Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~There were 13,563,491~~As of January 31, 2021, the registrant had 13,588,938 shares of ~~the Registrant’s Common Stock outstanding as of the close of business on January 31, 2018.~~common stock, $0.01 par value per share outstanding.

	December 31, 2017			September 30, 2017			December 31, 2020			September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	13,923		$	15,092		$	33,719		$	32,686
Short-term investments		32,085			36,137
Trade accounts receivable, net		7,011			9,435
Financing receivables		5,793			3,055
Income tax receivable		263			273
Inventories		19,994			20,752
Trade accounts and notes receivable, net								18,370			13,778
Unbilled receivables								4,263			—
Inventories, net								14,057			16,933
Asset held for sale								662			587
Prepaid expenses and other current assets		1,939			1,623			2,386			953
Total current assets		81,008			86,367			73,457			64,937

Non-current notes receivable								140			—
Non-current inventories, net								21,882			16,930
Rental equipment, net		15,542			16,462			44,167			54,317
Property, plant and equipment, net		36,475			37,399			29,493			29,874
Non-current inventories		56,184			55,935
Deferred income tax assets, net		305			259
Non-current financing receivables, net		7,032			8,195
Prepaid income taxes		56			450
Other assets		619			629
Goodwill								4,337			4,337
Other intangible assets, net								7,898			8,331
Deferred cost of revenue and other assets								8,094			8,119
Total assets	$	197,221		$	205,696		$	189,468		$	186,845

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade	$	3,322		$	2,599		$	5,653		$	1,593
Accrued expenses and other current liabilities		6,516			6,338
Deferred revenue		1,461			1,568
Contingent consideration								2,310			—
Deferred revenue and other current liabilities								8,350			8,753
Total current liabilities		11,299			10,505			16,313			10,346

Deferred income tax liabilities		29			37
Non-current contingent consideration								7,955			10,962
Non-current deferred revenue and other liabilities								5,363			4,567
Total liabilities		11,328			10,542			29,631			25,875

Commitments and contingencies (Note 11)
Commitments and contingencies (Note 12)

Stockholders’ equity:
Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $.01 par value, 20,000,000 shares authorized, 13,560,291 and 13,438,316 shares issued and outstanding		136			134
Preferred stock, 1,000,000 shares authorized, 0 shares issued and outstanding								—			—
Common stock, $.01 par value, 20,000,000 shares authorized; 13,727,971 and 13,670,639 shares
issued, respectively; and 13,610,334 and 13,670,639 shares outstanding, respectively								137			137
Additional paid-in capital		84,557			83,733			91,513			90,965
Retained earnings		115,686			125,517			85,516			86,566
Accumulated other comprehensive loss		(14,486	)		(14,230	)		(16,501	)		(16,698	)
Treasury stock, at cost, 117,637 shares at December 31, 2020								(828	)		—
Total stockholders’ equity		185,893			195,154			159,837			160,970
Total liabilities and stockholders’ equity	$	197,221		$	205,696		$	189,468		$	186,845

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

	Three Months Ended						Three Months Ended
	December 31, 2017			December 31, 2016			December 31, 2020			December 31, 2019
Revenue:
Products	$	13,425		$	10,297		$	26,722		$	9,083
Rental equipment		1,219			4,988
Rental								1,738			8,622
Total revenue		14,644			15,285			28,460			17,705
Cost of revenue:
Products		13,243			14,836			16,830			9,903
Rental equipment		2,369			3,776
Rental								4,905			5,305
Total cost of revenue		15,612			18,612			21,735			15,208

Gross profit (loss)		(968	)		(3,327	)
Gross profit								6,725			2,497

Operating expenses:
Selling, general and administrative		5,129			5,094			5,354			5,997
Research and development		3,158			3,372			3,520			4,296
Bad debt expense (recovery)		350			(482	)
Change in estimated fair value of contingent consideration								(697	)		—
Bad debt expense								7			27
Total operating expenses		8,637			7,984			8,184			10,320

Loss from operations		(9,605	)		(11,311	)		(1,459	)		(7,823	)

Other income (expense):
Interest expense		(64	)		(8	)		—			(12	)
Interest income		263			130			321			134
Foreign exchange losses, net		(43	)		(65	)
Foreign exchange gains (losses), net								149			(132	)
Other, net		(25	)		(17	)		(3	)		(29	)
Total other income, net		131			40
Total other income (loss), net								467			(39	)

Loss before income taxes		(9,474	)		(11,271	)		(992	)		(7,862	)
Income tax expense		6			434			58			1,420
Net loss	$	(9,480	)	$	(11,705	)	$	(1,050	)	$	(9,282	)

Loss per common share:
Basic	$	(0.72	)	$	(0.89	)	$	(0.08	)	$	(0.69	)
Diluted	$	(0.72	)	$	(0.89	)	$	(0.08	)	$	(0.69	)

Weighted average common shares outstanding:
Basic		13,202,384			13,094,809			13,571,510			13,454,254
Diluted		13,202,384			13,094,809			13,571,510			13,454,254

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

	Three Months Ended						Three Months Ended
	December 31, 2017			December 31, 2016			December 31, 2020			December 31, 2019
Net loss	$	(9,480	)	$	(11,705	)	$	(1,050	)	$	(9,282	)
Other comprehensive loss, net of tax
Change in unrealized losses on available-for-sale securities		(51	)		(62	)
Other comprehensive income:
Foreign currency translation adjustments		(205	)		(306	)		197			566
Total other comprehensive loss, net of tax		(256	)		(368	)
Total other comprehensive income								197			566
Total comprehensive loss	$	(9,736	)	$	(12,073	)	$	(853	)	$	(8,716	)

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

	Common Stock										Accumulated
						Additional					Other
						Paid-In		Retained			Comprehensive			Treasury
	Shares			Amount		Capital		Earnings			Loss			Stock			Total
Balance at October 1, 2020		13,670,639		$	137	$	90,965	$	86,566		$	(16,698	)	$	—		$	160,970
Net loss		—			—		—		(1,050	)		—			—			(1,050	)
Foreign currency translation adjustments		—			—		—		—			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

Balance at October 1, 2019		13,630,666		$	136	$	88,660	$	105,808		$	(15,757	)	$	—		$	178,847
Net loss		—			—		—		(9,282	)		—			—			(9,282	)
Foreign currency translation adjustments		—			—		—		—			566			—			566
Issuance of common stock pursuant to the vesting of restricted stock units		30,823			1		—		—			—			—			1
Forfeiture of restricted stock		—			—		—		—			—			—			—
Stock-based compensation		—			—		590		—			—			—			590
Balance at December 31, 2019		13,661,489		137		$	89,250	$	96,526		$	(15,191	)	$	—		$	170,722

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

	Three Months Ended						Three Months Ended
	December 31, 2017			December 31, 2016			December 31, 2020			December 31, 2019
Cash flows from operating activities:
Net loss	$	(9,480	)	$	(11,705	)	$	(1,050	)	$	(9,282	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided (used in) by operating activities:
Deferred income tax expense (benefit)		(55	)		34			6			(25	)
Rental equipment depreciation		2,247			3,308			3,831			4,443
Property, plant and equipment depreciation		1,095			1,313			985			930
Accretion of discounts on short-term investments		13			16
Amortization of intangible assets								433			433
Stock-based compensation expense		826			1,375			548			590
Bad debt expense (recovery)		350			(482	)
Bad debt expense								7			27
Inventory obsolescence expense		1,434			4,147			617			1,436
Change in estimate of collectability of rental revenue								—			7,993
Change in estimated fair value of contingent consideration								(697	)		—
Gross profit from sale of used rental equipment		(2,566	)		(1,201	)		(4,127	)		(284	)
Realized loss on short-term investments		—			1
Gain on disposal of property, plant and equipment								—			(14	)
Effects of changes in operating assets and liabilities:
Trade accounts receivable		2,562			2,312
Income tax receivable		10			—
Trade accounts and other receivables								5,143			(8,460	)
Unbilled receivables								(4,263	)		—
Inventories		(2,865	)		(1,507	)		(2,065	)		(3,126	)
Prepaid expenses and other current assets		(329	)		(39	)
Prepaid income taxes		41			393
Deferred cost of revenue and other assets								(1,422	)		(954	)
Accounts payable trade		723			(348	)		4,053			2,284
Accrued expenses and other		267			(257	)
Deferred revenue		(65	)		771
Income tax payable		—			(31	)
Net cash used in operating activities		(5,792	)		(1,900	)
Deferred revenue and other liabilities								311			651
Net cash provided by (used in) operating activities								2,310			(3,358	)

Cash flows from investing activities:
Purchase of property, plant and equipment		(218	)		(106	)		(597	)		(1,670	)
Proceeds from the sale of property, plant and equipment								—			40
Investment in rental equipment								(13	)		(5,152	)
Proceeds from the sale of used rental equipment		997			1,915			112			1,146
Purchases of short-term investments		(1,905	)		—
Proceeds from the sale of short-term investments		5,898			2,674
Net cash provided by investing activities		4,772			4,483
Net cash used in investing activities								(498	)		(5,636	)

Cash flows from financing activities:
Proceeds from the exercise of stock options		—			50
Net cash provided by financing activities		—			50
Purchase of treasury stock								(828	)		—
Net cash used in financing activities								(828	)		—

Effect of exchange rate changes on cash		(149	)		(101	)		49			210
Increase (decrease) in cash and cash equivalents		(1,169	)		2,532			1,033			(8,784	)
Cash and cash equivalents, beginning of fiscal year		15,092			10,262			32,686			18,925
Cash and cash equivalents, end of fiscal period	$	13,923		$	12,794		$	33,719		$	10,141

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest							$	—		$	12
Cash paid for income taxes								40			1,440
Note receivable in connection with sale of used rental equipment								9,868			—
Inventory transferred to (from) rental equipment								(667	)		4,070

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

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, ~~2017~~2020 was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at December 31, ~~2017~~2020 and the consolidated statements of operations, comprehensive loss, stockholders’ equity and ~~the consolidated statements of~~ cash flows for the three months ended December 31, ~~2017~~2020 and ~~2016~~2019 were prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made. All intercompany balances and transactions have been eliminated. The results of operations for the three months ended December 31, ~~2017~~2020 are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to the rules of the Securities and Exchange Commission. 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 for the Company’s fiscal year ended September 30, ~~2017.~~2020.

Certain amounts previously presented in the consolidated financial statements have been reclassified to conform to the current year presentation. Such reclassifications had no effect on previously reported net loss, stockholders’ equity or cash flows.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 ~~consolidated~~ financial statements. The Company continually evaluates its estimates, including those related to bad debt reserves, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets and intangible assets, contingent consideration, investment in debt security and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. ~~Actual~~While management believes current estimates are reasonable and appropriate, actual results may differ from these estimates under different conditions or assumptions.

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.

~~The Company classifies its short-term investments consisting of corporate bonds, government bonds~~ At December 31, 2020, cash and other such similar investments as available-for-sale securities. Available-for-sale securities are carried at fair market value with net unrealized holding gains and losses reported each period as a component of accumulated other comprehensive loss in stockholders’ equity. See note 2 for additional information.

The Company records a write-down of its inventories when the cost basis of any manufactured product, including any estimated future costs to complete the manufacturing process, exceeds its net realizable value. Inventories are stated at the lower of cost or market value. Cost is determined on the first-in, first-out method, except that certain ofcash equivalents included $5.0 million held by the Company’s foreign subsidiaries ~~use an average cost method~~and branch offices. If the Company were to ~~value~~repatriate the cash held by its foreign subsidiaries, it could be required to accrue and pay taxes on any amount repatriated. The Tax Cut and Jobs Act (“2017 Tax Act”) creates new taxes on certain foreign earnings and also requires entities to pay a one-time transition tax on undistributed earnings of their ~~inventories.~~

foreign subsidiaries which were previously tax deferred. The Company ~~periodically reviews~~has determined it is 0t required to pay transition tax on the ~~composition~~undistributed earnings of its inventories to determine if market demand, product modifications, technology changes, excessive quantities on-hand and other factors hinder its ability to recover its investment in such inventories. The Company’s assessment is based upon historical product demand, estimated future product demand and various other judgments and estimates. Inventory obsolescence reserves are recorded when such assessments reveal that portions or components of the Company’s inventory investment will not be realized in its operating activities.

The Company reviews its inventories for classification purposes. The value of inventories not expected to be realized in cash, sold or consumed during its next operating cycle are classified as noncurrent assets.

The Company’s long-lived assets are reviewed for impairment whenever an event or change in circumstances indicates the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value.

The Company primarily derives revenue from the sale of its manufactured products, including revenue derived from the sale of its manufactured rental equipment. In addition, the Company generates revenue from the short-term rental under operating leases of its manufactured products. The Company recognizes revenue from product sales, including the sale of used rental equipment, when all of the following have occurred: (i) title passes to the customer, (ii) the customer assumes the risks and rewards of ownership, (iii) the product sales price has been determined, (iv) collectability of the sales price is reasonably assured, and (v) product delivery occurs as directed by the customer. Although infrequent, in cases where collectability is not reasonably assured, the installment or cost recovery method is used. Except for certain of the Company’s reservoir characterization products, 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. The Company recognizes rental revenue as earned over the rental period. Rentals of the Company’s equipment generally range from daily rentals to rental periods of up to six months or longer. Revenue from engineering services is recognized as services are rendered over the duration of a project, or as billedforeign subsidiaries since it had 0 accumulated foreign earnings on a ~~per hour~~consolidated basis. ~~Field service revenue is recognized when services are rendered and is generally priced on a per day rate.~~

The Company expenses research and development costs as incurred. Research and development costs include salaries, employee benefit costs, department supplies, direct project costs and other related costs.

Most of the Company’s products do not require installation assistance or sophisticated instructions. The Company offers a standard product warranty obligating it to repair or replace equipment with manufacturing defects. The Company maintains a reserve for future warranty costs based on historical experience or, in the absence of historical product experience, management’s estimates. Reserves for future warranty costs are included within accrued expenses and other current liabilities on the consolidated balance sheets. Changes in the warranty reserve are reflected in the following table (in thousands):

In October 2016, the Financial Accounting Standards Board (“FASB”) issued guidance which eliminates the exception of recognizing, at the time of transfer, current and deferred income taxes for intercompany profits on intra-entity asset transfers other than inventory. The Company adopted this guidance in its first quarter of its fiscal year ending September 30, 2018 using the modified retrospective approach. The adoption resulted in a cumulative-effect adjustment to opening retained earnings of $0.4 million. Under prior guidance, the Company maintained a non-current prepaid income tax asset on its consolidated balance sheets representing income taxes paid in the U.S. on profits realized from the sale of rental equipment to its foreign subsidiaries. As this rental equipment was depreciated, the prepaid tax was recognized as a current income tax expense in the Company’s consolidated statement of operations. Under the new guidance, the Company is required to recognize a deferred tax asset related to the intercompany profits realized on the sale of non-inventory assets to its subsidiaries; however, profits realized from the intercompany sale of inventories will continue to be accounted for as a prepaid income tax asset in accordance with the prior guidance. Under the new guidance, the deferred tax asset resulting from the sale of non-inventory assets is recognized at the jurisdictional tax rate of the subsidiary which purchased the asset. Any differences between the subsidiary’s jurisdictional tax rate and the seller’s tax rate pertaining to the intercompany profit are charged to seller’s current income tax expense at the time of the sale. With the recent reduction in the U.S. income tax rate to 21%, and assuming that a majority of the Company’s equipment sales will continue to be made to its Canadian subsidiary having a higher statutory tax rate, the new guidance is expected to have a favorable impact on the Company’s provision for income taxes in future periods. Due to the fact the Company has a valuation allowance against its net deferred tax assets, the adoption of this guidance had no impact upon the Company’s income tax expense for the three months ended December 31, 2017.

In March 2016, the FASB issued guidance to simplify key components of employee share-based payment accounting. The new guidance simplifies several aspects of the accounting for share-based payment transactions, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification of excess tax benefits from share-based payments on the statement of cash flows. The Company adopted this guidance in the first quarter of its fiscal year ending September 30, 2018. No cumulative effect adjustment to retained earnings was needed upon adoption as the Company has no unrecorded excess tax benefits residing in additional paid-in-capital account. Under the prior standard, the Company was required to track and record as a component of additional paid-in capital the tax impact of cumulative windfalls, net of any shortfalls, which resulted from excess tax benefits from share-based payments. As a result, the impact of net windfalls has not historically affected the Company’s provision for income taxes or its effective income tax rate. Under the new guidance, the Company will no longer track windfalls or shortfalls resulting from share-based payments since all future windfalls and shortfalls will be recorded as a component of the Company’s current provision for income taxes. Depending on the magnitude of future windfalls or shortfalls, this change could significantly affect the Company’s provision for income taxes in a positive or negative direction. Due to the fact the Company has a valuation allowance against its net deferred tax assets, the adoption of this guidance had no impact upon the Company’s income tax expense for the three months ended December 31, 2017.

In July 2015, the FASB issued guidance requiring management to measure inventory at the lower of cost or net realizable value. Under the new guidance, net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Since the Company is a manufacturer and the nature of its inventory is generally unique to its designs and applications thus preventing the gathering of relevant external market data, its existing practice for calculating net realizable value under the current standard is consistent with the practice prescribed by the new guidance. The Company adopted this standard in its first quarter of its fiscal year ending September 30, 2018. The adoption did not have a material effect upon the Company’s consolidated financial statements.

In November 2016, the FASB issued guidance which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance must be adopted by the Company no later than its first quarter of fiscal year 2019 and should be applied on a retrospective transition basis. The Company has historically not held restricted cash balances and, therefore, does not expect the adoption of this guidance to have a material effect on its consolidated financial statements. However, upon adoption of this guidance, the Company will make any necessary changes to present restricted cash balances in accordance with the guidance.

In June 2016, the FASB issued guidance surrounding credit losses for financial instruments that replaces the incurred loss impairment methodology in ~~current U.S.~~ generally accepted accounting ~~principles (“GAAP”).~~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. ~~The~~As a small reporting company, the Company must adopt this standard ~~is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods.~~no later than the first quarter of its fiscal year ending September 30, 2024. Early adoption ~~for a fiscal year beginning after December 15, 2018~~ is permitted. ~~Entities~~The standard’s provisions will ~~apply the standard’s provisions~~be applied as a cumulative-effect adjustment to

retained earnings as of the beginning of the first effective reporting period. The Company ~~expects~~intends to adopt this standard during the first quarter of its fiscal year ending September 30, ~~2021~~2024 and is currently evaluating the impact of this new guidance on its consolidated financial statements.

In ~~February 2016,~~December 2019, the FASB issued guidance ~~requiring a lessee to recognize assets and liabilities~~on simplifying the accounting for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement and presentation of expense and cash flows arising from a lease by a lessee primarily will depend on its classification of the lease as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will also require operating leases of the lessee to be recognized on the balance sheet if the operating lease term is more than 12 months.income taxes. The guidance ~~also requires disclosures~~eliminates certain exceptions to ~~help investors~~the general principles in Topic 740 and ~~other financial statement users~~clarifies and amends existing guidance to better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. Theimprove consistent application. This guidance is effective for fiscal years and interim ~~reporting~~ periods ~~therein,~~within those fiscal years, beginning after December 15, ~~2018 and is~~2020. Certain amendments within the guidance are required to be applied on a retrospective basis for all periods presented; others are to be applied using ~~the~~a modified retrospective ~~approach.~~approach with a cumulative-effect adjustment to retained earnings, if any, as of the beginning of the first reporting period in which the guidance is adopted; and yet others are to be applied using either basis. All other amendments not specified in the guidance should be applied on a prospective basis. Early adoption is permitted. An entity that elects to early adopt in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company ~~expects~~intends to adopt this standard in its first quarter of its fiscal year ending September 30, 2020. The Company currently is not a lessee under any lease agreements with a term longer than one year. The Company is routinely a lessor in its rental contracts with customers; however, these rental agreements are generally short-term in nature, and the Company believes would be treated as operating leases under the new guidance; however, the Company has not completed a detailed review of its lease arrangements, and these conclusions are subject to change.

In May 2014, the FASB issued guidance requiring entities to recognize revenue from contracts with customers by applying a five-step model in accordance with the core principle to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this guidance specifies the accounting for some costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. In August 2015, the FASB issued guidance deferring the effective date of this guidance to annual periods beginning after December 15, 2017, including interim reporting periods therein. Entities have the option to adopt this guidance either retrospectively or through a modified retrospective transition method. This new standard will supersede existing revenue guidance and affect the Company's revenue recognition process and the presentations or disclosures of the Company's consolidated financial statements and footnotes. The Company recognizes revenue through three primary transactions types: (i) the immediate recognition of revenue through the routine delivery of products to its customers, (ii) the rental of equipment to its customers through short-term operating leases, and (iii) the recognition of revenue utilizing the percentage of completion method for the delivery of complex products requiring long manufacturing times and substantial engineering resources. The Company expects to adopt this standard induring the first quarter of its fiscal year ending September 30, ~~2019~~2022 and is ~~in the early stages of~~currently evaluating the ~~standard, including the method of adoption~~new guidance to determine the impact it will have on its condensed consolidated financial statements. ~~Further disclosures around policy changes or quantitative effects will be made as the Company moves closer to the adoption of this standard.~~

~~GEOSPACE TECHNOLOGIES CORPORATION AND SUBSIDIARIES~~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 assesses collectability during the contract assessment phase. In situations where collectability of the sales price is not probable, the Company recognizes revenue when it determines that collectability is probable or non-refundable cash is received from its customers. Transfer of control generally occurs with shipment or delivery, depending on the terms of the underlying contract.�� The Company’s ~~short-term investments have contractual maturities ranging from January 2018 to January 2020.~~

~~At December 31, 2017~~products are generally sold without any customer acceptance provisions, and ~~September 30, 2017,~~ the Company’s ~~Canadian subsidiary had CAN$32.7 million~~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 ~~CAD$26.1 million, respectively,~~is generally priced on a per day rate.

The Company also generates revenue from short-term rentals under operating leases of ~~Canadian dollar denominated intercompany accounts payable owed to one~~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 ~~U.S subsidiaries. In order~~equipment generally range from daily rentals to ~~mitigate its exposure~~minimum rental periods of up to ~~movements in foreign currency rates between~~six months or longer. The Company has determined that ASC 606 does not apply to rental contracts, which are within the ~~U.S. dollar~~scope of ASC Topic 842, Leases.

As permissible under the new standard, sales taxes and ~~Canadian dollar, the~~transaction-based taxes are excluded from revenue. The Company ~~routinely enters into foreign currency forward contracts to hedge a portion of its exposure to changes in~~does not disclose the value of ~~the Canadian dollar. On December 29, 2017,~~unsatisfied performance obligations for contracts with an original expected duration of one year or less. Additionally, the Company ~~entered into~~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 ~~CAN$32.0 million 90-day hedge contract effective January 2, 2018 with a United States bank to reduce~~sales transaction after the ~~impact on cash flows from movements in~~customer obtains control of the ~~Canadian dollar/U.S. dollar currency exchange rate, but has not been designated~~goods as a ~~hedge~~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 ~~accounting purposes. The Company’s derivative instruments had no fair value as~~reimbursable shipping and handling expenses are reported in cost of ~~December 31, 2017~~revenue.

During the third quarter of fiscal year 2020, the Company was awarded $10.5 million contract (inclusive of a subsequent contract amendment of $0.3 million) with the U.S. Customs and ~~September 30, 2017.~~

~~The following table summarizes~~Border Protection (“CBP”) to provide a technology solution to the ~~Company’s gains on derivative instruments in~~Department of Homeland Security. Revenue recognized under the ~~consolidated statements of operations~~contract for fiscal year 2020 and for the three months ended December 31, ~~2017~~2020 was $0.3 million and ~~2016~~$8.8 million, respectively. The Company had unbilled receivables of $4.3 million at December 31, 2020 under this contract. Unrecognized revenue for unsatisfied performance obligations on this contract at December 31, 2020 was approximately $1.6 million. The Company anticipates the majority of the revenue on the remaining performance obligation on this contract will be recognized in the second or third quarter of fiscal year 2021. Unsatisfied performance obligations on all other contracts held by the Company at December 31, 2020 had an original duration of one year or less.

At December 31, 2020 and September 30, 2020, the Company had deferred contract liabilities of 0 dollars and $0.2 million, respectively, which are included in current liabilities on the Company’s consolidated balance sheet as a component of deferred revenue and other liabilities. The Company had 0 deferred contract costs at December 31, 2020 and September 30, 2020. During the three months ended December 31, 2020 and 2019, revenue of $0.2 million and 0 dollars, respectively, was recognized from deferred contract liabilities. NaN cost of revenue was recognized from deferred contract costs for the three months ended December 31, 2020 and 2019.

During the second quarter of fiscal year 2020, the Company partially financed a $12.5 million product sale by entering into a $10.0 million promissory note with the customer. The note is for a three-year term with monthly principal and interest payments of $0.3 million. Due to the financial condition of the customer, the Company has concerns over the probable collectability of the promissory note. As a result, the Company has 0t recognized any revenue or cost of revenue on the product sale. The Company has received payments from the customer totaling $5.3 million (exclusive of interest) as of December 31, 2020 related to the product sale, which is reflected on the Company’s consolidated balance sheet as non-current deferred revenue. Management does not intend to recognize revenue and cost of revenue from the product sale until it becomes probable that the customer will satisfy its financial obligation to the Company.

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

Three Months Ended

Derivative Instrument

Location

December 31, 2017

December 31, 2016

Foreign Currency Forward Contracts

Other Income (Expense)

$
158

$
72

	Three Months Ended
	December 31, 2020		December 31, 2019
Oil and Gas Markets
Traditional exploration product revenue	$	997	$	2,330
Wireless exploration product revenue		10,029		404
Reservoir product revenue		29		180
Total revenue		11,055		2,914

Adjacent Markets
Industrial product revenue		4,407		3,596
Imaging product revenue		2,463		2,476
Total revenue		6,870		6,072

Emerging Markets
Revenue		8,797		97

Total	$	26,722	$	9,083

~~Amounts~~See Note 13 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:

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.

On July 13, 2020, the Company received an interest in a senior secured bond issued from an international seismic marine customer. The Company’s interest in the ~~above table include realized~~bond, which has a face value of $13.0 million, was received in exchange for $

13.0 million of unpaid invoices and ~~unrealized derivative gains~~late fees owed by the customer. The bond is secured by a third in line lien on the assets owned by the customer and ~~losses.~~has an 8% interest rate with bi-annual interest and possible principal payments based on available excess cash flows. Interest payments can be made either in cash or in-kind payments in the form of additional debt security. In-kind interest payments require an 8.8% interest rate. The bond matures on July 13, 2022. The bond is listed on the Oslo Alternative Bond Market; however, the actual marketability of the bond is unknown at this time.

As of September 30, 2020, the Company performed a fair value assessment of the investment to determine the bond’s initial carrying amount. In accordance with ASC 825, “Fair Value Instruments”, the Company has determined that the investment is a Level 3 financial instrument primarily due to its current unknown marketability. Because of the distressed financial condition of the customer, the Company believed the fair value of the bond was nominal at September 30, 2020. In January 2021, the Company sold the bond for $0.3 million cash pursuant to a purchase agreement (the “Agreement”) entered with a third party (the “Buyer”). Pursuant to the Agreement, the Company will also receive additional cash compensation of $2.4 million from the Buyer if certain terms and conditions between the Buyer and the Company’s customer are met by December 31, 2021. In the event these terms and conditions are not met, the Company has the option to repurchase the bond from the Buyer for one dollar ($1.00).

~~At December 31, 2017, the~~The Company’s financial instruments ~~included~~generally include cash and cash equivalents, ~~short-term investments, derivative instruments,~~ trade accounts, ~~and financing~~notes receivables and accounts payable. Due to ~~the~~their short-term maturities, ~~of cash and cash equivalents, trade and other receivables and accounts payable,~~ the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates. The valuation technique used to measure the fair value of the contingent consideration was derived from models utilizing market observable inputs.

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

The following tables present the fair value ~~measurement~~ of the Company’s ~~short-term investments~~contingent consideration by valuation hierarchy and ~~derivative instruments was determined using the following inputs~~input (in thousands):

As of December 31, 2017

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

$
23,711

$
—

$
—

$
23,711

Government bonds

12,750

—

—

12,750

Total

$
36,461

$
—

$
—

$
36,461

	As of December 31, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)			Totals
Contingent consideration - current portion	$	—	$	—	$	(7,955	)	$	(7,955	)
Non-current contingent consideration		—		—		(2,310	)		(2,310	)
Total	$	—	$	—	$	(10,265	)	$	(10,265	)

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)~~Assets and Liabilities Measured on a Nonrecurring Basis

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

Adjustments to the fair value of the contingent consideration are based on Monte Carlo simulations utilizing inputs which include market comparable information and management assessments regarding potential future scenarios. The Company believes its estimates and assumptions are reasonable, however, there is significant judgement involved.

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

	December 31, 2017			September 30, 2017			December 31, 2020			September 30, 2020
Trade accounts receivable	$	8,265		$	10,830		$	5,695		$	14,090
Allowance for doubtful accounts		(1,254	)		(1,395	)		(558	)		(496	)
	$	7,011		$	9,435
Total							$	5,137		$	13,594

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. ~~Accounts~~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):

December 31, 2017

September 30, 2017

Promissory notes

$
7,062

$
4,306

Sales-type lease

7,807

8,581

Total financing receivables

14,869

12,887

Unearned income:

   Promissory notes

(95
)

(90
)
   Sales-type lease

(444
)

(527
)
      Total unearned income

(539
)

(617
)
Total financing receivables, net of unearned income

14,330

12,270

Allowance for doubtful promissory notes

(1,505
)

(1,020
)
Less current portion

(5,793
)

(3,055
)
Non-current financing receivables

$
7,032

$
8,195

	December 31, 2020			September 30, 2020
Notes receivable	$	13,373		$	184
Less current portion		(13,233	)		(184	)
Non-current notes receivable	$	140		$	—

Promissory notes receivable are generally collateralized by the ~~three months ended December 31, 2017,~~products sold, and bear interest at rates ranging up to 8% per year. The promissory notes receivable (including the ~~Company issued a $2.8~~unrecognized $10.0 million promissory note receivable disclosed below) mature at various times through January 2023. The Company has, on occasion, extended or renewed notes receivable as they mature, but there is no obligation to do so.

During the second quarter of fiscal year 2020, the Company partially financed a $12.5 million product sale by entering into a $10.0 million secured promissory note with a customer. The note has a three-year term and bears interest at 7% per year. Principal and interest payments of $0.3 million are due monthly until maturity. Due to the financial condition of the customer, the note receivable is not reflected on the Company’s consolidated balance sheet due to collectability concerns. See Note 2 for more information on this matter.

During the first quarter of fiscal year 2021, the Company entered into a $13.2 million short-term promissory note with a customer ~~in connection with the sale of rental equipment. Cash flows from financing receivables~~ related to the sale of rental equipment ~~for~~and an outstanding receivable balance. The note bears interest at 8% per annum and is due on or before March 31, 2021. Principal payments due under the ~~three months ended December 31, 2017~~note of ~~$0.9~~$6.0 million ~~are presented in proceeds~~were received from the ~~sale of used rental equipment~~customer in ~~the consolidated statements of cash flows.~~January 2021.

	December 31, 2017			September 30, 2017			December 31, 2020			September 30, 2020
Finished goods	$	32,768		$	33,690		$	20,106		$	20,798
Work in process		5,837			2,512			4,203			984
Raw material		68,078			70,099
Raw materials								46,692			47,041
Obsolescence reserve		(30,505	)		(29,614	)		(35,062	)		(34,960	)
		76,178			76,687
								35,939			33,863
Less current portion		(19,994	)		(20,752	)		(14,057	)		(16,933	)
Non-current portion	$	56,184		$	55,935		$	21,882		$	16,930

~~During the three months ended December 31, 2017 and 2016, the Company made non-cash inventory transfers of $2.0 million and $0.3 million, respectively, to rental equipment.~~ Raw materials include semi-finished goods and component parts ~~which~~that totaled approximately ~~$44.1~~$24.6 million and ~~$43.2~~$24.3 million at December 31, ~~2017~~2020 and September 30, ~~2017,~~2020, respectively.

The Company has elected not to record operating right-of-use assets or operating lease liabilities on its consolidated balance sheet for leases having a minimum term of 12 months or less. Such leases are expensed on a straight-line basis over the lease term. The Company has 1 operating right-of use asset related to a leased facility in Austin, Texas. The lease commenced in May 2019 and is for a two-year term. The operating right-of-use asset had ~~no long-term debt outstanding at~~a balance of $40,000 as of December 31, ~~2017~~2020. Future minimum lease payments related to the operating lease as of December 31, 2020 was $42,000, all of which is due in fiscal year 2021.

Operating lease costs are recorded in a single expense in the consolidated statements of operations and ~~September~~allocated to the right-of-use asset and the related lease liability as amortization expense and interest expense, respectively. Right-of-use asset operating lease costs of $38,000 and $38,000 and short-term lease costs of $74,000 and $76,000, both included as a component of total operating expenses, were recognized for the three months ended December 30, ~~2017.~~2020 and 2019, respectively. The discount rate used on the operating right-of-use asset was 5%, which represented the Company’s incremental borrowing rate at the lease’s inception.

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

The Company has entered into a ~~credit agreement~~new operating lease on a facility in Austin, Texas which commences in March 2021. The Company will record the lease as an operating right-of-use asset in the second quarter of fiscal year 2021. The lease has a seven-year term with ~~Frost Bank with borrowing availability~~future minimum lease payments of ~~$50.0 million (the “Credit Agreement”). On May 4, 2015, the~~$0.9 million.

The Company ~~amended the Credit Agreement which reduced its borrowing availability~~leases equipment to ~~$30.0 million with amounts available~~customers primarily for borrowing determined by a borrowing base. On October 25, 2017, the Company entered into another amendment to the Credit Agreement which extended its maturity to April 30, 2019. The 2017 amendment also modified the borrowing base to be determined based upon certainterms of six months or less. All of the Company’s assets which include (i) 80% of certain accounts receivable plus (ii) 50% of certain notes receivable (such result not to exceed $10 million) plus (iii) 25% of certain inventories (such result not to exceed $20 million) and requires the Company to maintain unencumbered liquid assets of $10 million.leasing arrangements as lessor are classified as operating leases. The ~~2017 amendment also removed a requirement that the Company maintain a financial ratio that compares certain~~majority of the Company’s ~~assets to certain~~rental revenue is generated from its marine-based wireless seismic data acquisition system.

The Company regularly evaluates the collectability of its ~~liabilities~~lease receivables on a lease by lease basis. The evaluation primarily consists of reviewing past due account balances and ~~imposed~~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 ~~new financial covenant that~~direct write-off of the ~~Company maintain a minimum amount of certain liquid assets.~~lease receivable to rental revenue and limits future rental revenue recognition to cash received. As of December 31, ~~2017,~~2020, the Company had lease receivables from customers, net of reserves, of $3.9 million.

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

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

The Company owns a property located in Bogotá, Colombia that it is marketing for sale. The property was ~~$26.6 million. As~~used for warehousing its rental equipment operations, product sales and service support to its customers in South America. The property’s carrying value at December 31, 2020 and September 31, 2020 of $0.7 million and $0.6 million, respectively, is classified as assets held for sale in the accompanying consolidated balance sheets as of December 31, ~~2017,~~2020 and September 30, 2020. The Company believes the ~~amount available for borrowing was $26.3 million after consideration~~fair market value of ~~$0.3 million of outstanding letters of credit.~~ the property exceeds its carrying value and that the property will be sold within the next 12-months.

The Company’s ~~domestic subsidiaries have guaranteed the obligations of the Company under the Credit Agreement~~consolidated goodwill and ~~such subsidiaries have secured their obligations under such guarantees by the pledge of substantially all of the~~other intangible assets of such subsidiaries, except real property assets. The Company is required to make monthly interest payments on borrowed funds. The Credit Agreement limits the incurrence of additional indebtedness, restricts the Company and its subsidiaries’ ability to pay cash dividends and contains other covenants customary in agreements of this type. The interest rate for borrowings under the Credit Agreement is based on the Wall Street Journal prime rate, which was 4.50% at December 31, 2017. At December 31, 2017, the Company was in compliance with all covenants under the Credit Agreement.

~~Accumulated other comprehensive loss~~ consisted of the following (in thousands):

Unrealized Losses on
Available-for-Sale
Securities

Foreign Currency
Translation
Adjustments

Totals

Balance at October 1, 2017

$
(58
)

$
(14,172
)

$
(14,230
)
Changes in unrealized losses on available-for-sale
securities

(51
)

—

(51
)
Foreign currency translation adjustments

—

(205
)

(205
)
Balance at December 31, 2017

$
(109
)

$
(14,377
)

$
(14,486
)

	Weighted-
	Average
	Remaining Useful
	Lives (in years)		December 31, 2020			September 30, 2020
Goodwill			$	4,337		$	4,337

Other intangible assets:
Developed technology	16.2			5,918			5,918
Customer relationships	2.2			3,900			3,900
Trade names	3.2			1,930			1,930
Non-compete agreements	2.2			170			170
Total other intangible assets	9.3			11,918			11,918
Accumulated amortization		��		(4,020	)		(3,587	)
			$	7,898		$	8,331

The Company’s goodwill is entirely associated with its Emerging Markets reporting unit. At December 31, 2020, the Company determined there were no triggering events requiring an impairment assessment of its goodwill and other intangible assets.

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

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

During the three months ended December 31, ~~2017,~~2020, the Company issued ~~138,650 shares of~~154,950 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as ~~amended.~~amended (the “Plan”). The RSUs issued include both time-based and performance-based vesting provisions. The weighted average grant date fair value of ~~the restricted stock~~each RSU was ~~$15.54~~$6.52 per ~~share.~~unit. The grant date fair value of ~~these awards~~the RSUs was ~~$2.2~~$1.0 million, which will be charged to expense over the next four years as the restrictions lapse. Compensation expense for ~~restricted stock awards~~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 ~~shares~~units that are anticipated to fully vest. ~~Recipients~~Each RSU represents a contingent right to receive one share of ~~restricted~~the Company’s common stock ~~awards are entitled to vote such shares and are entitled to dividends, if paid.~~

upon vesting. As of December 31, ~~2017,~~2020, the Company had unrecognized compensation expense of ~~$4.8~~$3.1 million relating to ~~restricted stock awards. This unrecognized compensation expense~~RSUs that is expected to be recognized over a weighted average period of ~~3.1~~3.2 years. ~~In addition,~~

As of December 31, 2020, the Company had ~~$0.3~~$0.7 million of unrecognized compensation expense related to ~~nonqualified~~restricted stock ~~option~~ awards ~~which~~(“RSAs”) that is expected to be recognized over a weighted average period of ~~1.2~~1.1 years.

As of December 31, ~~2017, a total of 300,675 shares of restricted stock~~2020, there were 315,375 RSUs, 53,472 RSAs and ~~201,800~~38,800 nonqualified stock options ~~shares were~~ outstanding.

~~The Company applies the two -class method in calculating per share data.~~ The following table summarizes the calculation of net loss and weighted average common shares and common equivalent shares outstanding for purposes of the computation of loss per share (in thousands, except share and per share data):

	Three Months Ended						Three Months Ended
	December 31, 2017			December 31, 2016			December 31, 2020			December 31, 2019
Net loss	$	(9,480	)	$	(11,705	)	$	(1,050	)	$	(9,282	)
Less: Income allocable to unvested restricted stock		—			—
Loss available to common shareholders		(9,480	)		(11,705	)
Reallocation of participating earnings		—			—
Less: Loss allocable to unvested restricted stock								—			—
Loss attributable to common shareholders for diluted earnings per share	$	(9,480	)	$	(11,705	)	$	(1,050	)	$	(9,282	)
Weighted average number of common share equivalents:
Common shares used in basic loss per share		13,202,384			13,094,809			13,571,510			13,454,254
Common share equivalents outstanding related to stock options		—			—
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		13,202,384			13,094,809			13,571,510			13,454,254
Loss per share:
Basic	$	(0.72	)	$	(0.89	)	$	(0.08	)	$	(0.69	)
Diluted	$	(0.72	)	$	(0.89	)	$	(0.08	)	$	(0.69	)

For the calculation of diluted loss per share for the three months ended December 31, ~~2017~~2020, 38,800 stock options and ~~2016, 201,800~~315,375 non-vested RSUs were excluded in the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive. For the calculation of diluted loss per share for the three months ended December 31, 2019, 165,600 stock options and ~~206,300 stock options,~~253,320 non-vested RSUs, respectively, were excluded in the calculation of weighted average shares outstanding ~~as a result of~~since their impact ~~being~~on diluted loss per share was antidilutive.

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 utilizes the services of independent valuation consultants to assist with the estimation of the fair value of this contingent consideration. 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 earn-out 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 ending July 2022. The maximum amount of contingent payments is $23.5 million over the four-year earn-out period. At September 30, 2020, the contingent earn-out liability was valued at $5.8 million. During the three months ended December 31, 2020, the Company recorded an adjustment of $0.8 million to decrease the liability to an estimated fair value of $5.0 million. The decrease in the earn-out liability for the three months ended December 31, 2020 was due to a decrease in projected eligible revenue.

The Company recorded an initial contingent earn-out liability of $4.3 million in connection with its November 2018 acquisition of all the intellectual property and related assets of the OptoSeis^® fiber optic sensing technology. 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. The maximum amount of contingent payments is $23.2 million over the five-and-a-half year earn-out period. At September 30, 2020, the contingent earn-out liability was valued at $5.2 million. During the three months ended December 31, 2020, the Company recorded an adjustment of $0.1 million to increase the liability to an estimated value of $5.3 million.

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

The Company leases office space and certain equipment for terms of seven years or less. As of December 31, 2020, future minimum lease obligations, inclusive of leases which have not yet commenced, were $0.9 million.

The Company is involved in various pending ~~or potential~~ 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 ~~litigation. Management is~~such actions. However, management believes that the most probable, ultimate resolution of these pending matters will not ~~aware~~have a material adverse effect on the Company’s consolidated financial position, results of ~~any material pending~~operations or ~~known to be contemplated legal or government proceedings against the Company.~~cash flows.

The Company reports and evaluates financial information for ~~two~~3 operating segments: ~~Seismic~~Oil and ~~Non-Seismic. Seismic product lines include: land~~Gas Markets, Adjacent Markets and ~~marine~~Emerging Markets. The Oil and Gas Markets segment products include wireless seismic data acquisition systems, ~~permanent land and seabed~~ reservoir ~~monitoring~~characterization products and services, ~~geophones~~ and ~~geophone strings,~~traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, ~~telemetry~~ cables, marine streamer retrieval and steering devices and various other seismic products. The ~~Non-Seismic product lines~~Adjacent Markets segment products include imaging equipment, water meter products, offshore cables, and ~~industrial products.~~seismic sensors used for vibration monitoring and geotechnical applications such as mine safety applications and earthquake detection. The Emerging Markets segment provides seismic products targeted at the border and perimeter security markets.

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

	Three Months Ended						Three Months Ended
	December 31, 2017			December 31, 2016			December 31, 2020			December 31, 2019
Revenue:
Seismic	$	8,039		$	9,406
Non-Seismic		6,454			5,736
Corporate		151			143
Oil and Gas Markets							$	12,763		$	11,509
Adjacent Markets								6,900			6,099
Emerging Markets								8,797			97
Total	$	14,644		$	15,285		$	28,460		$	17,705

Income (loss) from operations:
Seismic	$	(7,673	)	$	(9,453	)
Non-Seismic		1,029			1,052
Oil and Gas Markets							$	(5,986	)	$	(3,894	)
Adjacent Markets								1,260			851
Emerging Markets								6,479			(1,365	)
Corporate		(2,961	)		(2,910	)		(3,212	)		(3,415	)
Total	$	(9,605	)	$	(11,311	)	$	(1,459	)	$	(7,823	)

~~The Company’s effective~~Consolidated income tax ~~rate~~expense for the three months ended December 31, ~~2017~~2020 and 2019 was ~~impacted by the Tax Cuts~~$0.1 million and ~~Jobs Act (“the Act”), which was enacted into law on December 22, 2017. Income tax effects resulting from changes~~$1.4 million, respectively. This decrease in tax laws are accounted for by the Company in accordance with the authoritative guidance, which requires that these tax effects be recognized in the period in which the law is enacted and the effects are recorded as a component of provision for income taxes from continuing operations. As a result, the Company made changes to its provision for income tax ~~resulting from~~expense was primarily the ~~enactment~~result of ~~the Act for the three months ended December 31, 2017.~~

~~The Act includes significant changes to the U.S. corporate income tax system which reduces the U.S. federal corporate tax rate from 35.0% to 21.0% as of January 1, 2018; shifts to~~ a modified territorial tax regime which requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred; and creates new taxes on certain foreign-sourced earnings. The decrease in ~~the U.S. federal corporate~~rental revenue earned in foreign jurisdictions requiring tax rate from 35.0% to 21.0% results in a blended statutory tax rate of 24.5% for the Company’s fiscal year ending September 30, 2018. The new taxes for certain foreign-sourced earnings under the Act are effective for the Company after the fiscal year ending September 30, 2018.

withholding. The Company is currently unable to record any tax benefits from the tax losses it incurs in the early stages of evaluating the impact of the Act on its consolidated financial statements. Based on the Company’s initial assessments to date, it expects the one-time transition tax on certain foreign earningsU.S., Canada and profits to have a minimal cash impact since it anticipates that it will be able to utilize existing net operating loss carryforwards to substantially offset any taxes payable on foreign earnings and profits. Additionally, the Company has adjusted its U.S. gross deferred tax assets and

liabilities to the new 21% statutory tax rate; however, it also recorded a corresponding adjustment to a valuation allowance which resulted in no net impact to deferred tax assets or provision for income taxes. Except for the adjustments referred to above, the Company has not recorded any income tax effects of the Act in its consolidated financial statements (including any provisional amounts) because it does not yet have the necessary information available, prepared or analyzed in reasonable detail to complete the applicable accounting.

The Company’s effective tax rates for the three months ended December 31, 2017 and 2016 were (0.1)% and (9.6)% , respectively. The United States statutory rate for the three months ended December 31, 2017 and 2016 was 24.5% (blended) and 35%, respectively. Compared to the United States statutory rate, the lower effective tax rates resulted primarily from the provision of a valuation allowance against the Company’s U.S. and Canadian deferred tax assetsRussian Federation due to the uncertainty surrounding ~~the Company’s~~its ability to utilize such ~~deferred tax assets~~losses in the future to offset taxable income.

As of December ~~2017,~~31, 2020, the Company ~~initiated~~had a ~~program~~note receivable of $13.2 million due from 1 customer, of which $6.0 million was received in January 2021. Revenue recognized from this customer during the three months ended December 31, 2020 was $11.2 million. Current assets at December 31, 2020 also included unbilled receivables from one customer of $4.3 million. Revenue recognized from this customer during the three months ended December 31, 2020 was $8.8 million.

The ongoing COVID-19 pandemic has spread across the globe and has negatively impacted worldwide economic activity, including the global demand for oil and natural gas, and continues to ~~reduce operating costs~~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. Following the initial outbreak of the virus, the Company experienced disruptions in its supply chain, a reduction in demand for certain products, cancellation of rental contracts and difficulty with field employees and salespeople traveling domestically and abroad to conduct the Company’s business. COVID-19 continues to pose the risk that the Company or its employees, contractors, suppliers and customers may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to restrictions that may be requested or mandated by governmental authorities, including quarantines of certain geographic areas, restrictions on travel and other restrictions that prohibit employees from going to work, both around the world as well as in certain jurisdictions in the United States. The continued spread of COVID–19 and the related mitigation measures have disrupted the Company’s supply chain, resulting in longer lead times in materials shipped from suppliers and extended the shipping time for these materials to reach the Company’s facilities. If COVID–19 continues to spread or the response to contain the COVID–19 pandemic is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and liquidity.

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

Sustained low oil prices or the failure of oil prices to rise in the future 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 ~~expected~~the decline in oil prices caused by the COVID-19 pandemic in 2020, oil and ~~continuing low levels~~gas exploration and production companies experienced a significant reduction in cash flows, which resulted in reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic data acquisition activities. Demand for the sale of the Company’s seismic ~~product demand. The program is expected to produce approximately $6 million of annualized cash savings. The~~products targeted at customers in its Oil and Gas Markets segment, which segment has historically accounted for the majority of its revenue, significantly declined during fiscal year 2020, and both product sales and rental revenue could significantly diminish during the cost reductions were realized through a reduction of over 60 employees from the Company’s Houston area workforce. In connection with the workforce reductions, the Company incurred $0.7 million of termination costs in its first quarterremainder of fiscal year ~~2018. The termination costs were recorded to both cost~~2021 or beyond as a result of ~~revenue and operating expenses~~significant uncertainty in the ~~consolidated statement~~outlook for oil and gas exploration. Specifically, the Company expects these challenging industry conditions to result in decreased demand for its marine wireless nodal products and its land-based seismic products, as the demand for such products has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general. In addition to the negative effects of ~~operations. No further termination costs are expected~~slowdowns in the United States economy, slowing economic growth in growing economies like those in China and ~~there are no outstanding liabilities related~~India could lead to ~~this program as~~a decline in demand for crude oil and natural gas. Slowdowns in economic activity would likely reduce worldwide demand for energy and result in an extended period of ~~December 31, 2017.~~ lower crude oil and natural gas prices. Any material changes in oil and gas prices or other market trends that adversely impact seismic exploration activity 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.

Item 2. Management’s Discussion and Analysis ofof 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~~Annual
Report on Form 10-K for the year ended September 30, ~~2017.~~2020.

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein ~~if any,~~ 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 adoption, results and success of our transactions with Quantum and the OptoSeis^® technology, the adoption and sale of our products in various geographic regions, potential tenders for permanent reservoir monitoring systems, future demand for OBX systems, the completion of new orders for our channels of our GCL system, the fulfillment of customer payment obligations, the impact of the coronavirus (or COVID-19) pandemic, 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 ~~therefore,~~therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves. These forward-looking statements reflect our ~~best~~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, ~~2017,~~2020, 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 or OptoSeis^® technology transactions to yield positive operating results, decreases in commodity price levels, which could reduce demand for our products, the failure of our products to achieve market acceptance ~~despite~~(despite substantial investment by ~~us,~~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, ~~and any negative impact~~inability to collect on promissory notes, inability to realize value from bonds, lack of further orders for our ~~restatement~~OBX rental equipment, failure of our ~~financial statements regarding current assets.~~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.

Geospace Technologies Corporation reincorporated as a Texas corporation on April 16, 2015. We originally incorporated as a Delaware corporation on September 27, 1994. 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 used in~~equipment. These seismic products are marketed to the oil and gas industry ~~to acquire seismic data in order~~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, ~~including industrial products,~~imaging equipment, offshore cables and ~~imaging equipment.~~provide contract manufacturing services. We report and categorize our customers and products into ~~two~~three different segments: ~~Seismic~~Oil and ~~Non-Seismic.~~Gas Markets, Adjacent Markets and Emerging Markets.

~~We have engaged in the seismic instrument and equipment business since 1980 and market our products primarily to the oil and gas industry.~~ Demand for our 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, ~~2017.~~2020.

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~~internet at the SEC’s website at ~~http://~~www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on their public reference room. Our SEC filings are also available to the public on our website at ~~http://~~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.

Our ~~seismic~~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. ~~Our~~This segment’s products include wireless seismic ~~product lines currently consist of land and marine nodal~~ data acquisition systems, ~~permanent land and seabed~~ reservoir ~~monitoring~~characterization products and services, ~~geophones~~ and ~~geophone strings,~~traditional seismic exploration products such as geophones, hydrophones, leader wire, connectors, ~~telemetry~~ cables, marine streamer retrieval and steering devices and various other ~~products. Our~~ seismic ~~products are compatible with most major competitive seismic data acquisition systems currently in use.~~products. We believe that our ~~seismic~~Oil and Gas Markets products are among the most technologically advanced instruments and equipment available for seismic data acquisition.

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 ~~which~~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.

Our products used in marine seismic data acquisition include our seismic streamer retrieval devices (“SRDs”). Occasionally, streamer cables are severed and become disconnected from the vessel as a result of obstacles, inclement weather, vessel traffic or human error. Our SRDs, which are attached to the streamer cables, contain air bags which are designed to inflate automatically at a given water depth, bringing the severed streamer cables to the surface. These SRDs save the seismic contractors significant time and money compared to the alternative of losing the streamer cable. We also produce seismic streamer steering devices, or “birds,” which are fin-like devices that attach to the streamer cable. These birds help maintain the streamer cable at a certain desired depth as it is being towed through the water.

We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition ~~system called the GSX.~~system. Rather than utilizing interconnecting cables as required by most traditional land data acquisition systems, each ~~GSX station operates~~of our wireless stations operate as an independent data collection system, allowing ~~our GSX stations to be deployed in~~for virtually unlimited channel configurations. As a result, our ~~GSX system requires~~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. ~~Our GSX system~~Each wireless station is ~~designed into configurations ranging from one to four channels per station.~~available in a single-channel or three-channel configuration. Since its introduction in 2008 and through December 31, ~~2017,~~2020, we have sold ~~417,000 GSX~~473,000 wireless channels and we currently have ~~64,000 GSX~~84,000 wireless channels in our rental fleet. ~~We expect to make additional investments in our GSX rental fleet in fiscal year 2018 to replenish a sale of used GSX rental equipment in the fourth quarter of fiscal year 2017.~~

We have also developed a marine-based wireless seismic data acquisition system called the OBX. Similar to our ~~GSX~~ land-based wireless ~~system,~~systems, the marine OBX system ~~can~~may be deployed in virtually unlimited channel configurations and does not require interconnecting cables between each station. Our ~~deep water~~deepwater versions of the OBX system can be deployed in depths of up to 3,450 meters. Through December 31, ~~2017,~~2020, we have sold ~~approximately 600~~8,400 OBX stations and we currently have ~~6,700~~26,000 OBX stations in our rental fleet.

Seismic surveys repeated over selected time intervals show dynamic changes within ~~the~~a producing oil and gas reservoir, and operators can ~~be used~~use these surveys to monitor the effects of oil and gas development and production. ~~In this regard, we have developed permanently installed high-definition~~This type of reservoir monitoring systems for land and ocean-bottom applications in producing oil and gas fields. We also produce a retrievable version of our ocean-bottom system for use on fields where permanently installed systems are not appropriate or economical. Utilizing these tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.

Our high-definition reservoir monitoring products include the HDSeis™ product line and a suite of borehole and reservoir monitoring products and services. Our HDSeis™ system is a high-definition seismic data acquisition system with flexible architecture that allows it to be configured as a borehole seismic system or as a subsurface system for both land and marine reservoir-monitoring projects. The scalable architecture of the HDSeis™ system enables custom designed system 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”). Modular architecture allows virtually unlimited channel expansion. In addition, multi-system synchronization features make the HDSeis™ system well suited for multi-well or multi-site acquisition, simultaneous surface and downhole acquisition and continuous reservoir monitoring projects.

~~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. We believe our HDSeis™ System and tools, designed for cost-effective deployment and lifetime performance, will make borehole and seabed seismic acquisition a cost-effective and reliable process for the challenges of reservoir monitoring. Our multi-component seismic product developments include an omni-directional geophone for use inUtilizing these reservoir monitoring tools, producers can enhance the recovery of oil and gas deposits over the life of a ~~compact marine three-component or four-component gimbaled sensor and special-purpose connectors, connector arrays and cases.~~reservoir.

We have ~~not delivered nor did~~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^® fiber optic sensing technology, we ~~receive orders~~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 ~~any~~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 ~~systems during fiscal year 2017 or during the first three months~~(“PRM”). The modular architecture of ~~fiscal year 2018.~~these products allows virtually unlimited channel expansion for these systems.

In addition, we produce seismic borehole acquisition systems ~~which~~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.

~~Non-Seismic Products~~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 received a request from 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 to the customer. However, we are in further discussions with this customer to try and resolve the issues necessary to provide a PRM system. We do not know exactly when or if these discussions will lead to a resolution or the award of a proposal. We have not received any orders for a large-scale seabed PRM system since November 2012.

Our ~~non-seismic~~Adjacent Markets businesses leverage upon ~~our~~ existing manufacturing facilities and engineering ~~capabilities. We have found that many~~capabilities utilized by our Oil and Gas Markets businesses. Many of ~~our~~the seismic products in our Oil and Gas Markets segment, with little or no modification, have direct application to ~~industries beyond those involved in oil~~other industries.

Our industrial products include water meter products, contract manufacturing products, offshore cables, and ~~gas exploration~~seismic sensors used for vibration monitoring and ~~development. For example, our customers utilize our borehole tools to monitor subsurface carbon dioxide injections and for~~geotechnical applications such as mine safety ~~applications.~~applications and earthquake detection.

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

Our Emerging Markets business segment consists entirely of our Quantum business. Quantum’s product line includes a proprietary detection system called SADAR^®, which detects, locates and tracks items of interest in real-time. Using the SADAR technology, Quantum designs and sells products used for border and perimeter security surveillance, cross-border tunneling detection and other ~~non-seismic~~ products ~~consist~~targeted at movement monitoring, intrusion detection and situational awareness. Quantum’s customers include various agencies of ~~(i) sensors~~the U.S. government including the Department of Defense, Department of Energy, Department of Homeland Security and tools for vibration monitoring, mine safety application and earthquake detection, (ii) cables for power and communication for the offshore oil and gas and offshore construction industries, (iii) water meter cables and connectors, and (iv) other ~~specialty industrial cable and connector products.~~agencies, in addition to its commercial base.

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

	Three Months Ended						Three Months Ended
	December 31, 2017			December 31, 2016			December 31, 2020			December 31, 2019
Seismic
Oil and Gas Markets
Traditional exploration product revenue	$	3,790		$	2,570		$	997		$	2,354
Wireless exploration product revenue		3,631			6,323			11,737			8,937
Reservoir product revenue		618			513			29			218
Total revenue		8,039			9,406			12,763			11,509
Operating loss		(7,673	)		(9,453	)		(5,986	)		(3,894	)
Non-Seismic
Adjacent Markets
Industrial product revenue		3,676			3,079			4,407			3,596
Imaging product revenue		2,778			2,657			2,493			2,503
Total revenue		6,454			5,736			6,900			6,099
Operating income		1,029			1,052			1,260			851
Emerging Markets
Revenue								8,797			97
Operating income (loss)								6,479			(1,365	)
Corporate
Revenue		151			143
Operating loss		(2,961	)		(2,910	)		(3,212	)		(3,415	)
Consolidated Totals
Revenue		14,644			15,285			28,460			17,705
Operating loss		(9,605	)		(11,311	)		(1,459	)		(7,823	)

~~Early in calendar year~~ In 2014, ~~we began to experience~~our Oil and Gas Markets segment experienced a softening in the demand for ~~our seismic~~its traditional exploration products, particularly in North America, as capital budgets for oil and gas producers were trending away from exploration-focused activities toward production and exploitation activities. During this period oil production in North America’s unconventional shale reservoirs increased, as did oil production from other non-OPEC countries, resulting in an oversupply of crude oil in the world ~~market. Market prices for~~market and a ~~barrel~~resulting drop in energy prices. In February 2020, decreased demand again caused by the oversupply of crude oil ~~declined from over $100~~due to failed OPEC negotiations and, when combined with the impact of the COVID–19 pandemic, led to a dramatic drop in ~~July 2014 to approximately $27~~crude oil prices. These declines in ~~January 2016, and have recovered somewhat to approximately $64 today. With this decline in~~the demand for oil and ~~natural~~ gas ~~prices,~~have caused oil and gas exploration and production companies ~~experienced~~to experience a significant reduction in cash flows, which have resulted in ~~sharp~~and will likely continue to result in reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic data acquisition activities. ~~We expect~~Our Oil and Gas Markets segment has in recent years experienced strong demand for the rental of our marine wireless nodal products; however, this demand could significantly diminish during fiscal year 2021 or beyond as a result of the significant uncertainty in the outlook for oil and gas exploration. Demand for new land-based seismic equipment in recent fiscal years has remained restrained due to capital limitations affecting many of our customers, along with their excess levels of underutilized equipment. As a result, revenue from the sale and rental of our ~~seismic products, and in particular our~~land-based traditional and wireless products has remained low due to ~~remain low until crude~~the reduced investment in exploration-focused seismic activities. Policies implemented by the Biden administration in the United States could also result in decreased demand for our products. President Biden has announced climate change as a core focus of his administration and that he intends to set the United States on a path to net-zero carbon emissions by 2050. In January of 2021, President Biden implemented a hold on issuing new drilling permits and new oil and gas leasing for federal lands and waters. The administration may also implement new or amended rules and regulations concerning hydraulic fracturing and emissions from oil and gas sector operations. Crude oil prices ~~stabilize at higher levels~~have recently rebounded to February 2020 levels; however, oil and ~~exploration-focused industry~~gas pricing and the resultant economic conditions ~~improve. We~~may not recover meaningfully in the long term, and we expect these challenging industry conditions ~~to continue to negatively impact the demand for~~will result in decreased revenue from our ~~seismic~~traditional and land-based wireless products ~~throughout~~in fiscal year ~~2018.~~

In September 2017, we were notified by a previous PRM system customer that it was in the process of requesting quotes for two new PRM systems which must utilize fiber optic sensor technology. Since our PRM designs utilize electrical sensor technology, we did not participate with a quotation for the design and manufacture of these PRM systems. We believe that our PRM system designs, which utilize electrical sensor technology, provide the best long-term functionality and performance of any PRM system, and we continue to aggressively market our PRM systems to major oil and gas companies. However, the occurrence of this notice, combined with the absence of any new PRM orders of any technology type since November 2012, have caused us to provide additional obsolescence reserves for a substantial portion of our PRM inventories, and we concluded a triggering event occurred and performed an impairment assessment on certain heavy equipment used for the manufacturing of PRM systems, which resulted in an impairment. Specific to our PRM inventories and manufacturing equipment, we recorded obsolescence reserves of $5.1 million and impairment expense of $5.3 million, respectively, in the fourth quarter of our fiscal year ended September 30, 2017.

In December 2017, we initiated a program to reduce operating costs in light of expected and continuing low levels of seismic product demand. The program is expected to produce approximately $6 million of annualized cash savings. The majority of the cost reductions were realized through a reduction of over 60 employees from our Houston area workforce. In connection with the workforce reductions, we incurred $0.7 million of termination costs in our first quarter of fiscal year 2018. The termination costs were recorded to both cost of revenue and operating expenses in the consolidated statement of operations. No further termination costs are expected and there are no outstanding liabilities related to this program as of December 31, 2017.2021.

~~Three months ended December 31, 2017 compared to the three months ended December 31, 2016~~

Consolidated revenue for the three months ended December 31, 2017, decreased $0.6 million, or 4.2%, from the corresponding period of the prior fiscal year. The decrease in revenue for the three months ended December 31, 2017 was primarily due to a decrease in wireless exploration rental revenue in our seismic business segment.

Consolidated gross profit (loss) for the three months ended December 31, 2017 was a loss of ($1.0) million, compared to a loss of ($3.3) million for the corresponding period of prior fiscal year. The improvement in gross profit (loss) for the three months ended December 31, 2017 was primarily the result of a decrease in inventory obsolescence and rental equipment depreciation expenses. These improvements were partially offset by a decrease in wireless exploration rental revenue. Until seismic product demand increases to historical norms, we expect our consolidated gross margins to remain low.

In light of current market conditions, the inventory balances in our ~~seismic product inventories~~Oil and Gas Markets business segment at December 31, ~~2017 far~~2020 continued to exceed levels ~~considered~~we consider appropriate for the current level of product demand. While we are aggressively working to reduce these legacy inventory balances, we ~~have~~are also ~~added~~adding new inventories for ~~recent~~new wireless product developments and for other product ~~demand.~~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 ~~in our consolidated income statement~~ as we experience reduced ~~levels of inventory turnover~~product demand and as our inventories continue to age. If ~~current~~difficult market conditions continue for the products in our Oil and Gas Markets segment, we expect to record additional inventory obsolescence expense in fiscal year ~~2018~~2021 and beyond until ~~seismic~~ product demand ~~and~~and/or resulting ~~seismic~~ inventory turnover ~~returns~~return to acceptable levels.

The ongoing COVID-19 pandemic has spread across the globe and has negatively impacted worldwide economic activity, including the global demand for oil and natural gas, and continues to create challenges in our markets. While we continue to support our customers, there remain uncertainties regarding the duration and the extent to which the COVID-19 pandemic will ultimately have a negative impact on the demand for our products and services or on our supply chain. We continue to closely monitor the situation as information becomes readily available.

As of the date of this filing, our operations have, for the most part, remained open globally and the impact of the effects of COVID-19 to our personnel and operations has been limited. We have experienced lower than expected sales in our Oil and Gas Markets and Adjacent Markets segments (despite the growth in revenue this quarter compared to the same prior year quarter) and a reduction in demand for the rental of our OBX marine nodal products, which we believe is primarily the result of the pandemic. We have also experienced a reduction in demand for certain products and difficulty with field employees and salespeople traveling domestically and abroad to conduct our business.

The recent increases in oil and gas prices may not be long lived and we could see a return to lower pricing which could be intensified and prolonged by the COVID-19 pandemic, increasing the risk and financial stress placed on our customers. We cannot reasonably estimate the length or severity of this pandemic, or the extent to which COVID-19 will affect our business, financial condition and results of operations in fiscal year 2021 and beyond.

In July 2020, we initiated a program to reduce operating and manufacturing expenses in light of decreased demand for products in our Oil and Gas Markets and Adjacent Markets segments. The program is expected to produce approximately $2.0 million of annualized cash savings. The cost reductions were primarily realized through a reduction of employees from our workforce. In connection with the workforce reductions, we incurred $0.9 million of termination costs in our fourth quarter of fiscal year 2020. The termination costs were recorded to both cost of revenue and operating expenses in the consolidated statement of operations. There are no outstanding liabilities related to this program as of December 31, 2020.

Three months ended December 31, 2020 compared to the three months ended December 31, 2019

Consolidated revenue for the three months ended December 31, ~~2017 were $8.6~~2020 was $28.5 million, an increase of ~~$0.7~~$10.8 million, or ~~8.2%~~60.7%, from the corresponding period of the prior fiscal year. This increase was primarily due to a $0.8 million increase in bad debt expense. Excluding the change in bad debt, consolidated operating expense declined by $0.1 million due to a reduction is stock-based compensation expenses and partially offset by termination costs.

Consolidated other income for the three months ended December 31, 2017 was $131,000, an increase of $91,000 from the corresponding period of the prior fiscal year. The increase for the three months ended December 31, 2017 was primarily due to an increase in interest income resulting from increased financing receivables.

Consolidated income tax expense for the three months ended December 31, 2017 was $6,000 compared to $0.4 million for the corresponding period of the prior fiscal year. Our effective tax rates for the three months ended December 31, 2017 and 2016 were (0.1)% and (9.6)%, respectively. The United States statutory tax rate for the three months ended December 31, 2017 and 2016 were 24.5% (blended) and 35%, respectively. Compared to the United States statutory rate, the lower effective tax rates for the three months ended December 31, 2017 and 2016 primarily resulted from our inability to recognize any tax benefits for the tax losses we incurred in the U.S. and Canada due to the uncertainty surrounding our ability to utilize these losses in the future to offset taxable income.

Revenue from our seismic products for the three months ended December 31, 2017 decreased $1.4 million, or 14.5%, from the corresponding period of the prior fiscal year. The components of this decrease include the following:

~~Despite decreased revenues, our operating loss associated with our seismic~~Gas Markets products for the three months ended December 31, ~~2017 decreased $1.8~~2020 increased $1.3 million, or ~~18.9%~~10.9%, from the corresponding period of the prior fiscal year. ~~The decrease in operating loss was~~

~~primarily due to a decrease in inventory obsolescence~~Our product and rental ~~equipment depreciation expenses. These decreases~~revenue in this segment were ~~partially offset~~significantly impacted by ~~lower wireless exploration rental revenue.~~the COVID-19 pandemic and its impact on worldwide demand for crude oil. The components of this increase included the following:

~~Revenue from~~Operating loss associated with our ~~non-seismic~~Oil and Gas Markets products for the three months ended December 31, ~~2017~~2020 was $6.0 million, compared to $3.9 million from the corresponding period of the prior fiscal year. The increase in our operating loss was primarily due to (i) a decrease in wireless rental revenue and related gross profits from the rental of our OBX systems and (ii) an increase in unutilized factory costs resulting from lower productivity. The increase in operating loss was partially offset by (i) a large sale of OBX rental equipment to the former lessee of the equipment and (ii) lower operating expenses resulting from our fiscal year 2020 cost reduction program and a reduction in research and development project costs.

Revenue from our Adjacent Markets products for the three months ended December 31, 2020 increased ~~$0.7~~$0.8 million, or ~~12.5%,~~13.1 %, from the corresponding period of the prior fiscal year. The components of this increase included the following:

~~Our operating income associated with sales of our non-seismic~~Emerging Markets products for the three months ended December 31, ~~2017 declined $23,000~~2020 was $8.8 million, compared to $0.1 million from ~~the corresponding period of~~ the prior fiscal year. The ~~decline resulted~~increase in revenue was primarily attributable to the recognition of $8.8 million in revenue related our contract with the U.S. Customs and Border Protection (“CBP”). Quantum was awarded this contract during fiscal year 2020 to provide a technology solution to the Department of Homeland Security. As of December 31, 2020, unrecognized revenue related to this contract was approximately $1.4 million, the majority of which is expected to be recognized in the second fiscal quarter of 2021.

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 new 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 from ~~reduced~~our Emerging Markets products for the three months ended December 31, 2021 was $6.5 million, compared to a loss of $(1.4) million from corresponding period in the prior fiscal year. The increase was primarily due to revenue and gross profit ~~margins~~recognized on our contract with the CBP. The increase was also due to ~~higher manufacturing costs,~~a non-cash adjustment of $0.8 million related to a decrease in the estimated fair value of contingent earn-out consideration related to our Quantum acquisition. Since its acquisition in July 2018, Quantum has primarily focused on product development activities, and ~~increased operating expenses resulting from increased sales~~the marketing of its technologies to government agencies and ~~marketing expenses.~~other end users.

At December 31, ~~2017,~~2020, we had approximately ~~$13.9~~$33.7 million in cash and cash ~~equivalents and $32.1 million in short-term investments.~~equivalents. For the three ~~months~~month ended December 31, ~~2017,~~2020, we ~~used $5.8~~generated $2.3 million of cash infrom operating activities. Our net loss of ~~$9.1~~$1.1 million was offset by ~~(i)~~ net non-cash charges of ~~$5.9~~$5.7 million resulting from deferred income taxes, depreciation, ~~accretion,~~amortization, inventory obsolescence, stock-based compensation, bad debt expense and ~~bad debts, (ii)~~changes in the estimated fair value of contingent consideration. Other sources of cash included (i) a ~~$2.6~~$5.1 million decrease in trade and other receivables primarily due to collections from a significant customer, (ii) a $4.1 million increase in accounts ~~receivable~~payable resulting from the timing of ~~collections from customers,~~vendor payments and (iii) a ~~$0.7~~$0.3 million increase in ~~accounts payable primarily due to an increase in inventories~~deferred revenue and ~~the timing of payments to suppliers. Other uses~~other liabilities. Offsetting these sources of cash ~~in our operations included~~were (i) ~~a $2.9 increase in inventories for the replenishment of rental equipment sold to customers and the purchase of raw materials for new product production and (ii)~~ the removal of a ~~$2.6~~$4.1 million gross profit from the sale of used rental equipment, ~~since such gross profit is reflected~~(ii) a $4.3 million increase in unbilled receivables related to our contract with CBP, (iii) a $2.1 million increase in inventories and (iv) a $1.4 million increase in deferred cost of revenue and other assets primarily due to the ~~proceeds from the sale~~prepayment of ~~used rental equipment under investing activities.~~annual insurance premiums.

For the three months ended December 31, ~~2017,~~2020, we ~~generated~~used cash of ~~$4.8~~$0.5 million ~~from~~in investing activities. ~~Sources~~Uses of cash included ~~(i) $4.0~~$0.6 million for additions to our property, plant and equipment. Uses of ~~net proceeds from the sale of short-term investments and (ii) $1.0~~cash were partially offset by $0.1 million of proceeds from the sale of rental equipment. ~~These sources of cash were partially offset by an investment of $0.2 million in property, plant and equipment.~~ We ~~estimate total fiscal year 2018~~expect our cash investments in property, plant and equipment ~~will~~during fiscal year 2021 to be approximately $3$5 million. We ~~expect fiscal year 2018~~anticipate that our cash investments into our rental fleet toduring fiscal year 2021 will primarily be ~~approximately $2 million in order to replenish land-based wireless~~dependent on demand for our OBX marine rental ~~fleet equipment recently sold to customers.~~equipment. Our capital expenditures are expected to be funded from our cash on hand, internal cash ~~flow~~flows, cash flows from our rental contracts or, if necessary, ~~from~~ borrowings under our credit agreement.

For the three months ended December 31, ~~2017,~~2020, we ~~had no cash flows~~used $0.8 million from financing ~~activities. We had no long-term debt outstanding throughout the fiscal year ended September 30, 2017 or~~activities for the ~~three months ended~~purchase of treasury stock pursuant to a stock buy-back program authorized by our board of directors. The program authorizes us to repurchase up to $5 million of our common stock in open market transactions. At December 31, ~~2017.~~2020, $4.2 million remains available for repurchases under the program.

~~While~~Since 2014, the oil and gas industry has experienced a sustained downturn due to low oil and gas prices. The unprecedented sharp decline in crude oil prices since February 2020 has further impacted the overall condition of the oil and gas industry, stifling budgets targeted at the oil and gas exploration industry, including the seismic industry. Prior to this downturn we saw some signs of increased seismic activity in certain areas around the world; however, we expect the need for new seismic equipment to remain restrained due to current industry conditions, capital limitations affecting many of our customers and excessive on-hand quantities of under-utilized customer-owned seismic equipment. Further, we expect product sales of our Oil and Gas Markets products—specifically our legacy land-based traditional and wireless products—to remain low until the oil and gas industry begins to show signs of recovery and exploration-focused seismic activities increase. Crude oil prices have recently ~~increased~~rebounded to their highest level in three years, the current level of crude oil prices remain significantly below the peak price levels seen in 2014. These lower crude oil prices combined with an ample supply of crude oil in the world market do not support the investment required by many exploration and production companies to explore and develop new frontier areas forFebruary 2020 levels; however, oil and gas development and production. In addition, many smaller exploration and production companies are under-capitalized and their capital spending budgets for exploration-focused activities, including seismic activities, are financial restrained. As a result, our seismic business segment continues to experience lower levels of product orders and associated revenue, resulting in substantial operating lossespricing and the ~~continued depletion of our cash balances. Due to~~resultant economic conditions may not recover meaningfully in the ~~uncertainty concerning a recovery of crude oil prices to levels capable of sustaining increased seismic exploration activities,~~long term, and we expect these ~~depressed seismic market~~challenging industry conditions tofacing our land-based traditional and legacy wireless products will continue ~~through~~in fiscal year ~~2018.~~2021.

On July 13, 2020, we received an interest in a senior secured bond from an international seismic marine customer. Our interest in the bond, which has a face value of $13.0 million, was received in exchange for $13.0 million of unpaid invoices and late fees owed by the customer. The bond is secured by a third in line lien on the assets owned by the customer and has an 8% interest rate with bi-annual interest and possible principal payments based on excess available cash flow. Interest payments can be made either in cash or in-kind payments in the form of additional debt security. In-kind interest payments require an 8.8% interest rate. The bond matures on July 13, 2022. The bond is listed on the Oslo Alternative Bond Market; however, the actual marketability is unknown at this time. Based on the distressed financial condition of the customer, we believed the fair value of the bond was nominal. In January 2021, we sold the bond for $0.3 million cash pursuant to a purchase agreement (the “Agreement”) entered into with a third party (the “Buyer”). Pursuant to the Agreement, we will also receive additional cash compensation of $2.4 million from the Buyer if certain terms and conditions between the Buyer and our customer are met by December 31, 2021. In the event these terms and conditions are not met, we have the option to repurchase the bond from the Buyer for one dollar ($1.00).

During the first quarter of fiscal year 2021, we entered into a $13.2 million short-term promissory note with a customer related to the sale of rental equipment and an outstanding receivable balance. The note bears interest at 8% per annum and is due on or before March 31, 2021. Principal payments due under the note of $6.0 million were received from the customer in January 2021.

Our available cash and cash equivalents ~~and short-term investments~~ totaled ~~$46.0~~$33.7 million at December 31, ~~2017, including $8.4~~2020, which included $5.0 million of cash and cash equivalents held by our foreign subsidiaries and branch offices. ~~In light of the~~The 2017 Tax ~~Cuts~~Act creates new taxes on certain foreign earnings and ~~Jobs Act signed into law on December 22, 2017 which~~also requires companies to pay a one-time transition tax on undistributed earnings of their foreign

subsidiaries which were previously tax deferred. We have determined that we are ~~currently re-evaluating our prior intent~~not required to ~~permanently reinvest these~~pay any transition tax on the undistributed ~~earnings. If we were to repatriate the cash held by~~earnings of our foreign subsidiaries since we ~~would be required to accrue and pay taxes~~had no accumulated foreign earnings on ~~any amounts repatriated.~~a consolidated basis.

Our credit agreement allows for borrowings of up to $30.0 million with such amounts available for borrowing determined by a borrowing base. In ~~October 2017,~~November 2019, we ~~extended~~amended the credit agreement to (i) extend the maturity date from April 2020 to April 2022, (ii) increase the unencumbered liquid assets covenant threshold from $5 million to $10 million commencing with the fiscal quarter ending December 31, 2020 and for each fiscal quarter thereafter, (iii) increase the tangible net worth requirement from $140 million to $145 million commencing with the fiscal quarter ending December 31, 2020 and for each fiscal quarter thereafter and (iv) remove the requirement that we obtain the consent of Frost Bank prior to paying dividends or repurchasing stock so long as we are in compliance with the covenants of the credit agreement.Our tangible net worth as defined in the credit agreement ~~from May 2018~~was $148 million as of December 31, 2020. Although, we have no amounts outstanding under our credit agreement, we continue to ~~April 2019.~~ monitor our compliance with the covenants in our credit agreement in order to maintain flexibility. Should we fall below the required covenant amount, we may seek to amend our credit agreement or seek an alternative credit agreement in the future in order to maintain this flexibility. Should we need to amend the facility or seek an alternative credit facility, we may not be able to obtain as favorable terms as the current agreement.

At December 31, ~~2017,~~2020, we had no outstanding borrowings under the credit agreement and ~~after consideration of $0.3 million of outstanding letters of credit,~~ our borrowing availability under the credit facility as of December 31, 2020 was ~~$26.3~~$14.7 million. At December 31, ~~2017,~~2020, we were in compliance with all covenants under the credit agreement. We currently do not anticipate the need to borrow under the credit agreement; however, we ~~can make no assurance that we will not~~may be required to do ~~so.~~so if circumstances change.

In fiscal years 2016 and 2017, we received income tax refunds of $18.3 million and $12.8 million, respectively, from the U.S. Department of Treasury. These refunds were a result of the significant tax losses we experienced in fiscal year 2016 and 2015, which we elected to carryback and recoup taxes previously paid. For U.S. income tax purposes, we are now in a loss carryforward position in regards to our tax losses for fiscal year 2017 and beyond. As a result, we will not receive any additional U.S. federal income tax refunds as a result of our current tax losses. The tax refunds we received in fiscal years 2016 and 2017 have been significant contributors to our overall liquidity. In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future ~~operating results,~~operations, including ~~liquidating short-term investments,~~ executed rental contracts, available borrowings under our credit agreement through its expiration in April ~~2019,~~2022, leveraging or sale of real estate assets, sales of rental assets and other liquidity sources which may be available to us. However, currently we believe that our cash, cash equivalents and ~~short-term investment balances~~borrowings under our credit facility will be sufficient to finance ~~our~~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.

We recorded an initial contingent earn-out liability of $7.7 million in connection with our July 2018 acquisition of Quantum. Subsequent to the acquisition, we reduced the estimated contingent earn-out liability to $5.0 million as of December ~~2018.~~31, 2020. 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 ending in July 2022. We made cash earn-out payments of $0.1 million in fiscal year 2020. The maximum amount of contingent payments is $23.5 million.

We recorded an initial contingent earn-out 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 increased the estimated contingent earn-out liability to $5.3 million as of December 31, 2020. 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. No payments have been made to date related to the continent earn-out liability. The maximum amount of contingent payments is $23.2 million.

We review and assess the fair value of our contingent earn-out liabilities on a quarterly basis. See Note 13 to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on our contractual contingencies.

During the three months ended December 31, ~~2017,~~2020, there has been no material change to our critical accounting policies discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2017 other than the adoption of Accounting Standards Update 2016-09, “Improvements to Employee Share-Based Payment Accounting” and 2016-16, “Accounting for Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory”.2020.

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.

We have market risk relative to our short-term investments, foreign currency rates and interest rates. We do not engage in commodity or commodity derivative instrument purchase or sales transactions. Becauseare a smaller reporting company as defined by Rule 12b-2 of the ~~inherent unpredictability~~Exchange Act and are not required to provide the information under this item, in accordance with Item 305(e) of ~~foreign currency rates and interest rates, as well as other factors, actual results could differ materially from those projected in this Item.~~Regulation S-K.

One of our wholly-owned subsidiaries, Geospace Technologies Eurasia, is located in the Russian Federation. In addition, we operate a branch office, Geospace Technologies Sucursal Sudamericana, in Colombia. Our financial results for these entities may be affected by factors such as changes in foreign currency exchange rates, weak economic conditions or changes in the political climate. Our consolidated balance sheet at December 31, 2017 reflected approximately USD $6.0 million and USD $0.2 million of foreign currency denominated net working capital related to our Russian and Colombian operations, respectively. Both of these entities receive a portion of their revenue and pay a majority of their expenses primarily in their local currency. To the extent that transactions of these entities are settled in their local currency, a devaluation of these currencies versus the U.S. dollar could reduce any contribution from these entities to our consolidated results of operations and total comprehensive income as reported in U.S. dollars. We do not hedge the market risk with respect to our operations in these countries; therefore, such risk is a general and unpredictable risk of future disruptions in the valuation of such currencies versus U.S. dollars to the extent such disruptions result in any reduced valuation of these foreign entities’ net working capital or future contributions to our consolidated results of operations. At December 31, 2017, the foreign exchange rate for $1.00 (one U.S. dollar) was equal to approximately 57.61 Russian Rubles and 2,973 Colombian Pesos, respectively. If the value of the U.S. dollar were to strengthen by ten percent against these foreign currencies, our working capital in the Russian Federation and in Colombia would decline by USD $0.6 million and USD $20,000, respectively.

From time to time, we may provide access to capital to our foreign subsidiaries through U.S. dollar denominated interest bearing promissory notes. Such funds are generally used by our foreign subsidiaries to purchase capital assets and for general working capital needs. In addition, we sell products to our foreign subsidiaries on trade credit terms in both U.S. dollars and in the subsidiary’s local currency. At December 31, 2017, we had outstanding Canadian-dollar denominated intercompany accounts receivable of CAN $33.6 million, which we consider to be of a short-term nature. The appreciation or devaluation of the Canadian dollar against the U.S. dollar will result in a gain or loss, respectively, to our consolidated statement of operations. At December 31, 2017, the foreign exchange rate for USD $1.00 was equal to approximately CAN $1.26. On December 29, 2017 we entered into a CAN $32.0 million 90-day hedge agreement effective January 2, 2018 with a United States bank to hedge a portion of our Canadian dollar foreign exchange rate exposure, resulting in an under-hedged position of approximately CAN $1.6 million. At December 31, 2017, if the U.S. dollar exchange rate were to strengthen by ten percent against the Canadian dollar, we would recognize a foreign exchange loss of USD $0.1 million in our consolidated financial statements.

Our credit agreement contains a floating interest rate which subjects us to the risk of increased interest costs associated with any upward movements in bank market interest rates. Under our credit agreement our borrowing interest rate is the Wall Street Journal prime rate, which was 4.50% at December 31, 2017. As of December 31, 2017 and September 30, 2017, there were no borrowings outstanding under our credit agreement.

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 December 31, ~~2017,~~2020, 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 December 31, ~~2017.~~2020.

~~We previously reported a material weakness~~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 December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As

Item 2. Unregistered Sales of ~~September 30, 2017, we did not maintain effective controls concerning our classification~~Equity Securities and Use of ~~current assets~~Proceeds

The following table provides information with respect to ~~inventories. We determined that a portion~~purchases of ~~our inventories should have been classified as noncurrent assets, as all inventories were not reasonably expected to be realized in cash, sold or consumed~~common stock of the Company made during ~~our next operating cycle.~~

~~This error was subsequently identified and corrected, and resulted in a restatement to~~ the ~~consolidated balance sheets as of September 30, 2016 and 2015 and as of~~three months ended December 31, 2016, March 31, 2017 and June 30, 2017, which was included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017. The error had no impact upon previously reported total assets, total liabilities, revenues, net loss, net loss per share, or cash flows.

To remediate the material weakness described above we have designed and implemented a quarterly control to determine the value of inventories expected to be realized in cash, sold or consumed during the next operating cycle. This control, which encompasses a review by senior management, utilizes a combination of forecasts and historical trends to determine our future expected inventory utilization.

~~We believe that this measure remediates the material weakness identified and strengthens our internal controls over financial reporting.~~2020:

(1) On November 19, 2020, the Company announced that its board of directors authorized a stock buy-back program which authorized the Company to repurchase up to $5 million shares of its common stock in open market transactions. Common stock repurchases will be made in accordance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans, which allows stock repurchases when the Company might otherwise be precluded from doing so.The repurchase program has no time limit, does not obligate the Company to acquire a specified number of shares and may be modified, suspended or discontinued at any time at the Company’s discretion.

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

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.

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

Large accelerated filer	☐		Accelerated filer	☒☐

Non-accelerated filer	☐☒	~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐☒

			Emerging growth company	☐

		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		1718

Item 3. Quantitative and Qualitative Disclosures about Market Risk		2327

Item 4. Controls and Procedures		2428

PART II. OTHER INFORMATION

Item ~~6. Exhibits~~2. Unregistered Sales of Equity Securities and Use of Proceeds		2529

Item 6. Exhibits		30

Balance at October 1, 2017	$	508
Accruals for warranties issued during the period		197
Settlements made (in cash or in kind) during the period		(150	)
Balance at December 31, 2017	$	555

	December 31, 2020			September 30, 2020
Rental equipment, primarily wireless recording equipment	$	97,938		$	114,783
Accumulated depreciation and impairment		(53,771	)		(60,466	)
	$	44,167		$	54,317

	As of December 31, 2017 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	21,739	$	—	$	(67	)	$	21,672
Government bonds		10,452		—		(39	)		10,413
Total	$	32,191	$	—	$	(106	)	$	32,085

	As of September 30, 2017 (in thousands)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Short-term investments
Corporate bonds	$	22,829	$	—	$	(31	)	$	22,798
Government bonds		13,363		—		(24	)		13,339
Total	$	36,192	$	—	$	(55	)	$	36,137

		Three Months Ended
Derivative Instrument	Location	December 31, 2017		December 31, 2016
Foreign Currency Forward Contracts	Other Income (Expense)	$	158	$	72

	As of December 31, 2017
	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	$	23,711	$	—	$	—	$	23,711
Government bonds		12,750		—		—		12,750
Total	$	36,461	$	—	$	—	$	36,461

	As of September 30, 2017
	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	$	22,798	$	—	$	—	$	22,798
Government bonds		13,339		—		—	$	13,339
Total	$	36,137	$	—	$	—	$	36,137

Balance at October 1, 2020	$	10,962
Fair value adjustments		(697	)
Balance at December 31, 2020	$	10,265

	December 31, 2017			September 30, 2017
Promissory notes	$	7,062		$	4,306
Sales-type lease		7,807			8,581
Total financing receivables		14,869			12,887
Unearned income:
Promissory notes		(95	)		(90	)
Sales-type lease		(444	)		(527	)
Total unearned income		(539	)		(617	)
Total financing receivables, net of unearned income		14,330			12,270
Allowance for doubtful promissory notes		(1,505	)		(1,020	)
Less current portion		(5,793	)		(3,055	)
Non-current financing receivables	$	7,032		$	8,195

	Unrealized Losses on Available-for-Sale Securities			Foreign Currency Translation Adjustments			Totals
Balance at October 1, 2017	$	(58	)	$	(14,172	)	$	(14,230	)
Changes in unrealized losses on available-for-sale securities		(51	)		—			(51	)
Foreign currency translation adjustments		—			(205	)		(205	)
Balance at December 31, 2017	$	(109	)	$	(14,377	)	$	(14,486	)

For fiscal years ending September 30,
2021 (remainder)	$	1,299
2022		1,624
2023		714
2024		342
2025		329
Thereafter		3,590
	$	7,898

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1)
October 1, 2020 through October 31, 2020		—	$	—		—	$	5,000,000
November 1, 2020 through November 30, 2020		—		—		—		5,000,000
December 1, 2020 through December 31, 2020		117,637		6.99		117,637		4,172,319

3.1		Amended and Restated Certificate of Formation of Geospace Technologies Corporation (incorporated by reference to Exhibit 3.1 to the ~~Registrant’s~~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 ~~Registrant’s~~Company’s Current Report on Form 8-K filed ~~April~~August 8, 2019).
10.1		Second Amendment, effective November 17, ~~2015)~~2020, to Employment Agreement dated as of August 1, 1997, between the Company and Michael J. Sheen (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 10-K filed November 23, 2020).

~~10.1~~31.1*		Fourth Amendment to Loan Agreement dated October 25, 2017 among Geospace Technologies Corporation, as borrower, certain subsidiaries of Geospace Technologies Corporation, as guarantors, and Frost Bank, as lender (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed October 27, 2017).

~~31.1~~		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~31.2*		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~32.1**		Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~32.2~~32.2**		Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101~~		~~Interactive data file.~~
101*		The following financial information from the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2020, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets at December 31, 2020 and September 30, 2020, (ii) the Consolidated Statements of Operations for the three months ended December 31, 2020 and 2019, (iii) the Consolidated Statements of Comprehensive Loss for the three months ended December 31, 2020 and 2019, (iv) the Consolidated Statements of Stockholders’ Equity for the three months ended December 31, 2020 and 2019, (v) the Consolidated Statements of Cash Flows for the three months ended December 31, 2020 and 2019 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 December 31, 2020 formatted in Inline XBRL.


		GEOSPACE TECHNOLOGIES CORPORATION


Date:	February ~~7, 2018~~4, 2021		By:	/s/ Walter R. Wheeler
				Walter R. Wheeler, President
				and Chief Executive Officer
				(duly authorized officer)


Date:	February ~~7, 2018~~4, 2021	By:	/s/ ~~Thomas T. McEntire~~Robert L. Curda
			~~Thomas T. McEntire,~~Robert L. Curda, Vice President,
			~~and~~Vice President, Chief Financial Officer and Secretary
			(principal financial officer)