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What changed in GEOSPACE TECHNOLOGIES CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of GEOSPACE TECHNOLOGIES CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+139 added−158 removedSource: 10-K (2024-11-22) vs 10-K (2023-11-17)

Top changes in GEOSPACE TECHNOLOGIES CORP's 2024 10-K

139 paragraphs added · 158 removed · 107 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeReservoir 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.
Biggest changeOur recently introduced Aquanaut™ is a deepwater, wireless seismic acquisition node capable of operating for 200 days in water as deep as 3,450 meters. 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.
In the spring of 2023, we released a derivative of the OptoSeis® technology for high temperature downhole applications. The product know as Insight by OptoSeis offers a passive, all-optical downhole sensor network – no electronics downhole - resulting in years long operational lifetime @ 150 °C.
In the spring of 2023, we released a derivative of the OptoSeis® technology for high temperature downhole applications. The product know as Insight by OptoSeis® offers a passive, all-optical downhole sensor network – no electronics downhole - resulting in years long operational lifetime at 150 °C.
Human Rights – This year, we introduced a Human Rights Policy Statement which demonstrates our commitment to supporting and promoting human rights that benefit all our stakeholders, including our customers, employees, shareholders, investors, and the communities in which we live and operate. Our approach is applied in our business operations, across our supply chain and through ethical business conduct.
Human Rights – Last year, we introduced a Human Rights Policy Statement which demonstrates our commitment to supporting and promoting human rights that benefit all our stakeholders, including our customers, employees, shareholders, investors, and the communities in which we live and operate. Our approach is applied in our business operations, across our supply chain and through ethical business conduct.
For a discussion of financial information by segment and geographic area, see Note 19 to the consolidated financial statements contained in this Annual Report on Form 10-K. Products and Product Development Oil and Gas Markets Our Oil and Gas Markets business segment has historically accounted for the majority of our revenue.
For a discussion of financial information by segment and geographic area, see Note 20 to the consolidated financial statements contained in this Annual Report on Form 10-K. Products and Product Development Oil and Gas Markets Our Oil and Gas Markets business segment has historically accounted for the majority of our revenue.
Competition Oil and Gas Products We are one of the world’s largest designers and manufacturers of seismic products used in the oil and gas industry. The principal competitors for many of our traditional seismic products are Sercel (a division of CGG) and INOVA.
Competition Oil and Gas Products We are one of the world’s largest designers and manufacturers of seismic products used in the oil and gas industry. The principal competitors for many of our traditional seismic products are Sercel (a division of Viridien, formerly a division of CGG) and INOVA.
In general, most customers prefer to standardize data acquisition systems, geophones and hydrophones, particularly if they are used by seismic companies that have multiple crews which are able to support each other. This standardization makes it difficult for competitive manufacturers to gain market share from other manufacturers with existing customer relationships.
In general, most customers prefer to standardize data acquisition systems, particularly if they are used by seismic companies that have multiple crews which are able to support each other. This standardization makes it difficult for competitive manufacturers to gain market share from other manufacturers with existing customer relationships.
Financial Information by Segment and Geographic Area For a discussion of financial information by segment and geographic area, see Note 19 to the consolidated financial statements contained in this Annual Report on Form 10-K.
Financial Information by Segment and Geographic Area For a discussion of financial information by segment and geographic area, see Note 20 to the consolidated financial statements contained in this Annual Report on Form 10-K.
We pledge to conduct ourselves in a most responsible manner in each community. As a manufacturer, we have a responsibility to reuse or recycle waste materials from our operations. Over the last three years, we have recycled more than 263 tons of recyclable materials. Year to date 2023, we have recycled over 174 tons of manufacturing waste materials.
We pledge to conduct ourselves in a most responsible manner in each community. As a manufacturer, we have a responsibility to reuse or recycle waste materials from our operations. Over the last three years, we have recycled more than 423 tons of recyclable materials. Year to date 2024, we have recycled over 212 tons of manufacturing waste materials.
We have two versions of OBX nodal stations: A shallow water version that can be used in depths up to 750 meters and a deepwater version that can be deployed in depths of up to 3,450 meters. Through September 30, 2023, we have sold 13,000 OBX stations and we currently have 28,000 OBX stations in our rental fleet.
We have two versions of OBX nodal stations: a shallow water version that can be used in depths of up to 750 meters and a deepwater version that can be deployed in depths of up to 3,450 meters. Through September 30, 2024, we have sold 29,000 OBX stations and we currently have 19,000 OBX stations in our rental fleet.
For a discussion of the risks related to our reliance on these suppliers, see “Risk Factors – We Rely on Key Suppliers for Certain Components Used in Our Products.” COVID-19 has 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.
For a discussion of the risks related to our reliance on these suppliers, see “Risk Factors – We Rely on Key Suppliers for Certain Components Used in Our Products.” Our supply chain frequently experiences disruptions, resulting in longer lead times in materials available from suppliers and extended the shipping time for these materials to reach our facilities.
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.
Similar to our land-based wireless systems, these marine wireless systems may be deployed in virtually unlimited channel configurations and do not require interconnecting cables between each station.
We have incurred company-sponsored research and development expenses of $16.0 million and $18.1 million during the fiscal years ended September 30, 2023 and 2022, respectively.
We have incurred company-sponsored research and development expenses of $16.3 million and $15.9 million during the fiscal years ended September 30, 2024 and 2023, respectively.
Workforce Composition - At September 30, 2023, we employed 681 people predominantly on a full-time basis, of which 451 were employed in the United States, 209 in the Russian Federation and the remainder in the United Kingdom, Canada, China and Colombia.
Workforce Composition - At September 30, 2024, we employed 478 people predominantly on a full-time basis, of which 461 were employed in the United States and the remainder in the United Kingdom, Canada and Colombia.
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.
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.
Through our acquisition of the 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.
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 following table describes our revenue by product type (in thousands): YEAR ENDED SEPTEMBER 30, 2023 2022 Traditional seismic exploration product revenue $ 12,183 $ 6,597 Wireless seismic exploration product revenue 60,848 40,667 Seismic reservoir product revenue 962 1,877 Industrial product revenue 36,859 25,640 Imaging product revenue 12,180 13,531 Border & perimeter security product revenue 1,234 711 Corporate revenue 243 230 Total revenue $ 124,509 $ 89,253 Intellectual Property We seek to protect our intellectual property by means of patents, trademarks, trade secrets and other measures.
The following table describes our revenue by product type (in thousands): YEAR ENDED SEPTEMBER 30, 2024 2023 Traditional seismic exploration product revenue $ 9,812 $ 12,183 Wireless seismic exploration product revenue 67,059 60,848 Seismic reservoir product revenue 584 962 Industrial product revenue 43,060 36,859 Imaging product revenue 12,565 12,180 Border & perimeter security product revenue 2,222 1,234 Corporate revenue 296 243 Total revenue $ 135,598 $ 124,509 Intellectual Property We seek to protect our intellectual property by means of patents, trademarks, trade secrets and other measures.
This includes production recyclable materials (aluminum, brass, copper, stainless steel, steel, and titanium as well as armored cable, film, lithium batteries, PCB boards and solder paste) plus paper, plastic, cardboard and e-waste (electronics). We produce an Environmental, Society and Governance (ESG) report annually which is made public on our website.
This includes production recyclable materials (aluminum, brass, copper, stainless steel, steel, and titanium as well as armored cable, film, lithium batteries, PCB boards and solder paste) plus paper, plastic, cardboard and e-waste (electronics).
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.
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.
In this regard, we do not anticipate paying any cash dividends in the foreseeable future, however, during fiscal years 2021 and 2022 we repurchased 841,992 shares of our common stock in open market transactions completing a $7.5 million stock-buy-back program authorized by our board of directors.
In this regard, we do not anticipate paying any cash dividends in the foreseeable future, however, since fiscal year 2021 we have repurchased 1,496,701 shares of our common stock in open market transactions under stock-buy-back programs authorized by our Board of Directors.
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.
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 September 30, 2024, we have sold 7,600 Mariner™ nodes.
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.
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.
Two customers comprised 26.7% and 11.7% of our revenue during fiscal year 2023. One customer comprised 29.3% of our revenue during fiscal year 2022.
Two customers comprised 27.4% and 16.0% of our revenue during fiscal year 2024. Two customers comprised 26.7% and 11.7% of our revenue during fiscal year 2023.
Available Information We file annual, quarterly and special 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 free of charge on our website at www.geospace.com.
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 free of charge on our website at www.geospace.com.
Our professional staff includes geoscientists, electrical and mechanical engineers, accountants, computer and data scientists, marketing and human resource professionals. 65% of our global workforce is employed in manufacturing, 14% in engineering and 17% in sales and administration. The majority of our employees in the Russian Federation belong to a regional union for machine manufacturers. Our remaining employees are not unionized.
Our professional staff includes geoscientists, electrical and mechanical engineers, accountants, computer and data scientists, marketing and human resource professionals. 63% of our global workforce is employed in manufacturing, 19% in engineering and 18% in sales and administration. Our employees are not unionized. We have never experienced a work stoppage.
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 Mariner™ is 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.
In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations. This includes having employees work from home, while implementing additional safety measures for employees continuing critical on-site work.
We provide our full-time employees and their families with access to healthcare programs. In response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees, as well as the communities in which we operate, and which comply with government regulations.
For a description of risks attendant to our foreign operations, please see “Risk Factors - Our Foreign Subsidiaries and Foreign Marketing Efforts Are Subject to Additional Political, Economic, Legal and Other Uncertainties Not Generally Associated with Domestic Operations and The Ongoing Armed Conflict Between Russia and Ukraine Could Adversely Affect Our Business, Financial Condition, and Results of Operations".
For a description of risks attendant to our foreign operations, please see “Risk Factors - Our Foreign Subsidiaries and Foreign Marketing Efforts Are Subject to Additional Political, Economic, Legal and Other Uncertainties Not Generally Associated with Domestic Operations". Available Information We file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”).
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. 2 We have also developed a marine-based wireless seismic data acquisition system called the OBX.
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. The Pioneer™ is a small lightweight, cable-free, connector-less, node. Pioneer™ is the next generation node designed for extended duration land based seismic data acquisition.
We believe the primary competitors for our marine nodal data acquisition systems are Magseis Fairfield ASA (a division of TGS), Sercel and InApril AS each of whom utilizes their own proprietary nodal technology. Most oil and gas seismic products are price sensitive, so the ability to manufacture these products at a low cost is essential to maintain market share.
We believe the primary competitors for our marine nodal data acquisition systems are Magseis Fairfield ASA (a division of TGS, which recently merged with PGS), Sercel and InApril AS (which merged with SAExploration in September 2024) each of whom utilizes their own proprietary nodal technology.
We have never experienced a work stoppage. As a global manufacturer of high-tech offerings, we believe that a diverse workforce benefits everyone, from our skilled workforce, to our valued clients, to our trusted shareholders and our society.
As a global manufacturer of high-tech offerings, we believe that a diverse workforce benefits everyone, from our skilled workforce, to our valued clients, to our trusted shareholders and our society. Our domestic workforce make-up includes 33% white, 31% Asian, 25% Hispanic or Latino, 10% Black or African American, and 1% two or more races.
Compensation and Benefits - We provide competitive compensation and benefits programs to help meet the needs of our employees.
This includes having employees work from home, while implementing additional safety measures for employees continuing critical on-site work. Compensation and Benefits - We provide competitive compensation and benefits programs to help meet the needs of our employees.
Health, Safety and Wellness - The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees. We provide our full-time employees and their families with access to healthcare programs.
Women in managerial roles represent 2% of our domestic workforce. We proudly employ veterans of the US Armed Forces, who make up 5% of our domestic workforce. Health, Safety and Wellness - The success of our business is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health and safety of our employees.
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In August 2023, we announced the latest in our ocean bottom node product line known as Aquanaut™, a deepwater, wireless seismic acquisition node capable of operating for 200 days in water as deep at 3,450 meters.
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The device continuously records for up to 50 days and offers connector less charging and data downloading. Its lightweight and connector-less design will allow contractors to operate more efficiently and at a lower cost. 2 We have also developed a marine-based wireless seismic data acquisition system called the OBX, and recently released Mariner™ and Aquanaut™.
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During 2022, in coordination with a potential client, we concluded a successful demonstration of our OptoSeis fiber optic PRM technology in real-world field conditions. This demonstration was a prerequisite step toward future contract consideration. We have also held discussions and received requests for information from other major oil and gas producers regarding PRM systems.
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Our electrical reservoir monitoring systems are currently installed on numerous offshore reservoirs in the North Sea and elsewhere. Through our acquisition of the OptoSeis® fiber optic sensing technology, we now offer both electrical and fiber optic reservoir monitoring systems.
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As a result of the steep decline in product demand that began in fiscal year 2014, further accentuated by the COVID-19 pandemic creating a global decline in the demand for oil and gas, also aggravated by global supply shortages of electronic components, we currently hold more than twelve months supply of inventory.
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In July 2024, we received requests for bids on Front-End Engineering and Design studies from a major oil and gas producer issued ahead of PRM tenders that may follow. These are multistage, large-scale opportunities. We have not received any orders for a large-scale seabed PRM system since November 2012.
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Our domestic workforce make-up includes 29% white, 34% Asian, 24% Hispanic or Latino, 11% Black or African American, and 2% two or more races. Women in managerial roles represent 3% of our domestic workforce. We proudly employ veterans of the US Armed Forces, who make up 3% of our domestic workforce.
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Most oil and gas seismic products are price sensitive, so the ability to manufacture these products at a low cost is essential to maintain market share.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe Ongoing Armed Conflict Between Russia and Ukraine Could Adversely Affect Our Business, Financial Condition, and Results of Operations, including our ability to repatriate cash from Russia. A portion of our oil and gas product manufacturing is conducted through our wholly-owned subsidiary, Geospace Technologies Eurasia LLC ("GTE"), which is based in the Russian Federation.
Biggest changeA portion of our oil and gas product manufacturing was conducted through our wholly-owned subsidiary, Geospace Technologies Eurasia LLC ("GTE") in the Russian Federation. In August 2024, we sold these operations to a group of former employees of GTE. We have continued to purchase products from the new ownership and expect to continue to do so for the foreseeable future.
The rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to serious delays in getting goods to or from Russia as port authorities struggle to keep up with the changing environment.
However, the rapid changes in rules and implementation of new rules on imports and exports of goods involving Russia has also led to serious delays in getting goods to or from Russia as port authorities struggle to keep up with the changing environment.
As a result, we may be subject to foreign currency fluctuations on our revenue. The reporting currency for our financial statements is the U.S. dollar. However, the assets, liabilities, revenue and costs of our Russian, Canadian and United Kingdom subsidiaries and our Brazilian, Colombian, and Kazakhstan branch offices are denominated in currencies other than U.S. dollars.
As a result, we may be subject to foreign currency fluctuations on our revenue. The reporting currency for our financial statements is the U.S. dollar. However, the assets, liabilities, revenue and costs of our Canadian and United Kingdom subsidiaries and our Brazilian and Colombian branch offices are denominated in currencies other than U.S. dollars.
Furthermore, we may be required to write down the value of other intangible assets related to our acquisitions of Quantum, the OptoSeis® fiber optic sensing technology or the goodwill and other intangible assets related to our Aquana acquisition if sufficient cash flows are not generated to recover the carrying value of such assets.
Furthermore, we may be required to write down the value of other intangible assets related to our acquisition of the OptoSeis® fiber optic sensing technology or the goodwill and other intangible assets related to our Aquana acquisition if sufficient cash flows are not generated to recover the carrying value of such assets.
An increase in the level of bad debts and any deterioration in our credit risk could adversely affect the price of our stock. In addition, we rent equipment to our oil and gas customers who utilize such equipment in various countries around the world.
An increase in the level of credit losses and any deterioration in our credit risk could adversely affect the price of our stock. In addition, we rent equipment to our oil and gas customers who utilize such equipment in various countries around the world.
We again expect revenue outside of the United States to represent a substantial portion of our revenue for fiscal year 2024 and subsequent years.
We again expect revenue outside of the United States to represent a substantial portion of our revenue for fiscal year 2025 and subsequent years.
Based on customer billing data, revenue to customers outside the United States accounted for approximately 50% of our revenue during fiscal year 2023; however, we believe the percentage of revenue outside the United States is likely higher since many of our products are first delivered to a domestic location and ultimately shipped to a foreign location.
Based on customer billing data, revenue to customers outside the United States accounted for approximately 53% of our revenue during fiscal year 2024; however, we believe the percentage of revenue outside the United States is likely higher since many of our products are first delivered to a domestic location and ultimately shipped to a foreign location.
These translations could result in significant changes to our results of operations from period to period. For the fiscal year ended September 30, 2023, approximately 5% of our consolidated revenue was related to the operations of our foreign subsidiaries and branches. Our Long-Lived Assets May be Subject to Impairment. We periodically assess our long-lived assets for impairment.
These translations could result in significant changes to our results of operations from period to period. For the fiscal year ended September 30, 2024, approximately 6% of our consolidated revenue was related to the operations of our foreign subsidiaries and branches. Our Long-Lived Assets May be Subject to Impairment. We periodically assess our long-lived assets for impairment.
This limited number of shares outstanding results in a relatively limited market for our common stock. Our daily trading volume for the year ended September 30, 2023 averaged approximately 41,000 shares. Our small float and daily trading volumes have in the past caused, and may in the future result in, significant volatility in our stock price.
This limited number of shares outstanding results in a relatively limited market for our common stock. Our daily trading volume for the year ended September 30, 2024 averaged approximately 85,000 shares. Our small float and daily trading volumes have in the past caused, and may in the future result in, significant volatility in our stock price.
Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. We Have a Relatively Small Public Float, and Our Stock Price May be Volatile. At September 30, 2023, we have approximately 12.2 million shares outstanding held by non-affiliates.
Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. We Have a Relatively Small Public Float, and Our Stock Price May be Volatile. At September 30, 2024, we have approximately 11.8 million shares outstanding held by non-affiliates.
Export Control Laws, as Well as the Laws of Other Countries We have offices in Brazil, Colombia, Canada, the Russian Federation, Kazakhstan and the United Kingdom, in addition to our offices in the United States.
Export Control Laws, as Well as the Laws of Other Countries We have offices in Brazil, Colombia, Canada and the United Kingdom, in addition to our offices in the United States.
If we are forced to write down the value of our long-lived assets, these noncash asset impairments could adversely affect our results of operations.
If we are forced to write down the value of our long-lived assets, these non-cash asset impairments could adversely affect our results of operations.
Our Credit Risk Could Increase and We May Incur Bad Debt Write-Offs If Our Customers Continue to Face Difficult Economic Circumstances.
Our Credit Risk Could Increase and We May Incur Credit Loss Write-Offs If Our Customers Continue to Face Difficult Economic Circumstances.
While we believe that our allowance for bad debts is adequate in light of known circumstances, additional amounts attributable to uncollectible accounts and notes receivable and bad debt write-offs may have a material adverse effect on our future results of operations.
While we believe that our allowance for credit losses is adequate in light of known circumstances, additional amounts attributable to uncollectible accounts and notes receivable and credit loss write-offs may have a material adverse effect on our future results of operations.
Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions in addition to any direct impact on our operations in Russia.
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.
Demand for many of our products and the profitability of our 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.
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.
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 as of November 2022.
The Ongoing Armed Conflict Between Russia and Ukraine Could Adversely Affect Our Business and Results of Operations. In February 2022, the Russian Federation launched a full-scale military invasion of Ukraine, and Russia and Ukraine and continue to engage in active and armed conflict as of November 2024.
International revenue transactions for our products containing hydrophones require prior U.S. government approval in the form of an export license, which may be withheld by the U.S. government based upon factors which we cannot predict. 10 We may experience difficulties in connection with future foreign revenue.
International revenue transactions for our products containing hydrophones require prior U.S. government approval in the form of an export license, which may be withheld by the U.S. government based upon factors which we cannot predict. 10 Increases in Tariffs, Trade Restrictions or Taxes on our Products Could Have an Adverse Impact on our Operations.
If imports of these products from the Russian Federation are restricted by government regulation, we may be forced to find other sources for the manufacturing of these products at potentially higher costs.
If imports of these products from the Russian Federation are restricted by government regulation, we may be forced to find other sources for the manufacturing of these products at potentially higher costs. The risk of doing business in the Russian Federation and other economically or politically volatile areas could adversely affect our operations and earnings.
Increases in Tariffs, Trade Restrictions or Taxes on our Products Could Have an Adverse Impact on our Operations. In fiscal year 2023, customers outside the United States accounted for approximately 50% of our revenues. We also purchase a portion of our raw materials from suppliers in China and other foreign countries.
In fiscal year 2024, customers outside the United States accounted for approximately 53% of our revenues. We also purchase a portion of our raw materials from suppliers in China and other foreign countries.
If we are not successful in this emerging market segment, it will negatively impact our financial performance and could negatively impact our reputation and harm our other business segments. 14 Cybersecurity Breaches and Other Disruptions of Our Information Technology Network and Systems Could Adversely Affect Our Business.
If we are not successful in this emerging market segment, it will negatively impact our financial performance and could negatively impact our reputation and harm our other business segments. 14 We Rely on Key Suppliers for Certain Components Used in Our Products.
We store our back-up data offsite and we replicate our mission critical data to an alternative cloud-based data center on a real-time basis.
We store our back-up data offsite and we replicate our mission critical data to an alternative cloud-based data center on a real-time basis. In the event of a major service interruption in our data center, we believe we would be able to activate our mission critical applications within less than 24 hours.
Crude oil prices held above $65 per barrel throughout 2022 and through September 2023, which may result in higher cash flows for exploration and production companies.
Crude oil prices have stabilized over the past two years, which may result in higher cash flows for exploration and production companies.
In the event of a major service interruption in our data center, we believe we would be able to activate our mission critical applications within less than 24 hours. 15 Our Credit Agreement Imposes Restrictions on Our Business. We and several of our subsidiaries domiciled in the United States are parties to a credit agreement.
Such an event could materially and adversely affect our business operations. We currently evaluating our fire suppression system in an effort further to mitigate this risk. 15 Our Credit Agreement Imposes Restrictions on Our Business. We and several of our subsidiaries domiciled in the United States are parties to a credit agreement.
As such, we will 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 Could Affect Demand for Our Oil and Gas Products, Which Could Materially and Adversely Affect Our Results of Operations and Liquidity.
External Factors that Could Adversely Affect Us Oil Commodity Price Levels Could Affect Demand for Our Oil and Gas Products, Which Could Materially and Adversely Affect Our Results of Operations and Liquidity. Demand for many of our products and the profitability of our operations depend primarily on the level of worldwide oil and gas exploration activity.
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External Factors that Could Adversely Affect Us The Ongoing COVID-19 Pandemic Has Significantly Impacted Worldwide Economic Conditions and Could Have a Material Adverse Effect on Our Operations and Business. The ongoing COVID-19 pandemic has negatively impacted worldwide economic activity and continues to create challenges in our markets.
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Our Storage of Lithium Batteries is a Fire Hazard. We use lithium batteries in several of our products which are stored at our Pinemont facility. These batteries are known to pose significant fire hazards. Should a fire occur, it could result in personal injuries, damage to our facility and likely interrupt our manufacturing operations.
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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.
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The occurrence or resurgence of global or regional health events such as the COVID-19 pandemic, and the related government responses, could result in a material adverse effect on our business, financial condition, results of operations and liquidity.
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The implementation of these sanctions and export 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. During fiscal year 2023, we imported $3.8 million of products from GTE for resale elsewhere in the world.
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Likewise, restrictions on our ability to send products to our subsidiary in Russia may force our subsidiary to have to find other sources for the manufacturing of these products at potentially higher costs; however, our exports to GTE have historically been limited.
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Boycotts, protests, unfavorable regulations, additional governmental sanctions and other actions in the region could also adversely affect our ability to operate profitably. Delays in obtaining governmental approvals can affect our ability to timely deliver our products pursuant to contractual obligations, which could result in us being liable to our customers for damages.
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The risk of doing business in the Russian Federation and other economically or politically volatile areas could adversely affect our operations and earnings.
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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. We are actively monitoring the situation in Ukraine and Russia and assessing its impact on our business, including GTE.
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The net carrying value of GTE on our consolidated balance sheet at September 30, 2023 was $5.8 million, including cash of $2.5 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.
Removed
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 $3.8 million of products we imported from GTE in fiscal year 2023, the subsidiary generated $1.8 million in revenue from domestic sales in fiscal year 2023.
Removed
Additionally, due to foreign laws and restrictions, should we experience substantial growth in certain foreign markets, for example in the Russian Federation, we may not be able to transfer cash balances to the United States to assist with debt servicing or other obligations.
Removed
We rely on information technology networks and systems, some of which are owned and operated by third parties, to process, transmit and store electronic information. In particular, we depend on our information technology infrastructure for a variety of functions, including worldwide financial reporting, inventory management, procurement, invoicing and email communications.
Removed
Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks and similar events. Despite the implementation of network security measures, our systems and those of third parties on which we rely may also be vulnerable to computer viruses, break-ins, malware and similar disruptions.
Removed
Malware, if surreptitiously installed on our systems and not timely detected and removed, could collect and disclose sensitive information relating to our customers, employees or others, exposing us to legal liability and causing us to suffer reputational damage. It could also lead to disruptions in critical systems or the corruption or destruction of critical data.
Removed
If we are unable to prevent such outages and breaches, these events could damage our reputation and lead to financial losses from remedial actions, loss of business or potential liability. We Rely on Key Suppliers for Certain Components Used in Our Products.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIt is currently being used as additional parking for the Pinemont Facility and legacy structures are being used to support our manufacturing and warehousing operations. (3) This property is located at 8701 Cross Park Drive, Suite 100, in Austin, Texas. This facility supports the majority of our OptoSeis® research and development and engineering operations.
Biggest changeIt is currently being used as additional parking for the Pinemont Facility and legacy structures are being used to support our manufacturing and warehousing operations. This facility is classified as "Property held for sale" on our accompanying consolidated balance sheet as of September 30, 2024. (3) This property is located at 8701 Cross Park Drive, Suite 100, in Austin, Texas.
Properties As of September 30, 2023, our operations included the following locations: Location Owned/Leased Approximate Square Footage/Acreage Use Segment (see notes below) Houston, Texas Owned 387,000 See Note 1 below 6 and 7 Houston, Texas Owned 17.3 acres See Note 2 below 6 Austin, Texas Leased 9,000 See Note 3 below 6 Melbourne, Florida Leased 7,000 See Note 4 below 8 Ufa, Bashkortostan, Russia Owned 120,000 Manufacturing, sales and service 6 Calgary, Alberta, Canada Owned 45,000 Manufacturing, sales and service 6 and 7 Luton, Bedfordshire, England Owned 8,000 Sales and service 7 Bogotá, Colombia Owned 19,000 Sales and service 6 (1) This property is located at 7007 Pinemont Drive in Houston, Texas (the “Pinemont Facility”).
Properties As of September 30, 2024, our operations included the following locations: Location Owned/Leased Approximate Square Footage/Acreage Use Segment (see notes below) Houston, Texas Owned 387,000 See Note 1 below 5 and 6 Houston, Texas Owned 17.3 acres See Note 2 below 5 Austin, Texas Leased 9,000 See Note 3 below 5 Melbourne, Florida Leased 7,000 See Note 4 below 7 Calgary, Alberta, Canada Owned 45,000 Manufacturing, sales and service 5 and 6 Luton, Bedfordshire, England Owned 8,000 Sales and service 6 Bogotá, Colombia Owned 19,000 Sales and service 5 (1) This property is located at 7007 Pinemont Drive in Houston, Texas (the “Pinemont Facility”).
(4) This property is located at 5700 N. Harbor City Blvd., Suite 100, in Melbourne, Florida. This facility contains all the operations of Quantum. (5) Oil and Gas Markets. (6) Adjacent Markets (7) Emerging Markets
This facility supports the majority of our OptoSeis® research and development and engineering operations. (4) This property is located at 5700 N. Harbor City Blvd., Suite 100, in Melbourne, Florida. This facility contains all the operations of Quantum. (5) Oil and Gas Markets. (6) Adjacent Markets (7) Emerging Markets

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeYear Ended September 30, 2023: Low High Fourth Quarter $ 7.22 $ 14.59 Third Quarter 6.60 9.16 Second Quarter 3.96 7.55 First Quarter 3.76 4.88 Year Ended September 30, 2022: Fourth Quarter $ 4.10 $ 5.45 Third Quarter 4.64 6.72 Second Quarter 4.97 8.88 First Quarter 6.41 10.27 Dividends Since our initial public offering in 1997, we have not paid dividends, and we do not intend to pay cash dividends on our common stock in the foreseeable future.
Biggest changeYear Ended September 30, 2024: Low High Fourth Quarter Third Quarter $ 8.09 $ 10.81 Second Quarter 8.49 14.83 First Quarter 11.40 17.09 10.35 13.74 Year Ended September 30, 2023: Fourth Quarter $ 7.22 $ 14.59 Third Quarter 6.60 9.16 Second Quarter 3.96 7.55 First Quarter 3.76 4.88 Dividends Since our initial public offering in 1997, we have not paid dividends, and we do not intend to pay cash dividends on our common stock in the foreseeable future.
Securities Authorized for Issuance under Equity Compensation Plans The following equity plan information is provided as of September 30, 2023: Equity Compensation Plan Information Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) (In shares) (In dollars per share) (In shares) Equity Compensation Plans Approved by Security Holders (1) 377,549 N/A 1,137,509 Equity Compensation Plans Not Approved by Security Holders — — — Total 377,549 N/A 1,137,509 (1) The number of securities shown in column (c) represents number of securities remaining available for issuance under the Company’s 2014 Long Term Incentive Plan, as amended (the “2014 Plan”).
Securities Authorized for Issuance under Equity Compensation Plans The following equity plan information is provided as of September 30, 2024: Equity Compensation Plan Information Plan Category Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) Weighted-average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) (In shares) (In dollars per share) (In shares) Equity Compensation Plans Approved by Security Holders (1) 408,895 N/A 827,088 Equity Compensation Plans Not Approved by Security Holders — — — Total 408,895 N/A 827,088 (1) The number of securities shown in column (c) represents number of securities remaining available for issuance under the Company’s 2014 Long Term Incentive Plan, as amended (the “2014 Plan”).
On October 31, 2023, there were approximately 143 holders of record of our common stock, and the closing price per share on such date was $11.99 as quoted by The NASDAQ Global Select Market.
On October 31, 2024, there were approximately 136 holders of record of our common stock, and the closing price per share on such date was $11.20 as quoted by The NASDAQ Global Select Market.
Column (b) excludes restricted stock unit awards. 19 Recent Sales of Unregistered Securities and Use of Proceeds None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 20
Column (b) excludes restricted stock unit awards. 19 Recent Sales of Unregistered Securities and Use of Proceeds None.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information with respect to purchases of common stock of the Company made during the three months ended September 30, 2024: Period Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) July 1, 2024 through July 31, 2024 $ 164,048 $ 9.09 $ 164,048 $ 501,000 August 1, 2024 through August 31, 2024 141,695 9.23 141,695 1,186,000 September 1, 2024 through September 30, 2024 57,491 9.88 57,491 615,000 (1) On May 9, 2024, the Company's Board of Directors (the "Board") authorized a stock repurchase program ("the program") under which the Company may repurchase up to $5 million of its outstanding stock.
Added
On August 8, 2024, the Board approved an extension to the Program increasing the dollar amount of shares allowed to be purchased to $7 million, Under the Program, the Company may purchase shares of common stock on a discretionary basis from time to time through open market transactions through block trades, in privately negotiated transactions and pursuant to any trading plan that may be adopted by the Company’s management in accordance with Rule 10b5-1 of the Exchange Act, or otherwise.
Added
The timing and number of shares repurchased will depend on a variety of factors, including stock price, trading volume, and general business and market conditions. The Program has no time limit, does not obligate the Company to acquire a specified number of shares and may be modified, suspended or discontinued at any time at the Company’s discretion.
Added
The repurchase plan will be funded using existing cash or future cash flow.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSummary financial data by business segment follows (in thousands): YEAR ENDED SEPTEMBER 30, 2023 2022 Oil and Gas Markets Traditional exploration product revenue $ 12,183 $ 6,597 Wireless exploration product revenue 60,848 40,667 Reservoir product revenue 962 1,877 Total revenue 73,993 49,141 Operating income (loss) 15,759 (7,539 ) Adjacent Markets Industrial product revenue 36,859 25,640 Imaging product revenue 12,180 13,531 Total revenue 49,039 39,171 Operating income 11,490 6,021 Emerging Markets Revenue 1,234 711 Operating loss (4,003 ) (9,128 ) Corporate Revenue 243 230 Operating loss (11,918 ) (12,490 ) Consolidated Totals Revenue 124,509 89,253 Operating income (loss) 11,328 (23,136 ) 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.
Biggest changeSummary financial data by business segment follows (in thousands): YEAR ENDED SEPTEMBER 30, 2024 2023 Oil and Gas Markets Traditional exploration product revenue $ 9,812 $ 12,183 Wireless exploration product revenue 67,059 60,848 Reservoir product revenue 584 962 Total revenue 77,455 73,993 Operating income 13,134 15,759 Adjacent Markets Industrial product revenue 43,060 36,859 Imaging product revenue 12,565 12,180 Total revenue 55,625 49,039 Operating income 14,152 11,490 Emerging Markets Revenue 2,222 1,234 Operating loss (6,193 ) (4,003 ) Corporate Revenue 296 243 Operating loss (13,976 ) (11,918 ) Consolidated Totals Revenue 135,598 124,509 Operating income 7,117 11,328 Overview As further discussed below, revenue increased for all of our business segments for fiscal year 2024, confirming increased momentum in our diversification strategy.
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 the Agreement through its expiration in July 2025, leveraging or sales of real estate assets, sales of rental assets and other liquidity sources which may be available to us.
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 the Agreement through its expiration in July 2025, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us.
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. 26 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.
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. 26 Contractual Obligations Contingent Compensation Costs In connection with the acquisition of Aquana in 2021, we are subject to additional contingent cash payments to the former members of Aquana over a six-year earn-out period.
Consolidated Results of Operations As we have reported in the past, our revenue and operating profits have varied significantly from quarter-to-quarter, and even year-to-year, and are expected to continue that trend in the future, especially when our quarterly or annual financial results are impacted by the presence or absence of relatively large, but somewhat erratic, sales of our oil and gas PRM systems and/or wireless seismic data acquisition systems for land and marine applications. 21 We report and evaluate financial information for three segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets.
Consolidated Results of Operations As we have reported in the past, our revenue and operating profits have varied significantly from quarter-to-quarter, and even year-to-year, and are expected to continue that trend in the future, especially when our quarterly or annual financial results are impacted by the presence or absence of relatively large, but somewhat unpredictable, sales of our oil and gas PRM systems and/or wireless seismic data acquisition systems for land and marine applications. 21 We report and evaluate financial information for three segments: Oil and Gas Markets, Adjacent Markets and Emerging Markets.
Such examples include, but are not limited to, the failure of the Quantum or OptoSeis® or Aquana technology transactions to yield positive operating results, decreases in commodity price levels and 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 perimeter security market, or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property.
Such examples include, but are not limited to, the failure of the Quantum or OptoSeis® or Aquana technology transactions to yield positive operating results and decreases in commodity price levels 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 perimeter security market, or a decrease in such market due to governmental changes, and infringement or failure to protect intellectual property.
Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the 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 PRM systems, future demand for OBX rental equipment, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for our 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.
Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the 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 PRM systems, future demand for OBX rental equipment, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for our channels of our GCL system, the fulfillment of customer payment obligations, 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.
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 in order for any of Aquana’s former members to be eligible to receive any earn-out payments.
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 receive any earn-out payments.
See Note 17 to our consolidated financial statements in this Annual Report on Form 10-K for more information on our contractual contingencies.
See Note 18 to our consolidated financial statements in this Annual Report on Form 10-K for more information on our contractual contingencies.
We expect fiscal year 2024 revenue from our Adjacent Markets products to increase over fiscal year 2023 levels due to our acquisition of Aquana and intergration of Aquana's products into our business and optimism that demand for our industrial, imaging products and contract manufacturing services will continue to increase in fiscal year 2024.
We expect fiscal year 2025 revenue from our Adjacent Markets products to increase over fiscal year 2024 levels due to our acquisition of Aquana and integration of Aquana's products into our business and optimism that demand for our industrial, imaging products and contract manufacturing services will continue to increase in fiscal year 2025.
In accordance with ASC 805, Business Combination s, 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.
In accordance with ASC 805, Business Combination s, 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 are recorded as compensation expense when incurred.
At September 30, 2023, we had no outstanding borrowings under the Agreement and our borrowing base availability under the Agreement was $13.1 million after consideration of a $0.1 million outstanding letter of credit. We were in compliance with all covenants under the Agreement.
At September 30, 2024, 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 letter of credit. We were in compliance with all covenants under the Agreement.
While we have experienced stronger marine nodal rental activity in fiscal year 2023, the need for new seismic equipment, particularly land-based equipment, remains restrained due to our customers’ (i) limited capital resources, (ii) lack of visibility into future demand for their seismic services and (iii) in some cases, under-utilized legacy equipment.
While we experienced stronger marine nodal product sales in fiscal year 2024, the need for new seismic equipment, particularly land-based equipment, remains restrained due to our customers’ (i) limited capital resources, (ii) lack of visibility into future demand for their seismic services and (iii) in some cases, under-utilized legacy equipment.
We currently believe that our cash and cash equivalents will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.
We currently believe that our cash and short-term investments will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.
Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out method, except that our subsidiaries in the Russian Federation and the United Kingdom use an average cost method to value their inventories.
Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out method, except that our subsidiary in the United Kingdom uses an average cost method to value their inventories.
As a result of substantial declines in crude oil prices in recent years combined with the recent reduced global demand for oil and gas as a result of the COVID-19 pandemic, oil and gas exploration and production companies experienced a significant reduction in cash flows resulting in sharp reductions in their capital spending budgets for oil and gas exploration-focused activities including seismic data acquisition activities.
As a result of substantial declines in crude oil prices in recent years, oil and gas exploration and production companies experienced a significant reduction in cash flows resulting in sharp reductions in their capital spending budgets for oil and gas exploration-focused activities including seismic data acquisition activities.
If a large scale PRM order were received in fiscal year 2024, revenue would likely not be recognized until fiscal year 2025 and 2026.
These are multistage, large-scale opportunities. If a large scale PRM order were received in fiscal year 2025, revenue would likely not be recognized until fiscal year 2026 and 2027.
The components of this increase were as follows: ● Traditional Exploration Product Revenue – Revenue from our traditional products increased $5.6 million, or 84.7% from the prior fiscal year.
The components of this increase were as follows: ● Traditional Exploration Product Revenue – Revenue from our traditional products decreased $2.4 million, or 19.5% from the prior fiscal year.
In February 2023, we sold our real property located at 7310 Langfield Road in Houston, Texas for a cash sales price of $3.7 million, net of closing costs of $0.3 million. We recognized a gain of $1.3 million from the sale of this property in the second quarter of fiscal year 2023.
In February 2023, we sold our real property located at 7310 Langfield Road in Houston, Texas for a cash sales price of $3.7 million, net of closing costs of $0.3 million.
Adjacent Markets Revenue Revenue from our Adjacent Markets products for fiscal year 2023 increased $9.9 million, or 25.2%, from the prior fiscal year. The components of this increase were as follows: ● Industrial Product Revenue and Services – Revenue from our industrial products increased $11.2 million, or 43.8%, from the prior fiscal year.
The components of this increase were as follows: ● Industrial Product Revenue and Services – Revenue from our industrial products increased $6.2 million, or 16.8%, from the prior fiscal year.
The increase in revenue was largely due to higher rental revenue from our Oil and Gas Markets segment due to increased utilization of our OBX rental fleet and an increase in demand for our industrial products from our Adjacent Markets segment. The increase was partially offset by a decrease in sales of wireless exploration products.
This increase was largely offset by a decrease in utilization of our OBX rental fleet and decreased demand for our traditional seismic exploration products. Revenue from our Adjacent Markets segment increased $6.6 million primarily due to an increase in demand from our industrial products.
The increase was primarily due to higher demand for our water meter products. ● Imaging Product Revenue – Revenue from our imaging products decreased $1.4 million, or 10.0%, from the prior fiscal year. The decrease was primarily due to lower demand for our imaging equipment.
The increase was primarily due to higher demand for our water meter products. ● Imaging Product Revenue – Revenue from our imaging products increased $0.4 million, or 3.2%, from the prior fiscal year. The increase was primarily due to higher demand for our film products, partially offset by a decrease in demand for our imaging equipment.
Operating Income Operating income from our Adjacent Markets products for fiscal year 2023 was $11.5 million, an increase of $5.5 million, or 90.8% from the prior fiscal year. The increase in operating income was primarily due to the increase in revenue and related gross profits.
Operating Income Operating income from our Adjacent Markets products for fiscal year 2024 was $14.2 million, an increase of $2.7 million, or 23.2%, from the prior fiscal year. The increase in operating income was primarily due to the increase in revenue and gross margin improvements.
We expect fiscal year 2024 cash investments in our property, plant and equipment will be approximately $4 million. 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.
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.
Emerging Markets Revenue Revenue from our Emerging Markets products for fiscal year 2023 was $1.2 million, compared to $0.7 million from the prior fiscal year. The increase in revenue was primarily due to revenue of $0.7 million recognized on a security related contract completed with a commercial customer.
The increase in revenue was primarily due to revenue recognized on $1.5 million government contract completed in third quarter of fiscal year 2024. Operating Loss Operating loss from our Emerging Markets products for fiscal year 2024 was $6.2 million, compared to $4.0 million from the prior fiscal year.
The increase was partially offset by (i) an increase in operating expenses resulting from the increased revenue and (ii) higher research and development expense. Operating income for the prior fiscal year included a $0.4 million impairment charge on our manufacturing equipment.
The increase was partially offset by (i) an increase in operating expenses resulting from the increased revenue and (ii) higher research and development expense. Emerging Markets Revenue Revenue from our Emerging Markets products for fiscal year 2024 was $2.2 million, compared to $1.2 million from the prior fiscal year.
The increase primarily reflects higher demand for our sensor and marine products. ● Wireless Exploration Product Revenue – Revenue from our wireless exploration products increased $20.2 million, or 49.6%, from the prior fiscal year. The increase was primarily due to increased rental revenue attributable to higher utilization of our OBX rental fleet.
The decrease primarily reflects lower demand for our sensor and marine products. ● Wireless Exploration Product Revenue – Revenue from our wireless exploration products increased $6.2 million, or 10.2%, from the prior fiscal year.
We do not currently anticipate the need to borrow under the Agreement; however, we may decide to do so in the future, if needed. Our available cash, cash equivalents and short-term investments increased $17.0 million during fiscal year 2023.
We do not currently anticipate the need to borrow under the Agreement; however, we may decide to do so in the future, if needed. Our available cash, cash equivalents and short-term investments was $37.1 million at September 30, 2024, which included $1.1 million of cash and cash equivalents held by our foreign subsidiaries and branch offices.
Crude oil prices have rebounded; however, lasting higher levels of oil and gas commodity pricing may not stabilize in the long term, thus continuing the challenging industry conditions we have experienced in previous fiscal years. Many of our land-based traditional seismic products can be damaged, destroyed or otherwise consumed during our customer’s field operations.
Crude oil prices have rebounded; however, lasting higher levels of oil and gas commodity pricing may not stabilize in the long term, thus continuing the challenging industry conditions we have experienced in previous fiscal years. 28 The vast majority of our oil and gas revenue in fiscal year 2024 was derived from wireless product sales and rentals.
Recent Accounting Pronouncements Please refer to Note 1 to our consolidated financial statements contained in this Annual Report for a discussion of recent accounting pronouncements.
Recent Accounting Pronouncements Please refer to Note 1 to our consolidated financial statements contained in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements. Management ’ s Current Outlook and Assumptions Regarding our Oil and Gas Markets business segment, demand for our products are subject to volatile fluctuations in crude oil prices.
For the fiscal year ended September 30, 2023, we generated $15.6 million of cash from operating activities. Sources of cash included our net income of $12.2 million and net non-cash charges of $19.6 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and bad debt recovery.
Our net loss of $6.6 million was offset by net non-cash charges of $18.8 million resulting from deferred income taxes, depreciation, amortization, impairment, accretion, inventory obsolescence, stock-based compensation and provision for credit losses.
These sources of cash were partially offset by (i) a $5.6 million increase in trade accounts and notes receivable primarily due to our increase in revenue and the timing of collections from customers, (ii) a $11.0 million increase in inventories to meet an increase in demand for our products, (iii) the removal of $4.4 million gross profit from the sale of used rental equipment and (iv) a $1.1 million of gain from the sale of property and equipment since they are included in investing activities.
These uses of cash were partially offset by a (i) $6.6 million decrease in trade accounts and notes receivable primarily due to the timing of collections from customers and (ii) $2.7 million increase in accounts payable due to timing of payments to our suppliers.
We expect that fiscal year 2024 revenue from our oil and gas reservoir products, and principally our borehole tools and services, will increase slightly over fiscal year 2023 levels. We have not received any orders for a large-scale seabed PRM system since November 2012, although we do believe opportunities for PRM orders do exist in today's market.
We expect that fiscal year 2025 revenue from our oil and gas reservoir products, and principally our borehole tools and services, will increase slightly over fiscal year 2024 levels. In July 2024, we received requests for bids on Front-End Engineering and Design studies from a major oil and gas producer issued ahead of PRM tenders that may follow.
The increase was partially offset by a decrease in interest income attributable to lower note receivable balances between periods. Segment Results of Operations Fiscal Year 2023 Compared to Fiscal Year 2022 Oil and Gas Markets Revenue Revenue from our Oil and Gas Markets products for fiscal year 2023 increased $24.9 million, or 50.6%, from fiscal year 2022.
Segment Results of Operations Fiscal Year 2024 Compared to Fiscal Year 2023 Oil and Gas Markets Revenue Revenue from our Oil and Gas Markets products for fiscal year 2024 increased $3.5 million, or 4.7%, from fiscal year 2023.
These uses of cash were partially offset by proceeds of (i) $11.5 million from the sale of used rental equipment and (ii) $4.4 million from the sale of property and equipment. We expect fiscal year 2024 cash investments into our rental fleet will be approximately $9 million.
We expect fiscal year 2025 cash investments into our rental fleet will be approximately $3 million. We expect fiscal year 2025 cash investments in our property, plant and equipment will be approximately $8 million.
Other sources of cash included a (i) $5.4 million increase in other liabilities due to an increase in customer deposits on rental contracts and accrued employee compensation costs and (ii) $1.3 million decrease in other assets.
Other uses of cash included a (i) $11.0 million increase in inventories for the strategic purchase of long lead components needed for use in wireless products, valves and contract manufacturing and (ii) $3.0 million decrease in other liabilities due to the return of customer deposits on rental contracts, partially offset by an increase in our product warranty accrual and (iii) $0.3 million increase in other assets.
For the fiscal year ended September 30, 2023, we used cash of $11.9 million in investing activities. Uses of cash included (i) $4.0 million for additions to our property, plant and equipment, (ii) $9.9 million for additions to our equipment rental fleet and (iii) net disbursements of $13.9 million for purchases of short-term investments.
This source of cash was partially offset by (i) $3.9 million for additions to our property, plant and equipment, (ii) $8.3 million for additions to our equipment rental fleet, (iii) net disbursements of $14.7 million for purchases of short-term investments and (iv) $1.2 million for cash disposed on sale of our subsidiary.
Wireless product revenue for fiscal year 2023 also included the $4.0 million from a rental equipment customer as compensation for lost OBX nodes. 23 Operating Income (Loss) Operating income associated with our Oil and Gas Markets products for fiscal year 2023 was $15.8 million, compared to an operating loss of $(7.5) million from the prior fiscal year.
This increase was largely offset by a decrease in utilization of our OBX rental fleet. 23 Operating Income Operating income associated with our Oil and Gas Markets products for fiscal year 2024 was $13.1 million, a decrease of $2.6 million, or 16.7%, from the prior fiscal year.
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 July 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender.
At September 30, 2024, $0.6 million of our common stock remains available for repurchases under the program. 25 In July 2023, we entered into a credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender.
The decrease in operating loss was partially offset by a $0.7 million decrease to a favorable non-cash adjustment to the estimated fair value of contingent consideration related to our Quantum acquisition when compared to the same period of the prior fiscal year. 24 Liquidity and Capital Resources Fiscal Year 2023 At September 30, 2023, we had approximately $33.7 million in cash, cash equivalents and short-term investments.
The increase in operating loss for fiscal year 2024 was primarily due a $2.8 million non-cash impairment of intangible assets. 24 Liquidity and Capital Resources At September 30, 2024, we had approximately $37.1 million in cash and cash equivalents and short-term investments. For the fiscal year ended September 30, 2024, we used $9.1 million of cash from operating activities.
The increase in operating expenses were partially offset by a (i) $4.3 million non-cash goodwill impairment charge reported in the prior fiscal year related to our Quantum acquisition, (ii) reduction in personnel costs attributable to our workforce reduction, (iii) lower research and development project expenditures and (iv) decrease in bad debt expense resulting from collections of previously reserved past due receivables.
The increase was largely due to a $2.8 million non-cash impairment of intangible assets from our Emerging Markets segment. The increase was also attributable to (i) higher selling and marketing expenses resulting from increased revenue and (ii) increased research and development expense caused by an increase in project expenditures and personnel costs.
We believe our OBX rental revenue will increase in fiscal year 2024 as a result of rental contracts executed during fiscal year 2023 and anticipated new rental contracts, but we can make no assurance in this regard.
We believe our wireless product sales and rentals will increase in fiscal year 2025, over 2024 levels, primarily driven by our recent introduction of our Mariner™ marine wireless system and our Pioneer™ land based wireless system, but we can make no assurance in this regard.
Operating Loss Operating loss from our Emerging Markets products for fiscal year 2023 was $4.0 million, compared to $9.1 million from the prior fiscal year.
Revenue from our Emerging Markets segment increased $1.0 million primarily due to the completion of a government contract. Consolidated gross profit for fiscal year 2024 was $52.6 million, an increase of $0.9 million, or 1.7%, from fiscal year 2023.
The increase in gross profit was primarily due to higher gross profits from the increased utilization of our OBX rental fleet and the increase in industrial product revenue and related gross profits. The increase was partially offset by the decrease in wireless exploration product revenue and related gross profits.
The decrease in operating income was primarily due to lower utilization of our OBX rental fleet, of which its cost is primarily fixed depreciation. This decrease was partially offset by lower research and development costs. Adjacent Markets Revenue Revenue from our Adjacent Markets products for fiscal year 2024 increased $6.6 million, or 13.4%, from the prior fiscal year.
Removed
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.
Added
We have embarked on a diversification strategy to grow our non-Oil and Gas businesses through organic means or through acquisition. As a result of these efforts, we have experienced steady year over year revenue growth in our Adjacent Markets segment.
Removed
Crude oil prices held above $65 per barrel throughout 2022 and through September 2023; however, a lag in time typically occurs between higher oil prices and greater demand for our Oil and Gas Markets segment products.
Added
Our Oil and Gas Markets segment saw a shift from rentals of our OBX marine wireless nodes to purchases of the equipment. This shift signifies our customer’s recognition of future backlog to justify ownership versus renting the nodes.
Removed
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.
Added
Additionally, we experienced year over year growth in oil and gas revenue, mostly due to growing demand for wireless marine nodes for ocean bottom seismic surveys.
Removed
As this lag persists, we expect the reduced levels of demand for our Oil and Gas Markets segment 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.
Added
We do not expect significant expansion of the ocean bottom nodal market, for we expect the market is saturable and future rental fleet use will come from our customer’s need to temporarily expand their nodal fleet.
Removed
During the third quarter of fiscal year 2022, we began to experience an increase in rental demand for our marine nodal products in the form of additional rental contracts and requests for quotes from existing and new customers.
Added
We expect our Oil and Gas Markets segment to provide the majority of our revenue for years to come, but in diminishing portion to our other segments. Growing industry acceptance of our water meter cables and connectors provides a strong enabler for additional revenue from our Adjacent Markets segment.
Removed
The increase in demand has led to near full utilization of our marine wireless rental fleet, yet we continue to experience low levels of demand for our land-based wireless products.
Added
Automatic meter reading efficiencies in operations and improved customer service has begun to be understood by the municipalities of the United States. We expect this portion of our business to continue to grow for the foreseeable future.
Removed
During the first quarter of fiscal year 2023, we implemented a plan to discontinue the manufacture of certain low margin, low revenue products and reconfigure our production facilities to lower our costs and raise efficiencies. As part of the plan, reductions were made to our workforce which are expected to yield an annual savings of more than $2 million.
Added
Additionally, we anticipate this segment to see substantial revenue contributions from our Aquana smart water valve and IoT technology products as market traction and increased sales backlog continues to gather.
Removed
In connection with the plan, we incurred costs of $0.6 million in the first quarter of fiscal year 2023, primarily termination costs related to the workforce reduction. The costs were recorded both to cost of revenue and operating expenses in the consolidated statement of operations. No significant future costs are expected.
Added
Given the well-known and often extreme volatility experienced in our Oil and Gas segment, careful expansion of products and market diversity in our Adjacent Markets segment has been a longstanding part of our strategic vision and reflects our on-going diversification efforts. We continue to maintain a strong balance sheet with no debt.
Removed
In light of current market conditions, the inventory balances in our Oil and Gas Markets business segment at September 30, 2023 continued to exceed levels we consider appropriate for the current level of product demand.
Added
Our current liquidity enables our ability to seek out business acquisitions, allows us to continue investments in capital assets and product research and development, which have historically driven revenue growth. 22 Fiscal Year 2024 Compared to Fiscal Year 2023 Consolidated revenue for fiscal year 2024 was $135.6 million, an increase of $11.1 million, or 8.9%, from fiscal year 2023.
Removed
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.
Added
The increase in revenue was driven by increases in demand across all three of our business segments.
Removed
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.
Added
Revenue from our Oil and Gas Markets segment increased $3.5 million, which was largely driven by a $30.0 million sale of our Mariner™ shallow water ocean bottom nodes and a $10.5 million sale of our shallow water OBX 750E nodes, both of which replaced rental contracts with the customers.
Removed
Although the Oil and Gas Markets segment is seeing a recovery after experiencing difficult market conditions, we 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.
Added
Gross profit from our Adjacent Markets segment increased $4.4 million, attributable to (i) the increase in revenue and (ii) margins improvements from fully absorbing our fixed overhead.
Removed
Armed Conflict Between Russia and Ukraine A portion of our oil and gas product manufacturing is conducted through GTE, which is based in the Russian Federation. Consequently, our oil and gas business could be directly affected by the current war between Russia and Ukraine.
Added
This increase was offset by a $3.3 million decrease in gross profit from our Oil and Gas Markets segment as a result of the lower utilization of our OBX rental fleet, of which cost is primarily fixed depreciation. Consolidated operating expenses for fiscal year 2024 were $45.5 million, an increase of $3.8 million, or 9.1%, from fiscal year 2023.
Removed
Please see “Part I—Item 1A.—Risk Factors” for more information. 22 Coronavirus (COVID-19) The ongoing COVID-19 pandemic has negatively impacted worldwide economic activity and continues to create challenges in our markets.
Added
We recognized a gain of $1.3 million from the sale of this property which is included as a component of our income from operations in the accompanying statement of operations. In August 2024, we sold our oil and gas product manufacturing operations based in the Russian Federation to a group of former employees ("Buyer").
Removed
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.
Added
We recorded a loss of $14.5 million in connection with the transaction, of which $13.1 million was related to the impact of cumulative foreign currency translation losses previously included in accumulated comprehensive loss. The loss on sale of this subsidiary is included as a component of other income (loss) in the accompanying statement of operations.
Removed
The occurrence or resurgence of global or regional health events such as the COVID-19 pandemic, and the related government responses, could result in a material adverse effect on our business, financial condition, results of operations and liquidity.
Added
We have determined that the Buyer's legal entity is a variable interest entity ("VIE") due to the nature of the financing for the transaction. While the debt represents a direct obligation to absorb significant losses of the VIE, the debt does not establish the right and power to direct activities that most significantly impact the economic performance of the entity.
Removed
As such, we will continue to closely monitor COVID-19 and will continue to reassess our strategy and operational structure on a regular, ongoing basis. Fiscal Year 2023 Compared to Fiscal Year 2022 Consolidated revenue for fiscal year 2023 was $124.5 million, an increase of $35.3 million, or 39.5%, from fiscal year 2022.
Added
We retained no equity or voting interest, have no employees that are directors or advisors of the new ownership group, and have no direct influence on the day-to-day decisions in operations or affect their ability to generate profits or losses. As such, we have determined we are not the primary beneficiary of the entity.
Removed
Wireless exploration product revenue for fiscal year 2023 also included $4.0 million from a rental customer as compensation for lost OBX nodes. Consolidated gross profit for fiscal year 2023 was $51.7 million, an increase of $33.6 million, or 186.5%, from fiscal year 2022.
Added
The sale had no material reduction to our consolidated net assets and is not expected to have a material effect on future revenue, profits or losses.
Removed
Consolidated operating expenses for fiscal year 2023 were $41.7 million, an increase of $0.5 million, or 1.2%, from fiscal year 2022.

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