimum lease obligations due from the Company’s leasing customers (all in fiscal year 2021) were $ 7.1 million.

Rental equipment consisted of the following (in thousands):

December 31, 2020

March 31, 2021

September 30, 2020

1 unchanged sentence

Accumulated depreciation and impairment

Asset Held for Sale

During the second quarter of fiscal year 2021, the Company entered into a memorandum of understanding with a customer to lease land-based wireless seismic rental equipment from its rental fleet.

The transaction is expected to be in the form of a sales-type lease with ownership of the equipment transferring to the customer upon completion of the lease, which has a term of six months .

The carrying amount of the equipment to be leased is $ 1.3 million and has been reclassified from rental equipment to assets held for sale on its consolidated balance sheet as of March 31, 2021.

Total lease payments due from the customer under the lease exceed the equipment’s carrying value.

The Company anticipates the transaction will be consummated during the third quarter of fiscal year 2021.

Assets Held for Sale

Property, Plant & Equipment

The Company owns a property located in Bogot á , Colombia that it is marketing for sale.

The property was used for warehousing its rental equipment operations, product sales and service support to its customers in South America.

The property’s carrying value at December 31, 2020 and September 31, 2020 of $ 0.7 million and $ 0.6 million, respectively, is classified as assets held for sale in the accompanying consolidated balance sheets as of December 31, 2020 and September 30, 2020.

The property’s carrying value at March 31, 2021 and September 30, 2020 of $ 0.5 million and $ 0.6 million, respectively, is classified as an asset held for sale in the accompanying consolidated balance sheets as of December 31, 2020 and September 30, 2020.

The Company has been marketing the property since the second quarter of fiscal year 2020.

The Company believes the fair market value of the property exceeds its carrying value and that the property will be sold within the next 12-months.

Rental Equipment

The Company classified rental equipment with a carrying value of $ 1.3 million as assets held for sale on its consolidated balance sheet as of March 31, 2021.

See Note 7 for more information.

Goodwill and Other Intangible Assets

2 unchanged sentences

Lives (in years)

December 31, 2020

March 31, 2021

September 30, 2020

6 unchanged sentences

The Company’s goodwill is entirely associated with its Emerging Markets reporting unit.

At December 31, 2020, the Company determined there were no triggering events requiring an impairment assessment of its goodwill and other intangible assets.

Other intangible assets amortization expense for each of the three months ended December 31, 2020 and 2019 was $ 0.4 million.

As of December 31, 2020, future estimated amortization expense of other intangible assets is as follows (in thousands):

At March 31, 2021, the Company determined there were no triggering events requiring an impairment assessment of its goodwill and other intangible assets.

Other intangible assets amortization expense was $ 0.4 million for each of the three months ended March 31, 2021 and 2020 and $ 0.9 million for each of the six months ended March 31, 2021 and 2020.

As of March 31, 2021, future estimated amortization expense of other intangible assets is as follows (in thousands):

For fiscal years ending September 30,

1 unchanged sentence

Stock-Based Compensation

During the three months ended December 31, 2020, the Company issued 154,950 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as amended (the “Plan”).

During the six months ended March 31, 2021, the Company issued 189,950 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as amended (the “Plan”).

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

1 unchanged sentence

The grant date fair value of the RSUs was $ 1.3 million, which will be charged to expense over the next four years as the restrictions lapse.

Compensation expense for RSUs was determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of units that are anticipated to fully vest.

Compensation expense for RSUs was

determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of units that are anticipated to fully vest.

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

As of December 31, 2020, the Company had unrecognized compensation expense of $ 3.1 million relating to RSUs that is expected to be recognized over a weighted average period of 3.2 years.

As of December 31, 2020, the Company had $ 0.7 million of unrecognized compensation expense related to restricted stock awards (“RSAs”) that is expected to be recognized over a weighted average period of 1.1 years.

As of December 31, 2020, there were 315,375 RSUs, 53,472 RSAs and 38,800 nonqualified stock options outstanding.

As of March 31 , 202 1 , the Company had unrecognized compensation expense of $ 3.1 million relating to RSUs that is expected to be recognized over a weighted average period of 2.8 years .

As of March 31, 2021, the Company had $ 0.5 million of unrecognized compensation expense related to restricted stock awards (“RSAs”) that is expected to be recognized over a weighted average period of 0.9 years.

As of March 31, 2021, there were 334,687 RSUs, 48,847 RSAs and 38,800 nonqualified stock options outstanding.

Loss Per Common Share

1 unchanged sentence

Three Months Ended

December 31, 2020

December 31, 2019

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Loss allocable to unvested restricted stock

8 unchanged sentences

Loss per share:

For the calculation of diluted loss per share for the three months ended December 31, 2020, 38,800 stock options and 315,375 non-vested RSUs were excluded in the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive.

For the calculation of diluted loss per share for the three months ended December 31, 2019, 165,600 stock options and 253,320 non-vested RSUs, respectively, were excluded in the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive.

For the calculation of diluted loss per share for the three and six months ended March 31, 2021, 38,800 stock options and 334,687 non-vested RSUs were excluded in the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive.

For the calculation of diluted loss per share for the three and six months ended March 31, 2020, 103,100 stock options and 265,220 non-vested RSUs, respectively, were excluded in the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive.

Commitments and Contingencies

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At September 30, 2020, the contingent earn-out liability was valued at $ 5.8 million.

During the three months ended December 31, 2020, the Company recorded an adjustment of $ 0.8 million to decrease the liability to an estimated fair value of $ 5.0 million.

The decrease in the earn-out liability for the three months ended December 31, 2020 was due to a decrease in projected eligible revenue.

During the six months ended March 31, 2021, the Company recorded an adjustment of $ 0.8 million to decrease the liability to an estimated fair value of $ 5.0 million.

The decrease in the earn-out liability for the six months ended March 31, 2021 was due to a decrease in projected eligible revenue.

The Company made a cash earn-out payment of $ 0.1 million in fiscal year 2020 to the former shareholders of Quantum.

The Company plans to make an additional earn-out payment of approximately $ 2.3 million in the fourth quarter of fiscal year 2021.

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

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At September 30, 2020, the contingent earn-out liability was valued at $ 5.2 million .

During the three months ended December 31, 2020, the Company recorded an adjustment of $ 0.1 million to increase the liability to an estimated value of $ 5.3 million.

During the six months ended March 31, 202 1 , the Company recorded an adjustment of $ 0.1 million to de crease the liability to an estimated value of $ 5.1 million.

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

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The Company leases office space and certain equipment for terms of seven years or less.

As of December 31, 2020, future minimum lease obligations, inclusive of leases which have not yet commenced, were $ 0.9 million.

As of March 31, 2021, future minimum lease payment obligations were $ 1.5 million.

Legal Proceedings

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Three Months Ended

December 31, 2020

December 31, 2019

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Oil and Gas Markets

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Emerging Markets

Consolidated income tax expense for the three months ended December 31, 2020 and 2019 was $ 0.1 million and $ 1.4 million, respectively.

This decrease in income tax expense was primarily the result of a decrease in rental revenue earned in foreign jurisdictions requiring tax withholding.

Consolidated income tax expense for the three and six months ended March 31, 2021 was $ 0.1 million and $ 0.1 million, respectively.

Consolidated income tax expense for the three and six months ended March 31, 2020 was $ 0.6 million and $ 2.0 million, respectively.

This decrease in fiscal year 2021 income tax expense was primarily the result of a decrease in rental revenue earned in foreign jurisdictions requiring tax withholding.

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

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Concentration of Credit Risk

As of December 31, 2020, the Company had a note receivable of $ 13.2 million due from one customer, of which $ 6.0 million was received in January 2021.

Revenue recognized from this customer during the three months ended December 31, 2020 was $ 11.2 million.

Current assets at December 31, 2020 also included unbilled receivables from one customer of $ 4.3 million.

Revenue recognized from this customer during the three months ended December 31, 2020 was $ 8.8 million.

As of March 31, 2021, the Company had combined trade accounts and notes receivable and unbilled receivables from three customers of $ 6.9 million, $ 4.2 million and $ 1.0 million.

During the six months ended March 31, 2021, revenue recognized from these three customers was $ 13.2 million, $ 12.7 million and $ 8.9 million, respectively.

COVID-19 Pandemic

The ongoing COVID-19 pandemic has spread across the globe and has negatively impacted worldwide economic activity, including the global demand for oil and natural gas, and continues to create challenges in the Company’s markets.

In addition to measures the Company has taken voluntarily, the government authorities in the Company’s markets have taken actions to mitigate the

spread of COVID-19, including travel restrictions, border closings, restrictions on public gatherings, stay-at-home orders and other quarantine and isolation measures.

In addition to measures the Company has taken voluntarily, the government authorities in the Company’s markets have taken actions to mitigate the spread of COVID-19, including travel restrictions, border closings, restrictions on public gatherings, stay-at-home orders and other quarantine and isolation measures.

Following the initial outbreak of the virus, the Company experienced disruptions in its supply chain, a reduction in demand for certain products, cancellation of rental contracts and difficulty with field employees and salespeople traveling domestically and abroad to conduct the Company’s business.

COVID-19 continues to pose the risk that the Company or its employees, contractors, suppliers and customers may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to restrictions that may be requested or mandated by governmental authorities, including quarantines of certain geographic areas, restrictions on travel and other restrictions that prohibit employees from going to work, both around the world as well as in certain jurisdictions in the United States.

The continued spread of COVID–19 and the related mitigation measures ha ve disrupt ed the Company’s supply chain, resulting in longer lead times in materials shipped from suppliers and extended the shipping time for these materials to reach the Company’s facilities.

COVID-19 continues to pose the risk that the Company or its employees, contractors, suppliers and customers may be prevented from conducting business activities for an indefinite period of time, including potential spread of the disease within these groups or restrictions that may be requested or mandated by governmental authorities, including quarantines of certain geographic areas, restrictions on travel and other restrictions that prohibit employees from going to work, both around the world as well as in certain jurisdictions in the United States.

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

If COVID–19 continues to spread or the response to contain the COVID–19 pandemic is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and liquidity.

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In light of the decline in oil prices caused by the COVID-19 pandemic in 2020, oil and gas exploration and production companies experienced a significant reduction in cash flows, which resulted in reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic data acquisition activities.

Demand for the sale of the Company’s seismic products targeted at customers in its Oil and Gas Markets segment, which segment has historically accounted for the majority of its revenue, significantly declined during fiscal year 2020, and both product sales and rental revenue could significantly diminish during the remainder of fiscal year 2021 or beyond as a result of significant uncertainty in the outlook for oil and gas exploration.

Demand for the sale of the Company’s seismic products targeted at customers in its Oil and Gas Markets segment, which has historically accounted for the majority of its revenue, significantly declined during fiscal year 2020, and both product sales and rental revenue could significantly diminish during the remainder of fiscal year 2021 or beyond as a result of significant uncertainty in the outlook for oil and gas exploration.

Specifically, the Company expects these challenging industry conditions to result in decreased demand for its marine wireless nodal products and its land-based seismic products, as the demand for such products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general.

4 unchanged sentences

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