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

FOR THE ~~NINE MONTHS ENDED JUNE~~nine months ended June 30, 2023 and 2022 ~~AND 2021~~

																					*Common Stock*											*Accumulated*
	Common Stock											Accumulated														*Additional*						*Other*
						Additional						Other									*Shares*					*Paid-In*			*Retained*			*Comprehensive*			*Treasury*
																					*Outstanding*			*Amount*		*Capital*			*Earnings*			*Loss*			*Stock*			*Total*
Balance at October 1, 2022																						13,021,241		$	139	$	94,667		$	49,654		$	(15,313	)	$	(7,500	)	$	121,647
Net loss																						—			—		—			(97	)		—			—			(97	)
Other comprehensive income																						—			—		—			—			14			—			14
Issuance of common stock pursuant to the vesting of restricted stock units																						109,748			1		—			—			—			—			1
Stock-based compensation																						—			—		370			—			—			—			370
Balance at December 31, 2022																						13,130,989			140		95,037			49,557			(15,299	)		(7,500	)		121,935

Net income																						—			—		—			4,637			—			—			4,637
Other comprehensive loss																						—			—		—			—			(1,341	)		—			(1,341	)
Issuance of common stock pursuant to the vesting of restricted stock units																						40,500			—		—			—			—			—			-
Stock-based compensation																						—			—		306			-			—			—			306
Balance at March 31, 2023																						13,171,489			140		95,343			54,194			(16,640	)		(7,500	)		125,537

Net income																						—			—		—			3,228			—			—			3,228
Other comprehensive loss																						—			—		—			—			(206	)		—			(206	)
Issuance of common stock pursuant to the vesting of restricted stock units																						15,000			—		—			—			—			—			—
Stock-based compensation																						—			—		398			—			—			—			398
Balance at June 30, 2023																						13,186,489		$	140	$	95,741		$	57,422		$	(16,846	)	$	(7,500	)	$	128,957
	Shares					Paid-In			Retained			Comprehensive			Treasury
	Outstanding			Amount		Capital			Earnings			Loss			Stock			Total
Balance at October 1, 2021		12,969,542		$	137	$	92,935		$	72,510		$	(16,320	)	$	(6,805	)	$	142,457			12,969,542		$	137	$	92,935		$	72,510		$	(16,320	)	$	(6,805	)	$	142,457
Net loss		—			—		—			(6,768	)		—			—			(6,768	)		—			—		—			(6,768	)		—			—			(6,768	)
Other comprehensive loss		—			—		—			—			(142	)		—			(142	)		—			—		—			—			(142	)		—			(142	)
Issuance of common stock pursuant to the vesting of restricted stock units		84,762			1		—			—			—			—			1			84,762			1		—			—			—			—			1
Purchase of treasury stock		(72,563	)		—		—			—			—			(695	)		(695	)		(72,563	)		—		—			—			—			(695	)		(695	)
Stock-based compensation		—			—		536			—			—			—			536			—			—		536			—			—			-			536
Balance at December 31, 2021		12,981,741			138		93,471			65,742			(16,462	)		(7,500	)		135,389			12,981,741			138		93,471			65,742			(16,462	)		(7,500	)		135,389

Net loss		—			—		—			(1,474	)		—			—			(1,474	)		—			—		—			(1,474	)		—			—			(1,474	)
Other comprehensive loss		—			—		—			—			(1,556	)		—			(1,556	)		—			—		—			—			(1,556	)		—			(1,556	)
Issuance of common stock pursuant to the vesting of restricted stock units		37,500			1		(1	)		—			—			—			—			37,500			1		(1	)		—			—			—			-
Stock-based compensation		—			—		418			—			—			—			418			—			—		418			—			—			—			418
Balance at March 31, 2022		13,019,241			139		93,888			64,268			(18,018	)		(7,500	)		132,777			13,019,241			139		93,888			64,268			(18,018	)		(7,500	)		132,777

Net loss		—			—		—			(6,574	)		—			—			(6,574	)		—			—		—			(6,574	)		—			—			(6,574	)
Other comprehensive income		—			—		—			—			2,641			—			2,641			—			—		—			—			2,641			—			2,641
Stock-based compensation		—			—		388			—			—			—			388			—			—		388			—			—			—			388
Balance at June 30, 2022		13,019,241		$	139	$	94,276		$	57,694		$	(15,377	)	$	(7,500	)	$	129,232			13,019,241		$	139	$	94,276		$	57,694		$	(15,377	)	$	(7,500	)	$	129,232


Balance at October 1, 2020		13,670,639		$	137	$	90,965		$	86,566		$	(16,698	)	$	—		$	160,970
Net loss		—			—		—			(1,050	)		—			—			(1,050	)
Other comprehensive income		—			—		—			—			197			—			197
Issuance of common stock pursuant to the vesting of restricted stock units		57,332			—		—			—			—			—			—
Purchase of treasury stock		(117,637	)		—		—			—			—			(828	)		(828	)
Stock-based compensation		—			—		548			—			—			—			548
Balance at December 31, 2020		13,610,334			137		91,513			85,516			(16,501	)		(828	)		159,837

Net loss		—			—		—			(7,184	)		—			—			(7,184	)
Other comprehensive income		—			—		—			—			63			—			63
Forfeiture of restricted stock		(375	)		—		—			—			—			—			—
Issuance of common stock pursuant to the vesting of restricted stock units		13,500			—		—			—			—			—			—
Purchase of treasury stock		(157,551	)		—		—			—			—			(1,500	)		(1,500	)
Stock-based compensation		—			—		479			—			—			—			479
Balance at March 31, 2021		13,465,908			137		91,992			78,332			(16,438	)		(2,328	)		151,695

Net loss		—			—		—			(787	)		—			—			(787	)
Other comprehensive income		—			—		—			—			272			—			272
Forfeiture of restricted stock		(2,000	)		—		—			—			—			—			—
Purchase of treasury stock		(148,511	)		—		—			—			—			(1,260	)		(1,260	)
Stock-based compensation		—			—		483			—			—			—			483
Balance at June 30, 2021		13,315,397		$	137	$	92,475		$	77,545		$	(16,166	)	$	(3,588	)	$	150,403

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

Basis of Presentation

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, ~~2021~~2022 was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at June 30, ~~2022~~2023 and the consolidated statements of operations, comprehensive ~~loss,~~income (loss), stockholders’ equity and cash flows for the three and nine months ended June 30, ~~2022~~ 2023 and ~~2021~~2022 were prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made. All significant intercompany balances and transactions have been eliminated. The results of operations for the three and nine months ended June 30, ~~2022~~2023 are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") were omitted pursuant to the rules of the Securities and Exchange Commission. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form ~~10-K~~10-K for the Company’s fiscal year ended September 30, ~~2021.~~2022.

Use of Estimates

The preparation of financial statements in conformity ~~with accounting principles generally accepted in the United States of America~~GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. 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 revenue recognition, 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, impairment of goodwill and other intangible assets, contingent consideration 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. While management believes current estimates are reasonable and appropriate, actual results may differ from these estimates under different conditions or assumptions.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity at the time of purchase of three months or less to be cash equivalents. At June 30, 2023 and September 30, 2022, the Company had restricted cash of $~~0.1~~$0.3 million and $0.2 million, respectively. The restricted cash at June 30, 2023 consisted of collateral on a standby letter of credit and a deposit with a bank, which serves as collateral on employee issued credit cards. ~~The Company had~~ 0 ~~restricted cash at September 30, 2021.~~ At June 30, ~~2022,~~2023, cash and cash equivalents included $~~2.6~~$3.5 million held by the Company’s foreign subsidiaries and branch offices, including $~~1.4~~$2.1 million held by its subsidiary in the Russian Federation. IfIn response to sanctions imposed by the U.S. and others on Russia, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but the Company may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition, if the Company were to repatriate the cash held by its Russian subsidiary, it would be required to accrue and pay taxes on any amount repatriated. During the second quarter of fiscal year 2023, in light of recent volatility in the financial markets, the Company entered into an IntraFi Cash Service ("ICS") Deposit Placement Agreement with IntraFi Network LLC through its primary bank, Woodforest National Bank. The ICS program offers access to unlimited Federal Deposit Insurance Corporation ("FDIC') insurance on the Company's domestically held cash in excess of $5.0 million, thereby mitigating its risk of falling outside of FDIC coverage limits.

Impairment of Long-lived Assets

The Company's long-lived assets are reviewed for impairment whenever an event or circumstance indicates that the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of the 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. ~~At March 31, 2022,~~During the quarter ended June 30, 2023, no events or changes in light of the Company’s losses from operations for the six months ended March 31, 2022 and for fiscal year 2021 and the current war between Russia and Ukraine, management reviewed the recoverability ofcircumstances were identified indicating the carrying value of ~~certain~~any of the Company's asset groups based on future undiscounted cash flows and determined that their expected future cash flows exceeded their carrying value. No additional indicators of impairment were observed at June 30, 2022. As a result, no impairment charges have been necessary for the nine months ended June 30, 2022.

~~Recently Adopted Accounting Pronouncements~~

~~In December 2019, the FASB issued guidance on simplifying the accounting for income taxes. The guidance eliminates certain exceptions to the general principles in~~ ~~Topic 740~~ and clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. The Company ~~adopted~~ ~~this guidance during the~~ ~~first quarter of fiscal year 2022. The adoption of this guidance did~~ may not ~~have any impact on the Company's consolidated financial statements.~~ be recoverable.

Recently Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in generally accepted accounting principles. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other financial instruments. For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities. As a ~~small~~smaller reporting company, the Company must adopt this standard no later than the first quarter of its fiscal year ending September 30, 2024, although 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 continuing to evaluate~~does not expect the ~~impact~~adoption of this ~~new~~ guidance to have any material impact on its consolidated financial statements.

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

2. Revenue Recognition

In accordance with ASC Topic 606,Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when performance of contractual obligations are satisfied, generally when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services.

The Company primarily derives product revenue from the sale of its manufactured products. Revenue from these product sales, including the sale of used rental equipment, is recognized when obligations under the terms of a contract are satisfied, control is transferred and collectability of the sales price is probable. The Company records deferred revenue when customer funds are received prior to shipment or delivery or performance has not yet occurred. 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 when non-refundable cash is received from its customers and there is not a significant right of return. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract. The Company’s products are generally sold without any customer acceptance provisions, and the Company’s standard terms of sale do not allow customers to return products for credit.

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.

The Company also generates revenue from short-term rentals under operating leases of its manufactured products. Rental revenue is recognized as earned over the rental period if collectability of the rent is reasonably assured. Rentals of the Company’s equipment generally range from daily rentals to minimum rental periods of up to one year. The Company has determined that ASC 606 does not apply to rental contracts, which are within the scope of ASC Topic 842,Leases.

As permissible under ASC 606, sales taxes and transaction-based taxes are excluded from revenue. The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, the Company expenses costs incurred to obtain contracts when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expenses.

The Company has elected to treat shipping and handling activities in a sales transaction after the customer obtains control of the goods as a fulfillment cost and not as a promised service. Accordingly, fulfillment costs related to the shipping and handling of goods are accrued at the time of shipment. 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 an approximate $10.5~~ ~~million contract (inclusive of a subsequent contract amendment of $0.3~~ million) with the U.S. Customs and Border Protection (the “CBP”) to provide a technology solution to the Department of Homeland Security. Revenue recognized under the contract for the nine months ended

At June 30, ~~2022 and 2021 was $0.3~~ ~~million and $9.9~~ million, respectively. The Company completed this contract in the second quarter of fiscal year 2022 and has recognized revenue on the entire amount of the contract. No performance obligations remain under the contract. Unsatisfied performance obligations on all other contracts held by the Company at June 30, 2022 had an original duration of ~~one year~~ ~~or less.~~

~~At June 30, 2022 and September 30, 2021,~~2023, the Company had 0deferred contract liabilities of $1.1 million and deferred contract costs of $0.5 million. At September 30, 2022, the Company had no deferred liabilities or deferred contract ~~liabilities.~~costs. During the three and nine months ended June 30, ~~2022~~ 2023 and ~~2021,~~ 02022, no revenue was recognized from deferred contract liabilities and 0no cost of revenue was recognized from deferred contract costs.

~~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 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 Company did~~ 0t 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 was probable that the customer would satisfy its remaining payment obligations on the promissory note with the

~~Company and recognized revenue of $12.5~~ million on the product sale. During the fourth quarter of fiscal year 2021, the Company granted the customer a six-month principal payment forbearance. The customer recommenced its monthly payments to the Company in the second quarter of fiscal year 2022. The customer has made payments totaling $~~8.7~~ ~~million (exclusive of interest) as of~~ At June 30, ~~2022 related to the product sale, and the balance outstanding on the promissory note at June 30, 2022 was $~~~~3.8~~ ~~million. Deferred contract costs associated with this sale were recognized in the second quarter~~2023, all contracts had an original expected duration of ~~fiscal~~one year ~~2021.~~or less.

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

Three Months Ended

Nine Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Oil and Gas Markets

Traditional exploration product revenue

$
1,592

$
1,949

$
3,389

$
3,736

Wireless exploration product revenue

100

4,264

14,358

26,923

Reservoir product revenue

692

1,071

1,513

1,565

Total revenue

2,384

7,284

19,260

32,224

Adjacent Markets

Industrial product revenue

7,465

6,451

18,471

15,835

Imaging product revenue

3,429

2,883

9,708

7,923

Total revenue

10,894

9,334

28,179

23,758

Emerging Markets

Revenue

135

1,061

571

10,023

Corporate

Revenue

50

—

50

—

Total

$
13,463

$
17,679

$
48,060

$
66,005

	*Three Months Ended*				*Nine Months Ended*
	*June 30, 2023*		*June 30, 2022*		*June 30, 2023*		*June 30, 2022*
Oil and Gas Markets
Traditional exploration product revenue	$	3,363	$	1,592	$	9,414	$	3,389
Wireless exploration product revenue		907		100		8,077		14,358
Reservoir product revenue		523		692		810		1,513
Total revenue		4,793		2,384		18,301		19,260

Adjacent Markets
Industrial product revenue		11,678		7,465		29,250		18,471
Imaging product revenue		3,147		3,429		9,032		9,708
Total revenue		14,825		10,894		38,282		28,179

Emerging Markets
Revenue		109		135		393		571

Corporate
Revenue		—		50		—		50
Total	$	19,727	$	13,463	$	56,976	$	48,060

See Note 1314 for more information on the Company’s operating segments.

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

Three Months Ended

Nine Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Asia

$
1,223

$
4,088

$
7,580

$
16,554

Canada

577

279

1,634

1,167

Europe

1,625

3,223

14,368

6,102

United States

9,297

9,401

22,621

40,820

Other

741

688

1,857

1,362

Total

$
13,463

$
17,679

$
48,060

$
66,005

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

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 gains or losses were realized during the three and nine months ended June 30, 2023 from the sale of short-term investments. For the three and nine months ended June 30, 2022, the Company realized losses of $~~4,000~~$4,000 and $~~22,000~~,$22,000, respectively, ~~from the~~

~~sale of short-term investments. 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.

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

As of June 30, 2022 (in thousands)

Amortized Cost

Unrealized Gains

Unrealized Losses

Estimated Fair
Value

Short-term investments:

Corporate bonds

$
1,615

$
—

$
(17
)

$
1,598

	September 30, 2022 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate bonds	$	909	$	—	$	(15	)	$	894

As of September 30, 2021 (in thousands)

Amortized Cost

Unrealized Gains

Unrealized Losses

Estimated Fair
Value

Short-term investments:

Corporate bonds

$
9,511

$
—

$
(15
)

$
9,496

The ~~Company’s~~Company had no short-term investments at June 30, ~~2022 had contractual maturities ranging from July 2022 to March 2023.~~2023.

~~During the three and nine months ended June 30, 2021, the Company recognized a gain of $1.7~~ ~~million and $2.0~~ ~~million, respectively, in connection with the sale of its interest in a senior secured bond originally issued from an international seismic marine customer.~~

The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts ~~financing receivables~~and notes receivable and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts and ~~financing receivables~~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 based on internal estimates and the use of internal projections of future revenue.

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 September 30, 2022
									Quoted Prices in		Significant
									Active Markets for		Other		Significant
	As of June 30, 2022								Identical Assets		Observable		Unobservable
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals		(Level 1)		(Level 2)		(Level 3)		Totals
Short-term investments:
Corporate bonds	$	—	$	1,598	$	—	$	1,598	$	—	$	894	$	—	$	894
Total assets	$	—	$	1,598	$	—	$	1,598	$	—	$	894	$	—	$	894

Contingent consideration liabilities:									$	—	$	—	$	175	$	175
Current portion		—		—		168		168
Non-current portion		—		—		—		—
Total liabilities	$	—	$	—	$	168	$	168	$	—	$	—	$	175	$	175

11The Company had no short-term investments or contingent consideration payable at June 30, 2023.

As of September 30, 2021

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant
Other
Observable
(Level 2)

Significant
Unobservable
(Level 3)

Totals

Short-term investments:

       Corporate bonds

$
—

$
9,496

$
—

$
9,496

       Total assets

$
—

$
9,496

$
—

$
9,496

Contingent consideration liabilities:

       Current portion

$
—

$
—

$
807

$
807

Non-current portion

—

—

5,210

5,210

Total liabilities

$
—

$
—

$
6,017

$
6,017

The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the nine months ended June 30, ~~2022~~ 2023 and ~~2021~~2022 (in thousands):

Balance at October 1, 2021
$
6,017

Fair value adjustments

(5,042
)
Payment of contingent consideration

(807
)
Balance at June 30, 2022
$
168

Balance at October 1, 2020
$
10,962

Fair value adjustments

(1,713
)
Payment of contingent consideration

—

Balance at June 30, 2021
$
9,249

Contingent consideration balance at October 1, 2022	$	175
Fair value adjustments		—
Payment of contingent consideration		(175	)
Contingent consideration at June 30, 2023	$	—

Contingent consideration balance at October 1, 2021	$	6,017
Fair value adjustments		(5,042	)
Payment of contingent consideration		(807	)
Contingent consideration balance at June 30, 2022	$	168

Adjustments to the fair value of the contingent consideration ~~are~~were based on internal estimates and management assessments regarding potential future ~~scenarios. The Company believes its estimates and assumptions are reasonable, however, there is~~scenarios which involved significant ~~judgment involved. Also see Note 12.~~judgment.

5. Trade Accounts and ~~Financing Receivables~~Notes Receivable

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

June 30, 2022

September 30, 2021

Trade accounts receivable

$
12,832

$
12,635

Allowance for doubtful accounts

(542
)

(428
)
Total

$
12,290

$
12,207

	*June 30, 2023*			*September 30, 2022*
Trade accounts receivable	$	24,409		$	13,252
Allowance for doubtful accounts		(208	)		(591	)
Total	$	24,201		$	12,661

The allowance for doubtful accounts represents the Company’s best estimate of probable credit losses. The Company determines the allowance based upon historical experience and a current review of its trade accounts receivable balances. Trade accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.

~~Financing receivables~~

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

June 30, 2022

September 30, 2021

Promissory notes

$
14,416

$
5,432

Sales-type leases

—

2,464

     Total financing receivables

$
14,416

$
7,896

Unearned income:

     Sales-type leases

—

(6
)
         Total unearned income

—

(6
)
Total financing receivables, net of unearned income

14,416

7,890

Less current portion

(14,110
)

(4,952
)
Non-current notes receivable

$
306

$
2,938

	*June 30, 2023*			*September 30, 2022*
Notes receivable	$	2,108		$	8,225
Less current portion		(2,108	)		(8,225	)
Non-current notes receivable	$	—		$	—

Promissory notes receivable are generally collateralized by the products ~~sold, and bear interest at rates ranging~~sold. At June 30, 2023, the Company had one promissory note outstanding from ~~7.0% to~~ ~~9.5% per year.~~a customer with a face amount of $10.0 million. The ~~promissory notes receivable mature at various times through~~ ~~July 2023. The Company has, on occasion, extended or renewed notes receivable as they mature, but there is no obligation to do so.~~

~~During~~note originated during the second quarter of fiscal year ~~2022, the Company partially financed a $10.0~~ ~~million sale of rental equipment by entering into a $8.0~~ ~~million promissory note~~2020 in connection with a ~~customer. The note has a~~ ~~one-year~~ ~~term, with principal and interest payments due quarterly until maturity.~~

~~During the first quarter of fiscal year 2022, the Company financed a sale of rental equipment by entering into a $3.7~~ ~~million promissory note with a customer. The note has a term of~~ ~~nine months, with principal and interest payments due monthly until maturity.~~

~~During the third quarter of fiscal year 2021, the Company entered into a sales-type lease with a customer for rental equipment. The lease, which had term of~~ ~~six months, was paid during the second quarter of fiscal year 2022.~~

~~During the second quarter of fiscal year 2020, the Company partially financed a $12.5~~$12.5 million product sale ~~by entering into a $10.0~~ ~~million promissory note~~ with the customer. The note bears interest at 7.0% per year and has a three~~three-year~~-year term with monthly principal and interest payments of $~~0.3~~$0.3 million. ~~Due to~~During the financial condition of the customer, the Company had concerns over the probable collectability of the promissory note. As a result, the promissory note was not reflected on the Company’s consolidated balance sheet through its firstfourth quarter of fiscal year ~~2021. During~~2021, the Company granted the customer a six-month principal payment forbearance. The customer recommenced its monthly payments to the Company in the second quarter of fiscal year ~~2021, as a result of new information received from~~2022. In October 2022, the Company granted the customer ~~management determined that it was probable that the~~an additional six-month principal payment forbearance. The customer ~~would satisfy~~recommenced its ~~remaining payment obligations~~monthly payments to the Company in the third quarter of fiscal year 2023. The customer has made payments totaling $10.4 million (exclusive of interest) as of June 30, 2023 related to the product sale, and ~~therefore,~~ the ~~Company recognized~~balance outstanding on the promissory note ~~on its consolidated balance sheet as of March 31, 2021. See Note 2 for more information on this matter.~~at June 30, 2023 was $2.1 million. The note matures in January 2024.

6. Inventories

6. ~~Inventories~~

Inventories consist of the following (in thousands):

June 30, 2022

September 30, 2021

Finished goods

$
18,592

$
19,368

Work in process

3,758

8,247

Raw materials

48,816

43,620

Obsolescence reserve

(38,306
)

(36,936
)

32,860

34,299

Less current portion

18,868

16,196

Non-current portion

$
13,992

$
18,103

	*June 30, 2023*			*September 30, 2022*
Finished goods	$	18,176		$	14,653
Work in process		9,446			6,230
Raw materials		27,300			25,609
Obsolescence reserve (net realizable value adjustment)		(13,008	)		(13,971	)
		41,914			32,521
Less current portion		19,603			19,995
Non-current portion	$	22,311		$	12,526

Raw materials include semi-finished goods and component parts that totaled $~~23.1~~$9.3 million and $~~22.7~~$9.4 million at June 30, 2023 and September 30, 2022, respectively. At June 30,2023, non-current inventories included raw materials and work in process totaling $5.1 million that will be transferred to rental equipment during the fourth quarter of fiscal year 2023.

7. Property, Plant and Equipment

In February 2023, the Company completed the sale of its satellite property located at 6410 Langfield Road in Houston, Texas for a cash price of $3.7 million, net of closing costs of $0.3 million, and realized a gain on disposal of $1.3 million. The satellite property provided additional warehousing and maintenance and repair capacity for the Company’s marine rental equipment operations. The Company has relocated the operations of this facility to its main campus at 7007 Pinemont Drive in Houston, Texas. The sale was part of the Company’s plan to streamline operations and reduce costs.

Property, plant and equipment consisted of the following (in thousands):

	June 30, 2023			September 30, 2022
Land and land improvements	$	7,291		$	7,855
Building and building improvements		22,080			24,588
Machinery and equipment		49,588			59,393
Furniture and fixtures		1,495			1,434
Tools and molds		3,362			3,243
Construction in progress		509			341
Transportation equipment		75			74
		84,400			96,928
Accumulated depreciation and impairment		(62,481	)		(70,330	)
	$	21,919		$	26,598

Property, plant and equipment depreciation expense for the three and nine months ended June 30, 2023 was $0.9 million and $2.8 million, respectively. Property, plant and equipment depreciation expense for the three and nine months ended June 30, 2022 ~~and September 30, 2021, respectively. Finished goods and raw materials that totaled $27.1~~ was $1.0 million and $~~23.3~~$3.1 million, ~~were fully reserved at June 30, 2022 and September 30, 2021,~~ respectively.

7.8. Leases

As Lessee

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. 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, ~~2022,~~2023, the Company has 2two operating right-of-use assets related to leased facilities in Austin, Texas and Melbourne, Florida.

Maturities of the operating lease liabilities as of June 30, ~~2022~~2023 were as follows: (in thousands):

For fiscal years ending September 30,

2022 (remainder)

$
72

2023

270

2024

278

2025

186

2026

130

Thereafter

225

Future minimum lease payments

1,161

Less interest

(88
)
Present value of minimum lease payments

1,073

Less current portion

(237
)
Long-term portion

$
836

For fiscal years ending September 30,
2023 (remainder)	$	74
2024		278
2025		186
2026		130
2027		134
2028		91
Future minimum lease payments		893
Less interest		(57	)
Present value of minimum lease payments		836
Less current portion		(253	)
Non-current portion	$	583

Lease costs recognized in the consolidated statements of operations for the three and nine months ended June 30, ~~2022~~ 2023 and ~~2021~~2022 were as follows (in thousands):

Three Months Ended

Nine Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Right-of-use operating lease costs

$
68

$
67

$
204

$
178

Short-term lease costs

52

52

148

192

Total

$
120

$
119

$
352

$
370

	*Three Months Ended*				*Nine Months Ended*
	*June 30, 2023*		*June 30, 2022*		*June 30, 2023*		*June 30, 2022*
Right-of-use operating lease costs	$	68	$	68	$	204	$	204
Short-term lease costs		36		52		168		148
Total	$	104	$	120	$	372	$	352

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):


	Nine Months Ended						*Nine Months Ended*
	June 30, 2022			June 30, 2021			*June 30, 2023*			*June 30, 2022*
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	190		$	142		$	196		$	190
Operating lease assets obtained in exchange for new lease liabilities		—			1,336

Weighted average remaining lease term	4.9 years			5.8 years
Weighted average remaining lease term (in years)								4.1			4.9
Weighted average discount rate		3.25	%		3.25	%		3.25	%		3.25	%

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

As Lessor

~~Equipment~~

Equipment

The Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to one ~~year~~. year. All of the Company’s current leasing arrangements, which the Company ~~acting~~acts 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 systems.

The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. The Company suspends revenue recognition when the collectability of amounts due are no longer probable and concurrently records a direct write-off of the lease receivable to rental revenue and limits future rental revenue recognition to cash received. As of June 30, ~~2022,~~2023, the Company’s trade accounts receivables included lease receivables of $~~5.4~~$10.1 million.

Rental revenue related to leased equipment for the three and nine months ended June 30, ~~2022~~2023 was $~~7.1~~$12.9 million and $~~15.2~~$38.0 million, respectively. Rental revenue related to leased equipment for the three and nine months ended June 30, ~~2021~~2022 was $~~5.4~~$7.1 million and $~~9.4~~$15.2 million, respectively.

Future minimum lease obligations due from the Company’s leasing customers on operating leases executed as of June 30, ~~2022~~2023 were $~~7.9~~$29.9 million, all of which is expected to be due within the next 12 months. ~~An additional~~ ~~one-year~~ ~~operating lease was recently~~

~~executed and scheduled to begin in the~~ ~~fourth quarter of fiscal year 2022~~ ~~with future minimum lease obligations of $11.9~~ ~~million, the majority of which is expected to be due in fiscal year 2023.~~

Rental equipment consisted of the following (in thousands):

June 30, 2022

September 30, 2021

Rental equipment, primarily wireless recording equipment

$
85,912

$
95,827

Accumulated depreciation and impairment

(55,002
)

(56,922
)

$
30,910

$
38,905

	June 30, 2023			September 30, 2022
Rental equipment, primarily wireless recording equipment	$	80,819		$	83,887
Accumulated depreciation and impairment		(62,438	)		(55,688	)
	$	18,381		$	28,199

Property

During the first quarter of fiscal year 2022, the Company leased a portion of its property located in Calgary, Alberta, Canada and fully leased its warehouse in ~~Bogotá,~~ Colombia. The lease in Canada commenced in November 2021and is for a five~~five-year~~-year term. The lease on the warehouse in Bogotá commenced in December 2021and is ~~for~~currently on a ~~one-year~~ ~~term.~~month-to-month basis.

Rental revenue related to these 2two property leases for the three and nine months ended June 30, 2023 was $0.1 million and $0.2 million, respectively. Rental revenue related to these two properties for each of the three and nine months ended June 30, 2022 was $~~0.1~~ ~~million, respectively.~~$0.1 million.

Future minimum lease payments due to the Company as of June 30, ~~2022~~2023 on ~~these two leases were~~the lease in Canada was as follows (in thousands):

For fiscal years ending September 30,

2022 (remainder)

$
49

2023

136

2024

128

2025

131

2026

132

Thereafter

11

$
587

For fiscal years ending September 30,
2023 (remainder)	$	31
2024		128
2025		131
2026		132
2027		11
	$	433

8. 9.Goodwill and Other Intangible Assets

The Company’s consolidated goodwill and other intangible assets consisted of the following (in thousands):

Weighted-

Average

Remaining Useful

Lives (in years)

June 30, 2022

September 30, 2021

Goodwill

$
5,072

$
5,072

Other intangible assets:

Developed technology
14.4

$
6,475

$
6,475

Customer relationships
0.2

3,900

3,900

Trade names
1.3

2,022

2,022

Non-compete agreements
0.2

186

186

Total other intangible assets
7.7

12,583

12,583

Accumulated amortization

(6,672
)

(5,333
)

$
5,911

$
7,250

	*Weighted-*
	*Average*
	*Remaining Useful*
	*Lives (in years)*	*June 30, 2023*			*September 30, 2022*
Goodwill:
Emerging Markets reporting unit		$	4,336		$	4,336
Adjacent Markets reporting unit			736			736
Total goodwill			5,072			5,072
Accumulated impairment losses			(4,336	)		(4,336	)
		$	736		$	736

Other intangible assets:
Developed technology	13.4	$	6,475		$	6,475
Customer relationships	--		3,900			3,900
Trade names	0.3		2,022			2,022
Non-compete agreements	0.2		186			186
Total other intangible assets	7.0		12,583			12,583
Accumulated amortization			(7,632	)		(7,010	)
		$	4,951		$	5,573

At June 30, ~~2022,~~2023, the Company had goodwill of $~~4.3~~$0.7 million and other intangible assets, net of $~~3.6~~$0.6 million attributable to its ~~Emerging~~Adjacent Markets reporting unit; ~~goodwill of $0.7~~ ~~million and~~ other intangible assets, net of $~~0.6~~$3.1 million attributable to its ~~Adjacent~~Emerging Markets reporting unit; and other intangible assets, net of $~~1.7~~$1.3 million attributable to its Oil and Gas Markets reporting unit. Goodwill represents the excess cost of a business acquired over the fair market value of identifiable net assets at the date of acquisition.

At June 30, ~~2022,~~2023, 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 reporting units will not be sufficient to recover the carrying amount of the respective 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 asset amortization expense for ~~each of~~ the three and nine months ended June 30, 2023 was $0.2 million and $0.6 million, respectively. Other intangible asset amortization expense for the three and nine months ended June 30, 2022 ~~and 2021~~ was $~~0.4~~$0.4 million and $~~1.3~~$1.4 million, respectively.

As of June 30, ~~2022,~~2023, future estimated amortization expense of other intangible assets is as follows (in thousands):

For fiscal years ending September 30,

2022 (remainder)
$
338

2023

768

2024

395

2025

381

2026

374

Thereafter

3,655

$
5,911

For fiscal years ending September 30,
2023 (remainder)	$	145
2024		395
2025		381
2026		374
2027		360
Thereafter		3,296
	$	4,951

9.10. Long-Term Debt

The Company had no long-term debt outstanding at June 30, ~~2022~~2023 and September 30, ~~2021.~~2022.

~~In May 2022,~~

On July 26, 2023, the Company entered into a credit agreement ~~(the “Agreement”~~(“the Agreement”) with Woodforest National Bank, as sole lender. The Agreement refinanced the Company's credit agreement dated May 6, 2022, with Amerisource Funding, ~~Inc,~~Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender. ~~Available borrowings under the~~The Agreement ~~are determined by~~provides a ~~borrowing base~~revolving credit facility with a maximum availability of $10$15 million. ~~The borrowing base~~Availability under the Agreement is determined based upon a borrowing base comprised of certain of the ~~Company's~~Company’s domestic assets which include (i) 70~~% loan to value~~80% of eligible accounts, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the ~~Company's property located at 6410 Langfield Road in Houston, Texas (the “Property”), (ii)~~ 50~~% of forced~~orderly liquidation value of eligible equipment, ~~(iii)~~ 80~~% of~~in each case subject to certain ~~accounts receivable~~limitations and ~~(iv)~~ 50~~% of forced liquidation value of certain inventory (inventory borrowing base limited~~adjustments. Interest shall accrue on outstanding borrowings at a rate equal to ~~100% of borrowing base credit given toward accounts receivable). The Agreement is for~~Term SOFR (Secured Overnight Financing Rate) plus a ~~two-year~~ ~~term with all funds borrowed due at the expiration of the term. The interest rate on borrowed funds is the Wall Street prime rate (with a minimum of~~ ~~3.25%) plus~~ ~~4.00~~%.margin equal to 3.25% per annum. The Company is required to make monthly interest payments on borrowed funds. ~~Borrowings under the~~The Agreement ~~will be principally~~is secured by ~~the Property and~~substantially all of the Company's ~~domestic equipment, inventory and accounts receivables. In addition,~~assets, except for certain ~~domestic subsidiaries of the Company have guaranteed the obligations of the Company under the Agreement and such subsidiaries have secured the obligations by pledging certain assets.~~excluded property. The Agreement requires the Company to maintain a minimum (i) consolidated tangible net worth of $~~100~~ ~~million. At~~ $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 the Company to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance on the revolving credit facility. The Agreement expires in July 2025.

11. Stock-Based Compensation

During the nine months ended June 30, ~~2022, the Company was compliant with all covenants under the Agreement and its borrowing availability was $8.5~~ ~~million.~~

~~Debt issuance costs of $0.2~~ million were incurred in connection with the Agreement. These costs were capitalized in other assets on the consolidated balance sheet and are being amortized to interest expense over the term of the Agreement.

10~~. Stock-Based Compensation~~

~~During the nine months ended June 30, 2022,~~2023, the Company issued ~~200,350~~211,375 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as ~~amended (the “Plan”).~~amended. The RSUs issued include both time-based and performance-based vesting provisions. The weighted average grant date fair value of each RSU was $~~8.49~~$4.65 per unit. The grant date fair value of the RSUs was $~~1.7~~$1.0 million, which will be charged to expense over the next four years as the restrictions lapse. Compensation expense for the 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 June 30, ~~2022,~~2023, there were 379,549 RSUs outstanding. As of June 30, 2023, the Company had unrecognized compensation expense of $~~2.6~~$1.8 million relating to RSUs that is expected to be recognized over a weighted average period of 2.5 years.

~~As of June 30, 2022, the Company had $11,000~~ ~~of unrecognized compensation expense related to restricted stock awards (“RSAs”) that is expected to be recognized over a weighted average period of~~ ~~0.2~~ ~~years.~~

~~As of June 30, 2022, there were~~ ~~369,859~~ ~~RSUs and~~ ~~5,625~~ ~~RSAs outstanding. As of June 30, 2022,~~ 0 ~~nonqualified stock options were outstanding.~~

~~11.~~ ~~Loss~~12. Earnings (Loss) Per Common Share

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

Three Months Ended

Nine Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Net loss

$
(6,574
)

$
(787
)

$
(14,816
)

$
(9,021
)
Less: Loss allocable to unvested restricted stock

—

—

—

—

Loss attributable to common shareholders for
   diluted earnings per share

$
(6,574
)

$
(787
)

$
(14,816
)

$
(9,021
)
Weighted average number of common share equivalents:

Common shares used in basic loss per share

13,013,616

13,353,254

12,977,146

13,464,177

Common share equivalents outstanding related to
   stock options and RSUs

—

—

—

—

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

13,013,616

13,353,254

12,977,146

13,464,177

Loss per share:

Basic

$
(0.51
)

$
(0.06
)

$
(1.14
)

$
(0.67
)
Diluted

$
(0.51
)

$
(0.06
)

$
(1.14
)

$
(0.67
)

	*Three Months Ended*					*Nine Months Ended*
	*June 30, 2023*		*June 30, 2022*			*June 30, 2023*		*June 30, 2022*
Net income (loss)	$	3,228	$	(6,574	)	$	7,768	$	(14,816	)
Less: Income allocable to unvested restricted stock		—		—			—		—
Income (loss) attributable to common shareholders for diluted earnings (loss) per share	$	3,228	$	(6,574	)	$	7,768	$	(14,816	)
Weighted average number of common share equivalents:
Common shares used in basic earnings (loss) per share		13,171,654		13,013,616			13,131,795		12,977,146
Common share equivalents outstanding related to RSUs		149,227		—			26,124		—
Total weighted average common shares and common share equivalents used in diluted earnings (loss) per share		13,320,881		13,013,616			13,157,919		12,977,146
Earnings (loss) per share:
Basic	$	0.25	$	(0.51	)	$	0.59	$	(1.14	)
Diluted	$	0.24	$	(0.51	)	$	0.59	$	(1.14	)

For the calculation of diluted earnings per share for the three and nine months ended June 30, 2023, there were 230,322 and 364,188 non-vested RSUs, respectively, excluded from the calculation of weighted average shares outstanding since their impact on diluted earnings per share were antidilutive. For the calculation of diluted loss per share for each of the three and nine months ended June 30, 2022~~369,859~~, there were 353,425 non-vested RSUs ~~were~~ excluded infrom 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.~~

~~12.~~13. Commitments and Contingencies

~~Contingent Consideration~~

~~In connection with its acquisitions of Quantum Technology Sciences, Inc. (“Quantum”) and the OptoSeis~~® fiber optic sensing technology business, the Company recorded contingent purchase price payments, or contingent consideration, that may be owed in the future. For both acquisitions, the contingent payments are based on future receipt of contract awards and the resulting revenue derived from such contracts. The Company reviews and assesses the fair value of its contingent consideration on a quarterly basis. The determination of fair value is inherently unpredictable since it requires estimates and projections of future revenue, including the size, length, timing and, in the case of Quantum, the extent of gross profits earned under its future contracts. As a result, the Company anticipates fair value adjustments to these liabilities over the respective earn-out periods, and these adjustments will result in either charges or credits to the Company’s operating expenses when the fair value of the contingent consideration increases or decreases, respectively.

~~The Company recorded an initial contingent consideration liability of $7.7~~ million in connection with its July 2018 acquisition of Quantum. Contingent payments, if any, may be paid in the form of cash or Company stock and will be derived from eligible revenue generated during a ~~four-year~~ ~~earn-out period ended~~ ~~July 2022. The maximum amount of contingent payments is $23.5~~ ~~million over the four-year earn-out period. In fiscal year 2020, the Company made cash contingent consideration payments of $0.1~~ ~~million to the former shareholders of Quantum. In September 2021 and October 2021, the Company made additional cash earn-out payments of $1.4~~ ~~million and $0.8~~ ~~million, respectively, to the former shareholders of Quantum. The payments were primarily attributable to revenue earned on Quantum’s $10.5~~ ~~million contract with the CBP to provide a technology solution to the Department of Homeland Security. At September 30, 2021, the contingent consideration liability was valued at $0.8~~ ~~million related to projected future eligible revenue. During the nine months ended June 30, 2022, the Company recorded an adjustment of $0.6~~ ~~million to decrease the liability to an estimated value of $0.2~~ ~~million. The decrease for the nine months ended June 30, 2022 was primarily the result of timing in securing a potential second contract with the CBP caused by federal budget delays.~~

~~The Company recorded an initial contingent consideration 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. Contingent cash payments, if any, will be derived from eligible revenue generated during a~~ ~~five-and-a-half year~~ ~~earn-out period ending in~~ ~~May 2024~~. In order for revenue to be considered eligible, sales contracts must be entered into during the first four years of the earn-out period ending in November 2022. The maximum amount of contingent payments is $~~23.2~~ ~~million over the five-and-a-half year earn-out period. At September 30, 2021, the contingent consideration liability was valued at $4.4~~ ~~million. During the nine months ended June 30, 2022, the~~

~~Company recorded an adjustment of $4.4~~ ~~million to decrease the liability to~~ 0. The decrease for the nine months ended June 30, 2022 was the result of (i) the Company's decision not to provide a bid on a proposal from an oil and gas producer to manufacture a large-scale seabed permanent reservoir monitoring system under the terms and conditions presented and (ii) the unlikelihood of entering into a sales contract prior to the end of the eligibility date which is November 2022. No contingent consideration payments have been made to date on the acquisition.

Contingent Compensation Costs

In connection with the acquisition of Aquana, LLC (“Aquana”) in July 2021, the Company is subject to additional contingent cash payments to the former members of Aquana over a six~~six-year~~-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 firstfour years of the six year earn-out period in order for any of ~~Aquana��s~~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, if any, will be recorded as compensation expense when incurred. No eligible revenue has been generated to date.

~~Operating Leases~~

~~The Company leases office space and certain equipment for terms of~~ ~~seven years~~ ~~or less. Rent expense for the three and nine months ended June 30, 2022 was $0.1~~ ~~million and $0.4~~ ~~million, respectively. Rent expense for the three and nine months ended June 30, 2021 was $0.1~~ ~~million and $0.4~~ ~~million, respectively. See Note 7 for additional information.~~

Legal Proceedings

The Company is involved in various pending legal actions in the ordinary course of its business. Management is unable to predict the ultimate outcome of these actions, because of the inherent uncertainty of such actions. However, management believes that the most probable, ultimate resolution of current pending matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

~~13.~~14. Segment Information

The Company reports and evaluates financial information for ~~its~~three operating business segments: Oil and Gas Markets, Adjacent Markets and Emerging ~~Markets segments.~~Markets. The Oil and Gas Markets ~~segment~~segment's products include wireless seismic data acquisition systems, reservoir characterization products and services, and traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, cables, marine streamer retrieval and steering devices and various other seismic products. The Adjacent Markets ~~segment~~segment's products include imaging equipment, water meter products, remote shut-off valves and Internet of Things ~~(loT)~~(IoT) platform, ~~offshore cables,~~as well as and seismic sensors used for vibration monitoring and geotechnical applications such as mine safety applications and earthquake detection. The Emerging Markets segment ~~provides~~designs and markets seismic products targeted at the border and perimeter security markets.

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

Three Months Ended

Nine Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Revenue:

Oil and Gas Markets

$
9,517

$
12,649

$
34,317

$
41,544

Adjacent Markets

10,938

9,373

28,312

23,868

Emerging Markets

135

1,061

571

10,023

Corporate

101

—

182

—

Total

$
20,691

$
23,083

$
63,382

$
75,435

Income (loss) from operations:

Oil and Gas Markets

$
(3,695
)

$
(1,807
)

$
(6,209
)

$
(13,258
)
Adjacent Markets

1,841

1,997

4,341

4,819

Emerging Markets

(1,405
)

(4
)

(3,609
)

5,286

Corporate

(3,275
)

(2,625
)

(9,592
)

(8,921
)
Total

$
(6,534
)

$
(2,439
)

$
(15,069
)

$
(12,074
)

	*Three Months Ended*						*Nine Months Ended*
	*June 30, 2023*			*June 30, 2022*			*June 30, 2023*			*June 30, 2022*
Revenue:
Oil and Gas Markets	$	17,672		$	9,517		$	56,239		$	34,317
Adjacent Markets		14,862			10,938			38,392			28,312
Emerging Markets		109			135			393			571
Corporate		72			101			170			182
Total	$	32,715		$	20,691		$	95,194		$	63,382

Income (loss) from operations:
Oil and Gas Markets	$	3,238		$	(3,695	)	$	9,820		$	(6,209	)
Adjacent Markets		4,346			1,841			9,148			4,341
Emerging Markets		(1,047	)		(1,405	)		(3,267	)		(3,609	)
Corporate		(3,391	)		(3,275	)		(8,457	)		(9,592	)
Total	$	3,146		$	(6,534	)	$	7,244		$	(15,069	)

~~14.~~15. Income Taxes

Consolidated income tax expense for the three and nine months ended June 30, ~~2022~~2023 was $~~0.1~~$0.2 million and $~~0.2~~$0.3 million, respectively. Consolidated income tax expense for the three and nine months ended June 30, ~~2021~~2022 was $~~0.2~~$0.1 million and $~~0.3~~$0.2 million, respectively. The ~~Company is currently unable to record any~~primary difference between the Company's effective tax ~~benefits from~~rate of 3.3% for the ~~tax losses it incurs in the U.S., Canada~~ nine months ended June 30, 2023 and the ~~Russian Federation due~~statutory rate of 21% is adjustments to the ~~uncertainty surrounding its ability to utilize such losses in the future to offset taxable income.~~ valuation allowance against deferred tax assets.

~~15.~~16. Risks and Uncertainties

Concentration of Credit Risk

As of June 30, ~~2022,~~2023, the Company had combined trade accounts and ~~financing receivables~~notes receivable from 3two customers of $~~11.4~~ ~~million, $3.8~~$5.9 million and $~~3.1~~$4.7 million, respectively. During the three months ended June 30, ~~2022,~~2023, revenue recognized from these 3two customers was $~~3.9~~ ~~million, $0.7~~$8.0 million and 0.$3.7 million, respectively. During the nine months ended June 30, ~~2022,~~2023, revenue recognized from these 3two customers was $~~19.7~~ ~~million, $5.7~~$25.9 million and $~~0.9~~$9.3 million, respectively.

~~COVID-19~~

COVID-19 Pandemic

The ongoing ~~COVID-19~~COVID-19 pandemic has ~~spread across the globe and~~negatively has negatively impacted worldwide economic activity 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. 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 has allowed the continued spread of COVID–19. COVID-19~~COVID-19 pandemic and the related mitigation measures have disrupted the Company’s supply chain, resulting in longer lead times in materials available from suppliers and extended the shipping time for these materials to reach the Company’s facilities. If The occurrence or a resurgence of global or regional health events such as the COVID–19 ~~continues to spread or~~ pandemic, and the ~~response to contain the COVID–19 pandemic is unsuccessful, the Company~~related government responses, could ~~experience~~result in a material adverse effect on ~~its~~the Company's business, financial condition, results of operations and liquidity. As such, we continue to closely monitor COVID-19 and will continue to reassess our strategy and operational structure on a regular, ongoing basis.

Oil Commodity Price Levels

Demand for many of the Company’s products and the profitability of its operations depend primarily on the level of worldwide oil and gas exploration activity. Prevailing oil and gas prices, with an emphasis on crude oil prices, and market expectations regarding potential changes in such prices significantly affect the level of worldwide oil and gas exploration activity. During periods of improved energy commodity prices, the capital spending budgets of oil and natural gas operators tend to expand, which results in increased demand for our customers services leading to increased demand in the Company’s products. Conversely, in periods when these energy commodity prices deteriorate, capital spending budgets of oil and natural gas operators tend to contract causing demand for the Company’s products to weaken. Historically, the markets for oil and gas have been volatile and are subject to wide fluctuations in response to changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors that are beyond its control. These factors include the level of consumer demand, regional and international economic conditions, weather conditions, domestic and foreign governmental regulations (including those related to climate change), price and availability of alternative fuels, political conditions, the war between ~~Russian~~Russia and Ukraine, instability and hostilities in the Middle East and other significant oil-producing regions, increases and decreases in the supply of oil and gas, the effect of worldwide energy conservation measures and the ability of ~~OPEC~~the Organization of Petroleum Exporting Countries ("OPEC') to set and maintain production levels and prices of foreign imports.

~~Sustained low~~

Crude oil prices ~~or the failure of oil prices to rise in the future~~held above $65 per barrel throughout 2022 and the resulting downturns or lack of growth in the energy industry and energy‑related business, could have a negative impact on the Company’s results of operations and financial condition. In light of the decline in oil prices caused by the COVID-19 pandemic in 2020, oil and gas exploration and production ("E&P") companies experienced a significant reduction in cash flows, through June 2023, 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 has historically accounted for the majority of its revenue, significantly declined during fiscal year 2020, and both product sales and rental revenue diminished during the first half of fiscal year 2021 as a result of significant uncertainty in the outlook for oil and gas exploration. Recently, crude oil prices have increased, which will likely may result in higher cash flows for ~~E&P~~exploration and production companies. The Company believes E&P companies are allocating their increased levels of cash flow toward debt reduction and shareholder reward initiatives, such as stock buy-back programs and dividend payments. The Company expects low demand for its Oil and Gas Markets segment products until E&P companies redirect their cash flows towards investments in exploration activities, especially seismic exploration. Any material changes in oil and gas prices or other market trends, like slowing growth of the global economy, could adversely impact seismic exploration activity and would likely affect the demand for the Company's products and could materially and adversely affect its results of operations and liquidity.

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

Armed Conflict Between Russia and Ukraine

A portion of the Company's oil and gas product manufacturing is conducted through its wholly-owned subsidiary Geospace Technologies Eurasia LLC ("GTE"), which is based in the Russian Federation. In February 2022, the Russian Federation launched a full-scale military invasion of ~~Ukraine.~~Ukraine, and Russia and Ukraine continue to engage in active and armed conflict. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions in addition to any direct impact on the Company's operations in Russia. ~~The United States,~~As a result of the invasion, the governments of several western nations, including the U.S., Canada, the United Kingdom and the EUEuropean Union, implemented new and/or expanded economic sanctions and export restrictions against Russia, Russian-backed separatist regions in Ukraine, certain banks, companies, government officials, and other ~~countries have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties~~individuals in ~~and associated with~~ Russia and ~~additional sanction packages~~Belarus. The implementation of these sanctions and exports restrictions, in combination with the withdrawal of numerous private companies from the Russian market, has had, and is likely to ~~constrain Russia have been and~~ continue to ~~be proposed and adopted. United States sanctions against Russia~~ have, ~~been expanded to preclude~~a negative impact on the ~~export of oil and gas equipment anywhere~~Company's business in the ~~world that involve persons designated under the sanctions and to include projects in which persons subject to the sanctions have a~~ 33% ownership interest or a majority of voting interests. Together, these changes make it more difficult for the Company to support projects that have the potential to produce oil involving Russian energy companies. Furthermore, if an exporter is unable to determine whether its equipment will be used in such projects, the export is prohibited. Inregion. During fiscal year ~~2021,~~2022 the Company imported $~~1.2~~$1.9 million of products from ~~Geospace Technologies Eurasia LLC~~GTE for resale elsewhere in the ~~world.~~world and since then has imported $3.2 million of products during the firstnine months of fiscal year 2023. The rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to ~~serious~~material delays in getting goods to or from Russia as port authorities struggle to keep up with the changing environment. If imports of these products from the Russian Federation are restricted by government regulation, the Company may be forced to find other sources for the manufacturing of these products at potentially higher costs. Likewise, restrictions on the Company's ability to send products to ~~our subsidiary in Russia,~~ GTE, may force our subsidiary to have to find other sources for the manufacturing of these products at potentially higher ~~costs; however,~~costs. However, the Company's exports to ~~Geospace Technologies Eurasia LLC~~GTE have historically been limited. Boycotts, protests, unfavorable regulations, additional governmental sanctions and other actions in the region could also adversely affect the Company's ability to operate profitably. Delays in obtaining governmental approvals can affect the Company's ability to timely deliver its products pursuant to contractual obligations, which could result in the Company being liable to its customers for damages. The risk of doing business in the Russian Federation and other economically or politically volatile areas could adversely affect the Company's operations and earnings. It is possible that increasing sanctions, export controls, restrictions on access to financial institutions, supply and transportation challenges, or other circumstances or considerations could necessitate a reduction, or even discontinuation, of operations by GTE or other business in Russia.

The Company is actively monitoring the situation in Ukraine and Russia and assessing its impact on its business, including ~~its wholly-owned subsidiary Geospace Technologies Eurasia LLC.~~GTE. The net carrying value of ~~this subsidiary~~GTE on the Company's consolidated balance sheet at June 30, ~~2022~~2023 was $~~6.7~~$6.2 million, including cash of $~~1.4~~$2.1 million. In response to sanctions imposed by the U.S. and others on Russia, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but we may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition to the $~~1.2~~ ~~million of~~ products the Company imported from ~~Geospace Technologies Eurasia LLC in fiscal year 2021,~~GTE, the subsidiary generated $~~1.8~~$1.9 million in revenue from domestic sales in fiscal year ~~2021. The subsidiary~~2022 and has generated $~~1.2~~$1.6 million ~~in revenue~~ from domestic sales ~~for~~during the firstnine months of fiscal year ~~2022.~~2023. The Company has no way to predict the duration, progress or outcome of the military conflict in Ukraine. The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and the Company's business for an unknown period of time.

17. Exit and Disposal Activities

During the first quarter of fiscal year 2023, the Company implemented a plan to discontinue the manufacture of certain low margin, low revenue products and reconfigure our production facilities to lower our costs and raise efficiencies. As part of the plan, reductions were made to the Company's workforce which are expected to yield an annual savings of more than $2 million. In connection with the plan, the Company incurred costs of $0.6 million in the first quarter of fiscal year 2023, primarily termination costs related to the workforce reduction. The costs were recorded both to cost of revenue and operating expenses in the consolidated statement of operations. No significant future costs are expected. As of June 30, 2023, no liabilities were outstanding related to this plan.

Item 2. ~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion and analysis of the major elements of our consolidated financial statements. You should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and other detailed information appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended September 30, ~~2021.~~2022.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “could”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating” or similar words. Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the timing, adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for permanent reservoir monitoring systems, future demand for OBX ~~systems,~~rental equipment, the adoption of Quantum's SADAR®product monitoring of subsurface reservoirs, the completion of new orders for channels of our GCL system, the fulfillment of customer payment obligations, the impact of and the recovery from the impact of the coronavirus (or COVID-19) pandemic, the impact of the current armed conflict between Russia and Ukraine, our ability to manage changes and the continued health or availability of management personnel, volatility and direction of oil prices, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves. These forward-looking statements reflect our current judgment about future events and trends based on the information currently available to us. However, there will likely be events in the future that we are not able to predict or control. The factors listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021,~~2022, as well as other cautionary language in such Annual Report and this Quarterly Report on Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such examples include, but are not limited to, the failure of the Quantum and ~~OptoSeis~~®OptoSeis® or Aquana technology transactions to yield positive operating results, decreases in commodity price levels, ~~and~~the continued adverse impact of COVID-19 which could reduce demand for our products, the failure of our products to achieve market acceptance (despite substantial investment by us), our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, bad debt write-offs associated with customer accounts, inability to collect on promissory notes, lack of further orders for our OBX rental equipment, failure of our Quantum products to be adopted by the border and security perimeter market or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property. The occurrence of the events described in these risk factors and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.

Business Overview

Unless otherwise specified, the discussion in this Quarterly Report on Form 10-Q refers to Geospace Technologies Corporation and its subsidiaries. We principally design and manufacture seismic instruments and equipment. These seismic products are marketed to the oil and gas industry and used to locate, characterize and monitor hydrocarbon producing reservoirs. We also market our seismic products to other industries for vibration monitoring, border and perimeter security and various geotechnical applications. We design and manufacture other products of a non-seismic nature, including water meter products, imaging equipment, ~~offshore cables,~~ remote shutoff water valves and Internet of Things ~~(IoT)~~("IoT") platform and provide contract manufacturing services. We report and categorize our customers and products into three different segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets. In recent years, the revenue contribution from our Adjacent Markets segment has grown to represent nearly half of our total revenue. This revenue growth is reflective of both our diversification strategy as well a downturn in the Oil and Gas Markets segment at the time.

Demand for our seismic products targeted at customers in our Oil and Gas Markets segment has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general. For more information, please refer to the risks discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021.~~2022.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public over the internet at the SEC’s website at www.sec.gov. Our SEC filings are also available to the public on our website at www.geospace.com. From time to time, we may post investor presentations on our website under the “Investor Relations” tab. Please note that information contained on our website, whether currently posted or

posted in the future, is not a part of this Quarterly Report on Form 10-Q or the documents incorporated by reference in this Quarterly Report on Form 10-Q.

Products and Product Development

Oil and Gas Markets

Our Oil and Gas Markets business segment has historically accounted for the majority of our revenue. Geoscientists use seismic data primarily in connection with the exploration, development and production of oil and gas reserves to map potential and known hydrocarbon bearing formations and the geologic structures that surround them. This segment’s products include wireless seismic data acquisition systems, reservoir characterization products and services, and traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, cables, marine streamer retrieval and steering devices and various other seismic products. We believe that our Oil and Gas Markets products are among the most technologically advanced instruments and equipment available for seismic data acquisition.

Traditional Products

An energy source and a data recording system are combined to acquire seismic data. We provide many of the components of seismic data recording systems, including geophones, hydrophones, multi-component sensors, leader wire, geophone strings, connectors, seismic telemetry cables and other seismic related products. On land, our customers use geophones, leader wire, cables and connectors to receive and measure seismic reflections resulting from an energy source into data recording units, which store the seismic information for subsequent processing and analysis. In the marine environment, large ocean-going vessels tow long seismic cables known as “streamers” containing hydrophones that are used to detect pressure changes. Hydrophones transmit electrical impulses back to the vessel’s data recording unit where the seismic data is stored for subsequent processing and analysis. Our marine seismic products also help steer streamers while being towed and help recover streamers if they become disconnected from the vessel.

Our seismic sensor, cable and connector products are compatible with most major competitive seismic data acquisition systems currently in use. Revenue from these products results primarily from seismic contractors purchasing our products as components of new seismic data acquisition systems or to repair and replace components of seismic data acquisition systems already in use.

Wireless Products

We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition system. Rather than utilizing interconnecting cables as required by most traditional land data acquisition systems, each of our wireless stations operate as an independent data collection system, allowing for virtually unlimited channel configurations. As a result, our wireless systems require less maintenance, which we believe allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight and ease of operation. Each wireless station is available in a single-channel or three-channel configuration. ~~Since its introduction in 2008 and through June 30, 2022, we have sold 486,000 wireless channels and we currently have 74,000 wireless channels in our rental fleet.~~

We have also developed a marine-based wireless seismic data acquisition system called the OBX. Similar to our land-based wireless systems, the marine OBX system may be deployed in virtually unlimited channel configurations and does not require interconnecting cables between each station. ~~Our deepwater~~We have two versions of ~~the~~ OBX ~~system~~nodal stations: a shallow water version that can be used in depths up to 750 meters and a deepwater version that can be deployed in depths of up to 3,450 meters. ~~Since its introduction in 2010 and through~~Through June 30, ~~2022,~~2023, we have sold ~~12,000~~13,000 OBX stations and we currently have ~~26,000~~24,000 OBX stations in our rental fleet.

In August 2022, we announced the release of a new seismic acquisition product known as Mariner™, a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder. Mariner is the next generation node designed for extended duration seabed ocean bottom seismic data acquisition. The slim profile nodes, which are part of our shallow water stations, are ideally deployed as deep as 750 meters. The device continuously records for up to 70 days and offers more rapid recharging times. Its slim profile creates space savings on seismic survey vessels, allowing contractors to fit up to 25% more nodes into a download/charge container.

Reservoir Products

Seismic surveys repeated over selected time intervals show dynamic changes within a producing oil and gas reservoir, and operators can use these surveys to monitor the effects of oil and gas development and production. This type of reservoir monitoring requires special purpose or custom designed systems in which portability becomes less critical and functional reliability assumes greater importance. This reliability factor helps assure successful operations in inaccessible locations over a considerable period of time. Additionally, reservoirs located in deep water or harsh environments require special instrumentation and new techniques to maximize recovery. Reservoir monitoring also requires high-bandwidth, high-resolution seismic data for engineering project planning and reservoir management. Utilizing these reservoir monitoring tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.

We have developed permanently installed high-definition reservoir monitoring systems for land and ocean-bottom applications in producing oil and gas fields. Our electrical reservoir monitoring systems are currently installed on numerous offshore reservoirs in the North Sea and elsewhere. Through our acquisition of the ~~OptoSeis~~®OptoSeis® fiber optic sensing technology, we now offer both electrical and fiber optic reservoir monitoring systems. These high-definition seismic data acquisition systems have a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects. The scalable architecture

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

In addition, we produce seismic borehole acquisition systems that employ a fiber optic augmented wireline capable of very high data transmission rates. These systems are used for several reservoir monitoring applications, including an application pioneered by us allowing operators and service companies to monitor and measure the results of hydraulic fracturing operations.

We believe our reservoir characterization products make seismic acquisition a cost-effective and reliable process for reservoir monitoring. Our multi-component seismic product developments also include an omni-directional geophone for use in reservoir monitoring, a compact marine three-component or four-component gimbaled sensor and special-purpose connectors, connector arrays and cases.

~~In September 2020,~~

We have maintained active discussions with potential clients for future PRM systems. During 2022, in coordination with a potential client, we ~~received~~concluded a ~~request from~~successful demonstration of our OptoSeis® fiber optic PRM technology in real-world field conditions. This demonstration was a major oil and gas producer for a proposal to manufacture a large-scale seabed PRM system. Under the offered terms and conditions as initially presented, we decided not to provide a bid. In August 2021, we received a new request from the producer, however we have also decided not to bid under the new offered terms and conditions.pre-requisite step toward future contract consideration. We have also held discussions and received requests for information from other major oil and gas producers regarding PRM systems. We have not received any orders for a large-scale seabed PRM system since November 2012.

Adjacent Markets

Our Adjacent Markets businesses leverage upon existing manufacturing facilities and engineering capabilities utilized by our Oil and Gas Markets businesses. Many of the seismic products in our Oil and Gas Markets segment, with little or no modification, have direct application to other industries.

Our business diversification strategy has centered largely on translating expertise in ruggedized engineering and manufacturing into expanded customer markets. To bolster the solid market share we have established in the water utility market for water meter cables, in fiscal year 2021, we acquired the smart water IoT company, Aquana.

Industrial Products

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

Our water meter products support the global smart meter connectivity water utility market. Our products provide our customers with highly reliable automated meter-reading and automated meter infrastructure with our robust water-proof connectors. Our field splice kits allow for accelerated repairs once identified.

Our water IoT platform and remote-shut off valve allows customers that manage multi-family and commercial properties to monitor their properties for leak and burst events, with real-time notifications, complimented with our remote-shut off to stop water damage. These products also allow water utilities to control and monitor water use remotely, discontinue or limit service without placing its employees in potential harm or danger.

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

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

Imaging Products

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

Emerging Markets

Our Emerging Markets business segment consists entirely of our Quantum business. Quantum’s product line includes a proprietary detection system called ~~SADAR~~®SADAR®, which detects, locates and tracks items of interest in real-time. Using the ~~SADAR~~SADAR® technology, Quantum designs and sells products used for border and perimeter security surveillance, cross-border tunneling detection and other products targeted at movement monitoring, intrusion detection and situational awareness. ~~In addition to its commercial base of~~SADAR's technology also provides passive seismic real-time monitoring in emerging energy applications such as Carbon Capture and Storage (CCS) and geothermal energy. Quantum's customers ~~Quantum’s customers primarily~~ include various agencies of the U.S. government including the Department of Defense, Department of Energy, Department of Homeland Security and other ~~agencies.~~agencies as well as energy companies needing real-time monitoring of seismic data.

Consolidated Results of Operations

We report and evaluate financial information for three segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets. Summary financial data by business segment follows (in thousands):


	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021			June 30, 2023			June 30, 2022			June 30, 2023			June 30, 2022
Oil and Gas Markets
Traditional exploration product revenue	$	1,592		$	1,950		$	3,428		$	3,736		$	3,363		$	1,592		$	9,509		$	3,428
Wireless exploration product revenue		7,233			9,628			29,467			36,137			13,786			7,233			45,920			29,467
Reservoir product revenue		692			1,071			1,422			1,671			523			692			810			1,422
Total revenue		9,517			12,649			34,317			41,544			17,672			9,517			56,239			34,317
Operating loss		(3,695	)		(1,807	)		(6,209	)		(13,258	)
Operating income (loss)														3,238			(3,695	)		9,820			(6,209	)
Adjacent Markets
Industrial product revenue		7,465			6,451			18,471			15,835			11,678			7,465			29,250			18,471
Imaging product revenue		3,473			2,922			9,841			8,033			3,184			3,473			9,142			9,841
Total revenue		10,938			9,373			28,312			23,868			14,862			10,938			38,392			28,312
Operating income		1,841			1,997			4,341			4,819			4,346			1,841			9,148			4,341
Emerging Markets
Revenue		135			1,061			571			10,023			109			135			393			571
Operating income (loss)		(1,405	)		(4	)		(3,609	)		5,286
Operating loss														(1,047	)		(1,405	)		(3,267	)		(3,609	)
Corporate
Revenue	101				—		182				—			72			101			170			182
Operating loss		(3,275	)		(2,625	)		(9,592	)		(8,921	)		(3,391	)		(3,275	)		(8,457	)		(9,592	)
Consolidated Totals
Revenue		20,691			23,083			63,382			75,435			32,715			20,691			95,194			63,382
Operating loss		(6,534	)		(2,439	)		(15,069	)		(12,074	)
Operating income (loss)														3,146			(6,534	)		7,244			(15,069	)

~~Overview~~

Overview

Although in an already depressed oil and gas industry, demand further decreased in February 2020 because of the oversupply of crude oil due to failed OPEC negotiations that led to a dramatic drop in crude oil prices when combined with the impact of the COVID-19 pandemic. These declines in the demand for oil and gas have caused oil and gas exploration and production companies to experience a significant reduction in cash flows, which have resulted in reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic data acquisition activities. ~~Recently, crude~~Crude oil prices ~~have rebounded and~~ held above ~~February 2020 levels;~~$65 per barrel throughout 2022 and through June 2023; however, a lag in time typically occurs between higher oil prices and greater demand for our Oil and Gas Markets segment products. We believe this lag is the result of exploration and production (“E&P”) companies allocating their cash flow towards shareholder reward initiatives, such as stock buy-back programs and dividend payments, or in debt reduction. We believe this lag is a short-term trend that will continue until E&P companies decide to reinvest capital into exploration activities. As this lag persists, we expect the reduced levels of demand for our Oil and Gas Markets segment ~~products and our rental marine wireless nodal products to continue.~~products. We also expect our land-based traditional and wireless products will continue to experience low levels of product demand until our customers consume their excess levels of underutilized equipment. During the third quarter of fiscal year 2022, we ~~experienced increased~~began to experience an increase in rental demand for our marine nodal products in the form of additional rental contracts and requests for quotes from existing and new customers. The increase in demand has led to near full utilization of our marine wireless rental fleet, yet we continue to experience low levels of demand for our land-based wireless products.

During the first quarter of fiscal year 2023, we implemented a plan to discontinue the manufacture of certain low margin, low revenue products and reconfigure our production facilities to lower our costs and raise efficiencies. As part of the plan, reductions were made to our workforce which are expected to yield an annual savings of more than $2 million. In connection with the plan, we incurred costs of $0.6 million in the first quarter of fiscal year 2023, primarily termination costs related to the workforce reduction. The costs were recorded both to cost of revenue and operating expenses in the consolidated statement of operations. No significant future costs are expected.

In light of current market conditions, the inventory balances in our Oil and Gas Markets business segment at June 30, ~~2022~~2023 continued to exceed levels we consider appropriate for the current level of product demand. We are continuing to work aggressively to reduce these legacy inventory balances; however, we are also adding new inventories for new wireless product developments and for other product demand in our Adjacent Markets segment. During periods of excessive inventory levels, our policy has been, and will continue to be, to record obsolescence expense as we experience reduced product demand and as our inventories continue to age. ~~As difficult market conditions continue for~~Although the ~~products in our~~ Oil and Gas Markets segment is seeing a recovery after experiencing difficult market conditions, we ~~are~~have been recording additional expenses for inventory obsolescence and will continue to do so in the future until product demand and/or resulting inventory turnover return to acceptable levels.

Armed Conflict Between Russia and Ukraine

A portion of our oil and gas product manufacturing is conducted ~~through our wholly-owned subsidiary,~~by Geospace Technologies Eurasia LLC, ~~which is~~our wholly-owned subsidiary based in the Russian Federation. Consequently, our oil and gas business could be directly affected by the current war between Russia and Ukraine. ~~Please see “Part II—Item 1A.—Risk Factors”~~See Note 16 in this Quarterly Report on Form 10-Q for more information.

Coronavirus (COVID-19)

The ongoing COVID-19 pandemic has negatively impacted worldwide economic activity and continues to create challenges in our ~~markets,~~markets. The COVID-19 pandemic and the related mitigation measures have disrupted our supply chain, resulting in longer lead times in materials available from suppliers and extended shipping time for these materials to reach our facilities. The occurrence or resurgence of global or regional health events such as ~~uncertainties regarding the duration and extent to which~~ the COVID-19 pandemic, ~~will ultimately have~~and the related government responses, could result in a ~~negative impact on the demand for our products and services or~~material adverse effect on our ~~supply chain. We~~business, financial condition, results of operations and liquidity. As such, we will continue to closely monitor ~~the situation as information becomes readily available.~~

~~During the nine months ended June 30, 2022, our operations have, for the most part, remained open globally~~COVID-19 and ~~the impact of the effects of COVID-19 to our personnel and operations has been limited.~~ ~~Our supply chain has become increasingly strained due to increased pricing for raw material and supplies coupled with longer than expected lead times.~~ We initially experienced a reduction in demand for the rental of our OBX marine nodal products, which we believed was primarily the result of the pandemic; however, demand has increased in fiscal year 2022. ~~We also~~ ~~believe our Adjacent Markets business segment has entered into a period of recovery from the initial effects of the COVID-19 pandemic, but we~~will continue to ~~be cautious about the pandemic’s effect~~reassess our strategy and operational structure on ~~our other business segments and our supply chain. As~~ a ~~result,~~ ~~we continually communicate with our suppliers and customers as information is available to best manage this difficult situation.~~regular, ongoing basis.

Three and nine months ended June 30, ~~2022~~2023 compared to the three and nine months ended June 30, ~~2021~~2022

Consolidated revenue for the three months ended June 30, ~~2022~~2023 was ~~$20.7~~$32.7 million, ~~a decrease~~an increase of ~~$2.4~~$12.0 million, or ~~10.4%~~58.1%, from the corresponding period of the prior fiscal year. The decrease for the three months ended June 30, 2022 was primarily due to a decrease in revenue from our Oil and Gas Markets segment, primarily caused by lower wireless exploration product sales. The decrease in consolidated revenue was partially offset by increased rental revenue from our OBX rental fleet and increased revenue from our Adjacent Markets segment attributable to higher sales of our industrial and imaging products. Consolidated revenue for the nine months ended June 30, ~~2022~~2023 was $63.4 million, a decrease of $12.1 million, or 16.0%, from the corresponding period of the prior year. The decrease was primarily due to a reduction in revenue from our Emerging Markets segment related to our contract with the U.S. Customs and Border Protection (the "CBP") and a decrease in revenue from sales of our wireless seismic products. The decrease in revenue was partially offset by increased rental revenue from our OBX rental fleet and higher sales of our industrial and imaging products.

Consolidated gross profit for the three months ended June 30, 2022 was $3.7 million, a decrease of $2.0 million, or 35.1%, from the corresponding period of the prior fiscal year. The decrease in consolidated gross profit was primarily due to a reduction in revenue and related gross profit from wireless exploration product sales. The decrease was partially offset by higher gross profit attributable to the increased utilization of our OBX rental fleet discussed above. Consolidated gross profit for the nine months ended June 30, 2022 was $12.2 million, a decrease of $1.0 million, or 7.8%, from the corresponding period of the prior fiscal year. The decrease resulted from the reduction in revenue and related gross profit from our contract with the CBP discussed above. The decrease largely offset by (i) higher gross profit attributable to the increased utilization of our OBX rental fleet and (ii) the higher profit margins generated on wireless exploration product sales.

~~Consolidated operating expenses for the three months ended June 30, 2022 were $10.2~~$95.2 million, an increase of ~~$2.1~~$31.8 million, or ~~26.3%~~50.2%, from the corresponding period of the prior fiscal year. The increase in ~~consolidated~~revenue for both periods was largely due to higher rental revenue from our Oil and Gas Markets segment due to increased utilization of our OBX rental fleet and an increase in demand for our industrial products from our Adjacent Markets segment. The increase in revenue for the nine months ended June 30, 2023 was partially offset by a decrease in sales of wireless exploration products. Wireless exploration product revenue for the nine months ended June 30, 2023 also included $4.0 million from a rental customer as compensation for lost OBX nodes.

Consolidated gross profit for the three months ended June 30, 2023 was $14.0 million, an increase of $10.3 million, or 282.9%, from the corresponding period of the prior fiscal year. Consolidated gross profit for the nine months ended June 30, 2023 was $37.5 million, an increase of $25.3 million, or 208.0%, from the corresponding period of the prior fiscal year. The increase for both periods was primarily due to higher gross profits from the increased utilization of our OBX rental fleet and the increase in industrial product revenue and related gross profits. The increase for the nine months ended June 30, 2023 was partially offset by the decrease in wireless exploration product revenue and related gross profits.

Consolidated operating expenses for the three months ended June 30, 2022 was due to (i) a $0.9 million increase in personnel costs, (ii) $0.4 million in incremental operating costs associated with our recent acquisition of Aquana, (iii) a $0.3 million increase in sales, marketing and other general business expenses and (iv) a $0.5 million decrease in a favorable non-cash adjustment to the estimated fair value of contingent consideration related to our Quantum and OptoSeis® ~~acquisitions when compared to the same period of the prior fiscal year. Consolidated operating expenses for the nine months ended June 30, 2022~~2023 were ~~$27.2~~$10.8 million, an increase of ~~$2.0~~$0.6 million, or ~~7.8%~~6.4%, from the corresponding period of the prior fiscal year. The increase was due to a (i) $0.4 million favorable non-cash adjustment reported in the prior year period resulting from a ~~$1.5~~change in the estimated fair value of contingent consideration related to our OptoSeis® acquisition, (ii) $0.3 million increase in selling, general and administrative expenses, resulting from increased revenue and (iii) $0.2 million increase in research and development ~~project~~ costs (ii) a $2.1 million increase in personnel costs, (iii) $0.9 million in incremental operating costs associated with our recent acquisition of Aquana and (iv) a $0.8 million increase in sales, marketing and other general business expenses.attributable to employee termination costs. The increase was partially offset by a ~~$3.3~~$0.3 million decrease in bad debt expense resulting from collections of previously reserved past due receivables. Consolidated operating expenses for the nine months ended June 30, 2023 were $31.5 million, an increase inof $4.3 million, or 15.8%, from the corresponding period of the prior fiscal year. The increase was due to a (i) $5.0 million favorable non-cash adjustment toreported in the prior year period resulting from a change in the estimated fair value of contingent consideration related to our Quantum and ~~OptoSeis~~®OptoSeis® acquisitions ~~when compared~~and (ii) $1.4 million increase in selling, general and administrative expenses resulting from increased revenue, inclusive of $0.3 million in employee termination costs. These increased operating expenses were partially offset by a i) $1.9 million decrease in research and development expense attributable to ~~same period~~lower project expenditures and lower personnel costs attributable to our workforce reduction in the first quarter of fiscal year 2023 and (ii) $0.2 million decrease in bad debt expense resulting from collections of previously reserved past due receivables.

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 ~~prior~~sale of this property in the second quarter of fiscal ~~year.~~year 2023. The sale was part of our plan to streamline operations and reduce costs.

Consolidated other income for the three months ended June 30, ~~2022~~2023 was ~~$28,000,~~$0.3 million, compared to ~~$1.8 million~~$28,000 from the corresponding period of the prior ~~fiscal~~ year. Consolidated other income for the nine months ended June 30, ~~2022~~2023 was ~~$0.4~~$0.8 million, compared to ~~$3.3~~$0.4 million from the corresponding period of the prior ~~fiscal~~ year. The ~~decrease in other income~~increase for both periods was primarily due to ~~(i) a gain recognized on the sale of our investment~~an increase in ~~a debt security in the third quarter of fiscal year 2021, (ii)~~net foreign ~~exchanges losses incurred in the third quarter of fiscal year 2022 and (iii)~~exchange gains. The increase for both periods was partially offset by a decrease in interest income ~~during the first six months of fiscal year 2022.~~attributable to lower note receivable balances between periods.

Segment Results of Operations

Oil and Gas Markets

~~Revenue~~

Revenue

Revenue from our Oil and Gas Markets products for the three months ended June 30, ~~2022 decreased $3.1~~2023 increased $8.2 million, or ~~24.8%~~85.7%, from the corresponding period of the prior fiscal year. Revenue from our Oil and Gas Markets products for the nine months ended June 30, ~~2022 decreased $7.2~~2023 increased $21.9 million, or 17.4%, from the corresponding period of the prior fiscal year. Our product revenue in this segment continues to be negatively impacted by a lack of capital spending by oil and gas exploration companies despite higher crude oil prices. The components of these decreases were as follows:

•

~~Traditional Exploration Product Revenue~~– For the three months ended June 30, 2022, revenue from our traditional products decreased $0.4 million, or 18.4%, from the corresponding period of the prior fiscal year. For the nine months ended June 30, 2022, revenue from our traditional products decreased $0.3 million, or 8.2%55.6%, from the corresponding period of the prior fiscal year. The ~~decrease for both periods primarily reflects lower demand for our sensor products.~~components of these increases were as follows:

●

Traditional Exploration Product Revenue– For the three months ended June 30, 2023, revenue from our traditional products was $3.4 million, an increase of $1.8 million from the corresponding period of the prior fiscal year. For the nine months ended June 30, 2023, revenue from our traditional products was $9.5 million, an increase of $6.1 million from the corresponding period of the prior fiscal year. The increase for both periods was primarily due to higher demand for our sensor and marine products.

●

Wireless Exploration Product Revenue – For the three months ended June 30, 2023, revenue from our wireless exploration products increased $6.6 million, or 90.6%, from the corresponding period of the prior fiscal year. For the nine months ended June 30, 2023, revenue from our wireless exploration products increased $16.5 million, or 55.8%, from the corresponding period of the prior fiscal year. The increase for both periods was primarily due to increased rental revenue attributable to higher utilization of our OBX rental fleet. The increase for the nine months ended June 30, 2023 was partially offset by a decrease in wireless product sales. Wireless product revenue for the nine months ended June 30, 2023 also included $4.0 million from a rental equipment customer as compensation for lost OBX nodes.

•

~~Wireless Exploration Product Revenue~~ – For the three months ended June 30, 2022, revenue from our wireless exploration products decreased $2.4 million, or 24.9%, from the corresponding period of the prior fiscal year. This decrease in revenue was primarily due to a decrease in wireless product sales, largely attributable to a $2.9 million land-based seismic wireless product sale in the third quarter of fiscal year 2021. The decrease was partially offset by increased rental revenue attributable to higher utilization of our OBX rental fleet during the third quarter of fiscal year 2022. For the nine months ended June 30, 2022, revenue from our wireless exploration products decreased $6.7 million, or 18.5%, from the corresponding period of the prior fiscal year. This decrease was primarily due to the recognition of $12.5 million of revenue related to a land-based wireless system in the second quarter of fiscal year 2021 and a $9.9 million sale of used OBX rental equipment in the first quarter of fiscal year 2021. The decrease was partially offset by a $10.0 million sale of used OBX rental equipment in the second quarter of fiscal year 2022 and increased OBX rental revenue during the nine months ended June 30, 2022.

•

~~Reservoir Product Revenue~~ – For the three months ended June 30, 2022, revenue from our reservoir products decreased $0.4 million, or 35.4%, from the corresponding period of the prior fiscal year. For the nine months ended June 30, 2022, revenue from our reservoir products decreased $0.2 million, or 14.9%, from the corresponding period of the prior fiscal year. The decrease in revenue for both periods was primarily due to lower reservoir monitoring service revenue.

Operating ~~Loss~~Income (Loss)

Operating ~~loss~~income associated with our Oil and Gas Markets products for the three months ended June 30, ~~2022~~2023 was ~~$(3.7)~~$3.2 million, ~~compared to~~ an ~~operating loss~~increase of ~~$(1.8)~~$6.9 million from the corresponding period of the prior fiscal year. The increase in operating loss for the three months ended June 30, 2022 was primarily due to (i) a decrease in wireless product sales and related gross profits and (ii) an increase in operating expenses. The increase was partially offset by (i) higher OBX rental revenue and related gross profit and (ii) a $0.5 million increase to a favorable non-cash adjustment to the estimated fair value of contingent consideration related to our OptoSeis® ~~acquisition when compared to the same period of the prior fiscal year.~~ Operating ~~loss~~income associated with our Oil and Gas Markets products for the nine months ended June 30, ~~2022~~2023 was ~~$(6.2)~~$9.8 million, compared to an operating loss of ~~$(13.3)~~$(6.2) million from the corresponding period of the prior fiscal year. The ~~decrease~~increase in operating ~~loss~~income for ~~the nine months ended June 30, 2022~~both periods was primarily due to ~~(i) higher gross profits generated on wireless exploration product sales, (ii)~~to higher wireless rental revenue and related gross profits due to improved utilization of our OBX rental ~~fleet,~~fleet. The improvement in operating income for the nine months ended June 30, 2023 was partially offset by a decrease in wireless product revenue and ~~(iii) a~~related gross profits. The increase in operating income for both periods was partially offset by favorable non-cash adjustments reported of $0.4 million and $4.4 million ~~increase to a favorable non-cash adjustment to~~for the three and nine month periods of the prior year, respectively, resulting from changes in the estimated fair value of contingent consideration related to our ~~OptoSeis~~® acquisition when compared to the same period of the prior fiscal year. The decrease in operating loss for the nine months ended June 30, 2022 was partially offset by an increase in research and development costs and other operating expenses.OptoSeis® acquisition.

Adjacent Markets

~~Revenue~~

Revenue

Revenue from our Adjacent Markets products for the three months ended June 30, ~~2022~~2023 increased ~~$1.6~~$3.9 million, or ~~16.7%~~35.9%, from the corresponding period of the prior fiscal year. Revenue from our Adjacent Markets products for the nine months ended June 30, ~~2022~~2023 increased ~~$4.4~~$10.1 million, or ~~18.6%~~35.6%, from the corresponding period of the prior fiscal year. ~~While we experienced an increase in~~The components of these changes were as follows:

●

Industrial Product Revenue and Services – For the three months ended June 30, 2023, revenue from our industrial products increased $4.2 million, or 56.4%, from the corresponding period of the prior fiscal year. For the nine months ended June 30, 2023, revenue from our industrial products increased $10.8 million, or 58.4%, from the corresponding period of the prior fiscal year. The increase in revenue for both periods was primarily due to higher demand for our water meter products.

●

Imaging Product Revenue – For the three months ended June 30, 2023, revenue from our imaging products decreased $0.3 million, or 8.3%, from the corresponding period of the prior fiscal year. For the nine months ended June 30, 2023, revenue from our imaging products decreased $0.7 million, or 7.1%, from the corresponding period of the prior fiscal year. The decrease for both periods was primarily due to lower demand for our imaging equipment.

Operating Income

Operating income from our Adjacent Markets products ~~and services during the three and nine months ended June 30, 2022 despite global supply~~

~~chain shortages, we cannot reasonably determine the lasting affects of the supply chain shortages on this operating segment. The components of these increases were as follows:~~

•

~~Industrial Product Revenue and Services~~ ~~– For~~for the three months ended June 30, ~~2022 revenue from our industrial products increased $1.0~~2023 was $4.3 million, an increase of $2.5 million, or ~~15.7%~~136.1%, from the corresponding period of the prior fiscal year. ~~For~~Operating income from our Adjacent Markets products for the nine months ended June 30, ~~2022 revenue from our industrial products increased $2.6~~2023 was $9.1 million, an increase of $4.8 million, or ~~16.6%~~110.7%, from the corresponding period of the prior fiscal year. The increase in ~~revenue for both periods was primarily due to higher demand for our water meter products, industrial sensor products and contract manufacturing services.~~

•

~~Imaging Product Revenue~~ – For the three months ended June 30, 2022, revenue from our imaging products increased $0.6 million, or 22.6%, from the corresponding period of the prior fiscal year. For the nine months ended June 30, 2022, revenue from our imaging products increased $1.8 million, or 24.6%, from the corresponding period of the prior fiscal year. The increase for both periods was primarily due to higher demand for our imaging equipment and consumable film products.

~~Operating Income~~

The operating income from our Adjacent Markets products for the three months ended June 30, 2022 was $1.8 million, a decrease of $0.2 million, or 7.8%, from the corresponding period of the prior fiscal year. The operating income from our Adjacent Markets products for the nine months ended June 30, 2022 was $4.3 million, a decrease of $0.5 million, or 9.9%, from the corresponding period of the prior fiscal year. The decrease in operating income for both periods was primarily due to the increase in revenue and related gross profits. The increase in operating income was partially offset by an increase in operating expenses, mostly caused by (i) higher ~~research~~selling, general and development expense and incremental operating costs attributable to our acquisition of Aquana. The decrease in operating income for both periods was partially offset by an increase in revenue and related gross profits.administrative resulting from the increased revenue.

Emerging Markets

~~Revenue~~

Revenue

Revenue from our Emerging Markets products was $0.1 million for both the three months ended June 30, ~~2022 was $0.1 million, compared to $1.1 million from the corresponding period in the prior fiscal year.~~2023 and 2022. Revenue from our Emerging Markets products was $0.4 million for the nine months ended June 30, ~~2022 was~~2023 compared to $0.6 million ~~compared to $10.0 million from~~for the ~~corresponding period in the prior fiscal year.~~nine months ended June 30, 2022. The ~~decrease in~~ revenue for both periods ~~was due~~primarily included on-going service and maintenance related to our completed contract with the U.S. Customs and Border Protection. The revenue for the nine months ended June 30, 2023 also included $0.1 million of revenue recognized on ~~our~~a $1.5 million government related contract ~~with the CBP during the prior fiscal year. We were awarded this contract during fiscal year 2020~~expected to ~~provide a technology solution to the Department of Homeland Security. The majority of the revenue related to this contract was recognized in fiscal year 2021. The contract was~~be completed in the ~~second~~first quarter of fiscal year ~~2022.~~2024.

On January 20, 2021, President Biden ordered a pause on construction of the wall at the U.S. – Mexico border to assess the legality of the funding, contracting methods, as well as the consequences of stopping the construction. It remains uncertain at this time whether the executive order will result in a temporary halt or permanent cessation of the construction. The Biden administration may implement new or different policies or take further executive action regarding border security that could change the demand for our perimeter and security products.

Operating ~~Income (Loss)~~Loss

Operating loss from our Emerging Markets products for the three months ended June 30, ~~2022~~2023 was ~~$(1.4)~~$1.0 million, ~~compared to $(4,000)~~a decrease of $0.4 million, or 25.5%, from the corresponding period in the prior fiscal year. The increase in operating loss for the three months ended June 30, 2022 was primarily due to a decrease in revenue and related gross profits. The increase in operating loss was also due to a $0.9 million decrease to a favorable non-cash adjustment to the estimated fair value of contingent consideration related to our Quantum acquisition when compared to the same period of the prior fiscal year. Operating loss from our Emerging Markets products for the nine months ended June 30, ~~2022~~2023 was ~~$(3.6)~~$3.3 million, ~~compared to operating income~~a decrease of ~~$5.3~~$0.3 million, or 9.5%, from the corresponding period inof the prior fiscal year. The decrease for both periods was primarily attributable to lower personnel costs attributable to our workforce reduction in the first quarter of fiscal year 2023. The decrease in operating ~~income (loss)~~loss for the nine months ended June 30, ~~2022~~2023 was primarily due to the revenue and related gross profit recognized on our contract with the CBP in the prior fiscal year. The decrease in operating income (loss) was also due to a $1.0 million decrease topartially offset by a favorable non-cash adjustment toreported for the nine month period of the prior year of $0.7 million, which resulted from a change in the estimated fair value of contingent consideration related to our Quantum ~~acquisition when compared to the same period of the prior fiscal year.~~acquisition.

Liquidity and Capital Resources

At June 30, ~~2022,~~2023, we had approximately ~~$9.1~~$27.3 million in cash and cash ~~equivalents and short-term investments.~~equivalents. For the nine months ended June 30, ~~2022,~~2023, we ~~used $13.3~~generated $3.1 million of cash from operating activities. ~~Our~~Sources of cash included our net ~~loss~~income of ~~$14.8~~$7.8 million ~~was offset by~~and net non-cash charges of ~~$13.8~~$15.7 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and bad debt ~~expense and changes in the estimated fair value of contingent consideration.~~recovery. Other ~~uses~~sources of cash ~~in our operations primarily~~ included a (i) ~~the removal of $10.8~~$1.3 million ~~gross profit from the sale of used rental equipment as it is included in~~

~~investing activities, (ii) a $2.2 million decrease~~increase in accounts payable primarily due to the timing of payments to our suppliers, (ii) $1.7 million increase in other liabilities due to an increase in accrued employee compensation costs and (iii) $0.5 million increase in other assets. These sources of cash were partially offset by (i) a ~~$1.7~~$10.6 million increase in trade accounts and notes receivable primarily due to our increase in revenue and the timing of collections from customers, (ii) a $7.2 million increase in inventories to meet an increase in demand for our ~~Adjacent Markets products. Offsetting these uses~~products, (iii) the removal of ~~cash primarily~~$4.3 million gross profit from the sale of used rental equipment and (iv) a $1.7 million of gain from the sale of property and equipment since they are included ~~(i) a $1.5 million decrease~~ in ~~trade accounts and notes receivable primarily due to the timing of collections from customers and (ii) a $1.1 million decrease in unbilled receivables as a result of billings to the CBP.~~investing activities.

For the nine months ended June 30, ~~2022,~~2023, we generated cash of ~~$8.7~~$8.3 million in investing activities. Sources of cash ~~included (i) net~~primarily consisted of proceeds of ~~$7.7 million for the sale of short-term investments and (ii) proceeds of $5.9~~(i) $11.1 million from the sale of used rental ~~equipment.~~equipment, (ii) $4.4 million from the sale of property and equipment and (iii) $0.9 million from the sale of short-term investments. Offsetting ~~these sources~~this source of cash were (i) ~~$0.9~~$1.9 million for additions to our property, plant and equipment and (ii) ~~$4.1~~$6.2 million for additions to our equipment rental fleet. We do not expect ~~our~~to make any significant cash investments ininto our rental fleet ~~and property, plant and equipment during fiscal year 2022 to be significant~~ for the remainder of fiscal year ~~2022.~~2023. We expect our cash investments in our property, plant and equipment will be approximately $2.0 million in fiscal year 2023. 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 nine months ended June 30, ~~2022,~~2023 we used ~~$1.7~~$0.2 million from financing ~~activities. Uses of cash included (i) $0.8 million~~activities for our final contingent consideration payments to the former shareholders of Quantum, (ii) debt issuance costs of $0.2 million incurred in connection with our new credit agreement and (iii) $0.7 million for the purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors. The stock buy-back program authorized us to repurchase up to $7.5 million of our common stock in open market transactions. The program was completed in November 2021.Quantum.

Our available cash and cash equivalents ~~and short-term investments totaled $9.1~~was $27.3 million at June 30, ~~2022,~~2023, which included ~~$2.6~~$3.5 million of cash and cash equivalents held by our foreign subsidiaries and branch offices, of which ~~$1.4~~$2.1 million was held by our subsidiary in the Russian Federation. IfIn response to sanctions imposed by the U.S. and other countries on the Russian Federation, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but we may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition, if we were to repatriate the cash held by our Russian subsidiary, we would be required to accrue and pay taxes on any amount repatriated. During the second quarter of fiscal year 2023, in light of recent volatility in the financial markets, we entered into an IntraFi Cash Service ("ICS") Deposit Placement Agreement with IntraFi Network LLC through our primary bank, Woodforest National Bank. The ICS program offers us access to unlimited Federal Deposit Insurance Corporation ("FDIC") insurance on domestically held cash in excess of $5.0 million, thereby mitigating our risk of falling outside of FDIC coverage limits.

~~In May 2022,~~

On July 26, 2023, we entered into a credit agreement ~~(the “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. ~~Available borrowings under the~~The Agreement ~~are determined by~~provides a ~~borrowing base~~revolving credit facility with a maximum availability of ~~$10~~$15 million. ~~The borrowing base~~Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) ~~70% loan to value~~80% of ~~our property located at 6410 Langfield Road in Houston, Texas (the “Property”),~~eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of ~~forced~~the orderly liquidation value of eligible equipment, ~~(iii) 80% of~~in each case subject to certain ~~accounts receivable~~limitations and ~~(iv) 50% of forced liquidation value of certain inventory (inventory borrowing base limited~~adjustments. Interest shall accrue on outstanding borrowings at a rate equal to ~~100% of borrowing base credit given toward accounts receivable). The Agreement is for~~Term SOFR (Secured Overnight Financing Rate) plus a ~~two-year term with all funds borrowed due at the expiration of the term. The interest rate on borrowed funds is the Wall Street prime rate (with a minimum of~~margin equal to 3.25%~~) plus 4.00%.~~ per annum. We are required to make monthly interest payments on borrowed funds. ~~Borrowings under the~~The Agreement ~~will be principally~~is secured by ~~the Property and our domestic equipment, inventory and accounts receivables. In addition, certain~~substantially all of our ~~domestic subsidiaries have guaranteed our obligations under the Agreement and such subsidiaries have secured the obligations by pledging~~assets, except for certain ~~assets.~~excluded property. The Agreement requires us to maintain a minimum (i) consolidated tangible net worth of $100 ~~million.~~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 on the revolving credit facility. The Agreement expires in July 2025.

~~At June 30, 2022, we~~

We had no ~~borrowings~~long-term debt outstanding ~~and were compliant with all covenants under the Agreement. Our borrowing availability~~ at June 30, ~~2022 was $8.5 million.~~2023 and through the date of the filing of this Quarterly Report on Form 10-Q. 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 and cash ~~equivalent and short-term investments decreased $14.5~~equivalents increased $10.3 million during the nine months ended June 30, ~~2022.~~2023. 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 ~~our~~the Agreement through its expiration in ~~May 2024,~~July 2025, leveraging or sales of real estate assets, sales of rental assets and other liquidity sources which may be available to us. We currently believe that our cash and cash equivalents ~~and short-term investments~~ will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

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

Contractual Obligations

~~Contingent Consideration~~

We recorded an initial contingent consideration liability of $7.7 million in connection with our July 2018 acquisition of Quantum. Subsequent to the acquisition, we reduced the estimated liability to $0.2 million as of June 30, 2022 as a result of $2.3 million of earn-out payments made through June 2022 and $5.2 million in adjustments to reduce the value of expected future payments. Contingent payments, if any, may be paid in the form of cash or Company stock and will be derived from eligible revenue generated during the four-year post-acquisition period, which ended in July 2022. The maximum amount of contingent payments is $23.5 million.

~~We recorded an initial contingent consideration liability of $4.3 million in connection with our November 2018 acquisition of all the intellectual property and related assets of the OptoSeis~~® fiber optic sensing technology. Subsequent to the acquisition, we decreased the estimated liability to zero as of June 30, 2022 as a result of the unlikelihood any eligible revenue will be generated during the earn-out period. Contingent cash payments, if any, will be derived from eligible revenue generated during a five-and-a-half year post-acquisition earn-out period ending in May 2024. In order for revenue to be considered eligible, sales contracts must be entered into during the first four years of the earn-out period ending in November 2022. No payments have been made to date related to the contingent consideration liability. The maximum amount of contingent payments is $23.2 million.

~~We review and assess the fair value of our contingent consideration liabilities on a quarterly basis.~~

Contingent Compensation Costs

In connection with the acquisition of Aquana in July 2021, we are subject to additional contingent cash payments to the former members of Aquana over a six-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 any earn-out payments. In accordance with ASC 805, Business Combinations, due to the continued employment requirement, no liability has been recorded for the estimated fair value of contingent earn-out payments for this transaction. Earn-outs achieved, if any, will be recorded as compensation expense when incurred.

See Note 1213 to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on our contractual contingencies.

Critical Accounting Estimates

During the ~~three~~nine months ended June 30, ~~2022,~~2023, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2021.~~2022.

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item, in accordance with Item 305(e) of Regulation S-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures of persons within our Company and consolidated subsidiaries to report material information otherwise required to be set forth in our reports.

In connection with the preparation of this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the CEO and CFO, as of June 30, ~~2022,~~2023, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

~~Item 1A. Risk Factors~~

Except for the risk factors set forth below, there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the Company's fiscal year ended September 30, 2021.

~~The Ongoing Armed Conflict Between Russia and Ukraine Could Adversely Affect Our Business, Financial Condition, and Results of Operations~~

A portion of our oil and gas product manufacturing is conducted through our wholly-owned subsidiary, Geospace Technologies Eurasia LLC, which is based in the Russian Federation. In February 2022, the Russian Federation launched a full-scale military invasion of Ukraine. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions in addition to any direct impact on our operations in Russia. The United States, the United Kingdom, the EU and other countries have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in and associated with Russia, and additional sanction packages to constrain Russia have been and continue to be proposed and adopted. United States sanctions against Russia have been expanded to preclude the export of oil and gas equipment anywhere in the world that involve persons designated under the sanctions and to include projects in which persons subject to the sanctions have a 33% ownership interest or a majority of voting interests. Together, these changes make it more difficult for us to support projects that have the potential to produce oil involving Russian energy companies. Furthermore, if an exporter is unable to determine whether its equipment will be used in such projects, the export is prohibited. In fiscal year 2021, we imported $1.2 million of products from Geospace Technologies Eurasia LLC for resale elsewhere in the world. The rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to serious delays in getting goods to or from Russia as port authorities struggle to keep up with the changing environment. If imports of these products from the Russian Federation are restricted by government regulation, we may be forced to find other sources for the manufacturing of these products at potentially higher costs. Likewise, restrictions on our ability to send products to our subsidiary in Russia, may force our subsidiary to have to find other sources for the manufacturing of these products at potentially higher costs; however, our exports to Geospace Technologies Eurasia LLC have historically been limited. Boycotts, protests, unfavorable regulations, additional governmental sanctions and other actions in the region could also adversely affect our ability to operate profitably. Delays in obtaining governmental approvals can affect our ability to timely deliver our products pursuant to contractual obligations, which could result in us being liable to our customers for damages. The risk of doing business in the Russian Federation and other economically or politically volatile areas could adversely affect our operations and earnings.

We are actively monitoring the situation in Ukraine and Russia and assessing its impact on our business, including our wholly-owned subsidiary, Geospace Technologies Eurasia LLC. The net carrying value of this subsidiary on our consolidated balance sheet at June 30, 2022 was $6.7 million, including cash of $1.4 million. In addition to the $1.2 million of products we imported from Geospace Technologies Eurasia LLC in fiscal year 2021, the subsidiary generated $1.8 million in revenue from domestic sales in fiscal year 2021. The subsidiary generated $1.2 million in revenue from domestic sales for the first nine months of fiscal year 2022. We have no way to

predict the duration, progress or outcome of the military conflict in Ukraine. The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time and could exacerbate or heighten many of the other risk factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K.

~~Climate Change and Legislation Designed to Reduce Climate Change~~

The physical and regulatory effects of climate change could have a negative impact on our operations, our customers’ operations and the overall demand for our customers’ products and, accordingly, our services. There is an increasing focus of local, state, regional, national and international regulatory bodies on Greenhouse Gas ("GHG") emissions and climate change issues. Legislation to regulate GHG emissions has periodically been introduced in the U.S. Congress, and there has been a wide-ranging policy debate, both in the United States and internationally, regarding the impact of these gases and possible means for their regulation. These efforts have included consideration of cap-and-trade programs, carbon taxes, GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources. Some of the proposals would require industries to meet stringent new standards that would require substantial reductions in carbon emissions. Those reductions could be costly and difficult to implement. In the absence of federal GHG-limiting legislation, the EPA has determined that GHG emissions present a danger to public health and the environment and has adopted regulations that, among other things, establish construction and operating permit reviews for GHG emissions from certain large stationary sources, require the monitoring and annual reporting of GHG emissions from certain oil and natural gas system sources, implement CAA emission standards directing the reduction of methane emissions from certain new, modified, or reconstructed facilities in the oil and natural gas sector, and together with the DOT, implement GHG emissions limits on vehicles manufactured for operation in the United States.

In April 2016, the United States signed the Paris Agreement, which requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years. Under the Paris Agreement, the Biden Administration has committed the United States to reducing its greenhouse gas emissions by 50-52% from 2005 levels by 2030. In November 2021, the Unites States and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy. Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of the Paris Agreement.

Governmental, scientific, and public concern over the threat of climate change arising from GHG emissions has resulted in increasing political risks in the United States. President Biden and Congress have identified climate change as a priority, and it is likely that additional executive orders, regulatory action, and/or legislation targeting greenhouse gas emissions, or prohibiting or restricting oil and gas development activities in certain areas, will be proposed and/or promulgated during the Biden Administration. President Biden issued an executive order imposing a moratorium on new oil and gas leasing on federal lands and offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices. President Biden’s order also established climate change as a primary foreign policy and national security consideration, affirms that achieving net-zero greenhouse gas emissions by or before midcentury is a critical priority, affirms the Biden Administration’s desire to establish the United States as a leader in addressing climate change, generally further integrates climate change and environmental justice considerations into government agencies’ decision-making, and eliminates fossil fuel subsidies, among other measures. Other actions impacting oil and natural gas production activities that could be pursued by the Biden administration may include more restrictive requirements for the establishment of pipeline infrastructure or the permitting of liquified natural gas export facilities.

It is not possible at this time to predict the timing and effects of climate change or whether additional climate-related legislation, regulations or other measures will be adopted at the local, state, regional, national and international levels. However, continued efforts by governments and non-governmental organizations to reduce GHG emissions appear likely, and additional legislation, regulation or other measures that control or limit GHG emissions or otherwise seek to address climate change could adversely affect our customers and our business. Because our business depends on the level of oil exploration, existing or future laws or regulations related to GHGs and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if such laws or regulations reduce demand for our customers’ products and, accordingly, our services.

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

Item 6. Exhibits

The following exhibits are filed with this Report on Form 10-Q or are incorporated by reference


3.1		Amended and Restated Certificate of Formation of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, filed May 8, 2015).

3.2		Amended and Restated Bylaws of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed August 8, 2019).

31.1*		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934.

31.2*		Certification of the Chief Financial Officer pursuant Rule 13a-14(a) under the Securities and Exchange Act of 1934.

32.1**		Certification of the Chief Executive Officer pursuant 18 U.S.C. Section 1350.

32.2**		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

101*		The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022,~~2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets at June 30, ~~2022~~2023 and September 30, ~~2021,~~2022 , (ii) the Consolidated Statements of Operations for the three and nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, (iii) the Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the three and nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, (iv) the Consolidated Statements of Stockholders’ Equity for the three and nine months ended June 30, ~~2022~~2023 and ~~2021,~~2022, (v) the Consolidated Statements of Cash Flows for the nine months ended June 30, ~~2022~~2023 and ~~2021~~2022 and (vi) Notes to Consolidated Financial Statements.

104*		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2022~~2023 formatted in Inline ~~XBRL.~~XBRL and contained in Exhibit 101.

* Filed with this Quarterly Report on Form 10-Q

** Furnished with this Quarterly Report on Form 10-Q

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:	August 11, 2023	By:

~~Date:~~	~~August 10, 2022~~		~~By:~~	/s/ Walter R. Wheeler
					Walter R. Wheeler, President
					and Chief Executive Officer
					(duly authorized officer)


Date:	August 11, 2023	By:	~~August 10, 2022~~	~~By:~~	/s/ Robert L. Curda
						Robert L. Curda, Vice President,
						~~Vice President,~~ Chief Financial Officer and Secretary
						(principal financial officer)


Texas	76-0447780
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
7007 Pinemont, Houston,, Texas	77040
(Address of principal executive offices)	(Zip Code)


		Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2118

I~~tem~~Item 3. Quantitative and Qualitative Disclosures about Market Risk		2922

Item 4. Controls and Procedures		3023

PART II. OTHER INFORMATION

~~Item 1A. Risk Factors~~		30

Item 6. Exhibits		3223


	June 30, 2022			September 30, 2021			*June 30, 2023*			*September 30, 2022*
ASSETS
Current assets:
Cash and cash equivalents	$	7,468		$	14,066		$	27,264		$	16,109
Short-term investments		1,598			9,496			—			894
Trade accounts and financing receivables, net		26,400			17,159
Unbilled receivables		—			1,051
Trade accounts and notes receivable, net								26,309			20,886
Inventories, net		18,868			16,196			19,603			19,995
Prepaid expenses and other current assets		2,614			2,062			3,200			2,077
Total current assets		56,948			60,030			76,376			59,961

Non-current financing receivables		306			2,938
Non-current inventories, net		13,992			18,103			22,311			12,526
Rental equipment, net		30,910			38,905			18,381			28,199
Property, plant and equipment, net		27,835			29,983			21,919			26,598
Operating right-of-use assets		1,011			1,191			776			957
Goodwill		5,072			5,072			736			736
Other intangible assets, net		5,911			7,250			4,951			5,573
Other assets		411			457
Other non-current assets								233			506
Total assets	$	142,396		$	163,929		$	145,683		$	135,056

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade	$	4,163		$	6,391		$	6,884		$	5,595
Contingent consideration		168			807			—			175
Operating lease liabilities		237			225			253			241
Other current liabilities		7,744			7,799			8,990			6,616
Total current liabilities		12,312			15,222			16,127			12,627

Non-current contingent consideration		—			5,210
Non-current operating lease liabilities		836			1,009			583			769
Non-current other liabilities		16			31
Deferred tax liabilities, net								16			13
Total liabilities		13,164			21,472			16,726			13,409

Commitments and contingencies (Note 12)
Commitments and contingencies (Note 13)

Stockholders’ equity:
Preferred stock, 1,000,000 shares authorized, 0 shares issued and outstanding		—			—
Common Stock, $.01 par value, 20,000,000 shares authorized; 13,861,233 and 13,738,971 shares issued, respectively; and 13,019,241 and 12,969,542 shares outstanding, respectively		139			137
Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding								—			—
Common Stock, $.01 par value, 20,000,000 shares authorized; 14,028,481 and 13,863,233 shares issued, respectively; and 13,186,489 and 13,021,241 shares outstanding, respectively								140			139
Additional paid-in capital		94,276			92,935			95,741			94,667
Retained earnings		57,694			72,510			57,422			49,654
Accumulated other comprehensive loss		(15,377	)		(16,320	)		(16,846	)		(15,313	)
Treasury stock, at cost, 841,992 and 769,429 shares, respectively		(7,500	)		(6,805	)
Treasury stock, at cost, 841,992 shares								(7,500	)		(7,500	)
Total stockholders’ equity		129,232			142,457			128,957			121,647
Total liabilities and stockholders’ equity	$	142,396		$	163,929		$	145,683		$	135,056


	Three Months Ended						Nine Months Ended						*Three Months Ended*						*Nine Months Ended*
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021			*June 30, 2023*			*June 30, 2022*			*June 30, 2023*			*June 30, 2022*
Revenue:
Products	$	13,463		$	17,679		$	48,060		$	66,005		$	19,727		$	13,463		$	56,976		$	48,060
Rental		7,228			5,404			15,322			9,430			12,988			7,228			38,218			15,322
Total revenue		20,691			23,083			63,382			75,435			32,715			20,691			95,194			63,382
Cost of revenue:
Products		12,460			12,907			37,310			47,492			14,522			12,460			43,083			37,310
Rental		4,580			4,549			13,909			14,744			4,214			4,580			14,649			13,909
Total cost of revenue		17,040			17,456			51,219			62,236			18,736			17,040			57,732			51,219

Gross profit		3,651			5,627			12,163			13,199			13,979			3,651			37,462			12,163

Operating expenses:
Selling, general and administrative		6,373			5,243			18,108			16,075			6,655			6,373			19,477			18,108
Research and development		4,108			3,658			14,050			10,943			4,356			4,108			12,097			14,050
Change in estimated fair value of contingent consideration		(384	)		(795	)		(5,042	)		(1,713	)		—			(384	)		—			(5,042	)
Bad debt expense (recovery)		88			(40	)		116			(32	)		(178	)		88			(41	)		116
Total operating expenses		10,185			8,066			27,232			25,273			10,833			10,185			31,533			27,232

Loss from operations		(6,534	)		(2,439	)		(15,069	)		(12,074	)
Gain on disposal of property														—			—			1,315			—

Income (loss) from operations														3,146			(6,534	)		7,244			(15,069	)

Other income (expense):
Interest expense		(26	)		—			(26	)		—			(22	)		(26	)		(100	)		(26	)
Interest income		402			151			722			1,284			88			402			371			722
Gain (loss) on investments, net		(4	)		1,727			(22	)		1,996
Foreign exchange gains (losses), net		(341	)		(49	)		(230	)		64			301			(341	)		593			(230	)
Other, net		(3	)		(8	)		(21	)		(3	)		(66	)		(7	)		(72	)		(43	)
Total other income, net		28			1,821			423			3,341			301			28			792			423

Loss before income taxes		(6,506	)		(618	)		(14,646	)		(8,733	)
Income (loss) before income taxes														3,447			(6,506	)		8,036			(14,646	)
Income tax expense		68			169			170			288			219			68			268			170
Net loss	$	(6,574	)	$	(787	)	$	(14,816	)	$	(9,021	)
Net income (loss)													$	3,228		$	(6,574	)	$	7,768		$	(14,816	)

Loss per common share:
Income (loss) per common share:
Basic	$	(0.51	)	$	(0.06	)	$	(1.14	)	$	(0.67	)	$	0.25		$	(0.51	)	$	0.59		$	(1.14	)
Diluted	$	(0.51	)	$	(0.06	)	$	(1.14	)	$	(0.67	)	$	0.24		$	(0.51	)	$	0.59		$	(1.14	)

Weighted average common shares outstanding:
Basic		13,013,616			13,353,254			12,977,146			13,464,177			13,171,654			13,013,616			13,131,795			12,977,146
Diluted		13,013,616			13,353,254			12,977,146			13,464,177			13,320,881			13,013,616			13,157,919			12,977,146


	Nine Months Ended						*Nine Months Ended*
	June 30, 2022			June 30, 2021			*June 30, 2023*			*June 30, 2022*
Cash flows from operating activities:
Net loss	$	(14,816	)	$	(9,021	)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred income tax benefit		(12	)		(3	)
Net income (loss)							$	7,768		$	(14,816	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred income tax expense (benefit)								1			(12	)
Rental equipment depreciation		10,500			11,332			9,204			10,500
Property, plant and equipment depreciation		3,112			2,956			2,785			3,112
Amortization		1,365			1,299
Accretion of discounts on short-term investments		89			45
Amortization of intangible assets								622			1,365
Amortization of premiums (accretion of discounts) on short-term investments								(50	)		89
Stock-based compensation expense		1,342			1,510			1,074			1,342
Bad debt expense (recovery)		116			(32	)		(41	)		116
Inventory obsolescence expense		2,310			1,702			2,131			2,310
Change in estimated fair value of contingent consideration		(5,042	)		(1,713	)		—			(5,042	)
Gross profit from sale of used rental equipment		(10,801	)		(6,546	)		(4,318	)		(10,801	)
(Gain) loss on disposal of property, plant and equipment		(9	)		6
Realized loss (gain) on sale of investments, net		22			(1,996	)
Gain on disposal of property								(1,315	)		—
Gain on disposal of equipment								(432	)		(9	)
Realized loss on short-term investments								—			22
Realized foreign currency translation loss from dissolution of foreign subsidiary								38			—
Effects of changes in operating assets and liabilities:
Trade accounts and notes receivables		1,455			(4,621	)
Trade accounts and notes receivable								(10,561	)		1,455
Unbilled receivables		1,051			(1,561	)		—			1,051
Inventories		(1,705	)		(4,920	)		(7,175	)		(1,705	)
Other assets		(250	)		6,756			453			(250	)
Accounts payable trade		(2,223	)		1,372			1,290			(2,223	)
Other liabilities		215			(4,080	)		1,654			215
Net cash used in operating activities		(13,281	)		(7,515	)
Net cash provided by (used in) operating activities								3,128			(13,281	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(913	)		(2,451	)		(1,862	)		(913	)
Proceeds from the sale of property, plant and equipment		9			3
Proceeds from the sale of equipment								724			9
Proceeds from the sale of property								3,682			—
Investment in rental equipment		(4,121	)		(1,528	)		(6,213	)		(4,121	)
Proceeds from the sale of used rental equipment		5,929			9,994			11,095			5,929
Purchases of short-term investments		(450	)		(10,844	)		—			(450	)
Proceeds from the sale of short-term investments		8,224			1,100			900			8,224
Proceeds from sale of investment in debt security		—			2,069
Net cash provided by (used in) investing activities		8,678			(1,657	)
Net cash provided by investing activities								8,326			8,678

Cash flows from financing activities:
Payments on contingent consideration		(807	)		—			(175	)		(807	)
Debt issuance costs		(211	)		—			—			(211	)
Purchase of treasury stock		(695	)		(3,588	)		—			(695	)
Net cash used in financing activities		(1,713	)		(3,588	)		(175	)		(1,713	)

Effect of exchange rate changes on cash		(282	)		144			(124	)		(282	)
Decrease in cash, cash equivalents and restricted cash		(6,598	)		(12,616	)
Increase (decrease) in cash and cash equivalents								11,155			(6,598	)
Cash and cash equivalents, beginning of fiscal year		14,066			32,686			16,109			14,066
Cash, cash equivalents and restricted cash, end of fiscal period	$	7,468		$	20,070
Cash and cash equivalents, end of fiscal period							$	27,264		$	7,468

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes	$	168		$	284		$	111		$	168
Issuance of notes receivable in connection with sale of used rental equipment		11,745			��
Issuance of note receivable related to sale of used rental equipment								—			11,745
Inventory transferred to rental equipment		1,194			3,777			117			1,194
Inventory transferred to property, plant and equipment		172			—			—			172


	As of June 30, 2022 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate bonds	$	1,615	$	—	$	(17	)	$	1,598


	As of September 30, 2021 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments:
Corporate bonds	$	9,511	$	—	$	(15	)	$	9,496


	As of September 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)		Totals
Short-term investments:
Corporate bonds	$	—	$	9,496	$	—	$	9,496
Total assets	$	—	$	9,496	$	—	$	9,496

Contingent consideration liabilities:
Current portion	$	—	$	—	$	807	$	807
Non-current portion		—		—		5,210		5,210
Total liabilities	$	—	$	—	$	6,017	$	6,017


	June 30, 2022			September 30, 2021
Promissory notes	$	14,416		$	5,432
Sales-type leases		—			2,464
Total financing receivables	$	14,416		$	7,896
Unearned income:
Sales-type leases		—			(6	)
Total unearned income		—			(6	)
Total financing receivables, net of unearned income		14,416			7,890
Less current portion		(14,110	)		(4,952	)
Non-current notes receivable	$	306		$	2,938


For fiscal years ending September 30,
2022 (remainder)	$	72
2023		270
2024		278
2025		186
2026		130
Thereafter		225
Future minimum lease payments		1,161
Less interest		(88	)
Present value of minimum lease payments		1,073
Less current portion		(237	)
Long-term portion	$	836


	Weighted-
	Average
	Remaining Useful
	Lives (in years)	June 30, 2022			September 30, 2021
Goodwill		$	5,072		$	5,072

Other intangible assets:
Developed technology	14.4	$	6,475		$	6,475
Customer relationships	0.2		3,900			3,900
Trade names	1.3		2,022			2,022
Non-compete agreements	0.2		186			186
Total other intangible assets	7.7		12,583			12,583
Accumulated amortization			(6,672	)		(5,333	)
		$	5,911		$	7,250

GEOSPACE TECHNOLOGIES CORPORATION