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

FOR THE ~~THREE MONTHS ENDED DECEMBER~~three months ended December 31, 2023 and 2022 ~~AND 2021~~

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

Basis of Presentation

The consolidated balance sheet of Geospace Technologies Corporation and its subsidiaries (the “Company”) at September 30, ~~2022~~2023 was derived from the Company’s audited consolidated financial statements at that date. The consolidated balance sheet at December 31, ~~2022~~2023 and the consolidated statements of operations, comprehensive ~~loss,~~income (loss), stockholders’ equity and cash flows for the three months ended December 31, ~~2022~~ 2023 and ~~2021~~2022 were prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the consolidated financial position, results of operations and cash flows were made. All significant intercompany balances and transactions have been eliminated. The results of operations for the three months ended December 31, ~~2022~~2023 are not necessarily indicative of the operating results for a full year or of future operations.

Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States of America ("U.S." GAAP") were omitted pursuant to the rules of the Securities and Exchange Commission. The accompanying consolidated financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form ~~10-K~~10-K for the Company’s fiscal year ended September 30, ~~2022.~~2023.

Use of Estimates

The preparation of financial statements in conformity with ~~accounting principles generally accepted in the~~ U.S. GAAP requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company considers many factors in selecting appropriate operational and financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. The Company continually evaluates its estimates, including those related to revenue recognition, bad debt reserves, collectability of rental revenue, inventory obsolescence reserves, self-insurance reserves, product warranty reserves, useful lives of long-lived assets, impairment of long-lived assets, impairment of goodwill and other intangible assets ~~contingent consideration~~ and deferred income tax assets. The Company bases its estimates on historical experience and various other factors that are believed to be reasonable under the circumstances. While management believes current estimates are reasonable and appropriate, actual results may differ from these estimates under different conditions or assumptions.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original or remaining maturity at the time of purchase of three months or less to be cash equivalents. At December 31, ~~2022~~2023 and September 30, ~~2022,~~2023, the Company had restricted cash of $~~0.2~~$0.2 million on deposit with a bank, which serves as collateral on employee issued credit cards. At December 31, ~~2022,~~2023, cash and cash equivalents included $~~2.9~~$3.3 million held by the Company’s foreign subsidiaries and branch offices, including $~~2.2~~$1.8 million held by its subsidiary in the Russian Federation. In response to sanctions imposed by the U.S. and others on Russia, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but the Company may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition, if the Company were to repatriate the cash held by its Russian subsidiary, it would be required to accrue and pay taxes on any amount repatriated. During fiscal year 2023, in light of recent volatility in the financial markets, the Company entered into an IntraFi Cash Service ("ICS") Deposit Placement Agreement with IntraFi Network LLC through its primary bank, Woodforest National Bank. The ICS program offers access to unlimited Federal Deposit Insurance Corporation ("FDIC') insurance on the Company's domestically held cash in excess of $5.0 million, thereby mitigating its risk of falling outside of FDIC coverage limits.

Impairment of Long-lived Assets

The Company's long-lived assets are reviewed for impairment whenever an event or circumstance indicates that the carrying amount of an asset or group of assets may not be recoverable. The impairment review, if necessary, includes a comparison of the expected future cash flows (undiscounted and without interest charges) to be generated by an asset group with the associated carrying value of the related assets. If the carrying value of the asset group exceeds the expected future cash flows, an impairment loss is recognized to the extent that the carrying value of the asset group exceeds its fair value. During the quarter ended December 31, ~~2022,~~ 2023, no events or changes in circumstances were identified indicating the carrying value of any of the Company's asset groups may not be recoverable.

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

The Company classifies its short-term investments as available-for-sale securities. Available-for-sale securities are carried at fair market value with net unrealized gains and losses reported as a component of accumulated other comprehensive loss in stockholders’ equity. No ~~gains or losses were realized during the three months ended December 31, 2022 from the sale of short-term investments. For the three months ended December 31, 2021, the Company realized losses of $7,000~~ ~~from the sale of short-term investments.~~

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


	As of December 31, 2022 (in thousands)									*As of December 31, 2023*
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value		*Amortized Cost*		*Unrealized Gains*		*Unrealized Losses*		*Estimated Fair Value*
Short-term investments:
Corporate bonds	$	904	$	—	$	(8	)	$	896	$	11,375	$	2	$	—	$	11,377
U.S. treasury securities and securities of U.S. government-sponsored agency											3,672		2		—		3,674
Total										$	15,047	$	4	$	—	$	15,051

As of September 30, 2022 (in thousands)

Amortized Cost

Unrealized Gains

Unrealized Losses

Estimated Fair
Value

Short-term investments:

Corporate bonds

$
909

$
—

$
(15
)

$
894

The ~~Company’s short-term investments~~Company had no securities in a material unrealized loss position at December 31, 2023 and September 30, 2023 and does not believe these securities represent credit losses based on the evaluation of evidence, which includes an assessment of whether it is more likely than not it will be required to sell or intend to sell the investment before recovery of the investments amortized cost basis. No gains or losses were realized during the three months ended December 31, 2023 and 2022 ~~had contractual maturities ranging~~ from ~~February 2023 to March 2023.~~the sale of short-term investments.

The Company’s financial instruments generally include cash and cash equivalents, short-term investments, trade accounts and notes receivable and accounts payable. Due to the short-term maturities of cash and cash equivalents, trade accounts and notes receivable and accounts payable, the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates. The ~~valuation technique used to measure the fair value of the contingent consideration was based on internal estimates and the use of internal projections of future revenue.~~

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

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

As of December 31, 2022

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

$
—

$
896

$
—

$
896

Total assets

$
—

$
896

$
—

$
896

As of September 30, 2022

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

$
—

$
894

$
—

$
894

Total assets

$
—

$
894

$
—

$
894

Contingent consideration liabilities:

$
—

$
—

$
175

$
175

Total liabilities

$
—

$
—

$
175

$
175

~~The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the three months ended December 31, 2022 and 2021 (in thousands):~~

Contingent consideration balance at October 1, 2022
$
175

Fair value adjustments

—

Payment of contingent consideration

(175
)
Contingent consideration at December 31, 2022
$
—

Contingent consideration balance at October 1, 2021
$
6,017

Fair value adjustments

(2,440
)
Payment of contingent consideration

(807
)
Contingent consideration balance at December 31, 2021
$
2,770

	*As of December 31, 2023*
	*Quoted Prices in*		*Significant*
	*Active Markets for*		*Other*		*Significant*
	*Identical Assets*		*Observable*		*Unobservable*
	*(Level 1)*		*(Level 2)*		*(Level 3)*		*Totals*
Short-term investments:
Corporate bonds	$	—	$	11,377	$	—	$	11,377
U.S. treasury securities and securities of U.S. government-sponsored agency				3,674				3,674
Total assets	$	—	$	15,051	$	—	$	15,051

Adjustments to the fair value of the contingent consideration were based on internal estimates and management assessments regarding potential future scenarios which involved significant judgment. As of December 31, 2022, the Company had no ~~contingent consideration payable.~~

5. Trade Accounts and Notes Receivable

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

December 31, 2022

September 30, 2022

Trade accounts receivable

$
24,629

$
13,252

Allowance for doubtful accounts

(689
)

(591
)
Total

$
23,940

$
12,661

	*December 31, 2023*			*September 30, 2023*
Trade accounts receivable	$	41,755		$	20,282
Allowance for credit losses		(92	)		(125	)
Total		41,663			20,157
Less current portion		(40,153	)		(20,157	)
Non-current trade accounts receivable	$	1,510		$	—

Trade accounts receivable at December 31, 2023 included $30.0 million from a single customer related to a product sale in December 2023, of which $28.5 million is backed by letters of credit from the customer and due in February 2024. The ~~allowance~~remaining $1.5 million of this receivable is classified as non-current and is due in December 2025. Credit quality indicators used for ~~doubtful accounts represents~~ the ~~Company’s best estimate~~non-current portion of ~~probable~~this receivable consisted of historical collection experience, internal credit ~~losses.~~risk grades and collateral. The Company determines the allowance ~~based upon historical experience and~~for credit losses through a ~~current~~ review of several factors, including historical collection experience, customer credit worthiness, current aging of customer accounts and current financial conditions of its ~~trade accounts receivable balances.~~customers. Trade accounts receivable balances are charged off against the allowance whenever it is probable that the receivable balance will not be recoverable.

~~Notes~~

Allowance for credit losses related to trade accounts receivable are reflected in the following table (in thousands):

December 31, 2022

September 30, 2022

Notes receivable

$
7,790

$
8,225

Less current portion

(7,484
)

(8,225
)
Non-current notes receivable

$
306

$
—

	*Three Months Ended*
	*December 31, 2023*			*December 31, 2022*
Allowance for credit losses:
Beginning of period		125			591
Provision for credit losses		43			286
Recoveries		(72	)		(166	)
Write-offs		(7	)		(6	)
Currency translation		3			(16	)
End of period	$	92		$	689

~~Promissory notes receivable are generally collateralized by the products sold, and bear interest at rates ranging from~~ ~~7.0% to~~ ~~9.5% per year. The promissory notes receivable mature at various times through~~ ~~January 2024~~.

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

~~During~~from a customer at December 31, 2023 and September 30, 2023 with balances of $0.3 million and $1.2 million, respectively. The note originated during the second quarter of fiscal year ~~2022, the Company partially financed a $10.0~~ ~~million sale of rental equipment by entering into a $8.0~~ ~~million promissory note~~2020 in connection with a ~~customer. The note has a~~ ~~one-year~~ ~~term, with principal and interest payments due quarterly until maturity. The balance outstanding on the promissory note at December 31, 2022 was $4.0~~ ~~million~~

~~During the first quarter of fiscal year 2022, the Company financed a sale of rental equipment by entering into a $3.7~~ ~~million promissory note with a customer. The note has a term of~~ ~~nine months, with principal and interest payments due monthly until maturity. The balance outstanding on the promissory note at December 31, 2022 was $0.8~~ ~~million. The balance outstanding was paid in January 2023.~~

~~During the second quarter of fiscal year 2020, the Company partially financed a $12.5~~$12.5 million product sale ~~by entering into a $10.0~~ ~~million promissory note~~ with the customer. The note ~~has a~~ ~~three-year~~ ~~term with~~ bears interest at 7.0% per year and requires monthly principal and interest payments of $~~0.3~~$0.3 million. ~~During the fourth quarter of fiscal year 2021, the Company granted the customer a six-month principal payment forbearance.~~ The ~~customer recommenced its monthly payments to the Company~~note was paid in ~~the second quarter of fiscal year 2022. In October 2022, the Company granted the customer an additional six-month principal payment forbearance. The customer has made payments totaling $9.5~~ ~~million (exclusive of interest) as of December 31, 2022 related to the product sale, and the balance outstanding on the promissory note at December 31, 2022 was $3.0~~ ~~million.~~January 2024.

6. Inventories

6. ~~Inventories~~

Inventories consist of the following (in thousands):

December 31, 2022

September 30, 2022

Finished goods

$
15,614

$
14,653

Work in process

6,905

6,230

Raw materials

27,761

25,609

Obsolescence reserve (net realizable value adjustment)

(13,940
)

(13,971
)

36,340

32,521

Less current portion

20,736

19,995

Non-current portion

$
15,604

$
12,526

	*December 31, 2023*			*September 30, 2023*
Finished goods	$	17,895		$	18,555
Work in process		8,122			11,992
Raw materials		27,551			26,832
Obsolescence reserve (net realizable value adjustment)		(11,697	)		(14,061	)
		41,871			43,318
Less current portion		21,839			18,430
Non-current portion	$	20,032		$	24,888

Inventory obsolescence expense was $20,000 and $1.4 million for the three months ended December 31, 2023 and 2022. Raw materials include semi-finished goods and component parts that totaled $~~21.3~~approximately $9.9 million and $~~20.7~~$10.6 million at December 31, ~~2022~~2023 and September 30, ~~2022,~~2023, respectively.

~~7. Asset Held for Sale~~

During the first quarter of fiscal year 2023, the Company entered into a contract to sell its property located at 6410 Langfield Road in Houston, Texas. The facility provides additional warehousing and maintenance and repair capacity for the Company's marine rental equipment operations. The Company plans on relocating the operations of this facility to its 7700 Pinemont Drive facility in Houston, Texas as part of its cost reductions efforts. The property's carrying value at December 31, 2022 was $~~2.4~~ million. The Company believes the fair market value of the property exceeds its carrying value. The contract provides for closing to occur before the end of the Company's second quarter of fiscal year 2023.

8~~. Leases~~

~~As Lessee~~

The Company has elected not to record operating right-of-use assets or operating lease liabilities on its consolidated balance sheet for leases having a minimum term of 12 months or less. Such leases are expensed on a straight-line basis over the lease term. Variable lease payments are excluded from the measurement of operating right-of-use assets and operating lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As of December 31, 2022, the Company has ~~two~~ ~~operating right-of-use assets related to leased facilities in Austin, Texas and Melbourne, Florida.~~

~~Maturities of the operating lease liabilities as of December 31, 2022 were as follows: (in thousands):~~

For fiscal years ending September 30,

2023 (remainder)

$
198

2024

278

2025

186

2026

130

2027

134

2028

91

Future minimum lease payments

1,017

Less interest

(71
)
Present value of minimum lease payments

946

Less current portion

(245
)
Long-term portion

$
701

~~Lease costs recognized in the consolidated statements of operations for the three months ended December 31, 2022 and 2021 were as follows (in thousands):~~

Three Months Ended

December 31, 2022

December 31, 2021

Right-of-use operating lease costs

$
68

$
68

Short-term lease costs

42

44

Total

$
110

$
112

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

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

Three Months Ended

December 31, 2022

December 31, 2021

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

Operating cash flows from operating leases
$
72

$
70

Weighted average remaining lease term
4.5 years

5.3 years

Weighted average discount rate

3.25
%

3.25
%

~~The discount rate used on the operating right-of-use assets represented the Company’s incremental borrowing rate at lease inception.~~7. Rental Equipment

~~As Lessor~~

~~Equipment~~

The Company leases equipment to customers which generally range from daily rentals to minimum rental periods of up to one ~~year~~. year. All of the Company’s current leasing arrangements, which the Company ~~acting~~acts as lessor, are classified as operating leases. The majority of the Company’s rental revenue is generated from its marine-based wireless seismic data acquisition systems.

The Company regularly evaluates the collectability of its lease receivables on a lease-by-lease basis. The evaluation primarily consists of reviewing past due account balances and other factors such as the credit quality of the customer, historical trends of the customer and current economic conditions. The Company suspends revenue recognition when the collectability of amounts due are no longer probable and concurrently records a direct write-off of the lease receivable to rental revenue and limits future rental revenue recognition to cash received. As of December 31, ~~2022,~~2023, the Company’s trade accounts receivables included lease receivables of $~~9.0~~$5.0 million.

Rental revenue related to leased equipment for the three months ended December 31, ~~2022 and 2021~~2023 was $~~11.5~~$6.2 million and $~~4.9~~$11.5 million, respectively.

Future minimum lease obligations due from the Company’s leasing customers on operating leases executed as of December ~~30, 2022~~31, 2023 were $~~27.1~~$6.4 million, all of which is expected to be due within the next 12 months.

Rental equipment consisted of the following (in thousands):


	December 31, 2022			September 30, 2022			*December 31, 2023*			*September 30, 2023*
Rental equipment, primarily wireless recording equipment	$	80,395		$	83,887		$	77,571		$	82,926
Accumulated depreciation and impairment		(57,153	)		(55,688	)		(62,329	)		(61,339	)
	$	23,242		$	28,199		$	15,242		$	21,587

~~Property~~

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

~~Rental revenue related to these~~ ~~two~~ ~~property leases for the three months ended December 31, 2022 was $46,000~~ ~~and $29,000, respectively.~~

~~Future minimum lease payments due to the Company as of December 31, 2022 on these two leases were as follows (in thousands):~~

For fiscal years ending September 30,

2023 (remainder)

$
93

2024

128

2025

131

2026

132

2027

11

$
495

9. ~~Goodwill and Other Intangible Assets~~

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

Weighted-

Average

Remaining Useful

Lives (in years)

December 31, 2022

September 30, 2022

Goodwill:

Emerging Markets reporting unit

$
4,336

$
4,336

Adjacent Markets reporting unit

736

736

Total goodwill

5,072

5,072

Accumulated impairment losses

(4,336
)

(4,336
)

$
736

$
736

Other intangible assets:

Developed technology
13.9

$
6,475

$
6,475

Customer relationships
--

3,900

3,900

Trade names
0.8

2,022

2,022

Non-compete agreements
0.2

186

186

Total other intangible assets
7.3

12,583

12,583

Accumulated amortization

(7,248
)

(7,010
)

$
5,335

$
5,573

~~At December 31, 2022, the Company had goodwill of $0.7~~ ~~million and other intangible assets, net of $0.6~~ ~~million attributable to its Adjacent Markets reporting unit; other intangible assets, net of $3.3~~ ~~million attributable to its Emerging Markets reporting unit; and other intangible assets, net of $1.4~~ million attributable to its Oil and Gas Markets reporting unit. Goodwill represents the excess cost of a business acquired over the fair market value of identifiable net assets at the date of acquisition.

At December 31, 2022, the Company determined there were no triggering events requiring an impairment assessment of its goodwill and other intangible assets. The Company performs its annual goodwill impairment test in the fourth quarter. If the Company determines that the future cash flows anticipated to be generated from its reporting units will not be sufficient to recover the carrying amount of the respective reporting unit, it will need to recognize an impairment charge equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of the goodwill.

~~Other intangible asset amortization expense for the three months ended December 31, 2022 and 2021 was $0.2~~ ~~million and $0.4~~ ~~million, respectively.~~

~~As of December 31, 2022, future estimated amortization expense of other intangible assets is as follows (in thousands):~~

For fiscal years ending September 30,

2023 (remainder)
$
529

2024

395

2025

381

2026

374

2027

360

Thereafter

3,296

$
5,335

10.8. Long-Term Debt

The Company had no long-term debt outstanding at December 31, ~~2022~~2023 and September 30, ~~2022.~~2023.

~~In May 2022,~~

On July 26, 2023, the Company entered into a credit agreement ~~(the “Agreement”~~(“the Agreement”) with Woodforest National Bank, as sole lender. The Agreement refinanced the Company's credit agreement dated May 6, 2022, with Amerisource Funding, ~~Inc,~~Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender. ~~Available borrowings under the~~The Agreement ~~are determined by~~provides a ~~borrowing base~~revolving credit facility with a maximum availability of $10$15 million. ~~The borrowing base~~Availability under the Agreement is determined based upon a borrowing base comprised of certain of the ~~Company's~~Company’s domestic assets which include (i) 70~~% loan to value~~80% of eligible accounts, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the ~~Company's property located at 6410 Langfield Road in Houston, Texas (the “Property”), (ii)~~ 50~~% of forced~~orderly liquidation value of eligible equipment, ~~(iii)~~ 80~~% of~~in each case subject to certain ~~accounts receivable~~limitations and ~~(iv)~~ 50~~% of forced liquidation~~

~~value of certain inventory (inventory borrowing base limited~~adjustments. Interest shall accrue on outstanding borrowings at a rate equal to ~~100% of borrowing base credit given toward accounts receivable). The Agreement is for~~Term SOFR (Secured Overnight Financing Rate) plus a ~~two-year~~ ~~term with all funds borrowed due at the expiration of the term. The interest rate on borrowed funds is the Wall Street prime rate (with a minimum of~~ ~~3.25%) plus~~ ~~4.00~~%.margin equal to 3.25% per annum. The Company is required to make monthly interest payments on borrowed funds. ~~Borrowings under the~~The Agreement ~~will be principally~~is secured by ~~the Property and~~substantially all of the Company's ~~domestic equipment, inventory and accounts receivables. In addition,~~assets, except for certain ~~domestic subsidiaries of the Company have guaranteed the obligations of the Company under the Agreement and such subsidiaries have secured the obligations by pledging certain assets.~~excluded property. The Agreement requires the Company to maintain a minimum (i) consolidated tangible net worth of $~~100~~ ~~million.~~ $100 million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to 1.00, in each case tested quarterly. The Agreement also requires the Company to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance on the revolving credit facility. The Agreement expires in July 2025. At December 31, ~~2022,~~2023 the Company's borrowing availability under the Agreement was $14.9 million after consideration of a $0.1 million outstanding letter of credit. At December 31, 2023, the Company was ~~compliant~~in compliance with all covenants under the ~~Agreement and its borrowing availability was $8.5~~ ~~million.~~Agreement.

~~As discussed in Note 7,~~

9. Stock-Based Compensation

During the ~~Property is under contract to sell at~~ three months ended December 31, ~~2022. The Company is currently in discussions with its lenders to collateralize the Agreement with alternative domestic assets.~~

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

~~11. Stock-Based Compensation~~

~~During the three months ended December 31, 2022,~~2023, the Company issued ~~174,250~~188,000 restricted stock units (“RSUs”) under its 2014 Long Term Incentive Plan, as amended. The RSUs issued include both time-based and performance-based vesting provisions. The weighted average grant date fair value of each RSU was $~~4.50~~$11.77 per unit. The grant date fair value of the RSUs was $~~0.8~~$2.2 million, which will be charged to expense over the next four years as the restrictions lapse. Compensation expense for the RSUs was determined based on the closing market price of the Company’s stock on the date of grant applied to the total number of units that are anticipated to fully vest. Each RSU represents a contingent right to receive one share of the Company’s common stock upon vesting.

As of December 31, ~~2022,~~2023, there were ~~382,111~~421,373 RSUs outstanding. As of December 31, ~~2022,~~2023, the Company had unrecognized compensation expense of $~~2.2~~$3.2 million relating to RSUs that is expected to be recognized over a weighted average period of 3.1 years.

~~12. Loss~~10. Earnings (Loss) Per Common Share

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

Three Months Ended

December 31, 2022

December 31, 2021

Net loss

$
(97
)

$
(6,768
)
Less: Loss allocable to unvested restricted stock

—

—

Loss attributable to common shareholders for
diluted earnings per share

$
(97
)

$
(6,768
)
Weighted average number of common share equivalents:

Common shares used in basic loss per share

13,067,991

12,919,673

Common share equivalents outstanding related to RSUs

—

—

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

13,067,991

12,919,673

Loss per share:

Basic

$
(0.01
)

$
(0.52
)
Diluted

$
(0.01
)

$
(0.52
)

	*Three Months Ended*
	*December 31, 2023*		*December 31, 2022*
Net income (loss)	$	12,679	$	(97	)
Less: Income allocable to unvested restricted stock		—		—
Income (loss) attributable to common shareholders for diluted earnings (loss) per share	$	12,679	$	(97	)
Weighted average number of common share equivalents:
Common shares used in basic earnings (loss) per share		13,251,360		13,067,991
Common share equivalents outstanding related to RSUs		209,156		—
Total weighted average common shares and common share equivalents used in diluted earnings (loss) per share		13,460,516		13,067,991
Earnings (loss) per share:
Basic	$	0.96	$	(0.01	)
Diluted	$	0.94	$	(0.01	)

For the calculation of diluted ~~loss~~earnings per share for the three months ended December 31, 2023 and 2022, there were 212,217 and 382,111 non-vested RSUs, ~~were~~respectively, excluded infrom the calculation of weighted average shares outstanding since their impact on diluted ~~loss~~earnings per share ~~was~~were antidilutive. ~~For the calculation of diluted loss per share for the three months ended December 31, 2021,~~ ~~376,466~~ ~~non-vested RSUs were excluded in the calculation of weighted average shares outstanding since their impact on diluted loss per share was antidilutive.~~

~~13.~~11. Commitments and Contingencies

Contingent Compensation Costs

In connection with the acquisition of Aquana, LLC (“Aquana”) in July 2021, the Company is subject to additional contingent cash payments to the former members of Aquana over a six~~six-year~~-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The merger agreement with Aquana requires the continued employment of a certain

key employee and former member of Aquana for the firstfour years of the six year earn-out period in order for any of Aquana’s former members to be eligible for any earn-out payments. Due to the continued employment requirement, no liability has been recorded for the estimated fair value of earn-out payments for this transaction. Earn-outs achieved, if any, will be recorded as compensation expense when incurred. No eligible revenue has been generated to date.

Legal Proceedings

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

~~14.~~12. Segment Information

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

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

Three Months Ended

December 31, 2022

December 31, 2021

Revenue:

Oil and Gas Markets

$
20,148

$
9,654

Adjacent Markets

10,822

8,171

Emerging Markets

93

137

Corporate

46

29

Total

$
31,109

$
17,991

Income (loss) from operations:

Oil and Gas Markets

$
2,406

$
(4,170
)
Adjacent Markets

1,747

1,208

Emerging Markets

(1,213
)

(820
)
Corporate

(3,219
)

(3,104
)
Total

$
(279
)

$
(6,886
)

	*Three Months Ended*
	*December 31, 2023*			*December 31, 2022*
Revenue:
Oil and Gas Markets	$	39,909		$	20,148
Adjacent Markets		9,815			10,822
Emerging Markets		234			93
Corporate		74			46
Total	$	50,032		$	31,109

Income (loss) from operations:
Oil and Gas Markets	$	14,563		$	2,406
Adjacent Markets		2,034			1,747
Emerging Markets		(625	)		(1,213	)
Corporate		(3,135	)		(3,219	)
Total	$	12,837		$	(279	)

~~15.~~13. Income Taxes

Consolidated income tax expense for the three months ended December 31, ~~2022~~ 2023 and ~~2021~~2022 was $~~30,000~~$0.1 million and $~~0.1~~ ~~million,~~$30,000, respectively. The ~~Company is currently unable to record any~~primary difference between the Company's effective tax ~~benefits from~~rate of 1.4% for the ~~tax losses it incurs in the U.S., Canada~~three months ended December 31, 2023 and the ~~Russian Federation due~~statutory rate of 21% is adjustments to the ~~uncertainty surrounding its ability to utilize such losses in the future to offset taxable income.~~ valuation allowance against deferred tax assets.

~~16.~~14. Risks and Uncertainties

Concentration of Credit Risk

As of December 31, ~~2022,~~2023, the Company had combined trade accounts and notes receivable from ~~four~~two customers of $~~9.2~~ ~~million, $6.0~~ ~~million, $4.1~~$33.6 million and $~~4.0~~$2.4 million, respectively. $28.7 million of the $33.6 million receivable is backed by letters of credit from the customer and is due in February 2024. During the three months ended December 31, 2023, revenue recognized from these two customers was $31.4 million and $3.5 million, respectively. During the three months ~~ended~~ December 31, 2022 revenue recognized from these ~~four~~two customers was $~~8.0~~ ~~million, $2.7~~ ~~million, $4.0~~$1.7 million and $~~1.7~~$2.7 million, respectively. ~~During the three months ended December 31, 2021, revenue recognized from these~~ ~~four~~ ~~customers was $3.2~~ ~~million, $0.7~~ ~~million,~~ ~~zero, and $4.6~~ ~~million, respectively.~~

~~COVID-19~~COVID-19 Pandemic

The ongoing ~~COVID-19~~COVID-19 pandemic ~~has spread across the globe and~~ has negatively impacted worldwide economic activity and continues to create challenges in the Company’s markets. ~~COVID-19~~The COVID-19 pandemic and the related mitigation measures have disrupted the Company’s supply chain, resulting in longer lead times in materials available from suppliers and extended the shipping time for these materials to

reach the Company’s facilities. If The occurrence or a resurgence of global or regional health events such as the COVID–19 ~~continues to spread or~~ pandemic, and the ~~response to contain the COVID–19 pandemic is unsuccessful, the Company~~related government responses, could ~~experience~~result in a material adverse effect on ~~its~~the Company's business, financial condition, results of operations and liquidity. As such, we continue to closely monitor COVID-19 and will continue to reassess our strategy and operational structure on a regular, ongoing basis.

Oil Commodity Price Levels

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

Crude oil prices held above $70$70 per barrel throughout ~~2022,~~2023, which may result in higher cash flows for exploration and production companies. Any material changes in oil and gas prices or other market trends, like slowing growth of the global economy, could adversely impact seismic exploration activity and would likely affect the demand for the Company's products and could materially and adversely affect its results of operations and liquidity.

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

Armed Conflict Between Russia and Ukraine

A portion of the Company's oil and gas product manufacturing is conducted through its wholly-owned subsidiary Geospace Technologies Eurasia LLC ("GTE"), which is based in the Russian Federation. In February 2022, the Russian Federation launched a full-scale military invasion of Ukraine, and Russia and Ukraine continue to engage in active and armed conflict. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions in addition to any direct impact on the Company's operations in Russia. As a result of the invasion, the governments of several western nations, including the U.S., Canada, the United Kingdom and the European Union, implemented new and/or expanded economic sanctions and export restrictions against Russia, Russian-backed separatist regions in Ukraine, certain banks, companies, government officials, and other individuals in Russia and Belarus. The implementation of these sanctions and exports restrictions, in combination with the withdrawal of numerous private companies from the Russian market, has had, and is likely to continue to have, a negative impact on the Company's business in the region. InDuring fiscal year ~~2022,~~2023 the Company imported $~~1.9~~$3.8 million of products from GTE for resale elsewhere in the ~~world.~~world and since then has imported $0.5 million of products during the three months of fiscal year 2024. The rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to ~~serious~~material delays in getting goods to or from Russia as port authorities struggle to keep up with the changing environment. If imports of these products from the Russian Federation are restricted by government regulation, the Company may be forced to find other sources for the manufacturing of these products at potentially higher costs. Likewise, restrictions on the Company's ability to send products to ~~our subsidiary in Russia,~~ GTE, may force our subsidiary to have to find other sources for the manufacturing of these products at potentially higher ~~costs; however,~~costs. However, the Company's exports to GTE have historically been limited. Boycotts, protests, unfavorable regulations, additional governmental sanctions and other actions in the region could also adversely affect the Company's ability to operate profitably. Delays in obtaining governmental approvals can affect the Company's ability to timely deliver its products pursuant to contractual obligations, which could result in the Company being liable to its customers for damages. The risk of doing business in the Russian Federation and other economically or politically volatile areas could adversely affect the Company's operations and earnings. It is possible that increasing sanctions, export controls, restrictions on access to financial institutions, supply and transportation challenges, or other circumstances or considerations could necessitate a reduction, or even discontinuation, of operations by GTE or other business in Russia.

The Company is actively monitoring the situation in Ukraine and Russia and assessing its impact on its business, including GTE. The net carrying value of ~~this subsidiary~~GTE on the Company's consolidated balance sheet at December 31, ~~2022~~2023 was $~~5.5~~$5.7 million, including cash of $~~2.2~~$1.8 million. In response to sanctions imposed by the U.S. and others on Russia, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but we may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition to the $~~1.9~~ ~~million of~~ products the Company imported from GTE, ~~in fiscal year 2022,~~ the subsidiary generated

$~~1.9~~ $1.8 million in revenue from domestic sales in fiscal year ~~2022.~~2023 and has generated $0.3 million from domestic sales during the firstthree months of fiscal year 2024. The Company has no way to predict the duration, progress or outcome of the military conflict in Ukraine. The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and the Company's business for an unknown period of time.

~~17. Exit and Disposal Activities~~

During the first quarter of fiscal year 2023, the Company implemented a plan to discontinue the manufacture of certain low margin, low revenue products and reconfigure our production facilities to lower our costs and raise efficiencies. As part of the plan, reductions were made to the Company's workforce which are expected to yield an annual savings of more than $2 ~~million. In connection with the plan, the Company incurred costs of $0.6~~ million in the first quarter of fiscal year 2023, primarily termination costs related to the workforce reduction. The costs were recorded both to cost of revenue and operating expenses in the consolidated statement of operations. No significant future costs are expected. Outstanding liabilities related to the plan was $~~0.2~~ ~~million as of December 31, 2022.~~

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

The following is management’s discussion and analysis of the major elements of our consolidated financial statements. You should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and other detailed information appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended September 30, ~~2022.~~2023.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “could”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating” or similar words. Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the timing, adoption, results and success of our rollout of our Aquana smart water valves and cloud-based control platform, future demand for our Quantum security solutions, the adoption and sale of our products in various geographic regions, potential tenders for permanent reservoir monitoring systems, future demand for OBX rental equipment, the adoption of Quantum's ~~SADAR~~® SADAR®product monitoring of subsurface reservoirs, the completion of new orders for channels of our GCL system, the fulfillment of customer payment obligations, the impact of and the recovery from the impact of the coronavirus (or COVID-19) pandemic, the impact of the current armed conflict between Russia and Ukraine, our ability to manage changes and the continued health or availability of management personnel, volatility and direction of oil prices, anticipated levels of capital expenditures and the sources of funding therefor, and our strategy for growth, product development, market position, financial results and the provision of accounting reserves. These forward-looking statements reflect our current judgment about future events and trends based on the information currently available to us. However, there will likely be events in the future that we are not able to predict or control. The factors listed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2022,~~2023, as well as other cautionary language in such Annual Report and this Quarterly Report on Form 10-Q, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such examples include, but are not limited to, the failure of the Quantum and ~~OptoSeis~~®OptoSeis® or Aquana technology transactions to yield positive operating results, decreases in commodity price levels, the continued adverse impact of COVID-19 which could reduce demand for our products, the failure of our products to achieve market acceptance (despite substantial investment by us), our sensitivity to short term backlog, delayed or cancelled customer orders, product obsolescence resulting from poor industry conditions or new technologies, bad debt write-offs associated with customer accounts, inability to collect on promissory notes, lack of further orders for our OBX rental equipment, failure of our Quantum products to be adopted by the border and security perimeter market or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property. The occurrence of the events described in these risk factors and elsewhere in this Quarterly Report on Form 10-Q could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.

Business Overview

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

Demand for our seismic products targeted at customers in our Oil and Gas Markets segment has been, and will likely continue to be, vulnerable to downturns in the economy and the oil and gas industry in general. For more information, please refer to the risks discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2022.~~2023.

Available Information

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). Our SEC filings are available to the public over the internet at the SEC’s website at www.sec.gov. Our SEC filings are also

available to the public on our website at www.geospace.com. From time to time, we may post investor presentations on our website under the “Investor Relations” tab. Please note that information contained on our website, whether currently posted or posted in the future, is not a part of this Quarterly Report on Form 10-Q or the documents incorporated by reference in this Quarterly Report on Form 10-Q.

Products and Product Development

Oil and Gas Markets

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

Traditional Products

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

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

Wireless Products

We have developed multiple versions of a land-based wireless (or nodal) seismic data acquisition system. Rather than utilizing interconnecting cables as required by most traditional land data acquisition systems, each of our wireless stations operate as an independent data collection system, allowing for virtually unlimited channel configurations. As a result, our wireless systems require less maintenance, which we believe allows our customers to operate more effectively and efficiently because of its reduced environmental impact, lower weight and ease of operation. Each wireless station is available in a single-channel or three-channel configuration. ~~Since its introduction in 2008 and through December 31, 2022, we have sold 500,000 wireless channels and we currently have 63,000 wireless channels in our rental fleet.~~

We have also developed a marine-based wireless seismic data acquisition system called the OBX. Similar to our land-based wireless systems, the marine OBX system may be deployed in virtually unlimited channel configurations and does not require interconnecting cables between each station. We have two versions of OBX nodal ~~stations. A~~stations: a shallow water version that can be used in depths up to 750 meters and a deepwater version that can be deployed in depths of up to 3,450 meters. Through December 31, ~~2022,~~2023, we have sold 13,000 OBX stations and we currently have 24,000 OBX stations in our rental fleet.

In ~~August~~ 2022, we announced the release of a new seismic acquisition product known as Mariner™, a continuous, cable-free, four channel autonomous, shallow water ocean bottom recorder. Mariner is the next generation node designed for extended duration seabed ocean bottom seismic data acquisition. The slim profile nodes, which are part of our shallow water stations, are ideally deployed as deep as 750 meters. The device continuously records for up to 70 days and offers more rapid recharging times. Its slim profile creates space savings on seismic survey vessels, allowing contractors to fit up to 25% more nodes into a download/charge container. Through December 31, 2023, we have sold 7600 Mariner™ nodes.

Reservoir Products

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

reservoir management. Utilizing these reservoir monitoring tools, producers can enhance the recovery of oil and gas deposits over the life of a reservoir.

We have developed permanently installed high-definition reservoir monitoring systems for land and ocean-bottom applications in producing oil and gas fields. Our electrical reservoir monitoring systems are currently installed on numerous offshore reservoirs in the North Sea and elsewhere. Through our acquisition of the ~~OptoSeis~~®OptoSeis® fiber optic sensing technology, we now offer both electrical and fiber optic reservoir monitoring systems. These high-definition seismic data acquisition systems have a flexible architecture allowing them to be configured as a subsurface system for both land and marine reservoir-monitoring projects. The scalable architecture of these systems enables custom designed configuration for applications ranging from low-channel engineering and environmental-scale surveys requiring a minimum number of recording channels to high-channel surveys required to efficiently conduct permanent reservoir monitoring (“PRM”). The modular architecture of these products allows virtually unlimited channel expansion for these systems.

In the spring of 2023, we released a derivative of the OptoSeis® technology for high temperature downhole applications. The product known as Insight by OptoSeis offers a passive, all-optical downhole sensor network - no electronics downhole - resulting in years long operational lifetime at 150 °C.

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

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

~~During 2022, we~~

We have maintained active discussions with potential clients for future PRM systems. InDuring 2022, in coordination with a potential client, we concluded a successful demonstration of our ~~OptoSeis~~®OptoSeis® fiber optic PRM technology in real-world field conditions. This demonstration was a pre-requisite step toward future contract consideration. ~~If we are awarded a PRM contract in fiscal year 2023, revenue will most likely not be recognized until fiscal year 2024.~~ We have also held discussions and received requests for information from other major oil and gas producers regarding PRM systems. We have not received any orders for a large-scale seabed PRM system since November 2012.

Adjacent Markets

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

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

Industrial Products

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

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

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

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

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

Imaging Products

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

Emerging Markets

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

Consolidated Results of Operations

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


	Three Months Ended						Three Months Ended
	December 31, 2022			December 31, 2021			December 31, 2023			December 31, 2022
Oil and Gas Markets
Traditional exploration product revenue	$	2,755		$	591		$	1,763		$	2,755
Wireless exploration product revenue		17,238			8,727			38,073			17,238
Reservoir product revenue		155			336			73			155
Total revenue		20,148			9,654			39,909			20,148
Operating income (loss)		2,406			(4,170	)
Operating income								14,563			2,406
Adjacent Markets
Industrial product revenue		7,930			5,013			6,443			7,930
Imaging product revenue		2,892			3,158			3,372			2,892
Total revenue		10,822			8,171			9,815			10,822
Operating income		1,747			1,208			2,034			1,747
Emerging Markets
Revenue		93			137			234			93
Operating loss		(1,213	)		(820	)		(625	)		(1,213	)
Corporate
Revenue	46				29			74			46
Operating loss		(3,219	)		(3,104	)		(3,135	)		(3,219	)
Consolidated Totals
Revenue		31,109			17,991			50,032			31,109
Operating loss		(279	)		(6,886	)
Operating income (loss)								12,837			(279	)

Overview

~~Overview~~

Although in an already depressed oil and gas industry, demand further decreased in February 2020 because of the oversupply of crude oil due to failed OPEC negotiations that led to a dramatic drop in crude oil prices when combined with the impact of the COVID-19 pandemic. These declines in the demand for oil and gas have caused oil and gas exploration and production companies to experience a significant reduction in cash flows, which have resulted in reductions in their capital spending budgets for oil and gas exploration-focused activities, including seismic data acquisition activities. Crude oil prices held above $70 per barrel throughout ~~2022;~~2023; however, a lag in time typically occurs between higher oil prices and greater demand for our Oil and Gas Markets segment products. We believe this lag is the result of exploration and production (“E&P”) companies allocating their cash flow towards shareholder reward initiatives, such as stock buy-back programs and dividend payments, or in debt reduction. We believe this lag is a short-term trend that will continue until E&P companies decide to reinvest capital into exploration activities. As this lag persists, we expect the reduced levels of demand for our Oil and Gas Markets segment ~~products and our rental marine wireless nodal products to continue.~~products. We also expect our land-based traditional and wireless products will continue to experience low levels of product demand until our customers consume their excess levels of underutilized equipment. ~~During the third quarter of fiscal year 2022,~~As discussed below, we ~~began~~had a $30.0 million wireless product sale to ~~experience an increase~~a customer in ~~rental demand for our marine nodal products in the form of additional rental contracts and requests for quotes from existing and new customers.~~

~~During~~ the first quarter of fiscal year ~~2023,~~2024. However, we ~~implemented a plan to discontinue~~do not currently anticipate another product sale this large for the manufacture of certain low margin, low revenue products and reconfigure our production facilities to lower our costs and raise efficiencies. As part of the plan, reductions were made to our workforce which are expected to yield an annual savings of more than $2 million. In connection with the plan, we incurred costs of $0.6 million in ther first quarterremainder of fiscal year 2023, primarily termination costs related to the workforce reduction. The costs were recorded both to cost of revenue and operating expenses in the consolidated statement of operations. No significant future costs are expected.2024.

In light of current market conditions, the inventory balances in our Oil and Gas Markets business segment at December 31, ~~2022~~2023 continued to exceed levels we consider appropriate for the current level of product demand. We are continuing to work aggressively to reduce these legacy inventory balances; however, we are also adding new inventories for new wireless product developments and for other product demand in our Adjacent Markets segment. During periods of excessive inventory levels, our policy has been, and will continue to be, to record obsolescence expense as we experience reduced product demand and as our inventories continue to age. ~~As difficult market conditions continue for~~Although the ~~products in our~~ Oil and Gas Markets segment is seeing a recovery after experiencing difficult market conditions, we ~~are~~have been recording additional expenses for inventory obsolescence and will continue to do so in the future until product demand and/or resulting inventory turnover return to acceptable levels.

Armed Conflict Between Russia and Ukraine

A portion of our oil and gas product manufacturing is conducted by ~~Geopace~~Geospace Technologies Eurasia LLC, our wholly-owned subsidiary based in the Russian Federation. Consequently, our oil and gas business could be directly affected by the current war between Russia and Ukraine. See Note 1614 in this Quarterly Report on Form 10-Q for more information.

Coronavirus (COVID-19)

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

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

Three months ended December 31, ~~2022~~2023 compared to the three months ended December 31, ~~2021~~2022

Consolidated revenue for the three months ended December 31, ~~2022~~2023 was ~~$31.1~~$50.0 million, an increase of ~~$13.1~~$18.9 million, or ~~72.9%~~60.8%, from the corresponding period of the prior fiscal year. The increase was largely ~~attributable to higher revenue from our Oil and Gas Markets segment, primarily~~ due to ~~increased~~a $30.0 million sale of our Mariner™ shallow water ocean bottom nodes, which replaced a rental contract with the customer. The increase was partially offset by (i) a decrease in rental revenue due to lower utilization of our OBX rental fleet and ~~higher wireless exploration product revenue. Wireless exploration product revenue included $4.0 million from~~(ii) a ~~rental customer as compensation~~decrease in demand for ~~lost OBX nodes. The increase in consolidated revenue was also caused by an increase in sales of~~our industrial products from our Adjacent Markets segment. We do not expect this increase in revenue to continue for the remaining three quarters of of fiscal year 2024.

Consolidated gross profit for the three months ended December 31, ~~2022~~2023 was ~~$10.5~~$22.2 million, an increase of ~~$8.8~~$11.7 million, or 111.1%, from the corresponding period of the prior fiscal year. The increase was primarily due to ~~higher~~ gross ~~profits from~~profit on its Mariner™ sale. The increase in gross profit was partially offset by (i) the ~~increased~~decrease in utilization of our OBX rental fleet and ~~from~~(ii) a higher ~~wireless exploration product sales. The increase was also attributable~~warranty accrual, primarily related to the ~~increase from industrial product revenue and related gross profits.~~Mariner™ sale.

Consolidated operating expenses for the three months ended December 31, ~~2022~~2023 were ~~$10.8~~$9.4 million, ~~an increase~~a decrease of ~~$2.2~~$1.4 million, or ~~25.9%~~13.1%, from the corresponding period of the prior fiscal year. The ~~increase~~decrease was primarily due to ~~(i) a $2.4 million favorable non-cash adjustment reported in the prior year period resulting from a change in the estimated fair value of contingent consideration related~~lower personnel costs attributable to our ~~Quantum and OptoSeis~~®~~acquisitions, (ii) a $0.7 million increase~~workforce reduction in ~~selling, general and administrative expenses, resulting from increased revenue and $0.3~~first quarter of fiscal year 2023, which included $0.4 million in employee termination ~~costs and (iii) a $0.1 million increase in bad debt expense. These increased operating expenses were partially offset by a $1.0 million~~costs. The decrease inwas also due to lower research and development project ~~costs.~~expenditures.

Consolidated other ~~income~~expense for the three months ended December 31, ~~2022 did not change materially~~2023 was $(0.1) million, compared to other income of $0.2 million from the corresponding period of the prior ~~year period.~~year. The decrease in other income was primarily due to net foreign currency transaction losses. The decrease was partially offset by an increase in interest income attributable to short-term investments.

Segment Results of Operations

Oil and Gas Markets

~~Revenue~~

Revenue

Revenue from our Oil and Gas Markets products for the three months ended December 31, ~~2022~~2023 increased ~~$10.5~~$19.8 million, or ~~108.7%~~98.1%, from the corresponding period of the prior fiscal year. The components of ~~these increases~~this increase were as follows:

•

~~Traditional Exploration Product Revenue~~– For the three months ended December 31, 2022, revenue from our traditional products was $2.8 million, an increase of $2.2 million from the corresponding period of the prior fiscal year. The increase was primarily due to higher demand for our sensor products.

•

~~Wireless Exploration Product Revenue~~ – For the three months ended December 31, 2022, revenue from our wireless exploration products increased $8.5 million, or 97.5%, from the corresponding period of the prior fiscal year. This increase was primarily due to increased rental revenue attributable to higher utilization of our OBX rental fleet. The increase also reflects higher revenue from both our OBX and land-based wireless products. Wireless product revenue for the three months ended December 31, 2022 included $4.0 million from a rental equipment customer as compensation for lost OBX nodes.

●

Traditional Exploration Product Revenue– For the three months ended December 31, 2023, revenue from our traditional products was $1.8 million, a decrease of $1.0 million from the corresponding period of the prior fiscal year. The decrease was primarily due to lower demand for our sensor products.

●

Wireless Exploration Product Revenue – For the three months ended December 31, 2023, revenue from our wireless exploration products increased $20.8 million, or 120.9%, from the corresponding period of the prior fiscal year. The increase was primarily due to a $30.0 million sale of our Mariner™ shallow water ocean bottom nodes, which replaced a rental contract with the customer. The increase was partially offset by a decrease in rental revenue attributable to lower utilization of our OBX rental fleet. We do not expect this increase in revenue to continue for the remaining three quarters of fiscal year 2024.

Operating Income ~~(Loss)~~

Operating income associated with our Oil and Gas Markets products for the three months ended December 31, ~~2022~~2023 was ~~$2.4~~$14.6 million, ~~compared to~~ an ~~operating loss~~increase of ~~$(4.2)~~$12.2 million from the corresponding period of the prior fiscal year. The increase in operating income was ~~primarily due~~related to ~~(i) higher~~gross profits related to the Mariner™ sale. The income was partially offset by lower wireless rental ~~and product~~ revenue and related gross profits due to ~~improved~~a decrease in the utilization of our OBX rental fleet, (ii) compensation for OBX nodes lost by our customer. These improvements in operating income were partially offset by a $2.4 million favorable non-cash adjustment reported in the prior year period resulting from a change in the estimated fair value of contingent consideration related to our OptoSeis® ~~acquisition.~~fleet.

Adjacent Markets

~~Revenue~~

Revenue

Revenue from our Adjacent Markets products for the three months ended December 31, ~~2022 increased $2.7~~2023 decreased $1.0 million, or ~~32.4%~~9.3%, from the corresponding period of the prior fiscal year. The components of ~~these increases were~~this change was as follows:

•

~~Industrial Product Revenue and Services~~ – For the three months ended December 31, 2022, revenue from our industrial products increased $2.9 million, or 58.2%, from the corresponding period of the prior fiscal year. The increase in revenue was primarily due to higher demand for our water meter products.

•

~~Imaging Product Revenue~~ – For the three months ended December 31, 2022, revenue from our imaging products decreased $0.3 million, or 8.4%, from the corresponding period of the prior fiscal year. The decrease was primarily due to lower demand for our consumable film products.

●

Industrial Product Revenue and Services – For the three months ended December 31, 2023, revenue from our industrial products decreased $1.5 million, or 18.8%, from the corresponding period of the prior fiscal year. The decrease was primarily due to lower demand for both our water meter products and industrial sensor products.

●

Imaging Product Revenue – For the three months ended December 31, 2023, revenue from our imaging products increased $0.5 million, or 16.6%, from the corresponding period of the prior fiscal year. The increase was primarily due to higher demand for our film products and imaging equipment.

Operating Income

~~The operating~~

Operating income from our Adjacent Markets products for the three months ended December 31, ~~2022~~2023 was ~~$1.7~~$2.0 million, ana increase of ~~$0.5~~$0.3 million, or ~~44.6%~~16.4%, from the corresponding period of the prior fiscal year. The increase in operating income was primarily due to ~~the increase in revenue~~margin improvements on both our industrial and ~~related gross profits. The increase in operating income was partially offset by an increase in operating expenses, mostly caused by higher research and development expense.~~imaging products.

Emerging Markets

~~Revenue~~

Revenue

Revenue from our Emerging Markets products was ~~$0.1~~$0.2 million for ~~each of the~~ three months ended December 31, ~~2022 and 2021.~~2023 compared to $0.1 million from the corresponding period of the prior fiscal year. The increase in revenue ~~for each period~~ primarily ~~consisted of~~due to higher on-going service and maintenance related to our completed contract with the U.S. Customs and Border Protection.

Operating Loss

Operating loss from our Emerging Markets products for the three months ended December 31, ~~2022~~2023 was ~~$(1.2)~~$0.6 million, ~~an increase~~a decrease of ~~0.4~~$0.6 million, or ~~47.9%~~48.5%, from the corresponding period in the prior fiscal year. The ~~increase in operating loss~~decrease was primarily ~~due~~attributable to ~~a $0.6 million favorable non-cash adjustment reported~~lower personnel costs attributable to our workforce reduction in the ~~prior~~first quarter of fiscal year period resulting from a change in the estimated fair value of contingent consideration related to our Quantum acquisition. The increase in operating loss was partially offset by lower operating expenses.2023.

Liquidity and Capital Resources

At December 31, ~~2022,~~2023, we had ~~approximately $12.3~~$34.0 million in cash and cash equivalents and short-term investments. For the three months ended December 31, ~~2022,~~2023, we ~~used $4.9~~generated $2.7 million of cash from operating activities. ~~Our~~Sources of cash included our net ~~loss~~income of ~~$0.1~~$12.7 million ~~was offset by~~and net non-cash charges of ~~$6.4~~$4.5 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and ~~bad debt expense.~~provision for credit losses. Other ~~uses~~sources of cash ~~in our operations primarily~~ included a (i) ~~a $6.9~~$8.0 million ~~increase~~decrease in trade accounts and notes receivable payable primarily due to ~~our increase in revenue and~~ the timing of collections from customers and (ii) $1.2 million increase in other liabilities due to increases in customer deposits and our product warranty accrual, partially offset by lower accrued employee compensation costs. These sources of cash were partially offset by (i) the removal of $19.4 million gross profit from the sale of rental equipment is included in investing activities, (ii) a ~~$5.2~~$0.5 million decrease in accounts payable due to timing of payments to our suppliers and (iii) $4.1 million increase in inventories to meet an increase in demand for our products and (iii) the removal of $3.1 million gross profit from the sale of used rental equipment as it is included in investing activities. Offsetting these uses of cash were (i) a $1.9 million increase in accounts payable primarily due to the timing of payments to our suppliers, (ii) a $1.2 million increase in other liabilities due an increase in customer deposits we require for our rental equipment from and an increase in accrued property taxes and (iii) a $0.9 million decrease in other assets primarily due to a decrease in prepaid product purchases and prepaid insurance.products.

For the three months ended December 31, ~~2022,~~2023, we ~~generated~~used cash of ~~$0.2~~$2.7 million in investing activities. ~~Sources~~Uses of cash ~~primarily consisted of proceeds of $0.6~~included (i) $2.6 million ~~from the sale of used~~for additions to our equipment rental ~~equipment. Offsetting this source of cash were (i) $0.3~~fleet and (ii) $0.8 million for additions to our property, plant and ~~equipment and (ii) $0.2~~equipment. Offsetting these uses of cash was $0.6 million ~~for additions to~~of proceeds from the sale of rental equipment. We expect cash investments into our ~~equipment~~ rental ~~fleet.~~fleet will be approximately $5 million in fiscal year 2024. We expect our cash investments in our ~~rental fleet to be approximately $6.0 million in fiscal year 2023. We expect our cash investments in~~ property, plant and equipment will be approximately ~~$1.0~~$2 million in fiscal year ~~2023.~~2024. Our capital expenditures are expected to be funded from our cash on hand, internal cash flows, cash flows from our rental contracts or, if necessary, borrowings under our new credit agreement.

For the three months ended December ~~30, 2022,~~31, 2023 we ~~used $0.2 million~~had no cash flows from financing ~~activities for contingent consideration payments to the former shareholders of Quantum.~~activities.

Our available cash, ~~and~~ cash equivalents and short-term investments ~~totaled $12.3~~was $34.0 million at December 31, ~~2022,~~2023, which included ~~$2.9~~$3.3 million of cash and cash equivalents held by our foreign subsidiaries and branch offices, of which ~~$2.2~~$1.8 million was held by our subsidiary in the Russian Federation. In response to sanctions imposed by the U.S. and ~~others~~other countries on ~~Russia,~~the Russian Federation, the Russian government has imposed restrictions on companies' abilities to repatriate or otherwise remit cash from their Russian-based operations to locations outside of Russia. As a result, this cash can be used in our Russian operations, but we may be unable to transfer it out of Russia without incurring substantial costs, if at all. In addition, if we were to repatriate the cash held by our Russian subsidiary, we would be required to accrue and pay taxes on any amount repatriated. During fiscal year 2023, in light of recent volatility in the financial markets, we entered into an IntraFi Cash Service ("ICS") Deposit Placement Agreement with IntraFi Network LLC through our primary bank, Woodforest National Bank. The ICS program offers us access to unlimited Federal Deposit Insurance Corporation ("FDIC") insurance on domestically held cash in excess of $5.0 million, thereby mitigating our risk of falling outside of FDIC coverage limits.

~~In May 2022,~~

On July 26, 2023, we entered into a credit agreement ~~(the “Agreement”~~(“the Agreement”) with Woodforest National Bank, as sole lender. The Agreement refinanced our credit agreement dated May 6, 2022, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender. ~~Available borrowings under the~~The Agreement ~~are determined by~~provides a ~~borrowing base~~revolving credit facility with a maximum availability of ~~$10~~$15 million. ~~The borrowing base~~Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) ~~70% loan to value~~80% of ~~our property located at 6410 Langfield Road in Houston, Texas (the “Property”),~~eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of ~~forced~~the orderly liquidation value of eligible equipment, ~~(iii) 80% of~~in each case subject to certain ~~accounts receivable~~limitations and ~~(iv) 50% of forced liquidation value of certain inventory (inventory borrowing base limited~~adjustments. Interest shall accrue on outstanding borrowings at a rate equal to ~~100% of borrowing base credit given toward accounts receivable). The Agreement is for~~Term SOFR (Secured Overnight Financing Rate) plus a ~~two-year term with all funds borrowed due at the expiration of the term. The interest rate on borrowed funds is the Wall Street prime rate (with a minimum of~~margin equal to 3.25%~~) plus 4.00%.~~ per annum. We are required to make monthly interest payments on borrowed funds. ~~Borrowings under the~~The Agreement ~~will be principally~~is secured by ~~the Property and our domestic equipment, inventory and accounts receivables. In addition, certain~~substantially all of our ~~domestic subsidiaries have guaranteed our obligations under the Agreement and such subsidiaries have secured the obligations by pledging~~assets, except for certain ~~assets.~~excluded property. The Agreement requires us to maintain a minimum (i) consolidated tangible net worth of $100 ~~million. We expect~~million, (ii) liquidity of $5 million, and (iii) current ratio no less than 2.00 to ~~remain~~1.00, in ~~compliance with this requirement~~each case tested quarterly. The Agreement also requires us to maintain a springing minimum interest coverage ratio of 1.50 to 1.00, tested quarterly whenever there is an outstanding balance on the revolving credit facility. The Agreement expires in ~~fiscal year 2023.~~July 2025.

~~The Property is under contract to sell at December 31, 2022. The Company is currently in discussions with its lenders to collateralize the Agreement with alternative domestic assets.~~

At December 31, ~~2022,~~2023 we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $14.9 million after consideration of a $0.1 million outstanding ~~and~~letter of credit. We were ~~compliant~~in compliance with all covenants under the Agreement. ~~Our borrowing availability at December 31, 2022 was $8.5 million.~~ We do not currently anticipate the need to borrow under the Agreement, however, we may decide to do so in the future, if needed.

Our total available cash, ~~and~~ cash ~~equivalent~~equivalents and short-term investments ~~decreased $4.8 million~~did not significantly change during the three months ended December 31, ~~2022.~~2023. Our current accounts receivable includes $28.7 related to our first quarter 2024 Mariner™ sale. We expect to receive these funds in the second quarter of fiscal year 2024. In the absence of future profitable results of operations, we may need to rely on other sources of liquidity to fund our future operations, including executed rental contracts, available borrowings under ~~our~~the Agreement through its expiration in ~~May 2024,~~July 2025, leveraging or sales of real estate assets, sales of rental assets and other liquidity sources which may be available to us. We currently believe that our cash, cash equivalents and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

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

Contractual Obligations

Contingent Compensation Costs

In connection with the acquisition of Aquana in July 2021, we are subject to additional contingent cash payments to the former members of Aquana over a six-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The merger agreement with Aquana requires the continued employment of a certain key employee and former member of Aquana for the first four years of the six year earn-out period for any of Aquana’s former members to be eligible to any earn-out payments. In accordance with ASC 805, Business Combinations, due to the continued employment requirement, no liability has been recorded for the estimated fair value of contingent earn-out payments for this transaction. Earn-outs achieved, if any, will be recorded as compensation expense when incurred.

See Note 13 to our consolidated financial statements in this Quarterly Report on Form 10-Q for more information on our contractual contingencies.

Critical Accounting Estimates

During the three months ended December 31, ~~2022,~~2023, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2022.~~2023.

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

In connection with the preparation of this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the CEO and CFO, as of December 31, ~~2022,~~2023, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, ~~2022.~~2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the fiscal quarter ended December 31, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 6. Exhibits

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


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

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

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

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

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

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

101*		The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, ~~2022,~~2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets at December 31, ~~2022~~2023 and September 30, ~~2022,~~2023 , (ii) the Consolidated Statements of Operations for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, (iii) the Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, (iv) the Consolidated Statements of Stockholders’ Equity for the three months ended December 31, ~~2022~~2023 and ~~2021,~~2022, (v) the Consolidated Statements of Cash Flows for the three months ended December 31, ~~2022~~2023 and ~~2021~~2022 and (vi) Notes to Consolidated Financial Statements.

104*		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, ~~2022~~2023 formatted in Inline ~~XBRL.~~XBRL and contained in Exhibit 101.

* Filed with this Quarterly Report on Form 10-Q

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

~~SIGNATURES~~

SIGNATURES

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

Date:	February 8, 2024	By:

~~Date:~~	~~February 9, 2023~~		~~By:~~	/s/ Walter R. Wheeler
					Walter R. Wheeler, President
					and Chief Executive Officer
					(duly authorized officer)


Date:	February 8, 2024	By:	~~February 9, 2023~~	~~By:~~	/s/ Robert L. Curda
						Robert L. Curda, Vice President,
						~~Vice President,~~ Chief Financial Officer and Secretary
						(principal financial officer)


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


		Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2015

Item 3. Quantitative and Qualitative Disclosures about Market Risk		2719

Item 4. Controls and Procedures		2819

PART II. OTHER INFORMATION

Item 6. Exhibits		2820


	December 31, 2022			September 30, 2022			*December 31, 2023*			*September 30, 2023*
ASSETS
Current assets:
Cash and cash equivalents	$	11,355		$	16,109		$	18,907		$	18,803
Short-term investments		896			894			15,051			14,921
Trade accounts and notes receivable, net		31,424			20,886
Property held for sale		2,403			—
Trade accounts and note receivable, net								41,969			21,373
Inventories, net		20,736			19,995			21,839			18,430
Prepaid expenses and other current assets		1,756			2,077			2,227			2,251
Total current assets		68,570			59,961			99,993			75,778

Non-current notes receivable		306			—
Non-current inventories, net		15,604			12,526			20,032			24,888
Rental equipment, net		23,242			28,199			15,242			21,587
Property, plant and equipment, net		23,334			26,598			24,083			24,048
Non-current trade accounts receivable								1,510			—
Operating right-of-use assets		897			957			653			714
Goodwill		736			736			736			736
Other intangible assets, net		5,335			5,573			4,696			4,805
Other non-current assets		409			506			438			486
Total assets	$	138,433		$	135,056		$	167,383		$	153,042

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable trade	$	7,522		$	5,595		$	6,190		$	6,659
Contingent consideration		—			175
Operating lease liabilities		245			241			261			257
Other current liabilities		8,023			6,616			14,161			12,882
Total current liabilities		15,790			12,627			20,612			19,798

Non-current operating lease liabilities		701			769			439			512
Deferred tax liabilities, net		7			13			25			16
Total liabilities		16,498			13,409			21,076			20,326

Commitments and contingencies (Note 13)
Commitments and contingencies (Note 11)

Stockholders’ equity:
Preferred stock, 1,000,000 shares authorized, no shares issued and outstanding		—			—			—			—
Common Stock, $.01 par value, 20,000,000 shares authorized; 13,972,981 and 13,863,233 shares issued, respectively; and 13,130,989 and 13,021,241 shares outstanding, respectively		140			139
Common Stock, $.01 par value, 20,000,000 shares authorized; 14,159,082 and 14,030,481 shares issued, respectively; and 13,317,090 and 13,188,489 shares outstanding, respectively								142			140
Additional paid-in capital		95,037			94,667			96,444			96,040
Retained earnings		49,557			49,654			74,539			61,860
Accumulated other comprehensive loss		(15,299	)		(15,313	)		(17,318	)		(17,824	)
Treasury stock, at cost, 841,992 shares		(7,500	)		(7,500	)		(7,500	)		(7,500	)
Total stockholders’ equity		121,935			121,647			146,307			132,716
Total liabilities and stockholders’ equity	$	138,433		$	135,056		$	167,383		$	153,042


	Three Months Ended						*Three Months Ended*
	December 31, 2022			December 31, 2021			*December 31, 2023*			*December 31, 2022*
Revenue:
Products	$	19,548		$	13,032		$	43,714		$	19,548
Rental		11,561			4,959			6,318			11,561
Total revenue		31,109			17,991			50,032			31,109
Cost of revenue:
Products		15,365			11,350			23,842			15,365
Rental		5,210			4,939			3,954			5,210
Total cost of revenue		20,575			16,289			27,796			20,575

Gross profit		10,534			1,702			22,236			10,534

Operating expenses:
Selling, general and administrative		6,435			5,744			5,826			6,435
Research and development		4,258			5,269			3,602			4,258
Change in estimated fair value of contingent consideration		—			(2,440	)
Bad debt expense		120			15
Provision for credit losses								(29	)		120
Total operating expenses		10,813			8,588			9,399			10,813

Loss from operations		(279	)		(6,886	)
Income (loss) from operations								12,837			(279	)

Other income (expense):
Interest expense		(39	)		—			(56	)		(39	)
Interest income		156			194			235			156
Foreign exchange gains, net		107			18
Foreign currency transaction gains (losses), net								(163	)		107
Other, net		(12	)		(17	)		(74	)		(12	)
Total other income, net		212			195
Total other income (expense), net								(58	)		212

Loss before income taxes		(67	)		(6,691	)
Income (loss) before income taxes								12,779			(67	)
Income tax expense		30			77			100			30
Net loss	$	(97	)	$	(6,768	)
Net income (loss)							$	12,679		$	(97	)

Loss per common share:
Income (loss) per common share:
Basic	$	(0.01	)	$	(0.52	)	$	0.96		$	(0.01	)
Diluted	$	(0.01	)	$	(0.52	)	$	0.94		$	(0.01	)

Weighted average common shares outstanding:
Basic		13,067,991			12,919,673			13,251,360			13,067,991
Diluted		13,067,991			12,919,673			13,460,516			13,067,991


	Three Months Ended
	December 31, 2022			December 31, 2021
Net loss	$	(97	)	$	(6,768	)
Other comprehensive income (loss):
Change in unrealized gains (losses) on available-for-sale securities, net of tax		8			(9	)
Foreign currency translation adjustments		6			(133	)
Total other comprehensive income (loss)		14			(142	)
Total comprehensive loss	$	(83	)	$	(6,910	)

																				*Common Stock*										*Accumulated*
	Common Stock										Accumulated													*Additional*						*Other*
						Additional					Other									*Shares*				*Paid-In*			*Retained*			*Comprehensive*			*Treasury*
	Shares					Paid-In		Retained			Comprehensive			Treasury						*Outstanding*		*Amount*		*Capital*			*Earnings*			*Loss*			*Stock*			*Total*
Balance at October 1, 2023																					13,188,489	$	140	$	96,040		$	61,860		$	(17,824	)	$	(7,500	)	$	132,716
Net income																					—		—		—			12,679			—			—			12,679
Other comprehensive income (loss)																					—		—		—			—			506			—			506
Issuance of common stock pursuant to the vesting of restricted stock units																					128,601		2		(2	)		—			—			—			—
Stock-based compensation																					—		—		406			—			—			—			406
Balance at December 31, 2023																					13,317,090		142	$	96,444		$	74,539		$	(17,318	)	$	(7,500	)	$	146,307
	Outstanding			Amount		Capital		Earnings			Loss			Stock			Total
Balance at October 1, 2022		13,021,241		$	139	$	94,667	$	49,654		$	(15,313	)	$	(7,500	)	$	121,647			13,021,241	$	139	$	94,667		$	49,654		$	(15,313	)	$	(7,500	)	$	121,647
Net loss		—			—		—		(97	)		—			—			(97	)		—		—		—			(97	)		—			—			(97	)
Other comprehensive income		—			—		—		—			14			—			14			—		—		—			—			14			—			14
Issuance of common stock pursuant to the vesting of restricted stock units		109,748			1		—		—			—			—			1			109,748		1		—			—			—			—			1
Stock-based compensation		—			—		370		—			—			—			370			—		—		370			—			—			-			370
Balance at December 31, 2022		13,130,989			140	$	95,037	$	49,557		$	(15,299	)	$	(7,500	)	$	121,935			13,130,989		140	$	95,037		$	49,557		$	(15,299	)	$	(7,500	)	$	121,935

Balance at October 1, 2021		12,969,542		$	137	$	92,935	$	72,510		$	(16,320	)	$	(6,805	)	$	142,457
Net loss		—			—		—		(6,768	)		—			—			(6,768	)
Other comprehensive loss		—			—		—		—			(142	)		—			(142	)
Issuance of common stock pursuant to the vesting of restricted stock units		84,762			1		—		—			—			—			1
Purchase of treasury stock		(72,563	)		—		—		—			—			(695	)		(695	)
Stock-based compensation		—			—		536		—			—			—			536
Balance at December 31, 2021		12,981,741		$	138	$	93,471	$	65,742		$	(16,462	)	$	(7,500	)	$	135,389


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

	*As of September 30, 2023*
	*Amortized Cost*		*Unrealized Gains*		*Unrealized Losses*			*Estimated Fair Value*
Short-term investments:
Corporate bonds	$	11,310	$	—	$	(15	)	$	11,295
U.S. treasury securities and securities of U.S. government-sponsored agency		3,622		4		—			3,626
Total	$	14,932	$	4	$	(15	)	$	14,921


	As of December 31, 2022
	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	$	—	$	896	$	—	$	896
Total assets	$	—	$	896	$	—	$	896


	As of September 30, 2022
	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	$	—	$	894	$	—	$	894
Total assets	$	—	$	894	$	—	$	894

Contingent consideration liabilities:	$	—	$	—	$	175	$	175
Total liabilities	$	—	$	—	$	175	$	175


Contingent consideration balance at October 1, 2022	$	175
Fair value adjustments		—
Payment of contingent consideration		(175	)
Contingent consideration at December 31, 2022	$	—

Contingent consideration balance at October 1, 2021	$	6,017
Fair value adjustments		(2,440	)
Payment of contingent consideration		(807	)
Contingent consideration balance at December 31, 2021	$	2,770


	December 31, 2022			September 30, 2022
Notes receivable	$	7,790		$	8,225
Less current portion		(7,484	)		(8,225	)
Non-current notes receivable	$	306		$	—


For fiscal years ending September 30,
2023 (remainder)	$	198
2024		278
2025		186
2026		130
2027		134
2028		91
Future minimum lease payments		1,017
Less interest		(71	)
Present value of minimum lease payments		946
Less current portion		(245	)
Long-term portion	$	701


	Weighted-
	Average
	Remaining Useful
	Lives (in years)	December 31, 2022			September 30, 2022
Goodwill:
Emerging Markets reporting unit		$	4,336		$	4,336
Adjacent Markets reporting unit			736			736
Total goodwill			5,072			5,072
Accumulated impairment losses			(4,336	)		(4,336	)
		$	736		$	736

Other intangible assets:
Developed technology	13.9	$	6,475		$	6,475
Customer relationships	--		3,900			3,900
Trade names	0.8		2,022			2,022
Non-compete agreements	0.2		186			186
Total other intangible assets	7.3		12,583			12,583
Accumulated amortization			(7,248	)		(7,010	)
		$	5,335		$	5,573

GEOSPACE TECHNOLOGIES CORPORATION