What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 166 added, 136 removed, 431 unchanged (41% of the section changed)

3 unchanged sentences

(in thousands except share amounts)

March 31, 2021

June 30, 2021

September 30, 2020

2 unchanged sentences

Short-term investments

Trade accounts and notes receivable, net

Trade accounts and financing receivables, net

Unbilled receivables

Inventories, net

Assets held for sale

Asset held for sale

Prepaid expenses and other current assets

Total current assets

Non-current notes receivable

Non-current financing receivables

Non-current inventories, net

26 unchanged sentences

Accumulated other comprehensive loss

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

Treasury stock, at cost, 423,999 shares at June 30, 2021

Total stockholders’ equity

5 unchanged sentences

Three Months Ended

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Total revenue

5 unchanged sentences

Change in estimated fair value of contingent consideration

Bad debt expense

Bad debt expense (recovery)

Total operating expenses

3 unchanged sentences

Interest income

Gain on investments, net

Foreign exchange gains (losses), net

9 unchanged sentences

Three Months Ended

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Other comprehensive income (loss):

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

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

Foreign currency translation adjustments

4 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE NINE MONTHS ENDED JUNE 30, 2021 AND 2020

(in thousands, except share amounts)

12 unchanged sentences

Balance at March 31, 2021

Other comprehensive income

Forfeiture of restricted stock

Purchase of treasury stock

Stock-based compensation

Balance at June 30, 2021

Balance at October 1, 2019

8 unchanged sentences

Balance at March 31, 2020

Other comprehensive income

Forfeiture of restricted stock

Stock-based compensation

Balance at June 30, 2020

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

2 unchanged sentences

(in thousands)

Six Months Ended

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

Cash flows from operating activities:

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

Deferred income tax benefit

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

Deferred income tax expense (benefit)

Rental equipment depreciation

3 unchanged sentences

Stock-based compensation expense

Bad debt expense

Bad debt expense (recovery)

Inventory obsolescence expense

3 unchanged sentences

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

Gain on transfer of investment in security

Realized gain on sale of investments, net

Effects of changes in operating assets and liabilities:

11 unchanged sentences

Purchases of short-term investments

Proceeds from investment security transaction

Net cash provided by (used in) investing activities

Proceeds from the sale of short-term investments

Proceeds from sale of investment in debt security

Net cash used in investing activities

Cash flows from financing activities:

2 unchanged sentences

Effect of exchange rate changes on cash

Decrease in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of fiscal year

3 unchanged sentences

Cash paid for income taxes

Inventory transferred to (from) rental equipment

Inventory transferred to rental equipment

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

4 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 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.

The consolidated balance sheet at June 30, 2021 and the consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three and nine months ended June 30, 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 and six months ended March 31, 2021 are not necessarily indicative of the operating results for a full year or of future operations.

The results of operations for the three and nine months ended June 30, 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.

6 unchanged sentences

The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements.

The Company continually evaluates its estimates, including those related to bad debt reserves, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets and intangible assets, contingent consideration, investment in debt security and deferred income tax assets.

The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances.

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

At June 30, 2021, cash and cash equivalents included $ 5.6 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.

42 unchanged sentences

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 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.

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

Revenue recognized under the contract for fiscal year 2020 and for the nine months ended June 30, 2021 was $ 0.3 million and $ 9.9 million, respectively.

The Company had unbilled receivables of $ 1.5 million at June 30, 2021 under this contract.

Unrecognized revenue for unsatisfied performance obligations on this contract at June 30, 2021 was approximately $ 0.3 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.

Unsatisfied performance obligations on all other contracts held by the Company at June 30, 2021 had an original duration of one year or less.

At June 30, 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 three and nine months ended June 30, 2021, no revenue and $ 0.2 million, respectively, was recognized from deferred contract liabilities.

During the three and nine months ended June 30, 2020, no revenue was recognized from deferred contract liabilities.

No cost of revenue was recognized from deferred contract costs for the three and nine months ended June 30, 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.

The note has 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.

1 unchanged sentence

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.

The customer is current on its payment obligations and has made payments totaling $ 7.0 million (exclusive of interest) as of June 30, 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

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Oil and Gas Markets

12 unchanged sentences

Three Months Ended

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

United States

4 unchanged sentences

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.

For each of the three and nine months ended June 30, 2021, the Company realized losses of $ 1,000 from the sale of short-term investments.

No gains or losses were realized during the three and nine months ended June 2020 from the sale of short-term investments.

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

As of March 31, 2021 (in thousands)

As of June 30, 2021 (in thousands)

Amortized Cost

5 unchanged sentences

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 .

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

Investment in Debt Security

5 unchanged sentences

The bond matures on July 13, 2022 .

The bond is listed on the Oslo Alternative Bond Market;

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

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.

5 unchanged sentences

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.

During the third quarter of fiscal year 2021, the Company agreed to a reduction to the additional cash compensation required from the Buyer to obtain full rights to the bond from $ 2.4 million to $ 1.8 million.

In June 2021, the Company received the $ 1.8 million from the Buyer and relinquished all rights to the bond.

The Company recognized a $ 1.7 million gain on the sale of the bond during the third quarter of fiscal year 2021.

Fair Value of Financial Instruments

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

Due to the short-term maturities of cash and cash equivalents, trade accounts, financing receivables 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.

1 unchanged sentence

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

As of June 30, 2021

Quoted Prices in

3 unchanged sentences

Corporate bonds

Contingent consideration:

Contingent consideration liabilities:

Current portion

6 unchanged sentences

Non-current contingent consideration

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:

The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the nine months ended June 30, 2021:

Balance at October 1, 2020

3 unchanged sentences

Balance at March 31, 2021

Fair value adjustments

Balance at June 30, 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 and Financing Receivables

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

March 31, 2021

June 30, 2021

September 30, 2020

4 unchanged sentences

Trade accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.

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

March 31, 2021

Financing receivables are reflected in the following table (in thousands):

June 30, 2021

September 30, 2020

Notes receivable

Promissory notes

Sales-type lease

Total financing receivables

Unearned income:

Sales-type lease

Total unearned income

Total financing receivables, net of unearned income

Less current portion

4 unchanged sentences

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.

The note has 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.

As a result, the promissory note 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 recognized the promissory note on its consolidated balance sheet as of March 31, 2021.

See Note 2 for more information on this matter.

1 unchanged sentence

The note, which bore interest at 5 % per annum, was paid during the three months ended March 31, 2021 .

During the third quarter of fiscal year 2021, the Company entered into a sales-type lease with a customer on land-based wireless seismic equipment from its rental fleet.

The lease has a term of six months .

Future minimum payments required under the lease at June 30, 2021 were $ 3.0 million, including $ 31,000 of unearned income.

The future minimum leases payments of $ 2.0 million and $ 1.0 million are due in fiscal year 2021 and 2022, respectively.

Interest income related to the lease of $ 12,000 was recognized for the three and nine months ended June 30, 2021.

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

Inventories consist of the following (in thousands):

March 31, 2021

June 30, 2021

September 30, 2020

5 unchanged sentences

Non-current portion

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.

Raw materials include semi-finished goods and component parts that totaled approximately $ 22.7 million and $ 24.3 million at June 30, 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.

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:

Variable lease payments are excluded from the measurement of operating right-of-use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

As of June 30, 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 June 30, 2021 were as follows:

(in thousands):

6 unchanged sentences

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):

Lease costs recognized in the consolidated statements of operations for the three and nine months ended June 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Right-of-use operating lease costs

2 unchanged sentences

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

Six Months Ended

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

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

5 unchanged sentences

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

All of the Company’s leasing arrangements as lessor are classified as operating leases.

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

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

See Note 5 for more information on the Company’s sales-type lease.

The Company regularly evaluates the collectability of its lease receivables on a lease by lease basis.

1 unchanged sentence

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 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.

As of June 30, 2021, the Company’s trade accounts receivables included lease receivables of $ 4.8 million.

Rental revenue for the three and nine months ended June 30, 2021 was $ 5.4 million and $ 9.4 million, respectively.

Rental revenue for the three and nine months ended June 30, 2020 was $ 15.7 million and $ 40.7 million, respectively.

At June 30, 2021, future minimum lease obligations due from the Company’s leasing customers on operating leases (all in fiscal year 2021) were $ 6.4 million.

Rental equipment consisted of the following (in thousands):

March 31, 2021

June 30, 2021

September 30, 2020

1 unchanged sentence

Accumulated depreciation and impairment

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

Asset Held for Sale

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 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 property’s carrying value at June 30, 2021 and September 30, 2020 of $ 0.6 million is classified as an asset held for sale in the accompanying consolidated balance sheets as of June 30, 2021 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)

March 31, 2021

June 30, 2021

September 30, 2020

6 unchanged sentences

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

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):

At June 30, 2021, the Company determined there were no triggering events requiring an impairment assessment of its goodwill and other intangible assets.

The Company performs its annual goodwill impairment test in the fourth quarter.

If the Company determines that the future cash flows anticipated to be generated from its Emerging Markets reporting unit will not be sufficient to recover the carrying amount of the reporting unit, it will need to recognize an impairment charge 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.

Other intangible assets amortization expense was $ 0.4 million for each of the three months ended June 30, 2021 and 2020 and $ 1.3 million for each of the nine months ended June 30, 2021 and 2020.

As of June 30, 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 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”).

During the nine months ended June 30, 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 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.

As of June 30, 2021, the Company had unrecognized compensation expense of $ 2.7 million relating to RSUs that is expected to be recognized over a weighted average period of 2.6 years.

As of June 30, 2021, the Company had $ 0.3 million of unrecognized compensation expense related to restricted stock awards (“RSAs”) that is expected to be recognized over a weighted average period of 0.6 years.

As of June 30, 2021, there were 331,999 RSUs, 46,847 RSAs and 38,800 nonqualified stock options outstanding.

Loss Per Common Share

1 unchanged sentence

Three Months Ended

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Loss allocable to unvested restricted stock

8 unchanged sentences

Loss per share:

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.

For the calculation of diluted loss per share for the three and nine months ended June 30, 2021, 38,800 stock options and 331,999 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 nine months ended June 30, 2020, 103,100 stock options and 264,375 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

10 unchanged sentences

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

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.

During the three and nine months ended June 30, 2021, the Company recorded adjustments of $ 0.9 million and $ 1.7 million, respectively, to decrease the liability to an estimated fair value of $ 4.1 million.

The decrease in the earn-out liability 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.

4 unchanged sentences

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

During the nine months ended June 30, 2021, the Company recorded a net decrease of $ 17,000 to the liability, maintaining the liability’s estimated value of $ 5.2 million at June 30, 2021.

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

1 unchanged sentence

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

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

As of June 30, 2021, future minimum lease payment obligations were $ 1.4 million.

Legal Proceedings

10 unchanged sentences

Three Months Ended

Six Months Ended

March 31, 2021

March 31, 2020

March 31, 2021

March 31, 2020

Nine Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Oil and Gas Markets

5 unchanged sentences

Emerging Markets

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.

Consolidated income tax expense for the three and nine months ended June 30, 2021 was $ 0.2 million and $ 0.3 million, respectively.

Consolidated income tax expense for the three and nine months ended June 30, 2020 was $ 0.6 million and $ 2.6 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.

2 unchanged sentences

Concentration of Credit Risk

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.

As of June 30, 2021, the Company had combined trade accounts, financing receivables and unbilled receivables from three customers of $ 5.5 million, $ 6.1 million and $ 1.6 million, respectively.

During the three months ended June 30, 2021, the revenue recognized from these three customers was $ 4.5 million, $ 0.4 million and $ 1.0 million, respectively.

During the nine months ended June 30, 2021, revenue recognized from these three customers was $ 17.3 million, $ 13.2 million and $ 9.9 million, respectively.

COVID-19 Pandemic

2 unchanged sentences

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 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.

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.

The effort to vaccinate the global population appears to be reducing the effects of COVID-19, but new mutations of the virus and the global unvaccinated population has allowed the continued spread of COVID–19.

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

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.

2 unchanged sentences

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

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

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

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

Conversely, in

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

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

8 unchanged sentences

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

Subsequent Event

On July 2, 2021 , the Company acquired 100 percent of the outstanding membership interest of Aquana, LLC, a comprehensive wireless water monitoring and control system provider (“Aquana”).

Aquana will operate as a wholly-owned subsidiary of the Company and reside in the Company’s Adjacent Markets business segment.

The acquisition purchase price for Aquana consisted of an initial cash down payment at closing of approximately $ 1.4 million, subject to adjustment, and additional contingent cash payments over a six year earn-out period.

The contingent cash payments will be derived from revenue generated during the earn-out period from products and services sold by Aquana.

The fair value of the contingent consideration has not yet been determined.

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