GEOS 10-K & 10-Q changes, risk factors and insider trading

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

Crude oil prices have stabilized over the past two years, which may result in higher cash flows for exploration and production companies. Any material changes in oil and gas prices or other market trends, like slowing growth of the global economy, could adversely impact seismic exploration activity and would likely affect the demand for the Company's products and could materially and adversely affect its results of operations and liquidity. Generally, imbalances in the supply and demand for oil and gas will affect oil and gas prices and, in such circumstances, demand for our oil and gas products may be adversely affected when world supplies exceed demand.

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. 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. As a result of the invasion, the governments of several western nations, including the U.S., Canada, the United Kingdom and the European Union, implemented new and/or expanded economic sanctions and export restrictions against Russia, Russian-backed separatist regions in Ukraine, certain banks, companies, government officials, and other individuals in Russia and Belarus.

A portion of our oil and gas product manufacturing was conducted through our wholly-owned subsidiary,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. 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. 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.

We have no way to predict the duration, progressprogress, or outcome of the military conflict in Ukraine. The extent and duration of the military action, sanctions, and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.

Foreign revenue is subject to special risks inherent in doing business outside of the United States,States including the risk of war, terrorist activities, civil disturbances, embargo and government activities, shifting foreign attitudes about conducting business activities with the United States, restrictions of the movement and exchange of funds, inhibitions of our ability to collect accounts receivable or repossess our rental equipment, international sanctions, expropriation and nationalization of our assets or those of our customers, currency fluctuations, devaluations and conversion restrictions, confiscatory taxation or other adverse tax policies and governmental actions that may result in the deprivation of our contractual rights, all of which may disrupt markets or our operations.

InApproximately 37% of our revenue for fiscal year 2024,2025 was generated from customers outside of the United States accounted for approximately 53% of our revenues.U.S. We also purchase a portion of our raw materials from suppliers in China and other foreign countries. The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials we purchase, and the products we ship, cross international borders. Trade tensions between the United States and China, as well as those between the U.S. and Canada, MexicoMexico, and other countries have been escalating in recent years. TradeIn addition, the current presidential administration is utilizing tariffs to fortify domestic tax revenue which could further impact our business and operations, due to potential trade wars as a result of the implementation of tariffs or otherwise. Historically, trade tensions have led to a series of tariffs imposed by the U.S. on imports from China, as well as retaliatory tariffs imposed by China on imports from the U.S. If the U.S. and China are able to negotiate the issues to restore a mutually advantageous and fair trading regime, the increased tariffs could be eliminated. Certain raw materials we purchase from China are subject to these tariffs which has increased our manufacturing costs. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs,tariffs making the products we sell uncompetitive to similar products not subjected to such import tariffs. Further changes in U.S. trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials including rare earth minerals, may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials, which could have a material adverse effect on our business, results of operations or financial conditions. It remains unclear as to the tariff related impact of the future geopolitical climate will bring to our operations.

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

In April 2016, the United States signed the Paris Agreement, which requires countries to review and “represent a progression” in their nationally determined contributions, which set emissions reduction goals, every five years. Under the Paris Agreement, the BidenUnited AdministrationStates has committed the United States to reducing its greenhouse gas emissions by 50-52% by 2030 from its 2005 levelslevels. byHowever, 2030.the United States is currently scheduled to end its participation in the Paris Agreement in January 2026. In November 2021, the Unites States and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including,including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy. Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of the Paris Agreement.

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

These political, litigation, and financial risks may result in our customers restricting or cancelling exploration or production activities which also could reduce demand for our products and services. In addition to regulatory impacts, the occurrence of weather events caused or exacerbated by climate change could impact local, national or global commodity demand or availability in ways that could be material to our business and/or the businessbusinesses of our customers.

We Operate in Highly Competitive MarketsMarkets, and Our Competitors May Be Able to Provide Newer or Better Products Than We Are Able to ProvideProvide.

Economic slowdowns, currently or in the future, in the United States, China or India, could adversely affect our business in ways that we cannot predict. During times of economic slowdown, our customers may reduce their capital expenditures and defer or cancel pending projects and product orders. Such developments occur even among customers that are not experiencing financial difficulties. During times of economic slowdowns, some of our customers have (and other customers may have) undergone restructuring or bankruptcy that has or could adversely impact our revenues and profitability. Any economic downturn may adversely affect the demand for oil and gas generally or cause volatility in oil and gas commodity prices and, therefore, adversely affect the demand for delivery of our oil and gas products. It could also adversely affect the demand for consumer and industrial products, which could in turn adversely affect our Adjacent Markets business segment. To the extent these factors adversely affect other companies in the industries we serve, there could be an oversupply of products and services and downward pressure on pricing for our products and services, which could adversely affect us. Additionally, bankruptcies or financial difficulties among our oil and gas customers could reduce our cash flowsflow and adversely impact our liquidity and profitability. For a discussion of the customers of our oil and gas products, see “The Limited Market for Our Oil and Gas Products Can Affect Our Revenue,” below.

Our outlook and assumptions are based on various macro-economic factors and internal assessments, and actual market conditions could vary materially from those assumed. In recent years, we have incurred significant expenditures to fund our research and development efforts, and we intend to continue those expenditures in the future. However, research and development is by its nature speculative, and we cannot assure you that these expenditures will result in the development of new products or services or that any new products and services we have developed recently or may develop in the future will be commercially marketable or profitable to us. In particular, we have incurred substantial expenditures to develop our oilocean and gasbottom nodal seismic data acquisition systems, as well as other products for PRM applications. In addition, we try to use some of our capabilities to supply products to newsmart adjacentwater and emergingintelligent markets.industrial products. We cannot assure you that we will realize our expectations regarding acceptance of and revenue generated by our new products and services in existing or new markets.

Our instruments and equipment are constantly undergoing rapid technological improvement. Our future success depends on our ability to continue to:

Current competitors or new market entrants may develop new technologies, products or standards that could render our products obsolete. We cannot assure you that we will be successful in developing and marketing, on a timely and cost-effective basis, product enhancements or new products that respond to technological developments, that are accepted in the marketplace or that comply with new industry standards. Additionally, in anticipation of customer product orders, from time to time we acquire substantial quantities of inventories, which if not sold or integrated into products within a reasonable period of time,time could become obsolete. In such case, we would be required to impair the value of such inventories on our balance sheet.

The Limited Market for Our Oil and Gas MarketsProducts and EmergingBorder Markets'and Perimeter Security Products Can Affect Our Revenue.

In our Oil and Gas Markets segment, weWe generally market many of our oil and gas products to seismic service contractors. We estimate that fewer than 30 oil and gas seismic contracting companies are currently operating in countries other than those operating in the Russian Federation and the former Soviet Union, India, the People’s Republic of China and certain Eastern European countries, where such information is difficult to verify. We estimate that fewer than 15 seismic contractors are engaged in marine seismic exploration activities. Due to these market factors, a relatively small number of customers, some of whom are experiencing financial difficulties, account for most of our oil and gas product revenue. From time to time, these contractors have sought to vertically integrate and acquire our competitors, which has influenced their supplier decisions before and after such transactions. In addition, consolidation among our customers may further concentrate our business to a limited number of customers and expose us to increased risks related to dependence on a small number of customers. We market our seabed PRM systems' products to large oil and gas companies. SinceDuring thisthe product’sthird introduction in 2002, we have received system orders from three offshore oil and gas operators: BP, Shell and Equinor, which have accounted for a significant portionquarter of our revenue in fiscal year 20142025, andwe priorentered fiscal years. We have not received any orders forinto large-scale seabed PRM systemssystem contract, our first since November 2012.2014. Our emergingborder marketsand segment primarily sells itsperimeter products are sold to a small number of agencies within the U.S. government. The loss of a small number of these customers, and particularly our oil and gas customers, could materially and adversely impact our future revenues.

The advancement of seismic technology having a significant competitive advantage over the equipment in our rental fleet could have an adverse effect on our ability to profitably rent and/or sell this equipment. Significant improvements in technology may also require us to record asset impairment charges to write-downwrite down the value of our rental fleet investment and to invest significant sums to upgrade or replace our rental fleet with newer equipment demanded by our customers. In addition, rental contracts may not be renewed for equipment in our rental fleet. Significant technologytechnological improvements by our competitors could have an adverse effect on our results of operations and earnings.

Our Diversification Strategy Using both Organic Expansion into the Border and Perimeter Security MarketAcquisitions May Not Be Successful.

For our imaging products, we purchase all of our thermal film from one manufacturer. Except for the film sold to us by this manufacturer, we know of no other source for thermal film that performs as well in our imaging equipment. If the manufacturer were to discontinue producing thermal film, were to become unwilling to contract with us on competitive termsterms, or were unable to supply thermal film in sufficient quantities to meet our requirements, our ability to compete in the direct thermal imaging marketplace could be impaired, which could adversely affect our financial performance.

Due to its proximity to the Texas Gulf Coast, our facilities in Houston, Texas are annually subject to the threat of hurricanes,hurricanes and the aftermath that follows. Hurricanes may cause, among other types of damage, the loss of electrical power for extended periods of time. If we lost electrical power at our Pinemont facility, or if a fire or other natural disaster occurred, we would be unable to continue our manufacturing operations during the power outage because we do not own a generator or any other back-up power source large enough to provide for our manufacturing power consumption needs. Additionally, we do not have an alternative manufacturing or operating location in the United States. Therefore, a significant disruption in our manufacturing operations could materially and adversely affect our business operations during an extended period of a power outage, fire or other natural disaster. We have a back-up generator to provide power for our information technology operations. 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.

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 interruptinterruptions to our manufacturing operations. Such an event could materially and adversely affect our business operations. We currently are evaluating our fire suppression system in an effort further to mitigate this risk.

We and several of our subsidiaries domiciled in the United States are parties to a credit agreement. Amounts available for borrowing under the credit agreement are determined by a borrowing base, which is determined based upon certain of our domestic assets. Borrowings under the credit agreement will be secured by substantially all of our domestic assets, except for certain excluded property. The credit agreement limits the incurrence of additional indebtedness, contains a covenantcovenants that requiresrequire us to maintain (i) a certain amount of consolidated tangible net worth and liquidity,liquidity and (ii) minimum asset and interest coverage ratios. The credit agreement also contains other covenants customary in agreements of this type. Our ability to comply with these restrictions may be affected by events beyond our control, including, but not limited to, prevailing economic, financial and industry conditions and continuing declines in our product revenue. The breach of any of these covenants or restrictions, as well as any failure to make a payment of interest or principal when due, could result in a default under the credit agreement. Such a default would permit our lender to declare any amountsamount borrowed from it to be due and payable, together with accrued and unpaid interest, and our ability to borrow under the credit agreement could be terminated. If we are unable to repay any debts owed to our lender, the lender could proceed against the collateral securing such debt. While we intend to seek alternative sources of cash in such a situation, there is no guarantee that any alternative cash source would be available or would be available on terms favorable to us.

Our Global Operations Expose Us to Risks Associated with Conducting Business Internationally, Including Failure to Comply with U.S. Laws Which Apply to International Operations, Such as the Foreign Corrupt Practices Act and U.S. Export Control Laws, as Well as the Laws of Other CountriesCountries.

We have offices in Brazil, Colombia, Canada and the United Kingdom, in addition to our offices in the United States. In addition to the risks that are inherent in conducting business internationally, we are also liable for compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, U.S. laws such as the Foreign Corrupt Practices Act and similar laws in other countries which also prohibit certain payments to governmental officials or certain payments or remunerations to customers. Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may be sold, or require an export license in connection with revenue transactions outside the United States. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently breached, for exampleexamples through the negligent or the unauthorized intentional behavior of individual employees, or our failure to comply with certain formal documentation requirements or otherwise. Additionally, we may be held liable for actions taken by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries and could materially damage our reputation, our brands, our international expansion efforts, our ability to attract and retain employees, and our business and our operating results.

We have not paid cash dividends on our common stock since our incorporation and do not anticipate paying any cash dividends in the foreseeable future. Any payment of cash dividends in the future will be dependent on the amount of funds legally available, our financial condition, capital requirements, loan covenants and other factors that our Board of Directors may deem relevant. 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.investments.

We periodically assess our long-lived assets for impairment. Significant sustained future decreases in crude oil and natural gas prices may require us to write down the value of our long-lived assets in our OilEnergy and Gas MarketsSolutions business segment, including our manufacturing facilities, manufacturing equipment and rental equipment if future cash flows anticipated to be generated from these assets fall below the asset’s net book value. 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 acquisitionor Geovox acquisitions if sufficient cash flows are not generated to recover the carrying value of such assets. 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.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and effectively prevent and detect material fraud. If we cannot provide reliable financial reports or prevent or detect material fraud, our operating results could be misstated. There can be no assurances that we will be able to prevent control deficiencies from occurringoccurring, which could cause us to incur unforeseen costs, negatively impact our results of operations, cause the market price of our common stock to decline, or have other potential adverse consequences.

The following is management’s discussion and analysis of the major elements of our consolidated financial statements. You should read this discussion and analysis together with our consolidated financial statements, including the accompanying notes, and other detailed information appearing elsewhere in this Annual Report on Form 10-K, including under the heading “Risk Factors.” The discussion of our financial condition and results of operations includes various forward-looking statements about our markets, the demand for our products and services and our future plans and results. These statements are based on assumptions that we consider to be reasonable,reasonable but that could prove to be incorrect. For more information regarding our assumptions, you should refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements and Assumptions” below.

This Annual Report on Form 10-K and the documents incorporated by reference herein, if any, contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can be identified by terminology such as “may”, “will”, “should”, “intend”, “expect”, “plan”, “budget”, “forecast”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue”, “evaluating” or similar words. Statements that contain these words should be read carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other forward-looking information. Examples of forward-looking statements include, among others, statements that we make regarding our expected operating results, the adoption, results and success of our 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, futuresales demandor rentals for OBXocean rentalbottom equipment,nodes, the adoption of Quantum's SADAR® product monitoring of subsurface reservoirs, the completion of new orders for our channels of our GCLPioneer™ 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. These forward-looking statements reflect our current judgment about future events and trends based on the information currently available to us. However, there will likely be events in the future that we are not able to predict or control. The factors listed under the caption “Risk Factors”, as well as cautionary language in this Annual Report on Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Such examples include, but are not limited to, the failure of theour Quantum or OptoSeis® or Aquana technology transactionsacquisitions 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 OBXocean bottom 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. The occurrence of the events described in these risk factors and elsewhere in this Annual Report on Form 10-K could have a material adverse effect on our business, results of operations and financial position, and actual events and results of operations may vary materially from our current expectations. We assume no obligation to revise or update any forward-looking statement, whether written or oral, that we may make from time to time, whether as a result of new information, future developments or otherwise.

We design and manufacture seismic instruments and equipment and primarily market these products to the oil and gas industry to locate, characterize and monitor hydrocarbon producing reservoirs. We also market our seismic products to other industries for vibration monitoring, border and perimeter security and various geotechnical applications. We design and manufacture other products of a non-seismic nature, includingHydroconn® water meter connector products, IoT water values, imaging equipment and provide contract manufacturing services. For further information on the nature of our operations, see the information under the heading “Business” in this Annual Report on Form 10-K.

We report and evaluate financial information for three segments: OilSmart Water, Energy Solutions and GasIntelligent Markets, Adjacent Markets and Emerging Markets.Industrial. Summary financial data by business segment follows (in thousands):

Growing industry acceptance of our water meter cables and connectors provides a strong enabler for additional revenue from our AdjacentSmart MarketsWater segment. 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. 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. Given the well-known and often extreme volatility experienced in our OilEnergy and GasSolutions segment, careful expansion of products and market diversity in our AdjacentSmart MarketsWater segmentand Intelligent Industrial segments 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. Our current liquidity enables our ability to seek out business acquisitions,acquisitions and allows us to continue investments in capital assets and product research and development, which have historically driven revenue growth.

Consolidated revenue for fiscal year 2025 was $110.8 million, a decrease of $24.8 million, or 18.3%, from fiscal year 2024. The decrease in revenue was primarily due to lower product revenue from our Energy Solutions segment. Revenue for fiscal year 2025 included a $17 million sale of ocean bottom nodes structured as a sales-type lease. However, in comparison, revenue for fiscal year 2024 was $135.6 million, an increase of $11.1 million, or 8.9%, from fiscal year 2023. The increase in revenue was driven by increases in demand across all three of our business segments. Revenue from our Oil and Gas Markets segment increased $3.5 million, which was largely driven byincluded a $30.0$30 million sale of our Mariner™® shallow water ocean bottom nodesnodes. andThe a $10.5 million sale of our shallow water OBX 750E nodes, both of which replaced rental contracts with the customers. This increasedecrease was largelyalso offsetattributable byto a decrease in utilization of our OBXwireless marine rental fleetrevenue. andThe decreaseddecrease demandin consolidated revenue for ourfiscal traditionalyear seismic2025 explorationwas products.partially Revenueoffset from our Adjacent Markets segment increased $6.6 million primarily due toby an increase in demand fromfor our industrialHydroconn® products.cable Revenueand connector products from our EmergingSmart MarketsWater segment increased $1.0 million primarily due to the completion of a government contract.segment.

In FebruaryJune 2023,2025, we sold our real property located at 73104318 LangfieldNorthfield Road inLane Houston, TexasTexas. The 17.3-acre property served as additional property for aour cashmain salescampus priceand ofcontained $3.7legacy million,structures netused ofto closingsupport costsour ofmanufacturing $0.3and million.warehousing operations We recognized a gain on disposal of $1.3property of $4.6 million fromduring the salethird quarter of thisfiscal propertyyear which2025. The gain is included as a component of ourincome income(loss) from operations in the accompanying statementstatements of operations.

Revenue from our OilSmart and Gas MarketsWater products for fiscal year 20242025 increased $3.5$3.4 million, or 4.7%,10.4%, from the prior fiscal year 2023.year. The componentsincrease ofwas thisprimarily due to an increase werein asdemand follows:for our Hydroconn® cable and connector products.

Revenue from our AdjacentEnergy MarketsSolutions products for fiscal year 20242025 increaseddecreased $6.6$27.3 million, or 13.4%,35.0%, from the prior fiscal year.year 2024. The components of this increasedecrease were as follows:

Operating income fromassociated with our AdjacentEnergy MarketsSolutions products for fiscal year 20242025 wasdecreased $14.2 million, an increase of $2.7$18.2 million, or 23.2%,97.9%, from the prior fiscal year. The increase in operating incomedecrease was primarily due to the increase in revenue and gross margin improvements. The increase was partially offset by (i) anthe increasedecrease in operatingrevenues expensesand resultingrelated fromgross the increased revenueprofits and (ii) higher research and development expense.expenses, primarily personnel costs.

Revenue from our EmergingIntelligent MarketsIndustrial products for fiscal year 20242025 wasdecreased $2.2$0.9 million, comparedor to $1.2 million3.7%, from the prior fiscal year. The increase in revenuedecrease was primarily due to (i) revenue recognized for fiscal year 2024 on $1.5 milliona government contract completed in thirdthe fourth quarter of fiscal year 2024.2024 and (ii) lower demand for our imaging products. The decrease was partially offset by an increase in demand for our sensor products and contract manufacturing services.

At September 30, 2024,2025, we had approximately $37.1 million$26.3 in cash and cash equivalents and short-term investments.equivalents. For the fiscal year ended September 30, 2024,2025, we used $9.1$22.2 million of cash from operating activities. OurUses of cash included (i) our net loss of $6.6$9.7 million wasmillion, offset by net non-cash charges of $18.8$14.6 million resulting from deferred income taxes, depreciation, amortization, impairment, accretion, inventory obsolescence, stock-based compensation and provision for credit losses.losses, Other uses of cash included(ii) a (i) $11.0$7.6 million increase in inventories for the strategic purchase of long leadlead-time components needed for use in wireless products, valves and contract manufacturingmanufacturing, (iii) $4.2 million increase in trade accounts and (ii)notes $3.0 million decrease in other liabilitiesreceivable due to the returntiming of customercollections depositsfrom on rental contracts, partially offset by an increase in our product warranty accrualcustomers and (iiiiv) $0.3$1.3 million increase in other assets.assets, primarily due to prepaid product purchases. These uses of cash were partially offset by a (i) $6.6$4.8 million decreaseincrease in tradeother accounts and notes receivableliabilities primarily duerelated to thecustomer timing of collections from customersdeposits and (ii) $2.7$2.4 million increase in trade accounts payable due to timing of payments to our suppliers.

For the fiscal year ended September 30, 2024,2025, we generated cash of $3.8$42.7 million in investing activities. SourceSources of cash was proceedsconsisted of $32.0(i) $30.4 million from the sale of usedshort-term investments, (ii) $8.7 million of proceeds from the sale of property, plant and equipment and (iii) $14.2 million in proceeds from the sale of rental equipment. ThisThese sourcesources of cash waswere partially offset by (i) $3.9$8.0 million for additions to our property, plant and equipment, (ii) $8.3$1.1 million for additions to our equipment rental fleet,fleet and (iii) net disbursements of $14.7$1.8 million for purchases of short-term investments and (iv) $1.2 millionpaid for cash disposed on sale of our subsidiary.Geovox acquisition. We expect fiscal year 2025 cash investments into our rental fleet will be approximately $3 million. We expect fiscal year 20252026 cash investments in our property, plant and equipment will be approximately $8$7 million. Our capital expenditures are expected to be funded from our cash on hand,hand and internal cash flows, cash flows from our rental contracts or, if necessary, borrowings under our new credit agreement.

For the fiscal year ended September 30, 2024,2025, we used cash of $6.4$1.0 million from financing activities which consisted of (i) $0.4 million in debt issuance costs related the renewal of our credit agreement and (ii) $0.6 million for the purchase of treasury stock pursuant to a stock buy-back program authorized by our Boardboard of Directors.directors. The program authorizesauthorized us to repurchase up to $7.0$7 million of our common stock in open market transactions. AtThe Septemberprogram 30,was 2024,completed $0.6in millionthe second quarter of ourfiscal commonyear stock remains available for repurchases under the program.2025.

InOn JulyAugust 2023,29, 2025, we enteredamended into aour credit agreement (“the Agreement”) with Woodforest National Bank, as sole lender.Bank. The Agreement refinancedextended our creditrevolving agreementloan agreement, dated Mayas 6,of 2022,July 26, 2023, with Amerisource Funding, Inc., as administrative agent and as a lender, and Woodforest National Bank, as a lender.Woodforest. The Agreement is for a three-year term and provides a revolving credit facility with a maximum availability of $15$25 million. Availability under the Agreement is determined based upon a borrowing base comprised of certain of our domestic assets which include (i) 80% of eligible accounts receivable, plus (ii) 90% of eligible foreign insured accounts, plus (iii) 25% of eligible inventory plus (iv) 50% of the orderly liquidation value of eligible equipment, in each case subject to certain limitations and adjustments. Interest shall accrue on outstanding borrowings at a30 rate equal toDay Term SOFR (Secured Overnight Financing Rate) plus a margin equal to 3.25%2.75% per annum. We are required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of our assets, except for certain excluded property. The Agreement requires us to maintain (i) a minimum (i) consolidated tangible net worth of $100$85 million, (ii) minimum liquidity of $5$10 million, and (iii) currenta minimum asset coverage ratio no less thanof 2.00 to 1.00, in each case tested quarterly.1.00. The Agreement also requires us to maintain a springing minimum interest coverage ratio of at least 1.50 to 1.00, tested quarterly whenever (a) there is an outstanding balance.balance Theon Agreementthe expiresrevolving incredit Julyfacility 2025.or (b) have letter of credit exposure greater than $1 million.

At September 30, 2024,2025, 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. At September 30, 2025, we could borrow approximately $8 million without violating any debt covenants. At September 30, 2025, we had no outstanding borrowings under the Agreement. 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 and cash equivalents and short-term investments was $37.1$26.3 million at September 30, 2024,2025, which included $1.1$0.8 million of cash and cash equivalents held by our foreign subsidiaries and branch offices. 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 2025,2028, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us. 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.

Contingent Compensation CostsConsideration

In connection with the acquisition of Aquana inJuly 2021, we areacquired Aquana. Pursuant to the merger agreement with Aquana, as amended ("the Merger Agreement"), the Company is subject to additional contingent cash payments to the former members of Aquana over a six-yearseven-year earn-out period. The contingent payments, if any, will be derived from certain eligible revenue generated during the earn-out period from products and services sold by Aquana. There is no maximum limit to the contingent cash payments that could be made. The mergerMerger agreement with AquanaAgreement requires the continued employment of a certain key employee and former member of Aquana for the first fourfive years of the six yearseven-year earn-out period in order for any of Aquana’s former members to be eligible to receivefor any earn-out payments. In accordance with ASC 805, Business Combinations, dueDue 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.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We consider many factors in selecting appropriate operational and financial accounting policies and controls and in developing the estimates and assumptions that are used in the preparation of these financial statements. We continually evaluate our estimates, including those related to rental revenue recognition, bad debt reserves, inventory obsolescence reserves, goodwillbusiness acquisitions and long-livedcontingent assetearn-out impairment.liabilities. We base our estimates on historical experience and various other factors, including the impact from the current economic conditions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions.

We record a write-down of our inventories when the cost basis of any manufactured product, including any estimated future costs to complete the manufacturing process, exceeds its net realizable value. Inventories are stated at the lower of cost or 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 theirits inventories.

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

Regarding our OilEnergy and Gas MarketsSolutions business segment, demand for our products areis subject to volatile fluctuations in crude oil prices. 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. While we experienced stronger marinewireless nodalland product sales in fiscal year 2024,2025, the need for new seismic equipment, particularly traditional 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. 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.

The vast majority of our oilEnergy andSolutions gasbusiness segment revenue in fiscal year 20242025 was derived from wireless product sales and rentals.sales. We believe our wireless product sales andwill rentals willmoderately increase in fiscal year 2025,2026 over 20242025 levels, primarily driven by our recent introduction of our MarinerPioneer™ marineland-based wireless system and our Pioneer™ land basedMariner® wireless system, but we can make no assurance in this regard.

We expect fiscal year 20252026 revenue from our AdjacentSmart MarketsWater business segment products to increase slightly over fiscal year 20242025 levels due in part to ourthe acquisitioncontinued ofincrease Aquana and integration of Aquana's products into our business and optimism thatin demand for our industrial, imagingHydroconn® products and contract manufacturing services will continue to increasegrowth in fiscalmarket yearacceptance 2025.in our Aquana products.

We are aggressively marketing our SADAR® technologies to both our security and oil and gas industry customers. While marked acceptance of SADAR® as an effective analytical tool for categorizing seismic data, we continue to believe acceptance will occur. Fiscal year 2025 revenue from our Emerging Markets products is expected to be flat or modesty increase compared to fiscal year 2024 .

Our Smart Water segment has experienced a decline in sales in fiscal year 2026, however we believe this decline is temporary, largely due to overstockinga bydecrease in demand for our customersHydroconn® in the prior fiscal year.products. Growing industry acceptance of our water meter cables and connectors provides a strong enabler for additional revenue from our Smart Water segment. 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. Additionally, we anticipate this segment to see revenue contributions from our Aquana smart water valve and IoT technology products as market traction and increased sales backlog continues to gather. Given the well-known and often extreme volatility experienced in our Energy Solutions segment, careful expansion of products and market diversity in our Smart Water and Intelligent Industrial segments has been a longstanding part of our strategic vision and reflects our on-going diversification efforts.

Three and sixnine months ended MarchJune 31,30, 2026 compared to the three and sixnine months ended MarchJune 31,30, 2025

Consolidated gross profit for the three months ended MarchJune 31,30, 2026, was $0.7$0.5 million, compared to $1.7$7.5 million from the corresponding period of the prior fiscal year. The decrease for the three months ended MarchJune 31,30, 2026 was primarily due to the decrease in revenue and related gross profits from our Smart Water segment. Consolidated gross profit for the sixnine months ended MarchJune 31,30, 2026, was $3.4$3.9 million, compared to $21.9$29.4 million from the corresponding period of the prior fiscal year. The decrease was also attributable to a high gross profit on the sale of our marine recovery device in the corresponding period of the prior fiscal year. The decrease in gross profit for the sixnine months ended MarchJune 31,30, 2026 was primarily due to (i) a high gross margin on our $17 million sale of ocean bottom nodes in the first quarter of fiscal year 2025 and (ii) the decrease in revenue and gross profits from our Smart Water segment. The decrease in gross profit for both three and sixnine months ended MarchJune 31,30, 2026 was also attributable to an increase in tariffs on the raw materials we purchase.

Consolidated operating expenses for the three months ended MarchJune 31,30, 2026, were $12.1$10.6 million, ana increasedecrease of $0.1$1.2 million, or 0.7%, from the corresponding period of the prior fiscal year. Consolidated operating expenses for the six months ended March 31, 2026, were $25.1 million, an increase of $0.7 million, or 2.9%9.8%, from the corresponding period of the prior fiscal year. The increasedecrease for boththe periodsthree months ended June 30, 2026 was largely due to (i) a decrease personnel costs, (ii) agent commissions and (iii) lower legal and professional fees incurred during the period. Consolidated operating expenses for the nine months ended June 30, 2026, were $35.7 million, a decrease of $0.4 million, or 1.2% from the corresponding period of the prior fiscal year. The decrease for the nine months ended June 30, 2026 was primarily due to (i) an increase in sales and marketing costs, (ii) higher professional fees and (iii) severance costs. The increase in operating expenses six months ended March 31, 2026 was partially offset by a decrease in research and development expenses,costs, primarily personnel costs and project expenditures.costs and (ii) agent commission.

Consolidated other income was unchanged for the three months ended MarchJune 31,30, 2026 andcompared 2025.to the corresponding period of the prior fiscal year. Consolidated other income for the six nine months ended MarchJune 31,30, 2026,2026 decreased $0.1 million, or 8.8% 8.1%, from the corresponding period of the prior fiscal year. The decrease was principally due to (i) a decrease in interest income on short-term investments and (ii) a decrease in foreign exchange transaction losses.investments.

Revenue from our Smart Water segment for the three months ended MarchJune 31,30, 2026, decreased $5.7$5.9 million, or 60.6%,56.1%, from the corresponding period of the prior fiscal year. Revenue from our Smart Water segment for the sixnine months ended MarchJune 31,30, 2026, decreased $7.3$13.2 million, or 43.4%,48.3%, from the corresponding period of the prior fiscal year. The decrease for both periods was primarily due to a decrease in demand for our Hydroconn® cable and connector products. We believe this decline is temporary due to overstocking by our customers in the prior fiscal year.

Operating loss from our Smart Water segment for the three months ended MarchJune 31,30, 2026, was $(1.60.9) million, in comparison to operating income of $1.4$2.2 million from the corresponding period of the prior fiscal year. Operating loss from our Smart Water segment for the sixnine months ended MarchJune 31,30, 2026, was $(2.43.4) million, in comparison to operating income of $1.8$4.0 million from the corresponding period of the prior fiscal year. The decrease for both periods was primarily due the decrease in revenue and related gross profits.profits, in addition to agent commissions. The decrease for the sixnine months ended MarchJune 31,30, 2026 was also attributable to higher research and development expense, largely personnel costs.

Revenue from our Energy Solutions segment for the three months ended MarchJune 31,30, 2026, increaseddecreased $7.0$2.3 million, or 272.1%,27.8%, from the corresponding period of the prior fiscal year. Revenue from our Energy Solutions segment for the sixnine months ended MarchJune 31,30, 2026, decreased $2.6$4.9 million, or 9.7%,13.9%, from the corresponding period of the prior fiscal year. The components of thisthese changesdecreases were as follows:

Operating loss associated with our Energy Solutions segment for the three months ended MarchJune 31,30, 2026, was $(4.84.6) million, compared to $(6.71.2) million for the corresponding period of the prior fiscal year. The decreaseincrease in operating loss was primarily due to the increasedecrease in revenue and related gross profits. Operating loss for the sixnine months ended MarchJune 31,30, 2026, was $(8.212.8) million, compared to operating income of $6.6$5.4 million for the corresponding period of the prior fiscal year. This decrease was primarily attributable to the decrease in revenue,revenue largelydue rentalto revenue, coupled by(i) a high gross margin on our $17 million sale of ocean bottom nodes in the first quarter of fiscal year 2025.2025 and (ii) lower utilization of our ocean bottom rental fleet.

Revenue from our Intelligent Industrial segment for the three months ended MarchJune 31,30, 2026, increaseddecreased $0.4$0.9 million, or 7.1%,14.5%, from the corresponding period of the prior fiscal year. The increase was primarily due to an increase in demand for our contract manufacturing services. Revenue from our Intelligent Industrial segment for the sixnine months ended MarchJune 31,30, 2026, decreased $0.1$0.9 million, or 0.4%,5.3%, from the corresponding period of the prior fiscal year. The decrease in revenue for theboth six months ended March 31, 2026,periods was primarily due to a decrease in demand for our industrial sensor products,products. largelyThe offsetdecrease byfor increasedthe three months ended June 30, 2026 was also due to a decrease in demand for our contract manufacturing services.

Operating loss from our Intelligent Industrial segment for the three months ended MarchJune 31,30, 2026 decreased $0.7$0.6 million, or 54.4%,55.4%, from the corresponding period of the prior fiscal year. Operating loss for the nine months ended June 30, 2026 decreased $1.4 million, or 43.0%, from the corresponding period of the prior fiscal year. The decrease in operating loss for theboth three months ended March 31, 2026 was primarily due to the increase in revenue and related gross profits. Operating loss for the six months ended March 31, 2026 decreased $0.8 million, or 37.1%, from the corresponding period of the prior fiscal year. The decrease in operating loss for the six months ended March 31, 2026periods was primarily due to lower research and development expense, principally personnel costs.

At MarchJune 31,30, 2026, we had $13.4$4.8 million in cash, cash equivalents and cashrestricted equivalents.cash. For the sixnine months ended MarchJune 31,30, 2026, we used $16.7$27.3 million of cash from operating activities. Uses of cash included (i) our net loss of $20.8$30.5 million, offset by non-cash charges of $7.7$11.2 million resulting from deferred income taxes, depreciation, amortization, accretion, inventory obsolescence, stock-based compensation and provision for credit losses, a (ii) $2.8$5.4 million increase in inventories largely due to material purchases for use in our PRM contract, (iii) $2.4$1.5 million increase in notes receivable on product sales, (iv) $5.2$4.1 million decrease in trade accounts payable primarily due the timing of payments and (v) $2.6$3.3 million increase in other assets, primarily due to (i) prepaid product purchases related to our PRM contract.contract and (ii) prepaid insurance related to the renewal of our insurance policies. These uses of cash were partially offset by a $9.1$5.8 million increase in other liabilities, primarily deferred contract liabilities related to our PRM contract.

For the sixnine months ended MarchJune 31,30, 2026, we generated cash of $4.0$6.2 million in investing activities. Sources of cash included $6.9$9.4 million of proceeds from the sale of rental equipment, partially offset by $3.0$3.3 million used for additions to our property, plant and equipment. We do not expect significant cash investments in property, plant and equipment or our rental fleet for the remainder of fiscal year 2026.

For the sixnine months ended MarchJune 31,30, 2026, we used $0.3$0.4 million from financing activities primarily for tax payments on stock-based compensation for the exchange of common stock.

On August 29, 2025, we amended and restated our credit agreement (“the Agreement”) with Woodforest National Bank. The Agreement extended our revolving loan agreement, dated as of July 26, 2023, with Woodforest. The Agreement is for a three-year term expiring August 29, 2028 and provides a revolving credit facility with a maximum availability of $25 million. Interest shall accrue on outstanding borrowings at 30 Day Term SOFR plus a margin equal to 2.75% per annum. We are required to make monthly interest payments on borrowed funds. The Agreement is secured by substantially all of our assets, except for certain excluded property. The Agreement requires us to maintain (i) a minimum consolidated tangible net worth of $85 million, (ii) minimum liquidity of $10 million, which includes cash and amounts available to borrow and (iii) a minimum asset coverage ratio of 2.00 to 1.00. The Agreement also requires us to maintain a springing minimum interest coverage ratio of at least 1.50 to 1.00, tested quarterly whenever (a) there is an outstanding balance on the revolving credit facility or (b) have letter of credit exposure greater than $1 million. Effective December 31, 2025, we entered into a limited waiver agreement with Woodforest which waived our springing minimum interest coverage ratio through February 16, 2027. At MarchJune 31,30, 2026 we were in compliance with all financial and non-financial covenants under the Agreement. We had no debt outstanding at MarchJune 31,30, 2026 and had a borrowing availability of $25 million. On May 5, 2026, we entered into an amendment the Agreement which removed the springing minimum interest coverage requirement. This amendment requires us to maintain a $2 million cash reserve pledged to Woodforest and is primarily secured by our Pinemont facility.

Our available cash and cash equivalents decreased $13$24 million during the first sixnine months of fiscal year 2026, largely due to the decrease in revenue across all of our segments. At the end of the second quarter of fiscal year 2026 we implemented an organizational change plan, which included a voluntary early retirement plan available to eligible qualifying employees as well as a reduction in force. This plan will result in an approximate 20% reduction our global workforce, and together with cost-containment measures are expected to produce approximately $10 million of annualized cash savings. We anticipate receiving our next installment payment from our PRM customer of approximately $35 million bybetween the endsecond and third quarters of fiscal year 2027. In July 2026, we funded $5 million from the calendarAgreement year.and may require additional fundings to bridge the gap until the next PRM installment payment is received.

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 our backlog, executed rental contracts, available borrowings under the Agreement through its expiration in July 2028, sales or leveraging real estate assets, sales of rental assets and other liquidity sources which may be available to us. We currently believe that our cash, and amounts available under the Agreement if needed,Agreement, will be sufficient to finance any future operating losses and planned capital expenditures through the next twelve months.

During the sixnine months ended MarchJune 31,30, 2026, there has been no material change to our critical accounting estimates discussed in Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.